-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BbyeAUA2mixqWOrNtC5yuwD99cLoo4D2jg8nrr+ijqBPgTTvy+J7WsD9u9Lf6uru /WL55yd0YSVfHGO4MY/4og== 0000950123-97-007652.txt : 19970912 0000950123-97-007652.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950123-97-007652 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 45 FILED AS OF DATE: 19970905 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED REFINING CO CENTRAL INDEX KEY: 0000101462 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 251411751 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083 FILM NUMBER: 97676369 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIANTONE PIPELINE CORP CENTRAL INDEX KEY: 0000830253 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 251211902 STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-01 FILM NUMBER: 97676370 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED REFINING CO /PA/ CENTRAL INDEX KEY: 0001040270 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 250850960 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-02 FILM NUMBER: 97676371 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIANTONE PIPELINE CO CENTRAL INDEX KEY: 0001045539 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-03 FILM NUMBER: 97676372 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KWIK FIL INC CENTRAL INDEX KEY: 0001045540 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-04 FILM NUMBER: 97676373 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KWIK FILL INC CENTRAL INDEX KEY: 0001045541 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-05 FILM NUMBER: 97676374 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED JET CENTER INC CENTRAL INDEX KEY: 0001045542 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-06 FILM NUMBER: 97676375 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELL OIL CORP CENTRAL INDEX KEY: 0001045543 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-07 FILM NUMBER: 97676376 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPC INC CENTRAL INDEX KEY: 0001045544 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-08 FILM NUMBER: 97676377 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPER TEST PETROLEUM INC CENTRAL INDEX KEY: 0001045545 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-09 FILM NUMBER: 97676378 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VULCAN ASPHALT REFINING CORP CENTRAL INDEX KEY: 0001045546 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-10 FILM NUMBER: 97676379 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDEPENDENT GASOLINE & OIL CO OF ROCHESTER CENTRAL INDEX KEY: 0001045547 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-35083-11 FILM NUMBER: 97676380 BUSINESS ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 BUSINESS PHONE: 8147231500 MAIL ADDRESS: STREET 1: 15 BRADLEY ST CITY: WARREN STATE: PA ZIP: 16365 S-4 1 UNITED REFINING COMPANY 1 As filed with the Securities and Exchange Commission on September __, 1997 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------ UNITED REFINING COMPANY (Exact Name of Registrant as Specified in its Charter) Pennsylvania 2911 25-1411751 (State or Other Jurisdiction of (Primary Standard (Employer Incorporation or Organization Industrial Classification Identification No.) Code Number) See Table of Additional Registrants 15 Bradley Street Warren, Pennsylvania 16365 (814-723-1500) (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) MYRON L. TURFITT 15 BRADLEY STREET WARREN, PENNSYLVANIA 16365 (814-723-1500) (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Copy to: MARTIN R. BRING, ESQ. LOWENTHAL, LANDAU, FISCHER & BRING, P.C. 250 PARK AVENUE NEW YORK, NEW YORK 10177 (212) 986-1116 FACSIMILE NO. (212) 986-0604 ------------ Approximate Date of Proposed Sale to the Public: As soon as practicable after this Registration Statement becomes effective. ------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] 2 CALCULATION OF REGISTRATION FEE
Proposed Title of each class Proposed maximum maximum Amount of of securities to Amount to be offering price per aggregate offering registration be registered registered security(1) price fee - ------------------------------------------------------------------------------------------------------------- 10 3/4% Series B Senior Notes due 2007........ $200,000,000 100% $200,000,000(1) $60,606.06 - ------------------------------------------------------------------------------------------------------------- Guarantees of Series B Senior -- -- -- -- (2) Notes due 2007........ - -------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee. (2) Pursuant to Rule 457(n) no registration fee is payable with respect to the Guarantees. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 3 TABLE OF ADDITIONAL REGISTRANTS
State of Other Jurisdiction Primary Standard Industrial IRS Employer Identification Name of Incorporation Classification Number Number - ------------------------------------------------------------------------------------------------------------- Kiantone Pipeline New York 4612 25-1211902 Corporation - ------------------------------------------------------------------------------------------------------------- Kiantone Pipeline Company Pennsylvania 4600 25-1416278 - ------------------------------------------------------------------------------------------------------------- United Refining Company Pennsylvania 5541 25-0850960 of Pennsylvania - ------------------------------------------------------------------------------------------------------------- United Jet Center, Inc. Delaware 4500 52-1623169 - ------------------------------------------------------------------------------------------------------------- Kwik-Fill, Inc. Pennsylvania 5541 25-1525543 - ------------------------------------------------------------------------------------------------------------- Independent Gasoline and Oil New York 5170 06-1217388 Company of Rochester, Inc. - ------------------------------------------------------------------------------------------------------------- Bell Oil Corp. Michigan 5541 38-1884781 - ------------------------------------------------------------------------------------------------------------- PPC, Inc. Ohio 5541 31-0821706 - ------------------------------------------------------------------------------------------------------------- Super Test Petroleum, Inc. Michigan 5541 38-1901439 - ------------------------------------------------------------------------------------------------------------- Kwik-Fil, Inc. New York 5541 25-1525615 - ------------------------------------------------------------------------------------------------------------- Vulcan Asphalt Refining Delaware 2911 23-2486891 Corporation - -------------------------------------------------------------------------------------------------------------
4 SUBJECT TO COMPLETION DATED SEPTEMBER __, 1997 PROSPECTUS UNITED REFINING COMPANY Offer to Exchange its 10 3/4% Series B Senior Notes due 2007, which have been registered under the Securities Act, for any and all of its outstanding 10 3/4% Series A Senior Notes due 2007. The Exchange Offer will expire at 5:00 P.M. New York City time, on ________, 199__, unless extended. United Refining Company, a Pennsylvania corporation (the "Company"), hereby offers to exchange (the "Exchange Offer") up to $200,000,000 in aggregate principal amount of the Company's 10 3/4% Series B Senior Notes due 2007 (the "New Notes") for $200,000,000 in aggregate principal amount of the Company's outstanding 10 3/4% Series A Senior Notes due 2007 (the "Original Notes") (the Original Notes and the New Notes are collectively referred to herein as the "Notes"). The terms of the New Notes are substantially identical in all respects (including principal amount, interest rate and maturity) to the terms of the Original Notes for which they may be exchanged pursuant to this Exchange Offer, except that the New Notes will be freely transferable by holders thereof (other than as provided in the next paragraph) and issued free of any covenant regarding registration. The New Notes will evidence the same debt as the Original Notes and contain terms which are substantially identical to the terms of the Original Notes for which they are to be exchanged. For a complete description of the terms of the New Notes, see "Description of the Notes". There will be no cash proceeds to the Company from the Exchange Offer. The Original Notes were sold on June 9, 1997, in a transaction not registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption provided in Section 4(2) of the Securities Act. Accordingly, the Original Notes may not be offered, resold or otherwise pledged, hypothecated or transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The New Notes are being offered to satisfy the obligations of the Company under a Registration Rights Agreement relating to the Original Notes. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." New Notes issued pursuant to the Exchange Offer in exchange for the Original Notes may be offered for resale, resold or otherwise transferred by the holders thereof (other than any holder which is an affiliate of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by so delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer" and "Plan of Distribution". 4 5 The Notes constitute securities for which there is no established trading market. Any Original Notes not tendered and accepted in the Exchange Offer will remain outstanding. The Company does not currently intend to list the New Notes on any securities exchange. To the extent that any Original Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Original Notes could be adversely affected. No assurances can be given as to the liquidity of the trading market for either the Original Notes or the New Notes. The Exchange Offer is not conditioned on any minimum aggregate principal amount of Original Notes being tendered for exchange. The Exchange Offer will expire at 5:00 P.M. New York City time, on________ , 199_, unless extended (the "Expiration Date"). The date of acceptance for exchange of the Original Notes will be the first business day following the Expiration Date. Original Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date, otherwise, such tenders are irrevocable. The Company will pay all expenses incident to the Exchange Offer. Interest on the New Notes shall accrue from the last December 15 or June 15 (an "Interest Payment Date") on which interest was paid on the Original Notes so surrendered, or, if no interest has been paid on such Original Notes, from June 9, 1997. See "Risk Factors" for a discussion of certain factors which holders of Original Notes should consider in connection with the Exchange Offer. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1997. 5 6 AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-4 with respect to the New Notes being offered hereby (including all exhibits and amendments thereto, the "Registration Statement"). This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto, certain portions of which have been omitted pursuant to the rules and regulations of the Commission. For further information with respect to the Company and the securities offered hereby, reference is made to the Registration Statement and to the exhibits filed therewith. Statements made in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and where applicable reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement is qualified by such reference. As a result of the filing of the Registration Statement, the Company will become subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will be required to file reports and other information with the Commission. Such reports, the Registration Statement and other information may be inspected and copied, at prescribed rates, at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, at the regional offices of the Commission located at Seven World Trade Center, New York, New York 10048, and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. The Commission also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. Furthermore, so long as the Notes are outstanding, during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company has agreed to (i) file with the Commission to the extent permitted, and distribute to holders ("Holders") of the Notes, reports, information and documents specified in Section 13 and 15(d) of the Exchange Act, and (ii) make available, upon request, to any holder of the Notes, the information required pursuant to Rule 144A(d)(4) under the Exchange Act. Any such request should be directed to the Secretary of the Company at 15 Bradley Street, Warren, Pennsylvania 16365, telephone number 814-723-1500. 6 7 SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the financial statements and notes thereto, appearing elsewhere in this Prospectus. Careful consideration to the information set forth under "Risk Factors" should be given prior to making a decision to exchange Original Notes for New Notes. Unless otherwise stated herein, references to the "Company" shall mean United Refining Company and its subsidiaries. All references to a fiscal year refer to the year ended August 31 of the stated year. Certain terms used herein have been defined in the Glossary appearing on page 100 of this Prospectus. THE COMPANY The Company is a leading integrated refiner and marketer of petroleum products in its primary market area, which encompasses western New York and northwestern Pennsylvania. The Company owns and operates a medium complexity 65,000 barrel per day ("bpd") petroleum refinery in Warren, Pennsylvania where it produces a variety of products, including various grades of gasoline, diesel fuel, kerosene, jet fuel, No. 2 heating oil, and asphalt. The Company sells gasoline and diesel fuel under the Kwik Fill(R) brand name at a network of 320 Company-operated retail units, 226 of which it owns. In fiscal 1996 approximately 60% and 23% of the Company's gasoline and diesel fuel production, respectively, was sold through this network. The Company operates convenience stores at most of its retail units, primarily under the Red Apple Food Mart(R) brand name. The Company also sells its petroleum products to long-standing regional wholesale customers. For the 12 months ended June 30, 1997 the Company had total revenues of approximately $876.0 million, of which approximately 55% were derived from gasoline sales, approximately 37% were from sales of other petroleum products and approximately 8% were from sales of non-petroleum products. The Company's capacity utilization rates have ranged from approximately 88% to approximately 97% over the last five years. In fiscal 1996, approximately 75% of the Company's refinery output consisted of higher value products such as gasoline and distillates. REFINING OPERATIONS The Company believes that the location of its 65,000 bpd refinery in Warren, Pennsylvania provides it with a transportation cost advantage over its competitors, which is significant within an approximately 100-mile radius of the Company's refinery. For example, in Buffalo, New York over its last five fiscal years, the Company has experienced an approximately 2.1 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. The Company owns and operates the Kiantone Pipeline, a 78 mile long crude oil pipeline which connects the refinery to Canadian, U.S. and world crude oil sources through the Interprovincial Pipe Line/Lakehead Pipeline system ("IPL"). Utilizing the storage facilities of the pipeline, the Company is able to blend various grades of crude oil from different suppliers, allowing it to efficiently schedule production while managing feedstock mix and product yields in order to optimize profitability. In addition to its transportation cost advantage, the Company has benefited from a reduction in regional production capacity of approximately 103,000 bpd brought about by the closure during the 1980s of two competing refineries in Buffalo, New York, owned by Ashland Inc. and Mobil Oil Corporation. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and the Company believes that no significant production from such refinery is currently shipped into the Company's primary market area. It is the Company's view that the high construction costs and the stringent regulatory requirements inherent 7 8 in petroleum refinery operations make it uneconomical for new competing refineries to be constructed in the Company's primary market area. During the period from January 1, 1979 to August 31, 1996, the Company spent approximately $199 million on capital improvements to increase the capacity and efficiency of its refinery and to meet environmental requirements. These capital expenditures have: (i) substantially rebuilt and upgraded the refinery, (ii) enhanced the refinery's capability to comply with applicable environmental regulations, (iii) increased the refinery's efficiency, and (iv) helped maximize profit margins by permitting the processing of lower cost, high sulfur crudes. MARKETING AND DISTRIBUTION OPERATIONS The Company's primary market area is western New York and northwestern Pennsylvania and its core market encompasses its Warren County base and the eight contiguous counties in New York and Pennsylvania. The Company's retail gasoline and merchandise sales are split approximately 60%/40% between rural and urban markets. Margins on gasoline sales are traditionally higher in rural markets, while gasoline sales volume is greater in urban markets. The Company's urban markets include Buffalo, Rochester and Syracuse, New York and Erie, Pennsylvania. The Company believes it has higher profitability per store than its average convenience store competitor. In 1995, convenience store operating profit per store averaged approximately $70,100 for the Company, as compared to approximately $66,500 for the industry as a whole according to industry data compiled by the National Association of Convenience Stores ("NACS"). The Company is one of the largest marketers of refined petroleum products within its core market area according to a study commissioned by the Company from Gerke & Associates, Inc. ("Gerke"), an independent industry consultant. The Company currently operates 320 retail units, of which 180 are located in New York, 128 in Pennsylvania and 12 in Ohio. The Company owns 226 of these units. In fiscal 1996, approximately 60% of the refinery's gasoline production was sold through the Company's retail network. In addition to gasoline, all units sell convenience merchandise, 39 have delicatessens and eight of the units are full-service truck stops. Customers may pay for purchases with credit cards including the Company's own "Kwik Fill" credit card. In addition to this credit card, the Company maintains a fleet credit card catering to regional truck and automobile fleets. Sales of convenience products, which tend to have constant margins throughout the year, have served to reduce the effects of the seasonality inherent in gasoline retail margins. The Company has consolidated its entire retail system under the Red Apple Food Mart(R) and Kwik Fill(R) brand names, providing the chain with a greater regional brand awareness. CAPITAL IMPROVEMENT PLAN Refining Operations The Company intends to use approximately $14.8 million of the proceeds of the Private Offering (as hereinafter defined) over the next two years to expand and upgrade its refinery. The investment is expected to increase rated crude oil throughput capacity from 65,000 bpd to 70,000 bpd, to improve yield of finished products from crude inputs and to lower refinery costs. 8 9 Marketing and Distribution Operations The Company intends to use approximately $20.0 million of the proceeds of the Private Offering over the next two years to rebuild or refurbish 70 existing retail units and to acquire three new retail units. Approximately half of this upgrade project is expected to be completed within the first twelve months after the consummation of the Private Offering. Management believes that these capital improvements will enable the Company's retail network to absorb through retail sales at Company-operated units a majority of the additional gasoline and diesel production resulting from the concurrent refinery upgrade, with the remaining production being sold to wholesale customers. BUSINESS STRATEGY The Company's goal is to strengthen its position as a leading producer and marketer of high quality refined products within its primary market area. The Company's business strategy is to: (i) maximize the benefits from its transportation cost advantage within its primary market area; (ii) expand its sales of high margin specialty products; (iii) optimize its feedstock mix and product yield to maximize profitability; (iv) invest in increased refinery capacity and improved refining productivity; and (v) increase its market share and improve retail profitability through selective rebuildings or refurbishments of retail units and, to a lesser extent, through acquisitions of selected retail sites. The Company's principal executive offices are located at 15 Bradley Street, Warren, Pennsylvania 16365 and its telephone number is (814) 723-1500. THE TRANSACTIONS On June 9, 1997, the Company completed the sale (the "Private Offering") of $200,000,000 principal amount of the Company's Original Notes. In connection with the Private Offering, the Company also entered into a new credit facility with PNC Bank and retired certain indebtedness then outstanding (the "Transactions"). The Transactions were undertaken to: (i) enhance the Company's financial flexibility; (ii) reduce the Company's annual debt service requirements; (iii) funds its Capital Improvement Plan; and (iv) provide the Company with a capital structure that will facilitate the continued growth of its refinery and related operations. THE EXCHANGE OFFER Purpose of the Exchange Offer: The Original Notes were sold in the Private Offering by the Company on June 9, 1997, to Dillon, Read & Co. Inc. and Bear, Stearns & Co. Inc., as initial purchasers (the "Initial Purchasers"). In connection therewith, the Company executed and delivered, for the benefit of the holders of the Original Notes, a Registration Rights Agreement dated June 9, 1997 (the "Registration Rights Agreement") which is filed as an exhibit to the Registration Statement of which this Prospectus is a part, providing for, among other things, the Exchange Offer so that the New Notes will be freely transferable by the holders thereof without registration or any prospectus delivery requirements under the Securities Act, except that a "dealer" or any of their "affiliates" as such terms are defined under the Securities Act, who exchanges Original Notes held for its own account (a "Restricted Holder") will be required to deliver copies of this Prospectus in connection with any resale of the New 9 10 Notes (the "Resale Notes") issued in exchange for such Original Notes (the "Prospectus Delivery Requirement"). See "The Exchange Offer -- Purpose and Effect of the Exchange Offer" and "Plan of Distribution." The Exchange Offer: The Company is offering to exchange pursuant to the Exchange Offer up to $200,000,000 aggregate principal amount of the Company's 10 3/4% Series B Senior Notes due 2007 (the "New Notes") for $200,000,000 aggregate principal amount of the Company's outstanding 10 3/4% Series A Senior Notes due 2007 (the "Original Notes"). The Original Notes and the New Notes are collectively referred to herein as the "Notes". The terms of the New Notes are substantially identical in all respects (including principal amount, interest rate and maturity) to the terms of the Original Notes for which they may be exchanged pursuant to the Exchange Offer, except that the New Notes are freely transferable by holders thereof (other than as provided herein), and are not subject to any covenant regarding registration under the Securities Act. See "The Exchange Offer-- Terms of the Exchange" and "Procedures for Tendering". The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. Expiration Date: The Exchange Offer will expire at 5:00 P.M. New York City time on______________, 199_, unless extended (the "Expiration Date"). Conditions of the Exchange Offer: The Company's obligation to consummate the Exchange Offer will be subject to certain conditions. See "The Exchange Offer -- Conditions to the Exchange Offer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such conditions. Withdrawal Rights: Tenders may be withdrawn at any time prior to the Expiration Date; otherwise, all tenders will be irrevocable. Procedures for Tendering Notes: See "The Exchange Offer -- Procedures for Tendering." Federal Income Tax Consequences: The exchange of Original Notes for New Notes will not be a taxable exchange for federal income tax purposes. See "Certain United States Federal Income Tax Considerations." Effect on Holders of the Original Notes: As a result of the making of, and upon acceptance for exchange of all validly tendered Original Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled one of the covenants contained in the Registration Rights Agreement and, accordingly, there will be no increase in the interest rate on the Original Notes pursuant to the applicable terms of the Registration Rights Agreement due to the Exchange Offer. Holders of the Original Notes 10 11 who do not tender their Original Notes will be entitled to all the rights and limitations applicable thereto under the Indenture dated as of June 9, 1997, among the Company and IBJ Schroder Bank and Trust Company, as trustee (the "Trustee") relating to the Original Notes and the New Notes (the "Indenture"), except for any rights under the Indenture or the Registration Rights Agreement, which by their terms, terminate or cease to have further effectiveness as a result of the making of, and the acceptance for exchange of all validly tendered Original Notes pursuant to, the Exchange Offer. All untendered Original Notes will continue to be subject to the restrictions on transfer provided for in the Original Notes and in the Indenture. To the extent that Original Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Original Notes could be adversely affected. Use of Proceeds: There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. RISK FACTORS The information set forth under "Risk Factors" as well as other information set forth in this Prospectus should be carefully considered in evaluating the Notes and the Company. THE NEW NOTES The Exchange Offer applies to the $200,000,000 principal amount of the Original Notes outstanding as of the date hereof. The form and the terms of the New Notes will be identical in all material respects to the form and the terms of the Original Notes except that the New Notes will have been registered under the Securities Act and, therefore, will not contain legends restricting the transfer thereof. The New Notes evidence the same debt as the Original Notes exchanged for the New Notes and will be entitled to the benefits of the same Indenture under which the Original Notes were issued. See "Description of the Notes." Certain capitalized terms used below are defined under the caption "Description of the Notes -- Certain Definitions." Securities Offered: $200,000,000 aggregate principal amount of 10 3/4% Series B Senior Notes due 2007 (the "New Notes"). Maturity Date: June 15, 2007. Interest Payment Dates: Interest on the New Notes shall accrue from the last December 15 or June 15 on which interest was paid on the Original Notes, or, if no interest has been paid on such Original Notes, from June 9, 1997. Ranking: The Notes will be senior unsecured obligations of the Company and will rank pari passu in right of payment with existing and future unsecured and unsubordinated Indebtedness (as defined herein) of the Company and senior to all Subordinated Indebtedness (as defined herein) of the Company. 11 12 Subsidiary Guarantees: The Notes will be unconditionally guaranteed by each of the Company's subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantees will be unconditional joint and several obligations of each Subsidiary Guarantor (collectively, the "Guarantees"), ranking pari passu in right of payment with all other unsecured and unsubordinated Indebtedness of such Subsidiary Guarantor. Optional Redemption: The Notes will be redeemable in whole or in part at the option of the Company at any time on or after June 15, 2002 at the redemption prices hereinafter set forth. In addition, at any time on or prior to June 15, 2000, the Company may redeem up to 35% of the originally issued aggregate principal amount of the Notes with the proceeds of one or more Equity Offerings (as defined herein) at a redemption price equal to 110.00% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, provided that after giving effect to such redemption at least $100 million aggregate principal amount remains outstanding. The Notes are not otherwise redeemable at the option of the Company. Offers to Purchase: In the event of a Change of Control (as defined herein), each holder of Notes will have the right to require the Company to purchase all of the Notes then held by it at purchase price equal to 101% of the aggregate principal amount of the Notes, plus accrued and unpaid interest to the date of purchase. In addition, under certain circumstances, the Company will be required to offer to purchase Notes with the proceeds of certain Asset Sales (as defined herein) and with the Special Offer Amount of the Escrow Funds (each, as defined herein) if the Company's Capital Improvement Plan is abandoned or not completed by August 31, 1999. See "Description of the Notes." Certain Covenants The Indenture will contain certain covenants that, among other things, limit the incurrence of additional indebtedness by the Company and its Subsidiaries (as defined herein); limit the issuance of preferred stock of the Company's Subsidiaries; limit the payment of dividends and certain other payments by the Company and its Subsidiaries; limit the creation of certain liens by the Company and its Subsidiaries; limit the ability of the Company and its Subsidiaries to enter into sale/leaseback transactions; limit the Company's creation of restrictions on the ability of Subsidiaries to make payments to the Company; restrict the ability of the Company to engage in Asset Sales; and limit the ability of the Company or its Subsidiaries to enter into certain transactions with affiliates or merge, consolidate or transfer substantially all of their assets. 12 13 SUMMARY HISTORICAL AND CONSOLIDATED FINANCIAL DATA The following table sets forth certain historical financial and operating data (the "Summary Information") as of August 31, 1992, 1993, 1994, 1995, and 1996 and for each of the years in the five-year period ended August 31, 1996 and as of June 30, 1996 and 1997 and for the ten months ended June 30, 1996 and 1997. The summary income statement, balance sheet, financial and ratio data as of and for each of the three years ended August 31, 1996 have been derived from the audited consolidated financial statements of the Company. Such information as of and for each of the two years ended August 31, 1993 have been derived from the unaudited consolidated financial statements of the Company. Such information as of and for the ten months ended June 30, 1996 and 1997 have been derived from the unaudited consolidated financial statements of the Company which include all adjustments, consisting of normal recurring adjustments, which management considers necessary for a fair presentation of the financial position and the results of operations of the Company for such periods. Results for the interim periods are not necessarily indicative of the results for the full year. The audited consolidated financial statements of the Company and related notes thereto as of August 31, 1995 and 1996 and for each of the three years ended August 31, 1996 and the unaudited consolidated financial statements of the Company as of June 30, 1997 and for the ten months ended June 30, 1996 and 1997 and related notes thereto appear elsewhere in this Prospectus. The operating information for all periods presented has been derived from the accounting and financial records of the Company. The Summary Information set forth below should be read in conjunction with, and is qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and notes thereto and other financial information included elsewhere in this Prospectus. 13 14
TEN MONTHS ENDED ----- YEAR ENDED AUGUST 31, JUNE 30, --------------------- -------- JUNE 30, 1992 1993 1994 1995 1996 1996 1997 ------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT OPERATING INFORMATION) INCOME STATEMENT DATA: Net sales $ 799,467 $ 830,054 $729,126 $ 783,686 $833,818 $669,882 $ 712,071 Gross margin(1) 138,438 162,251 156,898 151,852 168,440 144,051 128,375 Refining operating expenses 47,853 49,835 56,121 56,665 63,218 52,630 51,114 Selling, general and administrative expenses 72,612 72,495 69,158 68,876 70,124 58,920 58,703 Operating income 11,255 33,099 22,580 18,112 26,882 24,646 11,449 Interest expense(2) 16,087 15,377 17,100 18,523 17,606 14,681 13,835 Interest income 1,057 706 1,134 1,204 1,236 1,053 1,073 Other income (expense) (7,365) (2,701) (3,257) 155 (884) (819) (990) Income (loss) before income tax expense (benefit) and extraordinary item (11,140) 15,727 3,357 948 9,628 10,999 (2,303) Income tax expense (benefit) (4,213) 6,687 1,337 487 3,787 4,392 (902) Income (loss) before extraordinary item (6,927) 9,040 2,020 461 5,841 6,607 (1,401) Net income (loss) (6,927) 9,040 490 461 5,841 6,607 (8,054) BALANCE SHEET DATA (AT END OF PERIOD): Total assets $ 251,498 $272,995 $303,983 $ 299,283 $294,893 $313,733 $ 339,562 Total debt 144,822 137,721 158,491 154,095 136,777 137,307 201,316 Total stockholder's equity 53,704 77,235 77,725 78,186 84,027 84,793 47,688 SELECTED FINANCIAL DATA: EBITDA(2) $ 14,842 $38,030 $ 29,035 $ 27,159 $ 34,859 $32,249 $18,211 Depreciation and amortization 6,966 7,073 7,860 8,568 8,505 7,302 7,339 Capital expenditures 14,685 30,680 20,889 12,134 4,562 3,604 3,553 SELECTED RATIOS: EBITDA/interest expense(2) 0.92x 2.47x 1.70x 1.47x 1.98x 2.20x 1.31x Total debt/EBITDA 9.76x 3.62x 5.46x 5.67x 3.92x -- -- Ratio of earnings to fixed charges(3) (4) 1.86x 1.15x 1.04x 1.50x 1.68x (4)
14 15
TEN MONTHS ENDED YEAR ENDED AUGUST 31, JUNE 30, JUNE 30, JUNE 30, 1992 1993 1994 1995 1996 1996 1997 -------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT OPERATING INFORMATION) OPERATING INFORMATION (UNAUDITED): Refining Operations: Crude oil input (mbbls/day) 58.5 61.5 57.0 62.4 63.0 62.8 60.7 Utilization(5) 90.0% 94.7% 87.8% 96.0% 96.9% 96.6% 93.5% Total saleable refinery production (mbbls/day) 58.6 62.0 57.2 62.1 63.5 63.5 61.8 Gasoline 29.9 31.4 27.7 30.1 29.9 29.8 28.8 Middle distillates 17.3 18.5 15.6 17.5 18.5 18.8 18.7 As8.5lt 8.5 9.0 10.0 11.6 12.2 12.2 11.6 Total saleable products (mbbls/day)(6) 61.1 65.3 62.3 64.1 65.4 65.6 64.5 Gross margin (per bbl $ 3.07 $ 3.87 $ 4.03 $ 3.48 $ 4.26 $ 4.48 $ 3.81 Refining operating expenses (per bbl) $ 2.14 $ 2.09 $ 2.47 $ 2.42 $ 2.64 $ 2.64 $ 2.6 1 Retail Network: Number of stores (at period end) 348 345 341 335 327 326 320 Gasoline volume (m gal) 302,240 297,083 292,062 279,454 274,480 226,201 216,110 Gasoline gross margin (cents/gal) 11.8 11.9 13.6 15.7 14.4 14.3 14.7 Average gasoline volume per store (m gal/month) 74 73 72 70 70 69 68 Distillate volume(m gal) 36,066 40,045 37,378 40,480 41,256 34,175 33,805 Distillate gross margin (cents/gal) 9.8 11.7 12.5 12.5 11.9 12.4 11.9 Merchandise sales (000s) $ 68,467 $ 68,607 $68,178 $ 70,613 $ 71,686 $57,843 $ 60,006 Merchandise gross margin 31.3% 32.6% 30.5% 30.5% 30.6% 30.2% 30.0% Average merchandise sales per store per month (000s) $ 16.4 $ 16.6 $ 16.7 $ 17.6 $ 18.3 $ 17.4 $ 18.8 Retail operating expenses (000s) $ 50,844 $ 51,081 $51,892 $ 51,703 $ 53,218 $44,478 $ 44,426 Total Sales (000s/store) Convenience stores $ 1,337 $ 1,303 $ 1,270 $ 1,299 $ 1,318 $ 1,074 $ 1,110 Limited gasoline stations 1,067 1,061 1,058 1,102 1,140 937 978 Truckstops 5,961 6,327 6,046 6,516 6,813 5,634 5,806 Other 614 642 659 696 705 573 576
(1) Gross margin is defined as gross profit plus refining operating expenses. Refining operating expenses are expenses incurred in refining and included in cost of goods sold in the Company's financial statements. Refining operating expenses equals refining operating expenses per barrel, multiplied by the volume of total saleable products per day, multiplied by the number of days in the period. For fiscal years 1992 and 1993, gross margin for the Company included $9.2 million and $7.6 million, respectively, of gross margin ($0.1 million and $0.6 million, respectively, on an EBITDA basis) from an entity conducting business unrelated to the refining and marketing of petroleum products, which the Company sold to its parent in fiscal 1993. (2) EBITDA is as defined in the Indenture. See "Description of the Notes." EBITDA is presented not as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles), but rather to provide additional information related to the debt servicing ability of the Company. Interest expense as reflected on the Company's financial statements does not include amortization of deferred financing fees. Amortization of deferred financing fees is included in the Company's financial statements in other expense and amounts to $0.5 million, $0.5 million, $0.7 million, $0.6 million, $0.5 million, $0.4 million and $0.4 million for fiscal years 1992, 1993, 1994, 1995 and 1996 and for the ten month periods ended June 30, 1996 and 1997, respectively. (3) The ratio of earnings to fixed charges is computed by dividing (i) income before provision for income taxes plus fixed charges by (ii) fixed charges. Fixed charges consist of interest on 15 16 indebtedness including amortization of discount and debt issuance costs and the estimated interest component of rental expense which is 33% of actual rental expense. (4) Income before provision for income taxes was inadequate to cover fixed charges. Additional income before provision for income taxes of $11.3 million and $2.3 million would have been necessary to cover the deficiencies as of August 31, 1992 and June 30, 1997. (5) Refinery utilization is the ratio of crude oil input to the rated capacity of the refinery to process crude oil which is 65,000 bpd. Total input and total yield may be greater than the rated capacity of the refinery because feedstocks other than crude oil, which add to the refinery's yield are utilized in the refining process. The rated capacity of the refinery reflects estimated downtime for scheduled and unscheduled maintenance and other contingencies during which refinery production is reduced. Utilization may therefore exceed 100% if actual downtime is less than estimated downtime. Utilization was lower in fiscal 1994 due to an 18 day turnaround at the crude unit for scheduled maintenance. (6) Includes refined products purchased from others and resold by the Company. 16 17 RISK FACTORS Holders of Original Notes should consider carefully all of the information set forth in this Prospectus, and, in particular, should evaluate the following risks before tendering their Original Notes in the Exchange Offer, although the risk factors (other than the first risk factor) are generally applicable to the Original Notes as well as the New Notes. CONSEQUENCE OF FAILURE TO EXCHANGE Holders of Original Notes who do not exchange their Original Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Original Notes as set forth in the legend thereon as a consequence of the offer or sale of the Original Notes pursuant to an exemption from in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Original Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act or applicable state securities laws. The Company does not currently anticipate that it will register the Original Notes under the Securities Act. Based on interpretations by the staff of the Commission, New Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. Any holder of Original Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes could not rely on such interpretation by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Thus, any Original Notes acquired by such holders will not be freely transferable except in compliance with the Securities Act. Each Restricted Holder (as hereinafter defined) that receives New Notes for its own account in exchange for the Original Notes, where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE AND REFINANCE DEBT As of June 30, 1997, the aggregate total debt of the Company was $201.3 million and its stockholder's equity was $47.7 million. The ratio of the Company's earnings to fixed charges for fiscal 1996 was 1.50:1. Income before provision for income taxes was inadequate to cover fixed charges for the ten months ended June 30, 1997. Additional income before provision for income taxes of $2.3 million would have been necessary to cover the deficiency as of June 30, 1997. In addition, subject to the restrictions in the Indenture and the New Bank Credit Facility described in "Description of Certain Indebtedness", the Company may incur additional indebtedness from time to time to provide working capital, to finance acquisitions or capital expenditures or for other corporate purposes. The level of the Company's indebtedness could have important consequences to holders of the Notes, including: (i) a substantial portion of the Company's cash flow from operations must be dedicated to debt service and will not be available for other purposes; (ii) the Company's ability to obtain additional debt financing in the future for working capital, capital expenditures or acquisitions may be limited; and (iii) the Company's level of indebtedness could limit its flexibility in planning for and reacting to changes in the industry and economic conditions generally. 17 18 The Company's ability to pay interest and principal on the Notes and to satisfy its other debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, most of which are beyond the Company's control. The Company anticipates that its operating cash flow, together with borrowings under the New Bank Credit Facility, will be sufficient to meet its operating expenses and capital expenditures, to sustain operations and to service its interest requirements as they become due. If the Company is unable to generate sufficient cash flow to service its indebtedness and fund its capital expenditures, it will be forced to adopt an alternative strategy that may include reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness (including the Notes) or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. The Company's ability to meet its debt service obligations will be dependent upon its future performance which, in turn, is subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." VOLATILITY OF CRUDE OIL PRICES AND REFINING MARGINS The Company is engaged primarily in the business of refining crude oil and selling refined petroleum products. The Company's earnings and cash flows from operations are dependent upon its realizing refining and marketing margins at least sufficient to cover its fixed and variable expenses. The cost of crude oil and the prices of refined products depend upon numerous factors beyond the Company's control, such as the supply of and demand for crude oil, gasoline and other refined products, which are affected by, among other things, changes in domestic and foreign economies, political events, production levels, weather, the availability of imports, the marketing of gasoline and other refined petroleum products by its competitors, the marketing of competitive fuels, the impact of energy conservation efforts, and the extent of government regulation and taxation. A large, rapid increase in crude oil prices would adversely affect the Company's operating margins if the increased cost of raw materials could not be passed to the Company's customers on a timely basis, and would adversely affect the Company's sales volumes if consumption of refined products, particularly gasoline, were to decline as a result of such price increases. A sudden drop in crude oil prices would adversely affect the Company's operating margins since wholesale prices typically decline promptly in response thereto, while the Company will be paying the higher crude oil prices until its crude supply at such higher prices is processed. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Recent Developments." The prices which the Company may obtain for its refined products are also affected by regional factors, such as local market conditions and the operations of competing refiners of petroleum products as well as seasonal factors influencing demand for such products. In addition, the Company's refinery throughput and operating costs may vary due to scheduled and unscheduled maintenance shutdowns. RISKS RELATED TO CAPITAL EXPANSION AND IMPROVEMENTS The Company plans to apply approximately $34.8 million of the proceeds of the Private Offering over a two year period to fund the expansion of its refining capacity and the improvement of refinery productivity and to make capital improvements to its retail network. The Company believes that after completion of the projects funded with the proceeds of the Private Offering, the Company will experience positive effects on its revenues, refining margins and operating income. However, there can be no assurance that such capital expenditure plans will be implemented in the time frame disclosed herein, that actual costs of planned projects will not exceed budgeted amounts or that the projects will have such intended effects. For example, there can be no assurance that the Company will be able to economically sell any increased production of refined products as a result of expanding the capacity of its refinery. 18 19 Changes in the economic or regulatory environments or delays in implementing the capital expenditure plans may require modification of such plans, increase the cost to complete such plans or otherwise make the completion of such plans impracticable or uneconomical. In certain circumstances, the Company may be required to obtain additional financing to complete its planned projects and there can be no assurance that such financing will be available on acceptable terms, or at all. COMPETITION Many of the Company's competitors are fully integrated companies engaged on a national and/or international basis in many segments of the petroleum business, including exploration, production, transportation, refining and marketing, on scales much larger than the Company. Large oil companies, because of the diversity and integration of their operations, larger capitalization and greater resources, may be better able to withstand volatile market conditions, compete on the basis of price, and more readily obtain crude oil in times of shortages. The Company faces strong competition in its market for the sale of refined petroleum products, including gasoline. Such competitors have in the past and may in the future engage in marketing practices that result in profit margin deterioration for the Company for periods of time, causing an adverse impact on the Company. Another refining company has announced its intention to reopen a fuels refinery in the New York Harbor supply area. The Company cannot predict what effect, if any, the reopening of such refinery would have on the supply of petroleum products in the Company's marketing area or on the Company's sales or profitability. IMPACT OF ENVIRONMENTAL REGULATION; GOVERNMENTAL REGULATION The Company's operations and properties are subject to stringent environmental laws and regulations, such as those governing the use, storage, handling, generation, treatment, transportation, emission, release, discharge and disposal of certain materials, substances and wastes, remediation of areas of contamination and the health and safety of employees. The nature of the Company's operations and previous operations by others at certain of its facilities exposes the Company to the risk of claims under those laws and regulations. There can be no assurance that material costs or liabilities will not be incurred in connection with such claims. Environmental compliance has required, and will continue to require, capital expenditures. The Company spent approximately $2.8 million in fiscal 1992, $28.6 million in fiscal 1993, $14.0 million in fiscal 1994, $7.4 million in fiscal 1995 and $1.6 million in fiscal 1996 for such capital expenditures. The Company currently estimates that capital expenditures for environmental compliance will approximate $3.9 million in fiscal 1997 and $3.7 million in fiscal 1998. Approximately $5.9 million of total fiscal 1997 and fiscal 1998 expenditures are for the upgrading of underground storage tanks at the Company's retail units to meet certain minimum performance standards under regulations promulgated by the United States Environmental Protection Agency (the "EPA") which take effect in December 1998. As of June 30, 1997, approximately 48% of the total sites have been completed and the Company expects to be in total compliance with the regulations by the December 22, 1998 mandated deadline. See "Business--Environmental Considerations." 19 20 CONCENTRATION OF REFINING OPERATIONS All of the Company's refinery activities are conducted at its facility in Warren, Pennsylvania. In addition, the Company obtains substantially all of its crude oil supply through its owned and operated Kiantone Pipeline. Any prolonged disruption to the operations of its refinery or the Kiantone Pipeline, whether due to labor difficulties, destruction of or damage to such facilities, severe weather conditions, interruption of utilities service or other reasons, would have a material adverse effect on the Company's business, results of operations or financial condition. In order to minimize the effects of any such incident, the Company maintains a full schedule of insurance coverage which includes, but is not limited to, property and business interruption insurance. The property insurance policy has a combined loss limit for property loss at the Company's refinery and business interruption of $249 million in excess of (i) a $1 million self-insured retention and (ii) a deductible, which in the case of property insurance is $250,000, and in the case of business interruption insurance, is an amount equal to lost profits for a period of ten days. The Company believes that its business interruption coverage is reasonable. However, there can be no assurance that the proceeds of any such insurance would be paid in a timely manner or be in an amount sufficient to meet the Company's needs if such an event were to occur. NATURE OF DEMAND FOR ASPHALT In fiscal 1996, asphalt sales represented 9.3% of the total revenues of the Company. Approximately 77% of the Company's asphalt is produced for use in paving or repaving roads and highways. The level of paving activity is, in turn, dependent upon funding available from federal, state and local governments. Funding for paving has been affected in the past, and may be affected in the future, by budget difficulties at the federal, state or local levels. A decrease in demand for asphalt could cause the Company to sell asphalt at significantly lower prices or to curtail production of asphalt by processing more costly lower sulfur content crude oil which would adversely affect refining margins. In addition, paving activity in the Company's marketing area generally ceases in the winter months. Therefore, much of the Company's asphalt production during the winter must be stored until warmer weather arrives, resulting in deferred revenue and inventory buildups each year. RANKING OF THE NOTES; SECURITY Although the Original Notes are and the New Notes will be senior unsecured obligations of the Company ranking pari passu with all other existing and future senior debt of the Company, the indebtedness of the Company under the $35 million New Bank Credit Facility is secured by all the accounts receivable and certain inventory of the Company and its Subsidiaries. Accordingly, the New Notes and the Subsidiary Guarantees will be effectively subordinated to the extent of such security interests. See "Description of the Notes." RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS The terms of the New Bank Credit Facility, the Indenture and the other agreements governing the Company's indebtedness impose operating and financing restrictions on the Company and the Company's subsidiaries. Such restrictions affect, and in many respects limit or prohibit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, sell assets, or engage in mergers or acquisitions. These restrictions could limit the ability of the Company to plan for or react to market conditions or meet extraordinary capital needs or otherwise could restrict corporate activities. There can be no assurance that such restrictions will not adversely affect the Company's ability to finance its future operations or capital needs or to engage in other business activities which will be in the interest 20 21 of the Company. See "Description of the Notes--Certain Covenants" and "Description of Certain Indebtedness." CONTROLLING STOCKHOLDER John A. Catsimatidis indirectly owns all of the outstanding voting stock of the Company. By virtue of such stock ownership, Mr. Catsimatidis has the power to control all matters submitted to stockholders of the Company and to elect all directors of the Company. The interests of Mr. Catsimatidis as equity holder may differ from the interests of holders of the Notes. CHANGE OF CONTROL Upon a Change of Control (as defined herein), the holders of all of the Notes have the right to require the Company to offer to purchase all of the outstanding Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. There can be no assurance that the Company will have sufficient funds available or will be permitted by its other debt agreements to purchase the Notes upon the occurrence of a Change of Control. In addition, a Change of Control may require the Company to offer to purchase other outstanding indebtedness and may cause a default under the New Bank Credit Facility. The inability to purchase all of the tendered Notes would constitute an Event of Default (as defined herein) under the Indenture. See "Description of the Notes--Change of Control." ABSENCE OF PUBLIC MARKET FOR THE NOTES The New Notes are being offered to the holders of the Original Notes. The Original Notes were purchased and immediately resold by the Initial Purchasers in June 1997 to a small number of institutional investors and are eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages (PORTAL) Market. The Company does not intend to apply for a listing of the New Notes on a securities exchange. There is currently no established market for the New Notes and there can be no assurance as to the liquidity of markets that may develop for the New Notes, the ability of the holders of the New Notes to sell their New Notes or the price at which such holders would be able to sell their New Notes. If such markets were to exist, the New Notes could trade at prices that may be lower than the initial market values thereof depending on many factors, including prevailing interest rates and the markets for similar securities. The liquidity of, and trading market for the New Notes also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for, the Company. FRAUDULENT CONVEYANCE; UNENFORCEABILITY OF SUBSIDIARY GUARANTEES The Company believes that the indebtedness represented by the Subsidiary Guarantees is being incurred for proper purposes and in good faith and each Subsidiary Guarantor is, and after the consummation of the Offering will be, solvent, will have sufficient capital for carrying on its business and will be able to pay its debts as they mature. Revenues of the Subsidiary Guarantors accounted for approximately 55.8% of the Company's consolidated revenues for fiscal 1996 and as of August 31, 1996 the assets of such Subsidiary Guarantors were approximately 34.3% of the assets of the Company on a consolidated basis. If a court of competent jurisdiction in a suit by a creditor or representative of creditors 21 22 of any Subsidiary Guarantor (such as a trustee in bankruptcy or a debtor-in-possession) were to find that, at the time of the incurrence of the indebtedness represented by the Subsidiary Guarantee, such Subsidiary Guarantor was insolvent, was rendered insolvent by reason of such incurrence of such guarantee, was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital, intended to incur, or believes that it would incur, debts beyond its ability to pay such debts as they matured, or intended to hinder, delay or defraud its creditors, and that the indebtedness was incurred for less than fair consideration or reasonably equivalent value, then such court could, among other things, (a) void all or a portion of such Subsidiary Guarantor's obligations to the holders of the Notes, the effect of which could be that the holders of the Notes may not be repaid in full and/or (b) subordinate such Subsidiary Guarantor's obligations to the holders of the Notes to other existing and future indebtedness of such Subsidiary Guarantor, the effect of which would be to entitle such other creditors to be paid in full before any payment could be made on the Notes. THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Original Notes were sold by the Company on June 9, 1997 to the Initial Purchasers and immediately resold to certain accredited institutions in the Private Offering. In connection therewith, the Company entered into the Registration Rights Agreement which required that within ninety (90) days following the issuance of the Original Notes, the Company file with the Commission a registration statement under the Securities Act with respect to an issue of New Notes of the Company identical in all material respects to the Original Notes, use its best efforts to cause such registration statement to become effective under the Securities Act and, upon the effectiveness of that registration statement, offer to the holders of the Original Notes the opportunity to exchange their Original Notes for a like principal amount of such New Notes, which will be issued without a restrictive legend. The purpose of the Exchange Offer is to fulfill the Company's obligations under the Registration Rights Agreement. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. Original Notes were initially represented by two global Notes in registered form, registered in the name of Cede & Co., a nominee of The Depository Trust Company, New York, New York ("DTC"), as depositary. Based on no-action letters issued by the staff of the Commission to third parties, the Company believes that the New Notes issued pursuant to the Exchange Offer in exchange for the Original Notes may be offered for resale, resold and otherwise transferred by any holder of such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act (other than "affiliates" of the Company within the meaning of Rule 405 under the Securities Act), provided that such New Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such New Notes. Any holder of Original Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes could not rely on such interpretation by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Thus, any New Notes acquired by such holders will not be freely transferable except in compliance with the Securities Act. Each Registration Statement that receives New Notes for its own account in exchange for the Original Notes, where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." 22 23 As described above, the Original Notes were sold to the Initial Purchasers and immediately resold to certain accredited institutional investors on June 9, 1997 and there is a limited private trading market for them at present. To the extent Original Notes are tendered and accepted in the Exchange Offer, the principal amount of outstanding Original Notes will decrease. Following the consummation of the Exchange Offer, holders of the Original Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Original Notes could be adversely affected. See "Risk Factors--Consequence of Failure to Exchange." TERMS OF THE EXCHANGE Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal (which together constitute the "Exchange Offer"), the Company will accept any and all Original Notes validly tendered, and not theretofore withdrawn, prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of outstanding Original Notes accepted in the Exchange Offer as promptly as practicable after the Expiration Date. Holders may tender some or all of their Original Notes pursuant to the Exchange Offer provided, however, that Original Notes may be tendered only in integral multiples of $1,000. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Original Notes being tendered for exchange. The form and terms of the New Notes are identical in all material respects to the form and terms of the Original Notes except that the New Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The New Notes will not represent additional indebtedness of the Company and will be entitled to the benefits of the Indenture, which is the same Indenture as the one under which the Original Notes were issued. Interest on New Notes will accrue from the most recent date to which interest has been paid on the Original Notes or, if no interest has been paid, from June 9, 1997. Holders of Original Notes do not have any appraisal or dissenters' rights under the Pennsylvania Business Corporation Law or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. For purposes of the Exchange Offer, the Company shall be deemed to have accepted for exchange and exchange Original Notes validly tendered for exchange when, as and if the Company gives oral or written notice to the Exchange Agent of acceptance of the tenders of such Original Notes for exchange. Exchange of Original Notes accepted for exchange pursuant to the Exchange Offer will be made by deposit of tendered Original Notes with the Exchange Agent, which will act as agent for the tendering holders for the purpose of receiving New Notes from the Company and transmitting such New Notes to tendering Holders. In all cases, any exchange of New Notes for Original Notes accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Original Notes (or of a confirmation of a book-entry transfer of such Original Notes in the Exchange Agent's account at the Book Entry Transfer Facility (as defined in "Procedures for Tendering" below)), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other required documents. For a description of the procedures for tendering Original Notes pursuant to the Exchange Offer see "Procedures for Tendering." 23 24 If any tendered Original Notes are not accepted for exchange because of an invalid tender, or due to the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Original Notes will be returned without expense to the tendering holders thereof (or in the case of Original Notes tendered by book entry transfer, such Original Notes will be credited to the account of such holder maintained at the Book Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Exchange Offer. No alternative, conditional or contingent tenders will be accepted. All tendering Holders, by execution of a Letter of Transmittal (or facsimile thereof), waive any right to receive notice of acceptance of their Original Notes for exchange. Holders who tender Original Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Original Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "Fees and Expenses." This Prospectus, together with the Letter of Transmittal, is being sent to registered holders of Original Notes as of , 1997. EXPIRATION DATE; AMENDMENTS; TERMINATION The term "Expiration Date" shall mean 5:00 p.m. New York City time on , 199_, unless the Company, in its sole discretion, extends the Exchange Offer in which case the term "Expiration Date" shall mean the later date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will make a public announcement thereof, each prior to 9:00 a.m. New York City time, on the next business day, after the previously scheduled expiration date of the Exchange Offer. The Company reserves the right, at any time and from time to time, in its sole discretion (subject to its obligations under the Registration Rights Agreement) (i) to delay accepting any Original Notes or to delay the issuance and exchange of New Notes for Original Notes, to extent the Exchange Offer or, if any of the conditions set forth below under "Conditions to the Exchange Offer" shall not have been satisfied, to terminate the Exchange Offer by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner. If the Company extends the period of time during which the Exchange Offer is open, or if it is delayed in accepting for exchange of, or in issuing and exchanging the New Notes for, any Original Notes or is unable to accept for exchange of, or issue New Notes for, any Original Notes pursuant to the Exchange Offer for any reason, then, without prejudice to the Company's rights under the Exchange Offer the Exchange Agent may, on behalf of the Company, retain all Original Notes tendered and such Original Notes may not be withdrawn except as otherwise provided in "Withdrawal of Tenders." The reservation by the Company of the right to delay acceptance for exchange of, or the issuance and the exchange of the New Notes, for any Original Notes is subject to applicable law, including Rule 14e-1(c) under the Exchange Act, which requires that the Company pay the consideration offered or return the Original Notes deposited by or on behalf of the holders thereof promptly after the termination or withdrawal of the Exchange Offer. 24 25 Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered Holders, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered Holders, if the Exchange Offer would otherwise expire during such five to ten business day period. The term "business day" shall mean any day other than Saturday, Sunday or a federal holiday and shall consist of the time period from 12:01 a.m. through 12:00 midnight, New York City time. Without limiting the manner in which the Company may choose to make public announcement of any delay, extension, termination or amendment of the Exchange Offer, the Company shall have no obligation to make public, advertise or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. Any such announcement of an extension of the exchange offer shall be issued no later than 9:00 A.M. New York City time, on the next business day after the previously scheduled expiration of the Exchange Offer. PROCEDURES FOR TENDERING Only a holder of Original Notes may tender such Original Notes in the Exchange Offer. To tender in the Exchange Offer the holder must complete, sign and date the Letter of Transmittal or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with any other required documents, to the Exchange Agent so that delivery is received prior to 5:00 p.m. New York City time, on the Expiration Date. To be tendered effectively, the Letter of Transmittal and other required documents must be received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m. New York City time on the Expiration Date. In addition, either (i) the certificates for the tendered Original Notes must be received by the Exchange Agent along with the Letter of Transmittal or such Original Notes must be received by the Exchange Agent along with the Letter of Transmittal or such Original Notes must be tendered pursuant to the procedures for book entry transfer described below and a confirmation of receipt of such tendered Original Notes must be received by the Exchange Agent in each case, prior to 5:00 p.m. New York City time, on the Expiration Date, or (ii) the tendering holder must comply with the guaranteed delivery procedures described below. NO LETTERS OF TRANSMITTAL, CERTIFICATES REPRESENTING ORIGINAL NOTES OR ANY OTHER REQUIRED DOCUMENTATION SHOULD BE SENT TO THE COMPANY. SUCH DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT. The tender by a holder of Original Notes made pursuant to any method of delivery set forth herein will constitute a binding agreement between such tendering holder and the Company in accordance with the terms and subject to the conditions of the Exchange Offer. The method of delivery of Original Notes and the Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transaction for such holders or for assistance concerning the Exchange Offer. 25 26 Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Original Notes either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. If the Letter of Transmittal is signed by a person other than the registered holder of any Original Notes (which term includes any participants in DTC whose name appears on a security position listing as the owner of the Original Notes) or if the delivery of the Original Notes is to be made to a person other than the registered Holder, such Original Notes must be endorsed or accompanied by a properly completed bond power, in either case signed by such registered holder as such registered Holder's name appears on such Original Notes with the signature on the Original Note or the bond power guaranteed by an Eligible Institution (as defined below). If the Letter of Transmittal or any Original Notes or bond powers are signed by trustees, executors, administrators, guardians, attorney-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and unless waived by the Company must submit with the Letter of Transmittal evidence satisfactory to the Company of their authority to so act. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Original Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal , (ii) for the account of an Eligible Institution, or (iii) for the account of DTC. See Instruction 4 in the Letter of Transmittal. In the event that signatures on a Letter of Transmittal or a notice of withdrawal as the case may be are required to be guaranteed, such guarantee must be by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (any of which is referred to herein as an "Eligible Institution"). The Exchange Agent will establish an account with respect to the Original Notes at DTC (the "Book Entry Transfer Facility") for the purpose of the Exchange Offer promptly after the date of this Prospectus, and any financial institution that is a participant in the Book Entry Transfer Facility's system may make delivery of the Original Notes by causing the Book Entry Transfer Facility to transfer such Original Notes into the Exchange Agent's Notes account in accordance with the Book Entry Transfer Facility's procedure for such transfer. ALTHOUGH DELIVERY OF ORIGINAL NOTES MAY BE EFFECTED THROUGH BOOK ENTRY TRANSFER IN THE EXCHANGE AGENT'S ACCOUNT AT THE BOOK ENTRY TRANSFER FACILITY, THE LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) WITH ALL REQUIRED SIGNATURE GUARANTEES AND ANY OTHER REQUIRED DOCUMENTS MUST, IN ANY CASE, BE TRANSMITTED TO AND RECEIVED AND CONFIRMED BY THE EXCHANGE AGENT AT ITS ADDRESS SET FORTH BELOW PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE, EXCEPT AS OTHERWISE PROVIDED BELOW UNDER THE CAPTION "GUARANTEED DELIVERY PROCEDURES." DELIVERY OF DOCUMENTS TO THE BOOK ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 26 27 All questions as to the validity, form (including time of receipt), acceptance and withdrawal of tendered Original Notes will be determined by the Company in its sole discretion which determination will be final and binding. The Company reserves the absolute right to reject any and all Original Notes determined by the Company not to be validly tendered or any Original Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right to waive any defects, irregularities or conditions of tender as to particular Original Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of the Original Notes will render such tenders invalid unless such defects or irregularities are cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Original Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Any Original Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal as soon as practicable following the Expiration Date. In addition, the Company reserves the right in its sole discretion to purchase or make offers for any Original Notes that remain outstanding subsequent to the Expiration Date, or, as set forth herein, to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase original Notes in the open market privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available, or (ii) who cannot deliver their Original Notes (or complete the procedures for book entry transfer), the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, may nevertheless effect a tender of Original Notes if all of the following conditions are met: (a) the tender is made by or through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail, hand delivery or overnight courier) setting forth the name and address of the Holder, any certificate number(s) of such Original Notes and the principal amount of original Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Original Notes (or a confirmation of a book entry transfer of such Original Notes in the Exchange Agent's account at the Book Entry Transfer Facility) and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof) as well as the certificate(s) representing all tendered Original Notes in proper form for transfer (or a confirmation of book entry transfer of such Original Notes into the Exchange Agent's account at the Book Entry Transfer Facility) and all other documents required by the Letter of Transmittal 27 28 are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. A notice of Guaranteed Delivery is being sent to holders along with this Prospectus and the Letter of Transmittal. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m. New York City time, on the Expiration Date, as such term is defined above under the caption "Expiration Date; Amendments; Termination," unless previously accepted for exchange. If the Company extends the period of time during which the Exchange Offer is open, or if it is delayed in accepting for exchange of, or in issuing and exchanging the New Notes for, any Original Notes or are unable to accept for exchange of, or issue and exchange the New Notes for, any Original Notes pursuant to the Exchange Offer for any reason, then without prejudice to the Company's rights under the Exchange Offer the Exchange Agent may, on behalf of the Company, retain all Original Notes tendered, and such Original Notes may not be withdrawn except as otherwise provided herein, subject to Rule 14e-1(c) under the Exchange Agent which provides that the person making an issuer tender offer shall either pay the consideration offered or return tendered securities, promptly after the termination or withdrawal of the offer. To withdraw a tender of Original Notes in the Exchange Offer a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m. New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Original Notes to be withdrawn (the "Depositor"), (ii) specify the serial numbers on the particular certificates evidencing the Original Notes to be withdrawn and the name of the registered holder thereof (if certificates have been delivered or otherwise identified to the Exchange Agent) or the name and number of the account at DTC to be credited with withdrawn Original Notes (if the Original Notes have been tendered pursuant to the procedures for book entry transfer), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which Original Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Note Registrar with respect to the Original Notes register the transfer of such Original Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Original Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sold discretion, which determination shall be final and binding on all parties. Any Original Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Original Notes so withdrawn are validly tendered. Properly withdrawn Original Notes may be retendered by following one of the procedures described above under "Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other term of the Exchange Offer and without prejudice to the Company's other rights under the Exchange Offer the Company shall not be required to accept for exchange, or exchange New Notes for any Original Notes and may amend or terminate the Exchange Offer as provided herein before the acceptance of such Original Notes if, among other things: 28 29 (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company, or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; or (b) any change, or any development involving a prospective change, in the business or financial affairs of the Company or any of its subsidiaries has occurred which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with respect to the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (c) any law, statute, rule or regulation is proposed, adopted or enacted, which, in the sold judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (d) the New Notes to be received by holders of Original Notes in the Exchange Offer upon receipt, will not be transferable by such holders (other than as "affiliates" of the Company) without restriction under the Securities Act and the Exchange Act and without material restriction under the blue sky laws of substantially all of the states of the United States (subject, in the case of Restricted Holders, to any requirements that such persons comply with the Prospectus Delivery Requirements). If the Company determines in its sole discretion that any of the conditions are not satisfied, the Company may, subject to its obligations under the Registration Rights Agreement to use its best efforts to consummate the Exchange Offer (i) terminate the Exchange Offer and return all tendered Original Notes to tendering holders, (ii) extend the Exchange Offer and, subject to withdrawal rights as set forth in "Withdrawal of Tenders" above, retain all such Original Notes until the expiration of the Exchange Offer as so extended, (iii) waive such condition and, subject to any requirement to extend the period of time during which the Exchange Offer is open, exchange all Original Notes validly tendered for exchange by the Expiration Date and not withdrawn, or (iv) delay acceptance for exchange of, or delay the issuance and exchange of New Notes for, any Original Notes until satisfaction or waiver of such conditions to the Exchange Offer even though the Exchange Offer has expired. The Company's right to delay acceptance for exchange of, or delay the issuance and exchange of New Notes for, Original Notes tendered for exchange pursuant to the Exchange Offer is subject to provisions of applicable law, including, to the extent applicable, Rule 14e-1(c) promulgated under the Exchange Agent which requires that the Company pay the consideration offered or return the Original Notes deposited by or on behalf of holders of Original Notes promptly after termination or withdrawal of the Exchange Offer. For a description of the Company's right to extend the period of time during which the Exchange Offer is open and to amend, delay or terminate the Exchange Offer see "Expiration Date; Amendments; Termination" above. If such waiver constitutes a material change to the Exchange Offer the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, if the Exchange Offer would otherwise expire during such five to ten business day period. 29 30 EXCHANGE AGENT IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Registered or Certified Mail IBJ Schroder Bank & Trust Company P.O. Box 84 Bowling Green Station New York, New York 10274-0084 Attn: Reorganization Operations Department By Overnight Courier or By Hand IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attn: Securities Processing Window, Subcellar One (SC-1) By Facsimile (212) 858-2611 Confirm by Telephone (212) 858-2103 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The expense of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail, however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager or other soliciting agent in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptance of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith and will pay the reasonable fees and expenses of one firm acting as counsel for the holders of Original Notes should such holders deem it advisable to appoint such counsel. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated in the aggregate to be approximately $ . Such expenses include fees and 30 31 expenses of the Exchange Agent, Trustee, Paying Agent and Note Registrar, accounting and legal fees and printing costs, among others. The Company will pay all transfer taxes, if any, applicable to the exchange of Original Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Original Notes for principal amounts not tendered or acceptable for exchange, are to be delivered to, or are to be issued in the name of any person other than the registered holder of the Original Notes tendered, or if tendered Original Notes are registered in the name of any person other than the person signing the Letter of Transmittal or if a transfer tax is imposed for any reason other than the exchange of Original Notes pursuant to the Exchange Offer then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Original Notes as reflected in the Company's accounting records on the date of the exchange. Accordingly no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer will be amortized over the term of the New Notes. TRANSFER TAXES Holders who tender their Original Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register New Notes in the name of, or request that Original Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Original Notes who do not exchange their Original Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfers of such Original Notes as set forth in the legend thereon as a consequence of the issuance of the Original Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Original Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Original Notes under the Securities Act. Based on interpretations by the staff of the Commission, New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such 31 32 jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the New Notes reasonably requests in writing. 32 33 USE OF PROCEEDS The Company will not receive any proceeds from the Exchange Offer. The proceeds from the sale of the Original Notes, net of discounts, were approximately $193.0 million, which was, and will be, used to retire outstanding indebtedness, upgrade its refinery, refurbish existing retail units, acquire new retail units, engage in other capital projects and pay fees and expenses in connection with the Private Offering. CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of June 30, 1997, and reflects the sale of the Original Notes offered by the Company in the Private Offering and the application of the net proceeds therefrom.
AS OF JUNE 30, 1997 ------------------- (UNAUDITED) (Dollars in thousands) Cash and cash equivalents $ 17,925 ======== Long-term debt including current maturities(1): New Bank Credit Facility(2) $ 15,000 10 3/4% Senior Notes due 2007 200,000 Other long-term debt 1,316 -------- Total long-term debt including current maturities 216,316 Stockholder's equity 47,688 -------- Total capitalization $264,004 ========
(1) For a further description of the terms of the Company's long-term debt, see Notes 6 and 7 of Notes to Consolidated Financial Statements. (2) For a further description of the New Bank Credit Facility, see "Description of Certain Indebtedness." 33 34 SELECTED FINANCIAL AND OTHER OPERATING DATA The following table sets forth certain historical financial and operating data (the "Selected Information") as of August 31, 1992, 1993, 1994, 1995, and 1996 and for each of the years in the five-year period ended August 31, 1996 and as of June 30, 1996 and 1997 and for the ten months ended June 30, 1996 and 1997. The selected income statement, balance sheet, financial and ratio data as of and for each of the three years ended August 31, 1996 have been derived from the audited consolidated financial statements of the Company. Such information as of and for each of the two years ended August 31, 1993 have been derived from the unaudited consolidated financial statements of the Company. Such information as of and for the ten months ended June 30, 1996 and 1997 have been derived from the unaudited consolidated financial statements of the Company which include all adjustments, consisting of normal recurring adjustments, which management considers necessary for a fair presentation of the financial position and the results of operations of the Company for such periods. Results for the interim periods are not necessarily indicative of the results for the full year. The audited consolidated financial statements of the Company and related notes thereto as of August 31, 1995 and 1996 and for each of the three years ended August 31, 1996 and the unaudited consolidated financial statements of the Company as of June 30, 1997 and for the ten months ended June 30, 1996 and 1997 and related notes thereto appear elsewhere in this Prospectus. The operating information for all periods presented has been derived from the accounting and financial records of the Company. The Selected Information set forth below should be read in conjunction with, and is qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and notes thereto and other financial information included elsewhere in this Prospectus.
Ten Months Ended Year Ended August 31, June 30 June 30 ------------------------------------------------------------- ----------------------- 1992 1993 1994 1995 1996 1996 1997 (Dollars in thousands, except operating information) INCOME STATEMENT DATA: Net sales $ 799,467 $ 830,054 $ 729,128 $783,686 $ 833,818 $ 669,882 $ 712,071 Gross margin(1) 138,438 162,251 156,898 151,852 168,440 144,051 128,375 Refining operating expenses 47,853 49,835 56,121 56,665 63,218 52,630 51,114 Selling, general and administrative expenses 72,612 72,495 69,158 68,876 70,124 58,920 58,703 Operating income 11,255 33,099 22,580 18,112 26,882 24,646 11,449 Interest expense(2) 16,087 15,377 17,100 18,523 17,606 14,681 13,835 Interest income 1,057 706 1,134 1,204 1,236 1,053 1,073 Other income (expense) (7,365) (2,701) (3,257) 155 (884) (819) (990) Income (loss) before income tax expense (benefit) and extraordinary item (11,140) 15,727 3,357 948 9,628 10,999 (2,303) Income tax expense (benefit) (4,213) 6,687 1,337 487 3,787 4,392 (902) Income (loss) before extraordinary item (6,927) 9,040 2,020 461 5,841 6,607 (1,401) Net income (loss) (6,927) 9,040 490 461 5,841 6,607 (8,054) BALANCE SHEET DATA (AT END OF PERIOD): Total assets $ 251,498 $ 272,995 $ 303,983 $299,283 $ 294,893 $ 313,733 $ 339,562 Total debt 144,822 137,721 158,491 154,095 136,777 137,307 201,316 Total stockholder's equity 53,704 77,235 77,725 78,186 84,027 84,793 47,688 SELECTED FINANCIAL DATA: EBITDA(2) $ 14,842 $ 38,030 $ 29,035 $ 27,159 $ 34,859 $ 32,249 $ 18,211 Depreciation and amortization 6,966 7,073 7,860 8,568 8,505 7,302 7,339 Capital expenditures 14,685 30,680 20,889 12,134 4,562 3,604 3,553 SELECTED RATIOS: EBITDA/interest expense(2) 0.92x 2.47x 1.70x 1.47x 1.98x 2.20x 1.31x Total debt/EBITDA 9.76x 3.62x 5.46x 5.67x 3.92x -- --
34 35
TEN MONTHS ENDED YEAR ENDED AUGUST 31, ----- --------------------- JUNE 30 JUNE 30 1992 1993 1994 1995 1996 1996 1997 --------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT OPERATING INFORMATION) OPERATING INFORMATION (UNAUDITED): Refining Operations: Crude oil input (mbbls/day) 58.5 61.5 57.0 62.4 63.0 62.8 60.7 Utilization(3) 90.0% 94.7% 87.8% 96.0% 96.9% 96.6% 93.5% Total saleable refinery production (mbbls/day) 58.6 62.0 57.2 62.1 63.5 63.5 61.8 Gasoline 29.9 31.4 27.7 30.1 29.9 29.8 28.8 Middle distillates 17.3 18.5 15.6 17.5 18.5 18.8 18.7 Asphalt 8.5 9.0 10.0 11.6 12.2 12.2 11.6 Total saleable products (mbbls/day)(4) 61.1 65.3 62.3 64.1 65.4 65.6 64.5 Gross margin (per bbl) $ 3.07 $ 3.87 $ 4.03 $ 3.48 $ 4.26 $ 4.48 $ 3.81 Refining operating expenses (per bbl) $ 2.14 $ 2.09 $ 2.47 $ 2.42 $ 2.64 $ 2.64 $ 2.61 Retail Network: Number of stores (at period end) 348 345 341 335 327 326 320 Gasoline volume (m gal) 302,240 297,083 292,062 279,454 274,480 226,201 216,110 Gasoline gross margin (cents/gal) 11.8 11.9 13.6 15.7 14.4 14.3 14.7 Average gasoline volume per store (m gal/month) 74 73 72 70 70 69 68 Distillate volume(m gal) 36,066 40,045 37,378 40,480 41,256 34,175 33,805 Distillate gross margin (cents/gal) 9.8 11.7 12.5 12.5 11.9 12.4 11.9 Merchandise sales (000s) $ 68,467 $ 68,607 $ 68,178 $ 70,613 $ 71,686 $ 57,843 $ 60,006 Merchandise gross margin 31.3% 32.6% 30.5% 30.5% 30.6% 30.2% 30.0% Average merchandise sales per store per month (000s) $ 16.4 $ 16.6 $ 16.7 $ 17.6 $ 18.3 $ 17.4 $ 18.8 Retail operating expenses (000s) $ 50,844 $ 51,081 $ 51,892 $ 51,703 $ 53,218 $ 44,478 $ 44,426 Total Sales (000s/store) Convenience stores $ 1,337 $ 1,303 $ 1,270 $ 1,299 $ 1,318 1,074 1,110 Limited gasoline stations 1,067 1,061 1,058 1,102 1,140 937 978 Truckstops 5,961 6,327 6,046 6,516 6,813 5,634 5,806 Other 614 642 659 696 705 573 576
- --------------------------------- (1) Gross margin is defined as gross profit plus refining operating expenses. Refining operating expenses are expenses incurred in refining and included in cost of goods sold in the Company's financial statements. Refining operating expenses equals refining operating expenses per barrel, multiplied by the volume of total saleable products per day, multiplied by the number of days in the period. For fiscal years 1992 and 1993, gross margin for the Company included $9.2 million and $7.6 million, respectively, of gross margin ($0.1 million and $0.6 million, respectively, on an EBITDA basis) from an entity conducting business unrelated to the refining and marketing of petroleum products, which the Company sold to its parent in fiscal 1993. (2) EBITDA is as defined in the Indenture. See "Description of the Notes." EBITDA is presented not as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles), but rather to provide additional information related to the debt servicing ability of the Company. Interest expense as reflected on the Company's financial statements does not include amortization of deferred financing fees. Amortization of deferred financing fees is included in the Company's financial statements in other expense and amounts to $0.5 million, $0.5 million, $0.7 million, 35 36 $0.6 million, $0.5 million, $0.4 million and $0.4 million for fiscal years 1992, 1993, 1994, 1995 and 1996 and for the ten month periods ended June 30, 1996 and 1997, respectively. (3) Refinery utilization is the ratio of crude oil input to the rated capacity of the refinery to process crude oil which is 65,000 bpd. Total input and total yield may be greater than the rated capacity of the refinery because feedstocks other than crude oil, which add to the refinery's yield are utilized in the refining process. The rated capacity of the refinery reflects estimated downtime for scheduled and unscheduled maintenance and other contingencies during which refinery production is reduced. Utilization may therefore exceed 100% if actual downtime is less than estimated downtime. Utilization was lower in fiscal 1994 due to an 18 day turnaround at the crude unit for scheduled maintenance. (4) Includes refined products purchased from others and resold by the Company. 36 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is engaged in the refining and marketing of petroleum products. In fiscal 1996, approximately 60% and 23% of the Company's gasoline and diesel fuel production was sold through the Company's network of service stations and truckstops. The balance of the Company's refined products were sold to wholesale customers. In addition to transportation and heating fuels, primarily gasoline and distillate, the Company is a major regional wholesale marketer of asphalt. The Company also sells convenience merchandise at convenience stores located at most of its service stations. The Company's profitability is influenced by fluctuations in the market prices of crude oil and refined products. Although the Company's product sales mix helps to reduce the impact of large short term variations in crude oil price, net sales and costs of goods sold can fluctuate widely based upon fluctuations in crude oil prices. Specifically, the margins on wholesale gasoline and distillate tend to decline in periods of rapidly declining crude oil prices, while margins on asphalt and retail gasoline and distillate tend to improve. During periods of rapidly rising crude oil prices, margins on wholesale gasoline and distillate tend to improve, while margins on asphalt and retail gasoline and distillate tend to decline. Gross margins on the sale of convenience merchandise have been consistently near 30% for the last five years and are essentially unaffected by variations in crude oil and petroleum product prices. The Company includes in cost of goods sold operating expenses incurred in the refining process. Therefore, operating expenses reflect only selling, general and administrative expenses, including all expenses of the retail network, and depreciation and amortization. RECENT DEVELOPMENTS The Company's operating results since June 30, 1997 have benefited from strong product margins, particularly those for gasoline and asphalt. In addition, the Company has been able to achieve utilization rates in excess of 100% of rated crude oil input capacity. This high utilization was made possible, in part, by the fact that, during a brief crude distillation unit shutdown in late April, the Company took the opportunity to perform maintenance work which allowed higher summer crude oil input rates. RESULTS OF OPERATIONS Comparison of the Ten Months ended June 30, 1997 and June 30, 1996. Net Sales. Net sales increased $42.2 million or 6.3% from $669.9 million for the ten months ended June 30, 1996 to $712.1 million for the ten months ended June 30, 1997. The increase was primarily due to a 10.5% increase in wholesale gasoline and distillate weighted average net selling prices, 7.5% higher retail refined product weighted average selling prices, and a 13.0% increase in average asphalt selling prices. Also contributing to the revenue increase was an 8.6% increase in asphalt sales volume and a 3.7% increase in retail merchandise sales. These increases were partially offset by a 1.5% decrease in wholesale gasoline and distillate volume and by a 4.0% decrease in retail refined products volume. Cost of Goods Sold. Cost of goods sold increased $56.3 million or 9.7% from $578.5 million for the ten months ended June 30, 1996 to $634.8 million for the ten months ended June 30, 1997. The increase was primarily the result of an 18.7% increase in per barrel crude oil costs, partially offset by lower refinery crude oil input volume. The Company's higher crude cost resulted from a rapid increase in world crude oil prices, which peaked in February 1997 at the highest level since the Gulf War. 37 38 Subsequent to February, world crude oil prices and the company's crude costs decreased substantially. The Company's crude oil costs for April, May and June 1997 averaged $2.00 per barrel or 9.4% below those for the corresponding months of the prior year. Operating Expenses. Operating expenses decreased $0.2 million or 0.2% from $66.0 million for the ten months ended June 30, 1996 to $65.8 million for the ten months ended June 30, 1997. Operating Income. Operating income decreased $14.0 million or 55.0% from $25.4 million for the ten months ended June 30, 1996 to $11.4 million for the ten months ended June 30, 1997. Rapidly rising crude costs, peaking in February 1997, reduced retail margins, as retail prices could not be increased as rapidly as crude costs. A rapid drop in industry prices after the February peak reduced wholesale gross margin in February, and to a lesser extent in March, as decreased industry price levels impacted the Company's wholesale product pricing more quickly than they reduced the Company's crude cost. Interest Expense. Net interest expense (interest expense less interest income) declined $0.8 million from $13.6 million for the ten months ended June 30, 1996 to $12.8 million for the ten months ended June 30, 1997. The decrease was due to a reduction in the amount of long-term debt outstanding in December 1996, until the sale in June 1997 of $200 million of Senior Notes. Income Taxes. The provisions for income taxes for the ten month periods ended June 30, 1996 and 1997 have been computed with effective tax rates of approximately 40% and 39% respectively. Extraordinary Items. In June 1997, the Company incurred an extraordinary charge of $6.7 million (net of an income tax benefit of $4.2 million) as a result of "make-whole premiums" paid and financing costs written-off in connection with the early retirement of its 11.50% and 13.50% Senior Unsecured Notes. Comparison of Fiscal 1996 and Fiscal 1995 Net Sales. Net sales increased $50.1 million or 6.4% from $783.7 million in fiscal 1995 to $833.8 million in fiscal 1996. This was the result of a 3.5% volume increase in refined product sales corresponding to higher refinery throughput, as well as a 5.3% increase in weighted average net selling prices of refined products. The 3.5% volume increase in refined product sales consisted of a 5.9% increase in wholesale refined product volume combined with a 1.3% volume decrease in retail sales. The decreased retail volume resulted from factors including the Company's closure of eight retail units and retail expansion by competitors. Sales of convenience merchandise at retail units increased by $1.1 million or 1.5% due to new marketing techniques, introduction of new merchandise items and redesigns of store layouts. Cost of Goods Sold. Cost of goods sold increased $40.1 million or 5.8% from $688.5 million in fiscal 1995 to $728.6 million in fiscal 1996. This was due to a 7.0% increase in the per barrel cost of crude oil purchases as well as a 2.5% increase in the volume of crude oil and other feedstocks purchased. The increase in the Company's per barrel crude cost was in line with the general increase in market crude oil prices. Operating Expenses. Operating expenses increased $1.3 million or 1.6% from $77.1 million in fiscal 1995 to $78.3 million in fiscal 1996. This was due to increases in retail operating expenses due to an intensified retail station maintenance program and to expenses for snow removal and similar items related to unusually severe weather in the second fiscal quarter of fiscal 1996. 38 39 Operating Income. Operating income increased $8.8 million or 48.4% from $18.1 million in fiscal 1995 to $26.9 million in fiscal 1996. Rising crude costs in the third quarter of fiscal 1996 reduced retail and asphalt margins, but this was more than offset by the improvement in wholesale gasoline and distillate margins, as the Company was able to increase wholesale product prices in step with crude oil price increases, while deriving significant benefit from processing crude oil purchased approximately 30 days earlier at lower prices. The magnitude of the wholesale improvement is reflected in a refinery gross margin improvement from $3.48/bbl in fiscal 1995 to $4.26/bbl in fiscal 1996. Also contributing to increased earnings was a $1.1 million increase in convenience merchandise sales. Interest Expense. Net interest expense declined $0.9 million from $17.3 million in fiscal 1995 to $16.4 million in fiscal 1996 due to a reduction in the Company's long-term debt outstanding. Income Taxes. The Company's effective tax rate for fiscal 1996 was approximately 39.3% compared to a rate of 51.4% for fiscal 1995. The high 1995 effective rate reflects the effects of certain permanently non-deductible expenses for tax purposes, against minimal pre-tax book income. Comparison of Fiscal 1995 and Fiscal 1994. Net Sales. Net sales increased $54.6 million or 7.5% from $729.1 million in fiscal 1994 to $783.7 million in fiscal 1995, partially as a result of a 4.9% increase in volume sales of products versus fiscal 1994 when production was reduced due to a scheduled refinery turnaround. Also contributing to the increased sales revenue was a 5.9% increase in average net selling prices of refined products. The distribution of pricing changes was uneven, however, with gasoline net selling prices increasing 8.7% and distillate net selling prices declining by 3.4%. The drop in distillate prices was primarily due to an unusually mild winter in fiscal 1995, which depressed demand for home heating oil, along with the absence of the large price premium for low sulfur diesel which had been obtained early in fiscal 1994, when sale of this product was first mandated under the Clean Air Act Amendments of 1990. Contributing to the net revenue increase was a $2.4 million increase in convenience merchandise sales. Cost of Goods Sold. Cost of goods sold increased $60.1 million or 9.6% from $628.4 million in fiscal 1994 to $688.5 in fiscal 1995. This was due to an 8.1% increase in volume of crude and other feedstocks purchased, and to a 13.3% increase in per barrel crude oil cost. Operating Expenses. Operating expenses decreased $1.1 million from $78.2 million in fiscal 1994 to $77.1 million in fiscal 1995. This decrease was the result of a nonrecurring expense in 1994 of $1.6 million, $0.8 million of increased depreciation, primarily due to increased depreciation on the distillate hydrotreater, and $0.3 million of decreased selling, general and administrative expenses. Operating Income. Operating income decreased $4.5 million or 19.8% from $22.6 million in fiscal 1994 to $18.1 million in fiscal 1995. This decrease was largely due to the increase in the cost of crude oil, and the failure of wholesale product prices to keep pace, primarily because of declines in distillate prices. The decline in wholesale margin was partially offset by improved retail refined products margins, as well as by a $2.4 million increase in convenience merchandise sales. Interest Expense. Net interest expense increased $1.3 million from $16.0 million in fiscal 1994 to $17.3 million in fiscal 1995. This increase was primarily related to increased interest expense on the Company's $41.8 million principal amount of 11.50% Senior Unsecured Notes due December 2003 which were issued in January 1994. Under the terms of the note agreement pursuant to which these notes were 39 40 issued, the interest rate per annum increased 0.25% each quarter as long as the Company's revolving credit facility was secured, up to a maximum of 2.0% over the initial interest rate. Income Taxes. The Company's effective tax rate for fiscal 1995 was 51.4% compared to a rate of 39.8% for fiscal 1994. The high 1995 effective tax rate reflects the effect, of certain permanently non-deductible expenses for tax purposes, against minimal pre-tax book income. LIQUIDITY AND CAPITAL RESOURCES Working capital (current assets minus current liabilities) at June 30, 1997, was $103.3 million and at August 31, 1995 and 1996 was $44.5 million and $39.9 million, respectively. The Company's current ratio (current assets divided by current liabilities) was 2.57:1 at June 30, 1997, and was 1.69:1 and 1.59:1 at August 31, 1995 and 1996, respectively. Net cash used in operating activities totaled $21.1 million for the ten months ended June 30, 1997 compared to $2.4 million for the ten months ended June 30, 1996. Net cash provided by operating activities equaled $25.0 million in 1996 compared to $17.6 million in 1995 and $0.5 million in 1994. Net cash used in investing activities for purchases of property, plant and equipment and other assets totaled $43.4 million for the ten months ended June 30, 1997. This compares to $3.0 million for the ten months ended June 30, 1996. For the ten months ended June 30, 1997, investments included $40.0 million in government securities and commercial paper maturing through December 1997. Net cash used in investing activities for purchases of property, plant and equipment and other assets totaled $3.9 million, $11.5 million and $17.4 million for all of 1996, 1995 and 1994, respectively. Fiscal 1994 and 1995 saw the completion of major projects including installation of equipment for the production of reformulated gasoline, a distillate hydrotreater and a sulfur recovery unit, while in fiscal 1996 expenditures were primarily for enhancements to existing units. The Company reviews its capital expenditures on an ongoing basis. Including the pending refinery expansion and retail improvement program, the Company has budgeted approximately $19.3 million for capital expenditures in fiscal 1997. Approximately $3.9 million of the total capital expenditure budget is related to the cost of compliance with environmental regulations relating to underground storage tanks. The Company currently has budgeted approximately $28.2 million for capital expenditures in fiscal 1998 with $2.9 million for completion of projects relating to underground storage tanks. The remaining $15.4 million for fiscal 1997 and $25.3 million for fiscal 1998 is budgeted for the refinery expansion and retail capital improvement program, refinery environmental compliance and routine maintenance. The refinery expansion and retail capital improvement program is expected to be completed in fiscal 1999. Maintenance and non-discretionary capital expenditures have averaged approximately $4 million annually over the last three years for the refining and marketing operations. Future liquidity, both short and long-term, will continue to be primarily dependent on realizing a refinery margin sufficient to cover fixed and variable expenses, including planned capital expenditures. The Company expects to be able to meet its working capital, capital expenditure and debt service requirements out of cash flow from operations, the proceeds of the Private Offering and borrowings under the New Bank Credit Facility. Although the Company is not aware of any pending circumstances which would change its expectation, changes in the tax laws, the imposition of and changes in federal and state clean air and clean fuel requirements and other changes in environmental laws and regulations may also increase future capital expenditure levels. Future capital expenditures are also subject to business 40 41 conditions affecting the industry. The Company continues to investigate strategic acquisitions and capital improvements to its existing facilities. Simultaneously with the consummation of the Private Offering, PNC Bank ("PNC") provided the Company and one of its subsidiaries a New Bank Credit Facility. Subject to borrowing base limitations and the satisfaction of customary borrowing conditions, the Company and such subsidiary are permitted to borrow up to $35 million under the New Bank Credit Facility. As of June 30, 1997, there was $15 million of indebtedness outstanding under the New Bank Credit Facility. The revolving credit loans bear interest at PNC's Base Rate (defined as the higher of PNC's prime rate or the Federal Funds rate plus 0.50%) plus up to an additional 0.75% per annum or at LIBOR plus an additional 2.25% per annum based upon the ratio of the Company's total indebtedness to EBITDA (as such terms are defined in the New Bank Credit Facility) as of the end of each fiscal quarter. The New Bank Credit Facility terminates on June 9, 2002, unless sooner terminated at the Company's option or upon an event of default and outstanding revolving credit loans will be payable on such date or such earlier date as they may be accelerated following the occurrence of an event of default. Federal, state and local laws and regulations relating to the environment affect nearly all the operations of the Company. As is the case with all the companies engaged in similar industries, the Company faces significant exposure from actual or potential claims and lawsuits involving environmental matters. Future expenditures related to environmental matters cannot be reasonably quantified in many circumstances due to the uncertainties as to required remediation methods and related clean-up cost estimates. The Company cannot predict what additional environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied. SEASONAL FACTORS Seasonal factors affecting the Company's business may cause variation in the prices and margins of some of the Company's products. For example, demand for gasoline tends to be highest in spring and summer months, while demand for home heating oil and kerosene tends to be highest in winter months. As a result, the margin on gasoline prices versus crude oil costs generally tends to increase in the spring and summer, while margins on home heating oil and kerosene tend to increase in winter. The Company therefore adjusts its refinery operations to increase production of gasoline in the spring and summer and to increase production of heating oil and kerosene in the winter. Also, because winter weather in the Company's market is not favorable for paving activity, the Company's asphalt sales in winter months are composed of a much lower percentage of paving asphalt and a correspondingly higher percentage of roofing asphalt whose demand is much less seasonal. In addition, the Company stores a significant portion of winter asphalt production for sale the following spring and summer. INFLATION The effect of inflation on the Company has not been significant during the last five fiscal years. 41 42 BUSINESS INTRODUCTION The Company is a leading integrated refiner and marketer of petroleum products in its primary market area, which encompasses western New York and northwestern Pennsylvania. The Company owns and operates a medium complexity 65,000 barrel per day ("bpd") petroleum refinery in Warren, Pennsylvania where it produces a variety of products, including various grades of gasoline, diesel fuel, kerosene, jet fuel, No. 2 heating oil, and asphalt. The Company sells gasoline and diesel fuel under the Kwik Fill(R) brand name at a network of 320 Company-operated retail units, 226 of which are owned by the Company. In fiscal 1996 approximately 60% and 23% of the Company's gasoline and diesel fuel production, respectively, was sold through this network. The Company operates convenience stores at most of its retail units, primarily under the Red Apple Food Mart(R) brand name. The Company also sells its petroleum products to long-standing regional wholesale customers. For the 12 months ended June 30, 1997 the Company had total revenues of approximately $876.0 million, of which approximately 55% were derived from gasoline sales, approximately 37% were from sales of other petroleum products and approximately 8% were from sales of non-petroleum products. The Company's capacity utilization rates have ranged from approximately 88% to approximately 97% over the last five years. In fiscal 1996, approximately 75% of the Company's refinery output consisted of higher value products such as gasoline and distillates. The Company believes that the location of its 65,000 bpd refinery in Warren, Pennsylvania provides it with a transportation cost advantage over its competitors, which is significant within an approximately 100-mile radius of the Company's refinery. For example, in Buffalo, New York over its last five fiscal years, the Company has experienced an approximately 2.1 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. The Company owns and operates the Kiantone Pipeline, a 78 mile long crude oil pipeline which connects the refinery to Canadian, U.S. and world crude oil sources through the Interprovincial Pipe Line/Lakehead Pipeline system ("IPL"). Utilizing the storage facilities of the pipeline, the Company is able to blend various grades of crude oil from different suppliers, allowing it to efficiently schedule production while managing feedstock mix and product yields in order to optimize profitability. In addition to its transportation cost advantage, the Company has benefited from a reduction in regional production capacity of approximately 103,000 bpd brought about by the closure during the 1980s of two competing refineries in Buffalo, New York, owned by Ashland Inc. and Mobil Oil Corporation. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and the Company believes that no significant production from such refinery is currently shipped into the Company's primary market area. It is the Company's view that the high construction costs and the stringent regulatory requirements inherent in petroleum refinery operations make it uneconomical for new competing refineries to be constructed in the Company's primary market area. During the period from January 1, 1979 to August 31, 1996, the Company spent approximately $199 million on capital improvements to increase the capacity and efficiency of its refinery and to meet environmental requirements. These capital expenditures have: (i) substantially rebuilt and upgraded the refinery, (ii) enhanced the refinery's capability to comply with applicable environmental regulations, (iii) increased the refinery's efficiency and (iv) helped maximize profit margins by permitting the processing of lower cost, high sulfur crudes. 42 43 The Company's primary market area is western New York and northwestern Pennsylvania and its core market encompasses its Warren County base and the eight contiguous counties in New York and Pennsylvania. The Company's retail gasoline and merchandise sales are split approximately 60%/40% between rural and urban markets. Margins on gasoline sales are traditionally higher in rural markets, while gasoline sales volume is greater in urban markets. The Company's urban markets include Buffalo, Rochester and Syracuse, New York and Erie, Pennsylvania. The Company believes it has higher profitability per store than its average convenience store competitor. In 1995, convenience store operating profit per store averaged approximately $70,100 for the Company, as compared to approximately $66,500 for the industry as a whole according to industry data compiled by the NACS. The Company is one of the largest marketers of refined petroleum products within its core market area according to a study commissioned by the Company from Gerke. The Company currently operates 320 retail units, of which 180 are located in New York, 128 in Pennsylvania and 12 in Ohio. The Company owns 226 of these units. In fiscal 1996, approximately 60% of the refinery's gasoline production was sold through the Company's retail network. In addition to gasoline, all units sell convenience merchandise, 39 have delicatessens and eight of the units are full-service truck stops. Customers may pay for purchases with credit cards including the Company's own "Kwik Fill" credit card. In addition to this credit card, the Company maintains a fleet credit card catering to regional truck and automobile fleets. Sales of convenience products, which tend to have constant margins throughout the year, have served to reduce the effects of the seasonality inherent in gasoline retail margins. The Company has consolidated its entire retail system under the Red Apple Food Mart(R) and Kwik Fill(R) brand names, providing the chain with a greater regional brand awareness. INDUSTRY OVERVIEW Worldwide demand for petroleum products rose from an average 67.6 million bpd in 1993 to 68.9 million bpd in 1994, 70.1 million bpd in 1995 and 71.7 million bpd in 1996, according to the International Energy Agency. While much of the increase has been in developing countries, increases in demand have also occurred in the developed industrial countries. The Company believes that worldwide economic growth will continue to raise demand for energy and petroleum products. U.S. refined petroleum product demand increased in 1996 for the fifth consecutive year. Following the economic recession and Persian Gulf War in 1990 and 1991, U.S. refined petroleum product demand increased from an average of 16.7 million bpd in 1991 to 17.7 million bpd in 1995 based on information published by the U.S. Energy Information Administration (the "EIA") and to 18.2 million bpd in 1996 according to preliminary EIA industry statistics reported by the Oil & Gas Journal. The increase in U.S. refined petroleum demand is largely the result of demand for gasoline, jet fuel and highway diesel fuel which increased from 10.0 million bpd in 1991 to 11.0 million bpd in 1995 based on industry information reported by EIA and the Department of Transportation Federal Highway Administration ("FHA") and to 11.2 million bpd in 1996 based on preliminary industry statistics reported by the Oil & Gas Journal (based on information from EIA) and the FHA. The Company believes that this is a reflection of the steady increase in economic activity in the U.S. The U.S. vehicle fleet has grown, miles driven per vehicle have increased and fuel efficiency has dropped as consumers have shown an increased preference for light trucks and sport utility vehicles. In addition, passenger seat-miles flown by domestic airlines have increased. Gasoline demand has increased from an average of 7.2 million bpd in 1991 to 7.8 million bpd in 1995 and to 7.9 million bpd in 1996. The Company believes that demand for transportation fuels will continue to track domestic economic growth. 43 44 Asphalt is a residual product of the crude oil refining process which is used primarily for construction and maintenance of roads and highways and as a component of roofing shingles. Distribution of asphalt is localized, usually within a distance of 150 miles from a refinery or terminal, and demand is influenced by levels of federal, state, and local government funding for highway construction and maintenance and by levels of roofing construction activities. The Company believes that an ongoing need for highway maintenance and domestic economic growth will sustain asphalt demand. In addition, Congress recently approved legislation that shifts 4.3 cents of the federal tax on motor fuels out of the U.S. Treasury's general fund into the Highway Trust Fund effective October 1, 1997. The Congressional Budget estimates that by adding revenues from 4.3 cents per gallon tax, total tax deposits to the Highway Trust Fund will rise from $24.5 billion in 1997 to $31.4 billion in 1998. The additional tax revenues will be split between the Trust Funds highway account and the mass transit account with 3.45 cents to highways and 0.85 cents to mass transit. The Company believes that domestic refining capacity utilization is close to maximum sustainable limits because of the existing high throughput coupled with a reduction in refining capacity. The following table sets forth selected U.S. refinery information published by the Oil & Gas Journal and EIA:
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ----------------------------------------------------------------------------------------------- Operable annual average refining capacity (million bpd)* 18.3 18.6 17.4 16.7 16.0 15.7 15.5 15.6 15.9 15.7 15.6 15.7 15.5 15.1 15.1 15.4 15 3 Crude input to refineries (million bpd) 13.5 12.5 11.8 11.7 12.0 12.0 12.7 12.9 13.2 13.4 13.4 13.3 13.4 13.6 13.9 14.0 14 2 Utilization (in percent) 73.8 67.0 67.5 70.1 75.1 76.6 82.3 82.2 83.1 85.3 85.8 84.7 86.7 89.9 91.5 90.9
- -------------------- * Includes operating and operable but currently shutdown refineries Since 1990 the refining sector of the domestic petroleum industry has been required to make significant capital expenditures, primarily to comply with federal environmental statutes and regulations, including the Clean Air Act, as amended ("CAA"). Capital expenditures were required to equip refineries to manufacture cleaner burning reformulated gasoline ("RFG") and low sulfur diesel fuel. From 1990 to 1994 refining sector capital expenditures have totaled over $27 billion, of which approximately $13 billion, or 46%, was for environmental compliance. The American Petroleum Institute ("API") and the Oil & Gas Journal have estimated that the refining sector made the following capital expenditures during such time:
1990 1991 1992 1993 1994 Total ----------------------------------------------- Total capital expenditure (billions) $ 4.4 $ 6.7 $ 6.1 $ 5.4 $ 5.1 $ 27.7 Environmental capital expenditure (billions) $ 1.3 $ 1.8 $ 3.3 $ 3.2 $ 3.1 $ 12.7 Environmental/total 29% 27% 53% 60% 61% 46%
1995 and 1996 total refining sector capital expenditures are estimated to be approximately $4.9 billion and $3.9 billion, respectively, based on information published by the Oil & Gas Journal. 44 45 The Company believes that high utilization rates and the reduction in refinery crude processing capacity coupled with little anticipated crude capacity expansion is likely to result over the long term in improved operating margins in the refining industry. The Company is a regional refiner and marketer located primarily in Petroleum Administration for Defense District ("PADD") I. As of January 1, 1997, there were 17 refineries operating in PADD I with a combined crude processing capacity of 1.5 million bpd, representing approximately 10% of U.S. refining capacity. Petroleum product consumption in 1995 in PADD I averaged 5.3 million bpd, representing approximately 30% of U.S. demand based on industry statistics reported by EIA. According to the Lundberg Letter, an industry newsletter, total gasoline consumption in the region grew by approximately 2.4% during 1995 in response to improving economic conditions. Refined petroleum production in PADD I is insufficient to satisfy demand for such products in the region, making PADD I a net importer of such products. BUSINESS STRATEGY The Company's goal is to strengthen its position as a leading producer and marketer of high quality refined petroleum products within its primary market area. The Company plans to accomplish this goal through continued attention to optimizing the Company's operations at the lowest possible cost, improving and enhancing the profitability of the Company's retail assets and capitalizing on opportunities present in its refinery assets. More specifically, the Company intends to: - Maximize the transportation cost advantage afforded the Company by its geographic location by increasing retail and wholesale market shares within its primary market area. - Expand sales of higher margin specialty products such as jet fuel, premium diesel, roofing asphalt and SHARP specification paving asphalt. - Expand and upgrade its refinery to increase rated crude oil throughput capacity from 65,000 bpd to 70,000 bpd, improve the yield of finished products from crude oil inputs and lower refinery costs through improved energy efficiency and refinery debottlenecking. - Optimize profitability by managing feedstock costs, product yields, and inventories through its recently improved refinery feedstock linear programming model and its systemwide distribution model. - Make capital investments in retail marketing to rebuild or refurbish 70 existing retail units and to acquire three new retail units. In addition, the Company plans to improve its comprehensive retail management information system which allows management to be informed and respond promptly to market changes, inventory levels, and overhead variances and to monitor daily sales, cash receipts, and overall individual location performance. REFINING OPERATIONS The Company's refinery is located on a 92 acre site in Warren, Pennsylvania. The refinery has a rated capacity of 65,000 bpd of crude oil processing. The refinery averaged saleable production of approximately 63,500 bpd during fiscal 1996 and approximately 60,700 bpd during the ten months ended June 30, 1997. The Company produces three primary petroleum products: gasoline, middle distillates and 45 46 asphalt. The Company believes its geographic location in the product short PADD I is a marketing advantage. The Company's refinery is located in northwestern Pennsylvania and is geographically distant from the majority of PADD I refining capacity. The nearest fuels refinery is over 160 miles from Warren, Pennsylvania and the Company believes that no significant production from such refinery is currently shipped into the Company's primary market area. The refinery was established in 1902 but has been substantially rebuilt and expanded. From January 1, 1979 to August 31, 1996, the Company spent approximately $199 million on capital improvements to increase the capacity and efficiency of its refinery and to meet environmental requirements. Major investments have included the following: - Between 1979 and 1983, the Company spent over $76 million expanding the capacity of the refinery from 45,000 bpd to 65,000 bpd. The expansion included a new crude unit and a fluid catalytic cracking unit. This increase in the capacity of the refinery had the effect of reducing per barrel operating costs and allowing the refinery to benefit from increased economies of scale. - In fiscal 1987, the Company installed an isomerization unit, at a cost of $10.1 million, which enabled the refinery to produce higher octane unleaded gasoline. - In fiscal 1988, the Company spent $6.1 million for the expansion of its wastewater plant, a new electrostatic precipitator and new fuel gas scrubbers, which allowed the refinery to meet environmental standards for wastewater quality, particulate emissions and sulfur dioxide emissions from refinery fuel gas. - In fiscal 1990, the Company spent $3.3 million installing a wet gas compressor at the fluid catalytic cracker, increasing the refinery's gasoline production capacity. - In fiscal 1993, a distillate hydrotreater was built to produce low sulfur diesel fuel (less than 0.05% sulfur content) in compliance with requirements of the CAA for the sale of on-road diesel. This unit has a present capacity of 16,000 bpd; however, its reactor was designed to process 20,000 bpd. In connection with this installation, a sulfur recovery unit was built which has the capacity of recovering up to 60 tons per day of raw sulfur removed from refined products. In fiscal 1996 the unit was running at approximately 60% of capacity giving the Company the opportunity to run higher sulfur content crudes as opportunities arise. The capital expenditures for these two projects were approximately $42.0 million. - In fiscal 1994, the Company spent approximately $7.4 million to enable the refinery to produce RFG for its marketing area. Although not currently mandated by federal law, Pennsylvania and New York had opted into the EPA program for RFG for counties within the Company's marketing area with an effective date of January 1, 1995. However, both states elected to "opt out" of the program late in December 1994. The Company believes that it will be able to produce RFG without incurring substantial additional fixed costs if the use of RFG is mandated in the future in the Company's marketing area. Products 46 47 The Company presently produces two grades of unleaded gasoline, 87 octane regular and 93 octane premium. The Company also blends its 87 and 93 octane gasoline to produce a mid-grade 89 octane. In fiscal 1996, approximately 59.7% of the Company's gasoline production was sold through its retail network and the remaining 40.3% of such production was sold to wholesale customers. Middle distillates include kerosene, diesel fuel, heating oil (No. 2 oil) and jet fuel. In fiscal 1996 the Company sold approximately 85.5% of its middle distillate production to wholesale customers and the remaining 14.5% at the Company's retail units, primarily at the Company's eight truck stops. The Company also produces aviation fuels for commercial airlines (Jet-A) and military aircraft (JP-8). The Company optimizes its bottom of the barrel processing by producing asphalt, a higher value alternative to residual fuel oil. Asphalt production as a percentage of all refinery production has increased over the last three fiscal years due to the Company's ability and decision to process a larger amount of less costly higher sulfur content crudes in order to realize higher overall refining margins. The following table sets forth the refinery's product yield during the three years ended August 31, 1996 and for the ten months ended June 30, 1996 and 1997: REFINERY PRODUCT YIELD(1) (THOUSANDS OF BARRELS)
Fiscal Year Ended August 31, Ten Months Ended ---------------------------------------------------- ------------------------------ June 30, June 30, 1994 1995 1996 1996 1997 Volume Percent Volume Percent Volume Percent Volume Percent Volume Percent -------------- -------------- -------------- -------------- --------------- Gasoline Regular (87 octane) 7,413 33.8% 8,770 37.0% 8,952 36.9% 7,340 36.4% 7,526 38.6% Midgrade (89 octane) -- -- 288 1.2% 249 1.0% 249 1.2% -- -- Premium (93 octane) 2,681 12.2% 1,918 8.1% 1,741 7.2% 1,457 7.2% 1,208 6.2% Middle distillates Kerosene 336 1.5% 322 1.4% 377 1.6% 351 1.7% 411 2.1% Diesel fuel 2,049 9.4% 4,195 17.7% 4,177 17.2% 3,403 16.9% 3,667 18.8% No. 2 heating oil 3,287 15.0% 1,609 6.8% 1,770 7.3% 1,594 7.9% 1,261 6.5% Jet fuel 24 0.1% 253 1.1% 445 1.8% 367 1.8% 334 1.7% Asphalt 3,636 16.6% 4,228 17.9% 4,479 18.5% 3,708 18.4% 3,522 18.1% Other(2) 1,437 6.6% 1,076 4.5% 1,043 4.3% 837 4.1% 780 4.0% ------ ----- ------ ---- ------ ---- ------ ----- ------ ----- Saleable yield 20,863 95.3% 22,659 95.7% 23,233 95.8% 19,306 95.6% 18,709 96.0% Refining fuel 1,605 7.3% 1,559 6.6% 1,603 6.6% 1,345 6.7% 1,240 6.4% ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- Total product yield(3) 22,468 102.6% 24,218 102.3% 24,836 102.4% 20,651 102.3% 19,949 102.4%
- --------------------------------- (1) Percent yields are percentage of refinery input. (2) Includes primarily butane, propane and sulfur. (3) Total product yield is greater than 100% due to the processing of crude oil into products which, in total, are less dense and therefore, have a higher volume than the raw materials processed. Refining Process The Company's production of petroleum products from crude oil involves many complex steps which are briefly summarized below. The Company seeks to maximize refinery profitability by selecting crude oil and other feedstocks taking into account factors including product demand and pricing in the Company's market areas as well as price, quality and availability of various grades of crude oil. The Company also considers product inventory 47 48 levels and any planned turnarounds of refinery units for maintenance. The combination of these factors is optimized by a sophisticated proprietary linear programming computer model which selects the most profitable feedstock and product mix. The linear programming model is continuously updated and improved to reflect changes in the product market place and in the refinery's processing capability. Blended crude is stored in a tank farm near the refinery which has a capacity of approximately 200,000 barrels. The blended crude is then brought into the refinery where it is first distilled at low pressure into its component streams in the crude and preflash unit. This yields the following intermediate products: light products consisting of fuel gas components (methane and ethane) and LPG (propane and butane), naphtha or gasoline, kerosene, diesel or heating oil, heavy atmospheric distillate and crude tower bottoms which are further distilled under vacuum conditions to yield light and heavy vacuum distillates and asphalt. The present capacity of the crude unit is 65,000 bpd. The intermediate products are then processed in downstream units that produce finished products. A naphtha hydrotreater treats naphtha with hydrogen across a fixed bed catalyst to remove sulfur before further treatment. The treated naphtha is then distilled into light and heavy naphtha at a prefractionator. Light naphtha is then sent to an isomerization unit and heavy naphtha is sent to a reformer in each case for octane enhancement. The isomerization unit converts the light naphtha catalytically into a gasoline component with 83 octane. The reformer unit converts the heavy naphtha into another gasoline component with up to 94 octane depending upon the desired octane requirement for the grade of gasoline to be produced. The reformer also produces as a co-product all the hydrogen needed to operate hydrotreating units in the refinery. Raw kerosene or heating oil is treated with hydrogen at a distillate hydotreater to remove sulfur and make finished kerosene, jet fuels and No. 2 fuel oil. A new distillate hydrotreater built in 1993 also treats raw distillates to produce low sulfur diesel fuel. The long molecular chains of the heavy atmospheric and vacuum distillates are broken or "cracked" in the fluidized catalytic cracking unit and separated and recovered in the gas concentration unit to produce fuel gas, propylene, butylene, LPG, gasoline, light cycle oil and clarified oil. Fuel gas is burned within the refinery, propylene is fed to a polymerization unit which polymerizes its molecules into a larger chain to produce an 87 octane gasoline component, butylene is fed into an alkylation unit to produce a gasoline component and LPG is treated to remove trace quantities of water and then sold. Clarified oil is burned in the refinery or sold. Various refinery gasoline components are blended together in refinery tankage to produce 87 octane and 93 octane finished gasoline. Likewise, light cycle oil is blended with other distillates to produce low sulfur diesel and No. 2 fuel oil. Although the major components of the downstream units are capable of producing finished products based on an 80,000 bpd crude rate the 65,000 bpd rated capacity of the crude unit currently limits sustainable crude oil input to that level or less. The Company intends to use a portion of the proceeds of the Private Offering to expand the capacity of the crude unit to 70,000 bpd. The Company's refining configuration allows the processing of a wide variety of crude oil inputs. Historically, its inputs have been of Canadian origin and range from light low sulfur (38 degrees API, 0.5% sulfur) to high sulfur heavy asphaltic (25 degrees API, 2.8% sulfur). The Company's ability to market asphalt enables it to purchase selected heavier crudes at a lower cost. 48 49 Set forth below is a diagram which outlines the major steps and components of the Company's refining process. Diagram outlines the major steps and components of the Company's refining process. 49 50 Supply of Crude Oil Even though the Company's crude supply is currently nearly all Canadian, the Company is not dependent on this source alone. Within 60 days, the Company could shift up to 85% of its crude oil requirements to some combination of domestic and offshore crude. With additional time, 100% of its crude requirements could be obtained from non-Canadian sources. The Company utilizes Canadian crude because it affords the Company the highest refining margins currently available. The Company's contracts with its crude suppliers are on a month-to-month evergreen basis, with 30-to-60 day cancellation provisions. As of June 30, 1997 the Company had supply contracts with 18 different suppliers for an aggregate of 61,000 bpd of crude oil. The Company's contracts with Husky Trading Company and Pancanadian Petroleum Limited covered an aggregate of 13,500 and 12,000 bpd, respectively. As of such date the Company had no other contract covering more than 10% of its crude oil supply. The Company accesses crude through the Kiantone Pipeline, which connects with the IPL in West Seneca, New York which is near Buffalo. The IPL provides access to most North American and foreign crude oils through three primary routes: (i) Canadian crude is transported eastward from Alberta and other points in Canada along the IPL; (ii) various mid-continent crudes from Texas, Oklahoma and Kansas are transported northeast along the Cushing-Chicago Pipeline, which connects to the IPL at Griffith, Indiana; and (iii) foreign crudes unloaded at the Louisiana Offshore Oil Port are transported north via the Capline and Chicago pipelines which connect to the IPL at Mokena, Illinois. The Kiantone Pipeline, a 78-mile Company-owned and operated pipeline, connects the Company's West Seneca, New York terminal at the pipeline's northern terminus to the refinery's tank farm at its southern terminus. The Company completed construction of the Kiantone Pipeline in 1971 and has operated it continuously since then. The Company is the sole shipper on the Kiantone Pipeline, and can currently transport up to 68,000 bpd along the pipeline. The pipeline's flow rate can be increased to approximately 72,000 bpd through the injection of surfactants into the crude being transported. The Company believes that the cost of the surfactants required to increase pipeline flow to 70,000 bpd would be approximately $0.2 million per annum. Additional increases in flow rate to a maximum rate of 80,000 bpd are possible with the installation of pumps along the pipeline at an estimated cost of $2.6 million. The Company's right to maintain the pipeline is derived from approximately 265 separate easements, right-of-way agreements, licenses, permits, leases and similar agreements. The pipeline operation is monitored by a computer located at the refinery. Shipments of crude arriving at the West Seneca terminal are separated and stored in one of the terminal's three storage tanks, which have an aggregate storage capacity of 485,000 barrels. The refinery tank farm has two additional crude storage tanks with a total capacity of 200,000 barrels. An additional 35,000 barrels can be stored at the refinery. Turnarounds Turnaround cycles vary for different refinery units. A planned turnaround of each of the two major refinery units--the crude unit and the fluid catalytic cracking unit--is conducted approximately every three or four years, during which time such units are shut down for internal inspection and repair. A turnaround, which generally takes two to four weeks to complete in the case of the two major refinery units, consists of a series of moderate to extensive maintenance exercises. Turnarounds are planned and accomplished in a manner that allows for reduced production during maintenance instead of a complete plant shutdown. The Company completed its latest turnarounds of the crude unit and the fluid catalytic 50 51 cracking unit in March 1994 and April 1994, respectively, and is scheduled to complete turnarounds for the fluid catalytic cracking unit in the fall of 1997 and the crude unit in the spring of 1998 during which times it intends to complete certain of the projects to be financed with the proceeds of the Private Offering. The Company accrues on a monthly basis a charge for the maintenance work to be conducted as part of turnarounds of major units. The costs of turnarounds of other units are expensed as incurred. It is anticipated that the turnarounds to be conducted in the fall of 1997 and spring of 1998 will cost approximately $7.0 million, exclusive of projects to be financed with the proceeds of the Private Offering. The Company began accruing charges for the 1997 and 1998 turnarounds in May 1994. Refinery Expansion and Improvement The Company intends to use approximately $14.8 million of the proceeds of the Private Offering over the next two years to expand and upgrade its refinery to increase rated crude oil throughput capacity from 65,000 to 70,000 bpd, improve the yield of finished products from crude inputs and lower refinery costs. Each of the key projects was selected because the Company believes that it has a relatively rapid pay back rate and improves profitability at low as well as high crude throughput rates. The Company anticipates that the total completion time for the projects will be two years. Most of the projects are scheduled to coincide with the turnarounds planned for the fall of 1997 and spring of 1998. The key projects are: (i) the addition of convection sections to two existing furnaces for energy savings, (ii) the installation of a new vacuum tower bottoms exchanger to recover waste heat, (iii) the replacement of the fluid catalytic cracker feed nozzle to improve product yield, (iv) the modification of the reformer for low pressure operation to improve product yield, (v) the modification of the alkylation unit to improve efficiency, (vi) the installation of advanced computer controls for the crude unit and fluid catalytic cracking unit to improve product yield and reduce operating expense and (vii) modifications to two boilers, water wash tower and compressor to improve product yield and reduce operating expense. MARKETING AND DISTRIBUTION General The Company has a long history of service within its market area. The Company's first retail service station was established in 1927 near the Warren refinery and over the next seventy years its distribution network has steadily expanded. Major acquisitions of competing retail networks occurred in 1983, with the acquisition of 78 sites from Ashland Oil Company and in 1989 to 1991, with the acquisition of 53 sites from Sun Oil Company and Busy Bee Stores, Inc. The Company maintains an approximate 60/40% split between sales at its rural and urban units. The Company believes this to be advantageous, balancing the higher gross margins often achievable due to decreased competition in rural areas with higher volumes in urban areas. The Company believes that its rural convenience store units provide an important alternative to traditional grocery store formats. In fiscal 1996, approximately 60% and 23% of the Company's gasoline and diesel fuel production, respectively, was sold through this retail network. Retail Operations The Company operates a retail marketing network that includes 320 retail units, of which 180 are located in western New York, 128 in northwestern Pennsylvania and 12 in east Ohio. The Company owns 226 of these units. Gasoline at these retail units is sold under the brand name "Kwik Fill". Most retail 51 52 units operate under the brand name Red Apple Food Mart(R). The Company believes that Red Apple Food Mart(R) and Kwik Fill(R) are well-recognized names in the Company's marketing areas. The Company believes that the operation of its retail units provides it with a significant advantage over competitors that operate wholly or partly through dealer arrangements because the Company has greater control over pricing and operating expenses, thus establishing a potential for improved margins. The Company classifies its stores into four categories: convenience stores, limited gasoline stations, truck stop facilities and other stores. Full convenience stores have a wide variety of foods and beverages and self-service gasoline. Thirty-nine of such units also have delicatessens where food (primarily submarine sandwiches, pizza, chicken and lunch platters) is prepared on the premises for retail sales and also distribution to other nearby Company units which do not have in-store delicatessens. Mini convenience stores sell snacks and beverages and self-service gasoline. Limited gasoline stations sell gasoline as well as oil and related car care products and provide full service for gasoline customers. They also sell cigarettes, candy and beverages. Truckstop facilities sell gasoline and diesel fuel on a self-service and full-service basis. All truckstops include either a full or mini convenience store. Four of the truckstops include either an expanded delicatessen area with seating or an on-site restaurant and shower facilities. In addition, two of the truck stops have stand alone restaurants and one has a truck repair garage. These three facilities are classified separately in the table below as "other stores." As of June 30, 1997, the average sales areas of the Company's convenience stores, limited gasoline stations, truckstops and other stores were 700, 200, 1,140 and 2,520 square feet, respectively. The table below sets forth certain information concerning the stores as of and for the fiscal year ended August 31, 1994, 1995 and 1996:
Average Monthly Average Monthly Average Monthly Store Format and Number of Gasoline Gallonage Diesel Fuel Gallonage Merchandise Sales Stores at August 31, 1996 (Thousands) (Thousands) (Thousands) - -------------------------- Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended August 31, August 31, August 31, 1994 1995 1996 1994 1995 1996 1994 1995 1996 -------------------------- ----------------------- -------------------------- Convenience (184) 13,430 12,764 12,554 326 302 345 $4,530 $4,636 $4,671 Limited Gasoline Stations (132) 10,299 9,902 9,734 158 165 177 634 699 749 Truck Stops (8) 610 622 586 2,631 2,907 2,916 353 375 377 Other Stores(3) 0 0 0 0 0 0 165 174 176 ------ ------ ------ ----- ----- ----- ------ ------ ------ Total (327) 24,339 23,288 22,874 3,115 3,374 3,438 $5,682 $5,884 $5,973
The Company's strategy has been to maintain diversification between rural and urban markets within its region. Retail gasoline and merchandise sales are split approximately 60%/40% between rural and urban markets. Margins on gasoline sales are traditionally higher in rural markets, while gasoline sales volume is greater in urban markets. In addition, more opportunities for convenience store sales have arisen with the closing of local independent grocery stores in the rural areas of New York and Pennsylvania. The Company believes it has higher profitability per store than its average convenience store competitor. In 1995, convenience store operating profit per store averaged approximately $70,100 for the Company, as compared to approximately $66,500 for the industry as a whole, according to industry data compiled by the NACS. Total merchandise sales for fiscal year 1996 were $71.7 million, with a gross profit of approximately $21.9 million. Over the last five fiscal years, merchandise gross margins have averaged over 30% and the Company believes that merchandise sales will continue to remain a stable source of gross profit. 52 53 Merchandise Supply The Company's primary merchandise vendor is Tripifoods, which is located in Buffalo, New York. During fiscal 1996, the Company purchased approximately 47% of its convenience merchandise from this vendor. Tripifoods supplies the Company with tobacco products, candy, deli foods, grocery, health and beauty products, and sundry items on a cost plus basis for resale. The Company also purchases dairy products, beer, soda, snacks, and novelty goods from direct store vendors for resale. The Company annually reviews its suppliers' costs and services versus those of alternate suppliers. The Company believes that alternative sources of merchandise supply at competitive prices are readily available. Location Performance Tracking The Company maintains a store tracking mechanism whereby transmissions are made five times a week to collect operating data including sales and inventory levels. Data transmissions are made using either hand held programmable data collection units or personal computers which are available at each location. Once verified, the data interfaces with a variety of retail accounting systems which support daily, weekly and monthly performance reports. These different reports are then provided to both the field management and office staff. Following significant capital improvements, management closely tracks "before and after" performance, to observe the return on investment which has resulted from the improvements. Capital Improvement Program The Company intends to use approximately $20.0 million of the proceeds of the Private Offering over the next two years to rebuild or refurbish 70 existing retail units and to acquire three new retail units. The program targets approximately 60% of the funds to units within 100 miles of the refinery, thereby taking advantage of the Company's transportation cost advantage. Management believes that these capital improvements will enable the Company's retail network to absorb through retail sales at Company-operated units a majority of the additional gasoline and diesel production resulting from the concurrent refinery upgrade with the remaining production being sold to wholesale customers. In developing its retail capital improvement program, the Company considered and evaluated over 90 units. For each location the Company generally made sales and expense projections in comparison to the Company's five year historical average performance for similar facilities based on geographic proximity or type of location or both. In some cases only projected gasoline increases were considered. In all cases the incremental profitability was calculated using the 1996 average margins on petroleum and merchandise specific to a given site. All projects were then ranked based on the projected return on investment. While the retail projects include the Company's entire marketing area, the greatest emphasis has been placed on units closest to the refinery. The substantial majority of the capital to be expended in the program involves the rebuilding or refurbishment of existing facilities, including the enhancement of existing stores and the upgrading of petroleum dispensing units. Rebuilds include the development of previously undeveloped properties, as well as the total removal of existing facilities for replacement with efficient, modern and "sales smart" facilities. Generally, rebuilt structures will be in one of two styles which have previously been used by the Company and have resulted in improved sales performance. The plan incorporates 31 rebuild projects. The construction cycle is expected to accommodate 15 to 16 rebuilds during each building season and hence is expected to be 53 54 completed within two years after the consummation of the Private Offering. Nine projects involve improvements to existing facilities, such as enhancements to sales counters, flooring, ceilings, lighting and windows and the addition of more coolers and freezers, rather than complete rebuilds. Some projects are limited to the confines of the existing marketing area while others convert unused space to additional marketing area. In some cases an addition to the existing building will be made. All refurbishment projects are expected to be completed in the 12 months after consummation of the Private Offering. Petroleum upgrades include the removal of existing petroleum dispensing equipment, the repositioning of the dispensing area for optimal visibility, accessibility and throughput, the installation of new petroleum dispensing equipment and the installation of a custom canopy which is designed and sized according to the number of dispensers and fueling positions that it will cover and which is equipped with improved lighting to enhance the visibility and appeal of the unit. The petroleum dispensing units to be installed have multiple product dispensers with six hoses per unit (three per side) offering three grades of product. The dispensers are capable of offering several marketing enhancements, such as built-in credit card readers, cash acceptors, video advertising and fuel blending. The petroleum upgrades will be performed simultaneously with the underground storage tank upgrades which must be completed prior to December 22, 1998. The Company estimates that about 50% of the petroleum upgrades will be performed within 12 months after the consummation of the Private Offering and the remaining upgrades will be completed within the following 12 months. Wholesale Marketing and Distribution The Company sells, on a wholesale basis, approximately 36,200 bpd of gasoline, distillate and asphalt products to distributor, commercial and government accounts. In addition, the Company sells 1,000 bpd of propane to liquefied petroleum gas marketers. In fiscal 1996, the Company's output of gasoline, distillate and asphalt sold at wholesale was 40%, 85% and 100%, respectively. The Company sells 96% of its wholesale gasoline and distillate products from its Company-owned and operated product terminals. The remaining 4% is sold through six third-party exchange terminals located in East Freedom, Pennsylvania; Rochester, Syracuse, Vestal and Brewerton, New York; and Niles, Ohio. The Company's wholesale gasoline customer base includes 64 branded dealer/distributor units operating under the Company's proprietary "Keystone" brand name. Long-term Keystone dealer/distributor contracts accounted for approximately 16% of the Company's wholesale gasoline sales in fiscal 1996. Supply contracts generally range from three to five years in length, with Keystone branded prices based on the prevailing Company wholesale rack price in Warren. The Company believes that the location of its refinery provides it with a transportation cost advantage over its competitors which is significant within an approximately 100-mile radius of the Company's refinery. For example, in Buffalo, New York over its last five fiscal years, the Company has experienced an approximately 2.1 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. In addition to this transportation cost advantage, the Company's proximity to local accounts allows it a greater range of shipment options, including the ability to deliver truckload quantities of approximately 200 barrels versus much larger 25,000 barrel pipeline batch deliveries, and faster response time, which the Company believes help it provide enhanced service to its customers. The Company's ability to market asphalt is critical to the performance of its refinery, since such marketing ability enables the Company to process lower cost higher sulfur content crude oils which in turn 54 55 affords the Company higher refining margins. Sales of paving asphalt generally occur during the summer months due primarily to weather conditions. In order to maximize its asphalt sales, the Company has made substantial investments to increase its asphalt storage capacity through the installation of additional tanks, as well as through the purchase or lease of outside terminals. Partially mitigating the seasonality of the asphalt paving business is the Company's ability to sell asphalt year-round to roofing shingle manufacturers, which accounted for approximately 23% of its total asphalt sales over the Company's last five fiscal years. In fiscal 1996, the Company sold 4.8 million barrels of asphalt while producing 4.5 million barrels. The refinery was unable to produce enough asphalt to satisfy the demand and, therefore, purchased 300,000 barrels for resale at a profit. The Company has a significant share of the asphalt market in the cities of Pittsburgh, Pennsylvania and Rochester and Buffalo, New York. The Company distributes asphalt from the refinery by railcar and truck transport to its owned and leased asphalt terminals in such cities or their suburbs. The Company also operates a terminal at Cordova, Alabama giving it a presence in the Southeast. Asphalt can be purchased in the Gulf Coast area and delivered by barge to third party or Company-owned terminals near Pittsburgh. The Company's wide asphalt terminal network allows the Company to enter into product exchanges between units, as a means to balance supply and demand. The Company uses a network of eight terminals to store and distribute refined products. The Company's gasoline, distillate and asphalt terminals and their respective capacities in barrels as of June 30, 1997 were as follows:
Gasoline Distillate Asphalt Total Terminal Location Capacity Capacity Capacity Capacity - ----------------- -------- -------- -------- -------- Warren, Pennsylvania 697,000 451,000 1,004,000 2,152,000 Tonawanda, New York 60,000 190,000 75,000 325,000 Rochester, New York -- 190,000 -- 190,000 Pittsford, New York* -- -- 170,000 170,000 Springdale, Pennsylvania -- -- 130,000 130,000 Dravosburg, Pennsylvania* -- -- 100,000 100,000 Cordova, Alabama -- -- 200,000 200,000 Butler, Pennsylvania -- -- 10,000 10,000 ------- ------- --------- --------- Total 757,000 831,000 1,689,000 3,277,000 ======= ======= ========= =========
- --------------------------------- * Leased During fiscal 1996, approximately 90% of the Company's refined products were transported from the refinery to retail units, wholesale customers and product storage terminals via truck transports, with the remaining 10% transported by rail. The majority of the Company's wholesale and retail gasoline distribution is handled by common carrier trucking companies at competitive costs. The Company also operates a fleet of eight gasoline tank trucks that supply approximately 20% of its Kwik Fill retail stations. Product distribution costs to both retail units and wholesale accounts are minimized through product exchanges. Through these exchanges, the Company has access to product supplies at 34 terminals located throughout the Company's retail market area. The Company seeks to minimize retail distribution costs through the use of a system wide distribution model. ENVIRONMENTAL CONSIDERATIONS 55 56 The Company is subject to federal, state and local laws and regulations relating to pollution and protection of the environment such as those governing releases of certain materials into the environment and the storage, treatment, transportation, disposal and clean-up of wastes, including, but not limited to, the Federal Clean Water Act, as amended, the CAA, the Resource Conservation and Recovery Act of 1976, as amended, Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and analogous state and local laws and regulations. The Company believes that its refinery and other operations are in substantial compliance with all applicable environmental requirements including those relating to wastewater discharge, particulate emissions, sulfur in fuel gas, vapor recovery at the loading rack, volatile organic compounds and solid waste. However, the Company has entered into a Consent Order and Agreement with the Pennsylvania Department of Environmental Resources (the "DER") under the Clean Streams Law and the Storage Tank and Spill Prevention Act to, among other things, perform ongoing investigations to define the extent, if any, of on-site ground water contamination at its refinery and to remove and contain any such contamination. The Company is currently conducting groundwater remediation on-site. The Company is currently contesting a proposal by DER to extend the investigation to adjacent properties. In addition, in 1996, the DER issued a notice of violation requiring the Company to install vapor controls on the refinery's API separator, which the Company intends to install in 1997 at a cost of approximately $150,000. The Company has been identified by the EPA as a potentially responsible party ("PRP") under CERCLA with respect to the Pollution Abatement Services Site in Oswego, New York, the Batavia Landfill Site in Batavia, New York and the Frontier Chemical Superfund Site in Niagara Falls, New York based on the alleged shipment of materials to them by the Company. Based upon available information, including the substantial number of other PRPs and the relatively small share of costs expected to be allocated to it, the Company does not believe that any ultimate liability relating to those sites will be material. In 1995, the Pennsylvania Environmental Defense Foundation ("PEDF") commenced a lawsuit in the United States District Court for the Western District of Pennsylvania under the Federal Water Pollution Control Act, as amended, against the Company alleging ongoing violations of discharge limits in the Company's waste-water discharge permit on substances discharged to the Allegheny River at its refinery in Warren, Pennsylvania. PEDF seeks to enjoin the alleged ongoing violations, an assessment of civil penalties up to $25,000 per day per violation, and an award of attorneys' fees. The Company has filed a motion for summary judgment seeking dismissal of the action. Based upon available information, and its belief that the discharges are in substantial compliance with applicable requirements, the Company believes this action will not result in any material adverse effect upon its operations or consolidated financial condition. Based on its experience to date, the Company believes that none of these matters or any future costs of compliance with existing environmental protection law and health and safety laws and regulations or liability for other known environmental claims, will have a material adverse effect on the Company's business and consolidated financial condition. However, the actual costs associated with known requirements could be substantial and future events, such as the discovery of presently unknown environmental conditions and changes in existing laws and regulations or their interpretation or more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material to the Company's business and consolidated financial condition. 56 57 The Clean Air Act Amendments of 1990 In 1990 the CAA was amended to greatly expand the role of the government in controlling product quality. The legislation included provisions that have significantly impacted the manufacture of both gasoline and diesel fuel including the requirement for significantly lower sulfur content and a limit on aromatics content in diesel fuel. The Company is able to satisfy these requirements. Diesel Fuel Sulfur and Aromatics Content The EPA issued rules under the CAA which became effective in October 1993 which limit the sulfur and aromatics content of diesel fuels nationwide. The rules required refiners to reduce the sulfur in on-highway diesel fuel from 0.5 Wt.% to 0.05 Wt.%. The Company meets these specifications of the CAA for all of its on-highway diesel production. The Company's on-road diesel represented 75% of its total distillate sales in fiscal 1996. Since the reduction of sulfur in diesel required some new investment at most refineries, a two-tier market has developed in distillate sales. Due to capital constraints and timing issues, as well as strategic decisions not to invest in diesel fuel desulfurization, some other refineries are unable to produce specification highway diesel. Reformulated Gasoline The CAA requires that by January 1, 1995 RFG be sold in the nine worst ozone non-attainment areas of the U.S. None of these areas is within the Company's marketing area. However, the CAA enabled the EPA to specify 87 other, less serious ozone non-attainment areas that could opt into this program. In 1994, the Company spent approximately $7.4 million to enable its refinery to produce RFG for its marketing area because the Governors of Pennsylvania and New York had opted into the RFG program. In December 1994 such states elected to "opt out" of the program. The CAA also contains provisions requiring oxygenated fuels in carbon monoxide non-attainment areas to reduce pollution. There are currently no carbon monoxide non-attainment areas in the Company's primary marketing area. Conventional Gasoline Quality In addition to reformulated and oxygenated gasoline requirements, the Environmental Protection Agency has promulgated regulations under the CAA which relate to the quality of "conventional" gasoline and which require expanded reporting of the quality of such gasoline by refiners. Substantially all of the Company's gasoline sales are of conventional gasoline. The Company closely monitors the quality of the gasoline it produces to assure compliance at the lowest possible cost with CAA regulations. Underground Storage Tank Upgrade The Company is currently undergoing a tank replacement/retrofitting program at its retail units to comply with regulations promulgated by the EPA. These regulations require new tanks to meet all performance standards at the time of installation. Existing tanks can be upgraded to meet such standards. The upgrade requires retrofitting for corrosion protection (cathodic protection, interior lining or a combination of the two), spill protection (catch basins to contain spills from delivery hoses) and overfill protection (automatic shut off devices or overfill alarms). As of June 30, 1997, approximately 48% of the 57 58 total sites had been completed, and the Company expects to be in total compliance with the regulations by the December 22, 1998 mandated deadline. As of December 31, 1996 the total remaining cost of the upgrade was estimated to be $5.9 million. LEGAL PROCEEDINGS From time to time, the Company and its subsidiaries are parties to various legal proceedings that arise in the ordinary course of the Company's business, including various administrative proceedings relating to federal, state and local environmental matters. The Company's management believes that if the legal proceedings in which the Company is currently involved were determined against the Company, they would not have a material adverse effect on the Company's consolidated results of operations or financial condition. COMPETITION Petroleum refining and marketing is highly competitive. The Company's major retail competitors include British Petroleum, Citgo, Amerada Hess, Mobil and Sun Oil Company. With respect to wholesale gasoline and distillate sales, the Company competes with Sun Oil Company, Mobil and other major refiners. The Company primarily competes with Marathon Oil Company and Ashland Oil Company in the asphalt market. Many of the Company's principal competitors are integrated multinational oil companies that are substantially larger and better known than the Company. Because of their diversity, integration of operations, larger capitalization and greater resources, these major oil companies may be better able to withstand volatile market conditions, compete on the basis of price and more readily obtain crude oil in times of shortages. The principal competitive factors affecting the Company's refining operations are crude oil and other feedstock costs, refinery efficiency, refinery product mix and product distribution and transportation costs. Certain of the Company's larger competitors have refineries which are larger and more complex and, as a result, could have lower per barrel costs or higher margins per barrel of throughput. The Company has no crude oil reserves and is not engaged in exploration. The Company believes that it will be able to obtain adequate crude oil and other feedstocks at generally competitive prices for the foreseeable future. The withdrawal of retail marketing operations in New York in the early 1980's by Ashland, Texaco, Gulf and Exxon significantly reduced competition from major oil companies in New York and substantially enhanced the Company's market position. The Company believes that the high construction costs and stringent regulatory requirements inherent in petroleum refinery operations makes it uneconomical for new competing refineries to be constructed in the Company's primary market area. The Company believes that the location of its refinery provides it with a transportation cost advantage over its competitors, which is significant within an approximately 100-mile radius of the Company's refinery. For example, in Buffalo, New York over the last five fiscal years, the Company has experienced an approximately 2.1 cents per gallon transportation cost advantage over those competitors who are required to ship gasoline by pipeline and truck from New York Harbor sources to Buffalo. The principal competitive factors affecting the Company's retail marketing network are location of stores, product price and quality, appearance and cleanliness of stores and brand identification. Competition from large, integrated oil companies, as well as from convenience stores which sell motor fuel, is expected to continue. The principal competitive factors affecting the Company's wholesale 58 59 marketing business are product price and quality, reliability and availability of supply and location of distribution points. EMPLOYEES As of June 30, 1997 the Company had approximately 1,375 full-time and 1,649 part-time employees. Approximately 2,377 persons were employed at the Company's retail units, 300 persons at the Company's refinery, 50 at the Kiantone pipeline and at terminals operated by the Company and the balance at the Company's corporate offices in Warren, Pennsylvania. The Company has entered into collective bargaining agreements with International Union of Operating Engineers Local No. 95, United Steel Workers of America Local No. 2122-A, the International Union of Plant Guard Workers of America Local No. 502 and General Teamsters Local Union No. 397 covering 196, 6, 23 and 17 employees, respectively. The agreements expire on February 1, 2001, January 31, 2000, June 25, 1999 and July 31, 2000, respectively. The Company believes that its relationship with its employees is good. INTELLECTUAL PROPERTY The Company owns various federal and state service marks used by the Company, including Kwik-Fill(R), United(R) and Keystone(R). The Company has obtained the right to use the Red Apple Food Mart(R) service mark to identify its retail units under a royalty-free, nonexclusive, nontransferable license from Red Apple Supermarkets, Inc., a corporation which is indirectly wholly owned by John A. Catsimatidis, the sole stockholder, Chairman of the Board and Chief Executive Officer of the Company. The license is for an indefinite term. The licensor has the right to terminate this license in the event that the Company fails to maintain quality acceptable to the licensor. The Company licenses the right to use the trademark Keystone(R) to approximately 65 independent distributors on a non-exclusive royalty-free basis for contracted wholesale sales of gasoline and distillates. The Company does not own any patents. Management believes that the Company does not infringe upon the patent rights of others nor does the Company's lack of patents have a material adverse effect on the business of the Company. INSURANCE The Company maintains a full schedule of insurance coverage, including property insurance, business interruption insurance and general liability insurance. The property insurance policy has a combined loss limit for property loss at the Company's refinery and business interruption of $249 million in excess of (i) a $1 million self-insured retention and (ii) a deductible, which in the case of property insurance is $250,000, and in the case of business interruption insurance is an amount equal to lost profits for a period of five days. The Company's primary liability coverage has a limit of $1 million per occurrence with a $150,000 self-insured retention on the refinery operations and a $50,000 self-insured retention on the retail operations. In addition to the primary coverage the Company carries another $50 million of umbrella liability insurance coverage. The Company also carries other insurance customary in the industry. PROPERTIES The Company owns a 92-acre site in Warren, Pennsylvania upon which it operates its refinery. The site also contains a building housing the Company's principal executive offices. 59 60 The Company owns various real property in the states of Pennsylvania, New York and Ohio upon which it operates 226 retail units and two crude oil and six refined product storage terminals. The Company also owns the 78 mile long Kiantone Pipeline, a pipeline which connects a crude oil storage terminal to the refinery's tank farm. The Company's right to maintain the pipeline is derived from approximately 265 separate easements, right-of-way agreements, leases, permits, and similar agreements. The Company also has easements, right-of-way agreements, leases, permits and similar agreements which would enable the Company to build a second pipeline on property contiguous to the Kiantone Pipeline. The Company also leases an aggregate of 94 sites in Pennsylvania, New York and Ohio upon which it operates retail units. As of December 31, 1996, the leases had an average remaining term of 27 months, exclusive of option terms. Annual rents on such retail units range from $2,400 to $74,500. 60 61 MANAGEMENT DIRECTORS AND OFFICERS The directors and executive officers of the Company are as follows:
Name Age Director - ---- --- Position -------- Since ----- John A. Catsimatidis 48 1986 Chairman of the Board, Chief Executive Officer and Director Myron L. Turfitt 45 1988 President, Chief Operating Officer and Director Thomas C. Covert 63 1988 Vice Chairman and Director Ashton L. Ditka 56 --- Senior Vice President--Marketing Thomas E. Skarada 54 --- Vice President--Refining Frederick J. Martin, Jr. 43 --- Vice President--Supply and Transportation James E. Murphy 51 --- Vice President and Chief Financial Officer Dennis E. Bee, Jr. 55 --- Treasurer Martin R. Bring 54 1988 Director Evan Evans 71 1997 Director Kishore Lall 50 1997 Director Douglas Lemmonds 50 1997 Director Andrew Maloney 65 1997 Director Dennis Mehiel 54 1997 Director
JOHN A. CATSIMATIDIS has been Chairman of the Board and Chief Executive Officer of the Company since February 1986, when his wholly-owned company, United Acquisition Corp., purchased the parent of the Company. He also served as President of the Company from February 1986 until September 1996. He also serves as Chairman of the Board, Chief Executive Officer, President, and was the founder of Red Apple Group, Inc. (a holding company for certain businesses, including corporations which operate supermarkets in New York); Chief Executive Officer and Director of Sloan's Supermarkets, Inc., a public company whose common stock is listed on the American Stock Exchange and operates supermarkets in New York; a director of News Communications, Inc., a public company whose stock is traded over-the-counter; and Fonda Paper Company, Inc., a privately held company. MYRON L. TURFITT has been President and Chief Operating Officer of the Company since September 1996. From June 1987 to September 1996 he was Chief Financial Officer and Executive Vice President of the Company. From August 1983 until June 1987 he was Senior Vice President--Finance and from July 1981 to August 1983, Mr. Turfitt held the position of Vice President, Accounting and Administration. Mr. Turfitt is a CPA with over 22 years of financial and operations experience in all phases of the petroleum business including exploration and production, refining and retail marketing. His experience covers both fully-integrated major oil companies and large independents. THOMAS C. COVERT has been Vice Chairman of the Company since September 1996. From December 1987 to September 1996 he was Executive Vice President and Chief Operating Officer of the Company and from June 1986 to December 1987 he was Executive Vice President--Manufacturing of the Company. Mr. Covert was Executive Vice President of Prudential Energy Company from 1983 until June 1986. Prior thereto Mr. Covert was Vice President--Refining of Coastal Corporation. Mr. Covert is a 61 62 petroleum expert with over 35 years of experience in the international and domestic petroleum industry. He is experienced in all phases of integrated oil company operations including crude oil and gas production, refining, marketing, marine and pipeline. ASHTON L. DITKA has been Senior Vice President--Marketing of the Company since July 1990. From December 1989 to July 1990 he was Vice President--Wholesale & Retail Marketing and from August 1976 until December 1989 he was Vice President--Wholesale Marketing. Mr. Ditka has over 30 years of experience in the petroleum industry, including 11 years in retail marketing with Atlantic Richfield Company. THOMAS E. SKARADA has been Vice President--Refining of the Company since February 1996. From September 1994 to February 1996 he was Assistant Vice President--Refining and from March 1993, when he joined the Company, to September 1994 he was Director of Regulatory Compliance. Over his 30 year refining and marketing career, Mr. Skarada has worked in virtually every segment of the downstream business including supply, distribution, refinery operations, economics, planning, research and development. He has 18 years of managerial experience with Sun Refining and Marketing Co. and one year consulting with Muse Stancil and Co. in Dallas, Texas. FREDERICK J. MARTIN, JR. has been Vice President--Supply and Transportation of the Company since February 1993. From 1980 to January 1993 he held other positions in the Company involving transportation, product supply, crude supply and pipeline and terminal administration. JAMES E. MURPHY has been Chief Financial Officer of the Company since January 1997. He was Vice President--Finance from April 1995 to December 1996 and since May 1982 has held other accounting and internal auditing positions with the Company, including Director of Internal Auditing since April 1986. Prior to joining the Company, Mr. Murphy had over 10 years experience in accounting and auditing with banking, public accounting and manufacturing companies. DENNIS E. BEE, JR. has been Treasurer of the Company since May 1988. Prior thereto and since he joined the Company in 1977, Mr. Bee held various positions in the accounting department including Assistant Treasurer from July 1982 to May 1988. MARTIN R. BRING is a member of the law firm of Lowenthal, Landau, Fischer & Bring, P.C., New York, New York. He also serves as a Director for both The He-Ro Group, Ltd., an apparel manufacturer and Sloan's Supermarkets, Inc., a supermarket chain. EVAN EVANS is the Chairman of Holvan Properties, Inc., a privately owned petroleum industry consulting firm, a director of U.S. Energy Systems, Inc., a public company whose common stock is quoted on the Nasdaq SmallCap Market, and a director of Alexander-Allen, Inc., a privately owned company which owns a refinery in Alabama which is currently shut down. KISHORE LALL is an independent consultant. Prior to becoming a consultant in 1994, Mr. Lall was Senior Vice President and head of commercial banking of ABN AMRO Bank, New York branch from 1990 to 1994. In his capacity as head of commercial banking with ABN AMRO, Mr. Lall also served on the Management and Credit Committees. DOUGLAS LEMMONDS has been a Managing Director and the Chief Operating Officer, Private Banking-Americas of the Deutsche Bank Group since May 1996. Private Banking-Americas operates across four separate legal entities, including a registered investment advisor, a broker-dealer, a trust 62 63 company and a commercial bank. From June 1991 to May 1996 Mr. Lemmonds was the Regional Director of Private Banking of the Northeast Regional Office of the Bank of America and from August 1973 to June 1991 he held various other positions with Bank of America. ANDREW MALONEY has been a partner of Brown & Wood LLP, a New York law firm, since December 1992. From June 1986 to December 1992 he was the United States Attorney for the Eastern District of New York. DENNIS MEHIEL has been Chairman and Chief Executive Officer of The Fonda Group, Inc. since 1988. Since 1966 he has been the Chairman of Four M, a converter and seller of interior packaging, corrugated sheets and corrugated containers which he co-founded, and since 1977 (except during a leave of absence from April 1994 through July 1995) he has been the Chief Executive Officer of Four M. Mr. Mehiel is also the Chairman of MannKraft Corporation, a manufacturer of corrugated containers, and Chief Executive Officer and Chairman of Creative Expressions, Group, Inc. EXECUTIVE COMPENSATION The following table sets forth for fiscal years 1994, 1995 and 1996 the compensation paid by the Company to its Chairman of the Board and Chief Executive Officer and each of the four other executive officers of the Company whose salary and bonus exceeded $100,000 during fiscal year 1996. SUMMARY COMPENSATION TABLE Annual Compensation -------------------
Other Other Annual Annual Compensa- Compensa- Name and Principal Position Year Salary($) Bonus($) tion(1) ($) tion(2) ($) - --------------------------- ---- --------- -------- ----------- ----------- John A. Catsimatidis, 1996 $360,000 $205,000 -- $4,750 Chairman of the Board and 1995 360,000 205,000 -- 4,620 Chief Executive Officer 1994 360,000 205,000 -- 4,620 Myron L. Turfitt, 1996 235,000 120,000 2,600 4,750 President and 1995 235,000 120,000 2,167 4,620 Chief Operating Officer 1994 235,000 120,000 3,195 4,620 Thomas C. Covert, 1996 185,000 120,000 4,099 4,750 Vice Chairman(3) 1995 185,000 120,000 4,745 4,620 1994 185,000 120,000 4,644 4,620 Ashton L. Ditka, 1996 125,558 6,100 3,262 3,660 Senior Vice President-- 1995 122,000 6,100 3,089 3,660 Marketing 1994 118,000 6,000 2,532 3,540 Geoffrey S. Soares, 1996 108,033 5,300 5,554 3,267 Vice President--Planning 1995 105,000 5,250 5,512 3,150 and Development(4) 1994 101,000 5,700 4,762 3,330
- -------------------------------- (1) All amounts are automobile allowances. (2) All amounts are Company matching contributions under the Company's 401(k) Incentive Savings Plan. (3) Mr. Covert retired September 1, 1996, but continues to serve the Company as Vice Chairman and as a director. 63 64 (4) Mr. Soares resigned on January 10, 1997. EMPLOYMENT AND CONSULTING AGREEMENTS Myron L. Turfitt is employed by the Company pursuant to an Employment and Termination Benefits Agreement dated June 30, 1993. The agreement is for a five year term expiring on May 31, 1998 and provides for an annual salary of $235,000 and a cash bonus to be paid in the discretion of the Board of Directors. Additional benefits include participation in the Company's Flexible Benefit Plan or the provision by the Company to Mr. Turfitt of benefits comparable thereto for male individuals of the same age. In the event that the Company terminates Mr. Turfitt's employment without cause, Mr. Turfitt is entitled to his full compensation over the remaining term of the agreement. If Mr. Turfitt's employment is terminated due to death, legal incapacity or a mental or physical disability, Mr. Turfitt or his estate will be entitled to compensation for a period equal to the lesser of one year after the date of termination or the remaining term of the agreement. If Mr. Turfitt's employment is terminated by the Company for specified acts constituting "cause", he will not be entitled to further compensation under the agreement after the date of his termination. If the agreement is terminated within three years after a change of control (as defined in the agreement) other than as a result of Mr. Turfitt's death, total and permanent disability or his voluntarily termination for good reason (as defined in the agreement), then Mr. Turfitt is entitled to termination benefits equal to the greater of (a) the full compensation payable to him over the remaining term of the agreement or (b) 300% of his average compensation for the three years out of the five most recent calendar years ended immediately before the year in which the change of control occurs during which Mr. Turfitt earned the highest compensation under the agreement. Mr. Turfitt is also the Vice President-Finance of Red Apple Group, Inc. ("RAG"), a corporation which is wholly owned by John A. Catsimatidis, the sole stockholder, Chairman of the Board and Chief Executive Officer of the Company. However, substantially all of Mr. Turfitt's working time is devoted to the affairs of the Company. Mr. Turfitt's Employment Agreement provides that if any of RAG, United Refining Inc. ("URI"), United Acquisition Corp. ("UAC") or the Company becomes insolvent or bankrupt, then the employment of Mr. Turfitt shall be deemed terminated under the Employment Agreement and Mr. Turfitt will be entitled to his full compensation over the remaining term of the agreement. In such event, RAG, URI, UAC and the Company are jointly and severally obligated to pay such compensation to Mr. Turfitt. Mr. Catsimatidis owns all of the outstanding capital stock of RAG. RAG owns all of the outstanding capital stock of UAC, which in turn owns all of the outstanding capital stock of URI. URI owns all of the outstanding capital stock of the Company. Thomas C. Covert has entered into a two-year consulting agreement with the Company, the term of which commenced on September 1, 1996. The term of the agreement will be extended for two additional one year periods unless the Company or Mr. Covert gives written notice of cancellation to the other party within specified time periods. Under the agreement Mr. Covert is obligated to render services to the Company on a limited time basis of between 30-40 hours per month in such capacities as the Board of Directors of the Company may designate. Under the agreement the Company has agreed to pay Mr. Covert $170 per hour for services rendered, but in no event less than $6,800 per month for each month during the term of the agreement. Mr. Covert has also entered into a Deferred Compensation Agreement with the Company pursuant to which since the date of his retirement on September 1, 1996, the Company has been paying Mr. Covert a retirement benefit at the rate of approximately $12,300 per year. The benefit is payable to Mr. Covert until his death, whereupon Mr. Covert's wife is entitled to a benefit of approximately $6,150 per year until her death if she does not predecease him. COMPENSATION OF DIRECTORS Non-officer directors receive a stipend of $15,000 per year and $1,000 for each meeting attended. 64 65 CERTAIN TRANSACTIONS During 1993, the Company sold certain retail grocery operations to Red Apple (Caribbean), Inc., a corporation indirectly wholly-owned by John A. Catsimatidis, the Chairman of the Board, Chief Executive Officer and beneficial owner of all of the outstanding capital stock of the Company, in exchange for a promissory note totalling $17,600,000. The note bears interest at the rate of 5% per annum and was originally due on December 31, 1994. Subsequent to this date, the note was successively amended and restated. Simultaneously with the consummation of the Private Offering, the Company distributed the note to its sole stockholder. The Company and other entities affiliated with RAG share the overhead costs incurred at RAG's New York headquarters. These overhead costs were allocated among these entities based on various factors and the Company's portion for fiscal 1996 and the ten months ended June 30, 1997 amounted to approximately $2,424,000 and $2,185,000, respectively. Pursuant to a Servicing Agreement entered into between the Company and RAG simultaneously with the consummation of the Private Offering the Company will pay $1,000,000 per year for its portion of the overhead costs. The term of the Servicing Agreement expires on June 9, 2000, but the term shall be automatically extended for periods of one year if neither party gives notice of termination of the Servicing Agreement prior to the expiration of the then current term. As of the date of this Prospectus, URI owned by John A. Catsimatidis, was leasing to the Company nine retail units. The term of each lease expires on April 1, 2001. The annual rentals payable under the leases aggregate $264,000, which the Company believes are market rates. As of the date of this Prospectus, the Company was current on all rent obligations under such leases. RAG files a consolidated tax return with affiliated entities, including the Company. Simultaneously with the consummation of the Private Offering, RAG, the Company and certain of their affiliates entered into a tax sharing agreement (the "Tax Sharing Agreement"). Under the Tax Sharing Agreement the parties established a method for allocating the consolidated federal income tax liability and combined state tax liability of the RAG affiliated group among its members; for reimbursing RAG for payment of such tax liability; for compensating any member for use of its net operating loss or tax credits in arriving at such tax liability; and to provide for the allocation and payment of any refund arising from a carryback of net operating loss or tax credits from subsequent taxable years. Included in amounts due from affiliated companies are advances and amounts relating to the allocation of overhead expenses, certain charter air services and income taxes from the Company's parent. These amounts do not bear interest and have no set repayment terms. At August 31, 1995 and 1996, the amounts approximated $2,000,000 and $2,500,000 respectively. In June 1997, the Company declared a dividend of $28,285,000 of which $5,000,000 was paid in cash and $23,285,000 was forgiveness of debt from related parties. Additionally, the Company has offset $2,017,000 of amounts due from related parties with deferred tax benefits previously received. Therefore, upon consummation of the Private Offering there were no outstanding liabilities between the Company and affiliated entities. During fiscal 1996, the Company made payments for services rendered to it by Lowenthal, Landau, Fischer & Bring, P.C., a law firm of which Martin R. Bring, a director of the Company, is a member. 65 66 PRINCIPAL STOCKHOLDER As of the date of this Prospectus, URI owned 1,000 shares of the Common Stock of the Company, constituting all of the outstanding shares of capital stock of the Company. UAC owns all of the outstanding capital stock of URI. All of the outstanding capital stock of UAC is owned by RAG. As a result of his ownership of all of the outstanding capital stock, and control, of RAG and his control of each of UAC and URI, John A. Catsimatidis beneficially owns all of the outstanding shares of capital stock of the Company. There are no outstanding securities which are exercisable for, or convertible into, shares of any class of capital stock of the Company. 66 67 DESCRIPTION OF CERTAIN INDEBTEDNESS The Company is a party to a $35,000,000 secured revolving credit facility with PNC Bank (the "New Bank Credit Facility"). As of June 30, 1997, there was $15 million of indebtedness outstanding under the New Bank Credit Facility. The New Bank Credit Facility enables the Company to obtain revolving credit loans from time to time for general corporate purposes and working capital in an aggregate amount not exceeding the lesser of (x) $35 million and (y)(i) 100% of cash in PNC's account which is subject to a security interest, (ii) 80% of eligible accounts receivable plus (iii) the lesser of (a) 70% of eligible inventory or (b) 150% of advances against eligible receivables. The revolving credit loans bear interest at PNC's Base Rate (defined as the higher of PNC's prime rate or the Federal Funds rate plus 0.50%) plus up to an additional 0.75% per annum or at LIBOR plus an additional 2.25% per annum based upon the ratio of the Company's Total Indebtedness as of the end of each fiscal quarter to EBITDA (as such capitalized terms are defined in the commitment letter) for the previous four fiscal quarters. The New Bank Credit Facility terminates on June 9, 2002, unless sooner terminated at the Company's option or upon an event of default and outstanding revolving credit loans will be payable on such date or such earlier date as they may be accelerated following the occurrence of an event of default. The New Bank Credit Facility is secured by a lien on the Company's accounts receivable and the following inventory of the Company: all crude oil, wherever located; all asphalt, wherever located; and motor gasoline located at the Company's refinery. The New Bank Credit Facility has various restrictive covenants and events of default customary for a transaction of this type including limitations on liens, limitations on asset sales, additional indebtedness, investments and advances, acquisitions, payments of parent company overhead expenses, prohibition on business changes and financial covenants relating to the maintenance of a net worth equal to at least 70% of the Company's net worth (as defined) upon entering into the New Bank Credit Facility plus 50% of positive net income of the Company thereafter and maintenance of a fixed charge coverage ratio (as defined) of at least 1.10 to 1.00 for the period until February 28, 1998 and 1.25 to 1.00 thereafter. 67 68 DESCRIPTION OF THE NOTES The Original Notes were, and the New Notes will be, issued under an indenture dated as of June 9, 1994 (the "Indenture") between the Company and IBJ Schroeder Bank & Trust Company, as trustee (the "Trustee"). The New Notes are subject to all the terms of the Indenture, and holders of New Notes are referred to the Indenture, which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The form of the New Notes and the Original Notes will be identical in all material respects except that the New Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer pursuant thereto. The New Notes will not represent new indebtedness of the Company, will be entitled to the benefits of the same Indenture which governs the Original Notes and will rank pari passu with the Original Notes. Any provision of the Indenture which requires actions by or approval of a specified percentage of Original Notes shall require the approval of the holders of such percentage of Original Notes and New Notes, in the aggregate. (The Original Notes and New Notes are collectively referred to herein as the "Notes"). The following is a summary of the material terms and provisions of the Notes. This summary does not purport to be a complete description of the Notes and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Notes and the Indenture (including the definitions contained therein). Definitions relating to certain capitalized terms are set forth under "--Certain Definitions" and throughout this description. Capitalized terms that are used by not otherwise defined herein have the meanings assigned to them in the Indenture and such definitions are incorporated herein by reference. GENERAL The Notes are senior unsecured obligations of the Company limited to an aggregate principal amount of $200 million. The Notes bear interest at 10 3/4%, payable on June 15 and December 15 of each year, commencing on December 15, 1997, to holders of record at the close of business on June 1 or December 1, as the case may be, immediately preceding the relevant interest payment date. The Notes will mature on June 15, 2007 and issued in registered form, without coupons, and in denominations of $1,000 and integral multiples thereof. The Notes are payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, by wire transfer of immediately available funds or, in the case of certificated securities only, by mailing a check to the registered address of the holder. See "--Delivery and Form of Securities--Book Entry, Delivery and Form." Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. RANKING The Notes and each Subsidiary Guarantee are senior unsecured obligations of the Company, and the applicable Subsidiary Guarantor, respectively, and rank pari passu in right of payment with all other existing and future unsecured and unsubordinated Indebtedness of the Company and the applicable Subsidiary Guarantor, respectively, and senior to all existing and future subordinated indebtedness of the Company and the Subsidiary Guarantors. At June 30, 1997, the Company and the Subsidiary Guarantors had approximately $1.3 million of Indebtedness outstanding other than the Notes, of which approximately $0.5 million was secured. Subject to certain limitations, the Company and its Subsidiaries (including the Subsidiary Guarantors) may incur additional Indebtedness in the future. See "--Certain Covenants--Limitations on Additional Indebtedness." 68 69 SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes are jointly and severally guaranteed (the "Subsidiary Guarantees") by the Subsidiary Guarantors. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee is limited so as not to constitute a fraudulent conveyance under applicable law. The Indenture provides that no Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Guarantor unless (i) the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all of the obligations of such Subsidiary Guarantor pursuant to a supplemental indenture, in form and substance satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) immediately after giving effect to such transaction the Company could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the covenant described under "Limitations on Additional Indebtedness." OPTIONAL REDEMPTION OF THE NOTES The Notes may not be redeemed prior to June 15, 2002, but will be redeemable at the option of the Company, in whole or in part, at any time on or after June 15, 2002, at the following redemption prices (expressed as percentages of principal amount), together with accrued and unpaid interest, if any, thereon to the redemption date, if redeemed during the 12-month period beginning June 15:
Optional Year Redemption Price ---- ---------------- 2002 105.375% 2003 103.583% 2004 101.792% 2005 and thereafter 100.000%
Notwithstanding the foregoing, at any time prior to June 15, 2000, the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more Equity Offerings at a redemption price equal to 110.00% of the principal amount thereof, plus accrued and unpaid interest to the redemption date; provided that (a) at least $100 million aggregate principal amount of the Notes remains outstanding immediately after the occurrence of such redemption and (b) such redemption occurs within 60 days of the date of the closing of any such Equity Offering. If less than all of the Notes are to be redeemed at any time, selection of the Notes to be redeemed will be made by the Trustee from among the outstanding Notes on a pro rata basis, by lot or by any other method permitted in the Indenture. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at the registered address of such Holder. On and after the redemption date, interest will cease to accrue on the Notes or portions thereof called for redemption. CHANGE OF CONTROL 69 70 Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to all holders of Notes to purchase (a "Change of Control Offer") all outstanding Notes and will purchase, on a business day not more than 60 days nor less than 30 days after the occurrence of the Change of Control (such purchase date being the "Change of Control Purchase Date"), all Notes properly tendered pursuant to such offer to purchase for a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. The Change of Control Offer is required to remain open for at least 20 business days or for such longer period as is required by law. In order to effect a Change of Control Offer, the Company shall within 30 days after the occurrence of the Change of Control mail to the Trustee, who shall mail to each holder of Notes, a copy of the Change of Control Offer, which shall state, among other things, the procedures that holders must follow to accept the Change of Control Offer. The occurrence of the events constituting a Change of Control under the Indenture may result in an event of default in respect of other Indebtedness of the Company and its Subsidiaries and, consequently, the lenders thereof may have the right to require repayment of such Indebtedness in full. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay for all or any of the Notes that might be delivered by holders of Notes seeking to accept the Change of Control Offer. The Company's obligation to make a Change of Control Offer will be satisfied if a third party makes the Change of Control Offer in the manner and at the times and otherwise in compliance with the requirements applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer. The definition of Change of Control includes the sale of "all or substantially all" of the assets of the Company or the Company and its Subsidiaries taken as a whole. The phrase "all or substantially all" is subject to interpretation under applicable legal precedent and has no clear meaning. As a result, there may be uncertainty as to whether a Change of Control has occurred. The Change of Control feature of the Notes, by requiring a Change of Control Offer, may in certain circumstances make more difficult or discourage a sale or takeover of the Company, and, thus, the removal of incumbent management. The Change of Control feature, however, is not part of a plan by management to adopt a series of antitakeover provisions. Instead, the Change of Control feature is a result of negotiations between the Company and the Initial Purchasers. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act to the extent applicable in connection with the purchase of Notes pursuant to a Change of Control Offer. CAPITAL IMPROVEMENTS ESCROW AND SPECIAL OFFER TO PURCHASE On the Issue Date the Company deposited with the Escrow Agent $48.1 million of the net proceeds from the sale of the Notes. All amounts so deposited with the Escrow Agent (collectively, the "Escrow Funds") have been pledged to and are being held by the Escrow Agent on behalf of the holders of the Notes as security for the Notes. Out of the Escrow Funds, approximately $34.8 million will be used for the Capital Improvement Plan and no more than $13.3 million will be used for Other Capital Expenditures. The Escrow Agreement provides that from time to time, upon delivery by the Company to the Escrow 70 71 Agent of a request for disbursement, an Officer's Certificate certifying that the monies to be disbursed are to be applied to pay costs and expenses of the Capital Improvement Plan or to fund Other Capital Expenditures, as applicable, and a certificate signed by the Secretary or Assistant Secretary of the Company (a "Secretary's Certificate") which sets forth and authenticates a resolution that has been adopted by a majority vote of the Independent Directors of the Company which states that the monies to be disbursed are to be applied to pay costs and expenses of the Capital Improvement Plan or to fund Other Capital Expenditures, as applicable, and authorizes the disbursement of such monies, then the Escrow Agent will release Escrow Funds to the Company in an amount equal to the requested disbursement for application to the Capital Improvements Plan or for Other Capital Expenditures, as applicable. Upon release of all of the Escrow Funds, the Notes will be unsecured obligations of the Company. Pending release of the Escrow Funds as provided in the Indenture, the Escrow Funds will be invested in cash and Cash Equivalents and any investment income therefrom will be available to the Company at any time upon written request. If an offer to purchase Notes is made on the Special Offer Notice Date, all Notes tendered or, if the aggregate principal amount of Notes tendered exceeds the amount of Escrow Funds, a pro rata portion thereof in an aggregate principal amount equal to the Escrow Funds, will be purchased with the Escrow Funds and any portion of the Escrow Funds remaining after the consummation of the offer to purchase will be returned to the Company. If the Capital Improvement Plan is abandoned by the Company because its completion is no longer possible, practical or economical, as determined by the Board of Directors and evidenced by a Board Resolution, or not completed on or before August 31, 1999, then, 30 days after the earlier of (i) written notice, and a certified copy of the Board Resolution, is received by the Trustee regarding the abandonment of the Capital Improvement Plan or, (ii) August 31, 1999, (as the case may be, the "Special Offer Notice Date") the Company will be obligated to make an offer to purchase (the "Special Offer") an aggregate principal amount of Notes equal to $34.8 million less any amount previously released from the Escrow Funds to be applied to the Capital Improvement Plan (the "Special Offer Amount") for a purchase price of 100% of the principal amount of the Notes, plus accrued and unpaid interest to the date of purchase (the "Special Offer Purchase Date"). On the Special Offer Notice Date, the Company shall mail to each holder of Notes at such holder's registered address a notice stating: (i) that the Capital Improvement Plan has been abandoned or not completed and that the Company is offering to purchase the specified aggregate principal amount of Notes at a purchase price in cash equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the Special Offer Purchase Date, which shall be a business day, specified in such notice, that is not earlier than 30 days or later than 60 days from the date such notice is mailed, (ii) the amount of accrued and unpaid interest as of the Special Offer Purchase Date, (iii) that any Note not tendered will continue to accrue interest, (iv) that, unless the Company defaults in the payment of the purchase price for the Notes payable pursuant to the Special Offer, any Notes accepted for payment pursuant to the Special Offer shall cease to accrue interest on and after the Special Offer Purchase Date, (v) the procedures, consistent with the Indenture, to be followed by a holder of Notes in order to accept a Special Offer or to withdraw such acceptance, and (vi) such other information as may be required by the Indenture and applicable laws and regulations. On the Special Offer Purchase Date, the Company will (i) accept for payment the aggregate principal amount of Notes covered by the Special Offer or such lesser amount as is tendered pursuant to the Special Offer and (ii) deliver or cause to be delivered to the Trustee all Notes tendered pursuant to the Special Offer and accepted for payment and the Special Offer Amount of the Escrow Funds will be applied to consummate the Special Offer. If less than all Notes tendered pursuant to the Special Offer are accepted 71 72 for payment by the Company for any reason consistent with the Indenture, selection of the Notes to be purchased by the Company shall be in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that Notes accepted for payment in part shall only be purchased in integral multiples of $1,000. The paying agent shall promptly mail to each holder of Notes or portions thereof accepted for payment an amount equal to the purchase price for such Notes including any accrued and unpaid interest thereon, and the Trustee shall promptly authenticate and mail to such holder of Notes accepted for payment in part a new Note equal in principal amount to any unpurchased portion of the Notes, and any Note not accepted for payment in whole or in part for any reason consistent with the Indenture shall be promptly returned to the holder of such Note. On and after the Special Offer Purchase Date, interest will cease to accrue on the Notes or portions thereof accepted for payment, unless the Company defaults in the payment of the purchase price therefor. The Company will announce the results of the Special Offer to holders of the Notes on or as soon as practicable after the Special Offer Purchase Date. The Company will comply with the applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act, and all other applicable securities laws and regulations in connection with any Special Offer. CERTAIN COVENANTS Limitations on Additional Indebtedness. (a) The Indenture provides that (i) the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or otherwise become liable with respect to (collectively, "incur") any Indebtedness (including without limitation Acquired Indebtedness), and (ii) the Company will not permit any of its Subsidiaries to issue (except if issued to or owned beneficially and of record by the Company or any of its Subsidiaries) any Capital Stock having a preference in liquidation or with respect to the payment of dividends; provided that (i) the Company and its Subsidiaries may incur Permitted Indebtedness and (ii) the Company may incur Indebtedness if, after giving effect thereto, the Company's Consolidated Fixed Charge Coverage Ratio on the date thereof would be at least 2.0 to 1, determined on a pro forma basis as if the incurrence of such additional Indebtedness, and the application of the net proceeds therefrom, had occurred at the beginning of the four-quarter period used to calculate the Company's Consolidated Fixed Charge Coverage Ratio. (b) The Company will not, and will not permit any of its Subsidiaries to, incur any Indebtedness that is expressly subordinated to any other Indebtedness of the Company or such Subsidiary unless such Indebtedness by its terms is also expressly made subordinated to the Notes, in the case of the Company, or the Subsidiary Guarantees, in the case of a Subsidiary. Limitations on Restricted Payments. The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, make any Restricted Payment (except as permitted below) if at the time of such Restricted Payment: (i) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; (ii) the Company would be unable to incur an additional $1.00 of Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the covenant described under "Limitations on Additional Indebtedness"; or 72 73 (iii) the amount of such Restricted Payment, when added to the aggregate amount of all Restricted Payments made after the Issue Date, exceeds the sum of (A) 50% of the Company's Consolidated Net Income (taken as one accounting period) from but not including February 28, 1997 to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such aggregate Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit) plus (B) the net cash proceeds from the issuance and sale (other than to a Subsidiary of the Company) after the Issue Date of the Company's Capital Stock that is not Disqualified Capital Stock, plus (C) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (x) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (y) the initial amount of such Restricted Investment plus (D) the amount of Restricted Investment outstanding in an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Subsidiary of the Company in accordance with the definition of "Unrestricted Subsidiary". The foregoing provisions will not prohibit, so long as no default shall have occurred and be continuing, (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (2) the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Capital Stock of the Company (other than any Disqualified Capital Stock); (3) the defeasance, redemption, repurchase or other retirement of Subordinated Indebtedness in exchange for, or out of the proceeds of, the substantially concurrent issue and sale of Capital Stock of the Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of loans from the Company or any of its Subsidiaries); (4) the making of a Petroleum Investment so long as the amount of such investment outstanding or committed does not exceed at any time $35.0 million less the amount of cash received upon the disposition of any such investment or the return of capital thereon; (5) the making of a Related Business Investment in joint ventures or Unrestricted Subsidiaries out of the proceeds of the substantially concurrent issue and sale of Capital Stock of the Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of loans from the Company or any of its Subsidiaries); or (6) Restricted Payments (other than Restricted Investments and Restricted Debt Payments) which, when added to the aggregate amount of Restricted Payments made pursuant to this clause (6) after the Issue Date, does not exceed $5.0 million. The amounts referred to in clauses (1), (2) and (5) shall be included as Restricted Payments in any computation made pursuant to clause (iii) above. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Limitations on Restricted Payments" were computed, which calculations shall be based upon the Company's latest available financial statements. Limitations on Restrictions on Distributions from Subsidiaries. The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual Payment Restriction with respect to any of its Subsidiaries, except for (a) any such Payment Restriction in effect on the Issue Date under the New Bank Credit Facility or any similar Payment Restriction under any similar bank credit facility or any replacement thereof, provided that such similar Payment Restriction is no more restrictive than the Payment Restriction in effect on the date 73 74 of the Indenture under the New Bank Credit Facility, (b) any such Payment Restriction under any agreement evidencing any Acquired Indebtedness that was permitted to be incurred pursuant to the Indenture, provided that such Payment Restriction only applies to assets that were subject to such restriction and encumbrances prior to the acquisition of such assets by the Company or its Subsidiaries and (c) any such Payment Restriction arising in connection with Refinancing Indebtedness; provided that any such Payment Restrictions that arise under such Refinancing Indebtedness are not, taken as a whole, more restrictive than those under the agreement creating or evidencing the Indebtedness being refunded or refinanced. Limitations on Transactions with Affiliates. The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction (or series of related transactions) involving aggregate payments in excess of $1.0 million but less than $3.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted by a vote of a majority of the Independent Directors approving such Affiliate Transaction or, if at the time fewer than four Independent Directors are then in office, a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted unanimously by the Company's Board of Directors set forth in a Secretary's Certificate and (b) with respect to any Affiliate Transaction (or series of related transactions) involving aggregate payments of $3.0 million or more, the certificates described in the preceding clause (a) and an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an Independent Financial Advisor; provided, however, that (w) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary, (x) transactions exclusively between or among the Company and/or its Subsidiaries, (y) the payment of up to $1 million per fiscal year pursuant to the Servicing Agreement and (z) payments under the Tax Sharing Agreement shall not be deemed to be Affiliate Transactions. Notwithstanding the foregoing proviso, the Company shall not, and shall not permit any of its Subsidiaries to, pay any of its employees total annual compensation in excess of $250,000 unless (a) such amount of compensation has been approved by a vote of a majority of the Independent Directors, or (b) such employee's total annual compensation in effect on the Issue Date exceeded $250,000. Any increase in total compensation over and above the amount previously approved in the case of clause (a) or the employee's total annual compensation on the Issue Date in the case of clause (b) shall be approved by a vote of a majority of the Independent Directors, other than an increase at the end of any year in the amount of total compensation by an amount equal to the Index Amount for such year. Independent Directors. (a) The Indenture provides that the Company's Board of Directors shall at all times have at least four Independent Directors; provided, however, that, notwithstanding the foregoing, if an Independent Director resigns, dies or is terminated for any reason and the remaining number of Independent Directors is less than four, a replacement for that Independent Director shall be elected as promptly as practicable, but in no event later than the date that is six months from the date of the resignation, death or termination of the Independent Director being replaced. 74 75 (b) After the Issue Date, the election of any new Independent Directors must be approved by a unanimous vote of the Independent Directors then in office, provided that only a majority vote of the Independent Directors is required if at the time there are four or more Independent Directors in office. The Independent Directors shall approve such new Independent Director unless the Independent Directors determine that such person does not satisfy the requirements to serve as an Independent Director under the Indenture or such person is not able or willing to perform the obligations of the Independent Directors under the Indenture. (c) If at any time the number of Independent Directors then in office is less than two, then until such time as the number of Independent Directors exceeds two the Company shall not, and shall not permit any of its Subsidiaries to, engage in any transaction that the Indenture requires be approved by a vote of the Independent Directors. (d) Any transaction that the Indenture requires be approved by a vote of the Independent Directors shall be evidenced by a Secretary's Certificate setting forth a resolution adopted by at least the requisite number of Independent Directors, a copy of which shall be delivered to the Trustee, which resolution shall state that the transaction being approved is not unfair to the holders of the Notes. The failure to comply with this clause(d) shall have the effect of the Company failing to comply with the requirement in the Indenture to obtain a vote of the Independent Directors. Limitations on Liens. The Indenture provides that neither the Company nor any of its Subsidiaries may directly or indirectly create, incur, assume or suffer to exist any Lien on any property or asset now owned or hereafter acquired, or on any income or profits therefrom, or assign or convey any right to receive income therefrom, except Permitted Liens, unless prior thereto or simultaneously therewith the Notes are equally and ratably secured; provided that if such Indebtedness is Subordinated Indebtedness the Lien securing such Indebtedness shall be junior to the Lien securing the Notes. Limitations on Asset Sales. (a) The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, consummate any Asset Sale unless (i) the Company receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; provided that the aggregate Fair Market Value of the consideration received from any Asset Sale that is not in the form of cash or Cash Equivalents shall not, when aggregated with the Fair Market Value of all other non-cash consideration received by the Company and its Subsidiaries from all previous Asset Sales since the Issue Date that have not, prior to such date, been converted to cash or Cash Equivalents, exceed five percent of the Consolidated Tangible Assets of the Company at the time of the Asset Sale under consideration; and provided, further, that with respect to any Asset Sales to Affiliates the Company receives consideration consisting of no less than 85% cash or Cash Equivalents and (ii) the Company delivers to the Trustee an Officers' Certificate certifying that such Asset Sale complies with clause (i). The amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Company or such Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Company or such Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, shall be deemed to be cash or Cash Equivalents for purposes of clause (ii) and shall also be deemed to constitute a repayment of, and a permanent reduction in, the amount of such Indebtedness for purposes of the following paragraph (b). If at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this covenant. A transfer of assets by the Company to a Subsidiary or by a Subsidiary to the Company 75 76 or to a Subsidiary will not be deemed to be an Asset Sale and a transfer of assets that constitutes a Restricted Investment and that is permitted under "--Limitations on Restricted Payments" will not be deemed to be an Asset Sale. In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Subsidiaries as an entirety to a Person in a transaction permitted under "--Merger, Consolidation and Sale of Assets," the successor corporation shall be deemed to have sold the properties and assets of the Company and its Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of such properties and assets of the Company or its Subsidiaries deemed to be sold shall be deemed to be Net Available Proceeds for purposes of this covenant. (b) If the Company or any Subsidiary engages in an Asset Sale, the Company or any Subsidiary may either, no later than 270 days after such Asset Sale, (i) apply all or any of the Net Available Proceeds therefrom to repay amounts outstanding under the New Bank Credit Facility or any other Indebtedness (other than Subordinated Indebtedness) of the Company or any Subsidiary; provided, in each case, that the related loan commitment (if any) is thereby permanently reduced by the amount of such Indebtedness so repaid or (ii) invest all or any part of the Net Available Proceeds thereof in properties and assets that replace the properties or assets that were the subject of such Asset Sale or in other properties or assets that will be used in the business of the Company and its Subsidiaries as it existed on the Issue Date. The amount of such Net Available Proceeds not applied or invested as provided in this paragraph will constitute "Excess Proceeds." (c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0 million, the Company will be required to make an offer to purchase, from all Holders of the Notes, an aggregate principal amount of Notes equal to such Excess Proceeds as follows: (i) The Company will make an offer to purchase (a "Net Proceeds Offer") from all Holders of the Notes in accordance with the procedures set forth in the Indenture the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased out of the amount (the "Payment Amount") of such Excess Proceeds. (ii) The offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and Liquidated Damages, if any, to the date such Net Proceeds Offer is consummated (the "Offered Price"), in accordance with the procedures set forth in the Indenture. To the extent that the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer is less than the Payment Amount relating thereto (such shortfall constituting a "Net Proceeds Deficiency"), the Company may use such Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the limitations of the "Limitations on Restricted Payments" covenant. (iii) If the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the Payment Amount, Notes to be purchased will be selected on a pro rata basis. (iv) Upon completion of such Net Proceeds Offer, the amount of Excess Proceeds remaining shall be zero. 76 77 The Company will not permit any Subsidiary to enter into or suffer to exist any agreement that would place any restriction of any kind (other than pursuant to law or regulation) on the ability of the Company to make a Net Proceeds Offer following any Asset Sale. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, if applicable, in the event that an Asset Sale occurs and the Company is required to purchase Notes as described above. Restrictions on Sale and Leaseback Transactions. The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, renew or extend any Sale and Leaseback Transaction unless: (i) the Company or such Subsidiary would be entitled, under the covenant described under "Limitations on Additional Indebtedness" to incur Indebtedness in an amount equal to the Attributable Indebtedness with respect to such Sale and Leaseback Transaction, (ii) such Sale and Leaseback Transaction would not result in a violation of the covenant described under "Limitations on Liens"; and (iii) the Net Available Proceeds from any such Sale and Leaseback Transaction are applied in a manner consistent with the provisions described under "Limitations on Asset Sales." Restrictions on Sale of Capital Stock of Subsidiaries. The Indenture provides that the Company will not, and will not permit any Subsidiary to, directly or indirectly sell or otherwise dispose of any of the Capital Stock of any Subsidiary unless: (i) (a) the Company shall retain ownership, directly or indirectly, of more than 50% of the Common Equity of such Subsidiary or (b) all of the Capital Stock of such Subsidiary shall be sold or otherwise disposed of; and (ii) the Net Available Proceeds from any such sale or disposition are applied in a manner consistent with the provisions described under "Limitations on Asset Sales." Limitations on Mergers and Certain Other Transactions. The Indenture provides that the Company will not, in a single transaction or a series of related transactions, (i) consolidate or merge with or into (other than a merger with a Wholly-Owned Subsidiary solely for the purpose of changing the applicable Company's jurisdiction of incorporation to another State of the United States), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Company or the Company and the Subsidiaries (taken as a whole), or assign any of its obligations under the Notes and the Indenture, to any Person or (ii) adopt a Plan of Liquidation unless, in either case: (a) the Person formed by or surviving such consolidation or merger (if other than the Company) or to which such sale, lease, conveyance or other disposition or assignment shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the "Successor"), is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia, and the Successor assumes by supplemental indenture in a form satisfactory to the Trustee all of the obligations of the Company under the Notes and the Indenture; (b) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (a) above and the incurrence of any Indebtedness to be incurred in connection therewith, no Default or Event of Default shall have occurred and be continuing; and (c) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (a) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, (1) the Consolidated Net Worth of the Company or the Successor, as the case may be, would be at least equal to the Consolidated Net Worth of the Company immediately prior to such transaction and (2) the Company or the Successor, as the case may be, could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the covenant described under "Limitations on Additional Indebtedness;" and (d) each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have by amendment to its guarantee confirmed that its guarantee of the Notes shall apply to the obligations of the Company or the Successor under the Notes and the Indenture. For purposes of this covenant, any Indebtedness of the Successor which was not Indebtedness of the Company 77 78 immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction. Additional Subsidiary Guarantees. The Indenture provides that if the Company or any of its Subsidiaries shall acquire or create another Subsidiary, then such newly acquired or created Subsidiary will be required to execute a Subsidiary Guarantee, in accordance with the terms of the Indenture, unless it has been designated as an Unrestricted Subsidiary. Reports. Whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company and the Subsidiary Guarantors will file with the Commission, to the extent such filings are accepted by the Commission, and will furnish to the Holders of Notes all quarterly and annual reports and other information, documents and reports that would be required to be filed with the Commission pursuant to Section 13 of the Exchange Act if the Company and the Subsidiary Guarantors were required to file under such section. In addition, the Company and the Subsidiary Guarantors will make such information available to prospective purchasers of the Notes, securities analysts and broker-dealers who request it in writing. The Company and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and beneficial holders of Notes and to prospective purchasers of Notes designated by the Holders of Transfer Restricted Securities and to broker dealers, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT An "Event of Default" is defined in the Indenture as (i) failure by the Company to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days; (ii) failure by the Company to pay the principal or premium, if any, on any of the Notes when it becomes due and payable, whether at stated maturity, upon redemption, upon acceleration or otherwise; (iii) the Company shall fail to comply with any of its agreements or covenants described above under "Change of Control" or under "Certain Covenants--Limitations on Asset Sales" and "--Independent Directors"; (iv) failure by the Company to comply with any other covenant in the Indenture and continuance of such failure for 30 days after notice of such failure has been given to the Company by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding; (v) failure by either of the Company or any of their Subsidiaries to make any payment when due after the expiration of any applicable grace period, in respect of any Indebtedness of the Company or any of such Subsidiaries that has an aggregate outstanding principal amount of $5.0 million or more; (vi) a default under any Indebtedness of the Company or any Subsidiary, whether such Indebtedness now exists or hereafter shall be created, if (A) such default results in the holder or holders of such Indebtedness causing the Indebtedness to become due prior to its stated maturity and (B) the outstanding principal amount of such Indebtedness, together with the outstanding principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregate $5.0 million or more at any one time; (vii) one or more final judgments or orders that exceed $5.0 million in the aggregate for the payment of money have been entered by a court or courts of competent jurisdiction against the Company or any Subsidiary of the Company and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; (viii) certain events of bankruptcy, insolvency or reorganization involving the Company or any Significant Subsidiary of the Company; and (ix) except as permitted by the Indenture, any Subsidiary Guarantee ceases to be in full force and effect or any Subsidiary Guarantor repudiates its obligations under any Subsidiary Guarantee. 78 79 If an Event of Default (other than an Event of Default specified in clause (viii) above involving the Company), shall have occurred and be continuing under the Indenture, the Trustee, by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding by written notice to the Company and the Trustee may declare all amounts owing under the Notes to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal of, premium, if any, and interest on the outstanding Notes shall immediately become due and payable. If an Event of Default results from bankruptcy, insolvency or reorganization involving the Company, all outstanding Notes shall become due and payable without any further action or notice. In certain cases, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive an existing Default or Event of Default and its consequences, except a default in the payment of principal of, premium, if any, and interest on the Notes. The Holders may not enforce the provisions of the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power; provided however, that such direction does not conflict with the terms of the Indenture. The Trustee may withhold from the Holders notice of any continuing Default or Event of Default (except any Default or Event of Default in payment of principal of, premium, if any, or interest on the Notes) if the Trustee determines that withholding such notice is in the Holders' interest. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and, upon any Officer of the Company becoming aware of any Default or Event of Default, a statement specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE The Company may terminate its obligations under the Indenture at any time by delivering all outstanding Notes to the Trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the Notes (except for certain obligations of the Company to register the transfer or exchange of such Notes, replace stolen, lost or mutilated Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the Indenture, if the Company deposits with the Trustee, in trust, U.S. Legal Tender or U.S. Government Obligations or a combination thereof that, through the payment of interest and premium thereon and principal amount at maturity in respect thereof in accordance with their terms, will be sufficient to pay all the principal amount at maturity of and interest and premium on the Notes on the dates such payments are due in accordance with the terms of such Notes as well as the Trustee's fees and expenses. To exercise either such option, the Company is required to deliver to the Trustee (A) an Opinion of Counsel and, in connection with a discharge pursuant to clause (i) above, a private letter ruling issued to the Company by the Internal Revenue Service (the "Service"), to the effect that the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of the deposit and related defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised, (B) subject to certain qualifications, an Opinion of Counsel to the effect that funds so deposited will not be subject to avoidance under applicable bankruptcy law and (C) an Officers' Certificate and an Opinion of Counsel to the effect that the Company has complied with all conditions precedent to the defeasance. Notwithstanding the foregoing, the Opinion of Counsel required by clause (A) above need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable on the maturity date within one year or (iii) are to be called 79 80 for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. TRANSFER AND EXCHANGE A Holder will be able to register the transfer of or exchange Notes only in accordance with the provisions of the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Without the prior consent of the Company, the Registrar is not required (i) to register the transfer of or exchange any Note selected for redemption, (ii) to register the transfer of or exchange any Note for a period of 15 days before a selection of Notes to be redeemed or (iii) to register the transfer or exchange of a Note between a record date and the next succeeding interest payment date. The registered holder of a Note will be treated as the owner of such Note for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holders of at least a majority in principal amount of the Notes then outstanding, and any existing Default under, or compliance with any provision of, the Indenture may be waived (other than any continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes) with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holders of a majority in principal amount of the Notes then outstanding. Without the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders in the case of a merger or acquisition, or to make any change that does not adversely affect the rights of any Holder. Without the consent of each Holder affected, the Company and the Trustee may not: (i) extend the maturity of any Note; (ii) affect the terms of any scheduled payment of interest on or principal of the Notes (including without limitation any redemption provisions); (iii) make any change in the provisions described above under the caption "Change of Control" or in the obligations of the Company to make a Net Proceeds Offer or Special Offer or the definitions related thereto that could adversely affect the rights of any Holder of the Notes; (iv) take any action that would subordinate the Notes or the Subsidiary Guarantees to any other Indebtedness of the Company or any of its Subsidiaries, respectively, or otherwise affect the ranking of the Notes or the Subsidiary Guarantees; (v) reduce the percentage of Holders necessary to consent to an amendment, supplement or waiver to the Indenture. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest (as defined in the Indenture), it must eliminate such conflict or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the 80 81 Trustee, subject to certain exceptions. The Indenture provides that, in case an Event of Default occurs and is not cured, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in similar circumstances in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee. GOVERNING LAW Each of the Indenture, the Notes and the Subsidiary Guarantees provides that it will be governed by, and construed in accordance with, the laws of the State of New York. DELIVERY AND FORM OF SECURITIES Book-Entry, Delivery and Form The Original Notes were initially issued in the form of two Global Notes (the "Global Notes"). The Global Notes were deposited on the date of the closing of the sale of the Original Notes (the "Closing Date") with, or on behalf of, the Depositary and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the "Global Note Holder"). The Depositary maintains the Original Notes in denominations of $1,000 and integral multiples thereof through its book-entry facilities. The New Notes will be issued in the form of one or more global notes (the "New Global Notes"). The New Global Notes will be deposited with the Depository and registered in the name of the Global Note Holder. The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depositary's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depositary's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depositary's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Depositary's Participants or the Depositary's Indirect Participants. The Company expects that pursuant to procedures established by the Depositary (i) upon deposit of the Global Notes, the Depositary will credit the accounts of Participants with portions of the principal amount of the Global Notes and (ii) ownership of the New Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's Participants), the Depositary's Participants and the Depositary's Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer the Notes will be limited to such extent. For certain other restrictions on the transferability of the Notes, see "Transfer Restrictions." 81 82 So long as the Global Note Holder is the registered owner of any Notes, the Global Note Holder will be considered the sole Holder of outstanding Notes under the Indenture. Except as provided below, owners of Notes will not be entitled to have Notes registered in their names and will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. None of the Company, the Subsidiary Guarantors or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by the Depositary, or for maintaining, supervising or reviewing any records of the Depositary relating to such Notes. Payments in respect of the principal of, premium, if any, and interest on any Notes registered in the name of a Global Note Holder on the applicable record date will be payable by the Trustee to or at the direction of such Global Note Holder in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names any Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, none of the Company or the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes (including principal, premium, if any, and interest). The Company believes, however, that it is currently the policy of the Depositary to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Depositary's Participants and the Depositary's Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depositary's Participants or the Depositary's Indirect Participants. Subject to certain conditions, any person having a beneficial interest in the Global Notes may, upon request to the Trustee, exchange such beneficial interest for Notes in definitive form. Upon any such issuance, the Trustee is required to register such Notes in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). Such Notes would be issued in fully registered form and would be subject to the legal requirements described herein under the caption "Notice to Investors." In addition, if (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in definitive form under the Indenture, then, upon surrender by the relevant Global Note Holder of its Global Note(s), Notes in such form will be issued to each person that such Global Note Holder and the Depositary identifies as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depositary in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depositary for all purposes. The Indenture requires that payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, interest and Liquidated Damages, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. With respect to Certified Securities, the Company will make all payments of principal, premium, if any, interest and Liquidated Damages, if any, by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The Company expects that secondary trading in the Certified Securities will also be settled in immediately available funds. 82 83 REGISTRATION RIGHTS; LIQUIDATED DAMAGES The Company and the Initial Purchasers entered into a Registration Rights Agreement in connection with the Private Offering. Pursuant to the Registration Rights Agreement, the Company agreed to file with the Commission the Exchange Offer Registration Statement on the appropriate form under the Securities Act with respect to the New Notes. Upon the effectiveness of the Exchange Offer Registration Statement, the Company will offer, pursuant to the Exchange Offer, to the Holders of Transfer Restricted Securities who are able to make certain representations the opportunity to exchange their Transfer Restricted Securities for New Notes. If (i) the Company is not required to file the Exchange Offer Registration Statement because the Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities notifies the Company that (a) it is prohibited by law or Commission policy from participating in the Exchange Offer or (b) it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (c) it is a broker-dealer and holds Original Notes acquired directly from the Company or an affiliate of the Company, the Company will file with the Commission a Shelf Registration Statement to cover resales of the Original Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. The Company will use its best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Securities" means each Original Note or New Note (each, a "Note") until (i) the date on which such Original Note has been exchanged by a person other than a broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Original Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Original Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. The Registration Rights Agreement provides that (i) the Company and the Subsidiary Guarantors will file an Exchange Offer Registration Statement with the Commission on or prior to 90 days after the Issue Date, (ii) the Company and the Subsidiary Guarantors will use their best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 150 days after the Issue Date, (iii) unless the Exchange Offer would not be permitted by a policy of the Commission, the Company and the Subsidiary Guarantors will commence the Exchange Offer and will use their best efforts to issue on or prior to 60 days after the date on which the Exchange Offer Registration Statement is declared effective by the Commission (the "Exchange Offer Effective Date") New Notes in exchange for all Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Company and the Subsidiary Guarantors will each use its best efforts to file the Shelf Registration Statement with the Commission on or prior to 90 days after such obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 150 days after such obligation arises. If (a) the Company and the Subsidiary Guarantors fail to file within 90 days, or cause to become effective within 150 days, the Exchange Offer Registration Statement or (b) the Company and the Subsidiary Guarantors are obligated to file the Shelf Registration Statement and such Shelf Registration Statement is not filed within 90 days, or declared effective within 150 days, of the date on which the Company and the Subsidiary Guarantors became so obligated or (c) the Company and the Subsidiary Guarantors fail to consummate the Exchange Offer within 60 days of the Exchange Offer Effective Date or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities 83 84 during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), in the case of clause (b) only, other than by reason of the failure of the Holders to make certain representations to or provide information reasonably requested by the Company or by reason of delays caused by the failure of any Holder to provide information to the National Association of Securities Dealers, Inc. or to any other regulatory agency having jurisdiction over any of the Holders, then the Company will pay liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted Securities, during the first 90-day period immediately following the occurrence of such Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Original Notes constituting Transfer Restricted Securities held by such Holder. The amount of the Liquidated Damages will increase an additional $.05 per week per $1,000 principal amount constituting Transfer Restricted Securities for each subsequent 90-day period until the applicable Registration Default has been cured, up to a maximum amount of Liquidated Damages of $.30 per week per $1,000 principal amount of Original Notes constituting Transfer Restricted Securities. All accrued Liquidated Damages will be paid by the Company on each Damages Payment Date to the Global Note Holder by wire transfer of immediately available funds or by federal funds check and to the Holders of certificated securities by mailing a check to such Holders' registered addresses. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. Holders of the Original Notes will be required to make certain representations to the Company (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver information to be used in connection with the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Original Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. Following the consummation of the Exchange Offer, holders of the Old Notes who were eligible to participate in the Exchange Offer but who did not tender their Old Notes will not have any further registration rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms. "Acquired Indebtedness" means (a) with respect to any Person that becomes a direct or indirect Subsidiary of the Company after the date of the Indenture, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Subsidiary of the Company that was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company and (b) with respect to the Company or any of its Subsidiaries, any Indebtedness assumed by the Company or any of its Subsidiaries in connection with the acquisition of an asset from another Person that was not incurred by such other Person in connection with, or in contemplation of, such acquisition. "Affiliate" of any Person means any Person (i) which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person, (ii) which beneficially owns or holds 10% or more of any class of the Voting Stock of the referent Person, (iii) of which 10% or more of the Voting Stock (or, in the case of a Person which is not a corporation, 10% or more of the equity interest) is beneficially owned or held by the referent Person or (iv) with respect to an individual, any immediate family member of such person. For purposes of this definition, control of a Person shall mean 84 85 the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. "Asset Sale" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition to any Person other than the Company or any of its Subsidiaries (including, without limitation, by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this definition, a "transfer"), directly or indirectly, in one transaction or a series of related transactions, of (a) any Capital Stock of any Subsidiary or (b) any other properties or assets of the Company or any of its Subsidiaries other than transfers of cash, Cash Equivalents, accounts receivable, inventory or other properties or assets in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any of the following: (i) any transfer of properties or assets (including Capital Stock) that is governed by, and made in accordance with, the provisions described under "Covenants--Limitations on Mergers and Certain Other Transactions"; (ii) any transfer of properties or assets to an Unrestricted Subsidiary, if permitted under the "Limitations on Restricted Payments" covenant; (iii) sales of damaged, worn-out or obsolete equipment or assets that, in the Company's reasonable judgment, are either no longer used or useful in the business of the Company or its Subsidiaries; and (iv) any transfers that, but for this clause (iv), would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the properties or assets transferred in such transaction or any such series of related transactions does not exceed $100,000. "Attributable Indebtedness," when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, property subject to such Sale and Leaseback Transaction and the present value (discounted at a rate equivalent to the Company's then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors. "Board Resolution" means a duly adopted resolution of the Board of Directors of the Company. "Capital Improvement Plan" means the Company's plans to expand its refinery capacity and improve and upgrade its retail network as described in this Prospectus. "Capital Stock" of any Person means any and all shares, rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) the equity (including without limitation common stock, preferred stock and partnership interests) of such Person. "Capitalized Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Cash Equivalents" means (i) marketable obligations with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) demand and time deposits and certificates of deposit or acceptances with a maturity of 180 85 86 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million; (iii) commercial paper maturing no more than 180 days from the date of creation thereof issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any commercial bank meeting the specifications of clause (ii) above; and (v) investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (i) through (iv) above. "Change of Control" means the occurrence of any of the following: (i) the consummation of any transaction the result of which is (x) if such transaction occurs prior to the first sale of Common Equity of the Company pursuant to a registration statement under the Securities Act that results in at least 20% of the then outstanding Common Equity of the Company having been sold to the public, that Permitted Holders beneficially own less than, directly or indirectly, 51% of the Common Equity of the Company, and (y) if such transaction occurs thereafter, that any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than Permitted Holders) owns, directly or indirectly, a majority of the Common Equity of the Company, (ii) the Company consolidates with, or merges with or into, another person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the Company's assets or the assets of Company and its Subsidiaries taken as a whole to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company, as the case may be, is converted into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting Stock of the Company, as the case may be, is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee corporation and the beneficial owners of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving or transferee corporation immediately after such transaction, (iii) the Company, either individually or in conjunction with one or more Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of, or the Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of, all or substantially all of the properties and assets of the Company and its Subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the Subsidiaries, to any Person (other than the Company or a Wholly Owned Subsidiary), or (iv) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by either (i) a vote of two-thirds of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or (ii) a Permitted Holder) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. "Common Equity" of any Person means all Capital Stock of such Person that is generally entitled to (i) vote in the election of directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that controls the management and policies of such Person. "Consolidated Amortization Expense" of any Person for any period means the amortization expense of such Person and its Subsidiaries for such period (to the extent included in the computation of Consolidated Net Income of such Person), determined on a consolidated basis in accordance with GAAP. 86 87 "Consolidated Depreciation Expense" of any Person for any period means the depreciation expense of such Person and its Subsidiaries for such period (to the extent included in the computation of Consolidated Net Income of such Person), determined on a consolidated basis in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" of any Person means, with respect to any determination date, the ratio of (i) EBITDA for such Person's four full fiscal quarters immediately preceding the determination date, to (ii) the aggregate Fixed Charges of such Person for such four fiscal quarters. In making such computations, (i) EBITDA and Fixed Charges shall be calculated on a pro forma basis assuming that (A) the Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and all other Indebtedness incurred or Disqualified Capital Stock issued after the first day of such period of four full fiscal quarters referred to in the covenant described in paragraph (a) under "-- Certain Covenants--Limitations on Additional Indebtedness" through and including the date of determination), and (if applicable) the application of the net proceeds therefrom (and from any other such Indebtedness or Disqualified Capital Stock), including the refinancing of other Indebtedness, had been incurred on the first day of such four quarter period and, in the case of Acquired Indebtedness, on the assumption that the related transaction (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation and (B) any acquisition or disposition by the Company or any Subsidiary of any properties or assets outside the ordinary course of business or any repayment of any principal amount of any Indebtedness of the Company or any Subsidiary prior to the stated maturity thereof, in either case since the first day of such period of four full fiscal quarters through and including the date of determination, had been consummated on such first day of such four quarter period; (ii) the Fixed Charges attributable to interest on any Indebtedness required to be computed on a pro forma basis in accordance with the covenant described in paragraph (a) under "--Certain Covenants--Limitations on Additional Indebtedness" and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying, at the option of the Company, either the fixed or floating rate; (iii) the Fixed Charges attributable to interest on any Indebtedness under a revolving credit facility required to be computed on a pro forma basis in accordance with the covenant described in paragraph (a) under "--Certain Covenants--Limitations on Additional Indebtedness" shall be computed based upon the average daily balance of such Indebtedness during the applicable period, provided that such average daily balance shall be reduced by the amount of any repayment of Indebtedness under a revolving credit facility during the applicable period, which repayment permanently reduced the commitments or amounts available to be reborrowed under such facility, (iv) notwithstanding the foregoing clauses (ii) and (iii), interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements; and (v) if after the first day of the applicable four quarter period the Company has permanently retired any Indebtedness out of the net proceeds of the issuance and sale of shares of Capital Stock (other than Disqualified Capital Stock) of the Company within 30 days of such issuance and sale, Fixed Charges shall be calculated on a pro forma basis as if such Indebtedness had been retired on the first day of such period. "Consolidated Income Tax Expense" means, for any Person for any period, the provision for taxes based on income and profits of such Person and its Subsidiaries to the extent such income or profits were included in computing Consolidated Net Income of such Person for such period. "Consolidated Interest Expense" means, without duplication, with respect to any Person for any period, the sum of the interest expense on all Indebtedness of such Person and its Subsidiaries for such 87 88 period, determined on a consolidated basis in accordance with GAAP and including, without limitation (i) imputed interest on Capitalized Lease Obligations and Attributable Indebtedness, (ii) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations and bankers' acceptance financing, (iii) the net costs associated with Hedging Obligations, (iv) amortization of other financing fees and expenses, (v) the interest portion of any deferred payment obligations, (vi) amortization of debt discount or premium, if any, (vii) all other non-cash interest expense, (viii) capitalized interest, (ix) all interest payable with respect to discontinued operations, and (x) all interest on any Indebtedness of any other Person guaranteed by the referent Person or any of its Subsidiaries. "Consolidated Net Income" of any Person for any period means the net income (or loss) of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein), without duplication: (i) the net income (or loss) of any Person (other than a Subsidiary of the referent Person) in which any Person other than the referent Person has an ownership interest, except to the extent that any such income has actually been received by the referent Person or any of its Wholly-Owned Subsidiaries in the form of cash dividends during such period; (ii) except to the extent includible in the consolidated net income of the referent Person pursuant to the foregoing clause (i), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Subsidiary of the referent Person or is merged into or consolidated with the referent Person or any of its Subsidiaries or (b) the assets of such Person are acquired by the referent Person or any of its Subsidiaries; (iii) the net income of any Subsidiary of the referent Person during such period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income (a) is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period or (b) would be subject to any taxes payable on such dividend or distribution; (iv) any gain (but not loss), together with any related provisions for taxes on any such gain, realized during such period by the referent Person or any of its Subsidiaries upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the referent Person or any of its Subsidiaries or (b) any Asset Sale by the referent Person or any of its Subsidiaries, (v) any extraordinary gain (but not extraordinary loss), together with any related provision for taxes on any such extraordinary gain, realized by the referent Person or any of its Subsidiaries during such period; and (vi) in the case of a successor to such Person by consolidation, merger or transfer of its assets, any earnings of the successor prior to such merger, consolidation or transfer of assets; and provided, further, that (y) any gain referred to in clauses (iv) and (v) above that relates to a Restricted Investment and which is received in cash by the referent Person or one of its Subsidiaries during such period shall be included in the consolidated net income of the referent Person. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a Subsidiary of such Person. "Consolidated Tangible Assets" of any Person as of any date means the total assets of such Person and its Subsidiaries (excluding any assets that would be classified as "intangible assets" under GAAP) on 88 89 a consolidated basis at such date, determined in accordance with GAAP, less all write-ups subsequent to the Issue Date in the book value of any asset owned by such Person or any of its Subsidiaries. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default. "Disqualified Capital Stock" means any Capital Stock of such Person or any of its Subsidiaries that, by its terms, by the terms of any agreement related thereto or by the terms of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed or repurchased by such Person or any to its Subsidiaries, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the final maturity date of the Notes; provided, however, that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Capital Stock that is not Disqualified Capital Stock, and that is not convertible, puttable or exchangeable for Disqualified Capital Stock or Indebtedness, shall not be deemed to be Disqualified Capital Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Capital Stock. "EBITDA" means, with respect to any Person for any period, without duplication, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Income Tax Expense, (iii) Consolidated Amortization Expense (but only to the extent not included in Fixed Charges), (iv) Consolidated Depreciation Expense, (v) Fixed Charges, (vi) prepayment or make-whole payments incurred in connection with the repayment of Indebtedness on the date of the Indenture, and (vii) all other non-cash items reducing the Consolidated Net Income (excluding any such non-cash charge that results in an accrual of a reserve for cash charges in any future period) of such Person and its Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP (provided, however, that the amounts set forth in clauses (ii) through (vii) shall be included without duplication and only to the extent such amounts actually reduced Consolidated Net Income), less the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increase Consolidated Net Income. "Equity Offering" means an offering or sale of Capital Stock (other than Disqualified Capital Stock) of the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act or pursuant to an exemption from the registration requirements thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means all of the Indebtedness of the Company and its Subsidiaries that is outstanding on the Issue Date. "Fair Market Value" means the fair market value as determined in good faith by the Board of Directors and evidenced by a Board Resolution. "Fixed Charges" means, with respect to any Person for any period, the sum of (a) the Consolidated Interest Expense of such Person and its Subsidiaries for such period, and (b) the product of (i) all cash 89 90 dividend payments (and non-cash dividend payments in the case of a Person that is a Subsidiary) on any series of preferred stock of such Person or a Subsidiary of such Person, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue date. "Hedging Obligations" of any person means the obligations of such person pursuant to any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement relating to interest rates. "Indebtedness" of any Person at any date means, without duplication: (i) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof); (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services, which payable is not overdue by more than 60 days according to the original terms of sale unless such payable is being contested in good faith; (v) the maximum fixed repurchase price of all Disqualified Capital Stock of such Person; (vi) all Capitalized Lease Obligations of such Person; (vii) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (viii) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Company or its Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Company and its Subsidiaries on a consolidated basis; and (ix) all Attributable Indebtedness. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (vii), the lesser of (A) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (B) the amount of the Indebtedness secured. For purposes of the preceding sentence, the "maximum fixed repurchase price" of any Disqualified Capital Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock (or any equity security for which it may be exchanged or converted), such fair market value shall be determined in good faith by the Board of Directors of such Person, which determination shall be evidenced by a Board Resolution. "Independent Director" means a director of the Company who has not and whose Affiliates have not, at any time during the twelve months prior to the taking of any action hereunder, directly or indirectly, received, or entered into any understanding or agreement to receive, any compensation, payment or other benefit, of any type or form, from the Company or any of its Affiliates, other than customary directors fees 90 91 for serving on the Board of Directors of the Company or any Affiliate and reimbursement of out-of-pocket expenses for attendance at the Company's or Affiliate's board and board committee meetings. "Independent Financial Advisor" means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Company's Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Company and its Affiliates. "Index Amount" means, for any year, an amount equal to the percentage increase, if any, in the Index as of the end of such year when compared to the Index in effect at the end of the previous year multiplied by the applicable amount of total compensation for such year. The "Index" means the Consumer Price Index for all Urban Consumers (CPI-U), Northeast, all items, 1982-84 = 100, published by the Bureau of Labor Statistics of the U. S. Department of Labor or if at any time such Index is not published, any substitute index designated by the Company and appropriately adjusted. "Investments" of any Person means (i) all investments by such Person in any other Person in the form of loans, advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business) or similar credit extensions constituting Indebtedness of such Person, and any guarantee of Indebtedness of any other Person, (ii) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Capital Stock or other securities of any other Person and (iii) all other items that would be classified as investments (including without limitation purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. "Issue Date" means the date the Original Notes are initially issued. "Lien" means, with respect to any asset or property, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset or property, whether or not filed, recorded or otherwise perfected under applicable law (including without limitation any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Available Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts required to be paid to any Person (other than the Company or any Subsidiary) owning a beneficial interest in the properties or assets subject to the Asset Sale or having a Lien therein and (iv) appropriate amounts to be provided by the Company or any Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; 91 92 provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds. "New Bank Credit Facility" means that certain Credit Agreement dated as of June 9, 1997 by and among PNC Bank, National Association, as agent, the banks party thereto, the Company, United Refining Company of Pennsylvania and Kiantone Pipeline Corporation, as subsequently amended, restated or replaced from time to time. See "Description of Certain Indebtedness." "Non-Recourse Purchase Money Indebtedness" means Indebtedness of the Company or any of its Subsidiaries incurred (a) to finance the purchase of any assets of the Company or any of its Subsidiaries within 90 days of such purchase, (b) to the extent the amount of Indebtedness thereunder does not exceed 100% of the purchase cost of such assets, (c) to the extent the purchase cost of such assets is or should be included in "additions to property, plant and equipment" in accordance with GAAP, (d) to the extent that such Indebtedness is non-recourse to the Company or any of its Subsidiaries or any of their respective assets other than the assets so purchased, and (e) to the extent the purchase of such assets is not part of an acquisition of any Person. "Other Capital Expenditures" means capital expenditures and expenses incurred to fund capital improvement projects of the Company including without limitation, to fund the replacement of its underground storage tanks to comply with applicable environmental laws and regulations. "Payment Restriction", with respect to a Subsidiary of any Person, means any encumbrance, restriction of limitation, whether by operation of the terms of its charter or by reason of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation, on the ability of (i) such Subsidiary to (a) pay dividends or make other distributions on its Capital Stock or make payments on any obligation, liability or Indebtedness owed to such Person or any other Subsidiary of such Person, (b) make loans or advances to such Person or any other Subsidiary or such Person or (c) transfer any of its properties or assets to such Person or any other Subsidiary of such Person or (ii) such Person or any other Subsidiary of such Person to receive or retain any such dividends, distributions or payments, loans or advances or transfer or properties or assets. "Permitted Holders" means John A. Catsimatidis and his Related Parties. "Permitted Indebtedness" means any of the following: (i) Indebtedness in an aggregate principal amount at any time outstanding not to exceed 85% of the book value of the eligible accounts receivable and 60% of inventory of the Company and its Subsidiaries, calculated on a consolidated basis and in accordance with GAAP; (ii) Indebtedness under the Notes, the Subsidiary Guarantees and the Indenture; (iii) Existing Indebtedness; (iv) Indebtedness under Hedging Obligations, provided that (1) such Hedging Obligations are related to payment obligations on Permitted Indebtedness or Indebtedness otherwise permitted by paragraph (a) of the "Limitations on Additional Indebtedness" covenant, and (2) the notional principal amount of such Hedging Obligations does not exceed the principal amount of such Indebtedness to which such Hedging Obligations relate; 92 93 (v) Indebtedness of the Company to a Subsidiary and Indebtedness of any Subsidiary to the Company or a Subsidiary; provided, however, that upon either (1) the subsequent issuance (other than directors' qualifying shares), sale, transfer or other disposition of any Capital Stock or any other event which results in any such Subsidiary ceasing to be a Subsidiary or (2) the transfer or other disposition of any such Indebtedness (except to the Company or a Subsidiary), the provisions of any such Indebtedness (except to the Company or a Subsidiary), the provisions of this clause (v) shall no longer be applicable to such Indebtedness and such Indebtedness shall be deemed, in each case, to be incurred and shall be treated as an incurrence for purposes of paragraph (a) of the "Limitations on Additional Indebtedness" covenant at the time the Subsidiary in question ceased to be a Subsidiary or the time such transfer or other disposition occurred; (vi) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company in the ordinary course of business, including guarantees or obligations of the Company with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (vii) Indebtedness in respect of Non-Recourse Purchase Money Indebtedness incurred by the Company or any Subsidiary; and (viii) Refinancing Indebtedness. "Permitted Liens" means: (i) Liens for taxes, assessments or governmental charges or claims that either (a) are not yet delinquent or (b) are being contested in good faith by appropriate proceedings and as to which appropriate reserves or other provisions have been made in accordance with GAAP; (ii) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other Liens imposed by law arising in the ordinary course of business and with respect to amounts that either (a) are not yet delinquent or (b) are being contested in good faith by appropriate proceedings and as to which appropriate reserves or other provisions have been made in accordance with GAAP; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, progress payments, government contracts and other obligations of like nature (exclusive of obligations for the payment of borrowed money), in each case, incurred in the ordinary course of business; (v) easements, rights-of-way, restrictions and other similar charges or encumbrances in respect of real property not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries and not materially affecting the value of the property subject thereto; (vi) leases or subleases granted to others not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries and not materially affecting the value of the property subject thereto; (vii) Liens securing Acquired Indebtedness, provided that such Liens (x) are not incurred in connection with, or in contemplation of, the acquisition of the property or assets acquired and (y) do not extend to or cover any property or assets of the Company or any of its Subsidiaries other than the property or assets so acquired; (viii) Liens securing Refinancing Indebtedness to the extent incurred to repay, refinance or refund Indebtedness that is secured by Liens and outstanding as of the Issue Date (after giving effect to the application of the proceeds of the Offering), provided that such Refinancing Indebtedness shall be secured solely by the assets securing the outstanding Indebtedness being repaid, refinanced or refunded; (ix) Liens that secure Sale and Leaseback Transactions that are permitted under the covenants described under "Limitations on Additional Indebtedness" and "Limitations on Sale and Leaseback Transactions"; (x) Liens securing Indebtedness between the Company and its Wholly Owned Subsidiaries or among such Wholly Owned Subsidiaries; and (xi) Liens existing on the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date (after giving effect 93 94 to the application of the proceeds of the Offering); (xii) Liens securing the New Bank Credit Facility; provided that any such Liens shall not extend to or cover Restricted Inventory of the Company or any of its Subsidiaries unless on the date such Liens are incurred either (A)(1) the Company has in effect a rating no lower than B from Standard & Poor's ("S&P"), (2) the Notes have in effect a rating no lower than B from S&P and (3) the Notes have in effect a rating no lower than B3 from Moody's, or (B)(1) the Notes have in effect a rating no lower than B3 from Moody's and (2) the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the determination date is no less than 2.25 to 1; (xiii) Liens securing Non-Recourse Purchase Money Indebtedness, provided, that such Liens extend only to the property being acquired and such Lien is created within 90 days of the purchase of such property and (xiv) Liens securing Indebtedness in an amount not to exceed $500,000 at any time outstanding. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Petroleum Investment" means an Investment by the Company in an entity engaged in the business of petroleum refining and/or retail marketing of refined petroleum products and which is not an Affiliate of the Company. "Plan of Liquidation", with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such Person to Holders of Capital Stock of such Person. "Refinancing Indebtedness" means Indebtedness of the Company or a Subsidiary of the Company issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to repay, redeem, refund, refinance, discharge or otherwise retire for value, in whole or in part (collectively, "repay"), or constituting an amendment, modification or supplement to or a deferral or renewal of (collectively, an "amendment"), any Indebtedness of the Company or any of its Subsidiaries or incurred pursuant to the Fixed Charge Coverage Ratio test of the covenant described under "Limitations on Additional Indebtedness" in a principal amount not in excess of the principal amount of the Indebtedness so repaid or amended (or, if such Refinancing Indebtedness refinances Indebtedness under a revolving credit facility or other agreement providing a commitment for subsequent borrowings, with a maximum commitment not to exceed the maximum commitment under such revolving credit facility or other agreement); provided that: (i) the Refinancing Indebtedness is the obligation of the same Person, and is subordinated to the Notes, if at all, to the same extent, as the Indebtedness being repaid or amended; (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being repaid or amended or (b) after the maturity date of the Notes; (iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes; and (iv) the Refinancing Indebtedness is secured only to the extent, if at all, and by the assets, that the Indebtedness being repaid or amended is secured. 94 95 "Related Business Investment" means any Investment directly by the Company or its Subsidiaries in any business that is closely related to or complements the business of the Company or its Subsidiaries as such business exists on the Issue Date. "Related Party" with respect to any Person means (i) any 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Person, or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (i). "Restricted Debt Payment" means any purchase, redemption, defeasance (including without limitation in substance or legal defeasance) or other acquisition or retirement for value, directly or indirectly, by the Company or a Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness. "Restricted Inventory" means all the Company's and its Subsidiaries' inventory other than inventory of crude oil and asphalt wherever located and motor gasoline located in Warren, Pennsylvania. "Restricted Investment", with respect to any Person, means any Investment by such Person (other than investments in Cash Equivalents) in any Person that is not a Subsidiary, including its Unrestricted Subsidiaries, if any. "Restricted Payment" means with respect to any Person: (i) the declaration of any dividend (other than a dividend declared by a Wholly Owned Subsidiary to holders of its Common Equity) or the making of any other payment or distribution of cash, securities or other property or assets in respect of such Person's Capital Stock (except that a dividend payable solely in Capital Stock (other than Disqualified Capital Stock) of such Person shall not constitute a Restricted Payment); (ii) any payment on account of the purchase, redemption, retirement or other acquisition for value of such Person's Capital Stock or any other payment or distribution made in respect thereof, either directly or indirectly (other than a payment solely in Capital Stock that is not Disqualified Capital Stock); (iii) any Restricted Investment; (iv) any Restricted Debt Payment; or (v) any payments under the Servicing Agreement in excess of $1 million per fiscal year. "Sale and Leaseback Transaction" means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person or any of its Subsidiaries of any property or asset of such Person or any of its Subsidiaries which has been or is being sold or transferred by such Person or such Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. "Servicing Agreement" means that certain agreement dated June 9, 1997, between RAG and the Company, pursuant to which the Company shall pay to RAG for the use of RAG's New York headquarters, as such agreement may be amended from time to time, and any agreement concerning the same subject matter between the Company and John A. Catsimatidis and/or any of his Affiliates, whether such agreement is a replacement thereof or in addition thereto. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation 95 96 is in effect on the Issue Date, except all references to "10 percent" in such definition shall be changed to "2 percent". "Subordinated Indebtedness" means Indebtedness of the Company or any Subsidiary that is subordinated in right of payment to the Notes or the Subsidiary Guarantees, respectively. "Subsidiary" of any Person means (i) any corporation of which at least a majority of the aggregate voting power of all classes of the Common Equity is owned by such Person directly or through one or more other Subsidiaries of such Person and (ii) any entity other than a corporation in which such Person, directly or indirectly, owns at least a majority of the Common Equity of such entity, other than any such person designated as an Unrestricted Subsidiary in accordance with the definition of "Unrestricted Subsidiary". "Subsidiary Guarantors" means each of Kiantone Pipeline Corporation, Kiantone Pipeline Company, United Jet Center, Inc., United Refining Company of Pennsylvania, Kwik Fill, Inc., Independent Gasoline and Oil Company of Rochester, Inc., Bell Oil Corp., PPC, Inc., Super Test Petroleum, Inc., Kwik-Fil, Inc. and Vulcan Asphalt Refining Corporation and each other person who is required to become a Subsidiary Guarantor by the terms of the Indenture. "Tax Sharing Agreement" means the Tax Sharing Agreement dated June 9, 1997, by and among RAG, the Company and certain of their affiliates, as in effect on the Issue Date and as amended from time to time thereafter; provided that any such amendment does not increase the liability or decrease the rights of the Company or any of its Subsidiaries under the Tax Sharing Agreement. "Unrestricted Subsidiary" means each of the Subsidiaries of the Company so designated by a resolution adopted by the Board of Directors of the Company and whose creditors have no direct or indirect recourse (including without limitation recourse with respect to the payment of principal of or interest on Indebtedness of such Subsidiary) to the Company or a Subsidiary; provided, however, that the Board of Directors of the Company will be prohibited from designating as an Unrestricted Subsidiary any Subsidiary existing on the date of the Indenture. The Board of Directors of the Company may designate an Unrestricted Subsidiary to be a Subsidiary, provided that (i) any such redesignation shall be deemed to be an incurrence by the Company and its Subsidiaries of the Indebtedness (if any) of such redesignated Subsidiary for purposes of the "Limitations on Additional Indebtedness" covenant in the Indenture as of the date of such redesignation and (ii) immediately after giving effect to such redesignation and the incurrence of any such additional Indebtedness, the Company and its Subsidiaries could incur $1 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the "Limitations on Additional Indebtedness" covenant described above. Any such designation or redesignation by the Board of Directors shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the Board Resolution giving effect to such designation or redesignation and an Officer's Certificate certifying that such designation or redesignation complied with the foregoing conditions and setting forth the underlying calculations of such certificate. "Voting Stock", with respect to any Person, means securities of any class of Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the board of directors of such Person. "Weighted Average Life to Maturity", when applied to any Indebtedness at any date, means the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, 96 97 including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Subsidiary" of the Company means a Subsidiary of the Company, of which 100% of the Common Equity (except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) is owned directly by the Company or through one or more Wholly-Owned Subsidiaries of the Company. 97 98 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following summary describes only the United States federal income tax consequences of the ownership of Notes as of the date hereof relating to the exchange of the Original Notes for New Notes. It deals only with Notes held as capital assets by United States Holders and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, life insurance companies, persons holding Notes as a part of the hedging or conversion transaction or a straddle or United States Holder whose "functional currency" is not the U.S. dollar. Furthermore, the discussion below is based on the provisions of the Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in federal income tax consequences different from those discussed below. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. As used herein a "United States Holder" of a Note means a holder that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. EXCHANGE OFFER The exchange of New Notes for the Original Notes pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the New Notes will not be considered to differ materially in kind or extent from the Original Notes. Rather, the New Notes received by a holder will be treated as a continuation of the Original Notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging the Original Notes for the New Notes pursuant to the Exchange Offer. If, however, the exchange of the Original Notes for the New Notes were treated as an "exchange" for federal income tax purposes, such exchange would constitute a recapitalization for federal income tax purposes. Holders exchanging Original Notes pursuant to such recapitalization would not recognize any gain or loss upon the exchange. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Original Notes where such Original Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 90 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _____________________, all dealers effecting transactions in the New Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writings of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive 98 99 compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. Each letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 90 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in its Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters with respect to the Notes offered hereby will be passed upon for the Company by Lowenthal, Landau, Fischer & Bring, P.C., New York, New York. Martin R. Bring, a member of the firm of Lowenthal, Landau, Fischer & Bring, P.C., is a director of the Company. EXPERTS The consolidated financial statements and schedule included in this Prospectus and in the Registration Statement have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their reports contained herein and in the Registration Statement. All such financial statements and schedule have been included in reliance upon such reports given upon the authority of such firm as experts in auditing and accounting. The consolidated financial statements and schedule of United Refining Company and subsidiaries as of and for the year ended August 31, 1994 have been included in this Prospectus and in the Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein and in the Registration Statement and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP included herein refers to a revision to the financial statements to apply pushdown accounting. 99 100 GLOSSARY The following table includes definitions of certain terms used in this Prospectus: ALKYLATION: a refining process for chemically combining isobutane with olefins, such as butylene, through the control of temperature and pressure in the presence of sulfuric acid catalyst to produce alkylate, a high octane gasoline component. API GRAVITY: an arbitrary scale recommended by the American Petroleum Institute for measuring the density of crude oil or other liquid hydrocarbons and expressed as "Degrees API". AROMATICS: hydrocarbons whose molecular structure consists of rings containing six carbon atoms. Aromatics are high octane chemicals but their usage in gasoline is limited by environmental regulation. Benzene, toluene and xylenes are examples of aromatics. BARRELS: unit of measurement commonly used in the refining industry, equivalent to 42 U.S. gallons. BBL: abbreviation for barrel. BOTTOM OF THE BARREL ("BOTTOMS"): refers to the fraction of crude oil with the highest boiling point, typically 1000(degree) F or higher, which collects in the bottom of a fractionation tower. BPD: barrels per day; when used in connection with a discussion of an operating capacity, bpd means that the refinery is believed capable of averaging the given bpd rate seven days per week over a long period of time, net of a reasonably anticipated number of days down for maintenance or other reasons. CRUDE UNIT: equipment used in the refining process which separates crude oil components at slightly higher than atmospheric pressure by heating the crude oil to a temperature of approximately 700(degree) F in a series of heat exchangers and a furnace and subsequently condensing the fractions by cooling. The Company's crude unit consists of one distillation tower, one furnace and multiple heat exchangers and pumps. DISTILLATE HYDROTREATER: refinery equipment used in the refining process for treating the middle distillate fraction from the crude unit in the presence of a catalyst and substantial quantities of hydrogen. Hydrotreating includes desulfurization and other chemical reactions to upgrade the quality of the product. The Company also hydrotreats light cycle oil, a diesel component produced from the fluid catalytic cracking unit. ELECTROSTATIC PRECIPITATOR: large hoppers which electrically attract and capture particulates in the flue gas from the fluid catalytic cracking unit. Elements in the hoppers through which the flue gas travels bear an electric charge which attracts the particulates, which are subsequently discharged into the hoppers and removed as a non-hazardous solid waste. FLUID CATALYTIC CRACKING UNIT: refinery equipment used in the refining process to break down the larger, heavier and more complex hydrocarbon molecules into simpler and lighter molecules. Gas oil feed contacts a hot circulating catalyst and reacts to form a product mixture consisting of methane, ethane, 100 101 propane, propylene, butane, butylenes, catalytic gasoline, light cycle oil, clarified oil and coke. The coke is consumed in the unit as refinery fuel. GAL: U.S. gallon GAS OIL: a liquid petroleum fraction produced in conventional distillation operations and having an approximate boiling range from 650(degree) F to 1000(degree) F. HEAVY CRUDE: crude oil of 25(degree) API or less. ISOMERIZATION UNIT: refinery equipment used in the refining process which alters the arrangement of atoms in the molecule without adding or removing anything from the original material. The Company's unit converts low octane normal pentane and hexane into isopentane and iso-hexane, high-octane gasoline components. LIGHT CRUDE: crude oil of 30(degree) API or greater. M: thousands MEDIUM COMPLEXITY: a relative term indicating that a refinery incorporates upgrading units such as a reformer, fluid catalytic cracker, alkylation and isomerization but does not utilize coking, petrochemical or lubricating oil production units. M GALS: thousands of gallons MIDDLE DISTILLATES: a general classification for one of the petroleum fractions produced in conventional distillation operations and having an approximate boiling range from 400(degree) F to 650(degree) F. Included are kerosene, jet fuel, heating oils and diesel fuels. MM: millions NAPHTHA: a petroleum fraction produced in conventional distillation operations and having an approximate boiling range from 150(degree) F to 400(degree) F. NAPHTHA HYDROTREATING UNIT: refinery equipment used in the refining process for treating the naphtha fraction from the atmospheric distillation unit in the presence of a catalyst and substantial quantities of hydrogen. Hydrotreating includes desulfurization and removal of substances that deactivate reformer unit catalyst. PADD: Petroleum Administration for Defense District. There are five such districts in the United States. The Company's refinery and primary market area are located in PADD I which encompasses most of the eastern seaboard. POLYMERIZATION UNIT: refinery equipment used in the refining process to combine two or more molecules of propylene in the presence of a catalyst to form a gasoline blending component having an octane value similar to that of regular grade 87 road octane gasoline. PREFLASH UNIT: refinery equipment used in the refining process for performing the initial separation of light components in crude oil by heating the crude oil to a temperature of about 300(degree) F in a series of 101 102 heat exchangers and subsequent cooling of the fractions. The Company's preflash unit consists of one distillation tower and multiple heat exchangers and pumps. RATED CRUDE OIL THROUGHPUT CAPACITY: the input crude oil capacity of the crude unit after accounting for scheduled downtime, and estimated to be 65,000 bpd for the Company's crude unit. REFORMER: refinery equipment used in the refining process whereby controlled heat and pressure are used with a catalyst to rearrange certain hydrocarbon molecules, converting low octane hydrocarbons into higher octane hydrocarbons suitable for blending into finished gasoline. The Company operates its reformer unit at varying severity thereby producing a lower octane or a higher octane reformate product as required for blending regular and premium grades of gasoline. The reformer also produces hydrogen which is utilized in the hydrotreater units. REFORMULATED GASOLINE (RFG): gasoline formulated for use in motor vehicles, the composition and properties of which meet the requirements of the reformulated gasoline regulations promulgated by the U.S. Environmental Protection Agency. ROAD OCTANE: the performance rating of gasoline which is posted on dispensing pumps at gasoline service stations. Road octane is the arithmetic average of a gasoline or gasoline component research octane and motor octane. SATURATE GAS PLANT: refinery equipment used in the refining process which applies compression and distillation to separate gases and produce refinery fuel gas, propane, butane and a pentane gasoline component. SHARP SPECIFICATION PAVING ASPHALT: asphalt made to the specifications of the Strategic Highway Research Program established by Congress to improve the performance and durability of U.S. roads. SULFUR RECOVERY UNIT: refinery equipment used in the refining process for reacting hydrogen sulfide gas with oxygen at high temperature and in the presence of a catalyst to form elemental sulfur for later sale. THROUGHPUT: volume of feedstock input to a process unit. TURNAROUND: the planned, periodic inspection and preventive maintenance of the units of a refinery requiring the shutting down of the units. Turnaround cycles vary for different units so that some units continue to operate when others are inactive. UTILIZATION: the ratio of the actual input to a unit to the rated capacity of the unit. The Company's refinery utilization is the ratio of actual crude oil input to the crude unit to the Company's 65,000 barrel per day rated capacity of the crude unit. YIELD: the output volume of the mixture of products produced from the refining of crude oil input. 102 103 INDEX TO FINANCIAL STATEMENTS PAGE Reports of Independent Certified Public Accountants F-2 - F-3 Consolidated Financial Statements: Balance Sheets F-4 Statements of Operations F-5 Statements of Stockholder's Equity F-6 Statements of Cash Flows F-7 - F-8 Notes to Consolidated Financial Statements F-9 - F-24 F-1 104 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Stockholder United Refining Company We have audited the accompanying consolidated balance sheets of United Refining Company and subsidiaries as of August 31, 1995 and 1996, and the related consolidated statements of operations, stockholder's equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the management of United Refining Company and its subsidiaries. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Refining Company and subsidiaries as of August 31, 1995 and 1996, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 1, the consolidated financial statements for the years ended August 31, 1995 and 1996 have been revised to apply pushdown accounting. October 25, 1996 BDO Seidman, LLP F-2 105 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholder United Refining Company: We have audited the accompanying consolidated statements of operations, stockholder's equity and cash flows of United Refining Company and subsidiaries for the year ended August 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated statements of operations, stockholder's equity and cash flows referred to above present fairly, in all material respects, the results of operations, changes in stockholder's equity and cash flows of United Refining Company and subsidiaries for the year ended August 31, 1994 in conformity with generally accepted accounting principles. As discussed in Note 1, the consolidated financial statements for the year ended August 31, 1994 have been revised to apply pushdown accounting. KPMG Peat Marwick LLP October 28, 1994 F-3 106 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
August 31, June 30, 1995 1996 1997 -------- -------- -------- (unaudited) ASSETS Current: Cash and cash equivalents $ 12,414 $ 15,511 $ 9,796 Cash and cash equivalents-restricted -- -- 8,129 Available for sale securities -- -- 40,000 Accounts receivable, net 30,635 33,340 28,909 Inventories 57,027 52,168 68,068 Prepaid expenses and other assets 8,683 6,728 14,106 Deferred income taxes 346 -- -- -------- -------- -------- Total current assets 109,105 107,747 169,008 -------- -------- -------- Property, plant and equipment: Cost 215,254 219,395 222,929 Less: accumulated depreciation 45,916 53,564 60,656 -------- -------- -------- Net property, plant and equipment 169,338 165,831 162,273 -------- -------- -------- Amounts due from affiliated companies 17,674 19,038 -- Other assets 3,166 2,277 8,281 -------- -------- -------- $299,283 $294,893 $339,562 ======== ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current: Revolving credit facility $ -- $ -- $ 15,000 Current installments of long-term debt 17,913 $ 16,759 269 Accounts payable 16,523 22,387 24,806 Accrued liabilities 15,554 13,401 11,436 Sales, use and fuel taxes payable 14,654 14,827 13,641 Deferred income taxes -- 508 508 -------- -------- -------- Total current liabilities 64,644 67,882 65,660 -------- -------- -------- Long term debt: less current installments 136,182 120,018 201,047 Deferred income taxes 4,757 7,488 6,866 Deferred gain on settlement of pension plan obligations 2,850 2,635 2,456 Deferred retirement benefits 7,409 8,384 10,366 Other noncurrent liabilities 5,255 4,459 5,479 -------- -------- -------- Total liabilities 221,097 210,866 291,874 -------- -------- -------- Commitments and contingencies Stockholder's equity: Common stock, $.10 par value per share-- shares authorized 100; issued and outstanding 100 -- -- -- Additional paid-in capital 7,150 7,150 7,150 Retained earnings 71,036 76,877 40,538 -------- -------- -------- Total stockholder's equity 78,186 84,027 47,688 -------- -------- -------- $299,283 $294,893 $339,562 ======== ======== ========
See accompanying notes to consolidated financial statements. F-4 107 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
TEN MONTHS ENDED ------------------------ YEAR ENDED AUGUST 31, JUNE 30 --------------------------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- (UNAUDITED) Net sales $ 729,128 $ 783,686 $ 833,818 $ 669,882 $ 712,071 Cost of goods sold 628,351 688,499 728,596 578,461 634,810 --------- --------- --------- --------- --------- Gross profit 100,777 95,187 105,222 91,421 77,261 --------- --------- --------- --------- --------- Expenses: Selling, general and administrative expenses 69,158 68,876 70,124 58,920 58,703 Depreciation and amortization expenses 7,441 8,199 8,216 7,055 7,109 Other 1,598 -- -- -- -- --------- --------- --------- --------- --------- Total operating expenses 78,197 77,075 78,340 65,975 65,812 --------- --------- --------- --------- --------- Operating income 22,580 18,112 26,882 25,446 11,449 --------- --------- --------- --------- --------- Other income (expense): Interest income 1,134 1,204 1,236 1,053 1,073 Interest expense (17,100) (18,523) (17,606) (14,681) (13,835) Other, net (3,257) 155 (884) (819) (990) --------- --------- --------- --------- --------- (19,223) (17,164) (17,254) (14,447) (13,752) --------- --------- --------- --------- --------- Income (loss) before income tax expense (benefit) and extraordinary items 3,357 948 9,628 10,999 (2,303) Income tax expense (benefit): Current 1,050 1,500 200 2,419 (2,297) Deferred 287 (1,013) 3,587 1,973 1,395 --------- --------- --------- --------- --------- 1,337 487 3,787 4,392 (902) --------- --------- --------- --------- --------- Net income (loss) before extraordinary items 2,020 461 5,841 6,607 (1,401) --------- --------- --------- --------- --------- Extraordinary items, net of tax benefit of $1,155 and $4,200 (1,530) -- -- -- (6,653) --------- --------- --------- --------- --------- Net income (loss) $ 490 $ 461 $ 5,841 $ 6,607 $ (8,054) ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements. F-5 108 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
TOTAL ADDITIONAL STOCK- COMMON STOCK PAID-IN RETAINED HOLDER'S SHARES AMOUNT CAPITAL EARNINGS EQUITY -------- -------- -------- -------- -------- Balance at August 31, 1993 100 $ -- $ 7,150 $ 70,085 $ 77,235 Net income -- -- 490 490 -------- -------- -------- -------- -------- Balance at August 31, 1994 100 -- 7,150 70,575 77,725 Net income -- -- 461 461 -------- -------- -------- -------- -------- Balance at August 31, 1995 100 -- 7,150 71,036 78,186 Net income -- 5,841 5,841 -------- -------- -------- -------- -------- Balance at August 31, 1996 100 -- 7,150 76,877 84,027 Net loss (unaudited) -- -- (8,054) (8,054) Dividends (unaudited) (28,285) (28,285) -------- -------- -------- -------- -------- Balance at June 30, 1997 (unaudited) 100 $ -- $ 7,150 $ 40,538 $ 47,688 ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements. F-6 109 UNITED REFINING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
TEN MONTHS ENDED ------------------------- YEAR ENDED AUGUST 31, JUNE 30, --------------------------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- (UNAUDITED) Cash flows from operating activities: Net income (loss) $ 490 $ 461 $ 5,841 $ 6,607 $ (8,054) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 7,860 8,568 8,505 7,302 7,339 Extraordinary item - write-off of deferred financing costs -- -- -- -- 1,118 Post-retirement benefits 1,975 2,885 2,000 2,415 1,982 Change in deferred income taxes (582) (1,013) 3,587 1,973 1,395 (Gain)/loss on asset dispositions 1,753 (338) (132) (372) (121) Cash provided by (used in) working capital items (11,173) 6,698 5,614 (20,725) (24,823) Other, net 152 381 (440) 410 72 --------- --------- --------- --------- --------- Total adjustments (15) 17,181 19,134 (8,997) (13,038) --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities 475 17,642 24,975 (2,390) (21,092) --------- --------- --------- --------- --------- Cash flows from investing activities: Purchase of available- for-sale securities -- -- -- -- (40,000) Additions to property, plant and equipment (20,889) (12,134) (4,562) (3,604) (3,553) Proceeds from asset dispositions 3,531 639 653 629 124 --------- --------- --------- --------- --------- Net cash used in investing activities (17,358) (11,495) (3,909) (2,975) (43,429) --------- --------- --------- --------- --------- Cash flows from financing activities: Dividends -- -- -- -- (5,000) Net (reductions) borrowings on revolving credit facility 4,000 (4,000) -- 17,500 15,000 Principal reductions of long-term debt (25,005) (629) (17,939) (17,048) (135,468) Proceeds from issuance of long-term debt 41,750 -- -- -- 200,000 Deferred financing costs (624) (104) (30) (15) (7,597) --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities 20,121 (4,733) (17,969) 437 66,935 --------- --------- --------- --------- --------- Net increase (decrease) in
F-7 110
TEN MONTHS ENDED ---------------------- YEAR ENDED AUGUST 31, JUNE 30, ---------------------------------- 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- (UNAUDITED) cash and cash equivalents: 3,238 1,414 3,097 (4,928) 2,414 Cash and cash equivalents, beginning of year 7,762 11,000 12,414 12,414 15,511 -------- -------- -------- -------- -------- Cash and cash equivalents, end of year $ 11,000 $ 12,414 $ 15,511 $ 7,486 $ 17,925 ======== ======== ======== ======== ========
TEN MONTHS ENDED ---------------------- YEAR ENDED AUGUST 31, JUNE 30, ------------------------------------ 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- (UNAUDITED) Cash provided by (used in) working capital items Accounts receivable, net $ (7,746) $ 1,350 $ (3,585) $ (1,808) $ 4,431 Inventories (9,787) 6,371 4,859 (22,062) (15,900) Prepaid expenses and other assets (3,931) 1,201 2,277 (25) (13,642) Accounts payable 6,128 (4,012) 5,864 7,140 2,419 Accrued liabilities 105 1,973 (3,974) (2,358) (945) Sales, use and fuel taxes payable 4,058 (185) 173 (1,612) (1,186) -------- -------- -------- -------- -------- Total change $(11,173) $ 6,698 $ 5,614 $(20,725) $(24,823) -------- -------- -------- -------- -------- Cash paid during the period for: Interest (net of amount capitalized) $ 17,069 $ 18,336 $ 18,480 $ 15,110 $ 16,118 Income taxes $ 858 $ 339 $ 929 $ 922 $ 195 ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements. F-8 111 UNITED REFINING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION RELATED TO THE TEN MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED.) 1. ACCOUNTING POLICIES Basis of Presentation United Refining Company is a wholly-owned subsidiary of United Refining, Inc. ("United"), a wholly-owned subsidiary of United Acquisition Corporation ("UAC") which, in turn is a wholly-owned subsidiary of Red Apple Group, Inc. (the "Parent"). The cost of the Parent's investment in the Company is reflected as the basis in the consolidated financial statements of the Company ("pushdown accounting"). The common stock of the Company was acquired by the Parent in February, 1986 in a transaction accounted for as a purchase for $8.0 million, an amount below the historical cost of the acquired assets net of liabilities. Stock acquisitions are not required to be reported on the basis of pushdown accounting and prior to the offering the Company's separate financial statements were presented on the basis of the historical cost of the assets and liabilities. The accompanying financial statements for the years ended August 31, 1994, 1995 and 1996 have been revised to apply pushdown accounting. The effects of the revision were as follows:
AUGUST 31, 1995 1996 (IN THOUSANDS) Reduction in property, plant and equipment $42,825 $38,108 Increase in deferred income tax assets 17,141 15,254 Decrease in stockholder's equity 25,684 22,854
YEAR ENDED AUGUST 31, 1994 1995 1996 ------ ------ ------ (IN THOUSANDS) Increase in net income $2,830 $2,830 $2,830
Principles of Consolidation The consolidated financial statements include the accounts of United Refining Company and its subsidiaries (collectively, the "Company"), United Refining Company of Pennsylvania and its subsidiaries, and Kiantone Pipeline Corporation. All significant intercompany balances and transactions have been eliminated in consolidation. F-9 112 Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investment securities with maturities of three months or less at date of acquisition to be cash equivalents. Available For Sale Securities Available for sale securities are stated at fair market value in accordance with Statement of Financial Accounting Standards No. 115 ("Statement 115"), "Accounting for Certain Investments in Debt and Equity Securities" and consist of investment in government securities and commercial paper maturing through December 1997. At June 30, 1997, cost approximated market value. Inventories and Exchanges Petroleum inventories are stated at the lower of cost or market, with cost being determined under the last-in, first-out (LIFO) method. Due to fluctuating market conditions for certain petroleum product inventories, LIFO cost exceeded market by approximately $4,000,000, $4,000,000 and $1,800,000 as of August 31, 1995 and 1996, and June 30, 1997, respectively, resulting in the valuation of certain inventories at market. The cost of other inventories, principally supplies and retail merchandise inventories, amounting to $16,788,000, $17,630,000, and $17,906,000, as of August 31, 1995, and 1996 and June 30, 1997, respectively, is determined under the first-in, first-out method. Product exchange balances are reflected in petroleum inventories. The Company does not own sources of crude oil and depends on outside vendors for supplies of crude oil. Property, Plant and Equipment Property, plant and equipment is stated at cost and depreciated by the straight-line method over the respective estimated useful lives. The costs of funds used to finance projects during construction are capitalized. Routine current maintenance, repairs and replacement costs are charged against income. Turnaround costs, which consist of complete shutdown and inspection of significant units of the refinery at intervals of two or more years for necessary repairs and replacements, are estimated during the units' operating cycles and charged against income currently. Expenditures which materially increase values, expand capacities or extend useful lives are capitalized. Revenue Recognition Revenue from wholesale sales are recognized upon shipment or when title passes. Retail revenues are recognized immediately upon sale to the customer. F-10 113 Income Taxes Effective September 1, 1993 the Company adopted Statement of Financial Accounting Standards No. 109 ("Statement 109"), "Accounting for Income Taxes." Statement 109 requires use of the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company joins with the Parent and the Parent's other subsidiaries in filing a Federal income tax return on a consolidated basis. Income taxes are calculated on a separate return basis with consideration of the tax sharing agreement among the Parent and its subsidiaries. Post-retirement Healthcare Benefits The Company provides at no cost to retirees, post-retirement healthcare benefits to salaried and certain hourly employees. The benefits provided are hospitalization, medical coverage and dental coverage for the employee and spouse until age 65. After age 65, benefits continue until the death of the retiree which results in the termination of benefits for all dependent coverage. If an employee leaves the Company as a terminated vested member of a pension plan prior to normal retirement age, the person is not entitled to any post-retirement healthcare benefits. Effective September 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 ("Statement 106"), "Employers' Accounting for Post-retirement Benefits other than Pensions." Statement 106 requires accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. As permitted by Statement 106, the Company has elected to amortize the transition obligation of approximately $12,000,000 on a straight-line basis over a 20-year period. The adoption of Statement 106 had no effect on cash flows. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentrations of Credit Risk The Company extends credit based on evaluation of the customer's financial condition, generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. F-11 114 Insurance Claims Revenue is recognized or expense is reduced, as appropriate, relating to amounts recoverable from insurance carriers for, among other things, property damage and business interruption arising from insured occurrences at the time the Company determines the related claims to be valid and enforceable. Prepaid expenses and other assets include claims receivable from insurance carriers of $3,101,000, $1,751,000, and $1,751,000 as of August 31, 1995 and 1996 and June 30, 1997, respectively. Recent Accounting Standards In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 121 ("Statement 121"), "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." Statement 121 requires, among other things, an impairment loss on assets to be held and gains or losses from assets that are expected to be disposed of to be included as a component of income from continuing operations before taxes on income. The Company has adopted Statement 121 in fiscal 1997, and its implementation has not had a material effect on the consolidated financial statements. In June, 1997, the FASB issued Statement of Financial Accounting Standards No. 130 ("Statement 130"), "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, Statement 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Statement 130 is effective for financial statements for periods beginning after December 15, 1997 and requires comparative information for earlier years to be restated. Because of the recent issuance of this standard, management has been unable to fully evaluate the impact, if any, the standard may have on future financial disclosures. Results of operations and financial position, however, will be unaffected by the implementation of this standard. Also in June 1997, the FASB issued Statement of Financial Accounting Standards No. 131 ("Statement 131"), "Disclosures about Segments of an Enterprise and Related Information," which supersedes Statement 14, "Financial Reporting for Segments of a Business Enterprise." Statement 131 establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. Statement 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Statement 131 is effective for financial statements for periods beginning after December 15, 1997 and requires comparative information for earlier years to be restated. Because of the recent issuance of this standard, management has been unable to fully evaluate the impact, if any, it may have on future financial statement disclosures. Results of operations and financial position, however, will be unaffected by implementation of this standard. F-12 115 Unaudited Interim Consolidated Financial Statements In the opinion of the Company's management, the consolidated balance sheet as of June 30, 1997, the consolidated statements of operations and cash flows for the ten months ended June 30, 1996 and 1997, and the consolidated statement of stockholder's equity for the ten months ended June 30, 1997 contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. The results of operations for the ten months ended June 30, 1996 and 1997 are not necessarily indicative of the results for any other period. Reclassification Certain amounts in the prior year's consolidated financial statements have been reclassified to conform with the presentation in the current year. 2. ACCOUNTS RECEIVABLE, NET As of August 31, 1995 and 1996, and June 30, 1997, accounts receivable was net of allowance for doubtful accounts of $541,000, $541,000, and $541,000, respectively. 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is summarized as follows:
AUGUST 31, JUNE 30, 1995 1996 1997 -------- -------- -------- (IN THOUSANDS) Refinery equipment, including construction-in-progress $140,104 $142,296 $143,868 Marketing (i.e. retail outlets) 68,327 70,225 72,186 Transportation 6,823 6,874 6,875 -------- -------- -------- 215,254 219,395 222,929 Less: Accumulated depreciation 45,916 53,564 60,656 -------- -------- -------- $169,338 $165,831 $162,273 ======== ======== ========
4. ACCRUED LIABILITIES Accrued liabilities include the following:
AUGUST 31, JUNE 30, 1995 1996 1997 ------- ------- ------- (IN THOUSANDS) Interest $ 4,242 $ 3,702 $ 1,393 Payrolls and benefits 5,651 6,292 8,565 Income taxes 971 565 -- Other 4,690 2,842 1,478 ------- ------- ------- $15,554 $13,401 $11,436 ======= ======= =======
F-13 116 5. LEASES The Company occupies premises, primarily retail gas stations and convenience stores and office facilities under long-term leases which require minimum annual rents plus, in certain instances, the payment of additional rents based upon sales. The leases generally are renewable for one to three five-year periods. As of August 31, 1995 and 1996 and June 30, 1997, capitalized lease obligations, included in long-term debt, amounted to $583,000, $769,000, and $624,000, respectively, net of current portion of $170,000, $174,000, and $174,000, respectively. The related assets (retail gas stations and convenience stores) as of August 31, 1995 and 1996 and June 30, 1997, amounted to $401,000, $656,000, and $556,000, respectively, net of accumulated amortization of $850,000, $956,000, and $1,056,000, respectively. Lease amortization amounting to $110,000, $100,000, and $106,000, for the years ended August 31, 1994, 1995 and 1996, respectively, and $90,000 and $100,000 for the ten months ended June 30, 1996 and 1997, respectively, is included in depreciation and amortization expense. Future minimum lease payments as of August 31, 1996 are summarized as follows:
Capital Operating leases leases ------ ------ (in thousands) YEAR ENDED AUGUST 31, 1997 $ 301 $2,829 1998 225 2,040 1999 193 1,448 2000 156 825 2001 101 268 Thereafter 670 285 ------ ------ Total minimum lease payments 1,646 7,695 Less: Minimum sublease income -- 111 ------ ------ Net minimum sublease payments 1,646 $7,584 ====== Less: Amount representing interest 703 Present value of net minimum lease payments $ 943 ======
Net rent expense for operating leases amounted to $3,048,000, $3,157,000, and $3,265,000 for the years ended August 31, 1994, 1995 and 1996, respectively, and $2,474,000 and $2,421,000 for the ten months ended June 30, 1996 and 1997, respectively. F-14 117 6. CREDIT FACILITY In June 1997, the Company negotiated a $35,000,000 secured revolving credit facility (the "Facility") with a syndicate of banks that provides for revolving credit loans and for the issuance of letters of credit. The Facility expires on June 9, 2002 and is secured by certain qualifying cash accounts, accounts receivable, and inventory, which amounted to $54,986,000 as of June 30, 1997. Until maturity, the Company may borrow, repay and reborrow on an amount not exceeding certain percentages of secured assets. The interest rate on borrowing varies with the Company's earnings and is based on the higher of the bank's prime rate or Federal funds rate plus 1/2% for base rate borrowings and the LIBOR rate for Euro-Rate borrowings, which was 7.9% as of June 30, 1997. As of June 30, 1997, no letters of credit and $15,000,000 of borrowings were outstanding under the agreement. No other borrowings or letters of credit were outstanding for any other period presented. The Company pays a commitment fee of 3/8% per annum on the unused balance of the Facility. 7. LONG-TERM DEBT During June 1997, the Company sold $200,000,000 of 10 3/4% Senior Unsecured Notes due 2007, Series A. The proceeds of the offering were used to retire all of its outstanding senior notes, pay prepayment penalties related thereto and to retire the amount outstanding under the Company's existing secured revolving credit facility. The excess proceeds from the offering of approximately $48,129,000 were deposited in an escrow account to be used for expanding and upgrading its refinery, rebuilding and refurbishing existing retail units, and for acquiring new retail units and other capital expenditure projects. As of June 30, 1997, $8,129,000 and $40,000,000 of the excess proceeds were classified as "Cash and cash equivalents-restricted" and "Available for sale securities", respectively. Both the senior unsecured notes and secured credit facility require that the Company maintain certain minimum levels of tangible net worth, working capital ratios and cash flow and restrict the amount available to distribute dividends. A summary of long-term debt is as follows:
AUGUST 31, JUNE 30, ---------- -------- 1995 1996 1997 (IN THOUSANDS) Long-term debt: 10.75% senior unsecured notes due June 9, 2007, Series A $ -- $ -- $200,000 11.50% senior unsecured notes due in annual installments of $16,500 beginning December 1, 1995 through December 1, 1998, when the remaining principal balance is due and payable 110,000 93,500 -- 13.50% senior unsecured notes due in annual installments of $9,600 on December 31, 2001 and 2002, with the remaining principal balance of $22,550 due on December 31, 2003 41,750 41,750 -- 9.70% unsecured promissory note due in monthly installments of $34 from August 1, 1991 through June 1, 1996 Remaining balance of $846 due on July 1, 1996 1,185 -- -- Other long-term debt 414 589 518 Other obligations:
F-15 118
AUGUST 31, JUNE 30, -------- --------------------- 1995 1996 1997 (IN THOUSANDS) Capitalized lease obligations 753 943 798 -------- -------- -------- 154,102 136,782 201,316 Less: Unamortized long-term discount of debt 7 5 -- -------- -------- -------- 154,095 136,777 201,316 Less: Current installments of long-term debt 17,913 16,759 269 -------- -------- -------- Total long-term debt, less current installments $136,182 $120,018 $201,047 ======== ======== ========
The principal amount of long-term debt outstanding (including amounts due under capital leases) as of August 31, 1996, matures as follows:
YEAR ENDED AUGUST 31, (in thousands) 1997 $ 16,759 1998 16,716 1999 60,705 2000 165 2001 113 Thereafter 42,319 ========= $136,777
The following financing costs have been deferred and are classified as other assets and are being amortized to expense over the term of the related debt:
AUGUST 31, JUNE 30, 1995 1996 1997 ------- ------- ------- (IN THOUSANDS) Beginning balance $ 2,330 $ 1,854 $ 1,380 Current year additions 104 30 7,597 ------- ------- ------- Total financing costs 2,434 1,884 8,977 Write-off of deferred financing costs -- -- (1,118) Amortization (580) (504) (409) ------- ------- ------- $ 1,854 $ 1,380 $ 7,450 ======= ======= =======
8. INTEREST EXPENSE Interest expense consists of the following:
TEN MONTHS ENDED YEAR ENDED AUGUST 31, JUNE 30, ------------------------------- ------------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (IN THOUSANDS) Interest on long-term notes and other debt $17,175 $18,249 $17,182 $14,349 $13,358 Interest on secured debt, capital leases and other
F-16 119
TEN MONTHS ENDED YEAR ENDED AUGUST 31, JUNE 30, ------------------------------------ --------------------- 1994 1995 1996 1996 1997 -------- -------- -------- -------- -------- (IN THOUSANDS) obligations 438 374 424 332 477 Interest cost capitalized as a component of construction costs (513) (100) -- -- -- -------- -------- -------- -------- -------- $ 17,100 $ 18,523 $ 17,606 $ 14,681 $ 13,835 ======== ======== ======== ======== ========
9. RETIREMENT PLANS Substantially all employees of the Company are covered by noncontributory defined benefit retirement plans. The benefits are based on each employee's years of service and compensation. The Company's policy is to contribute the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended. The assets of the plans are invested in an investment trust fund and consist of interest-bearing cash and bank common/collective trust funds. Net periodic pension cost for the years ended August 31, 1994, 1995 and 1996 included the following components:
1994 1995 1996 ------- ------- ------- (IN THOUSANDS) Service cost $ 1,185 $ 1,067 $ 1,166 Interest cost on projected benefit obligation 1,136 1,171 1,442 Return on assets (478) (1,319) (1,227) Net amortization and deferral (699) (15) 45 ------- ------- ------- Net periodic pension cost $ 1,144 $ 904 $ 1,426 ======= ======= =======
Assumptions for the years ended August 31, 1994, 1995 and 1996 used in the calculation of the projected benefit obligation were:
1994 1995 1996 ---- ---- ---- Discount rates 8.0% 8.0% 8.0% Salary increases 4.0% 4.0% 3.0%-4.5% Expected long-term rate of return on assets 8.0% 8.0% 8.0%
The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheets as of August 31, 1995 and 1996:
1995 1996 -------- -------- (IN THOUSANDS) Actuarial present value of benefit obligations: Vested benefit obligation $ 11,312 $ 14,489 ======== ======== Accumulated benefit obligation $ 11,959 $ 15,055 ======== ======== Projected benefit obligation $ 16,680 $ 20,394 Plan assets at fair value (14,913) (16,360) -------- -------- Projected benefit obligation in excess of plan assets 1,767 4,034 Unrecognized net obligation as of September 1, 1985 (1,750) (1,610)
F-17 120
1995 1996 ------- ------- (IN THOUSANDS) Unrecognized prior service cost (606) (562) Unrecognized net gain 4,593 2,881 ------- ------- Pension liability recognized on the consolidated balance sheets $ 4,004 $ 4,743 ======= =======
The Company's deferred gain on settlement of past pension plan obligations amounted to $2,850,000, $2,635,000 and $2,456,000 as of August 31, 1995, and 1996 and June 30, 1997, respectively, and is being amortized over 23 years. 10. OTHER BENEFIT PLANS As discussed in Note 1, the Company adopted Statement 106 effective September 1, 1993, for certain post-retirement healthcare benefits to salaried and certain hourly employees. The Company funds such benefits as they become payable. The Company made benefit payments of $479,000, $504,000, and $497,000, for the years ended August 31, 1994, 1995, and 1996, respectively, and $218,000 and $268,000 for the ten months ended June 30, 1996 and 1997, respectively. Benefit payments are reflected as a reduction of the accrued post-retirement healthcare benefit costs. The following table sets forth the post-retirement healthcare benefits status reconciled with the amounts on the Company's consolidated balance sheets as of August 31, 1995 and 1996:
1995 1996 -------- -------- (IN THOUSANDS) Retirees $ 3,608 $ 4,689 Fully eligible active plan participants 10,167 8,012 Unrecognized net gain 642 2,576 Unrecognized transition obligation, being recognized over 20 years (10,742) (10,145) -------- -------- Accrued post-retirement healthcare benefit cost $ 3,675 $ 5,132 ======== ========
YEAR ENDED AUGUST 31, 1994 1995 1996 ------- ------- ------- (IN THOUSANDS) Net periodic post-retirement healthcare benefit cost for the year includes the following components: Service cost $ 821 $ 970 $ 545 Interest cost on accumulated post-retirement healthcare benefit obligation 819 854 919 Amortization of transition obligation 597 597 597 Amortization of net gain -- -- (107) ------- ------- ------- Net periodic post-retirement healthcare benefit cost $ 2,237 $ 2,421 $ 1,954 ======= ======= =======
For measurement purposes, the assumed annual rate of increase in the per capita cost of covered medical and dental benefits was 8% and 5%, respectively for 1996; the rates were assumed to decrease F-18 121 gradually to 5% for both medical and dental benefits until 2006 and remain at that level thereafter. The healthcare cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing the assumed healthcare cost trend rates by 1 percentage point in each year would increase the accumulated post-retirement healthcare benefit obligation as of August 31, 1996, by $2,185,000 and the aggregate of the service and interest cost components of net periodic post-retirement healthcare benefit cost for the year then ended by $395,000. The weighted average discount rate used in determining the accumulated post-retirement healthcare benefit obligation for August 31, 1995 and 1996 and June 30, 1997 was 8.0%. The Company also contributes to voluntary employee savings plans through regular monthly contributions equal to various percentages of the amounts invested by the participants. The Company's contributions to these plans amounted to $420,000, $453,000, and $491,000, for the years ended August 31, 1994, 1995, and 1996, respectively, and $401,000 and $408,000 for the ten months ended June 30, 1996 and 1997, respectively. 11. INCOME TAXES As discussed in Note 1, in fiscal 1994 the Company adopted the provisions of Statement 109 retroactively to the acquisition by the Parent, as more fully described in Note 1, in February 1986. The cumulative effect of this change resulted in a net reduction in stockholder's equity of approximately $20,000,000 as of August 31, 1993. Income tax expense (benefit) consisted of:
TEN MONTHS ENDED -------------------- YEAR ENDED AUGUST 31, JUNE 30, --------------------------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (IN THOUSANDS) Federal: Current $ 500 $ 1,031 $ (44) $ 2,079 $(2,117) Deferred 1,403 (517) 2,868 1,737 1,314 ------- ------- ------- ------- ------- 1,903 514 2,824 3,816 (803) ------- ------- ------- ------- ------- State: Current 550 469 244 340 (180) Deferred (1,116) (496) 719 236 81 ------- ------- ------- ------- ------- (566) (27) 963 576 (99) ------- ------- ------- ------- ------- $ 1,337 $ 487 $ 3,787 $ 4,392 $ (902) ======= ======= ======= ======= =======
Reconciliation of the differences between income taxes computed at the Federal statutory rate and the provision for income taxes attributable to income before income tax expense (benefit) and extraordinary items is as follows:
Ten Months Ended ---------------- Year Ended August 31, June 30, --------------------- 1994 1995 1996 1996 1997 ------ ------ ------ ------ ------ (in thousands) U. S. Federal income taxes at the statutory rate of 34% $1,141 $ 322 $3,274 $3,740 $ (783)
F-19 122
Ten Months Ended ---------------- Year Ended August 31, June 30, --------------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (in thousands) State income taxes, net of Federal benefit 298 78 716 639 (147) Federal income tax audit settlement 492 -- -- -- -- Adjustment to deferred tax assets and liabilities for enacted changes in state tax rates and laws (911) -- -- -- -- Reduction of taxes provided in prior year -- -- (201) -- -- Nondeductible expenses 223 67 62 -- -- Other 94 20 (64) 13 28 ------- ------- ------- ------- ------- Income tax attributable to income before income tax expense (benefit) and extraordinary items $ 1,337 $ 487 $ 3,787 $ 4,392 $ (902) ======= ======= ======= ======= =======
Deferred tax liabilities (assets) are comprised of the following:
AUGUST 31, JUNE 30, 1995 1996 1997 -------- -------- -------- (IN THOUSANDS) Inventory valuation $ 3,321 $ 4,583 $ 4,583 Accounts receivable allowance (294) (261) (261) Property, plant and equipment 15,129 15,764 15,142 Accrued liabilities (11,083) (9,388) (9,388) Tax credits and carryforwards (4,068) (3,636) (3,636) State net operating loss carryforwards (2,205) (1,952) (1,952) Valuation allowance 818 1,041 1,041 Other 2,793 1,845 1,845 -------- -------- -------- Net deferred income taxes $ 4,411 $ 7,996 $ 7,374 ======== ======== ========
The Company's results of operations are included in the consolidated Federal tax return of the Parent. The Company's net operating loss carryforward for regular tax is approximately $1,000,000, available for use in years beginning after August 31, 1996. Substantially all of this amount, with expiration dates beginning after August 31, 1997, is restricted to offsetting future taxable income of the respective subsidiaries that generated the losses. The Tax Reform Act of 1986 created a separate parallel tax system called the Alternative Minimum Tax ("AMT") system. AMT is calculated separately from the regular U.S. Federal income tax and is based on a flat rate of 20% applied to a broader tax base. The higher of the two taxes is paid. The excess AMT over regular tax is a tax credit, which can be carried forward indefinitely to reduce regular tax liabilities in excess of AMT liabilities of future years. For tax reporting purposes, the Company generated AMT credits in prior years of approximately $2,800,000 that is available to offset the regular tax liability in future years. The Company's AMT net operating loss is approximately $1,000,000 which begins expiring after August 31, 1997; substantially all of this amount is restricted to offsetting future taxable income of the respective subsidiary that generated the loss. A general business credit carryforward for tax reporting purposes amounts to approximately $200,000 and expires beginning after August 31, 2001. F-20 123 12. NET SALES AND COST OF GOODS SOLD Net sales and cost of goods sold for the years ended August 31, 1994, 1995, and 1996 and for the ten months ended June 30, 1996 and 1997 included consumer excise taxes of $148,206,000, $145,078,000, $142,791,000, $117,942,000, and $114,594,000, respectively. 13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. The carrying amount of cash and cash equivalents, trade accounts and notes receivable and current liabilities approximate fair value because of the short maturity of these instruments. The fair value of long-term debt (Note 7) was calculated by discounting scheduled cash flows through the maturity of the debt using estimated market rates for the individual debt instruments. As of August 31, 1996, the carrying amount and estimated fair value of these debt instruments approximated $136,777,000 and $140,000,000, respectively. It was not considered practical to estimate the fair value of amounts receivable from affiliated entities. 14. CONTINGENCIES The Company is a defendant in various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such kind, or involve such amounts that unfavorable disposition would not have a material adverse effect on the consolidated financial position of the Company. 15. TRANSACTIONS WITH AFFILIATED COMPANIES In June 1997, the Company declared a dividend of $28,285,000 of which $5,000,000 was paid in cash and $23,285,000 was a forgiveness of debt from related parties, resulting in a non-cash financing activity. Additionally, the Company has offset $2,017,000 of amounts due from related parties with deferred tax benefits previously received. During 1993, the Company sold certain retail grocery operations acquired in December 1990 from an affiliated entity to Red Apple (Caribbean), Inc., an affiliated company, in exchange for a promissory note amounting to $17,600,000. The note bears interest at the rate of 5% per annum and was originally due on December 31, 1994. Subsequent to this date, the note was amended and restated, extending the due date to December 31, 1997. During the years ended August 31, 1994, 1995, and 1996, interest income of $880,000 per annum was recognized, and $733,000 and $660,000 of interest income was recognized for the ten months ended June 30, 1996 and 1997, respectively. As of August 31, 1995 and 1996, the entire amount of the note, plus the accrued interest income relating thereto, was outstanding. As of June 30, 1997, no amounts were outstanding relating to this note. Included in amounts due from affiliated companies are advances, certain charter air services and income taxes due from the Parent company. These amounts do not bear interest and have no set repayment terms. As of August 31, 1995 and 1996, the amounts approximated $2,000,000 and $2,500,000, respectively. As of June 30, 1997, no amounts were outstanding. F-21 124 During 1994, 1995 and 1996, the entities comprising the affiliated group of the Parent shared the overhead costs incurred at the Parent's New York headquarters. These overhead costs were allocated among these entities based on various factors, which are representative of the basis in which such costs were incurred. The Company's portion during the years ended August 31, 1994, 1995 and 1996 amounted to approximately $2,200,000, $2,480,000, and $2,424,000, respectively, and for the ten months ended June 30, 1996 and 1997, $2,314,000 and $2,185,000, respectively. An affiliate of the Company leases nine retail gas station and convenience stores to the Company under various operating leases which all expire in 2001. Rent expense relating to these leases was $264,000 for each of the years ended August 31, 1994, 1995 and 1996, respectively, and $220,000 for each of the ten months ended June 30, 1996 and 1997, respectively. 16. ENVIRONMENTAL MATTERS The Company is subject to federal, state and local laws and regulations relating to pollution and protection of the environment such as those governing releases of certain materials into the environment and the storage, treatment, transportation, disposal and clean-up of wastes, including, but not limited to, the Federal Clean Water Act, as amended, the Clean Air Act, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and analogous state and local laws and regulations. Pursuant to a consent order issued by the Pennsylvania Department of Environmental Protection, the Company is required to determine the extent of any ground water contamination and its effect on site remediation. Management of the Company believes that remediation costs or other expenditures required by the consent order are not expected to be material. Due to the nature of the Company's business, the Company is and will continue to be subject to various environmental claims, legal actions and complaints. In the opinion of management, all current matters are without merit or are of such kind or involve such amounts that an unfavorable disposition would not have a material adverse effect on the consolidated financial position of the Company. 17. OTHER EXPENSE During 1994, the Company incurred a loss of $1,598,000 in connection with the settlement of a claim dating back to a period prior to the acquisition by the Parent (Note 1). The related settlement amount of $2,300,000 ($1,598,000 after being discounted at 13% per annum) is payable in quarterly installments of $125,000 commencing on January 13, 1995, and continuing to October 13, 1998, at which time annual payments of $160,000 will be required until the remaining outstanding balance is liquidated on October 13, 2002. 18. EXTRAORDINARY ITEMS In June 1997, the Company incurred an extraordinary loss of $6,653,000 (net of an income tax benefit of $4,200,000) as a result of "make-whole premiums" paid and financing costs written-off in connection with the early retirement of its 11.50% and 13.50% senior unsecured notes. During 1994, the Company incurred an extraordinary loss of $1,530,000 (net of an income benefit of $1,155,000) as a result of a "make-whole premium" paid in connection with the early retirement of its 10.80% senior unsecured notes. F-22 125 19. SEGMENTS OF BUSINESS The Company operates in two industry segments. The retail segment sells petroleum products and convenience store merchandise to the general public. The wholesale segment sells petroleum products to other oil companies and distributors. Intersegment sales are primarily from the wholesale segment to the retail segment and are accounted for in a manner similar to third party sales and are eliminated in consolidation.
TEN MONTHS ENDED ---------------- YEAR ENDED AUGUST 31, JUNE 30, --------------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (IN THOUSANDS) Net sales: Retail $446,158 $456,690 $460,869 $377,270 $382,679 Wholesale 282,970 326,996 372,949 292,612 329,392 -------- -------- -------- -------- -------- $729,128 $783,686 $833,818 $669,882 $712,071 ======== ======== ======== ======== ======== Intersegment sales: Wholesale $172,747 $178,057 $189,631 $154,334 $162,678 ======== ======== ======== ======== ======== Income from operations: Retail $ 2,588 $ 9,849 $ 4,425 $ 1,985 $ 2,554 Wholesale 19,992 8,263 22,457 23,461 8,895 -------- -------- -------- -------- -------- $ 22,580 $ 18,112 $ 26,882 $ 25,446 $ 11,449 ======== ======== ======== ======== ======== Identifiable assets: Retail $ 94,414 $ 98,469 $ 97,548 $ 97,897 $ 77,197 Wholesale 209,569 200,814 197,345 215,836 262,365 -------- -------- -------- -------- -------- $303,983 $299,283 $294,893 $313,733 $339,562 ======== ======== ======== ======== ======== Depreciation and amortization: Retail $ 2,443 $ 1,985 $ 1,893 $ 1,677 $ 1,702 Wholesale 4,998 6,214 6,323 5,378 5,407 -------- -------- -------- -------- -------- $ 7,441 $ 8,199 $ 8,216 $ 7,055 $ 7,109 ======== ======== ======== ======== ======== Capital expenditures: Retail $ 1,680 $ 2,835 $ 2,122 $ 1,932 1,983 Wholesale 19,209 9,299 2,440 1,672 1,570 -------- -------- -------- -------- -------- $ 20,889 $ 12,134 $ 4,562 $ 3,604 $ 3,553 ======== ======== ======== ======== ========
F-23 126 20. QUARTERLY FINANCIAL DATA (UNAUDITED):
NET NET GROSS INCOME SALES PROFIT (LOSS) ----- ------ ------ (IN THOUSANDS) 1996 First Quarter $204,089 $29,712 $ 2,982 Second Quarter 185,904 25,433 1,143 Third Quarter 208,070 28,114 2,309 Fourth Quarter 235,755 21,963 (593) 1995 First Quarter $197,607 $24,855 $ 776 Second Quarter 166,275 16,588 (4,714) Third Quarter 194,212 25,189 1,661 Fourth Quarter 225,592 28,555 2,738
F-24 127 ================================================================================ NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO BUY SUCH SECURITIES BY ANY PERSON IN ANY CIRCUMSTANCES IN WHICH EACH OFFER OR SOLICITATION IS UNLAWFUL OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY. TABLE OF CONTENTS PAGE Available Information....................................... Summary..................................................... Risk Factors................................................ Use of Proceeds............................................. The Exchange Offer.......................................... Capitalization.............................................. Selected Financial and Other Operating Data................. Management's Discussion and Analysis of Financial Condition and Results of Operations............... Business.................................................... Management.................................................. Certain Transactions........................................ Principal Stockholder....................................... Description of Certain Indebtedness......................... Description of the Notes.................................... Certain United States Federal Income Tax.................... Consequences................................................ Plan of Distribution........................................ Legal Matters............................................... Experts..................................................... Glossary.................................................... Index to Financial Statements............................... Additional Information...................................... Index to Financial Statements............................... UNTIL ________ __, 199_ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING NEW NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR OWN ACCOUNT. SEE "PLAN OF DISTRIBUTION." ================================================================================ $200,000,000 UNITED REFINING COMPANY 10 3/4% SERIES B SENIOR NOTES DUE 2007 PROSPECTUS 128 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS UNITED JET CENTER, INC. AND VULCAN ASPHALT REFINING CORPORATION ("VULCAN ASPHALT"), EACH A DELAWARE CORPORATION, (THE "DELAWARE SUBSIDIARIES"). The Certificates of Incorporation of the Delaware Subsidiaries, together with Vulcan Asphalt's By-laws, provide for indemnification of the Delaware Subsidiaries' directors, officers, employers and other agents to the fullest extent permitted by the provisions of Section 145 of the General Corporation Law of the State of Delaware (the "GCL"), as the same shall be amended and supplemented. Section 145 of the GCL permits a Delaware corporation to indemnify each person who was or is made a party to (or is threatened to be made a party to) or is otherwise involved in any civil or criminal action, suit or proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Company or was serving as such with respect to another corporation or entity at the request of the Company, including expenses incurred in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf thereof (i) against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and (ii) advance expenses to any and all said persons, and that such indemnification and advances shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such offices, and shall continue as to persons who have ceased to be directors, officers, employees or agents and shall inure to the benefit of their heirs, executors and administrators of such person. In addition, Article Eight of Vulcan Asphalt's Certificate of Incorporation also provides for the elimination of personal liability of directors of the Corporation to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, to the fullest extent permitted by the GCL, as amended and supplemented. In the case of an amendment to the GCL, Vulcan Asphalt's Certificate of Incorporation limits such amendment to the extent that the amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment. BELL OIL CORP. ("BELL") AND SUPER TEST PETROLEUM, INC. ("STPI"), EACH A MICHIGAN CORPORATION. The Certificates of Incorporation and By-laws of Bell and STPI do not contain any provisions regarding the indemnification of its officers and director. The Michigan Corporate Business Act provides that a Michigan corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to II-1 129 any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, including an action by or in the right of the corporation to procure judgment in its favor, by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, whether for profit or not, against expenses, including attorneys' fees, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders, and with respect to any criminal action or proceeding, if the person had no reasonable cause to believe his conduct was unlawful. To the extent that a director, officer, employee, or agent of a corporation has been successful on the merits or other in defense of an action, suit, or proceeding referred to herein, or in defense of a claim, issue, or matter in the action, suit, or proceeding, he or she shall be indemnified against actual and reasonable expenses, including attorneys' fee, incurred by him or her in connection with the action, suit or proceeding and an action, suit, or proceeding brought to enforce the mandatory indemnification provided in this subsection. The indemnification or advancement of expenses is not exclusive of other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation, By-laws, or a contractual agreement and continues as to a person who ceases to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, personal representatives, and administrators of the person. A Michigan corporation shall have the power to purchase and maintain insurance on behalf of any person described above. INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. ("IGOC"), KIANTONE PIPELINE CORPORATION ("KIANTONE") AND KWIK-FIL, INC. ("KFI"), EACH A NEW YORK CORPORATION. Articles V of the IGOC and Kiantone By-laws contain indemnification provisions for its directors and officers to the fullest extent permitted by the New York Business Corporation Law in effect at any time. The Certificate of Incorporation and By-laws of KFI do not contain any provisions regarding the indemnification of its officers and directors. The New York Corporation Business Corporation Law permits a New York corporation, to indemnify, including interim indemnification, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against all liabilities, expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture trust, association or other entity or enterprise. Expenses (including attorney's fees) incurred in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the fullest extent and under the circumstances permitted by law. By provision of By-laws, by resolution of the shareholders or of the directors or by agreement, the Corporation may, in accordance with Section 721 of the Business Corporation Law of the State of New York (as now or hereafter amended or under any similar provisions hereafter enacted), grant any director or officer rights II-2 130 of indemnification or advancement of expenses in addition to or other than those granted pursuant to, or provided by, said Sections 722 and 725 of said Business Corporation law (as now or hereafter amended or under any similar provisions hereafter enacted). P P C, INC. ("PPC"), AN OHIO CORPORATION. The Certificate of Incorporation and By-laws of PPC do not contain any provisions regarding the indemnification of its officers and directors. The Ohio General Corporation Law provides that a corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including an action or suit by or in the right of the corporation to procure a judgment in its favor, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorney's fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful. To the extent that a director, trustee, officer, employee, member, manager, or agent has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in Section 1701.13(E)(1) or (2), or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses, including attorney's fees, actually and reasonably incurred by him in connection with the action, suit, or proceeding. Expenses, including attorney's fees, incurred by a director in defending the action, suit, or proceeding shall be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or proceeding, upon receipt of an undertaking. The indemnification authorized by this section shall not be exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under the articles, the regulations, any agreement a vote of shareholders or disinterested directors, or otherwise, both as to action in their official capacities and as to action in another capacity while holding their offices or positions, and shall continue as to a person who has ceased to be a director, trustee, officer, employee, member, manager, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. KIANTONE PIPELINE COMPANY ("KPC"), KWIK-FILL CORPORATION ("KWIK-FILL"), UNITED REFINING COMPANY ("URC") AND UNITED REFINING COMPANY OF PENNSYLVANIA ("URCP"), EACH A PENNSYLVANIA CORPORATION. Articles VIII of the By-laws of KPC, Kwik-Fill, URC and URCP contain provisions making indemnification of their directors and officers mandatory to the fullest extent now or hereafter permitted by the Pennsylvania Business Corporation Law. II-3 131 The Pennsylvania Business Corporation Law permits any Pennsylvania Corporation, unless otherwise restricted by a corporation's By-laws, to have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a representative of the corporation, or is or was serving at the request of the corporation as a representative of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgements, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation. To the extent that a representative of a business corporation has been successful on the merits or otherwise in defense of any action or proceeding relating to third-party actions or relating to derivative and corporate actions or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney fees) actually and reasonably incurred by him in connection therewith. Expenses (including attorneys' fees) incurred in defending any action or proceeding referred to in this subchapter may be paid by a business corporation in advance of the final disposition of the action or proceeding upon receipt of an undertaking by or on behalf of the representative to repay the amount if it is ultimately determined that he is not entitled to be indemnified by the corporation as authorized herein or otherwise. The indemnification and advancement of expenses shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any By-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding that office. Unless otherwise restricted in its By-laws, a business corporation shall have power to purchase and maintain insurance. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE (a) EXHIBITS 3.1 Certificate of Incorporation of United Refining Company ("URC"). 3.2 Bylaws of URC. 3.3 Certificate of Incorporation of United Refining Company of Pennsylvania ("URCP"). 3.4 Bylaws of URCP. 3.5 Certificate of Incorporation of Kiantone Pipeline Corporation ("KPC"). 3.6 Bylaws of KPC. 3.7 Certificate of Incorporation of Kiantone Pipeline Company ("KPCY"). 3.8 Bylaws of KPCY. 3.9 Certificate of Incorporation of Kwik Fill, Inc. ("KFI"). 3.10 Bylaws of KFI. 3.11 Certificate of Incorporation of Independent Gasoline & Oil Company of Rochester, Inc. ("IGOCRI"). 3.12 Bylaws of IGOCRI. 3.13 Certificate of Incorporation of Bell Oil Corp. ("BOC"). II-4 132 3.14 Bylaws of BOC. 3.15 Certificate of Incorporation of PPC, Inc. ("PPCI"). 3.16 Bylaws of PPCI. 3.17 Certificate of Incorporation of Super Test Petroleum, Inc. ("STPI"). 3.18 Bylaws of STPI. 3.19 Certificate of Incorporation of Kwik-Fil, Inc. ("K-FI"). 3.20 Bylaws of K-FI. 3.21 Certificate of Incorporation of Vulcan Asphalt Refining Corporation ("VARC"). 3.22 Bylaws of VARC. 3.23 Certificate of Incorporation of United Jet Center, Inc. ("UJCI"). 3.24 Bylaws of UJCI. 4.1 Indenture dated as of June 9, 1997 between URC, URCP, KPC, KPCY, KFI, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, UJCI and IBJ Schroder Bank & Trust Company ("Schroder"), relating to the 10 3/4% Series A Senior Notes due 2007. 4.2 Form of Note (included in Exhibit 4.1 hereto). *5.1 Opinion of Lowenthal, Landau, Fischer & Bring, P.C. 10.1 Purchase Agreement dated June 4, 1997 between URC, URCP, KPC, KPCY, KFI, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, UJCI, Dillon, Read & Co. Inc. ("DRCI") and Bear, Stearns & Co. Inc. ("BSCI"). 10.2 Registration Rights Agreement dated June 9, 1997 between URC, URCP, KPC, KPCY, KFI, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, UJCI, DRCI and BSCI. *10.3 Escrow Agreement dated June 9, 1997 between Schroder, as Escrow Agent, Schroder, as Trustee, and URC. 10.4 Servicing Agreement dated June 9, 1997 between URC and Red Apple Group, Inc. 10.5 Collective Bargaining Agreement dated February 1, 1996 between URC and International Union of Operating Engineers, Local No. 95. 10.6 Collective Bargaining Agreement dated June 23, 1993 between URC and International Union, United Plant Guard Workers of America and Local No. 502. 10.7 Collective Bargaining Agreement dated February 1, 1997 between URC and United Steel Workers of America Local Union No. 2122-A. 10.8 Collective Bargaining Agreement dated August 1, 1995 between URC and General Teamsters Local Union No. 397. 10.9 Credit Agreement dated as of June 9, 1997 by and among, URC, URCP, KPC and the Banks party thereto and PNC Bank, National Association, as Agent. 10.10 Continuing Agreement of Guaranty and Suretyship dated as of June 9, 1997 by URC. 10.11 Continuing Agreement of Guaranty and Suretyship dated as of June 9, 1997 by URCP. 10.12 Continuing Agreement of Guaranty and Suretyship dated as of June 9, 1997 by KPC. 10.13 Form of Security Agreement dated as of June 9, 1997 by and among, URC, URCP, KPC and the Banks party thereto and PNC Bank, National Association, as Agent. 21.1 Subsidiaries of the Registrants. *23.1 Consent of Lowenthal, Landau, Fischer & Bring, P.C. to be included in Exhibit 5.1. II-5 133 23.2 Consent of BDO Seidman, LLP. 23.3 Consent of KPMG Peat Marwick LLP. 24.1 Powers of Attorney (contained on signature page of Registration Statement). *25.1 Statement of Eligibility of Trustee on Form T-1 related to the Notes. 99.1 Letter of Transmittal relating to the 10 3/4% Series A Senior Notes due 2007. 99.2 Form of Notice of Guaranteed Delivery relating to the 10 3/4% Series A Senior Notes due 2007. 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees relating to the 10 3/4% Series A Senior Notes due 2007. 99.4 Form of Letter to Clients relating to the 10 3/4% Series A Senior Notes due 2007. * To be filed by amendment. (b) FINANCIAL STATEMENT SCHEDULE Schedule II Valuation and qualifying accounts ITEM 22. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-6 134 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. UNITED REFINING COMPANY By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President and Chief Operating Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt, James E. Murphy and Martin R. Bring, or any of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - ------------------------------- John A. Catsimatidis President, Chief Operating Officer /s/ Myron L. Turfitt and Director September 5, 1997 - -------------------------------- Myron L. Turfitt /s/ Thomas C. Covert Vice Chairman and Director September 5, 1997 - ------------------------------- Thomas C. Covert Vice President and Chief Financial /s/ James E. Murphy Officer September 5, 1997 - ------------------------------- James E. Murphy /s/ Martin R. Bring Director September 5, 1997 - ------------------------------- Martin R. Bring
II-7 135 /s/ Evan Evans Director September 5, 1997 - ------------------------------- Evan Evans /s/ Kishore Lall Director September 5, 1997 - ------------------------------- Kishore Lall /s/ Douglas Lemmonds Director September 5, 1997 - ------------------------------- Douglas Lemmonds /s/ Andrew Maloney Director September 5, 1997 - ------------------------------- Andrew Maloney /s/ Dennis Mehiel Director September 5, 1997 - ------------------------------- Dennis Mehiel
II-8 136 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. UNITED REFINING COMPANY OF PENNSYLVANIA By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President and Chief Operating Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt, James E. Murphy and Martin R. Bring, or any of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis President, Chief Operating Officer /s/ Myron L. Turfitt and Director September 5, 1997 - -------------------------------- Myron L. Turfitt /s/ Thomas C. Covert Vice Chairman and Director September 5, 1997 - -------------------------------- Thomas C. Covert Vice President and Chief Financial /s/ James E. Murphy Officer September 5, 1997 - -------------------------------- James E. Murphy /s/ Martin R. Bring Director September 5, 1997 - -------------------------------- Martin R. Bring
II-9 137 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. KIANTONE PIPELINE CORPORATION By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt President and Chief Operating Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt, James E. Murphy and Martin R. Bring, or any of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis President, Chief Operating Officer /s/ Myron L. Turfitt and Director September 5, 1997 - -------------------------------- Myron L. Turfitt /s/ Thomas C. Covert Vice Chairman and Director September 5, 1997 - -------------------------------- Thomas C. Covert Vice President and Chief Financial /s/ James E. Murphy Officer September 5, 1997 - -------------------------------- James E. Murphy /s/ Martin R. Bring Director September 5, 1997 - -------------------------------- Martin R. Bring
II-10 138 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. KIANTONE PIPELINE COMPANY By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-11 139 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. UNITED JET CENTER, INC. By:/s/ Myron L. Turfitt -------------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-12 140 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. VULCAN ASPHALT REFINING CORPORATION By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-13 141 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. KWIK-FIL, INC. By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-14 142 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. KWIK FILL, INC. By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-15 143 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. INDEPENDENT GASOLINE & OIL COMPANY OF ROCHESTER, INC. By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-16 144 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. BELL OIL CORP. By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-17 145 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. PPC, INC. By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - ------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-18 146 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York, State of New York, on September 5, 1997. SUPER TEST PETROLEUM, INC. By:/s/ Myron L. Turfitt ----------------------- Myron L. Turfitt Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Myron L. Turfitt and James E. Murphy, or either of them acting singly, as his lawful attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead in any and all capacities to execute in the name of each such person who is then an officer or director of the registrant any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing required or necessary to be done in and about the premises as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Chairman of the Board, Chief /s/ John A. Catsimatidis Executive Officer and Director September 5, 1997 - -------------------------------- John A. Catsimatidis /s/ Myron L. Turfitt Executive Vice President September 5, 1997 - -------------------------------- Myron L. Turfitt Vice President and Chief /s/ James E. Murphy Financial Officer September 5, 1997 - -------------------------------- James E. Murphy
II-19 147 REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS To the Board of Directors and Stockholder of United Refining Company The audits referred to in our report dated October 25, 1996 relating to the consolidated financial statements of United Refining Company and Subsidiaries, which is contained in the Prospectus constituting a part of this Registration Statement, included the audits of the financial statement schedule listed in the accompanying index for each of the two years in the period ended August 31, 1996. This financial statement schedule is the responsibility of management. Our responsibility is to express an opinion on this schedule based on our audits. In our opinion, such financial statement Schedule II -- Valuation and Qualifying Accounts, presents fairly, in all material respects, the information set forth therein. BDO SEIDMAN, LLP New York, New York October 25, 1996 II-20 148 ACCOUNTANTS' REPORT ON SCHEDULES AND CONSENT The Board of Directors and Stockholder United Refining Company: The audit referred to in our report dated October 28, 1994, included the related financial statement schedule as of August 31, 1994, and for the year then ended, included in the registration statement. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit. In our opinion, such financial statement schedule as of August 31, 1994, and for the year then ended, when considered in relation to the 1994 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We consent to the use of our reports included herein and in the prospectus and to the reference to our firm under the heading "Experts" in the prospectus. Our report included in the prospectus refers to a revision to the financial statements to apply pushdown accounting. /s/ KPMG PEAT MARWICK, LLP Pittsburgh, PA September 5, 1997 II-21 149 UNITED REFINING COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Balance at Charged to Beginning Costs and Balance at Description of Period Expenses Deductions End of Period - ---------------------------------------- ----------- ---------- ----------- ------------- Year ended August 31, 1994: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts $ 581 $ 271 $ (221) $ 631 ======= ======= ======== ======== Year ended August 31, 1995: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts $ 631 $ 141 $ (231) $ 541 ======= ======= ======== ======== Year ended August 31, 1994: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts $ 841 $ 369 $ (369) $ 541 ======= ======= ======== ========
S-1 150 EXHIBIT INDEX EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------- ----------- ------------ 3.1 Certificate of Incorporation of United Refining Company ("URC"). 3.2 Bylaws of URC. 3.3 Certificate of Incorporation of United Refining Company of Pennsylvania ("URCP"). 3.4 Bylaws of URCP. 3.5 Certificate of Incorporation of Kiantone Pipeline Corporation ("KPC"). 3.6 Bylaws of KPC. 3.7 Certificate of Incorporation of Kiantone Pipeline Company ("KPCY"). 3.8 Bylaws of KPCY. 3.9 Certificate of Incorporation of Kwik Fill, Inc. ("KFI"). 3.10 Bylaws of KFI. 3.11 Certificate of Incorporation of Independent Gasoline & Oil Company of Rochester, Inc. ("IGOCRI"). 3.12 Bylaws of IGOCRI. 3.13 Certificate of Incorporation of Bell Oil Corp. ("BOC").
151
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------- ----------- ------------ 3.14 Bylaws of BOC. 3.15 Certificate of Incorporation of PPC, Inc. ("PPCI"). 3.16 Bylaws of PPCI. 3.17 Certificate of Incorporation of Super Test Petroleum, Inc. ("STPI"). 3.18 Bylaws of STPI. 3.19 Certificate of Incorporation of Kwik-Fil, Inc. ("K-FI"). 3.20 Bylaws of K-FI. 3.21 Certificate of Incorporation of Vulcan Asphalt Refining Corporation ("VARC"). 3.22 Bylaws of VARC. 3.23 Certificate of Incorporation of United Jet Center, Inc. ("UJCI"). 3.24 Bylaws of UJCI. 4.1 Indenture dated as of June 9, 1997 between URC, URCP, KPC, KPCY, KFI, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, UJCI and IBJ Schroder Bank & Trust Company ("Schroder"), relating to the 10 3/4% Series A Senior Notes due 2007. 4.2 Form of Note (included in Exhibit 4.1 hereto). *5.1 Opinion of Lowenthal, Landau, Fischer & Bring, P.C. 10.1 Purchase Agreement dated June 4, 1997 between URC, URCP, KPC, KPCY, KFI, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, UJCI, Dillon, Read & Co. Inc. ("DRCI") and Bear, Stearns & Co. Inc. ("BSCI"). 10.2 Registration Rights Agreement dated June 9, 1997 between URC, URCP, KPC, KPCY, KFI, IGOCRI, BOC, PPCI, STPI, K-FI, VARC, UJCI, DRCI and BSCI. *10.3 Escrow Agreement dated June 9, 1997 between Schroder, as Escrow Agent, Schroder, as Trustee, and URC. 10.4 Servicing Agreement dated June 9, 1997 between URC and Red Apple Group, Inc. 10.5 Collective Bargaining Agreement dated February 1, 1996 between URC and International Union of Operating Engineers, Local No. 95. 10.6 Collective Bargaining Agreement dated June 23, 1993 between URC and International Union, United Plant Guard Workers of America and Local No. 502. 10.7 Collective Bargaining Agreement dated February 1, 1997 between URC and United Steel Workers of America Local Union No. 2122-A. 10.8 Collective Bargaining Agreement dated August 1, 1995 between URC and General Teamsters Local Union No. 397. 10.9 Credit Agreement dated as of June 9, 1997 by and among, URC, URCP, KPC and the Banks party thereto and PNC Bank, National Association, as Agent. 10.10 Continuing Agreement of Guaranty and Suretyship dated as of June 9, 1997 by URC. 10.11 Continuing Agreement of Guaranty and Suretyship dated as of June 9, 1997 by URCP. 10.12 Continuing Agreement of Guaranty and Suretyship dated as of June 9, 1997 by KPC. 10.13 Form of Security Agreement dated as of June 9, 1997 by and among, URC, URCP, KPC and the Banks party thereto and PNC Bank, National Association, as Agent. 21.1 Subsidiaries of the Registrants. *23.1 Consent of Lowenthal, Landau, Fischer & Bring, P.C. to be included in Exhibit 5.1.
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SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------- ----------- ------------ 23.2 Consent of BDO Seidman, LLP. 23.3 Consent of KPMG Peat Marwick LLP. 24.1 Powers of Attorney (contained on signature page of Registration Statement). *25.1 Statement of Eligibility of Trustee on Form T-1 related to the Notes. 99.1 Letter of Transmittal relating to the 10 3/4% Series A Senior Notes due 2007. 99.2 Form of Notice of Guaranteed Delivery relating to the 10 3/4% Series A Senior Notes due 2007. 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees relating to the 10 3/4% Series A Senior Notes due 2007. 99.4 Form of Letter to Clients relating to the 10 3/4% Series A Senior Notes due 2007. * To be filed by amendment.
EX-3.1 2 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 8104 1064 (line for numbering) 72250 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU In compliance with the requirements of section 204 of the Business Corporation Law, act of May 5, 1933 (P.L. 364) (15 P. Section 1204) the undersigned, desiring to be incorporated as a business corporation, hereby certified (certify) that: 1. The name of the corporation is Coral Acquisitions, Inc. 2. The location and post office address of the initial registered office of the corporation in this Commonwealth is: 123 South Broad Street, Philadelphia, Pennsylvania 19109, c/o CT Corporation System, County of Philadelphia. 3. The corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania for the following purpose or purposes: to engage in and to do any lawful act concerning any of all lawful business for which corporations may be incorporated under 15 P.S. Section 1204. 4. The term for which the corporation is to exist is perpetual. 5. The aggregate number of shares which the corporation shall have authority to issue is: 100 shares of common stock, par value of $0.10 per share. 6. The names and post office addresses of each incorporator(s) and the number and class of shares subscribed by such incorporator(s) is (are):
NAME ADDRESS NUMBER AND CLASS OF SHARES Lucinda Anne Tiajoloff Skadden, Arps, Slate, 100 shares of Meagher & Flom common stock 919 Third Avenue New York, NY 10022
IN TESTIMONY WHEREOF, the incorporator has signed and sealed these Articles of Incorporation this 18th day of December, 1980. /LUCINDA ANNE TIAJOLOFF/ (SEAL) EX-3.2 3 BYLAWS OF URC 1 EXHIBIT 3.2 BYLAWS OF UNITED REFINING COMPANY (hereinafter called the "Corporation") (Adopted February 29, 1988) ARTICLE I OFFICES Section 1. The registered office of the Corporation shall be located in the City of Philadelphia, County of Philadelphia, Commonwealth of Pennsylvania. Section 2. The Corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. All meetings of the shareholders of the Corporation shall be held at such time and place within or without the Commonwealth of Pennsylvania as may be from time to time fixed or determined by the Board of Directors. One or more shareholders may participate in a meeting of the 2 shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting may hear each other. Section 2. An annual meeting of the shareholders, commencing with the year 1988, shall be held on the 31st day of October if it is not a legal holiday, and, if it is a legal holiday, then on the next following day which is not a legal holiday at 10:00 A.M., when they shall elect, by a plurality vote, a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Unless otherwise prescribed by statute or by the articles of incorporation, special meetings of the shareholders, for any purpose or purposes, may be called at any time by the President, a majority of the Board of Directors, or, upon written request delivered to the Secretary of the Corporation, the holders of not less than one-fifth of all the shares issued and outstanding and entitled to vote at the particular meeting. Such written request for a special meeting shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the shareholders to be held at such time, not more than 60 days thereafter, as the Secretary may fix. If the Secretary neglects to issue such call, the person or persons making the request may issue the call. 3 Section 4. Written notice of every meeting of the shareholders specifying the place, date and hour and the general nature of the business of the meeting shall be served upon or mailed, postage prepaid, to each shareholder entitled to vote thereat at least five days prior to the meeting, unless a greater period of notice is required by law. Section 5. The officer having charge of the transfer books for shares of the Corporation shall prepare and make, at least five days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address and the number of shares held by each, which list shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. Section 6. Business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice. Section 7. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at 4 all meetings of the shareholders for the transaction of business, except as otherwise provided by law, the articles of incorporation of the Corporation or these bylaws. If, however, any meeting of shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have the power, except as otherwise provided by law, to adjourn the meeting to such time and place as they may determine; but, in the case of any meeting called for the election of directors, such meeting may be adjourned only from day to day or for such longer periods not exceeding 15 days, in each case as the holders of a majority of the shares, present in person or represented by proxy, shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the shares having voting powers, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law, the articles of incorporation of the 5 Corporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Each shareholder shall, at every meeting of the shareholders, be entitled to one vote in person or by proxy for each share having voting power held by such shareholder, but no proxy shall be voted on after three years from its date, unless coupled with an interest; and, except where the transfer books of the Corporation have been closed or a date has been fixed as a record date for the determination of those shareholders entitled to vote, transferees of shares which are transferred on the books of the Corporation within 10 days next preceding the date of such meeting shall not be entitled to vote at such meeting. Section 10. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the chairman of any such meeting may, and, on the request of any shareholder or his proxy, shall, make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or 6 three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them if requested by the chairman of the meeting or any shareholder or his proxy. If there are three judges of election, the decision, act or certificate of a majority shall be effected in all respects as the decision, act or certificate of all. Section 11. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation. Section 12. In each election for directors, every shareholder entitled to vote shall have the right to multiply the number of votes to which he may be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. 7 ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be one or such other number as may hereafter be determined from time to time by the Board of Directors or as may otherwise be required by law. The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this Article III, and, unless he dies, resigns or is removed prior thereto, each director shall hold office until his successor is elected and qualified. Directors need not be shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, although less than a quorum, and each person so elected shall be a director until his successor is elected by the shareholders at the earlier of the next annual meeting of the shareholders or a special meeting duly called for that purpose. 8 Section 3. The business of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the articles of incorporation of the Corporation or these bylaws directed or required to be exercised and done by the shareholders. Section 4. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the Commonwealth of Pennsylvania. One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the shareholders at the meeting at which such directors were elected, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be present. In the event of the failure of the shareholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as 9 hereinafter provided for such meetings of the Board of Directors or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of at least a majority of the board at a duly convened meeting or by unanimous written consent. Section 7. Special meetings of the Board of Directors not otherwise provided for in these bylaws may be held upon notice which is provided at least three days prior to the meeting. The Secretary or other person or persons calling the meeting shall provide such notice either in writing mailed or sent by telegraphic means to each director's last known address, or through oral communication to each director in person or by telephone or similar communications equipment. Section 8. At all meetings of the board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided by law or the articles of incorporation of the Corporation. If a quorum shall not be present at any meeting of directors, 10 the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. Section 9. If all the directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate act as though it had been authorized at a meeting of the Board of Directors. Section 10. The Board of Directors may, by resolution adopted by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in such resolution or in these bylaws, shall have and exercise the authority of the Board of Directors in the management of the business and affairs of the Corporation. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the 11 place of any such absent or disqualified member. The committees shall keep regular minutes of the proceedings and report the same to the board when required. Section 11. Directors as such shall not receive any stated salary for their services, but, by resolution of the board, a fixed sum and any expenses of attendance may be allowed for attendance at each regular or special meeting of the board or at meetings of the executive committee; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV NOTICES Section 1. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required by law, the articles of incorporation of the Corporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or 12 after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The President and Secretary shall be natural persons of full age; the Treasurer may be a corporation, but, if a natural person, shall be of full age. The Board of Directors may also choose one or more Assistant Secretaries and Assistant Treasurers. Any number of the aforesaid offices may be held by the same person. Section 2. The Board of Directors, immediately after each annual meeting of shareholders, shall elect a Chairman of the Board, who may, but need not, be a director, and the board shall also annually choose a President, a Vice-President, a Secretary and a Treasurer, who need not be members of the board. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. 13 Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board Of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 6. The Chairman of the Board shall be the chief executive officer of the Corporation. He shall preside over all meetings of the shareholders and directors, have general and active management of the business of the Corporation, and see that all orders and resolutions of the Board of Directors are carried into effect. He shall perform all other duties that usually pertain to his office or are delegated to him by the Board of Directors. Section 7. The Chairman of the Board shall have authority to make, execute and deliver any and all contracts of any and every nature whatsoever, including sales, purchases, promissory notes, checks, deeds and other conveyances of real and personal property of whatever kind or nature, leases of real or personal property, bills of sale, mortgages 14 of real or personal property, and any other encumbrances of whatsoever nature or kind and renewals or extensions thereof, assignments of any and every nature, satisfactions, releases and discharges of claims, liens, and the like, and to affix, or cause to be affixed, the corporate seal to any thereof requiring the same. Section 8. The Chairman of the Board may sign, with the Secretary, or, as the case may be, any other officer of the Corporation so authorized by the Board of Directors, any instruments that the Board of Directors has authorized for execution, except when the signing and execution thereof have been expressly delegated by the Board of Directors or these bylaws to some other officer or agent of the Corporation or are required by law to be otherwise signed and executed. The Chairman of the Board shall also make reports to the Board of Directors and the shareholders and generally perform all duties incident to the office of Chairman of the Board and such other duties as may be required by the Board of Directors. Section 9. The President shall be the chief operating officer of the Corporation. He shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties as the Board of Directors shall prescribe. 15 Section 10. The Vice President, or, if there is more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board or the President may from time to time prescribe. Section 11. The Secretary shall attend all meetings of the Board of Directors and of the shareholders and record all the proceedings of these meetings in a book to be kept for that purpose, and shall perform like duties for the executive committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation, and, when authorized by the Board of Directors, shall affix the same to any instrument requiring it, and, when so affixed, it shall be attested by his signature or the signature of an Assistant Secretary. 16 Section 12. The Assistant Secretary, or, if there is more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform such duties and have such other powers as the Board of Directors, the Chairman of the Board, the President or the Secretary may from time to time prescribe. Section 13. The Treasurer shall have the custody of the corporate funds and securities, keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 14. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at their regular meetings or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 15. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory 17 to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in the case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 16. The Assistant Treasurer, or, if there is more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer, and shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the President or the Treasurer may from time to time prescribe. ARTICLE VI CERTIFICATES OF SHARES Section 1. The certificates of shares of the Corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder, the number and class of such shares, the series, if any, represented thereby and the par value of each such share or a statement that such shares are without par value, as the case may be. If more than one class of shares 18 is authorized, the certificate shall state that the Corporation will furnish to any shareholder, upon request and without charge, a full or summary statement of the designations, preferences, limitations and relative rights of the shares of each class authorized to be issued, the variations thereof between the shares of each series, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Section 2. Every share certificate shall be signed by the President or Vice President and the Secretary an Assistant Secretary, the Treasurer or an Assistant Treasurer, and shall be sealed with the corporate seal which may be a facsimile, engraved or printed. Where a certificate is signed by a transfer agent, an assistant transfer agent or a registrar, the signature of any such President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be a facsimile. Section 3. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease for any reason to be such officer or officers of the Corporation before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who 19 signed such certificate or certificates or whose facsimile signature or signatures have been used thereon has not ceased to be such officer or officers of the Corporation. Section 4. The Board of Directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation which is alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming such share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken. Section 5. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the 20 person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. The Board of Directors may fix a time, not more than 50 days prior to the date of any meeting of shareholders, the date fixed for the payment of any dividend or distribution, the date for the allotment of rights, or the date when any change, conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, receive payment of any such dividend or distribution, receive any such allotment of rights, or exercise the rights in respect to any such change, conversion or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, receive payment of such dividend, receive such allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period, and, in such case written or printed notice thereof shall be mailed at least 10 days before the closing thereof to each shareholder of record at the address appearing on the 21 records of the Corporation or supplied by him to the Corporation for the purpose of notice. Section 7. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim of interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary, unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amounts to bad faith. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends upon the shares of the Corporation payable in cash, in property or in its shares may be declared by the Board of Directors at any regular or special meeting, pursuant and subject to law and the articles of incorporation of the Corporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors, 22 from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. The directors shall not be required to send, or cause to be sent, to the shareholders a financial report as of the closing date of the preceding fiscal year. Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5. The fiscal year of the Corporation shall be the twelve months ending August 31 or such other period as may be fixed by the Board of Directors. Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 23 ARTICLE VIII INDEMNIFICATION Section 1. The Corporation shall, to the fullest extent permitted by law as in effect at any time, indemnify, including interim indemnification, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against all liabilities, expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Expenses (including attorney's fees) incurred in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the fullest extent and under the circumstances permitted by law. Section 2. The liabilities, expenses, judgments, fines and amounts paid in settlement against which a person shall be indemnified pursuant to Section 1 of this Article shall be construed to include (without limitation) liabilities, expenses, judgments, fines and amounts paid in 24 settlement arising from or relating to any assertion against such person (including a threatened assertion) of a liability of or claim against the Corporation which is provided for in the Debtors' Sixth Amended Consolidated Plan of Reorganization (as Technically Modified) dated January 29, 1988 of the Corporation or was discharged by said Plan of Reorganization, the order confirming it or applicable law. Section 3. Section 1 of this Article shall be deemed to be a contract between the Corporation and each person who serves, at any time while such Section is in effect, as a director or officer of the Corporation or at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Any subsequent repeal or modification of such Section shall not affect any rights to indemnification of such person, or any obligation of the Corporation to indemnify, in existence immediately prior to such repeal or modification. Section 4. The Corporation may, but shall not be obligated, to indemnify, in the manner provided in Section 1 of this Article, any person who was or is a party or was or is threatened to be made a party to any action, suit or proceeding of the kind described in such Section against liabilities, expenses, judgments, fines and amounts paid in settlement of the kind described in such Section and Section 25 2 incurred by reason of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Section 5. The indemnification provided herein shall not be deemed exclusive of any other rights to which a person may be entitled under the articles of incorporation of the Corporation, these bylaws, an agreement, a vote of shareholders or disinterested directors, or otherwise, and shall continue as to a person who ceased to be an officer, director, partner or trustee and inure to the benefit of such person's heirs, executors and administrators. ARTICLE IX AMENDMENT These bylaws may be altered, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened. EX-3.3 4 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.3 To the Governor of the Commonwealth of Pennsylvania: SIR: In compliance with the requirements of an act of the General Assembly of the Commonwealth of Pennsylvania, entitled "An act to provide for the incorporation and regulation of certain corporations," approved the 29th day of April A.D. 1874, and the several supplements thereto, the undersigned EIGHT of whom are citizens of Pennsylvania having associated themselves together for the purpose hereinafter specified, and desiring that they may be incorporated, and that letters patent may issue to them and their successors according to law, do hereby certify: 1st. The name of the proposed corporation is UNITED REFINING COMPANY. 2nd. Said corporation is formed for the purpose of producing and refining petroleum and its products, and manufacture of lubricants. 3rd. The business of said corporation is to be transacted in Glade Township, Warren County, Pennsylvania. 4th. Said corporation is to exist for the term of ninety-nine years. 5th. The names and residences of the subscribers and the number of shares subscribed by each are as follows:
NAME RESIDENCE NO. OF SHARES A.A. Baunerot Allegheny, PA 100 F.G. Baunerot Allegheny, PA 10 A.B. Baunerot Allegheny, PA 10 D. Shear Warren Borough, PA 100 H.R. Taylor Warren Borough, PA 50 Benjamin Taylor Warren Borough, PA 50 George Taylor Warren Borough, PA 30 M.M. Sanderson Warren Borough, PA 50 Charles C. Stoll Louisville, KY 100
6th. The number of directors of said corporation is fixed at FIVE and the names and residences of the directors who are chosen directors for the first year are as follows: 2
NAME RESIDENCE A.A. Baunerot Allegheny, PA D. Shear Warren Borough, PA H.B. Taylor Warren Borough, PA George Taylor Warren Borough, PA M.M. Sanderson Warren Borough, PA
7th. The amount of the capital stock of said corporation is $50,000 divided into 500 shares of the par value of $100 and $5,000 as a per centum of the capital stock, has been paid in cash to the Treasurer of said corporation, whose name and residence are: David Shear, Warren Borough, Warren County, Pennsylvania A.A. Baunerot, (SEAL) Benjamin Taylor, (SEAL) F.G. Baunerot, (SEAL) George Taylor, (SEAL) David Shaw, (SEAL) M.M. Sanderson, (SEAL) H.B. Taylor, (SEAL)
STATE OF PENNSYLVANIA ) : s.s.: COUNTY OF WARREN ) Before me, a Notary Public in and for the county aforesaid, personally came the above-named A.A. Baunerot, F.G. Baunerot, D. Shear, H.B. Taylor, Benjamin Taylor, George Taylor and M.M. Sanderson, who in due form of law acknowledge the foregoing instrument to be their act and deed for the purposes therein specified. Witness my hand and Seal of office, Twenty-Sixty day of May A.D. 1902. (SEAL) Frank J. Lyons, Notary Public. My Commission expires last day next Session Senate 3 STATE OF PENNSYLVANIA ) : s.s.: COUNTY OF WARREN ) Personally appeared before me this 26th day of May A.D., 1902, A.A. Baunerot, F.G. Baunerot, D. Shear, H.B. Taylor, Benjamin Taylor, George Taylor and M.M. Sanderson, who being duly sworn, according to law, depose and say that the statements contained in the foregoing instrument are true. Sworn and subscribed before me, the day and A.A. Baunerot, year aforesaid F.G. Baunerot, D. Shear, Frank J. Lyons, Notary Public H.B. Taylor, (SEAL) Commission expires last day Benjamin Taylor, next Session Senate George Taylor M.M. Sanderson EXECUTIVE CHAMBER Harrisburg, June 23rd, 1902 To the Secretary of the Commonwealth Having examined the within application and found it to be in proper form and within the purposes of the class of corporations specified in section two of the act entitled "An act to provide for the incorporation and regulation of certain corporations" approved April 29th A.D. 1874, and the several supplements thereto I hereby approve the same, and direct that letters patent. /William A. Stone/ ----------------------- SECRETARY'S OFFICE PENNSYLVANIA, ss: Enrolled in Charter Book No. 70, page ------ Witness my hand and Seal of office, at Harrisburg, this 23rd day of June A.D., 1902 Certified to Auditor General: June 23rd, 1902. /W.W. Briest/ ----------------------- EX-3.4 5 BYLAWS OF URCP 1 EXHIBIT 3.4 BYLAWS OF UNITED REFINING COMPANY OF PENNSYLVANIA (hereinafter called the "Corporation") (Adopted February 29, 1988) ARTICLE I OFFICES Section 1. The registered office of the Corporation shall be located in the City of Philadelphia, County of Philadelphia, Commonwealth of Pennsylvania. Section 2. The Corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. All meetings of the shareholders of the Corporation shall be held at such time and place within or without the Commonwealth of Pennsylvania as may be from time to time fixed or determined by the Board of Directors. One or more shareholders may participate in a meeting of the 2 shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting may hear each other. Section 2. An annual meeting of the shareholders, commencing with the year 1988, shall be held on the 31st day of October if it is not a legal holiday, and, if it is a legal holiday, then on the next following day which is not a legal holiday at 10:00 A.M., when they shall elect, by a plurality vote, a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Unless otherwise prescribed by statute or by the articles of incorporation, special meetings of the shareholders, for any purpose or purposes, may be called at any time by the President, a majority of the Board of Directors, or, upon written request delivered to the Secretary of the Corporation, the holders of not less than one-fifth of all the shares issued and outstanding and entitled to vote at the particular meeting. Such written request for a special meeting shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the shareholders to be held at such time, not more than 60 days thereafter, as the Secretary may fix. If the Secretary neglects to issue such call, the person or persons making the request may issue the call. 3 Section 4. Written notice of every meeting of the shareholders specifying the place, date and hour and the general nature of the business of the meeting shall be served upon or mailed, postage prepaid, to each shareholder entitled to vote thereat at least five days prior to the meeting, unless a greater period of notice is required by law. Section 5. The officer having charge of the transfer books for shares of the Corporation shall prepare and make, at least five days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address and the number of shares held by each, which list shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. Section 6. Business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice. Section 7. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at 4 all meetings of the shareholders for the transaction of business, except as otherwise provided by law, the articles of incorporation of the Corporation or these bylaws. If, however, any meeting of shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have the power, except as otherwise provided by law, to adjourn the meeting to such time and place as they may determine; but, in the case of any meeting called for the election of directors, such meeting may be adjourned only from day to day or for such longer periods not exceeding 15 days, in each case as the holders of a majority of the shares, present in person or represented by proxy, shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the shares having voting powers, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law, the articles of incorporation of the 5 Corporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Each shareholder shall, at every meeting of the shareholders, be entitled to one vote in person or by proxy for each share having voting power held by such shareholder, but no proxy shall be voted on after three years from its date, unless coupled with an interest; and, except where the transfer books of the Corporation have been closed or a date has been fixed as a record date for the determination of those shareholders entitled to vote, transferees of shares which are transferred on the books of the Corporation within 10 days next preceding the date of such meeting shall not be entitled to vote at such meeting. Section 10. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the chairman of any such meeting may, and, on the request of any shareholder or his proxy, shall, make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or 6 three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them if requested by the chairman of the meeting or any shareholder or his proxy. If there are three judges of election, the decision, act or certificate of a majority shall be effected in all respects as the decision, act or certificate of all. Section 11. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation. Section 12. In each election for directors, every shareholder entitled to vote shall have the right to multiply the number of votes to which he may be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. 7 ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be one or such other number as may hereafter be determined from time to time by the Board of Directors or as may otherwise be required by law. The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this Article III, and, unless he dies, resigns or is removed prior thereto, each director shall hold office until his successor is elected and qualified. Directors need not be shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, although less than a quorum, and each person so elected shall be a director until his successor is elected by the shareholders at the earlier of the next annual meeting of the shareholders or a special meeting duly called for that purpose. 8 Section 3. The business of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the articles of incorporation of the Corporation or these bylaws directed or required to be exercised and done by the shareholders. Section 4. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the Commonwealth of Pennsylvania. One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the shareholders at the meeting at which such directors were elected, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be present. In the event of the failure of the shareholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as 9 hereinafter provided for such meetings of the Board of Directors or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of at least a majority of the board at a duly convened meeting or by unanimous written consent. Section 7. Special meetings of the Board of Directors not otherwise provided for in these bylaws may be held upon notice which is provided at least three days prior to the meeting. The Secretary or other person or persons calling the meeting shall provide such notice either in writing mailed or sent by telegraphic means to each director's last known address, or through oral communication to each director in person or by telephone or similar communications equipment. Section 8. At all meetings of the board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided by law or the articles of incorporation of the Corporation. If a quorum shall not be present at any meeting of directors, 10 the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. Section 9. If all the directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate act as though it had been authorized at a meeting of the Board of Directors. Section 10. The Board of Directors may, by resolution adopted by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in such resolution or in these bylaws, shall have and exercise the authority of the Board of Directors in the management of the business and affairs of the Corporation. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the 11 place of any such absent or disqualified member. The committees shall keep regular minutes of the proceedings and report the same to the board when required. Section 11. Directors as such shall not receive any stated salary for their services, but, by resolution of the board, a fixed sum and any expenses of attendance may be allowed for attendance at each regular or special meeting of the board or at meetings of the executive committee; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV NOTICES Section 1. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required by law, the articles of incorporation of the Corporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or 12 after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The President and Secretary shall be natural persons of full age; the Treasurer may be a corporation, but, if a natural person, shall be of full age. The Board of Directors may also choose one or more Assistant Secretaries and Assistant Treasurers. Any number of the aforesaid offices may be held by the same person. Section 2. The Board of Directors, immediately after each annual meeting of shareholders, shall elect a Chairman of the Board, who may, but need not, be a director, and the board shall also annually choose a President, a Vice-President, a Secretary and a Treasurer, who need not be members of the board. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. 13 Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board Of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 6. The Chairman of the Board shall be the chief executive officer of the Corporation. He shall preside over all meetings of the shareholders and directors, have general and active management of the business of the Corporation, and see that all orders and resolutions of the Board of Directors are carried into effect. He shall perform all other duties that usually pertain to his office or are delegated to him by the Board of Directors. Section 7. The Chairman of the Board shall have authority to make, execute and deliver any and all contracts of any and every nature whatsoever, including sales, purchases, promissory notes, checks, deeds and other conveyances of real and personal property of whatever kind or nature, leases of real or personal property, bills of sale, mortgages 14 of real or personal property, and any other encumbrances of whatsoever nature or kind and renewals or extensions thereof, assignments of any and every nature, satisfactions, releases and discharges of claims, liens, and the like, and to affix, or cause to be affixed, the corporate seal to any thereof requiring the same. Section 8. The Chairman of the Board may sign, with the Secretary, or, as the case may be, any other officer of the Corporation so authorized by the Board of Directors, any instruments that the Board of Directors has authorized for execution, except when the signing and execution thereof have been expressly delegated by the Board of Directors or these bylaws to some other officer or agent of the Corporation or are required by law to be otherwise signed and executed. The Chairman of the Board shall also make reports to the Board of Directors and the shareholders and generally perform all duties incident to the office of Chairman of the Board and such other duties as may be required by the Board of Directors. Section 9. The President shall be the chief operating officer of the Corporation. He shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties as the Board of Directors shall prescribe. 15 Section 10. The Vice President, or, if there is more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board or the President may from time to time prescribe. Section 11. The Secretary shall attend all meetings of the Board of Directors and of the shareholders and record all the proceedings of these meetings in a book to be kept for that purpose, and shall perform like duties for the executive committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation, and, when authorized by the Board of Directors, shall affix the same to any instrument requiring it, and, when so affixed, it shall be attested by his signature or the signature of an Assistant Secretary. 16 Section 12. The Assistant Secretary, or, if there is more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform such duties and have such other powers as the Board of Directors, the Chairman of the Board, the President or the Secretary may from time to time prescribe. Section 13. The Treasurer shall have the custody of the corporate funds and securities, keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 14. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at their regular meetings or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 15. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory 17 to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in the case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 16. The Assistant Treasurer, or, if there is more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer, and shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the President or the Treasurer may from time to time prescribe. ARTICLE VI CERTIFICATES OF SHARES Section 1. The certificates of shares of the Corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder, the number and class of such shares, the series, if any, represented thereby and the par value of each such share or a statement that such shares are without par value, as the case may be. If more than one class of shares 18 is authorized, the certificate shall state that the Corporation will furnish to any shareholder, upon request and without charge, a full or summary statement of the designations, preferences, limitations and relative rights of the shares of each class authorized to be issued, the variations thereof between the shares of each series, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Section 2. Every share certificate shall be signed by the President or Vice President and the Secretary an Assistant Secretary, the Treasurer or an Assistant Treasurer, and shall be sealed with the corporate seal which may be a facsimile, engraved or printed. Where a certificate is signed by a transfer agent, an assistant transfer agent or a registrar, the signature of any such President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be a facsimile. Section 3. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease for any reason to be such officer or officers of the Corporation before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who 19 signed such certificate or certificates or whose facsimile signature or signatures have been used thereon has not ceased to be such officer or officers of the Corporation. Section 4. The Board of Directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation which is alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming such share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken. Section 5. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the 20 person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. The Board of Directors may fix a time, not more than 50 days prior to the date of any meeting of shareholders, the date fixed for the payment of any dividend or distribution, the date for the allotment of rights, or the date when any change, conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, receive payment of any such dividend or distribution, receive any such allotment of rights, or exercise the rights in respect to any such change, conversion or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, receive payment of such dividend, receive such allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period, and, in such case written or printed notice thereof shall be mailed at least 10 days before the closing thereof to each shareholder of record at the address appearing on the 21 records of the Corporation or supplied by him to the Corporation for the purpose of notice. Section 7. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim of interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary, unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amounts to bad faith. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends upon the shares of the Corporation payable in cash, in property or in its shares may be declared by the Board of Directors at any regular or special meeting, pursuant and subject to law and the articles of incorporation of the Corporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors, 22 from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. The directors shall not be required to send, or cause to be sent, to the shareholders a financial report as of the closing date of the preceding fiscal year. Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5. The fiscal year of the Corporation shall be the twelve months ending August 31 or such other period as may be fixed by the Board of Directors. Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 23 ARTICLE VIII INDEMNIFICATION Section 1. The Corporation shall, to the fullest extent permitted by law as in effect at any time, indemnify, including interim indemnification, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against all liabilities, expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Expenses (including attorney's fees) incurred in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the fullest extent and under the circumstances permitted by law. Section 2. The liabilities, expenses, judgments, fines and amounts paid in settlement against which a person shall be indemnified pursuant to Section 1 of this Article shall be construed to include (without limitation) liabilities, expenses, judgments, fines and amounts paid in 24 settlement arising from or relating to any assertion against such person (including a threatened assertion) of a liability of or claim against the Corporation which is provided for in the Debtors' Sixth Amended Consolidated Plan of Reorganization (as Technically Modified) dated January 29, 1988 of the Corporation or was discharged by said Plan of Reorganization, the order confirming it or applicable law. Section 3. Section 1 of this Article shall be deemed to be a contract between the Corporation and each person who serves, at any time while such Section is in effect, as a director or officer of the Corporation or at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Any subsequent repeal or modification of such Section shall not affect any rights to indemnification of such person, or any obligation of the Corporation to indemnify, in existence immediately prior to such repeal or modification. Section 4. The Corporation may, but shall not be obligated, to indemnify, in the manner provided in Section 1 of this Article, any person who was or is a party or was or is threatened to be made a party to any action, suit or proceeding of the kind described in such Section against liabilities, expenses, judgments, fines and amounts paid in settlement of the kind described in such Section and Section 25 2 incurred by reason of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Section 5. The indemnification provided herein shall not be deemed exclusive of any other rights to which a person may be entitled under the articles of incorporation of the Corporation, these bylaws, an agreement, a vote of shareholders or disinterested directors, or otherwise, and shall continue as to a person who ceased to be an officer, director, partner or trustee and inure to the benefit of such person's heirs, executors and administrators. ARTICLE IX AMENDMENT These bylaws may be altered, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened. EX-3.5 6 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.5 CERTIFICATE OF INCORPORATION OF KIANTONE PIPELINE CORPORATION Pursuant to Section Three of the Transportation Corporations Law. For the purpose of forming a pipe line corporation under the Transportation Corporations Law of the State of New York, the undersigned hereby certifies that he is over 21 years of age and that: 1. The name of the corporation shall be KIANTONE PIPELINE CORPORATION. 2. The purposes for which the corporation is formed are to construct and operate for public use partly within and partly without this state, lines of pipe for conveying petroleum, gas, liquids or any products or property and to maintain and operate for public use for such purposes lines of pipe already constructed. 3. The office of the corporation is to be located in the Town of Busti, Chautauqua County, New York. 4. The aggregate number of shares the corporation is authorized to issue is four thousand (4,000), The shares are to consist of one class only, are to be of a par value of $5.00 each, and are designated "common shares". 5. The Secretary of State of the State of New York is designated as the Agent of the Corporation upon whom process against it may be served, and the post office address to which the Secretary of State shall mail a copy of any such process 2 - 2 - served upon him is 122 Chautauqua Avenue, Lakewood, New York 14750. 6. The corporation shall be a pipe line corporation. The places from and to which the pipe lines are to be maintained are West Seneca, Erie County, New York and Warren County, Pennsylvania, crossing the New York-Pennsylvania border between or near the Towns of South Valley, Cattaraugus County, New York and Elk, Warren County, Pennsylvania. The counties through which or in which such pipe lines are to be maintained and operated are Erie County, New York; Cattaraugus County, New York and Warren County, Pennsylvania. 7. Subject to any limitation provided in any statute of the State of New York, the corporation if furtherance of its corporate purposes shall have all the powers now or hereafter conferred by statute upon, or otherwise legally attributable to, pipe line corporations. IN WITNESS WHEREOF, I have made and signed this certificate this 13th day of October, 1970, and I affirm the statements contained therein as true under penalties of perjury. /s/ John M. Kimball __________________________________________ John K. Kimball Incorporator 1330 Marine Trust Building Buffalo, New York 14203 EX-3.6 7 BYLAWS OF KPC 1 EXHIBIT 3.6 KIANTONE PIPELINE CORPORATION (hereinafter called the "Corporation") Bylaws (Adopted February 29, 1988) Article I OFFICES AND RECORDS 1.1. The Corporation shall maintain an office in the State of New York and shall keep at said office or at the office of its transfer agent or registrar in the State of New York a complete record of shareholders; provided, that the registered office of the Corporation shall be located in the City of Philadelphia, County of Philadelphia, Commonwealth of Pennsylvania. The Corporation may maintain such other offices and may keep its other books, documents and records at such places within or without the State of New York as may from time to time be designated by the Board of Directors or as the business of the Corporation may require. Article II MEETINGS OF SHAREHOLDERS 2.1. Place of Meetings. All meetings of the shareholders of the Corporation shall be held at such place within or without the State of New York as the Board of Directors may designate. The place at which any meeting is to be held shall be specified in the notice of such meeting. 2.2. Time of Annual Meeting. An annual meeting of shareholders of the Corporation, for the election of directors and for the transaction of any other proper business, commencing with the year 1988, shall be held either (a) at 10:00 A.M. on the on the 31st day of October, unless such day is a legal holiday, in which event the meeting shall be held at the same time on the next business day, or (b) at such other time and date, not more than thirteen months after the last preceding annual meeting, as the Board of Directors shall designate. 2.3. Call of Special Meetings. Special meetings of the shareholders shall be called by the Secretary at the 2 request in writing of the Chairman of the Board, the President or a majority of the directors then in office. Such request shall state the purpose or purposes of the proposed meeting. 2.4. Quorum and Adjourned Meetings. Except as otherwise provided by any provision of law, the Certificate of Incorporation or these Bylaws requiring a greater quorum, a quorum for the transaction of business at meetings of the shareholders shall consist of the holder or holders of a majority of the shares entitled to vote thereat, present in person or represented by proxy, provided that when a specified item of business is required to be voted on by a class or series, voting as a class, the holder or holders of a majority of the shares of such class or series shall constitute a quorum for the transaction of such item. Whether or not a quorum is present, a majority in interest of the shareholders present in person or represented by proxy at any duly called meeting and entitled to vote thereat may adjourn the meeting from time to time to another time or place, at which time or place, if a quorum is present, any business may be transacted which might have been transacted at the meeting as originally scheduled. Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. 2.5. Vote of Shareholders and Proxies. Every shareholder entitled to vote at a meeting or to express consent or dissent without a meeting may exercise such vote in person or may authorize another person or persons to act for him by proxy signed by such shareholder or by his attorney-in-fact. No proxy shall be valid after eleven months from the date thereof unless otherwise provided in the proxy. Each shareholder shall have one vote for each share having voting power held by him. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all elections of directors shall be determined by a plurality of the votes cast in respect thereof, and all other items of business upon which a vote of shareholders is held shall be decided by a majority of the votes cast in respect thereof, a quorum being present in each instance. 2.6. List of Shareholders. The Secretary shall prepare, or cause the transfer agent to prepare, prior to every meeting of the shareholders, a complete list of the shareholders entitled to vote at the meeting, certified by the Secretary or the transfer agent. Such list shall be produced at any meeting of shareholders upon the request 3 thereat or prior thereto of any shareholder. If the right of any person to vote at any meeting is challenged, the inspectors of election or the person presiding thereat shall require such list to be produced as evidence of the right of such person to vote and all persons who appear from such fist to be shareholders entitled to vote thereat may vote at such meeting. 2.7. Inspectors of Elections. In advance of any shareholders meeting the Board may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed as inspector fails to appear or act, the vacancy may be filled by the Board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. 2.8. Notice of Meetings. Written notice of each meeting of the shareholders shall be given by the Secretary, not less than ten or more than fifty days before the meeting, to each shareholder entitled to vote at such meeting. Such notice shall set forth the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes thereof and an indication that the notice is being issued by or at the direction of the person or persons calling the meeting. The business transacted at any special meeting shall be confined to the purposes stated in such notice. No such notice of any meeting need be given to any shareholder who files a written waiver of notice thereof with the Secretary, either before or after the meeting. The attendance of any shareholder at a meeting of shareholders, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice of such meeting. 2.9. Action Without a Meeting. Whenever under the New York Business Corporation Law the shareholders are required or permitted to take any action by vote, such action may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by the holders of all outstanding shares entitled to vote thereon. 4 Article III BOARD OF DIRECTORS 3.1. Number and Qualifications of Directors. The business of the Corporation shall be managed by its Board of Directors (the "Board") , which shall consist of such number of members, not less than one, as may be fixed from time to time by vote of a majority of the entire Board or as may otherwise by required by law. Each director shall be at least eighteen years of age. 3.2. Election of Directors and Vacancies. Except as otherwise provided in this Section 3.2, each director shall be elected at an annual meeting of shareholders. Newly created directorships and all other vacancies occurring for any reason (including the removal of directors without cause) may be filled at any time by a majority vote of the directors then in office, although less than a quorum. Unless he resigns, dies or is removed prior thereto, each director shall continue to hold office until the annual meeting of shareholders next following his election, and until his successor has been elected and has qualified. 3.3. Resignations. Resignations of directors must be in writing and shall be effective upon the date of receipt thereof by the Secretary or upon an effective date specified therein, whichever date is later, unless acceptance is made a condition of the resignation, in which event it shall be effective upon acceptance by the Board. 3.4. Removal of Directors. Any director may be removed at any time, with or without cause, by vote of the shareholders. Any director may be removed for cause by action of the Board. 3.5. Powers. The Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. 3.6. Meetings of the Board. (a) The first meeting of the Board after the annual meeting of shareholders may be held without notice, either immediately after said meeting of shareholders and at the place where it was held, or at such other time and place, whether within or without the State of New York, as shall be determined by the Board prior to the annual meeting or by the consent in writing of all the directors. 5 (b) Regular meetings of the Board may be held without notice at such time and place, whether within or without the State of New York, as shall from time to time be determined by the Board. (c) Special meetings of the Board shall be called by the Secretary at the request in writing of the Chairman of the Board, if elected, of the President or of one-fifth of the entire Board. Such request shall state the purpose or purposes of the proposed meeting. Such meetings may be held at any place, whether within or without the State of New York. Notice of each such meeting, specifying the time and place thereof, shall be given by the Secretary by causing the same to be delivered to each director at least three days before the meeting or mailed to each director at least four days before the meeting. No such notice of any meeting need be given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him or who files a written waiver of notice thereof with the Secretary, either before or after the meeting. 3.7. Quorum of Directors. A quorum for the transaction of business at meetings of the Board shall consist of a majority of the directors then in office, but in no event less than one-third of the entire Board. In the absence of a quorum at any duly scheduled or duly called meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present, at which time any business may be transacted which might have been transacted at the meeting as originally scheduled. 3.8. Meetings by Conference Telephone. One or more members of the Board or of any committee thereof may participate in any meeting of the Board or of such committee by means of conference telephone or similar communications. equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. In any such case the minutes of the meeting shall indicate which members of the Board or of such committee participated in the meeting by such means. 3.9. Action Without a Meeting. Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or committee consent in writing to the adoption of a resolution authorizing the action, and the writing or writings are filed with the minutes of proceedings of the Board or committee. 6 3.10. Executive Committee. The Board of Directors, by resolution passed by a majority of the entire Board, may designate from its members an Executive Committee and such other standing or special committees, each to consist of three or more directors, as may be provided in such resolution. The Board may designate one or more directors as alternate members of each committee, who may replace any absent member at any meeting of the committee. Each committee may meet at stated times, or on notice to all by any of their own number. During the intervals between meetings of the Board the Executive Committee shall advise, consult with and aid the officers of the Corporation in all matters concerning its interests and the management of its business, and generally perform such duties as may be directed by the Board from time to time. The Executive Committee shall possess and may exercise all the powers of the Board while the Board is not in session, except that the Executive Committee shall have no authority with respect to the submission to shareholders of any action for which shareholders' approval is required by New York law, the filling of vacancies in or the fixing of compensation of directors for serving on the Board, the Executive Committee or any other committee of the Board, the amendment or repeal of these Bylaws or the adoption of new Bylaws, or the amendment or repeal of any resolution of the Board which by its terms can not be so amended or repealed. Each other committee shall have all such powers and perform all such duties as may be specified from time to time by the Board. Vacancies in the membership of each committee shall be filled by the Board. Unless he resigns, dies or is removed prior thereto, each member of a committee shall continue to hold office until the first meeting of the Board after the annual meeting of shareholders next following his designation, and until his successor has been designated. Any member of a committee may be removed at any time, with or without cause, by the affirmative vote of a majority of the entire Board. Each committee shall keep regular minutes of its proceedings and report the same to the Board. 3.11. Compensation of Directors. The directors as such, and as members of any standing or special committee, may receive such compensation for their services as may be fixed from time to time by resolution of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 7 Article IV OFFICERS 4.1. Number, Election and Compensation. The officers of the Corporation shall be chosen by the Board. The principal officers shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may in the discretion of the Board include a Chairman of the Board. The Board may choose such other officers having such powers and duties as the Board may determine. Each officer shall be elected each year at the first meeting of the Board after the annual meeting of the shareholders of the Corporation. Two or more offices, except those of President and Secretary, may be held by the same person. The salaries of the principal officers of the Corporation shall be fixed by the Board; the salaries of other officers may be fixed by the President. 4.2. Term and Removal. Unless he resigns, dies or is removed prior thereto, each officer of the Corporation shall hold office until his successor has been chosen and has qualified. Any person elected or appointed by the Board may be removed at any time, with or without cause, and all vacancies (however arising) may be filled at any time, in each case by the affirmative vote of a majority of the directors then in office. Any other employee of the Corporation may be removed at any time, with or without cause, by whichever of the Chairman of the Board or the President shall be the chief executive officer of the Corporation or by any superior of such employee to whom the power of removal has been delegated by such chief executive officer. 4.3. Chairman of the Board. The Chairman of the Board, if one is elected, shall be the chief executive officer if so designated by the Board and shall preside at all meetings of the shareholders and the Board. He shall be a member and chairman of the Executive Committee and of all other committees appointed by the Board, and he shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. 4.4. President. The President shall be the chief executive officer unless the Chairman of the Board has been so designated pursuant to Section 4.3, shall have general supervision and direction of the business of the Corporation, shall see that all orders and resolutions of the Board are carried into effect, and shall be a member of the Executive Committee and of all other committees appointed by the Board. He shall have all the general powers and duties usually vested in the chief executive officer of a corporation unless the Chairman of the Board has been so designated and in addition 8 shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. He shall be vested with all the powers and perform all the duties of the Chairman of the Board in the absence or disability of the Chairman of the Board, and the performance of any act or the execution of any instrument by the President in any instance in which such performance or execution would customarily have been accomplished by the Chairman of the Board shall constitute conclusive evidence of the absence or disability of the Chairman of the Board. 4.5. Vice Presidents. Each Vice President shall have such powers and perform such duties as may be prescribed from time to time by the Board, the Chairman of the Board or the President. In the absence or disability of the Chairman of the Board and the President, each Vice President shall be vested with all the powers and authorized to perform all the duties of said officers, and the performance of any act or the execution of any instrument by a Vice President in any instance in which such performance or execution would customarily have been accomplished by the Chairman of the Board or by the President shall constitute conclusive evidence of the absence or disability of the Chairman of the Board and the President. 4.6. Secretary. The Secretary shall attend all sessions of the Board and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and of the Board when notice is required by these Bylaws. He shall have custody of the seal of the Corporation, and, when authorized by the Board or when any instrument requiring the corporate seal to be affixed shall first have been signed by the Chairman of the Board, the President or a Vice President, shall affix the seal to such instrument and shall attest the same by his signature. He shall have such other powers and perform such other duties as may be prescribed from time to time by the Board, the Chairman of the Board or the President. 4.7. Assistant Secretaries. Each Assistant Secretary, if one or more are appointed, shall be vested with all the powers and authorized to perform all the duties of the Secretary in his absence or disability. The performance of any act or the execution of any instrument by an Assistant Secretary in any instance in which such performance or execution would customarily have been accomplished by the Secretary shall constitute conclusive evidence of the absence or disability of the Secretary. Each Assistant Secretary shall 9 perform such other duties as may be prescribed from time to time by the Board, the Chairman of the Board, the President or the Secretary. 4.8. Treasurer. The Treasurer shall be the chief financial officer of the Corporation. He shall have custody of the corporate funds and securities of the Corporation, keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board. He shall disburse the funds of the Corporation, taking proper vouchers for such disbursements, and render to the Chairman of the Board, if one is elected, the President and the Board, at the regular meetings of the Board or whenever any of them may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by the Board, the Chairman of the Board or the President. 4.9. Assistant Treasurers. Each Assistant Treasurer, if one or more are appointed, shall be vested with all the powers and authorized to perform all the duties of the Treasurer in his absence or disability. The performance of any act or the execution of any instrument by an Assistant Treasurer in any instance in which such performance or execution would customarily have been accomplished by the Treasurer shall constitute conclusive evidence of the absence or disability of the Treasurer. Each Assistant Treasurer shall perform such other duties as may be prescribed from time to time by the Board, the Chairman of the Board, the President or the Treasurer. 4.10. Fidelity Bonds. If required by the Board, any officer shall give the Corporation a bond in a sum and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. 4.11. Duties of Officers May be Delegated. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director, provided a majority of the directors then in office concur therein. 10 Article V INDEMNIFICATION 5.1. The Corporation shall, to the fullest extent permitted by law as in effect at any time, indemnify, including interim indemnification, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against all liabilities, expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Expenses (including attorney's fees) incurred in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the fullest extent and under the circumstances permitted by law. By provision of these Bylaws, by resolution of the shareholders or of the directors or by agreement, the Corporation may, in accordance with Section 721 of the Business Corporation Law of the State of New York (as now or hereafter amended or under any similar provisions hereafter enacted), grant any director or officer rights of indemnification or advancement of expenses in addition to or other than those granted pursuant to, or provided by, said Sections 722 through 725 of said Business Corporation law (as now or hereafter amended or under any similar provisions hereafter enacted). Article VI CAPITAL STOCK 6.1. Certificates for Shares. The certificates for shares of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall state on their face that the Corporation is formed under the laws of New York and shall exhibit the holder's name and number and class of shares and shall be signed by (a) the Chairman of the Board or the President or a Vice President and (b) the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Any or all of the signatures of the officers on the certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or its employee. If any officer who has signed or whose facsimile signature has been placed upon a stock certificate shall 11 cease to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. When the Corporation is authorized to issue shares of more than One class there shall be set forth upon the face or back of the certificate, or the certificate shall include a statement that the Corporation will furnish to any shareholder upon request and without charge, a full statement of the designation, relative rights, preferences and limitations of the shares of each class authorized to be issued and, if the Corporation is authorized to issue any class of preferred shares in series, the designation, relative rights, preferences and limitations of each such series so far as the same have been fixed, and the authority of the Board to designate and fix the relative rights, preferences and limitations of other series. 6.2. Transfers of Shares. Transfers of shares shall be made on the books of the Corporation only by the person named in the certificate or by his attorney, executor or administrator, lawfully constituted in writing, and upon surrender of the certificate therefor. 6.3. Registered Shareholders. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of New York. 6.4. Lost Certificates. Any person claiming a certificate for shares to be lost, stolen or destroyed shall furnish proof of that fact satisfactory to an officer of the Corporation, and shall give the Corporation a bond of indemnity in form and amount and with one or more sureties satisfactory to such officer, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost, stolen or destroyed. The Board may at any time authorize the issuance of a new certificate to replace a certificate alleged to be lost, stolen or destroyed upon such other lawful terms and conditions as the Board shall prescribe. 6.5. Dividends. Dividends upon the capital stock of the Corporation payable in cash, in property or in its shares may be declared by the Board at any regular or special meeting as provided by law and the Certificate of Incorporation. Before payment of any dividend or making any distribution of profits, there may be set aside out of the surplus or net profits of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, 12 think proper as a reserve fund to meet Contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall deem conducive to the interests of the Corporation. 6.6. Fixing Record Date. For the purpose of determining the shareholders entitled to (a) notice of or to vote at any meeting of shareholders or any adjournment thereof, (b) express consent to or dissent from any proposal without a meeting, (c) receive payment of any dividend or other distribution or allotment of any rights, or (d) exercise any rights in respect of any of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than fifty nor less than ten days before the date of such meeting, nor more than fifty days prior to any other action. Article VII CONDUCT OF BUSINESS 7.1. Powers of Execution. (a) All checks and other demands for money and notes and other instruments for the payment of money shall be signed on behalf of the Corporation by such officer or officers or by such other person or persons as the Board may from time to time designate. (b) All contracts, deeds and other instruments to which the seal of the Corporation is affixed shall be signed on behalf of the Corporation by the Chairman of the Board, the President, any Vice President or such other person or persons as the Board may from time to time designate, and shall be attested by the Secretary or an Assistant Secretary. (c) All other contracts, deeds and instruments shall be signed on behalf of the Corporation by the Chairman of the Board, the President, any Vice President or such other person or persons as the Board, the Chairman of the Board or the President may from time to time designate. (d) All shares of stock owned by the Corporation in other corporations shall be voted on behalf of the Corporation by such person or persons as the Board may from time to time designate, or, in the absence of such designation, by whichever of the Chairman of the Board or the President shall be the chief executive officer of the Corporation. 7.2. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words, "Corporate Seal, New York." 13 7.3. Fiscal Year. The fiscal year of the Corporation shall be the twelve months ending August 31 or such other period as may be fixed by the Board of Directors. Article VIII NOTICES 8.1. Whenever, under the provisions of these Bylaws, notice is required to be given to any director or shareholder, such notice may be given in writing (a) in person or (b) by mail, by depositing the same in the United States mail, postage prepaid, addressed to such director or shareholder at such address as appears on the records of the Corporation (or in the case of any shareholder, at such other address as he may have specified in a written request filed with the Secretary), and such notice shall be deemed to be given on the day it is so mailed. Article IX AMENDMENTS 9.1. These Bylaws may be amended or repealed (a) by the vote of the holder or holders of the shares at the time entitled to vote in the election of any directors or (b) at any meeting of the Board by the affirmative vote of a majority of the directors then in office except as to any matter requiring a higher vote under the laws of New York; provided, however, that in either case notice of the proposed amendment shall have been contained in the notice of the meeting. EX-3.7 8 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.7 1812 81-64 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU In compliance with the requirements of section 294 of the Business Corporation Law, act of May 5, 1933 (P.L. 364)(15 P.S. Section 1204) the undersigned, desiring to be incorporated as a business corporation, hereby certifies (certify) that: 1. The name of the corporation is: Kiantone Pipeline Company 2. The location and post office address of the initial registered office of the corporation in this Commonwealth is: 15 Bradley Street (Number) (Street) Warren Pennsylvania 16365 (City) (Zip Code) 3. The corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania for the following purposes: To construct and operate for public use within and without the Commonwealth of Pennsylvania, lines of pipe for conveying petroleum, gas, liquid or any products or property, to maintain and operate lines of pipe for public use for such purposes, and to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law. 4. The term for which the corporation is to exist is: perpetual 5. The aggregate number of shares which the corporation shall have authority to issue is: 100 shares of Common Stock, par value $10.00 per share 2 6. The name(s) and post office address(es) of each incorporator(s) and the number and class of shares subscribed by such incorporator(s) is (are): Name Address Number and Class of Shares (including street and number,if any) Frank J. Rauktis 747 Union Trust Building 1 share of - ------------------------------------------------------------------------------- Pittsburgh, PA 15219 Common Stock - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed and sealed these Articles of Incorporation this 2nd day of October, 1981. /s/ (SEAL) (SEAL) ------------------------------ ----------------------------- (SEAL) ------------------------------ EX-3.8 9 BYLAWS OF KPCY 1 EXHIBIT 3.8 BYLAWS OF KIANTONE PIPELINE COMPANY (hereinafter called the "Corporation") ARTICLE I OFFICES Section 1. The registered office of the Corporation shall be located in the City of Philadelphia, County of Philadelphia, Commonwealth of Pennsylvania. Section 2. The Corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. All meetings of the shareholders of the Corporation shall be held at such time and place within or without the Commonwealth of Pennsylvania as may be from time to time fixed or determined by the Board of Directors. One or more shareholders may participate in a meeting of the 2 shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting may hear each other. Section 2. An annual meeting of the shareholders, commencing with the year 1988, shall be held on the 31st day of October if it is not a legal holiday, and, if it is a legal holiday, then on the next following day which is not a legal holiday at 10:00 A.M., when they shall elect, by a plurality vote, a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Unless otherwise prescribed by statute or by the articles of incorporation, special meetings of the shareholders, for any purpose or purposes, may be called at any time by the President, a majority of the Board of Directors, or, upon written request delivered to the Secretary of the Corporation, the holders of not less than one-fifth of all the shares issued and outstanding and entitled to vote at the particular meeting. Such written request for a special meeting shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the shareholders to be held at such time, not more than 60 days thereafter, as the Secretary may fix. If the Secretary neglects to issue such call, the person or persons making the request may issue the call. 3 Section 4. Written notice of every meeting of the shareholders specifying the place, date and hour and the general nature of the business of the meeting shall be served upon or mailed, postage prepaid, to each shareholder entitled to vote thereat at least five days prior to the meeting, unless a greater period of notice is required by law. Section 5. The officer having charge of the transfer books for shares of the Corporation shall prepare and make, at least five days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address and the number of shares held by each, which list shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. Section 6. Business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice. Section 7. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at 4 all meetings of the shareholders for the transaction of business, except as otherwise provided by law, the articles of incorporation of the Corporation or these bylaws. If, however, any meeting of shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have the power, except as otherwise provided by law, to adjourn the meeting to such time and place as they may determine; but, in the case of any meeting called for the election of directors, such meeting may be adjourned only from day to day or for such longer periods not exceeding 15 days, in each case as the holders of a majority of the shares, present in person or represented by proxy, shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the shares having voting powers, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law, the articles of incorporation of the 5 Corporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Each shareholder shall, at every meeting of the shareholders, be entitled to one vote in person or by proxy for each share having voting power held by such shareholder, but no proxy shall be voted on after three years from its date, unless coupled with an interest; and, except where the transfer books of the Corporation have been closed or a date has been fixed as a record date for the determination of those shareholders entitled to vote, transferees of shares which are transferred on the books of the Corporation within 10 days next preceding the date of such meeting shall not be entitled to vote at such meeting. Section 10. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the chairman of any such meeting may, and, on the request of any shareholder or his proxy, shall, make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or 6 three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them if requested by the chairman of the meeting or any shareholder or his proxy. If there are three judges of election, the decision, act or certificate of a majority shall be effected in all respects as the decision, act or certificate of all. Section 11. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation. Section 12. In each election for directors, every shareholder entitled to vote shall have the right to multiply the number of votes to which he may be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. 7 ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be one or such other number as may hereafter be determined from time to time by the Board of Directors or as may otherwise be required by law. The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this Article III, and, unless he dies, resigns or is removed prior thereto, each director shall hold office until his successor is elected and qualified. Directors need not be shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, although less than a quorum, and each person so elected shall be a director until his successor is elected by the shareholders at the earlier of the next annual meeting of the shareholders or a special meeting duly called for that purpose. 8 Section 3. The business of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the articles of incorporation of the Corporation or these bylaws directed or required to be exercised and done by the shareholders. Section 4. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the Commonwealth of Pennsylvania. One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the shareholders at the meeting at which such directors were elected, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be present. In the event of the failure of the shareholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as 9 hereinafter provided for such meetings of the Board of Directors or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of at least a majority of the board at a duly convened meeting or by unanimous written consent. Section 7. Special meetings of the Board of Directors not otherwise provided for in these bylaws may be held upon notice which is provided at least three days prior to the meeting. The Secretary or other person or persons calling the meeting shall provide such notice either in writing mailed or sent by telegraphic means to each director's last known address, or through oral communication to each director in person or by telephone or similar communications equipment. Section 8. At all meetings of the board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided by law or the articles of incorporation of the Corporation. If a quorum shall not be present at any meeting of directors, 10 the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. Section 9. If all the directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate act as though it had been authorized at a meeting of the Board of Directors. Section 10. The Board of Directors may, by resolution adopted by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in such resolution or in these bylaws, shall have and exercise the authority of the Board of Directors in the management of the business and affairs of the Corporation. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the 11 place of any such absent or disqualified member. The committees shall keep regular minutes of the proceedings and report the same to the board when required. Section 11. Directors as such shall not receive any stated salary for their services, but, by resolution of the board, a fixed sum and any expenses of attendance may be allowed for attendance at each regular or special meeting of the board or at meetings of the executive committee; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV NOTICES Section 1. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required by law, the articles of incorporation of the Corporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or 12 after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The President and Secretary shall be natural persons of full age; the Treasurer may be a corporation, but, if a natural person, shall be of full age. The Board of Directors may also choose one or more Assistant Secretaries and Assistant Treasurers. Any number of the aforesaid offices may be held by the same person. Section 2. The Board of Directors, immediately after each annual meeting of shareholders, shall elect a Chairman of the Board, who may, but need not, be a director, and the board shall also annually choose a President, a Vice-President, a Secretary and a Treasurer, who need not be members of the board. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. 13 Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board Of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 6. The Chairman of the Board shall be the chief executive officer of the Corporation. He shall preside over all meetings of the shareholders and directors, have general and active management of the business of the Corporation, and see that all orders and resolutions of the Board of Directors are carried into effect. He shall perform all other duties that usually pertain to his office or are delegated to him by the Board of Directors. Section 7. The Chairman of the Board shall have authority to make, execute and deliver any and all contracts of any and every nature whatsoever, including sales, purchases, promissory notes, checks, deeds and other conveyances of real and personal property of whatever kind or nature, leases of real or personal property, bills of sale, mortgages 14 of real or personal property, and any other encumbrances of whatsoever nature or kind and renewals or extensions thereof, assignments of any and every nature, satisfactions, releases and discharges of claims, liens, and the like, and to affix, or cause to be affixed, the corporate seal to any thereof requiring the same. Section 8. The Chairman of the Board may sign, with the Secretary, or, as the case may be, any other officer of the Corporation so authorized by the Board of Directors, any instruments that the Board of Directors has authorized for execution, except when the signing and execution thereof have been expressly delegated by the Board of Directors or these bylaws to some other officer or agent of the Corporation or are required by law to be otherwise signed and executed. The Chairman of the Board shall also make reports to the Board of Directors and the shareholders and generally perform all duties incident to the office of Chairman of the Board and such other duties as may be required by the Board of Directors. Section 9. The President shall be the chief operating officer of the Corporation. He shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties as the Board of Directors shall prescribe. 15 Section 10. The Vice President, or, if there is more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board or the President may from time to time prescribe. Section 11. The Secretary shall attend all meetings of the Board of Directors and of the shareholders and record all the proceedings of these meetings in a book to be kept for that purpose, and shall perform like duties for the executive committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation, and, when authorized by the Board of Directors, shall affix the same to any instrument requiring it, and, when so affixed, it shall be attested by his signature or the signature of an Assistant Secretary. 16 Section 12. The Assistant Secretary, or, if there is more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform such duties and have such other powers as the Board of Directors, the Chairman of the Board, the President or the Secretary may from time to time prescribe. Section 13. The Treasurer shall have the custody of the corporate funds and securities, keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 14. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at their regular meetings or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 15. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory 17 to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in the case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 16. The Assistant Treasurer, or, if there is more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer, and shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the President or the Treasurer may from time to time prescribe. ARTICLE VI CERTIFICATES OF SHARES Section 1. The certificates of shares of the Corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder, the number and class of such shares, the series, if any, represented thereby and the par value of each such share or a statement that such shares are without par value, as the case may be. If more than one class of shares 18 is authorized, the certificate shall state that the Corporation will furnish to any shareholder, upon request and without charge, a full or summary statement of the designations, preferences, limitations and relative rights of the shares of each class authorized to be issued, the variations thereof between the shares of each series, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Section 2. Every share certificate shall be signed by the President or Vice President and the Secretary an Assistant Secretary, the Treasurer or an Assistant Treasurer, and shall be sealed with the corporate seal which may be a facsimile, engraved or printed. Where a certificate is signed by a transfer agent, an assistant transfer agent or a registrar, the signature of any such President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be a facsimile. Section 3. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease for any reason to be such officer or officers of the Corporation before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who 19 signed such certificate or certificates or whose facsimile signature or signatures have been used thereon has not ceased to be such officer or officers of the Corporation. Section 4. The Board of Directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation which is alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming such share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken. Section 5. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the 20 person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. The Board of Directors may fix a time, not more than 50 days prior to the date of any meeting of shareholders, the date fixed for the payment of any dividend or distribution, the date for the allotment of rights, or the date when any change, conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, receive payment of any such dividend or distribution, receive any such allotment of rights, or exercise the rights in respect to any such change, conversion or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, receive payment of such dividend, receive such allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period, and, in such case written or printed notice thereof shall be mailed at least 10 days before the closing thereof to each shareholder of record at the address appearing on the 21 records of the Corporation or supplied by him to the Corporation for the purpose of notice. Section 7. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim of interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary, unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amounts to bad faith. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends upon the shares of the Corporation payable in cash, in property or in its shares may be declared by the Board of Directors at any regular or special meeting, pursuant and subject to law and the articles of incorporation of the Corporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors, 22 from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. The directors shall not be required to send, or cause to be sent, to the shareholders a financial report as of the closing date of the preceding fiscal year. Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5. The fiscal year of the Corporation shall be the twelve months ending August 31 or such other period as may be fixed by the Board of Directors. Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 23 ARTICLE VIII INDEMNIFICATION Section 1. The Corporation shall, to the fullest extent permitted by law as in effect at any time, indemnify, including interim indemnification, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against all liabilities, expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Expenses (including attorney's fees) incurred in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the fullest extent and under the circumstances permitted by law. Section 2. The liabilities, expenses, judgments, fines and amounts paid in settlement against which a person shall be indemnified pursuant to Section 1 of this Article shall be construed to include (without limitation) liabilities, expenses, judgments, fines and amounts paid in 24 settlement arising from or relating to any assertion against such person (including a threatened assertion) of a liability of or claim against the Corporation which is provided for in the Debtors' Sixth Amended Consolidated Plan of Reorganization (as Technically Modified) dated January 29, 1988 of the Corporation or was discharged by said Plan of Reorganization, the order confirming it or applicable law. Section 3. Section 1 of this Article shall be deemed to be a contract between the Corporation and each person who serves, at any time while such Section is in effect, as a director or officer of the Corporation or at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, association or other entity or enterprise. Any subsequent repeal or modification of such Section shall not affect any rights to indemnification of such person, or any obligation of the Corporation to indemnify, in existence immediately prior to such repeal or modification. Section 4. The Corporation may, but shall not be obligated, to indemnify, in the manner provided in Section 1 of this Article, any person who was or is a party or was or is threatened to be made a party to any action, suit or proceeding of the kind described in such Section against liabilities, expenses, judgments, fines and amounts paid in settlement of the kind described in such Section and Section EX-3.9 10 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.9 ARTICLES OF INCORPORATION TO THE DEPARTMENT OF STATE COMMONWEALTH OF PENNSYLVANIA In compliance with the requirements of the "BUSINESS CORPORATION LAW," approved the 5th day of May, A.D. 1933, P.L. 364, as amended, the undersigned, being of full age and desiring that they may be incorporated as a business corporation, do hereby certify: FIRST. The name of the corporation is Kwik-Fill Corporation. SECOND. The location and post office address of its initial registered office in this Commonwealth is c/o CT Corporation System, Oliver Building, Mellon Square, Pittsburgh, Pennsylvania 15222. THIRD. The corporation is organized under the provisions of the Business Corporation Law, as amended, and shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law. FOURTH. The term of its existence is perpetual. FIFTH. The aggregate number of shares which the Corporation shall have the authority to issue is 100 shares, all of which shall be of one class only (Common Stock), and shall be of the par value of $1.00 each, amounting in the aggregate to $100. SIXTH. The name and post office address of the incorporator and the number of shares of Common Stock subscribed to by him are:
Number Name Address of Shares Robert D. Pischer Oliver Building1 Pittsburgh, Pennsylvania 15222 William R. Gavin Oliver Building1 Pittsburgh, Pennsylvania 15222
Signed and sealed this 1st day of November, 1972. /s/ Robert D. Pischer ----------------------- /s/ William R. Gavin ----------------------- 2 Filed in the Department of State on the 3rd day of November 1972. /s/ ----------------------------- Secretary of the Commonwealth 2 EX-3.10 11 BYLAWS OF KFI 1 EXHIBIT 3.10 KWIK-FILL, INC. By-Laws ARTICLE I Shareholders Section 1.01. Annual Meetings. Annual meetings of the shareholders shall be held on such day in May as shall be adopted by the Board of Directors at the principal business office of the Corporation, or at such other place as may be fixed by the Board of Directors. Written notice of the annual meeting shall be given at least five days prior to the meeting to each shareholder entitled to vote thereat. Any business may be transacted at the annual meeting irrespective of whether or not the notice calling such meeting shall contain a reference thereto, except as otherwise expressly required herein or by law. Section 1.02. Special Meetings. Special Meetings of the shareholders may be called at any time, for the purpose or purposes set forth in the call, by the President, the Board of Directors, or the holders of at least one-fifth of all the 2 shares outstanding and entitled to vote thereat, by delivering a written request to the Secretary. Special meetings shall be held at the registered office of the Corporation, or at such other place as may be fixed by the Board of Directors. Written notice of special meetings shall be given at least five days prior to the meeting to each shareholder entitled to vote thereat. No business may be transacted at any special meeting other than that stated in the notice of meeting, and business which is germane thereto. Section 1.03. Organization. The Chairman of the Board, if one has been elected and is present, or if not, the President, or in his absence the Vice President having the greatest seniority, shall preside, and the Secretary, or in his absence any Assistant Secretary, shall take the minutes at all meetings of the shareholders. ARTICLE II DIRECTORS Section 2.01. Number, Election and Term of Office. The number of Directors which shall constitute the full Board of Directors shall be such number, not less than three, as shall be fixed by the Board of Directors; provided, however, that if all the shares of the Corporation shall be owned beneficially -2- 3 and of record by either one or two shareholders, the number of Directors may be less than three but not less than the number of shareholders. A full Board of Directors shall be elected at each annual meeting of shareholders. Each Director shall hold office from the time of his election, but shall be responsible as a director from such time only if he consents to his election; otherwise from the time he accepts office or attends his first meeting of the Board. Each Director shall serve until the next annual meeting of shareholders, and thereafter until his successor is duly elected and qualifies, or until his earlier death, resignation or removal. Section 2.02. Regular Meetings; Notice. Regular meetings of the Board of Directors shall be held at such time and place as shall be designated by the Board of Directors from time to time. Notice of such regular meetings of the Board shall not be required to be given, except as otherwise expressly required herein or by law, and except that whenever the time or place of regular meetings shall be initially fixed or changed, notice of such action shall be given promptly by telephone or otherwise to each Director not participating in such action. Any business may be transacted at any regular meeting. Section 2.03. Annual Meeting of the Board. The regular meeting of the Board of Directors in May of each -3- 4 year shall be held immediately after the annual meeting of the shareholders and shall be the annual organization meeting of the Directors-elect, at which meeting the new Board shall organize itself and elect the executive officers of the Corporation for the ensuing year, and may transact any other business. Section 2.04. Special Meetings; Notice. Special meetings of the Board may be called at any time by the Board itself by vote at a meeting, or by the Chairman, the President or any Director, to be held at such place and day and hour as shall be specified by the person calling the meeting. Notice of every special meeting of the Board of Directors, stating the place, day and hour thereof, shall be given to each Director by being mailed or by being sent by telegraph or given personally by telephone at least 24 hours before the time at which the meeting is to be held. Any business may be transacted at any special meeting. Section 2.05. Organization. At all meetings of the Board of Directors, the presence of at least a majority of the Directors at the time in office shall be necessary and sufficient to constitute a quorum for the transaction of business. If a quorum is not present at any meeting, the meeting may be adjourned from time to time by a majority of the Directors present, until a quorum as aforesaid shall be present; but notice of the time and place to which such meeting is adjourned -4- 5 shall be given to any Directors not present either by being sent by telegraph or given personally or by telephone at least 8 hours prior to the hour of reconvening. Resolutions of the Board shall be adopted, and any action of the Board at a meeting upon any matter shall be valid and effective, with the affirmative vote of at least a majority of the Directors present at a meeting duly convened. The Chairman of the Board, if one has been elected and is present, or if not, the President, shall preside at each meeting of the Board. In the absence of the President, the Directors present shall designate one of their number to preside at the meeting. The Secretary, or in his absence any Assistant Secretary, shall take the minutes at all meetings of the Board of Directors. In the absence of the Secretary and an Assistant Secretary, the presiding officer shall designate any person to take the minutes of the meeting. Section 2.06. Meetings by Telephone. One or more of the Directors may participate in any regular or special meeting of the Board of Directors or of a committee of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting are able to hear each other. Section 2.07. Presumption of Assent. Minutes of each meeting of the Board shall be made available to each Director at or before the next succeeding meeting. Each Director shall -5- 6 be presumed to have assented to such minutes and agreed to the action taken thereat unless his objection thereto shall be made to the Secretary within two days after such meeting. Section 2.08. Catastrophe. Notwithstanding any other provisions of law, the Articles or these By-Laws, during any emergency period caused by a national catastrophe or local disaster, a majority of the surviving members (or the sole survivor) of the Board of Directors who have not been rendered incapable of acting because of incapacity or the difficulty of communication or transportation to the place of meeting shall constitute a quorum for the sole purpose of electing directors to fill such emergency vacancies; and a majority of the directors present at such a meeting may act to fill such vacancies. Directors so elected shall serve until such absent directors are able to attend meetings or until the shareholders act to elect directors for such purpose. During such an emergency period, if the Board is unable to or fails to meet, any action appropriate to the circumstances may be taken by such officers of the Corporation as may be present and able. Questions as to the existence of a national catastrophe or local disaster and the number of surviving members capable of acting shall be conclusively determined at the time by the Board of Directors or the officers so acting. -6- 7 Section 2.09. Resignations. Any Director may resign by submitting to the Chairman of the Board, if one has been elected, or to the President or the Secretary, his resignation, which shall become effective upon its receipt by such officer or as otherwise specified therein. Section 2.10. Committees. Standing or temporary committees may be appointed from its own number by the Board of Directors from time to time and the Board may from time to time invest committees with such power and authority, subject to such conditions, as it may see fit. An Executive Committee may be appointed by a majority of the full Board; it shall have all the powers and exercise all the authority of the Board in the management of the business and affairs of the Corporation except as specially limited by the Board. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting; and in the event of such absence or disqualification, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. Any action taken by any committee shall be subject to alteration or revocation by the Board of Directors; provided, however, that third parties shall not be prejudiced by such alteration or revocation. -7- 8 ARTICLE III OFFICERS AND EMPLOYEES Section 3.01. Executive Officers. The Executive Officers of the Corporation shall be the President, a Secretary and a Treasurer, and may include a Chairman of the Board and one or more Vice Presidents as the Board may from time to time determine, all of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person. Each Executive Officer shall hold office until the next succeeding annual meeting of the Board of Directors and thereafter until his successor is duly elected and qualifies, or until his earlier death, resignation or removal. Section 3.02. Additional Officers; Other Agents and Employees. The Board of Directors may from time to time appoint or hire such additional officers, assistant officers, agents, employees and independent contractors as the Board deems advisable; and the Board or the President shall prescribe their duties, conditions of employment and compensation. Subject to the power of the Board, the President may employ from time to time such other agents, employees, and independent contractors as he may deem advisable for the prompt and orderly transaction of the business of the Corporation, and he may prescribe their duties and the conditions of their employment, fix their compensation -8- 9 and dismiss them, without prejudice to their contract rights, if any. Section 3.03. The Chairman. If there shall be a Chairman of the Board, he shall be elected from among the Directors, shall preside at all meetings of the shareholders and of the Board, and shall have such other powers and duties as from time to time may be prescribed by the Board. Section 3.04. The President. The President shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors, the President shall have general policy supervision of and general management and executive powers over all the property, business, operations and affairs of the Corporation, and shall see that the policies and programs adopted or approved by the Board are carried out. The President shall exercise such further powers and duties as from time to time may be prescribed in these By-Laws or by the Board of Directors. Section 3.05. The Vice Presidents. The Vice Presidents may be given by resolution of the Board general executive powers, subject to the control of the President, concerning one or more or all segments of the operations of the Corporation. The Vice Presidents shall exercise such further powers and -9- 10 duties as from time to time may be prescribed in these By-Laws or by the Board of Directors or by the President. At the request of the President or in his absence or disability, the senior Vice President shall exercise all the powers and duties of the President. Section 3.06. The Secretary and Assistant Secretaries. It shall be the duty of the Secretary (a) to keep or cause to be kept at the registered office of the Corporation an original or duplicate record of the proceedings of the shareholders and the Board of Directors, and a copy of the Articles and of the By-Laws; (b) to attend to the giving of notices of the Corporation as may be required by law or these By-Laws; (c) to be custodian of the corporate records and of the seal of the Corporation and see that the seal is affixed to such documents as may be necessary or advisable; (d) to have charge of and keep at the registered office of the Corporation, or cause to be kept at the office of a transfer agent or registrar within the Commonwealth of Pennsylvania, the stock books of the Corporation, and an original or duplicate share register, giving the names of the shareholders in alphabetical order, and showing their respective addresses, the number and classes of shares held by each, the number and date of certificates issued for the shares, and the date of cancellation of every certificate surrendered for cancellation; and (e) to exercise all powers and duties incident to the office of Secretary, and such other -10- 11 powers and duties as may be prescribed by the Board of Directors or by the President from time to time. The Secretary by virtue of his office shall be an Assistant Treasurer. The Assistant Secretaries shall assist the Secretary in the performance of his duties and shall also exercise such further powers and duties as from time to time may be assigned to them by the Board of Directors, the President or the Secretary. At the direction of the Secretary or in his absence or disability, an Assistant Secretary shall perform the duties of the Secretary. Section 3.07. The Treasurer and Assistant Treasurers. The Treasurer shall (a) have custody of the Corporation's contracts, insurance policies, leases, deeds and other business records; (b) see that the lists, books, reports, statements, tax returns, certificates and other documents and records required by law are properly prepared, kept and filed; (c) be the principal officer in charge of tax and financial matters, budgeting and accounting of the Corporation; (d) have charge and custody of and be responsible for the corporate funds, securities and investments; (e) receive and give receipts for checks, notes, obligations, funds and securities of the Corporation, and deposit monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as shall be designated by the Board of Directors; (f) subject to the provisions of Section 5.01 of he By-Laws, cause to be disbursed the funds -11- 12 of the Corporation by payment in cash or by checks or drafts upon the authorized depositories of the Corporation, and cause to be taken and preserved proper vouchers for such disbursements; (g) render to the President and the Board of Directors whenever they may require it an account of all his transactions as Treasurer, and reports as to the financial position and operations of the Corporation; (h) cause to be kept appropriate, complete and accurate books or records of account of all its business and transactions; and (i) exercise all powers and duties incident to the office of Treasurer, and such other duties as may be prescribed by the Board of Directors or by the President from time to time. The Treasurer by virtue of his office shall be an Assistant Secretary. The Assistant Treasurers shall assist the Treasurer in the performance of his duties and shall also exercise such further powers and duties as from time to time may be assigned to them by the Board of Directors, the President or the Treasurer. At the direction of the Treasurer or in his absence or disability, an Assistant Treasurer shall perform the duties of the Treasurer. Section 3.08. Vacancies. Vacancy in any office or position by reason of death, resignation, removal, disqualification, disability or other cause, shall be filled in the manner provided in this Article III for regular election or appointment to such office. -12- 13 Section 3.09. Delegation of Duties. The Board of Directors may in its discretion delegate for the time being the powers and duties, or any of them, of any officer to any other person whom it may select. ARTICLE IV SHARES OF CAPITAL STOCK Section 4.01. Share Certificates. Every holder of fully-paid stock of the Corporation shall be entitled to a certificate or certificates, to be in such form as the Board of Directors may from time to time prescribe, and signed (in facsimile or otherwise, as permitted by law) by the President or a Vice President and the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, which shall represent and certify the number of shares of stock owned by such holder. The Board may authorize the issuance of certificates for fractional shares or, in lieu hereof, scrip or other evidence of ownership, which may (or may not) as determined by the Board entitle the holder thereof to voting, dividends or other rights of shareholders. Section 4.02. Transfer of Shares. Transfers of shares of stock of the Corporation shall be made on the books of the Corporation only upon surrender to the Corporation of -13- 14 the certificate or certificates for such shares properly endorsed, by the shareholder or by his assignee, agent or legal representative, who shall furnish proper evidence of assignment, authority or legal succession, or by the agent of one of the foregoing thereunto duly authorized by an instrument duly executed and filed with the Corporation, in accordance with regular commercial practice. Section 4.03. Lost, Stolen, Destroyed or Mutilated Certificates. New certificates for shares of stock may be issued to replace certificates lost, stolen, destroyed or mutilated upon such conditions as the Board of Directors may from time to time determine. Section 4.04. Regulations Relating to Shares. The Board of Directors shall have power and authority to make all such rules and regulations not inconsistent with these By-Laws as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. Section 4.05. Holders of Record. The Corporation shall be entitled to treat the holder of record of any share or shares of stock of the Corporation as the holder and owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such -14- 15 shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of Pennsylvania. ARTICLE V MISCELLANEOUS CORPORATE TRANSACTIONS AND DOCUMENTS Section 5.01. Notes, Checks, etc. All notes, bonds, drafts, acceptances, checks, endorsements (other than for deposit), guarantees, and all evidences of indebtedness of the Corporation whatsoever, shall be signed by such officers or agents of the Corporation, subject to such requirements as to countersignature or other conditions, as the Board of Directors from time to time may determine. Facsimile signatures on checks may be used if authorized by the Board of Directors. Section 5.02. Execution of Instruments Generally. Except as provided in Section 5.01, all deeds, mortgages, contracts and other instruments requiring execution by the Corporation may be signed by the President, any Vice President or the Treasurer; and authority to sign any such contracts or instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons. Any person having authority to sign on behalf of the Corporation may delegate, from time to time, by instrument in writing, -15- 16 all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. Section 5.03. Voting Securities Owned by Corporation. Securities having voting power in any other corporation owned by this Corporation shall be voted by the President, unless the Board confers authority to vote with respect thereto, which may be general or confined to specific investments, upon some other person. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. ARTICLE VI GENERAL PROVISIONS Section 6.01. Offices. The principal business office of the Corporation shall be at Warren, Pennsylvania. The Corporation may also have offices at such other places within or without the Commonwealth of Pennsylvania as the business of the Corporation may require. Section 6.02. Corporate Seal. The Board of Directors shall prescribe the form of a suitable corporate seal, which shall contain the full name of the Corporation and the year and state of incorporation. Section 6.03. Fiscal Year. The fiscal year of the -16- 17 Corporation shall end on such day as shall be fixed by the Board of Directors. Section 6.04. Financial Reports to Shareholders. The Board shall have discretion to determine whether financial reports shall be sent to shareholders, what such reports shall contain, and whether they shall be audited or accompanied by the report of an independent or certified public accountant. ARTICLE VII VALIDATION OF CERTAIN CONTRACTS Section 7.01. No contract or other transaction between the Corporation and another person shall be invalidated or otherwise adversely affected by the fact that any one or more shareholders, directors or officers of the Corporation --- (i) is pecuniarily or otherwise interested in, or is a shareholder, director, officer, or member of, such other person, or (ii) is a party to, or is in any other way pecuniarily or otherwise interested in, the contract or other transaction, or (iii) is in any way connected with any person pecuniarily or otherwise interested in such contract or other transaction, provided the fact of such interest shall be disclosed or known to the Board of Directors or the shareholders, as the case may be; and in any action of the shareholders or of the Board of Directors of the Corporation authorizing or approving any -17- 18 such contract or other transaction, any and every shareholder or director may be counted in determining the existence of a quorum, and in determining the effectiveness of action taken, with like force and effect as though he were not so interested, or were not such a shareholder, director, member or officer, or were not such a party, or were not so connected. Such director, shareholder or officer shall not be liable to account to the Corporation for any profit realized by him from or through any such contract or transaction approved or authorized as aforesaid. As used herein, the term "person" includes a corporation, partnership, firm, association or other legal entity. ARTICLE VIII INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 8.01. Directors and officers of the Corporation shall be indemnified as of right to the fullest extent now or hereafter permitted by law in connection with any actual or threatened civil, criminal, administrative or investigative action, suit or proceeding (whether brought by or in the name of the Corporation or otherwise) arising out of their service to the Corporation or to another organization at the Corporation's request. Persons who are not directors or officers of the Corporation may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors. The Corporation may maintain insurance to protect -18- 19 itself and any such director, officer or other person against any liability, cost or expense incurred in connection with any such action, suit or proceeding. ARTICLE IX AMENDMENTS Section 9.01. Amendments. These By-Laws may be amended, altered and repealed, and new By-Laws may be adopted, by the shareholders or the Board of Directors of the Corporation at any regular or special meeting. No provision of these By-Laws shall vest any property or contract right in any shareholder. -19- EX-3.11 12 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.11 CERTIFICATE OF INCORPORATION OF INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW * * * * * WE, THE UNDERSIGNED, all of the age of eighteen years or over, for the purpose of forming a corporation pursuant to Section 402 of the Business Corporation Law of New York, do hereby certify: FIRST: The name of the corporation is INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. SECOND: The purposes for which it is formed are: To establish and maintain an oil, gas or other mineral business or businesses, and to refine, market and distribute oil, gas, hydrocarbons, petroleum and all of their products; to locate, purchase, lease, sub-lease, acquire by grant, concession or other means, develop or otherwise acquire and sell, mortgage or otherwise dispose of lands containing or believed to contain petroleum, oil or natural gas, or any of them, and any interests therein, and to drill or prospect for or produce the same; to purchase, lease or otherwise acquire, and to sell, mortgage or otherwise dispose of developed or producing oil and gas properties or the products of 2 such oil or gas properties; to purchase, produce, refine, sell and distribute petroleum and all of the products and by-products thereof; to buy, sell, or otherwise dispose of, and manufacture all kinds of oil, gasoline, lubricants, greases, waxes and all other products and by-products of petroleum; to produce, deal in and sell natural gas. To buy, construct, erect and maintain buildings, machinery, vessels, pipe lines, terminals, tanks and all other structures, facilities and appliances for the purchase, sale, manufacture, storage, transportation and handling of petroleum, its products, oils, gases and other fluids and substances. To carry on in connection with any and all of the purposes of the corporation, the business of owning, leasing and operating filling stations, service stations, garages and repair shops, and buying, selling and dealing in and with goods, wares, merchandise and commodities customarily handled at filling stations, service stations, garages and repair shops. THIRD: The office of the corporation is to be located in the City of Rochester, County of Monroe, State of New York. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is fifty (50) of the par value of One Hundred Dollars ($100.00) each. FIFTH: The Secretary of State is designated as the agent of the corporation upon whom process against the corporation 3 may be served. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: Minute Man Service Inc., c/o W. M. Petre, 104 Chautauqua Avenue, Lakewood, New York 14750. SIXTH: The tax year for the corporation shall end on December 31st. IN WITNESS WHEREOF, we have made and signed this certificate this 21st day of August, A.D. 1978, and we affirm the statements contained therein as true under penalties of perjury. THOMAS B. WARD ------------------------------------ Thomas B. Ward 277 Park Avenue, New York, N. Y. 10017 KIT RASEMAN ------------------------------------ Kit Raseman 277 Park Avenue, New York, N. Y. 10017 EX-3.12 13 BYLAWS OF IGOCRI 1 EXHIBIT 3.12 INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. * * * * * BY - LAWS * * * * * ARTICLE I OFFICES Section 1. The office of the corporation shall be located in Rochester, County of Monroe, State of New York. Section 2. The corporation may also have offices at such other places both within and without the State of New York as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. All meetings of shareholders for the election of directors shall be held in Warren, State of Pennsylvania, at such place as may be fixed from time to time by the board of directors. 2 Section 2. Annual meetings of shareholders, commencing with the year 1979, shall be held on the second Wednesday of June if not a legal holiday, and if a legal holiday, then on the next secular day following, at which they shall elect by a plurality vote, a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written or printed notice of the annual meeting stating the place, date and hour of the meeting shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders may be held at such time and place within or without the State of New York as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president, the board of directors, or the holders of 3 not less than a majority of all the shares entitled to vote at the meeting. Section 3. Written or printed notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by, or at the direction of, the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. The notice should also indicate that it is being issued by, or at the direction of, the person calling the meeting. Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy 4 shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders, unless the vote of a greater or lesser number of shares of stock is required by law or the certificate of incorporation. Section 3. Each outstanding share of stock having voting power shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Section 4. The board of directors in advance of any shareholders' meeting may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and, on the request of any shareholder entitled to vote thereat, shall appoint one or more inspectors. In case any person appointed as inspector fails to appear or act, the vacancy may be filled by the board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of 5 his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Section 5. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon. ARTICLE V DIRECTORS Section 1. The number of directors shall be not less than three nor more than ten. The first board shall consist of six directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the shareholders at the annual meeting. Directors shall be at least eighteen years of age and need not be residents of the State of New York nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, except as hereinafter provided, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. 6 Section 2. Any or all of the directors may be removed, with or without cause, at any time by the vote of the shareholders at a special meeting called for that purpose. Any director may be removed for cause by the action of the directors at a special meeting called for that purpose. Section 3. Unless otherwise provided in the certificate of incorporation, newly created directorships resulting from an increase in the board of directors and all vacancies occurring in the board of directors, including vacancies caused by removal without cause, may be filled by the affirmative vote of a majority of the board of directors, however, if the number of directors then in office is less than a quorum then such newly created directorships and vacancies may be filled by a vote of a majority of the directors then in office. A director elected to fill a vacancy shall hold office until the next meeting of shareholders at which election of directors is the regular order of business, and until his successor shall have been elected and qualified. A director elected to fill a newly created directorship shall serve until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified. 7 Section 4. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. Section 5. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside the State of New York, at such place or places as they may from time to time determine. Section 6. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of New York. Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to 8 the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Section 4. Special meetings of the board of directors may be called by the president on three days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 5. Notice of a meeting need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 6. A majority of the directors shall constitute a quorum for the transaction of business unless a greater or lesser number is required by law or by the 9 certificate of incorporation. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the vote of a greater number is required by law or by the certificate of incorporation. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 8. Unless the certificate of incorporation provides otherwise, any action required or permitted to be taken at a meeting of the directors or a committee thereof may be taken without a meeting if a consent in writing to the adoption of a resolution authorizing the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. 10 ARTICLE VII EXECUTIVE COMMITTEE Section 1. The board of directors, by resolution adopted by a majority of the entire board, may designate, from among its members, an executive committee and other committees, each consisting of three or more directors, and each of which, to the extent provided in the resolution, shall have all the authority of the board, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. 11 Section 2. Whenever any notice of a meeting is required to be given under the provisions of the statutes or under the provisions of the certificate of incorporation or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE IX OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a president, one or more vice-presidents, a secretary and a treasurer, none of whom need be a member of the board. Any two or more offices may be held by the same person, except the offices of president and secretary. When all the issued and outstanding stock of the corporation is owned by one person, such person may hold all or any combination of offices. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors. 12 Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENTS Section 8. The vice-president or, if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the 13 president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary or, if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 14 THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other 15 powers as the board of directors may from time to time prescribe. ARTICLE X CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by certificates signed by the chairman or vice-chairman of the board or the president or a vice-president and the secretary or an assistant secretary or the treasurer or an assistant treasurer of the corporation and may be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designation, relative rights, preferences, and limitations of the shares of each class authorized to be issued and, if the corporation is authorized to issue any class of preferred shares in series, the designation, relative rights, preferences and limitations of each such series so far as the same have been fixed and the authority of the board of directors to designate and fix the relative rights, preferences and limitations of other series. Section 2. The signatures of the officers of the corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered 16 by a registrar other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, 17 a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the corporation. FIXING RECORD DATE Section 5. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the board of directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty nor less than ten days before the date of any meeting nor more than fifty days prior to any other action. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the board fixes a new record date for the adjourned meeting. REGISTERED SHAREHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its 18 books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of New York. LIST OF SHAREHOLDERS Section 7. A list of shareholders as of the record date, certified by the corporate officer responsible for its preparation or by a transfer agent, shall be produced at any meeting upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. ARTICLE XI GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the certificate of incorporation relating thereto, if any; dividends 19 may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in shares of the capital stock or in the corporation's bonds or its property, including the shares or bonds of other corporations subject to any provisions of law and of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. 20 SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, New York". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XII AMENDMENTS Section 1. These by-laws may be amended or repealed or new by-laws may be adopted at any regular or special meeting of shareholders at which a quorum is present or represented, by the vote of the holders of shares entitled to vote in the election of any directors, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting. These by-laws may also be amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board. If any by-law regulating an impending election of directors is adopted, amended or repealed by the board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the by-law so adopted, amended or repealed, together with precise statement of the changes made. By-laws adopted by the board of directors may be amended or repealed by the shareholders. EX-3.13 14 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.13 ARTICLES OF INCORPORATION (Profit Corporation) These Articles of Incorporation are signed and acknowledged by the incorporator for the purpose of forming a corporation for profit under the provisions of Act No. 327 of the Public Acts of 1931, as amended, as follows: ARTICLE I The name of the corporation is Bell Oil Corp. ARTICLE II The purpose or purposes for which the corporation is formed are as follows: To buy, sell and otherwise deal in gasoline, fuel oil, motor oil, tires, auto parts and all manner of accessories and appliances to be used on or in motor vehicles of every description; to purchase, sell, lease, make repairs to and store automobiles, their parts and accessories and to buy, sell or lease and operate garage service stations and repair shops and to carry on all business incidental thereto; to distribute and sell at retail and wholesale, gasoline, fuel oil, motor oil and petroleum and all other related products; to buy, sell or lease and operate car washes and to do any and all things necessary or incident to the business of the corporation and to exercise and possess the powers herein set forth as fully as natural persons. In general to carry on any business in connection therewith and incident thereto not forbidden by the laws of the State of Michigan and with all the powers conferred upon corporations by the laws of the State of Michigan. ARTICLE III Location of the first registered office is: 428 Hunter, City of Saginaw, County of Saginaw, Michigan 48602 Post office address of the first registered office is: 428 Hunter, City of Saginaw, County of Saginaw, Michigan 48602 ARTICLE IV The name of the first resident agent is Harold Campbell. ARTICLE V 2 The total authorized capital stock is
(1) Preferred shares ------------- Par Value $------------ Common shares 5,000 Par value $10.00 per share Book Value (2) Preferred shares Price fixed for sale $ Common Book Value Price fixed for sale $
(3) A statement of all or any of the designations and the powers, preferences and rights, and the qualifications limitations or restrictions thereof is as follows: ARTICLE VI The name and places of resident or business of the incorporators and the number and class of shares subscribed for are as follows: (Statute requires one or more incorporators)
NUMBER OF SHARES NAME/RESIDENCE OR BUSINESS ADDRESS PAR STOCK NON-PAR STOCK COMMON PREFERRED COMMON PREFERRED Harold Campbell, 428 Hunter, Saginaw, 300 Michigan
ARTICLE VII The names and addresses of the first board of directors are as follows: (Statute requires at least three directors)
NAME RESIDENCE OR BUSINESS ADDRESS Harold Campbell 428 Hunter, Saginaw, Michigan Arnold J. Middeldorf 501 Lapeer, Saginaw, Michigan
3
Leopold P. Borrello 1201 Second National Bank, Saginaw, Michigan
ARTICLE VIII The term of the corporate existence is perpetual. I, the incorporator, sign my name this 21st day of February, 1969. /s/ Harold Campbell ------------------- Harold Campbell STATE OF MICHIGAN ) ) ss.: COUNTY OF SAGINAW ) On this 21st day of February, 1969, before me personally appeared Harold Campbell, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. /s/ Joan F. Wojewoda ------------------- EX-3.14 15 BYLAWS OF BOC 1 EXHIBIT 3.14 BY-LAWS OF As amended February 10, 1975 BELL OIL CORP. ARTICLE I MEETINGS Section 1. Place of Meeting. Any or all meetings of the shareholders, and of the board of directors, of this corporation may be held within or without the State of Michigan provided that no meeting shall be held at a place other than the registered office in Michigan, except pursuant to by-law or resolution adopted by the board of directors. Section 2. Annual Meeting of Shareholders. The annual meeting of the shareholders shall be held on the second Monday in February. Section 3. Notice of Annual Meeting of Shareholders. At least ten (10) days prior to the date fixed by Section 2 of this article for the holding of the annual meeting of shareholders, written notice of the time, place and purpose of such meeting shall be mailed, as hereinafter provided, to each shareholder entitled to vote at such meeting. Section 4. Delayed Annual Meeting. If, for any reason, the annual meeting of the shareholders shall not be held on the day hereinbefore designated, such meeting may be called and held as a special meeting, and the same proceedings may be had thereat as at an annual meeting, provided however, that the notice of such meeting shall be the same herein required for the annual meeting, namely, not less than a ten (10) day notice. Section 5. Order of Business at Annual Meeting. The order of business at the annual meeting of the shareholders shall be as follows: (a) Roll call (b) Reading notice and proof of mailing (c) Report of president (d) Report of secretary (e) Report of treasurer (f) Election of directors (g) Transaction of other business mentioned in the notice (h) Adjournment provided, that in the absence of any objection, the presiding officer may vary the order of business at discretion. 2 BY-LAWS (Cont'd) Section 6. Special Meetings of Shareholders. A special meeting of the shareholders may be called at any time by the president, or by a majority of the board of directors, or by shareholders entitled to vote upon not less than an aggregate of fifty (50%) percent of the outstanding shares of the corporation having the right to vote at such special meeting. The method by which such meeting may be called is as follows: upon receipt of a specification in writing setting forth the date and objects of such proposed special meeting, signed by the president, or by a majority of the board of directors, or by shareholders as above provided, the secretary of this corporation shall prepare, sign and mail the notices requisite to such meeting. Section 7. Notice of Special Meeting of Shareholders. At least three (3) days prior to the date fixed for the holding of any special meeting of shareholders, written notice of the time, place and purposes of such meeting shall be mailed, as hereinafter provided, to each shareholder entitled to vote at such meeting. No business not mentioned in the notice shall be transacted at such meeting. Section 8. Organization Meeting of Board. At the place of holding the annual meeting of shareholders, and immediately following the same, the board of directors as constituted upon final adjournment of such annual meeting shall convene for the purpose of electing officers and transacting any other business property brought before it provided, that the organization meeting in any year may be held at a different time and place than that herein provided by consent of a majority of the directors of such new board. Section 9. Meetings of the Board. Meetings of the board of directors may be called at any time by the president or secretary, or by a majority of the board of directors. Directors shall be notified in writing of the time, place and purpose of all meetings of the board, except the regular annual meeting held immediately after the annual meeting of the shareholders, at least three (3) days prior thereto. Any director shall, however, be deemed to have waived such notice by his attendance at any meeting, or by waiver as hereinafter provided. Section 10. Notices and Mailing. All notices required to be given by any provision of these by-laws shall state the authority pursuant to which they are issued (as, "by order of shareholders", or "by order of the president", or "by order of the board of directors", as the case may be) and shall bear the written or printed signature of the secretary. Every notice shall be deemed duly served when the same has been deposited in the United States 3 BY-LAWS (Cont'd) mail, with postage fully prepaid, plainly addressed to the sendee at his, her or its last address appearing upon the original or duplicate stock ledger of this corporation at its registered office in Michigan. Section 11. Waiver of Notice. Notice of the time, place and purpose of any meeting of the shareholders or of the board of directors may be waived by telegram, radiogram, cablegram or other writing, either before or after such meeting has been held. ARTICLE II QUORUM Section 1. Quorum of Shareholders. A majority of the outstanding shares of this corporation entitled to vote, present by the record holders thereof in person or by proxy shall constitute a quorum at any meeting of the shareholders. Section 2. Quorum of Directors. A majority of the directors shall constitute a quorum at any meeting of the shareholders. ARTICLE III VOTING, ELECTIONS AND PROXIES Section 1. Who Entitled to Vote. Except as the articles or an amendment, or amendments, thereto otherwise provide, each shareholder of this corporation shall, at every meeting of the shareholders, be entitled to one vote in person or by proxy for each share of capital stock of this corporation held by such shareholder, subject, however, to the full effect of the limitations imposed by the fixed record date for determination of shareholders set forth in Section 2 of this article. Section 2. Record Date for Determination of Shareholders. Twenty (20) days preceding (a) the date of any meeting of shareholders (b) the date for the payment of any dividends (c) the date for the allotment of rights (d) the date when any change or conversion or exchange of capital stock shall go into effect is hereby fixed as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or to any such allotment of rights, or to exercise such rights, as the case may be notwithstanding any transfer of any stock on the books of the corporation or otherwise after any such record date fixed as aforesaid. Nothing in this section shall affect the rights of a shareholder and his transferee or transferor as between themselves. 4 BY-LAWS (Cont'd) Section 3. Proxies. No proxy shall be deemed operative unless and until signed by the shareholders and filed with the corporation. In the absence of limitation to the contrary contained in the proxy, the same shall extend to all meetings of the shareholders and shall remain in force three years from its date, and no longer. Section 4. Vote by Shareholder Corporation. Any other corporation owning voting shares in this corporation may vote upon the same by the president of such shareholder corporation, or by proxy appointed by him, unless some other person shall be appointed to vote upon such shares by resolution of the board of directors of such shareholder corporation. Section 5. Cumulative Voting. In all elections for directors, every shareholder entitled to vote shall have the right to vote, in person or by proxy the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate said shares, and give one candidate as many votes as will equal the number of directors multiplied by the number of shares of his stock or to distribute them on the same principle among as many candidates as he shall see fit. ARTICLE IV BOARD OF DIRECTORS Section 1. Number and Term of Directors. The business, property and affairs of this corporation shall be managed by a board of directors composed of four members, who need not be shareholders. The directors shall be elected at the annual meeting of the corporation each year and shall hold office for a term of one year and until his successor is elected and qualified. Section 2. Vacancies. Vacancies in the board of directors shall be filled by appointment made by the remaining directors. Each person so elected to fill vacancy shall remain a director until his successor has been elected by the shareholders, who may make such election at their next annual meeting or at any special meeting, duly called for that purpose, held prior thereto. Section 3. Action by Unanimous Written Consent. If and when the directors shall severally or collectively consent in writing to any action to be taken by the corporation, such action shall be as valid corporate action as though it had been authorized at a meeting of the board of directors. 5 BY-LAWS (Cont'd) Section 4. Power to Make By-Laws. The board of directors shall have power to make and alter any by-law or by-laws, including the fixing and altering of the number of the directors, provided, that the board shall not make or alter any by-law or by-laws fixing the qualifications, classifications or term of office of any member or members of the then existing board. Section 5. Power to Elect Officers. The board of directors shall select a president, a secretary and a treasurer and may select one or more vice-presidents, assistant secretaries and assistant treasurer. No officer except a president need be a member of the board but a vice-president who is not a director shall not succeed to nor fill the office of president. Any two of the above offices, except those of president and vice-president, may be held by the same person but no officer shall execute, acknowledge or verify any instrument in more than one capacity. Section 6. Power to Appoint Other Officers and Agents. The board of directors shall have power to appoint such other officers and agents as the board may deem necessary for transaction of the business of the corporation. Section 7. Removal of Officers and Agents. Any officer or agent may be removed by the board of directors whenever in the judgment of the board the business interests of the corporation will be served thereby. Section 8. Power to Fill Vacancies. The board shall have power to fill any vacancy in any office occurring from any reason whatsoever. Section 9. Delegation of Powers. For any reason deemed sufficient by the board of directors, whether occasioned by absence or otherwise, the board may delegate all or any of the powers and duties of any officer to any other officer or director, but no officer or director shall execute, acknowledge or verify any instrument in more than one capacity. Section 10. Power to Appoint Executive Committee. The board of directors shall have power to appoint by resolution an executive committee composed of two or more directors who, to the extent provided in such resolution, shall have and exercise the authority of the board of directors in the management of the business of the corporation between meetings of the board. Section 11. Power to Require Bonds. The board of directors may require. any officer or agent to file with the corporation a satisfactory bond conditioned for faithful performance of his duties. 6 BY-LAWS (Cont'd) Section 12. Compensation. The compensation of directors, officers and agents may be fixed by the board. ARTICLE V OFFICERS Section 1. President. The president shall be selected by, and from the membership of, the board of directors. He shall be the chief executive officer of the corporation. He shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board are carried into effect. He shall be ex-officio a member of all standing committees and shall have the general powers and duties of supervision and management usually vested in the office of president of a corporation. Section 2. Vice-Presidents. At least one vice-president may be chosen from the membership of the board. Such vice-presidents as are board members, in the order of their seniority, shall perform the duties and exercise the powers of the president during the absence or disability of the president. Section 3. Secretary. The secretary shall attend all meetings of the stockholders and of the board of directors, and of the executive committee, and shall preserve in books of the company true minutes of the proceedings of all such meetings. He shall safely keep in his custody the seal of the corporation and shall have authority to affix the same to all instruments where its use is required. He shall give all notices required by statute, by-law or resolution. He shall perform such other duties as may be delegated to him by the board of directors or by the executive committee. Section 4. Treasurer. The treasurer shall have custody of all corporate funds and securities and shall keep in books belonging to the corporation full and accurate accounts of all receipts and disbursements; he shall deposit all moneys, securities and other valuable effects in the name of the corporation in such depositaries as may be designated for that purpose by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board, taking proper vouchers for such disbursements, and shall render to the president and directors at the regular meetings of the board, and whenever requested by them, an account of all his transactions as treasurer and of the financial condition of the corporation. If required by the board he shall deliver to the president of the company, and shall keep in force, a bond in form 7 BY-LAWS (Cont'd) amount and with a surety or sureties satisfactory to the board, conditioned for faithful performance of the duties of his office, and for restoration to the corporation in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and property whatever kind in his possession or under his control belonging to the corporation. Section 5. Assistant Secretary and Assistant Treasurer. The assistant secretary, in the absence or disability of the secretary, shall perform the duties and exercise the powers of the secretary. The assistant treasurer, in the absence or disability of the treasurer, shall perform the duties and exercise the powers of the treasurer. ARTICLE VI STOCKS AND TRANSFERS Section 1. Certificates for Shares. Every shareholder shall be entitled to a certificate of his shares signed by the president or a vice-president and the secretary or the treasurer, or by the assistant secretary or the assistant treasurer, under the seal of the corporation, certifying the number and class of shares represented by such certificates, which certificates shall state the terms and provisions of all classes of shares and if such shares are not full-paid, the amount paid. Section 2. Transferably Only on Books of Corporation. Shares shall be transferable only on the books of the corporation by the persons named in the certificate, or by attorney lawfully constituted in writing, and upon surrender of the certificates therefor. Section 3. Registered Shareholders. The corporation shall have the right to treat the registered holder of any share as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the corporation shall have express or other notice thereof, save as may be otherwise provided by the statutes of Michigan. Section 4. Regulations. The board of directors shall have power and authority to make all such rules and regulations as the board shall deem expedient regulating the issue, transfer and registration of certificates for shares in this corporation. 8 BY-LAWS (Cont'd) ARTICLE VII DIVIDENDS AND RESERVES Section 1. Sources of Dividends. The board of directors shall have power and authority to declare dividends from the following sources: (a) From earned surplus; (b) From any surplus, as to dividends upon preferred shares only; (c) From appreciation of the value of the assets of the corporation, provided that such dividend shall be payable in stock only. In determining earned surplus the judgment of the board shall be conclusive in the absence of bad faith or gross negligence. Section 2. Manner of Payment of Dividend. Dividends may be paid in cash, in property, in obligations of the corporation or in shares of the capital stock of the corporation. Section 3. Reserves. The board of directors shall have power and authority to set apart, out of any funds available for dividends, such reserve or reserves, for any proper purpose, as the board in its discretion shall approve; and the board shall have power and authority to abolish any reserve created by the board. ARTICLE VIII EXECUTION OF INSTRUMENT Section 1. Checks, etc. All checks, drafts and orders for payment of money shall be signed in the name of the corporation and shall be countersigned by such officers or agents as the board of directors shall from time to time designate for that purpose. Section 2. Contracts, Conveyances, etc. When the execution of any contract, conveyance or other instrument has been authorized without specification of the executing officers, the president, or any vice-president, and the secretary, treasurer or assistant secretary, may execute the same in the name and behalf of this corporation and may affix the corporate seal thereto. The board of directors shall have power to designate the officers and agents who shall have authority to execute any instrument in behalf of this corporation. 9 BY-LAWS (Cont'd) ARTICLE IX AMENDMENT OF BY-LAWS Section 1. Amendments, How Effected. These by-laws may be amended, altered, changed, added to or repealed by the affirmative vote of a majority of the shares entitled to vote at any regular or special meeting of the shareholders if notice of the proposed amendment, alteration, change, addition or repeal be contained in the notice of the meeting, or by the affirmative vote of a majority of the board of directors if the amendment, alteration, change, addition or repeal be proposed at a regular or special meeting of the board and adopted at a subsequent regular meeting; provided, that any by-laws made by the affirmative vote of a majority of the board of directors as provided herein may be amended, altered, changed, added to or repealed by the affirmative vote of a majority of the shares entitled to vote at any regular or special meeting of the shareholders; also provided, however, that no change of the date for the annual meeting of shareholders shall be made within thirty days next before the day on which such meeting is to be held, unless consented to in writing, or by a resolution adopted at a meeting, by all shareholders entitled to vote at the annual meeting. ARTICLE X ELECTION WHERE CORPORATION IS SOLE SHAREHOLDER Section 1. Corporation as Sole Shareholder. Articles IV and V notwithstanding, whenever all of the shares of the corporation are held by a corporation, such corporation, as sole shareholder, shall elect Directors and Officers for the corporation at each annual meeting. EX-3.15 16 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.15 ARTICLES OF INCORPORATION OF P P C, INC. **** THE UNDERSIGNED, desiring to form a corporation, for profit, under Sections 1701.01 et seq. of the Revised Code of Ohio, do hereby certify: FIRST: The name of said corporation shall be P P C, INC. SECOND: The place in the State of Ohio where its principal office is to be located is Cleveland, in Cuyahoga County. THIRD: The purposes for which it is formed are: to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98 inclusive of the Revised Code of Ohio. To purchase or otherwise acquire, lease as lessee, invest in, hold, use, lease as lessor, encumber, sell, exchange, transfer, and dispose of property of any description or any interest therein. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and tradenames, relating to or useful in connection with any business of this corporation. To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge, or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or 2 created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof. To purchase or otherwise acquire all or any part of the business, good will, rights, property and assets, and to assume all or any part of the liabilities of any corporation, association, partnership or individual engaged in any business in which any corporation organized under sections 1701.01 et seq. of the Revised Code of Ohio is entitled to engage. To borrow money, and issue, sell, and pledge its notes, bonds, and other evidences of indebtedness, and secure any of its obligations by mortgage, pledge, or deed of trust of all or any of its property, and guarantee or secure obligations of any person. To purchase, hold, sell and transfer the shares of its own capital stock to the extent permitted by law but no such purchase may be made when there is reasonable ground for believing that the corporation is unable, or, by such purchase, may be rendered unable to satisfy its obligations and liabilities. To conduct its business, and to have and maintain one or more offices, within and without the State of Ohio and in all other states and territories, in the District of Columbia, in all dependencies, colonies, or possessions of the United States of America and in foreign countries; and to purchase, or otherwise acquire, hold, own, equip, improve, manage operate, promote, finance, sell, convey, mortgage or otherwise dispose of real and personal property in all such states and places, to the extent that the same may be permissible under the laws thereof. To carry on any other lawful business and to do any and every thing necessary, suitable, convenient or proper for 3 the accomplishment of any of the purposes or the attainment of any one or all of the objects hereinbefore enumerated or incidental to the powers herein named or for the enhancement of the value of the properties of the corporation or which shall at any time appear conducive thereto or expedient, either as holder of, or as interested in, any property or otherwise; to have all the rights, powers, and privileges now or hereafter conferred by the laws of the State of Ohio upon corporations organized under sections 1701.01 et seq. of the Revised Code of Ohio or under any act amendatory thereof, supplemental thereto or substituted therefor. The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in these articles of incorporation, but the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes. FOURTH: The authorized number of shares of the corporation is Five Hundred (500) which shall be classified as follows:
CLASS NO. OF SHARES PAR VALUE Common 500 $1.00
FIFTH: The amount of stated capital with which the corporation will begin business is Five Hundred Dollars ($500.00). SIXTH: The following provisions are hereby agreed to for the purpose of defining, limiting and regulating the exercise of the authority of the corporation, or of the directors, or of all of the shareholders: The board of directors is expressly authorized to set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose or 4 to abolish any such reserve in the manner in which it was created, and to purchase on behalf of the corporation any shares issued by it to the extent of the surplus of the aggregate of its assets over the aggregate of its liabilities plus stated capital. The corporation may in its regulations confer powers upon its board of directors in addition to the powers and authorities conferred upon it expressly by Sections 1701.01 et seq. of the Revised Code of Ohio. Any meeting of the shareholders or the board of directors may be held at any place within or without the State of Ohio in the manner provided for in the regulations of the corporation. Any amendments to the articles of incorporation may be made from time to time, and any proposal or proposition requiring the action of shareholders may be authorized from time to time by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation. SEVENTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in its articles of incorporation, in the manner now or hereafter prescribed by Sections 1701.01 et seq. of the Revised Code of Ohio, and all rights conferred upon shareholders herein are granted subject to this reservation. 5 IN WITNESS WHEREOF, We have hereunto subscribed our names this 22nd day of September, 1972. /s/ Robert D. Pischer ------------------------------- Robert D. Pischer /s/ Robert K. Bennett ------------------------------- Robert K. Bennett /s/ Martin C. Roach ------------------------------- Martin C. Roach EX-3.16 17 BYLAWS OF PPCI 1 EXHIBIT 3.16 P P C, INC. * * * * * REGULATIONS * * * * * ARTICLE I OFFICES Section 1. The principal office shall be in the City of Cleveland, County of Cuyahoga, State of Ohio. Section 2. The corporation may also have offices at such other places as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II SHAREHOLDERS' MEETINGS Section 1. Meetings of the shareholders shall be held in the City of Cleveland, State of Ohio. Section 2. An annual meeting of the shareholders, commencing with the year 1973, shall be held on the second Tuesday of May in each year if not a legal holiday, and, if a legal holiday, then on the next secular day following, at 10:00 A.M., when they shall elect by a plurality vote a board 2 of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice stating the time, place and purpose of a meeting of the shareholders shall be given either by personal delivery or by mail not less than seven nor more than sixty days before the date of the meeting to each shareholder of record entitled to notice of the meeting by or at the direction of the president or a vice president or the secretary or an assistant secretary. If mailed, such notice shall be addressed to the shareholder at his address as it appears on the records of the corporation. Notice of adjournment of a meeting need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. Section 4. Meetings of the shareholders may be called by the president or a vice president, or the directors by action at a meeting, or a majority of the directors acting without a meeting or by the secretary of the corporation upon the order of the board of directors, or by the persons who hold twenty-five per cent of all the shares outstanding and entitled to vote thereat. Upon the request in writing delivered either in person or by registered mail to the president or secretary by any persons entitled to call a meeting of the shareholders, such officer shall forthwith cause notice to be given to the 3 shareholders entitled thereto. If such request be refused, then the persons making such request may call a meeting by giving notice in the manner provided in these regulations. Section 5. Business transacted at any special meeting of shareholders shall be confined to the purposes stated in the notice. Section 6. Upon request of any shareholders at any meeting of shareholders, there shall be produced at such meeting an alphabetically arranged list, or classified lists, of the shareholders of record as of the record date of such meeting, who are entitled to vote, showing their respective addresses and the number and class of shares held by each. Such list or lists when certified by the officer or agent in charge of the transfers of shares shall be prima-facie evidence of the facts shown therein. Section 7. The holders of a majority of the shares issued and outstanding having voting power, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of shareholders for the transaction of business, except that at any meeting of shareholders called to take any action which is authorized or regulated by statute, in order to constitute a quorum, there shall be present in person or represented by proxy the holders of record of shares entitling them to exercise the voting power 4 required by statute, the articles of incorporation, or these regulations, to authorize or take the action proposed or stated in the notice of the meeting. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the articles of incorporation or of these regulations, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. At every meeting of shareholders, each outstanding share having voting power shall entitle the holder thereof to one vote on each matter properly submitted to the 5 shareholders, subject to the provisions with respect to cumulative voting set forth in this section. If notice in writing is given by any shareholder to the president, a vice president or the secretary, not less than forty-eight hours before the time fixed for holding a meeting of the shareholders for the purpose of electing directors if notice of such meeting shall have been given at least ten days prior thereto, and otherwise not less than twenty-four hours before such time, that he desires that the voting at such election shall be cumulative, and if an announcement of the giving of such notice is made upon the convening of the meeting by the chairman or secretary or by or on behalf of the shareholder giving such notice, each shareholder shall have the right to cumulate such voting power as he possesses and to give one candidate as many votes as the number of directors to be elected multiplied by the number of his votes equals, or to distribute his votes on the same principle among two or more candidates, as he sees fit. A shareholder shall be entitled to vote even though his shares have not been fully paid, but shares upon which an installment of the purchase price is overdue and unpaid shall not be voted. Section 10. A person who is entitled to attend a shareholders' meeting, to vote thereat, or to execute consents, waivers, or releases, may be represented at such meeting or 6 vote thereat, and execute consents, waivers, and releases, and exercise any of his other rights, by proxy or proxies appointed by a writing signed by such person. A telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of a writing, appointing a proxy is sufficient writing. No appointment of a proxy shall be valid after the expiration of eleven months after it is made unless the writing specifies the date on which it is to expire or the length of time it is to continue in force. Section 11. Unless the articles or these regulations prohibit the authorization or taking of any action of the shareholders without a meeting, any action which may be authorized or taken at a meeting of the shareholders may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by all the shareholders who would be entitled to notice of a meeting of the shareholders held for such purpose, which writing or writings shall be filed with or entered upon the records of the corporation. ARTICLE III DIRECTORS Section 1. The number of directors, which shall not be less than three, may be fixed or changed at a meeting of 7 shareholders called for the purpose of electing directors. The first board shall consist of six directors. Except where the law, the articles of incorporation, or these regulations require any action to be authorized or taken by shareholders, all of the authority of the corporation shall be exercised by the directors. The directors shall be elected at the annual meeting of shareholders, except as provided in Section 2 of this article, and each director shall hold office until the next annual meeting of the shareholders and until his successor is elected and qualified, or until his earlier resignation, removal from office, or death. when the annual meeting is not held or directors are not elected thereat, they may be elected at a special meeting called for that purpose. Directors need not be shareholders. Section 2. If the office of any director or directors becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining directors, though less than a quorum, shall by a vote of a majority of their number, choose a successor or successors, who shall hold office for the unexpired term in respect to which such vacancy occurred. Section 3. For their own government the directors may adopt by-laws not inconsistent with the articles of incorporation or these regulations. 8 Section 4. The directors may hold their meeting, and keep the books of the corporation, outside the State of Ohio, at such places as they may from time to time determine but, if no transfer agent is appointed to act for the corporation in Ohio, it shall keep an office in Ohio at which shares shall be transferable and at which it shall keep books in which shall be recorded the names and addresses of all shareholders and all transfers of shares. COMMITTEES Section 5. The directors may at any time elect three or more of their number as an executive committee or other committee, which shall, in the interval between meetings of the board of directors, exercise such powers and perform such duties as may from time to time be prescribed by the board of directors. Any such committee shall be subject at all times to the control and direction of the board of directors. Unless otherwise ordered by the board of directors, any such committee may act by a majority of its members at a meeting or by a writing or writings signed by all its members. An act or authorization of an act by any such committee within the authority delegated to it shall be as effective for all purposes as the act or authorization of the board of directors. Section 6. The committee shall keep regular minutes 9 of their proceedings and report the same to the board when required. COMPENSATION OF DIRECTORS Section 7. Directors, as such, shall not receive any stated salary for their services but, by resolution of the board, a fixed sum, and expenses of attendance if any, may be allowed for attendance at each regular or special meeting of the board; provided that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 8. Members of the executive committee or other committees may be allowed like compensation for attending committee meetings. MEETINGS OF THE BOARD Section 9. The first meeting of each newly elected board other than the board first elected shall be held at such time and place, either within or without the State of Ohio, as shall be fixed by the vote of the shareholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such place and time as shall be fixed by the consent in writing of all the directors given either before or after the meeting. 10 Section 10. Regular meetings of the board may be held at such time and place, either within or without the State of Ohio, as shall be determined by the board. Section 11. Special meetings of the board may be called by the president, any vice president, or by two directors on two days' notice to each director, either delivered personally or sent by mail, telegram or cablegram. The notice need not specify the purposes of the meeting. Section 12. At all meetings of the board a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the articles of incorporation or by these regulations. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Notice of adjournment of a meeting need not be given to absent directors if the time and place are fixed at the meeting adjourned. Section 13. Unless the articles or these regulations prohibit the authorization or taking of any action of the directors without a meeting, any action which may be authorized or taken at a meeting of the directors may be authorized or 11 taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by all the directors, which writing or writings shall be filed with or entered upon the records of the corporation. REMOVAL OF DIRECTORS Section 14. All the directors, or all the directors of a particular class, if any, or any individual director may be removed from office, without assigning any cause, by the vote of the holders of a majority of the voting power entitling them to elect directors in place of those to be removed, provided that unless all the directors, or all the directors of a particular class, if any, are removed, no individual director shall be removed in case the votes of a sufficient number of shares are cast against his removal which, if cumulatively voted at an election of all the directors, or all the directors of a particular class, if any, as the case may be, would be sufficient to elect at least one director. In case of any such removal, a new director may be elected at the same meeting for the unexpired term of each director removed. Failure to elect a director to fill the unexpired term of any director removed shall be deemed to create a vacancy in the board. 12 ARTICLE IV NOTICES Section 1. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors and shareholders may also be given by telegram or telephone. Section 2. Notice of the time, place and purposes of any meeting of shareholders or directors as the case may be, whether required by law, the articles of incorporation or these regulations, may be waived in writing, either before or after the holding of such meeting, by any shareholder, or by any director, which writing shall be filed with or entered upon the records of the meeting. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the directors and shall be a president, a vice president, a secretary and a treasurer. The board of directors may also choose additional vice presidents, and one or more assistant secretaries and assistant treasurers. Any two or more of such offices except the offices of president 13 and vice president, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law or by these regulations to be executed, acknowledged or verified by any two or more officers Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a president, a vice president, a secretary and a treasurer, none or whom need be a member of the board. Section 3. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the board of directors. 14 THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation; he shall preside at all meetings of the shareholders and directors, shall be ex officio a member of the executive committee or any other committee, shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the board are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE PRESIDENTS Section 8. The vice presidents in the order of their seniority, unless otherwise determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president. They shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 15 THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. Section 10. The assistant secretaries in the order of their seniority unless otherwise determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary. They shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 16 THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. 17 Section 14. The assistant treasurers in the order of their seniority, unless otherwise determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. They shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATES OF STOCK Section 1. Each holder of shares is entitled to one or more certificates, signed by the president or a vice president and by the secretary, an assistant secretary, the treasurer, or an assistant treasurer of the corporation, which shall certify the number and class of shares held by him in the corporation. Every certificate shall state that the corporation is organized under the laws of Ohio, the name of the person to whom the shares represented by the certificate are issued, the number of shares represented by the certificate, and the par value of each share represented by it or that the shares are without par value, and if the shares are classified, the designation of the class, and the series, if any, of the shares represented by the certificate. There shall also be stated on the face or back of the certificate the express 18 terms, if any, of the shares represented by the certificate and of the other class or classes and series of shares, if any, which the corporation is authorized to issue, or a summary of such express terms, or that the corporation will mail to the shareholder a copy of such express terms without charge within five days after receipt of written request therefor, or that a copy of such express terms is attached to and by reference made a part of such certificate and that the corporation will mail to the shareholder a copy of such express terms without charge within five days after receipt of written request therefor if the copy has become detached from the certificate. Section 2. In case of any restriction on transferability of shares or reservation of lien thereon, the certificate representing such shares shall set forth on the face or back thereof the statements required by the General Corporation Law of Ohio to make such restrictions or reservations effective. Section 3. Where a certificate is countersigned by an incorporated transfer agent or registrar, the signature of any of the officers specified in Section 1 of this article may be facsimile, engraved, stamped, or printed. Although any officer of the corporation, whose manual or facsimile signature has been placed upon such certificate, 19 ceases to be such officer before the certificate is delivered, such certificate nevertheless shall be effective in all respects when delivered. LOST CERTIFICATES Section 4. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. TRANSFERS OF STOCK Section 5. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall 20 be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. For any lawful purpose, including without limitation, (1) the determination of the shareholders who are entitled to receive notice of or to vote at a meeting of shareholders; (2) receive payment of any dividend or distribution; (3) receive or exercise rights of purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to contract rights with respect thereto; or (4) participate in the execution of written consents, waivers, or releases, the directors may fix a record date which shall not be a date earlier than the date on which the record date is fixed and, in the cases provided for in clauses (1), (2) and (3) above, shall not be more than sixty days, preceding the date of the meeting of the shareholders, or the date fixed for the payment of any dividend or distribution, or the date fixed for the receipt or the exercise of rights, as the case may be. Section 7. If a meeting of the shareholders is called by persons entitled to call the same, or action is taken by shareholders without a meeting, and if the directors fail or refuse, within such time as the persons calling such meeting or initiating such other action may request, to 21 fix a record date for the purpose of determining the shareholders entitled to receive notice of or vote at such meeting, or to participate in the execution of written consents, waivers, or releases, then the persons calling such meeting or initiating such other action may fix a record date for such purposes, subject to the limitations set forth in Section 6 of this article. Section 8. The record date for the purpose of clause (1) of Section 6 of this article shall continue to be the record date for all adjournments of such meeting, unless the directors or the persons who shall have fixed the original record date shall, subject to the limitations set forth in Section 6 of this article, fix another date, and in case a new record date is so fixed, notice thereof and of the date to which the meeting shall have been adjourned shall be given to shareholders of record as of said date in accordance with the same requirements as those applying to a meeting newly called. Section 9. The directors may close the share transfer books against transfers of shares during the whole or any part of the period provided for in Section 6 of this article, including the date of the meeting of the shareholders and the period ending with the date, if any, to which adjourned. If no record date is fixed therefor, the record date for deter- 22 mining the shareholders who are entitled to receive notice of, or who are entitled to vote at, a meeting of shareholders, shall be the date next preceding the day on which notice is given, or the date next preceding the day on which the meeting is held, as the case may be. Section 10. The corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Ohio. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. The board of directors may declare and the corporation may pay dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of its articles of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve 23 fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interests of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. At the annual meeting of shareholders, or the meeting held in lieu thereof, the corporation shall prepare and lay before the shareholders a financial statement consisting of: A balance sheet containing a summary of the assets, liabilities, stated capital, and surplus (showing separately any capital surplus arising from unrealized appreciation of assets, other capital surplus, and earned surplus) of the corporation as of a date not more than four months before such meeting; if such meeting is an adjourned meeting, said balance sheet may be as of a date not more than four months before the date of the meeting as originally convened; and a statement of profit and loss and surplus, including a summary of profits, dividends paid, and other changes in the surplus accounts of the corporation for the period commencing with the date marking the end of the period for which the last preceding statement of profit and loss required under this section was made and ending with the date of said balance 24 sheet, or in the case of the first statement of profit and loss, from the incorporation of the corporation to the date of said balance sheet. The financial statement shall have appended thereto a certificate signed by the president or a vice president or the treasurer or an assistant treasurer or by a public accountant or firm of public accountants to the effect that the financial statement presents fairly the position of the corporation and the results of its operations in conformity with generally accepted accounting principles applied on a basis consistent for the period covered thereby, or such other certificate as is in accordance with sound accounting practice. Section 4. Upon the written request of any shareholder made within sixty days after notice of any such meeting has been given, the corporation, not later than the fifth day after receiving such request or the fifth day before such meeting, whichever is the later date, shall mail to such shareholder a copy of such financial statement. CHECKS Section 5. All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the board of directors may from time to time designate. 25 FISCAL YEAR Section 6. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 7. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Ohio". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE VIII AMENDMENTS Section 1. These regulations may be amended or new regulations adopted by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power on such proposal, at any regular meeting of the shareholders, or at any special meeting of the shareholders if notice of the proposal to amend or add to the regulations be contained in the notice of the meeting, or, without a meeting, by the written consent of the holders of record of shares entitling them to exercise a majority of the voting power on such proposal. EX-3.17 18 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.17 ARTICLES OF INCORPORATION (Profit Corporation) These Articles of Incorporation are signed and acknowledged by the incorporation for the purpose of forming a corporation for profit under the provisions of Act No. 327 of the Public Acts of 1981, as amended, as follows: ARTICLE 1. The name of the corporation is Craig Enterprises, Inc. ------------------------------------------------ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ARTICLE II. The purpose for which the corporation is formed are as follows: Sales, manufacture, promotion, development and research related to petroleum products. Purchase, sale, rental, lease and mortgage of property, real and personal, and the development of the same. In general to carry on any business in connection therewith and incident thereto not forbidden by the laws of the State of Michigan and with all the powers conferred upon corporation laws of the State of Michigan. ARTICLE III. Location of the first registered office is:
717 S. Grand Traverse Flint Genesee Michigan 48503 (No.) (Street) (City) (County) (Zip Code)
Postoffice address of the first registered office is:
717 S. Grand Traverse Flint Genesee Michigan 48503 (No.) (Street) (City) (County) (Zip Code)
2 ARTICLE IV. The name of the first resident agent is Harold A. Draper, Jr. ARTICLE V. The total authorized capital stock is Preferred shs. Par Value $ (1) per share Common Shs. 50,000 Par Value $ 10,000 Book Value $ per share Preferred Price fixed for sale $ and/or shs. of (2) no par value Common Book Value $ per share Price fixed for sale $ (3) A statement of all or any of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof is as follows: ARTICLE VI. The names and places of residence or business of each of the incorporators and the number and class of shares subscribed for by each are as follows: (Statute requires one or more incorporation)
================================================================================================================================ Name Residence or Business Address Number of Shares - -------------------------------------------------------------------------------------------------------------------------------- (No.) (Street) (City) (State) Par Stock Non-Par Stock - -------------------------------------------------------------------------------------------------------------------------------- Common Preferred Common Preferred - --------------------------------------------------------------------------------------------------------------------------------
3
Stephnos D. Craig 50 - -------------------------------------------------------------------------------------------------------------------------------- 7144 Sheridan Ave., Flushing, Michigan - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Alfred J. Hontbriand 50 - -------------------------------------------------------------------------------------------------------------------------------- 356 Claremont Dr., Dearborn, Michigan - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Robert E. Beresford 50 - -------------------------------------------------------------------------------------------------------------------------------- 856 Claremont Dr. Dearborn, Michigan - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- ================================================================================================================================
ARTICLE VII. The names and addresses of the first board of directors are as follows: (Statute requires at least three directors)
Name Residence or Business Address (No.) (Street) (City) (State) Stephnos D. Craig 7144 Sheridan Ave., Flushing, Mich. - ----------------------------------------------------------------------------------------------------------- Alfred J. Hontbriand 904 N. Reading, Bloomfield Hills, Mich. - ----------------------------------------------------------------------------------------------------------- Robert E. Beresford 856 Claremont Dr., Dearborn, Michigan - -----------------------------------------------------------------------------------------------------------
4 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ARTICLE VIII. The term of the corporate existence is perpetual. (A term is for a limited number of years, then states the number of years instead of perpetual) 5 ARTICLE IX. OPTIONAL. (Please delete Article IX if not applicable) Whenever a compromise or arrangement or any plan of reorganization of this corporative is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders of any class of them, any court of equity jurisdiction within the state, may on the application of this corporation or of any creditor or any shareholder thereof, or on the application of any receiver or receivers appointed for this corporation, order a meeting of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization to be summoned in such manner as said court directs. If a majority in number representing three-fourths in value of the creditors of class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, agree to any compromise or arrangement or to any reorganization of this corporation as a consequence of such compromise or arrangement, said compromise or arrangement and said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on this corporation. ARTICLE X. (Here insert any desired additional provisions authorized by the Act) We, the incorporators, sign our names this 23rd day of Sept. 1968. All parties appearing under Article VI are required to sign in this space) /s/ Stephnos D. Craig - ------------------------------------------------------------------------------- /s/ Alfred J. Hontbriand - ------------------------------------------------------------------------------- /s/ Robert E. Beresford - ------------------------------------------------------------------------------- 6 STATE OF MICHIGAN (One or more of the parties signing must acknowledge COUNTY OF Genesee ss. before the Notary) On this 23rd day of September 1968 before me personally appeared Stephnos D. Craig - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- to be known to be the persons described in and who executed the foregoing instrument, and acknowledged that they executed the same as their free act and deed. /s/ Brenda Wilson (Signature of Notary) Brenda Wilson (Print or type name of Notary) Notary Public for Genesee County, State of Michigan My commission expires 1/11/69 (Notarial seal required if acknowledgement taken out of State) 7 CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION Craig Enterprises, Inc., a Michigan corporation, whose registered office is located at 666 Old Kent Building, Grand Rapids, Kent County, Michigan 49502 certifies pursuant to the provisions of Section 43 of Act No. 327 of the Public Acts of 1931, as amended, that at a meeting of the shareholders of said corporation called for the purpose of amending the articles of incorporation, and held on the 27th day of September, 1972, it was resolved by the vote of the holders of a majority of the shares of each class entitled to vote and by a majority of the shares of each class whose rights, privileges or preferences are changed, that Article No. I of the Articles of Incorporation is amended to read as follows, viz.: ARTICLE I The name of the corporation is Super Test Petroleum, Inc. Signed on September 27, 1972. Affix Corporate Seal Here: Craig Enterprises, Inc. By:/s/ Armond Hanson 8 STATE OF MICHIGAN ) ) ss.: COUNTY OF KENT ) On this 27th day of September, 1972, before me appeared Armond Hansen, to be personally known, who, being by me duly sworn, did say that he is the president of Craig Enterprises, Inc., which executed the foregoing instrument, and that said instrument was signed on behalf of said corporation by authority of its board of directors, and said officer acknowledged said instrument to be the free act and deed of said corporation, and that said corporation has no corporate seal. /s/ Gary P. Skinner (Signature of Notary) Gary P. Skinner (Print or type name of Notary Public for Kent County, State of Michigan My commission expires Dec. 8, 1975 (Notarial seal required if acknowledgement taken out of State) EX-3.18 19 BYLAWS OF STPI 1 EXHIBIT 3.18 BYLAWS OF SUPER TEST PETROLEUM, INC. ARTICLE I Shares of Stock 1.1 Certificate of Shares. The certificates of shares of capital stock of the Corporation shall be in such form as shall be approved by the Board of Directors and as shall be required by law. The certificates of shares shall be signed by the Chairman of the Board, Vice-Chairman of the Board, President or a Vice-President and may also be signed by another officer of the Corporation. The certificates may be sealed with the seal of the Corporation or a facsimile thereof. 1.2 Transfer of Shares. Shares of capital stock of the Corporation shall be transferred by endorsement of the certificates representing said shares by the registered holder thereof, or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney who shall be authorized by a Power of Attorney which is duly executed and filed with the Secretary of the Corporation, and by the surrender of the shares to the Secretary for cancellation. The person whose name is listed on the books of the Corporation as the owner of the shares shall be deemed by the Corporation to be the owner thereof for all purposes. 1.3 Lost Certificates. In the event of loss of stock certificates, new certificates shall be issued only upon proof of loss by affidavit by the registered holder and approval by the Board of Directors, who may require a Bond of Indemnity in a form satisfactory to them as a condition thereof. 1.4 Fixing of Record Date. For the purpose of determining shareholders entitled to notice of and to vote at a meeting of shareholders or an adjournment of a meeting, the Board may fix a record date which shall not precede the date on which the resolution fixing the record date is adopted by the Board. The date shall be not more than sixty (60) nor less than ten (10) days before the date of the meeting. If a record date is not fixed, the record date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the close of business on the day next preceding the day on which notice is given, or if no notice is given, the day next preceding the day on which the meeting is held. When a determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders has been made as provided in this section, the determination applies to any adjournment of the meeting, unless the Board fixes a new record date under this section for the adjourned meeting. 2 For the purpose of determining shareholders entitled to express consent to or to dissent from a proposal without a meeting, the Board may fix a record date which shall not precede the date on which the resolution fixing the record date is adopted by the Board and shall not be more than ten (10) days after the Board resolution. If a record date is not fixed and prior action by the Board is required with respect to the corporate action to be taken without a meeting, the record date shall be the close of business on the day on which the resolution of the Board is adopted. If a record date is not fixed and prior action by the Board is not required, the record date shall be the first date on which a signed written consent is delivered to the Corporation pursuant to Section 407 of the Michigan Business Corporation Act, as amended, or any successor provision. For the purpose of determining shareholders entitled to receive payment of a share dividend or distribution, or allotment of a right, or for the purpose of any other action, the Board may fix a record date which shall not precede the date on which the resolution fixing the record date is adopted by the Board. The date shall not be more than sixty (60) days before the payment of the share dividend or distribution or allotment of a right or other action. If a record date is not fixed, the record date shall be the close of business on the day on which the resolution of the Board relating to the corporate action is adopted. 1.5 Dividends. The Board of Directors may, from time to time, declare and the Corporation may pay dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE II Shareholders 2.1 Annual Meeting. The annual meeting of the shareholders shall be held at a time and place designated by the Board of Directors. The purpose of the annual meeting shall be to elect Directors, and to transact such other business as may come before the meeting. 2.2 Special Meeting. Special meetings of the shareholders may be called by the President or Secretary and shall be called by either of them on the request in writing or by vote of one or more shareholders of record owning a majority of the issued and outstanding shares of capital stock of the Corporation. 2.3 Notice of Meeting. Written notice of the time, place and purpose of any shareholders' meeting shall be given to each shareholder, either personally or by mail, not less than ten (10) days nor more than sixty (60) days before the meeting. If mailed, notice shall be deemed given by depositing the same in a post office box, postage prepaid, and addressed to the last-known address of such shareholder. 2 3 2.4 Quorum of Shareholders. Except as hereinafter provided and as otherwise provided by law, at any meeting of the shareholders, a majority in interest of all the capital stock issued and outstanding, represented by shareholders of record in person or by proxy, shall constitute a quorum. The shareholders present in person or by proxy at such meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Less interest than a quorum may adjourn any meeting. 2.5 Voting. Each outstanding share is entitled to one vote on each matter submitted to a vote, unless otherwise provided in the Articles of Incorporation. A vote may be cast either orally or in writing. When an action, other than the election of Directors, is to be taken by vote of the shareholders, it shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, unless a greater plurality is required by the Articles of Incorporation or by law. Except as otherwise provided by the Articles of Incorporation, the Directors shall be elected by a plurality of the votes cast at an election of Directors. 2.6 Proxies. Shareholders of record may vote at any meeting either in person or by proxy in writing, which shall be filed with the secretary of the meeting before being voted. Such proxies shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of three (3) years from the date of its execution unless the shareholder executing it shall have specified therein the length of time it is to continue in force, which shall be for some limited period. 2.7 Waiver of Notice. Attendance of a person at a meeting of shareholders, in person or by proxy, constitutes a waiver of notice of the meeting, except when the shareholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. 2.8 Consent in Writing. Any action required or permitted to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice, and without a vote, if before or after the action all the shareholders entitled to vote consent in writing. 2.9 Electronic Meetings. The shareholders may participate in a meeting of the shareholders by means of conference telephone or similar communications equipment by means, of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at the meeting. 2.10 Conduct of Meetings. Meetings of shareholders generally shall follow accepted rules of parliamentary procedure, subject to the following: (a) The Chairperson of the meeting shall have absolute authority over matters of procedure, and there shall be no appeal from the ruling of the Chairperson. If, in his or her absolute discretion, the Chairperson deems it advisable to dispense with the rules of parliamentary 3 4 procedure as to any one meeting of shareholder so part thereof, he or she shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted. (b) If disorder should arise which, in the absolute discretion of the Chairperson, prevents the continuation of the legitimate business of the meeting, the Chairperson may quit the chair and announce the adjournment of the meeting, and upon his or her so doing, the meeting shall be immediately adjourned without the necessity of any vote or further action of the shareholders. (c) The Chairperson may require any person who is not a bona fide shareholder of record on the record date, or a validly appointed proxy of such a shareholder, to leave the meeting. (d) Except as the Chairperson shall direct, a resolution or motion shall be considered for vote only if proposed by a shareholder of record on the record date or a validly appointed proxy of such a shareholder, and seconded by such a shareholder or proxy other than the individual who proposed the resolution or motion. (e) Unless otherwise provided in the Articles of Incorporation or directed by the Chairperson, no matter may be presented to the meeting which has not been submitted for inclusion in the agenda within ten (10) days after the date written notice of the meeting is mailed to the shareholders. ARTICLE III Board of Directors 3.1 Number, Term, and Qualifications. The business and affairs of the Corporation shall be managed by its Board of Directors. The number of Directors on the first Board of Directors shall be one (1). Thereafter, the number of Directors of the Corporation may be changed from time to time, as determined by the Board of Directors or shareholders of the Corporation. A Director need not be a shareholder. Each Director shall hold office for the term for which he is elected and until his successor shall have been elected and qualified or until his resignation or removal. 3.2 Nominations of Director Candidates. Members of the Board of Directors of the Corporation shall be nominated as follows: (a) Nominations of candidates for election to the Board of Directors of the Corporation may be made by the Board of Directors or by any shareholder entitled to vote for election of Directors. 4 5 (b) Nominations made by the Board of Directors shall be made at a meeting of the Board of Directors, or by written consent of the Directors in lieu of a meeting, at any time prior to the date of any meeting of shareholders called for the election of Directors, and such nominations shall be reflected in the record books of the Corporation as of the date made. (c) Nominations made by a shareholder entitled to vote for election of Directors shall be made in writing and shall be delivered to the Secretary of the Corporation not less than fourteen (14) nor more than fifty (50) days prior to the date of any meeting of shareholders called for the election of Directors provided, however, that if less than twenty-one (21) days' notice of the meeting is given to shareholders, such nominations shall be delivered to the Secretary of the Corporation not more than seven (7) days following the date of such notice. Such nominations shall set forth: (1) the name, age, business address and residence address of each nominee; (2) the principal occupation or employment of each nominee; (3) the number of shares of capital stock of the Corporation beneficially owned by each nominee; (4) the total number of shares of capital stock of the Corporation that will be voted for each nominee; (5) the name, business address and residence address of the nominating shareholder; (6) the number of shares of capital stock of the Corporation owned by the nominating shareholder; (7) a statement that each nominee is willing to be nominated; and (8) such other information concerning each nominee as would be required under the rules of the Securities and Exchange Commission in a proxy statement soliciting proxies for the election of such nominees. (d) If a nomination was note made in accordance with the foregoing procedures, such nomination shall be void and all votes cast in favor of a person so nominated shall be disregarded. 3.3 Meetings. Regular meetings of the Board of Directors shall be held either with or without notice, at such times and such places as any of the Directors may by resolution from time to time determine. Special meetings of the Board of Directors shall be held whenever called by the President; or when the President shall be required to call a special meeting upon written request by any Director. Due notice of any special meeting, which may be waived, shall be given by the Secretary, in writing, not later than the day preceding the meeting. A Director's attendance at, or participation in, a meeting constitutes a waiver of notice of the meeting, except where, at the beginning of the meeting or upon his arrival, the Director objects to the meeting or the transacting of business at the meeting and does not thereafter vote for or assent to any action taken at the meeting. A member of the Board or a committee designated by the Board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this method constitutes presence in person at the meeting. 3.4 Quorum. A majority of the members of the Board then in office, or of the members of a committee thereof, constitutes a quorum for the transaction of business. 5 6 3.5 Voting. The vote of the majority of members present at a meeting at which a quorum is present constitutes the action of the Board or of the committee. 3.6 Vacancies. Vacancies in the Board of Directors, including a vacancy resulting from an increase in the number of Directors, may be filled by either the shareholders or the Directors. If the Directors remaining in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of all Directors remaining in office. 3.7 Action Without a Meeting. Action may be taken by the Board of Directors or a committee thereof without a meeting if, before or after the action, all members of the Board then in office or of the committee consent thereto in writing. The written consent shall be filed with the minutes of the proceedings of the Board or committee. 3.8 Removal of Directors. A Director or the entire Board may be removed, with or without cause, by vote of the holders of a majority of the shares entitled to vote at an election of Directors. 3.9 Electronic Meetings. The Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such Board, or committee, by means of conference telephone or similar communications equipment by means, of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at the meeting. ARTICLE IV Officers 4.1 Officers. The officers of this Corporation shall consist of a President, a Secretary, a Treasurer, and if desired, a Chairman of the Board and one or more Vice Presidents, who shall be elected by the Board of Directors at the annual meeting held immediately after the adjournment of the regular annual meeting of the shareholders. The Board of Directors may also appoint such other officers and agents as they shall deem necessary for the transaction of business of the Corporation. An officer shall hold office for the term for which he is elected or appointed and until his successor is elected or appointed and qualified, or until his resignation or removal. Two or more offices may be held by the same person, but an officer shall not execute, acknowledge or verify an instrument in more than one capacity, if the instrument is required by law, or the Articles of Incorporation, or these Bylaws, to be executed and acknowledged or verified by two or more officers. 4.2 Duties of Officers. The officers of the Corporation shall be charged with such duties and authority as usually appertains to such offices in a Corporation, except that said duties may be varied or added to by the Board of Directors. 6 7 4.3 Removal of Officers and Agents. Any officer or agent may be removed by the Board of Directors whenever in its judgment the business interests of the Corporation will be served thereby. 7 8 ARTICLE V Fiscal Year 5.1 Fiscal Year. The Corporation's fiscal year shall be as determined from time to time by the Board of Directors. ARTICLE VI Amendments 6.1 Amendments. These Bylaws may be altered or amended by the shareholders or the Board of Directors. Amendment of the Bylaws by the Board requires the vote of not less than a majority of the members of the Board then in office. 8 EX-3.19 20 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.19 CERTIFICATE OF INCORPORATION OF KWIK-FIL, INC. UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW * * * * * * THE UNDERSIGNED, of the age of eighteen years or over, for the purpose of forming a corporation pursuant to Section 402 of the Business Corporation Law of New York, does hereby certify: FIRST: The name of the corporation is KWIK-FIL, INC. SECOND: The purposes for which it is formed are: To establish and maintain an oil, gas or other mineral business or businesses, and to refine, market and distribute oil, gas, hydrocarbons, petroleum and all of their products; to locate, purchase, lease, sub-lease, acquire by grant, concession or other means, develop or otherwise acquire and sell, mortgage or otherwise dispose of lands containing or believed to contain petroleum, oil or natural gas, or any of them, and any interests therein, and to drill or prospect for or produce the same; to purchase, lease or otherwise acquire, and to sell, mortgage or otherwise dispose of developed or producing oil and gas properties or the products of such oil or gas properties; to purchase, produce, refine, sell and distribute petroleum and all of the products and by-products thereof; to buy, sell, or otherwise dispose of, and manufacture all kinds of oil, gasoline, lubricants, greases, waxes 2 and all other products and by-products of petroleum; to produce, deal in and sell natural gas. To buy, construct, erect and maintain buildings, machinery, vessels, pipe lines, terminals, tanks and all other structures, facilities and appliances for the purchase, sale, manufacture, storage, transportation and handling of petroleum, its products, oils, gases and other fluids and substances. To carry on in connection with any and all of the purposes of the corporation, the business of owning, leasing and operating filling stations, service stations, garages and repair shops, and buying, selling and dealing in and with goods, wares, merchandise and commodities customarily handled at filling stations, service stations, garages and repair shops. THIRD: The office of the corporation is to be located in the Village of Lakewood, County of Chautauqua and State of New York. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is fifty(50) of the par value of One Hundred Dollars ($100.00) each. FIFTH: The Secretary of State is designated as the agent of the corporation upon whom process against the corporation may be served. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: KWIK-FIL, INC., c/o w. M. Petre, 104 Chautauqua Avenue, Lakewood, New York 14750. 3 SIXTH: The tax year for the corporation shall end on Decanter 31st. IN WITNESS WHEREOF, I have made and signed this certificate the 28th day of December, 1978, and I affirm the statements contained therein as true under penalties of perjury. /s/ Clive L. Wright, Jr. ------------------------------------ Clive L. Wright, Jr. P.O. Box 1198 525 Fairmount Avenue, W. E. Jamestown, New York 14701 STATE OF NEW YORK : : SS: COUNTY OF CHAUTAUQUA: On the 28th day of December, in the year Nineteen Hundred and Seventy-eight, before me personally came ---CLIVE L. WRIGHT, JR.---, to me known and known to me to be the individual described in and who executed the foregoing Certificate, and he duly acknowledged to me that he executed the same. /s/ Rochelle M. Giambrone ------------------------- Notary Public ROCHELLE M. GIAMBRONE, #4501716 Notary Public State of New York Qualified in Chautauqua County My Commission expires March 30, 1979 EX-3.20 21 BYLAWS OF K-FI 1 EXHIBIT 3.20 KWIK-FIL, INC. * * * * * * BY-LAWS * ** * * * ARTICLE I OFFICES Section 1. The office of the corporation shall be located in the Village of Lakewood, County of Chautauqua, State of New York. Section 2. The corporation may also have offices at such other places both within and without the State of New York as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. All meetings of shareholders for the election of directors shall be held in Warren, State of Pennsylvania, at such place as may be fixed from time to time by the board of directors. 2 Section 2. Annual meetings of shareholders, commencing with the year 1979, shall be held on the second Wednesday of June if not a legal holiday, and if a legal holiday, then on the next secular day following, at which they shall elect by a plurality vote, a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written or printed notice of the annual meeting stating the place, date and hour of the meeting shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders may be held at such time and place within or without the State of New York as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president, the board of directors, or the holders of 3 not less than a majority of all the shares entitled to vote at the meeting. Section 3. Written or printed notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by, or at the direction of, the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. The notice should also indicate that it is being issued by, or at the direction of, the person calling the meeting. Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy 4 shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders, unless the vote of a greater or lesser number of shares of stock is required by law or the certificate of incorporation. Section 3. Each outstanding share of stock having voting power shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Section 4. The board of directors in advance of any shareholders' meeting may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and, on the request of any shareholder entitled to vote thereat, shall appoint one or more inspectors. In case any person appointed as inspector fails to appear or act, the vacancy may be filled by the board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of 5 his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Section 5. whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon. ARTICLE V DIRECTORS Section 1. The number of directors shall be not less than three nor more than ten. The first board shall consist of six directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the shareholders at the annual meeting. Directors shall be at least eighteen years of age and need not be residents of the State of New York nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, except as hereinafter provided, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. 6 Section 2. Any or all of the directors may be removed, with or without cause, at any time by the vote of the shareholders at a special meeting called for that purpose. Any director may be removed for cause by the action of the directors at a special meeting called for that purpose. Section 3. Unless otherwise provided in the certificate of incorporation, newly created directorships resulting from an increase in the board of directors and all vacancies occurring in the board of directors, including vacancies caused by removal without cause, may be filled by the affirmative vote of a majority of the board of directors, however, if the number of directors then in office is less than a quorum then such newly created directorships and vacancies may be filled by a vote of a majority of the directors then in office. A director elected to fill a vacancy shall hold office until the next meeting of shareholders at which election of directors is the regular order of business, and until his successor shall have been elected and qualified. A director elected to fill a newly created directorship shall serve until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified. 7 Section 4. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. Section 5. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside the State of New York, at such place or places as they may from time to time determine. Section 6. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of New York. Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to 8 the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Section 4. Special meetings of the board of directors may be called by the president on three days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 5. Notice of a meeting need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 6. A majority of the directors shall constitute a quorum for the transaction of business unless a greater or lesser number is required by law or by the 9 certificate of incorporation. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the vote of a greater number is required by law or by the certificate of incorporation. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 8. Unless the certificate of incorporation provides otherwise, any action required or permitted to be taken at a meeting of the directors or a committee thereof may be taken without a meeting if a consent in writing to the adoption of a resolution authorizing the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. 10 ARTICLE VII EXECUTIVE COMMITTEE Section 1. The board of directors, by resolution adopted by a majority of the entire board, may designate, from among its members, an executive committee and other committees, each consisting of three or more directors, and each of which, to the extent provided in the resolution, shall have all the authority of the board, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. 11 Section 2. Whenever any notice of a meeting is required to be given under the provisions of the statutes or under the provisions of the certificate of incorporation or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE IX OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a president, one or more vice-presidents, a secretary and a treasurer, none of whom need be a member of the board. Any two or more offices may be held by the same person, except the offices of president and secretary. When all the issued and outstanding stock of the corporation is owned by one person, such person may hold all or any combination of offices. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors. 12 Section 4. The salaries of all officers and agents of the corporation shall be fixed by the. board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENTS Section 8. The vice-president or, if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the 13 president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary or, if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 14 THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other 15 powers as the board of directors may from time to time prescribe. ARTICLE X CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by certificates signed by the chairman or vice-chairman of the board or the president or a vice-president and the secretary or an assistant secretary or the treasurer or an assistant treasurer of the corporation and may be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designation, relative rights, preferences, and limitations of the shares of each class authorized to be issued and, if the corporation is authorized to issue any class of preferred shares in series, the designation, relative rights, preferences and limitations of each such series so far as the same have been fixed and the authority of the board of directors to designate and fix the relative rights, preferences and limitations of other series. Section 2. The signatures of the officers of the corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered 16 by a registrar other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, 17 a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the corporation. FIXING RECORD DATE Section 5. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the board of directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty nor less than ten days before the date of any meeting nor more than fifty days prior to any other action. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the board fixes a new record date for the adjourned meeting. REGISTERED SHAREHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its 18 books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of New York. LIST OF SHAREHOLDERS Section 7. A list of shareholders as of the record date, certified by the corporate officer responsible for its preparation or by a transfer agent, shall be produced at any meeting upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. ARTICLE XI GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the certificate of incorporation relating thereto, if any, dividends 19 may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in shares of the capital stock or in the corporation's bonds or its property, including the shares or bonds of other corporations subject to any provisions of law and of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. 20 SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, New York". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XII AMENDMENTS Section 1. These by-laws may be amended or repealed or new by-laws may be adopted at any regular or special meeting of shareholders at which a quorum is present or represented, by the vote of the holders of shares entitled to vote in the election of any directors, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting. These by-laws may also be amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board. If any by-law regulating an impending election of directors is adopted, amended or repealed by the board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the by-law so adopted, amended or repealed, together with precise statement of the changes made. By-laws adopted by the board of directors may be amended or repealed by the shareholders. EX-3.21 22 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.21 CERTIFICATE OF INCORPORATION of VULCAN ASPHALT REFINING CORPORATION FIRST: The name of the corporation (the "Corporation") is Vulcan Asphalt Refining Corporation. SECOND: The registered office of the Corporation in the State of Delaware is to be located at 229 South State Street, in the City of Dover, County of Kent, and the name of its registered agent at such address is United States Corporation Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is One Thousand (1,000) shares of the par value of one dollar ($1.00) each, to be designated common stock. FIFTH: The name and mailing address of the incorporator are as follows: Name Mailing Address Barbara E. Greer Room 3500 30 Rockefeller Plaza New York, New York 10112 SIXTH: The powers of the incorporator shall terminate upon the filing of this Certificate of Incorporation. 2 2 The name and mailing address of each person who is to serve as a director until the first annual meeting of stockholders or until the election and qualification of such person's successor are as follows: Name Mailing Address John A. Catsimatidis 823 11th Avenue New York, New York 10019 J. Nelson Happy 15 Bradley Street P.O. Box 780 Warren, Pennsylvania 16365 SEVENTH: Election of directors need not be by written ballot except to the extent provided in the Bylaws. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, and consistently with such laws, the Board of Directors is expressly authorized: (a) To make, alter, amend or repeal the Bylaws of the Corporation, subject to the power of the holders of stock having voting power thereon to alter, amend or repeal the Bylaws made by the Board of Directors; (b) To authorize and cause to be executed mortgages and liens, without limit as to amount, on the real and personal property of the Corporation; (c) To determine from time to time whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any book or document of the Corporation except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors, or of the stockholders; and (d) To authorize the sale, lease or exchange of less than substantially all of the properties and assets of the Corporation for such consideration and on such terms and conditions as the Board 3 3 of Directors may determine and without any vote or consent of stockholders. The Corporation may in its Bylaws confer powers upon its directors in addition to the foregoing and in addition to the powers and authority expressly conferred upon them by the laws of the State of Delaware. EIGHTH: A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is expressly forbidden by the General Corporation Law of Delaware, as the same exists or may hereafter be amended. No amendment or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. NINTH: (a) Each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, 4 4 whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred by such person in connection with such action, suit or proceeding, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person; provided, however, that, except as provided in paragraph (b), the Corporation shall indemnify any such person seeking indemnification in connection with an action, suit or proceeding (or part thereof) initiated by such person only if such action, suit or proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article shall be a contract right and shall include the right to be paid by the Corpora- 5 5 tion the expenses incurred in defending any such action, suit or proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of Delaware requires, the payment of such expenses incurred by a director or officer in his capacity as such in advance of the final disposition of any such action, suit or proceeding shall be made only upon receipt by the Corporation of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, by action of the Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) If a claim under paragraph (a) is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corpora- 6 6 tion) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including the Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the General Corporation Law of Delaware, nor an actual determination by the Corporation (including the Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation (as it may be amended), the Bylaws, agreement, vote of stockholders or disinterested directors or otherwise. (d) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee 7 7 or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of Delaware. TENTH: The directors in their discretion may submit any contract or other transaction or act for approval or ratification by the stockholders by written consent or at any meeting of the stockholders, and any contract or other transaction or act that shall be approved or be ratified by the written consents of the holders of a majority of the outstanding stock of the Corporation entitled to vote with respect to such approval or ratification or by the vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon the Corporation and upon all of the stockholders of the Corporation, as though it had been approved or ratified by every stockholder of the Corporation. ELEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application 8 8 in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. TWELFTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred 9 9 herein on stockholders, directors and officers are subject to this reserved power. THE UNDERSIGNED INCORPORATOR hereby acknowledges that the foregoing Certificate of Incorporation is her act and deed and that the facts stated therein are true. /s/ Barbara E. Greer ----------------------------------- BARBARA E. GREER 10 STATE OF NEW YORK ) : ss. : COUNTY OF NEW YORK ) BE IT REMEMBERED that on this 22nd day of June, 1987, personally came before me, a Notary Public in and for the County and State aforesaid, Barbara E. Greer, the person who executed the foregoing certificate of incorporation, known to me personally to be such person, and acknowledged that said certificate is her act and deed and that the facts stated therein are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Ya Tsung Hsu -------------------------------- Notary Public Ya Tsung Hsu Notary Public State of New York 7/31/88 EX-3.22 23 BYLAWS OF VARC 1 EXHIBIT 3.22 BYLAWS of VULCAN ASPHALT REFINING CORPORATION Article I OFFICES AND RECORDS. 1.1. The Corporation shall maintain a registered office in Delaware, and may maintain such other offices and keep its books, documents and records at such places within or without Delaware as may from time to time be designated by the Board of Directors. Article II. MEETINGS OF STOCKHOLDERS. 2.1. Place of Meetings. All meetings of the stockholders shall be held either at the office of the Corporation in Cordova, Alabama, or at such other place within or without Delaware as the Board shall designate. The place at which any meeting is to be held shall be specified in the notice of such meeting. 2.2. Time of Annual Meeting. An annual meeting of the stockholders, for the election of directors and for the transaction of any other proper business, shall be held either (i) at 10:00 a.m. on the third Tuesday in April, unless such day is a legal holiday, in which event the meeting shall be held at the same time on the next business day, or (ii) at such other time and date, not more than thirteen months after 2 2 the last preceding annual meeting, as the Board shall designate. 2.3. Call of Special Meetings. Special meetings of the stockholders shall be called by the Secretary at the request in writing of the President or a majority of the directors then in office. Such request shall state the purpose or purposes of the proposed meeting. 2.4. Quorum and Adjourned Meetings. Except as otherwise provided by the laws of Delaware or by the Certificate of Incorporation, a quorum for the transaction of business at meetings of the stockholders shall consist of the holders of a majority of the stock entitled to vote thereat, present in person or represented by proxy. Whether or not a quorum is present, a majority in interest of the stockholders present in person or by proxy at any duly called meeting and entitled to vote thereat may adjourn the meeting from time to time to another time or place, at which time, if a quorum is present, any business may be transacted which might have been transacted at the meeting as originally scheduled. Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than thirty days or a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 3 3 2.5. Vote of Stockholders and Proxies. Every stockholder having the right to vote at a meeting of stockholders shall be entitled to exercise such vote in person or by proxy appointed by an instrument in writing subscribed by such stockholder or by his duly authorized attorney-in-fact. Each stockholder shall have one vote for each share of stock having voting power held by him. Except as otherwise provided by the laws of Delaware, by the Certificate of Incorporation or by these Bylaws, all elections shall be determined and all questions decided by a plurality of the votes cast in respect thereof, a quorum being present. 2.6. List of Stockholders. The Secretary shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 4 4 2.7. Notice of Meetings. Notice of each meeting of the stockholders shall be given by the Secretary, not less than ten nor more than sixty days before the meeting, to each stockholder entitled to receive the same. Such notice shall set forth the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes thereof. The business transacted at any special meeting shall be confined to the purposes stated in such notice. No such notice of any meeting need be given to any stockholder who files a written waiver of notice thereof with the Secretary, either before or after the meeting. Attendance of a person at a meeting of stockholders, in person or by proxy, shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. 2.8. Action Without a Meeting. Any action required or permitted by these Bylaws to be taken at an annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the 5 5 taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Article III. BOARD OF DIRECTORS. 3.1. Number and Qualifications of Directors. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors, consisting of such number of directors as may be determined from time to time by the Board. Except as otherwise provided in this section, each director shall be elected at the annual meeting of stockholders. Newly created directorships and all other vacancies may be filled at any time by a majority vote of the directors then in office, although less than a quorum. Unless he resigns, dies or is removed prior thereto, each director shall continue to hold office until the annual meeting of stockholders next following his election and until his successor has been elected and has qualified. Resignations of directors must be in writing and shall be effective upon the date of receipt thereof by the Secretary or upon an effective date specified therein, whichever date is later, unless acceptance is made a condition of the resignation, in which event it shall be effective upon acceptance by the Board. Any director may be removed at any time, with or without cause, by the affirmative vote of the holders of a majority 6 6 of the stock of the Corporation issued and outstanding and entitled to vote. 3.2. Powers. The Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by the laws of Delaware, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. 3.3. First Meeting. The first meeting of the Board after the annual meeting of stockholders may be held without notice, either immediately after said meeting of stockholders and at the place where it was held, or at such other time and place, whether within or without Delaware, as shall be determined by the Board prior to the annual meeting or by the consent in writing of all the directors. 3.4. Regular Meetings. Regular meetings of the Board may be held without notice at such time and place, whether within or without Delaware, as shall from time to time be determined by the Board. 3.5. Special Meetings. Special meetings of the Board shall be called by the Secretary at the request in writing of the President or of any two directors. Such request shall state the purpose or purposes of the proposed meeting. Such meetings may be held at any place, whether within or without Delaware. Notice of each such meeting shall be given by the Secretary to each director at least two days before the meeting. Such notice shall set forth the 7 7 time and place at which the meeting is to be held and the purpose or purposes thereof. No such notice of any meeting need be given to any director who attends the meeting or who files a written waiver of notice thereof with the Secretary, either before or after the meeting. 3.6. Quorum of Directors. A quorum for the transaction of business at meetings of the Board shall consist of a majority of the directors then in office, but in no event less than one-third of the whole Board. In the absence of a quorum at any duly scheduled or duly called meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present, at which time any business may be transacted which might have been transacted at the meeting as originally scheduled. 3.7. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or committee consent thereto in writing and the writing is filed with the minutes of the proceedings of the Board or committee. 3.8. Meetings by Conference Telephone. Members of the Board, or of any committee of the Board, may participate in any meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can 8 8 hear each other, and such participation shall constitute presence in person at such meeting. 3.9. Executive and Other Committees. The Board of Directors, by resolution passed by a majority of the whole Board, may designate from its members an Executive Committee and such other standing or special committees, each to consist of two or more directors, as may be provided in such resolution. The Board may designate one or more directors as alternate members of each committee, who may replace any absent or disqualified member at any meeting of the committee. Each committee may meet at stated times, or on notice to all by any of their own number. During the intervals between meetings of the Board the Executive Committee shall advise with and aid the officers of the Corporation in all matters concerning its interests and the management of its business, and generally perform such duties as may be directed by the Board from time to time. Subject to any limitations imposed by the Board, the Executive Committee shall possess and may exercise all the powers of the Board while the Board is not in session, except in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, amending the Bylaws, filling newly created directorships and 9 9 vacancies on the Board or the Committee, or (unless expressly authorized by resolution of the Board) declaring a dividend or authorizing the issuance of stock. Each other committee shall have all such powers and perform all such duties as may be expressly determined by the Board. Vacancies in the membership of each committee shall be filled by the Board. Unless he resigns, dies or is removed prior thereto, each member of a committee shall continue to hold office until the first meeting of the Board after the annual meeting of stockholders next following his designation, and until his successor has been designated. Any member of a committee may be removed at any time, with or without cause, by the affirmative vote of a majority of the whole Board. 3.10. Committee Minutes. Each committee shall keep regular minutes of its proceedings and report the same to the Board. 3.11. Compensation of Directors. The directors as such, and as members of any standing or special committee, may receive such compensation for their services as may be fixed from time to time by resolution of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 10 10 Article IV. OFFICERS. 4.1. Principal Officers, Election and Compensation. The officers of the Corporation shall be chosen by the Board. The principal officers shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may in the discretion of the Board include a Chairman of the Board, all of whom shall be elected each year at the first meeting of the Board after the annual meeting of the stockholders of the Corporation. Two or more offices may be held by the same person. The Chairman of the Board, if one is elected, and the President shall be chosen by the directors from their own number. The salaries of the principal officers of the Corporation shall be fixed by the Board. 4.2. Other Officers. The Board may appoint such other officers, assistant officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined by the Board. The salaries of persons appointed under this section may be fixed by the President, who shall report to the Board annually thereon. 4.3. Term and Removal. Unless he resigns, dies or is removed prior thereto, each officer of the Corporation shall hold office until his successor has been chosen and has qualified. Any person elected or appointed by the Board may be removed at any time, with or without cause, and all vacan- 11 11 cies (however arising) may be filled at any time, by the affirmative vote of a majority of the directors then in office. Any other employee of the Corporation may be removed at any time, with or without cause, by the President or by any superior of such employee to whom the power of removal has been delegated by the President. 4.4. Chairman of the Board. The Chairman of the Board, if one is elected, shall preside at all meetings of the stockholders and directors. He shall be a member of the Executive Committee and of all other committees appointed by the Board, and he shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. 4.5. President. The President shall be the chief executive officer and shall have general supervision and direction of the business of the Corporation, shall see that all orders and resolutions of the Board are carried into effect, and shall be a member of the Executive Committee and of all other committees appointed by the Board. He shall have all the general powers and duties usually vested in the chief executive officer of a corporation, and in addition shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. He shall be vested with all the powers and perform all the duties of the Chairman of the Board in the absence or disability of the Chairman of the Board. 12 12 4.6. Vice Presidents. Each Vice President shall have such powers and perform such duties as may be prescribed from time to time by the Board or the President. In the absence or disability of the Chairman of the Board and the President, each Vice President shall be vested with all the powers and authorized to perform all the duties of said officers, and the performance of any act or the execution of any instrument by a Vice President in any instance in which such performance or execution would customarily have been accomplished by the Chairman of the Board or by the President shall constitute conclusive evidence of the absence or disability of the Chairman of the Board and the President. 4.7. Secretary. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board, when notice is required by these Bylaws. He shall have custody of the seal of the Corporation, and, when authorized by the Board, or when any instrument requiring the corporate seal to be affixed shall first have been signed by the Chairman of the Board, the President or a Vice President, shall affix the seal to such instrument and shall attest the same by his signature. He shall have 13 13 such other powers and perform such other duties as may be prescribed from time to time by the Board or the President. 4.8. Assistant Secretary. Each Assistant Secretary, if one or more are appointed; shall be vested with all the powers and authorized to perform all the duties of the Secretary in his absence or disability. The performance of any act or the execution of any instrument by an Assistant Secretary in any instance in which such performance or execution would customarily have been accomplished by the Secretary shall constitute conclusive evidence of the absence or disability of the Secretary. Each Assistant Secretary shall perform such other duties as may be prescribed from time to time by the Board, the President or the Secretary. 4.9. Treasurer. The Treasurer shall be the chief financial officer of the Corporation. He shall have custody of the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation, in such depositaries as may be designated by the Board. He shall disburse the funds of the Corporation, taking proper vouchers for such disbursements, and shall render to the President and the Board, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall have such other powers and 14 14 perform such other duties as may be prescribed from time to time by the Board or the President. 4.10. Assistant Treasurer. Each Assistant Treasurer, if one or more are appointed, shall be vested with all the powers and authorized to perform all the duties of the Treasurer in his absence or disability. The performance of any act or the execution of any instrument by an Assistant Treasurer in any instance in which such performance or execution would customarily have been accomplished by the Treasurer shall constitute conclusive evidence of the absence or disability of the Treasurer. Each Assistant Treasurer shall perform such other duties as may be prescribed from time to time by the Board, the President or the Treasurer. 4.11. Fidelity Bonds. If required by the Board, any officer shall give the Corporation a bond in a sum and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. 4.12. Duties of Officers May be Delegated. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, 15 15 or any of them, of such officer to any other officer, or to any director, provided a majority of the directors then in office concur therein. Article V INDEMNIFICATION OF DIRECTORS AND OFFICERS. 5.1. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation (or of a constituent corporation, including any constituent of a constituent, absorbed in a consolidation or merger by the Corporation), or is or was serving at the request of the Corporation (or of such a constituent corporation) as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the full extent permitted by the General Corporation Law of Delaware, upon such determination having been made as to his good faith and conduct as is required by said General Corporation Law. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding 16 16 to the extent, if any, authorized by the Board in accordance with the provisions of said General Corporation Law, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in these Bylaws. Article VI. CAPITAL STOCK. 6.1. Certificates of Stock. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by (i) the Chairman of the Board or President or a Vice President and (ii) the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Any or all of the signatures on the certificate may be a facsimile. If any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a stock certificate shall cease to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. 6.2. Transfers of Stock. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney, lawfully con- 17 17 stituted in writing, and upon surrender of the certificate therefor. 6.3. Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. 6.4. Lost Certificates. Any person claiming a certificate of stock to be lost, stolen or destroyed shall furnish proof of that fact satisfactory to an officer of the Corporation, and shall give the Corporation a bond of indemnity in form and amount and with one or more sureties satisfactory to such officer, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost, stolen or destroyed. The Board may at any time authorize the issuance of a new certificate to replace a certificate alleged to be lost, stolen or destroyed upon such other lawful terms and conditions as the Board shall prescribe. 6.5. Dividends. Dividends upon the capital stock of the Corporation may be declared by the Board at any regular or special meeting as provided by the laws of Delaware and the Certificate of Incorporation. Before payment of any dividend or making any distribution of profits, there may be 18 18 set aside out of the surplus or net profits of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall deem conducive to the interests of the Corporation. 6.6. Fixing Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. Article VII. CONDUCT OF BUSINESS. 7.1. Powers of Execution. (a) All checks and other demands for money and notes and other instruments for the payment of money shall be signed on behalf of the Corporation by such officer or officers or by such other person or persons as the Board may from time to time designate. 19 19 (b) All contracts, deeds and other instruments to which the seal of the Corporation is affixed shall be signed on behalf of the Corporation by the Chairman of the Board, by the President, by any Vice President, or by such other person or persons as the Board may from time to time designate, and shall be attested by the Secretary or an Assistant Secretary. (c) All other contracts, deeds and instruments shall be signed on behalf of the Corporation by the Chairman of the Board, by the President, by any Vice President, or by such other person or persons as the Board or the President may from time to time designate. (d) All shares of stock owned by the Corporation in other corporations shall be voted on behalf of the Corporation by the President or by such other person or persons as the Board may from time to time designate. 7.2. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words, "Corporate Seal, Delaware." 7.3. Fiscal Year. The fiscal year of the Corporation shall be the twelve-month period which ends on August 31. Article VIII. NOTICES. 8.1. Whenever, under the provisions of these Bylaws, notice is required to be given to any director or stockholder, such notice may be given in writing (i) by mail, 20 20 by depositing the same in the United States mail, postage prepaid, or (ii) by telegram, by delivering the same with payment of the applicable tariff to a telegraph company for transmission, in either case addressed to such director or stockholder at such address as appears on the records of the Corporation, and such notice shall be deemed to be given at the time when the same shall be so mailed or so delivered to a telegraph company. Article IX AMENDMENTS 9.1. These Bylaws may be amended (i) at any meeting of the stockholders by the affirmative vote of the holders of a majority of the stock issued and outstanding and entitled to vote thereat or (ii) at any meeting of the Board by the affirmative vote of a majority of the directors then in office; provided, however, that in either case notice of the proposed amendment shall have been contained in the notice of the meeting. EX-3.23 24 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.23 CERTIFICATE OF INCORPORATION OF UNITED JET CENTER, INC. I, THE UNDERSIGNED, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, do hereby certify as follows: FIRST: The name of the corporation is UNITED JET CENTER, INC. SECOND: Its registered office is to be located at 229 South State Street, in the City of Dover, in the County of Kent, in the State of Delaware. The name of its registered agent at that address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the corporation is authorized to issue is one thousand (1,000) shares, and the par value of each of such shares is one dollar ($1.00). FIFTH: The name and address of the single incorporator is: Madeline A. Stirber 250 Park Avenue New York, NY 10177 SIXTH: The By-Laws of the corporation may be made, altered, amended, changed, added to or repealed by the Board of Directors without the assent or vote of the stockholders. 2 Elections of directors need not be by ballot unless the By-Laws so provide. SEVENTH: No director of the corporation shall be personally liable to the corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this Article SEVENTH shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived an improper benefit. EIGHTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power. IN WITNESS WHEREOF, I have hereunto set my hand and seal the 14th day of March, 1989. /s/ Madeline A. Stirber -------------------------------------- Madeline A. Stirber 2 3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF UNITED JET CENTER, INC. Pursuant to the provisions of the General Corporation Law of the State of Delaware, the undersigned hereby amend the Certificate of Incorporation as follows: FIRST: The name of the Corporation is United Jet Center, Inc. SECOND: The Certificate of Incorporation was filed on March 16, 1989. THIRD: The Certificate of Incorporation shall be amended by adding a new Article NINTH to the end thereof to read in its entirety as follows: "NINTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same shall be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said Section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person." FOURTH: The above amendment to the Certificate of Incorporation was authorized and approved by the sole director and sole stockholder of the Corporation pursuant to the provisions of Section 242 of the General Corporation Law. 4 We have subscribed this Certificate of Amendment to the Certificate of Incorporation this 23rd day of October, 1989 and affirm the statements contained herein are true under the penalties of perjury and that the statements contained therein have been examined by us and are true and correct, and that this Certificate of Amendment is the act and deed of the Corporation. /s/ John Catsimatidis - ------------------- ----------------------------------- John Catsimatidis President Attest: /s/ James Devaney - ------------------------------------------ James Devaney, Secretary EX-3.24 25 BYLAWS OF UJCI 1 EXHIBIT 3.24 BY-LAWS OF UNITED JET CENTER, INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE.--The registered office shall be established and maintained at the office of The Prentice-Hall Corporation Services, Inc. in the City of Dover, in the County of Kent, in the State of Delaware, and said corporation shall be the registered agent of this corporation in charge thereof. SECTION 2. OTHER OFFICES.--The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS.--Annual meetings of stockholders for the election of directors and/or such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. In the event the Board of Directors fails to so determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the registered office of the corporation in Delaware on May 15, 1989. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting. SECTION 2. OTHER MEETINGS.--Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. 2 SECTION 3. VOTING.--Each Stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 4. QUORUM.--Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 5. SPECIAL MEETINGS.--Special meetings of the stockholders for any purpose or purposes may be called by the President or Secretary, or by resolution of the directors. -3- 3 SECTION 6. NOTICE OF MEETINGS.--Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than sixty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat. SECTION 7. ACTION WITHOUT MEETING.--Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM.--The number of directors shall be one (1). The director shall be elected at the annual meeting of the stockholders and such director shall be elected to serve until his or her successor shall be elected and shall qualify. The Director need not be a stockholder. SECTION 2. RESIGNATIONS.--Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 3. VACANCIES.--If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. -4- 4 SECTION 4. REMOVAL.--Except as hereinafter provided, any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest or the stockholders entitled to vote. Unless the Certificate of Incorporation otherwise provides, stockholders may effect removal of a director who is a member of a classified Board of Directors only for cause. If the Certificate of Incorporation provides for cumulative voting and if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or, if there be classes of directors, at an election of the class or directors of which he is a part. If the holders of any class or series are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, these provisions shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. SECTION 5. INCREASE OF NUMBER.--The number of directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify. SECTION 6. POWERS.--The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders. SECTION 7: COMMITTEES.--The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or -5- 5 disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution, these By-Laws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 8. MEETINGS.--The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors. Regular meetings of the directors may be held without notice at such places and times as shall be determined from time to time by resolution of the directors. Special meetings of the board may be called by the President or by the Secretary on the written request of any two directors on at least two days' notice to each director and shall be held at such place or places as may be determined by the directors, or as shall be stated in the call of the meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. -6- 6 SECTION 9. QUORUM.--A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. SECTION 10. COMPENSATION.--Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. SECTION 11. ACTION WITHOUT MEETING.--Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. OFFICERS.--The officers of the corporation shall be a President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman, one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. -7- 7 SECTION 3. CHAIRMAN.--The Chairman of the Board of Directors, if one be elected shall preside at all meetings of the Board of Directors and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4. PRESIDENT.--The President shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer. SECTION 5. VICE-PRESIDENT.--Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors. SECTION 6. TREASURER.--The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe. SECTION 7. SECRETARY.--The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these ByLaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto -8- 8 directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the President, and attest the same. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.--Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V MISCELLANEOUS SECTION 1. CERTIFICATES OF STOCK.--Certificate of stock, signed by the Chairman or Vice Chairman of the Board of Directors, if they be elected, President or Vice-President, and the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. Any of or all the signatures may be facsimiles. SECTION 2. LOST CERTIFICATES.--A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate. SECTION 3. TRANSFER OF SHARES.--The shares of stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. -9- 9 SECTION 4. STOCKHOLDERS RECORD DATE.--In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. DIVIDENDS.--Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation. SECTION 6. SEAL.--The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 7. FISCAL YEAR.--The fiscal year of the corporation shall be determined by resolution of the Board of Directors. SECTION 8. CHECKS.--All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors. -10- 10 SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute. Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI AMENDMENTS These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal or By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, or by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting. -11- EX-4.1 26 INDENTURE 1 EXHIBIT 4.1 ================================================================================ INDENTURE Dated as of June 9, 1997 among UNITED REFINING COMPANY, as Company, KIANTONE PIPELINE CORPORATION KIANTONE PIPELINE COMPANY UNITED JET CENTER, INC. UNITED REFINING COMPANY OF PENNSYLVANIA KWIK FILL, INC. INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC . BELL OIL CORP. PPC, INC. SUPER TEST PETROLEUM INC. KWIK-FIL, INC. VULCAN ASPHALT REFINING COMPANY, as Subsidiary Guarantors, and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee ------------ $200,000,000 10 3/4% Senior Notes due 2007, Series A 10 3/4% Senior Notes due 2007, Series B ================================================================================ 2 CROSS-REFERENCE TABLE TIA Indenture Section Section ------- ------- 310(a)(1) ................................................ 7.10 (a)(2) ................................................ 7.10 (a)(3) ................................................ N.A. (a)(4) ................................................ N.A. (a)(5) ................................................ 7.10 (b) ................................................... 7.10 (c) ................................................... N.A. 311(a) ................................................... 7.11 (b) ................................................... 7.11 (c) ................................................... N.A. 312(a) ................................................... 2.05 (b) ................................................... 11.03 (c) ................................................... 11.03 313(a) ................................................... 7.06 (b)(1) ................................................ 7.06 (b)(2) ................................................ 7.06 (c) ................................................... 7.06; 11.02 (d) ................................................... 7.06 314(a) ................................................... 4.08; 4.10 (b) ................................................... N.A. (c)(1) ................................................ 4.08; 11.04 (c)(2) ................................................ 13.04 (c)(3) ................................................ 4.08 (d) ................................................... N.A. (e) ................................................... 11.05 (f) ................................................... N.A. 315(a) ................................................... 7.01(b) (b) ................................................... 7.05; 11.02 (c) ................................................... 7.01(a) (d) ................................................... 6.05; 7.01(c) (e) ................................................... 6.11 316(a)(last sentence) .................................... 2.09 (a)(1)(A) ............................................. 6.05 (a)(1)(B) ............................................. 6.04 (a)(2) ................................................ N.A. (b) ................................................... 6.07 (c) ................................................... 9.04 317(a)(1) ................................................ 6.08 (a)(2) ................................................ 6.09 (b) ................................................... 2.04 318(a) ................................................... 11.01 (c) ................................................... 11.01 - ---------- N.A. means Not Applicable NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions ................................... 1 Section 1.02 Incorporation by Reference of TIA ............. 27 Section 1.03 Rules of Construction ......................... 28 ARTICLE TWO THE SECURITIES Section 2.01 Form and Dating ............................... 28 Section 2.02 Execution and Authentication .................. 29 Section 2.03 Registrar and Paying Agent .................... 31 Section 2.04 Paying Agent to Hold Money in Trust ....................................... 31 Section 2.05 Securityholder Lists .......................... 32 Section 2.06 Transfer and Exchange ......................... 32 Section 2.07 Replacement Securities ........................ 33 Section 2.08 Outstanding Securities ........................ 33 Section 2.09 Treasury Securities ........................... 34 Section 2.10 Temporary Securities .......................... 34 Section 2.11 Cancellation .................................. 35 Section 2.12 Defaulted Interest ............................ 35 Section 2.13 CUSIP Number .................................. 36 Section 2.14 Deposit of Moneys ............................. 36 Section 2.15 Book-Entry Provisions for Global Securities .................................. 36 Section 2.16 Registration of Transfers and Exchanges ................................... 37 Section 2.17 Designation ................................... 43 ARTICLE THREE REDEMPTION Section 3.01 Notices to Trustee ............................ 43 Section 3.02 Selection of Securities to Be Redeemed .................................... 43 Section 3.03 Notice of Redemption .......................... 44 Section 3.04 Effect of Notice of Redemption ................ 45 -i- 4 Page ---- Section 3.05 Deposit of Redemption Price; Unclaimed Moneys ............................ 45 Section 3.06 Securities Redeemed in Part ................... 46 ARTICLE FOUR COVENANTS Section 4.01 Payment of Securities ......................... 46 Section 4.02 Maintenance of Office or Agency ............... 46 Section 4.03 Limitation on Restricted Payments ............. 46 Section 4.04 Limitation on Additional Indebtedness ................................ 48 Section 4.05 Corporate Existence ........................... 49 Section 4.06 Payment of Taxes and Other Claims ............. 49 Section 4.07 Maintenance of Properties; Insur- ance; Books and Records ..................... 49 Section 4.08 Compliance Certificate; Notice of Default ..................................... 50 Section 4.09 Compliance with Laws .......................... 51 Section 4.10 Reports ....................................... 51 Section 4.11 Waiver of Stay, Extension or Usury Laws ........................................ 52 Section 4.12 Limitation on Transactions with Affiliates .................................. 52 Section 4.13 Independent Directors ......................... 54 Section 4.14 Limitation on Restrictions on Dis- tributions from Subsidiaries ................ 54 Section 4.15 Limitation on Liens ........................... 55 Section 4.16 Limitations on Asset Sales .................... 55 Section 4.17 Restrictions on Sale of Capital Stock of Subsidiaries ....................... 58 Section 4.18 Restrictions on Sale and Leaseback Transactions ................................ 58 Section 4.19 Additional Subsidiary Guarantees .............. 58 Section 4.20 Change of Control ............................. 59 Section 4.21 Capital Improvements Escrow ................... 62 Section 4.22 Special Offer upon Failure to Con- summate Capital Improvement Program ..................................... 63 ARTICLE FIVE SUCCESSOR CORPORATION Section 5.01 Mergers, Consolidations and Sale of Assets ................................... 65 -ii- 5 Page ---- Section 5.02 Successor Corporation Substituted ............. 66 ARTICLE SIX DEFAULT AND REMEDIES Section 6.01 Events of Default ............................. 67 Section 6.02 Acceleration .................................. 69 Section 6.03 Other Remedies ................................ 69 Section 6.04 Waiver of Past Defaults ....................... 69 Section 6.05 Control by Majority ........................... 70 Section 6.06 Limitation on Suits ........................... 70 Section 6.07 Rights of Holders to Receive Payment ..................................... 71 Section 6.08 Collection Suit by Trustee .................... 71 Section 6.09 Trustee May File Proofs of Claim .............. 71 Section 6.10 Priorities .................................... 72 Section 6.11 Undertaking for Costs ......................... 73 Section 6.12 Rights and Remedies Cumulative ................ 73 Section 6.13 Delay or Omission Not Waiver .................. 73 ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee ............................. 74 Section 7.02 Rights of Trustee ............................. 75 Section 7.03 Individual Rights of Trustee .................. 76 Section 7.04 Trustee's Disclaimer .......................... 77 Section 7.05 Notice of Default ............................. 77 Section 7.06 Reports by Trustee to Holders ................. 78 Section 7.07 Compensation and Indemnity .................... 79 Section 7.08 Replacement of Trustee ........................ 81 Section 7.09 Successor Trustee by Merger, Etc. ............. 81 Section 7.10 Eligibility; Disqualification ................. 81 Section 7.11 Preferential Collection of Claims Against Company ............................. 81 ARTICLE EIGHT DISCHARGE OF INDENTURE Section 8.01 Termination of Company's Obligations ................................. 82 Section 8.02 Application of Trust Money .................... 83 -iii- 6 Page ---- Section 8.03 Repayment to the Company ...................... 84 Section 8.04 Indemnity for Government Obligations ................................. 84 Section 8.05 Reinstatement ................................. 84 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01 Without Consent of Holders .................... 85 Section 9.02 With Consent of Holders ....................... 86 Section 9.03 Compliance with TIA ........................... 88 Section 9.04 Revocation and Effect of Consents ............. 88 Section 9.05 Notation on or Exchange of Securities .................................. 89 Section 9.06 Trustee to Sign Amendments, Etc. .............. 89 ARTICLE TEN GUARANTEES Section 10.01 Unconditional Guarantee ....................... 90 Section 10.02 Severability .................................. 91 Section 10.03 Limitation of Subsidiary Guaran- tors' Liability ............................. 91 Section 10.04 Contribution .................................. 92 Section 10.05 Waiver of Subrogation ......................... 92 Section 10.06 Execution of Guarantee ........................ 93 Section 10.07 Waiver of Stay, Extension or Usury Laws ........................................ 93 ARTICLE ELEVEN MISCELLANEOUS Section 11.01 TIA Controls .................................. 94 Section 11.02 Notices ....................................... 94 Section 11.03 Communications by Holders with Other Holders ............................... 95 Section 11.04 Certificate and Opinion as to Con- ditions Precedent ........................... 96 Section 11.05 Statements Required in Certificate or Opinion .................................. 96 Section 11.06 Rules by Trustee, Paying Agent, Registrar ................................... 97 -iv- 7 Page ---- Section 11.07 Legal Holidays ................................ 97 Section 11.08 Governing Law ................................. 97 Section 11.09 No Adverse Interpretation of Other Agreements .................................. 97 Section 11.10 No Recourse Against Others .................... 98 Section 11.11 Successors .................................... 98 Section 11.12 Duplicate Originals ........................... 98 Section 11.13 Severability .................................. 98 Section 11.14 Tax Considerations ............................ 98 Signatures ................................................... 100 Exhibit A - Form of Series A Security Exhibit B - Form of Series B Security Exhibit C - Form of Legend for Global Securities Exhibit D - Transfer Certificate Exhibit E - Transferee Certificate for Institutional Accred- ited Investors Exhibit F - Transferee Certificate for Regulation S Transfers Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. -v- 8 INDENTURE dated as of June 9, 1997, among United Refining Company (the "Company"), Kiantone Pipeline Corporation, Kiantone Pipeline Company, United Jet Center, Inc., United Refining Company of Pennsylvania, Kwik Fill, Inc., Independent Gasoline and Oil Company of Rochester, Inc., Bell Oil Corp., PPC, Inc., Super Test Petroleum, Inc., Kwik-Fil Inc. and Vulcan Asphalt Refining Company, as Subsidiary Guarantors, and IBJ Schroder Bank & Trust Company, as Trustee (the "Trustee"). The Company has duly authorized the creation of an issue of 10 3/4% Senior Notes due 2007, Series A, and 10 3/4% Senior Notes due 2007, Series B, to be issued in exchange for the 10 3/4% Senior Notes due 2007, Series A, pursuant to the Registration Rights Agreement and, to provide therefor, the Company and the Subsidiary Guarantors have duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when duly issued and executed by the Company and authenticated and delivered hereunder, and the Guarantees the valid joint and several obligations of the Company and the Subsidiary Guarantors, respectively, and to make this Indenture a valid and binding agreement of the Company and each of the Subsidiary Guarantors, have been done. The Trustee is entering into this Indenture acting for the benefit of itself as well as for the benefit of the Holders of the Securities. Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Securities: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" means (a) with respect to any Person that becomes a direct or indirect Subsidiary of the Company after the date of this Indenture, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Subsidiary of the Company that was not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of the Company and (b) with respect to the Company or any of its Subsidiaries, any Indebtedness assumed by the Company or any of its Subsidiaries in connection with the acquisition of an asset from another Person that was not 9 -2- incurred by such other Person in connection with, or in contemplation of, such acquisition. "Affiliate" of any Person means any Person (i) which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person, (ii) which beneficially owns or holds 10% or more of any class of the Voting Stock of the referent Person or (iii) of which 10% or more of the Voting Stock (or, in the case of a Person which is not a corporation, 10% or more of the equity interest) is beneficially owned or held by the referent Person or (iv) with respect to an individual, any immediate family member of such person. For purposes of this definition, control of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise . "Affiliate Transaction" has the meaning ascribed to such term in Section 4.12. "Asset Sale" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition to any Person other than the Company or any of its Subsidiaries (including, without limitation, by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this definition, a "transfer"), directly or indirectly, in one transaction or a series of related transactions, of (a) any Capital Stock of any Subsidiary or (b) any other properties or assets of the Company or any of its Subsidiaries other than transfers of cash, Cash Equivalents, accounts receivable, inventory or other properties or assets in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any of the following: (i) any transfer of properties or assets (including Capital Stock) that is governed by, and made in accordance with, the provisions described under Section 5.01; (ii) any transfer of properties or assets to an Unrestricted Subsidiary, if permitted under Section 4.03; (iii) sales of damaged, worn-out or obsolete equipment or assets that, in the Company's reasonable judgment, are either no longer used or useful in he business of the Company or its Subsidiaries; and (iv) any transfers that, but for this clause (iv), would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the properties or assets transferred in such transaction or any such series of related transactions does not exceed $100,000. 10 -3- "Attributable Indebtedness" of any Person, when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, property subject to such Sale and Leaseback Transaction and the present value (discounted at a rate equivalent to Company's then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction. "Bankruptcy Law" means Title 11, U.S. Code or foreign law for the relief of debtors. "Board Resolution" means a duly adopted resolution of the Board of Directors of the Company. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in the City of New York are required or authorized by law or other governmental action to be closed. "Capital Improvement Plan" means the Company's plans to expand its refinery capacity and improve and upgrade its retail network as described in the Company's Offering Memorandum dated June 4, 1997. "Capital Stock" of any Person means any and all shares, rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) the equity (including without limitation common stock, preferred stock and partnership interests) of such Person. "Capitalized Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Cash Equivalents" means (i) marketable obligations with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) demand and time deposits and certificates of deposit or acceptances with a maturity of 180 days or 11 -4- less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million; (iii) commercial paper maturing no more than 180 days from the date of creation thereof issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any commercial bank meeting the specifications of clause (ii) above; and (v) investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (i) through (iv) above. "Change of Control" means the occurrence of any of the following: (i) the consummation of any transaction the result of which is (x) if such transaction occurs prior to the first sale of Common Equity of the Company pursuant to a registration statement under the Securities Act that results in at least 20% of the then outstanding Common Equity of the Company having been sold to the public, that Permitted Holders beneficially own less than, directly or indirectly, 51% of the Common Equity of the Company, and (y) if such transaction occurs thereafter, that any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than Permitted Holders) owns, directly or indirectly, a majority of the Common Equity of the Company, (ii) the Company consolidates with, or merges with or into, another person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the Company's assets or the assets of Company and its Subsidiaries taken as a whole to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company, as the case may be, is converted into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting Stock of the Company, as the case may be, is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee corporation and the beneficial owners of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving or transferee corporation immediately after such transaction, (iii) the Company, either individually or in conjunction with one or more Subsidiaries sells, assigns, conveys, transfers, leases or otherwise 12 -5- disposes of, or the Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of, all or substantially all of the properties and assets of the Company and its Subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the Subsidiaries, to any Person (other than the Company or a Wholly Owned Subsidiary), or (iv) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by either (i) a vote of two-thirds of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or (ii) a Permitted Holder) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. "Change of Control Offer" has the meaning ascribed to that term in Section 4.20(a). "Change of Control Purchase Date" has the meaning ascribed to that term in Section 4.20(a). "Change of Control Purchase Notice" has the meaning ascribed to that term in Section 4.20(a). "Change of Control Purchase Price" has the meaning ascribed to that term in Section 4.20(a). "Commission" means the Securities and Exchange Commission. "Common Equity" of any Person means all Capital Stock of such Person that is generally entitled to (i) vote in the election of directors or managing directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, members, managers or others that controls the management and policies of such Person. "Consolidated Amortization Expense" of any Person for any period means the amortization expense of such Person and its Subsidiaries for such period (to the extent included in the computation of Consolidated Net Income of such Person), determined on a consolidated basis in accordance with GAAP. 13 -6- "Consolidated Depreciation Expense" of any Person for any period means the depreciation expense of such Person and its Subsidiaries for such period (to the extent included in the computation of Consolidated Net Income of such Person), determined on a consolidated basis in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" of any Person means, with respect to any determination date, the ratio of (i) EBITDA for such Person's four full fiscal quarters immediately preceding the determination date, to (ii) the aggregate Fixed Charges of such Person for such four fiscal quarters. In making such computations, (i) EBITDA and Fixed Charges shall be calculated on a pro forma basis assuming that (A) the Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and all other Indebtedness incurred or Disqualified Capital Stock issued after the first day of such period of four full fiscal quarters referred to in the covenant described in paragraph (a) under Section 4.04 through and including the date of determination), and (if applicable) the application of the net proceeds therefrom (and from any other such Indebtedness or Disqualified Capital Stock), including the refinancing of other Indebtedness, had been incurred on the first day of such four quarter period and, in the case of Acquired Indebtedness, on the assumption that the related transaction (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation and (B) any acquisition or disposition by the Company or any Subsidiary of any properties or assets outside the ordinary course of business or any repayment of any principal amount of any Indebtedness of the Company or any Subsidiary prior to the stated maturity thereof, in either case since the first day of such period of four full fiscal quarters through and including the date of determination, had been consummated on such first day of such four quarter period; (ii) the Fixed Charges attributable to interest on any Indebtedness required to be computed on a pro forma basis in accordance with the covenant described in paragraph (a) under Section 4.04 and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying, at the option of the Company, either the fixed or floating rate; (iii) the Fixed Charges attributable to interest on any Indebtedness under a revolving credit facility required to be computed on a pro forma basis in 14 -7- accordance with the covenant described in paragraph (a) under Section 4.04 shall be computed based upon the average daily balance of such Indebtedness during the applicable period, provided that such average daily balance shall be reduced by the amount of any repayment of Indebtedness under a revolving credit facility during the applicable period, which repayment permanently reduced the commitments or amounts available to be reborrowed under such facility, (iv) notwithstanding the foregoing clauses (ii) and (iii), interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements; and (v) if after the first day of the applicable four quarter period the Company has permanently retired any Indebtedness out of the net proceeds of the issuance and sale of shares of Capital Stock (other than Disqualified Capital Stock) of the Company within 30 days of such issuance and sale, Fixed Charges shall be calculated on a pro forma basis as if such Indebtedness had been retired on the first day of such period. "Consolidated Income Tax Expense" means, for any Person for any period, the provision for taxes based on income and profits of such Person and its Restricted Subsidiaries to the extent such income or profits were included in computing Consolidated Net Income of such Person for such period. "Consolidated Interest Expense" means, without duplication, with respect to any Person for any period, the sum of the interest expense on all Indebtedness of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without limitation (i) imputed interest on Capitalized Lease Obligations and Attributable Indebtedness, (ii) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations and bankers' acceptance financing, (iii) the net costs associated with Hedging Obligations, (iv) amortization of other financing fees and expenses, (v) the interest portion of any deferred payment obligations, (vi) amortization of debt discount or premium, if any, (vii) all other non-cash interest expense, (viii) capitalized interest, (ix) all interest payable with respect to discontinued operations, and (x) all interest on any Indebtedness of any other Person guaranteed by the referent Person or any of its Subsidiaries. 15 -8- "Consolidated Net Income" of any Person for any period means the net income (or loss) of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein), without duplication: (i) the net income (or loss) of any Person (other than a Subsidiary of the referent Person) in which any Person other than the referent Person has an ownership interest, except to the extent that any such income has actually been received by the referent Person or any of its Wholly-Owned Subsidiaries in the form of cash dividends during such period; (ii) except to the extent includible in the consolidated net income of the referent Person pursuant to the foregoing clause (i), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Subsidiary of the referent Person or is merged into or consolidated with the referent Person or any of its Subsidiaries or (b) the assets of such Person are acquired by the referent Person or any of its Subsidiaries; (iii) the net income of any Subsidiary of the referent Person during such period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income (a) is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period or (b) would be subject to any taxes payable on such dividend or distribution; (iv) any gain (but not loss), together with any related provisions for taxes on any such gain, realized during such period by the referent Person or any of its Subsidiaries upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the referent Person or any of its Subsidiaries or (b) any Asset Sale by the referent Person or any of its Subsidiaries; (v) any extraordinary gain (but not extraordinary loss), together with any related provision for Taxes on any such extraordinary gain, realized by the referent Person or any of its Subsidiaries during such period; and (vi) in the case of a successor to such Person by consolidation, merger or transfer of its assets, any earnings of the successor prior to such merger, consolidation or transfer of assets; and provided, further, that any gain referred to in clauses (iv) and (v) above that is received in cash by the referent Person or one of its Subsidiaries during such period shall be included in the consolidated net income of the referent Person. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity 16 -9- of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to this payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a Subsidiary of such Person. "Consolidated Tangible Assets" of any Person as of any date means the total assets of such Person and its Subsidiaries (excluding any assets that would be classified as "intangible assets" under GAAP) on a consolidated basis at such date, determined in accordance with GAAP, less all write-ups subsequent to the Issue Date in the book value of any asset owned by such Person or any of its Restricted Subsidiaries. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, or similar official under any Bankruptcy Law. "Default" means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default. "Depository" means, with respect to the Securities issued in the form of one or more Global Securities, The Depository Trust Company or another Person designated as Depository by the Company, which must be a clearing agency registered under the Exchange Act. "Disqualified Capital Stock" means any Capital Stock of such Person or any of its Subsidiaries that, by its terms, by the terms of any agreement related thereto or by the terms of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed or repurchased by such Person or any of its Subsidiaries, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation 17 -10- or otherwise, in whole or in part, on or prior to the final maturity date of the Senior Notes; provided, however, that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Capital Stock that is not Disqualified Capital Stock, and that is not convertible, puttable or exchangeable for Disqualified Capital Stock or Indebtedness, shall not be deemed to be Disqualified Capital Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Capital Stock. "EBITDA" means, with respect to any Person for any period, without duplication, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Income Tax Expense, (iii) Consolidated Amortization Expense (but only to the extent not included in Fixed Charges), (iv) Consolidated Depreciation Expense, (v) Fixed Charges, (vi) prepayment or make-whole payments incurred in connection with the repayment of Indebtedness on the date of this Indenture and (vii) all other non-cash items reducing the Consolidated Net Income (excluding any such non-cash charge that results in an accrual of a reserve for cash charges in any future period) of such Person and its Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP (provided, however, that the amounts set forth in clauses (ii) through (vii) shall be included only to the extent such amounts reduce Consolidated Net Income), less the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increase Consolidated Net Income. "Equity Offering" means an offering or sale of Capital Stock (other than Disqualified Capital Stock) of the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act or pursuant to an exemption from the registration requirements in accordance with the Securities Act or pursuant to an exemption from the registration requirements thereof. "Escrow Agent" means IBJ Schroder Bank & Trust Company, in its capacity as Escrow Agent under the Escrow Agreement . 18 -11- "Escrow Agreement" means the Escrow Agreement dated June 9, 1997, by and among the Company, the Trustee and the Escrow Agent, as in effect on the Issue Date. "Events of Default" has the meaning ascribed to that term in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means all of the Indebtedness of the Company and its Subsidiaries that is outstanding on the Issue Date. "Fair Market Value" means the fair market value as determined in good faith by the Board of Directors and evidenced by a Board Resolution. "Fifth Anniversary" means the fifth anniversary of the later of (i) the Issue Date and (ii) if an Exchange Offer is consummated within six months of the Issue Date, the consummation of the Exchange Offer. "Fixed Charges" means, with respect to any Person for any period, the sum of (a) the Consolidated Interest Expense of such Person and its Subsidiaries for such period, and (b) the product of (i) all cash dividend payments (and non-cash dividend payments in the case of a Person that is a Subsidiary) on any series of preferred stock of such Person or a Subsidiary of such Person, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state, local or equivalent foreign statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date. "Global Security" means a security evidencing all or a part of the Securities issued to the Depository in accordance 19 -12- with Section 2.01 and bearing the legend prescribed in Exhibit C. "Guarantee" has the meaning ascribed to that term in Section 10.01. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement relating to interest rates. "Holder" or "Securityholder" means the Person in whose name a Security is registered in the register of the Securities maintained by the Registrar pursuant to Section 2.03. "Indebtedness" of any Person at any date means, without duplication: (i) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof); (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services, which payable is not overdue by more than 60 days according to the original terms of sale unless such payable is being contested in good faith; (v) the maximum fixed repurchase price of all Disqualified Capital Stock of such Person; (vi) all Capitalized Lease Obligations of such Person; (vii) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (viii) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Company or its Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries shall only be counted once in the calculation of the Company and its Subsidiaries on a consolidated basis; and (ix) all Attributable Indebtedness of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (vii), the lesser of (A) the fair market 20 -13- value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (B) the amount of the Indebtedness secured. For purposes of the preceding sentence, the "maximum fixed repurchase price" of any Disqualified Capital Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock (or any equity security for which it may be exchanged or converted), such fair market value shall be determined in good faith by the Board of Directors of such Person, which determination shall be evidenced by a Board Resolution. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Independent Director" means a director of the Company who has not and whose Affiliates have not, at any time during the twelve months prior to the taking of any action hereunder, directly or indirectly, received, or entered into any understanding or agreement to receive, any compensation, payment or other benefit, of any type or form, from the Company or any of its Affiliates other than customary directors fees for serving on the Board of Directors of the Company or any Affiliate and reimbursement of out-of-pocket expenses for attendance at the Company's or Affiliate's board and board committee meetings. On the Issue Date, the Independent Directors are Evan Evans, Douglas Lemmonds, Andrew Maloney and Dennis Mehiel . "Independent Financial Advisor" means an accounting, appraisal or investment banking firm of nationally recognized standing in the United States that is, in the reasonable judgment of the Company's Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Company and its Affiliates. "Index Amount" means, for any year, an amount equal to the percentage increase, if any, in the Index as of the end of such year when compared to the Index in effect that the end of the previous year multiplied by the applicable amount of total compensation for such year. The "Index" means the Consumer Price Index for all Urban Consumers (CPI-U), Northeast, 21 -14- all items, 1982-84=100 published by the Bureau of Labor Statistics of the U.S. Department of Labor or if at any time such Index is not published, any substitute index designated by the Company and appropriately adjusted. "Initial Purchasers" means Dillon, Read & Co. Inc. and Bear, Stearns & Co. Inc. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 50l(a)(l), (2), (3) or (7) under the Securities Act. "Interest Payment Date" means the stated maturity of an installment of interest on the Securities. "Investments" of any Person means (i) all investments by such Person in any other Person in the form of loans, advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business) or similar credit extensions constituting Indebtedness of such Person, and any guarantee of Indebtedness of any other Person, (ii) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Capital Stock or other securities of any other Person and (iii) all other items that would be classified as investments (including without limitation purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. "Issue Date" means the date the Securities are initially issued. "Lien" means, with respect to any asset or property, any mortgage, deed of trust, debenture, fiduciary transfer, fiduciary assignment, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset or property, whether or not filed, recorded or otherwise perfected under applicable law (including without limitation any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" has the meaning ascribed to such term in the Registration Rights Agreement. 22 -15- "Net Available Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts required to be paid to any Person (other than the Company or any Subsidiary) owning a beneficial interest in the properties or assets subject to the Asset Sale or having a Lien therein and (iv) appropriate amounts to be provided by the Company or any Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds. "New Bank Credit Facility" means that certain Credit Agreement dated as of June 9, 1997 by and among PNC Bank, National Association, as agent, the banks party thereto, the Company, United Refining Company of Pennsylvania and Kiantone Pipeline Corporation, as subsequently amended, restated or replaced from time to time. "Non-Recourse Purchase Money Indebtedness" means Indebtedness of Company or any of its Subsidiaries incurred (a) to finance the purchase of any assets of the Company or any of its Subsidiaries within 90 days of such purchase, (b) to the extent the amount of Indebtedness thereunder does not exceed 100% of the purchase cost of such assets, (c) to the extent the purchase cost of such assets is or should be included in "additions to property, plant and equipment" in accordance with GAAP, (d) to the extent that such Indebtedness is non-recourse to the Company or any of its Subsidiaries or any of their respective assets other than the assets so purchased and (e) to 23 -16- the extent the purchase of such assets is not part of an acquisition of any Person. "Obligations" means all obligations of the Company and the Subsidiary Guarantors for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities and amounts payable under this Indenture, the Securities, the Guarantees. "Officer" means, with respect to any Person, the Chairman of the Board, the Managing Director, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Controller, or the Secretary of such Person. "Officers' Certificate" means a certificate signed by two Officers of the Company or a Subsidiary Guarantor, as the case may be. "Opinion of Counsel" means a written opinion from legal counsel (who may be an employee of the Company) which and who are acceptable to the Trustee. "Parent" means Red Apple Group, Inc. "Paying Agent" has the meaning ascribed to that term in Section 2.03. "Payment Restriction", with respect to a Subsidiary of any Person, means any encumbrance, restriction or limitation, whether by operation of the terms of its charter or by reason of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation, on the ability of (i) such Subsidiary to (a) pay dividends or make other distributions on its Capital Stock or make payments on any obligation, liability or Indebtedness owed to such Person or any other Restricted Subsidiary of such Person, (b) make loans or advances to such Person or any other Subsidiary of such Person or (c) transfer any of its properties or assets to such Person or any other Subsidiary of such Person or (ii) such Person or any other Subsidiary of such Person to receive or retain any such dividends, distributions or payments, loans or advances or transfer or properties or assets. "Permitted Holders" means John A. Catsimatidis and his Related Parties. 24 -17- "Permitted Indebtedness" means any of the following: (i) Indebtedness in an aggregate principal amount at any time outstanding not to exceed 85% of the book value of the eligible accounts receivable and 60% of inventory of the Company and its Subsidiaries, calculated on a consolidated basis and in accordance with GAAP; (ii) Indebtedness under the Senior Notes, the New Senior Notes, the Subsidiary Guarantees and this Indenture; (iii) Existing Indebtedness; (iv) Indebtedness under Hedging Obligations, provided that (1) such Hedging Obligations are related to payment obligations on Permitted Indebtedness or Indebtedness otherwise permitted by paragraph (a) of Section 4.04, and (2) the notional principal amount of such Hedging Obligations does not exceed the principal amount of such Indebtedness to which such Hedging Obligations relate; (v) Indebtedness of the Company to a Subsidiary and Indebtedness of any Subsidiary to the Company or a Subsidiary; provided, however, that upon either (1) the subsequent issuance (other than directors' qualifying shares), sale, transfer or other disposition of any Capital Stock or any other event which results in any such Subsidiary ceasing to be a Subsidiary or (2) the transfer or other disposition of any such Indebtedness (except to the Company or a Subsidiary), the provisions of this clause (v) shall no longer be applicable to such Indebtedness and such Indebtedness shall be deemed, in each case, to be incurred and shall be treated as an incurrence for purposes of paragraph (a) of Section 4.04 at the time the Subsidiary in question ceased to be a Subsidiary or the time such transfer or other disposition occurred; (vi) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company in the ordinary course of business, including guarantees or obligations of the Company with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); 25 -18- (vii) Indebtedness in respect of Non-Recourse Purchase Money Indebtedness incurred by the Company or any Subsidiary; and (viii) Refinancing Indebtedness. "Permitted Liens" means: (i) Liens for taxes, assessments or governmental charges or claims that either (a) are not yet delinquent or (b) are being contested in good faith by appropriate proceedings and as to which appropriate reserves or other provisions have been made in accordance with GAAP; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other Liens imposed by law arising in the ordinary course of business and with respect to amounts that either (a) are not yet delinquent or (b) are being contested in good faith by appropriate proceedings and as to which appropriate reserves or other provisions have been made in accordance with GAAP; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, progress payments, government contracts and other obligations of like nature (exclusive of obligations for the payment of borrowed money), in each case, incurred in the ordinary course of business; (v) easements, rights-of-way, restrictions and other similar charges or encumbrances in respect of real property not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries and not materially affecting the value of the property subject thereto; (vi) leases or sub-leases granted to others not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries and not materially affecting the value of the property subject thereto; (vii) Liens securing Acquired Indebtedness, provided that such Liens (x) are not incurred in connection with, or in contemplation of, the acquisition of the property or assets acquired and (y) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired; (viii) Liens securing Refinancing Indebtedness to the extent incurred to repay, refinance or refund Indebtedness that is secured by Liens and outstanding as of the date hereof, provided that such Refinancing Indebtedness shall be secured solely by the assets securing the outstanding Indebtedness being repaid, refinanced or refunded; (ix) Liens that secure Sale and Leaseback Transactions that are permitted to be incurred under Sections 4.04 and 26 -19- 4.18; (x) Liens securing Indebtedness between the Company and its Wholly Owned Subsidiaries or among such Wholly Owned Subsidiaries; (xi) Liens existing on the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date (after giving effect to the application of the proceeds of this Offering); (xii) Liens securing the New Bank Credit Facility; provided that any such Liens shall not extend to or cover Restricted Inventory of the Company or any of its Subsidiaries unless on the date such Liens are incurred either (A) (1) the Company has in effect a rating no lower than B from Standard & Poor's ("S&P"), (2) the Notes have in effect a rating no lower than B from S&P and (3) the Notes have in effect a rating no lower than B3 from Moody's, or (B) the Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the determination date is no less than 2.25 to 1; (xiii) Liens securing Non-Recourse Purchase Money Indebtedness, provided, that such Liens extend only to the property being acquired and such Lien is created within 90 days of the purchase of such property; and (xiv) Liens securing Indebtedness in an amount not to exceed $500,000 at any time outstanding. "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. "Petroleum Investment" means an Investment by the Company in an entity engaged in the business of petroleum refining and/or retail marketing of refined petroleum products and which is not an Affiliate of the Company. "Physical Securities" has the meaning ascribed to that term in Section 2.01. "Plan of Liquidation", with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such Person to Holders of Capital Stock of such Person. 27 -20- "Private Placement Legend" means the legend initially set forth on the Securities in the form set forth on Exhibit A. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act as interpreted by the Company's Boards of Directors in consultation with its independent certified public accountants. "Purchase Agreement" means the purchase agreement dated as of June 4, 1997 by and among the Company and the Initial Purchasers. "Purchase Date" shall have the meaning ascribed to such term in Section 4.15(e). "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "Record Date" means each of the Record Dates specified in the Securities; provided that if any such date is not a Business Day, the Record Date shall be the first day immediately preceding such specified day that is a Business Day. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Securities. "Redemption Price," when used with respect to any Security to be redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Securities. "Refinancing Indebtedness" means Indebtedness of the Company or a Subsidiary of the Company issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to repay, redeem, refund, refinance, discharge or otherwise retire for value, in whole or in part (collectively, "repay"), or constituting an amendment, modification or supplement to or a deferral or renewal of (collectively, an "amendment"), any Indebtedness of the Company or any of its Subsidiaries existing immediately after the original issuance of the Securities or incurred pursuant to the Fixed Charge Coverage Ratio of Section 4.04 in a principal amount not in excess of the principal amount of the Indebtedness so repaid or amended or, if such Refinancing 28 -21- Indebtedness refinances Indebtedness under a revolving credit facility or other agreement providing a commitment for subsequent borrowings, with a maximum commitment not to exceed the maximum commitment under such revolving credit facility or other agreement; provided that: (i) the Refinancing Indebtedness is the obligation of the same Person, and is subordinated to the Securities, if at all, to the same extent, as the Indebtedness being repaid or amended; (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being repaid or amended or (b) after the maturity date of the Securities; (iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Securities has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Securities; and (iv) the Refinancing Indebtedness is secured only to the extent, if at all, and by the assets, that the Indebtedness being repaid or amended is secured . "Registered Exchange Offer" means the offer to exchange the Series B Securities for all of the outstanding Series A Securities in accordance with the Registration Rights Agreement . "Registrar" has the meaning ascribed to that term in Section 2.03. "Registration Rights Agreement" means the Registration Rights Agreement dated as of June 9, 1997 by and among the Company, the Subsidiary Guarantors and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act. "Reimbursement Payments" has the meaning ascribed to such term in Section 4.20(b). "Related Business Investment" means any Investment directly by the Company or its Subsidiaries in any business that is closely related to or complements the business of the Company or its Subsidiaries as such business exists on the Issue Date. 29 -22- "Related Party" with respect to any Person means (i) any controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Person or (ii) any trust, corporation, partnership or other entity, the beneficiaries, shareholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (i). "Responsible Officer" shall mean, when used with respect to the Trustee, any officer in the Corporate Trust Department of the Trustee with direct responsibility for the administration of this Indenture or to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Debt Payment" means any purchase, redemption, defeasance (including without limitation in substance or legal defeasance) or other acquisition or retirement for value, directly or indirectly, by the Company or a Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness. "Restricted Inventory" means all of the Company's and its Subsidiaries' inventory other than inventory and crude oil and asphalt wherever located in Warren, Pennsylvania. "Restricted Investment", with respect to any Person, means any Investment by such Person (other than investments in Cash Equivalents in any Person that is not a Subsidiary including its Unrestricted Subsidiaries, if any. "Restricted Payment" means with respect to any Person: (i) the declaration of any dividend (other than a dividend declared by a Wholly Owned Restricted Subsidiary to holders of its Common Equity) or the making of any other payment or distribution of cash, securities or other property or assets in respect of such Person's Capital Stock (except that a dividend payable solely in Capital Stock (other than Disqualified Stock) of such Person shall not constitute a Restricted Payment); (ii) any payment on account of the purchase, redemption, retirement or other acquisition for value of such Person's Capital Stock or any other payment or distribution made in respect thereof, either directly or indirectly (other than a payment solely in Capital Stock that is not Disqualified Stock); (iii) any Restricted Investment; (iv) any Restricted Debt Payment; or 30 -23- (v) any payments under the Servicing Agreement in excess of $1 million per fiscal year. "Restricted Security" has the meaning set forth in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Security is a Restricted Security. "Rule 144A" means Rule 144A under the Securities Act. "Sale and Leaseback Transaction" means, with respect to any Person, an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person or any of its Subsidiaries of any property or asset of such Person or any of its Subsidiaries which has been or is being sold or transferred by such Person or such Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. "Securities" means the Series A Securities and the Series B Securities treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended . "Series A Securities" means the 10 3/4% Senior Notes due 2007, Series A, of the Company issued pursuant to this Indenture and sold pursuant to the Purchase Agreement. "Series B Securities" means the 10 3/4% Senior Notes due 2007, Series B, of the Company to be issued in exchange for the Series A Securities pursuant to the Registered Exchange Offer and the Registration Rights Agreement. "Servicing Agreement" means that certain agreement between Parent and the Company, to be entered into simultaneously with the consummation of the Offering, pursuant to which the Company shall pay to Parent for the use of Parent's New York headquarters, as such agreement may be amended from time to time, and any agreement concerning the same subject matter between the Company and John A. Catsimatidis and/or any 31 -24- of his Affiliates, whether such agreement is a replacement thereof or in addition thereto. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date, except all references to "10 percent" in such definition shall be changed to "2 percent". "Subordinated Indebtedness" means Indebtedness of the Company or any Subsidiary that is subordinated in right of payment to the Securities or the Subsidiary Guarantees, respectively. "Subsidiary" of any Person means (i) any corporation of which at least a majority of the aggregate voting power of all classes of the Common Equity is owned by such Person directly or through one or more other Subsidiaries of such Person and (ii) any entity other than a corporation in which such Person, directly or indirectly, owns at least a majority of the Common Equity of such entity other than any such person designated as an Unrestricted Subsidiary in accordance with the definition of "Unrestricted Subsidiary". "Subsidiary Guarantors" means each of Kiantone Pipeline Corporation, Kiantone Pipeline Company, United Jet Center, Inc., United Refining Company of Pennsylvania, Kwik Fill, Inc., Independent Gasoline and Oil Company of Rochester, Inc., Bell Oil Corp., PPC, Inc., Super Test Petroleum, Inc., Kwik-Fil, Inc. and Vulcan Asphalt Refining Corporation and each other Person who is required to become a Subsidiary Guarantor by the terms of this Indenture. "Successor" has the meaning ascribed to that term in Section 5.01(a). "Tax Sharing Agreement" means the Tax Sharing Agreement dated the Issue Date by and among Parent, the Company and certain of their affiliates, as in effect on the Issue Date and as amended from time to time thereafter; provided that any such amendment does not increase the liability or decrease the rights of the Company or any of its Subsidiaries under the Tax Sharing Agreement. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as amended, as in effect on the date 32 -25- of the execution of this Indenture until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.03; provided, however, that in the event the Trust Indenture Act of 1939 is amended after either such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended. "Trust Moneys" means all cash received by the Trustee in accordance with the terms of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor . "Unrestricted Subsidiary" means each of the Subsidiaries of the Company so designated by a resolution adopted by the Board of Directors of the Company and whose creditors have no direct or indirect recourse (including without limitation recourse with respect to the payment of principal of or interest on Indebtedness of such Subsidiary) to the Company or a Subsidiary; provided, however, that the Board of Directors of the Company will be prohibited from designating as an Unrestricted Subsidiary any Subsidiary of the Company existing on the date of this Indenture. The Board of Directors of the Company may designate an Unrestricted Subsidiary to be a Restricted Subsidiary, provided that (i) any such redesignation shall be deemed to be an incurrence by the Company and its Restricted Subsidiaries of the Indebtedness (if any) of such redesignated Subsidiary for purposes of Section 4.04 as of the date of such redesignation and (ii) immediately after giving effect to such redesignation and the incurrence of any such additional Indebtedness, the Company and its Restricted Subsidiaries could incur $1 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.04. Any such designation or redesignation by the Board of Directors shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the Board Resolution giving effect to such designation or redesignation and an Officers' Certificate certifying that such designation or redesignation complied with the foregoing conditions and setting forth the underlying calculations in such certificate. "U.S. Government Obligations" means U.S. Legal Tender or direct non-callable obligations of, or non-callable 33 -26- obligations guaranteed by, the United States of America for payment of which obligation or guarantee the full faith and credit of the United States of America is pledged. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "U.S. Person" means (i) any individual resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of any state of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settlor of the trust if revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non-discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the U.S. (other than such an account held for the benefit or account of a non-U.S. Person), (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated, and owned, by accredited investors within the meanings of rule 501(a) under the Securities Act who are not natural Persons, estates or trusts); provided, however, that the term "U.S. Person" shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the U.S. for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country and (C) the international organizations set forth in Section 902(o)(7) of Regulation S under the Securities Act and any other similar international organizations, and their agencies, Affiliates and pension plans. 34 -27- "U.S. Physical Securities" has the meaning ascribed to that term in Section 2.01. "Voting Stock", with respect to any Person, means securities of any class of Capital Stock of such Person entitling the Holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the board of directors of such Person. "Weighted Average Life to Maturity", when applied to any Indebtedness at any date, means the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Subsidiary" of the Company means a Subsidiary, of which 100% of the Common Equity (except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) is owned directly by the Company or through one or more Wholly-Owned Subsidiaries of the Company. SECTION 1.02. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities. "indenture security holder" means a Holder of Securities. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. 35 -28- "obligor" on the indenture securities means the Company, any Subsidiary Guarantor or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by reference in the TIA to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Series A Securities and the Trustee's certificate of authentication thereof shall be substantially in the form of Exhibit A annexed hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Series B Securities and the Trustee's certificate of authentication thereof shall be substantially in the form of Exhibit B annexed hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements (including notations relating to the Guarantees) 36 -29- required by law, stock exchange rule or usage. The Company and the Trustee shall approve any notation, legend or endorsement (including notations relating to the Guarantees) on the Securities. Each Security shall be dated the date of its authentication . Securities offered and sold in reliance on Rule 144A, Securities offered and sold to Institutional Accredited Investors and Securities offered and sold in reliance on Regulation S shall be issued initially in the form of one or more permanent Global Securities in registered form, substantially in the form set forth in Exhibit A, deposited with the Trustee, as custodian for the Depository, and shall bear the legend set forth on Exhibit C. The aggregate principal amount of any Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Securities offered and sold in reliance on any other exemption from registration under the Securities Act other than as described in the preceding paragraph shall be issued, and Securities offered and sold in reliance on Rule 144A may be issued, in the form of certificated Securities in registered form in substantially the form set forth in Exhibit A (the "Physical Securities"). All Securities offered and sold in reliance on Regulation S shall remain in the form of a Global Security until the consummation of the Exchange Offer pursuant to the Registration Rights Agreement; provided, however, that all of the time period specified in the Registration Rights Agreement to be complied with by the Company have been so complied with. SECTION 2.02. Execution and Authentication. Two Officers, or an Officer and an Assistant Secretary of the Company, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary of the Company (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Securities for the Company by manual or facsimile signature. If an Officer or Assistant Secretary of the Company whose signature is on a Security was an Officer or Assistant Secretary of the Company at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. Each 37 -30- Subsidiary Guarantor shall execute the Guarantee in the manner set forth in Section 10.06. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate (i) Series A Securities for original issue in the aggregate principal amount not to exceed $200,000,000 and (ii) Series B Securities from time to time for issue only in exchange for a like principal amount of Series A Securities, in each case upon a written order of each of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of Securities to be authenticated, the series of Securities and the date on which the Securities are to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $200,000,000, except as provided in Section 2.07. Upon receipt of a written order of the Company in the form of an Officers' Certificate, the Trustee shall authenticate Securities in substitution for Securities originally issued to reflect any name change of the Company. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as the Trustee to deal with the Company and Affiliates of the Company. The Securities shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof, except as other denominations may be necessary as a result of a pro rata redemption or purchase of Securities required by the provisions of this Indenture and the Securities. The Company, any Subsidiary Guarantor, the Trustee and any agent of the Company, any Subsidiary Guarantor or the Trustee may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to the provisions of this Indenture and the Securities with respect to 38 -31- record dates) interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, any Subsidiary Guarantor, the Trustee nor any agent of the Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to the contrary. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where (a) Securities may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) Securities may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company, upon written notice to the Trustee, may have one or more co-Registrars reasonably acceptable to the Trustee. The Company shall appoint the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned or a successor has been appointed. Notwithstanding anything to the contrary in this Indenture, the Paying Agent shall be, at all times, the Trustee. To the extent the Company makes such payments directly to the Holders of the Securities, the Company shall simultaneously notify the Trustee thereof in writing. The Paying Agent shall comply with all applicable backup withholding tax and information reporting requirements under the U.S. Internal Revenue Code of 1986, as amended, and the Treasury regulations issued thereunder in respect of any payment on, or in respect of, a Security or under a Guarantee. SECTION 2.04. Paying Agent To Hold Money in Trust. Each Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities (whether such money has been paid to it by the Company or any other obligor on the Securities), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require 39 -32- the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default, upon written request to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making any payment, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of the Securities. If the Trustee is not the Registrar, the Company shall furnish to the Trustee before each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of Holders of the Securities, which list may be conclusively relied upon by the Trustee and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. Transfer and Exchange. Subject to the provisions of Sections 2.15 and 2.16, when Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations of the same series, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Securities surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other governmental charge payable upon exchanges (without transfer to another Person) pursuant to Section [2.02, 2.10, 3.06, 4.15, 6.14 or 9.05,] in which event the Company shall be responsible for 40 -33- payment of any such taxes or charges). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part and (iii) between a Record Date and the next succeeding Interest Payment Date. Any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Depository (or its agent), and that ownership of a beneficial interest in a Global Security shall be required to be reflected in a book-entry system. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate upon written notice from the Company a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company and the Trustee from any loss which they may suffer if a Security is replaced. The Company and the Trustee may charge such Holder for their reasonable, out-of-pocket expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security is an additional obligation of the Company and is entitled to the benefit of this Indenture. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 2.09, a Security does not cease to be outstanding 41 -34- because either of the Company or any of their Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Final Maturity Date the Paying Agent holds U.S. Legal Tender sufficient to pay all of the principal and interest due on the Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by either of the Company, any of the Subsidiary Guarantors or any of their respective Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that a Responsible Officer of the Trustee actually knows are so owned shall be disregarded. The Trustee may require an Officers' Certificate listing Securities owned by either of the Company, a Subsidiary Guarantor or any of their respective Affiliates. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Securities to be authenticated and the date on which the temporary Securities are to be authenticated. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company consider appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate upon receipt of a 42 written order of the Company pursuant to Section 2.02 definitive Securities in exchange for temporary Securities. SECTION 2.11. Cancellation. The Company shall deliver to the Trustee for cancellation any Securities that the Company may have acquired in any matter whatever. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, unless otherwise directed in writing by the Company, shall dispose of all Securities surrendered for registration of transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that they had paid or delivered to the Trustee for cancellation. If any Subsidiary Guarantor shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay interest on overdue principal and on overdue installments of interest (to the extent lawful) (without grace periods) on a subsequent special record date, which date shall be at least ten Business Days prior to the payment date, at the rate of 2% per annum in excess of the rate shown on the Securities. The Company shall fix or cause to be fixed any such special record date and payment date. The Company shall notify the Trustee in writing of the amount of defaulted interest to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest. At least 15 days before any such special record date, the Company shall mail or cause to be mailed to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. 43 -36- SECTION 2.13. CUSIP Number. The Company in issuing the Securities will use a "CUSIP" number, and, if such CUSIP number shall be provided to the Trustee, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders of the Securities; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Company shall promptly notify the Trustee of any change in a CUSIP number. SECTION 2.14. Deposit of Moneys. Prior to 11:00 a.m. New York City time on each Interest Payment Date and the Final Maturity Date, the Company shall have either delivered by wire transfer or check such interest or principal and interest, as the case may be, to Holders of the Securities at such Holders' registered addresses or deposited with the Paying Agent in immediately available funds money sufficient to make cash payments due on such Interest Payment Date or the Final Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders of the Securities on such Interest Payment Date or the Final Maturity Date, as the case may be. If payment is made directly to Holders, the Company shall give notice to the Paying Agent and Trustee of such payment. SECTION 2.15. Book-Entry Provisions for Global Securities. (a) The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit C. Members of, or participants in, the Depository ("Participants") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, 44 -37- proxy or other authorization furnished by the Depository or impair, as between the Depository and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or exchanged for Physical Securities in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Physical Securities shall be delivered to all beneficial owners in exchange for their beneficial interests in Global Securities if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for any Global Security and a successor depository is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depository to issue Physical Securities. (c) In connection with the transfer of Global Securities as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global Securities shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall upon written instructions from the Company authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Securities, an equal aggregate principal amount of Physical Securities of authorized denominations. (d) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (b) or (c) of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (e) The Holder of any Global Security may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which a Holder of Securities is entitled to take under this Indenture or the Securities. 45 -38- SECTION 2.16. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Physical Securities. When Physical Securities are presented to the Registrar with a request: (i) to register the transfer of the Physical Securities; or (ii) to exchange such Physical Securities for an equal number of Physical Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.16 for such transactions are met; provided, however, that the Physical Securities presented or surrendered for registration of transfer or exchange: (I) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (II) in the case of Physical Securities the offer and sale of which have not been registered under the Securities Act, such Physical Securities shall be accompanied by the following additional information and documents, as applicable: (A) if such Physical Security is being delivered to the Registrar by the Holder thereof for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Exhibit D hereto); or (B) if such Physical Security is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto); or (C) if such Physical Security is being transferred to an Institutional Accredited Investor, a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee 46 -39- Certificate for Institutional Accredited Investors in substantially the form of Exhibit E hereto; or (D) if such Physical Security is being transferred in reliance on Regulation S, a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee Certificate for Regulation S Transfers in substantially the form of Exhibit F hereto and an Opinion of Counsel reasonably satisfactory to the Company and addressed to the Company and the Registrar to the effect that such transfer is in compliance with the Securities Act; or (E) if such Physical Security is being transferred in reliance on Rule 144 under the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company and addressed to the Company and the Registrar to the effect that such transfer is in compliance with the Securities Act; or (F) if such Physical Security is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company and addressed to the Company and the Registrar to the effect that such transfer is in compliance with the Securities Act. (b) Restrictions on Exchange of a Physical Security for a Beneficial Interest in a Global Security. A Physical Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Registrar of a Physical Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar, together with: (A) a certification, in substantially the form of Exhibit D hereto, that such Physical Security is being transferred to a Qualified Institutional Buyer or an Institutional Accredited Investor; and (B) written instructions directing the Registrar to make, or to direct the Depository to make, an endorsement 47 -40- on the Global Security to reflect an increase in the aggregate amount of the Securities represented by the Global Security, then the Registrar shall cancel such Physical Security and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar, the number of Securities represented by the Global Security to be increased accordingly. If no Global Security is then outstanding, the Company shall issue and the Trustee shall upon written instructions from the Company authenticate a new Global Security in the appropriate amount. (c) Transfer and Exchange of Global Securities. The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor. (d) Transfer of a Beneficial Interest in a Global Security for a Physical Security. (i) Any Person having a beneficial interest in a Global Security may upon request exchange such beneficial interest for a Physical Security. Upon receipt by the Registrar of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Security and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest containing registration instructions and, in the case of any such registration of transfer or exchange of a beneficial interest in a Global Security the offer and sale of which have not been registered under the Securities Act, the following additional information and documents: (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such Person to that effect (in substantially the form of Exhibit D hereto); or 48 -41- (B) if such beneficial interest is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto); or (C) if such beneficial interest is being transferred to an Institutional Accredited Investor, a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee Certificate for Institutional Accredited Investors in substantially the form of Exhibit E hereto; or (D) if such beneficial interest is being transferred in reliance on Regulation S, a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee Certificate for Regulation S Transfers in substantially the form of Exhibit F hereto and an Opinion of Counsel reasonably satisfactory to the Company and addressed to the Company and the Registrar to the effect that such transfer is in compliance with the Securities Act; or (E) if such beneficial interest is being transferred in reliance on Rule 144 under the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company and addressed to the Company and the Registrar to the effect that such transfer is in compliance with the Securities Act; or (F) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company and addressed to the Company and the Registrar to the effect that such transfer is in compliance with the Securities Act, then the Registrar will cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar, the aggregate amount of the Global Security to be reduced and, following such reduction, the Company will execute and, upon receipt of an authentication order in the form of an Officers' 49 -42- Certificate, the Trustee will authenticate and deliver to the transferee a Physical Security. (ii) Securities issued in exchange for a beneficial interest in a Global Security pursuant to this Section 2.16(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Registrar in writing. The Registrar shall deliver such Physical Securities to the Persons in whose names such Physical Securities are so registered. (e) Restrictions on Transfer and Exchange of Global Securities. Notwithstanding any other provisions of this Indenture, a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) Private Placement Legend. Upon the registration of transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless, and the Trustee is hereby authorized to deliver Securities without the Private Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (ii) such Security has been sold pursuant to an effective registration statement under the Securities Act. (g) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to 50 -43- Section 2.15 or this Section 2.16 in accordance with its usual procedures. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 2.17. Designation. The Indebtedness evidenced by the Securities and the Guarantees is hereby irrevocably designated as "senior indebtedness" or such other term denoting seniority for the purposes of any future Indebtedness of the Company and the Subsidiary Guarantors which the Company or any Subsidiary Guarantor makes subordinate to any senior indebtedness or such other term denoting seniority. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of Securities to be redeemed. The Company shall give notice of redemption to the Trustee at least 45 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein. SECTION 3.02. Selection of Securities to Be Redeemed. If fewer than all of the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. If the Securities are listed on any national securities exchange, the Company shall notify the Trustee in writing of the requirements of such exchange in respect of any redemption. The Trustee shall make the selection from the Securities outstanding and 51 -44- not previously called for redemption and shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities in denominations equal to $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first class mail, postage prepaid, to each Holder whose Securities are to be redeemed. At the Company's written request, the Trustee shall give the notice of redemption in the name of the Company and at the expense of the Company. Each notice for redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (5) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Securities redeemed; (6) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities 52 -45- in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if fewer than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; and (8) the Paragraph of the Securities pursuant to which the Securities are to be redeemed. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Paying Agent, such Securities called for redemption shall be paid at the Redemption Price (plus accrued and unpaid interest, if any, thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. SECTION 3.05. Deposit of Redemption Price; Unclaimed Moneys. On or before 11:00 A.M. on the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued and unpaid interest, if any, of all Securities to be redeemed on that date. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price plus accrued and unpaid interest, if any, interest on the Securities to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Securities are presented for payment. If money on deposit with the Trustee or the Paying Agent, as the case may be, for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent will, subject to any applicable law, pay the money to the Company at Company's request. Thereafter, Holders of Securities entitled to the money must look to the Company and 53 -46- the Subsidiary Guarantors for payment unless an abandoned property law designates another Person, and all liability of the Trustee and the Paying Agent with respect to such money shall cease. Any money earned on funds held in trust by the Trustee or the Paying Agent, if any, shall be remitted to the Company. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is to be redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder a new Security or Securities equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Company shall pay the principal of and interest on the Securities in the manner provided in the Securities. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. The Company hereby initially designates the corporate trust office of the Trustee as its office or agency in the Borough of Manhattan, The City of New York. 54 -47- SECTION 4.03. Limitation on Restricted Payments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make any Restricted Payment (except as permitted below) if at the time of such Restricted Payment: (i) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; (ii) The Company would be unable to incur an additional $1.00 of Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.04(a); or (iii) the amount of such Restricted Payment, when added to the aggregate amount of all Restricted Payments made after the Issue Date, exceeds the sum of (A) 50% of the Company's Consolidated Net Income (taken as one accounting period) from but not including February 28, 1997, to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such aggregate Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit) plus (B) the net Cash proceeds from the issuance and sale (other than to a Subsidiary of the Company) after the Issue Date of the Company's Capital Stock that is not Disqualified Stock, plus (C) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (x) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (y) the initial amount of such Restricted Investment plus (D) the amount of Restricted Investment outstanding in an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Subsidiary of the Company in accordance with the definition of "Unrestricted Subsidiary". The foregoing provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (2) the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than 55 -48- to a Subsidiary of the Company) of other Capital Stock of the Company, so long as no default shall have occurred and be continuing, (other than any Disqualified Capital Stock); (3) the defeasance, redemption, repurchase or other retirement of Subordinated Indebtedness in exchange for, or out of the proceeds of, the substantially concurrent issue and sale of (I) the Securities or (II) Capital Stock of the Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of loans from the Company or any of its Subsidiaries); (4) the making of a Petroleum Investment so long as the amount of such investment outstanding or committed does not exceed at any time $35.0 million less the amount of cash received upon the disposition of any such investment or the return of capital thereon; (5) the making of a Related Business Investment in joint ventures or Unrestricted Subsidiaries out of the proceeds of the substantially concurrent issue and sale of Capital Stock of the Company (other than (x) Disqualified Stock, (y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock purchased by members of the Company's or its Subsidiaries' management with the proceeds of loans from the Company or any of its Subsidiaries); or (6) Restricted Payments (other than Restricted Payments or any Restricted Debt Payments) which, when added to the aggregate amount of Restricted Payments made pursuant to this clause (6) after the Issue Date, does not exceed $5.0 million. The amounts referred to in clauses (1), (2) and (5) of this paragraph shall be included as Restricted Payments in any computation made pursuant to clause (iii) above. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.03 were computed, which calculations shall be based upon the Company's latest available financial statements. SECTION 4.04. Limitation on Additional Indebtedness. (a) The Company will not, and will not permit any of its Subsidiaries to directly or indirectly, create, incur, assume, guarantee or otherwise become liable with respect to (collectively, "incur") any Indebtedness (including without limitation Acquired Indebtedness) and the Company will not permit any of its Subsidiaries to issue or have outstanding (except if issued to or owned beneficially and of record by the 56 -49- Company or any of its Subsidiaries) any Capital Stock having a preference in liquidation or with respect to the payment of dividends; provided, that (i) the Company and its Subsidiaries may incur Permitted Indebtedness and (ii) the Company may incur Indebtedness, if, after giving effect thereto, the Company's Consolidated Fixed Charge Ratio on the date thereof would be at least 2.0 to 1, determined on a pro forma basis as if the incurrence of such additional Indebtedness and the application of the net proceeds therefrom had occurred at the beginning of the four-quarter period used to calculate the Company's Consolidated Fixed Charge Coverage Ratio. (b) The Company will not, and will not permit any of its Subsidiaries to, incur any Indebtedness that is expressly subordinated to any other Indebtedness of the Company or such Subsidiary unless such Indebtedness by its terms is also expressly made subordinated to the Securities in the case of the Company or the Company Subsidiary Guarantees, in the case of a Subsidiary. SECTION 4.05. Corporate Existence. Except as otherwise permitted by Article Five, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect their corporate existence and the corporate, partnership or other existence of each of the Company's Subsidiaries in accordance with the respective organizational documents of each Subsidiary and the material rights (charter and statutory) and franchises of the Company and each of the Company's Subsidiaries. SECTION 4.06. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all Taxes levied or imposed upon them or any of the Subsidiaries or upon their or any of the Subsidiaries' income, profits or property and (ii) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a Lien upon the property of the Company or any of the Subsidiaries. SECTION 4.07. Maintenance of Properties; Insurance; Books and Records. (a) The Company will cause all material properties used in the conduct of its business or the business of any 57 -50- Subsidiary of the Company to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company advantageously conducted at all times; provided, however, that nothing in this Section 4.07(a) shall prevent the Company or any Subsidiary of the Company from (i) discontinuing the operation or maintenance of any of such properties if such discontinuance is, as determined by the Board of Directors in good faith, desirable in the conduct of the business of the Company or of any of its Subsidiaries, (ii) making an Asset Sale that complies with Section 4.16 or (iii) entering into a transaction permitted by Section 5.01. (b) The Company shall, and shall cause each of its Subsidiaries to, keep at all times all of their properties which are of an insurable nature insured against loss or damage with insurers believed by the Company to be responsible to the extent that property of similar character usually is so insured by corporations similarly situated and owning like properties in accordance with good business practice. (c) The Company shall, and shall cause each of its Restricted Subsidiaries to, keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each of its Restricted Subsidiaries, in accordance with GAAP. SECTION 4.08. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within 90 days after the close of each fiscal year and 45 days after the close of each fiscal quarter, an Officers' Certificate (one of which Officers shall be the principal executive officer, principal financial officer or principal accounting officer of the Company) stating that a review of the activities of the Company and the Subsidiary Guarantors has been made under the supervision of the signing Officers with a view to determining whether the Company and the Subsidiary Guarantors have kept, observed, performed and fulfilled their obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company and the Subsidiary Guarantors during such preceding fiscal year or fiscal quarter, as the case may be, have kept, observed, performed and fulfilled each and every such covenant 58 -51- and no Default or Event of Default occurred during such period and at the date of such certificate no Default or Event of Default has occurred and is continuing or, if such signers do know of any Default or Event of Default, the certificate shall describe its status with reasonable particularity. The Officers' Certificate shall also notify the Trustee should the Company or a Subsidiary Guarantor elect to change its fiscal year end. For purposes of this Section 4.08(a), performance by the Company and the Subsidiary Guarantors of their obligations under this Indenture shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. (b) The annual financial statements delivered pursuant to Section 4.10 shall be accompanied by a written report of the Company's independent accountants (who shall be a firm of established national reputation) that in conducting their audit of such financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four, Five or Six of this Indenture insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall deliver to the Trustee, within ten days of becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, an Officers' Certificate specifying the Default or Event of Default and describing its status with particularity. SECTION 4.09. Compliance with Laws. The Company shall comply, and shall cause each of their Subsidiaries to comply, with all applicable statutes, laws, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its properties, except for such noncompliance as would not, individually or in the aggregate, have a material adverse effect on the business, condition (financial or otherwise), properties, assets, results of operations or prospects of the Company and their Restricted Subsidiaries taken as a whole. 59 -52- SECTION 4.10. Reports. (a) Whether or not required by the rules and regulations of the Commission, so long as any Securities are outstanding, the Company and the Subsidiary Guarantors will file with the Commission, to the extent such filings are accepted by the Commission, and will furnish to the Holders of Senior Notes all quarterly and annual reports and other information, documents and reports that would be required to be filed with the Commission pursuant to Section 13 of the Exchange Act if the Company and the Subsidiary Guarantors were required to file under such section. In addition, the Company and the Subsidiary Guarantors will make such information available to prospective purchasers of the Securities, securities analysts and broker-dealers who request it in writing. (b) For so long as any Securities remain outstanding, the Company and the Subsidiary Guarantors will furnish to the Holders and beneficial holders of Securities and to prospective purchasers of Securities designated by the Holders of Transfer Restricted Securities (as defined in the Registration Rights Agreement) and to broker dealers, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4). SECTION 4.11. Waiver of Stay, Extension or Usury Laws. The Company and the Subsidiary Guarantors covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company and the Subsidiary Guarantors from paying all or any portion of the principal of and/or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent that they may lawfully do so) the Company and the Subsidiary Guarantors hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 60 -53- SECTION 4.12. Limitation on Transactions with Affiliates. The Company shall not and shall not permit any of its Subsidiaries to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from or enter into any contract, agreement, understanding, loan advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction (or series of related transactions) involving aggregate payments in excess of $1.0 million but less than $3.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted by a vote of a majority of the Independent Directors approving such Affiliate Transaction or, if at the time fewer than four Independent Directors are then in office, a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted unanimously by the Company's Board of Directors and (b) with respect to any Affiliate Transaction (or series of related transactions) involving aggregate payments of $3.0 million or more, the certificates described in the preceding clause (a) and an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an Independent Financial Advisor; provided, however, that (w) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary, (x) transactions exclusively between or among the Company and/or its Subsidiaries, (y) the payment of up to $1 million per fiscal year pursuant to the Servicing Agreement and (z) payments to Parent under the Tax Sharing Agreement shall not be deemed to be Affiliate Transactions. Notwithstanding the foregoing proviso, the Company shall not and shall not permit any of its Subsidiaries to pay any of its employees total annual compensation in excess of $250,000 unless (a) such amount of compensation has been approved by a vote of a majority of the Independent Directors, or (b) such employee's total annual compensation in effect on the Issue Date exceeded $250,000. Any increase in total compensation over and above 61 -54- the amount previously approved in the case of clause (a) or the employee's total annual compensation on the Issue Date in the case of clause (b), shall be approved by a vote of a majority of the Independent Directors, other than an increase at the end of any year in the amount of total compensation by an amount equal to the Index Amount for such year. SECTION 4.13. Independent Directors. (a) The Company's Board of Directors shall at all times have at least four Independent Directors; provided, however, that notwithstanding the foregoing, if an Independent Director resigns, dies or is terminated for any reason and the remaining number of Independent Directors is less than four, a replacement for that Independent Director shall be elected as promptly as practicable, but in no event later than the date that is six months from the date of the resignation, death or termination of the Independent Director being replaced. (b) After the Issue Date, the election of any new Independent Directors must be approved by a unanimous vote of the Independent Directors then in office, provided that only a majority vote of the Independent Directors is required if at the time there are four or more Independent Directors in office. The Independent Directors shall approve such new Independent Director unless the Independent Directors determine that such person does not satisfy the requirements to serve as an Independent Director under this Indenture or such person is not able or willing to perform the obligations of the Independent Directors under this Indenture. (c) If at any time the number of Independent Directors then in office is less than two, then until such time as the number of Independent Directors exceeds two the Company shall not, and shall not permit any of its Subsidiaries to, engage in any transaction that this Indenture requires be approved by a vote of the Independent Directors. (d) Any transaction that this Indenture requires be approved by a vote of the Independent Directors shall be evidenced by a Secretary's Certificate setting forth a resolution adopted by at least the requisite number of Independent Directors, a copy of which shall be delivered to the Trustee, which resolution shall state that the transaction being approved is not unfair to the holders of the Securities. The failure to comply with this clause (d) shall have the effect of the -55- 62 Company failing to comply with the requirement in this Indenture to obtain a vote of the Independent Directors. SECTION 4.14. Limitations on Restrictions on Distributions from Subsidiaries. The Company shall not, and shall not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual Payment Restriction with respect to any of its Subsidiaries, except for (a) any such Payment Restriction in effect on the Issue Date under the New Bank Credit Facility or any similar Payment Restriction under any similar bank credit facility or any replacement thereof, provided that such similar Payment Restriction is no more restrictive than the Payment Restriction in effect on the Issue Date under the New Bank Credit Facility, (b) any such Payment Restriction under any agreement evidencing any Acquired Indebtedness that was permitted to be incurred pursuant to this Indenture, provided that such Payment Restriction only applies to assets that were subject to such restriction and encumbrances prior to the acquisition of such assets by the Company or its Subsidiaries and (c) any such Payment Restriction arising in connection with Refinancing Indebtedness; provided that any such Payment Restrictions that arise under such Refinancing Indebtedness are not, taken as a whole, more restrictive than those under the agreement creating or evidencing the Indebtedness being refunded or refinanced. SECTION 4.15. Limitation on Liens. The Company shall not, and shall not cause or permit any of the Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien on any property or asset now owned or hereafter acquired, or on any income or profits therefrom, or assign or convey any right to receive income therefrom, except Permitted Liens, unless prior thereto or simultaneously therewith, the Securities are equally and ratably secured; provided that if such Indebtedness is Subordinated Indebtedness the Lien securing such Indebtedness shall be junior to the Lien securing the Securities. SECTION 4.16. Limitation on Asset Sales. (a) The Company shall not, and shall not permit any of its Subsidiaries to, consummate any Asset Sale unless (i) the Company or its Subsidiaries receive consideration at the time of such Asset Sale at least equal to the Fair Market 63 -56- Value of the assets included in such Asset Sale, provided the aggregate Fair Market Value of the consideration received from an Asset Sale that is not in the form of cash or Cash Equivalents shall not, when aggregated with the Fair Market Value of all other non-cash or consideration received by the Company and its Subsidiaries from all previous Asset Sales since the Issue Date that has not, prior to such date, been converted into cash or Cash Equivalents, exceed 5% of the Consolidated Tangible Assets of the Company at the time of such Asset Sale under consideration and provided, further, that with respect to any Asset Sale to Affiliates the Company shall receive consideration consisting of not less than 85% cash or Cash Equivalents and (ii) the Company delivers to the Trustee an Officers' Certificate certifying that such Asset Sale complies with clause (i). The amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Company or such Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Company or such Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, shall be deemed to be cash or Cash Equivalents for purposes of clause (ii) and shall also be deemed to constitute a repayment of and a permanent reduction in, the amount of such Indebtedness for purposes of the following paragraph (b). If at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.16. A transfer of assets by the Company to a Subsidiary or by a Subsidiary to the Company or to a Subsidiary will not be deemed to be an Asset Sale and a transfer of assets that constitutes a Restricted Investment and that is permitted under Section 4.03 will not be deemed to be an Asset Sale. In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Subsidiaries as an entirety to a Person in a transaction permitted under Section 5.01 the successor corporation shall be deemed to have sold the properties and assets of the Company and its Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of such properties and 64 -57- assets of the Company or its Subsidiaries deemed to be sold shall be deemed to be Net Available Proceeds for purposes of this covenant. (b) If the Company or any Subsidiary engages in an Asset Sale, the Company or such Subsidiary may either, no later than 270 days after such Asset Sale, (i) apply all or any of the Net Available Proceeds therefrom to repay amounts outstanding under the New Bank Credit Facility or any other Indebtedness (other than Subordinated Indebtedness) of the Company or any Subsidiary; provided, in each case, that the related loan commitment (if any) is thereby permanently reduced by the amount of such Indebtedness so repaid or (ii) invest all or any part of the Net Available Proceeds thereof in properties and assets that replace the properties or assets that were the subject of such Asset Sale or in other properties or assets that will be used in the business of the Company and its Subsidiaries as it existed on the Issue Date. The amount of such Net Available Proceeds not applied or invested as provided in this paragraph will constitute "Excess Proceeds." (c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0 million, the Company will be required to make an offer to purchase, from all Holders of the Senior Notes, an aggregate principal amount of Senior Notes equal to such Excess Proceeds as follows: (i) The Company will make an offer to purchase (a "Net Proceeds Offer") from all Holders of the Securities the maximum principal amount (expressed as a multiple of $1,000) of Securities that may be purchased out of the amount (the "Payment Amount") of such Excess Proceeds. (ii) The offer prices for the Securities will be payable in cash in an amount equal to 100% of the principal amount of the Securities tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and Liquidated Damages, if any, to the date such Net Proceeds Offer is consummated (the "Offered Price"). To the extent that the aggregated Offered Price of Securities tendered pursuant to a Net Proceeds Offer is less than the Payment Amount relating thereto (such shortfall constituting a "Net Proceeds Deficiency"), the Company may use such Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the limitations of Section 4.03. 65 -58- (iii) If the aggregate Offered Price of Securities validly tendered and not withdrawn by Holders thereof exceeds the Payment Amount, Securities to be purchased will be selected on a pro rata basis. (iv) Upon completion of such Net Proceeds Offer, the amount of Excess Proceeds remaining shall be zero. The Company will not permit any Subsidiary to enter into or suffer to exist any agreement that would place any restriction of any kind (other than pursuant to law or regulation) on the ability of the Company to make a Net Proceeds Offer following any Asset Sale. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder, if applicable, in the event that an Asset Sale occurs and the Company is required to purchase Senior Notes as described above. SECTION 4.17. Restrictions on Sale of Capital Stock of Subsidiaries. The Company shall not, and shall not permit any Subsidiary to, sell or otherwise dispose of any of the Capital Stock of any Subsidiary unless: (i) (a) the Company shall retain ownership, directly or indirectly, of more than 50% of the Common Equity of such Subsidiary or (b) all of the Capital Stock of such Subsidiary shall be sold or otherwise disposed of; and (ii) the Net Available Proceeds from any such sale or disposition are applied or otherwise treated in a manner consistent with the provisions described in Section 4.16. SECTION 4.18. Restrictions on Sale and Leaseback Transactions. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, renew or extend any Sale and Leaseback Transaction unless: (i) the Company or such Subsidiary would be entitled, under Section 4.04 and Section 4.19 to incur Indebtedness in an amount equal to the Attributable Indebtedness with respect to such Sale and Leaseback Transaction, (ii) such Sale and Leaseback Transaction would not result in a violation of Section 4.18; and (iii) the Net Available Proceeds from any such Sale and Leaseback Transaction are applied in a manner consistent with the provisions described in Section 4.18. 66 -59- SECTION 4.19. Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries shall acquire or create another Subsidiary, then, unless such newly acquired or created Subsidiary will be required to execute a Subsidiary Guarantee, in accordance with the terms of this Indenture, unless it has been been designated as an Unrestricted Subsidiary. SECTION 4.20. Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to all Holders of Securities to purchase (a "Change of Control Offer") all outstanding Securities and will purchase, on a business day not more than 60 days nor less than 30 days after the occurrence of the Change of Control (such purchase date being the "change of Control Purchase Date"), all Securities properly tendered pursuant to such offer to purchase for a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount of the Senior notes, plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. (b) In order to effect a Change of Control Offer, the Company shall within 30 days after the occurrence of the Change of Control mail the Trustee who shall mail to each Holder of Securities (with a copy to the Trustee), a copy of the Change of Control Offer. The Change of Control Offer shall remain open from the time of mailing for at least 20 Business Days and until the close of business on the third Business Day prior to the Change of Control Purchase Date. The notice, which shall govern the terms of the Change of Control Offer, shall include such disclosures as are required by law and shall state: (i) the date of such Change of Control and, briefly, the events causing such Change of Control; (ii) that the Change of Control Offer is being made pursuant to this Section 4.20 and that all Securities tendered in the Change of Control Offer will be accepted for payment; (iii) the Change of Control Purchase Price for each Security, the date on which the Securities shall be purchased (such purchase date being the "Change of Control Purchase Date"), the last date on which the Change of 67 -60- Control Purchase Notice must be given, the date on which the Change of Control Offer expires and the names and addresses of any Paying Agent and the offices or agencies maintained by the Company for such purpose in The City of New York; (iv) that any Security not tendered for payment will continue to accrue interest in accordance with the terms thereof; (v) that, unless the Company shall default in the payment of the Change of Control Purchase Price, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; (vi) that Holders electing to have Securities purchased pursuant to a Change of Control Offer will be required to surrender their Securities to the Paying Agent at the address specified in the notice prior to 5:00 p. m., New York City time, on the third Business Day immediately preceding the Change of Control Purchase Date and, except in the case of a Global Security, must complete any form letter of transmittal (the "Change of Control Purchase Notice") proposed by the Company and acceptable to the Trustee and the Paying Agent; (vii) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Business Day immediately preceding the Change of Control Purchase Date, a telex or facsimile transmission (confirmed by overnight delivery of the original thereof) or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for purchase, the Security certificate number (if any) and a statement that such Holder is withdrawing his election to have such Securities purchased; (viii) that Holders whose Securities are purchased only in part will be issued Securities equal in principal amount to the unpurchased portion of the Securities surrendered; (ix) the instructions that Holders must follow in order to tender their Securities and the procedures for withdrawing a Change in Control Purchase Notice; and 68 -61- (x) the most recent annual and quarterly reports of the Company and the Subsidiary Guarantors filed with the Commission pursuant to the Exchange Act (or, if the Company and the Subsidiary Guarantors are not required to file any such reports with the Commission, the comparable reports prepared pursuant to Section 4.10), a description of material developments in the Company's business, information with respect to pro forma historical financial information after giving effect to such Change of Control and such other information concerning the circumstances and relevant facts regarding such Change of Control and Change of Control Offer as would be material to a Holder of Securities in connection with the decision of such Holder as to whether or not it should tender Securities pursuant to the Change of Control Offer, including, but not limited to, the events causing such Change of Control and the date such Change of Control is deemed to have occurred. (c) On the Change of Control Purchase Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money in United States dollars, in immediately available funds, sufficient to pay the Change of Control Purchase Price of all Securities or portions thereof so tendered and accepted (including any Additional Amounts or Reimbursement Payments payable in respect thereof) and (iii) deliver to the Trustee the Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof tendered to and accepted for payment by the Company. The Paying Agent shall promptly disburse or deliver to the Holders of Securities so accepted payment in an amount equal to such Change of Control Purchase Price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of each Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Change of Control Offer not later than the first Business Day following the Change of Control Purchase Date. (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other securities laws or regulations, in connection with the repurchase of Securities pursuant to a Change of Control Offer. To the extent that the provisions of any 69 -62- securities laws or regulations conflict with the provisions of this Section 4.20, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under this Section 4.20 by virtue thereof. For purposes of this Section 4.20, the Trustee shall act as Paying Agent. Prior to the commencement of a Change of Control Offer, the Company shall deliver to the Trustee an Officers' Certificate and an Opinion of Counsel (to the extent matters of law are involved) stating that all conditions precedent to such Change of Control Offer have been complied with. SECTION 4.21. Capital Improvements Escrow. (a) On the Issue Date, the Company will deposit into an account (the "Collateral Account") with the Escrow Agent $48.1 million of the net proceeds of the offering of the Notes. The amount deposited in the Collateral Account shall be invested and released in accordance with the provisions of the Escrow Agreement. (b) In order to secure the full and punctual payment and performance of the Company's obligation to offer to purchase Notes in the event a Special Offer is required to be made in accordance with Section 4.22, the Company hereby grants to the Trustee, for its benefit and for the benefit of the Holders, a first priority and continuing security interest in and to all of the right, title and interest of the Company in, to and under the Collateral Account and all cash and Cash Equivalents from time to time on deposit therein and credited thereto, whether now owned or existing or hereafter acquired or arising (such amounts collectively, the "Escrow Funds"). (c) The Escrow Agent shall hold the Escrow Funds, for the benefit of the Trustee and the Holders, until the earlier to occur of: (i) the date on which all amounts deposited in or credited to the Collateral Account are released in accordance with the terms of the Escrow Agreement; or 70 -63- (ii) the Special Offer Purchase Date, as specified in an Officers' Certificate from the Company to the Trustee in accordance with Section 4.22. (d) On the date on which all of the Escrow Funds are released from the Collateral Account in accordance with the terms of the Escrow Agreement, the security interest granted to the Trustee and the Holders in the Collateral Account shall automatically terminate. (e) On the Special Offer Purchase Date as specified in an Officers' Certificate delivered pursuant to Section 4.22, the Escrow Agent shall apply the Escrow Funds in accordance with Section 4.22 and the security interest in the Collateral Account granted to the Trustee and the Holders shall terminate on and as of such Special Offer Purchase Date. (f) Any amounts remaining in the Collateral Account on the Special Offer Purchase Date after application of the Escrow Funds as specified in Section 4.22 shall be paid by the Escrow Agent to the Company. (g) The Company will comply with Sections 314(b) and 314(d) of the TIA, as applicable, including, without limitation, providing an Opinion of Counsel with respect to Section 3.14(b) and the certificates or opinions of counsel with respect to Section 3.14(d), in connection with the deposit and release of the Escrow Funds. SECTION 4.22. Special Offer upon Failure to Consummate Capital Improvement Program. (a) If the Capital Improvement Plan is abandoned by the Company because its completion is no longer possible, practical or economical, as determined by the Board of Directors of the Company and evidenced by a Board Resolution, or not completed on or before August 31, 1999, then, 30 days after the earlier of (i) written notice from an Officer of the Company, and a certified copy of the Board Resolution, is received by the Trustee regarding the abandonment of the Capital Improvement Plan or (ii) August 31, 1999 (as the case may be, the "Special Offer Notice Date"), the Company will be obligated to make an offer to purchase (the "Special Offer") an aggregate principal amount of Securities equal to $34.8 million less any amount previously released from the Escrow Funds to be applied to the Capital Improvement Plan (the "Special Offer Amount") for a purchase price of 100% of the principal amount of the 71 -64- Securities, plus accrued and unpaid interest to the date of purchase (the "Special Offer Purchase Date"). (b) On the Special Offer Notice Date, the Company shall mail to each Holder of Securities at such Holder's registered address a notice stating: (i) that the Capital Improvement Plan has been abandoned or not completed and that the Company is offering to purchase the specified aggregate principal amount of Securities at a purchase price in cash equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the Special Offer Purchase Date, which shall be a business day, specified in such notice, that is not earlier than 30 days or later than 60 days from the date such notice is mailed, (ii) the amount of accrued and unpaid interest as of the Special Offer Purchase Date, (iii) that any Security not tendered will continue to accrue interest, (iv) that, unless the Company defaults in the payment of the purchase price for the Securities payable pursuant to the Special Offer, any Securities accepted for payment pursuant to the Special Offer shall cease to accrue interest on and after the Special Offer Purchase Date, (v) the procedures, consistent with this Indenture, to be followed by a holder of Securities in order to accept a Special Offer or to withdraw such acceptance, and (vi) such other information as may be required by this Indenture and applicable laws and regulations. (c) On the Special Offer Purchase Date, the Company will (i) accept for payment the aggregate principal amount of Securities covered by the Special Offer or such lesser amount as is tendered pursuant to the Special Offer and (ii) deliver or cause to be delivered to the Trustee all Securities tendered pursuant to the Special Offer and accepted for payment and the Special Offer Amount of the Escrow Funds will be applied to consummate the Special Offer. If less than all Securities tendered pursuant to the Special Offer are accepted for payment by the Company for any reason consistent with this Indenture, selection of the Securities to be purchased by the Company shall be in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that Securities accepted for payment in part shall only be purchased in integral multiplies of $1,000. The Paying Agent shall promptly mail to each holder of Securities or portions thereof accepted for payment an amount equal to the purchase price for such Securities including any accrued and unpaid interest thereon, and the Trustee 72 -65- shall promptly authenticate and mail to such Holder of Securities accepted for payment in part a new Security equal in principal amount to any unpurchased portion of the Securities, and any Security not accepted for payment in whole or in part for any reason consistent with this Indenture shall be promptly returned to the Holder of such Security. On and after the Special Offer Purchase Date, interest will cease to accrue on the Securities or portions thereof accepted for payment, unless the Company defaults in the payment of the purchase price therefor. The Company will announce the results of the Special Offer to Holders of the Securities on or as soon as practicable after the Special Offer Purchase Date. (d) The Company will comply with the applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act, and all other applicable securities laws and regulations in connection with any Special Offer. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Mergers, Consolidations and Sale of Assets. (a) The Company shall not, in a single transaction or a series of related transactions, (i) consolidate or merge with or into (other than a merger with a Wholly-Owned Subsidiary solely for the purpose of changing the Company's jurisdiction of incorporation to one of the States of the United States), or sell, lease, convey or otherwise dispose of or assign all or substantially all of the assets of the Company and its Subsidiaries (taken as a whole), or assign any of its obligations under the Securities or this Indenture, to any Person or (ii) adopt a Plan of Liquidation unless, in either case: (a) the Person formed by or surviving such consolidation or merger (if other than the Company) or to which such sale, lease, conveyance or other disposition or assignment shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the "Successor") is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and the Successor assumes by supplemental indenture in a form satisfactory to the Trustee all of the obligations of the Company under the Securities and this Indenture; (b) immediately prior to and immediately after giving effect to such 73 -66- transaction and the assumption of the obligations as set forth in clause (a) above and the incurrence of any Indebtedness to be incurred in connection therewith, no Default or Event of Default shall have occurred and be continuing; (c) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (a) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, (1) the Consolidated Net Worth of the Company or the Successor, as the case may be, would be at least equal to the Consolidated Net Worth of the Company immediately prior to such transaction and (2) the Company or the Successor, as the case may be, could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.04(a); and (d) each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have by amendment to its Guarantee confirmed that its Guarantee of the Securities shall apply to the obligations of the Company or the Successor under the Securities and this Indenture. For purposes of this Section 5.01, any Indebtedness of the Successor which was not Indebtedness of the Company immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction. The Company shall give the Trustee an Officer's Certificate and if a supplemental indenture is required, a legal opinion that the merger, consolidation, or sale of assets contemplated in this Section 5.01 complies with this Indenture. SECTION 5.02. Successor Corporation Substituted. Upon any such consolidation, merger, conveyance, lease or transfer in accordance with the foregoing, the Successor formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Company entering into or making such consolidation, merger, conveyance, lease or transfer under this Indenture with the same effect as if such Successor had been named as the Company herein, and thereafter (except in the case of a sale, assignment, transfer, lease, conveyance or other disposition) the predecessor corporation will be relieved of all further obligations and covenants under this Indenture, the Securities and the Registration Rights Agreement. For all purposes of this Indenture and the Securities (including the provisions of this Article Five and Article Four), Subsidiaries of any Successor will, upon such transaction or series of 74 -67- transactions, become Subsidiaries or Unrestricted Subsidiaries as provided pursuant to definition of Unrestricted Subsidiary and all Indebtedness, and all Liens on property or assets, of the Company and the Subsidiaries immediately prior to such transaction or series of transactions will be deemed to have been incurred upon such transaction or series of transactions. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. The following are "Events of Default" under this Indenture: (i) failure by the Company to pay interest on any of the Securities when it becomes due and payable and the continuance on any such failure for 30 days; or (ii) failure by the Company to pay the principal or premium, if any, on any of the Securities when it becomes due and payable, whether at stated maturity, upon redemption, upon acceleration or otherwise; or (iii) the Company shall fail to comply with any of its agreements or covenants in Section 4.13, 4.16 or 4.20; or (iv) failure by the Company to comply with any other covenant in this Indenture and continuance of such failure for 30 days after notice of such failure has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% of the aggregate principal amount of the Securities then outstanding; or (v) failure by the Company or any of their Subsidiaries to make any payment after the expiration of any applicable grace period in respect of any Indebtedness of the Company or any of such Subsidiaries that has an aggregate outstanding principal amount of $5.0 million or more; or (vi) a default under any Indebtedness of either of the Company or any Subsidiary of an Company, whether such Indebtedness now exists or hereafter shall be created, if 75 -68- (A) such default results in the holder or holders of such Indebtedness causing the Indebtedness to become due prior to its stated maturity and (B) the outstanding principal amount of such Indebtedness, together with the outstanding principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregate $5.0 million or more at any one time; or (vii) one or more final judgments or orders that exceed $5.0 million in the aggregate for the payment of money have been entered by a court or courts of competent jurisdiction against the Company or any Subsidiary of either of the Company and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; or (viii) except as permitted by this Indenture, any Subsidiary Guarantee ceases to be in full force and effect or any Subsidiary Guarantor repudiates its obligations under any Guarantee; or (ix) the Company or any Subsidiary Guarantor (a) admits in writing its inability to pay its debts generally as they become due, (b) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (c) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (d) consents to the appointment of a Custodian (as defined below) of it or for substantially all of its property, (e) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (f) makes a general assignment for the benefit of its creditors or (g) takes any partnership or corporate action, as the case may be, to authorize or effect any of the foregoing; or (x) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company or any Subsidiary Guarantor in an involuntary case or proceeding under any Bankruptcy Law, which shall (a) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of an Company or any Subsidiary Guarantor, (b) appoint a Custodian of the Company or a Subsidiary Guarantor or for substantially all of any of their property or (c) order the winding-up or liquidation of its affairs; and such 76 -69- judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or For purposes of this Article Six: the term "Custodian" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator or similar official charged with maintaining possession or control over property for one or more creditors, whether under any Bankruptcy Law or otherwise. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in clause (x) or (xi)) shall have occurred and be continuing under this Indenture, the Trustee, by written notice to the Company, or the Holders of at least 25% in the aggregate principal amount of the Securities then outstanding by written notice to the Company and Trustee may declare all amounts owing under the Securities to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal amount of, premium, if any, and interest on the outstanding Securities shall immediately become due and payable. If an Event of Default specified in clause (x) or (xi) above with respect to Company occurs and is continuing, then the principal amount of, premium, if any, and accrued interest on, all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of Securities. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may (and, at the direction of the Holders of a majority of the aggregate principal amount of outstanding Securities, subject to Section 7.02(f), shall) pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities, this Indenture, or the Guarantees. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee, or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All 77 -70- available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.07 and 9.02, the Holders of not less than a majority in aggregate principal amount of the outstanding Securities may on behalf of the Holders of all the Securities waive any past Defaults under this Indenture, except a Default in the payment of the principal of, premium, if any, or interest on any Security. The Company shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents upon which the Trustee may conclusively rely. SECTION 6.05. Control by Majority. The Holders of not less than a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it hereunder. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that the Trustee reasonably believes conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder of Securities, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by it which is not inconsistent with such direction; and provided further, that this provision shall not affect the rights of the Trustee set forth in Section 7.01(d). In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification from the Company satisfactory to it in its sole discretion against any loss, liability, cost or expense caused by taking such action or following such direction. SECTION 6.06. Limitation on Suits. A Holder of Securities may not pursue any remedy with respect to this Indenture, the Guarantees or the Securities unless: 78 -71- (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holder or Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity or security; and (5) during such 60-day period the Holder or Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Holder of Securities may not use this Indenture to prejudice the rights of another Holder of Securities or to obtain a preference or priority over such other Holder of Securities. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of or premium, if any, and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in clause (i) or (ii) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal, accrued interest and other amounts remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Securities and 79 -72- such further amount as shall be sufficient to cover the costs and expenses of collection, including the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, legal fees, disbursements and advances of the Trustee, and its agents, nominees, custodians and counsel, and any other amounts due to the Trustee under Section 7.07) and the Holders of Securities allowed in any judicial proceedings relating to the Company and the Subsidiary Guarantors, their creditors or their property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities, to pay to the Trustee any amount due to it for the compensation, expenses, legal fees, disbursements and advances of the Trustee and its agents, nominees, custodians and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of Securities any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of Securities in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: First: to the Trustee for amounts due under Section 7.07; Second: if the Holders of Securities are forced to proceed against the Company or a Subsidiary Guarantor or any other obligor on the Securities directly without the Trustee, to such Holders for their collection costs; 80 -73- Third: to Holders of Securities for amounts due and unpaid on the Securities for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Fourth: to Holders of Securities for amounts due and unpaid on the Securities for principal, ratably, without preference or priority of any kind, according to amounts due and payable on the Securities for principal; and Fifth: to the Company or the Subsidiary Guarantors, as their respective interests may appear. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Holders of Securities pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of Securities pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Securities. SECTION 6.12. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 81 -74- SECTION 6.13. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VI or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default actually known to a Responsible Officer (except in the case of Sections 7.05 and 7.06, as used in this Article Seven, "Trustee" shall mean the Trustee in its capacity as Trustee under this Indenture) has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of his own affairs. Subject to such provisions, the Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request of any Holder of Securities, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it. (b) Except during the continuance of an Event of Default actually known to a Responsible Officer: (1) The Trustee need perform only those duties as are specifically set forth herein and no others and no implied covenants or obligations shall be read into this Indenture against the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions and such other documents furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee 82 -75- shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture or the Security Documents. (c) The Trustee may not be relieved from liability for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02 or 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders of Securities if it shall have grounds for believing that repayment of such funds is not assured to it or it does not receive an indemnity satisfactory to it in its sole discretion against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 83 -76- SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively rely and shall be protected in acting or refraining from acting on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both, which shall conform to the provisions of Section 11.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys, agents, custodians and nominees and shall not be responsible for the misconduct or negligence of any attorney, agent, custodian or nominee (other than such a Person who is an employee of the Trustee) appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or the Security Documents at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. (g) The Trustee shall not be deemed to have notice or knowledge of any matter, including any Default or Event of Default, unless a Responsible Officer has actual knowledge thereof or unless written notice thereof is received by the Trustee at its Corporate Trust Department and such notice 84 -77- references the Securities generally, the Company or this Indenture. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may make loans to, accept deposits from or perform services for and may otherwise deal with either of the Company, any of their Subsidiaries or any of their respective Affiliates with the same rights it would have if it were not Trustee. However, the Trustee is subject to the provisions of Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company or the Subsidiary Guarantors in this Indenture, the Securities, the Security Documents or any document issued in connection with the sale of Securities or any statement in the Securities other than the Trustee's certificate of authentication. The Trustee makes no representations with respect to and shall not be responsible for the effectiveness or adequacy of this Indenture. The Trustee shall not be responsible for independently ascertaining or maintaining such validity, if any, and shall be fully protected in relying upon certificates and opinions delivered to it in accordance with the terms of this Indenture. SECTION 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and a Responsible Officer receives actual notice of such event, the Trustee shall mail to each Holder of Securities, as their names and addresses appear on the list of Holders of Securities described in Section 2.05, notice of the uncured Default or Event of Default within 30 days after the Trustee receives such notice. Except in the case of a Default or an Event of Default in payment of principal amount, premium, if any, or interest on, any Security, including the failure to make payment on (i) any Change of Control Purchase Date pursuant to a Change of Control Offer or (ii) any Purchase Date pursuant to an Offer to Purchase, the Trustee may withhold the notice if and so long as the board of directors, the executive committee, or a trust committee of directors, of the Trustee in 85 -78- good faith determines that withholding the notice is in the interest of the Holders of Securities. SECTION 7.06. Reports by Trustee to Holders. This Section 7.06 shall not be operative as a part of this Indenture until this Indenture is qualified under the TIA, and, until such qualification, this Indenture shall be construed as if this Section 7.06 were not contained herein. Within 60 days after each May 15 of each year beginning with 1998, the Trustee shall, to the extent that any of the events described in TIA ss.313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder of Securities a brief report dated as of such date that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss.ss. 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Holders of Securities shall be mailed to the Company and filed with the Commission and each securities exchange, if any, on which the Securities are listed. The Company shall notify a Responsible Officer of the Trustee if the Securities become listed on any securities exchange or of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time compensation for its acceptance of this Indenture and its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all disbursements, expenses and advances (including fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's gross negligence, bad faith or willful misconduct. Such expenses shall include the reasonable compensation, legal fees, disbursements and expenses of the Trustee's agents, accountants, experts, nominees, custodians and counsel and any taxes or other expenses incurred by a trust created pursuant to Section 8.01 hereof. The Company shall indemnify the Trustee, its directors, officers and employees and each predecessor trustee for, 86 -79- and hold it harmless against, any loss, liability or expense incurred by the Trustee without gross negligence, bad faith or willful misconduct on its or their part arising out of or in connection with the administration of this trust and the Trustee's duties under this Indenture, including the reasonable expenses and attorneys' fees of defending themselves against any claim of liability arising hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. However, the failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense (and may employ its own counsel) at the Company's expense. The Company need not pay for any settlement made without their written consent, which consent shall not be unreasonably withheld or delayed. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee as a result of the violation of this Indenture by the Trustee if such violation arose from the gross negligence, bad faith or willful misconduct of the Trustee. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a senior Lien prior to the Securities against all money or property held or collected by the Trustee, in its capacity as Trustee, other than money held in trust to pay principal of and interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in clause (xi), (xii) or (xiii) of Section 6.01 occurs, the expenses (including the reasonable fees and expenses of its agents and counsel) and the compensation for the services shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 7.07 and any claim arising hereunder shall survive the resignation or removal of any Trustee, the discharge of the Company's obligations pursuant to Article Eight, any rejection or termination under any Bankruptcy Law and the termination of this Indenture. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time (subject to the further provisions of this Section 7.08) by so notifying the Company in writing. The Holders of a majority in principal 87 -80- amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor trustee with the Company's consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes legally incapable of acting with respect to its duties hereunder. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of Securities of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture; provided, however, that no Trustee under this Indenture shall be liable for any act or omission of any successor Trustee. A successor Trustee shall mail notice of its succession to each Holder of Securities. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction 88 -81- for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee and the Company shall pay to any such replaced or removed Trustee all amounts owed under Section 7.07 upon such replacement or removal. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA ss.ss. 310(a)(l) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss. 310(b)(l) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee, in its capacity as Trustee hereunder, shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. 89 -82- ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Company's Obligations. This Indenture shall cease to be of further effect (except that the Company's obligations under Section 7.07 and the Trustee's and Paying Agent's obligations under Section 8.03 shall survive) when all outstanding Securities theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Securities that have been replaced or paid) to the Trustee for cancellation and the Company have paid all sums payable hereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the Securities (except for certain obligations of the Company to register the transfer or exchange of such Securities, replace stolen, lost or mutilated Securities, maintain paying agencies and holding moneys for payment in trust) or (ii) need not comply with certain of the restricted covenants with respect to this Indenture, if the Company deposits with the Trustee, in trust, U.S. Legal Tender or U.S. Government Obligations or a combination thereof that, through the payment of interest and premium thereon and principal amount at maturity in respect thereof in accordance with their terms, will be sufficient to pay all the principal amount at maturity of and interest and premium on the Securities on the dates such payments are due in accordance with the terms of such Securities as well as the Trustee's fees and expenses if the Company delivers to the Trustee: (A) an Opinion of Counsel and in connection with a discharge pursuant to clause (i) above, a private letter ruling issued to the Company by the Internal Revenue Service (the "service"), to the effect that the holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of the deposit and related defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised; (B) subject to certain customary qualifications, an Opinion of Counsel to the effect that funds so deposited will not be subject to avoidance under applicable Bankruptcy Law; and 90 -83- (C) an Officers' Certificate and an Opinion of Counsel to the effect that the Company has complied with all conditions precedent to the defeasance. Notwithstanding the foregoing, the Opinion of Counsel required by clause (A) above need not be delivered if all Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable on the maturity date within one year or (iii) are to be called for redemption within one year under arrangement satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. Immediately after such event, or after the expiration of the period of time referred to in the opinion of counsel referred to in clause (v) above; this Indenture shall cease to be of further effect, and the Trustee, on demand of the Company, shall execute proper instruments acknowledging confirmation of and discharge under this Indenture. However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02 and 6.07 and Article Seven and the Company's, the Trustee's and Paying Agent's obligations in Section 8.03 shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Section 7.07 and the Trustee's and Paying Agent's obligations in Section 8.03 and 8.04 shall survive. Nothing contained in this Article Eight shall abrogate any of the rights, obligations or duties of the Trustee under this Indenture and the Security Documents. After such irrevocable deposit made pursuant to this Section 8.01 and satisfaction of the other conditions set forth herein, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified above. In order to have money available on a payment date to pay principal amount of, premium, if any, or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option. SECTION 8.02. Application of Trust Money. The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government 91 -84- Obligations deposited with it pursuant to Section 8.01. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal amount of, premium, if any, and interest on the Securities. SECTION 8.03. Repayment to the Company. The Trustee and the Paying Agent shall promptly pay to the Company upon delivery of an Officer's Certificate stating that such payment does not violate the terms of this Indenture any excess money or securities held by them or if deposited with the Trustee by any Subsidiary Guarantor, to such Subsidiary Guarantor at any time. The Trustee and the Paying Agent shall pay to the Company or any Subsidiary Guarantor, as the case may be, upon delivery of an Officer's Certificate stating that such payment does not violate the terms of this Indenture any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have either caused notice of such payment to be mailed to each Holder entitled thereto no less than 30 days prior to such repayment or within such period shall have published such notice in a financial newspaper of widespread circulation published in the City of New York. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.04. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.05. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Indenture by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such 92 -85- application, then and only then the Company's and each Subsidiary Guarantor's, if any, obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had been made pursuant to this Indenture until such time as the Trustee is permitted to apply all such money or U.S. Government Obligations in accordance with this Indenture; provided, however, that if the Company or the Subsidiary Guarantors, as the case may be, have made any payment of principal amount of, premium, if any, or interest on any Securities because of the reinstatement of their obligations, the Company or the Subsidiary Guarantors, as the case may be, shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company and the Subsidiary Guarantors (when authorized by Board Resolutions), and the Trustee, together, may amend or supplement this Indenture, the Securities and the Guarantees, without notice to or consent of any Securityholder: (1) to cure any ambiguity, defect or inconsistency provided that such amendment or supplement does not, in the opinion of the Trustee, adversely affect the rights of any Holder; (2) to evidence the succession in accordance with Article Five hereof of another Person to a Company or a Subsidiary Guarantor and the assumption by any such successor of the covenants of a Company or a Subsidiary Guarantor herein and in the Securities or a Guarantee, as the case may be; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; (4) to make any other change that does not adversely affect the rights of any Holders of Securities hereunder or thereunder; 93 -86- (5) to mortgage, pledge or grant a security interest in favor of the Trustee as additional security for the payment and performance of obligations under this Indenture, the Securities and the Guarantees; (6) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (7) to add or release any Subsidiary Guarantor strictly in accordance with another provision of this Indenture expressly providing for such addition or release; provided that each of the Company and the Subsidiary Guarantors party thereto has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. Subject to Section 6.07, the Company and the Subsidiary Guarantors (when authorized by Board Resolutions) and the Trustee, together, with the written consent (which may include consents obtained in connection with a tender offer or exchange offer for Securities) of the Holder or Holders of at least a majority in aggregate principal amount of the outstanding Securities, may amend or supplement this Indenture, the Securities or the Guarantees without notice to any other Holders of Securities. Subject to Section 6.07, the Holder or Holders of a majority in aggregate principal amount of the outstanding Securities may by written consent (which may include consents obtained in connection with a tender offer for Securities) waive any existing Default (other than any continuing Default or Event of Default in the payment of the principal amount of, premium, if any, or interest on Securities) under, or compliance by the Company with any provision of, this Indenture or the Securities without notice to any other Holder of Securities. Without the consent of each Holder of Securities affected no such amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may: (1) change the principal amount of Securities whose Holders must consent to an amendment, supplement or waiver 94 -87- of any provision of this Indenture, the Securities, the Guarantees; (2) reduce the rate or change the time for payment of interest, including default interest, on any Security; (3) reduce the principal amount of any Security; (4) change the Final Maturity Date of any Security, affect the terms of any scheduled payment of interest on or principal of the Securities, or alter the redemption provisions contained in this Indenture or the Securities in any manner adverse to any Holder; (5) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Security on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of the Securities to waive Defaults or Events of Default; (6) make any changes in Section 6.04, 6.07 or this Section 9.02; (7) make the principal of, or the interest on any Security payable in money other than as provided for in this Indenture, the Securities and the Guarantees as in effect on the date hereof; (8) make any changes in the provisions described in Section 4.20 or in the obligations of the Company to make a Net Proceeds Offer or Special Offer or the definitions related thereto that could adversely affect the rights of any Holder of the Securities; or (9) take any action that would subordinate the Securities or the Subsidiary Guarantees to any other Indebtedness of the Company or any of its Subsidiaries, respectively, or otherwise affect the ranking of the Securities or the Subsidiary Guarantees. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. 95 -88- After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Securities affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Compliance with TIA. From the date on which this Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture, the Security Documents, the Securities or the Guarantees shall comply with the TIA as then in effect and to the extent applicable thereto. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder of Securities is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders of Securities entitled to consent to any amendment, supplement or waiver, which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders of Securities at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. 96 -89- After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (1) through (9) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.06. Trustee to Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver to any agreement authorized pursuant to this Article Nine; provided that (i) the form of any amendment, supplement or waiver with respect to the matters referred to in clauses (1) through (9) of Section 9.02 shall be satisfactory to the Trustee and (ii) the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects its own rights, duties or immunities under this Indenture or the Security Documents. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate of the Company each stating, in addition to the matters set forth in Section 11.04, that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and constitutes the legal, valid and binding obligations of the Company, the Subsidiary Guarantors or the Pledgors, as the case may be, enforceable in accordance with its terms. Such Opinion of Counsel shall be at the expense of the Company, and the Trustee shall have a Lien under Section 7.07 for any such expense. 97 -90- ARTICLE TEN GUARANTEES SECTION 10.01. Unconditional Guarantee. Each Subsidiary Guarantor, jointly and severally, hereby unconditionally guarantees (such guarantee to be referred to herein as a "Guarantee") to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns that: (i) the principal amount of, premium, if any, and interest on the Securities will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise and interest on the overdue principal and interest on any overdue interest, to the extent lawful, of the Securities and all other Obligations of the Company to the Holders of the Securities or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Securities or of any such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 10.03. Each Subsidiary Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, and action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and in this Guarantee. If any Holder of the Securities or the Trustee is required by any court or otherwise to return to the Company or any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official 98 -91- acting in relation to the Company or any Subsidiary Guarantor, any amount paid by the Company or any Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor, on the one hand, and the Holders of the Securities and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration against the Company in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor for the purpose of this Guarantee. SECTION 10.02. Severability. In case any provision of this Article Ten or any Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions hereof or thereof shall not in any way be affected or impaired thereby. SECTION 10.03. Limitation of Subsidiary Guarantors' Liability. It is the intention of all parties hereto that the guarantee by each Subsidiary Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal, state or foreign law. To effectuate the foregoing intention, the Holders of Securities and each Subsidiary Guarantor incorporated in one of the States of the United States hereby irrevocably agree that the obligations of such Subsidiary Guarantor under its Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Guarantee or pursuant to Section 10.04, result in the obligations of such Subsidiary Guarantor under its Guarantee not constituting such fraudulent transfer or conveyance. 99 -92- SECTION 10.04. Contribution. In order to provide for just and equitable contribution among the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se that in the event any payment or distribution is made by any Subsidiary Guarantor (a "Funding Subsidiary Guarantor") under its Guarantee, such Funding Subsidiary Guarantor shall be entitled to a contribution from all other Subsidiary Guarantors in a pro rata amount based on the Adjusted Net Assets (as defined below) of each Subsidiary Guarantor (including the Funding Subsidiary Guarantor) for all payments, damages and expenses incurred by that Funding Subsidiary Guarantor in discharging the Company's obligations with respect to the Securities or any other Subsidiary Guarantor's obligations with respect to its Guarantee. "Adjusted Net Assets" of such Subsidiary Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date (other than liabilities of such Subsidiary Guarantor under Indebtedness subordinated to such Subsidiary Guarantor's Guarantee)), but excluding liabilities under the Guarantee, of such Subsidiary Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Subsidiary Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Subsidiary Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Subsidiary Guarantor in respect of the obligations of such Subsidiary under its Guarantee, if any), excluding debt in respect of the Guarantee of such Subsidiary Guarantor, as they become absolute and matured. SECTION 10.05. Waiver of Subrogation. Until all Guarantee Obligations are paid in full, each Subsidiary Guarantor hereby irrevocably waives any claims or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Subsidiary Guarantor's obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Securities against the Company, whether or not such claim, remedy or right arises in equity, or under 100 -93- contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Subsidiary Guarantor in violation of the preceding sentence and the Securities shall not have been paid in full, such amount shall have been deemed to have been paid to such Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Securities, whether matured or unmatured, in accordance with the terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 10.05 is knowingly made in contemplation of such benefits. SECTION 10.06. Execution of Guarantee. To evidence its guarantee to the Holders of Securities set forth in this Article Ten, each Subsidiary Guarantor hereby agrees to execute its Guarantee in substantially the form included in the Securities, which shall be endorsed on each Security ordered to be authenticated and delivered by the Trustee. Each Subsidiary Guarantor hereby agrees that its Guarantee set forth in this Article Ten shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. Each such Guarantee shall be signed on behalf of each Subsidiary Guarantor by two Officers. Such signatures upon the Guarantee may be by manual or facsimile signature of such officers and may be imprinted or otherwise reproduced on the Guarantee, and in case any such officer who shall have signed the Guarantee shall cease to be such officer before the Security on which such Guarantee is endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Security nevertheless may be authenticated and delivered or disposed of as though the Person who signed the Guarantee had not ceased to be such officer of the Subsidiary Guarantor. SECTION 10.07. Waiver of Stay, Extension or Usury Laws. Each Subsidiary Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury 101 -94- law or other law that would prohibit or forgive each such Subsidiary Guarantor from performing its Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) such Subsidiary Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or any Subsidiary Guarantor: United Refining Company 15 Bradley Street Warren, Pennsylvania 10365 Attention: Myron L. Turfitt Facsimile: (814) 723-4371 Telephone: (814) 723-4655 102 -95- if to the Trustee: IBJ Schroder Bank & Trust Company 1 State Street New York, New York 10004 Attention: Corporate Trust Department Facsimile: (212) 858-2952 Telephone: (212) 858-2815 Each of the Company, the Subsidiary Guarantors and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Company, the Subsidiary Guarantors and the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Holder of Securities shall be mailed to him by first-class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Holders of Securities. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communications by Holders with Other Holders. Holders of Securities may communicate pursuant to TIA ss.312(b) with other Holders of Securities with respect to their rights under this Indenture, the Securities or the Guarantees. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA ss.312(c). 103 -96- SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company, a Subsidiary Guarantor or a Pledgor to the Trustee to take any action under this Indenture, the Company, such Subsidiary Guarantor or such Pledgor, as the case may be, shall furnish to the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.08, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. 104 -97- SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. The Trustee, Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. Legal Holidays. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day with the same force and effect as if made on such payment date. SECTION 11.08. Governing Law. THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to the nonexclusive jurisdiction of the courts of the State of New York and the U.S. Federal Courts sitting in the City of New York for the purposes of any suit, action or proceeding arising out of or relating to this Indenture. The Company and the Subsidiary Guarantors hereby designate and appoint CT Corporation System, 1633 Broadway, New York, New York 10019, as its agent to receive on its behalf service of all process in any proceedings in any court sitting in New York, New York, such service being hereby acknowledged by the Company and Subsidiary Guarantors to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to the Company and Subsidiary Guarantors, at their respective address specified in Section 11.02 hereof, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by the Company and Subsidiary Guarantors refuses to accept service, the Company and Subsidiary Guarantors hereby agree that service upon them by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Trustee to bring proceedings against the Company and Subsidiary Guarantors in the courts of any other jurisdiction. SECTION 11.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company or any 105 -98- of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. No Recourse Against Others. A director, officer, employee, its direct or indirect stockholder or incorporator, as such, of the Company or any of its Subsidiaries, shall not have any liability for any obligations of the Company or the Subsidiary Guarantors under the Securities, this Indenture or the Guarantees or for any claim based on, in respect of or by reason of such obligations or their creations. Each Holder of Securities by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. SECTION 11.11. Successors. All agreements of the Company and the Subsidiary Guarantors in this Indenture, the Securities and the Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 11.13. Severability. In case any one or more of the provisions in this Indenture, in the Securities or in the Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SECTION 11.14. Tax Considerations. It is the intention of the parties hereto that for U.S. Federal, state and local income tax purposes: (i) neither the Holders nor the Trustee shall be at any time the owner of the Collateral for U.S. Federal, state or local tax purposes 106 -99- and (ii) the arrangement created hereby is intended solely to be a security arrangement and not a trust and neither the Trustee nor the Holders shall file any returns, reports or other documents or take any position inconsistent therewith for U.S. Federal, state or local tax law purposes. 107 -100- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. UNITED REFINING COMPANY By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: IBJ SCHRODER BANK & TRUST COMPANY as Trustee By: ------------------------------------ Name: Title: 108 -101- IN WITNESS WHEREOF, each of the undersigned Subsidiary Guarantors has caused this Indenture to be duly executed as of this 9th day of June, 1997. KIANTONE PIPELINE CORPORATION By: ------------------------------------ Name: Title: KIANTONE PIPELINE COMPANY By: ------------------------------------ Name: Title: UNITED JET CENTER, INC. By: ------------------------------------ Name: Title: UNITED REFINING COMPANY OF OF PENNSYLVANIA By: ------------------------------------ Name: Title: KWIK-FILL, INC. By: ------------------------------------ Name: Title: 109 -102- INDEPENDENT GASOLINE AND OIL OIL COMPANY OF ROCHESTER, INC. By: ------------------------------------ Name: Title: BELL OIL, CORP. By: ------------------------------------ Name: Title: PPC, INC. By: ------------------------------------ Name: Title: SUPER TEST PETROLEUM, INC. By: ------------------------------------ Name: Title: KWIK-FIL, INC. By: ------------------------------------ Name: Title: 110 -103- VULCAN ASPHALT REFINING CORPORATION By: ------------------------------------ Name: Title: 111 EXHIBIT A [FORM OF SERIES A SECURITY] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE U.S. TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY, (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE U.S. OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASERS FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS PART OF ITS INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, DIRECTLY OR INDIRECTLY, OTHER THAN TO AFFILIATES OF THE COMPANY CONTROLLING, UNDER COMMON CONTROL WITH OR CONTROLLED BY THE ISSUERS, PENSION FUNDS, INSURANCE COMPANIES, SECURITIES FIRMS AND OTHER INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS, INTERNATIONAL ORGANIZATIONS CREATED UNDER PUBLIC INTERNATIONAL LAW AND OTHER COMPARABLE ENTITIES, INCLUDING, INTER ALIA, FINANCE COMPANIES OF INDUSTRIAL AND FINANCIAL ENTERPRISES, WHO OR WHICH ARE ACTIVE ON A REGULAR AND 112 PROFESSIONAL BASIS IN THE FINANCIAL MARKETS FOR THEIR OWN ACCOUNT . 113 UNITED REFINING COMPANY 10 3/4% Senior Notes due 2007, Series A CUSIP No.: No . $ United Refining Company, a Pennsylvania corporation (the "Company"), for value received, hereby promises to pay to ___________ or registered assigns, the principal sum of $200,000,000 United States Dollars, on May __, 2007. Interest Payment Dates: June 15 and December 15, commencing December 15, 1997 Record Dates: June 1 and December 1 Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. 114 IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: June 9, 1997 UNITED REFINING COMPANY By: ______________________________ Name: Title: By: ______________________________ Name: Title: 115 This is one of the 10 3/4% Senior Notes due 2007, Series A, described in the within-mentioned Indenture. IBJ SCHRODER BANK & TRUST COMPANY as Trustee By: ___________________________ Authorized Signatory 116 (REVERSE OF SECURITY) UNITED REFINING COMPANY 10 3/4% Senior Notes due 2007, Series A 1. Interest. United Refining Company, a Pennsylvania corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on June 15 and December 15 of each year (the "Interest Payment Date"), commencing December 15, 1997. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from June 9, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal from time to time on demand at the rate borne by the Securities plus 2% and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and interest by wire transfer of U.S. Federal funds, or interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. IBJ Schroder Bank & Trust Company (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Registrar or co-Registrar without notice to the Holders; 117 -2- however, the Paying Agent shall always be the Trustee or any successor trustee, under the Indenture. 4. Indenture and Guarantees. The Company issued the Securities under an Indenture, dated as of June 9, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA, except as provided in the Indenture. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are unsecured obligations of the Company limited in aggregate principal amount to $200,000,000. Payment on each Security is guaranteed on a senior basis, jointly and severally, by the Subsidiary Guarantors pursuant to Article Ten of the Indenture. 5. Redemption. (a) Optional Redemption. The Securities will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after June 15, 2002 at the following redemption prices (expressed as percentages of the principal amount), together with accrued and unpaid interest, if any, thereon to the Redemption Date if redeemed during the 12-month period beginning : Year Percentage ---- ---------- 2002 ............................. 105.375% 2003 ............................. 103.583% 2004 ............................. 101.792% 2005 and thereafter ............. 100.000% (b) Optional Redemption upon Public Equity Offering. On or prior to June 15, 2000, the Company may redeem up to 35% of the aggregate principal amount of the Securities with the net cash proceeds of one or more Equity Offerings at a redemption price equal to 110.0% of the principal amount thereof, 118 -3- plus accrued and unpaid interest, if any, to the Redemption Date; provided that (a) at least $100 million aggregate principal amount of the Securities remain outstanding immediately after the occurrence of such redemption and (b) such redemption occurs within 60 days of the date of the closing of any such Equity Offering. (c) Selection of Securities for Redemption. If less than all of the Securities are to be redeemed at any time, selection of the Securities to be redeemed will be made by the Trustee from among the outstanding Securities on a pro rata basis, by lot or by any other method permitted in the Indenture. 6. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the Redemption Date, interest will cease to accrue on Securities or portions thereof called for redemption. 7. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples of U.S.$1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption, except the unredeemed portion of any Security being redeemed in part. 119 -4- 8. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 9. Unclaimed Funds. If funds for the payment of principal or interest remain unclaimed for two years, the Trustee and the Paying Agent will repay the funds to the Company at their request. After that, all liability of the Trustee and Paying Agent with respect to such funds shall cease. 10. Discharge. The Company may be discharged from their obligations under the Indenture and the Securities except for certain provisions thereof, upon satisfaction of certain conditions specified in the Indenture. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent (which may include consents obtained in connection with a tender offer or exchange offer for securities) of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived other than any continuing Default or Event of Default in the payment of the principal amount of, premium, if any, or interest on the Securities with the consent (which may include consents obtained in connection with a tender offer or exchange offer for securities) of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities to provide for the assumption of the Company's obligations to Holders in the case of a merger or acquisition or comply with any requirements of the Commission in connection with the qualification of the Indenture under the TIA, or make any other change that does not materially adversely affect the rights of any Holder of a Security. 120 -5- 14. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Company and their subsidiaries to make Restricted Payments, to incur Indebtedness, to create Liens, to issue preferred or other Capital Stock of Subsidiaries, to sell assets, to permit restrictions on dividends and other payments by subsidiaries to the Company, to consolidate, merge or sell all or substantially all of their assets, to engage in transactions with Affiliates or to engage in certain businesses. The limitations are subject to a number of important qualifications and exceptions. The Company must report to the Trustee on compliance with such limitations. 15. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest, including an accelerated payment) if it determines that withholding notice is in their interest. 16. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, their Subsidiaries or their respective Affiliates as if it were not the Trustee. 17. No Recourse Against Others. No director, officer, employee, direct or indirect stockholder or incorporator, as such, of the Company or any of their Subsidiaries, including but not limited to Parent and its 121 -6- stockholders, shall have any liability for any obligation of the Company under the Securities or the Indenture, or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. 18. Authentication. This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security. 19. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 21. Registration Rights. Pursuant to the Registration Rights Agreement, the Company will be obligated upon the occurrence of certain events to consummate an exchange offer pursuant to which the Holder of this Security shall, subject to certain limitations, have the right to exchange this Series A Security for the Company's [ ]% Senior Notes due 2007, Series B (the "Series B Securities"), which will be registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Series A Securities. The Holders shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain 122 -7- other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture. Requests may be made to: United Refining Company, 15 Bradley Street, Warren, Pennsylvania 16365, Attention: Myron L. Turfitt. 123 GUARANTEE The Subsidiary Guarantors (as defined in the Indenture referred to in the Security upon which this notation is endorsed and each hereinafter referred to as a "Subsidiary Guarantor," which term includes any successor Person under the Indenture) have unconditionally guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being referred to herein as the "Guarantee") (i) the due and punctual payment of the principal amount of, premium and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal amount and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in Article Ten of the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. No director, officer, employee, direct or indirect stockholder or incorporator, as such, of any Subsidiary Guarantor, including but not limited to Parent and its stockholders, shall have any liability for any obligations of the Subsidiary Guarantors under the Guarantee or for any claim based on, in respect of or by reason of such obligations or their creation. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. 124 KIANTONE PIPELINE CORPORATION By: ___________________________ Name: Title: By: ___________________________ Name: Title: KIANTONE PIPELINE COMPANY By: ____________________________ Name: Title: By: ____________________________ Name: Title: UNITED JET CENTER, INC. By: ___________________________ Name: Title: By: ___________________________ Name: Title: UNITED REFINING COMPANY OF PENNSYLVANIA By: ___________________________ Name: Title: By: ____________________________ Name: Title: 125 KWIK FILL, INC. By: _____________________________ Name: Title: INDEPENDENT GAS AND OIL COMPANY OF ROCHESTER INC. By: ____________________________ Name: Title: By: _____________________________ Name: Title: BELL OIL CORP. By: _____________________________ Name: Title: By: _____________________________ Name: Title: PPC INC. By: ____________________________ Name: Title: By: ____________________________ Name: Title: 126 SUPER TEST PETROLEUM INC. By: ___________________________ Name: Title: By: ___________________________ Name: Title: KWIK-FIL, INC. By: ____________________________ Name: Title: By: ___________________________ Name: Title: VULCAN ASPHALT REFINING CORPORATION By: ___________________________ Name: Title: By: ___________________________ Name: Title: 127 ASSIGNMENT FORM I or we assign and transfer this Security to _______________________________________________________________________________ _______________________________________________________________________________ (Print or type name, address and zip code of assignee or transferee) _______________________________________________________________________________ (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint _____________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: __________________ Signed: ____________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ___________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) 128 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.16 or Section 4.20 of the Indenture, check the appropriate box: Section 4.16 [ ] or Section 4.20 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.16 or Section 4.20 of the Indenture, state the amount: $_____________ Date: _________________________ Your Signature: _____________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ___________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) 129 EXHIBIT B [FORM OF SERIES B SECURITY] UNITED REFINING COMPANY 10 3/4% Senior Note due 2007, Series B CUSIP No.: No . $ United Refining Company, a Pennsylvania corporation (the "Company"), for value received, hereby promises to pay to ________________ or registered assigns, the principal sum of $200,000,000 United States Dollars, on June 15, 2007. Interest Payment Dates: June 15 and December 15 commencing December 15, 1997 Record Dates: June 1 and December 1 Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. 130 IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: UNITED REFINING COMPANY By: _______________________________ Name: Title: By: ______________________________ Name: Title: 131 This is one of the 10 3/4% Senior Notes due 2007, Series B, described in the within-mentioned Indenture. IBJ Schroder Bank & Trust Company, as Trustee By____________________________________ Authorized Signatory 132 (REVERSE OF SECURITY) UNITED REFINING COMPANY 10 3/4% Senior Note due 2007, Series B 1. Interest. United Refining Company, a Pennsylvania corporation (the "Company"), hereby jointly and severally promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on June 15 and December 15 of each year (the "Interest Payment Date"), commencing December 15, 1997. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from June 9, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal from time to time on demand at the rate borne by the Securities plus 2% and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and interest by wire transfer of U.S. Federal funds, or interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. IBJ Schroder Bank & Trust Company (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Registrar or co-Registrar without notice to the Holders; however the Paying Agent shall always be the Trustee or any successor trustee under the Indenture. 133 -2- 4. Indenture and Guarantees. The Company issued the Securities under an Indenture, dated as of June 9, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA, except as provided in the Indenture. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are unsecured obligations of the Company limited in aggregate principal amount to $200,000,000. Payment on each Security is guaranteed on a senior basis, jointly and severally, by the Subsidiary Guarantors pursuant to Article Ten of the Indenture. 5. Redemption. (a) Optional Redemption. The Securities will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after June 15, 2002 at the following redemption prices (expressed as percentages of the principal amount), together with accrued and unpaid interest, if any, thereon to the Redemption Date if redeemed during the twelve-month period beginning November 15: Year Percentage ---- ---------- 2002 .............................. 105.375% 2003 .............................. 103.583% 2004 .............................. 101.792% 2005 and thereafter .............. 100.000% provided that the Company may not redeem the Securities prior to the Fifth Anniversary with the proceeds of Asset Sales. (b) Optional Redemption upon Public Equity Offering. On or prior to June 15, 2000, the Company may redeem up to 35% of the aggregate principal amount of the Securities with the net cash proceeds of one or more Equity Offerings at a redemption price equal to 110.00% of the principal amount thereof, plus accrued and unpaid interest to the Redemption Date; 134 -3- provided that (a) at least $100 million aggregate principal amount of the Securities remain outstanding immediately after the occurrence of such redemption and (b) such redemption occurs within 60 days of the date of the closing of any such Equity Offering. (c) Selection of Securities for Redemption. If less than all of the Securities are to be redeemed at any time, selection of the Securities to be redeemed will be made by the Trustee from among the Outstanding Securities on a pro rata basis, by lot or by any other method permitted in the Indenture. 6. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the Redemption Date, interest will cease to accrue on Securities or portions thereof called for redemption. 7. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples of U.S.$1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption, except the unredeemed portion of any security being redeemed in part. 135 -4- 8. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 9. Unclaimed Funds. If funds for the payment of principal or interest remain unclaimed for two years, the Trustee and the Paying Agent will repay the funds to the Company at its request. After that, all liability of the Trustee and Paying Agent with respect to such funds shall cease. 10. Discharge. The Company may be discharged from their obligations under the Indenture and the Securities except for certain provisions thereof upon satisfaction of certain conditions specified in the Indenture. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture, or the Securities may be amended or supplemented with the written consent (which may include consents obtained in connection with a tender offer or exchange offer for securities) of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived other than any continuing Default or Event of Default in the payment of the principal amount of, premium, if any, or interest on the Securities with the consent (which may include consents obtained in connection with a tender offer or exchange offer for securities) of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities to provide for the assumption of the Company's obligations to Holders in the case of a merger or acquisition or comply with any requirements of the Commission in connection with the qualification of the Indenture under the TIA, or make any other change that does not materially adversely affect the rights of any Holder of a Security. 136 -5- 12. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Company and their subsidiaries to make Restricted Payments, to incur Indebtedness, to create Liens, to issue preferred or other Capital Stock of Subsidiaries, to sell assets, to permit restrictions on dividends and other payments by subsidiaries to the Company, to consolidate, merge or sell all or substantially all of their assets, to engage in transactions with Affiliates or to engage in certain businesses. The limitations are subject to a number of important qualifications and exceptions. The Company must report to the Trustee on compliance with such limitations. 13. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest, including an accelerated payment) if it determines that withholding notice is in their interest. 14. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, their Subsidiaries or their respective Affiliates as if it were not the Trustee . 15. No Recourse Against Others. No director, officer, employee, direct or indirect stockholder or incorporator, as such, of the Company or any of their Subsidiaries, including but not limited to Parent and its stockholders, shall have any liability for any obligation of 137 -6- the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. 16. Authentication. This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security. 17. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 28. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company have caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 138 GUARANTEE The Subsidiary Guarantors (as defined in the Indenture referred to in the Security upon which this notation is endorsed and each hereinafter referred to as a "Subsidiary Guarantor," which term includes any successor Person under the Indenture) have unconditionally guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being referred to herein as the "Guarantee") (i) the due and punctual payment of the principal amount of, premium and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal amount and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in Article Ten of the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. No director, officer, employee, direct or indirect stockholder or incorporator, as such, of any Subsidiary Guarantor, including but not limited to Parent and its stockholders, shall have any liability for any obligations of the Subsidiary Guarantors under the Guarantee or for any claim based on, in respect of or by reason of such obligations or their creation. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. 139 KIANTONE PIPELINE CORPORATION By: ____________________________ Name: Title: By: ____________________________ Name: Title: KIANTONE PIPELINE COMPANY By: ____________________________ Name: Title: By: ____________________________ Name: Title: UNITED JET CENTER, INC. By: ___________________________ Name: Title: By: ____________________________ Name: Title: UNITED REFINING COMPANY OF PENNSYLVANIA By: ____________________________ Name: Title: By: ____________________________ Name: Title: 140 KWIK FILL, INC. By: _____________________________ Name: Title: INDEPENDENT GAS AND OIL COMPANY OF ROCHESTER INC. By: ____________________________ Name: Title: By: ____________________________ Name: Title: BELL OIL CORP. By: ____________________________ Name: Title: By: ____________________________ Name: Title: PPC INC. By: ____________________________ Name: Title: By: ____________________________ Name: Title: 141 SUPER TEST PETROLEUM INC. By: ____________________________ Name: Title: By: ____________________________ Name: Title: KWIK-FIL, INC. By: ____________________________ Name: Title: By: ____________________________ Name: Title: VULCAN ASPHALT REFINING CORPORATION By: ____________________________ Name: Title: By: ____________________________ Name: Title: 142 ASSIGNMENT FORM I or we assign and transfer this Security to _______________________________________________________________________________ _______________________________________________________________________________ (Print or type name, address and zip code of assignee or transferee) _______________________________________________________________________________ (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint ________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: __________________ Signed: ____________________ (Sign exactly as name appears on the first page of this Security) Signature Guarantee: ___________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) 143 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.16 or Section 4.20 of the Indenture, check the appropriate box: Section 4.16 [ ] or Section 4.20 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.16 or Section 4.20 of the Indenture, state the amount: $___________ Date: ___________________________ Your Signature: _____________________ (Sign exactly as your name appears on the first page of this Security) Signature Guarantee: __________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) 144 EXHIBIT C FORM OF LEGEND FOR GLOBAL SECURITIES Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS OR THEIR AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 145 EXHIBIT D CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SECURITIES Re: 10 3/4% Senior Notes due 2007, Series A (the "Securities") of United Refining Company This Certificate relates to $_______ principal amount of Securities held in the form of* ___ a beneficial interest in a Global Security or* _______ Physical Securities by ______ (the "Transferor") . The Transferor:* |_| has requested by written order that the Registrar deliver in exchange for its beneficial interest in a Global Security held by the Depositary a Physical Security or Physical Securities in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Security (or the portion thereof indicated above); or |_| has requested the Registrar by written order to exchange or register the transfer of a Physical Security or Physical Securities. In connection with such request and in respect of each such Security, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Securities and the restrictions on transfers thereof as provided in Section 2.16 of such Indenture, and that the transfer of the Securities does not require registration under the Securities Act of 1933, as amended (the "Act") because*: |_| Such Security is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section 2.16(d)(i)(A) of the Indenture). |_| Such Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A. 146 -2- |_| Such Security is being transferred to an institutional "accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Act. |_| Such Security is being transferred in reliance on Regulation S under the Act. |_| Such Security is being transferred in accordance with Rule 144 under the Act. |_| Such Security is being transferred in reliance on and in compliance with another exemption from the registration requirements of the Act. ________________________________ [INSERT NAME OF TRANSFEROR] By: _________________________ [Authorized Signatory] Date: ______________________ *Check applicable box. 147 EXHIBIT E Form of Certificate To Be Delivered in Connection with Transfers to Institutional Accredited Investors _____________, ____ Trustee [Address] Re: United Refining Company, Incorporated (the "Company") Under the Indenture (the "Indenture") relating to 10 3/4% Senior Notes due 2007, Series A Ladies and Gentlemen: In connection with our proposed purchase of 10 3/4% Senior Notes due 2007, Series A (the "Securities"), of the Company, we confirm that: 1. We have received such information as we deem necessary in order to make our investment decision. 2. We understand that any subsequent transfer of the Securities is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 3. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons except as permitted in the following sentence. We agree, on our own behalf and on behalf of each account for which we acquire any Securities, that, prior to (x) the date which is two years after the later of the date of original issuance of the Securities and (y) such later date, if any, as may be required by applicable laws, the Securities may be offered, resold, pledged or otherwise transferred only (a) to the Company, (b) inside the United States to a Person whom we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in compliance 148 -2- with Rule 144A under the Securities Act, (c) inside the United States to a Person we reasonably believe to be an institutional accredited investor" (as defined below) that, prior to such transfer, furnishes to the Trustee a signed letter substantially in the form hereof, (d) outside the United States to Persons other than U.S. Persons in offshore transactions meeting the requirements of Rule 904 under Regulation S under the Securities Act, (e) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), (f) pursuant to an effective registration statement under the Securities Act or (g) pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction, and we further agree to provide to any Person purchasing Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein. 4. We understand that, on any proposed resale of Securities, we will be required to furnish to the Trustee and the Company, such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 6. We are acquiring the Securities purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. 149 -3- You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferor] By: ________________________ [Authorized Signatory] Upon transfer the Securities would be registered in the name of the new beneficial owner as follows: Name: ____________________________________ Address: _________________________________ Taxpayer ID Number: ______________________ 150 EXHIBIT F Form of Certificate To Be Delivered in Connection with Regulation S Transfers ________________, ____ Trustee [address] Re: United Refining Company, Incorporated (the "Company") 10 3/4% Senior Notes due 2007, Series A (the "Securities") Ladies and Gentlemen: In connection with our proposed sale of $200,000,000 aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a Person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any Person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any Person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and 151 -2- (5) we have advised the transferee of the transfer restrictions applicable to the Securities. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferor] By: _______________________ [Authorized Signature] Upon transfer the Securities would be registered in the name of the new beneficial owner as follows: Name: __________________________________ Address:________________________________ Taxpayer ID Number: ____________________ EX-10.1 27 PURCHASE AGREEMENT 1 EXHIBIT 10.1 UNITED REFINING COMPANY $200,000,000 10 3/4% SERIES A SENIOR NOTES DUE 2007 PURCHASE AGREEMENT June 4, 1997 New York, New York Dillon, Read & Co. Inc. Bear, Stearns & Co. Inc. c/o Dillon, Read & Co. Inc. 535 Madison Avenue New York, New York 10022 Ladies and Gentlemen: United Refining Company (the "Company"), a Pennsylvania corporation, agrees with you as follows: 1. ISSUANCE OF NOTES. The Company and Kiantone Pipeline Corporation, Kiantone Pipeline Company, United Jet Center, Inc., United Refining Company of Pennsylvania, Kwik-Fil, Inc., Kwik Fill, Inc., Independent Gasoline and Oil Company of Rochester, Inc., Bell Oil Corp., PPC, Inc., Super Test Petroleum, Inc., and Vulcan Asphalt Refining Corporation (collectively, the "Subsidiary Guarantors") proposes to issue and sell to Dillon, Read & Co. Inc. and Bear, Stearns & Co. Inc. (the "Initial Purchasers") an aggregate of $200,000,000 principal amount of 10 3/4% Series A Senior Notes due 2007 (the "Senior Notes"). The Senior Notes will be issued pursuant to an indenture (the "Indenture"), to be dated the Closing Date (as defined below), by and among the Company, the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). The Company's obligations under the Senior Notes will be unconditionally guaranteed on a senior basis by each of the Subsidiary Guarantors pursuant to each of their guarantees (the "Subsidiary Guarantees"). All references herein to the Senior Notes include the related guarantees, unless the context otherwise requires. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Indenture or the Offering Memorandum (as defined below). The Senior Notes will be offered and sold to the Initial Purchasers pursuant to an exemption from the registration 2 -2- requirements under the Securities Act of 1933, as amended (the "Act"). The Company has prepared a preliminary offering memorandum, dated May 16, 1997 (the "Preliminary Offering Memorandum"), and a final offering memorandum, dated and available for distribution on the date hereof (the "Offering Memorandum"), relating to the Company, the Subsidiary Guarantors and the Senior Notes. The Initial Purchasers have advised the Company that the Initial Purchasers intend, as soon as it deems advisable after this Purchase Agreement has been executed and delivered, to resell (the "Exempt Resales") the Senior Notes purchased by the Initial Purchasers under this Purchase Agreement (this "Agreement") in private sales exempt from registration under the Act on the terms set forth in the Offering Memorandum, as amended or supplemented, solely to (i) persons whom the Initial Purchasers reasonably believe to be "qualified institutional buyers," as defined in Rule 144A under the Act ("QIBs"), (ii) institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under Regulation D of the Act) that make certain representations and agreements (each, an "Institutional Accredited Investor") and (iii) other eligible purchasers pursuant to offers and sales that occur outside the U.S. within the meaning of Regulation S under the Act; the persons specified in clauses (i)-(iii) are sometimes collectively referred to herein as the "Eligible Purchasers." Holders (including subsequent transferees) of the Senior Notes will have the registration rights set forth in the registration rights agreement (the "Registration Rights Agreement"), to be dated the Closing Date, in the form of Exhibit A to this Agreement, for so long as such Senior Notes constitute "Transfer Restricted Securities" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company and the Subsidiary Guarantors will agree to (A) file with the Securities and Exchange Commission (the "Commission"), under the circumstances set forth in the Registration Rights Agreement, (i) a registration statement under the Act (the "Exchange Offer Registration Statement") relating to the 10 3/4% Series B Senior Notes due 2007 (the "Series B Senior Notes" and, together with the Senior Notes, the "Notes," which term includes the Subsidiary Guarantees related thereto) to be offered in exchange for the Senior Notes (the "Exchange Offer") and/or (ii) a shelf registration statement pursuant to Rule 415 under the Act (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, the "Registration Statements") relating to the resale by certain holders of the Senior Notes, and (B) use their best efforts to 3 -3- cause such Registration Statements to be declared effective as soon as practicable. This Agreement, the Escrow Agreement, the Notes, the Indenture and the Registration Rights Agreement are hereinafter sometimes referred to collectively as the "Operative Documents." A portion of the net proceeds from the sale of the Senior Notes will be deposited with IBJ Schroder Bank & Trust Company, as escrow agent (the "Escrow Agent") as described in the Offering Memorandum and in accordance with the Escrow Agreement and the Indenture. Upon original issuance of the Senior Notes and until such time as the same is no longer required under the applicable requirements of the Act, the Senior Notes shall bear the following legend: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE U.S. TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE U.S. OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED 4 -4- TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. In connection with the offering of the Notes hereby, the Company will enter into a $35 million senior secured revolving credit facility (the "New Bank Credit Facility"). 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations, warranties and covenants contained in this Agreement, and subject to the terms and conditions contained in this Agreement, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers agree to purchase from the Company, the aggregate principal amount of the Senior Notes. The purchase price for the Senior Notes shall be 10 3/4% of their principal amount. The Company shall cause each Subsidiary Guarantor to unconditionally guarantee on a senior basis by such Subsidiary Guarantor the Company's obligations under the Notes. 3. DELIVERY AND PAYMENT. Delivery of, and payment of the purchase price for, the Senior Notes shall be made at 9:00 a.m., New York City time, on the third business day following the date of this Agreement (the "Closing Date") at the offices of Cahill Gordon & Reindel, LLP, 80 Pine Street, New York, New York 10019. The Closing Date and the location of delivery of and the form of payment for the Senior Notes may be varied by mutual agreement between the Initial Purchasers and the Company. One or more of the Senior Notes in global form or certificated form, as the case may be, registered in such names as the Initial Purchasers may request upon at least one business day's notice prior to the Closing Date, having an aggregate principal amount corresponding to the aggregate principal amount of the Senior Notes sold pursuant to Exempt Resales to QIBs and Institutional Accredited Investors, in the case of the Notes in global form, and to other Eligible Purchasers, in the case of Notes in certificated form sold pursuant to Regulation S, shall be delivered by the Company to the Initial Purchasers (or as the Initial Purchasers direct), against payment by the Initial Purchasers of the purchase price therefor by means of transfer of immediately available funds (including book transfer) reasonably acceptable to the Initial Purchasers and the Company to the order of the Company. The Senior Notes in global form shall be made available to the Initial Purchasers for inspection not later than 9:30 a.m. on the business day immediately preceding the Closing Date. 5 -5- 4. AGREEMENTS OF THE ISSUERS. The Company and the Subsidiary Guarantors covenant and agree with the Initial Purchasers as follows: (a) To furnish the Initial Purchasers and those persons identified by the Initial Purchasers, without charge, with as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments or supplements thereto, as the Initial Purchasers may reasonably request for purposes contemplated by the Act. The Company consents to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant to this Agreement, by the Initial Purchasers in connection with Exempt Resales that are in compliance with Section 5(b) of this Agreement. (b) Not to amend or supplement the Offering Memorandum prior to the Closing Date unless the Initial Purchasers shall previously have been advised of, and shall not have objected to (any such objection not to be unreasonable), such amendment or supplement within a reasonable time, but in any event not longer than five days after being furnished with a copy of such amendment or supplement. The Company shall promptly prepare, upon the Initial Purchasers' reasonable request, any amendment or supplement to the Offering Memorandum that may be necessary or advisable in connection with Exempt Resales. (c) If, during the time that an Offering Memorandum is required to be delivered in connection with any Exempt Resales or market-making transactions after the date of this Agreement and prior to the consummation of the Exchange Offer, any event shall occur that, in the judgment of the Company or in the judgment of counsel to the Initial Purchasers, makes any statement of a material fact in the Offering Memorandum untrue or that requires the making of any additions to or changes in the Offering Memorandum in order to make the statements in the Offering Memorandum, in the light of the circumstances under which they are made, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with all applicable laws, the Company shall promptly notify the Initial Purchasers of such event and prepare an appropriate amendment or supplement to the Offering Memorandum so that (i) the statements in the Offering Memorandum as amended or supplemented will, in the light of the circumstances at the time that the Offering Memorandum is deliv- 6 -6- ered to prospective Eligible Purchasers, not be misleading and (ii) the Offering Memorandum will comply with applicable law. (d) To cooperate with the Initial Purchasers and counsel to the Initial Purchasers in connection with the qualification or registration of the Senior Notes under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may request and to continue such qualification in effect so long as required for the Exempt Resales. Notwithstanding the foregoing, the Company shall not be required to qualify as foreign corporations in any jurisdiction in which it is not so qualified or to file a general consent to service of process in any such jurisdiction or subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (e) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement becomes effective or is terminated, to pay all costs, expenses, fees, disbursements (including fees, expenses and disbursements of counsel) and stamp, documentary or similar taxes imposed by the U.S. incident to and in connection with: (i) the preparation, printing, filing and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including, without limitation, financial statements) and all amendments and supplements thereto, (ii) the preparation and delivery of the Operative Documents and all other agreements, memoranda, correspondence and documents prepared and delivered in connection with this Agreement and with the Exempt Resales, (iii) the issuance, transfer and delivery by the Company and the Subsidiary Guarantors of the Senior Notes and the Subsidiary Guarantees, respectively, to the Initial Purchasers, (iv) the qualification or registration of the Notes for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the cost of printing and mailing a preliminary and final Blue Sky memorandum and the fees and disbursements of counsel to the Initial Purchasers relating thereto), (v) the furnishing of such copies of the Preliminary Offering Memorandum and the Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for use in connection with Exempt Resales, (vi) the preparation of certificates for the Notes (including, without limitation, printing and engraving thereof), (vii) the application for quotation of the Notes in the National Asso- 7 -7- ciation of Securities Dealers, Inc. ("NASD") Automated Quotation - System PORTAL ("PORTAL"), including, but not limited to, all listing fees and expenses, (viii) the approval of the Notes by The Depository Trust Company ("DTC") for "book-entry" transfer, (ix) the rating of the Notes by rating agencies, (x) the fees and expenses of the Trustee and Escrow Agent and its counsel and (xi) the performance by the Company and the Subsidiary Guarantors of their other obligations under the Operative Documents, including, but not limited to, the fees, disbursements and expenses of the Company's counsel and accountants. (f) To use the proceeds from the sale of the Senior Notes in the manner described in the Offering Memorandum under the caption "Use of Proceeds." (g) To do and perform all things required to be done and performed under this Agreement by it prior to or after the Closing Date and to satisfy all conditions precedent on its part to the delivery of the Senior Notes. (h) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Senior Notes in a manner that would require the registration under the Act of the sale of the Senior Notes to the Initial Purchasers or any Eligible Purchasers. (i) From and after the Closing Date, for so long as any of the Notes remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Act and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make available the information required by Rule 144A(d)(4) under the Act to (i) any Holder or beneficial owner of Notes in connection with any sale of such Notes and (ii) any prospective purchaser of such Notes from any such Holder or beneficial owner designated by the Holder or beneficial owner. (j) To comply with all of its agreements set forth in the Registration Rights Agreement and all agreements set forth in the representations letter of the Company to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. 8 -8- (k) To use its best efforts to effect the inclusion of the Senior Notes in PORTAL and to obtain approval of the Notes by DTC for "book-entry" transfer. (l) From and after the Closing Date, for so long as any of the Notes remain outstanding, to deliver without charge to the Initial Purchasers, promptly upon their becoming available, copies of all reports and other communications (financial or otherwise) that the Company shall mail or otherwise make available to its securityholders and all reports or financial statements furnished to or filed by the Company and each of the Subsidiary Guarantors with the Commission or any national securities exchange. (m) Prior to the Closing Date, to furnish to the Initial Purchasers, as soon as they have been prepared by the Company and the Subsidiary Guarantors, a copy of any regularly prepared internal financial statements of the Company and each of the Subsidiary Guarantors for any period subsequent to the period covered by the financial statements appearing in the Offering Memorandum and prior to the Closing Date. (n) Not to distribute prior to the Closing Date any offering material in connection with the offer and sale of the Senior Notes other than the Preliminary Offering Memorandum and the Offering Memorandum. 5. REPRESENTATIONS AND WARRANTIES. (a) Each of the Company and the Subsidiary Guarantors represent and warrant to the Initial Purchasers that: (i) Each of the Preliminary Offering Memorandum and the Offering Memorandum has been prepared in connection with the Exempt Resales. Neither the Preliminary Offering Memorandum nor the Offering Memorandum, or any supplement or amendment thereto, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum, as supplemented or amended, in reliance upon and in conformity with information furnished to the Company in writing by the Initial Purchasers expressly for inclusion in the Preliminary Offering Memorandum or the Offering Memorandum or any sup- 9 -9- plement or amendment thereto. No order asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Act has been issued or threatened. (ii) There are no securities of either the Company or any of the Subsidiary Guarantors that are listed on a national securities exchange registered under Section 6 of the Exchange Act or that are quoted in a United States automated interdealer quotation system. (iii) John A. Catsimatidis beneficially owns 100% of the outstanding capital stock and other securities evidencing equity ownership of the Company and the Company owns 100% of the outstanding capital stock and other securities evidencing equity ownership of the Subsidiary Guarantors, free and clear of any pledge, fiduciary transfer, security interest, claim, lien, limitation on voting rights or encumbrance, and all such securities will have been duly authorized and validly issued, fully paid and nonassessable and will not have been issued in violation of, or subject to, any preemptive or similar rights. There will not be any outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock or other equity interest of any Subsidiary Guarantor. (iv) The Company and each of the Subsidiary Guarantors has been duly incorporated, is validly existing as a corporation in good standing under the laws of its respective jurisdiction of incorporation and has all requisite corporate power and authority, and all necessary authorizations, approvals, orders, licenses, certificates and permits of and from regulatory or governmental officials, bodies and tribunals, except where the failure to obtain such authorizations, approvals, orders, licenses, certificates and permits would not result in a Material Adverse Effect, to (a) carry on its business as it is currently being conducted and as described in the Offering Memorandum and (b) own, lease, license and operate its respective properties in accordance with its business as currently conducted. The Company and each of the Subsidiary Guarantors is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not, either individually or in the aggregate, result in a Material Ad- 10 -10- verse Effect. A "Material Adverse Effect" means any material adverse effect on the business, condition (financial or other), properties, assets, liabilities, results of operations or prospects of the Company and the Subsidiary Guarantors taken as a whole. (v) The Company and each of the Subsidiary Guarantors has all requisite corporate power and authority to execute, deliver and perform all of its obligations under the Operative Documents and to consummate the transactions contemplated by the Operative Documents and, without limitation, the Company has all requisite corporate power and authority to issue, sell and deliver the Notes and each of the Subsidiary Guarantors has all requisite corporate power and authority to execute, deliver and perform all of its obligations under the Subsidiary Guarantees. (vi) This Agreement has been duly and validly authorized, executed and delivered by the Company and each of the Subsidiary Guarantors. (vii) The Indenture has been, or upon the Closing Date will be, duly and validly authorized by the Company and each of the Subsidiary Guarantors and, when duly executed and delivered by the Company and each of the Subsidiary Guarantors, will be a legal, valid and binding obligation of each of the Company and the Subsidiary Guarantors, enforceable against each of them in accordance with its terms, except that enforceability of the Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. The Indenture, when executed and delivered, will conform in all material respects to the description thereof in the Preliminary Offering Memorandum and the Offering Memorandum. (viii) The Senior Notes have been duly and validly authorized for issuance and sale to the Initial Purchasers by the Company and, when issued, authenticated and delivered by the Company against payment by the Initial Purchasers in accordance with the terms of this Agreement and the Indenture, the Senior Notes will be legal, valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except that enforceability of the Senior Notes may be limited by bankruptcy, insol- 11 -11- vency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. The Senior Notes, when issued, authenticated and delivered, will conform in all material respects to the description thereof in the Preliminary Offering Memorandum and the Offering Memorandum. (ix) The Series B Senior Notes have been duly and validly authorized for issuance by the Company and, when issued, authenticated and delivered by the Company in accordance with the terms of the Exchange Offer and the Indenture, the Series B Senior Notes will be legal, valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except that enforceability of the Series B Senior Notes may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. The Series B Senior Notes, when issued, authenticated and delivered, will conform in all material respects to the description thereof in the Preliminary Offering Memorandum and the Offering Memorandum. (x) The Subsidiary Guarantees will be duly and validly authorized by the Subsidiary Guarantors and, when the Notes are executed and delivered in accordance with the terms of the Indenture and the Registration Rights Agreement, will be legal, valid and binding obligations of the Subsidiary Guarantors, enforceable against each of them in accordance with their terms, except that enforceability of the Subsidiary Guarantees may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. The Subsidiary Guarantees, when executed and delivered, will conform in all material respects to the description thereof in the Preliminary Offering Memorandum and the Offering Memorandum. (xi) The Registration Rights Agreement has been, or upon the Closing Date, will be, duly and validly authorized, executed and delivered by the Company and each of the Subsidiary Guarantors and is a legal, valid and bind- 12 -12- ing obligation of the Company and each of the Subsidiary Guarantors, enforceable against each of them in accordance with its terms, except that (a) enforceability of the Registration Rights Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought and (b) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. The Registration Rights Agreement will conform in all material respects to the description thereof in the Preliminary Offering Memorandum and the Offering Memorandum. (xii) None of the Company or the Subsidiary Guarantors is (A) in violation of its charter, constitutive documents or bylaws or (B) in default (or, with notice or lapse of time or both, would be in default) in the performance or observance of any obligation, agreement, covenant or condition contained in any bond, debenture, note, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, authorization, permit, certificate or other agreement or instrument to which any of them is a party or by which any of them is bound or to which any of their assets or properties is subject (collectively, "Agreements"), or (C) in violation of any law, statute, rule, regulation, judgment, order or decree of any domestic or foreign court with jurisdiction over any of them or any of their assets or properties or other governmental or regulatory authority, agency or other body, that, in the case of clauses (B) and (C) above, would result in a Material Adverse Effect. There exists no condition that, with notice, the passage of time or otherwise, would constitute a default by the Company or any of the Subsidiary Guarantors under any such document or instrument or result in the imposition of any penalty or the acceleration of any indebtedness, other than penalties, defaults or conditions that would not result in a Material Adverse Effect. (xiii) The New Bank Credit Facility has been duly and validly authorized, and when executed and delivered by the Company and Kiantone Pipeline Corporation and United Refining Company of Pennsylvania, will constitute the legal, valid and binding obligations of the Company and Kiantone Pipeline Corporation and United Refining Company of Pennsylvania, as applicable, enforceable against the Company 13 -13- and Kiantone Pipeline Corporation and United Refining Company of Pennsylvania, as applicable, in accordance with their terms, except that enforceability of the New Bank Credit Facility may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. The New Bank Credit Facility conforms in all material respects to the description thereof in the Preliminary Offering Memorandum and the Offering Memorandum. (xiv) The Escrow Agreement has been duly and validly authorized, executed and delivered by the Company, and constitutes the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms except that enforceability of the Escrow Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. (xv) The execution, delivery or performance by the Company and the Subsidiary Guarantors (as applicable) of this Agreement and the other Operative Documents to which they are a party does not or will not violate, conflict with or constitute a breach of any of the terms or provisions of, or a default under (or an event that with notice or the lapse of time, or both, would constitute a default), or require consent under, or result in the creation or imposition of a lien, charge or encumbrance on any property or assets of the Company or any of the Subsidiary Guarantors or an acceleration of any indebtedness of the Company or any of the Subsidiary Guarantors pursuant to, (i) the charter, constitutive documents or bylaws of the Company or any of the Subsidiary Guarantors, (ii) any Agreement except for the Existing Facility as defined and described in the Offering Memorandum under the caption "Description of Certain Indebtedness," (iii) any law, statute, rule or regulation applicable to the Company or any of the Subsidiary Guarantors or their assets or properties or (iv) any judgment, order or decree of any domestic or foreign court or governmental agency or authority having jurisdiction over the Company or any of the Subsidiary Guarantors or their assets or properties that, in the case of clauses (ii), (iii) and (iv) above, would result in a Material Adverse Effect. Assuming the accu- 14 -14- racy of the representations and warranties of the Initial Purchasers in Section 5(b) of this Agreement, no consent, approval, authorization or order of, or filing, registration, qualification, license or permit of or with, any court or governmental agency, body or administrative agency, domestic or foreign, is required to be obtained or made by the Company for the execution, delivery and performance by the Company and the Subsidiary Guarantors of this Agreement or any of the other Operative Documents, except (i) such as have been or will be obtained or made prior to Closing, (ii) registration of the Notes under the Act pursuant to the Registration Rights Agreement or (iii) such as may be required by the NASD. No consents or waivers from any other person or entity are required for the execution, delivery and performance of this Agreement or any of the other Operative Documents, the execution, delivery and performance of the New Bank Credit Facility or any of the transactions contemplated thereby. (xvi) The Company has delivered to the Initial Purchasers true and correct executed copies of the New Bank Credit Facility and there have been no amendments, alterations or modifications thereto or waivers of any of the provisions thereof. The representations and warranties of the Company set forth in the New Bank Credit Facility will be true and correct as of the Closing Date (except to the extent that any such representation or warranty was expressly made as of any other date, in which case such representation and warranty was true and correct as of such date). (xvii) There is (i) no action, suit or proceeding before or by any court, arbitrator or governmental agency, body or official, domestic or foreign, now pending or, to the knowledge of the Company or the Subsidiary Guarantors, threatened or contemplated, to which the Company or any of the Subsidiary Guarantors is or may be a party or to which the business, assets or property of such person is or may be subject, (ii) no statute, rule, regulation or order that has been enacted, adopted or issued or, to the knowledge of the Company or the Subsidiary Guarantors, that has been proposed by any governmental body or agency, domestic or foreign, (iii) no injunction, restraining order or order of any nature by a federal or state court or foreign court of competent jurisdiction to which the Company or any of the Subsidiary Guarantors is or may be subject that (x) in the case of clause (i) above, if determined adversely to the Company or the Subsidiary Guarantors, would 15 -15- be reasonably likely to, either individually or in the aggregate, (1) result in a Material Adverse Effect, or (2) interfere with or adversely affect the issuance of the Notes or the Subsidiary Guarantees in any jurisdiction or adversely affect the consummation of the transactions contemplated by any of the Operative Documents and (y) in the case of clauses (ii) and (iii) above, would, either individually or in the aggregate, (1) result in a Material Adverse Effect, or (2) interfere with or adversely affect the issuance of the Notes or the Subsidiary Guarantees in any jurisdiction or adversely affect the consummation of the transactions contemplated by any of the Operative Documents. Every request of any securities authority or agency of any jurisdiction for additional information with respect to Notes that has been received by the Company, the Subsidiary Guarantors or their counsel prior to the date hereof has been, or will prior to the Closing Date be, complied with in all material respects. (xviii) No labor disturbance by the employees of the Company or any of the Subsidiary Guarantors exists or, to the actual knowledge of the Company or the Subsidiary Guarantors, is imminent, that might reasonably be expected to have a Material Adverse Effect; the Company and the Subsidiary Guarantors are in compliance in all respects with, as applicable and except where a failure to so comply would not have a Material Adverse Effect, all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or the Subsidiary Guarantors would have any liability; none of the Company or the Subsidiary Guarantors has incurred or expects to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" that is maintained or contributed to by the Company or the Subsidiary Guarantors that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, that would cause the loss of such qualification. (xix) Except as set forth in the Offering Memorandum, the Company and each of the Subsidiary Guarantors (i) is 16 -16- in compliance with, or not subject to costs or liabilities under, all local, state, provincial, federal and foreign laws, regulations, rules of common law, orders and decrees, as in effect as of the date hereof, and any present judgments and injunctions issued or promulgated thereunder relating to pollution or protection of public and employee health and safety and the environment applicable to it or its business or operations or ownership or use of its property ("Environmental Laws"), other than noncompliance or such costs or liabilities that would not result in a Material Adverse Effect, and (ii) possesses all permits, licenses or other approvals required under applicable Environmental Laws, other than permits, licenses or approvals the lack of which would not result in a Material Adverse Effect. All currently pending and, to their knowledge, threatened proceedings, notices of violation, demands, notices of potential responsibility or liability, suits and existing environmental conditions with respect to which the Company or the Subsidiary Guarantors could reasonably be expected to have any liability are fully and accurately described in all material respects in the Offering Memorandum except as would not have a Material Adverse Effect. (xx) The Company and each of the Subsidiary Guarantors has (i) good and marketable title to all of the properties and assets described in the Offering Memorandum as owned by it and good and marketable title to the leasehold estates in the real and personal property described in the Offering Memorandum as leased by it, free and clear of all Liens (as defined in the Indenture), except for Liens described in the Offering Memorandum, Liens permitted under the Indenture and such Liens as would not have a Material Adverse Effect, (ii) all licenses, certificates, permits, authorizations, approvals, franchises and other rights from, and has made all declarations and filings with, all federal, state, local and foreign authorities, all self-regulatory authorities and all courts and other tribunals (each, an "Authorization") necessary to engage in the business conducted by it in the manner described in the Offering Memorandum, except where failure to hold such Authorizations would not have a Material Adverse Effect, and (iii) no reason to believe that any governmental body or agency, domestic or foreign, is considering limiting, suspending or revoking any such Authorization, other than revocations that would not result in a Material Adverse Effect. Except where the failure to be in full force and effect would not have a Material Adverse Effect, all such 17 -17- Authorizations are valid and in full force and effect and the Company and each of the Subsidiary Guarantors is in compliance in all material respects with the terms and conditions of all such Authorizations and with the rules and regulations of the regulatory authorities having jurisdiction with respect to such Authorizations. All leases to which the Company or any of the Subsidiary Guarantors is a party are valid and binding, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter affecting the enforcement of creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought and no default has occurred and is continuing thereunder, other than defaults that would not result in a Material Adverse Effect. (xxi) The Company and each of the Subsidiary Guarantors owns, possesses or has the right to employ all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, the "Intellectual Property") necessary to conduct the businesses operated by it as described in the Offering Memorandum, other than such Intellectual Property the failure to own, possess or have the right to employ would not result in a Material Adverse Effect. None of the Company or the Subsidiary Guarantors has received any notice of infringement of or conflict with (and neither knows of any such infringement or a conflict with) asserted rights of others with respect to any of the foregoing that, if such assertion of infringement or conflict were sustained, would have a Material Adverse Effect. The use of the Intellectual Property in connection with the business and operations of the Company and the Subsidiary Guarantors does not infringe on the rights of any person. (xxii) All tax returns required to be filed by the Company and each of the Subsidiary Guarantors have been filed in all jurisdictions where such returns are required to be filed; and all taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due or claimed to be due from such entities or that are due and payable have been paid, other than those being contested in good faith and for which reserves have been provided in accordance with generally accepted accounting 18 -18- principles or those currently payable without penalty or interest, except where the failure to make any such filing or payment would not have a Material Adverse Effect. To the knowledge of the Company and each of the Subsidiary Guarantors, there are no material proposed additional tax assessments against any of them or their assets or property. (xxiii) None of the Company or the Subsidiary Guarantors is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), or analogous foreign laws and regulations. (xxiv) Except with respect to the Notes, there are no holders of securities of the Company or any of the Subsidiary Guarantors who have the right to request or demand that the Company or any of the Subsidiary Guarantors register under the Act or analogous foreign laws and regulations any of such securities held by any such holders. (xxv) The Company and each of the Subsidiary Guarantors maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (A) transactions are executed in accordance with management's general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of its financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for its assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxvi) The Company and each of the Subsidiary Guarantors maintains insurance covering its properties, assets, operations, personnel and businesses, and such insurance is of such type and in such amounts in accordance with customary industry practice to protect the Company and the Subsidiary Guarantors and their businesses. None of the Company or the Subsidiary Guarantors has received notice from any insurer or agent of such insurer that any material capital improvements or other material expenditures will have to be made in order to continue any insurance maintained by any of them other than capital improvements 19 -19- and other expenditures that have been budgeted by the Company or the Subsidiary Guarantors, as the case may be. (xxvii) None of the Company, the Subsidiary Guarantors or their Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has (A) taken, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Senior Notes or (B) since the date of the Preliminary Offering Memorandum (x) sold, bid for, purchased or paid any person any compensation for soliciting purchases of the Senior Notes in a manner that would require registration of the Senior Notes under the Act or (y) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company or any of the Subsidiary Guarantors in a manner that would require registration of the Senior Notes under the Act. (xxviii) No registration under the Act of the Senior Notes is required for the sale of the Senior Notes to the Initial Purchasers as contemplated by this Agreement or for the Exempt Resales, assuming in each case that (A) the purchasers who buy the Senior Notes in the Exempt Resales are either QIBs or Accredited Investors and (B) the accuracy of and compliance with the Initial Purchasers' representations, warranties and covenants contained in Section 5(b) of this Agreement. No form of general solicitation or general advertising (prohibited by the Act in connection with offers or sales such as the Exempt Resales) was used by the Company, any of the Subsidiary Guarantors or any of their representatives (provided that no representation is being made in this paragraph (xxviii) with respect to the Initial Purchasers) in connection with the offer and sale of any of the Senior Notes or in connection with Exempt Resales, including, but not limited to, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (xxix) The execution and delivery of this Agreement, the other Operative Documents and the sale of the Notes and Subsidiary Guarantees to be purchased by the QIBs and the Accredited Investors will not involve any prohibited transaction within the meaning of Section 406(a) of ERISA 20 -20- or Section 4975(c)(1)(A)-(D) of the Code. The representation made by the Company and each of the Subsidiary Guarantors in the preceding sentence is made in reliance upon and subject to the accuracy of, and compliance with, the representations and covenants made or deemed made by the QIBs and the Accredited Investors as set forth in the Offering Memorandum under the caption "Transfer Restrictions." (xxx) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, and each amendment or supplement thereto, as of its date, contains the information specified in, and meets the requirements of, Rule 144A(d)(4) under the Act. (xxxi) As of February 28, 1997, neither the Company nor any of the Subsidiary Guarantors had any material liabilities or obligations, direct or contingent, that were not set forth in the Company's consolidated balance sheet as February 28, 1997, or in the notes thereto. Since February 28, 1997 and up to the Closing Date, except as set forth in the Offering Memorandum, (a) none of the Company or the Subsidiary Guarantors has (1) incurred any liabilities or obligations, direct or contingent, that are not in the ordinary course of business that would have a Material Adverse Effect or (2) entered into any material transaction not in the ordinary course of business, and (b) there has not been any event or development in respect of the business, development or financial condition of the Company that would, either individually or in the aggregate, result in a Material Adverse Effect. (xxxii) Neither the Company nor any of the Subsidiary Guarantors (nor any agent thereof acting its behalf has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System or analogous foreign laws and regulations, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date. (xxxiii) The accountants who have certified or shall certify the financial statements included or to be included as part of the Offering Memorandum are independent accountants within the meaning of the Act. The historical financial statements of the Company comply as to form in 21 -21- all material respects with the requirements applicable to registration statements on Form S-1 under the Act and present fairly in all material respects the consolidated financial position and results of operations of the Company at the respective dates and for the respective periods indicated. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods presented (except as disclosed in the Offering Memorandum) and comply as to form with the rules and regulations promulgated under the Act. The pro forma financial statements included in the Offering Memorandum have been prepared on a basis consistent with such historical statements, except for the pro forma adjustments specified therein, and give effect to assumptions made on a reasonable basis and present fairly in all material respects the historical and proposed transactions contemplated by the Offering Memorandum, this Agreement and the other Operative Documents. The other financial and statistical information and data included in the Offering Memorandum, historical and pro forma, are accurately presented in all material respects and prepared on a basis consistent with the financial statements and the books and records of the Company and the Subsidiary Guarantors. (xxxiv) None of the Company or the Subsidiary Guarantors (A) is "insolvent" as that term is defined in Section 101(32) of the United States Bankruptcy Code (the "Bankruptcy Code") (11 U.S.C. Section 101(32)), Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (B) has "unreasonably small capital" as that term is used in Section 548(a)(2)(ii) of the Bankruptcy Code or Section 5 of the UFCA, (C) is engaged or about to engage in a business or transaction for which its remaining property is "unreasonably small" in relation to the business or transaction as that term is used in Section 4 of the UFTA or (D) is unable to pay its debts as they mature or become due, within the meaning of Section 548(a)(2)(B)(iii) of the Bankruptcy Code, Section 4 of the UFTA and Section 6 of the UFCA. The Company and each of the Subsidiary Guarantors now owns assets having a value both at "fair valuation" and at "present fair saleable value" greater than the amount required to pay its "debts" as such terms are used in Section 2 of the UFTA and Section 2 of the UFCA. None of the Company or the Subsidiary Guarantors will be rendered insolvent by the execution and delivery of any of 22 -22- the Operative Documents or the New Bank Credit Facility or by the transactions contemplated hereunder or thereunder. (xxxv) Except as described in the section entitled "Certain Relationships and Related Transactions" in the Offering Memorandum, there are no contracts, agreements or understandings between the Company or any of the Subsidiary Guarantors and any other person other than the Initial Purchasers that would give rise to a valid claim against the Company, the Subsidiary Guarantors or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the issuance, purchase and sale of the Notes. (xxxvi) The Company has the authorized, issued and outstanding capitalization set forth in the Offering Memorandum under the caption "Capitalization"; all of the outstanding capital stock of the Company has been duly authorized and validly issued, is or will be on the Closing Date fully paid and nonassessable and was not issued in violation of any preemptive or similar rights. (xxxvii) The statistical and market-related data included in the Offering Memorandum are based on or derived from sources that the Company believes to be reliable and accurate in all material respects and represent the Company's good faith estimates that are made on the basis of data derived from such sources. (xxxviii) Each certificate signed by any officer of the Company or any of the Subsidiary Guarantors and delivered to the Initial Purchasers or counsel for the Initial Purchasers pursuant to, or in connection with, this Agreement shall be deemed to be a representation and warranty by the Company or such Subsidiary Guarantor to the Initial Purchasers as to the matters covered by such certificate. The Company and each of the Subsidiary Guarantors acknowledges that the Initial Purchasers and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 8 of this Agreement, the various law firms acting as counsel to the Company and each of the Subsidiary Guarantors and counsel to the Initial Purchasers will rely upon the accuracy and truth of the foregoing representations and the Company and each Subsidiary Guarantor hereby consent to such reliance. (b) The Initial Purchasers represent, warrant and covenant (as to themselves only) to the Company that they are 23 -23- QIBs with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the securities. The Initial Purchasers represent, warrant and agree (as to themselves only) with the Company that (i) they have not and will not solicit offers for, or offer or sell, the Notes by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act and (ii) they have and will solicit offers for the Notes only from, and will offer the Notes only to, (x) persons whom the Initial Purchasers reasonably believe to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to the Initial Purchasers that each such account is a QIB to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A, (y) a limited number of other institutional investors reasonably believed by the Initial Purchasers to be Institutional Accredited Investors that, prior to their purchase of the Notes, deliver to the Initial Purchasers a letter containing the representations and agreements set forth in Annex C to the Offering Memorandum or (z) persons other than U.S. persons outside the U.S. in reliance on Regulation S. The Initial Purchasers represent and warrant that the source of funds being used by them to acquire the Notes does not include the assets of any "employee benefit plan" (within the meaning of Section 3 of ERISA) or any "plan" (within the meaning of Section 4975 of the Code). The Initial Purchasers understand that the Company and, for purposes of the opinion to be delivered to them pursuant to Section 8(f) hereof, counsel to the Company will rely upon the accuracy and truth of the foregoing representations, and the Initial Purchasers hereby consent to such reliance. 6. INDEMNIFICATION. (a) Each of the Company and the Subsidiary Guarantors, on a joint and several basis, agrees to indemnify and hold harmless the Initial Purchasers, each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, the agents, employees, officers and directors of the Initial Purchasers and the agents, employees, officers and directors of any such controlling person from and against any and all losses, liabilities, claims, damages and expenses whatsoever (including but not limited to reasonable attorneys' fees 24 -24- and any and all reasonable expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all reasonable amounts paid in settlement of any claim or litigation) to which they or any of them may become subject under the Act, the Exchange Act or otherwise insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and Subsidiary Guarantors will not be liable (i) in any such case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company by or on behalf of the Initial Purchasers expressly for use therein or (ii) with respect to the Preliminary Offering Memorandum, to the extent that any such loss, claim, damage or liability results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, such preliminary Offering Memorandum that was corrected in the final Offering Memorandum, if the Company or the Subsidiary Guarantors shall sustain the burden of proving that such Indemnified Person sold Notes to the person alleging such loss, claim, damage or liability without sending or giving, at or prior to the written confirmation of such sale, a copy of the Prospectus or of the Offering Memorandum as then amended or supplemented even though the Company and the Subsidiary Guarantors had previously furnished copies thereof to such Indemnified Person. This indemnity agreement will be in addition to any liability that the Company may otherwise have, including, but not limited to, under this Agreement. (b) The Initial Purchasers agree, severally and not jointly, to indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and each of its agents, employees, officers and directors and the agents, employees, officers and directors of such controlling person from and against any losses, liabilities, claims, damages and reasonable expenses whatsoever (including but not lim- 25 -25- ited to reasonable attorneys' fees and any and all reasonable expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever and any and all reasonable amounts paid in settlement of any claim or litigation) to which they or either of them may become subject under the Act, the Exchange Act or otherwise insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company by the Initial Purchasers expressly for use therein. The Company and the Initial Purchasers acknowledge that the information set forth in Section 9 is the only information furnished in writing by the Initial Purchasers to the Company expressly for use in the Offering Memorandum. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, suit or proceeding (collectively, an "action"), such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement of such action (but the failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability that it may have under this Section 6 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may otherwise have). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement of such action, the indemnifying party will be entitled to participate in such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense of such action with counsel satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their 26 -26- own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them that are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such reasonable fees and expenses of counsel shall be borne by the indemnifying parties. In no event shall the indemnifying party be liable for the fees and expenses of more than one counsel (together with appropriate local counsel) at any time for all indemnified parties in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. 7. CONTRIBUTION. In order to provide for contribution in circumstances in which the indemnification provided for in Section 6 of this Agreement is for any reason held to be unavailable from the indemnifying party, or is insufficient to hold harmless a party indemnified under Section 6 of this Agreement, the Company, the Subsidiary Guarantors and the Initial Purchasers shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any reasonable investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action or any claims asserted) to which the Company and the Initial Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Senior Notes or, if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connec- 27 -27- tion with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the offering of Senior Notes (net of discounts and commissions but before deducting expenses) received by the Company and the Subsidiary Guarantors and (y) the total discounts and commissions received by the Initial Purchasers as set forth in the table on the cover page of the Offering Memorandum. The relative fault of the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission. The Company, the Subsidiary Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 7, (i) in no case shall the Initial Purchasers be required to contribute any amount in excess of the amount by which the total discount and commissions applicable to the Senior Notes pursuant to this Agreement exceeds the amount of any damages that the Initial Purchasers have otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of this Section 7. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action against such party in respect of 28 -28- which a claim for contribution may be made against another party or parties under this Section 7, notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 6 for purposes of indemnification. No party shall be liable for contribution with respect to any action or claim settled without its written consent, provided, however, that such written consent was not unreasonably withheld. 8. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of the Initial Purchasers to purchase and pay for the Senior Notes, as provided for in this Agreement, shall be subject to satisfaction of the following conditions prior to or concurrently with such purchase: (a) All of the representations and warranties of the Company and the Subsidiary Guarantors contained in this Agreement shall be true and correct on the date of this Agreement and on the Closing Date. The Company and the Subsidiary Guarantors shall have performed or complied with all of the agreements contained in this Agreement and required to be performed or complied with by then at or prior to the Closing Date. (b) No stop order suspending the qualification or exemption from qualification of the Senior Notes in any jurisdiction shall have been issued and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (c) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency that would, as of the Closing Date, prevent the issuance of the Senior Notes or the Exchange Offer; no action, suit or proceeding shall have been commenced and be pending against or affecting or, to the best knowledge of the Company and the Subsidiary Guarantors, threatened against the Company and/or the Subsidiary Guarantors before any court or arbitrator or any governmental body, agency or official that, if adversely determined, would result in a Material Adverse Effect. 29 -29- (d) Since February 28, 1997, except as contemplated by the Offering Memorandum, neither the Company nor any of the Subsidiary Guarantors had any material liabilities or obligations, direct or contingent, that were not set forth in the Company's consolidated balance sheet as of February 28, 1997 or in the notes thereto. Since February 28, 1997 and up to the Closing Date, except as set forth in the Offering Memorandum, (a) none of the Company or the Subsidiary Guarantors has (1) incurred any liabilities or obligations, direct or contingent, that are material to any of them (other than obligations to sell petroleum products in the ordinary course of business) or (2) entered into any material transaction not in the ordinary course of business, and (b) there has not been any event or development that would result in a Material Adverse Effect. (e) The Initial Purchasers shall have received certificates, dated the Closing Date, signed by (i) the Chief Executive Officer and (ii) the chief financial or accounting officer of the Company confirming, as of the Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8. (f) The Initial Purchasers shall have received on the Closing Date an opinion dated the Closing Date, addressed to the Initial Purchasers, of Lowenthal, Landau, Fischer & Bring, P.C., counsel to the Company, in form and substance as set forth in Exhibit B hereto. (g) The Initial Purchasers shall have received on the Closing Date an opinion (satisfactory in form and substance to the Initial Purchasers) dated the Closing Date of Cahill Gordon & Reindel, special counsel to the Initial Purchasers, covering such matters as are customarily covered in such opinions. (h) Prior to the execution of this Agreement, the Initial Purchasers shall have received a "comfort letter" from BDO Seidman LLP, independent public accountants for the Company, dated as of the date of this Agreement, addressed to the Initial Purchasers and in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers. In addition, as of the Closing Date, the Initial Purchasers shall have received a "bring-down comfort letter" from BDO Seidman LLP in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers covering the same items and matters as covered in the "comfort letter" but as of a 30 -30- date that is not more than three days prior to the date thereof and any changes and additions to the Preliminary Offering Memorandum that were made producing the Offering Memorandum. (i) The Initial Purchasers shall have received from Ernst & Young/Wright Killen (satisfactory in form and substance to the Initial Purchasers and counsel to the Initial Purchasers) a report and analysis of the strategy and economics of the refinery expansion and retail capital improvements outlined in the Offering Memorandum. (j) The Company, the Subsidiary Guarantors and the Trustee shall have entered into the Indenture and the Initial Purchasers shall have received counterparts, conformed as executed, thereof. (k) The Company and the Subsidiary Guarantors shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received counterparts, conformed as executed, thereof. (l) The Company, the Subsidiary Guarantors and the Escrow Agent shall have entered into the Escrow Agreement and the Initial Purchasers shall have received counterparts, conformed as executed, thereof. (m) The Company shall have entered into the New Bank Credit Facility, which shall be in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers; and the Initial Purchasers shall have received counterparts, conformed as executed, thereof. (n) The Initial Purchasers shall have been furnished with certified copies of such documents as they may reasonably request, including, but not limited to, certified copies of the New Bank Credit Facility, and all closing documents from the closings of the transactions contemplated hereby. (o) Cahill Gordon & Reindel, counsel to the Initial Purchasers, shall have been furnished with such documents as they may reasonably request to enable them to review or pass upon the matters referred to in this Section 8 and in order to evidence the accuracy, completeness or satisfaction in all material respects of any of the representations, warranties or conditions contained in this Agreement. 31 -31- If any of the conditions specified in this Section 8 shall not have been fulfilled when and as required by this Agreement to be fulfilled, this Agreement may be terminated by the Initial Purchasers on notice to the Company at any time at or prior to the Closing Date, and such termination shall be without liability of any party to any other party except that the Company shall reimburse the Initial Purchasers for all of their reasonable out-of-pocket expenses, including the reasonable expense of Initial Purchasers' counsel, incurred by the Initial Purchasers in connection with this Agreement. Notwithstanding any such termination, the provisions of Sections 4(e), 6, 7, 10, 11(d) and 14 shall remain in effect. The Company's obligation under this Agreement to sell the Senior Notes to the Initial Purchasers on the Closing Date is subject to the Initial Purchasers purchasing and paying for all of the Senior Notes. 9. INITIAL PURCHASERS' INFORMATION. The Company and the Initial Purchasers severally acknowledge that the statements with respect to the offer and sale of the Senior Notes set forth in the first sentence of the second paragraph under the caption "Plan of Distribution" in the Offering Memorandum constitute the only information furnished in writing by the Initial Purchasers expressly for use in the Offering Memorandum. 10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and warranties, covenants and agreements contained in this Agreement, including the agreements contained in Sections 4(e) and 11(d), the indemnity agreements contained in Section 6 and the contribution agreements contained in Section 7 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Initial Purchasers or any controlling person thereof or by or on behalf of the Company, any of the Subsidiary Guarantors or any controlling person of any thereof, and shall survive delivery of and payment for the Senior Notes to and by the Initial Purchasers. The representations contained in Section 5 and the agreements contained in Sections 4(e), 6, 7, 11(d) and 14 shall survive the termination of this Agreement, including pursuant to Sections 8 and 11. 11. EFFECTIVE DATE OF AGREEMENT; TERMINATION. (a) This Agreement shall become effective upon execution and delivery of a counterpart hereof by each of the parties hereto. 32 -32- (b) The Initial Purchasers shall have the right to terminate this Agreement at any time prior to the Closing Date by notice to the Company from the Initial Purchasers, without liability (other than with respect to Sections 6 and 7) on the Initial Purchasers' if, on or prior to such date, (i) the Company or any of the Subsidiary Guarantors shall have failed, refused or been unable to perform in any material respect any agreement on its part to be performed under this Agreement, (ii) any other condition of the obligations of the Initial Purchasers under this Agreement as provided in Section 8 is not fulfilled when and as required in any material respect, (iii) trading in securities generally on the New York Stock Exchange or the American Stock Exchange shall have been suspended or materially limited, or minimum prices shall have been established on such exchange by the Commission, or by such exchange or other regulatory body or governmental authority having jurisdiction, (iv) a general banking moratorium shall have been declared by federal or New York authorities, or if a moratorium in foreign exchange trading by major international banks or persons shall have been declared, (v) there is an outbreak or escalation of armed hostilities involving the United States on or after the date of this Agreement, or if there has been a declaration by the United States of a national emergency or war, the effect of which shall be, in the Initial Purchasers' judgment, to make it inadvisable or impracticable to proceed with the offering or delivery of the Senior Notes on the terms and in the manner contemplated in the Offering Memorandum or (vi) there shall have been such a material adverse change in general economic, political or financial conditions or the effect of international conditions on the financial markets in the United States shall be such as, in the Initial Purchasers' judgment, to make it inadvisable or impracticable to proceed with the offering or delivery of the Senior Notes on the terms and in the manner contemplated in the Offering Memorandum. (c) Any notice of termination pursuant to this Section 11 shall be given at the address specified in Section 12 below by telephone, telex, telephonic facsimile or telegraph, confirmed in writing by letter. (d) If this Agreement shall be terminated pursuant to clause (i) or (ii) of Section 11(b), or if the sale of the Senior Notes provided for in this Agreement is not consummated because any condition to the obligations of the Initial Purchasers set forth in this Agreement is not 33 -33- satisfied or because of any refusal, inability or failure on the part of either of the Company or any Subsidiary Guarantor to perform any agreement in this Agreement or comply with any provision of this Agreement, the Company will, subject to demand by the Initial Purchasers, reimburse the Initial Purchasers for all of its reasonable out-of-pocket expenses (including the reasonable fees and expenses of the Initial Purchasers' counsel) incurred in connection with this Agreement. 12. NOTICE. All communications with respect to or under this Agreement, except as may be otherwise specifically provided in this Agreement, shall be in writing and, if sent to the Initial Purchasers, shall be mailed, delivered, or telexed, telegraphed or telecopied and confirmed in writing to Dillon, Read & Co. Inc., 535 Madison Avenue, New York, New York 10022 (telephone: (212) 906-7000), Attention: Corporate Finance Department, telecopy number: (212) 593-0164; and if sent to the Company or the Subsidiary Guarantors, shall be mailed, delivered or telexed, telegraphed or telecopied and confirmed in writing to United Refining Company, 15 Bradley Street, Warren, Pennsylvania 16365 (telephone: (814) 726-4655), Attention: Myron Turfitt, telecopy number: (814) 723-4371 and Lowenthal, Landau, Fischer & Bring, P.C., 250 Park Avenue, 10th floor, New York, New York 10177 (telephone: (212) 986-1116, telecopy number: (212) 986-0604. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged if telecopied; and one business day after being timely delivered to a next-day air courier. 13. PARTIES. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Initial Purchasers and the Company and the Subsidiary Guarantors and the controlling persons and agents referred to in Sections 6 and 7, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of Senior Notes from the Initial Purchasers. 14. CONSTRUCTION. This Agreement shall be construed in accordance with the internal laws of the State of New York (without giving effect to any provisions thereof relating to 34 -34- conflicts of law) and each of the parties hereto consent to the jurisdiction of the courts of the State of New York. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York and the U.S. Federal Courts sitting in the City of New York for the purposes of any suit, action or proceeding arising out of or relating to this Indenture. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Initial Purchasers to bring proceedings against the Company in the courts of any other jurisdiction. 15. CAPTIONS. The captions included in this Agreement are included solely for convenience of reference and are not to be considered a part of this Agreement. 16. COUNTERPARTS. This Agreement may be executed in various counterparts that together shall constitute one and the same instrument. UNITED REFINING COMPANY By:________________________ Name: Title: KIANTONE PIPELINE CORPORATION By:________________________ Name: Title: KIANTONE PIPELINE COMPANY By:________________________ Name: Title: 35 -35- UNITED JET CENTER, INC. By:________________________ Name: Title: UNITED REFINING COMPANY OF PENNSYLVANIA By:________________________ Name: Title: KWIK FILL, INC. By:________________________ Name: Title: INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. By:_________________________ Name: Title: BELL OIL CORP. By:_________________________ Name: Title: PPC, INC. By:_________________________ Name: Title: 36 -36- SUPER TEST PETROLEUM, INC. By:_________________________ Name: Title: KWIK-FIL, INC. By:_________________________ Name: Title: VULCAN ASPHALT REFINING CORPORATION By:_________________________ Name: Title: Confirmed and accepted as of the date first above written: DILLON, READ & CO. INC. By:________________________ Name: Title: 37 Exhibit A Form of Registration Rights Agreement EX-10.2 28 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT Dated as of June 9, 1997 by and among UNITED REFINING COMPANY THE SUBSIDIARY GUARANTORS NAMED HEREIN and DILLON, READ & CO. INC. and BEAR, STEARNS & CO. INC. 2 This Registration Rights Agreement (the "Agreement") is made and entered into as of June 9, 1997 by and among UNITED REFINING COMPANY, a Pennsylvania corporation (the "Company"), the SUBSIDIARY GUARANTORS (as defined herein) and DILLON, READ & CO. INC. and BEAR, STEARNS & CO. INC. (the "Initial Purchasers"). The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers to purchase $175,000,000 of the Company's 10 3/4% Series A Senior Notes due 2007 under the Purchase Agreement, dated as of June 4, 1997 (the "Purchase Agreement"), by and among the Company and the Initial Purchasers. The Company, the Subsidiary Guarantors and the Initial Purchasers hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Act: The Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission pursuant thereto. Action: As defined in Section 8(c) of this Agreement. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Closing Date: The date that the Notes are purchased by the Initial Purchasers pursuant to the Purchase Agreement. Commission: The Securities and Exchange Commission. Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) of this Agreement and (iii) the delivery by the Company to the Registrar under the Indenture of New Notes in the same aggregate principal amount as the aggregate principal amount of Old Notes that were so tendered. 3 -2- Damages Payment Date: With respect to the Notes, each Interest Payment Date. Effectiveness Target Date: As defined in Section 5 of this Agreement. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission pursuant thereto. Exchange Offer: The registration under the Act by the Company and the Subsidiary Guarantors of the New Notes pursuant to a Registration Statement pursuant to which the Company and the Subsidiary Guarantors offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Old Notes that are Transfer Restricted Securities held by such Holders for New Notes in an aggregate principal amount equal to the aggregate principal amount of the Old Notes that are Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Notes to (i) certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, (ii) to a limited number of certain institutional "accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of Regulation D under the Act and (iii) other eligible purchasers pursuant to Regulation S under the Act. Holders: As defined in Section 2(b) of this Agreement. Indenture: The Indenture, dated as of June , 1997, by and among the Company, the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with its terms. Initial Purchasers: Dillon, Read & Co. Inc. and Bear, Stearns & Co. Inc. Interest Payment Date: As defined in the Notes. 4 -3- NASD: National Association of Securities Dealers, Inc. New Notes: The Company's 10 3/4% Series B Senior Notes due 2007 to be issued pursuant to the Indenture in connection with the Exchange Offer and evidencing the same debt as the Old Notes, including the guarantees by the Subsidiary Guarantors. Notes: Old Notes and New Notes. Old Notes: The Company's 10 3/4% Series A Senior Notes due 2007 to be issued pursuant to the Indenture on the Closing Date, including the guarantees by the Subsidiary Guarantors. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments and supplements thereto, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such Prospectus. Registration Default: As defined in Section 5 of this Agreement. Registration Statement: Any registration statement of the Company and the Subsidiary Guarantors relating to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement that is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including pre- and post-effective amendments) and all exhibits and material incorporated by reference or deemed to be incorporated by reference, if any, therein. Shelf Filing Deadline: As defined in Section 4(a) of this Agreement. Shelf Registration Statement: As defined in Section 4(a) of this Agreement. 5 -4- Subsidiary: With respect to any Person, any other Person of which a majority of the equity ownership or the voting securities is at the time owned, directly or indirectly, by such Person or by one or more other subsidiaries of such Person or a combination thereof. Subsidiary Guarantors: Each Subsidiary of the Company that, pursuant to the Indenture, is, or is required to become, a guarantor of the obligations of the Company under the Notes and the Indenture. TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section 77aaa-77bbbb), as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note until the earliest to occur of (i) the date on which each such Old Note has been exchanged by a person other than a Broker-Dealer for a New Note in the Exchange Offer, (ii) following the exchange by a Broker-Dealer in the Exchange Offer of an Old Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such Broker-Dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective Registration Statement. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person beneficially owns Transfer Restricted Securities. 6 -5- SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless, due to a change in law or Commission policy after the date hereof, the Exchange Offer shall not be permissible under applicable federal law or Commission policy, the Company and the Subsidiary Guarantors shall (i) cause to be filed with the Commission as soon as practicable on or prior to 90 days after the Closing Date, a Registration Statement under the Act relating to the New Notes and the Exchange Offer and (ii) use their best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable on or prior to 150 days after the Closing Date. In connection with the foregoing, the Company and the Subsidiary Guarantors shall (A) file all pre-effective amendments to such Registration Statement as may be necessary to cause such Registration Statement to become effective, (B) if applicable, file a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Act, (C) cause all necessary filings in connection with the registration and qualification of the New Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer (provided, however, that the Company and the Subsidiary Guarantors shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to take any action that would subject them to general service of process or taxation in any jurisdiction where they are not so subject) and (D) upon the effectiveness of such Registration Statement, commence the Exchange Offer and use their best efforts to issue on or prior to 60 days after the date on which such Registration Statement is declared effective by the Commission, New Notes in exchange for all Old Notes tendered in the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the New Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of New Notes held by Broker-Dealers as contemplated by Section 3(c) below. If, after such Exchange Offer Registration Statement initially is declared effective by the Commission, the Exchange Offer or the issuance of New Notes under the Exchange Offer or the resale of New Notes received by Broker-Dealers in the Exchange Offer as contemplated by Section 3(c) below is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Registration Statement shall be deemed not to have become effective for purposes of this Agreement during the period that such stop order, injunction or other similar order or requirement shall remain in effect. 7 -6- (b) The Company shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days nor longer than 90 days. The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. The Company and the Subsidiary Guarantors shall only offer to exchange New Notes for Old Notes in the Exchange Offer, and only the New Notes shall be registered under the Exchange Offer Registration Statement. The Company and the Subsidiary Guarantors shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 60 business days after such effective date. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus included in the Exchange Offer Registration Statement that any Broker-Dealer that holds Old Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Old Notes pursuant to the Exchange Offer; provided, however, that such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the New Notes received by such Broker-Dealer in the Exchange Offer. Such "Plan of Distribution" section shall allow the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Act, including Participating Broker-Dealers, and shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Subsidiary Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result 8 -7- of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time. The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such period in order to facilitate such resales. (d) The Company and the Subsidiary Guarantors shall not consummate the Exchange Offer later than 210 days following the Closing Date. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company and the Subsidiary Guarantors are not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities shall notify the Company within 20 business days of the Consummation of the Exchange Offer that such Holder (A) is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) is a Broker-Dealer and holds Old Notes (including the Initial Purchasers who holds Old Notes as part of an unsold allotment from the original offering of the Notes) acquired directly from the Company or one of its affiliates or (iii) the Company and the Subsidiary Guarantors do not consummate the Exchange Offer within 60 days following the effectiveness date of the Exchange Offer Registration Statement, then the Company and the Subsidiary Guarantors shall (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement"), on or prior to the earliest to occur of (1) the 60th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement or (2) the 60th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) of this Agreement, and (y) use its best efforts 9 -8- to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 150th day after the Shelf Filing Deadline. The Company and the Subsidiary Guarantors shall use its best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) of this Agreement to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a) and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a continuous period of two years following the date on which such Shelf Registration Statement becomes effective under the Act or such shorter period that will terminate when all the Notes covered by the Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information regarding such Holder as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included in such Shelf Registration Statement. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 60 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or usable in connection with resales of Transfer Re- 10 -9- stricted Securities during the periods required by this Agreement (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company hereby agrees to pay liquidated damages to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Notes constituting Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Notes constituting Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.30 per week per $1,000 in principal amount of Notes constituting Transfer Restricted Securities. Notwithstanding the foregoing, the Company shall not be required to pay liquidated damages to each Holder of Transfer Restricted Securities if the Registration Default arises from the failure of the Company to file, or cause to become effective, a Shelf Registration Statement within the time period required by Section 4 of this Agreement and such Registration Default is by reason of the failure of the Holders to provide the information regarding the Holder reasonably requested by the Company, the NASD or any other regulatory agency having jurisdiction over any of the Holders at least 10 business days prior to such Registration Default. All accrued liquidated damages shall be paid by the Company on each Damages Payment Date to the Holders by wire transfer of immediately available funds or by federal funds check and to the Holders of certificated securities by mailing a check to such Holders' registered addresses. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of liquidated damages with respect to such Transfer Restricted Securities will cease. All obligations of the Company set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Transfer Restricted Security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all of the provisions of Sec- 11 -10- tion 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If, due to a change in law or Commission policy after the date hereof, in the reasonable opinion of special counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable federal law or Commission policy, the Company hereby agrees to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Subsidiary Guarantors to Consummate an Exchange Offer for such Old Notes. The Company hereby agrees to pursue the issuance of such a no-action letter or favorable decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission an analysis prepared by special counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission of such submission. The Initial Purchasers shall be given prior notice of any action taken by the Company under this clause (i). (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company or any of the Subsidiary Guarantors, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Notes to be issued in the Exchange Offer and (C) it is acquiring the New Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company' preparations for the Exchange Offer. 12 -11- (iii) The Company and the Initial Purchasers acknowledge that the staff of the Commission has taken the position that any broker-dealer that owns New Notes that were received by such broker-dealer for its own account in the Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Act and must deliver a prospectus meeting the requirements of the Act in connection with any resale of such New Notes (other than a resale of an unsold allotment resulting from the original offering of the Notes). The Company and the Initial Purchasers also acknowledge that it is the Commission staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the New Notes, without naming the Participating Broker-Dealers or specifying the amount of New Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligations under the Act in connection with resales of New Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the Act. (b) Shelf Registration Statement. In the event that a Shelf Registration Statement is required by this Agreement, the Company and the Subsidiary Guarantors shall comply with all the provisions of Section 6(c) of this Agreement and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution of such Transfer Restricted Securities and, in connection therewith, the Company and the Subsidiary Guarantors will as expeditiously as possible prepare and file with the Commission a Shelf Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution of such Transfer Restricted Securities. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus, to the extent that the same are required to be available to permit resales of Notes by Broker-Dealers), the Company and the Subsidiary Guarantors shall: 13 -12- (i) use their best efforts to keep such Registration Statement continuously effective for the applicable time period required hereunder and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of the Subsidiary Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall promptly notify the Holders to suspend use of the Prospectus, and the Holders shall suspend use of the Prospectus, and such Holders shall not communicate non-public information to any third party, in violation of the securities laws, until the Company and the Subsidiary Guarantors have made an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), the Company and the Subsidiary Guarantors shall use their best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to such Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 of this Agreement, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act during the applicable time period required hereunder and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act and the Exchange Act with respect to the disposition of all Transfer Restricted Securities covered by such Registration Statement during such period in accordance with the intended method or methods of distribution by the sellers of such securities set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; 14 -13- (iii) advise the underwriter(s), if any, the Initial Purchasers, and, in the case of a Shelf Registration Statement, each of the selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating to such Registration Statement or Prospectus, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement to such Registration Statement or Prospectus, as the case may be, or any document incorporated by reference in such Registration Statement or Prospectus untrue in any material respect, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements in such Registration Statement or Prospectus not misleading and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Subsidiary Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the underwriter(s), if any, the Initial Purchasers and, in the case of a Shelf Registration Statement, each of the selling Holders before filing with the Commission, copies of any Registration Statement or any Prospectus included in such Registration 15 -14- Statement or Prospectus or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the reasonable review of such underwriter(s), if any, the Initial Purchasers, and such Holders for a period of at least five business days, and the Company and the Subsidiary Guarantors will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus, as the case may be, (including all such documents incorporated by reference) to which any underwriter, Initial Purchasers or selling Holder shall reasonably object within five business days after the receipt of such Registration Statement or Prospectus. A selling Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, Prospectus, amendment or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, (a) provide copies of such document to the selling Holders and to the underwriter(s), if any, (b) make the Company's and the Subsidiary Guarantors' representatives available for discussion of such document and other customary due diligence matters; provided that such discussion and due diligence shall be coordinated on behalf of the selling Holders by one counsel designated by and on behalf of such selling Holders and (c) include such information in such document prior to the filing of such document as such selling Holders or underwriter(s), if any, may reasonably request; (vi) make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such selling Holders or any of the underwriter(s), if any, at the offices where normally kept, during reasonable business hours, all relevant financial and other records, pertinent corporate documents and properties of the Company and the Subsidiary Guarantors and cause the Company's and the Subsidiary Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing 16 -15- thereof and prior to its effectiveness; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons, unless and to the extent that (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of the Shelf Registration Statement or the use of any Prospectus), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such person or (iv) such information becomes available to such person from a source other than the Company and its Subsidiaries and such source is not bound by a confidentiality agreement; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid for Transfer Restricted Securities and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 6(c)(vii) that would, in the opinion of counsel for the Company, violate applicable law; (viii) furnish to each underwriter, if any, the Initial Purchasers and upon request to the Company to a selling Holder without charge, at least one conformed copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including, upon the request of such Person, all documents incorporated by ref- 17 -16- erence therein and all exhibits to the extent requested (including exhibits incorporated therein by reference); (ix) deliver to each selling Holder, each of the underwriter(s), if any, and the Initial Purchasers, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company and the Subsidiary Guarantors hereby consent to the use of the Prospectus and any amendment or supplement to the Prospectus by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities in accordance with the terms thereof and with U.S. Federal securities laws and Blue Sky laws covered by the Prospectus or any amendment or supplement thereto; (x) enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings of securities of this type) and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all as may be reasonably requested by any Holder of Transfer Restricted Securities or the underwriter(s), if any, in connection with any sale or resale of Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Subsidiary Guarantors shall (i) make such representations and warranties to the Holders of such Transfer Restricted Securities and the underwriters, if any, with respect to the business of the Company and its Subsidiaries (including with respect to businesses or assets acquired or to be acquired by any of them), and the Shelf Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when customarily requested; (ii) obtain opinions of counsel to the Company and the Subsidiary Guarantors and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the underwriters, if any, and special counsel to the Holders of the Transfer Restricted Securities being sold), addressed to 18 -17- each selling Holder of Transfer Restricted Securities and each of the underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters, if any, and special counsel to Holders of Transfer Restricted Securities; (iii) use their best efforts to obtain customary "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company or any such subsidiary for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed (where reasonably possible) to each selling Holder of Transfer Restricted Securities and each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the selling Holders and the underwriters, if any, than those set forth in Section 8 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Transfer Restricted Securities covered by such Shelf Registration Statement and the underwriters, if any); and (v) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities being sold and the underwriters, if any, to evidence the continued validity of the representations and warranties made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. If at any time the representations and warranties of the Company and the Subsidiary Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by any of them, shall confirm such advice in writing; (xi) prior to any public offering of Transfer Restricted Securities, cooperate with and cause the Subsidiary Guarantors to cooperate with the selling Holders, the 19 -18- underwriter(s), if any, and their respective counsel in connection with the registration and qualification (or exemption from such registration or qualification) of the Transfer Restricted Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the selling Holders and underwriter(s), if any, may reasonably request in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Registration Statement; provided, however, that neither the Company nor the Subsidiary Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xii) if a Shelf Registration is filed pursuant to Section 2(b), cooperate with the selling Holders of Registrable Securities and the managing Underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the managing Underwriters, if any, or Holders may reasonably request; (xiii) in connection with any sale or transfer of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with and cause the Subsidiary Guarantors to cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xiv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable 20 -19- the seller or sellers of such Transfer Restricted Securities or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xi) above; (xv) if any fact or event contemplated by Section 6(c)(iii)(D) of this Agreement shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated in such Registration Statement or Prospectus by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Registration Statement will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading and the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; (xvi) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities that are in a form eligible for deposit with The Depository Trust Company; (xvii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); (xviii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission in regards to any Registration Statement, and make generally available to its securityholders, as soon as practicable, a consolidated earning statement of the Company meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm commitment or reasonable best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commenc- 21 -20- ing after the effective date of the Registration Statement; (xix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture, if any, as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause the Trustee to execute, all customary documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) of this Agreement, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) of this Agreement, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event that the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 of this Agreement, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) of this Agreement to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) of this Agreement or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All fees and expenses incident to the Company's and the Subsidiary Guarantors' performance of or compliance 22 -21- with this Agreement will be borne by the Company regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the New Notes to be issued in the Exchange Offer and printing of Prospectuses); (iv) all fees and disbursements of counsel for the Company, the Subsidiary Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; and (v) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by it. Notwithstanding the foregoing or anything in this Agreement to the contrary, each Holder of Transfer Restricted Notes shall pay all underwriting discounts and commissions of any underwriters with respect to any Notes sold by or on behalf of it. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Cahill Gordon & Reindel or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 23 -22- SECTION 8. INDEMNIFICATION (a) The Company and each of the Subsidiary Guarantors jointly and severally agree to indemnify and hold harmless (i) the Initial Purchasers, each Holder of Transfer Restricted Securities and each Participating Broker Dealer, (ii) each person, if any, who controls any of the foregoing within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the agents, employees, officers and directors and the agents, employees, officers and directors of any such controlling person (collectively, the "Indemnified Persons") from and against any and all losses, liabilities, claims, damages and reasonable expenses whatsoever (including but not limited to reasonable attorneys' fees and any and all reasonable expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all reasonable amounts paid in settlement of any claim or litigation) to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Subsidiary Guarantors will not be liable in any such case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Indemnified Person relating to such Indemnified Person expressly for use therein; provided, further, that the Company and the Subsidiary Guarantors shall not be liable to any Indemnified Person under the indemnity agreement in this subsection with respect to any preliminary Prospectus to the extent that any such loss, claim, damage or liability of such Indemnified Person results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, such preliminary Prospectus that was corrected in the final Prospectus, if the Company or the Subsidiary Guarantors shall sustain the burden of proving that such Indemnified Person sold 24 -23- Notes to the person alleging such loss, claim, damage or liability without sending or giving, at or prior to the written confirmation of such sale, a copy of the Prospectus or of the Prospectus as then amended or supplemented even though the Company and the Subsidiary Guarantors had previously furnished copies thereof to such Indemnified Person. This indemnity agreement will be in addition to any liability that the Company or any of the Subsidiary Guarantors may otherwise have, including, but not limited to, under this Agreement. (b) In connection with any Registration Statement pursuant to which a Holder of Transfer Restricted Securities offers or sells Transfer Restricted Securities, such Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and the Subsidiary Guarantors, their respective directors and officers and any person controlling the Company or a Subsidiary Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Subsidiary Guarantors to each Indemnified Person but only with respect to information relating to such Holder furnished in writing by or on behalf of such Holder expressly for use in such Registration Statement. In any such case in which any action shall be brought against the Company or a Subsidiary Guarantor, any director or officer of the Company or a Subsidiary Guarantor or any person controlling the Company or a Subsidiary Guarantor based on such Registration Statement and in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given to the Company and the Subsidiary Guarantors (except that if the Company or a Subsidiary Guarantor shall have assumed the defense thereof, such Holder shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Holder), and the Company and the Subsidiary Guarantors, their respective directors and officers and any person controlling the Company or a Subsidiary Guarantor shall have the rights and duties given to the Indemnified Persons by Section 7(a) hereof. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, suit or proceeding (collectively, an "Action"), such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, promptly notify each party against whom indemnification is to be sought in writing of the commencement of such Action (but the failure so to notify an indemnifying party shall not 25 -24- relieve such indemnifying party from any liability that it may have under this Section 8 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may otherwise have). In case any such Action is brought against any indemnified party, and it notifies an indemnifying party of the commencement of such Action, the indemnifying party will be entitled to participate in such Action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense of such Action with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such Action, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such Action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such Action within a reasonable time after notice of commencement of the Action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them that are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such Action on behalf of the indemnified party or parties), in any of which events such fees and expenses of counsel shall be borne by the indemnifying parties. In no event shall the indemnifying party be liable for the fees and expenses of more than one counsel (together with appropriate local counsel) at any time for all indemnified parties in connection with any one Action or separate but substantially similar or related Actions in the same jurisdiction arising out of the same general allegations or circumstances. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or Action effected without its written consent; provided, however, that such consent was not unreasonably withheld. (d) In order to provide for contribution in circumstances in which the indemnification provided for in paragraphs (a) and (b) of this Section 8 is for any reason held to be unavailable from the indemnifying party, or is insufficient to hold harmless a party indemnified under this Section 8, the Company, the Subsidiary Guarantors and the Indemnified Parties shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such in- 26 -25- demnification provision (including any reasonable investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any Action or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the indemnifying party, any contribution received by the indemnifying party, from persons other than the indemnified party who may also be liable for contribution, including persons who control the indemnified party within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which the Company, the Subsidiary Guarantors and the Indemnified Parties may be subject, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Indemnified Parties, on the other hand, from the offering of the Old Notes or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in paragraph (c) of this Section 8, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand, and the Indemnified Parties, on the other hand, in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Subsidiary Guarantors shall be deemed to be in the same proportion as the total proceeds from the offering of Old Notes (net of discounts but before deducting expenses) received by the Company as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Subsidiary Guarantors, on the one hand, and the Indemnified Parties, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Subsidiary Guarantors or the Indemnified Parties and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Subsidiary Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to paragraph (d) of this Section 8 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to above. Notwithstanding the provisions of paragraph (d) of this Section 8, (i) in no case shall an Indemnified Party be required to contribute any amount in 27 -26- excess of the amount by which the total received by such Indemnified Party with respect to its sale of its Transfer Restricted Securities or New Notes, as the case may be, exceeds the amount of any damages that such Indemnified Party has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of paragraphs (d) and (e) of this Section 8, each person, if any, who controls an Indemnified Party within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Indemnified Party, and each person, if any, who controls the Company or the Subsidiary Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company or the Subsidiary Guarantors, subject in each case to clauses (i) and (ii) of this Section 8(e). Any party entitled to contribution will, promptly after receipt of notice of commencement of any Action against such party in respect of which a claim for contribution may be made against another party or parties under paragraphs 8(d) or (e) of this Section 8, notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under paragraphs (d) or (e) of this Section 8 or otherwise. No party shall be liable for contribution with respect to any Action or claim settled without its written consent; provided, however, that such written consent was not unreasonably withheld. SECTION 9. RULE 144A The Company shall use its best efforts, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale of such securities and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration under this Agreement unless such Holder (a) agrees to 28 -27- sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled under this Agreement to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorneys, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to so so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. Each Holder, in addition to being entitled to exercise all rights provided in this Agreement, in the Indenture, the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company and the Subsidiary Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any Action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions of this Agreement. The Company have not previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders under this Agreement do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date of this Agreement. 29 -28- (c) Adjustments Affecting the Notes. Without the written consent of the Holders of a majority in aggregate principal amount of outstanding Transfer Restricted Notes, the Company and the Subsidiary Guarantors will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions of this Agreement may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions of this Agreement that relates exclusively to the rights of Holders whose securities are being sold or tendered pursuant to a Registration Statement and that does not affect directly or indirectly the rights of other Holders whose securities are not being sold or tendered pursuant to such Registration Statement may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being so sold or tendered. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivering, first-class mail (registered or certified, return receipt requested), telex, telecopier or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or the Subsidiary Guarantors, at: United Refining Company 15 Bradley Street Warren, Pennsylvania 16365 Facsimile: (814) 723-4371 Attention: Myron Turfitt with a copy to: Lowenthal, Landau, Fischer & Bring, P.C. 250 Park Avenue 30 -29- 10th Floor New York, NY 10177 Facsimile: (212) 986-0604 Attention: Martin Bring, Esq. All such notices and communications shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered; (ii) five business days after being deposited in the mail, postage prepaid, if mailed; (iii) when answered back, if telexed; (iv) when receipt acknowledged, if telecopied; and (v) on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties to this Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of this Agreement. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained in this Agreement, or the application of any such provision in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained in this Agreement shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase 31 -30- Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties to this Agreement in respect of the subject matter contained in this Agreement. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to in this Agreement with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signatures on Next Page] 32 -31- [Registration Rights Agreement - Signature Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. UNITED REFINING COMPANY By:_________________________ Name: Title: KIANTONE PIPELINE CORPORATION By:_________________________ Name: Title: KIANTONE PIPELINE COMPANY By:_________________________ Name Title: UNITED JET CENTER, INC. By:_________________________ Name: Title: UNITED REFINING COMPANY OF PENNSYLVANIA By:_________________________ Name: Title: KWIK FILL, INC. 33 -32- By:_________________________ Name: Title: INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC. By:_________________________ Name: Title: BELL OIL CORP. By:_________________________ Name: Title: PPC, INC. By:_________________________ Name: Title: SUPER TEST PETROLEUM, INC. By:_________________________ Name: Title: KWIK-FIL, INC. By:_________________________ Name: Title: VULCAN ASPHALT REFINING CORPORATION 34 -33- By:_________________________ Name: Title: 35 -34- [Registration Rights Agreement - Initial Purchasers' Signature Page] Accepted and agreed as of the date first above written: ____________________________ DILLON, READ & CO. INC. By:_________________________ Name: Title: EX-10.4 29 SERVICING AGREEMENT 1 EXHIBIT 10.4 UNITED REFINING COMPANY 15 Bradley Street P.O. Box 780 Warren, Pennsylvania 16365 June 9, 1997 Red Apple Group, Inc. 823 Eleventh Avenue New York, New York 10019-3535 Gentlemen: This will confirm our agreement that United Refining Company (the "Company") will pay to its parent, Red Apple Group, Inc. ("RAG"), $1,000,000 per annum, as its allocated portion of the overhead costs of the New York headquarters of RAG. This agreement shall become effective immediately upon the consummation of the sale by the Company of its Series A Senior Notes due 2007 pursuant to an Offering Memorandum substantially in the form of the Preliminary Offering Memorandum circulated to prospective investors (the "Effective Date"). The term of this Agreement shall expire on the third anniversary of the Effective Date; provided, however, that if neither party gives the other notice of termination prior to the expiration of the initial term (or if the term of this agreement is extended pursuant to the terms hereof or otherwise, the expiration of any extended term), the term of this agreement shall automatically be extended for an additional period of one year. Please indicate your agreement with the foregoing by signing one copy of this agreement in the space indicated below and returning such copy to the undersigned. Very truly yours, UNITED REFINING COMPANY By: /s/ Myron Turfitt - ----------------------------- ------------------------------------- Myron Turfitt, President AGREED TO: RED APPLE GROUP, INC. By: /s/ John A. Catsimatidis -------------------------- John A. Catsimatidis, Chairman of the Board 2 GUARANTEE (Not to be used for signature guarantee) The undersigned, a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office in the United States, guarantees (a) that the above-named person(s) "own(s)" the principal amount of $ 10 3/4% Series A Senior Notes due 2007 (the "Original Notes") of United Refining Company, a Pennsylvania corporation, tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) that such tender of such Original Notes complies with Rule 14e-4, and (c) to deliver to the Exchange Agent the certificates representing the Original Notes tendered hereby or confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company, in proper form for transfer, together with the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, within five (5) New York Stock Exchange trading days after the Expiration Date. - ----------------------------- ---------------------------------------- Name of Firm Authorized Signature - ----------------------------- ---------------------------------------- Address Title Name: - ----------------------------- ----------------------------------- Zip Code Type or Print Name: - ----------------------------- ----------------------------------- Area Code and Tel. No. Dated: ------- ---------------------------------- NOTE: DO NOT SEND CERTIFICATES REPRESENTING ORIGINAL NOTES WITH THIS FORM. CERTIFICATES REPRESENTING ORIGINAL NOTES SHOULD BE SENT ONLY WITH A LETTER OF TRANSMITTAL. 3 Ladies and Gentlemen: The undersigned hereby tender(s) to United Refining Company the principal amount of the Original Notes listed below, upon the terms of and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal and the instructions thereto (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, pursuant to the guaranteed delivery procedures set forth in the Prospectus, as follows:
Principal Amount Tendered Aggregate Principal Amount (must be in integral multiples) Certificate Nos. Represented by Certificate(s) of $1,000 - ----------------------------- ----------------------------------------------------------------------------------------- - ----------------------------- ----------------------------------------------------------------------------------------- - ----------------------------- -----------------------------------------------------------------------------------------
The Book-Entry Transfer Facility Account Sign Here Number (if the Original Notes will be tendered by book-entry transfer) ----------------------------------- - --------------------------------------- ----------------------------------- Account Number - --------------------------------------- ----------------------------------- Principal Amount Tendered (must be Number and Street or P.O. Box in multiples of $1,000) ----------------------------------- City, State, Zip Code Dated: 1997 ----------------------- EX-10.5 30 COLLECTIVE BARGAINING AGREEMENT 1 EXHIBIT 10.5 AGREEMENT BETWEEN UNITED REFINING COMPANY AND INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL NO. 95 Effective February 1, 1996 Termination February 1, 2001 2 TABLE OF CONTENTS Preamble .................................................1 Article 1: Union Recognition and Management Rights .......1 Article 2: Wages .........................................4 Article 3: Hours of Work and Overtime ....................5 Article 4: Holidays ......................................8 Article 5: Seniority .....................................9 Article 6: Time Off With Pay ............................15 Article 7: Union Committee and Union Activities .........19 Article 8: Problem Adjustment Procedure .................20 Article 9: Military Service .............................21 Article 10: No Strike ...................................21 Article 11: Equipment, Safety and Health ................22 Article 12: Department Lists ............................25 Article 13: Education Fund ..............................25 Article 14: Duration ....................................25 Appendix A: URC Hourly Wage Rates .......................27 Appendix B: Substance Test Limits .......................30 Appendix C: Benefit Change: .............................31 Appendix D: Christmas Bonus .............................31 Appendix E: Maintenance Breaker .........................31 Appendix F: Operations Proficiency Program ..............32 Appendix G: Departmental Lines of Progression ...........33 2 3 AGREEMENT PREAMBLE This Agreement, entered into as of the 1st day of February, 1996, at Warren, Pennsylvania, between UNITED REFINING COMPANY, a corporation with main offices and plant in the City of Warren, Pennsylvania, or its successor, hereinafter referred to as "Company," and the INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL NO. 95, hereinafter referred to as "Union." WHEREAS, the majority of the production and maintenance employees of the Company have heretofore organized themselves into said Union and said Union has been certified by the National Labor Relations Board as the exclusive bargaining agent for all said production and maintenance employees as to their rates of pay, wages, hours of work and other conditions of employment: NOW THEREFORE, the parties to this Agreement, after conference for the purpose of continuing and improving the relations between the Company and said employees with respect to rates of pay, wages, hours of work and other conditions of employment, state that: 1. The Company and the Union agree that pursuant to Executive Order 11246 (30 FR 12319, September 28, 1965) and CFR, Chapter 60, they will not discriminate against any employee or applicant because of race, color, religion, age, physical or mental handicap, national origin or sex, except in those instances where it can be proven that sex, or the absence of a physical or mental handicap, is a bona fide occupational qualification necessary to the operation of the business. The use of the masculine gender in any provisions of this Agreement will not be deemed to indicate any distinction based on sex. Such use of a masculine gender will be deemed to include the feminine gender wherever it is found. 2. Guarantees against discrimination will apply to hiring and recruitment, upgrading and promotion, apprenticeship, job training, transfer, layoff, rehire and discharge, and 3. Both the Company and the Union will make every effort to comply with both the letter and the spirit of both State and Federal legislation and regulations, and further agree as follows: ARTICLE 1 UNION RECOGNITION AND MANAGEMENT RIGHTS 101. During the term of this Agreement, the Company recognizes the Union as the exclusive bargaining agent for the aforesaid classes of employees with respect to rates of pay, wages, hours of work and other conditions of employment applicable thereto. The Company will not interfere with the right of its employees to become members of the Union and agrees that there will be no discrimination, interference, restraint, or coercion by it or any of its agents against any employees because of their membership or lawful activity in the Union, except as hereinafter provided. 101.1 Union Representation: Section 1: Authorized representatives of the Union shall have access to the refinery and areas defined in Paragraph 103.2 with an advance request of at least 24 hours given to the Vice President of Human Resources provided they display proper identification and sign in and out and do not interfere with the work of the employees, and further provided that such representatives fully comply with the visitor and security rules established for the refinery. The Company shall have the right to establish other reasonable rules and procedures governing access by Union representatives. 4 Section 2: The stewards shall, in addition to working in their regular classification, be permitted to perform, during the workday, only such union duties as cannot be performed at other times. The duties of the steward shall be performed as expeditiously as possible, and the Company agrees to allow the steward a reasonable amount of time for the performance of such duties. The Company shall not discriminate against the steward in the proper performance of the steward's union duties. The steward shall not leave the work area without first notifying the appropriate supervisor and receiving his approval. Such approval will not be unreasonably withheld. 102.1 For the first six (6) months following the date of first employment, an employee will be considered as probationary, during which six (6) months he will not be considered as a regular production or maintenance employee. Any decision as to the continuance of his employment or discharge therefrom will be at the sole discretion of the Company; provided, however, that as a condition of continued employment, after the first thirty (30) days employment, an employee will become a member of the Union and remain a member in good standing for the duration of this Agreement. 102.2 For the purpose of effecting the procedure set forth in the preceding Paragraph 102.1 of this Article, the Union agrees to accept into membership all such new employees who are continued in the employment of the Company after their first thirty (30) days, without limitation or qualification, and further agrees that the total cost of such membership will not be more than the regular initiation fee plus regular membership dues at the same monthly rate that all other members of the Union are required to pay as a condition of being members in good standing. 102.3 The Company will require, as a condition of hiring, all new employees to sign an authorization card authorizing the Company to make monthly payroll deductions covering the initiation fee and the regular monthly membership dues during the duration of this Agreement. The Union shall have a representative present at the initial meeting when employees are first hired to inform them of the terms and conditions of this Agreement. Upon receipt of a written request from any employee, the Company will cooperate with the Union in the collection of dues by deducting from the wages due said employee each month the regular monthly dues specified in the request and will continue to make such deductions monthly unless and until written instructions to the contrary are received from said employee, it being within the discretion of the employee to determine whether such deduction will be made from the first or second pay each month. All money so deducted by the company will be paid to the Secretary of the Union not later than the Tuesday following the second pay day in each month. 103.1 Employees hired for construction work upon Company property, or other special jobs of similar nature, are expressly excluded from the provisions of this Agreement. Hence, prior to the starting of any construction work or other special jobs on Company premises, the Company will meet with the Union Committee for the purpose of determining the nature of the work contemplated and whether or not employees specially hired for the work will be considered as temporary and special employees or regular operating maintenance employees. 103.2 The operation and maintenance of the Crude Oil Pipeline from and including our pump station in West Seneca, New York, south to the refinery in Warren, Pennsylvania, will be covered by the terms of this Agreement, with the exception of the part-time security personnel which are expressly excluded from the terms of this Agreement. 104. The Company agrees to discuss with the Union any and all jobs which the Company assigns to outside contractors, prior to commencement of such work. The Company will provide the Union with at 2 5 least 24 hours notice prior to subcontracting bargaining unit work when circumstances permit such notice. However, it is understood and agreed that the Company's right to contract includes, but is not limited to the following: 1. Where such work is required to be sublet to maintain a legitimate manufacturer's warranty; or 2. Where the subcontracting of work will not result in the termination or layoff, or the failure to recall from layoff, any eligible permanent employee with commensurate skills; or, 3. Where the employees of the Company lack the skills or qualifications or the Company does not possess the requisite equipment for carrying out the work. 104.1 Company employees not covered by this Agreement will not be permitted to perform work customarily performed by production or maintenance employees covered by this Agreement, except in emergencies or for the purpose of instruction. 105. Any employee transferred or promoted into a supervisory capacity and any employee transferred to any office department or put on salary will withdraw from membership in the Union. Any employee re-entering the bargaining unit who has previously been in the Union will enter as per Article XV, Section 4(d) of the International Union of Operating Engineers' Constitution, which is as follows: Any member entering a Local Union on a withdrawal card shall pay the difference in initiation fee as herein before provided in the case of clearance cards. If he shall enter said Local Union within a period of time less than thirteen (13) months dated from the month in which the withdrawal card was issued, he shall be required to pay all dues and assessments accruing in such period of time in the Local Union which issued the same, and said dues and assessments shall be paid to the Local Union admitting the member and shall be forwarded to the Local Union which issued the withdrawal card. At the same time he shall pay an assessment of Ten ($10) Dollars or such amount as shall be fixed by the General Executive Board, Fifty (50) per cent of which assessment shall be forwarded by the Local Union to the General Secretary-Treasurer. Members who enter said Local Union during the thirteenth (13th) month following the month in which the withdrawal card was issued shall be considered as having been on withdrawal for exactly one (1) year. If the member shall enter said Local Union after more than thirteen (13) months since the issuance of the withdrawal card, he shall pay an assessment of Ten ($10.00) Dollars or such amount as shall be fixed by the General Executive Board, and a similar amount for each successive year or part thereof, Fifty (50) per cent of which assessment shall be forwarded by the Local Union to the General Secretary-Treasurer. Provided, however, the total payment so required shall not exceed the amount of the regular current initiation fee in the Local Union to which the application is made. All members of the International Union who have been granted withdrawal cards by their Local Unions and were then in good standing in the Death Benefit Fund may continue their good standing therein by paying on or before June 1 of each year, in advance and directly to the General Secretary-Treasurer, the sum of Nine ($9.00) Dollars per annum, but they shall not be in good standing in any other respect. Provided, however, members initiated on or after July 1, 1973, shall not participate in the Death Benefit Fund. 106. Management of the Company and the direction of the work force is exclusively vested in the Company except as limited by the terms of this Agreement. 3 6 106.1 COMPANY RULES: The Company shall continue to have the right to publish reasonable rules and regulations from time to time. However, such rules and regulations shall not conflict with the express terms of this Agreement. Furthermore, the Company agrees to give advanced notice to the Union committee of any new rules and regulations or changes in ones in effect now. The Union shall have the right to question the reasonableness of such rules and regulations or the application thereof. ARTICLE 2 WAGES 201. The Wage Scale Schedule adjusted by the following: 3.0% Increase February 1, 1996 Excludes Labor Rates 3.0% Increase February 1, 1997 Excludes Labor Rates 3.0% Increase February 1, 1998 Excludes Labor Rates 3.5% Increase February 1, 1999 Includes Labor Rates 4.0% Increase February 1, 2000 Includes Labor Rates 201.1 PAYDAY: The Company will continue its biweekly system of payment of wages and payday shall be every other Thursday. The Company will make every reasonable effort to have the checks available to employees by noon on payday. 201.2 MAKE-UP PAY: When any hourly employee has been shorted by $25.00 or more gross, and the mistake is brought to the Company's attention no later than noon Monday following payday, he shall receive a make-up check for the amount of the mistake no later than 4:00 P.M. Tuesday following the payday. 202. The normal schedule for shift workers will be based on an average 42 hour week, but no distinction will be made between the various days of the week. The regular working hours will be from 6 A.M. to 2 P.M., 2 P.M. to 10 P.M. and 10 P.M. to 6 A.M. Relief for employees working the 6 A.M. to 2 P.M., the 2 P.M. to 10 P.M. and the 10 P.M. to 6 A.M. shifts will be made on the job at 6 A.M., 2 P.M. and 10 P.M. However, relief will be considered as being made at the proper time if made not more than fifteen (15) minutes prior to the scheduled time. Should it be necessary for an employee to have or make an earlier or later relief because of some emergency condition, permission for such unusual relief should be requested from the employee's supervisor. 202.1 In addition to the job rates listed in the Wage Scale referred to in Section 201 of this Article 2, effective July 1, 1981, shift employees when working the 2 P.M. to 10 P.M. shift will receive an additional fifty (50) cents per hour, and when working the 10 P.M. to 6 A.M. shift will receive an additional one dollar ($1.00) per hour. 202.2 Shift differentials will be applicable to Maintenance Department employees in the following situations: (1) when Maintenance Department employees work in excess of eight (8) hours, the applicable shift differential will apply. (2) When any Maintenance employees work other than the normal or posted scheduled day shift they will be paid the applicable shift differential (any day shift will start between 6:00 A.M. and 8 00 A.M.), i.e., between the hours of 2:00 P.M. and 10:00 P.M. they will receive a shift premium of fifty (50) cents per hour and the hours between 10:00 P.M. and 6:00 A.M. will receive a shift premium of one dollar ($1.00) per hour. Shift differentials will be added to the hourly base rate in computing overtime and holiday pay, as well as regular pay for hours actually worked, but will not be considered in the computation of vacation pay, make-up pay or sick pay under the Workmen's Compensation Make-Up Pay Benefit Plan or the Sick Pay Benefit Plan. Shift differentials will not apply in any case or for any purpose to hours not actually worked. 4 7 ARTICLE 3 HOURS OF WORK AND OVERTIME 301. It is the expressed intent and aim of the Company to continue in effect the hours of employment being worked as of the date of this Agreement, viz., an average of forty-two (42) hours per week for Operating Departments and forty (40) hours per week for the Maintenance Department. However, the Company hereby expressly reserves the right in case of changed business conditions, or for any other reason or reasons, to increase or decrease the number of hours of employment per workweek. Before putting into effect any change in the number of hours per workweek, nevertheless, the Company will meet with the Union Committee for the purpose of explaining the necessity for such changed hours. 302. "Workweek" is hereby defined as the period starting at 6:00 A.M. on Monday and extending through to 6:00 A.M. the following Monday. "Workday" is defined as the period starting at 6:00 A.M. and extendIng to 6:00 A.M. the following day. For all hours worked in excess of forty (40) in any one (1) workweek or for hours worked in excess of eight (8) in any one (1) workday or when over eight (8) consecutive hours are worked, the employee shall be paid at the rate of one and one half (1-1/2) times the regular rate of pay for the job in which overtime is incurred. The Company has established a five (5) day week schedule , Monday through Friday, for the Maintenance Department with no Maintenance Department employees regularly scheduled for Saturday work. The normal starting time for the Maintenance Department will be 7:30 A.M. Eastern Standard Time and 7:00 A.M. Daylight Savings Time. The Company reserves the right that should conditions change, the Company will schedule Maintenance men as required for the work to be done. When the need arises for the Maintenance Department to work other than their normally scheduled hours, they will work 6:00 A.M.-2:30 P.M., 2:00 P.M.- 10:30 P.M., and 10:00 P.M.-6:30 A.M. These hours will include a 15 minute break, a 30 minute lunch, and 20 minutes of cleanup time. The Company will make a reasonable effort to provide as much advance notice as possible of any schedule change and that at no time will a schedule be changed for the purpose of avoiding overtime. 303. A callback occurs when an employee is called back for extra duty after punching out, he will be paid for the time worked at one and one-half (1-1/2) times his regular rate, plus any applicable shift differential, except that he will be guaranteed four (4) hours at straight time. In the case of each callback, the difference between hours worked and four (4) hours will be made up at base rate. It is understood and agreed, however, that such callback pay for extra duty work will apply only to time worked when an employee is called back to work and is not applicable to time spent during requested or suggested attendance at lectures, rallies, and other meetings of that nature. 303.1 No callback occurs when an employee is requested, before completing a regularly scheduled period of work, to report back to the Company premises for extra duty over and beyond his regularly scheduled period of work for the particular day involved. If an employee is so requested to report back, he will be scheduled for and will receive a minimum of two (2) hours of overtime for the scheduled work assignment. If agreed by the respective supervisor and employee, the employee can clock-out at the completion of an assignment if less than two (2) hours and will be paid for the actual time worked. However, it is understood that an employee who reports on a fire call will be deemed to be on a callback. In the event an employee is called back and must proceed out of town for necessary work at a terminal, station, etc., and the work required extends past midnight, the employee has the option of completing the necessary work and returning home or he may elect to remain at a nearby motel. If he remains, the lodging, as attested to by receipt and cost of meals per the schedule in Section 308 of Article 3 will be paid by the Company. 303.2 When scheduled overtime is required of the oil movements Pumper II for railroad tank car switching, the following hours of work and pay will apply: They will be scheduled for and will receive a minimum of two (2) hours of overtime for the scheduled work assignment. The employee will be assigned work for the two (2) hour period. 5 8 If agreed by the respective supervisor and employee, the employee can clock-out at the completion of an assignment if less than two (2) hours and be paid for the actual time worked. 303.3 An early time call for operations personnel will be treated as a callback if the employee is not notified more than eight (8) hours before he is scheduled to report to work. 304. On occasion certain employees are required, because of emergency situations arising from time to time, to work longer hours per day than the established schedule calls for. The Company, therefore, hereby declares it to be part of its policy that employees working under these conditions will not be penalized by being laid off in order to keep their total hours in any particular week within a set limit and that they will be permitted to work their regularly scheduled hours per day and per week, regardless of extra time worked over and above their scheduled hours in any one (1) day. 305. The Company will make reasonable efforts to equalize scheduled overtime. Overtime will be distributed equally among the employees regularly assigned to the type of work required. When an employee refuses to work overtime, the number of hours offered will be counted the same as overtime worked. However, Maintenance Department employees will only be charged for scheduled overtime hours refused if they are given notice of the need to work overtime more than four (4) hours before the end of their last scheduled shift worked on the day preceding the day on which the overtime is to be worked. If an employee is inadvertently by passed he will be assigned to the next appropriate overtime opportunity. Records of overtime hours worked will be accessible for inspection. Excused absences will be recorded accordingly. 305.1 When overtime, other than scheduled, is required in the Maintenance Department on a given job, the Senior man in that classification on that job shall be asked first, then going by seniority until a man or men have volunteered. If no one volunteers, a man or men on that job will be assigned to the overtime by reverse seniority. 305.2 In the Operations Department, when overtime is required, the operators in that classification will be given first choice over a maintenance sub if there is no increased cost to the Company. The Company reserves the right to use subs when it results in cost savings to the Company. 306. After an employee has worked two (2) hours or more at the end of and in addition to his scheduled workday, the Company will provide and pay for such a meal as can reasonably be obtained and at four (4) hour intervals thereafter. In an emergency situation when an employee is called out for extra duty before his regular work schedule and misses a regular meal thereby, the Company will provide and pay for such a meal as can reasonably be obtained. If he has not been able to make the customary arrangements for his mid-day meal, the Company will provide and pay for such a meal as can reasonably be obtained. When an employee is called out for extra duty after his regular work schedule and misses a regular meal thereby, or after the first four (4) hours if after regular meal times, the Company will provide and pay for such a meal as can reasonably be obtained and at four (4) hour intervals thereafter. Any employee entitled to meals at Company expense as provided for in the forgoing shall be allowed time for obtaining and eating such meals as follows: (a) If the employee is required to remain on the job, he will be paid for the time to eat the meal to the extent of thirty (30) minutes at the applicable premium rate. (b) If the employee leaves the job to obtain a meal and is requested to return to work immediately after eating the meal, he will be paid for such time to the extent of one (1) hour at the applicable premium rate to obtain and eat the meal. If the employee leaves the Company's 6 9 premises to eat a meal, the employee will not be entitled to a meal ticket until four (4) hours or more of actual time worked and then at four (4) hour intervals thereafter. (c) In the event that any of the meals as herein provided are not furnished, then the employee will receive a meal ticket valued at $5.00 for each meal not so furnished. This meal ticket will be issued at the time the employee qualifies for it. In order to pay for the above meals, the Company will provide the employees due meals with meal tickets good at local restaurants selected by the Company. These tickets do not necessarily have to be used when issued and are good for up to $5.00 in food and are not redeemable for cash in whole or part. (d) Meal tickets to be redeemable for groceries at all Kwik-Fills, Company-operated Keystone stations and Company-operated Red Apple marts. No discounts to apply. 307. If an employee is called back to work on his scheduled day or days off prior to the start of a paid vacation period or at the end of his paid vacation period, he shall be paid at time and one-half (1-1/2) for the time worked prior to, or at the end of, that scheduled vacation period. Vacation will count as time worked when computing daily or weekly overtime. When an employee is called out during an emergency while on vacation, they will be paid at the rate of one and a half (1.5) for time worked, plus vacation pay or choice of time off for full days only. 307.1 When an operator works any of his scheduled days off he will be paid at least time and one half for hours worked. This time will not count as time worked in computing weekly overtime and is not meant to change any other articles of the Contract. 307.2 Article 3, Paragraph 307.1 of the Collective Bargaining Agreement will apply to Maintenance Department employees who hold Operations sub jobs, under the following circumstances: When a substitute is actually working his or her sub job for a full shift, and as part of that schedule is required to work scheduled days off, he will receive pay according to Articles 3, Paragraph 307.1. 308. If an employee is required to be out-of-town overnight for Company purposes, he will be paid for any meals per the following schedule: Breakfast .................$ 4.50 Noonday Meal ................5.50 Evening Meal ...............13.00 Overnight Snack .............4.50 However, any employee required to be out-of-town during a regularly scheduled workday will furnish his own meal, except that in the event that he is required to be out-of-town and does not arrive back in Warren prior to two (2) hours past the regular quitting time, the Company will pay for his evening meal, per the above schedule. 309. Work schedules for the Maintenance Department on weekends will not be less than four (4) hours in length. In an effort to equalize call-backs on weekends, a sign-up sheet will be maintained by the foremen for any employee to indicate their availability by 4:00 p.m. Thursday. However, if the supervisor and employee agree, the employee may leave after completing his work assignment and be paid for the time worked. In any event, he shall be paid for a minimum of two (2) hours, whether he works it or not. 310. An employee not notified, prior to 10:00 P.M. the night before that he need not report for overtime work as previously instructed, shall have the option of working two (2) hours or leaving. 311. Voluntary shift change: Operators within the same classification will be permitted to change shifts voluntarily for an entire 8 hour shift with prior approval of their unit supervisor. This will not count as 7 10 a 'swing' as defined under paragraph 312, and the individuals who voluntarily change shifts will not receive time and one-half due to this change. 312. Rest period between shifts: Employees shall have a minimum of 8 hours off from the completion of a shift to the beginning of the next shift, unless agreed to otherwise by the affected employee and his supervisor. If the employee receives less than 8 hours off between shifts, those hours worked within the 8 hour rest period will be paid at least time and one-half with applicable shift premium. In the Maintenance Department only two (2) shift swings will be permitted in any one Monday to Monday work week, except in the case of emergencies. In the Operations Department only two shift swings will be permitted in any scheduled shift, which included days off prior to and following that shift, except in cases of emergencies. ARTICLE 4 HOLIDAYS 401 The following named holidays will be recognized by the parties hereto: New Years Day Thanksgiving Day Good Friday First Day of Pa. Antlered Last Monday in May Deer Season Independence Day One-half (1/2) day, the Labor Day day before Christmas Christmas Day 401.1 In addition to the above listed holidays, an employee having six (6) months or more Company seniority may select two (2) personal holidays of his choosing any time during the calendar year. Such holidays are to be scheduled and approved by the employee's foreman so as not to interfere with scheduled vacation weeks or shifts or the orderly operation of the plant. Employees with 12 months perfect attendance and no tardiness will earn one additional personal holiday. The 12 month period will be a rolling year where an employee who misses a day starts a new perfect attendance year the following month. Personal holidays earned must be taken within six months after earning. Personal holidays must be taken in the form of time off from work with pay. If the personal holidays to which an employee is entitled in a given calendar year are not used prior to September 1 of that year, or scheduled in advance of September 1 for use during September, October, November or December, they will be assigned by the department foreman. Employees on long term disability are not entitled to personal holidays. If an employee is signed up for personal holidays and is prevented from utilizing these personal holidays by December 31 of that year because of personal illness or injury or company cancellation of such holiday, he shall be allowed to take the days off within six (6) months of his return to work. 401.2 Maintenance employees can utilize one personal holiday by taking time off without pay during the year and then be paid for the time when they have used eight hours or at the end of the year. Time off must be taken in at least one hour increments. 402. Employees not required to work on the days on which the above holidays are observed will receive eight (8) hours holiday pay at their base hourly rate (which shall exclude any shift differential) or four (4) hours in the case of the day before Christmas, provided, however, that to receive such holiday pay an employee, except in case of his sickness, vacation, personal holiday or death in his immediate family, will work his regularly scheduled hours on both the scheduled day before and the scheduled day after such holiday in accordance with the regular work schedule, and, in the case of the day before 8 11 Christmas, the four (4) scheduled hours that day must be worked in addition to the scheduled days immediately before and after the holiday. 402.1 If an employee is on workers' compensation he will be made whole for any holiday excluding December 24th. The Company will pay the difference between his compensation pay and what his holiday pay would have been at eight hours at his regular rate. 403. Employees required to work on any of the above holidays, excluding personal holidays, will, in addition to holiday pay of eight (8) hours, or the four (4) hours for the day before Christmas, at their base hourly rate, receive pay at the rate of one and one-half (1 1/2) times their regular hourly rate, for the work performed. For shift employees time and one-half (1 1/2) for the one-half (1/2) day holiday will be paid for the first four (4) hours of the regularly scheduled shift, and for Maintenance Department employees, the last four (4) hours of the regularly scheduled shift. However, if a holiday falls after the employee has already worked forty (40) hours, he will, in addition to the above, receive one-half (1/2) the number of hours worked at one and one-half (1 1/2) times his regular hourly rate. 403.1 If you are scheduled to be off and are called out on a holiday, you shall receive double time plus premium pay. 404. For Maintenance Employees, the holidays which fall on a Saturday shall be observed and paid on the previous Friday and holidays which fall on Sunday shall be observed and paid on the following Monday. All Operations Employees will receive Holiday and premium pay only for the Calendar Holiday for the purpose of computing weekly end daily overtime. 405. When a holiday falls on a day on which an employee would work his regularly scheduled hours, but for the fact that it is a holiday, the employee will receive credit as time worked for the purpose of computing weekly overtime, for the number of hours he would be regularly scheduled to work on that day. 406. If any of the aforementioned holidays fall within an employee's approved vacation period, that period being no less than one scheduled work week, he has the options of: (1) receiving his holiday pay for (8) eight hours, plus his vacation pay, or (2) may request to take his holiday off immediately prior to or following his vacation. 406.1 If any of the aforementioned holidays fall within an operating employee's approved vacation days, and the days off prior to and following the approved vacation days, being no less than one scheduled shift, the employee has the option of: (1) receiving holiday pay for eight hours, plus any other pay to which the employee is entitled on that day, or (2) requesting an additional day off for the holiday immediately prior to or following the scheduled days off in that period. 407. Holidays will be considered as running from 6:00 A.M. on the morning of the holiday to 6:00 A.M. the following morning, except with respect to the day before Christmas which shall be treated as provided in Section 402 and 403 of this Article. ARTICLE 5 SENIORITY 501 "Seniority," as the term is used in this Agreement, is composed of four (4) types: (a) Company, (b) Plant, (c) Departmental and (d) job. 501.1 "Company Seniority" is the length of time an employee is in the continuous employment of the Company. 9 12 501.2 "Plant Seniority" is the length of time an employee has worked in the unit bargained for by the Union, and will be coextensive with seniority in the "Laborer" classification in the Maintenance Department. Plant seniority is used in determining vacation rights for Maintenance Department employees only. 501.3 "Departmental Seniority" is the length of time an employee has worked in any particular department of the Company. 501.4 "Job Seniority" is the length of time an employee has worked in any particular job in a particular department of the Company. Job Seniority is used in determining vacation rights for Operations Department employees only. 502. Any employee entering the bargaining unit from another department of the Company will maintain his accrued company seniority; but for the purpose of job bidding and layoffs, plant seniority will govern. 503. Layoffs by reason of reduction in force or for any reason beyond the control of the employee and followed by re-employment per the below schedule, will not be considered as an interruption of continuous employment for the purpose of computing plant and company seniority and also applies to the length of time following layoff for which an employee shall have recall rights and bridging of seniority. More than 6 month/less than 1 year .......3 months 1 through 3 years service ................6 months 4 through 5 years service ................9 months 6 through 8 years service ................2 years 9 through 11 years service ...............3 years over 11 years service ....................4 years The Company agrees to provide the Union and affected employees at least a two (2) weeks notice in advance of a layoff. 503.1 Job seniority, as defined above, will start to accrue only after the employee has received the pay rate for thirty (30) days in a particular job, provided, however, that in situations where an employee, having been awarded a different job classification, is prevented from assuming that job because of having to break in a replacement, or for any other Company reason, his seniority in his new job classification will start to accrue from the date he would have assumed the new job had he not been retained to break in a replacement or for any other Company reason. Upon receiving the rate for thirty (30) days, the employee will be credited with thirty (30) days seniority, plus any additional seniority due him. For seniority pertaining to substitute jobs, see Section 520. 503.2 If an employee who is on layoff fails to report his intentions to the Personnel Office within three (3) working days of notice of recall, and fails to return to work within five (5) working days of such notice, he shall be deemed to have quit and will lose all seniority rights. Notice of recall shall be by registered mail with return receipt, addressed to employee as it appears on the Company records. Employees will be responsible for keeping the Company advised as to their current address. The Company will advise the Union Committee prior to notice or notices of recall. 504. In filling vacancies seniority will govern when ability as determined by the Company is substantially equal, it being the expressed policy of the Company in such situations to, whenever possible, give preference on the basis of seniority rights. The term "ability" as used throughout this Agreement will mean not only the ability to fill the job presently open but the potential ability to become proficient at that job through exposure to it within a reasonable period of time. 10 13 504.1 Promotions and demotions in all departments will be based on departmental seniority when ability as determined by the Company is substantially equal among the eligible employees. 504.2 It is recognized there are lines of progression in each sub-division of the Maintenance Department with entry level positions, and employees bidding into higher classifications within a given line of progression must be in the line of progression for that vacancy. Past job seniority will be recognized in awarding jobs, after an employee has re-entered the sub-division at the entry level position. Past job seniority will not be recognized when awarding entry level jobs in sub-divisions of the Maintenance Department. 504.3 It is recognized there are lines of progression in each sub-division of the Operations Department with entry level positions, and employees bidding into higher classifications within a given line of progression must be in the line of progression for that vacancy. Past job seniority will be recognized in awarding jobs, after an employee has re-entered the sub-division at the entry level position. Past job seniority will not be recognized when awarding entry level jobs in sub-divisions of the Operations Department. 504.4 Sub-divisions in the Maintenance and Operations Departments shall be as shown in Appendix G and does not change any articles pertaining to bidding procedures. 505. All hourly paid job vacancies will be filled according to the following procedure: The Company will post all job vacancies in the Daily Instruction Sheet, stating the job classification, and the rate of pay, as well as other jobs, if any, involved and at the same time notify an officer of the Union so that the same may be posted on the Union Bulletin Board. (Such postings in the Daily Instruction Sheet shall be for a seventy-two (72) hour period.) Any regular production or maintenance employee desiring the job will make application for the same to a foreman. All bids for the jobs will be in writing, in duplicate, signed by the employee bidding for the job, or by his proxy, and initialed by the foreman to whom the application was made and will be dated by such foreman as to the exact hour the bid is received. The duplicate copy will thereafter be delivered to the Secretary of the Union. From the applications received, the vacancy will be filled by the employee having a record of greatest departmental seniority in the department in which the vacancy exists in all cases when ability is substantially equal. 505.1 Job vacancies in classifications which have a set minimum level, and where the current complement is below that minimum level, will be posted within sixty (60) hours of the vacancy occurring. The names of successful bidders will be posted no later than one hundred-twenty (120) hours after the closing of the job posting. 505.2 In the event the vacancy is not filled on the basis of departmental seniority, the vacancy will be filled on the basis of plant seniority when the ability of the applicants is substantially equal. 505.3 When there are no applicants for the job, the Company, in order to fill the job may in its discretion, utilize any of the following methods: It may select any qualified employee from the "Operation Pool" which will be deemed to consist of all employees holding the classification of Laborer, Mechanic Helper, Mechanic Helper Grade II or Utility Repairman and assign him to the job or a next lower classified operator from the unit which has the vacancy, or hire a new employee, or recall an employee from layoff, if anyone is on layoff, by normal recall procedures or if there is no one in the Operation Pool, select the least senior qualified employee in the Maintenance Department. If there is no one left in the Operations Pool, and the Company must use this section in filling jobs because there are no applicants, the following procedure will be used: 1) Appoint the least senior maintenance Department employee not already holding a sub job. 11 14 2) When a permanent vacancy opens in the bottom classification in the Operations Department and there are no bids, the Company would appoint the person with the most senior sub classification to that job. If there are no subs available except those appointed in one (1) above, the Company would appoint the least senior Maintenance Department employee regardless of any sub job he or she might already hold. 505.4 Openings in the Operations Department may be bid on by all employees, with first preference being given Operation Department employees. 506. Promotions and transfers in the Maintenance and Operations Departments shall be considered as temporary for the period of sixty (60) days and thirty (30) days respectively from the date of such promotion or other transfer, provided that when an employee is placed or transferred from one job classification to another and to a job with a higher wage rate, he will continue at his former rate of pay for a period of sixty (60) days, or until such time as he assumes the work and responsibility of the job to which he is transferred, whichever occurs sooner, but in no case before the start of the second day's work in the new job classification. It is not the intent of this Section 506. to in any way change the procedure for bidding jobs as set forth in Section 505. of this Article. Promotions and transfers in the Maintenance and Operations Departments shall be considered as temporary for the period of sixty (60) days and thirty (30) days respectively from the date of such promotion or other transfer, provided that when an employee is placed or transferred from one job classification to another and to a job with a higher wage rate, he will continue at his former rate of pay for a period of thirty (30) days, or until such time as he assumes the work and responsibility of the job to which he is transferred, whichever occurs sooner, but in no case before the start of the second day's work in the new job classification. It is not the intent of this Section 506.1 to in any way change the procedure for bidding in jobs as set forth in Section 505. of this Article 5. 506.1 The term "temporary" as used in this Article refers to the Company's prerogative of observing and evaluating an employee's performance in a new position for the purpose of determining whether an employee is satisfactorily performing in a new job. The Company will have the right to make such a determination, but any such determination will be subject to the grievance procedure. 507. In the event of any promotion or transfer and a return to the former job classification by an employee in any situation, every other employee advanced or transferred by reason of such initial transfer and return will be returned to his former job classification. The employee who turns down a job and returns to their previous classification is prohibited from bidding for a period of six months. 507.1 Any Operations employee who successfully bids a job will assume the job within a maximum of six (6) months. Any Maintenance employee who successfully bids a job will assume the job within a maximum of three (3) months. 508. Any employee may decline a promotion without loss of any seniority rights or promotional privileges; however, an employee who has advanced in a definite line of progression beyond or ahead of an employee who has refused a promotion or beyond or ahead of an employee who has failed on a promotion will, for the purpose of promotions or demotions, continue to remain ahead of such other employee. An employee demoted because of incompetence will not carry back to the lower classification any job seniority acquired in the higher classification. 508.1 When an operator is appointed to the next higher sub classification and, upon that appointment, immediately expresses dissatisfaction to the Company, he will be returned to his previous classification when another employee qualifies for his sub classification through the Proficiency Program. The employee who replaces the appointed operator will remain senior to that individual for the purposes of bidding rights. 12 15 There will be four proficiency positions for each classification per unit, including 3A, 3B, 2A, 2B, and there can be eight No.2 proficiency positions at the FCC or as spelled out per unit. Sub time will be divided equally as much as possible to provide both the sub and the employee with the proficiency rate the opportunity to perform the duties of the higher classification. If two operators with the same job seniority express interest in the proficiency test and there is only one vacancy open, both individuals will be afforded the opportunity to take the test. If both pass the test, the rate will be awarded based on the flip of a coin. 509. In case of a job abolishment, the employee thus affected will return to such former job as his departmental seniority will allow; otherwise he will return to the Maintenance Department in the classification which he most recently held in that department, but in no case lower than the classification of Utility Repairman. 509.1 If any job is abolished and then reopened, the employee who last held the job prior to it being abolished shall have first opportunity to return to his former job before it can be put up for bid. 510. In the event it becomes necessary to reduce the number of employees subject to this Agreement, employees will be laid off on the basis of their plant seniority; the last man hired will be the first laid off irrespective of departmental seniority. Employees so laid off will be recalled for work in the reverse order of their layoff; the last man laid off will be the first man recalled. 510.1 The Company agrees to super seniority as follows: The Chief Steward, Assistant Chief Steward, Secretary Steward, and Treasury Steward of the Union shall have top seniority during their term of office. Such top seniority will apply in layoff and recall, as set forth in Paragraph 510. Employees who may be elected or appointed to office in the Union, which requires him to be absent from duly with the Company, shall be granted a leave of absence up to five (5) years to work for the Union. 511. When a new department is created or a new job classification established with two (2) or more employees being put into that department or classification at the same time, the departmental seniority of such employees will begin as of the same date but for the purpose of subsequent promotions, demotions and layoffs, plant seniority will be recognized when ability, as herein defined, is substantially equal. Plant seniority will control for vacation period preference. 512. Effective 2/1/90, new employees not presently members of the Union will have a 20 year commitment to Operations after they have obtained an operator's classification other than entry level sub. 512.1 The following defines and sets forth the procedure and situation under which shift employees may enter the Maintenance Department. One (1) shift employee may transfer to the Maintenance Department as a Utility Repairman every four (4) months per calendar year, provided he has not less than eleven (11) years service on shift jobs and notifies the Company and the Union at least four (4) months prior to January 1, May 1, or September 1, of any year, with the transfer to be effective on the January 1, May 1, or September 1, following the notice. If more than one (1) shift employee desires to make the transfer on the same date, the transfer will be granted to the person having the greatest departmental seniority. Once a shift employee has given his notice to transfer, he must complete the transfer. Any vacancies created by transfer of shift employees will be filled by regular bidding procedures; however, if no bids are received the vacancy will be filled as in like case under Section 505.4. 13 16 512.2 Operators coming out into the Maintenance Department after (11) eleven years are exempt from being appointed back into the Operation Department. 512.3 Operations Department employees who have returned to the Maintenance Department after eleven (11) years per Article 512.1 will, after one (1) year in the Maintenance Department, be given credit for 50% of their Operation Department seniority as maintenance seniority for bidding purposes. 512.4 Effective July 1, 1987, Maintenance employees bidding into the Operations Department, after one year in the Operations Department, will be given credit for 50% of their Maintenance Department seniority as Operations seniority for bidding purposes. 513. A shift employee who voluntarily requests a transfer to the Maintenance Department due to a physical or mental condition certified to by a Company physician and verified by a second physician, as being such as to make him unable to perform his job, will be transferred to the Maintenance Department with a classification as follows: 1 through 3 years shift work................Laborer 4 through 7 years shift work................Mechanic Helper 8 or more years shift work..................Utility Repairman 514. Minimum employee complement levels in certain Maintenance Department job classifications shall be as specified in Appendix A, Wage Rates. Within each Maintenance Department sub-division, if the Company maintains a higher level than the minimum in the upper classification, then the number of employees in the lower classification can be reduced by an equal number, as long as the total number of employees is equal to or exceeds the total for the minimum for all classifications within the sub-division. This is subject to reductions in accordance with Paragraph 510. 514.1 It is understood that no minimum or maximum figures will be placed on classifications of Utility Repairman, Mechanic Helper, Mechanic Helper Grade 2, or Laborer. 515. The Union Committee will at all times have the right to discuss with a representative or representatives of the Company, who will meet with it for that purpose, questions of fitness and ability, claims of favoritism or other matters pertaining to seniority where matters of promotion, demotion, transfer, discharge, or layoff are concerned. 515.1 In all questions effecting seniority rights the records of the Company will be made available and in case of a dispute such records will be conclusive. 516 The Company agrees that in the event of a controversy involving the ability of a person bidding in a job that person will be given forty-five (45) days in which to qualify. 517 In the event that any employee is transferred or promoted to a supervisory capacity or transferred to an office department or put on salary such employee will continue to accrue departmental seniority for up to maximum of six months after the date of transfer or promotion, but will not accrue such seniority beyond that six months until such time as he may re-enter the bargaining unit. Such an employee will retain all departmental seniority accrued prior to the date of such transfer or promotion plus additional seniority accrued thereafter up to the maximum of six (6) months of such additional seniority as aforesaid as long as he is employed by the Company. 518 The provisions of this Article 5 relative to filling vacancies and determining layoffs will NOT apply to the jobs of terminal attendant and helper at the Williamsport Terminal. 519. All employees will accrue the applicable seniority when absent from work because of leaves-of-absence, compensation, sickness or military service. 14 17 520. There will be a substitute for each job classification within an operating department. 520.1 With the exception of any department that has only one (1) job classification, the substitute for the top operating job in a department will be bid on and awarded to an employee in the next lower job classification within that department and in like manner, substitutes will be acquired for the other job classifications with the exception of the bottom job in each department. The substitute will accrue seniority on the substitute job as of the date awarded and will be first to move up to the classification in which he is substituting when a vacancy occurs. 520.2 Substitute jobs in the bottom classification of each Operating Department or in departments with only one (1) job classification are open only to employees in the Maintenance Department with the classification of Laborer, Mechanic Helper, Mechanic Helper Grade 2, or Utility Repairman. Sub jobs are open to an Maintenance Department personnel when no one is left in the Operations pool. When not working at the substitute job, the employee will work in the Maintenance Department at the classification he held at the time of bidding in the substitute job or a subsequent classification up to and including that of Utility Repairman which he might be awarded while in the Maintenance Department and also holding The substitute job classification. An employee working in a substitute job in the bottom classification or in a department with only one (1) job classification will gain departmental seniority on this job over a Laborer, Mechanic Helper, Mechanic Helper Grade 2, or Utility Repairman, but he will not gain seniority over maintenance personnel with higher or dual classifications, and operating employees. 520.3 Substitutes for the bottom classification or where there is only one classification who have not worked in the unit for six months will receive one week of training at their Maintenance rate. ARTICLE 6 TIME OFF WITH PAY 601 The Company will grant vacations with pay during the continuance of this Agreement in accordance with the following schedule: 601.1 Each employee who reports to work on or before the first working day of April of any year, after completing six (6) months service, will be entitled to a vacation consisting of one (1) week and one (1) day absence from his work and will receive as pay therefore the amount he would have earned according to his normally scheduled workweek computed on a straight base rate basis. A shift employee will begin such a vacation period upon his completing any regularly scheduled tour of work 601.2 After the first anniversary of continuous employment with the Company occurs, and beginning with each calendar year thereafter, each employee will be entitled to a vacation of two (2) weeks and one (1) day computed on his base hourly rate. 601.3 Beginning with the calendar year in which the fifth (5th) anniversary of continuous employment with the Company occurs, Maintenance Department employees will be entitled to a vacation of one hundred twenty-eight (128) hours computed on his base hourly rate. Operations Department employees will be entitled to a vacation consisting of three (3) scheduled shifts computed on his base hourly rate. 601.4 Beginning with the calendar year in which the tenth (10th) anniversary of continuous employment with the Company occurs, Maintenance Department employees will be entitled to a vacation of one hundred sixty-eight (168) hours computed on his base hourly rate. Operations 15 18 Department employees will be entitled to a vacation consisting of four (4) scheduled shifts computed on his base hourly rate. 601.5 Beginning with the calendar year in which the twentieth (20th) anniversary of continuous employment with the Company occurs, Maintenance Department employees will be entitled to a vacation of two hundred eight (208) hours computed on his base hourly rate. Operations Department employees will be entitled to a vacation consisting of five (5) scheduled shifts computed on his base hourly rate. 601.6 Beginning with the calendar year in which the thirtieth (30) anniversary of continuous employment with the Company occurs, Maintenance Department employees will be entitled to a vacation of two hundred forty (240) hours computed on his base hourly rate. Operations Department employees will be entitled to a vacation consisting of six (6) scheduled shifts computed on his hourly rate. 601.7 Maintenance Department employees having vacation eligibility in excess of two (2) weeks will be granted time off based on a forty (40) hour week [i.e. one hundred twenty-eight (128) hours becomes three weeks and one (1) day, one hundred sixty-eight (168) hours becomes four (4) weeks and one (1) day and two hundred eight (208) hours becomes five (5) weeks and one (1) day.] 601.8 Maintenance Department employees with three (3) or more weeks of vacation time due them may take one (1) week multiples of one (1) day. However, that all of these days continue to be considered vacation days, and as such, must be scheduled. 601.9 Operations Department employees with three (3) or more shifts of vacation time due them may take one (1) shift in multiples of one day providing they give one weeks notice and it shall not interfere with scheduled vacations or scheduled personal holidays. 601.10 Employees who are subs in the Operations Department will receive their vacation entitlement and holiday pay on a pro-rata basis. Each January, the time worked in each department the previous year will be determined and recorded. The pay rate for vacation and personal holidays will be determined according to the following formula: Fraction straight time worked in Maintenance multiplied by maintenance rate, plus fraction straight time in Operations multiplied by Operations rate. The vacation entitlement will be rounded to the nearest whole day. 602. Vacations for the Operations Department employees may be taken at any time during the calendar year. In the assignment of vacation time, the Company will, as far as feasible and in line with efficient operating schedules, comply with the expressed preference of employees on the basis of their seniority, provided, however, that no preference on the basis of seniority will be given unless such preference is expressed to the respective foreman on or before the first day of February. All vacations signed up for by February 1 will be approved or disapproved by March 1. In case an employee fails to indicate before June 1 of any year his vacation preference, his vacation period will be at the convenience of the Company and assigned to him by his foreman. Vacations for the Maintenance Department employees may be taken at any time during the calendar year. In the assignment of vacation time, the Company will, as far as feasible and in line with efficient operating schedules, comply with the expressed preference of employees on the basis of their seniority, provided, however, that no preference on the basis of seniority will be given unless such preference is expressed to the respective foreman on or before the first day of February for the vacation period of February 1 to June 30 and by March 1 for the period of July 1 to December 31. All vacations signed up by February 1 for the vacation period of February 1 to June 30 will be approved or disapproved by March 1. All vacations signed up by March 1 for the vacation period of July 1 to December 31 will be approved or disapproved by April 1. In case an employee fails to indicate before June 1 for any year his 16 19 vacation preference, his vacation period will be at the convenience of the Company and assigned to him by his foreman. A weeks vacation requested by a Maintenance employee of less seniority, or equal seniority, will outweigh that of a single vacation day requested by a more senior employee, while a more senior employee requesting two or more vacation days will be granted his or her vacation preference over a less senior employee requesting a weeks vacation. In the case in which both employees have the same seniority, the greater amount of vacation time requested during the week will overrule the lesser amount of vacation requested. Vacations within the above period will be allotted so far as possible at the time desired by the employee but the final decision will, in order to insure the orderly operation of the plant, be within the absolute discretion and judgment of the Company. 602.1 Hourly day employees scheduled to start their vacation on Monday will not normally be required to work the preceding Saturday or Sunday. 603. It will be compulsory for employees to take vacations annually as herein provided, with the exception of Paragraph 604 and 605. 604. An employee with two (2) or more weeks vacation, who upon request from the Company cancels a vacation after it has previously been approved per the Contract, may reschedule said vacation later that year or carry over that period of vacation to the next year or may reschedule said vacation and will bear no consequence on prior scheduling and shall be granted, when desired, if it does not interfere with the orderly operation of the plant. 605. Those employees who wish to be reimbursed in lieu of taking vacation and with the Company's prior approval, will be compensated per the following schedule: Vacation Entitlement Sell Back Limit 2 Weeks/1 Day ....................1 Week 128 Hours/3 Shifts ...............40 Hours/1 Shift 168 Hours/4 Shifts ...............50 Hours/2 Shifts 208 Hours/3 Shifts ...............80 Hours/2 Shifts 240 Hours/6 Shifts ...............120 Hours/3 Shifts 605.1 In the case of employees entitled to a vacation of more than one (1) week, such additional weeks of vacation may be taken consecutively or separately provided the same does not interfere with the orderly and efficient operation of the plant. 605.2 In determining vacation preference rights in the Operations Department, the following will apply: Combination Unit, FCC Unit, Boiler House, and Pump House, the top classification on each shift shall have preference of his first two shifts of vacation. He then has first choice of the remainder of his vacation entitlement after others on his shift have declared their choice of one shift of vacation in order of their classification ranking. In departments with only one (1) classification, seniority, except as provided in Section 511, will apply in the following order: (1) job seniority, (2) departmental seniority, (3) plant seniority, and (4) company seniority. In determining vacation preference rights in the Maintenance Department, seniority will apply in the following order: (1) plant seniority, (2) job seniority, (3) departmental seniority, and (4) company seniority. 17 20 605.3 Vacation rights for any calendar year become vested in any regular, active, full-time employee with three (3) or more years of continuous active service as of the preceding May 31st, in accordance with the Company's letter to all employees dated December 23, 1966. However, after January 1, 1960, vacation rights for any calendar year become vested in any regular active full-time employee with three (3) or more years of continuous active service as of the preceding January 1st. 606. In determining vacation rights due employees upon retirement or death before retirement, January 1st is the starting date, and for each month thereafter up to his retirement or death, an employee will accrue 1/12th of his next year's vacation. 607. All rights to vacation or pay therefore will end with the termination of employment by resignation, or discharge for cause, of the employee, except those rights which have become vested in accordance with Section 605.3 of this Article 6. 608. After an initial absence from work of thirty (30) consecutive scheduled work days for any reason other than an injury compensable by Workmen's Compensation during the twelve (12) month period starting with January 1 of any year and extending through December 31 of that year, an employee's vacation time for the next ensuing year will be reduced by 1/12th, calculated to the nearest full day, for each thirty (30) scheduled work days of absence after the initial absence period of thirty (30) scheduled work days. This section will not apply to employees having twenty (20) or more years of service. 609. The Company has the right to use substitutes in all situations. 610.1 In the event of the death of a spouse or child of any employee who has been in the employment of the Company for at least thirty (30) days, such employee will, upon request to his foreman, be granted the necessary time off but not to exceed five (5) consecutive work days. In the case of death in the immediate family of an employee, other than spouse, child or stepchild, such employee will upon request to his foreman, be granted the necessary time off but not to exceed three (3) consecutive calendar days. However, in the case where the funeral is not held within the above periods, the employee may be granted one extra day, if needed, to attend the funeral. For the purpose of the foregoing, it is understood that the immediate family will consist of legal mother or step mother, legal father or step father, or legal guardian, brother, sister, mother-in-law, father-in-law, step-brother, and step-sister. In the case of the death of an employee's grandmother, grandfather or grandchildren, such employee, upon request to his foreman, will be granted one (1) day off to attend the funeral. The employee will receive for each such day his base rate of pay times eight (8). 610.2 If an employee's vacation is interrupted by such death and he notifies the Company promptly, the number of bereavement days to which he normally would have been entitled shall be added to his vacation period. 610.3 When an employee is requested to act as pallbearer at the funeral of a fellow employee, he will, on request to his foreman, be granted such time off as is necessary to serve in such capacity. For each hour or fraction thereof rounded off to the nearest 1/2 hour used by an employee, he will be paid his base rate. 611 An employee who is called for jury service or jury selection, either local or federal, will be excused from work for the days on which he serves as juryman. Employees who report for jury service or jury selection and are dismissed from jury service or jury selection are expected to report to work for the remainder of their shift, if they are dismissed with two hours or more of their scheduled shift left to work. If there are two hours or less left of their scheduled shift, the employee need not report to work. Should they not return to work, they will be paid only for the time spent at jury service or jury selection. 18 21 Any employee who was called for jury service or jury selection and was excused from work for jury service or jury selection must provide the Company proof of time spent at jury service or jury selection before he will be reimbursed. An employee who gives the Company advance notice of jury service or jury selection and is on third shift will have his shift adjusted so that he may get eight hours of steep before meeting his civil duty. 611.1 Jury service or jury selection and funeral days to count as time worked for the purpose of computing daily and weekly overtime. ARTICLE 7 UNION COMMITTEE AND UNION ACTIVITIES 701.1 The Union Committee will consist of seven (7) stewards and (2) alternates: - 1 from the FCC - 1 from the Combination Unit - 1 from the Boiler House, Loading Rack, Laboratory, and Pump House areas - 1 from the Operations Department at large (Alternate) - 4 from the Maintenance Department - 1 from the Body at large (Alternate) All seven (7) stewards shall be recognized by the Company. A maximum of seven (7) stewards, however, will attend any joint meetings, unless otherwise agreed to by both parties. Alternates will be recognized upon advance request when filling in for another steward on vacation, off sick, or excused from work. The thirty (30) hours in 701.3 will be considered as a bank of 210 hours and the Union Committee of nine (9) stewards will draw upon this bank as needed, until all hours are used up. The intent of this is not to guarantee each steward 30 hours but to have those hours distributed among all the stewards and charged against the 210 hour bank. 701.2 Special meetings may be scheduled at any time by mutual agreement between the Company and the Union. 701.3 The Company will pay employees attending a joint meeting of the Union Committee and the Company Committee at their regular rate for 30 hours of total meeting time per year, after which the Company will pay employees at their regular rate for the hours which they are scheduled to work but did not work because of attending the meeting. 701.4 The names of the members of the Union Committee, together with the name of the Chairperson thereof and any change in the personnel thereof will be certified to the Company from time to time by the proper officers of the Union under the seal thereof. 701.5 Members of the Committee attending necessary and duly called meetings with Company representatives during their regular hours of work will be afforded such time off as may be reasonably required for such purpose without prejudice and without loss of time, provided advance notice is given to their department foreman. 702. The Company will provide and maintain a bulletin board at the time clocks of the Company which will be used by the Union exclusively for posting Union notices concerning or having reference to Union meetings, dues, social and recreational events, Union elections, appointments and job vacancies. 19 22 ARTICLE 8 PROBLEM ADJUSTMENT PROCEDURE 801. Should any difference arise between the Company and the Union as to the meaning, application or claimed violation of any of the provisions of this Agreement, or should any one (1) or more employees of the classes covered by this Agreement have any complaint that any of its terms and conditions as to him or them are being violated, there will be no suspension of work on account of such differences or complaints, but an earnest effort will be made to settle them promptly by the following steps: Step 1. Any employee, or group of employees, or the Union Committee having a grievance shall reduce it to writing and discuss the grievance with his Department Foreman, with his Steward being present (if requested), within ten (10) days, exclusive of Saturday or Sunday, after the cause giving rise to the grievance occurs. The presentation of Step 1 grievances shall occur during the regular workday as the time permits, based on the availability of the involved supervisor, the grievant and the union representative. The Union representative will seek and obtain permission from the involved supervisor and from the Union representative's supervisor for the time on the clock in which to meet with the grievant and the involved supervisor for the presentation of a Step 1 grievance and such requests will not be unreasonably denied by the supervisors. Step 2. In the event no settlement is reached in Step "1", a joint meeting of Union and Management Committees shall be held thereafter within ten (10) days (exclusive of Saturday and Sunday) or such extended time as may be mutually agreed upon. A Business Representative of the Union may be present and participate in this meeting if requested to do so. The Company will respond to the Union in writing with their answer to step 2 within five (5) working days from the meeting. Step 3. In the event no settlement is reached by the procedure outlined in Steps "1" and "2", the Union may upon written notice to the employer, appeal the grievance to arbitration within ten (10) days (exclusive of Saturday and Sunday) after the Company's step 2 response. The arbitrator shall be selected from a list of nine (9) submitted to the parties from the Federal Mediation and Conciliation Service. This selection process will consist of each party alternately striking names from a nine (9) member panel. The name left after eight (8) strikes shall be the arbitrator used for the case which the panel was requested for. If the parties are unable to agree upon the selection, an Arbitrator will be appointed by the Federal Mediation and Conciliation Service. The Arbitrator so selected will conduct his hearings and proceedings in accordance with the rules of the Federal Mediation and Conciliation Service and will render his decision in writing on or before such time as may be determined by the Arbitrator. 802.1 In cases of discipline, the Company will issue such discipline within 5 scheduled work days of the occurrence in maintenance or 1 scheduled shift in operations unless the Company and Union agree to an extension of the time limit. 802.2 The Arbitrator will have no power to add to, subtract from, alter or modify in any way any of the provisions of this Agreement, directly or by drawing inferences from relationships. The decision of the Arbitrator on a matter properly before him within the limits of his jurisdiction will be final and binding on the parties. The expenses and fees of the Arbitrator will be borne equally by the Company and the Union. All other expenses, including witnesses, stenographic record, etc., will be paid for by the party ordering them. 803. No difference or complaint will be deemed valid to be processed under the forgoing provisions of the grievance procedure or submitted to arbitration hereunder unless the same will have been initiated within ten (10) normally scheduled work days exclusive of Saturday and Sunday after the occurrence of the circumstances out of which it arose. Should the Union dispute the Company's action 20 23 as not being for just cause, the dispute may be processed starting at step 2 of the grievance procedure. Disciplinary letters will no longer be considered in the disciplinary cases after two (2) years from their date, except for verbal warnings which will no longer be considered after eighteen (18) months. Suspensions will no longer be considered after five (5) years. 804. Any time limit herein above set forth for the initiation or processing of a grievance or for submission to arbitration will be strictly complied with and if at any stage a time limit is not complied with, the difference or complaint (grievance) will be deemed settled and of no further validity, provided nevertheless that the parties may extend the time limit in any particular instance by agreement in writing. 805. It is understood and agreed that either party will have the right, at any step of the grievance procedure or arbitration, to request the presence of a representative of the national organization of the Union, and such representative will have the right to participate in any step or in arbitration, but the failure of the national organization of the Union to provide a representative at any time, even though requested to do so, will not prevent or delay processing as above provided or in any way affect any of the time limits provided. 806. It is understood and agreed that an Arbitrator can become involved in only one (1) Company-Union case at any one (1) time. ARTICLE 9 MILITARY SERVICE 901. Employees who either voluntarily or by reason of Selective Service regulations leave the employ of the Company for the purpose of performing military service in any branch of the US Armed Forces will be entitled on their release from such service, to resume their employment with the Company and to be restored to a position which their accrued seniority and experience warrant, provided they are physically fit to do so; and, provided such employees have not been discharged from the military service under circumstances or for causes which, when viewed in light of the nature of refinery operations and job requirements, would render re-employment inadvisable or inappropriate; and, provided further that they apply for work within ninety (90) days from the date of their release and have not voluntarily extended the period of their service beyond the first opportunity for discharge therefrom. The Company and Union Committee may by mutual agreement waive the ninety (90) day requirement in individual cases upon consideration of the merits of the case. 902. An employee who enters military service of the United States under the Selective Service Act of 1948, as amended, will be entitled to his vacation for that year either by way of time off or vacation pay. 903. Employees returning from military service will be entitled to vacation rights upon the completion of six (6) months' work in the calendar year of their return. ARTICLE 10 NO STRIKE 1001. In consideration of the covenants and agreement to be performed by the Company under this Agreement, and to effect mutuality thereof the Union agrees that neither it nor any of its members will engage in any strike, sit-down, slowdown or work stoppage during the life of this Agreement. Also, the Company agrees that there shall be no lockout during the life of this Agreement, if any employee or group of employees represented by the Union should violate the intent of this section, the Union through 21 24 its proper officers will promptly notify the Company and such employee or employees in writing, of its disapproval of such violations, and will take steps to effect a prompt resumption of work ARTICLE 11 EQUIPMENT SAFETY AND HEALTH 1101. In the interest of safe and efficient operation of the Company's plant and the protection of its employees, each employee of the Company will undergo, at such times as requested by the Company and at its expense, a physical examination to be conducted by a reputable physician designated by the Company. If an employee is not satisfied with the results of such physical examination, he will have the right to undergo a physical examination conducted by a reputable physician of his own choosing and at his own expense. If the results of the two (2) examinations do not agree, the physicians conducting said examinations will choose a third physician who will make a physical examination of such employee and the report and findings of such third physician will be final and conclusive upon the Company and the employee, the cost of which shall be borne equally by the Company and the employee. The last two (2) preceding sentences of this paragraph, however, will not apply to any examination by any physician connected with or designated by the United States Health Services or the Department of Health of the Commonwealth of Pennsylvania, the examination by latter physicians will be final. 1102. The future of United Refining Company is dependent upon the physical and psychological health of its employees. Being under the influence of a drug or alcohol on the job may pose serious safety and health risks not only to the user, but also to all those who work with the user and may diminish productivity. The possession, use or sale of an illegal drug in the workplace may also pose unacceptable risks for safe, healthful and efficient operations. Recognizing that the Company has adopted pre-employment screening practices designed to prevent hiring individuals who use illegal drugs, or whose use of illegal drugs or alcohol indicates a potential for impairment, now therefore, effective February 1, 1990, the Company and the Union hereby adopt this policy for all employees covered by this Agreement. Section 1. Employee Assistance Program. The Company will maintain an Employee Assistance Program (EAP) which assists employees who suffer from alcohol or drug abuse and other personal problems in securing professional help. It is recognized that substance screening results can trigger participation in the EAP and no disciplinary action will be taken against any employee who is participating in the EAP solely because of his/her participation in the EAP. The EAP will monitor any employee's progress through treatment and after care in order to insure that the employee has every opportunity to be as productive an employee as he/she can be. Section 2. Possession Prohibited. No employee at any work site may possess any quantity of alcohol or any substance or drug (lawful or unlawful) which, if taken in sufficient quantity (which quantity may be greater than that in the employee's possession) could result in impairment, except for authorized substances. "Work Site" means any office, building or property owned or operated by the employer, or any other personal effects, tools, and areas substantially entrusted to the control of the employee such as desk, files and lockers. Authorized substances include only: a) lawful over-the-counter drugs (excluding alcohol) in reasonable amounts; and b) other lawful (prescription) drugs taken at prescribed dosage. Section 3. Impairment Prohibited. No employee will report for work or will work impaired by any substance, drug or alcohol, lawful or unlawful, except with management's approval; such approval will be limited to lawful medications and based strictly on an assessment of the employee's ability to perform his/her regular or other assigned duties safely and efficiently. "Impaired" means under the influence of a substance (alcohol .05%) such that the employee's motor sense (i.e. sight, speech, hearing, balance, reaction, reflex) or judgment either are, or may be reasonably presumed to be affected. 22 25 Section 4. Suspected Impairment. When there is reasonable cause to believe that any employee has reported to work or is working impaired, that employee may be required to submit to substance screening. In addition, any employee involved in a job related accident or incident which involves the apparent violation of any safety rule or standard which did result or could have resulted in injury or property damage where impairment appears to be the cause, may be subject to substance screening. Before an employee will be subject to substance screening, one of the following management personnel must be present in addition to the immediate supervisor and the management representative must concur that there is reasonable cause to believe the employee may be impaired: Refinery Manager, Maintenance Manager, Assistant Maintenance Manager, or Operations Manager. When one of the aforementioned management people are called, the supervisor will also call one of the members of the Union Committee and such union representative may be present to advise the employee of his or her rights, if a member of the Union's Committee can be contacted. Section 5. Substance Screening. For the purpose of assuring compliance with Sections 3 and 4 above, employees will be subject to substance screening under the process described below. "Substance Screening" means prompt testing of blood and urine deemed necessary to determine possession or impairment, and the completion of a substance use questionnaire. The screening of employees is not intended to be a punitive program, but one in which those identified as having drug or alcohol related problems will be referred through the EAP for help. Section 6. Substance Screening Process. All substance screening tests will be conducted by an approved NIDA certified technological laboratory and based on an appropriate sample obtained from the employee. If an initial analysis results in a positive finding, confirmatory tests will be conducted. If the confirmatory results are positive, the individual will be advised. An employee whose urine or blood reveals higher concentration (as spelled out in Appendix B and measured by EMIT BC/MS Test) of the drugs identified in Appendix B will be deemed to have a positive drug screening result. Section 7. Disciplinary Action a. Any dispute arising from the administration or interpretation of this policy will be subject to the grievance and arbitration procedures. b. Except as herein after specified, any discipline meted out to an employee will be determined based upon the circumstances or event that gave rise to the substance screening and without regard to the results of the screening. c. A positive substance screening test result will serve as a trigger mechanism for the EAP. d. A positive substance screening result will allow the Company to require an employee to submit to a maximum of four (4) random tests within twelve (12) months of the positive result. e. An employee who has a positive substance screening test result and who refuses to enter the EAP or fails to complete the treatment program he/she enters will be suspended for two (2) weeks for the first positive test. f. Failure to submit to substance screening is grounds for automatic two (2) weeks suspension and the employee will be required to submit to a maximum of four (4) random tests within twelve (12) months of his/her refusal to take the substance screening test. g. Any employee who has a second positive substance screening test result or refuses a second time to submit to substance screening or has a positive substance screening test result after having earlier refused to submit to substance screening or who refuses to submit to substance screening after having had a positive substance screening result will be discharged. 23 26 h. Possession of any substance referred to in Section 2 will result in a two (2) week suspension for the first offense and the employee will be required to submit to a maximum of four (4) random tests within twelve (12) months of the date the possession was discovered by the Company. Any subsequent possession of any substance referred to in Section 2 will result in discharge. Section 8. Recognizing that the Company and the Union have a mutual interest in protecting the safety of employees and the assets of the Company, all Company employees shall be subject to random screening under the same general conditions as those subject to the Department of Transportation jurisdiction. 1102.1 The efforts of both the Company and the employees will be directed to maintaining all equipment, tools and property in a safe and efficient working order; and that the regulations and safety codes adopted, or to be adopted by the Company, the Department of Labor and Industry of the Commonwealth of Pennsylvania, and the Federal Government, as they affect this industry in the interest of the protection of health and safety of the employees and of plant property, will be observed by both the Company and the employees. 1102.2 The Company agrees to hold monthly Safety Meetings consisting of three Union representatives and three Management representatives. Safety Meetings are intended and expected to be productive and beneficial to employees and the Company. The purpose of the meetings will include but not be limited to discussions about: - Plant Safety Inspections - Tool Box Meetings - Safety Training - OSHA Compliance - Safety Work Order The Safety Committee will submit written meeting minutes and recommendations to the Vice President of Refining and the Chief Steward of the Union. Management will review recommendations for appropriate action as decided by Management. 1102.3 Each employee has a duty to properly use and care for all tools and equipment entrusted to him, and the Company will be entitled to take reasonable disciplinary action in the case of a breach of this duty. 1103. The Company agrees to an annual inspection and appropriate maintenance as indicated annually for the Pettibone Multikrane, the Grove 30 ton and 18 ton cranes, Electricians' line truck, Grove AP 308 and Insulators' bucket truck and Insulators' man lift. This inspection will be performed by any qualified contractor or qualified salaried employee. 1104. Any unlawful activity committed upon Company property will constitute grounds for discharge of the employee or employees participating therein. However such discharge as well as any other discharge, will be subject to the grievance procedure contained in Article 8, Section 801. 1105. Employees required to perform work which unavoidably results in the destruction of or serious damage to their boots or clothing by chemical action or other abnormal conditions will be provided suitable replacements by the Company, if the Company agrees the damage was the result of extraordinary circumstances. 1106. The Company will buy a pair of safety shoes with a value not to exceed $60.00 for any FCC operator or Zone Mechanic who has worked at the Alky for six consecutive months, or for any Isom 24 27 operator or substitute that has incurred damage to his foot wear due to the nature of the process involved. Old shoes must be turned into their supervisor. ARTICLE 12 DEPARTMENT LISTS 1201. The Company agrees to furnish the Union promptly upon execution of this Agreement a list of the departments in its plant showing as to each department the various positions thereunder, together with the wage rates for each classification. 1202. The Company will provide the Union with copies of posted work schedules and posted Company memos that pertain to all Bargaining Unit employees. ARTICLE 13 EDUCATION FUND 1301. LOCAL 96 EDUCATION FUND. The Company agrees to participate in the Local 95 Education Fund. Contributions shall be $.05 per hour for each hour worked up to a maximum of 2080 hours per year for each employee, payable Monday following payday. The Union agrees to focus the first twelve (12) months of education on safety related matters. ARTICLE 14 DURATION 1401. This Agreement will continue in full force and effect from 12:01 a.m. on the 1st day of February, 1996, to and ending at 12:01 a.m. on the 1st day of February, 2001, and will thereafter automatically renew itself for subsequent periods of two (2) years each unless written notice is forwarded by registered mail by either party hereto to the other party at least sixty (60) days prior to the termination date of this Agreement, or of any then current renewed term, of a desire to terminate or modify this Agreement. Within said period of sixty (60) days the parties hereto will confer with each other for the purpose of mutually considering upon what terms and conditions this Agreement may, if possible, be extended. During any such sixty (60) day period there will be no suspension of work by the employees by reason of inability to mutually agree upon new terms and conditions. Except that on February 1, 1997, the topics of the IUOE Central Pension Fund and the pre-retirement death benefit of The Hourly Noncontributory Pension Fund may be reopened. 25 EX-10.6 31 COLLECTIVE BARGAINING AGREEMENT 1 EXHIBIT 10.6 AGREEMENT BETWEEN UNITED REFINING COMPANY WARREN, PENNSYLVANIA and THE INTERNATIONAL UNION UNITED PLANT GUARD WORKERS OF AMERICA (UPGWA) and LOCAL UNION NO. 502 2 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- ARTICLE I - PURPOSE 3 ARTICLE II - SCOPE OF AGREEMENT 4 ARTICLE III - RECOGNITION 4 ARTICLE IV - MANAGEMENT RIGHTS 4 ARTICLE V - UNION MEMBERSHIP 5 ARTICLE VI - CHECK OFF 5 ARTICLE VII - RESPONSIBILITIES OF THE PARTIES 6 ARTICLE VIII - GRIEVANCE COMMITTEE 7 ARTICLE IX - GRIEVANCE PROCEDURE 8 ARTICLE X - SUSPENSION AND DISCHARGE CASES 12 ARTICLE XI - HOURS OF WORK 12 ARTICLE XII - SENIORITY 13 ARTICLE XIII - GENERAL PROVISIONS 16 ARTICLE XIV - UNIFORMS AND EQUIPMENT 18 ARTICLE XV - WAGES 18 ARTICLE XVI - HOLIDAYS 18 ARTICLE XVII - VACATIONS 19 ARTICLE XVIII - CHRISTMAS BONUS 21 ARTICLE XIX - LONG TERM DISABILITY PLAN 21 ARTICLE XX - FUNERAL LEAVE 21 ARTICLE XXI - JURY DUTY 21 ARTICLE XXII - HOSPITALIZATION AND DENTAL INSURANCE 22 ARTICLE XXIII - LIFE INSURANCE 22 ARTICLE XXIV - SAVINGS PLAN 22 ARTICLE XXV - PENSION PLAN 22 ARTICLE XXVI - SHIFT BONUS 23 ARTICLE XXVII - TERMINATION 23 SIGNING AGREEMENT 24 APPENDIX A - CHECKOFF 25 APPENDIX B - WAGES 28 APPENDIX C - STEADY ROTATING SCHEDULE 29 2 3 Board No. 6-RC-10776 AGREEMENT This Agreement dated as of June 23, 1993 is between UNITED REFINING COMPANY, Warren, Pennsylvania, or its successor, (hereinafter referred to as the "Company") and the INTERNATIONAL UNION, UNITED PLANT GUARD WORKERS OF AMERICA (UPGWA) and its Amalgamated Local No. 502 (herein after referred to as the "Union"). Except as otherwise provided herein the provisions of this Agreement shall be effective at 12:01 a.m., June 25, 1996. ARTICLE I PURPOSE The purpose of the Company and the Union entering into this Labor Agreement is to set forth their agreement of rates of pay, hours of work and other conditions of employment so as to promote orderly relations with the employees, to achieve uninterrupted operations in the Company and to achieve the highest level of employee performance consistent with safety, good health and sustained effort. 3 4 ARTICLE II SCOPE OF AGREEMENT The term "employee" as used in this Agreement means all full-time and part-time Security Officers employed by the Company at the UNITED REFINING COMPANY Plant, Warren, Pennsylvania as defined in NLRB Case No. 6-RC-10776. Supervision is allowed to do bargaining unit work for training purposes, in case of emergencies and relief periods. ARTICLE III RECOGNITION The Company recognizes the Union as the exclusive collective bargaining representative for employees as defined in Article II and for the purpose as defined in Article I. ARTICLE IV MANAGEMENT RIGHTS The exclusive right to manage the business of the Company and to direct the working forces, including the right to determine the size thereof, allocate and assign the work, hire, suspend or discharge for just cause, transfer, the right to relieve employees from duty because of lack of work or for other reasons, is vested exclusively in the Company, subject only to the restrictions governing the exercise of these rights as are expressly provided in this Agreement, provided that nothing in this provision will be used for purposes of discrimination against any employee because of membership in the Union. 4 5 ARTICLE V UNION MEMBERSHIP Employees occupying positions within the bargaining unit shall be free either to become and remain members of the union, or to refrain from becoming members, provided that once an employee voluntarily becomes a member, he must remain a member for the balance of the current collective bargaining agreement, employees shall be free to resign from membership during the 30 calendar days prior to the expiration of any collective bargaining agreement by sending a statement to that effect to the union by regular US mail. Premature or "early" settlements extending a contract shall not have the effect or preventing resignation, which may occur according to the originally scheduled expiration date. ARTICLE VI CHECK OFF Section 1. During the term of this agreement, the employer agrees to deduct regular union dues from the wages of each employee who authorizes such deduction and in writing and who receives pay for at least eight hours in the week. The employer shall remit the amounts that are deducted to an address designated by the union. Section 2. The union agrees to indemnify and hold harmless the Company against any form of liability arising in any way out of the Company's actions pursuant to this section or pursuant to any individual check off authorization, Section 3. Check off authorizations under this Section shall be revocable by the employee so as to result in no check-off authorization for any period of time during which the employee is not a member, and any authorization not so revocable need not be honored by the Company. 5 6 ARTICLE VII RESPONSIBILITIES OF THE PARTIES In addition to the responsibilities that are provided elsewhere in this Agreement, the following shall be observed: 1. There shall be no intimidation or coercion of employees into joining the Union or continuing their membership therein. 2. There shall be no solicitation of membership on Company time. 3. There shall be no strikes, work stoppages, sympathy strikes of any kind, or interruption or impeding of work. No officer or representative of the Union shall authorize, instigate, aid or condone any such activities. No employee shall participate in any such activities. 4. There shall be no lockouts. The Union recognizes, that it is the responsibility of the employees to familiarize themselves with the Company rules, including safety regulations established by the Company, and other regulations established by government agencies, and to report faithfully all violations thereof. The Union agrees that the employees shall discharge their duties as assigned to them, impartially as between all employees of the Company, and that failure to do so constitutes sufficient cause for discipline. The Union recognizes that it is the responsibility of the employees, to the best of their ability, to guard and protect Company premises, material, facilities, and the property of the Company at all times and under all circumstances to the best of their ability. The Union further agrees that, in the event of any controversy between the Company and any other group or organization of its employees, resulting or threatening to result in any strike or stoppage or work the employees will continue to report for duty, remain at their posts, and discharge their duties in the regular manner and discharge such security protection duties as their supervisors may deem necessary and proper under such circumstances. 6 7 ARTICLE VIII GRIEVANCE COMMITTEE Section 1. A Grievance Committee, consisting of three members who shall be employees actively at work, may be designated by the Union. One member of this Committee shall be designated as Chairman. The Union shall furnish the Company with a written list of the three designated members of the Grievance Committee and the member designated as Chairman. Any change in such designated representatives will be recognized by the Company only upon proper written notification by the Union. Section 2. The members of the Grievance Committee and the Local President (if employed in the Unit) in appropriate steps of the grievance procedure will be afforded such reasonable time off without pay as may be required: a) for the purpose of investigating facts essential to the settlement of any grievance; or b) for the purpose of attending scheduled grievance meetings in any step of the grievance procedure. The Grievance Committee and the Local President shall not leave their work for these purposes without first receiving permission from their supervision. Permission shall be granted unless the efficient operation of the Department would be affected. Section 3. Duties of the Grievance Committee and the Local President shall be confined to the adjustment of disputes within the limitation of this Agreement which the Company and employee or employees have failed to adjust. Section 4. When the Company decides that the work force in the Unit is to be reduced, the Chairman of the Grievance Committee and the President of the Local Union (if employed in the Unit), shall, if the reduction in force continues to the point at which they would otherwise be laid off, be retained at work, and for such hours per week as may be scheduled in the Unit in which they are employed, provided they can perform the work on the job to which they are assigned. The intent of this provision is to retain in active employment the aforementioned Union officials for the purpose of 7 8 continuity of the administration of the labor contract in the interest of employees, so long as a work force is at work. Section 5. Meetings may be called (or requested) by either party by mutual agreement between the Company and the Union Grievance Committee. If there are issues and/or grievances to discuss a proper agenda will be submitted by either party within three days of the scheduled meeting. Section 6. Members of the Union Grievance Committee attending necessary and duly called meetings with Company representatives during their regular hours of work will be afforded such time off without pay as may be reasonably required for such purposes without prejudice provided advance notice is given to their department supervisor. ARTICLE IX GRIEVANCE PROCEDURE Section 1. Differences or disputes as to the interpretation or application of, or compliance with the provisions of this Agreement are defined as "grievances" and shall be dealt with in accordance with the following grievance procedure. Step 1. An employee shall first discuss his grievance with his immediate Supervisor, or at the employee's option, the grievance may be discussed with the immediate Supervisor by the employee's Grievance Committeeman. The immediate Supervisor shall answer such grievance within the next two (2) working days, excluding Saturday, Sunday and holidays. Step 2. If the grievance is not adjusted in Step 1 to the satisfaction of the employee, the grievance, in order to be considered further, must be set forth in writing, signed by the affected employee(s) and the Grievance Committeeman referred to in Step 1 above in quadruplicate and filed with the Director of 8 9 Security within seven (7) working days of the incident of the grievance. Grievances will set forth the following minimum information: 1. Local Union Number. 2. Name and clock number of employee(s) involved. 3. Approximate date of alleged violation. 4. Date on which grievance was discussed with the immediate supervisor. 5. Name of the immediate Supervisor with whom grievance was discussed. 6. Decision of the immediate Supervisor. 7. Facts of the case. 8. Remedy sought. 9. Article and/or Section of Agreement under which grievance is entered. 10. Date of presentation of written grievance. Grievances properly presented in this step of the grievance procedure may, at the request of either party, be discussed between a member of the Grievance Committee and the Director of security. The Director will consider the matter and notify the Union of his decision in writing within five (5) working days after the grievance is presented in this step. Unless waived by the Union, failure of the Company to answer within the prescribed five (5) working day limit shall be construed as approval of the grievance. In case of emergency situations such as fires, spills, ruptures or anything beyond Company control, the five (5) day waiver shall not prevail. Step 3. If the decision of the Director of Security in Step 2 is not satisfactory, the grievance, in order to be considered further, must be appealed in writing by the Chairman of the Grievance Committee of the Local Union to the Vice President of Human Resources within seven (7) working days after receipt of the written decision in Step 2. The Vice President of Human Resources shall hold a hearing with the 9 10 President of the Local Union and/or Chairman of the Grievance Committee along with the Committeeman, within ten (10) working days after receipt of the appeal or at such other time as is mutually agreeable. The Vice President of Human Resources shall notify the Chairman of the Grievance Committee of the Local Union of his decision in writing within ten (10) working days after the hearing. Step 4. If the decision of the Company representative in Step 3 is not satisfactory, the International Union may file a written notice of appeal to have the grievance discussed further. Such appeal shall be in writing and shall be filed with the representatives of the executives of the Company within fifteen (15) working days after the third step written decision. If such notice is filed, the grievance shall be discussed in an attempt to reach a mutually satisfactory settlement. This discussion shall take place at the earliest date of mutual convenience following receipt of the notice of appeal, and within ten (10) working days after such discussion, the Vice President of Human Resources shall notify the International Union representative of the Company's decision in writing. It shall be the purpose of the fourth step to review cases for application of this Agreement. Arbitration Grievances which have not been satisfactorily adjusted in Step 4 of the grievance procedure, may be submitted by the International Union representative to arbitration provided written notice thereof is given by the International Union representative to the Company within thirty (30) calendar days after the written decision of tile Company representative in the Fourth step. The parties shall attempt to agree on an impartial arbitrator and in the event no agreement is reached within five (5) working days after request has been made for arbitration, the Federal Mediation and Conciliation Service shall be requested to submit a list of five (5) names of recognized and qualified arbitrators from which the Union shall strike one name, and the Company shall then strike one name, the 10 11 Union shall strike another name and the Company shall strike the fourth name. The person remaining shall be the arbitrator. The arbitrator shall have no power to add to or detract from or modify any of the terms of this Agreement or any agreements made supplemental thereto. The decision of the arbitrator shall be final and binding upon the Company, the Union and the employees. The fees and expenses of the arbitrator shall be borne equally by the Company and the Union. All other expenses or costs shall be borne by the party incurring them. Awards or settlements of the grievances may or may not be retroactive as the equities of each case may demand, but in no event shall any award be retroactive prior to the date of presentation of the grievance in writing as required by the Article. Section 1. Whenever in this Article IX the Union or Company is to confer or act, they may do so by a designated agent or agents. Section 2. Throughout the grievance procedure and in every case, notice to the Union shall be deemed notice to the employee alleging a grievance. Section 3. The provisions of this Article constitute the sole procedure for the processing and settlement of any claim by an employee or the Union of a violation by the Company of this Agreement. Section 4. Either the Union or the Company may have witnesses, whose testimony is relevant, in attendance at a grievance meeting in any step. Any witness' attendance at a grievance meeting will be limited, however, to the time required to present his testimony. Section 5. All grievances must be initiated in the first step of the grievance procedure except for grievances protesting a suspension or discharge which may be filed in the Third Step in accordance with Article X. 11 12 Section 6. The grievance procedure may be utilized by the Union in processing grievances which allege a violation of the obligations of the Company to the Union as such. Section 7. Except as otherwise specified, the time limits referred to in this Article shall be exclusive of Saturdays, Sundays and holidays. These may be extended by mutual agreement. Section 8. Arbitration in termination grievances; the Arbitrator must make an immediate bench decision at the conclusion of any termination grievance hearing. ARTICLE X SUSPENSION AND DISCHARGE CASES When an employee is reprimanded, suspended and/or discharged, he shall be given a copy of the Suspension/Reprimand Notice and another copy will be placed in his permanent employment record. A third copy shall be mailed promptly to the President of the Local Union. ARTICLE XI HOURS OF WORK Section 1. This article is intended to define the normal hours of work and shall not be construed as a limitation or guarantee of hours of work per day or per week. Section 2. The normal workday of all employees covered by this Agreement shall be eight and one quarter (8 1/4) hours per day. The workweek shall run from 0:01 Sunday to 2400 hours Saturday. Section 3. It is the expressed intent and aim of the Company to establish the hours of employment being worked as of the date of this Agreement to 41 1/4 hours per week for full-time 12 13 security personnel. However, the Company hereby expressly reserves the right to increase or decrease the number of hours of employment per work week. Section 4. All hours worked by an employee in excess of eight (8) hours in any one (1) day or all hours worked in excess of forty (40) in any one (1) week, shall be paid for at the rate of time-and-one-half the employee's regular straight-time hourly rate. The Company reserves the right to schedule security personnel as required for the work to be done. Section 5. When employees are required to work daily overtime as scheduled for four (4) or more hours per day, a twenty (20) minute Relief Period will be provided. The Company will provide a meal after four (4) hours of overtime. Section 6. The Company may assign employees to perform overtime work at any time. Section 7. Employees called out specifically, to report to work shall be entitled to at least two (2) hours work or equivalent pay at the rate of one-and-one-half (1 1/2) times their straight-time hourly rate. The Company may require the employee to work the two hours unless the employee elects to voluntarily leave work, therefore only receiving pay for those hours actually worked. Employees must work unless release by a supervisor. Section 8. During an eight (8) hour scheduled shift, a twenty (20) minute relief time will be given to each employee on each post. ARTICLE XII SENIORITY Section 1. COMPANY SENIORITY Company Seniority is defined as the length of time a full-time employee has been continuously employed in the Company. 13 14 Section 2. DEPARTMENT SENIORITY Department Seniority is defined as the length of time a full-time employee has been continuously employed in the security department. Section 3. New employees (including former employees) shall be on probation for a period of six (6) months. The Company shall have the right to terminate their employment for any reason whatsoever. Upon the successful completion of his probationary period, the new employee's seniority shall date from the date of entry into the Company Security Department. Where a probationary employee is relieved from work because of lack of work and employment status terminated in connection therewith, and the employees subsequently rehired by the Company Security Department within sixty (60) days from the date of such termination, the days of actual work accumulated by such probationary employee during the first employment shall be added to the hours of actual work accumulated during the second employment in determining when the employee has completed 120 days of actual work; provided, however, that should such an employee complete 120 days of actual work in accordance with this sentence, his continuous service date will be the date of hire of his second hiring. If, however, such an employee is rehired within two weeks of his last termination from employment at the Company Security Department his continuous service date will be the date of hire of the prior employment. Section 4. Employees hereafter entering the bargaining unit from other departments in the Company shall be considered as new employees in the Security Department unit for the purpose of Department seniority. Section 5. When reducing or increasing the Security Department work force, employees will be laid off or rehired in accordance with their security department seniority rights. 14 15 Section 6. At the discretion of the Company, full-time employees may be granted unpaid Personal Leave of Absence not to exceed six (6) months. Section 7. Employees who are promoted in rank will retain their seniority in the Security Department for up to six (6) months. During this time, that employee will be afforded the right to go back into the Security unit with all seniority rights. After the six (6) month period, he cannot hold any seniority or go back into the Security Department. Section 8. (A) Continuous service shall be determined by the employee's first employment, or re-employment following a break in continuous service in the Company Security Department, provided, however, that the effective date of employment prior to the date of this agreement shall be the date of first employment or re-employment after any event which constituted a break in service under the practices in effect at the time the break occurred. Continuous service is considered broken if an employee: 1. Voluntarily terminates employment. 2. Is discharged for proper cause. 3. At the expiration of a period of twenty-four (24) months absence from work on account of sickness, provided, however that an employee absent from work because of sickness shall have his/her case reviewed by a physician every six (6) months, and his/her seniority shall terminate at the end of any such six (6) month period when the physician determines he/she is able physically to return to work and he/she refuses to do so. The physician designated herein shall be chosen by mutual agreement of the parties hereto or if no agreement can be reached, three physicians shall be named and each party shall eliminate one. The one physician remaining shall be designated as the determining physician. 4. Fails after a layoff, to report within five (5) days after notice to report given by the Company by registered mail, addressed to employee's address as shown on company's records. 15 16 5. Overstays leave of absence unless prior to expiration of such leave employee requests and obtains an extension thereof. 6. Is absent from work without reporting off for a period of two (2) consecutive working days, unless it is physically impossible to do so. (B) Absence due to injury while on duty shall not break continuous service and continuous service will accumulate, except for vacation entitlement until termination of the period for which statutory compensation is payable, provided that the employee returns to work as soon as he is physically able to do so. Section 9. The seniority rankings of employees in the Company Security Department can be posted on the Union's Bulletin Board. Section 10. PART-TIME EMPLOYEES Part-time employees may be employed at an hourly rate lower than full-time employees, provided that this shall not result in or result from the Employer's layoff of current full-time employees or the involuntary transfer of current full-time employees to part-time status. Qualified, as determined by the Company, part-time employees shall be given the opportunity to fill a full-time position when one is available prior to the hiring of a new employee. The employment date of the part-time employee will govern when qualifications are equal. ARTICLE XIII GENERAL PROVISIONS Section 1. Any notice required or permitted by this Agreement to be given to an employee shall be given by registered mail addressed to the employee's last address as shown on the Company's personnel records. Any such notice shall be deemed to be completed by and at the time of mailing. 16 17 Section 2. It shall be the responsibility of each employee to furnish the Company with accurate information as to his current address and as to his marital or dependency status and to notify the Company in writing of any changes therein. In no event shall the Company be held accountable for the failure of an employee to furnish such information or to give written notice of such change. Section 3. BULLETIN BOARDS A bulletin board shall be available to the Union for the purpose hereinafter set forth. Such notices and announcements shall not contain any political, controversial, or advertising matter and shall be restricted to: a. Notices of meetings of the Union. b. Notices of Union elections. c. Notices of Union educational, social and recreational notices of Union appointments to office and results of elections. d. Notice of results of Union meetings. e. The Company will provide posted work schedules and Company memos that pertain to the Security Unit. Section 4. SAFETY AND HEALTH The Company and the Union cooperation the continuing objective to eliminate accidents and health hazards. The Company shall continue to make reasonable provisions for the safety and health of its employees at the Refinery during the hours of their employment. To this end the Union agrees to the Company's drug testing and the Employee Assistance Program. Section 5. Employees will be afforded the right to make trades in their work schedule as long as no overtime is involved in the trade. Section 6. Accidental death and dismemberment (AD&D) to be paid at $100,000. 17 18 Section 7. The Company will pay for one eye exam and up to $75 for glasses per year. ARTICLE XIV UNIFORMS AND EQUIPMENT The Company will prescribe all items of uniforms and equipment and will furnish all such items, excluding footwear, with the understanding that the use of such items will be restricted to regular working hours; uniform issue may also be worn to and from work. The Company will be responsible for laundry, cleaning and/or maintaining uniforms and/or equipment in a neat presentable condition. ARTICLE XV WAGES Wage scales and increases are set forth in Appendix A, annexed to this Agreement and made a part hereof. ARTICLE XVI HOLIDAYS Section 1. Employees shall receive or be paid for the following holidays if actively employed at the time the holiday occurs: New Year's Day Good Friday Last Monday in May Independence Day Labor Day 18 19 Thanksgiving Day 1-Half Day Before Christmas Christmas Day Three Personal Holidays (After One Year of Employment) Section 2. All employees who work on any paid holiday shall receive one and one-half (1-1/2) times their regular rate for the shift in addition to their straight-time pay. Section 3. All employees who do not work on a company holiday will be paid eight (8) hours for the holiday at their normal pay rate. Employees will receive holiday pay only for the calendar holiday. Section 4. Employees with twelve (12) months of perfect attendance will earn one (1) personal holidays. The twelve (12) month period will be a rolling year. If one day of work is missed, the time for the next year starts on the following calendar day. ARTICLE XVII VACATIONS Section 1. All employees accrue paid vacation. Vacation selections will start October 1 of each year for the following year's vacation and end on December 15. Vacations selections will be picked on a seniority basis. All vacations selections for the next year will be posted no later than January 1 of each year. A memo will be sent two (2) weeks prior to the employee picking vacation. Section 2. On the January 1 following the employee's first complete calendar year of service and on January 1 of subsequent years, an employee will accrue vacation to the following schedule: 19 20 Years of Continuous Service Vacation Per Calendar Year --------------------------- -------------------------- 1 year but less than 5 years 2 weeks and 1 day 5 years but less than 10 years 3 weeks and 1 day 10 years but less than 20 years 4 weeks and 1 day 20 years but less than 30 5 weeks and 1 day 30 years and over 6 weeks Section 3. Part-time employees accrue vacation on a pro-rata basis. Example: You have two (2) years of part-time service and regularly work 20 hours per week. You would accrue 40 hours (5 days) of vacation per calendar year. Section 4. Vacation days cannot be carried over from one calendar year to the next. Unused vacation days will be forfeited. Section 5. In determining vacation schedules, the supervisor will consider an employee's wishes as well as the staffing needs of the department. When conflicts arise in the requesting vacation time, they will be resolved by the supervisor. Section 6. An employee will take at least five days of vacation at a time up to the total accrued vacation for that year for personal use or emergencies. When it is necessary to use a vacation day or days for personal business or for an emergency; an employee shall notify the supervisor as far in advance as possible. Section 7. Should an employee terminate his/her employment with the company, an employee's vacation days will be prorated according to the number of full months an employee has worked form January 1 to an employee's termination date. If an employee has vacation days that were not used, he/she will receive pay for vacation in their final paycheck. 20 21 Section 8. An employee will be permitted to sell one (1) week of vacation back to the Company. ARTICLE XVIII CHRISTMAS BONUS A Christmas Bonus of 5% of each employee's earnings during the first 11 months of the year will be paid to all Security Department employees who are on the payroll as of November 30 of each year. ARTICLE XIX LONG TERM DISABILITY PLAN The Company will provide the long-term disability plan, that is now in effect. ARTICLE XX FUNERAL LEAVE The Company will provide the Funeral Leave plan in effect now under the same terms and condition available to other employees for the term of this contract. Part-time employees will be paid for Funeral Leave only for the day of the funeral if they are scheduled to work on that day. ARTICLE XXI JURY DUTY An employee called to serve as a juror shall continue to receive his regular pay, plus his pay as a juror, for each day on jury duty. Proof from the Clerk of Courts must be secured indicating the number of days served. 21 22 ARTICLE XXII HOSPITALIZATION AND DENTAL INSURANCE Section 1. The Company will provide hospitalization and medical coverage for full-time security employees and qualified dependents. Coverage will be the same as enjoyed by employees prior to ratification of the agreement. Section 2. The Company will provide dental benefits for full-time security employees and qualified dependents. Coverage will be the same as enjoyed by employees prior to ratification of this agreement. ARTICLE XXIII LIFE INSURANCE The Company will continue to provide life insurance for full-time security employees at a sum equal to one year's earnings plus provide sufficient flex credits to purchase an additional one-time earnings. ARTICLE XXIV SAVINGS PLAN The Company will continue to provide a savings plan 401(K), for full-time employees. ARTICLE XXV PENSION PLAN The Company will continue to provide a Pension Plan for full-time security employees. Pension will be estimated at the highest three (3) years of earnings and retirement at age 59 1/2 years. 22 23 ARTICLE XXVI SHIFT BONUS All Company Security Department employees who are scheduled to commence work on the 4 to 12 and 12 to 8 shift shall receive the following premium for each shift that is worked from Sunday to Saturday: 4 to 12 shift a premium of .40 cents per hour for each hour worked on that shift 12 to 8 shift a premium of .65 per hour for each hour worked on that shift ARTICLE XXVII TERMINATION This Agreement shall be in full force and effect from 12:01 a.m. June 25, 1996 to and including 12:01 a.m. June 25, 1999 and shall continue from year to year thereafter unless written notice, by registered mail, or desire to cancel or terminate this agreement is served by either party upon the other at least sixty (60) days prior to the date of expiration. If notice is given by the Company it shall be addressed to: United Plant Guard Workers of America (UPGWA) Joseph B. Durbin - President Box 191 Baden, PA 15005 and if by the Union, to: UNITED REFINING COMPANY Attn: L.A. Loughlin 15 Bradley Street Warren, PA 16365 23 24 IN WITNESS WHEREOF, the parties by their duly authorized representatives have signed this Agreement the day and year first above written. UNITED REFINING COMPANY International Union, United Plant Guard Workers of /s/ Lawrence A. Loughlin America (UPGWA) - ------------------------------ Lawrence A. Loughlin By /s/ Kerry Lacey (J.B.D.) Vice President --------------------------------- Human Resources Kerry Lacey, Regional Director Local Union No. 502, UPGWA /s/ Fred R. Lathwood - ------------------------------ By /s/ Joseph B. Durbin Fred R. Lathwood --------------------------------- Corporate Director of Security Joseph B. Durbin - President By /s/ Charles T. Rigner By /s/ Jon A. Young /s/ Gregory M. Bleech 24 EX-10.7 32 COLLECTIVE BARGAINING AGREEMENT 1 EXHIBIT 10.7 AGREEMENT BETWEEN VULCAN REFINING COMPANY AND UNITED STEEL WORKERS OF AMERICA LOCAL UNION NO. 2122-A EFFECTIVE: FEBRUARY 1, 1997 EXPIRES : JANUARY 31, 2000 2 TABLE OF CONTENTS Page 1 Article I RECOGNITION Page 2 Article II UNION SECURITY Page 2 Article III WAGES Page 3 Article IV HOURS OF EMPLOYMENT Page 4 Article V OVERTIME Page 4 Article VI HOLIDAYS Page 5 Article VII EMERGENCY CALLS Page 5 Article VIII TEMPORARY ASSIGNMENT Page 6 Article IX VACATIONS Page 7 Article X SETTLEMENT OF DISPUTES Page 9 Article XI PHYSICAL EXAMINATION Page 10 Article XII SENIORITY Page 12 Article XIII LEAVE OF ABSENCE Page 13 Article XIV DISCHARGES Page 13 Article XV DEATH IN FAMILY JURY DUTY Page 13 Article XVI BULLETIN BOARDS Page 14 Article XVII RECALL LIST Page 15 Article XVIII SICK LEAVE Page 17 Article XIX COMMITTEE MEETING Page 17 Article XX SAFETY Page 18 DRUG AND ALCOHOL TESTING Page 24 Article XXI MISCELLANEOUS Page 26 Article XXII SHIFT DIFFERENTIAL Page 26 Article XXIII STRIKES AND LOCKOUTS Page 26 Article XXIV NOTICES Page 27 Article XXV WAGES Page 27 Article XXVI TERMINATION Page 28 Article XXVII CONFLICT WITH LAWS Page 28 Article XXVIII NON-DISCRIMINATION Page 28 Article XXIX SENIORITY LIST Page 29 Article XXX RULES AND REGULATIONS Page 29 Article XXXI MANAGEMENT RIGHTS CLAUSE Page 30 Article XXXII INSURANCE Page 30 Article XXXIII CONTRACTING OUT Page 31 SIGNATURES 3 THIS AGREEMENT, made and entered into as this 1st day of February, 1997, by and between VULCAN REFINING COMPANY, Cordova, Alabama (hereinafter called the "Company") and the UNITED STEEL WORKERS OF AMERICA, AFL-CIO-CLC, on behalf of LOCAL UNION NO. 2122A (hereinafter called the "Union"). WITNESSETH That the parties hereto have reached an Agreement through collective bargaining for the purpose of facilitating the peaceful adjustment of differences and interpretations of this Agreement that may arise from time to time and for the purpose of promoting harmony and efficiency, to the end that the employees, the Company, and the general public may mutually benefit and the parties hereto contract and agree as follows: ARTICLE I RECOGNITION 1. The Union shall be the sole and exclusive bargaining agency for all employees of the Cordova, Alabama, plant, for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment and conditions of employment. 2. The term "Employee" as used in this Agreement applies only to persons employed in the Cordova Plant, but does not include foremen or superintendents with the authority to hire and discharge actually or by recommendation, office clerks, buyers, inspectors, salesmen, technical employees, or commercial watchmen. No foreman or supervisor shall do any work in any classification represented by the Union except for the purpose of instruction to an employee or employees and or in any emergency situation to protect life or property where no qualified employee is immediately available to perform the work. The Company has no intention of abusing this paragraph. 1 4 ARTICLE II UNION SECURITY 1. The Company recognizes and will not interfere with the rights of its employees to become members of the Union, and there shall be no discrimination, interference, restraining or coercion on the part of the Company, or its agents, against any member of the Union. 2. The Company agrees, upon individual written authorization by employees, to deduct union dues and initiation fees, which authorization shall be irrevocable for a period of not more than one (1) year or beyond the termination date of this Agreement, whichever first occurs, but which authorization shall be automatically renewed for successive periods of one (1) year for the period of each succeeding agreement, whichever shall be shorter, unless written notice is given by the employee to the Company and to the Union not more than seventy-five (75) days and not less than sixty (60) days prior to the expiration of each period of one (1) year of each agreement whichever first occurs. The Secretary-Treasurer of the International Union must certify to the Company the amount due by each employee. All deductions shall be forwarded to the Secretary-Treasurer, United Steel Workers of America, AFL-CIO-CLC, with an itemized list to cover and copy to Local Union Financial Secretary. ARTICLE III WAGES 1. The rate of pay and job classification for all classifications represented by the Union shall be agreed to by the Company and the Union shall be attached to this Agreement as an addendum and such shall become a part of this Agreement. 2 5 ARTICLE IV HOURS OF EMPLOYMENT 1. The regularly scheduled work week shall not exceed eight (8) consecutive hours in any one day of twenty-four (24) hours or more than forty (40) hours in any five (5) day period. 2. The work week shall commence at 7:00 AM o'clock on Monday and end at 7:00 AM o'clock on the following Monday. 3. Should any employee covered by this Agreement be required to work at least two (2) hours, but less than four (4) hours, past his normal quitting time, the Company shall provide such employee with a suitable lunch, if the employee so desires. Such employee shall be given a reasonable period of time, without loss of pay, to eat said lunch or lunches. In the event any employee is required to continue work through a second normal meal period (at least 4 hours) he shall be provided with a second lunch if he so desires. In the event the Company is unable to provide a suitable lunch or lunches as the case may be, such employee shall receive $5.00. This does not apply to scheduled overtime. 4. A reasonable period of time (not to exceed ten (10) minutes) shall be allowed for employees to return Company tools or other Company equipment at the end of each normal day of shift on Company time. Due consideration shall be given of the distance of their work from the checking point and the nature of the tools or equipment to be returned. 3 6 ARTICLE V OVERTIME 1. Overtime at the rate of one and one-half (1-1/2) times the base rate of pay will be paid for any and all hours worked in excess of any eight (8) regularly scheduled hours of work, however, there shall be no pyramiding of overtime or premium pay. In the event that two (2) regularly scheduled shifts are worked consecutively, all hours over eight (8) will be considered overtime. 2. One and one-half (1-1/2) times the base rate will be paid for each hour worked in excess of forty (40) in any work week. The Company reserves the right to schedule bargaining unit employees to minimize overtime. 3. The Company agrees to post barge information as it is received and give the Union as much notice as possible on weekend schedules. ARTICLE VI HOLIDAYS 1. Two and one-half (2 1/2) times the base rate of pay shall be paid for all work performed on New Year's Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas Eve, Christmas Day. It is understood that the employee working on the above-named holidays will receive their straight time base pay plus the premium pay for the holiday work, making a total pay of 2 1/2 times the hourly rate. 2. Employees not required to work on the above mentioned holidays shall receive their normal rate of pay and the days not worked shall be taken into consideration in computing weekly overtime. 4 7 3. If any of the above holidays fall on Sunday, the following Monday shall be recognized as the holiday. If any of the above holidays fall on Saturday, the Friday before shall be recognized as a holiday. Should a recognized holiday occur during an employees vacation, the employee may take the day before or the day immediately after the vacation period as approved by Management. 4. Employees will be given four (4) hours off with pay per year for personal business. ARTICLE VII EMERGENCY CALLS 1. If an employee is called in for an emergency, he will receive a minimum of two (2) hours pay for the work assignment he was called in to perform. 2. Employees shall not leave the plant until he is properly relieved by another qualified employee. If an employee cannot report as scheduled, he should provide as much notice as possible. ARTICLE VIII TEMPORARY ASSIGNMENT 1. It is understood that trainee employees shall receive the prevailing rate of pay for the job as quickly as he is able to perform the duties of the position. 2. An employee temporarily assigned to a higher rated classification shall receive the rate of the classification to which he has been assigned for the duration of that assignment. 3. An employee temporarily assigned to a lower rated classification should receive his regular rate of pay. 5 8 ARTICLE IX VACATIONS 1. Employees with one (1) to four (4) years seniority with the Company shall receive two (2) weeks vacation with full pay. Employees with five (5) to nine (9) years seniority with the Company shall receive three (3) weeks vacation with full pay. Employees with ten (10) to nineteen (19) years seniority with the Company shall receive four (4) weeks vacation with full pay. Employees with twenty (20) or more years seniority with the Company shall receive five (5) weeks vacation with full pay. Employees will be allowed to split one week's vacation into single days with two days advance notice to management. There is no guarantee that the employee's request will be granted, but the Company will attempt to comply with the request, if at all possible. 2. If an employee works eight (8) months or more between January 1st and December 31st of the preceding year, the employee shall be entitled to their full vacation. If an employee works less than eight (8) complete months between January 1st and December 31st of the preceding year, the employee shall be entitled to a pro rata share of the amount of vacation he or she would have been entitled to as specified by Article IX, Paragraph 1. Said pro-rata share is to be determined by multiplying the number of months worked, including partial months, times one-twelfth (1/12) times the entire vacation period for which the employee would have been entitled to if he or she had worked 12 complete months. (Example: total length of employment-3 years; total time worked preceding January 1st to December 1st-7-1/2 months; 7.5 x 1/12 x 10 days = 6.25 days = 1 week 1 day.) 6 9 3. Sick leave (occupational and non-occupational) shall count as time worked in computing the number of months worked for purposes of paragraphs 2 and 3 of this Article. 4. Paragraph 3 of this Article is only effective when the employee's reasons for completing less than a full year is due to the employee's quitting or being laid off due to lack of work or being discharged for cause. 5. Employees shall be entitled to sign up for a one week vacation period during June 1 - October 31. The Company will consider extended vacation periods during this time if it can be granted without interference with the operation of the facility. The remainder of the employees vacation can be scheduled throughout the remainder of the year. 6. Before any employee takes a vacation, he must give the Company two (2) weeks notice in writing. The requirement of two weeks notice in writing may be waived by mutual consent of the parties. ARTICLE X SETTLEMENT OF DISPUTES 1. Should differences arise between the Company and the Union as to the meaning and application of this Agreement, or should differences arise about matters not specifically mentioned in this Agreement but connected therewith, or should any local dispute of any kind arise, there shall be no suspension of work or slowdown by the employees on account of such differences nor any lockout by the Company, but an earnest effort shall be made to settle such differences promptly by the following methods of procedure. 7 10 First, between the aggrieved employee and the Foreman of the department involved. The department steward may accompany the aggrieved employee. Any grievance must be filed in writing as the first step within ten (10) days after the occurrence involved. Such days may be extended by mutual agreement. Second, between members of the grievance committee, designated by the Union, and the Foreman or Superintendent of the department. The grievance at this step must be submitted in writing. Third, between members of the Grievance Committee, designated by the Union, and the General Superintendent or Manager of the Works, or his designated assistant. Either side is authorized and allowed to have such other parties present as they deem desirable including the International Union Representative and Executives of the Company. Fourth, Arbitration: If the grievance has not been settled in the previous steps, they shall jointly request the Federal Mediation and Conciliation Service to submit a panel of five (5) arbitrators. The Company shall strike two (2) and the Union shall strike two (2), the remaining member shall be designated as the impartial Arbitrator. The parties will alternately strike one name at a time. 2. The decision of the Arbitrator shall be final and binding upon the parties. 3. The fees and expenses of the arbitrator will be equally shared between the Company and the Union. 4. It is agreed by both parties that they will use every effort to expedite the settlement of all disputes. 5. In further consideration of the mutual promises contained herein the parties hereto expressly agree that neither party shall bring or cause to be brought, any court, or other legal or administrative action against the other until the dispute, claim, 8 11 grievance of complaint shall have been brought to the attention of the party against whom it shall be made and the said party after actual notice of same shall, within a reasonable time, not, however, exceeding five (5) days, fail to take steps to correct the cause or circumstances giving rise to such dispute, claim, grievance, or complaint, and the same shall thereafter fail to be corrected within a reasonable time. ARTICLE XI PHYSICAL EXAMINATION 1. Applicants for initial employment shall submit to a physical examination by a physician appointed by the Company. 2. Irrespective of the foregoing, the Company may, in cases of constantly recurring absence from duty or in other exceptional cases, require an examination by a physician appointed by the Company. 3. In instances mentioned in (2) foregoing, the employee receiving notice that Company desires his physical examination shall have the right to first be examined by a physician of his own choice, and in the event of such examination, shall submit to Company the report of the examination by his physician. If Company is not satisfied with the examination by the employee's physician, such employee shall be so advised and shall thereupon be examined by a physician appointed by the Company. In the event the affected employee's physician's decision as to physical fitness is contrary to the report of physical fitness rendered by the physician appointed by the Company, then said two physicians regarding the employee's physical fitness shall be final. It shall be required by such arbitration procedure that the third physician and the physician appointed by the employee, when their reports are contrary to the report of the physician appointed by the Company, shall state in 9 12 writing to the Company that the employee is or is not (as the case may be) physically capable of performing all duties incident to his work in the classification to which it is then assigned. Such third physician must be approved by the insurance carrier of the Company. Each party shall pay the charges and expenses of the physician appointed by them and the charges and expenses of the third physician shall be borne equally by the Company and the interested employee. ARTICLE XII SENIORITY 1. Seniority and ability shall be the determining factors in promotions, demotions and layoffs. These rules and methods of promotions are not intended to place any employees in a position which he is not capable of handling in a safe and workmanlike manner. 2. Seniority shall become effective after 120 working days of employment on jobs included within the bargaining unit and shall relate back to the initial employment date. 3. All employees shall have plant seniority. Plant seniority will prevail in all cases except in filling vacancies in cases of promotion, demotion, layoff and recall, the following factors shall be considered: A - Plant Seniority B - Ability to perform work When factor "B" is relatively equal, seniority will be the governing factor. 4. When a vacancy occurs, it shall be posted in the plant for five (5) working days for plant wide bidding. Such vacancy shall be filed in accordance with 3. above. Employees who desire to bid on such jobs shall give written notice to both the Company and the Union before the expiration of said five days. Due consideration will be 10 13 given employees who are absent because of sickness, vacation or other excused absences. 5. Plant seniority will be used to determine vacations. 6. Plant seniority will prevail in layoffs except where employees are in classifications which the Company requires to continue production. An employee with plant seniority shall have the right to roll as of layoff within five (5) calendar days, providing he can perform the job. 7. It is understood that if a man rolls for a job, he will return to his former job as soon as it comes open. 8. It is understood that while laid off, a man does not have to roll or accept another job at the plant. He can stay on lay-off until his regular job comes open again. 9. When an employee is in line for promotion and is rejected by the Company on the grounds that he lacks the ability to perform the work, and some other employee is used to fill the position, such appointment shall be considered as temporary until the rejected employee or the Union Committee can file grievance with the Company. In case such grievance is not filed within five (5) days, this temporary appointment to such position shall be considered as permanent. 10. Any employee in line for promotion and being rejected by the Company shall be entitled to thirty (30) day trial period on the job in question. The operational record of the job in question shall serve as the determining factor related to the employee's ability. It is also agreed and understood that this provision shall not apply in case the employee in question would create a hazard to other employees or to the safety of both the employees and the plant. 11 14 11. The failure of any employee to demonstrate his ability on any job in question shall not prevent him from returning to the job previously held by him and he shall not lose his seniority rights to a promotion to some job which he is capable of handling. 12. A bidder for spare jobs and working on such spare jobs will be the man to have the regular job when said job is vacated. 13. When a new job is established or created, the new job will be posted and bids will be plant wide seniority on the new job. ARTICLE XIII LEAVE OF ABSENCE 1. Employees showing just cause may be granted a leave of absence for a reasonable length of time not exceeding thirty (30) days. When a leave of absence is granted, a notice shall be posted on Company bulletin boards. 2. It is further agreed that any employee who may be elected or appointed to any office in the Union, which will require him to absent himself from duty with the Company, may be granted a leave of absence not exceeding one year at any one time. Upon return of such employee herein he will retain his seniority rights and must stand regular physical examination upon reporting for duty. Not more than employee at any one time are to be covered by this provision. 3. Any employee being conscripted for military service in the armed forces shall be returned to his original or former job with full seniority rights providing he reports within ninety (90) days after discharge. It is agreed that the above employee shall be required to stand the regular physical examination upon reporting for duty with the Company. 12 15 ARTICLE XIV DISCHARGES 1. No employee shall be discharged if physically or mentally capable of continuing his duties because of any accident unless such accident was caused by failure to follow instructions, proved carelessness or malicious intent to the employee. 2. In cases where an employee is not physically capable of discharging his regular duties, he shall be provided with work of such a nature or character that he can so discharge such work, provided, however, that such work is available. ARTICLE XV DEATH IN THE IMMEDIATE FAMILY AND JURY DUTY PAY 1. Necessary time off without loss in pay will be allowed by the Company in case of death in the immediate family. The immediate family being defined as the employee's spouse, parent, children, grandchildren, brother, sister, mother-in-law, father-in-law, brother-in-law, sister-in-law or employee's and wife's grandparents. 2. Time off for death in the family shall not exceed three (3) days if the deceased is buried in state and five (5) days if deceased is buried out of state. 3. Necessary time off will be granted by the Company for such employees who are called for jury duty and such employees shall suffer no loss in pay for such time spent as juror. ARTICLE XVI BULLETIN BOARDS 1. The Company will cause a bulletin board to be erected where all employees may see it upon entering or leaving the plant. Such bulletin board shall be used by the Union for any matter related to its membership. 13 16 ARTICLE XVII RECALL LIST 1. Employees laid off due to reasons beyond their control shall have none of the rights of employees. However, their names will be kept on a recall list. Laid off employees with less than five (5) years seniority will be kept on a recall list for a period of two (2) years. Laid off employees with six (6) to ten (10) years seniority will be kept on a recall list for a period of three (3) years. Laid off employees with eleven (11) to fifteen (15) years seniority will be kept on a recall list for a period of four (4) years. Employees with sixteen (16) or more years seniority will be kept on a recall list for a period of five(5) years. The Company agrees not to hire new employees while any employee is on recall who has not been offered the opportunity to return to work. However, that such employee on recall has the ability to perform the job involved. 2. Employees off duty because of sickness, military service or leave of absence for Union Activity shall suffer no loss of seniority. 3. It is agreed that in layoffs, the last man hired, covered by conditional plant seniority, shall be the first man laid off. 4. In notifying laid off employees of available jobs, the Company shall direct a registered letter to the employee's last known address together with a copy to the Chairman of the Union Committee and a copy to the Secretary of Local Union No. 2122A, advising such employee that the work is available. Within five (5) days after receipt of such letter, such employee must notify the Company of his intention to return to work on the position or job will be offered to the next senior man on the recall list. 5. It is understood that in the event of an emergency the Company may fill such vacancy until employees on the recall list have advised when they will return to work. 14 17 ARTICLE XVIII SICK LEAVE If an employee misses work due to illness or an accident not related to work with the Company or another employer, he/she may be eligible for sick pay benefits. To be eligible for sick pay benefits, an employee must: * be actively employed by the Company; * have one year's seniority with the Company before the illness or accident occurred; and, * be under the care of a licensed doctor. Weekly reports on the employee's condition may be required from the employee's doctor. Sick pay benefits begin on the fourth day of absence and continue for four (4) days. During this time, the employee will receive a $5 daily benefit. Beginning with the eighth (8th) day of absence from work or starting with the first (1st) day of absence if the employee is hospitalized, daily benefits are paid based on a percentage of the employee's straight time regular base rate for a scheduled work week. The percentage will be paid as follows: If the employee has this service: Benefit Paid: 1-5 years 70% 6-9 years 80% 10-19 years 90% 20 or more years 100% Benefits can be paid for up to six months (6) for any one illness or accident. However, if an employee has returned to work full time 15 18 for at least twelve (12) months, benefits may be paid for an additional six months for the same illness or accident. Sick pay benefits will be limited during the full time the employee is employed by the Company. If the employee has less than twenty (20) years of service, the employee can receive a maximum of eighteen (18) months of sick pay benefits. If an employee has twenty (20) or more years of service, he/she can receive a maximum of twenty-four (24) months of sick pay benefits. The three day waiting period before sick pay benefits begin, or any sick pay benefits an employee is receiving, will end if the employee begins vacation. If the illness or injury extends past the employee's vacation, the $5 per day sick pay benefit will begin on his/her next scheduled working day after vacation. The three-day waiting period will not apply. If an employee becomes ill or is injured while he/she is on vacation, the three-day waiting period will start on the day the doctor diagnoses the illness or injury. However, in no case will the waiting period be longer than three (3) days before an employee is scheduled to return to work. Should the Company refer any employee to their doctor, the Company shall make all provisions for appointments, transportation and agrees to pay the employee for the day lost when he is being examined by the Company doctor. In the event the employee's doctor states that he is physically able to return to work, the employee shall return to work and work until such time as the Company has made an appointment with their physician. 16 19 ARTICLE XIX COMMITTEE MEETING 1. The Company agrees that it will meet with the Union's Committee, not to exceed a total of three (3) members, at such times as may be agreeable. Members on duty at the time of such meeting shall suffer no loss in pay. Should the Company request a meeting, the Company shall pay for all such time lost due to such meeting. 2. In addition to the three (3) man committee mentioned above, the Union shall have the right for the President or Secretary of the Local Union, or both, to attend any and all meetings related to the business of the Local Union. The Union shall have the right to call in District Representatives or any International Officer or Director at any time. ARTICLE XX SAFETY 1. The Company and the Union consider the factor of health and safety of vital importance and any employee considering any condition or equipment to be unsafe shall promptly report the same to his immediate supervisor and to the Union steward. 2. Upon request of the Union Committee duly made to any supervisor in charge, the supervisor will immediately inspect any condition or equipment considered unsafe. Such inspection shall be made in the presence of the Union Committee. No employee will be requested to work on or near unsafe equipment. 3. Adequate first aid equipment will be maintained at all times by the Company at places mutually agreed between the Company and the Union. 17 20 4. No employee shall be required to perform services that endanger his physical safety and his refusal to do such work shall not warrant or justify his discharge. In all such cases a conference shall be held at the earliest practicable moment between the Union Committee and the Company to dispose of such issue. 5. Employees shall at all times exercise safety in the performance of their duties and shall at all times follow all safety policies established by and utilize all equipment supplied by the Employer for protection of life, limb and property. There shall be formed a joint Employer-Union Safety Committee, subject to the following: A. The committee shall consist of four (4) members, two of which shall be supplied by the Union. B. The purpose of this committee shall include only clarification of problems and answering of questions which arise with regard to matters of employee safety, and to develop in and promote among all employees' working habits which are safe in every way. 6. It shall be the policy of the Employer to see that sufficient qualified workmen equipped with necessary safety devices are on the job to properly and safely handle the work to be done. The Union and the employees shall promote safety at all times. No employee shall take undue risk in the performance of his duties and the foremen shall exercise care for the safety of all employees. 7. Monthly safety meetings will be set by Management. DRUG AND ALCOHOL TESTING In the interest of safe and efficient operation of the Company's plant and the protection of its employees, each employee of the Company will undergo, at such times as requested by the Company and at its expense, a physical examination to be conducted by a 18 21 reputable physician designated by the Company if an employee is not satisfied with the results of such physical examination, he will have the right to undergo a physical examination conducted by a reputable physician of his own choosing and at his own expense if the results of the two (2) examinations do not agree, the physicians conducting said examinations will choose a third physician who will make a physical examination of such employee and the report and findings of such third physician will be final and conclusive upon the Company and the employee, the cost of which shall be borne equally by the Company and the employee. The last two (2) preceding sentences of this paragraph, however, will not apply to any examination by any physician connected with or designated by the United States Health Services or the Department of Health of the Commonwealth of Pennsylvania, the examination by latter physicians will be final. The future of Vulcan Refining Company is dependent upon the physical and psychological health of its employees. Being under the influence of a drug or alcohol on the job may pose serious safety and health risks not only to the user, but also to all those who work with the user and may diminish productivity. The possession, use of sale of an illegal drug in the workplace may also pose unacceptable risks for safe, healthful and efficient operations. Recognizing that the Company has adopted pre-employment screening practices designed to prevent hiring individuals who use illegal drugs, or whose use of illegal drugs or alcohol indicates a potential for impairment, now therefore, effective November 1, 1993, the Company and the Union hereby adopt this policy for all employees covered by this Agreement. 19 22 SECTION 1. Employee Assistance Program. The Company will maintain an Employee Assistance Program (EAP) which assists employees who suffer from alcohol or drug abuse and other personal problems in securing professional help. It is recognized that substance screening results can trigger participation in the EAP and no disciplinary action will be taken against any employee who is participating in the EAP solely because of his\her participation in the EAP. The EAP will monitor any employee's progress through treatment and after care in order to insure that the employee has every opportunity to be as productive an employee as he/she can be. SECTION 2. Possession Prohibited. No employee at any work site may possess any quantity of alcohol or any substance or drug (lawful or unlawful) which, if taken in sufficient quantity (which quantity may be greater than that in the employee's possession) could result in impairment, except for authorized substances. "Work Site" means any office, building or property owned or operated by the employer, or and other personal effects, tools, and areas substantially entrusted to the control of the employee such as desk, files and lockers. Authorized substances include only: a) lawful over-the-counter drugs (excluding alcohol) in reasonable amounts; and b) other lawful (prescription) drugs taken at prescribed dosage. SECTION 3. Impairment Prohibited. No employee will report for work or will work impaired by any substance, drug or alcohol, lawful or unlawful, except with management's approval; such approval will be limited to lawful medications and based strictly on an assessment of the employee's ability to perform his/her regular or other assigned duties safely and efficiently. "Impaired" means under the influence 20 23 of a substance (alcohol .05%) such that the employee's motor sense (i.e. sight, speech, hearing, balance, reaction, reflex) or judgment either are, or may be reasonably presumed to be affected. SECTION 4. Suspected Impairment. When there is reasonable cause to believe that any employee has reported to work or is working impaired, that employee may be required to submit to substance screening. In addition, any employee involved in a job related accident or incident which involve the apparent violation of any safety rule or standard which did result or could have resulted in injury or property damage where impairment appears to be the cause, may be subject to substance screening. Before an employee will be subject to substance screening, one of the following management personnel must be present in addition to the immediate supervisor and the management representative must concur that there is reasonable cause to believe the employee may be impaired: Terminal Manager and/or Vice President. When one of the aforementioned management people are called, the supervisor will also call one of the members of the Union Committee and such union representative may be present to advise the employee of his or her rights, if a member of the Union's Committee can be contacted. SECTION 5. Substance Screening. For the purpose of assuring compliance with Sections 3 and 4 above, employees will be subject to substance screening under the process described below. "Substance Screening" means prompt testing of blood and urine deemed necessary to determine possession or impairment, and the completion of a substance use questionnaire. The screening of employees is not intended to be a punitive program, but one in which those identified as having drug or alcohol related problems will be referred through the EAP for help. 21 24 SECTION 6. Substance Screening Process. All substance screening tests will be conducted by an approved NIDA certified technological laboratory and based on an appropriate sample obtained from the employee. If an initial analysis results in a positive finding, confirmatory tests will be conducted. If the confirmatory results are positive, the individual will be advised. An employee whose urine or blood reveals higher concentration (as spelled out in Appendix A and measured by EXIT BC/MS Test) of the drugs identified in Appendix A will be deemed to have a positive drug screening result. SECTION 7. Disciplinary Action. a. Any dispute arising from the administration or interpretation of this policy will be subject to the grievance and arbitration procedures. b. Except as hereinafter specified, any discipline meted out to an employee will be determined based upon the circumstances or event that gave rise to the substance screening and without regard to the results of the screening. c. A positive substance screening test result will serve as a trigger mechanism for the EAP. d. A positive substance screening result will allow the Company to require an employee to submit to a maximum of four (4) random tests within twelve (12) months of the positive result. 22 25 e. An employee who has a positive substance screening test result and who refuses to enter the EAP or fails to complete the treatment program he/she enters will be suspended for two (2) weeks for the first positive test. f. Failure to submit to substance screening is grounds for automatic two (2) weeks suspension and the employee will be required to submit to a maximum of four (4) random tests within twelve (12) months of his/her refusal to take the substance screening test. g. Any employee who has a second positive substance screening test result or refuses a second time to submit to substance screening or has a positive substance screening test result after having earlier refused to submit to substance screening or who refuses to submit to substance screening after having had a positive substance screening result will be discharged. h. Possession of any substance referred to in Section 2 result in a two (2) week suspension for the first offense and the employee will be required to submit to a maximum of four(4) random tests within twelve (12) months of the date the possession was discovered by the Company. Any subsequent possession of any substance referred to in Section 2 will result in discharge. 23 26 ARTICLE XXI MISCELLANEOUS 1. Employees shall be permitted to trade shifts if such trading shall not result in overtime payment by the Company. 2. All conditions not covered by this Agreement shall remain unchanged unless mutually agreeable to the Company and the Union. 3. The Company agrees to provide $50,000 life insurance and $50,000 AD&D. The Company shall furnish major medical for all employees in the unit, including the spouse and dependents of married employees, to cover a maximum amount of $500,000 above the basic coverage. 4. The Company agrees to furnish hard hats and rain gear on a fair wear and tear basis. Employees failing to turn in old equipment will be debited through payroll deductions for the cost of new equipment. Employees using Company tools and, through their negligence, these tools are lost or stolen, shall reimburse the Company. The Company agrees to replace clothing and shoes destroyed on the job. The Company will provide uniforms for employees at no cost to the employee. 5. The Company agrees to contribute $1.38 per hour effective 2/1/97, $1.48 per hour effective 2/1/98, and $1.58 per hour effective 2/1/99 to the U. S. W. A. National Industrial Group Pension Plan for all hours worked not to exceed forty (40) hours per week. For the purpose of this provision, holidays, vacation time and sick leave and time missed as a result of on the job injury shall be considered time worked. The Company agrees to execute the forms necessary to set up said pension agreement and to furnish information required in connection therewith, together with the agreement to transmit said funds called for. It is understood, however, that the Company shall 24 27 have no liability in connection with the expenditure of said funds furnished or the benefits to be furnished said employees. 6. The break periods for maintenance employees shall not exceed fifteen (15) minutes in length. Two break periods shall be allowed whenever possible. The break periods shall be from 9:00 am to 9:15 am and 2:00 pm to 2:15 pm., whenever possible. 7. The Company will provide affected employees notice of layoffs as far as possible in advance, but in any event, not less than five (5) calendar days notice or the Company will pay the employee for days less than five (5). 8. A Civil Rights Committee will be established and consist of two members appointed by the Union and two from Management who will meet at reasonable times upon request of either party to discuss matters pertaining to civil rights and advise the Company and Union concerning them. This committee shall have no jurisdiction over filing or processing of grievances. 9. The Company agrees that it will check off and transmit to the treasurer of the United Steelworkers of America Political Action Committee (USWA PAC) voluntary contributions on forms provided for that purpose by the USWA PAC. The amount and timing of such check off deductions and the transmittal of such voluntary contribution shall be as specified in such forms and in conformance with any applicable state or federal statute. The signing of such USWA PAC check-off form and the making of such voluntary annual contribution are not conditioned of membership in the union or of employment with the Company. The signing of such USWA PAC check-off holds Company harmless against any and all claims, demands, suits or other form of liability that shall arrive out of or by reason of action taken or not taken by 25 28 the Company for the purpose of complying with any of the provisions of this section. The USWA PAC supports various candidates for federal and other elective office, is connected with the United Steel Workers of America, a labor organization, and solicits and accepts only voluntary contributions, which are deposited in an account separate and segregated from the dues fund of the union, and its own fundraising efforts and in joint fundraising efforts with the AFL-CIO and its committee on political education. ARTICLE XXII SHIFT DIFFERENTIAL 1. It is hereby agreed that the shift differential of fifteen (15) cents per hour for second shift and twenty-five (25) cents per hour for third shift will be paid for all employees. ARTICLE XXIII STRIKES AND LOCKOUTS 1. The Company agrees that it will not lock out, or discriminate against, any member of the Union because of membership in the Union or because of legitimate Union activity during the life of this Agreement and the Union agrees that during the terms of this Agreement it will not engage in any unauthorized strike, slowdown or any interruption of the Company's operations. ARTICLE XXIV NOTICES 1. All notices required or permitted under this Agreement, which are to be given to the Company by the Union, shall be given by mailing a registered letter to the Company in Cordova, Alabama. All notices to the Union by the Company shall be given by mailing a registered letter to the Regional Director of District 9, United Steel 26 29 Workers of America, AFL-CIO-CLC, 6200 E.J. Oliver Blvd., Suite 44, Fairfield, Alabama, with a copy to the Secretary of the Local Union No. 2122-A ARTICLE XXV WAGES 2/1/97 2/1/98 2/1/99 Operators 14.40 14.75 15.10 Maintenance 14.40 14.75 15.10 Emulsion 14.40 14.75 15.10 Loaders 14.40 14.75 15.10 *Laborers 6.85 7.20 7.55 *New hires will be given the higher rate as soon as they have been evaluated by Management and found to be qualified to perform all aspects of the job. Classification of Operator, Maintenance, Loaders and Emulsion can work in any classification as long as they are not being utilized in their bid classification. ARTICLE XXVI TERMINATION 1. It is hereby agreed that this contract contains the complete agreement between the parties, and no additions, waivers, deletions, changes or amendments shall be made during the life of this contract except by mutual consent in writing, of the parties hereto. 27 30 2. This Agreement shall be effective as of February 1, 1997, and shall continue in full force and effect until 12:00 o'clock midnight, January 31, 2000, and shall automatically be renewed thereafter from year to year unless either party notifies the other in writing sixty (60) days prior to the expiration date that it desires to terminate or modify the provisions of this Agreement. 3. The Company and the Union can modify or change the Agreement by mutual consent at any time during the life of same. ARTICLE XXVII CONFLICT WITH LAWS Should any provision of this Agreement, at any time during its life be in conflict with Federal or State law or regulation, then such provisions shall continue in effect only to the extent permitted. In event of any provision of this Agreement thus being held inoperative, the remaining provisions of this Agreement shall, nevertheless remain in full force and effect. ARTICLE XXVIII NON-DISCRIMINATION Neither the Company nor the Union shall discriminate against any employee because of race, creed, sex, color or national origin, and accordingly, both parties hereto agree to comply with all applicable laws governing such matters. The Company agrees that it will not discriminate in any way, whether Union member or not. ARTICLE XXIX SENIORITY LIST The Company will furnish the Union, semi-annually, with an up-to-date seniority list of all employees in the bargaining unit. The seniority lists will be for the periods of January 1 through June 30 and July 1 through December 31. 28 31 A copy of the seniority list shall be transmitted to the Regional Director of District 9, United Steel Workers of America, AFL-CIO-CLC, 6200 E.J. Oliver Blvd. Suite 44, Fairfield, AL 35064, with a copy to the local union. The seniority list shall also be posted on the bulletin board; unless objections thereto are made within thirty (30) days after posting, the list shall be deemed to be approved and shall be considered as the official seniority list. ARTICLE XXX RULES & REGULATIONS The Company shall have the right to establish, maintain, and enforce reasonable rules and regulations to assure orderly plant operation, it being understood and agreed that such rules and regulations shall not be inconsistent in conflict with the provisions of this Agreement. All present rules and new rules the Company may put into effect will be subject to Article X, Settlement of Disputes, and it is further agreed that after the signing of this Agreement an employee's record will be cleared one year after the date of each offense. An employee's performance record will be reviewed personally on a yearly basis with management. ARTICLE XXXI MANAGEMENT RIGHTS CLAUSE The management of the works, the director of the working forces, and the right to hire, suspend and discharge for just cause are vested exclusively in the Company and these rights shall not be abridged subject to the seniority and other provisions herein contained. 29 32 ARTICLE XXXII INSURANCE The Company will provide to the employee, at no premium cost, less deduction, equivalent coverage to what the employee had in the previous agreement prior to July 1, 1990, with a lifetime medical benefit of $500,000. All employees agree to pre-certification upon entering the hospital for any cause except for emergency treatment. If an employee is laid off, the Company agrees to keep insurance in full force for a period of four months. When said employee is recalled to work, it is understood that he will repay the Company. Employees retiring before reaching age 65 will continue on the Company's health and dental plans until they reach age 65. Should the federal government establish a national health plan that provides benefits for this age group, the plan will be primary and the Company's plan secondary. ARTICLE XXXIII CONTRACTING OUT 1. The Company will not contract out work to others that is normally performed or can be performed by bargaining unit members whether working or on layoff. 30 33 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives on this the 1st day of February, 1997. UNITED REFINING COMPANY UNITED STEELWORKERS OF AMERICA /s/ Lawrence A. Loughlin /s/ George Becker - ----------------------------------- ------------------------------------ Lawrence A. Loughlin George Becker, Intl. Pres. V.P. Human Resources /s/ Michael J. Kolos /s/ Leo W. Gerard - ----------------------------------- ------------------------------------ Michael J. Kolos Leo W. Gerard, Intl. Sec/Treas. V.P. Asphault Marketing /s/ Michael Natale /s/ Richard H. Davis - ----------------------------------- ------------------------------------ Michael Natale Richard H. Davis, Intl. VP (Admin.) Sr. Vice President Vulcan Refining /s/ Leon Lynch ------------------------------------ Leon Lynch, Intl. V.P. H.R. /s/ Homer Wilson ------------------------------------ Homer Wilson, District Director /s/ Gary Graves ------------------------------------ Gary Graves, Staff Representative ------------------------------------ LU 2122A Negotiating Committee ------------------------------------ LU 2122A Negotiating Committee EX-10.8 33 COLLECTIVE BARGAINING AGREEMENT 1 EXHIBIT 10.8 AGREEMENT UNITED REFINING COMPANY AND GENERAL TEAMSTERS LOCAL UNION NO. 397 Affiliated with the International Brotherhood of Teamsters Effective Date: August 1, 1995 Termination Date: July 31, 2000 2 2 INDEX PAGE ---- ARTICLE I EMPLOYMENT Section 1. Union Security ..4 Section 2. Representation ..5 Section 3. Responsibility of Employees ..5 Section 4. Transfers ..6 Section 5. New Hires ..6 ARTICLE II CHECK OFF ..7 ARTICLE III WAGES ..7 Section 1. Drivers ..7 Section 2. Workweek ..7 Section 3. Weekly Payment ..8 Section 4. Deductions ..8 Section 5. Pay for Holiday and Emergency Delivery ..8 Section 6. Bereavement ..9 Section 7. Holidays .10 Section 8. Insurance .11 Section 9. Christmas Bonus .12 Section 10. Jury Duty .12 Section 11. Military Leave .12 Section 12. Employee Discount .13 ARTICLE IV VACATIONS .13 ARTICLE V WORKING CONDITIONS .14 ARTICLE VI SENIORITY .16 ARTICLE VII UNIFORMS .18 ARTICLE VIII GENERAL DUTIES OF THE COMPANY AND EMPLOYEES .18 ARTICLE IX PICKET LINES .22 ARTICLE X DISPUTES AND CONCILIATION .23 ARTICLE XI PENSION .25 ARTICLE XII DURATION AND TERMINATION .27 3 3 AGREEMENT Made and entered into between: UNITED REFINING COMPANY hereinafter referred to as the "Company" AND GENERAL TEAMSTERS LOCAL UNION NO. 397 Affiliated with the International Brotherhood of Teamsters, hereinafter referred to as the "Union". WITNESSETH THAT: WHEREAS, the parties hereto are desirous of entering upon an agreement as to wage rates and conditions of employment and to do away with the possibility of strikes, boycotts., lockouts and the like. NOW THEREFORE, the said Company and the said Union acting by their duly authorized representatives in conference, and after due consideration and study of the matter hereinafter treated, and upon approval of said Company and Union, hereby agree as contained herein. 4 4 ARTICLE I EMPLOYMENT Section 1. Union Security It shall be a condition of employment that all transport employees of the Company covered by this Agreement who are members of the Union in good standing on the effective date of this Agreement shall remain members in good standing and those transport employees who are not members on the effective date of this Agreement shall, on the thirty-first (31st) day following the effective date of this Agreement, become and remain members in good standing in the Union. It shall also be a condition of employment that all employees covered by this Agreement and hired on or after its effective date shall, on the thirty-first (31st) day following the beginning of such employment, become and remain members in good standing in the Union. Where the effective date is made retroactive, the execution date shall be substituted for the effective date. It is further agreed that any new employee, whether a Union member at the time of hiring or not, will be on probation for sixty (60) days after date of hiring, and subject during such probationary period to discharge without benefit of the grievance procedure. The failure of any person to become a member of the Union at the required time shall obligate the Company, upon written notice from the Union, to such effect and to the 5 5 further effect that the Union membership was available to such person on the same terms and conditions generally available to other members, to forthwith discharge such person. Further, the failure of any person to maintain his Union membership in good standing as required herein shall, upon written notice to the Company by the Union to such effect, obligate the Company to discharge such person. Section 2. Representation The Company recognizes the Union as the sole bargaining agent for its transport employees in negotiations between the Company and the Union on matters of wages, hours and working conditions. The Union states and represents that the employees covered by this Agreement constitute a unit appropriate for collective bargaining under the laws of the United States of America and of the Commonwealth of Pennsylvania and it is a condition of staying effect of this Agreement between the parties hereto that such statements and representations shall continue to be true. Section 3. Responsibility of Employees The Union agrees with the Company that it will not tolerate dishonesty or intoxication among the employees. In the event of merchandise being lost, stolen or broken, and in the event of injury to equipment, the driver shall be held responsible in the event such are due to his negligence or failure to care for equipment. The driver shall also be held responsible for running tanks over, errors in delivery, failures to call attention of the appropriate Company 6 6 employee to the need for repairs and for misuse of equipment and lack of care in handling. A violation of this clause, shall upon proof, be sufficient cause for reprimand, layoff or dismissal. Section 4. Transfers When an employee is permanently transferred by the Company from one class of work to another kind of work, the rate of pay for the new kind of work shall prevail, except that when an employee is required, for the convenience of the Company to transfer temporarily from his regular job to another job where his earnings will be impaired, he shall receive his past average hourly earnings. Section 5. New Hires When new employees are hired, the Company agrees at the time of hiring to inform such employees that they will be required to join the Union after thirty-one (31) days and such employees shall not be hired in case they say that they do not desire to join the Union. The Company will also request the employees to sign an application for membership dated the date of hiring and marked effective thirty-one (31) days later, which card so furnished to the Union by the Company before the expiration of such thirty-one (31) days for each such respective employee so hired. 7 7 ARTICLE II CHECK OFF The Company agrees to deduct and collect on behalf of the Union the dues charged by the Union to its members from the first pay received by each employee covered by this Agreement after the date on which he becomes a Union member, and to forward the sane forthwith to the Union. ARTICLE III WAGES Section 1. Drivers Effective August 1, 1995 $12.88 per hour (25 cent increase) Effective August 1, 1996 $13.20 per hour (32 cent increase) Effective August 1, 1997 $13.60 per hour (40 cent increase) Effective August 1, 1998 $14.08 per hour (48 cent increase) Effective August 1, 1999 $14.64 per hour (56 cent increase) The starting pay scale for new drivers shall be: Starting Rate - 85% of regular rate After Six Months - 90% of regular rate After Twelve Months - 100% of regular rate Section 2. Workweek The guaranteed workweek of the employee shall be forty (40) hours. Employees scheduled to work four 10-hour days shall be paid at time and one half the regular hourly rate in excess of 11 hours in one day or 40 hours in one week, but not both. Employees scheduled to work five 8-hour days shall be paid at time and one half the regular rate in excess of 8 hours in one day or 40 hours in one week, but 8 8 not both. In work weeks where there is a paid holiday, the 8 or 10 hours paid for the holiday not worked shall be counted as time worked for purpose of computing overtime. In addition to the above, transport drivers may be scheduled to work an irregular week. Transport drivers working an irregular workweek will work any 4 or 5 scheduled work days in the seven-day period. (Monday 12:01 AM through Sunday 12:00 PM). Transport drivers scheduled to work an irregular workweek will be entitled to two (2) or three (3) days off, whichever is applicable, in each seven-day period. All jobs will be bid by seniority. Section 3. Weekly Payment All drivers shall be paid by the Company once a week. Section 4. Deductions Deductions from an employee's paycheck will be accompanied by a listing or explanation thereof. Section 5. Pay for Holiday and Emergency Delivery The parties hereto agree that in case of work on the following holidays, New Year's Day, Good Friday, one-half day the day before Christmas, Decoration Day, Fourth of July, Labor Day, Thanksgiving Day and Christmas Day, such work will be paid for at time and one-half (1-1/2) for a minimum payment for four (4) hours work. It is understood and agreed that in the event an employee is called to make an emergency delivery, such employee will be paid a minimum of four (4) hours pay at time and one-half (1-1/2). 9 9 It is further agreed that the Company shall have the right to require that such emergency deliveries be made. Call out shall be by seniority order. If no employees accept the emergency deliveries, then the Company shall require employees to accept the deliveries from the bottom up on the seniority list. Section 6. Bereavement In the event of the death of a spouse or child of any employee who has been in the employment of the Company for at least thirty (30) days, such employee will, upon request to his foreman, be granted the necessary time off but not to exceed five (5) consecutive calendar days. In the case of a death in the immediate family of an employee, other than spouse or child, such employee will, upon request to his foreman, be granted the necessary time off but not to exceed three (3) consecutive calendar days. For the purpose of the foregoing, it is understood that the immediate family will consist of legal mother, foster mother, legal father, foster father, or legal guardian, brother, sister, mother-in-law, or father-in-law. In the case of the death of an employee's grandmother, grandfather, or grandchildren, such employee, upon request to his foreman, will be granted one (1) day off to attend the funeral. The employee will receive for each such day lost from work his base rate of pay times eight (8) hours or ten (10) hours, if applicable. 10 10 Section 7. Holidays There will be paid holidays on New Year's Day, Good Friday, Decoration Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas Day, and one-half day the day before Christmas. There will also be two (2) paid holidays mutually agreed upon between the Company and the employee for those employees with one (1) year or more of continuous service. The employee's birthday shall be a paid holiday for those employees who have one (1) year or more of continuous service. Said holidays will be paid at the regular hourly rate for eight (8) or ten (10) hours whichever is applicable even though such holidays are not worked upon the following conditions: (a) Such payments for paid holidays will be in effect sixty (60) days after date of hiring for employees who have worked for the Company during the previous year's season, and sixty (60) days after date of hiring for new employees. (b) Such employee shall have worked both the scheduled full work day immediately preceding and immediately following such holiday unless off due to illness which the Employer reserves the right to have the employee verify with a doctor's excuse, or if the employee is on Workers' Compensation. Employees shall be eligible for Holiday pay when off from work sick or injured for up to ninety (90) days. Employees on Workers' 11 11 Compensation shall be eligible for holiday pay for up to six (6) calendar months from the date of injury. Section 8. Insurance Members of Local Union No. 397 covered by this Agreement after 30 days of employment will be covered by the United Refining Company Flexible Benefit Program to include medical, dental, life, dependent life, AD&D, eye care and voluntary AD&D. After one year of employment, employees are eligible for the 401(k) Incentive Savings Plan. Medical and dental coverage will be provided to retirees from age 57 to 65. Employee's spouses are eligible for medical and dental benefits until age 65 if the retiree is still living. The Company's insurance become secondary to Medicare at age 65 and dental coverage stops at age 65. Should an employee be off work because of an illness or injury on or off the job, the insurance will continue for up to 12 months. If an employee is absent because of illness or off the job injury and notifies United Refining Company of such absence, that employee will be covered under the Sick Pay Plan for a maximum of six (6) months as follows: For the first three (3) days of absence, there is no pay due. Starting with the fourth through seventh day, the employee will receive $5.00 per day. At the start of the 8th day, the employee will be paid based upon the below schedule. 12 12 Years of Service ---------------- 1-5 70% of Base Pay 6-9 80% of Base Pay 10-19 90% of Base Pay 20 & Up 100% of Base Pay Section 9. Christmas Bonus A Christmas bonus equal to five (5) percent of the wages paid to each employee during the first eleven (11) months of each calendar year shall be paid to each employee who is a bona fide full-time employee on the Company's payroll as of December 1 of that year. Said bonus is to be paid within a reasonable time after December 1 of that year. Section 10. Jury Duty An employee who is called for jury service, either local or federal, will be excused as a trial (petit) juror from work for the days on which he serves as a juryman and he shall receive for each such day of jury service on which he would otherwise have worked eight (8) or ten (10) hours, whichever is applicable, times his base hourly rate of pay and the payment he receives for jury service. Section 11. Military Leave In cases where employees are in any of the Reserves of the Armed Forces of the United States and require short leaves of absence in excess of thirty (30) days for training periods, the parties hereto will consider the matter together and work out something mutually satisfactory, taking into account relevant factors including availability 13 13 of sufficient men, seniority of the individual concerned and of the other employees, and the necessity of maintaining the output of the Company. Section 12. Employee Discount Kwik Fill credit cards and the 10% discounts are available to qualified employees and retirees. ARTICLE IV VACATIONS Section 1. Any employee with one (1) year of service covered by this Agreement shall receive two (2) weeks and one (1) day (90 hours) vacation with pay; any employee with six (6) years of service shall receive three (3) weeks and one (1) day (130 hours) vacation with pay; any employee with ten (10) years of service shall receive four (4) weeks and one (1) day (170 hours) vacation with pay; any employee with fifteen (15) years of service shall receive four (4) weeks and three (3) days (190 hours) vacation with pay and any employee with twenty (20) years of service shall receive five (5) weeks and one (1) day (210 hours) vacation with pay. Section 2. If an employee is laid off or voluntarily quits, the employee shall receive, at the time of layoff or quit, prorated vacation pay calculated on the basis of one-twelfth (1/12) of the amount of vacation he would have been entitled to if he had remained at work and taken a vacation during 14 14 the vacation period (January 1st through December 31st) next following his date of layoff or quitting, for each month in which he has worked since his last anniversary date; provided, nevertheless, that to be entitled to prorated vacation pay on a voluntary quit, the employee must have given the Company at least two (2) calendar weeks notice prior to the time of termination of employment. If an employee is discharged for cause, all vacation pay shall be forfeited. This shall not apply for fully earned vacation not taken. After an initial absence from work of 60 calendar days for any reason other than an injury compensable by Workmen's Compensation during the twelve (12) month period starting with January 1 of any year and extending through December 31 of that year, an employees vacation time for the next ensuing year will be reduced by 1/12th, calculated to the nearest full day, for each thirty (30) calendar days of absence after the initial absence period of sixty (60) calendar days. This section will not apply to employees having twenty (20) or more years of service. ARTICLE V WORKING CONDITIONS Section 1. The previous practice of the Company with respect to sick leave, not involving need for leave of absence, shall be continued to the extent and in the manner heretofore 15 15 practiced without diminution on account of the making of this Contract. Section 2. Employees shall be entitled to a leave of absence, if possible or practical, for a non-occupational disability, substantiated by a doctor selected by the Company. The leave of absence shall be in writing, without pay, for a period not to exceed two (2) years or the length of the employee's service, whichever is the lesser. A written notice thereof shall be forwarded to the Union, and the disability shall be verified by a doctor selected by the Company. Employees shall be entitled to a leave of absence for an occupation-connected disability, substantiated by a doctor selected by the Company. The leave of absence shall be in writing, without pay, for a period of not to exceed two (2) years, or thirty (30) days after the last payment of statutory compensation. In either of the above provisions, at the expiration of the leave of absence, the employee shall be reinstated to his former classification, if he is physically able to perform the duties required, with full seniority accrued. 16 16 ARTICLE VI SENIORITY Straight seniority shall prevail in all cases concerning the layoff of all employees. Recall shall be in reverse order. If an employee quits or is discharged, he loses all seniority rights. Seniority shall end in all cases after the employee obtains a permanent job. An employee requiring a leave of absence for reasons other than disability shall make such request in writing to the Management and receive written permission from the Company in order not to lose any seniority that exists at the date of the leave of absence. Also, no leave of absence shall be granted for a period greater than thirty (30) days in any one (1) year unless the Company consents. An employee requesting a leave of absence must show good cause therefore. All questions of correct action under the seniority clause shall be subject to the grievance procedure. BID ON JOBS All job vacancies will be posted no later than three (3) days after the vacancy occurs for a period of five (5) working days. The job will be awarded to the bidder based on seniority and capability in three days, contingent that an adequate training period is allotted. 17 17 LAYOFFS Layoffs by reason of reduction in force or for any reason beyond the control of the employees and followed by re-employment per the below schedule, will not be considered as an interruption of continuous employment for the purpose of computing plant and Company seniority.
Up to 1 year service 9 months layoff 1 year through 5 years service 1 year layoff 6 years through 8 years service 2 years layoff 9 years through 11 years service 3 years layoff Over 11 years of service 4 years layoff
If an employee who is on layoff fails to report his intentions to his supervisor within three (3) working days of notice of recall and fails to return to work within five (5) working days of such notice, he will be deemed to have quit and will lose all seniority rights. Notice of recall will be by certified mail, addressed to the employee at his home address, as it appears on Company records, and be deemed received as of the date of mailing. Employees will be responsible for keeping the Company advised as to their current address. 18 18 ARTICLE VII UNIFORMS The Company will provide and/or pay for four (4) uniforms, two (2) coveralls and gloves for regular full-time employees annually but not for part-time, temporary or seasonal employees. Employees for whom uniforms are provided or paid for shall be responsible for keeping same in a clean and neat condition. The Company shall provide suitable rain gear and replacement as determined by Management. ARTICLE VIII GENERAL DUTIES OF THE COMPANY AND EMPLOYEES Section 1. The Union, as well as the employee members thereof, agree at all times as fully as it be in their power, to further the interests of the said industry and of the Company. Section 2. This Agreement is for the purpose of stabilizing and improving industrial relations between the Company and the Union. It is agreed that the Company and its representative and the Union and its representative will exhaust every avenue for the adjustment of complaints and will not engage in lockouts, walkouts, or strikes, or other industrial strife during the life of this Agreement. It is agreed by both parties that upon the expiration of this Agreement and 19 19 at times when both are negotiating an agreement that both parties use their best efforts to avoid industrial strife of any nature. Sympathy strikes will not be engaged in by the Union or any of its members. Section 3. No employees shall be discriminated against for reporting violations of this Agreement. Section 4. The Company shall not require employees to take out on the streets or highways any vehicle not equipped with the safety appliances required by law or any vehicle not in a safe operating condition. Section 5. Employees shall immediately report to the Company in writing all defects in equipment and all accidents and names of all witnesses to accidents. Employees shall report repairs at the end of each work day. Section 6. If the occasion arises where a driver gives a written report on forms used by the Company of a vehicle being in an unsafe operating condition and receives no consideration from the Company, the matter shall be subject under the grievance procedure. Section 7. It shall be the duty of every employee, when required by the Company, to carefully check all goods handled by such employee so that he knows the delivery bills correspond with 20 20 the goods so handled and any overages and shortages shall be promptly reported to the Company. Section 8. Violations on the part of the employees of the rules and regulations of the Company or violations of the rules and regulations provided by municipal, state or federal law or authority as related to motor transportation, or to general conduct or unnecessary delay in the transportation of freight or any employee's dishonesty, carelessness or incompetency shall be considered cause of disciplinary action on the part of the Company and shall subject the employee to temporary or permanent dismissal from employment. Section 9. The Company recognizes the right of the Union to designate job stewards and alternates. The authority of job stewards and alternates so designed by the Union shall be limited to and shall not exceed the following duties and activities: 1. The investigation and presentation of grievances in accordance with the provisions of the Collective Bargaining Agreement; 2. The transmission of such messages and information which shall originate with, and are authorized by the local Union or its officers, provided such messages and information a. have been reduced to writing, or 21 21 b. if not reduced to writing, are of a routine nature and do not involve work stoppages, slowdowns, refusal to handle goods, or any other interference with the Company's business. Job stewards and alternates have no authority to take strike action, or any other action interrupting the Company's business, except as authorized by official action of the Union. The Company recognizes these limitations upon the authority of job stewards and their alternates, and shall not hold the Union liable for any unauthorized acts. The Company in so recognizing such limitations shall have the authority to impose proper discipline, including discharge, in the event the job steward has taken unauthorized strike action, slowdown, or work stoppage in violation of this Agreement. Section 10. The Company and the Union agree that pursuant to Executive Order 11246 (30 FR 12319, September 28, 1965) and CFR, Chapter 60, they will not discriminate against any employee or applicant because of race, color, religion, age, physical or mental handicap, national origin or sex, except in those instances where it can be proven that sex, or the absence of a physical or mental handicap is a bona fide occupational qualification necessary to the operation of the business. The use of the masculine gender in any provisions of this Agreement will not be deemed to indicate any distinction based on sex. Such use of a masculine gender 22 22 will be deemed to include the feminine gender wherever it is found. Section 11. The Company and the Union agree that there will be no discrimination by the Company or the Union against any employee because of his or her membership in the Union or because of any employee's lawful activity and/or support of the Union. ARTICLE IX PICKET LINES The Company will not request employees to drive vehicles through picket lines of strikes at other places of business. The Union further agrees to use its best efforts to prevent any interference with the operations of the Company's business and the places of work or the operations of the trucks operated by the Company. However, it shall not be a violation of this Agreement and it shall not be cause for discharge or disciplinary action in the event an employee refuses to enter into any property involved in a labor dispute or refuses to go through or work behind any lawful primary picket line, including the lawful primary picket line of Unions party to this Agreement and including lawful primary picket lines at the Company's place or places of business. 23 23 ARTICLE X DISPUTES & CONCILIATION Section 1. Any grievance by the Company or employees under this Agreement may become the subject of conference and negotiation between the said Company and the said Local in the manner hereinafter set forth. Section 2. In the event of any grievance, complaint or dispute on the part of an employee, it shall be handled in the following manner: First: The employee shall endeavor to settle the grievance with his supervisor. If no satisfactory settlement is reached, then, Second: The employee shall reduce the grievance to writing and give one (1) copy to the steward and one (1) copy to his supervisor, and the steward shall attempt to adjust the matter with the supervisor. If this is unsuccessful, then, Third: The steward shall report the matter to the Union which shall, within seventy-two (72) hours, take the matter up with the Company. Fourth: If the Union and the Company, after reasonable efforts and good faith attempts to resolve the matter are unable to reach agreement, either party may request the services of a mediator from the Conciliation and Mediation Service of the 24 24 Pennsylvania Department of Labor. If the matter is not resolved after earnest efforts to do so with the Mediator, then, Fifth: Either party may request appointment of an arbitrator by the Conciliation Service of the United States Department of Labor. Section 3. In the event of arbitration, as above provided, the Arbitrator shall have the jurisdiction and authority to interpret, apply and determine compliance with the provisions set forth in this Agreement, but shall not have jurisdiction or authority to add to, detract from or alter in any way the specific provisions of this Agreement. The decision of the Arbitrator shall be final and binding upon both parties to this Agreement. All expenses incurred through the arbitration shall be borne equally by the Company and the Union. Section 4. All cases of grievances by employees shall be reported to the supervisor within three (3) working days by grievant from date of incident of the occurrence giving rise to the grievance. Any grievance not so reported shall be deemed void. Section 5. In the event of a grievance by the Company, it shall be processed as above provided, beginning at the "Third" step. 25 25 Section 6. In view of the orderly procedure for the settlement of grievances outlined in this Agreement, the Union and the employees will not authorize, sanction or take part in any strike, work stoppage, slowdown or restriction of output or deliveries for any reason whatsoever during the term of this Agreement. The Company will not lock out the employees. Any warning letters shall be removed from an employee's personnel file after twenty-four (24) months from the date the letter was issued. ARTICLE XI PENSION The Company will contribute to the Western Pennsylvania Teamsters & Employers Pension Fund the following: Effective 8/1/95 $48.00 per week 8/1/96 $50.00 per week 8/1/97 $52.00 per week 8/1/98 $54.00 per week 8/1/99 $57.00 per week These contributions will be made for each regular, full-time (not including seasonal or part-time) employee having thirty (30) or more days of service who works one (1) or more days in any such week. Any day for which an eligible employee receives compensation under the terms of this Agreement shall be considered a day worked for this purpose. 26 26 If an employee is absent because of illness or off-the-job injury and notifies the Company of such absence, the Company shall continue to make the required contributions for a period of four (4) weeks. If an employee is injured on the job, the Company shall continue to pay the required contribution until such employee returns to work; however, such contribution shall not be paid for a period of more than twelve (12) months. 401(K) Company will match up to 5% of employee's contribution at $0.50 per $1.00. 27 27 ARTICLE XII DURATION AND TERMINATION This Agreement shall be effective as of August 1, 1995, and shall remain in effect until July 31, 2000, and from year to year after July 31, 2000, unless terminated at the option of either party on written notice to the other. Such notice will be given by Certified Mail, Return Receipt Requested, to the last known address of the other party not less than sixty (60) days prior to any such yearly anniversary date, the first of which shall be July 31, 2000. (The present address of the Union is 1344 East 11th Street, Erie, Pennsylvania, and the present address of the Company is P.O. Box 780, Warren, Pennsylvania). IN WITNESS WHEREOF, the undersigned Local, duly authorized by its members, and the undersigned Employer have signed this Agreement this 22 day of August, 1995, effective as of and from August 1, 1995. UNITED REFINING COMPANY GENERAL TEAMSTERS LOCAL UNION NO. 397 Affiliated with the Inter- national Brotherhood of Teamsters By: By ------------------------------ ----------------------------- Title: VP HR Title: V.P. Business Agent --------------------------- ------------------------- Steward: ---------------------- EX-10.9 34 CREDIT AGREEMENT 1 EXHIBIT 10.9 $35,000,000 REVOLVING CREDIT FACILITY CREDIT AGREEMENT by and among UNITED REFINING COMPANY, UNITED REFINING COMPANY OF PENNSYLVANIA, KIANTONE PIPELINE CORPORATION, and THE BANKS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, As Agent Dated as of June 9, 1997 PREPARED BY BUCHANAN INGERSOLL PROFESSIONAL CORPORATION 2 TABLE OF CONTENTS
Section Page - ------- ---- 1. CERTAIN DEFINITIONS ........................................................ 1 1.1 Certain Definitions ................................................. 1 1.2 Construction ........................................................ 20 1.2.1 Number; Inclusion ........................................... 20 1.2.2 Determination ............................................... 20 1.2.3 Agent's Discretion and Consent .............................. 20 1.2.4 Documents Taken as a Whole .................................. 20 1.2.5 Headings .................................................... 20 1.2.6 Implied References to This Agreement ........................ 21 1.2.7 Persons ..................................................... 21 1.2.8 Modifications to Documents .................................. 21 1.2.9 From, To and Through ........................................ 21 1.2.10 Shall; Will ................................................ 21 1.3 Accounting Principles ............................................... 21 2. REVOLVING CREDIT AND SWING LOAN FACILITIES ................................. 22 2.1 Revolving Credit Commitments and Swing Loan Commitments ............. 22 2.1.1 Revolving Credit Commitments ................................ 22 2.1.2 Swing Loan Commitment ....................................... 22 2.2 Nature of Banks' Obligations With Respect to Revolving Credit Loans.. 22 2.3 Commitment Fees ..................................................... 23 2.4 Loan Requests ....................................................... 23 2.4.1 Revolving Credit Loan Requests .............................. 23 2.4.2 Swing Loan Requests ......................................... 23 2.5 Making Loans ........................................................ 24 2.5.1 Making Revolving Credit Loans ............................... 24 2.5.2 Making Swing Loans .......................................... 24 2.6 Borrowings to Repay Swing Loans ..................................... 24 2.7 Notes ............................................................... 25 2.7.1 Revolving Credit Notes ...................................... 25 2.7.2 Swing Loan Note ............................................. 25 2.8 Use of Proceeds ..................................................... 25 2.9 Letter of Credit Subfacility ........................................ 25 2.9.1 Issuance of Letters of Credit ............................... 25 2.9.2 Letter of Credit Fees ....................................... 26 2.9.3 Disbursements, Reimbursement ................................ 26 2.9.4 Repayment of Participation Advances ......................... 27 2.9.5 Documentation ............................................... 28 2.9.6 Determinations to Honor Drawing Requests .................... 28
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Section Page - ------- ---- 2.9.7 Nature of Participation and Reimbursement Obligations .................. 28 2.9.8 Indemnity .............................................................. 29 2.9.9 Liability for Acts and Omissions ....................................... 30 3. INTEREST RATES ........................................................................ 30 3.1 Interest Rate Options .......................................................... 30 3.1.1 Revolving Credit Interest Rate Options ................................. 31 3.1.2 Swing Loan Interest Rate Options ....................................... 31 3.1.3 Rate Quotations ........................................................ 32 3.2 Interest Periods ............................................................... 32 3.2.1 Ending Date and Business Day ........................................... 32 3.2.2 Amount of Borrowing Tranche ............................................ 32 3.2.3 Termination Before Expiration Date ..................................... 32 3.2.4 Renewals ............................................................... 32 3.3 Interest After Default ......................................................... 32 3.3.1 Letter of Credit Fees, Interest Rate, .................................. 33 3.3.2 Other Obligations ...................................................... 33 3.3.3 Acknowledgment ......................................................... 33 3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.. 33 3.4.1 Unascertainable ........................................................ 33 3.4.2 Illegality; Increased Costs; Deposits Not Available .................... 33 3.4.3 Agent's and Bank's Rights .............................................. 34 3.5 Selection of Interest Rate Options ............................................. 34 4. PAYMENTS .............................................................................. 35 4.1 Payments ....................................................................... 35 4.2 Pro Rata Treatment of Banks .................................................... 35 4.3 Interest Payment Dates ......................................................... 35 4.4 Voluntary Prepayments .......................................................... 36 4.4.1 Right to Prepay ........................................................ 36 4.4.2 Replacement of a Bank .................................................. 37 4.4.3 Change of Lending Office ............................................... 37 4.5 Mandatory Prepayments .......................................................... 38 4.5.1 Borrowing Base Exceeded ................................................ 38 4.5.2 Application Among Interest Rate Options ................................ 38 4.6 Additional Compensation in Certain Circumstances ............................... 38 4.6.1 Increased Costs or Reduced Return Resulting
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Section Page - ------- ---- From Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc .. 38 4.6.2 Indemnity ............................................................. 39 4.7 Settlement Date Procedures .................................................... 40 4.8 Deposit into Lockbox .......................................................... 40 4.9 Receipt and Application of Payment; Cash Collateral Account; Collections; Agent's Right to Notify Account Debtors ..................................... 40 4.9.1 Receipt and Application of Payment .................................... 40 4.9.2 Cash Collateral Account ............................................... 41 4.9.3 Collections; Agent's Right to Notify Account Debtors .................. 41 5. REPRESENTATIONS AND WARRANTIES ....................................................... 42 5.1 Representations and Warranties ................................................ 42 5.1.1 Organization and Qualification ........................................ 42 5.1.2 Capitalization and Ownership .......................................... 42 5.1.3 Subsidiaries .......................................................... 42 5.1.4 Power and Authority ................................................... 43 5.1.5 Validity and Binding Effect ........................................... 43 5.1.6 No Conflict ........................................................... 43 5.1.7 Litigation ............................................................ 43 5.1.8 Title to Properties ................................................... 44 5.1.9 Financial Statements .................................................. 44 5.1.10 Use of Proceeds; Margin Stock; Section 20 Subsidiaries ............... 45 5.1.11 Full Disclosure ...................................................... 45 5.1.12 Taxes ................................................................ 46 5.1.13 Consents and Approvals ............................................... 46 5.1.14 No Event of Default; Compliance With Instruments ..................... 46 5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc ....................... 46 5.1.16 Security Interests ................................................... 47 5.1.17 Insurance ............................................................ 47 5.1.18 Compliance With Laws ................................................. 47 5.1.19 Material Contracts; Burdensome Restrictions .......................... 47 5.1.20 Investment Companies; Regulated Entities ............................. 48 5.1.21 Plans and Benefit Arrangements ....................................... 48 5.1.22 Employment Matters ................................................... 49 5.1.23 Environmental Matters ................................................ 49 5.1.24 Senior Debt Status ................................................... 51 5.2 Updates to Schedules .......................................................... 51
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Section Page - ------- ---- 6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT ..................... 51 6.1 First Loans and Letters of Credit .................................... 51 6.1.1 Officer's Certificate ........................................ 51 6.1.2 Secretary's Certificate ...................................... 52 6.1.3 Delivery of Loan Documents ................................... 52 6.1.4 Opinion of Counsel ........................................... 52 6.1.5 Legal Details ................................................ 53 6.1.6 Payment of Fees .............................................. 53 6.1.7 Borrowing Base Certificate ................................... 53 6.1.8 Consents ..................................................... 53 6.1.9 Officer's Certificate Regarding MACs ......................... 53 6.1.10 No Violation of Laws ........................................ 53 6.1.11 No Actions or Proceedings ................................... 54 6.1.12 Insurance Policies; Certificates of Insurance; Endorsements.. 54 6.1.13 Filing Receipts ............................................. 54 6.1.14 Proceeds from Issuance of Senior Unsecured Notes ............ 54 6.1.15 Lockbox Agreements .......................................... 54 6.2 Each Additional Loan or Letter of Credit ............................. 55 7. COVENANTS ................................................................... 55 7.1 Affirmative Covenants ................................................ 55 7.1.1 Preservation of Existence, Etc ............................... 55 7.1.2 Payment of Liabilities, Including Taxes, Etc ................. 55 7.1.3 Maintenance of Insurance ..................................... 56 7.1.4 Maintenance of Properties and Leases ......................... 57 7.1.5 Maintenance of Patents, Trademarks, Etc ...................... 57 7.1.6 Visitation Rights ............................................ 57 7.1.7 Keeping of Records and Books of Account ...................... 57 7.1.8 Plans and Benefit Arrangements ............................... 57 7.1.9 Compliance With Laws ......................................... 58 7.1.10 Use of Proceeds ............................................. 58 7.1.11 Further Assurances .......................................... 58 7.1.12 Subordination of Intercompany Loans ......................... 58 7.1.13 Tax Sharing ................................................. 58 7.1.14 Wire Transfer Agreement ..................................... 58 7.2 Negative Covenants ................................................... 59 7.2.1 Indebtedness ................................................. 59 7.2.2 Liens ........................................................ 60 7.2.3 Guaranties ................................................... 60 7.2.4 Loans and Investments ........................................ 60 7.2.5 Dividends and Related Distributions .......................... 60
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Section Page - ------- ---- 7.2.6 Liquidations, Mergers, Consolidations, Acquisitions ............. 61 7.2.7 Dispositions of Assets or Subsidiaries .......................... 63 7.2.8 Affiliate Transactions .......................................... 64 7.2.9 Subsidiaries, Partnerships and Joint Ventures ................... 64 7.2.10 Continuation of or Change in Business .......................... 65 7.2.11 Plans and Benefit Arrangements ................................. 65 7.2.12 Fiscal Year .................................................... 66 7.2.13 Change in Control .............................................. 66 7.2.14 Issuance of Stock .............................................. 66 7.2.15 Changes in Organizational Documents and Senior Unsecured Notes.. 66 7.2.16 Minimum Fixed Charge Coverage Ratio ............................ 66 7.2.17 Minimum Net Worth .............................................. 67 7.3 Reporting Requirements .................................................. 67 7.3.1 Quarterly Financial Statements .................................. 67 7.3.2 Annual Financial Statements ..................................... 67 7.3.3 Certificate of the Borrowers .................................... 68 7.3.4 Weekly Borrowing Base Certificates, Schedules of Accounts and Inventory, Audits of Accounts and Inventory ................... 68 7.3.5 Notice of Default ............................................... 69 7.3.6 Notice of Litigation ............................................ 69 7.3.7 Certain Events .................................................. 69 7.3.8 Budgets, Forecasts, Other Reports and Information ............... 69 7.3.9 Notices Regarding Plans and Benefit Arrangements ................ 70 8. DEFAULT ........................................................................ 71 8.1 Events of Default ....................................................... 71 8.1.1 Payments Under Loan Documents ................................... 72 8.1.2 Breach of Warranty .............................................. 72 8.1.3 Breach of Negative Covenants or Visitation Rights ............... 72 8.1.4 Breach of Other Covenants ....................................... 72 8.1.5 Defaults in Other Agreements or Indebtedness .................... 72 8.1.6 Final Judgments or Orders ....................................... 73 8.1.7 Loan Document Unenforceable ..................................... 73 8.1.8 Notice of Lien or Assessment .................................... 73 8.1.9 Insolvency ...................................................... 73 8.1.10 Events Relating to Plans and Benefit Arrangements .............. 73
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Section Page - ------- ---- 8.1.11 Cessation of Business .............................................. 74 8.1.12 Involuntary Proceedings ............................................ 74 8.1.13 Voluntary Proceedings .............................................. 74 8.2 Consequences of Event of Default ............................................ 75 8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings ....................................................... 75 8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings ................ 75 8.2.3 Set-off ............................................................. 75 8.2.4 Suits, Actions, Proceedings ......................................... 76 8.2.5 Application of Proceeds ............................................. 76 8.2.6 Other Rights and Remedies ........................................... 77 8.3 Notice of Sale .............................................................. 77 9. THE AGENT .......................................................................... 77 9.1 Appointment ................................................................. 77 9.2 Delegation of Duties ........................................................ 77 9.3 Nature of Duties; Independent Credit Investigation .......................... 77 9.4 Actions in Discretion of Agent; Instructions From the Banks ................. 78 9.5 Reimbursement and Indemnification of Agent by the Borrowers ................. 78 9.6 Exculpatory Provisions; Limitation of Liability ............................. 79 9.7 Reimbursement and Indemnification of Agent by Banks ......................... 79 9.8 Reliance by Agent ........................................................... 80 9.9 Notice of Default ........................................................... 80 9.10 Notices .................................................................... 80 9.11 Banks in Their Individual Capacities ....................................... 80 9.12 Holders of Notes ........................................................... 81 9.13 Equalization of Banks ...................................................... 81 9.14 Successor Agent ............................................................ 82 9.15 Agent's Fee ................................................................ 82 9.16 Availability of Funds ...................................................... 82 9.17 Calculations ............................................................... 83
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Section Page - ------- ---- 9.18 Beneficiaries ........................................................ 83 10. MISCELLANEOUS ............................................................... 83 10.1 Modifications, Amendments or Waivers ................................. 83 10.1.1 Increase of Commitment; Extension or Expiration Date ......... 83 10.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment ............................ 84 10.1.3 Release of Collateral or Guarantor ........................... 84 10.1.4 Miscellaneous ................................................ 84 10.2 No Implied Waivers; Cumulative Remedies; Writing Required ............ 84 10.3 Reimbursement and Indemnification of Banks by the Borrowers; Taxes ... 85 10.4 Holidays ............................................................. 85 10.5 Funding by Branch, Subsidiary or Affiliate ........................... 86 10.5.1 Notional Funding ............................................. 86 10.5.2 Actual Funding ............................................... 86 10.6 Notices .............................................................. 86 10.7 Severability ......................................................... 87 10.8 Governing Law ........................................................ 87 10.9 Prior Understanding .................................................. 87 10.10 Duration; Survival .................................................. 87 10.11 Successors and Assigns .............................................. 88 10.12 Confidentiality ..................................................... 89 10.12.1 General ..................................................... 89 10.12.2 Sharing Information With Affiliates of the Banks ............ 89 10.13 Counterparts ........................................................ 90 10.14 Agent's or Bank's Consent ........................................... 90 10.15 Exceptions .......................................................... 90 10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL .............................. 90 10.17 Tax Withholding Clause .............................................. 91 10.18 Joinder of Guarantors ............................................... 91
-vii- 9 LIST OF SCHEDULES AND EXHIBITS SCHEDULES SCHEDULE 1.1(A) - PRICING GRID SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES SCHEDULE 1.1(P) - PERMITTED LIENS SCHEDULE 1.1(Q)(i) - QUALIFIED ACCOUNTS SCHEDULE 1.1(Q)(ii) - QUALIFIED INVENTORY SCHEDULE 5.1.1 - QUALIFICATIONS TO DO BUSINESS SCHEDULE 5.1.2 - CAPITALIZATION SCHEDULE 5.1.3 - SUBSIDIARIES SCHEDULE 5.1.7 - LITIGATION SCHEDULE 5.1.8 - OWNED AND LEASED REAL PROPERTY SCHEDULE 5.1.12 - TAXES SCHEDULE 5.1.13 - CONSENTS AND APPROVALS SCHEDULE 5.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC. SCHEDULE 5.1.17 - INSURANCE POLICIES SCHEDULE 5.1.19 - MATERIAL CONTRACTS SCHEDULE 5.1.21 - EMPLOYEE BENEFIT PLAN DISCLOSURES SCHEDULE 5.1.23 - ENVIRONMENTAL DISCLOSURES SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS EXHIBITS EXHIBIT 1.1(A)(1) - ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 1.1(A)(2) - CLOSING DATE CERTIFICATE EXHIBIT 1.1(G)(1) - GUARANTY AGREEMENT EXHIBIT 1.1(G)(2) - GUARANTY AGREEMENT EXHIBIT 1.1(I) - INTERCOMPANY SUBORDINATION AGREEMENT EXHIBIT 1.1(Q)(ii) - WAREHOUSEMAN'S WAIVER EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE EXHIBIT 1.1(S)(1) - SECURITY AGREEMENT EXHIBIT 1.1(S)(2) - SWING LOAN NOTE EXHIBIT 1.1(W) - WIRE TRANSFER AGREEMENT EXHIBIT 2.4.1 - REVOLVING CREDIT LOAN REQUEST EXHIBIT 2.4.2 - SWING LOAN REQUEST EXHIBIT 6.1.4 - OPINION OF COUNSEL EXHIBIT 7.2.6 - ACQUISITION NOTICE CERTIFICATE EXHIBIT 7.3.3 - QUARTERLY COMPLIANCE CERTIFICATE EXHIBIT 7.3.4 - BORROWING BASE CERTIFICATE -viii- 10 CREDIT AGREEMENT THIS CREDIT AGREEMENT is dated as of June 9, 1997 and is made by and among UNITED REFINING COMPANY, a Pennsylvania corporation ("United Refining"), UNITED REFINING COMPANY OF PENNSYLVANIA, a Pennsylvania corporation ("United Refining PA"), KIANTONE PIPELINE CORPORATION, a New York corporation ("Kiantone" and hereinafter together with United Refining and United Refining PA sometimes collectively referred to as the "Borrowers" and individually as a "Borrower"), the BANKS (as hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Banks under this Agreement (hereinafter referred to in such capacity as the "Agent"). WITNESSETH: WHEREAS, the Borrowers have requested the Banks to provide a revolving credit facility to the Borrowers in an aggregate principal amount not to exceed $35,000,000; and WHEREAS, the revolving credit facility shall be used for general corporate purposes and working capital; and WHEREAS, the Banks are willing to provide such credit upon the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows: 1. CERTAIN DEFINITIONS 1.1 Certain Definitions. In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise: Account shall mean any account, contract right, general intangible, chattel paper, instrument or document representing any right to payment for goods sold or services rendered, whether or not earned by performance and whether or not evidenced by a contract, instrument or document, which is now owned or hereafter acquired by a Loan Party. All Accounts, whether Qualified Accounts or not, shall be subject to the Banks' Prior Security Interest. Account Debtor shall mean any Person who is or 11 who may become obligated to a Borrower under, with respect to, or on account of, an Account. Acquisition Consideration shall mean with respect to any Permitted Acquisition, the aggregate of (i) the cash paid by any of the Loan Parties, directly or indirectly, to the seller in connection therewith, (ii) the Indebtedness incurred or assumed by any of the Loan Parties, whether in favor of the seller or otherwise and whether fixed or contingent, (iii) any Guaranty given or incurred by any Loan Party in connection therewith, and (iv) any other consideration given or obligation incurred by any of the Loan Parties in connection therewith. Adjusted Fixed Charge Coverage Ratio shall mean the Consolidated Fixed Charge Coverage Ratio as such term is defined in the Indenture as the Indenture exists on the Closing Date and without giving effect to any amendments to such Indenture after the Closing Date (the "Closing Date Indenture"). All defined terms included in the definition of the Consolidated Fixed Charge Coverage Ratio in the Closing Date Indenture (or included in other defined terms contained in the definitions of such defined terms or otherwise contained in the Closing Date Indenture) also shall have the meanings given to them in the Closing Date Indenture. Affiliate as to any Person shall mean any other Person (i) which directly or indirectly controls, is controlled by, or is under common control with such Person, (ii) which beneficially owns or holds ten percent (10%) or more of any class of the voting or other equity interests of such Person, or (iii) ten percent (10%) or more of any class of voting interests or other equity interests of which is beneficially owned or held, directly or indirectly, by such Person. Control, as used in this definition, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be. Agent shall mean PNC Bank, National Association, and its successors and assigns. Agent's Fee shall have the meaning assigned to that term in Section 9.15. Agent's Letter shall have the meaning assigned to that term in Section 9.15. Agreement shall mean this Credit Agreement, as the same may be supplemented or amended from time to time, 2 12 including all schedules and exhibits. Annual Statements shall have the meaning assigned to that term in subsection 5.1.9(i). Applicable Margin shall mean, as applicable: (A) the percentage spread to be added to Base Rate under the Base Rate Option based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading "Revolving Credit Base Rate Spread," or (B) the percentage spread to be added to Euro-Rate under the Euro-Rate Option based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading "Revolving Credit Euro-Rate Spread." The Applicable Margin shall be computed in accordance with the parameters set forth on Schedule 1.1(A). Assignment and Assumption Agreement shall mean an Assignment and Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and the Agent, as Agent and on behalf of the remaining Banks, substantially in the form of Exhibit 1.1(A). Authorized Officer shall mean those individuals, designated by written notice to the Agent from each Borrower, authorized to execute notices, reports and other documents on behalf of the Loan Parties required hereunder. A Borrower may amend such list of individuals from time to time by giving written notice of such amendment to the Agent. Banks shall mean the financial institutions named on Schedule 1.1(B) and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Bank. Base Net Worth shall mean the sum of $37,900,000 plus (i) fifty percent (50%) of consolidated net income of the Borrowers and their Subsidiaries for each fiscal quarter in which net income was earned (as opposed to a net loss) during the period from February 28, 1997 through the date of determination, plus (ii) one hundred percent (100%) of proceeds received by the Borrowers directly or indirectly in connection with any sale of capital stock of any of the Borrowers net of any reasonable and customary fees and expenses incurred by the Borrowers in connection with such sale (excluding proceeds received by any Person who holds stock of United Refining from the sale of such stock to another Person). -3- 13 Base Rate shall mean the greater of (i) the interest rate per annum announced from time to time by the Agent at its Principal Office as its then-prime rate, which rate may not be the lowest rate then being charged commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus one-half of one percent (0.5%) per annum. Base Rate Option shall mean the option of the Borrowers to have Revolving Credit Loans or Swing Loans bear interest at the rate and under the terms and conditions set forth in subsection 3.1.1(i) or subsection 3.1.2(ii), respectively. Benefit Arrangement shall mean at any time an "employee benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a Multiemployer Plan and which is maintained, sponsored or otherwise contributed to by any member of the ERISA Group. Borrowers or Borrower shall have the meanings as set forth in the first paragraph of this Agreement. Borrowing Base shall mean at any time the sum of (i) one hundred percent (100%) of cash held in the Cash Collateral Account, plus (ii) eighty percent (80%) of Qualified Accounts ("Accounts Portion"), plus (iii) the lesser of (A) seventy percent (70%) of Qualified Inventory ("Inventory Portion"), or (B) one hundred fifty percent (150%) of the Accounts Portion. Borrowing Date shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the same or a different Interest Rate Option, which shall be a Business Day. Borrowing Tranche shall mean specified portions of Loans outstanding as follows: (i) any Loans to which a Euro-Rate Option applies which become subject to the same Interest Rate Option under the same Loan Request by the Borrowers and which have the same Interest Period shall constitute one Borrowing Tranche, and (ii) all Loans to which the Base Rate Option applies shall constitute one Borrowing Tranche. Business Day shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in Pittsburgh, Pennsylvania, and if the applicable Business Day relates to any Loan to which the Euro-Rate Option applies, such day must also be a day on which dealings are carried on in the London interbank market. -4- 14 Cash Collateral Account shall mean the cash collateral account maintained by each of the Borrowers with the Agent from which monies may be withdrawn only by the Agent. Chase shall mean Chase Lincoln Bank. Chase Lockbox shall mean that certain lockbox maintained by United Refining with Chase pursuant to that certain lockbox agreement dated as of August 25, 1992. Closing Date shall mean the Business Day on which the first Loan shall be made, which shall be June 9, 1997. Collateral shall mean the property of the Loan Parties in which security interests are to be granted under the Security Agreement. Commercial Letter of Credit shall mean any Letter of Credit which is a commercial letter of credit issued in respect of the purchase of goods or services by one or more of the Loan Parties in the ordinary course of their business. Consolidated Cash Flow from Operations for any period of determination shall mean (i) the sum of net income, depreciation, amortization, other non-cash charges to net income, interest expense and income tax expense minus (ii) non-cash credits to net income, in each case of the Borrowers and their Subsidiaries for such period determined and consolidated in accordance with GAAP. Consolidated Net Worth shall mean, as of any date of determination, total stockholders' equity of the Borrowers and their Subsidiaries as of such date determined and consolidated in accordance with GAAP. Debt Instrument shall mean any instrument or agreement relating to or amending any terms or conditions applicable to any Indebtedness of any Borrower in an amount exceeding $1,000,000, whether existing on the Closing Date or entered into after the Closing Date. Depository shall have the meaning assigned to such term in Section 4.8. Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of the United States of America. Drawing Date shall have the meaning assigned to that term in Section 2.9.3.2. Environmental Complaint shall mean any written -5- 15 complaint setting forth a cause of action for personal or property damage or natural resource damage or equitable relief, order, notice of violation, citation, request for information issued pursuant to any Environmental Laws by an Official Body, subpoena or other written notice of any type relating to, arising out of, or issued pursuant to, any of the Environmental Laws or any Environmental Conditions, as the case may be. Environmental Conditions shall mean any conditions of the environment, including the workplace, the ocean, natural resources (including flora or fauna), soil, surface water, groundwater, any actual or potential drinking water supply sources, substrata or the ambient air, relating to or arising out of, or caused by, the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, emptying, discharging, injecting, escaping, leaching, disposal, dumping, threatened release or other management or mismanagement of Regulated Substances resulting from the use of, or operations on, any Property. Environmental Laws shall mean all federal, state, local and foreign Laws and regulations, including permits, licenses, authorizations, bonds, orders, judgments and consent decrees issued, or entered into, pursuant thereto, relating to pollution or protection of human health or the environment or employee safety in the workplace. ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. ERISA Group shall mean, at any time, the Borrowers and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with the Borrowers, are treated as a single employer under Section 414 of the Internal Revenue Code. Euro-Rate shall mean, with respect to the Loans comprising any Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period, the interest rate per annum determined by the Agent by dividing (the resulting quotient rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank offered rates of interest per annum for U.S. Dollars set forth on Telerate display page 3750 or such other display page on the Telerate System as may replace such page to evidence the average -6- 16 of rates quoted by banks designated by the British Bankers' Association (or appropriate successor or, if the British Bankers' Association or its successor ceases to provide such quotes, a comparable replacement determined by the Agent) two (2) Business Days prior to the first day of such Interest Period for an amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula: Telerate page 3750 quoted by British Bankers' Euro-Rate = Association or appropriate successor -------------------------------------------------- 1.00 - Euro-Rate Reserve Percentage The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The Agent shall give prompt notice to the Borrowers of the Euro-Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error. Euro-Rate Option shall mean the option of the Borrowers to have Revolving Credit Loans bear interest at the rate and under the terms and conditions set forth in subsection 3.1.1(ii). Euro-Rate Reserve Percentage shall mean the maximum percentage (expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined by the Agent which is in effect during any relevant period, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a member bank in such System. Event of Default shall mean any of the events described in Section 8.1 and referred to therein as an "Event of Default." Expiration Date shall mean, with respect to the Revolving Credit Commitments, the date which is the fifth anniversary of the Closing Date. Federal Funds Effective Rate for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by -7- 17 federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. Financial Projections shall have the meaning assigned to that term in subsection 5.1.9(ii). Fixed Charge Coverage Ratio shall mean the ratio of Consolidated Cash Flow from Operations plus rental expense for operating leases to interest expense plus rental expense for operating leases. Fixed Rate shall mean an interest rate per annum quoted by PNC Bank as a numerical percentage (and not as a spread over another rate such as the Euro-Rate) which shall be available for one (1) Business Day. Fixed Rate Option shall mean the option of the Borrowers to have Swing Loans bear interest at the rate and under the terms and conditions set forth in subsection 3.1.2(i). GAAP shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3, and applied on a consistent basis both as to classification of items and amounts. Governmental Acts shall have the meaning assigned to that term in Section 2.9.8. Guarantor shall mean each of the parties to this Agreement which is designated as a "Guarantor" on the signature page hereof and any other party which joins this Agreement as a Guarantor after the date hereof. Guarantor Joinder shall mean a joinder by a Person as a Guarantor under this Agreement, the Guaranty Agreement and the other Loan Documents in the form of Exhibit (G)(1). Guaranty of any Person shall mean any obligation of such Person guaranteeing or in effect guaranteeing any liability or obligation of any other Person in any manner, whether directly or indirectly, including any agreement to indemnify or hold harmless any other Person, any performance bond or other suretyship arrangement and any other form of -8- 18 assurance against loss, except endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business. Guaranty Agreement shall mean the Guaranty and Suretyship Agreement in substantially the form of Exhibit 1.1(G)(2) executed and delivered by each of the Guarantors to the Agent for the benefit of the Banks. Hedging Obligations shall mean with respect to any Person, the obligations of such Person pursuant to any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement relating to interest rates. Historical Statements shall have the meaning assigned to that term in subsection 5.1.9(i). Indebtedness shall mean, as to any Person at any time, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of: (i) borrowed money, (ii) amounts raised under or liabilities in respect of any note purchase or acceptance credit facility, (iii) reimbursement obligations (contingent or otherwise) under any letter of credit, currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device, (iv) any other transaction (including capitalized leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements (but not including trade payables and accrued expenses incurred in the ordinary course of business which are not represented by a promissory note or other evidence of indebtedness and which are not more than sixty (60) days past due), or (v) any Guaranty of Indebtedness for borrowed money; provided that any Indebtedness of any Loan Party that is Guaranteed by another Loan Party shall only be counted once in the covenants of the Loan Parties hereunder. Indenture shall mean that certain Indenture, dated as of June 9, 1997, among each of the Borrowers, certain of their Subsidiaries and IBJ Schroder Bank & Trust Company, as trustee pursuant to which the Senior Unsecured Notes are to be issued. Ineligible Security shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended. -9- 19 Insolvency Proceeding shall mean, with respect to any Person, (a) a case, action or proceeding with respect to such Person (i) before any court or any other Official Body under any bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or (ii) for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or otherwise relating to the liquidation, dissolution, winding-up or relief of such Person, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other similar arrangement in respect of such Person's creditors, generally, or any substantial portion of its creditors, undertaken under any Law. Intercompany Subordination Agreement shall mean a Subordination Agreement among the Loan Parties in the form attached hereto as Exhibit 1.1(I). Interest Period shall have the meaning assigned to such term in Section 3.2. Interest Rate Option shall mean any Euro-Rate Option, Base Rate Option or Fixed Rate Option. Interim Statements shall have the meaning assigned to that term in subsection 5.1.9(i). Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. Inventory shall mean any and all crude oil, motor gasoline and asphalt, including without limitation goods in transit, wheresoever located (including without limitation pipelines whether leased or owned) and whether now owned or hereafter acquired by a Loan Party, which are or may at any time be held as raw materials, finished goods, work-in-process, and all supplies or materials used or consumed in a Loan Party's business of producing crude oil, asphalt and motor gasoline or held for sale or lease, including, without limitation, (a) all such property the sale or other disposition of which has given rise to Accounts and which has been returned to or repossessed or stopped in transit by a Loan Party, and (b) all packing, shipping and advertising materials relating to all or any such property, provided, however, motor gasoline after it is processed and leaves the refinery facility located in Warren, Pennsylvania shall be excluded from Inventory. All Inventory, whether Qualified Inventory or not, shall be subject to the Banks' Prior Security Interest. -10- 20 Investment Consideration shall mean the amount of cash paid by the Loan Parties, liabilities or other obligations, whether contingent or otherwise, assumed or incurred in connection with any investment, including without limitation loans, advances or capital contributions in any other Person, any Guaranty of obligations of another Person, all purchases (or other acquisitions for consideration) by any Loan Party of Indebtedness, capital stock or other securities of any other Person. Labor Contracts shall mean all employment agreements, employment contracts, collective bargaining agreements and other agreements among any Loan Party or Subsidiary of a Loan Party and its employees. Law shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree or award of any Official Body. Letter of Credit shall have the meaning assigned to that term in Section 2.9.1. Letter of Credit Borrowing shall mean an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made and shall not have been converted into a Revolving Credit Loan under Section 2.9.3.2. Letter of Credit Fee shall mean the Letter of Credit fee based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading "Letter of Credit Fee" computed in accordance with the parameters set forth on Schedule 1.1(A). Letters of Credit Outstanding shall mean at any time the sum of (i) the aggregate undrawn face amount of outstanding Letters of Credit, and (ii) the aggregate amount of all unpaid and outstanding Reimbursement Obligations. Leverage Ratio shall mean (a) as of the Closing Date the ratio of (x) consolidated Indebtedness of Borrowers and their Subsidiaries on the Closing Date less the amount of cash of the Borrowers and their Subsidiaries as of the Closing Date to (y) the Consolidated Cash Flow from Operations for the four fiscal quarters ending on February 28, 1997; and (b) as of the end of each fiscal quarter ending after the Closing Date, the ratio of (x) consolidated -11- 21 Indebtedness of Borrowers and their Subsidiaries on such date less the amount of cash of the Borrowers and their Subsidiaries as of such date to (y) the Consolidated Cash Flow from Operations for the four fiscal quarters ending on such date. Lien shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing). LLC Interests shall have the meaning given to such term in Section 5.1.3. Loan Documents shall mean this Agreement, the Agent's Letter, the Guaranty Agreement, the Intercompany Subordination Agreement, the Notes, the Lockbox Agreements, the Security Agreement, the Wire Transfer Agreements, the Letters of Credit and any other instruments, certificates or documents delivered or contemplated to be delivered hereunder or thereunder or in connection herewith or therewith, as the same may be supplemented or amended from time to time in accordance herewith or therewith, and Loan Document shall mean any of the Loan Documents. Loan Parties shall mean the Borrowers and the Guarantors. Loan Request shall have the meaning given to such term in Section 2.4. Loans shall mean collectively, and Loan shall mean separately, all Revolving Credit Loans and Swing Loans or any Revolving Credit Loan or Swing Loan. Lockbox Agreements shall mean collectively any lockbox agreements between the Borrowers and PNC, National City and Chase referred to in the definitions of the PNC Lockbox, National City Lockbox and Chase Lockbox, respectively. Lockboxes shall mean collectively the PNC Lockbox, National City Lockbox and Chase Lockbox. Material Adverse Change shall mean any set of circumstances or events which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any other Loan -12- 22 Document, (b) is or could reasonably be expected to be material and adverse to the business, properties, assets, financial condition, results of operations or prospects of the Loan Parties taken as a whole, (c) impairs materially or could reasonably be expected to impair materially the ability of the Loan Parties taken as a whole to duly and punctually pay or perform its Indebtedness, or (d) impairs materially or could reasonably be expected to impair materially the ability of the Agent or any of the Banks, to the extent permitted, to enforce their legal remedies pursuant to this Agreement or any other Loan Document. Month, with respect to an Interest Period under the Euro-Rate Option, shall mean the interval between the days in consecutive calendar months numerically corresponding to the first day of such Interest Period. If any Euro-Rate Interest Period begins on a day of a calendar month for which there is no numerically corresponding day in the month in which such Interest Period is to end, the final month of such Interest Period shall be deemed to end on the last Business Day of such final month. More Favorable Provision shall have the meaning given to such term in Section 7.1.15. Multiemployer Plan shall mean any employee benefit plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which a Borrower or any member of the ERISA Group is then making or accruing an obligation to make contributions or, within the preceding five Plan years, has made or had an obligation to make such contributions. Multiple Employer Plan shall mean a Plan which has two or more contributing sponsors (including a Borrower or any member of the ERISA Group) at least two of whom are not under common control, as such a plan is described in Sections 4063 and 4064 of ERISA. National City shall mean National City Bank of Pennsylvania, successor to Integra Bank. National City Lockbox shall mean that certain lockbox maintained by United Refining with National City pursuant to that certain lockbox agreement dated as of July 1, 1991. Note Agreements shall mean collectively (i) that certain Note Agreement dated as of December 1, 1988, providing for the issuance by United Refining of $110,000,000 of its 11.50% Senior Unsecured Revolving Credit Notes due December 1, -13- 23 1998, and (ii) those certain Note Purchase Agreements, each dated as of January 18, 1994, providing for the issuance by United Refining of $41,750,000 of its 11.50% Senior Notes due 2003, as amended. Notes shall mean the Revolving Credit Notes and the Swing Note. Notices shall have the meaning assigned to that term in Section 10.6. Obligation shall mean any obligation or liability of any of the Loan Parties to the Agent or any of the Banks, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with this Agreement, the Notes, the Letters of Credit, the Agent's Letter or any other Loan Document. Official Body shall mean any national, federal, state, local or other government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. Other Permitted Investment shall have the meaning given to such term in Section 7.2.4(v). Overhead Reimbursement shall have the meaning given to such term in Section 7.2.8. Participation Advance shall mean, with respect to any Bank, such Bank's payment in respect of its participation in a Letter of Credit Borrowing according to its Ratable Share pursuant to Section 2.9.4. Partnership Interests shall have the meaning given to such term in Section 5.1.3. PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor. Permitted Acquisition shall have the meaning assigned to such term in Section 7.2.6. Permitted Investments shall mean: (i) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America maturing in twelve (12) months or less from the date of acquisition; -14- 24 (ii) commercial paper maturing in 180 days or less, rated not lower than A-1 by Standard & Poor's or P-1 by Moody's Investors Service, Inc. on the date of acquisition; (iii) demand deposits, time deposits or certificates of deposit maturing within one year in commercial banks whose obligations are rated A-1, A or the equivalent or better by Standard & Poor's on the date of acquisition; and (iv) mutual funds which hold exclusively investments described in clauses (i), (ii) or (iii) above. Permitted Liens shall mean: (i) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable; (ii) Pledges or deposits made in the ordinary course of business to secure payment of workmen's compensation, or to participate in any fund in connection with workmen's compensation, unemployment insurance, old-age pensions or other social security programs; (iii) Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default; (iv) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business; (v) Encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use; -15- 25 (vi) Liens, security interests and mortgages in favor of the Agent for the benefit of the Banks; (vii) Liens on property leased by any Loan Party or Subsidiary of a Loan Party under capital and operating leases securing obligations of such Loan Party or Subsidiary to the lessor under such leases; (viii) Any Lien existing on the date of this Agreement and described on Schedule 1.1(P), securing Indebtedness then existing and any Lien on the same asset securing Indebtedness which refinances the Indebtedness securing such Lien provided that the principal amount secured thereby is not increased, and no additional assets become subject to such Lien; (ix) Purchase Money Security Interests; and (x) The following, (A) if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed, or (B) if a final judgment is entered and such judgment is discharged, bonded or stayed (and continue to be stayed for all times thereafter) within thirty (30) days of entry, and in either case they do not affect the Collateral or, in the aggregate, materially impair the ability of any Loan Party to perform its Obligations hereunder or under the other Loan Documents: (1) Claims, Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits; and (2) Liens resulting from final judgments or orders described in Section 8.1.6; (xi) any Lien granted to a commodity broker in connection with an account created and maintained by United Refining to engage in the trading of futures contracts on a recognized exchange for the purpose or reducing the price risk associated with holding or purchasing crude oil and refined petroleum products inventory; provided that, (x) any such Lien shall be confined solely to futures contracts permitted by clause (y) below and to cash equivalents in an amount not exceeding $5,000,000 on deposit in such account and (y) with respect to such account, neither United Refining nor any Subsidiary shall enter into any obligations in any hedging -16- 26 transactions, the effect of which would be to cause more than 2,500,000 barrels of crude oil or more than 2,500,000 barrels of refined petroleum products to be at any time subject to fixed-price contracts to which United Refining or any Subsidiary is a party. A contract for the purchase of crude oil or refined petroleum products shall not be deemed to be a "fixed-price contract" for purposes of the proviso to the immediately preceding sentence if the price thereunder is based upon and varies with Canadian price postings for the same or a similar commodity, prices for the same or a similar commodity on the New York Mercantile Exchange or any other index which reflects market prices. (xii) any Lien on an asset acquired in a Permitted Acquisition provided that the asset is not of the category of any of the assets described in the definition of "Collateral" contained in the Security Agreement and securing Indebtedness incurred in connection with or assumed in such Permitted Acquisition. (xiii) Cash collateral securing surety bonds issued in the ordinary course of the business of the Loan Parties; (xiv) Liens in favor of the "Escrow Agent" against the "Escrow Deposit" as such terms are defined in the Escrow Agreement dated as of June 9, 1997 among IBJ Schroder Bank & Trust Company, both as escrow agent and as trustee, and United Refining. Permitted Voluntary Dissolution shall have the meaning assigned to such term in Section 7.1.1. Person shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity. Plan shall mean at any time an employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained by any member of the ERISA Group for employees of any member of the ERISA Group, or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the ERISA Group for employees of any entity which was at such time a member of the ERISA Group. PNC Bank shall mean PNC Bank, National -17- 27 Association, its successors and assigns. PNC Lockbox shall mean that certain lockbox maintained by United Refining with the Agent pursuant to that certain lockbox agreement dated as of February 7, 1993. Potential Default shall mean any event or condition which with notice, passage of time or a determination by the Agent or the Required Banks, or any combination of the foregoing, would constitute an Event of Default. Principal Office shall mean the main banking office of the Agent in Pittsburgh, Pennsylvania. Prior Security Interest shall mean a valid and enforceable perfected first-priority security interest under the Uniform Commercial Code in the UCC Collateral which is subject only to Liens for taxes not yet due and payable to the extent such prospective tax payments are given priority by statute or Purchase Money Security Interests as permitted hereunder or to Permitted Liens. Prohibited Transaction shall mean any prohibited transaction as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which neither an individual nor a class exemption has been issued by the United States Department of Labor. Property shall mean all real property, both owned and leased, of any Loan Party or Subsidiary of a Loan Party. Purchase Money Security Interest shall mean Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of a Loan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property. Purchasing Bank shall mean a Bank which becomes a party to this Agreement by executing an Assignment and Assumption Agreement. Qualified Accounts shall mean any Accounts which the Agent in its sole discretion reasonably exercised determines to have met all of the minimum requirements set forth on Schedule 1.1(Q)(i). Qualified Inventory shall mean any Inventory which the Agent in its sole discretion reasonably exercised determines to have met all of the minimum requirements set forth on Schedule 1.1(Q)(ii). Inventory which meets such requirements shall be valued for purposes of computing the Borrowing Base at -18- 28 the lower of (i) its book value on a FIFO basis or (ii) its market value computed by multiplying the quantity of such Qualified Inventory by the unit price per volume reported on the date of computation by (a) Oil Price Information Services for products if such Inventory consists of refining products or Poten and Partners, Inc. for asphalt if such Inventory consists of asphalt, (b) the New York Merchantile Exchange if such Inventory consists of crude oil; the market value of crude oil computed pursuant to this clause (ii)(b) shall be reduced by the applicable crude stream discounts for oil pricing. Ratable Share shall mean the proportion that a Bank's Revolving Credit Commitment bears to the Revolving Credit Commitments of all of the Banks. Regulated Substances shall mean any substance, including any solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage, wastes, chemicals, petroleum products, byproducts, coproducts, impurities, dust, scrap, heavy metals, defined as a "hazardous substance," "pollutant," "pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous waste," "industrial waste," "residual waste," "solid waste," "municipal waste," "mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or "regulated substance" or any related materials, substances or wastes as now or hereafter defined pursuant to any Environmental Laws, ordinances, rules, regulations or other directives of any Official Body, the generation, manufacture, extraction, processing, distribution, treatment, storage, disposal, transport, recycling, reclamation, use, reuse, spilling, leaking, dumping, injection, pumping, leaching, emptying, discharge, escape, release or other management or mismanagement of which is regulated by the Environmental Laws. Regulation U shall mean Regulation U, T, G or X as promulgated by the Board of Governors of the Federal Reserve System, as amended from time to time. Reimbursement Obligation shall have the meaning assigned to such term in Section 2.9.3.2. Reportable Event shall mean a reportable event described in Section 4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan. Required Banks shall mean: (i) if there are no Loans, Reimbursement Obligations or Letter of Credit Borrowings outstanding, Banks whose Revolving Credit Commitments aggregate at least sixty-six -19- 29 and two-thirds percent (66 2/3 %) of the Revolving Credit Commitments of all of the Banks, or (ii) if there are Loans, Reimbursement Obligations or Letter of Credit Borrowings outstanding, any Bank or group of Banks if the sum of the Loans, Reimbursement Obligations and Letter of Credit Borrowings of such Banks then outstanding aggregates at least sixty-six and two-thirds percent (66 2/3 %) of the total principal amount of all of the Loans, Reimbursement Obligations and Letter of Credit Borrowings then outstanding. Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for purposes of this definition, to be in favor of the Agent and not a participating Bank if such Bank has not made its Participation Advance in respect thereof and shall be deemed to be in favor of such Bank to the extent of its Participation Advance if it has made its Participation Advance in respect thereof. Revolving Credit Commitment shall mean, as to any Bank at any time, the amount initially set forth opposite its name on Schedule 1.1(B) in the column labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on Schedule I to the most recent Assignment and Assumption Agreement, and Revolving Credit Commitments shall mean the aggregate Revolving Credit Commitments of all of the Banks. Revolving Credit Loans shall mean collectively, and Revolving Credit Loan shall mean separately, all Revolving Credit Loans or any Revolving Credit Loan made by the Banks or one of the Banks to a Borrower or in the aggregate to the Borrowers pursuant to Section 2.1 or 2.9.3. Revolving Credit Notes shall mean collectively, and Revolving Credit Note shall mean separately, all the Revolving Credit Notes of the Borrowers in the form of Exhibit 1.1(R) evidencing the Revolving Credit Loans together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part. Revolving Facility Usage shall mean at any time the sum of the Revolving Credit Loans outstanding and the Letters of Credit Outstanding. Schedule of Accounts shall mean for each Borrower a detailed, aged trial balance of all then-existing Accounts in form and substance satisfactory to Agent, specifying in each case the names, addresses, face amount and dates of invoice(s) for each Account Debtor obligated on an Account so listed and, if requested by the Agent, copies of proof of delivery and customer statements and the original copy of all documents, including, without limitation, repayment histories and present -20- 30 status reports, and such other matters and information relating to the status of the Accounts and/or the Account Debtors so scheduled as the Agent may from time to time reasonably request. Schedule of Inventory shall mean for each Borrower a current schedule of Inventory in form and substance satisfactory to the Agent on a FIFO basis, itemizing and describing the kind, type, quality and quantity of Inventory, as determined by physical counts taken annually, such Borrower's costs therefor and selling price thereof, and the weekly withdrawals therefrom and additions thereto. Section 20 Subsidiary shall mean the Subsidiary of the bank holding company controlling any Bank, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. Security Agreement shall mean the Security Agreement in substantially the form of Exhibit 1.1(S)(1) executed and delivered by each of the Loan Parties to the Agent for the benefit of the Banks. Senior Unsecured Notes shall mean the $200,000,000 of 10.75% Series A Senior Notes due 2007 issued by United Refining under the Indenture. Servicing Agreement shall mean that certain agreement between the Red Apple Group ("RAG") and United Refining. to be entered into on the Closing Date, pursuant to which United Refining shall pay to RAG for the use of RAG's New York headquarters, as such agreement may be amended from time to time, and any agreement concerning the same subject matter between the United Refining and John A Catsimatidis and/or any of his Affiliates, whether such agreement is a replacement thereof or in addition thereto. Settlement Date shall mean the Thursday of each week (if such day is a Business Day and, if not, the next succeeding Business Day) and any other Business Day on which the Agent elects to effect settlement pursuant to Section 4.7. Shares shall have the meaning assigned to that term in Section 5.1.2. Standard & Poor's shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. Standby Letter of Credit shall mean a Letter of Credit issued to support obligations of one or more of the Loan Parties, contingent or otherwise, which finance the working capital and business needs of the Loan Parties incurred in the -21- 31 ordinary course of business. Subsidiary of any Person at any time shall mean (i) any corporation or trust of which fifty percent (50%) or more (by number of shares or number of votes) of the outstanding capital stock or shares of beneficial interest normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person's Subsidiaries, (ii) any partnership of which such Person is a general partner or of which fifty percent (50%) or more of the partnership interests is at the time directly or indirectly owned by such Person or one or more of such Person's Subsidiaries, (iii) any limited liability company of which such Person is a member or of which fifty percent (50%) or more of the limited liability company interests is at the time directly or indirectly owned by such Person or one or more of such Person's Subsidiaries, or (iv) any corporation, trust, partnership, limited liability company or other entity which is controlled by such Person or one or more of such Person's Subsidiaries. Subsidiary Shares shall have the meaning assigned to that term in Section 5.1.3. Swing Loan Commitment shall mean PNC Bank's commitment to make Swing Loans to the Borrowers pursuant to Section 2.1.2 hereof in an aggregate principal amount up to but not in excess of $5,000,000 and which shall automatically terminate upon the termination of the Revolving Credit Commitments. Swing Note shall mean the Swing Note of the Borrowers in the form of Exhibit 1.1(S)(2) evidencing the Swing Loans, together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part. Swing Loan Request shall mean a request for Swing Loans made in accordance with Section 2.4.2 hereof. Swing Loans shall mean collectively, and Swing Loan shall mean separately, all Swing Loans or any Swing Loan made by PNC Bank to a Borrower pursuant to Section 2.1.2 hereof. Syndications Period shall mean the period between the Closing Date and the earlier of the following dates: (a) the date on which the Revolving Credit Commitment of PNC Bank has been reduced below $21,000,000, or (b) the date which is one hundred twenty (120) days after the Closing Date. -22- 32 Tax Sharing Agreement shall mean that certain Tax Sharing Agreement dated June 9, 1997, among the Borrowers and certain Subsidiaries and Affiliates of the Borrowers. Transferor Bank shall mean the selling Bank pursuant to an Assignment and Assumption Agreement. Uniform Commercial Code shall have the meaning assigned to that term in Section 5.1.16. Wire Transfer Agreements shall mean the Agreements in the form of Exhibit 1.1(W) to be entered into among the Agent, the Borrowers and National City or Chase upon request by the Agent; such agreements provide that Chase or National City, as the case may be, shall, upon request by the Agent, wire transfer into the Cash Collateral Account funds received in the Chase Lockbox or National City Lockbox within 24 hours of their receipt thereof. 1.2 Construction. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents: 1.2.1 Number; Inclusion. references to the plural include the singular, the plural, the part and the whole; "or" has the inclusive meaning represented by the phrase "and/or," and "including" has the meaning represented by the phrase "including without limitation"; 1.2.2 Determination. references to "determination" of or by the Agent or the Banks shall be deemed to include good-faith estimates by the Agent or the Banks (in the case of quantitative determinations) and good-faith beliefs by the Agent or the Banks (in the case of qualitative determinations), and such determination shall be conclusive absent manifest error; 1.2.3 Agent's Discretion and Consent. whenever the Agent or the Banks are granted the right herein to act in its or their sole discretion or to grant or withhold consent such right shall be exercised in good faith; -23- 33 1.2.4 Documents Taken as a Whole. the words "hereof," "herein," "hereunder," "hereto" and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document; 1.2.5 Headings. the section and other headings contained in this Agreement or such other Loan Document and the Table of Contents (if any) preceding this Agreement or such other Loan Document are for reference purposes only and shall not control or affect the construction of this Agreement or such other Loan Document or the interpretation thereof in any respect; Implied References to This Agreement. article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; 1.2.7 Persons. reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement or such other Loan Document, as the case may be, and reference to a Person in a particular capacity excludes such Person in any other capacity; 1.2.8 Modifications to Documents. reference to any agreement (including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto), document or instrument means such agreement, document or instrument as amended, modified, replaced, substituted for, superseded or restated; 1.2.9 From, To and Through. relative to the determination of any period of time, "from" means "from and including," "to" means "to but excluding," and "through" means "through and including"; and 1.2.10 Shall; Will. references to "shall" and "will" are intended to have the same meaning. -24- 34 1.3 Accounting Principles. Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP; provided, however, that all accounting terms used in Section 7.2 [Negative Covenants] (and all defined terms used in the definition of any accounting term used in Section 7.2 shall have the meaning given to such terms (and defined terms) under GAAP as in effect on the date hereof applied on a basis consistent with those used in preparing the Annual Statements referred to in subsection 5.1.9(i) [Historical Statements]. In the event of any change after the date hereof in GAAP, and if such change would result in the inability to determine compliance with the financial covenants set forth in Section 7.2 based upon a Borrower's regularly prepared financial statements by reason of the preceding sentence, then the parties hereto agree to endeavor, in good faith, to agree upon an amendment to this Agreement that would adjust such financial covenants in a manner that would not affect the substance thereof, but would allow compliance therewith to be determined in accordance with such Borrower's financial statements at that time provided further that any demonstration of compliance or other matter may give effect to any "push down" basis of accounting which any Loan Party may hereafter adopt pursuant to Staff Accounting Bulletin No. 54 (November 3, 1983) of the Securities and Exchange Commission, or any successor regulation or bulletin or any change in GAAP. -25- 35 2. REVOLVING CREDIT AND SWING LOAN FACILITIES 2.1 Revolving Credit Commitments and Swing Loan Commitments. 2.1.1 Revolving Credit Commitments. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Bank severally agrees to make revolving credit loans ("Revolving Credit Loans") to the Borrowers at any time or from time to time on or after the date hereof to the Expiration Date, provided that after giving effect to such Loan, the aggregate amount of Loans from such Bank shall not exceed such Bank's Revolving Credit Commitment minus such Bank's Ratable Share of the Letters of Credit Outstanding. Within such limits of time and amount and subject to the other provisions of this Agreement, each Borrower may borrow, repay and reborrow pursuant to this Section 2.1. 2.1.2 Swing Loan Commitment. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, and in order to facilitate loans and repayments between Settlement Dates, PNC Bank may, at its option, cancelable at any time for any reason whatsoever, make swing loans (the "Swing Loans") to a Borrower at any time or from time to time after the date hereof to, but not including, the Expiration Date, in an aggregate principal amount up to the Swing Loan Commitment, provided that the aggregate principal amount of PNC Bank's Swing Loans, the Revolving Credit Loans of all the Banks at any one time outstanding and the aggregate Letters of Credit Outstanding shall not exceed the Revolving Credit Commitments of all the Banks. Within such limits of time and amount and subject to the other provisions of this Agreement, each Borrower may borrow, repay and reborrow pursuant to this Section 2.1.2 -26- 36 2.2 Nature of Banks' Obligations With Respect to Revolving Credit Loans. Each Bank shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.4 [Revolving Credit Loan Requests] in accordance with its Ratable Share. The aggregate of each Bank's Revolving Credit Loans outstanding hereunder to the Borrowers at any time shall never exceed its Revolving Credit Commitment minus its Ratable Share of the Letter of Credit Outstandings. The obligations of each Bank hereunder are several. The failure of any Bank to perform its obligations hereunder shall not affect the Obligations of the Borrowers to any other party nor shall any other party be liable for the failure of such Bank to perform its obligations hereunder. The Banks shall have no obligation to make Revolving Credit Loans hereunder on or after the Expiration Date. Commitment Fees. Accruing from the date hereof until the Expiration Date, the Borrowers, jointly and severally, agree to pay to the Agent for the account of each Bank, as consideration for such Bank's Revolving Credit Commitment hereunder, a nonrefundable commitment fee (the "Commitment Fee") equal to three eighths of one percent (3/8%) per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) on the average daily difference between the amount of (i) such Bank's Revolving Credit Commitment, as the same may be constituted from time to time (for purposes of this computation, PNC Bank's Swing Loans shall be deemed to be borrowed amounts under its Revolving Credit Commitment), and (ii) the principal amount of such Bank's Ratable Share of the Revolving Facility Usage. All Commitment Fees shall be payable in arrears on the first Business Day of each June, September, December and March after the date hereof and on the Expiration Date or upon acceleration of the Notes. -27- 37 2.4 Loan Requests. 2.4.1 Revolving Credit Loan Requests Except as otherwise provided herein, a Borrower may from time to time prior to the Expiration Date request the Banks to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans pursuant to Section 3.2 [Interest Periods], by delivering to the Agent, not later than 10:00 a.m., Pittsburgh time, (i) two (2) Business Days prior to the proposed Borrowing Date with respect to the making of Revolving Credit Loans to which the Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate Option for any Loans; and (ii) one (1) Business Day prior to either the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Option applies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Loan, of a duly completed request therefor substantially in the form of Exhibit 2.4.1 or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form (each, a "Loan Request"), it being understood that the Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Loan Request shall be irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the proposed Loans comprising each Borrowing Tranche, which shall be in integral multiples of $500,000 and not less than $2,000,000 for each Borrowing Tranche to which the Euro-Rate Option applies and not less than the lesser of $1,000,000 or the maximum amount available for Borrowing Tranches to which the Base Rate Option applies; (iii) whether the Euro-Rate Option or Base Rate Option shall apply to the proposed Loans comprising the applicable Borrowing Tranche; and (iv) in the case of a Borrowing Tranche to which the Euro-Rate Option applies, an appropriate Interest Period for the Loans comprising such Borrowing Tranche. -28- 38 2.4.2 Swing Loan Requests Except as otherwise provided herein, a Borrower may from time to time prior to the Expiration Date request PNC Bank to make Swing Loans by delivery to PNC Bank not later than 12:00 p.m., Pittsburgh time, on the proposed Borrowing Date of a duly completed request therefor substantially in the form of Exhibit 2.4.2 hereto or a request by telephone immediately confirmed in writing by letter, facsimile or telex (each, a "Swing Loan Request"), it being understood that the Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Swing Loan Request shall be irrevocable and shall specify the proposed Borrowing Date and the principal amount of such Swing Loan, which shall be not less than $50,000. 2.5 Making Loans. 2.5.1 Making Revolving Credit Loans. The Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.4.1 [Revolving Credit Loan Requests], notify the Banks of its receipt of such Loan Request specifying: (i) the proposed Borrowing Date and the time and method of disbursement of the Revolving Credit Loans requested thereby; (ii) the amount and type of each such Revolving Credit Loan and the applicable Interest Period (if any); and (iii) the apportionment among the Banks of such Revolving Credit Loans as determined by the Agent in accordance with Section 2.2 [Nature of Banks' Obligations with Respect to Revolving Credit Loans]. Each Bank shall remit the principal amount of each Revolving Credit Loan to the Agent such that the Agent is able to, and the Agent shall, to the extent the Banks have made funds available to it for such purpose and subject to Section 6.2 [Each Additional Loan or Letter of Credit], fund such Revolving Credit Loans to the Borrower requesting such Revolving Credit Loan in U.S. Dollars and immediately available funds at the Principal Office prior to 2:00 p.m., Pittsburgh time, on the applicable Borrowing Date, provided that if any Bank fails to remit such funds to the Agent in a timely manner, the Agent may elect in its sole discretion to fund with its own funds the Revolving Credit Loans of such Bank on such Borrowing Date, and such Bank shall be subject to the repayment obligation in Section 9.16 [Availability of Funds]. -29- 39 2.5.2 Making Swing Loans. So long as PNC Bank elects to make Swing Loans, PNC Bank shall, after receipt by it of a Swing Loan Request pursuant to Section 2.4.2, fund such Swing Loan to the Borrower requesting such Swing Loan in U.S. Dollars and immediately available funds at the Principal Office prior to 2:00 p.m., Pittsburgh time, on the Borrowing Date. 2.6 Borrowings to Repay Swing Loans. PNC Bank may at its option, exercisable at any time for any reason whatsoever, demand repayment of the Swing Loans, and in order to repay such Swing Loans each Bank shall make a Revolving Credit Loan in an amount equal to such Bank's Ratable Share of the aggregate principal amount of the outstanding Swing Loans, plus, if PNC Bank so requests, accrued interest thereon, provided that no Bank shall be obligated in any event to make Revolving Credit Loans, which when added to its Ratable Share of the Letters of Credit Outstanding, is in excess of its Revolving Credit Commitment. In that event, such Revolving Credit Loans shall bear interest at the Base Rate Option and shall be deemed to have been properly requested in accordance with Section 2.5.1 without regard to any of the requirements of that provision. PNC Bank shall provide notice to the Banks (which may be a telephonic or written notice by letter, facsimile or telex) that such Revolving Credit Loans are to be made under this Section 2.6 and of the apportionment among the Banks, and the Banks shall be unconditionally obligated to fund such Revolving Credit Loans (whether or not the conditions specified in Section 6.2 are then satisfied) by the time PNC Bank so requests, which shall not be earlier than 1:00 p.m., Pittsburgh time, on the Business Day next succeeding the date the Banks receive such notice from PNC Bank. 2.7 Notes. 2.7.1 Revolving Credit Notes. The Obligation of each Borrower to repay the aggregate unpaid principal amount of the Revolving Credit Loans made to it by each Bank, together with interest thereon, shall be evidenced by a Revolving Credit Note dated the Closing Date payable to the order of such Bank in a face amount equal to the Revolving Credit Commitment of such Bank. -30- 40 2.7.2 Swing Loan Note. The Obligation of each Borrower to repay the unpaid principal amount of the Swing Loans made to it by PNC Bank together with interest thereon shall be evidenced by a demand promissory note of each Borrower dated the Closing Date in substantially the form attached hereto as Exhibit 1.1(S)(2) payable to the order of PNC Bank in a face amount equal to the Swing Loan Commitment. 2.8 Use of Proceeds. The proceeds of the Revolving Credit Loans shall be used for general corporate purposes and working capital and in accordance with Section 7.1.10 [Use of Proceeds]. 2.9 Letter of Credit Subfacility. 2.9.1 Issuance of Letters of Credit. A Borrower may request the issuance of a letter of credit (each a "Letter of Credit") on behalf of itself or another Loan Party by delivering to the Agent a completed application and agreement for letters of credit in such form as the Agent may specify from time to time by no later than 10:00 a.m., Pittsburgh time, at least three (3) Business Days, or such shorter period as may be agreed to by the Agent, in advance of the proposed date of issuance. Each Letter of Credit shall be either a Standby Letter of Credit or a Commercial Letter of Credit. Subject to the terms and conditions hereof and in reliance on the agreements of the other Banks set forth in this Section 2.9, the Agent will issue a Letter of Credit, provided that each Letter of Credit shall (A) have a maximum maturity of twelve (12) months from the date of issuance, and (B) in no event expire later than ten (10) Business Days prior to the Expiration Date and providing that in no event shall (i) the Letters of Credit Outstanding exceed, at any one time, $20,000,000, or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments. -31- 41 Letter of Credit Fees. The Borrowers jointly and severally shall pay (i) to the Agent for the ratable account of the Banks the Letter of Credit Fee, and (ii) to the Agent for its own account, a fronting fee as set forth in the Agent's Letter), which fees shall be computed on the daily average Letters of Credit Outstanding and shall be payable quarterly in arrears commencing with the first Business Day of each June, September, December and March following issuance of each Letter of Credit and on the Expiration Date. The Borrowers shall also pay to the Agent for the Agent's sole account the Agent's then-in-effect customary fees (excluding fees in the nature of fronting fees which are addressed in the preceding sentence) and administrative expenses payable with respect to the Letters of Credit as the Agent may generally charge or incur from time to time in connection with the issuance, maintenance, modification (if any), assignment or transfer (if any), negotiation and administration of Letters of Credit. 2.9.3 Disbursements, Reimbursement. .9.3.1 Immediately upon the Issuance of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Bank's Ratable Share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. .9.3.2 In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Agent will promptly notify the Borrowers. Provided that they shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse the Agent shall sometimes be referred to as a "Reimbursement Obligation") the Agent prior to 12:00 noon, Pittsburgh time, on each date that an amount is paid by the Agent under any Letter of Credit (each such date, a "Drawing Date") in an amount equal to the amount so paid by the Agent. In the event the Borrowers fail to reimburse the Agent for the full amount of any drawing under any Letter of Credit by 12:00 noon, Pittsburgh time, on the Drawing Date, the Agent will promptly notify each Bank thereof, and the Borrowers shall be deemed to have requested that Revolving Credit Loans be made by the Banks under the Base Rate Option to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the Revolving Credit Commitment and subject to the conditions set forth in Section 6.2 [Each Additional Loan or Letter of Credit] other than any notice requirements. Any notice given by the Agent pursuant to this Section 2.9.3.2 may -32- 42 be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. .9.3.3 Each Bank shall upon any notice pursuant to Section 2.9.3.2 make available to the Agent an amount in immediately available funds equal to its Ratable Share of the amount of the drawing, whereupon the participating Banks shall (subject to Section 2.9.3.4) each be deemed to have made a Revolving Credit Loan under the Base Rate Option to the Borrowers in that amount. If any Bank so notified fails to make available to the Agent for the account of the Agent the amount of such Bank's Ratable Share of such amount by no later than 2:00 p.m., Pittsburgh time, on the Drawing Date, then interest shall accrue on such Bank's obligation to make such payment, from the Drawing Date to the date on which such Bank makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date, and (ii) at a rate per annum equal to the rate applicable to Loans under the Base Rate Option on and after the fourth day following the Drawing Date. The Agent will promptly give notice of the occurrence of the Drawing Date, but failure of the Agent to give any such notice on the Drawing Date or in sufficient time to enable any Bank to effect such payment on such date shall not relieve such Bank from its obligation under this Section 2.9.3.3. .9.3.4 With respect to any unreimbursed drawing that is not converted into Revolving Credit Loans under the Base Rate Option to the Borrowers in whole or in part as contemplated by Section 2.9.3.2, because of a Borrower's failure to satisfy the conditions set forth in Section 6.2 [Each Additional Loan or Letter of Credit] other than any notice requirements or for any other reason, a Borrower shall be deemed to have incurred from the Agent a Letter of Credit Borrowing in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Revolving Credit Loans under the Base Rate Option. Each Bank's payment to the Agent pursuant to Section 2.9.3.3 shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a Participation Advance from such Bank in satisfaction of its participation obligation under this Section 2.9.3. -33- 43 2.9.4 Repayment of Participation Advances. .9.4.1 Upon (and only upon) receipt by the Agent for its account of immediately available funds from a Borrower (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Bank has made a Participation Advance to the Agent, or (ii) in payment of interest on such a payment made by the Agent under such a Letter of Credit, the Agent will pay to each Bank, in the same funds as those received by the Agent, the amount of such Bank's Ratable Share of such funds, except the Agent shall retain the amount of the Ratable Share of such funds of any Bank that did not make a Participation Advance in respect of such payment by Agent. .9.4.2 If the Agent is required at any time to return to any Loan Party, or to a trustee, receiver, liquidator, custodian or any official in any Insolvency Proceeding, any portion of the payments made by any Loan Party to the Agent pursuant to Section 2.9.4.1 in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the Agent the amount of its Ratable Share of any amounts so returned by the Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Bank to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time. 2.9.5 Documentation. Each Loan Party agrees to be bound by the terms of the Agent's application and agreement for letters of credit and the Agent's written regulations and customary practices relating to letters of credit, though such interpretation may be different from the such Loan Party's own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct, the Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Loan Party's instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto. -34- 44 2.9.6 Determinations to Honor Drawing Requests. Subject to Section 10.8, in determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit. 2.9.7 Nature of Participation and Reimbursement Obligations. Each Bank's obligation in accordance with this Agreement to make the Revolving Credit Loans or Participation Advances, as contemplated by Section 2.9.3, as a result of a drawing under a Letter of Credit, and the Obligations of each Borrower to reimburse the Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.9 under all circumstances, including the following circumstances: (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Agent, a Borrower or any other Person for any reason whatsoever; (ii) the failure of any Loan Party or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Section 2.1 [Revolving Credit Commitments and Swing Loan Commitments], 2.4 [Loan Requests], 2.5 [Making Loans] or 6.2 [Each Additional Loan or Letter of Credit] or as otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Banks to make Participation Advances under Section 2.9.3; (iii) any lack of validity or enforceability of any Letter of Credit; (iv) the existence of any claim, set-off, defense or other right which any Loan Party or any Bank may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Agent or any Bank or any other Person or, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan -35- 45 Party and the beneficiary for which any Letter of Credit was procured); (v) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect even if the Agent has been notified thereof; (vi) payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (vii) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party or Subsidiaries of a Loan Party; (viii) any breach of this Agreement or any other Loan Document by any party thereto; (ix) the occurrence or continuance of an Insolvency Proceeding with respect to any Loan Party; (x) the fact that an Event of Default or a Potential Default shall have occurred and be continuing; (xi) the fact that the Expiration Date shall have passed or this Agreement or the Revolving Credit Commitments hereunder shall have been terminated; and (xii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. -36- 46 2.9.8 Indemnity. In addition to amounts payable as provided in Section 9.5 [Reimbursement and Indemnification of Agent by the Borrowers], the Borrowers hereby jointly and severally agree to protect, indemnify, pay and save harmless the Agent from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel ) which the Agent may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Agent as determined by a final judgment of a court of competent jurisdiction, or (B) subject to the following clause (ii), the wrongful dishonor by the Agent of a proper demand for payment made under any Letter of Credit, or (ii) the failure of the Agent to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Governmental Acts"). -37- 47 2.9.9 Liability for Acts and Omissions. As between any Loan Party and the Agent, such Loan Party assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the Agent shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Party against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Party and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the Agent's rights or powers hereunder. Nothing in the preceding sentence shall relieve the Agent from liability for the Agent's gross negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Agent under any resulting liability to the Borrowers or any Bank. -38- 48 3. INTEREST RATES 3.1 Interest Rate Options. Each Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by it from the Base Rate Option, Euro-Rate Option or Fixed Rate Option set forth below applicable to the Loans, it being understood that, subject to the provisions of this Agreement, a Borrower may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche, provided that there shall not be at any one time outstanding more than three (3) Borrowing Tranches in the aggregate among all of the Loans accruing interest at a Euro-Rate Option and provided, further, that only the Fixed Rate Option or the Base Rate Option, as set forth below, shall apply to Swing Loans and only the Base Rate Option or the Euro-Rate Option shall apply to Revolving Credit Loans. If at any time the designated rate applicable to any Loan made by any Bank exceeds such Bank's highest lawful rate, the rate of interest on such Bank's Loan shall be limited to such Bank's highest lawful rate. 3.1.1 Revolving Credit Interest Rate Options. Each Borrower shall have the right to select from the following Interest Rate Options applicable to the Revolving Credit Loans: (i) Base Rate Option: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or (ii) Euro-Rate Option: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the Applicable Margin. 3.1.2 Swing Loan Interest Rate Options. Each Borrower shall have the right to select from the following Interest Rate Options applicable to the Swing Loans: (i) Fixed Rate Option: A rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Fixed Rate; or -39- 49 (ii) Base Rate Option: A rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such Interest Rate to change automatically from time to time effective as the effective date of each change in the Base Rate. Notwithstanding the foregoing, (i) the Fixed Rate Option with respect to any Swing Loan shall only be available for one (1) Business Day; thereafter, unless such Swing Loan is converted to a Revolving Credit Loan or repaid, such Swing Loan shall automatically accrue interest at the Base Rate Option without any further action by any party hereto and (ii) if Swing Loans in excess of $3,000,000 have been outstanding for more than five (5) successive Business Days, the Borrowers' ability to request the Fixed Rate Option shall be suspended for one (1) Business Day. 3.1.3 Rate Quotations. A Borrower may call the Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Agent or the Banks nor affect the rate of interest which thereafter is actually in effect when the election is made. 3.2 Interest Periods. At any time when a Borrower shall select, convert to or renew a Euro-Rate Option, such Borrower shall notify the Agent thereof at least three (3) Business Days prior to the effective date of such Euro-Rate Option by delivering a Loan Request. The notice shall specify an interest period (the "Interest Period") during which such Interest Rate Option shall apply, such Interest Period to be (i) one Month if a Borrower selects the Euro-Rate Option during the Syndications Period, and (ii) one, two, three or six Months if a Borrower selects the Euro-Rate Option after the Syndications Period has ended. Notwithstanding the preceding sentence, the following provisions shall apply to any selection of, renewal of, or conversion to a Euro-Rate Option: 3.2.1 Ending Date and Business Day. any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day; -40- 50 3.2.2 Amount of Borrowing Tranche. each Borrowing Tranche of Euro-Rate Loans shall be in integral multiples of $500,000 and not less than $2,000,000; 3.2.3 Termination Before Expiration Date. a Borrower shall not select, convert to or renew an Interest Period for any portion of the Loans that would end after the Expiration Date; and 3.2.4 Renewals. in the case of the renewal of a Euro-Rate Option at the end of an Interest Period, the first day of the new Interest Period shall be the last day of the preceding Interest Period, without duplication in payment of interest for such day. 3.3 Interest After Default. To the extent permitted by Law, upon the occurrence of an Event of Default and until such time such Event of Default shall have been cured or waived: 3.3.1 Letter of Credit Fees, Interest Rate, the Letter of Credit Fees shall be increased by two percent (2%) per annum and the rate of interest for each Loan otherwise applicable pursuant to Section 2.9.2 [Letter of Credit Fees] or Section 3.1 [Interest Rate Options], respectively, shall bear interest at a rate per annum equal to the sum of the rate of interest applicable under the Base Rate Option plus an additional two percent (2.0%) per annum; 3.3.2 Other Obligations. each other Obligation hereunder if not paid when due shall bear interest at a rate per annum equal to the sum of the rate of interest applicable under the Base Rate Option plus an additional two percent (2%) per annum from the time such Obligation becomes due and payable and until it is paid in full. -41- 51 3.3.3 Acknowledgment. Each Borrower acknowledges that the increase in rates referred to in this Section 3.3 reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Banks are entitled to additional compensation for such risk; and all such interest shall be payable by Borrowers upon demand by Agent. 3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available. 3.4.1 Unascertainable. If on any date on which a Euro-Rate would otherwise be determined, the Agent shall have determined that: (i) adequate and reasonable means do not exist for ascertaining such Euro-Rate, or (ii) a contingency has occurred which materially and adversely affects the London interbank eurodollar market relating to the Euro-Rate, the Agent shall have the rights specified in Section 3.4.3. 3.4.2 Illegality; Increased Costs; Deposits Not Available. If at any time any Bank shall have determined that: (i) the making, maintenance or funding of any Loan to which a Euro-Rate Option applies has been made impracticable or unlawful by compliance by such Bank in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such Official Body (whether or not having the force of Law), or (ii) such Euro-Rate Option will not adequately and fairly reflect the cost to such Bank of the establishment or maintenance of any such Loan, or (iii) after making all reasonable efforts, deposits of the relevant amount in Dollars for the relevant Interest Period for a Loan to which a Euro-Rate Option applies, respectively, are not available to such Bank with respect to such Loan, in the London interbank market, then the Agent shall have the rights specified in Section 3.4.3. -42- 52 Agent's and Bank's Rights. In the case of any event specified in Section 3.4.1 above, the Agent shall promptly so notify the Banks and the Borrowers thereof, and in the case of an event specified in Section 3.4.2 above, such Bank shall promptly so notify the Agent and endorse a certificate to such notice as to the specific circumstances of such notice, and the Agent shall promptly send copies of such notice and certificate to the other Banks and the Borrowers. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of (A) the Banks, in the case of such notice given by the Agent, or (B) such Bank, in the case of such notice given by such Bank, to allow a Borrower to select, convert to or renew a Euro-Rate Option shall be suspended until the Agent shall have later notified the Borrowers, or such Bank shall have later notified the Agent, of the Agent's or such Bank's, as the case may be, determination that the circumstances giving rise to such previous determination no longer exist. If at any time the Agent makes a determination under Section 3.4.1 and a Borrower has previously notified the Agent of its selection of, conversion to or renewal of a Euro-Rate Option and such Interest Rate Option has not yet gone into effect, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. If any Bank notifies the Agent of a determination under Section 3.4.2, the Borrowers shall, subject to the Borrowers' indemnification Obligations under Section 4.6.2 [Indemnity], as to any Loan of the Bank to which a Euro-Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate Option otherwise available with respect to such Loan or prepay such Loan in accordance with Section 4.4 [Voluntary Prepayments]. Absent due notice from the Borrowers of conversion or prepayment, such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date. 3.5 Selection of Interest Rate Options. If a Borrower fails to select a new Interest Period to apply to any Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 3.2 [Interest Periods], such Borrower shall be deemed to have converted such Borrowing Tranche to the Base Rate Option commencing upon the last day of the existing Interest Period. -43- 53 4. PAYMENTS 4.1 Payments. All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees, Agent's Fee or other fees or amounts due from a Borrower hereunder shall be payable prior to 11:00 a.m., Pittsburgh time, on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by each Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Agent at the Principal Office for the account of PNC Bank with respect to the Swing Loans and for the ratable accounts of the Banks with respect to the Revolving Credit Loans in U.S. Dollars and in immediately available funds, and the Agent shall promptly distribute such amounts to the Banks in immediately available funds, provided that in the event payments are received by 11:00 a.m., Pittsburgh time, by the Agent with respect to the Loans and such payments are not distributed to the Banks on the same day received by the Agent, the Agent shall pay the Banks the Federal Funds Effective Rate with respect to the amount of such payments for each day held by the Agent and not distributed to the Banks. The Agent's and each Bank's statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an "account stated." 4.2 Pro Rata Treatment of Banks. Each borrowing shall be allocated to each Bank according to its Ratable Share, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by a Borrower with respect to principal, interest, Revolving Credit Commitment Fees, Letter of Credit Fees, or other fees (except for the Agent's Fee) or amounts due from such Borrower hereunder to the Banks with respect to the Loans, shall (except as provided in Section 3.4.3 [Agent's and Bank's Rights] in the case of an event specified in Section 3.4 [Euro-Rate Unascertainable; Etc.], 4.4.2 [Voluntary Prepayments] or 4.4 [Additional Compensation in Certain Circumstances]) be made in proportion to the applicable Loans outstanding from each Bank and, if no such Loans are then outstanding, in proportion to the Ratable Share of each Bank. Notwithstanding any of the foregoing, each borrowing or payment or prepayment by the Borrower of principal, interest, fees or other amounts from the Borrower with respect to Swing Loans shall be made by or to PNC Bank in accordance with Section 2. -44- 54 4.3 Interest Payment Dates. Interest on Loans to which the Base Rate Option applies shall be due and payable in arrears on the first Business Day of each June, September, December and March after the date hereof and on the Expiration Date or upon acceleration of the Notes. Interest on Loans to which the Euro-Rate Option applies shall be due and payable on the last day of each Interest Period for those Loans and, if such Interest Period is longer than three (3) Months, also on the 90th day of such Interest Period. Interest on mandatory prepayments of principal under Section 4.5 [Mandatory Prepayments] shall be due on the date such mandatory prepayment is due. Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated maturity date, upon acceleration or otherwise). 4.4 Voluntary Prepayments. 4.4.1 Right to Prepay. Each Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in Section 4.4.2 below or in Section 4.6 [Additional Compensation in Certain Circumstances]): at any time with respect to any Loan to which the Base Rate Option applies, (ii) on the last day of the applicable Interest Period with respect to Loans to which a Euro-Rate Option applies, (iii) on the date specified in a notice by any Bank pursuant to Section 3.4 [Euro-Rate Unascertainable, Etc.] with respect to any Loan to which a Euro-Rate Option applies. Whenever a Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Agent by 1:00 p.m. at least one (1) Business Day prior to the date of prepayment of Revolving Credit Loans or no later than 1:00 p.m. Pittsburgh time, on the date of prepayment of Swing Loans, setting forth the following information: (x) the date, which shall be a Business Day, on which the proposed prepayment is to be made; (y) a statement indicating the application of -45- 55 the prepayment between Swing Loans and Revolving Credit Loans; and (z) the total principal amount which shall not be less than $50,000 for any Swing Loan or, for Revolving Credit Loans, the lesser of: (a) $1,000,000, or (b) the Revolving Credit Loans comprising any Borrowing Tranche if all Revolving Credit Loans comprising such Borrowing Tranche are to be prepaid. All prepayment notices shall be irrevocable. The principal amount of the Loans for which a prepayment notice is given, together with interest on such principal amount, except with respect to Loans to which the Base Rate Option applies, shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made. Unless otherwise specified by such Borrower with respect to prepayments of the Revolving Credit Euro-Rate Portion of the Revolving Credit Loans permitted under clause (ii) above, any prepayments shall be applied first to Loans to which the Base Rate Option applies, then to Loans to which the Euro-Rate Option applies. Any prepayment hereunder shall be subject to the Borrowers' Obligation to indemnify the Banks under Section 4.6.2 [Indemnity]. -46- 56 4.4.2 Replacement of a Bank. In the event any Bank (i) gives notice under Section 3.4 [Euro-Rate Unascertainable, Etc.] or Section 4.6.1 [Increased Costs, Etc.], (ii) does not fund Revolving Credit Loans because the making of such Loans would contravene any Law applicable to such Bank, (iii) does not approve any action as to which consent of the Required Banks is requested by a Borrower and obtained hereunder, or (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), then applicable Borrowers shall have the right at their option, with the consent of the Agent, which shall not be unreasonably withheld, to prepay the Loans of such Bank in whole, together with all interest accrued thereon, and terminate such Bank's Revolving Credit Commitment within ninety (90) days after (w) receipt of such Bank's notice under Section 3.4 [Euro-Rate Unascertainable, Etc.] or 4.6.1 [Increased Costs, Etc.], (x) the date such Bank has failed to fund Revolving Credit Loans because the making of such Loans would contravene Law applicable to such Bank, (y) the date of obtaining the consent which such Bank has not approved, or (z) the date such Bank became subject to the control of an Official Body, as applicable; provided that each such Borrower shall also pay to such Bank at the time of such prepayment any amounts required under Section 4.6 [Additional Compensation in Certain Circumstances] and any accrued interest due on such amount and any related fees; provided, however, that the Revolving Credit Commitment of such Bank shall be provided by one or more of the remaining Banks or a replacement bank acceptable to the Agent and the Borrowers; provided, further, the remaining Banks shall have no obligation hereunder to increase their Revolving Credit Commitments. Notwithstanding the foregoing, the Agent may only be replaced subject to the requirements of Section 9.14 [Successor Agent] and provided that all Letters of Credit have expired or been terminated or replaced. -47- 57 4.4.3 Change of Lending Office. Each Bank agrees that upon the occurrence of any event giving rise to increased costs or other special payments under Section 3.4.2 [Illegality, Etc.] or 4.6.1 [Increased Costs, Etc.] with respect to such Bank, it will, if requested by a Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is made on such terms that such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 4.4.3 shall affect or postpone any of the Obligations of the Borrowers or any other Loan Party or the rights of the Agent or any Bank provided in this Agreement. 4.5 Mandatory Prepayments. 4.5.1 Borrowing Base Exceeded. Whenever the outstanding principal balance of Revolving Credit Loans and Swing Loans by the Banks plus the aggregate undrawn face amount of outstanding Letters of Credit issued pursuant to Section 2.9 exceeds the Borrowing Base, the Borrowers shall make, within one (1) Business Day after the Borrowers learn of such excess and whether or not the Agent has given notice to such effect, a mandatory prepayment of principal equal to the excess of the outstanding principal balance of the Revolving Credit Loans over the Borrowing Base, together with accrued interest on such principal amount. 4.5.2 Application Among Interest Rate Options. All prepayments required pursuant to this Section 4.5 shall first be applied to the principal amount of the Loans subject to the Base Rate Option, then to Loans subject to a Euro-Rate Option. In accordance with Section 4.6.2 [Indemnity], each Borrower shall indemnify the Banks for any loss or expense, including loss of margin, incurred with respect to any such prepayments applied against Loans subject to a Euro-Rate Option on any day other than the last day of the applicable Interest Period. -48- 58 Additional Compensation in Certain Circumstances. 4.6.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law, guideline or interpretation or any change in any Law, guideline or interpretation or application thereof by any Official Body charged with the interpretation or administration thereof or compliance with any request or directive (whether or not having the force of Law) of any central bank or other Official Body: (i) subjects any Bank to any tax or changes the basis of taxation with respect to this Agreement, the Notes, the Loans or payments by any Borrower of principal, interest, Revolving Credit Commitment Fees, or other amounts due from any Borrower hereunder or under the Notes (except for taxes on the overall net income of such Bank), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, or assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by, any Bank, or (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or letters of credit, other credits or commitments to extend credit extended by, any Bank, or (B) otherwise applicable to the obligations of any Bank under this Agreement, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon any Bank with respect to this Agreement, the Notes or the making, maintenance or funding of any part of the Loans (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on any Bank's capital, taking into consideration such Bank's customary policies with respect to capital adequacy) by an amount which such Bank in its sole discretion deems to be material, such Bank shall from time to time notify the Borrowers and the Agent of the amount determined in good faith (using any averaging and attribution methods employed in good faith) by such Bank to be necessary to compensate such Bank for such increase in cost, reduction of income, additional expense or reduced rate of return. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrowers to such Bank thirty (30) Business Days after such notice is given. -49- 59 4.6.2 Indemnity. In addition to the compensation required by Section 4.6.1 [Increased Costs, Etc.], the Borrowers shall indemnify, jointly and severally, each Bank against all liabilities, losses or expenses (including loss of margin, any loss or expense incurred in liquidating or employing deposits from third parties and any loss or expense incurred in connection with funds acquired by a Bank to fund or maintain Loans subject to a Euro-Rate Option) which such Bank sustains or incurs as a consequence of any: payment, prepayment, conversion or renewal of any Loan to which a Euro-Rate Option applies on a day other than the last day of the corresponding Interest Period (whether or not such payment or prepayment is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due), (ii) attempt by any Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any Loan Requests under Section 2.4 [Revolving Credit Loan Requests] or Section 3.2 [Interest Periods] or notice relating to prepayments under Section 4.4 [Voluntary Prepayments], or (iii) default by any Borrower in the performance or observance of any covenant or condition contained in this Agreement or any other Loan Document, including any failure of any Borrower to pay when due (by acceleration or otherwise) any principal, interest, Revolving Credit Commitment Fee or any other amount due hereunder. If any Bank sustains or incurs any such loss or expense, it shall from time to time notify the applicable Borrowers of the amount determined in good faith by such Bank (which determination may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss or expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable, jointly and severally, by the Borrowers to such Bank thirty (30) Business Days after such notice is given. -50- 60 4.7 Settlement Date Procedures. In order to minimize the transfer of funds between the Banks and the Agent, a Borrower may borrow, repay and reborrow Swing Loans and PNC Bank may make Swing Loans as provided in Section 2.1.2 hereof during the period between Settlement Dates. Not later than 11:00 a.m. on each Settlement Date, the Agent shall notify each Bank of its Ratable Share of the Swing Loans. Prior to 2:00 p.m., Pittsburgh time, on such Settlement Date, each Bank shall pay to the Agent the amount equal to the difference between its Ratable Share of the Loans and its Revolving Credit Loans, and the Agent shall pay to each Bank its Ratable Share of all payments made by the Borrowers to the Agent with respect to the Revolving Credit Loans. The Agent shall also effect settlement in accordance with the foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans and may at its option effect settlement on any other Business Day. These settlement procedures are established solely as a matter of administrative convenience, and nothing contained in this Section 4.7 shall relieve the Banks of their obligations to fund Revolving Credit Loans on dates other than a Settlement Date pursuant to Section 2.1.1. The Agent may at any time at its option for any reason whatsoever require each Bank to pay immediately to the Agent such Bank's Ratable Share of the outstanding Loans, and each Bank may at any time require the Agent to pay immediately to such Bank its Ratable Share of all payments made by the borrower to the Agent with respect to the Revolving Credit Loans. Deposit into Lockbox. Each Borrower shall continue to require Account Debtors whose represent at least eighty-five percent (85%) of all Accounts of such Borrower to make all payments due from them to such Borrower directly to the applicable Lockboxes for collection pursuant to the Lockbox Agreements. 4.9 Receipt and Application of Payment; Cash Collateral Account; Collections; Agent's Right to Notify Account Debtors.. The Provisions of this Section 4.9 shall apply immediately and only the occurrence of an Event of Default and for so long as such Event of Default shall be continuing: -51- 61 4.9.1 Receipt and Application of Payment. So long as such Event of Default shall be continuing (i) the Borrowers shall instruct Chase and National City to deposit via wire transfer into the Cash Collateral Account all cash, checks and other items of payment received in the Chase Lockbox or National City Lockbox, as the case may be, within 24 hours of Chase's or National City's receipt thereof, (ii) all cash, checks or other items of payment received in the PNC Lockbox shall be immediately deposited into the Cash Collateral Account promptly upon PNC's receipt thereof, and (iii) the Borrowers shall deposit into the Cash Collateral Account within 24 hours of Borrowers' receipt thereof all cash, checks or other items of payment received from those Account Debtors not currently making payment into a Lockbox or, promptly upon request of the Agent, shall cause such Account Debtors to deposit such cash, checks or other items of payment directly into one of the Lockboxes. In the event a Borrower (or any of its Affiliates, shareholders, directors, officers, employees, agents or those persons acting for or in concert with a Borrower) shall receive any cash, checks, notes, drafts or other similar items of payment relating to or constituting the Collateral (or proceeds thereof), no later than the first Business Day following receipt thereof, such Borrower shall (i) deposit or cause the same to be deposited, in kind, in the Cash Collateral Account established by such Borrower with the Agent or such other depository as may be designated in writing by the Agent (the "Depository"), from which account the Agent alone shall have the power of withdrawal, and with respect to which the Depository shall waive any rights of set off, and (ii) forward to the Agent, on a daily basis, a collection report in form and substance satisfactory to the Agent and, at the Agent's request, copies of all such items and deposit slips related thereto. -52- 62 4.9.2 Cash Collateral Account. The Agent alone shall have the sole power of withdrawal from the Cash Collateral Account, and at each such time, all cash, notes, checks, drafts or similar items of payment by or for the account of a Borrower shall be the sole and exclusive property of the Banks immediately upon the earlier of the receipt of such items by the Agent or the Depository or the receipt of such items by such Borrower; provided, however, that for the purpose of computing interest hereunder such items shall be deemed to have been collected and shall be applied by the Agent on account of the Revolving Credit Loans outstanding to such Borrower one (1) Business Day after receipt by the Agent (subject to correction for any items subsequently dishonored for any reason whatsoever). Notwithstanding anything to the contrary herein, during each period when this Section 4.9.2 is applicable, all such items of payment shall, solely for purposes of determining the occurrence of such Event of Default, be deemed received upon actual receipt by the Agent, unless the same are subsequently dishonored for any reason whatsoever, and all funds in the Cash Collateral Account, including all payments made by or on behalf of and all credits due a Borrower, may be applied and reapplied in whole or in part to any of the Revolving Credit Loans to the extent and in the manner the Agent deems advisable. 4.9.3 Collections; Agent's Right to Notify Account Debtors. The Agent may notify any or all Account Debtors that the Accounts have been assigned to the Banks and that the Banks have a security interest therein, and to direct such Account Debtors to make all payments due from them to each Borrower upon the Accounts directly to the Agent to the Lockboxes or to any other lockbox designated by the Agent. The Agent shall promptly furnish the Borrowers with a copy of any such notice sent. Any such notice, in the Agent's sole discretion, may be sent on the Borrowers' stationery, in which event the appropriate Borrower shall co-sign such notice with the Agent. To the extent that any Law or custom or any contract or agreement with any Account Debtor requires notice to or the approval of the Account Debtor in order to perfect such assignment of a security interest in Accounts, each Borrower agrees to give such notice or obtain such approval. -53- 63 5. REPRESENTATIONS AND WARRANTIES 5.1 Representations and Warranties. The Loan Parties, jointly and severally, represent and warrant to the Agent and each of the Banks as follows: 5.1.1 Organization and Qualification. Each Loan Party and each Subsidiary of each Loan Party is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Loan Party and each Subsidiary of each Loan Party has the lawful power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct. Each Loan Party and each Subsidiary of each Loan Party is duly licensed or qualified and in good standing in each jurisdiction listed on Schedule 5.1.1 and in all other jurisdictions where the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary. Capitalization and Ownership. The authorized capital stock of the Borrowers consists of the number of shares as set forth on Schedule 5.1.2 hereto. Schedule 5.1.2 hereto also sets forth the number of shares of issued and outstanding capital stock of such Borrower and the ownership of such shares, and all such shares have been validly issued and are fully paid and nonassessable. There are no options, warrants or other rights outstanding to purchase any shares of the capital stock of such Borrower except as indicated on Schedule 5.1.2. -54- 64 5.1.3 Subsidiaries. Schedule 5.1.3 states the name of each of the Borrowers' Subsidiaries, its jurisdiction of incorporation, its authorized capital stock, the issued and outstanding shares (referred to herein as the "Subsidiary Shares") and the owners thereof if it is a corporation, its outstanding partnership interests (the "Partnership Interests") if it is a partnership and its outstanding limited liability company interests, interests assigned to managers thereof and the voting rights associated therewith (the "LLC Interests") if it is a limited liability company. The Borrowers and each Subsidiary of the Borrowers has good and marketable title to all of the Subsidiary Shares, Partnership Interests and LLC Interests it purports to own, free and clear in each case of any Lien. All Subsidiary Shares, Partnership Interests and LLC Interests have been validly issued, and all Subsidiary Shares are fully paid and nonassessable. All capital contributions and other consideration required to be made or paid in connection with the issuance of the Partnership Interests and LLC Interests have been made or paid, as the case may be. There are no options, warrants or other rights outstanding to purchase any such Subsidiary Shares, Partnership Interests or LLC Interests except as indicated on Schedule 5.1.3. 5.1.4 Power and Authority. Each Loan Party has full power to enter into, execute, deliver and carry out this Agreement and the other Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Loan Documents and to perform its Obligations under the Loan Documents to which it is a party, and all such actions have been duly authorized by all necessary proceedings on its part. 5.1.5 Validity and Binding Effect. This Agreement has been duly and validly executed and delivered by each Loan Party, and each other Loan Document which any Loan Party is required to execute and deliver on or after the date hereof will have been duly executed and delivered by such Loan Party on the required date of delivery of such Loan Document. This Agreement and each other Loan Document constitutes, or will constitute, legal, valid and binding obligations of each Loan Party which is or will be a party thereto on and after its date of delivery thereof, enforceable against such Loan Party in accordance with its terms, except to the extent that enforceability of any of such Loan Document may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally or limiting the right of specific performance. -55- 65 No Conflict. Neither the execution and delivery of this Agreement or the other Loan Documents by any Loan Party nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them will conflict with, constitute a default under or result in any breach of (i) the terms and conditions of the certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents of any Loan Party, or (ii) any Law or any material agreement or instrument or order, writ, judgment, injunction or decree to which any Loan Party or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it is subject, or result in the creation or enforcement of any Lien, charge or encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Party or any of its Subsidiaries (other than Liens granted under the Loan Documents). 5.1.7 Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of any Loan Party, threatened against such Loan Party or any Subsidiary of such Loan Party at law or equity before any Official Body which individually or in the aggregate may result in any Material Adverse Change, except as described on Schedule 5.1.7. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of any order, writ, injunction or any decree of any Official Body which may result in any Material Adverse Change. 5.1.8 Title to Properties. The real property owned or leased by each Loan Party and each Subsidiary of each Loan Party is described on Schedule 5.1.8. Each Loan Party and each Subsidiary of each Loan Party has good and marketable title to or valid leasehold interest in all properties, assets and other rights which it purports to own or lease or which are reflected as owned or leased on its books and records, free and clear of all Liens and encumbrances except Permitted Liens, and subject to the terms and conditions of the applicable leases. All leases of property are in full force and effect without the necessity for any consent which has not previously been obtained upon consummation of the transactions contemplated hereby. -56- 66 5.1.9 Financial Statements. (i) Historical Statements. Each Borrower has delivered to the Agent copies of its audited consolidated year-end financial statements for and as of the end of the fiscal year ended August 31, 1996 (the "Annual Statements"). In addition, each Borrower has delivered to the Agent copies of its unaudited consolidated interim quarterly financial statements and for the fiscal year to date and as of the end of the fiscal quarter ended February 28, 1997 (the "Interim Statements") (the Annual Statements and Interim Statements being collectively referred to as the "Historical Statements"). The Historical Statements were compiled from the books and records maintained by each Borrower's management, are correct and complete in all material respects and fairly represent the consolidated financial condition of such Borrower and its Subsidiaries as of their dates and the results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, subject (in the case of the Interim Statements) to normal year-end audit adjustments. (ii) Financial Projections. Each Borrower has delivered to the Agent financial projections of such Borrower and its Subsidiaries for the period 1997-2002 derived from various assumptions of such Borrower's management (the "Financial Projections"). The Financial Projections represent what management of the Borrowers believes to be a reasonable range of possible results in light of the history of the business, present and foreseeable conditions and the intentions of such Borrower's management. The Financial Projections accurately reflect the liabilities of such Borrower and its Subsidiaries upon consummation of the transactions contemplated hereby as of the Closing Date. (iii) Accuracy of Financial Statements. None of the Borrowers nor any Subsidiary of any Borrowers has any material liabilities, contingent or otherwise, or forward or long-term commitments that are not disclosed in the Historical Statements or in the notes thereto, and except as disclosed therein, there are no unrealized or anticipated losses since February 28, 1997 from any commitments of the Borrowers or any Subsidiary of the Borrowers which may cause a Material Adverse Change. Since August 31, 1996, no Material Adverse Change has occurred. 5.1.10 Use of Proceeds; Margin Stock; Section 20 Subsidiaries. .1.10.1 General. The Loan Parties intend to use the proceeds -57- 67 of the Loans in accordance with Sections 2.8, and 7.1.10. .1.10.2 Margin Stock. None of the Loan Parties or any Subsidiaries of any Loan Party engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U). No part of the proceeds of any Loan has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or to refund Indebtedness originally incurred for such purpose, or for any purpose which entails a violation of or which is inconsistent with the provisions of the regulations of the Board of Governors of the Federal Reserve System. None of the Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin stock in such amounts that more than twenty-five (25%) of the reasonable value of the assets of any Loan Party or Subsidiary of any Loan Party are or will be represented by margin stock. .1.10.3 Section 20 Subsidiaries. The Loan Parties do not intend to use and shall not use any portion of the proceeds of the Loans, directly or indirectly (i) knowingly to purchase any Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by as Section 20 Subsidiary and issued by or for the benefit of any Loan Party or any Subsidiary of any Loan Party. -58- 68 5.1.11 Full Disclosure. Neither this Agreement nor any other Loan Document, nor any certificate, statement, agreement or other documents furnished to the Agent or any Bank in connection herewith or therewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading. There is no fact known to any Loan Party which materially adversely affects the business, property, assets, financial condition, results of operations or prospects of any Loan Party or Subsidiary of any Loan Party which has not been set forth in this Agreement or in the certificates, statements, agreements or other documents furnished in writing to the Agent and the Banks prior to or at the date hereof in connection with the transactions contemplated hereby. 5.1.12 Taxes. All federal, state, local and other tax returns required to have been filed with respect to each Loan Party and each Subsidiary of each Loan Party have been filed, and payment or adequate provision has been made for the payment of all taxes, fees, assessments and other governmental charges which have or may become due pursuant to said returns or to assessments received, except to the extent that such taxes, fees, assessments and other charges are being contested in good faith by appropriate proceedings diligently conducted and for which such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made. There are no agreements or waivers extending the statutory period of limitations applicable to any federal income tax return of any Loan Party or Subsidiary of any Loan Party for any period, except as described on Schedule 5.1.12. 5.1.13 Consents and Approvals. Except for the filing of financing statements in the state and county filing offices, no consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other Person is required by any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents by any Loan Party, except as listed on Schedule 5.1.13, all of which shall have been obtained or made on or prior to the Closing Date except as otherwise indicated on Schedule 5.1.13. -59- 69 5.1.14 No Event of Default; Compliance With Instruments. No event has occurred and is continuing and no condition exists or will exist after giving effect to the borrowings or other extensions of credit to be made on the Closing Date under or pursuant to the Loan Documents which constitutes an Event of Default or Potential Default. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of (i) any term of its certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents, or (ii) any material agreement or instrument to which it is a party or by which it or any of its properties may be subject or bound where such violation would constitute a Material Adverse Change. 5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc. Each Loan Party and each Subsidiary of each Loan Party owns or possesses all the material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by such Loan Party or Subsidiary, without known, possible, alleged or actual conflict with the rights of others. All material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises and permits of each Loan Party and each Subsidiary of each Loan Party are listed and described on Schedule 5.1.15. -60- 70 5.1.16 Security Interests. The Liens and security interests granted to the Agent for the benefit of the Banks pursuant to the Security Agreement in the Collateral constitute and will continue to constitute Prior Security Interests under the Uniform Commercial Code as in effect in each applicable jurisdiction (the "Uniform Commercial Code") or other applicable Law entitled to all the rights, benefits and priorities provided by the Uniform Commercial Code or such Law, subject only to Permitted Liens. Upon the filing of financing statements relating to said security interests in each office and in each jurisdiction where required in order to perfect the security interests described above, all such action as is necessary or advisable to establish such rights of the Agent will have been taken, and there will be upon execution and delivery of the Security Agreement, such filings and such taking of possession, no necessity for any further action in order to preserve, protect and continue such rights, except the filing of continuation statements with respect to such financing statements within six months prior to each five-year anniversary of the filing of such financing statements. All filing fees and other expenses in connection with each such action have been or will be paid by the Borrowers. 5.1.17 Insurance. Schedule 5.1.17 lists all insurance policies and other bonds to which any Loan Party or Subsidiary of any Loan Party is a party, all of which are valid and in full force and effect. No notice has been given or claim made and no grounds exist to cancel or avoid any of such policies or bonds or to reduce the coverage provided thereby. Such policies and bonds provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of each Loan Party and each Subsidiary of each Loan Party in accordance with prudent business practice in the industry of the Loan Parties and their Subsidiaries. Compliance With Laws. The Loan Parties and their Subsidiaries are in compliance in all material respects with all applicable Laws (other than Environmental Laws which are specifically addressed in Section 5.1.23 [Environmental Matters]) in all jurisdictions in which any Loan Party or Subsidiary of any Loan Party is presently or will be doing business except where the failure to do so would not constitute a Material Adverse Change. -61- 71 5.1.19 Material Contracts; Burdensome Restrictions. Schedule 5.1.19 lists all material contracts relating to the business operations of each Loan Party and each Subsidiary of any Loan Party, including all employee benefit plans and Labor Contracts. All such material contracts are valid, binding and enforceable upon such Loan Party or Subsidiary and, to the best of the Loan Parties' knowledge, each of the other parties thereto in accordance with their respective terms, and there is no default thereunder, to the Loan Parties' knowledge, with respect to parties other than such Loan Party or Subsidiary. None of the Loan Parties or their Subsidiaries is bound by any contractual obligation, or subject to any restriction in any organization document, or any requirement of Law which could result in a Material Adverse Change. 5.1.20 Investment Companies; Regulated Entities. None of the Loan Parties or any Subsidiaries of any Loan Party is an "investment company" registered or required to be registered under the Investment Company Act of 1940 or under the "control" of an "investment company" as such terms are defined in the Investment Company Act of 1940 and shall not become such an "investment company" or under such "control." None of the Loan Parties or any Subsidiaries of any Loan Party is subject to any other federal or state statute or regulation limiting its ability to incur Indebtedness for borrowed money. 5.1.21 Plans and Benefit Arrangements. Except as set forth on Schedule 5.1.21: (i) Each Borrower and each other member of the ERISA Group are in compliance in all material respects with any applicable provisions of ERISA with respect to all Benefit Arrangements, Plans and Multiemployer Plans. There has been no Prohibited Transaction with respect to any Benefit Arrangement or any Plan or, to the best knowledge of each Borrower, with respect to any Multiemployer Plan or Multiple Employer Plan, which could result in any material liability of any Borrower or any other member of the ERISA Group. Each Borrower and all other members of the ERISA Group have made when due any and all payments required to be made under any agreement relating to a Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto. With respect to each Plan and Multiemployer Plan, each Borrower and each other member of the ERISA Group (i) have fulfilled in all material respects their obligations under the minimum funding standards of ERISA, (ii) have not incurred any liability to the PBGC, and (iii) have not had -62- 72 asserted against them any penalty for failure to fulfill the minimum funding requirements of ERISA. To the best of each Borrower's knowledge, each Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder when due. (iii) Neither any Borrower nor any other member of the ERISA Group has instituted or intends to institute proceedings to terminate any Plan. (iv) No event requiring notice to the PBGC under Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with respect to any Plan, and no amendment with respect to which security is required under Section 307 of ERISA has been made or is reasonably expected to be made to any Plan. (v) The aggregate actuarial present value of all benefit liabilities (whether or not vested) under each Plan, determined on Financial Accounting Statement 35 basis, as disclosed in, and as of the date of, the most recent actuarial report for such Plan, does not exceed the aggregate fair market value of the assets of such Plan. (vi) Neither any Borrower nor any other member of the ERISA Group has incurred or reasonably expects to incur any material withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither any Borrower nor any other member of the ERISA Group has been notified by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan or Multiple Employer Plan has been terminated within the meaning of Title IV of ERISA and, to the best knowledge of each Borrower, no Multiemployer Plan or Multiple Employer Plan is reasonably expected to be reorganized or terminated within the meaning of Title IV of ERISA. (vii) To the extent that any Benefit Arrangement is insured, each Borrower and all other members of the ERISA Group have paid when due all premiums required to be paid for all periods through the Closing Date. To the extent that any Benefit Arrangement is funded other than with insurance, each Borrower and all other members of the ERISA Group have made when due all contributions required to be paid for all periods through the Closing Date. (viii) All Plans, Benefit Arrangements and Multiemployer Plans have been administered in accordance with their terms and applicable Law. -63- 73 5.1.22 Employment Matters. Each of the Loan Parties and each of their Subsidiaries is in compliance with the Labor Contracts and all applicable federal, state and local labor and employment Laws, including those related to equal employment opportunity and affirmative action, labor relations, minimum wage, overtime, child labor, medical insurance continuation, worker adjustment and relocation notices, immigration controls and worker and unemployment compensation, where the failure to comply would constitute a Material Adverse Change. There are no outstanding grievances, arbitration awards or appeals therefrom arising out of the Labor Contracts or current or threatened strikes, picketing, handbilling or other work stoppages or slowdowns at facilities of any of the Loan Parties or any of their Subsidiaries which in any case would constitute a Material Adverse Change. Each Borrower has delivered to the Agent true and correct copies of each of the Labor Contracts. 5.1.23 Environmental Matters. Except as disclosed on Schedule 5.1.23: (i) None of the Loan Parties or any Subsidiaries of any Loan Party has received any Environmental Complaint from any Official Body or private Person alleging that such Loan Party or Subsidiary or any prior or subsequent owner of any of the Property is a potentially responsible party under the Comprehensive Environmental Response, Cleanup and Liability Act, 42 U.S.C. Section 9601, et seq., and none of the Loan Parties has any reason to believe that such an Environmental Complaint might be received. There are no pending or, to any Loan Party's actual knowledge, threatened Environmental Complaints relating to any Loan Party or Subsidiary of any Loan Party or, to any Loan Party's actual knowledge, any prior or subsequent owner of any of the Property pertaining to, or arising out of, any Environmental Conditions. (ii) Except for conditions, violations or failures which individually or in the aggregate are not reasonably likely to result in a Material Adverse Change, there are no circumstances at, on or under any of the Property that constitute a breach of or noncompliance with any of the Environmental Laws, and (x) there are no present Environmental Conditions which individually or in the aggregate are reasonably likely to result in a Material Adverse Change nor to any Loan Party's actual knowledge, past Environmental Conditions at, on or under any of the Property or, to any Loan Party's actual knowledge, at, on or under adjacent property, which resulted from any Loan Party's ownership or operations, and (y) nothing has come to the attention of any Loan Party to indicate that -64- 74 there are any past or present Environmental Conditions, at, on, or under adjacent property which resulted from the actions of other persons, in each case (of (x) or (y) above), that prevent compliance with the Environmental Laws at any of the Property. (iii) Neither any of the Property nor any structures, improvements, equipment, fixtures, activities or facilities thereon or thereunder contain or use Regulated Substances except in compliance with Environmental Laws. There are no processes, facilities, operations, equipment or other activities at, on or under any of the Property, or, to any Loan Party's knowledge, at, on or under adjacent property, that currently result in the release or threatened release of Regulated Substances onto any of the Property, except to the extent that such releases or threatened releases are not a breach of or otherwise not a violation of the Environmental Laws, or are not likely to result in a Material Adverse Change. (iv) There are no aboveground storage tanks, underground storage tanks or underground piping associated with such tanks, used for the management of Regulated Substances at, on or under any of the Property that (a) do not have, to the extent required by Environmental Laws, a full operational secondary containment system in place, and (b) are not otherwise in compliance with all applicable Environmental Laws. There are no abandoned underground storage tanks or underground piping associated with such tanks, previously used for the management of Regulated Substances by any Loan Party or any Subsidiaries of any Loan Party or to the best of any Loan Party's knowledge, any such tanks or piping which had been used by any prior owner or operator of the Property at, on or under any of the Property that have not either been closed in place in accordance with Environmental Laws or removed in compliance with all applicable Environmental Laws, and to the best of each Loan Party's knowledge no contamination associated with the use of such tanks exists on any of the Property that is not in compliance with Environmental Laws. (v) Each Loan Party and to the best of any Loan Party's knowledge, each Subsidiary of any Loan Party has all material permits, licenses, authorizations, plans and approvals necessary under the Environmental Laws for the conduct of the business of such Loan Party or Subsidiary as presently conducted. Each Loan Party and to the best of each Loan Party's knowledge each Subsidiary of any Loan Party has submitted all material notices, reports and other filings required by the Environmental Laws to be submitted to an Official Body which pertain to past and current operations on any of the Property. (vi) Except for violations which individually or in the aggregate are not reasonably likely to result in a -65- 75 Material Adverse Change, all past and present on-site generation, storage, processing, treatment, recycling, reclamation, disposal or other use or management of Regulated Substances at, on, or under any of the Property and all off-site transportation, storage, processing, treatment, recycling, reclamation, disposal or other use or management of Regulated Substances by any Loan Party or to the best of each Loan Party's knowledge by any other person have been done in accordance with the Environmental Laws. 5.1.24 Senior Debt Status. The Obligations of each Loan Party under this Agreement, the Notes, the Guaranty Agreement and each of the other Loan Documents to which it is a party do rank and will rank at least pari passu in priority of payment with all other Indebtedness of such Loan Party except Indebtedness of such Loan Party to the extent secured by Permitted Liens. There is no Lien upon or with respect to any of the properties or income of any Loan Party or Subsidiary of any Loan Party which secures indebtedness or other obligations of any Person except for Permitted Liens. 5.2 Updates to Schedules. Should any of the information or disclosures provided on any of the Schedules attached hereto become outdated or incorrect in any material respect, the Borrowers shall promptly provide the Agent in writing with such revisions or updates to such Schedule as may be necessary or appropriate to update or correct same; provided, however, that no Schedule shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule be deemed to have been cured thereby, unless and until the Required Banks, in their sole and absolute discretion, shall have accepted in writing such revisions or updates to such Schedule. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT The obligation of each Bank to make Loans and of the Agent to issue Letters of Credit hereunder is subject to the performance by each of the Loan Parties of its Obligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the following further conditions: -66- 76 6.1 First Loans and Letters of Credit. On the Closing Date: 6.1.1 Officer's Certificate. The representations and warranties of each of the Loan Parties contained in Article 5 and in each of the other Loan Documents shall be true and accurate on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and each of the Loan Parties shall have performed and complied with all covenants and conditions hereof and thereof, no Event of Default or Potential Default shall have occurred and be continuing or shall exist; and there shall be delivered to the Agent for the benefit of each Bank a certificate of each of the Loan Parties, dated the Closing Date and signed by the Chief Executive Officer, President or Chief Financial Officer of each of the Loan Parties, to each such effect. 6.1.2 Secretary's Certificate. There shall be delivered to the Agent for the benefit of each Bank a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying as appropriate as to: (i) all action taken by each Loan Party in connection with this Agreement and the other Loan Documents; (ii) the names of the officer or officers authorized to sign this Agreement and the other Loan Documents and the true signatures of such officer or officers and specifying the Authorized Officers permitted to act on behalf of each Loan Party for purposes of this Agreement and the true signatures of such officers, on which the Agent and each Bank may conclusively rely; and (iii) copies of its organizational documents, including its certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, and limited liability company agreement as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each Loan Party in each state where organized or qualified to do business and a bring-down certificate by facsimile dated the Closing Date. -67- 77 Delivery of Loan Documents. The Guaranty Agreement, Notes, Intercompany Subordination Agreement and Security Agreement shall have been duly executed and delivered to the Agent for the benefit of the Banks, together with all appropriate financing statements. 6.1.4 Opinion of Counsel. There shall be delivered to the Agent for the benefit of each Bank a written opinion of Lowenthal, Landau, Fischer & Bring, P.C., counsel for the Loan Parties (who may rely on the opinions of such other counsel as may be acceptable to the Agent), dated the Closing Date and in form and substance satisfactory to the Agent and its counsel: (i) as to the matters set forth in Exhibit 6.1.4; and (ii) as to such other matters incident to the transactions contemplated herein as the Agent may reasonably request. 6.1.5 Legal Details. All legal details and proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be in form and substance satisfactory to the Agent and counsel for the Agent, and the Agent shall have received all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Agent and said counsel, as the Agent or said counsel may reasonably request. 6.1.6 Payment of Fees. The Borrowers shall have paid or caused to be paid to the Agent for itself and for the account of the Banks to the extent not previously paid the commitment and other fees accrued through the Closing Date and the costs and expenses for which the Agent and the Banks are entitled to be reimbursed. 6.1.7 Borrowing Base Certificate. Each Borrower shall deliver a Borrowing Base Certificate prepared as of the Closing Date in substantially the form of Exhibit 7.3.4, showing total unused Revolving Credit availability, after giving effect to the Loans to be made to such Borrower on the Closing Date and consummation of the transactions contemplated hereby. -68- 78 6.1.8 Consents. All material consents required to effectuate the transactions contemplated hereby as set forth on Schedule 5.1.13 shall have been obtained. Officer's Certificate Regarding MACs. Since August 31, 1996, no Material Adverse Change shall have occurred and there shall have been no material change in the management of any Loan Party or Subsidiary of any Loan Party; and there shall have been delivered to the Agent for the benefit of each Bank a certificate dated the Closing Date and signed by the Chief Executive Officer, President or Chief Financial Officer of each Loan Party to each such effect. 6.1.10 No Violation of Laws. The making of the Loans and the issuance of the Letters of Credit shall not contravene any Law applicable to any Loan Party or any of the Banks. 6.1.11 No Actions or Proceedings. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of, this Agreement, the other Loan Documents or the consummation of the transactions contemplated hereby or thereby or which, in the Agent's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents. 6.1.12 Insurance Policies; Certificates of Insurance; Endorsements. The Loan Parties shall have delivered evidence acceptable to the Agent that adequate insurance in compliance with Section 7.1.3 [Maintenance of Insurance] is in full force and effect and that all premiums then due thereon have been paid, together with a certified copy of each Loan Party's casualty insurance policy or policies evidencing coverage satisfactory to the Agent, with additional insured and lender loss payable special endorsements attached thereto in form and substance satisfactory to the Agent and its counsel naming the Agent as additional insured and lender loss payee and provided that such coverage may not be terminated without 10 days' prior written notice to the Agent. -69- 79 6.1.13 Filing Receipts. The Agent shall have received (1) copy of all filing receipts and acknowledgments issued by any governmental authority to evidence any recordation or filing necessary to perfect the Lien of the Banks on the Collateral or other satisfactory evidence of such recordation and filing, and (2) evidence in a form acceptable to the Agent that such Lien constitutes a Prior Security Interest in favor of the Agent for the benefit of the Banks. 6.1.14 Proceeds from Issuance of Senior Unsecured Notes. The Borrowers shall have received not less than $129,000,000 in cash proceeds from the issuance of Senior Unsecured Notes replacing all existing private placement debt issued and outstanding pursuant to the Note Agreements and shall have provided evidence of the receipt and application of such proceeds, together with a certificate of the President or Chief Financial Officer to the Agent for the benefit of the Banks to such effect, all to the satisfaction of the Agent in its sole discretion. The terms and conditions of such notes shall be reasonably satisfactory to the Agent. 6.1.15 Lockbox Agreements. The Borrowers shall deliver to the Agent a true and correct copy of each of the National City Lockbox Agreement and the Chase Lockbox Agreement. -70- 80 6.2 Each Additional Loan or Letter of Credit. At the time of making any Loans or issuing any Letters of Credit other than Loans made or Letters of Credit issued on the Closing Date and after giving effect to the proposed extensions of credit: the representations and warranties of the Loan Parties contained in Article 5 and in the other Loan Documents shall be true on and as of the date of such additional Loan or Letter of Credit with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which expressly relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein) and the Loan Parties shall have performed and complied with all covenants and conditions hereof; no Event of Default or Potential Default shall have occurred and be continuing or shall exist; the making of the Loans or issuance of such Letter of Credit shall not contravene any Law applicable to any Loan Party or Subsidiary of any Loan Party or any of the Banks; and each Borrower shall have delivered to the Agent a duly executed and completed Loan Request or application for a Letter of Credit as the case may be. 7. COVENANTS 7.1 Affirmative Covenants. The Loan Parties, jointly and severally, covenant and agree that until payment in full of the Loans, Reimbursement Obligations and Letter of Credit Borrowings, and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Parties' other Obligations under the Loan Documents and termination of the Revolving Credit Commitments, the Loan Parties shall comply at all times with the following affirmative covenants: -71- 81 7.1.1 Preservation of Existence, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain its legal existence as a corporation, limited partnership or limited liability company and its license or qualification and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary, except as otherwise expressly permitted in Section 7.2.6 [Liquidations, Mergers, Etc.], except that the Borrowers may cause a Subsidiary to dissolve (each a "Permitted Voluntary Dissolution") and go out of existence if the Subsidiary does not have any material assets and does not conduct any business and the Loan Parties otherwise comply with the covenants herein with respect to such Subsidiary. 7.1.2 Payment of Liabilities, Including Taxes, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, duly pay and discharge all liabilities to which it is subject or which are asserted against it, promptly as and when the same shall become due and payable, or, in the case of trade payables, within 60 days thereafter, including all taxes, assessments and governmental charges upon it or any of its properties, assets, income or profits, prior to the date on which penalties attach thereto, except to the extent that such liabilities, including taxes, assessments or charges, are being contested in good faith and by appropriate and lawful proceedings diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made, but only to the extent that failure to discharge any such liabilities would not result in any additional liability which would adversely affect to a material extent the financial condition of any Loan Party or Subsidiary of any Loan Party or which would affect the Collateral, provided that the Loan Parties and their Subsidiaries will pay all such liabilities forthwith upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor, unless the applicable Loan Parties are prohibited by Law for making such payment, in which case such Loan Party shall immediately notify the Agent thereof and make such payment as soon as it is permitted to do so. -72- 82 7.1.3 Maintenance of Insurance. Each Loan Party shall, and shall cause each of its Subsidiaries to, insure its properties and assets against loss or damage by fire and such other insurable hazards as such assets are commonly insured (including fire, extended coverage, property damage, workers' compensation, public liability and business interruption insurance) and against other risks (including errors and omissions) in such amounts as similar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financially sound insurers, including self-insurance to the extent customary, all as reasonably determined by the Agent. At the request of the Agent, the Loan Parties shall deliver to the Agent and each of the Banks (x) on the Closing Date and annually thereafter an original certificate of insurance signed by the Loan Parties' independent insurance broker describing and certifying as to the existence of the insurance on the Collateral required to be maintained by this Agreement and the other Loan Documents, together with a copy of the endorsement described in the next sentence attached to such certificate, and (y) from time to time a summary schedule indicating all insurance then in force with respect to each of the Loan Parties. Such policies of insurance shall contain endorsements, in form and substance acceptable to the Agent, which shall specify the Agent as an additional insured and lender loss payee as its interests may appear and that such insurance may be cancelled only upon ten (10) days notice to the Agent, with the understanding that any obligation imposed upon the insured (including, without limitation, the liability to pay premiums) shall be the sole obligation of the Loan Parties and not that of the insured. Each Loan Party shall notify the Agent promptly of any occurrence causing a material loss or decline in value of the Collateral owned or leased by such Borrower and the estimated (or actual, if available) amount of such loss or decline. Any monies received by the Agent constituting proceeds of insurance on or relating to the Collateral, may, at the option of the Agent, (i) be applied by the Agent to the payment of the Loans in such manner as the Agent may reasonably determine, or (ii) be disbursed to the applicable Loan Parties on such terms as are deemed appropriate by the Agent for the repair, restoration and/or replacement of property in respect of which such proceeds were received. -73- 83 7.1.4 Maintenance of Properties and Leases. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in good repair, working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all of those properties useful or necessary to its business, and from time to time, such Loan Party will make or cause to be made all appropriate repairs, renewals or replacements thereof. 7.1.5 Maintenance of Patents, Trademarks, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in full force and effect all patents, trademarks, service marks, trade names, copyrights, licenses, franchises, permits and other authorizations necessary for the ownership and operation of its properties and business if the failure so to maintain the same would constitute a Material Adverse Change. 7.1.6 Visitation Rights. Each Loan Party shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorized employees or representatives of the Agent or any of the Banks to visit and inspect any of its properties and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers, all in such detail and at such times and as often as any of the Banks may reasonably request, provided that each Bank shall provide any such Borrower and the Agent with reasonable notice prior to any visit or inspection and all information acquired in such visits shall be subject to Section 10.12. In the event any Bank desires to conduct an audit of any Loan Party, such Bank shall make a reasonable effort to conduct such audit contemporaneously with any audit to be performed by the Agent. 7.1.7 Keeping of Records and Books of Account. Each Borrower shall, and shall cause each Subsidiary of such Borrower to, maintain and keep proper books of record and account which enable such Borrower and its Subsidiaries to issue financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over the Borrower or any Subsidiary of such Borrower, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs. -74- 84 Plans and Benefit Arrangements. Each Borrower shall, and shall cause each other member of the ERISA Group to, comply with ERISA, the Internal Revenue Code and other applicable Laws applicable to Plans and Benefit Arrangements except where such failure, alone or in conjunction with any other failure, would not result in a Material Adverse Change. Without limiting the generality of the foregoing, such Borrower shall cause all of its Plans and all Plans maintained by any member of the ERISA Group to be funded in accordance with the minimum funding requirements of ERISA and shall make, and cause each member of the ERISA Group to make, in a timely manner, all contributions due to Plans, Benefit Arrangements and Multiemployer Plans. 7.1.9 Compliance With Laws. Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with all applicable Laws, including all Environmental Laws, in all respects, provided that it shall not be deemed to be a violation of this Section 7.1.9 if any failure to comply with any Law would not result in fines, penalties, remediation costs, other similar liabilities or injunctive relief which in the aggregate would constitute a Material Adverse Change. 7.1.10 Use of Proceeds. The Loan Parties will use the Letters of Credit and the proceeds of the Loans only for general corporate purposes and for working capital. The Loan Parties will not use the Letters of Credit or the proceeds of the Loans for any purposes which contravene any applicable Law or any provision hereof. 7.1.11 Further Assurances. Each Loan Party shall, from time to time, at its expense, faithfully preserve and protect the Agent's Lien on and Prior Security Interest in the Collateral as a continuing first-priority perfected Lien, subject only to Permitted Liens, and shall do such other acts and things as the Agent in its sole discretion may deem necessary or advisable from time to time in order to preserve, perfect and protect the Liens granted under the Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral. -75- 85 7.1.12 Subordination of Intercompany Loans. Each Loan Party shall cause any intercompany Indebtedness, loans or advances owed by any Loan Party to any other Loan Party to be subordinated pursuant to the terms of the Intercompany Subordination Agreement. 7.1.13 Tax Sharing. Borrowers shall not amend or modify the Tax Sharing Agreement without the consent of the Required Banks, not to be unreasonably withheld. Wire Transfer Agreement. Upon the written request of the Agent, the Borrowers shall promptly advise National City, and Chase to enter into a Wire Transfer Agreement in the form attached as Exhibit 1.1(W) hereof. 7.2 Negative Covenants. The Loan Parties, jointly and severally, covenant and agree that until payment in full of the Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and termination of the Revolving Credit Commitments, the Loan Parties shall comply with the following negative covenants: 7.2.1 Indebtedness. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness under the Loan Documents; (ii) Existing Indebtedness as set forth on Schedule 7.2.1 (including any extensions, renewals or refinancings (except refinancings of the Senior Unsecured Notes) thereof, provided there is no increase in the amount thereof or other significant change in the terms thereof unless otherwise specified on Schedule 7.2.1); (iii) Capitalized and operating leases; (iv) Indebtedness secured by Purchase Money Security Interests; -76- 86 (v) Indebtedness of a Loan Party to another Loan Party which is subordinated in accordance with the provisions of Section 7.1.12 [Subordination of Intercompany Loans] provided that the aggregate Indebtedness of the Borrowers from their Subsidiaries other than the Borrowers may not exceed $10,000,000 and provided that intercompany Indebtedness in the amount of up to $21,000,000 is being written off on the Closing Date and the amount thereof shall not be deemed to be outstanding under this clause (v) on or before the Closing Date. (vi) Indebtedness under Hedging Obligations, provided that (1) such Hedging Obligations are related to payment obligations on Indebtedness permitted under this Agreement and (2) the notional principal amount of such Hedging Obligations does not exceed the principal amount of such Indebtedness to which such Hedging Obligations relate. (vii) Indebtedness in respect of bid, performance or surety bonds issued for the account of any of the Loan Parties in the ordinary course of business. (viii) Other Indebtedness provided that after giving effect to such Indebtedness the Borrower's Adjusted Fixed Charge Ratio computed as of the end of the fiscal quarter preceding the fiscal quarter during which such Indebtedness is incurred (the "Referenced Quarter") would be at least 2.0 to 1.0, determined on a pro forma basis as if the incurrence of such additional Indebtedness and the application of the net proceeds therefrom had occurred at the beginning of the four-quarter period ending with the Referenced Quarter. 7.2.2 Liens. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except Permitted Liens. 7.2.3 Guaranties. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time, directly or indirectly, become or be liable in respect of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other Person, except for Guaranties of Indebtedness of the Loan Parties permitted hereunder. -77- 87 7.2.4 Loans and Investments. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time make or suffer to remain outstanding any loan or advance to, or purchase, acquire or own any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) or limited liability company interest in, or any other investment or interest in, or make any capital contribution to, any other Person, or agree, become or remain liable to do any of the foregoing, except: (i) trade credit extended on usual and customary terms in the ordinary course of business; (ii) advances to employees to meet expenses incurred by such employees in the ordinary course of business; (iii) Permitted Investments; (iv) loans to Subsidiaries not exceeding $10,000,000, and investments in Subsidiaries not exceeding amounts existing on the date hereof; and (v) investments (each an "Other Permitted Investment") by the Loan Parties directly in any business that is closely related to or complements the business of the Loan Parties, including an entity engaged in the business of petroleum refining and/or retail marketing of refined petroleum products, provided that (1) such business and investment complies with Section 7.2.9 and (2) the sum of the Investment Consideration incurred in connection with such investment plus the Acquisition Consideration incurred in connection with Permitted Acquisitions may not exceed $35,000,000. Dividends and Related Distributions. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, make or pay, or agree to become or remain liable to make or pay, any dividend or other distribution of any nature (whether in cash, property, securities or otherwise) on account of or in respect of its shares of capital stock, partnership interests or limited liability company interests on account of the purchase, redemption, retirement or acquisition of its shares of capital stock (or warrants, options or rights therefor), partnership interests or limited liability company interests, except that (i) the Loan Parties may pay dividends or other distributions payable to another Loan Party. -78- 88 (ii) the Loan Parties may pay dividends in aggregate amount on or after the Closing Date not to exceed $5,000,000 provided that no Potential Default or Event of Default exists and is continuing on the date of payment, and (iii) the Loan Parties may pay within the three-month period after the Borrowers deliver their annual financial statements and compliance certificate pursuant to Sections 7.3.2 and 7.3.3 for any fiscal year, beginning with the financial statements and compliance certificate for the fiscal year ending August 31, 1997, make dividend payments in the aggregate amount not to exceed 50% of the consolidated net income (computed in accordance with GAAP) of the Borrowers for such year provided that: (a) no Potential Default or Event of Default shall exist on the date on which the Borrower's make such dividend payment after giving effect to such dividend payment; and (b) the Borrowers shall demonstrate the fact described in clause (a) immediately above in the compliance certificate which they deliver for such fiscal year. (iv) the Loan Parties may pay dividends in an aggregate amount less than or equal to the amount of the proceeds received by United Refining in connection with the sale of capital stock of United Refining (other than to a Borrower or a Subsidiary of a Borrower) after the Closing Date net of any reasonable and customary fees and expenses, provided that no Potential Default or Event of Default exists and is continuing on the date of payment. (v) If any Other Permitted Investment described in and permitted under Section 7.2.4 (v) is sold for cash or otherwise liquidated or repaid for cash, the Loan Parties may pay dividends in an aggregate less than or equal to the excess of (A) the net cash proceeds from such sale (less the cost of disposition if any) over (B) the Investment Consideration paid, incurred or given in connection with such Permitted Investment, provided that no Potential Default or Event of Default exists and is continuing on the date of payment-- -79- 89 (v)Liquidations, Mergers, Consolidations, Acquisitions. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party to any merger or consolidation, or acquire by purchase, lease or otherwise all or substantially all of the assets or capital stock of any other Person, provided that: (1) any Subsidiary of any of the Borrowers (except for the Borrowers) may consolidate with or merge into or sell, transfer, lease or otherwise dispose of all or substantially all of its assets to a Borrower or a wholly-owned Subsidiary of a Borrower if such Borrower or wholly-owned Subsidiary shall be the surviving corporation and if, immediately after giving effect to such transaction, no condition or event shall exist which constitutes an Event of Default or Potential Default; and (2) any corporation (other than a Borrower or a Subsidiary of a Borrower) may consolidate with or merge into a Borrower if such Borrower shall be the surviving corporation and if, immediately after giving effect to such transaction, (a) no condition or event shall exist which constitutes an Event of Default or Potential Default and (b) the transaction does not require or involve any payment or other consideration from any Borrower or a Subsidiary of any Borrower; and (3) any Subsidiary of a Borrower may dissolve or merge out of existence if such Subsidiary has no assets and conducts no business. (4) any Loan Party may acquire, whether by purchase or by merger, (A) some or all of the ownership interests of another Person or (B) substantially all of the assets of another Person or of a business or division of another Person (each a "Permitted Acquisition"), provided that each of the following requirements is met: (i) if the Loan Parties are acquiring the ownership interests in such Person, such Person shall execute a Guarantor Joinder and join this Agreement as a Guarantor pursuant to Section 10.18 [Joinder of Guarantors] on or before the date of such Permitted Acquisition; (ii) the Loan Parties, such Person and its owners, as applicable, shall grant Liens to the Agent in the assets acquired to the extent they constitute Collateral of such Person and otherwise comply with Section [Joinder of Guarantors] on or before the date -80- 90 of such Permitted Acquisition, (iii) the business acquired, or the business conducted by the Person whose ownership interests are being acquired, as applicable, shall be substantially the same as one or more line or lines of business conducted by the Loan Parties and shall comply with Section 7.2.10 [Continuation of or Change in Business], (iv) no Potential Default or Event of Default shall exist immediately prior to and after giving effect to such Permitted Acquisition, the Borrower shall demonstrate that it shall be in compliance with the covenants contained in Section 7.2.1 and this Section 7.2.6 after giving effect to such Permitted Acquisition (including in such computation Indebtedness or other liabilities assumed or incurred in connection with such Permitted Acquisition but excluding income earned or expenses incurred by the Person, business or assets to be acquired prior to the date of such Permitted Acquisition) by delivering at least five (5) Business Days prior to such Permitted Acquisition a certificate in the form of Exhibit 7.2.6 evidencing such compliance. (vi) the sum of the following paid by the Loan Parties between the Closing Date and the date of such Permitted Acquisition shall not exceed $35,000,000 (1) the Acquisition Consideration paid by the Loan Parties for such Permitted Acquisition and all other Permitted Acquisitions, and (2) the Investment Consideration paid by the Loan Parties for all Other Permitted Investments described in Section 7.2.4 (v); provided that the Banks will reasonably consider any request by the Borrowers to make an acquisition which will cause the sum of Permitted Acquisitions and Other Permitted Investments to exceed the $35,000,000 limitation in this clause (vi) and such acquisition may be approved by the Required Banks, and (vii) any Indebtedness assumed or incurred in connection with such Permitted Acquisition must meet the requirements of Clause (viii) of Section 7.2.1 or otherwise be permitted under Section 7.2.1; and (viii) the Loan Parties shall deliver to the Agent at least five (5) Business Days before such Permitted Acquisition copies of any agreements entered into or proposed to be entered into by such Loan Parties in connection with such Permitted Acquisition and shall deliver to the Agent such other information about such -81- 91 Person or its assets as any Loan Party may reasonably require. 7.2.7 Dispositions of Assets or Subsidiaries. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, sell, sell and lease back, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any of its properties or assets, tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of capital stock, shares of beneficial interest, partnership interests or limited liability company interests of a Subsidiary of such Loan Party), except: (i) transactions involving the sale of inventory in the ordinary course of business; (ii) any sale, transfer or lease of assets in the ordinary course of business which is no longer necessary or required in the conduct of such Loan Party's or such Subsidiary's business; any sale, transfer or lease of assets by any wholly owned Subsidiary of such Loan Party to another Loan Party; (iv) any sale, transfer or lease of assets in the ordinary course of business which is replaced by substitute assets acquired or leased, provided such substitute assets are subject to the Banks' Prior Security Interest; or (v) any sale, transfer or lease of properties which (a) have become obsolete or (b) have no net value (after giving effect to the cost of maintaining such properties) and have no use in the business of the Loan Parties. (vi) any sale, transfer or lease of assets, other than those specifically excepted pursuant to clauses (i) through (v) above, which is approved by the Required Banks. -82- 92 7.2.8 Affiliate Transactions. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, enter into or carry out any transaction among one another or any of their Affiliates including, without limitation, purchasing property or services from any Affiliate, selling property or services to any Affiliate, reimbursing an Affiliate for expenses (including overhead which an Affiliate incurs), on any Borrower's behalf, except as permitted in clauses (i) and (ii) below: (i) The Borrowers may pay up to $1,000,000 during any fiscal year pursuant to the Servicing Agreement. (ii) The Borrowers may enter into transactions in the ordinary course of business upon fair and reasonable arms' length terms and conditions, provided that (a) the Borrower shall fully disclose the proposed terms and conditions of each transaction to the Agent at least ten (10) Business Days prior to the date on which any Borrower enters into such transaction; such disclosure shall be in sufficient detail to demonstrate the Borrowers' compliance with this Section 7.2.8 to the satisfaction of the Banks and (b) such terms and conditions are in accordance with all applicable Law and are not otherwise prohibited by this Agreement. 7.2.9 Subsidiaries, Partnerships and Joint Ventures. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, own or create directly or indirectly any Subsidiaries other than (i) those listed in Schedule 5.1.3, and (ii) any Subsidiary formed after the Closing Date which joins this Agreement as a Guarantor pursuant to Section 10.18 [Joinder of Guarantors], provided that such Subsidiary and the Loan Parties, as applicable, shall grant and cause to be perfected first priority Liens to the Agent for the benefit of the Banks in the Collateral held by such Subsidiary. Each of the Loan Parties shall not become or agree to become (i) a general or limited partner in any general or limited partnership, (ii) a member or manager of, or hold a limited liability company interest in, a limited liability company, or (iii) a joint venturer or hold a joint venture interest in any joint venture. -83- 93 7.2.10 Continuation of or Change in Business. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, engage in any business other than the refining, distribution and sale of petroleum and petroleum products and the ownership and operation of retail convenience stores and supermarkets, substantially as conducted and operated by such Loan Party or Subsidiary during the present fiscal year, and such Loan Party or Subsidiary shall not permit any material change in such business. 7.2.11 Plans and Benefit Arrangements. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to: (i) fail to satisfy the minimum funding requirements of ERISA and the Internal Revenue Code with respect to any Plan; (ii) request a minimum funding waiver from the Internal Revenue Service with respect to any Plan; (iii) engage in a Prohibited Transaction with any Plan, Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with any other circumstances or set of circumstances resulting in liability under ERISA, would constitute a Material Adverse Change; (iv) permit the aggregate actuarial present value of all benefit liabilities (whether or not vested) under each Plan, determined on a Financial Accounting Statement 35 basis, as disclosed in the most recent actuarial report completed with respect to such Plan, to exceed, as of any actuarial valuation date, the fair market value of the assets of such Plan; (v) fail to make when due any contribution to any Multiemployer Plan that a Borrower or any member of the ERISA Group may be required to make under any agreement relating to such Multiemployer Plan, or any Law pertaining thereto; (vi) withdraw (completely or partially) from any Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from any Multiple Employer Plan, where any such withdrawal is likely to result in a material liability of a Borrower or any member of the ERISA Group; (vii) terminate, or institute proceedings to terminate, any Plan, where such termination is likely to result in a material liability to a Borrower or any member of the ERISA -84- 94 Group; (viii) make any amendment to any Plan with respect to which security is required under Section 307 of ERISA; or fail to give any and all notices and make all disclosures and governmental filings required under ERISA or the Internal Revenue Code, where such failure is likely to result in a Material Adverse Change. 7.2.12 Fiscal Year. Each Borrower shall not, and shall not permit any Subsidiary of such Borrower to, change its fiscal year from the twelve-month period beginning September 1 and ending August 31. 7.2.13 Change in Control. The Borrowers shall not permit any sale, transfer or other disposition of capital stock of United Refining by any Person except (i) sales, transfers or dispositions by a Person resulting in not more than a forty-nine percent (49%) change of ownership of the capital stock of United Refining in the aggregate over the term of this Agreement by such Person; or (ii) involuntary transfers as a result of death, incapacity, liquidation or dissolution. 7.2.14 Issuance of Stock. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, issue any additional shares of its capital stock or any options, warrants or other rights in respect thereof, except that United Refining may permit a sale, transfer or other disposition of its shares which is permitted under Section 7.2.13 -85- 95 7.2.15 Changes in Organizational Documents and Senior Unsecured Notes. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, amend in any respect its certificate of incorporation (including any provisions or resolutions relating to capital stock), by-laws or other organizational documents without providing at least thirty (30) calendar days' prior written notice to the Agent and the Banks and, in the event such change would be adverse to the Banks as determined by the Agent in its sole discretion, obtaining the prior written consent of the Required Banks. Each of the Loan Parties shall not amend in any respect any provision of the Senior Unsecured Notes or related agreements if such amendment provides for, or could result in, any addition, acceleration or increase, directly or indirectly, in the amount of any principal payment thereunder, except that the Senior Unsecured Notes and related agreements may be amended to provide for the addition or increase of payments which are due after the scheduled due date for the last payment due under such Senior Unsecured Notes (as such Senior Unsecured Notes exist on the Closing Date) without obtaining the prior written consent of the Required Banks. 7.2.16 Minimum Fixed Charge Coverage Ratio. The Loan Parties shall not permit the Fixed Charge Coverage Ratio, calculated as of the end of each fiscal quarter set forth below (each a "Measurement Date") for the period set forth below (each a "Measurement Period")to be less than the ratio set forth below.
Measurement Date Measurement Period Minimum Ratio August 31, 1997 Quarter then ended 1.1 to 1.0 November 30, 1997 Two quarters then ended 1.1 to 1.0 February 28, 1998 Three quarters then ended 1.1 to 1.0 May 31, 1998 and each Four quarters then ended 1.25 to 1.0 fiscal quarter thereafter
7.2.17 Minimum Net Worth. The Loan Parties shall not at any time permit Consolidated Net Worth to be less than the Base Net Worth. -86- 96 7.3 Reporting Requirements. The Loan Parties, jointly and severally, covenant and agree that until payment in full of the Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and under the other Loan Documents and termination of the Revolving Credit Commitments, the Loan Parties will furnish or cause to be furnished to the Agent and each of the Banks: 7.3.1 Quarterly Financial Statements. As soon as available and in any event within forty-five (45) calendar days after the end of each of the first three fiscal quarters in each fiscal year, financial statements of the Borrowers consisting of a consolidated and consolidating balance sheet as of the end of such fiscal quarter and related consolidated and consolidating statements of income, stockholders' equity and cash flows for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments) by the Chief Executive Officer, President or Chief Financial Officer of each Borrower as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year. -87- 97 7.3.2 Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrowers, financial statements of the Borrowers consisting of a consolidated and consolidating balance sheet as of the end of such fiscal year and related consolidated and consolidating statements of income, stockholders' equity and cash flows for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year, and certified by independent certified public accountants of nationally recognized standing satisfactory to the Agent. The Banks acknowledge that the Borrowers' current accountants, BDO Seidman, LLP, are satisfactory. The certificate or report of accountants shall be free of qualifications (other than any consistency qualification that may result from a change in the method used to prepare the financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event, condition or contingency which would materially impair the prospect of payment or performance of any covenant, agreement or duty of any Loan Party under any of the Loan Documents. The Loan Parties shall deliver with such financial statements and certification by their accountants a letter of such accountants to the Agent and the Banks substantially (i) to the effect that, based upon their ordinary and customary examination of the affairs of the Borrowers performed in connection with the preparation of such consolidated financial statements, and in accordance with generally accepted auditing standards, they are not aware of the existence of any condition or event which constitutes an Event of Default or Potential Default or, if they are aware of such condition or event, stating the nature thereof and confirming the Borrowers' calculations with respect to the certificate to be delivered pursuant to Section 7.3.3 [Certificate of the Borrowers] with respect to such financial statements, and (ii) to the effect that the Banks are intended to rely upon such accountant's certification of the annual financial statements and that such accountants authorize the Loan Parties to deliver such reports and certificate to the Banks on such accountants' behalf. -88- 98 7.3.3 Certificate of the Borrowers. Concurrently with the financial statements of the Borrowers furnished to the Agent and to the Banks pursuant to Sections 7.3.1 [Quarterly Financial Statements] and 7.3.2 [Annual Financial Statements], a certificate of each Borrower signed by the Chief Executive Officer, President or Chief Financial Officer of such Borrower, in the form of Exhibit 7.3.3, to the effect that, except as described pursuant to Section 7.3.5 [Notice of Default], (i) the representations and warranties of such Borrower contained in Article 5 and in the other Loan Documents are true on and as of the date of such certificate with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which expressly relate solely to an earlier date or time), and the Loan Parties have performed and complied with all covenants and conditions hereof and thereof, (ii) no Event of Default or Potential Default exists and is continuing on the date of such certificate, and (iii) containing calculations in sufficient detail to demonstrate compliance as of the date of such financial statements with all financial covenants contained in Section 7.2 [Negative Covenants]. 7.3.4 Weekly Borrowing Base Certificates, Schedules of Accounts and Inventory, Audits of Accounts and Inventory. As soon as available: (i) by the Second Business Day of each week, a Borrowing Base Certificate, as of the last Business Day of the immediately preceding week, in the form of Exhibit 7.3.4 hereto, appropriately completed, executed and delivered by an Authorized Officer, and (ii) a Schedule of Accounts and Schedule of Inventory as of the end of the immediately preceding week. The Borrower shall cause to be performed and delivered to the Banks an audit by the Agent or another person acceptable to the Banks of Borrowers' accounts and inventory one time during each fiscal year of the Borrowers. 7.3.5 Notice of Default. Promptly after any officer of any Loan Party has learned of the occurrence of an Event of Default or Potential Default, a certificate signed by the Chief Executive Officer, President or Chief Financial Officer of such Loan Party setting forth the details of such Event of Default or Potential Default and the action which the such Loan Party proposes to take with respect thereto. -89- 99 7.3.6 Notice of Litigation. Promptly after the commencement thereof, notice of all actions, suits, proceedings or investigations before or by any Official Body or any other Person against any Loan Party or Subsidiary of any Loan Party which relate to the Collateral, involve a claim or series of claims in excess of $1,000,000 or which if adversely determined would constitute a Material Adverse Change. 7.3.7 Certain Events. Written notice to the Agent: (i) at least thirty (30) calendar days prior thereto, with respect to any proposed sale or transfer of assets pursuant to Section 7.2.7(iv) or (v); (ii) within the time limits set forth in Section 7.2.15 [Changes in Organizational Documents], any amendment to the organizational documents of any Loan Party; (iii) at least thirty (30) calendar days prior thereto, with respect to any change in any Loan Party's location(s) from the location(s) set forth in Schedule A to the Security Agreement; and (iv) at least thirty (30) calendar days prior thereto, with respect to any change in the fiscal year of any Loan Party or its Subsidiaries. 7.3.8 Budgets, Forecasts, Other Reports and Information. (A) Upon the request of the Agent or the Banks, the annual budget and any forecasts or projections of each Borrower, to be supplied not later than the commencement of the fiscal year to which any of the foregoing may be applicable, (B) Promptly upon their becoming available to any Borrower: (i) any reports, including management letters, submitted to any Borrower by independent accountants in connection with any annual, interim or special audit, any reports, notices or proxy statements generally distributed by any Borrower to its stockholders on a date no later than the date supplied to such stockholders, -90- 100 (iii) regular or periodic reports, including Forms 10-K, 10-Q and 8-K, registration statements and prospectuses, filed by any Borrower with the Securities and Exchange Commission, (iv) a copy of any order issued by any Official Body in any proceeding to which any Borrower or any of its Subsidiaries is a party, and (v) such other reports and information as any of the Banks may from time to time reasonably request. Each Borrower shall also notify the Banks promptly of the enactment or adoption of any Law which may result in a Material Adverse Change. 7.3.9 Notices Regarding Plans and Benefit Arrangements. .3.9.1 Certain Events Promptly upon becoming aware of the occurrence thereof, notice (including the nature of the event and, when known, any action taken or threatened by the Internal Revenue Service or the PBGC with respect thereto) of: (i) any Reportable Event with respect to any Borrower or any other member of the ERISA Group (regardless of whether the obligation to report said Reportable Event to the PBGC has been waived), (ii) any Prohibited Transaction which could subject any Borrower or any other member of the ERISA Group to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in connection with any Plan, any Benefit Arrangement or any trust created thereunder, (iii) any assertion of material withdrawal liability with respect to any Multiemployer Plan, (iv) any partial or complete withdrawal from a Multiemployer Plan by any Borrower or any other member of the ERISA Group under Title IV of ERISA (or assertion thereof), where such withdrawal is likely to result in material withdrawal liability, (v) any cessation of operations (by any Borrower or any other member of the ERISA Group) at a facility in the circumstances described in Section 4062(e) of ERISA, (vi) withdrawal by any Borrower or any other -91- 101 member of the ERISA Group from a Multiple Employer Plan, a failure by any Borrower or any other member of the ERISA Group to make a payment to a Plan required to avoid imposition of a Lien under Section 302(f) of ERISA, (viii) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA, or (ix) any change in the actuarial assumptions or funding methods used for any Plan, where the effect of such change is to materially increase or materially reduce the unfunded benefit liability or obligation to make periodic contributions. .3.9.2 Notices of Involuntary Termination and Annual Reports. Promptly after receipt thereof, copies of (a) all notices received by any Borrower or any other member of the ERISA Group of the PBGC's intent to terminate any Plan administered or maintained by any Borrower or any member of the ERISA Group, or to have a trustee appointed to administer any such Plan; and (b) at the request of the Agent or any Bank, each annual report (IRS Form 5500 series) and all accompanying schedules, the most recent actuarial reports, the most recent financial information concerning the financial status of each Plan administered or maintained by the Borrower or any other member of the ERISA Group, and schedules showing the amounts contributed to each such Plan by or on behalf of the Borrower or any other member of the ERISA Group in which any of their personnel participate or from which such personnel may derive a benefit, and each Schedule B (Actuarial Information) to the annual report filed by any Borrower or any other member of the ERISA Group with the Internal Revenue Service with respect to each such Plan. .3.9.3 Notice of Voluntary Termination Promptly upon the filing thereof, copies of any Form 5310, or any successor or equivalent form to Form 5310, filed with the PBGC in connection with the termination of any Plan. -92- 102 8. DEFAULT 8.1 Events of Default. An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law): 8.1.1 Payments Under Loan Documents. Any Borrower shall fail to pay (i) any principal of any Loan (including scheduled installments, mandatory prepayments or the payment due at maturity), Reimbursement Obligation or Letter of Credit Borrowing after such principal becomes due in accordance with the terms hereof or under any other Loan Document, or (ii) shall fail to pay any interest on any Loan, Reimbursement Obligation or Letter of Credit Borrowing or any other amount owing hereunder or under the other Loan Documents, within three (3) days after such interest or other amount becomes due in accordance with the terms hereof or thereof; 8.1.2 Breach of Warranty. Any representation or warranty made at any time by any of the Loan Parties herein or by any of the Loan Parties in any other Loan Document, or in any certificate, other instrument or statement furnished pursuant to the provisions hereof or thereof, shall prove to have been false or misleading in any material respect as of the time it was made or furnished; 8.1.3 Breach of Negative Covenants or Visitation Rights. Any of the Loan Parties shall default in the observance or performance of any covenant contained in Section 7.1.6 [Visitation Rights] or Section 7.2 [Negative Covenants]; 8.1.4 Breach of Other Covenants. Any of the Loan Parties shall default in the observance or performance of any other covenant, condition or provision hereof or of any other Loan Document, and such default shall continue unremedied for a period of twenty five (25) Business Days after any officer of any Loan Party becomes aware of the occurrence thereof (such grace period to be applicable only in the event such default can be remedied by corrective action of the Loan Parties as determined by the Agent in its sole discretion); -93- 103 8.1.5 Defaults in Other Agreements or Indebtedness. A default or event of default shall occur at any time under the terms of any other agreement involving borrowed money or the extension of credit or any other Indebtedness under which any Loan Party or Subsidiary of any Loan Party may be obligated as a borrower or guarantor in excess of $2,500,000 in the aggregate, and such breach, default or event of default consists of the failure to pay (beyond any period of grace permitted with respect thereto, whether waived or not) any indebtedness when due (whether at stated maturity, by acceleration or otherwise) if such breach or default causes the acceleration of any indebtedness (whether or not such right shall have been waived) or the termination of any commitment to lend; 8.1.6 Final Judgments or Orders. Any final judgments or orders for the payment of money in excess of $2,500,000 in the aggregate shall be entered against any Loan Party by a court having jurisdiction in the premises, which judgment is not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days from the date of entry; Loan Document Unenforceable. Any of the Loan Documents shall cease to be legal, valid and binding agreements enforceable against the party executing the same or such party's successors and assigns (as permitted under the Loan Documents) in accordance with the respective terms thereof, or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative, or shall in any way be challenged or contested or cease to give or provide the respective Liens, security interests, rights, titles, interests, remedies, powers or privileges intended to be created thereby; 8.1.8 Notice of Lien or Assessment. A notice of Lien or assessment in excess of $2,500,000 which is not a Permitted Lien is filed of record with respect to all or any part of any of the Loan Parties' or any of their Subsidiaries' assets by the United States or any department, agency or instrumentality thereof, or by any state, county, municipal or other governmental agency, including the PBGC, or any taxes or debts owing at any time or times hereafter to any one of these becomes payable and the same is not paid or bonded within thirty (30) days after the same becomes payable; -94- 104 8.1.9 Insolvency. Any Loan Party or any Subsidiary of a Loan Party ceases to be solvent or admits in writing its inability to pay its debts as they mature; 8.1.10 Events Relating to Plans and Benefit Arrangements. Any of the following occurs: (i) any Reportable Event, which the Agent determines in good faith constitutes grounds for the termination of any Plan by the PBGC or the appointment of a trustee to administer or liquidate any Plan, shall have occurred and be continuing; (ii) proceedings shall have been instituted or other action taken to terminate any Plan, or a termination notice shall have been filed with respect to any Plan; (iii) a trustee shall be appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice of its intent to institute proceedings to terminate any Plan or Plans or to appoint a trustee to administer or liquidate any Plan; and, in the case of the occurrence of (i), (ii), (iii) or (iv) above, the Agent determines in good faith that the amount of any Borrower's liability is likely to exceed 10% of its Consolidated Net Worth; (v) any Borrower or any member of the ERISA Group shall fail to make any contributions when due to a Plan or a Multiemployer Plan; (vi) any Borrower or any other member of the ERISA Group shall make any amendment to a Plan with respect to which security is required under Section 307 of ERISA; (vii) any Borrower or any other member of the ERISA Group shall withdraw completely or partially from a Multiemployer Plan; (viii) any Borrower or any other member of the ERISA Group shall withdraw (or shall be deemed under Section 4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix) any applicable Law is adopted, changed or interpreted by any Official Body with respect to or otherwise affecting one or more Plans, Multiemployer Plans or Benefit Arrangements, and with respect to any of the events specified in (v), (vi), (vii), (viii) or (ix), the Agent determines in good faith that any such occurrence would be reasonably likely to materially and adversely affect the total enterprise represented by any Borrower and the other members of the ERISA Group; -95- 105 Cessation of Business. Any Loan Party or Subsidiary of a Loan Party ceases to conduct its business as contemplated, except for a Permitted Voluntary Dissolution or as expressly permitted under Section 7.2.6 [Liquidations, Mergers, Etc.] or 7.2.7 [Disposition of Assets or Subsidiaries], or any Loan Party or Subsidiary of a Loan Party is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business, and such injunction, restraint or other preventive order is not dismissed within thirty (30) days after the entry thereof; 8.1.12 Involuntary Proceedings. A proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of any Loan Party or Subsidiary of a Loan Party in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or Subsidiary of a Loan Party for any substantial part of its property, or for the winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of thirty (30) consecutive days or such court shall enter a decree or order granting any of the relief sought in such proceeding; or 8.1.13 Voluntary Proceedings. Any Loan Party or Subsidiary of a Loan Party shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such Law, shall consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or other similar official) of itself or for any substantial part of its property, shall make a general assignment for the benefit of creditors, shall fail generally to pay its debts as they become due or shall take any action in furtherance of any of the foregoing. -96- 106 8.2 Consequences of Event of Default. 8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under Sections 8.1.1 through 8.1.12 shall occur and be continuing, the Banks and the Agent shall be under no further obligation to make Loans or issue Letters of Credit, as the case may be, and the Agent may, and upon the request of the Required Banks shall, (i) by written notice to the Borrowers, declare the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrowers to the Banks hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Agent for the benefit of each Bank without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, and (ii) require the Borrowers to, and each Borrower shall thereupon, deposit in a non-interest-bearing account with the Agent, as cash collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and each Borrower hereby pledges to the Agent and the Banks, and grants to the Agent and the Banks a security interest in, all such cash as security for such Obligations. Upon the curing of all existing Events of Default to the satisfaction of the Required Banks, the Agent shall return such cash collateral to the appropriate Borrower. 8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under Section 8.1.13 [Involuntary Proceedings] or 8.1.14 [Voluntary Proceedings] shall occur, the Banks shall be under no further obligations to make Loans hereunder, and the unpaid principal amount of the Loans then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrowers to the Banks hereunder and thereunder shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived. -97- 107 8.2.3 Set-off. If an Event of Default shall occur and be continuing, any Bank to whom any Obligation is owed by any Loan Party hereunder or under any other Loan Document or any participant of such Bank which has agreed in writing to be bound by the provisions of Section 9.13 [Equalization of Banks] and any branch, Subsidiary or Affiliate of such Bank or participant anywhere in the world shall have the right, in addition to all other rights and remedies available to it, without notice to such Loan Party, to set off against and apply to the then unpaid balance of all the Loans and all other Obligations of the Borrowers and the other Loan Parties hereunder or under any other Loan Document any debt owing to, and any other funds held in any manner for the account of, the Borrowers or any Borrower or such other Loan Party by such Bank or participant or by such branch, Subsidiary or Affiliate, including all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by a Borrower or such other Loan Party for its own account (but not including funds held in custodian or trust accounts) with such Bank or participant or such branch, Subsidiary or Affiliate. Such right shall exist whether or not any Bank or the Agent shall have made any demand under this Agreement or any other Loan Document, whether or not such debt owing to or funds held for the account of a Borrower or such other Loan Party is or are matured or unmatured and regardless of the existence or adequacy of any Collateral, Guaranty or any other security, right or remedy available to any Bank or the Agent. 8.2.4 Suits, Actions, Proceedings. If an Event of Default shall occur and be continuing, and whether or not the Agent shall have accelerated the maturity of Loans pursuant to any of the foregoing provisions of this Section 8.2, the Agent or any Bank, if owed any amount with respect to the Loans, may proceed to protect and enforce its rights by suit in equity, action at law and/or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement or the other Loan Documents, including as permitted by applicable Law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Agent or such Bank. -98- 108 8.2.5 Application of Proceeds. From and after the date on which the Agent has taken any action pursuant to this Section 8.2 and until all Obligations of the Loan Parties have been paid in full, any and all proceeds received by the Agent from any sale or other disposition of the Collateral, or any part thereof, or the exercise of any other remedy by the Agent, shall be applied as follows: (i) first, to reimburse the Agent and the Banks for out-of-pocket costs, expenses and disbursements, including reasonable attorneys' and paralegals' fees and legal expenses, incurred by the Agent or the Banks in connection with realizing on the Collateral or collection of any Obligations of any of the Loan Parties under any of the Loan Documents, including advances made by the Banks or any one of them or the Agent for the reasonable maintenance, preservation, protection or enforcement of, or realization upon, the Collateral, including advances for taxes, insurance, repairs and the like and reasonable expenses incurred to sell or otherwise realize on, or prepare for sale or other realization on, any of the Collateral; (ii) second, to the repayment of all Indebtedness then due and unpaid of the Loan Parties to the Banks incurred under this Agreement or any of the other Loan Documents, whether of principal, interest, fees, expenses or otherwise, in such manner as the Agent may determine in its discretion; and (iii) the balance, if any, as required by Law. 8.2.6 Other Rights and Remedies. In addition to all of the rights and remedies contained in this Agreement or in any of the other Loan Documents, the Agent shall have all of the rights and remedies of a secured party under the Uniform Commercial Code or other applicable Law, all of which rights and remedies shall be cumulative and nonexclusive, to the extent permitted by Law. The Agent may, and upon the request of the Required Banks shall, exercise all post-default rights granted to the Agent and the Banks under the Loan Documents or applicable Law. 8.3 Notice of Sale. Any notice required to be given by the Agent of a sale, lease or other disposition of the Collateral, or any other intended action by the Agent, if given ten (10) days prior to such proposed action, shall constitute commercially reasonable and fair notice thereof to the Borrowers. -99- 109 THE AGENT 9.1 Appointment. Each Bank hereby irrevocably designates, appoints and authorizes PNC Bank to act as Agent for such Bank under this Agreement and to execute and deliver or accept on behalf of each of the Banks the other Loan Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and any other instruments and agreements referred to herein, and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. PNC Bank agrees to act as the Agent on behalf of the Banks to the extent provided in this Agreement. 9.2 Delegation of Duties. The Agent may perform any of its duties hereunder by or through agents or employees (provided such delegation does not constitute a relinquishment of its duties as Agent) and, subject to Sections 9.5 [Reimbursement and Indemnification of Agent by the Borrowers] and 9.6 [Exculpatory Provisions; Limitation of Liability], shall be entitled to engage and pay for the advice or services of any attorneys, accountants or other experts concerning all matters pertaining to its duties hereunder and to rely upon any advice so obtained. -100- 110 9.3 Nature of Duties; Independent Credit Investigation. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement a fiduciary or trust relationship in respect of any Bank; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement except as expressly set forth herein. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Each Bank expressly acknowledges (i) that the Agent has not made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of any of the Loan Parties, shall be deemed to constitute any representation or warranty by the Agent to any Bank; (ii) that it has made and will continue to make, without reliance upon the Agent, its own independent investigation of the financial condition and affairs and its own appraisal of the creditworthiness of each of the Loan Parties in connection with this Agreement and the making and continuance of the Loans hereunder; and (iii) except as expressly provided herein, that the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect thereto, whether coming into its possession before the making of any Loan or at any time or times thereafter. -101- 111 9.4 Actions in Discretion of Agent; Instructions From the Banks. The Agent agrees, upon the written request of the Required Banks, to take or refrain from taking any action of the type specified as being within the Agent's rights, powers or discretion herein, provided that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or any other Loan Document or applicable Law. In the absence of a request by the Required Banks, the Agent shall have authority, in its sole discretion, to take or not to take any such action, unless this Agreement specifically requires the consent of the Required Banks or all of the Banks. Any action taken or failure to act pursuant to such instructions or discretion shall be binding on the Banks, subject to Section 9.6 [Exculpatory Provisions, Etc.]. Subject to the provisions of Section 9.6, no Bank shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Banks or, in the absence of such instructions, in the absolute discretion of the Agent. -102- 112 9.5 Reimbursement and Indemnification of Agent by the Borrowers. The Borrowers, jointly and severally, unconditionally agree to pay or reimburse the Agent and hold the Agent harmless against (a) liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements, including fees and expenses of counsel (including the allocated costs of staff counsel), appraisers and environmental consultants, incurred by the Agent (i) in connection with the development, negotiation, preparation, printing, execution, administration, syndication, interpretation and performance of this Agreement and the other Loan Documents, (ii) relating to any requested amendments, waivers or consents pursuant to the provisions hereof, (iii) in connection with the enforcement of this Agreement or any other Loan Document or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (iv) in any workout or restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings; and (b) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder, provided that the Borrowers shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Agent's gross negligence or willful misconduct, or if the Borrowers were not given notice of the subject claim and the opportunity to participate in the defense thereof, at their expense (except that the Borrowers shall remain liable to the extent such failure to give notice does not result in a loss to the Borrowers), or if the same results from a compromise or settlement agreement entered into without the consent of the Borrowers, which shall not be unreasonably withheld. In addition, the Borrowers, jointly and severally, agree to reimburse and pay all reasonable out-of-pocket expenses of the Agent's regular employees and agents (the "Agent's Auditors") engaged periodically to perform audits of the Loan Parties' books, records and business properties; provided that so long as there does not exist an Event of Default, the Borrowers shall not reimburse the Agent's Auditors under this sentence in excess of $10,000 during any fiscal year of the Borrowers, but if an Event of Default exists and is continuing there shall be no limit on the obligation of the Borrowers to reimburse the -103- 113 Agent's Auditors pursuant to this sentence. 9.6 Exculpatory Provisions; Limitation of Liability. Neither the Agent nor any of its directors, officers, employees, agents, attorneys or Affiliates shall (a) be liable to any Bank for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, including pursuant to any Loan Document, unless caused by its or their own gross negligence or willful misconduct, (b) be responsible in any manner to any of the Banks for the effectiveness, enforceability, genuineness, validity or the due execution of this Agreement or any other Loan Documents or for any recital, representation, warranty, document, certificate, report or statement herein or made or furnished under or in connection with this Agreement or any other Loan Documents, or (c) be under any obligation to any of the Banks to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions hereof or thereof on the part of the Loan Parties, or the financial condition of the Loan Parties, or the existence or possible existence of any Event of Default or Potential Default. -104- 114 9.7 Reimbursement and Indemnification of Agent by Banks. Each Bank agrees to reimburse and indemnify the Agent (to the extent not reimbursed by the Borrowers and without limiting the Obligation of the Borrowers to do so) in proportion to its Ratable Share from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, including attorneys' fees and disbursements (including the allocated costs of staff counsel) and costs of appraisers and environmental consultants, of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (a) if the same result from the Agent's gross negligence or willful misconduct, or (b) if such Bank was not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense (except that such Bank shall remain liable to the extent such failure to give notice does not result in a loss to the Bank), or (c) if the same result from a compromise and settlement agreement entered into without the consent of such Bank, which shall not be unreasonably withheld. In addition, each Bank agrees promptly upon demand to reimburse the Agent (to the extent not reimbursed by the Borrowers and without limiting the Obligation of the Borrowers to do so) in proportion to its Ratable Share for all amounts due and payable by the Borrowers to the Agent in connection with the Agent's periodic audit of the Loan Parties' books, records and business properties. Reliance by Agent. The Agent shall be entitled to rely upon any writing, telegram, telex or teletype message, resolution, notice, consent, certificate, letter, cablegram, statement, order or other document or conversation by telephone or otherwise believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon the advice and opinions of counsel and other professional advisers selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. -105- 115 9.9 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Default or Event of Default unless the Agent has received written notice from a Bank or a Borrower referring to this Agreement, describing such Potential Default or Event of Default and stating that such notice is a "notice of default." 9.10 Notices. The Agent shall promptly send to each Bank a copy of all notices received from any Borrower pursuant to the provisions of this Agreement or the other Loan Documents promptly upon receipt thereof. The Agent shall promptly notify the Borrowers and the other Banks of each change in the Base Rate and the effective date thereof. 9.11 Banks in Their Individual Capacities. With respect to its Revolving Credit Commitment and the Revolving Credit Loans made by it and any other rights and powers given to it as a Bank hereunder or under any of the other Loan Documents, the Agent shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not the Agent, and the term "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. PNC Bank and its Affiliates and each of the Banks and their respective Affiliates may, without liability to account, except as prohibited herein, make loans to, accept deposits from, discount drafts for, act as trustee under indentures of and generally engage in any kind of banking or trust business with the Loan Parties and their Affiliates, in the case of the Agent, as though it were not acting as Agent hereunder and, in the case of each Bank, as though such Bank were not a Bank hereunder. The Banks acknowledge that, pursuant to such activities, the Agent or its Affiliates may (i) receive information regarding the Loan Parties (including information that may be subject to confidentiality obligations in favor of the Loan Parties) and acknowledge that the Agent shall be under no obligation to provide such information to them, and (ii) accept fees and other consideration from the Loan Parties for services in connection with this Agreement and otherwise without having to account for the same to the Banks. -106- 116 Holders of Notes. The Agent may deem and treat any payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment or transfer thereof shall have been filed with the Agent. Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 9.13 Equalization of Banks. The Banks and the holders of any participations in any Notes agree among themselves that, with respect to all amounts received by any Bank or any such holder for application on any Obligation hereunder or under any Note or under any such participation, whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker's lien, by counterclaim or by any other non-pro rata source, equitable adjustment will be made in the manner stated in the following sentence so that, in effect, all such excess amounts will be shared ratably among the Banks and such holders in proportion to their interests in payments under the Notes, except as otherwise provided in Section 3.4.3 [Agent's and Bank's Rights], 4.4.2 [Replacement of a Bank] or 4.6 [Additional Compensation in Certain Circumstances]. The Banks or any such holder receiving any such amount shall purchase for cash from each of the other Banks an interest in such Bank's Loans in such amount as shall result in a ratable participation by the Banks and each such holder in the aggregate unpaid amount under the Notes, provided that if all or any portion of such excess amount is thereafter recovered from the Bank or the holder making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by law (including court order) to be paid by the Bank or the holder making such purchase. -107- 117 9.14 Successor Agent. The Agent (i) may resign as Agent or (ii) shall resign if such resignation is requested by the Required Banks (if the Agent is a Bank, the Agent's Loans and its Revolving Credit Commitment shall be considered in determining whether the Required Banks have requested such resignation) or required by Section 4.4.2 [Replacement of a Bank], in either case of (i) or (ii) by giving not less than thirty (30) days' prior written notice to the Borrowers. If the Agent shall resign under this Agreement, then either (a) the Required Banks shall appoint from among the Banks a successor agent for the Banks, subject to the consent of the Borrowers, such consent not to be unreasonably withheld, or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following the Agent's notice to the Banks of its resignation, then the Agent shall appoint, with the consent of the Borrowers, such consent not to be unreasonably withheld, a successor agent who shall serve as Agent until such time as the Required Banks appoint and the Borrowers consent to the appointment of a successor agent. Upon its appointment pursuant to either clause (a) or (b) above, such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the resignation of any Agent hereunder, the provisions of this Article 9 shall inure to the benefit of such former Agent, and such former Agent shall not by reason of such resignation be deemed to be released from liability for any actions taken or not taken by it while it was an Agent under this Agreement. 9.15 Agent's Fee. The Borrowers, jointly and severally, shall pay to the Agent a nonrefundable fee (the "Agent's Fee") under the terms of a letter (the "Agent's Letter") between the Borrowers and Agent, as amended from time to time. -108- 118 9.16 Availability of Funds. The Agent may assume that each Bank has made or will make the proceeds of a Loan available to the Agent unless the Agent shall have been notified by such Bank on or before the later of (1) the close of Business on the Business Day preceding the Borrowing Date with respect to such Loan or (2) two hours before the time the Agent actually funds the proceeds of such Loan to a Borrower (whether using its own funds pursuant to this Section 9.16 or using proceeds deposited with the Agent by the Banks and whether such funding occurs before or after the time the Banks are required to deposit the proceeds of such Loan with the Agent). The Agent may, in reliance upon such assumption (but shall not be required to), make available to such Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank, the Agent shall be entitled to recover such amount on demand from such Bank (or, if such Bank fails to pay such amount forthwith, upon such demand from a Borrower), together with interest thereon, in respect of each day during the period commencing on the date such amount was made available to such Borrower and ending on the date the Agent recovers such amount, at a rate per annum equal to (i) the Federal Funds Effective Rate during the first three (3) days after such interest shall begin to accrue and (ii) the applicable interest rate in respect of such Loan after the end of such three-day period. 9.17 Calculations. In the absence of gross negligence or willful misconduct, the Agent shall not be liable for any error in computing the amount payable to any Bank, whether in respect of the Loans, fees or any other amounts due to the Banks under this Agreement. In the event an error in computing any amount payable to any Bank is made, the Agent, the Borrowers and each affected Bank shall, forthwith upon discovery of such error, make such adjustments as shall be required to correct such error, and any compensation therefor will be calculated at the Federal Funds Effective Rate. -109- 119 9.18 Beneficiaries. Except as expressly provided herein, the provisions of this Article 9 are solely for the benefit of the Agent and the Banks, and the Loan Parties shall not have any rights to rely on or enforce any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation toward, or relationship of agency or trust with or for, any of the Loan Parties. This Section 9.18 is not intended to modify any limit contained in Section 9.8 on the right of the Agent to be indemnified by the Borrowers. 10. MISCELLANEOUS 10.1 Modifications, Amendments or Waivers. With the written consent of the Required Banks, the Agent, acting on behalf of all the Banks, and the Borrowers, on behalf of the Loan Parties, may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Banks or the Loan Parties hereunder or thereunder, or may grant written waivers or consents to a departure from the due performance of the Obligations of the Loan Parties hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Banks and the Loan Parties, provided, that, without the written consent of all the Banks, no such agreement, waiver or consent may be made which will: 10.1.1 Increase of Commitment; Extension or Expiration Date. Increase the amount of the Revolving Credit Commitment of any Bank hereunder or extend the Expiration Date; -110- 120 10.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment. Whether or not any Loans are outstanding, extend the time for payment of principal or interest of any Loan (excluding the due date of any mandatory prepayment of a Loan or any mandatory Revolving Credit Commitment reduction in connection with such a mandatory prepayment hereunder, except for mandatory reductions of the Revolving Credit Commitments on the Expiration Date), the Revolving Credit Commitment Fee or any other fee payable to any Bank, or reduce the principal amount of or the rate of interest borne by any Loan or reduce the Revolving Credit Commitment Fee or any other fee payable to any Bank, or otherwise affect the terms of payment of the principal of or interest on any Loan, the Revolving Credit Commitment Fee or any other fee payable to any Bank; 10.1.3 Release of Collateral or Guarantor. Except for sales of assets permitted by Section 7.2.7 [Dispositions of Assets or Subsidiaries], release any Collateral consisting of capital stock or other ownership interests of any Loan Party or its Subsidiaries or substantially all of the assets of any Loan Party, any Guarantor from its Obligations under the Guaranty Agreement or any other security for any of the Loan Parties' Obligations; or 10.1.4 Miscellaneous Amend Section 4.2 [Pro Rata Treatment of Banks], 9.6 [Exculpatory Provisions, Etc.] or 9.13 [Equalization of Banks] or this Section 10.1, alter any provision regarding the pro rata treatment of the Banks, change the definition of Required Banks or change any requirement providing for the Banks or the Required Banks to authorize the taking of any action hereunder; provided, further, that no agreement, waiver or consent which would modify the interests, rights or obligations of the Agent in its capacity as Agent or as the issuer of Letters of Credit shall be effective without the written consent of the Agent. -111- 121 10.2 No Implied Waivers; Cumulative Remedies; Writing Required. No course of dealing and no delay or failure of the Agent or any Bank in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy or privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Agent and the Banks under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of any Bank of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. -112- 122 10.3 Reimbursement and Indemnification of Banks by the Borrowers; Taxes. The Borrowers, jointly and severally, agree unconditionally upon demand to pay or reimburse each Bank (other than the Agent, as to which the Borrowers' Obligations are set forth in Section 9.5 [Reimbursement and Indemnification of Agent by the Borrowers]) for and to save such Bank harmless against (i) liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements (including fees and expenses of counsel (including allocated costs of staff counsel) for each Bank except with respect to (a) and (b) below) incurred by such Bank (a) in connection with the administration and interpretation of this Agreement, and other instruments and documents to be delivered hereunder, (b) relating to any amendments, waivers or consents pursuant to the provisions hereof, (c) in connection with the enforcement of this Agreement or any other Loan Document or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (d) in any workout or restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings, and (ii) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Bank, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by such Bank hereunder or thereunder, provided that the Borrowers shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (A) if the same result from such Bank's gross negligence or willful misconduct, or (B) if the Borrowers were not given notice of the subject claim and the opportunity to participate in the defense thereof, at their expense (except that the Borrowers shall remain liable to the extent such failure to give notice does not result in a loss to the Borrowers), or (C) if the same result from a compromise or settlement agreement entered into without the consent of the Borrowers, which shall not be unreasonably withheld. The Banks will attempt to minimize the fees and expenses of legal counsel for the Banks which are subject to reimbursement by the Borrowers hereunder by considering the usage of one law firm to represent the Banks and the Agent if appropriate under the circumstances. Each Borrower agrees unconditionally to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Agent or -113- 123 any Bank to be payable in connection with this Agreement or any other Loan Document, and the Borrowers, jointly and severally, agree unconditionally to save the Agent and the Banks harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions. 10.4 Holidays. Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day, such payment shall be due on the next Business Day, and such extension of time shall be included in computing interest and fees, except that the Loans shall be due on the Business Day preceding the Expiration Date if the Expiration Date is not a Business Day. Whenever any payment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day (except as provided in Section 3.2 [Interest Periods] with respect to Interest Periods under the Euro-Rate Option), and such extension of time shall not be included in computing interest or fees, if any, in connection with such payment or action. 10.5 Funding by Branch, Subsidiary or Affiliate. 10.5.1 Notional Funding. Each Bank shall have the right from time to time, without notice to the Borrowers, to deem any branch, Subsidiary or Affiliate (which for the purposes of this Section 10.5 shall mean any corporation or association which is directly or indirectly controlled by or is under direct or indirect common control with any corporation or association which directly or indirectly controls such Bank) of such Bank to have made, maintained or funded any Loan to which the Euro-Rate Option applies at any time, provided that immediately following (on the assumption that a payment were then due from a Borrower to such other office) and as a result of such change, such Borrower would not be under any greater financial obligation pursuant to Section 4.6 [Additional Compensation in Certain Circumstances] than it would have been in the absence of such change. Notional funding offices may be selected by each Bank without regard to such Bank's actual methods of making, maintaining or funding the Loans or any sources of funding actually used by or available to such Bank. -114- 124 Actual Funding. Each Bank shall have the right from time to time to make or maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to make or maintain such Loan subject to the last sentence of this Section 10.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Loans to the same extent as if such Loans were made or maintained by such Bank, but in no event shall any Bank's use of such a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder cause such Bank or such branch, Subsidiary or Affiliate to incur any costs or expenses payable by any Borrower hereunder or require any Borrower to pay any other compensation to any Bank (including any expenses incurred or payable pursuant to Section 4.6 [Additional Compensation in Certain Circumstances]) which would otherwise not be incurred. 10.6 Notices. All notices, requests, demands, directions and other communications (as used in this Section 10.6, collectively referred to as "notices") given to or made upon any party hereto under the provisions of this Agreement shall be by telephone or in writing (including telex or facsimile communication) unless otherwise expressly permitted hereunder and shall be delivered or sent by telex or facsimile to the respective parties at the addresses and numbers set forth under their respective names on Schedule 1.1(B) hereof or in accordance with any subsequent unrevoked written direction from any party to the others. All notices shall, except as otherwise expressly herein provided, be effective (a) in the case of telex or facsimile, when received, (b) in the case of a hand-delivered notice, when hand-delivered, (c) in the case of telephone, when telephoned, provided, however, that in order to be effective, telephonic notices must be confirmed in writing no later than the next day by letter, facsimile or telex, (d) if given by mail, four (4) days after such communication is deposited in the mail with first-class postage prepaid, return receipt requested, and (e) if given by any other means (including by air courier), when delivered; provided, that notices to the Agent shall not be effective until received. Any Bank giving any notice to any Loan Party shall simultaneously send a copy thereof to the Agent, and the Agent shall promptly notify the other Banks of the receipt by it of any such notice. -115- 125 10.7 Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 10.8 Governing Law. Each Letter of Credit and Section 2.9 [Letter of Credit Subfacility] shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be revised or amended from time to time, and, to the extent not inconsistent therewith, the internal Law of the Commonwealth of Pennsylvania without regard to its conflict of laws principles, and the balance of this Agreement shall be deemed to be a contract under the Law of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed and enforced in accordance with the internal Law of the Commonwealth of Pennsylvania without regard to its conflict of laws principles. 10.9 Prior Understanding. This Agreement and the other Loan Documents supersede all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein, including any prior confidentiality agreements and commitments. -116- 126 10.10 Duration; Survival. All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive the making of Loans and issuance of Letters of Credit and shall not be waived by the execution and delivery of this Agreement, any investigation by the Agent or the Banks, the making of Loans, issuance of Letters of Credit or payment in full of the Loans. All covenants and agreements of the Loan Parties contained in Sections 7.1 [Affirmative Covenants], 7.2 [Negative Covenants] and 7.3 [Reporting Requirements] herein shall continue in full force and effect from and after the date hereof so long as the Borrowers may borrow or request Letters of Credit hereunder and until termination of the Revolving Credit Commitments and payment in full of the Loans and expiration or termination of all Letters of Credit. All covenants and agreements of the Borrowers contained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forth in the Notes, Article 4 [Payments] and Sections 9.5 [Reimbursement and Indemnification of Agent by the Borrowers], 9.7 [Reimbursement and Indemnification of Agent by the Banks] and 10.3 [Reimbursement and Indemnification of Banks by the Borrowers; Taxes], shall survive payment in full of the Loans, expiration or termination of the Letters of Credit and termination of the Revolving Credit Commitments. -117- 127 10.11 Successors and Assigns. (i) This Agreement shall be binding upon and shall inure to the benefit of the Banks, the Agent, the Loan Parties and their respective successors and assigns, except that none of the Loan Parties may assign or transfer any of its rights and Obligations hereunder or any interest herein. Each Bank may, at its own cost, make assignments of or sell participations in all or any part of its Revolving Credit Commitments and the Loans made by it to one or more banks or other entities, subject to the consent of the Borrowers and the Agent with respect to any assignee, such consent not to be unreasonably withheld, provided that (1) no consent of the Borrowers shall be required in the case of an assignment by a Bank to an Affiliate of such Bank, and (2) any assignment by a Bank to a Person other than an Affiliate of such Bank may not be made in amounts less than the lesser of $5,000,000 or the amount of the assigning Bank's Revolving Credit Commitment. In the case of an assignment, upon receipt by the Agent of the Assignment and Assumption Agreement, the assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, benefits and obligations as it would have if it had been a signatory Bank hereunder, the Revolving Credit Commitments shall be adjusted accordingly, and upon surrender of any Note subject to such assignment, each Borrower shall execute and deliver a new Note to the assignee in an amount equal to the amount of the Revolving Credit Commitment assumed by it and a new Revolving Credit Note to the assigning Bank in an amount equal to the Revolving Credit Commitment retained by it hereunder. Any Bank which assigns any or all of its Revolving Credit Commitment or Loans to a Person other than an Affiliate of such Bank shall pay to the Agent a service fee in the amount of $3,500 for each assignment. In the case of a participation, the participant shall have only the rights specified in Section 8.2.3 [Set-off] (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto and not to include any voting rights except with respect to changes of the type referenced in Section 10.1.1 [Increase of Commitment, Etc.], 10.1.2 [Extension of Payment, Etc.] or 10.1.3 [Release of Collateral or Guarantor], all of such Bank's obligations under this Agreement or any other Loan Document shall remain unchanged, and all amounts payable by any Loan Party hereunder or thereunder shall be determined as if such Bank had not sold such participation. (ii) Any assignee or participant which is not incorporated under the Laws of the United States of America or a state thereof shall deliver to the Borrowers and the Agent the form of certificate described in Section 10.17 [Tax Withholding Clause] relating to federal income tax withholding. Each Bank -118- 128 may furnish any publicly available information concerning any Loan Party or its Subsidiaries and any other information concerning any Loan Party or its Subsidiaries in the possession of such Bank from time to time to assignees and participants (including prospective assignees or participants), provided that such assignees and participants agree to be bound by the provisions of Section 10.12 [Confidentiality]. (iii) Notwithstanding any other provision in this Agreement, any Bank may at any time pledge or grant a security interest in all or any portion of its rights under this Agreement, its Note and the other Loan Documents to any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent of the Borrowers or the Agent. No such pledge or grant of a security interest shall release the transferor Bank of its obligations hereunder or under any other Loan Document. 10.12 Confidentiality. 10.12.1 General. The Agent and the Banks each agree to keep confidential all information obtained from any Loan Party or its Subsidiaries which is nonpublic and confidential or proprietary in nature (including any information a Borrower specifically designates as confidential), except as provided below, and to use such information only in connection with their respective capacities under this Agreement and for the purposes contemplated hereby. The Agent and the Banks shall be permitted to disclose such information (i) to outside legal counsel, accountants and other professional advisors who need to know such information in connection with the administration and enforcement of this Agreement, subject to agreement of such Persons to maintain the confidentiality, (ii) to assignees and participants as contemplated by Section 10.11, (iii) to the extent requested by any bank regulatory authority or, with three (3) days prior notice (provided that such notice and the delay resulting thereby is permitted by the applicable Law, subpoena, legal process, investigation or proceeding) to the Borrowers, as otherwise required by applicable Law or by any subpoena or similar legal process, or in connection with any investigation or proceeding arising out of the transactions contemplated by this Agreement, (iv) if it becomes publicly available other than as a result of a breach of this Agreement or becomes available from a source not known to be subject to confidentiality restrictions, or (v) if a Borrower shall have consented to such disclosure. -119- 129 10.12.2 Sharing Information With Affiliates of the Banks. Each Loan Party acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to a Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Bank or by one or more Subsidiaries or Affiliates of such Bank, and each of the Loan Parties hereby authorizes each Bank to share any information delivered to such Bank by such Loan Party and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Bank to enter into this Agreement, any such Subsidiary or Affiliate of such Bank, it being understood that any such Subsidiary or Affiliate of any Bank receiving such information shall be bound by the provisions of Section 10.12.1 as if it were a Bank hereunder. Such authorization shall survive the repayment of the Loans and other Obligations and the termination of the Revolving Credit Commitments. 10.13 Counterparts. This Agreement may be executed by different parties hereto on any number of separate counterparts, each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. 10.14 Agent's or Bank's Consent. Whenever the Agent's or any Bank's consent is required to be obtained under this Agreement or any of the other Loan Documents as a condition to any action, inaction, condition or event, the Agent and each Bank shall be authorized to give or withhold such consent in its sole and absolute discretion and to condition its consent upon the giving of additional collateral, the payment of money or any other matter. 10.15 Exceptions. The representations, warranties and covenants contained herein shall be independent of each other, and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exceptions be deemed to permit any action or omission that would be in contravention of applicable Law. -120- 130 CONSENT TO FORUM; WAIVER OF JURY TRIAL. EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 10.6 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW. -121- 131 10.17 Tax Withholding Clause. Each Bank or assignee or participant of a Bank that is not incorporated under the Laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Agent two (2) duly completed copies of the following: (i) Internal Revenue Service Form W-9, 4224 or 1001, or other applicable form prescribed by the Internal Revenue Service, certifying that such Bank, assignee or participant is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes, or is subject to such tax at a reduced rate under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8 or other applicable form or a certificate of such Bank, assignee or participant indicating that no such exemption or reduced rate is allowable with respect to such payments. Each Bank, assignee or participant required to deliver to the Borrowers and the Agent a form or certificate pursuant to the preceding sentence shall deliver such form or certificate as follows: (A) each Bank which is a party hereto on the Closing Date shall deliver such form or certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable by the Borrower hereunder for the account of such Bank; and (B) each assignee or participant shall deliver such form or certificate at least five (5) Business Days before the effective date of such assignment or participation (unless the Agent in its sole discretion shall permit such assignee or participant to deliver such form or certificate less than five (5) Business Days before such date, in which case it shall be due on the date specified by the Agent). Each Bank, assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the Borrowers and the Agent two (2) additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by a Borrower or the Agent, either certifying that such Bank, assignee or participant is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes or is subject to such tax at a reduced rate under an applicable tax treaty or stating that no such exemption or reduced rate is allowable. The Agent shall be entitled to withhold United States federal income taxes at the full withholding rate unless the Bank, assignee or participant establishes an exemption or that it is subject to a reduced rate as established pursuant to the above provisions. -122- 132 10.18 Joinder of Guarantors. Any Subsidiary of any of the Borrowers which is required to join this Agreement as a Guarantor pursuant to Section 7.2.9 [Subsidiaries, Partnerships and Joint Ventures] shall execute and deliver to the Agent (i) a Guaranty Agreement (for entities which are not Borrowers) or a Guarantor Joinder to such Guaranty Agreement in substantially the form attached hereto as Exhibit (G)(1) or (2) pursuant to which it shall join as a Guarantor each of the documents to which the Guarantors are parties; (ii) documents in the forms described in Section [First Loans] modified as appropriate to relate to such Subsidiary including an opinion of counsel for such Subsidiary satisfactory to the Agent addressing the matters described in Exhibit 6.1.4 as such matters relate to such Subsidiary, the documents which it is executing and delivering and the Liens which it is granting; and (iii) documents necessary to grant and perfect Prior Security Interests to the Agent for the benefit of the Banks in all Collateral held by such Subsidiary including executed financing statements and a Security Agreement (for entities which are not Borrowers) in the substantially the form of Exhibit 1.1(S)(1). The Loan Parties shall deliver such Guarantor Joinder and related documents to the Agent: (i) within five (5) Business Days after the date of the filing of such Subsidiary's articles of incorporation if the Subsidiary is a corporation, the date of the filing of its certificate of limited partnership if it is a limited partnership or the date of its organization if it is an entity other than a limited partnership or corporation and (ii) on or before the date of the Permitted Acquisition if it is organized or acquired in connection with a Permitted Acquisition. [SIGNATURE PAGES FOLLOW] -123- 133 [SIGNATURE PAGE _ OF _ OF CREDIT AGREEMENT] IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written. BORROWERS: ATTEST: UNITED REFINING COMPANY _____________________________ By:_____________________________________ Title:__________________________________ [Seal] Address for Notices: 15 Bradley Street Warren, Pennsylvania 16365 Telecopier No. (814) 723-4371 Attention: Myron L. Turfitt, President Telephone No. (___) ____-_______ ATTEST: UNITED REFINING COMPANY OF PENNSYLVANIA _____________________________ By:_____________________________________ Title:__________________________________ [Seal] Address for Notices: 15 Bradley Street Warren, Pennsylvania 16365 Telecopier No. (814) 723-4371 Attention: Myron L. Turfitt, President Telephone No. (___) ____-_______ -124- 134 ATTEST: KIANTONE PIPELINE CORPORATION _____________________________ By:_____________________________________ Title:__________________________________ [Seal] Address for Notices: 15 Bradley Street Warren, Pennsylvania 16365 Telecopier No. (814) 723-4371 Attention: Myron L. Turfitt President Telephone No. (___) ____-_______ GUARANTORS: ATTEST: UNITED REFINING COMPANY _____________________________ By:_____________________________________ Title:__________________________________ [Seal] ATTEST: UNITED REFINING COMPANY OF PENNSYLVANIA _____________________________ By:_____________________________________ Title:__________________________________ [Seal] ATTEST: KIANTONE PIPELINE CORPORATION _____________________________ By:_____________________________________ Title:__________________________________ [Seal] -125- 135 PNC BANK, NATIONAL ASSOCIATION, individually and as Agent By:_____________________________________ Title:__________________________________ [OTHER BANKS] By:_____________________________________ Title:__________________________________ -126- 136 SCHEDULE 1.1(B) COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES Page 1 of 2 PART 1 - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES TO BANKS
AMOUNT OF COMMITMENT FOR REVOLVING BANK CREDIT LOANS RATABLE SHARE ---- ------------ ------------- Name: PNC Bank, National Association Address: One PNC Plaza, 3rd Floor 249 Fifth Avenue Pittsburgh, PA 15222-2707 $35,000,000 100.00% Attention: Robert D. Erwin Telephone: 412-762-3837 Telecopy: 412-762-2571
137 SCHEDULE 1.1(B) COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES Page 2 of 2 PART 2 - ADDRESSES FOR NOTICES TO BORROWERS AND GUARANTORS: AGENT Address: PNC Bank, National Association One PNC Plaza, 3rd Floor 249 Fifth Avenue Pittsburgh, PA 15222-2707 Attention: Robert D. Erwin Telephone: 412-762-3837 Telecopy: 412-762-2571 BORROWERS AND GUARANTORS: Address: c/o United Refining Company 15 Bradley Street Warren, PA 16365 Attention: Myron L. Turfitt Telephone: 814-723-1500 Telecopy: 814-723-4371 -2- 138 SCHEDULE 1.1(Q)(i) QUALIFIED ACCOUNTS Upon delivery to the Agent of each Schedule of Accounts, the Agent shall make a determination, in its sole discretion, as to which Accounts listed thereon shall be deemed Qualified Accounts. An Account shall not be considered a Qualified Account unless the Agent determines, in its sole discretion, that such Account has met the following minimum requirements: (i) the Account represents a complete bona fide transaction for goods sold and delivered or services rendered (but excluding any amounts in the nature of a service charge added to the amount due on an invoice because the invoice has not been paid when due) which requires no further act under any circumstances on the part of any Borrower to make such Account payable by the Account Debtor; the Account arises from an arm's length transaction in the ordinary course of the Borrowers' business between a Borrower and an Account Debtor which is not an Affiliate of a Borrower or an officer, stockholder or employee of a Borrower or of any Affiliate of a Borrower, or a member of the family of an officer, stockholder or employee of a Borrower or of any Affiliate of a Borrower; (ii) the Account shall not (a) if payable on a "net 10 basis" be or have been unpaid more than thirty (30) days from the invoice date; (b) if payable on a "net 30 basis" or basis other than described in the preceding clause (a) be or have been unpaid more than ninety (90) days from the invoice date, (c) be delinquent more than sixty (60) days, or (d) be payable by an Account Debtor (1) more than 50% of whose Accounts have remained unpaid for more than ninety (90) days from the invoice date or are delinquent more than sixty (60) days, or (2) whose Accounts constitute, in the Agent's determination, an unduly high percentage of the aggregate amount of all outstanding Accounts; (iii) the goods the sale of which gave rise to the Account were shipped or delivered or provided to the Account Debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding, and no part of such goods has been returned or rejected; (iv) the Account is not evidenced by chattel paper or an instrument of any kind; (v) the Account Debtor with respect to the Account (a) is solvent, (b) is not the subject of any bankruptcy 139 or insolvency proceedings of any kind or of any other proceeding or action, threatened or pending, which might have a materially adverse effect on its business, and (c) is not, in the sole discretion of the Agent, deemed ineligible for credit for other reasons (including, without limitation, unsatisfactory past experiences of the Borrowers or any of the Banks with the Account Debtor or unsatisfactory reputation of the Account Debtor); (vi) (a) the Account Debtor is not located outside Canada or the continental United States of America, or (b) if the Account Debtor is located outside the continental United States, the Account is supported by a letter of credit or FICA insurance deemed adequate and acceptable by the Agent; (vii) (a) the Account Debtor is not the government of the United States of America or any department, agency or instrumentality thereof, or (b) if the Account Debtor is an entity mentioned in clause (vii)(a), the Federal Assignment of Claims Act (or applicable similar legislation) has been fully complied with so as to validly perfect the Banks' Prior Security Interest to the Agent's satisfaction; (viii) the Account is a valid, binding and legally enforceable obligation of the Account Debtor with respect thereto and is not subject to any dispute, condition, contingency, offset, recoupment, reduction, claim for credit, allowance, adjustment, counterclaim or defense on the part of such Account Debtor, and no facts exist which may provide a basis for any of the foregoing in the present or future; (ix) the Account is subject to the Agent's and the Banks' Prior Security Interest and is not subject to any other Lien, claim, encumbrance or security interest whatsoever; (x) the Account is evidenced by an invoice or other documentation and arises from a contract which is in form and substance satisfactory to the Agent; (xi) the appropriate Borrower has observed and complied with all laws of the state in which the Account Debtor or the Account is located which, if not observed and complied with, would deny to such Borrower access to the courts of such state; (xii) the Account is not subject to any provision prohibiting its assignment or requiring notice of or consent to such assignment; (xiii) the goods giving rise to the Account were not, at the time of sale thereof, subject to any Lien or -2- 140 encumbrance except the Agent's and the Banks' Prior Security Interest; (xiv) the Account is payable in freely transferable United States Dollars; and (xv) the Account is not, or should not be, disqualified for any other reason generally accepted in the commercial finance business. In addition to the foregoing requirements, Accounts of any Account Debtor which are otherwise Qualified Accounts shall be reduced to the extent of any accounts payable (including, without limitation, the Agent's estimate of any contingent liabilities) by a Borrower to such Account Debtor ("Contras") provided that the Agent, in its sole discretion, may determine that none of the Accounts in respect to such Account Debtor shall be Qualified Accounts in the event that there exists an unreasonably large amount of payables owing to such Account Debtor. Notwithstanding the qualification standards specified above, upon prior notice to the Borrowers, the Agent may at any time or from time to time revise such qualification standards. -3- 141 SCHEDULE 1.1(Q)(ii) QUALIFIED INVENTORY Upon delivery to the Agent of each Schedule of Inventory, the Agent shall make a determination, in its sole discretion, as to which Inventory listed thereon shall be deemed Qualified Inventory. Inventory shall not be considered Qualified Inventory unless the Agent determines, in its sole discretion, that such Inventory has met the following minimum requirements: (i) the Inventory is either (a) finished goods (b) raw materials other than supplies or (c) work-in-process; but excluding in all cases any goods which have been shipped, delivered, sold by, purchased by or provided to a Borrower on a bill and hold, consignment sale, guaranteed sale, or sale or return basis, or any other similar basis or understanding other than an absolute sale and also excluding all supplies; (ii) the Inventory is new, of good and merchantable quality, and represents no more than a twelve (12) month supply of such finished goods or raw materials; (iii) the Inventory is located in the pipeline owned by Kiantone or in storage tanks located on a site owned by a Borrower or leased by a Borrower if the landlord has executed a landlord's waiver in the form of Exhibit 1.1(Q)(ii) hereto; (iv) the Inventory is not stored with a bailee, warehouseman, consignee or similar party unless the Agent has given its prior written consent and a Borrower has caused such bailee, warehouseman, consignee or similar party to issue and deliver to the Agent, in the form of Exhibit 1.1(Q)(ii) hereto, warehouse receipts or similar type documentation therefor in the Agent's name; (v) the Inventory is subject to the Agent's and the Banks' Prior Security Interest and is not subject to any other Lien; (vi) the Inventory has not been manufactured in violation of any federal minimum wage or overtime laws, including, without limitation, the Fair Labor Standards Act, 29 U.S.C. Section 215(a)(1); (vii) the Inventory is not, and should not be, disqualified for any other reason generally accepted in the commercial finance business; and (viii) the Inventory is attached, seized, levied upon or subjected to a writ or distress warrant, or such 142 come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not cured within thirty (30) days thereafter. Notwithstanding the qualification standards specified above, upon prior notice to the Borrowers, the Agent may at any time or from time to time revise such qualification standards. 143 SCHEDULE 1.1(A) PRICING GRID-- VARIABLE PRICING AND FEES BASED ON LEVERAGE RATIO
===================================================================================== Revolving Revolving Letter of Credit Base Credit Euro- Credit LEVEL Leverage Ratio Rate Spread Rate Spread Fee ===================================================================================== Level I Less than 2.0 to 1.0 0 1.25% 1.25% - ------------------------------------------------------------------------------------- Level II Greater than or equal to 0 1.50% 1.50% 2.0 to 1.0 but less than 3.0 to 1.0 - ------------------------------------------------------------------------------------- Level III Greater than or equal to .25% 1.75% 1.75% 3.0 to 1.0 but less than 3.5 to 1.0 - ------------------------------------------------------------------------------------- Level IV Greater than or equal to .50% 2.00% 2.00% 3.5 to 1.0 but less than 4.0 to 1.0 - ------------------------------------------------------------------------------------- Level V Greater than or equal to .75% 2.25% 2.25% 4.0 to 1.0 =====================================================================================
For purposes of determining the Applicable Margin and the Letter of Credit Fee: (a) The Applicable Margin and the Letter of Credit Fee shall be determined on the Closing Date based on the Leverage Ratio computed on such date pursuant to a certificate in the form of Exhibit 1.1(A)(2) to be delivered on the Closing Date. (b) The Applicable Margin and the Letter of Credit Fee shall be recomputed as of the end of each fiscal quarter ending after the Closing Date based on the Leverage Ratio as of such quarter-end. Any increase or decrease in the Applicable Margin or the Letter of Credit Fee computed as of a quarter end shall be effective on the date on which the Compliance Certificate evidencing such computation is due to be delivered under Section 8.3.4. EX-10.10 35 CONTINUING AGREEMENT 1 EXHIBIT 10.10 CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP This Continuing Agreement of Guaranty and Suretyship (the "Guaranty") is made and entered into this 9th day of June, 1997, by UNITED REFINING COMPANY, (the "Guarantor"), for the benefit of the Banks which are a party to that certain Credit Agreement by and among Guarantor,United Refining Company of Pennsylvania, Kiantone Pipeline Corporation, PNC Bank, National Association, as agent (the "Agent") and the Banks party thereto dated as of even date herewith (as amended, supplemented or modified from time to time, the "Credit Agreement"). BACKGROUND In order to induce the Banks to make loans to the Guarantor and the other Borrowers (as defined in the Credit Agreement) in accordance with that certain Credit Agreement, the Guarantor hereby unconditionally and irrevocably guarantees and becomes surety as though it was a primary obligor for the full and timely payment when due, whether at maturity, by declaration, acceleration or otherwise, of the principal of and interest and fees on all Loans (as defined in the Credit Agreement), both those now in existence and those that shall hereafter be made, of the Bank to the Borrowers under the Credit Agreement and the Notes issued by the Borrowers in connection therewith and any extensions, renewals, replacements or refundings thereof, and each and every other obligation or liability (both those now in existence and those that shall hereafter arise and including, without limitation, all costs and expenses of enforcement and collection, including reasonable attorney's fees) of the Borrowers to the Bank under the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) except this Agreement, and any extensions, renewals, replacements or refundings thereof (hereinafter referred to as the "Guaranteed Indebtedness"), whether or not such Guaranteed Indebtedness or any portion thereof shall hereafter be released or discharged or is for any reason invalid or unenforceable. 1. Capitalized terms used herein and not otherwise defined herein shall have such meanings given to them in the Credit Agreement. 2. The Guarantor agrees to make such full payment forthwith upon demand of the Agent or any Bank when the Guaranteed Indebtedness or any portion thereof is due to be paid by the other Borrowers, or any of them, whether at stated maturity, by declaration, acceleration or otherwise. The Guarantor agrees to make such full payment irrespective of whether or not any one or more of the following events has occurred: (i) the Agent or any of the Banks have made any demand on any other Borrower; (ii) the Agent or any of the Banks have taken any action of any nature against any other Borrower; (iii) the Agent or any of the Banks have pursued any rights which 2 they have against any other Person who may be liable for the Guaranteed Indebtedness; (iv) the Agent or any of the Banks hold or have resorted to any security for the Guaranteed Indebtedness; or (v) the Agent or any of the Banks have invoked any other remedies or right they have available with respect to the Guaranteed Indebtedness. The Guarantor further agrees to make full payment to the Banks even if circumstances exist which otherwise constitute a legal or equitable discharge of the Guarantor as surety or guarantor. 3. The Guarantor warrants to the Agent and the Banks that: (i) no other agreement, representation or special condition exists between such Guarantor and the Agent and/or any of the Banks regarding the liability of the Guarantor hereunder, nor does any understanding exist between the Guarantor and the Agent and/or any of the Banks that the obligations of the Guarantor hereunder are or will be other than as set forth herein; and (ii) as of the date hereof, the Guarantor has no defense whatsoever to any action or proceeding that may be brought to enforce this Guaranty. 4. The Guarantor waives and agrees not to enforce any of the rights of the Guarantor against any other Borrower, including, but not limited to: (i) any right of the Guarantor to be subrogated in whole or in part to any right or claim with respect to any Guaranteed Indebtedness or any portion thereof to any of the Banks which might otherwise arise from payment by the Guarantor to any of the Banks on the account of the Guaranteed Indebtedness or any portion thereof; and (ii) any right of the Guarantor to require the marshalling of assets of any other Borrower which might otherwise arise from payment by the Guarantor to any of the Banks on account of the Guaranteed Indebtedness or any portion thereof. If any amount shall be paid to the Guarantor in violation of the preceding sentence, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the Agent and shall forthwith be paid to the Agent for the benefit of the Agent and the Banks to be credited and applied upon the Guaranteed Indebtedness, whether matured or unmatured, in accordance with the terms of the Credit Agreement provided that the Guarantor shall have the rights against any other Borrower listed above after all Obligations under the Credit Agreement are paid in full in cash. The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in this Section are knowingly made in contemplation of such benefits. 5. The Guarantor waives promptness and diligence by the Agent or any of the Banks with respect to its rights under this Guaranty. 6. The Guarantor waives any and all notice with respect to: (i) acceptance by the Agent and the Banks of this Guaranty; (ii) the provisions of any note, instrument or agreement relating 3 to the Guaranteed Indebtedness; (iii) any default in connection with the Guaranteed Indebtedness; and (iv) any other notice in connection with the Guaranteed Indebtedness. 7. The Guarantor waives any presentment, demand, notice of dishonor or nonpayment, protest, and notice of protest in connection with the Guaranteed Indebtedness. 8. The Guarantor agrees that the Agent or any of the Banks may from time to time and as many times as the Agent or any of the Banks, in their sole discretion, deem appropriate, do any of the following without notice to the Guarantor and without adversely affecting the validity or enforceability of this Guaranty: (i) release, surrender, exchange, compromise, or settle the Guaranteed Indebtedness or any portion thereof; (ii) change, renew, or waive the terms of the Guaranteed Indebtedness or any portion thereof; (iii) change, renew, or waive the terms, including without limitation, the rate of interest charged to any other Borrower, of any note, instrument, or agreement relating to the Guaranteed Indebtedness or any portion thereof; (iv) grant any extension or indulgence with respect to the payment to the Agent or any of the Banks of the Guaranteed Indebtedness or any portion thereof; (v) enter into any agreement of forbearance with respect to the Guaranteed Indebtedness or any portion thereof; (vi) release, surrender, exchange or compromise any security held by the Agent or any of the Banks for the Guaranteed Indebtedness; (vii) release any Person who is a guarantor or surety or who has agreed to purchase the Guaranteed Indebtedness or any portion thereof; and (viii) release, surrender, exchange or compromise any security or Lien held by the Agent or any of the Banks for the liabilities of any Person who is a guarantor or surety for the Guaranteed Indebtedness or any portion thereof. The Guarantor agrees that the Agent or any of the Banks may do any of the above as the Agent or such Bank deems necessary or advisable, in the Agent's or such Bank's sole discretion, without giving any notice to the Guarantor, and that the Guarantor will remain liable for full payment to the Agent and each of the Banks of the Guaranteed Indebtedness. 9. The Guarantor agrees to be bound by the terms of this Guaranty and liable under this Guaranty. As a result of such liability, the Guarantor acknowledges that the Agent or any of the Banks may, in their sole discretion, elect to enforce this Guaranty for the total Guaranteed Indebtedness against the Guarantor without any duty or responsibility to pursue any other guarantor and that such an election by the Agent or any of the Banks shall not be a defense to any action the Agent or any of the Banks may elect to take against the Guarantor. 10. If any amount owing hereunder shall have become due and payable (by acceleration or otherwise), each of the Banks and any branch, subsidiary or affiliate of each of the Banks anywhere in the world shall each have the right, at any time and from time to time to the fullest extent permitted by Law, in addition to all other rights and remedies available to it, without prior notice 4 to the Guarantor, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of the Guarantor by such Bank or any such branch, subsidiary or affiliate including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by the Guarantor with such Bank or such branch, subsidiary or affiliate. Such right shall exist whether or not any Bank, or such branch, subsidiary or affiliate or the Agent shall have given notice or made any demand hereunder or under any of the Notes or Loan Documents, whether or not such debt owing to or funds held for the account of the Guarantor is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guarantee or any other security, right or remedy available to such Bank or such branch, subsidiary or affiliate. The Guarantor hereby consents to and confirms the foregoing arrangements, and confirms the Bank's rights and each such branch's, subsidiary's and affiliate's rights of banker's lien and set-off. 11. The Guarantor recognizes and agrees that any other Borrower, after the date hereof, may incur additional Indebtedness or other obligations, fees and expenses to the Agent and/or the Banks under the Credit Agreement, refinance existing Guaranteed Indebtedness or pay existing Guaranteed Indebtedness and subsequently incur additional Indebtedness to the Agent and/or the Banks under the Credit Agreement, and that in any such transaction, even if such transaction is not now contemplated, the Agent and the Banks will rely in any such case upon this Guaranty and the enforceability thereof against the Guarantor and that this Guaranty shall remain in full force and effect with respect to such future Indebtedness of the other Borrower to the Agent and/or the Banks and such Indebtedness shall for all purposes constitute Guaranteed Indebtedness. 12. The Guarantor further agrees that, if at any time all or any part of any payment, from whomever received, theretofore applied by the Agent or any of the Banks to any of the Guaranteed Indebtedness is or must be rescinded or returned by the Agent or any of the Banks for any reason whatsoever including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor, such liability shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or any of the Banks, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such liabilities, all as though such application by the Agent or any of the Banks had not been made. 13. The Guarantor agrees that no failure or delay on the part of the Agent or any of the Banks to exercise any of its rights, powers or privileges under this Guaranty shall be a wavier of such rights, powers or privileges or a waiver of any 5 default, nor shall any single or partial exercise of any of the Agent's or the Bank's rights, powers or privileges preclude other or further exercise thereof or the exercise of any other right, power or privilege or be construed as a waiver of any default. The Guarantor further agrees that no waiver or modification of any rights of the Agent or any of the Banks under this Guaranty shall be effective unless in writing and signed by the Agent and the Banks. The Guarantor further agrees that each written waiver shall extend only to the specific instance actually recited in such written waiver and shall not impair the rights of the Agent and the Banks in any other respect. 14. The Guarantor unconditionally agrees to pay all costs and expenses, including reasonable attorney's fees, incurred by the Agent and any of the Banks in enforcing this Guaranty against the Guarantor. 15. The Guarantor agrees that this Guaranty and the rights and obligations of the Guarantor, the Agent and the Banks shall for all purposes be governed by and construed and enforced in accordance with the substantive law of the Commonwealth of Pennsylvania without giving effect to its principles of conflict of laws. 16. The Guarantor recognizes that this Guaranty when executed constitutes a sealed instrument and as a result the instrument will be enforceable as such without regard to any statute of limitations which might otherwise be applicable and without any consideration. 17. The Guarantor acknowledges that in addition to binding itself to this Guaranty, at the time of execution of this Guaranty the Agent and the Banks offered to such Guarantor a copy of this Guaranty in the form in which it was executed and that by acknowledging this fact the Guarantor may not later be able to claim that a copy of the Guaranty was not received by it. 18. The Guarantor agrees that this Guaranty shall be binding upon the Guarantor, its successors and assigns; provided, however, that the Guarantor may not assign or transfer any of tis rights and obligations hereunder or any interest herein. The Guarantor further agrees that (i) this Guaranty is freely assignable and transferable by the Agent and each Bank in connection with any assignment or transfer of the Guaranteed Indebtedness and (ii) this Guaranty shall inure to the benefit of the Agent and each of the Banks, their successors and assigns. 19. The Guarantor agrees that if the Guarantor fails to perform any covenant or agreement hereunder or if there occurs an Event of Default under the Credit Agreement, all or any part of the Guaranteed Indebtedness may be declared to be forthwith due and payable and, in the case of an Event of Default described in subsections 8.1.13 or 8.1.14 of the Credit Agreement, the Guaranteed Indebtedness shall be immediately due and payable, in any case without presentment, demand, protest or notice of any 6 kind, all of which are hereby expressly waived. 20. The Guarantor agrees that the enumeration of the Bank's rights and remedies set forth in this Guaranty is not intended to be exhaustive and the exercise by the Agent or any of the Banks of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and shall be in addition to any other right or remedy given hereunder or under any other agreement among the parties to the Loan Documents or which may now or hereafter exist at law or in equity or by suit or otherwise. 21. The Guarantor agrees that all notices, statements, requests, demands and other communications under this Guaranty shall be given to the Guarantor at the address set forth below its name on the signature page hereof and to Lowenthal, Landau, Fischer & Bring, P.C., 250 Park Avenue, New Your, NY 10177, Attn: Martin R. Bring, Esq.,in the manner provided in Section 10.6 of the Credit Agreement. 22. (a) The Guarantor agrees that the provisions of this Guaranty are severable, and in an action or proceeding involving any state or federal bankruptcy, insolvency or other law affecting the rights of creditors generally: (i) if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Guaranty in any jurisdiction. (ii) if this Guaranty would be held or determined to be void, invalid or unenforceable on account of the amount of the Guarantor's aggregate liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the aggregate amount of such liability shall, without any further action by the Agent or any Bank, the Guarantor or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding, which (without limiting the generality of the foregoing) may be an amount which is not greater than the greater of: (A) the fair consideration actually received by the Guarantor under the terms of and as a result of the Loan Documents, including, without limiting the generality of the foregoing, and to the extent not inconsistent with applicable federal and state laws affecting the enforceability of guarantees, distributions or advances made to the Guarantor with the proceeds of any credit extended under the Loan Documents in exchange for its guaranty of the Guaranteed Indebtedness, or (B) the excess of (1) the amount of the fair 7 saleable value of the assets of the Guarantor as of the date of this Guaranty as determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors as in effect on the date thereof over (2) the amount of all liabilities of the Guarantor as of the date of this Guaranty, also as determined on the basis of applicable federal and state laws governing the insolvency of debtors as in effect on the date thereof. (b) If the guaranty by the Guarantor of the Guaranteed Indebtedness is held or determined to be void, invalid or unenforceable, in whole or in part, such holding or determination shall not impair or affect: (i) the validity and enforceability of the guaranty hereunder by any other guarantor, which shall continue in full force and effect in accordance with its terms; or (ii) the validity and enforceability of any clause or provision not so held to be void, invalid or unenforceable. 23. THE GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. THE GUARANTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR THE BANKS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND DELIVERY HEREOF BY THE GUARANTOR, AND (ii) ACKNOWLEDGES THAT THE ENTERING INTO OF THE CREDIT AGREEMENT BY THE BANK HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION. 24. The Guarantor (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania, or any successor to said court, and to the nonexclusive jurisdiction of the United States District Court for the Western District of Pennsylvania, or any successor to said court (hereinafter referred to as the "Pennsylvania Courts") for purposes of any suit, action or other proceeding which relates to this Guaranty or any other Loan Document, (ii) to the extent permitted by applicable Law, hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the Pennsylvania Courts; that such suit, action or proceeding is brought in an inconvenient forum; that the venue of such suit, action or proceeding is improper; or that this Guaranty or any Loan Document may not be enforced in or by the Pennsylvania Courts, (iii) hereby agrees not to seek, and hereby waives, any collateral review by any other court, which may be called upon to enforce the judgment of any of the Pennsylvania Courts, of the merits of any such suit, action or proceeding or the jurisdiction of the Pennsylvania Courts, and (iv) waives personal service of 8 any and all process upon it and consents that all such service of process by made by certified or registered mail addressed as provided in Section 21 hereof and service so made shall be deemed to be completed upon actual receipt thereof. Nothing herein shall limit the Agent's or any Bank's right to bring any suit, action or other proceeding against the Guarantor or any of Guarantor's assets or to serve process on the Guarantor by any means authorized by Law. [SIGNATURES BEGIN ON NEXT PAGE] 9 [SIGNATURE PAGE 1 OF 1 TO THE GUARANTY AGREEMENT] IN WITNESS WHEREOF, the Guarantor intending to be legally bound, has executed this Guaranty as of the date first above written with the intention that this Guaranty shall constitute a sealed instrument. WITNESS: Attest: UNITED REFINING COMPANY ______________________________ By:_____________________________________ Title:__________________________________ Address for Notices: 15 Bradley Street, Box 780 Warren, PA 16365 EX-10.11 36 CONTINUING AGREEMENT 1 EXHIBIT 10.11 CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP This Continuing Agreement of Guaranty and Suretyship (the "Guaranty") is made and entered into this 9th day of June, 1997, by UNITED REFINING COMPANY OF PENNSYLVANIA, (the "Guarantor"), for the benefit of the Banks which are a party to that certain Credit Agreement by and among Guarantor,United Refining Company, Kiantone Pipeline Corporation, PNC Bank, National Association, as agent (the "Agent") and the Banks party thereto dated as of even date herewith (as amended, supplemented or modified from time to time, the "Credit Agreement"). BACKGROUND In order to induce the Banks to make loans to the Guarantor and the other Borrowers (as defined in the Credit Agreement) in accordance with that certain Credit Agreement, the Guarantor hereby unconditionally and irrevocably guarantees and becomes surety as though it was a primary obligor for the full and timely payment when due, whether at maturity, by declaration, acceleration or otherwise, of the principal of and interest and fees on all Loans (as defined in the Credit Agreement), both those now in existence and those that shall hereafter be made, of the Bank to the Borrowers under the Credit Agreement and the Notes issued by the Borrowers in connection therewith and any extensions, renewals, replacements or refundings thereof, and each and every other obligation or liability (both those now in existence and those that shall hereafter arise and including, without limitation, all costs and expenses of enforcement and collection, including reasonable attorney's fees) of the Borrowers to the Bank under the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) except this Agreement, and any extensions, renewals, replacements or refundings thereof (hereinafter referred to as the "Guaranteed Indebtedness"), whether or not such Guaranteed Indebtedness or any portion thereof shall hereafter be released or discharged or is for any reason invalid or unenforceable. 1. Capitalized terms used herein and not otherwise defined herein shall have such meanings given to them in the Credit Agreement. 2. The Guarantor agrees to make such full payment forthwith upon demand of the Agent or any Bank when the Guaranteed Indebtedness or any portion thereof is due to be paid by the other Borrowers, or any of them, whether at stated maturity, by declaration, acceleration or otherwise. The Guarantor agrees to make such full payment irrespective of whether or not any one or more of the following events has occurred: (i) the Agent or any of the Banks have made any demand on any other Borrower; (ii) the Agent or any of the Banks have taken any action of any nature against any other Borrower; (iii) the Agent or any of the Banks have pursued any rights which 2 they have against any other Person who may be liable for the Guaranteed Indebtedness; (iv) the Agent or any of the Banks hold or have resorted to any security for the Guaranteed Indebtedness; or (v) the Agent or any of the Banks have invoked any other remedies or right they have available with respect to the Guaranteed Indebtedness. The Guarantor further agrees to make full payment to the Banks even if circumstances exist which otherwise constitute a legal or equitable discharge of the Guarantor as surety or guarantor. 3. The Guarantor warrants to the Agent and the Banks that: (i) no other agreement, representation or special condition exists between such Guarantor and the Agent and/or any of the Banks regarding the liability of the Guarantor hereunder, nor does any understanding exist between the Guarantor and the Agent and/or any of the Banks that the obligations of the Guarantor hereunder are or will be other than as set forth herein; and (ii) as of the date hereof, the Guarantor has no defense whatsoever to any action or proceeding that may be brought to enforce this Guaranty. 4. The Guarantor waives and agrees not to enforce any of the rights of the Guarantor against any other Borrower, including, but not limited to: (i) any right of the Guarantor to be subrogated in whole or in part to any right or claim with respect to any Guaranteed Indebtedness or any portion thereof to any of the Banks which might otherwise arise from payment by the Guarantor to any of the Banks on the account of the Guaranteed Indebtedness or any portion thereof; and (ii) any right of the Guarantor to require the marshalling of assets of any other Borrower which might otherwise arise from payment by the Guarantor to any of the Banks on account of the Guaranteed Indebtedness or any portion thereof. If any amount shall be paid to the Guarantor in violation of the preceding sentence, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the Agent and shall forthwith be paid to the Agent for the benefit of the Agent and the Banks to be credited and applied upon the Guaranteed Indebtedness, whether matured or unmatured, in accordance with the terms of the Credit Agreement provided that the Guarantor shall have the rights against any other Borrower listed above after all Obligations under the Credit Agreement are paid in full in cash. The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in this Section are knowingly made in contemplation of such benefits. 5. The Guarantor waives promptness and diligence by the Agent or any of the Banks with respect to its rights under this Guaranty. 6. The Guarantor waives any and all notice with respect to: (i) acceptance by the Agent and the Banks of this Guaranty; (ii) the provisions of any note, instrument or agreement relating 3 to the Guaranteed Indebtedness; (iii) any default in connection with the Guaranteed Indebtedness; and (iv) any other notice in connection with the Guaranteed Indebtedness. 7. The Guarantor waives any presentment, demand, notice of dishonor or nonpayment, protest, and notice of protest in connection with the Guaranteed Indebtedness. 8. The Guarantor agrees that the Agent or any of the Banks may from time to time and as many times as the Agent or any of the Banks, in their sole discretion, deem appropriate, do any of the following without notice to the Guarantor and without adversely affecting the validity or enforceability of this Guaranty: (i) release, surrender, exchange, compromise, or settle the Guaranteed Indebtedness or any portion thereof; (ii) change, renew, or waive the terms of the Guaranteed Indebtedness or any portion thereof; (iii) change, renew, or waive the terms, including without limitation, the rate of interest charged to any other Borrower, of any note, instrument, or agreement relating to the Guaranteed Indebtedness or any portion thereof; (iv) grant any extension or indulgence with respect to the payment to the Agent or any of the Banks of the Guaranteed Indebtedness or any portion thereof; (v) enter into any agreement of forbearance with respect to the Guaranteed Indebtedness or any portion thereof; (vi) release, surrender, exchange or compromise any security held by the Agent or any of the Banks for the Guaranteed Indebtedness; (vii) release any Person who is a guarantor or surety or who has agreed to purchase the Guaranteed Indebtedness or any portion thereof; and (viii) release, surrender, exchange or compromise any security or Lien held by the Agent or any of the Banks for the liabilities of any Person who is a guarantor or surety for the Guaranteed Indebtedness or any portion thereof. The Guarantor agrees that the Agent or any of the Banks may do any of the above as the Agent or such Bank deems necessary or advisable, in the Agent's or such Bank's sole discretion, without giving any notice to the Guarantor, and that the Guarantor will remain liable for full payment to the Agent and each of the Banks of the Guaranteed Indebtedness. 9. The Guarantor agrees to be bound by the terms of this Guaranty and liable under this Guaranty. As a result of such liability, the Guarantor acknowledges that the Agent or any of the Banks may, in their sole discretion, elect to enforce this Guaranty for the total Guaranteed Indebtedness against the Guarantor without any duty or responsibility to pursue any other guarantor and that such an election by the Agent or any of the Banks shall not be a defense to any action the Agent or any of the Banks may elect to take against the Guarantor. 10. If any amount owing hereunder shall have become due and payable (by acceleration or otherwise), each of the Banks and any branch, subsidiary or affiliate of each of the Banks anywhere in the world shall each have the right, at any time and from time to time to the fullest extent permitted by Law, in addition to all other rights and remedies available to it, without prior notice 4 to the Guarantor, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of the Guarantor by such Bank or any such branch, subsidiary or affiliate including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by the Guarantor with such Bank or such branch, subsidiary or affiliate. Such right shall exist whether or not any Bank, or such branch, subsidiary or affiliate or the Agent shall have given notice or made any demand hereunder or under any of the Notes or Loan Documents, whether or not such debt owing to or funds held for the account of the Guarantor is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guarantee or any other security, right or remedy available to such Bank or such branch, subsidiary or affiliate. The Guarantor hereby consents to and confirms the foregoing arrangements, and confirms the Bank's rights and each such branch's, subsidiary's and affiliate's rights of banker's lien and set-off. 11. The Guarantor recognizes and agrees that any other Borrower, after the date hereof, may incur additional Indebtedness or other obligations, fees and expenses to the Agent and/or the Banks under the Credit Agreement, refinance existing Guaranteed Indebtedness or pay existing Guaranteed Indebtedness and subsequently incur additional Indebtedness to the Agent and/or the Banks under the Credit Agreement, and that in any such transaction, even if such transaction is not now contemplated, the Agent and the Banks will rely in any such case upon this Guaranty and the enforceability thereof against the Guarantor and that this Guaranty shall remain in full force and effect with respect to such future Indebtedness of the other Borrower to the Agent and/or the Banks and such Indebtedness shall for all purposes constitute Guaranteed Indebtedness. 12. The Guarantor further agrees that, if at any time all or any part of any payment, from whomever received, theretofore applied by the Agent or any of the Banks to any of the Guaranteed Indebtedness is or must be rescinded or returned by the Agent or any of the Banks for any reason whatsoever including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor, such liability shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or any of the Banks, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such liabilities, all as though such application by the Agent or any of the Banks had not been made. 13. The Guarantor agrees that no failure or delay on the part of the Agent or any of the Banks to exercise any of its rights, powers or privileges under this Guaranty shall be a wavier of such rights, powers or privileges or a waiver of any 5 default, nor shall any single or partial exercise of any of the Agent's or the Bank's rights, powers or privileges preclude other or further exercise thereof or the exercise of any other right, power or privilege or be construed as a waiver of any default. The Guarantor further agrees that no waiver or modification of any rights of the Agent or any of the Banks under this Guaranty shall be effective unless in writing and signed by the Agent and the Banks. The Guarantor further agrees that each written waiver shall extend only to the specific instance actually recited in such written waiver and shall not impair the rights of the Agent and the Banks in any other respect. 14. The Guarantor unconditionally agrees to pay all costs and expenses, including reasonable attorney's fees, incurred by the Agent and any of the Banks in enforcing this Guaranty against the Guarantor. 15. The Guarantor agrees that this Guaranty and the rights and obligations of the Guarantor, the Agent and the Banks shall for all purposes be governed by and construed and enforced in accordance with the substantive law of the Commonwealth of Pennsylvania without giving effect to its principles of conflict of laws. 16. The Guarantor recognizes that this Guaranty when executed constitutes a sealed instrument and as a result the instrument will be enforceable as such without regard to any statute of limitations which might otherwise be applicable and without any consideration. 17. The Guarantor acknowledges that in addition to binding itself to this Guaranty, at the time of execution of this Guaranty the Agent and the Banks offered to such Guarantor a copy of this Guaranty in the form in which it was executed and that by acknowledging this fact the Guarantor may not later be able to claim that a copy of the Guaranty was not received by it. 18. The Guarantor agrees that this Guaranty shall be binding upon the Guarantor, its successors and assigns; provided, however, that the Guarantor may not assign or transfer any of tis rights and obligations hereunder or any interest herein. The Guarantor further agrees that (i) this Guaranty is freely assignable and transferable by the Agent and each Bank in connection with any assignment or transfer of the Guaranteed Indebtedness and (ii) this Guaranty shall inure to the benefit of the Agent and each of the Banks, their successors and assigns. 19. The Guarantor agrees that if the Guarantor fails to perform any covenant or agreement hereunder or if there occurs an Event of Default under the Credit Agreement, all or any part of the Guaranteed Indebtedness may be declared to be forthwith due and payable and, in the case of an Event of Default described in subsections 8.1.13 or 8.1.14 of the Credit Agreement, the Guaranteed Indebtedness shall be immediately due and payable, in any case without presentment, demand, protest or notice of any 6 kind, all of which are hereby expressly waived. 20. The Guarantor agrees that the enumeration of the Bank's rights and remedies set forth in this Guaranty is not intended to be exhaustive and the exercise by the Agent or any of the Banks of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and shall be in addition to any other right or remedy given hereunder or under any other agreement among the parties to the Loan Documents or which may now or hereafter exist at law or in equity or by suit or otherwise. 21. The Guarantor agrees that all notices, statements, requests, demands and other communications under this Guaranty shall be given to the Guarantor at the address set forth below its name on the signature page hereof and to Lowenthal, Landau, Fischer & Bring, P.C., 250 Park Avenue, New York, NY 10177, Attn: Martin R. Bring, Esq.,in the manner provided in Section 10.6 of the Credit Agreement. 22. (a) The Guarantor agrees that the provisions of this Guaranty are severable, and in an action or proceeding involving any state or federal bankruptcy, insolvency or other law affecting the rights of creditors generally: (i) if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Guaranty in any jurisdiction. (ii) if this Guaranty would be held or determined to be void, invalid or unenforceable on account of the amount of the Guarantor's aggregate liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the aggregate amount of such liability shall, without any further action by the Agent or any Bank, the Guarantor or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding, which (without limiting the generality of the foregoing) may be an amount which is not greater than the greater of: (A) the fair consideration actually received by the Guarantor under the terms of and as a result of the Loan Documents, including, without limiting the generality of the foregoing, and to the extent not inconsistent with applicable federal and state laws affecting the enforceability of guarantees, distributions or advances made to the Guarantor with the proceeds of any credit extended under the Loan Documents in exchange for its guaranty of the Guaranteed Indebtedness, or (B) the excess of (1) the amount of the fair 7 saleable value of the assets of the Guarantor as of the date of this Guaranty as determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors as in effect on the date thereof over (2) the amount of all liabilities of the Guarantor as of the date of this Guaranty, also as determined on the basis of applicable federal and state laws governing the insolvency of debtors as in effect on the date thereof. (b) If the guaranty by the Guarantor of the Guaranteed Indebtedness is held or determined to be void, invalid or unenforceable, in whole or in part, such holding or determination shall not impair or affect: (i) the validity and enforceability of the guaranty hereunder by any other guarantor, which shall continue in full force and effect in accordance with its terms; or (ii) the validity and enforceability of any clause or provision not so held to be void, invalid or unenforceable. 23. THE GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. THE GUARANTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR THE BANKS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND DELIVERY HEREOF BY THE GUARANTOR, AND (ii) ACKNOWLEDGES THAT THE ENTERING INTO OF THE CREDIT AGREEMENT BY THE BANK HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION. 24. The Guarantor (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania, or any successor to said court, and to the nonexclusive jurisdiction of the United States District Court for the Western District of Pennsylvania, or any successor to said court (hereinafter referred to as the "Pennsylvania Courts") for purposes of any suit, action or other proceeding which relates to this Guaranty or any other Loan Document, (ii) to the extent permitted by applicable Law, hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the Pennsylvania Courts; that such suit, action or proceeding is brought in an inconvenient forum; that the venue of such suit, action or proceeding is improper; or that this Guaranty or any Loan Document may not be enforced in or by the Pennsylvania Courts, (iii) hereby agrees not to seek, and hereby waives, any collateral review by any other court, which may be called upon to enforce the judgment of any of the Pennsylvania Courts, of the merits of any such suit, action or proceeding or the jurisdiction of the Pennsylvania Courts, and (iv) waives personal service of 8 any and all process upon it and consents that all such service of process by made by certified or registered mail addressed as provided in Section 21 hereof and service so made shall be deemed to be completed upon actual receipt thereof. Nothing herein shall limit the Agent's or any Bank's right to bring any suit, action or other proceeding against the Guarantor or any of Guarantor's assets or to serve process on the Guarantor by any means authorized by Law. [SIGNATURES BEGIN ON NEXT PAGE] 9 [SIGNATURE PAGE 1 OF 1 TO THE GUARANTY AGREEMENT] IN WITNESS WHEREOF, the Guarantor intending to be legally bound, has executed this Guaranty as of the date first above written with the intention that this Guaranty shall constitute a sealed instrument. WITNESS: Attest: UNITED REFINING COMPANY OF PENNSYLVANIA ______________________________ By:________________________________ Title:_____________________________ Address for Notices: 15 Bradley Street, Box 780 Warren, PA 16365 EX-10.12 37 CONTINUING AGREEMENT 1 EXHIBIT 10.12 CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP This Continuing Agreement of Guaranty and Suretyship (the "Guaranty") is made and entered into this 9th day of June, 1997, by KIANTONE PIPELINE CORPORATION, (the "Guarantor"), for the benefit of the Banks which are a party to that certain Credit Agreement by and among Guarantor,United Refining Company, United Refining Company of Pennsylvania, PNC Bank, National Association, as agent (the "Agent") and the Banks party thereto dated as of even date herewith (as amended, supplemented or modified from time to time, the "Credit Agreement"). BACKGROUND In order to induce the Banks to make loans to the Guarantor and the other Borrowers (as defined in the Credit Agreement) in accordance with that certain Credit Agreement, the Guarantor hereby unconditionally and irrevocably guarantees and becomes surety as though it was a primary obligor for the full and timely payment when due, whether at maturity, by declaration, acceleration or otherwise, of the principal of and interest and fees on all Loans (as defined in the Credit Agreement), both those now in existence and those that shall hereafter be made, of the Bank to the Borrowers under the Credit Agreement and the Notes issued by the Borrowers in connection therewith and any extensions, renewals, replacements or refundings thereof, and each and every other obligation or liability (both those now in existence and those that shall hereafter arise and including, without limitation, all costs and expenses of enforcement and collection, including reasonable attorney's fees) of the Borrowers to the Bank under the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) except this Agreement, and any extensions, renewals, replacements or refundings thereof (hereinafter referred to as the "Guaranteed Indebtedness"), whether or not such Guaranteed Indebtedness or any portion thereof shall hereafter be released or discharged or is for any reason invalid or unenforceable. 1. Capitalized terms used herein and not otherwise defined herein shall have such meanings given to them in the Credit Agreement. 2. The Guarantor agrees to make such full payment forthwith upon demand of the Agent or any Bank when the Guaranteed Indebtedness or any portion thereof is due to be paid by the other Borrowers, or any of them, whether at stated maturity, by declaration, acceleration or otherwise. The Guarantor agrees to make such full payment irrespective of whether or not any one or more of the following events has occurred: (i) the Agent or any of the Banks have made any demand on any other Borrower; (ii) the Agent or any of the Banks have taken any action of any nature against any other Borrower; (iii) the Agent or any of the Banks have pursued any rights which 2 they have against any other Person who may be liable for the Guaranteed Indebtedness; (iv) the Agent or any of the Banks hold or have resorted to any security for the Guaranteed Indebtedness; or (v) the Agent or any of the Banks have invoked any other remedies or right they have available with respect to the Guaranteed Indebtedness. The Guarantor further agrees to make full payment to the Banks even if circumstances exist which otherwise constitute a legal or equitable discharge of the Guarantor as surety or guarantor. 3. The Guarantor warrants to the Agent and the Banks that: (i) no other agreement, representation or special condition exists between such Guarantor and the Agent and/or any of the Banks regarding the liability of the Guarantor hereunder, nor does any understanding exist between the Guarantor and the Agent and/or any of the Banks that the obligations of the Guarantor hereunder are or will be other than as set forth herein; and (ii) as of the date hereof, the Guarantor has no defense whatsoever to any action or proceeding that may be brought to enforce this Guaranty. 4. The Guarantor waives and agrees not to enforce any of the rights of the Guarantor against any other Borrower, including, but not limited to: (i) any right of the Guarantor to be subrogated in whole or in part to any right or claim with respect to any Guaranteed Indebtedness or any portion thereof to any of the Banks which might otherwise arise from payment by the Guarantor to any of the Banks on the account of the Guaranteed Indebtedness or any portion thereof; and (ii) any right of the Guarantor to require the marshalling of assets of any other Borrower which might otherwise arise from payment by the Guarantor to any of the Banks on account of the Guaranteed Indebtedness or any portion thereof. If any amount shall be paid to the Guarantor in violation of the preceding sentence, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the Agent and shall forthwith be paid to the Agent for the benefit of the Agent and the Banks to be credited and applied upon the Guaranteed Indebtedness, whether matured or unmatured, in accordance with the terms of the Credit Agreement provided that the Guarantor shall have the rights against any other Borrower listed above after all Obligations under the Credit Agreement are paid in full in cash. The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in this Section are knowingly made in contemplation of such benefits. 5. The Guarantor waives promptness and diligence by the Agent or any of the Banks with respect to its rights under this Guaranty. 6. The Guarantor waives any and all notice with respect to: (i) acceptance by the Agent and the Banks of this Guaranty; (ii) the provisions of any note, instrument or agreement relating 3 to the Guaranteed Indebtedness; (iii) any default in connection with the Guaranteed Indebtedness; and (iv) any other notice in connection with the Guaranteed Indebtedness. 7. The Guarantor waives any presentment, demand, notice of dishonor or nonpayment, protest, and notice of protest in connection with the Guaranteed Indebtedness. 8. The Guarantor agrees that the Agent or any of the Banks may from time to time and as many times as the Agent or any of the Banks, in their sole discretion, deem appropriate, do any of the following without notice to the Guarantor and without adversely affecting the validity or enforceability of this Guaranty: (i) release, surrender, exchange, compromise, or settle the Guaranteed Indebtedness or any portion thereof; (ii) change, renew, or waive the terms of the Guaranteed Indebtedness or any portion thereof; (iii) change, renew, or waive the terms, including without limitation, the rate of interest charged to any other Borrower, of any note, instrument, or agreement relating to the Guaranteed Indebtedness or any portion thereof; (iv) grant any extension or indulgence with respect to the payment to the Agent or any of the Banks of the Guaranteed Indebtedness or any portion thereof; (v) enter into any agreement of forbearance with respect to the Guaranteed Indebtedness or any portion thereof; (vi) release, surrender, exchange or compromise any security held by the Agent or any of the Banks for the Guaranteed Indebtedness; (vii) release any Person who is a guarantor or surety or who has agreed to purchase the Guaranteed Indebtedness or any portion thereof; and (viii) release, surrender, exchange or compromise any security or Lien held by the Agent or any of the Banks for the liabilities of any Person who is a guarantor or surety for the Guaranteed Indebtedness or any portion thereof. The Guarantor agrees that the Agent or any of the Banks may do any of the above as the Agent or such Bank deems necessary or advisable, in the Agent's or such Bank's sole discretion, without giving any notice to the Guarantor, and that the Guarantor will remain liable for full payment to the Agent and each of the Banks of the Guaranteed Indebtedness. 9. The Guarantor agrees to be bound by the terms of this Guaranty and liable under this Guaranty. As a result of such liability, the Guarantor acknowledges that the Agent or any of the Banks may, in their sole discretion, elect to enforce this Guaranty for the total Guaranteed Indebtedness against the Guarantor without any duty or responsibility to pursue any other guarantor and that such an election by the Agent or any of the Banks shall not be a defense to any action the Agent or any of the Banks may elect to take against the Guarantor. 10. If any amount owing hereunder shall have become due and payable (by acceleration or otherwise), each of the Banks and any branch, subsidiary or affiliate of each of the Banks anywhere in the world shall each have the right, at any time and from time to time to the fullest extent permitted by Law, in addition to all other rights and remedies available to it, without prior notice 4 to the Guarantor, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of the Guarantor by such Bank or any such branch, subsidiary or affiliate including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by the Guarantor with such Bank or such branch, subsidiary or affiliate. Such right shall exist whether or not any Bank, or such branch, subsidiary or affiliate or the Agent shall have given notice or made any demand hereunder or under any of the Notes or Loan Documents, whether or not such debt owing to or funds held for the account of the Guarantor is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guarantee or any other security, right or remedy available to such Bank or such branch, subsidiary or affiliate. The Guarantor hereby consents to and confirms the foregoing arrangements, and confirms the Bank's rights and each such branch's, subsidiary's and affiliate's rights of banker's lien and set-off. 11. The Guarantor recognizes and agrees that any other Borrower, after the date hereof, may incur additional Indebtedness or other obligations, fees and expenses to the Agent and/or the Banks under the Credit Agreement, refinance existing Guaranteed Indebtedness or pay existing Guaranteed Indebtedness and subsequently incur additional Indebtedness to the Agent and/or the Banks under the Credit Agreement, and that in any such transaction, even if such transaction is not now contemplated, the Agent and the Banks will rely in any such case upon this Guaranty and the enforceability thereof against the Guarantor and that this Guaranty shall remain in full force and effect with respect to such future Indebtedness of the other Borrower to the Agent and/or the Banks and such Indebtedness shall for all purposes constitute Guaranteed Indebtedness. 12. The Guarantor further agrees that, if at any time all or any part of any payment, from whomever received, theretofore applied by the Agent or any of the Banks to any of the Guaranteed Indebtedness is or must be rescinded or returned by the Agent or any of the Banks for any reason whatsoever including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor, such liability shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or any of the Banks, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such liabilities, all as though such application by the Agent or any of the Banks had not been made. 13. The Guarantor agrees that no failure or delay on the part of the Agent or any of the Banks to exercise any of its rights, powers or privileges under this Guaranty shall be a wavier of such rights, powers or privileges or a waiver of any 5 default, nor shall any single or partial exercise of any of the Agent's or the Bank's rights, powers or privileges preclude other or further exercise thereof or the exercise of any other right, power or privilege or be construed as a waiver of any default. The Guarantor further agrees that no waiver or modification of any rights of the Agent or any of the Banks under this Guaranty shall be effective unless in writing and signed by the Agent and the Banks. The Guarantor further agrees that each written waiver shall extend only to the specific instance actually recited in such written waiver and shall not impair the rights of the Agent and the Banks in any other respect. 14. The Guarantor unconditionally agrees to pay all costs and expenses, including reasonable attorney's fees, incurred by the Agent and any of the Banks in enforcing this Guaranty against the Guarantor. 15. The Guarantor agrees that this Guaranty and the rights and obligations of the Guarantor, the Agent and the Banks shall for all purposes be governed by and construed and enforced in accordance with the substantive law of the Commonwealth of Pennsylvania without giving effect to its principles of conflict of laws. 16. The Guarantor recognizes that this Guaranty when executed constitutes a sealed instrument and as a result the instrument will be enforceable as such without regard to any statute of limitations which might otherwise be applicable and without any consideration. 17. The Guarantor acknowledges that in addition to binding itself to this Guaranty, at the time of execution of this Guaranty the Agent and the Banks offered to such Guarantor a copy of this Guaranty in the form in which it was executed and that by acknowledging this fact the Guarantor may not later be able to claim that a copy of the Guaranty was not received by it. 18. The Guarantor agrees that this Guaranty shall be binding upon the Guarantor, its successors and assigns; provided, however, that the Guarantor may not assign or transfer any of tis rights and obligations hereunder or any interest herein. The Guarantor further agrees that (i) this Guaranty is freely assignable and transferable by the Agent and each Bank in connection with any assignment or transfer of the Guaranteed Indebtedness and (ii) this Guaranty shall inure to the benefit of the Agent and each of the Banks, their successors and assigns. 19. The Guarantor agrees that if the Guarantor fails to perform any covenant or agreement hereunder or if there occurs an Event of Default under the Credit Agreement, all or any part of the Guaranteed Indebtedness may be declared to be forthwith due and payable and, in the case of an Event of Default described in subsections 8.1.13 or 8.1.14 of the Credit Agreement, the Guaranteed Indebtedness shall be immediately due and payable, in any case without presentment, demand, protest or notice of any 6 kind, all of which are hereby expressly waived. 20. The Guarantor agrees that the enumeration of the Bank's rights and remedies set forth in this Guaranty is not intended to be exhaustive and the exercise by the Agent or any of the Banks of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and shall be in addition to any other right or remedy given hereunder or under any other agreement among the parties to the Loan Documents or which may now or hereafter exist at law or in equity or by suit or otherwise. 21. The Guarantor agrees that all notices, statements, requests, demands and other communications under this Guaranty shall be given to the Guarantor at the address set forth below its name on the signature page hereof and to Lowenthal, Landau, Fischer & Bring, P.C., 250 Park Avenue, New York, NY 10177, Attn: Martin R. Bring, Esq.,in the manner provided in Section 10.6 of the Credit Agreement. 22. (a) The Guarantor agrees that the provisions of this Guaranty are severable, and in an action or proceeding involving any state or federal bankruptcy, insolvency or other law affecting the rights of creditors generally: (i) if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Guaranty in any jurisdiction. (ii) if this Guaranty would be held or determined to be void, invalid or unenforceable on account of the amount of the Guarantor's aggregate liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the aggregate amount of such liability shall, without any further action by the Agent or any Bank, the Guarantor or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding, which (without limiting the generality of the foregoing) may be an amount which is not greater than the greater of: (A) the fair consideration actually received by the Guarantor under the terms of and as a result of the Loan Documents, including, without limiting the generality of the foregoing, and to the extent not inconsistent with applicable federal and state laws affecting the enforceability of guarantees, distributions or advances made to the Guarantor with the proceeds of any credit extended under the Loan Documents in exchange for its guaranty of the Guaranteed Indebtedness, or (B) the excess of (1) the amount of the fair 7 saleable value of the assets of the Guarantor as of the date of this Guaranty as determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors as in effect on the date thereof over (2) the amount of all liabilities of the Guarantor as of the date of this Guaranty, also as determined on the basis of applicable federal and state laws governing the insolvency of debtors as in effect on the date thereof. (b) If the guaranty by the Guarantor of the Guaranteed Indebtedness is held or determined to be void, invalid or unenforceable, in whole or in part, such holding or determination shall not impair or affect: (i) the validity and enforceability of the guaranty hereunder by any other guarantor, which shall continue in full force and effect in accordance with its terms; or (ii) the validity and enforceability of any clause or provision not so held to be void, invalid or unenforceable. 23. THE GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. THE GUARANTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR THE BANKS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND DELIVERY HEREOF BY THE GUARANTOR, AND (ii) ACKNOWLEDGES THAT THE ENTERING INTO OF THE CREDIT AGREEMENT BY THE BANK HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION. 24. The Guarantor (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania, or any successor to said court, and to the nonexclusive jurisdiction of the United States District Court for the Western District of Pennsylvania, or any successor to said court (hereinafter referred to as the "Pennsylvania Courts") for purposes of any suit, action or other proceeding which relates to this Guaranty or any other Loan Document, (ii) to the extent permitted by applicable Law, hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the Pennsylvania Courts; that such suit, action or proceeding is brought in an inconvenient forum; that the venue of such suit, action or proceeding is improper; or that this Guaranty or any Loan Document may not be enforced in or by the Pennsylvania Courts, (iii) hereby agrees not to seek, and hereby waives, any collateral review by any other court, which may be called upon to enforce the judgment of any of the Pennsylvania Courts, of the merits of any such suit, action or proceeding or the jurisdiction of the Pennsylvania Courts, and (iv) waives personal service of 8 any and all process upon it and consents that all such service of process by made by certified or registered mail addressed as provided in Section 21 hereof and service so made shall be deemed to be completed upon actual receipt thereof. Nothing herein shall limit the Agent's or any Bank's right to bring any suit, action or other proceeding against the Guarantor or any of Guarantor's assets or to serve process on the Guarantor by any means authorized by Law. [SIGNATURES BEGIN ON NEXT PAGE] 9 [SIGNATURE PAGE 1 OF 1 TO THE GUARANTY AGREEMENT] IN WITNESS WHEREOF, the Guarantor intending to be legally bound, has executed this Guaranty as of the date first above written with the intention that this Guaranty shall constitute a sealed instrument. WITNESS: Attest: KIANTONE PIPELINE CORPORATION ______________________________ By:________________________________ Title:_____________________________ Address for Notices: 15 Bradley Street, Box 780 Warren, PA 16365 EX-10.13 38 FORM OF SECURITIY AGREEMENT 1 EXHIBIT 10.13 FORM OF SECURITY AGREEMENT THIS SECURITY AGREEMENT is dated June 9, 1997, and is made by and among UNITED REFINING COMPANY, a Pennsylvania corporation ("United Refining"), UNITED REFINING COMPANY OF PENNSYLVANIA, a Pennsylvania corporation ("United Refining PA"), KIANTONE PIPELINE CORPORATION, a New York corporation ("Kiantone" and hereinafter together with United Refining and United Refining of PA sometimes collectively referred to as the "Borrowers" and individually as a "Borrower"), the Banks (as defined in the Credit Agreement) party thereto, and PNC BANK, NATIONAL ASSOCIATION, a national banking association, as Agent for such Banks, and is referred to in Section 1.1 of the Credit Agreement dated as of June 9, 1997 among the Borrowers and the Bank (as it may hereafter be amended or otherwise modified from time to time, the "Credit Agreement"). WITNESSETH THAT: WHEREAS, in accordance with the terms of the Credit Agreement, the Banks agree to make certain Loans (as defined in the Credit Agreement) to the Borrowers; and WHEREAS, the obligation of the Banks to make Loans under the Credit Agreement is subject to the condition, among others, that the Borrowers secure their obligations to the Agent for the benefit of the Banks under the Credit Agreement by the grants of security interests in the Collateral, as defined and more fully set forth herein and each Guarantor secure its obligations to the Agent for the benefit of the Banks under the Guaranty Agreement by the grant of security interests in the Collateral, as defined and more fully set forth herein; and WHEREAS, each Borrower is the legal and beneficial owner and holder of its respective Collateral (as defined in Section 1 hereof), and has agreed to grant a security interest in such Collateral to the Bank on the terms and conditions set forth herein. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto covenant and agree as follows: 1. DEFINITIONS. .1 Terms Specifically Defined Herein. When used herein, the following terms shall have the following meanings: (a) Code shall mean the Uniform Commercial Code as enacted and in effect on the date hereof in each applicable jurisdiction, and as the same may subsequently be amended from time to time. 2 (b) Collateral shall mean in the case of each Borrower, all of its right, title and interest in, to and under the following described property, whether now owned or hereafter acquired and all other property and interests in property which shall, from time to time, secure payment of the Secured Indebtedness: (i) All accounts, contract rights, general intangibles, chattel paper, instruments or documents representing any right to payment for goods sold or services rendered, whether or not earned by performance and whether or not evidenced by a contract, instrument or document, which is now owned or hereafter acquired by a Borrower (collectively, the "Accounts") (ii) All crude oil, motor gasoline and asphalt, including without limitation goods in transit, wheresoever located (including without limitation pipelines whether leased or owned) and whether now owned or hereafter acquired by a Borrower, which are or may at any time be held as raw materials, finished goods, work-in-process, and all supplies or materials used or consumed in a Borrower's business of producing crude oil, asphalt and motor gasoline or held for sale or lease, including, without limitation, (a) all such property the sale or other disposition of which has given rise to Accounts and which has been returned to or repossessed or stopped in transit by a Borrower, and (b) all packing, shipping and advertising materials relating to all or any such property, provided, however, motor gasoline after it is processed and leaves the refinery facility located in Warren, Pennsylvania shall be excluded from Inventory (collectively the "Inventory") (iii) All monies, residues and property of any kind of the Borrower in the Cash Collateral Account, as defined in the Credit Agreement, now or at any time hereafter in the possession or under the control of the Bank or a bailee of the Bank; (iv) All accessions to, substitutions for and all replacements, Products or Proceeds of the foregoing, including, without limitation, proceeds of insurance policies insuring the aforesaid Collateral, all property received wholly or partly in trade or exchange for such Collateral, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection or any other temporary or permanent disposition of such items or any interest therein whether or not they constitute "proceeds" as defined in the Code; and (v) All books, records, documents and ledger -2- 3 receipts of the Borrower pertaining to any of the foregoing, including, without limitation, customer lists, credit files, computer records, computer programs, storage media and computer software used or required in connection with generating, processing and storing such books and records or otherwise used or acquired in connection with documenting information pertaining to the aforesaid Collateral. (c) Secured Indebtedness shall mean, as to each Borrower, all of the following: (i) all obligations, including, without limitation, all Indebtedness, whether of principal, interest, fees, expenses or otherwise, of any Borrower to the Banks, whether now existing or hereafter incurred under the Credit Agreement or any of the Loan Documents other than the Guaranty, as any of the same may from time to time be amended, modified or supplemented, together with any and all extensions, renewals, refinancings or refundings thereof in whole or in part by the Banks and including all advances, if any, made by the Banks to cure defaults under the Loan Documents; (ii) all obligations of every nature, including Indebtedness of each and every other Borrower, owed by it under the Guaranty (the "Guaranty Related Obligations") and, (iii) all out-of-pocket costs, expenses and disbursements, including, without limitation, reasonable attorneys' fees and legal expenses, incurred by the Banks or any one of them, or the Agent, in the collection of any of the obligations referred to in clause (i) or (ii) above; and (iv) any advances made by the Banks or any one of them, or the Agent, for the reasonable maintenance, preservation, protection or enforcement of, or realization upon, the Collateral, including, without limitation, advances for taxes, insurance, repairs and the like and reasonable expenses incurred to sell or otherwise realize on, or prepare for sale or other realization on, any of the Collateral. .2 Other Terms. Capitalized terms which are defined in the Credit Agreement and not otherwise defined herein shall have the meanings given to them in the Credit Agreement unless the context clearly requires otherwise. All other terms contained in this Security Agreement shall have the meanings given to them by the Code unless the context clearly requires otherwise. -3- 4 2. ASSIGNMENT AND GRANT OF SECURITY INTEREST. .1 Security Interest in Personal Property. As security for the due and punctual payment and performance of the Secured Indebtedness in full, each Borrower hereby agrees that the Agent shall have, and each Borrower hereby grants to and creates in favor of the Agent, for the benefit of each of the Agent and the Banks, (i) to secure all of the Secured Indebtedness (other than the Guaranty Related Obligations), a continuing first priority security interest in and to each Borrower's respective Collateral subject only to Permitted Liens and (ii) to secure all of the Guaranty Related Obligations, a continuing second priority security interest in and to each Borrower's respective Collateral subject only to Permitted Liens. Without limiting the generality of Section 5 below, each Borrower further agrees that with respect to each item of Collateral as to which (i) the creation of valid and enforceable security interests is not governed exclusively by the Code or (ii) the perfection of valid and enforceable security interests therein under the Code cannot be accomplished either by the Agent taking possession thereof or by the filing in appropriate locations of appropriate Code financing statements executed by the Borrower, such Borrower will at its expense execute and deliver to the Agent such documents, agreements, notices, assignments and instruments and take such further actions as may be reasonably requested by the Agent from time to time for the purpose of creating a valid and perfected first priority Lien on such item, subject only to Permitted Liens, enforceable against the Borrower and all third parties to secure the Secured Indebtedness. .2 Special Collateral. Immediately upon any Borrower's receipt of that portion of the Collateral which is or becomes evidenced by an agreement, instrument and/or document, including, without limitation, promissory notes, trade acceptances, documents of title and warehouse receipts (the "Special Collateral"), such Borrower shall deliver the original thereof to the Agent for the benefit of the Banks, together with appropriate endorsements or other specified evidence (in form and substance acceptable to the Agent) of assignment thereof to the Agent for the benefit of the Banks. Each Borrower acknowledges that it is the intent of the Borrowers, the Agent and the Banks that all Inventory now owned or hereafter acquired by the Borrowers shall be Collateral to secure the Secured Indebtedness. To the extent that Article 9 of the Code does not govern the creation and/or perfection of the Bank's Prior Security Interest intended to be created hereunder, each Borrower agrees to execute and deliver such further documents and instruments as the Agent may from time to time request in order to adequately create and fully perfect a first priority Lien with respect to such property. -4- 5 3. ACCOUNTS AND INVENTORY. .1 Verification of Accounts; Inspection; Audit. At any reasonable time or times hereafter, each Borrower shall fully and promptly cooperate with the Agent (and its officers, employees and agents) in verifying the validity, amount or any other matter relating to any Accounts. At any reasonable time or times hereafter, any of the Agent's officers, employees or agents shall have the right, in the Banks' name or in the name of the Borrowers, to verify the validity, amount or any other matter relating to any Accounts by mail, telephone or otherwise; provided, however, unless an Event of Default or Potential Default has occurred, without the prior written consent of any Borrower, none of the Agent's officers, employees or agents will directly contact any Account Debtor to verify such matters. The Agent (by any of its officers, employees or agents) shall have the right, at any time and from time to time during a Borrower's usual business hours, to audit and inspect the Collateral and all records related thereto (and to make extracts from such records), and shall have access to the premises upon which any of the Collateral is located, and the right to discuss the Collateral, at any time, with any attorney, accountant, or creditor of such Borrower and, after the occurrence of an Event of Default or Potential Default, with any Account Debtor. Subject to the limitation set forth in Section 9.5 of the Credit Agreement, all reasonable expenses and costs incurred by the Agent in connection with any audit or inspection of the Collateral shall be reimbursed by such Borrower on demand. .2 Physical Inventory. A physical inventory shall be conducted no less frequently than monthly. A Schedule of Inventory based on such physical inventory shall be provided to the Agent for the benefit of the Banks as soon as available and in any event within ten (10) Business Days after the end of each calendar month, together with such supporting information, including, without limitation, invoices relating to such Borrower's purchase of goods listed in said Schedule, as the Agent may reasonably request. .3 Notices Regarding Disputed Account. In the event any amounts due and owing in excess of $100,000 are at any time in dispute between any Account Debtor and a Borrower, such Borrower shall provide the Agent with written notice thereof at the time of submission of the next Schedule of Accounts pursuant to Section 4.2 hereof, explaining in detail the reason for the dispute, all claims related thereto and the amount in controversy. Each Borrower will in any event notify the Agent if such Borrower receives notice that an Account Debtor intends to revoke acceptance of any goods having an aggregate value in excess of $50,000, such notice to be given to the Agent within three (3) Business Days after such Borrower receives notice of such intention to revoke. .4 Returns of Inventory. Each Borrower shall notify -5- 6 the Agent of any returns of Inventory, the sale of which generated Accounts on which the Account Debtor is then (prior to such return) obligated to pay an amount in excess of $100,000 in the aggregate on any single day. .5 Collection of Accounts; Management of Collateral. (a) The Borrower's Collection. Until a Borrower's authority to do so is terminated (which the Agent may do at any time after the occurrence of an Event of Default), such Borrower will, at its own cost and expense but on the Agent's behalf and for the Agent's accounts, collect and otherwise enforce as the Agent's property and in trust for the Agent for the benefit of the Banks, in accordance with such Borrower's normal collection practices, all amounts unpaid on Accounts. (b) Bank's Collection. After termination of any Borrower's authority to collect the Accounts, as provided in subparagraph (a) above, the Agent shall have the rights set forth in this subparagraph (b). The Agent shall have the right to send notice of assignment and/or notice of the Bank's security interest to any and all Account Debtors or any third party holding or otherwise concerned with any of the Collateral, and thereafter the Agent, for the benefit of the Banks, shall have the sole right to collect the Accounts and/or take possession of the Collateral and the books and records relating thereto. The Agent, for the benefit of the Banks, shall have the right to receive, endorse, assign and/or deliver in its name or the name of such Borrower any and all checks, drafts and other instruments for the payment of money relating to the Accounts, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed. Without limiting Section 12 hereof, each Borrower hereby constitutes the Agent or its designee as such Borrower's attorney-in-fact with power to endorse such Borrower's name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral that may come into the Agent's or a Bank's possession, to sign such Borrower's name on any invoice or bill of lading relating to any of the Accounts, drafts against Account Debtors, assignments and verifications of Accounts and notices to Account Debtors, to notify the Post Office authorities to change the address for delivery of mail addressed to such Borrower to such address as the Agent may designate, and to do all other acts and things necessary to carry out this Agreement. The Agent for the benefit of the Banks may, without notice to or consent from any Borrower, sue upon or otherwise collect, extend the time of payment of, or compromise or settle for cash, credit or otherwise upon any terms, any of the Accounts or any securities, instruments or insurance applicable thereto and release the obligor thereon. The Agent is authorized and empowered to accept the return of the goods represented by any of the Accounts, without notice to or consent by any Borrower, all without discharging or in any way affecting any Borrower's liability hereunder. Any notice sent to Account Debtors by the Agent may, at the Agent's sole discretion, -6- 7 be sent on the relevant Borrower's stationery, in which event such Borrower shall co-sign such notice with the Agent. To the extent that any Law or custom or any contract or agreement with any Account Debtor requires notice to or the approval of the Account Debtor in order to perfect such assignment of and security interest in Accounts, each Borrower agrees to promptly give such notice or obtain such approval. (c) Relationship of the Borrower and Bank. Nothing herein contained shall be construed to constitute a Borrower as agent of the Agent for any purpose whatsoever, and the Agent shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof, except to the extent the same results from the Agent's own gross negligence or willful misconduct. The Agent shall not, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Accounts or any instrument received in payment thereof or for any damage resulting therefrom. The Agent does not, by anything herein or in any assignment or otherwise, assume any of the Borrowers' obligations under any contract or agreement assigned to the Agent, and the Agent shall not be responsible in any way for the performance by the Borrowers of any of the terms and conditions thereof. 4. REPRESENTATIONS AND WARRANTIES. .1 General Representations and Warranties. Each Borrower represents and warrants to the Agent that such Borrower has and will continue to have good and marketable title to its respective Collateral which such Borrower purports to own or which is reflected as owned in its books and records free and clear of all Liens and other encumbrances except Permitted Liens. The locations of each Borrower's chief executive office, the Collateral and the records pertaining thereto are specified on Schedule A hereto, which is incorporated herein by reference. Except as set forth on Schedule A, none of the Collateral is located on premises not owned or leased by a Borrower or is on consignment. .2 Account Representations and Warranties. With respect to its Accounts, each Borrower represents and warrants to the Agent that: (a) the Agent may rely, in determining which Accounts listed on any Schedule of Accounts are Qualified Accounts, on all statements and representations made by such Borrower on or with respect to any such Schedule of Accounts; and (b) unless otherwise indicated in writing by such Borrower, such Borrower has determined that all of the Accounts listed in each Schedule of Accounts will qualify as Qualified -7- 8 Accounts. .3 Inventory Representations and Warranties. With respect to Inventory, each Borrower represents and warrants to the Agent that: (a) the Agent may rely, in determining which items of Inventory listed on any Schedule of Inventory are Qualified Inventory, on all statements and representations made by such Borrower on or with respect to any such Schedule of Inventory; and (b) unless otherwise indicated in writing by such Borrower, such Borrower has determined that all of the Inventory listed in each Schedule of Inventory will qualify as Qualified Inventory. 5. FURTHER ASSURANCES. Each Borrower will, from time to time, at its expense, faithfully preserve and protect the Agent's security interest in the Collateral as a continuing first and second priority perfected security interest under the Code, subject only to Permitted Liens, and will do all such other acts and things and will, upon request therefor by the Agent, execute, deliver, file and record all such other documents and instruments, including, without limitation, financing statements, security agreements, pledges, assignments, documents and powers of attorney with respect to the Collateral, and pay all filing fees and taxes related thereto as the Agent in its reasonable discretion may deem necessary or advisable from time to time in order to preserve, perfect or protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral. Each Borrower agrees that a carbon, photographic or other reproduction of this Security Agreement or of a financing statement is sufficient as a financing statement; provided, however, each Borrower makes no representation that any filing office or officer will accept for filing any such financing statement. 6. COVENANTS. Each Borrower covenants and agrees that (a) it will maintain in good condition and repair and shall protect and preserve the Collateral and such Collateral will be insured in accordance with Section 7.1.3 of the Credit Agreement; (b) it will not sell, assign or otherwise dispose of any portion of the Collateral except sales or dispositions as permitted in Section 7.2.7 of the Credit Agreement; (c) it (i) will obtain and maintain sole and exclusive possession of the Collateral, (ii) will maintain and keep its chief executive office, the location of the Collateral and the location of the records pertaining thereto, at the location(s) specified on Schedule A hereto or at such other location as it may designate from time to time by prior written notice to the Agent, and (iii) will keep materially accurate and complete books and records concerning the Collateral and such other books and records as may be required -8- 9 under the Credit Agreement; (d) it will promptly furnish to the Agent such information and documents relating to the Collateral as the Agent may reasonably request in order to confirm the status of the Agent's security interest in such Collateral; (e) it will not take or omit to take any actions, the taking or the omission of which might result in a material adverse alteration or impairment of the Collateral or in a violation of this Security Agreement or the Credit Agreement; (f) it will not, without the prior written consent of the Agent, which will not be unreasonably withheld or delayed, waive or release any obligation of any party to any part of the Collateral, except in the ordinary course of a Borrower's business or in connection with the disposition of assets permitted under the Credit Agreement; and (g) it will execute and deliver to the Agent and record such supplements to this Security Agreement and additional assignments as the Agent reasonably may request to evidence and confirm the security interest herein contained. 7. PAYMENT OF INSURANCE PREMIUMS. In the event a Borrower, at any time hereafter, shall fail to obtain or maintain any of the policies of insurance in accordance and compliance with Section 7.1.3 of the Credit Agreement or to pay any premium in whole or in part relating thereto, then the Agent, without waiving or releasing any obligations of or any Event of Default by such Borrower under the Credit Agreement, may at any time thereafter (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which the Agent deems advisable. All sums so disbursed by the Agent, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be due and payable by such Borrower upon demand by the Agent, shall be additional Secured Indebtedness, and shall bear interest from the date due until paid by such Borrower at the Base Rate as set forth in the Credit Agreement and any increase in the Base Rate in accordance with the Credit Agreement. 8. PRESERVATION OF SECURITY INTERESTS. Each Borrower assumes full responsibility for taking and hereby agrees to take any and all necessary steps to preserve and defend the Agent's right, title and security interest in and to such Borrower's Collateral against the claims and demands of all persons. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of a Borrower's Collateral in the Agent's possession if the Agent takes such action for that purpose as such Borrower shall request in writing, provided that such requested action will not, in the judgment of the Agent, impair the security interest in such Borrower's Collateral created hereby or the Agent's rights in, or the value of, such Collateral, and provided further that such written request is received by the Agent in sufficient time to permit the Agent to take the requested action. 9. AGENT'S RIGHTS WITH RESPECT TO THE COLLATERAL. At any -9- 10 time and from time to time, whether or not an Event of Default shall have occurred, and without notice to or consent of the Borrowers, the Agent may, at its option, do any or all of the following: (a) do anything which a Borrower is required but fails to do hereunder, and in particular, without limiting the generality of the foregoing, the Agent may, if a Borrower fails to do so, provided that the Agent shall take such action within the applicable time period or cure period provided for in the Credit Agreement, (this proviso to apply only to the extent so covered in the Credit Agreement) (i) insure or take any reasonable steps to protect the Collateral, (ii) pay any or all taxes, levies, expenses and costs arising with respect to the Collateral, or (iii) pay any or all premiums payable on any policy of insurance required to be obtained or maintained hereunder in accordance with Section 7 hereof; (b) inspect the Collateral of any Borrower at any reasonable time; and (c) pay any amounts the Agent reasonably elects to pay or advance hereunder on account of taxes or other costs, fees or charges arising in connection with the Collateral of any Borrower either directly to the payee(s) of such cost, fee or charge, directly to such Borrower, or to such payee(s) and such Borrower jointly. All sums so disbursed by the Agent under this Section or any other Section of this Security Agreement, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be due and payable by the Borrowers upon demand by the Agent, shall be additional Secured Indebtedness, and shall bear interest at the Base Rate and any increase in the Base Rate in accordance the Credit Agreement. 10. REMEDIES ON DEFAULT. If there shall have occurred an Event of Default under the terms of the Credit Agreement, then the Agent shall have such rights and remedies with respect to the Collateral or any part thereof and the proceeds thereof as are provided by the Code and such other rights and remedies with respect thereto which it may have at law or in equity or under the Credit Agreement or this Security Agreement. In addition, upon the occurrence of an Event of Default, the Borrowers, at the request of the Agent, shall assemble all or any portion of the Collateral at such locations as the Agent shall designate which are reasonably convenient to the Borrowers, and the Agent may sell, assign, give an option or options to purchase or otherwise dispose of all or any part of the Collateral at any public or private sale at such place or places and at such time or times and upon such terms, whether for cash or on credit, and in such manner, as the Agent may determine, and apply the proceeds so received in accordance with Section 11 hereof. Written notice of sale mailed by certified mail, return receipt requested, to the Borrowers at least ten (10) days prior to such sale shall be deemed reasonable notice. 10. In the event of a breach by a Borrower in the performance of any of the terms of this Security Agreement, the Agent may demand specific performance of this Security Agreement and seek injunctive relief and may exercise any other remedy, -10- 11 available at law or in equity, it being recognized that the remedies of the Agent at law may not fully compensate the Agent for the damages they may suffer in the event of a breach hereof. 11. APPLICATION OF PROCEEDS. The security interest in the Collateral granted to and created in favor of the Agent by this Security Agreement shall be for the sole benefit of the Agent for the benefit of the Banks. Each of the rights, privileges and remedies provided to the Agent hereunder or otherwise by Law with respect to the Collateral shall be exercised by the Agent and any Collateral or proceeds thereof held or realized upon at any time by the Agent shall inure to the benefit of the Agent and shall be applied in accordance with the provisions of Section 8.2.5 of the Credit Agreement. Each Borrower shall be liable for any deficiency if the proceeds of any sale, assignment, giving of an option or options to purchase or other disposition of the Collateral is insufficient to pay all amounts to which the Agent is entitled. 12. ATTORNEYS-IN-FACT. Each Borrower hereby irrevocably appoints the Agent, its officers, employees and agents, or any of them, as attorneys-in-fact, with full power of substitution, for such Borrower for the purpose of carrying out the provisions of this Security Agreement and taking any action and executing, delivering, filing and recording any instruments which the Agent may deem necessary or advisable to accomplish the purposes hereof, which power of attorney being given for security is coupled with an interest and irrevocable. Such attorneys-in-fact shall not be liable for any acts of omission or commission, nor for any error of judgment or mistake of fact or Law, except to the extent the same results from the gross negligence or willful misconduct of the Agent, its officers, employees or agents. Each Borrower hereby ratifies and confirms and agrees to ratify and confirm all action taken by the Agent, its officers, employees or agents pursuant to the foregoing power of attorney. 13. INDEMNITY AND EXPENSES (a) In accordance with the Credit Agreement, the Borrowers unconditionally and jointly and severally agree to indemnify the Agent from and against any and all claims, losses and liabilities arising out of or resulting from this Security Agreement (including enforcement of this Security Agreement), except claims, losses or liabilities resulting from the gross negligence or willful misconduct of the Agent on behalf of the Banks. (b) The Borrowers unconditionally and jointly and severally agree upon demand to pay to the Agent the amount of any and all reasonable and necessary out-of-pocket costs, expenses and disbursements for which reimbursement is customarily obtained, including fees and expenses of its counsel, which the Agent may incur in connection with (i) the administration of this Security Agreement, (ii) the custody, preservation, use or -11- 12 operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder or (iv) the failure by the Borrowers to perform or observe any of the provisions hereof. 14. TERMINATION. Upon payment in full of the Secured Indebtedness and termination of the Credit Agreement and the Revolving Credit Commitment, this Security Agreement shall terminate and be of no further force and effect, and the Agent shall thereupon promptly return to each Borrower such of its Collateral and such other documents delivered by such Borrower hereunder as may then be in the Agent's possession. Upon any such termination, the Agent will, at the Borrower's expense, execute and deliver to each Borrower such documents as such Borrower shall reasonably request to evidence such termination. The Agent, upon request of a Borrower, shall return and release the Agent's security interest in any of its Collateral which is sold prior to the occurrence of an Event of Default (but not the proceeds thereof), provided such sale is permitted by, and made in accordance with, the provisions of the Credit Agreement. 15. MODIFICATIONS, AMENDMENTS AND WAIVERS. Any and all agreements amending or changing any provision of this Security Agreement or the rights of the Agent hereunder, and any and all waivers or consents to Events of Default or other departures from the due performance of the Borrowers hereunder, shall be made only pursuant to the provisions of Section 10.1 of the Credit Agreement. 16. NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED. No course of dealing and no failure or delay on the part of the Agent in exercising any right, remedy, power or privilege hereunder shall affect any other or future exercise thereof or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy or privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Agent under this Security Agreement are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of the Agent of any breach or default under this Security Agreement or any such waiver of any provision or condition of this Security Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. 17. NOTICES. All notices, statements, requests, demands and other communications given to or made upon the Borrowers or the Agent in accordance with the provisions of this Security Agreement shall be given or made as provided in Section 10.6 of the Credit Agreement. -12- 13 18. SEVERABILITY. The provisions of this Security Agreement are intended to be severable. If any provision of this Security Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 19. GOVERNING LAW. This Security Agreement shall be deemed to be a contract under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed in accordance with the internal Laws of said Commonwealth without reference to its conflicts of law principles, except as required by mandatory provisions of Law and except to the extent that the validity or perfection of security interests hereunder, or remedies hereunder with respect to any particular Collateral, is governed by the laws of a jurisdiction other than the Commonwealth of Pennsylvania. 20. DURATION; SURVIVAL. All representations, warranties and covenants of the Borrowers contained herein or made in connection herewith shall survive the making of the Loans and shall not be waived by the execution and delivery of this Security Agreement, any investigation by the Agent, the making of any of the Loans, or the payment in full of the Loans and termination of the Revolving Credit Commitment. 21. PRIOR UNDERSTANDING. This Security Agreement supersedes all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein. 22. SUCCESSORS AND ASSIGNS. This Security Agreement shall be freely assignable and transferable by the Agent in connection with the assignment or transfer of the Secured Indebtedness which assignment is addressed in and governed by the Credit Agreement; however, the duties and obligations of the Borrowers may not be delegated or transferred by the Borrowers without the prior written consent of the Agent. The rights and privileges of the Agent shall inure to the benefit of its successors and assigns, and the duties and obligations of the Borrowers shall bind the Borrowers and their respective successors and assigns. Except to the extent otherwise required by the context of this Security Agreement, the word "Banks" where used in this Security Agreement shall mean and include any holder of a Note, or assignee of an interest therein, originally issued to a Bank under the Credit Agreement, and each such holder of a Note, or assignee of an interest therein, shall be bound by and have the benefits of this Security Agreement to the same extent as if such holder had been a signatory hereto. 23. COUNTERPARTS. This Security Agreement may be executed in any number of counterparts and by the different parties hereto -13- 14 on separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. [SIGNATURES BEGIN ON NEXT PAGE] -14- 15 [SIGNATURE PAGE 1 OF 1 TO SECURITY AGREEMENT] WITNESS the due execution hereof as of the day and year first above written. BANK, NATIONAL ASSOCIATION By:________________________________ Title:_____________________________ WITNESS: UNITED REFINING COMPANY _____________________________ By:________________________________ Title:_____________________________ [Seal] WITNESS: UNITED REFINING COMPANY OF PENNSYLVANIA _____________________________ By:________________________________ Title:_____________________________ [Seal] ATTEST: KIANTONE PIPELINE CORPORATION _____________________________ By:________________________________ Title:_____________________________ [Seal] 16 SCHEDULE A TO SECURITY AGREEMENT 1. The location of the Borrower's chief executive office is: 2. The locations where any of the Collateral are as follows:
Address of Collateral Location Description of Collateral
3. All Collateral is at all times located at the addresses set forth above [list any exceptions]. EX-21.1 39 SUBSIDIARIES OF THE REGISTRANTS 1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANTS
Jurisdiction of Incorporation of Business Names of Registrant Subsidiaries Subsidiary Subsidiary - ---------------------------------------------------------------------------------------------- United Refining Company United Refining Company PA Kwik Fill of Pennsylvania Red Apple Food Mart Super Kwik Kiantone Pipeline NY None Corporation Kiantone Pipeline Kiantone Pipeline Company PA None Corporation United Refining Company Kwik-Fill, Inc. PA None of Pennsylvania Kwik-Fil, Inc. NY None Independent Gasoline & Oil NY None Company of Rochester, Inc. Bell Oil Corp. MI None PPC, Inc. OH None Super Test Petroleum, Inc. MI None Vulcan Asphalt Refining DE None Corporation United Jet Center, Inc. DE None Kiantone Pipeline None Company Kwik-Fill, Inc. None Kwik-Fil, Inc. None Independent Gasoline & None Oil Company of Rochester, Inc. Bell Oil Corp. None PPC, Inc. None Super Test Petroleum, Inc. None Vulcan Asphalt Refining None Corporation United Jet Center, Inc. None
EX-23.2 40 CONSENT OF BDO SEIDMAN, LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS United Refining Company Warren, Pennsylvania We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated October 25, 1996, relating to the consolidated financial statements of United Refining Company and Subsidiaries, which is contained in that Prospectus, and of our report dated October 25, 1996 relating to the schedule, which is contained in Part II of the Registration Statement. We also consent to the reference to us under the captions "Experts" in the Prospectus. BDO SEIDMAN, LLP New York, New York September 5, 1996 EX-23.3 41 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.3 The Board of Directors and Stockholder United Refining Company: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG Peat Marwick LLP Pittsburgh, PA September 5, 1997 EX-99.1 42 LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL UNITED REFINING COMPANY (A PENNSYLVANIA CORPORATION) OFFER TO EXCHANGE ITS 10 3/4 % SERIES B SENIOR NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ALL OF ITS OUTSTANDING 10 3/4% SERIES A SENIOR NOTES DUE 2007 PURSUANT TO THE PROSPECTUS DATED , 1997 - ------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , UNLESS EXTENDED - ------------------------------------------------------------------------------- To: IBJ Schroder Bank & Trust Company, as Exchange Agent By Registered or Certified Mail: IBJ Schroder Bank & Trust Company P. O. Box 84 Bowling Green Station New York, New York 10274-0084 Attention: Reorganization Operations Department By Overnight Courier or By Hand: IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Securities Processing Window, Subcellar One (SC-1) By Facsimile: (212) 858-2611 Confirm by Telephone: (212) 858-2103 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges that he or she has received the Prospectus dated , 1997 (the "Prospectus") of United Refining Company, a Pennsylvania corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together 1 2 constitute the Company's offer (the "Exchange Offer") to exchange up to $200,000,000 in aggregate principal amount of the Company's 10 3/4% Series B Senior Notes due 2007 which have been registered under the Securities Act of 1933, as amended (the "Securities Act") pursuant to a Registration Statement of which the Prospectus is a part (the "New Notes"), for a like principal amount of the Company's outstanding 10 3/4% Series A Senior Notes due 2007 (the "Original Notes") of which $200,000,000 principal amount is outstanding. The term "Expiration Date" shall mean 5:00 p.m. New York City time on , 1997, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. The Letter of Transmittal is to be used by holders of Original Notes whether (i) certificates representing the Original Notes are to be physically delivered herewith, (ii) the guaranteed delivery procedures described in the Prospectus are to be utilized, or (iii) tenders are to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company, New York, New York ("DTC" or the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in the Prospectus. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. Unless the context requires otherwise, the term "Holder" with respect to the Exchange Offer means any person in whose name Original Notes are registered on the books of the Company or the Note Registrar or any other person who has obtained a properly completed bond power from the registered holder or any person whose Original Notes are held of record by the Book-Entry Transfer Facility who desires to deliver such Original Notes by book-entry transfer at the Book-Entry Transfer Facility. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Original Notes must complete this Letter of Transmittal in its entirety. 2 3 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW.
- ---------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF 10 3/4% SERIES A SENIOR NOTES DUE 2007 (THE ORIGINAL NOTES) - ---------------------------------------------------------------------------------------------------------------------------------- Principal Amount Aggregate Tendered Principal Amount (must be in Integral Name and Address of Registered Holder(s) Certificate Represented by Multiples (Please fill in, if blank) Number(s)(1) Certificate(s)(1) of $1,000)(2) - ---------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- Total - ---------------------------------------------------------------------------------------------------------------------------------- (1) Need not be completed by Holders tendering by book-entry transfer. (2) Unless otherwise indicated in the column labeled "Principal Amount Tendered," any tendering Holder will be deemed to have tendered the full aggregate amount represented by such Original Notes. - ----------------------------------------------------------------------------------------------------------------------------------
3 4 Holders of Original Notes who wish to tender and whose Original Notes are not immediately available or who cannot deliver their Original Notes and all other documents required hereby to the Exchange Agent prior to the Expiration Date or whose Original Note(s) cannot be delivered on a timely basis pursuant to the rules for book-entry transfer may tender Original Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering." See Instruction below. / / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution:________________________________________ Account Number:_______________________________________________________ Transaction Code Number:______________________________________________ / / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s):_________________________________________ Name of Eligible Institution that guaranteed delivery:________________ Account Number (if delivered by book-entry transfer):_________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENT OR SUPPLEMENT TO THE PROSPECTUS. Name:_________________________________________________________________ Address:______________________________________________________________ ______________________________________________________________________ 4 5 SPECIAL DELIVERY INSTRUCTIONS (See Instructions 4, 5 and 6) To be completed ONLY if certificates for Original Notes in a principal amount not tendered, or New Notes issued in exchange for Original Notes accepted for exchange, are to be issued in the name of someone other than the undersigned or if Original Notes tendered by book-entry transfer which are not exchanged and/or any New Notes are to be returned by credit to an account maintained by DTC other than the account designated above. Issue certificate(s) to: DTC Account Number:____________________________________________________________ Name:__________________________________________________________________________ (Please Print) Address:_______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) _______________________________________________________________________________ (Tax Identification or Social Security No.) SPECIAL REGISTRATION INSTRUCTIONS (See Instructions 4, 5 and 6) To be completed ONLY if certificates for Original Notes in a principal amount not tendered, or New Notes issued in exchange for Original Notes accepted for exchange, are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Deliver certificate(s) to: Name:__________________________________________________________________________ (Please Print) Address:_______________________________________________________________________ _______________________________________________________________________________ (Include Zip Code) _______________________________________________________________________________ (Tax Identification or Social Security No.) 5 6 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Original Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Original Notes tendered in accordance with this Letter of Transmittal, the undersigned exchanges, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to the Original Notes tendered hereby and accepted for exchange pursuant to the Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its, his or her agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company) with respect to the tendered Original Notes with full power of substitution to (i) deliver certificates for such Original Notes to the Company or its agent or transfer ownership of such Original Notes on the account books maintained by DTC, together in either such case with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company or its agent or transfer ownership of such Original Notes on the account books maintained by DTC, together in either such case with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes and (ii) present such Original Notes for cancellation and transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Original Notes, all in accordance with the terms of the Exchange offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT, HE OR SHE HAS FULL POWER AND AUTHORITY TO TENDER, SELL, ASSIGN AND TRANSFER THE ORIGINAL NOTES TENDERED HEREBY AND THAT THE COMPANY WILL ACQUIRE GOOD AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES AND NOT SUBJECT TO ANY ADVERSE CLAIM, WHEN THE SAME ARE ACQUIRED BY THE COMPANY. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE EXCHANGE AGENT OR THE COMPANY TO BE NECESSARY OR DESIRABLE TO COMPLETE THE ASSIGNMENT, TRANSFER AND EXCHANGE OF THE ORIGINAL NOTES TENDERED HEREBY. The undersigned also acknowledges that the Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "Commission") that the New Notes issued in exchange for the Original Notes pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by Holders thereof (other than any Holder that is an affiliate of the Company within the meaning of Rule 405 of the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangements with any person to participate in the distribution of the New Notes. If the undersigned 6 7 is not a broker-dealer or is a broker-dealer but will not receive New Notes for its own account in exchange for Original Notes, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Original Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes, however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. By acceptance of the Exchange Offer, each broker-dealer that receives new Notes pursuant to the Exchange Offer hereby acknowledges and agrees that, upon receipt of notice by the Company of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus in order to make the Statements therein not misleading (which notice the Company agrees to deliver promptly to such broker-dealer), such broker-dealer will suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such broker-dealer. The undersigned represents that (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of such Holder's business, (ii) such Holder has not arrangement with any other person to participate in the distribution of such New Notes and (iii) such Holder is not an "affiliate" of the Company as defined under Rule 405 of the Securities Act, or if such Holder is an affiliate, that such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. The undersigned understands that, upon acceptance by the Company of the Original Notes tendered under the Exchange Offer, the undersigned will be deemed to have accepted the New Notes and will be deemed to have relinquished all rights with respect to the Original Notes so accepted. The undersigned understands that the Company may accept the undersigned's tender at any time on or after the Expiration Date by delivering oral or written notice of acceptance to the Exchange Agent. Tenders of Original Notes may be withdrawn at any time prior to the Expiration Date, unless theretofore accepted for exchange as provided in the Exchange Offer. The undersigned understands that the Company reserves the right, at any time and from time to time, in its sole discretion (subject to its obligation under the Registration Rights Agreement) (i) to delay accepting any Original Notes or to delay the issuance and exchange of New Notes for Original Notes, to extend the Exchange Offer, or if any of the conditions set forth in the Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange Offer" shall not have 7 8 been satisfied, to terminate the Exchange Offer, by giving oral or written notice of such delay, extension or termination of the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. If any tendered Original Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Original Notes will be returned, without expense to the tendering Holder thereon, to the undersigned at the address shown below or at a different address as may be indicated herein under "Special Delivery Instructions" (or, in the case of Original Notes tendered by book-entry transfer, such Original Notes will be credited to the account of such Holder maintained at the Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. All authority conferred or aimed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. The undersigned understands that tenders of Original Notes pursuant to the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Any tender of Original Notes pursuant to this Letter of Transmittal may be withdrawn only in accordance with the applicable procedures set forth in the Prospectus. The New Notes exchanged for the tendered Original Notes will be issued to the undersigned and mailed to the address (or credited) to the account maintained at the Book-Entry Transfer Facility above unless otherwise indicated under the "Special Registration Instructions" or the "Special Delivery Instructions" above. The undersigned understands that the Company has no obligation pursuant to the "Special Registration Instructions" or "Special Delivery Instructions" to transfer any Original Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Original Notes so tendered. Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available or (ii) who cannot deliver their Original Notes (or complete the procedures for book-entry transfer), this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date may tender their Original Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures". See Instruction 1 printed below regarding the completion of this Letter of Transmittal. PLEASE SIGN HERE WHETHER OR NOT ORIGINAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY 8 9 _________________________________________ ___________________________________ Date _________________________________________ ___________________________________ Signature(s) of Registered Holder(s) Date or Authorized Signatory Area Code and Telephone Number: __________________________________ The above lines must be signed by the registered Holder(s) as their name(s) appear(s) on the Original Notes or on a security position listing at the Book-Entry Transfer Facility as the owner of the Original Notes or by person(s) authorized to become registered Holder(s), a copy of which must transmitted with this Letter of Transmittal. If Original Notes to which this Letter of Transmittal relate are held of record by two or more joint Holders, then all such Holders must sign this Letter of Transmittal. If required by Instruction 4 hereto, the signatures on the above lines must be guaranteed by an Eligible Institution. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or a corporation or other person acting in a fiduciary or representative capacity, then such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority so to act with this letter. See Instruction 4 regarding the completion of this Letter of Transmittal below. Name(s)________________________________________________________________________ ________________________________________________________________________ (Please Print) Capacity (full title)__________________________________________________________ Address________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ (Include Zip Code) Area Code and Telephone No. ( ) Tax Identification or Social Security Nos.___________________________________________________________ Please Complete Substitute Form W-9 9 10 GUARANTEE OF SIGNATURES(S) Signature(s) must be guaranteed if required by Instruction 4 Authorized Signature Dated:_________________________, 1997 Name and Title_________________________________________________________________ (Please Print) Name of Firm___________________________________________________________________ 10 11 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ORIGINAL NOTES OR BOOK-ENTRY CONFIRMATIONS. Certificates for all physically tendered Original Notes, or confirmation of a book-entry transfer into the exchange Agent's account at the Book-Entry Transfer Facility of Original Notes tendered electronically, together in each case with a properly completed and duly executed copy of this Letter of Transmittal and any other documents required by this Letter of Transmittal or the Prospectus, must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date unless the tendering Holder complies with the guaranteed delivery procedures described in the following paragraph. The method of delivery of Original Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal, certificates representing Original Notes or any other required documents should be sent to the Company. Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available, or (ii) who cannot deliver their Original Notes (or complete the procedure for book-entry transfer), this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures; (i) such tender must be made by or through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail, delivery or overnight courier, setting forth the name and address of the Holder and any certificate numbers) of such Original Notes and the principal amount of Original Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five (5) New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or facsimile hereof) together with certificate(s) representing the Original Notes (or, with respect to a book-entry transfer, confirmation of a book-entry transfer of the Original Notes into the Exchange Agent's account at the Book-Entry Transfer Facility) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal (or facsimile hereof), as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all tendered Original Notes in proper form for transfer (or, with respect to a book-entry transfer, confirmation of a book-entry transfer of the Original Notes into the Exchange Agent's Account at the Book-Entry Transfer Facility, must be received by the Exchange Agent within five (5) New York Stock Exchange trading days after the Expiration Date, all as provided in the 11 12 Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." Any Holder who wishes to tender his, her or its Original Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery from the Eligible Institution prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the Exchange Agent, a duplicate Notice of Guaranteed Delivery will be sent to Holders. A Notice of Guaranteed Delivery has been included with the Prospectus and the Letter of Transmittal for use by Holders who wish to tender their Original Notes according to the guaranteed delivery procedures set forth above. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered original Notes, and withdrawal of tendered Original Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Original Notes determined by the Company not to be validly tendered or any Original Notes the acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right to waive any defects, irregularities or conditions of tender to particular Original Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Original Notes will render such tenders invalid unless such defects or irregularities are cured within such time as the Company shall determine. Any Original Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 2. TENDER OF HOLDER. Only a Holder of Original Notes may tender such Original Notes in the Exchange Offer. Any beneficial owner of Original Notes who is not the registered Holder and who wishes to tender should arrange with such registered Holder to execute and deliver this Letter of Transmittal on such owner's behalf or must, prior to completing and executing this Letter of Transmittal and delivering his Original Notes, either make appropriate arrangements to register ownership of the Original Notes in such owner's name or obtain a properly completed bond power from the registered Holder. 3. PARTIAL TENDERS; WITHDRAWALS. (Not applicable to Holders who tender by book-entry transfer.) If less than the entire principal amount of any Original Notes evidenced by a certificate is tendered, the tendering Holder should fill in the principal amount tendered in the third column of the box entitled "Description of 10 3/4% Senior Notes Due 2007 (The Original Notes)" above. The entire principal amount of any Original Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Original Notes are not tendered and a certificate or certificates representing New Notes (subject to the denomination requirements discussed in the Prospectus) issued in exchange for any Original Notes accepted will be sent to the Holder at its, his or her 12 13 registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, promptly after the Original Notes are accepted for exchange. A tender pursuant to the Exchange Offer may be withdrawn subject to the procedures set forth in this Letter of Transmittal and the Prospectus, at any time prior to the Expiration Date, if not theretofore accepted for exchange. To withdraw a tender of Original Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent as its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Original Notes to be withdrawn (the "Depositor"), (ii) specify the serial numbers on the particular certificates evidencing the Original Notes to be withdrawn and the name of the registered Holder thereof (if certificates have been delivered or otherwise identified to the Exchange Agent) or the name and number of the account at DTC to be credited with withdrawn Original Notes (if the Original Notes have been tendered pursuant to the procedures for book-entry transfer), (iii) be signed by the Holder in the same manner as the Original signature on the Letter of Transmittal by which such Original Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Note Registrar with respect to the Original Note register the transfer of such Original Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Original Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, which determination shall be final and binding on all parties. Any Original Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Original Notes so withdrawn are validly retendered. Properly withdrawn Original Notes may be retendered by following one of the procedures described in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration Date. 4. SIGNATURES ON THE LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder(s) of the Original Notes tendered hereby, the signature must correspond (i) with the name(s) as written on the face of the certificate without alteration, enlargement or any change whatsoever, or (ii) in the case of Original Notes held by book-entry, with the name as contained on the security position listing at the Book-Entry Transfer Facility. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder or Holders of Original Notes tendered and the New Notes issued in exchange therefor are to be issued (or any untendered principal amount of Original Notes is to be reissued) to the registered Holder, then such Holder need not and should not endorse any tendered Original Notes, nor provide a separate bond power. In any other case such Holder must either properly endorse the certificates tendered or transmit a properly completed separate bond power with this Letter of 13 14 Transmittal with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or facsimile thereof) or any Original Notes or bond are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Letter of Transmittal. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal is signed by the registered Holder(s) of the Original Notes tendered herewith in connection with the Exchange Offer and such Holder(s) have not completed the box set forth herein entitled "Special Registration Instructions," (b) such Original Notes are tendered for the account of an Eligible Institution, or (c) such Original Notes are tendered for the account of DTC. 5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders should indicate, in the applicable box or boxes, the name and address to which New Notes or substitute Original Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, or the account number at the Book-Entry Transfer Facility to which the New Notes are to be credited, if different from the name and address, or account number of the person signing this Letter of Transmittal. In the case of issuance in a different name or to a different account number, the taxpayer identification or social security number of the person named (or to whose account the New Notes are credited) must also be indicated. Holders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such Holders' account maintained at the Book-Entry Transfer Facility. 6. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the exchange of Original Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Original Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name or credited to the account of, any person other than the registered Holder of the Original Notes tendered hereby, or if tendered Original Notes are registered in the name of any person other than the exchange of Original Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or on any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such Holder. 14 15 Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Original Notes listed in this Letter of Transmittal. 7. WAIVER OF CONDITIONS. The Company reserves the right, in its sole discretion, to amend, waive or modify specified conditions in the Exchange Offer in the case of any Original Notes tendered. 8. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES. Any tendering Holder whose Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company or other nominees for assistance concerning the Exchange Offer. 15 16 IMPORTANT TAX INFORMATION Under current federal income tax law, an Original Noteholder whose tendered Original Notes are accepted for exchange is required to provide the Company, through the Exchange Agent (as payor), with such Original Noteholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 or otherwise establish a basis for exemption from backup withholding. If such Original Noteholder is an individual, the TIN is such Original Noteholder's social security number. If the Exchange Agent is not provided with the correct TIN, the Original Noteholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery of such Original Noteholder's New Notes may be subject to backup withholding. Certain Original Noteholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt Original Noteholders should indicate their exempt status on Substitute Form W-9. A foreign individual may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the Original Noteholder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any payment made to the Original Noteholder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made with respect to Original Notes exchanged in the Exchange Offer, each Original Noteholder is required to provide the Exchange Agent with either (i) the Original Noteholder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Original Noteholder is awaiting a TIN) and the (A) the Original Noteholder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the Original Noteholder that he or she is no longer subject to backup withholding, or (ii) an adequate basis for exemption. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The Original Noteholder is required to give the Exchange Agent the TIN (i.e., social security number or employer identification number) of the record owner of the Original Notes. If the Original Notes are held in more than one name or are not held in the name of the actual owner, 16 17 consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance regarding which number to report. 17 18 PAYOR'S NAME: IBJ SCHRODER BANK & TRUST COMPANY SUBSTITUTE Form W-9 Department of the Treasury Internal Revenue Service Payor's Request for Taxpayer Identification Number (TIN) PART 1 - Please provide your TIN in the box at right and certify by signing and dating below Social Sec. Number or Employer I.D. Number PART 2 - Certification-Under Penalties of Perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. Certificate Instructions -- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). PART 3 -- Awaiting TIN SIGNATURE DATE ------------------------- ----------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE 18 19 EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver such an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide such a number. Signature: Date: 19 20 [DO NOT WRITE IN SPACE BELOW]
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Delivery Prepared by Checked by Date ----------- ----------- ---------------- 20 EX-99.2 43 FORM OF NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT 99.2 UNITED REFINING COMPANY NOTICE OF GUARANTEED DELIVERY (Not to be used for Signature Guarantee) As set forth in the Prospectus dated __________________ , 1997 (the "Prospectus"), in the section entitled "The Exchange Offer-Procedures for Tendering" and in the accompanying Letter of Transmittal (the "Letter of Transmittal") and Instruction 1 thereto, this form or one substantially equivalent thereto must be used to accept the Exchange Offer if certificates representing outstanding 10 3/4% Series A Senior Notes due 2007 (the "Original Notes") of United Refining Company, a Pennsylvania corporation, are not immediately available or time will not permit such holder's Original Notes or other required documents to reach the Exchange Agent, or complete the procedures of book entry transfer, prior to the Expiration Date (as defined in the Prospectus) of the Exchange Offer. This form may be delivered by hand or sent by overnight courier, facsimile transmission or registered or certified mail to the Exchange Agent and must be received by the Exchange Agent prior to 5:00 p.m. New York City time on , 1997. To: IBJ Schroder Bank & Trust Company, as Exchange Agent By Registered or Certified Mail: IBJ Schroder Bank & Trust Company P. O. Box 84 Bowling Green Station New York, New York 10274-0084 Attention: Reorganization Operations Department By Overnight Courier or By Hand: IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Securities Processing Window, Subcellar One (SC-1) By Facsimile: (212) 858-2611 Confirm by Telephone: (212) 858-2103 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. EX-99.3 44 FORM OF LETTER TO BROKERS, DEALERS 1 EXHIBIT 99.3 UNITED REFINING COMPANY OFFER TO EXCHANGE ITS 10 3/4% SERIES B SENIOR NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 10 3/4% SERIES A SENIOR NOTES DUE 2007 To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: United Refining Company (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated _______________, 1997 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 10 3/4% Series B Senior Secured Notes due 2007 which have been registered under the Securities Act of 1933, as amended, for its outstanding 10 3/4% Series A Senior Secured Notes due 2007 (the "Original Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 9, 1997, between the Company, the Subsidiary Guarantors, Dillon, Read & Co., Inc. and Bear, Stearns & Co., Inc. We are requesting that you contact your clients for whom you hold Original Notes, regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original notes registered in your name or in the name of your nominee, or who h old Original Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated ________________ , 1997; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Original Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Original Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to , the Exchange Agent for the Original Notes. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________________ , 1997, UNLESS 5 2 EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). THE ORIGINAL NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Original Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Original Notes wish to tender, but it is impracticable for them to forward their certificates for Original Notes prior to the expiration of the Exchange Offer or to comply with the book entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer-Guaranteed Delivery Procedures." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Original Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all transfer taxes applicable to the exchange of Original Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to , the Exchange Agent for the Original Notes, at its address and telephone number set forth on the front of the Letter of Transmittal. ________________________________________ United Refining Company NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENTS OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. 6 EX-99.4 45 FORM OF LETTER TO CLIENTS 1 EXHIBIT 99.4 UNITED REFINING COMPANY OFFER TO EXCHANGE ITS 10 3/4% SERIES B SENIOR NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 10 3/4% SERIES A SENIOR NOTES DUE 2007 To Our Clients: Enclosed for your consideration is a Prospectus, dated 1997 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") of United Refining Company (the "Company") to exchange its 10 3/4% Series B Senior Notes due 2007 which have been registered under the Securities Act of 1933, as amended, for its outstanding 10 3/4% Series A Senior Notes due 2007 (the "Original Notes"), upon the terms and subject to the conditions described in the Prospectus. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 9, 1997, among the Company, the Subsidiary Guarantors, Dillon, Read & Co., Inc. and Bear, Stearns & Co., Inc. This material is being forwarded to you as the beneficial owner of the Original Notes carried by us in your account but not registered in your name. A TENDER OF ORIGINAL NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Original Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Original Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, unless extended by the Company. Any Original Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Original Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Certain Conditions to the Exchange Offer." 3. Any transfer taxes incident to the transfer of Original Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 1 2 4. The Exchange Offer expires at 5:00 p.m., New York City time, on , 1997, unless extended by the Company. If you wish to have us tender your Original Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER EXISTING NOTES. 2 3 INSTRUCTIONS WITH RESPECT TO EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by United Refining Company with respect to its Original Notes. This will instruct you to tender the Original Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and related Letter of Transmittal. Please tender the Original Notes held by you for my account as indicated below: Aggregate Principal Amount at Maturity of Original Notes 10 3/4% Series A Senior Notes due 2007 _____________________________________ Please do not tender any Original Notes held by you for my account. Dated: ________________, 1997 ________________________________________ ________________________________________ Signature ________________________________________ ________________________________________ Please print name(s) here ________________________________________ ________________________________________ Address(es) ________________________________________ Area Code and Telephone Number ________________________________________ Tax I.D. or Social Security No(s). 3 4 None of the Original Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Original Notes held by us for your account. 4 -----END PRIVACY-ENHANCED MESSAGE-----