Ancillary Equipment Ste Lease

Exhibit 10.12


EXECUTION COPY


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ANCILLARY EQUIPMENT SITE LEASE AND EASEMENT AGREEMENT


dated as of August 19, 1999


between


CLARK REFINING & MARKETING, INC.


and


PORT ARTHUR COKER COMPANY L.P.


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TABLE OF CONTENTS


Page


ARTICLE I
DEFINITIONS.................................................... 1
SECTION 1.1 Definitions....................................... 1
SECTION 1.2 Other Definitional Provisions..................... 1


ARTICLE II
LEASE AND GRANT OF EASEMENT.................................... 2
SECTION 2.1 Lease............................................. 2
SECTION 2.2 Grant of Easement................................. 2
SECTION 2.3 Easements Appurtenant............................. 2
SECTION 2.4 No Interference................................... 2


ARTICLE III
POSSESSION AND QUIET ENJOYMENT................................. 3


ARTICLE IV
TITLE.......................................................... 3


ARTICLE V
FIXTURES....................................................... 3


ARTICLE VI
CONSTRUCTION OBLIGATION........................................ 4
SECTION 6.1 Lessor to Upgrade Ancillary Equipment............. 4
SECTION 6.2 Scope of Work..................................... 4
SECTION 6.3 Assignment of Construction Contract............... 4
SECTION 6.4 Ancillary Equipment Letter of Credit.............. 5


ARTICLE VII
UNDERTAKINGS OF LESSOR; FURTHER ASSURANCES..................... 5


ARTICLE VIII
RESERVATIONS AND RESTRICTIONS.................................. 6
SECTION 8.1 Reservations...................................... 6


ARTICLE IX
MAINTENANCE; INSPECTION; COMPLIANCE WITH LAWS.................. 6
SECTION 9.1 Maintenance....................................... 6
SECTION 9.2 Inspection........................................ 7
SECTION 9.3 Compliance with Laws.............................. 7


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ARTICLE X
LIENS.......................................................... 8
SECTION 10.1 Lessee Liens..................................... 8
SECTION 10.2 Lessor Liens..................................... 8


ARTICLE XI
TAXES AND CHARGES.............................................. 8
SECTION 11.1 Taxes............................................ 8
SECTION 11.2 Apportionment.................................... 9


ARTICLE XII
INSURANCE...................................................... 9
SECTION 12.1 Lessor Insurance................................. 9


ARTICLE XIII
RENT........................................................... 10
SECTION 13.1 Initial Term..................................... 10
SECTION 13.2 Renewal Term..................................... 10
SECTION 13.3 Early Termination................................ 11


ARTICLE XIV
NONTERMINATION................................................. 11


ARTICLE XV
CONDEMNATION................................................... 12


ARTICLE XVI
BINDING EFFECT; SUCCESSORS AND ASSIGNS......................... 12


ARTICLE XVII
NON-REMOVAL OF FACILITY........................................ 12


ARTICLE XVIII
POSSESSION UPON TERMINATION.................................... 13


ARTICLE XIX
INDEMNITY...................................................... 13
SECTION 19.1 Lessee Indemnity................................. 13
SECTION 19.2 Lessor Indemnity................................. 13


ARTICLE XX
TERM........................................................... 14
SECTION 20.1 Ancillary Equipment Site Lease Term.............. 14
SECTION 20.2 Renewal Term..................................... 14


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ARTICLE XXI
MINERAL RIGHTS................................................. 15


ARTICLE XXII
MISCELLANEOUS.................................................. 15
SECTION 22.1 Assignment as Security for Lessee's Obligations.. 15
SECTION 22.2 Memorandum of Lease.............................. 15
SECTION 22.3 Relationship of the Parties...................... 16
SECTION 22.4 Time is of the Essence........................... 16
SECTION 22.5 Notices.......................................... 16
SECTION 22.6 Severability..................................... 17
SECTION 22.7 Amendment........................................ 17
SECTION 22.8 Headings, etc.................................... 17
SECTION 22.9 Counterparts..................................... 17
SECTION 22.10 GOVERNING LAW.................................... 17
SECTION 22.11 WAIVER OF JURY TRIAL............................. 17


ARTICLE XXIII
NO MERGER...................................................... 18
SECTION 23.1 No Merger........................................ 18


APPENDIX A -- DEFINITIONS


EXHIBITS


A Ancillary Equipment Site Description
B Ancillary Equipment Description
C Adjacent Refinery Property Description
D Lessor Ancillary Equipment Upgrade Description
E Turnarounds and Capital Maintenance Description
F Form of Consent and Assignment Agreement
G Form of Memorandum of Lease
H Ancillary Equipment Operating Fee Calculation


SCHEDULES


I Ancillary Equipment Site Permitted Liens


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SITE AND EQUIPMENT LEASE AND EASEMENT AGREEMENT (the "Ancillary Equipment Site Lease"), dated as of August 19, 1999, between Clark Refining & Marketing, Inc., a Delaware corporation ("Lessor") and Port Arthur Coker Company L.P., a Delaware limited partnership ("Lessee").


WHEREAS, the Lessor is the owner of the Ancillary Equipment Site and the Ancillary Equipment;


WHEREAS, Lessee wishes to lease the Ancillary Equipment Site and the Ancillary Equipment from Lessor and wishes Lessor to perform certain required upgrades thereto in order for the Lessee to operate the Ancillary Equipment in connection with the Coker Complex; and


WHEREAS, Lessor wishes to perform such upgrades to the Ancillary Equipment and lease the Ancillary Equipment and Ancillary Equipment Site to Lessee;


NOW THEREFORE, for and in consideration of the mutual covenants, premises and agreements set forth herein, and good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I
DEFINITIONS


SECTION 1.1 Definitions. Except as otherwise defined herein, the capitalized terms used herein shall have the respective meanings assigned thereto in Appendix A.


SECTION 1.2 Other Definitional Provisions.
-----------------------------


(a) The words "hereof," "herein", "hereto" and "hereunder" and words
of similar import when used in this Ancillary Equipment Site Lease shall
refer to this Ancillary Equipment Site Lease as a whole and not to any
particular provision of this Ancillary Equipment Site Lease, and Article,
Section and Schedule references are to this Ancillary Equipment Site Lease
unless otherwise specified.


(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.


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ARTICLE II
LEASE AND GRANT OF EASEMENT


SECTION 2.1 Lease. The Lessor hereby demises, leases and delivers to the Lessee and Lessee hereby leases and accepts from Lessor the following described properties for a term of years equal to the Ancillary Equipment Site Lease Term, subject to all Permitted Liens now or hereafter in existence, the following (such estates being referred to herein as the "Ancillary Equipment Site Leasehold"):


(a) the real property (the "Ancillary Equipment Site") described
in Exhibit A; and


(b) all equipment, buildings, structures, fixtures and
improvements located on the Ancillary Equipment Site, including
without limitation those processing units described in Exhibit B.


SECTION 2.2 Grant of Easement. Lessor does hereby grant and convey to Lessee a nonexclusive easement (the "Ancillary Equipment Easement") on, over and under the Adjacent Refinery Property as more particularly described in Exhibit C, for the purpose of ingress and egress, for the location and maintenance of the Ancillary Equipment (including, without limitation, all interconnection pipes, wiring, other pipelines and communication and utility lines) and for any other purpose as may be necessary or desirable in connection with the maintenance and operation of the Ancillary Equipment or the operation of the Heavy Oil Processing Facility. The appurtenant non-exclusive easement herein granted includes, without limitation, the right to use the twenty (20) foot wide access easements described on Exhibit C hereto, connecting the Ancillary Equipment Site to Texas Highway 870.


SECTION 2.3 Easements Appurtenant. The Ancillary Equipment Easement shall be deemed to be appurtenant to the Ancillary Equipment Leasehold and shall be for the benefit of the Lessee and its successors and assigns and any tenant of the Ancillary Equipment Leasehold. Lessor agrees that it will not make any use or permit any use of the land described in Exhibit C that would interfere with the use and enjoyment of the Ancillary Equipment Easement or the operation of the Ancillary Equipment Site in connection with the Coker Complex by the Lessee or its successors, assigns or subtenants at any time during the Ancillary Equipment Site Lease Term, except to the extent that such use would not impair (i) the ability of the Lessee or its successors, assigns or subtenants to operate the Coker Complex in accordance with the Base Case Financial Model or (ii) any of the security interests granted or to be granted by the Coker Company to the Financing Parties pursuant to the Financing Documents.


SECTION 2.4 No Interference. With respect to any nonexclusive easement granted pursuant to this Ancillary Equipment Site Lease, the Lessor shall not grant or convey any easement or other interest (other than a Permitted Lien) that, if used or enjoyed in accordance with its terms, would interfere with the use and enjoyment of the Coker Complex, the Ancillary Equipment Leasehold or the Ancillary Equipment Easement or the operation of the Ancillary Equipment or the Coker Complex by the Lessee or its permitted successors, assigns or subtenants at any time during the Ancillary Equipment Site Lease Term, except to the extent that such


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easement or interest would not or impair (i) the ability of the Lessee or its successors, assigns or subtenants to operate the Coker Complex in accordance with the Base Case Financial Model or (ii) any of the security interests granted or to be granted by the Coker Company to the Financing Parties pursuant to the Financing Documents.


ARTICLE III
POSSESSION AND QUIET ENJOYMENT


The Lessor covenants with the Lessee that the Lessee will enjoy quiet possession of the Ancillary Equipment Leasehold and the right to utilize the Ancillary Equipment Easement, free from claims of persons in possession and third parties claiming rights thereto.


ARTICLE IV
TITLE


The Lessor warrants and represents that it has (a) good and indefeasible title to the Ancillary Equipment, the Ancillary Equipment Site and to all property covered by the Ancillary Equipment Easement, in fee simple absolute and (b) the right to convey the Ancillary Equipment Easement, in each case free and clear of all liens and encumbrances, except for Permitted Liens. The Lessor further warrants and represents that Permitted Liens in existence on the date hereof do not and will not adversely affect the use of the Ancillary Equipment, the Ancillary Equipment Site and the Ancillary Equipment Easement as contemplated by the other Project Documents.


ARTICLE V
FIXTURES


As a material part of this Ancillary Equipment Site Lease, the Lessor and Lessee agree and intend that each item representing part of the Ancillary Equipment (including the Ancillary Equipment Upgrade) (a) is attached, affixed and annexed to the Ancillary Equipment Site or the Ancillary Equipment Easement, as the case may be, by agreement and intention of the parties, (b) shall remain affixed to the Ancillary Equipment Site or the Ancillary Equipment Easement, as the case may be, (c) shall be considered with respect to the interests of the parties hereto as the real property of the Lessor, (d) shall be considered to become fixtures to and a part of the Ancillary Equipment Site or the Ancillary Equipment Easement, as the case may be, immediately upon being installed or constructed on, or otherwise affixed or annexed to, the Ancillary Equipment Site, (e) is adaptable to the uses and purposes for which the Ancillary Equipment Site is being leased by Lessor to Lessee, and (f) cannot be removed from the Ancillary Equipment Site without doing substantial injury and/or material damage to the Ancillary Equipment Site.


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ARTICLE VI
CONSTRUCTION OBLIGATION


SECTION 6.1 Lessor to Upgrade Ancillary Equipment. The Lessor covenants to construct and substantially complete, on or before October 1, 2000, at Lessor's sole cost and expense, the additions, betterments and upgrades to the Ancillary Equipment described on Exhibit D (the "Lessor Ancillary Equipment Upgrade") pursuant to the Ancillary Equipment Upgrade Contract or otherwise. Should Lessor fail to complete the Lessor Ancillary Equipment Upgrade by October 1, 2000, Lessor hereby agrees that Lessee may engage its own contractor(s) to complete the Lessor Ancillary Equipment Upgrade at Lessor's expense.


SECTION 6.2 Scope of Work. Lessor shall perform or shall cause to be performed all of the Lessor Ancillary Equipment Upgrade in accordance with the specifications set forth on Exhibit D. Without limiting the generality of the foregoing:


(a) All components shall be new (except for used equipment (x)
expressly specified as used on Exhibit D, (y) not required, pursuant to the
Exhibit D, to be new equipment or (z) otherwise agreed in writing by
Lessee) and of good quality when installed; shall meet the generally
accepted standard of quality applicable to the design and engineering of
refinery installations of similar size, type and design; shall be designed
and manufactured in accordance with recognized refinery and petrochemical
industry standards for such components and in accordance with the
Standards; and shall be free from defects and deficiencies in design,
materials and workmanship or otherwise;


(b) The Lessor Ancillary Equipment Upgrade shall be performed
and installed in accordance with the standards set forth on Exhibit D and
in accordance with workmanlike and good engineering practices;


(c) The Lessor Ancillary Equipment Upgrade shall be designed and
built to integrate with the Coker Complex such that, upon completion, the
Heavy Oil Upgrade Project shall be capable of being operated (i) at the
Guaranteed Values as required by the Performance Test Standards; (ii) in
compliance with all Applicable Laws in effect on the date that the Lessee
issues a final completion certificate to the Contractor pursuant to the EPC
Contract; (iii) in accordance with the Standards; and (iv) free from
defects and deficiencies in design, materials and workmanship or otherwise;
and


(d) Lessor shall take all such actions, and shall direct the
Contractor to take all such actions, as may be required in connection with
the integration of the Ancillary Equipment with the Coker Complex.


SECTION 6.3 Assignment of Construction Contract. As security for its obligation to perform the Lessor Ancillary Equipment Upgrade, Lessor hereby collaterally assigns to Lessee, and hereby grants to Lessee a security interest in, all of Lessor's right, title and interest in and to any and all construction, design, engineering or procurement contracts entered


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into by or on behalf of Lessor for the purpose of performing the Lessor Ancillary Equipment Upgrade, including, without limitation, the Ancillary Equipment Upgrade Contract.


SECTION 6.4 Ancillary Equipment Letter of Credit. For so long as the Ancillary Equipment Upgrade is not substantially complete, the Lessor shall provide and maintain in effect, for the benefit of the Contractor, the standby letter as required by, and on the terms and conditions set forth in, the Ancillary Equipment Upgrade Contract.


ARTICLE VII
UNDERTAKINGS OF LESSOR; FURTHER ASSURANCES


The Lessor covenants, represents and warrants to the Lessee that the Ancillary Equipment Site Leasehold and the Ancillary Equipment Easement are sufficient and will, at all times during the Ancillary Equipment Site Lease Term, be sufficient or, if the same shall cease to be so sufficient, the Lessor will at its expense take such action, including the conveyance of additional easements and the grant of additional rights, as is reasonable or necessary, in order to provide the Lessee with reasonable means of constructing, connecting, operating, maintaining, replacing, renewing and repairing the Ancillary Equipment including, but not limited to (a) reasonable means of transporting materials to be processed to the Ancillary Equipment and transporting processed material from the Ancillary Equipment to the Coker Complex, (b) reasonable access subject to regulatory restrictions to communications networks and sources of electric power, natural gas and other utilities for operation of the Ancillary Equipment, (c) reasonable access subject to regulatory restrictions to sources of potable water, (d) reasonable access subject to regulatory restrictions to areas for or means of disposing of waste materials generated by the operation of the Ancillary Equipment, (e) reasonable access on the Ancillary Equipment Site to a supply of hydrogen, by pipeline, by a hydrogen supply plant commissioned by the Lessor and constructed by a hydrogen supplier on or near the Ancillary Equipment Site or by another commercially reasonable alternative, sufficient for the requirements of the Ancillary Equipment, and (f) existing firewater systems, as they may be modified, necessary to maintain, protect and preserve the Ancillary Equipment Site. At all times during the Ancillary Equipment Site Lease Term the Lessor, at its expense, shall maintain the areas covered by the Ancillary Equipment Easement in good condition and repair and in accordance with Applicable Laws so that they will be available for the operation of the Ancillary Equipment, including, without limitation, the maintenance of roads, equipment, pumps, and pipelines located on areas covered by the Ancillary Equipment Easement.


The agreement and obligation of Lessor to provide electric utilities and electric service, natural gas and gas service, potable water and water service, and sanitary sewage service to the Ancillary Equipment Site is incident to, dependent upon and inseparable from the landlord/tenant relationship established by this Ancillary Equipment Site Lease, and such obligation shall continue only for the Ancillary Equipment Site Lease Term and the existence of such landlord/tenant relationship. All charges for potable water and sanitary sewer services to be provided by Lessor to Lessee pursuant to the Services and Supply Agreement are included in the rent payable to Lessor hereunder. The calculation of the Ancillary Equipment Operating Fee as it


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relates to the provision of electricity and electric service and natural gas and gas service to the Ancillary Equipment is intended only to provide a mechanism for Lessor to recover from Lessee the cost of providing electricity and electric service, and natural gas and gas service, to the Ancillary Equipment, and it is not intended that Lessor shall make a profit by providing such utilities). Lessee acknowledges, understands and agrees that none of such utilities may be sold or resold by Lessee, and none of such utilities may be used by any other party or for any other purpose other than in connection with its tenancy hereunder.


ARTICLE VIII
RESERVATIONS AND RESTRICTIONS


SECTION 8.1 Reservations. The grant and conveyance of the Ancillary Equipment Easement by the Lessor to the Lessee are subject to the following reservations and understandings:


(a) The Lessor reserves the right to relocate all or any portion of
the Ancillary Equipment or other property of the Lessee located on the
Adjacent Refinery Property provided that such relocation (i) does not
subject such property to any Liens, conditions or other restrictions (other
than Permitted Liens) that are more burdensome to the Lessee than before
such relocation, (ii) is at the Lessor's expense and (iii) does not deprive
the Lessee of effective use of such property or make the use of such
property more expensive or burdensome or adversely affect the operation of
the Ancillary Equipment or the Coker Complex, except to the extent that
such relocation would not impair (x) the ability of the Lessee or its
successors, assigns or subtenants to operate the Coker Complex in
accordance with the Base Case Financial Model or (y) any of the security
interests granted or to be granted by the Coker Company to the Financing
Parties pursuant to the Financing Documents.


(b) Subject to Section 2.2 and clause (a) of this Section 8.1, the
Lessor reserves the right to use, permit the use of, or grant easements or
licenses to use, any part of the Adjacent Refinery Property.


ARTICLE IX
MAINTENANCE; INSPECTION; COMPLIANCE WITH LAWS


SECTION 9.1 Maintenance. During the Ancillary Equipment Site Lease Term, the Lessee shall take care of and maintain the Ancillary Equipment Site and provide ordinary maintenance of the Ancillary Equipment, which shall not include capital improvements. So long as the Services and Supply Agreement is in effect, such performance with respect to maintenance of the Ancillary Equipment Site as rendered by Lessor thereunder shall be deemed to fulfill Lessee's obligations under this Section. Lessor shall be obligated to conduct scheduled


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turnarounds and capital maintenance on the Ancillary Equipment, in accordance with Exhibit E hereto.


SECTION 9.2 Inspection. During the Ancillary Equipment Site Lease Term, the Lessor and its authorized representatives may, at their own expense, at reasonable times and by appointment on reasonable notice, inspect the Ancillary Equipment Site and the Ancillary Equipment and any other property located on the Ancillary Equipment Site.


SECTION 9.3 Compliance with Laws. (a) During the Ancillary Equipment Site Lease Term, the Lessee, at its sole cost and expense, shall conform to, comply with and take any and all action necessary to avoid or eliminate any violation of any Applicable Laws applicable to the Ancillary Equipment Site and the Ancillary Equipment, or the use or occupancy thereof, unless and to the extent that (x) the Lessee shall be prosecuting in good faith a test, challenge, appeal or proceeding for review of such Applicable Laws by appropriate proceedings that do not involve any substantial risk of (i) foreclosure, sale, forfeiture or loss of, or imposition of any Lien prohibited by Article X on the Ancillary Equipment Site or any part thereof, (ii) extending the ultimate imposition of such requirement beyond the termination of the Ancillary Equipment Site Lease Term or (iii) any material claim against the Lessor, the Ancillary Equipment Site or any property of the Lessor or (y) such violation relates to the presence of or any failure to remediate environmental contamination existing on or under the Ancillary Equipment Site prior to the date hereof. So long as the Services and Supply Agreement is in effect, such performance with respect to compliance with laws applicable to the Ancillary Equipment Site and the Ancillary Equipment as may be rendered thereunder by the Lessor shall be deemed to fulfill Lessee's obligations under this Section.


(b) During the Ancillary Equipment Site Lease Term, the Lessor, at its sole cost and expense, shall conform to, comply with and take any and all action necessary to avoid or eliminate any violation of any Applicable Laws applicable to the Clark Refinery Property (other than the Ancillary Equipment or the Ancillary Equipment Site, except to the extent that such violation relates to any environmental condition on or under the Ancillary Equipment Site prior to the date hereof), or the use, ownership or occupancy thereof, unless and to the extent that (x) the Lessor shall be prosecuting in good faith a test, challenge, appeal or proceeding for review of such Applicable Laws by appropriate proceedings that do not involve any substantial risk of (i) foreclosure, sale, forfeiture or loss of, or imposition of any Lien prohibited by Article X on the Clark Refinery Property or any part thereof, (ii) extending the ultimate imposition of such requirement beyond the termination of the Ancillary Equipment Site Lease ...