Construction Payment Agreement entered into October 29, 2018, to be effective as of December 13, 2017, by and among HEP Tulsa, LLC and HollyFrontier Refining & Marketing LLC

EX-10.3 4 d619390dex103.htm EX-10.3 EX-10.3

Exhibit 10.3

CONSTRUCTION PAYMENT AGREEMENT

(Tulsa Rail Yard)

BETWEEN

HEP TULSA LLC

AND

HOLLYFRONTIER REFINING & MARKETING LLC

with an Effective Date of

December 13, 2017

TABLE OF CONTENTS


		Page No.
ARTICLE I DEFINITIONS AND CONSTRUCTION			1

1.1	Certain Defined Terms		1
1.2	Interpretation		1

ARTICLE II CONSTRUCTION OF TRACK; REIMBURSEMENT FOR TRACK CONSTRUCTION			2

2.1	Construction of Track		2
2.3	Reimbursement for Track Construction		2
2.4	Adjustment for Annual Payment Amount		2
2.5	Place of Payment		2
2.6	Early Termination		2

ARTICLE III DEFAULTS; REMEDIES; TERMINATION			2

3.1	Default by HFRM		2
3.2	HEP’s Remedies		3
3.3	Default by HEP		3
3.4	HFRM’s Remedies		3

ARTICLE IV GUARANTEE			4

4.1	Guarantee by HollyFrontier		4
4.2	Guaranty Absolute		4
4.3	Waiver		4
4.4	Subrogation Waiver		5
4.5	Reinstatement		5
4.6	Continuing Guaranty		5
4.7	No Duty to Pursue Others		5

ARTICLE V GENERAL PROVISIONS			5

5.1	Assignment Prohibition		5
5.2	Severability		5
5.3	Time of Essence		5
5.4	Captions		5
5.5	Entire Agreement; Amendment		5
5.6	Schedules and Exhibits		6
5.7	Notices		6
5.8	Waivers		7
5.9	No Partnership or Joint Venture		7
5.10	No Third Party Beneficiaries		7
5.11	Mutual Cooperation; Further Assurances		7
5.12	Binding Effect		7
5.13	Choice of Law		7
5.14	Survival		8

SCHEDULE


Schedule
Schedule 2.5 — Calculation of Early Termination Payment Amount

CONSTRUCTION PAYMENT AGREEMENT

(Tulsa Rail Yard)

THIS CONSTRUCTION PAYMENT AGREEMENT (this “Agreement”) is made and entered as of October 29, 2018 into to be effective as of the 13^th day of December 2017 (the “Effective Date”), between HEP TULSA LLC, a Delaware limited liability company (herein called “HEP”), and HOLLYFRONTIER REFINING & MARKETING LLC, a Delaware limited liability company (herein called “HFRM”). HEP and HFRM are referred to individually as a “Party” and collectively as the “Parties.”

RECITALS:

A. HFRM has subleased from HEP certain real property situated at or near the railway station of Tulsa, County of Tulsa, Oklahoma (the “BNSF Premises”) pursuant to a certain Sublease Agreement dated to be effective as of December 13, 2017 (the “Ground Sublease”).

B. HFRM has sublicensed from HEP certain real property situated at or near the railway station of Tulsa, County of Tulsa, Oklahoma (the “HRM Tulsa Premises” and together with the BNSF Premises, the “Premises”) pursuant to a certain Sublicense Agreement effective as of December 13, 2007 (the “Ground Sublicense”).

C. Pursuant to Section 7.1 of the Ground Sublease and in accordance with the terms and conditions of the Ground Sublicense, HEP has constructed on the Premises a railroad track siding consisting of approximately (i) Five Thousand Twenty (5,020) track feet of runaround track, (ii) Seven Thousand Three Hundred (7,300) of inbound and outbound track, (iii) One Thousand Three Hundred (1,300) track feet of maintenance and engine storage track, (iv) Nine Thousand Eight Hundred Eighty (9,880) track feet of rail car storage, (v) One (1) mainline switch, and (vi) Fifteen (15) industry switches (the “Track”), which is owned by HEP. As used herein, the term Track does not include the Premises and the Additional Improvements.

D. HEP has agreed to lease the Track to HFRM pursuant to a certain Track Lease Agreement dated to be effective as of December 13, 2017 (the “Track Lease”).

E. HFRM has agreed to reimburse HEP in the amount of $12,517,553 (the “Track Construction Cost”) for costs incurred by HEP in constructing the Track, subject to the terms and conditions set forth in this Agreement.

AGREEMENT:

NOW, THEREFORE, for and in consideration of covenants, obligations and undertakings of the Parties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HEP and HFRM covenant and agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1 Certain Defined Terms. Unless the context otherwise requires, capitalized terms used in this Agreement shall have the respective meanings set forth in Appendix A hereto.

1.2 Interpretation. Interpretation matters are set forth in Appendix B hereto.

ARTICLE II

CONSTRUCTION OF TRACK; REIMBURSEMENT FOR TRACK CONSTRUCTION

2.1 Construction of Track. HEP represents and warrants that HEP designed, fabricated, constructed, installed and tested the Track in accordance with applicable law, all applicable requirements of the Ground Sublease and Ground Sublicense, and current and generally accepted industry practices, and pursuant to drawings and specifications previously approved by HFRM.

2.2 Reimbursement for Track Construction. As payment to HEP for the Track Construction Cost, during each Contract Year during the Term HFRM shall pay to HEP the Track Construction Cost divided by 8.0, or $12,517,553 / 8.0 or $1,564,694 as such amount may be adjusted pursuant to Section 2.3 (the “Annual Payment Amount”). The Annual Payment Amount shall be paid in equal quarterly payments (each, a “Quarterly Payment”) on or before the last day of each Contract Quarter during the Term, with the first such payment being due ten (10) business days after the date this Agreement is signed by both Parties.

2.3 Adjustment of Annual Payment Amount. The Annual Payment Amount shall be adjusted on the first day of each Contract Year, commencing on July 1, 2018, by an amount equal to the annual change in the PPI rounded to four decimal places; provided, however, that the annual percentage increase in the Annual Payment Amount during any Contract Year shall not be less than one percent (1%) or exceed three percent (3%). For avoidance of doubt, any PPI adjustment less than one percent (1%) in any given year shall be rounded up to one percent (1%) and any PPI adjustment greater than three percent (3%) shall be rounded down to three percent (3%). The change factor shall be calculated as follows: annual PPI index (most current year) less annual PPI index (most current year minus 1) divided by annual PPI index (most current year minus 1). An example for year 2018 change is: [PPI (2017) – PPI (2016)] / PPI (2016) or (198.0 – 191.9) / 191.9 or 3.1787%, which would be rounded down to 3.0%.

2.4 Place of Payment. The Quarterly Payments shall be payable in lawful money of the United States of America at HEP’s address set forth in Section 5.7. The Annual Payment Amount shall be paid without any claim on the part of HFRM for diminution, setoff or abatement and nothing shall suspend, abate or reduce any Annual Payment Amount to be paid hereunder, except as expressly provided herein.

2.5 Early Termination. In the event the Track Lease is terminated prior to its Expiration Date (as defined therein) for reasons other than the fault or breach of HEP pursuant to the Track Lease or Railroad Lease (as defined in the Track Lease), then, as HEP’s exclusive remedy hereunder, HFRM shall pay to HEP and HEP shall accept, an amount sufficient to reimburse HEP for the remaining unamortized amount of the Track Construction Cost (the “Early Termination Amount”), such amount to be calculated as provided in Schedule 2.5 and paid to HEP within thirty (30) days of the date of such early termination. The Early Termination Amount shall not be payable to HEP in the event the Track Lease is terminated prior to its Expiration Date due to the fault or breach of HEP under the Track Lease or the Railroad Lease (as defined in the Track Lease). The rights and obligations set forth in this Section 2.5 shall survive any termination of the Track Lease or this Agreement.

ARTICLE III

DEFAULTS; REMEDIES; TERMINATION

3.1 Default by HFRM. The occurrence of any one or more of the following events shall constitute a material default and breach of this Agreement by HFRM:

(a) The failure by HFRM to make when due any payment of a Quarterly Payment or any other payment required to be made by HFRM hereunder, if such failure continues for a period of 90 days following written notice from HEP;

(b) The failure by HFRM to observe or perform any of the other covenants, conditions or provisions of this Agreement to be observed or performed by HFRM, if such failure continues for a period of thirty (30) days following written notice from HEP of such failure; provided, however, if a reasonable time to cure such default would exceed thirty (30) days, HFRM shall not be in default so long as HFRM begins to cure such default within thirty (30) days of receiving written notice from HEP and thereafter completes the curing of such default within reasonable period of time (under the circumstances) following the receipt of such written notice from HEP; or

3.2 HEP’s Remedies.

(a) In the event of any such material default under or material breach of the terms of this Agreement by HFRM, HEP may, at HEP’s option, at any time thereafter that such default or breach remains uncured, without further notice or demand, terminate this Agreement and pursue all of its rights and remedies available under law or in equity, including, but not limited to, the remedies provided for in Section 2.5.

(b) If, by the terms of this Agreement, HFRM is required to do or perform any act or to pay any sum to a Third Party, and fails or refuses to do so, HEP, after thirty (30) days written notice to HFRM, without waiving any other right or remedy hereunder for such default, may do or perform such act, at HFRM’s expense, or pay such sum for and on behalf of HFRM, and the amounts so expended by HEP shall be repayable on demand, and bear interest from the date expended by HEP until paid at a rate equal to an interest rate equal to the “Prime Rate” as published in The Wall Street Journal, Southwest Edition, in its listing of “Money Rates” plus two percent (2%) (the “Default Rate”). Past due payments required hereunder shall bear interest from maturity until paid at the Default Rate.

3.3 Default by HEP. The occurrence of any one or more of the following events shall constitute a material default and breach of this Agreement by HEP:

(a) The failure by HEP to observe or perform any of the other covenants, conditions or provisions of this Agreement to be observed or performed by HEP, if such failure continues for a period of 30 days following written notice from HFRM; provided, however, if a reasonable time to cure such default would exceed thirty (30) days, HEP shall not be in default so long as HEP begins to cure such default within thirty (30) days of receiving written notice from HFRM and thereafter completes the curing of such default within a reasonable period of time following the receipt of such written notice from HFRM; or

(b) The occurrence of a Bankruptcy Event.

3.4 HFRM’s Remedies. In the event of any such material default under or material breach of the terms of this Agreement by HEP, HFRM may, at HFRM’s option, at any time thereafter that such default or breach remains uncured, after ten days prior written notice to HFRM, perform any act that HEP is required to do or perform any act or to pay any sum to a Third Party, at HEP’s expense (to the extent the terms of this Agreement require such performance at HEP’s expense) or pay such sum for and on behalf of HEP, and the amounts so expended by HFRM shall be repayable on demand, and bear interest from the date expended by HFRM until paid at the Default Rate. HFRM may, at HFRM’s option, deduct

any such amounts so expended by HFRM from the Quarterly Payment(s) and any other amounts owed hereunder and any such action on the part of HFRM shall be in addition to any other remedy that may be available to HFRM for default or breach of contract, or otherwise, including the right of setoff

ARTICLE IV

GUARANTEES

4.1 Guarantee by HollyFrontier. HollyFrontier Corporation, a Delaware corporation (“HollyFrontier”) unconditionally, absolutely, continually and irrevocably guarantees, as principal and not as surety, to HEP the punctual and complete payment in full when due of all amounts due from HFRM under this Agreement (collectively, the “HFRM Payment Obligations”). HollyFrontier agrees that HEP shall be entitled to enforce directly against HollyFrontier any of the HFRM Payment Obligations.

4.2 Guaranty Absolute. HollyFrontier hereby guarantees that the HFRM Payment Obligations will be paid strictly in accordance with the terms of the Agreement. The obligations of HollyFrontier under this Agreement constitute a present and continuing guaranty of payment, and not of collection or collectability. The liability of HollyFrontier under this Agreement shall be absolute, unconditional, present, continuing and irrevocable irrespective of:

(a) any assignment or other transfer of this Agreement or any of the rights thereunder of HEP;

(b) any amendment, waiver, renewal, extension or release of or any consent to or departure from or other action or inaction related to this Agreement;

(d) any bankruptcy, insolvency, reorganization, arrangement, composition, adjustment, dissolution, liquidation or other like proceeding relating to HFRM or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding;

(e) any absence of any notice to, or knowledge of, HollyFrontier, of the existence or occurrence of any of the matters or events set forth in the foregoing subsections (a) through (d); or

(f) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a guarantor.

The obligations of HollyFrontier hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the HFRM Payment Obligations or otherwise.

4.3 Waiver. HollyFrontier hereby waives promptness, diligence, all setoffs, presentments, protests and notice of acceptance and any other notice relating to any of the HFRM Payment Obligations and any requirement for HEP to protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against HFRM, any other entity or any collateral.

4.4 Subrogation Waiver. HollyFrontier agrees that for so long as there is a current or ongoing default or breach of this Agreement by HFRM, HollyFrontier shall not have any rights (direct or indirect) of subrogation, contribution, reimbursement, indemnification or other rights of payment or recovery from HFRM for any payments made by HollyFrontier under this Article IV, and HollyFrontier hereby irrevocably waives and releases, absolutely and unconditionally, any such rights of subrogation, contribution, reimbursement, indemnification and other rights of payment or recovery it may now have or hereafter acquire against HFRM during any period of default or breach of this Agreement by HFRM until such time as there is no current or ongoing default or breach of this Agreement by HFRM.

4.5 Reinstatement. The obligations of HollyFrontier under this Article IV shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the HFRM Payment Obligations is rescinded or must otherwise be returned to HFRM or any other entity, upon the insolvency, bankruptcy, arrangement, adjustment, composition, liquidation or reorganization of HFRM or such other entity, or for any other reason, all as though such payment had not been made.

4.6 Continuing Guaranty. This Article IV is a continuing guaranty and shall (i) remain in full force and effect until the first to occur of the indefeasible payment in full of all of the HFRM Payment Obligations, (ii) be binding upon HollyFrontier, its successors and assigns and (iii) inure to the benefit of and be enforceable by HEP and its respective successors, transferees and assigns.

4.7 No Duty to Pursue Others. It shall not be necessary for HEP (and HollyFrontier hereby waives any rights which HollyFrontier may have to require HEP), in order to enforce such payment by HollyFrontier, first to (i) institute suit or exhaust its remedies against HFRM or others liable on the HFRM Payment Obligations or any other person, (ii) enforce HEP’s rights against any other guarantors of the HFRM Payment Obligations, (iii) join HFRM or any others liable on the HFRM Payment Obligations in any action seeking to enforce this Article IV, (iv) exhaust any remedies available to HEP against any security which shall ever have been given to secure the HFRM Payment Obligations, or (v) resort to any other means of obtaining payment of the HFRM Payment Obligations.

ARTICLE V

GENERAL PROVISIONS

5.1 Assignment Prohibition. HFRM shall not, either voluntarily or by operation of law, assign, transfer, mortgage, encumber, pledge or hypothecate this Agreement or HFRM’s interest in this Agreement, in whole or in part, without the prior written consent of HEP, which shall not be unreasonably withheld.

5.2 Severability. The invalidity or unenforceability of any provision of this Agreement, as determined by a court of competent jurisdiction, shall in no way affect the validity or enforceability of any other provision hereof.

5.3 Time of Essence. Time is of the essence in the performance of all obligations hereunder.

5.4 Captions. The headings to Articles, Sections and other subdivisions of this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement.

5.5 Entire Agreement; Amendment. This Agreement, including the exhibits and schedules attached hereto, constitutes the entire agreement and understanding between the parties hereto with respect to the reimbursement of HEP by HFRM for the Track Construction Cost, and supersedes all prior and contemporaneous agreements and undertakings of the parties, in connection herewith. This Agreement may be modified in writing only, signed by the parties in interest at the time of modification.

5.6 Schedules and Exhibits. All schedules and exhibits hereto which are referred to herein are hereby made a part hereof and incorporated herein by such reference.

5.7 Notices. Any notice or other communication given under this Agreement shall be in writing and shall be (i) delivered personally, (ii) sent by documented overnight delivery service, (iii) sent by email transmission, or (iv) sent by first class mail, postage prepaid (certified or registered mail, return receipt requested). Such notice shall be deemed to have been duly given (x) if received, on the date of the delivery, with a receipt for delivery, (y) if refused, on the date of the refused delivery, with a receipt for refusal, or (z) with respect to email transmissions, on the date the recipient confirms receipt. Notices or other communications shall be directed to the following addresses:

Notices to HEP:

HEP Tulsa LLC