Case 18-10122 Doc 10 Filed 01/22/18 Page 1 of 97 SOLICITATION VERSION IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: PES HOLDINGS, LLC, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 18-10122 (____) (Joint Administration Requested) DISCLOSURE STATEMENT FOR THE JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES James H.M. Sprayregen, P.C. (pro hac vice admission pending) Steven N. Serajeddini (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 300 North LaSalle Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Laura Davis Jones (DE Bar No. 2436) Timothy P. Cairns (DE Bar No. 4228) Peter J. Keane (DE Bar No. 5503) PACHULSKI STANG ZIEHL & JONES LLP 919 North Market Street, 17th Floor Wilmington, Delaware 19801 Telephone: (302) 652-4100 Facsimile: (302) 652-4400 -andEdward O. Sassower, P.C. (pro hac vice admission pending) Matthew C. Fagen (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Proposed Co-Counsel to the Debtors and Debtors in Possession Dated: January 17, 2018 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103. Case 18-10122 Doc 10 Filed 01/22/18 Page 2 of 97 THIS IS A SOLICITATION OF VOTES TO ACCEPT OR REJECT THE PLAN IN ACCORDANCE WITH BANKRUPTCY CODE SECTION 1125 AND WITHIN THE MEANING OF BANKRUPTCY CODE SECTION 1126, 11 U.S.C. §§ 1125, 1126. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT. THE DEBTORS INTEND TO SUBMIT THIS DISCLOSURE STATEMENT TO THE BANKRUPTCY COURT FOR APPROVAL FOLLOWING COMMENCEMENT OF SOLICITATION AND THE DEBTORS’ FILING FOR RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE. THE INFORMATION IN THIS DISCLOSURE STATEMENT IS SUBJECT TO CHANGE, SUBJECT TO THE TERMS OF THE RESTRUCTURING SUPPORT AGREEMENT. THIS DISCLOSURE STATEMENT IS NOT AN OFFER TO SELL ANY SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY ANY SECURITIES. IMPORTANT INFORMATION REGARDING THIS DISCLOSURE STATEMENT DISCLOSURE STATEMENT, DATED JANUARY 17, 2018 SOLICITATION OF VOTES ON THE JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION FOR PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE FROM THE HOLDERS OF OUTSTANDING: VOTING CLASS NAME OF CLASS UNDER THE PLAN CLASS 7 TERM LOAN A CLAIMS CLASS 8 TERM LOAN B CLAIMS IF YOU ARE IN CLASS 7 OR CLASS 8 YOU ARE RECEIVING THIS DOCUMENT AND THE ACCOMPANYING MATERIALS BECAUSE YOU ARE ENTITLED TO VOTE ON THE PLAN DELIVERY OF BALLOTS BALLOTS MUST BE ACTUALLY RECEIVED BY THE SOLICITATION AGENT BY THE VOTING DEADLINE, WHICH IS 5:00 P.M. (PREVAILING EASTERN TIME) ON JANUARY 19, 2018, VIA THE ENCLOSED PRE-PAID, PRE-ADDRESSED RETURN ENVELOPE OR AT THE FOLLOWING ADDRESSES: VIA FIRST-CLASS MAIL, OVERNIGHT COURIER, OR HAND DELIVERY TO: PES HOLDINGS, LLC, ET AL. C/O RUST CONSULTING/OMNI BANKRUPTCY 5955 DESOTO AVE., SUITE 100 WOODLANDS, CA 91367 OR VIA E-MAIL TO: PESHOLDINGS@OMNIMGT.COM PLEASE CHOOSE ONLY ONE METHOD TO RETURN YOUR BALLOT BALLOTS RECEIVED VIA FACSIMILE WILL NOT BE COUNTED IF YOU HAVE ANY QUESTIONS ON THE PROCEDURE FOR VOTING ON THE PLAN, PLEASE CALL THE SOLICITATION AGENT AT: (844) 459-0695 (toll free) or (818) 906-8300 (for international calls) Case 18-10122 Doc 10 Filed 01/22/18 Page 3 of 97 This disclosure statement (this “Disclosure Statement”) provides information regarding the Joint Prepackaged Chapter 11 Plan of Reorganization for PES Holdings, LLC and its Debtor Affiliates (as may be amended, supplemented, or otherwise modified from time to time, the “Plan”),2 which the Debtors are seeking to have confirmed by the Bankruptcy Court. A copy of the Plan is attached hereto as Exhibit A. The Debtors are providing the information in this Disclosure Statement to certain Holders of Claims for purposes of soliciting votes to accept or reject the Plan. Pursuant to the Restructuring Support Agreement, the Plan is currently supported by Holders of 100% of the outstanding Term Loan A Claims and over 90% of the outstanding Term Loan B Claims. The consummation and effectiveness of the Plan are subject to certain material conditions precedent described herein and set forth in Article IX of the Plan. There is no assurance that the Bankruptcy Court will confirm the Plan or, if the Bankruptcy Court does confirm the Plan, that the conditions necessary for the Plan to become effective will be satisfied or in the alternative waived. You are encouraged to read this Disclosure Statement (including the Risk Factors described in Article VII hereof) and the Plan in their entirety before submitting your Ballot to vote on the Plan. The Debtors urge each Holder of a Claim or Interest to consult with its own advisors with respect to any legal, financial, securities, tax, or business advice in reviewing this Disclosure Statement, the Plan, and each proposed transaction contemplated by the Plan. The Debtors strongly encourage Holders of Claims in Class 7 and Class 8 to read this Disclosure Statement and the Plan in their entirety before voting to accept or reject the Plan. Assuming the requisite acceptances to the Plan are obtained, the Debtors will seek the Bankruptcy Court’s approval of the Plan at the Confirmation Hearing. RECOMMENDATION BY THE DEBTORS EACH DEBTOR’S BOARD OF DIRECTORS, MEMBER(S), OR MANAGER(S), AS APPLICABLE, HAS APPROVED THE TRANSACTIONS CONTEMPLATED BY THE PLAN AND DESCRIBED IN THIS DISCLOSURE STATEMENT, AND EACH DEBTOR BELIEVES THAT THE COMPROMISES CONTEMPLATED UNDER THE PLAN ARE FAIR AND EQUITABLE, MAXIMIZE THE VALUE OF EACH OF THE DEBTOR’S ESTATES, AND PROVIDE THE BEST RECOVERY TO CLAIM HOLDERS. AT THIS TIME, EACH DEBTOR BELIEVES THAT THE PLAN AND RELATED TRANSACTIONS REPRESENT THE BEST ALTERNATIVE FOR ACCOMPLISHING THE DEBTORS’ OVERALL RESTRUCTURING OBJECTIVES. EACH OF THE DEBTORS THEREFORE STRONGLY RECOMMENDS THAT ALL HOLDERS OF CLAIMS OR INTERESTS WHOSE VOTES ARE BEING SOLICITED SUBMIT BALLOTS TO ACCEPT THE PLAN BY RETURNING THEIR BALLOTS SO AS TO BE ACTUALLY RECEIVED BY THE SOLICITATION AGENT NO LATER THAN JANUARY 19, 2018 AT 5:00 P.M. (PREVAILING EASTERN TIME) PURSUANT TO THE INSTRUCTIONS SET FORTH HEREIN AND ON THE BALLOTS. SPECIAL NOTICE REGARDING FEDERAL AND STATE SECURITIES LAWS The Bankruptcy Court has not reviewed this Disclosure Statement or the Plan, and the securities to be issued on or after the Effective Date will not have been the subject of a registration statement filed with the United States Securities and Exchange Commission (the “SEC”) under the United States Securities Act of 1933 (as amended, the “Securities Act”) or any securities regulatory authority of any state under any state securities law (“Blue Sky Laws”). The Plan has not been approved or disapproved by the SEC or any state regulatory authority and neither the SEC nor any state regulatory authority has passed upon the accuracy or adequacy of the information contained in this Disclosure Statement or the Plan. Any representation to the contrary is a 2 Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Plan. Case 18-10122 Doc 10 Filed 01/22/18 Page 4 of 97 criminal offense. The Debtors are relying on section 4(a)(2) of the Securities Act, and similar Blue Sky Laws provisions, to exempt from registration under the Securities Act and Blue Sky Laws the offer to the DIP Commitment Parties, the Holders of Allowed DIP Facility Claims, the Holders of Allowed Term Loan B Claims, and the Parent of New Equity prior to the Petition Date, including in connection with the solicitation of votes to accept or reject the Plan (the “Solicitation”). After the Petition Date, the Debtors will rely on section 1145(a) of the Bankruptcy Code to exempt from registration under the Securities Act and Blue Sky Laws the offer, issuance, and distribution of New Equity under the Plan. Neither the Solicitation nor this Disclosure Statement constitutes an offer to sell or the solicitation of an offer to buy securities in any state or jurisdiction in which such offer or solicitation is not authorized. Except to the extent publicly available, this Disclosure Statement, the Plan, and the information set forth herein and therein are confidential. This Disclosure Statement and the Plan contain material non-public information concerning the Debtors, their subsidiaries, and their respective debt and Securities. Each recipient hereby acknowledges that it (a) is aware that the federal securities laws of the United States prohibit any person who has material non-public information about a company, which is obtained from the company or its representatives, from purchasing or selling Securities of such company or from communicating the information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such Securities and (b) is familiar with the United States Securities Exchange Act of 1934 (as amended, the “Securities Exchange Act”) and the rules and regulations promulgated thereunder, and agrees that it will not use or communicate to any Person or Entity, under circumstances where it is reasonably likely that such Person or Entity is likely to use or cause any Person or Entity to use, any confidential information in contravention of the Securities Exchange Act or any of its rules and regulations, including Rule 10b-5. Case 18-10122 Doc 10 Filed 01/22/18 Page 5 of 97 DISCLAIMER This Disclosure Statement contains summaries of certain provisions of the Plan and certain other documents and financial information. The information included in this Disclosure Statement is provided solely for the purpose of soliciting acceptances of the Plan and should not be relied upon for any purpose other than to determine whether and how to vote on the Plan. All Holders of Claims or Interests entitled to vote are advised and encouraged to read this Disclosure Statement and the Plan in their entirety before voting. The Debtors believe that these summaries are fair and accurate. The summaries of the financial information and the documents that are attached to, or incorporated by reference in, this Disclosure Statement are qualified in their entirety by reference to such information and documents. In the event of any inconsistency or discrepancy between a description in this Disclosure Statement, on the one hand, and the terms and provisions of the Plan or the financial information and documents incorporated in this Disclosure Statement by reference, on the other hand, the Plan or the financial information and documents, as applicable, shall govern for all purposes. Except as otherwise provided in the Plan or in accordance with applicable law, the Debtors are under no duty to update or supplement this Disclosure Statement. The Bankruptcy Court’s approval of this Disclosure Statement does not constitute a guarantee of the accuracy or completeness of the information contained herein or the Bankruptcy Court’s endorsement of the merits of the Plan. The statements and financial information contained in this Disclosure Statement have been made as of the date hereof unless otherwise specified. Holders of Claims or Interests reviewing the Disclosure Statement should not assume at the time of such review that there have been no changes in the facts set forth in this Disclosure Statement since the date of this Disclosure Statement. No Holder of a Claim or Interest should rely on any information, representations, or inducements that are not contained in or are inconsistent with the information contained in this Disclosure Statement, the documents attached to this Disclosure Statement, and the Plan. This Disclosure Statement does not constitute legal, business, financial, or tax advice. Any Person or Entity desiring any such advice should consult with their own advisors. Additionally, this Disclosure Statement has not been approved or disapproved by the Bankruptcy Court, the SEC, or any securities regulatory authority of any state under Blue Sky Laws. The Debtors are soliciting acceptances to the Plan prior to commencing any cases under chapter 11 of the Bankruptcy Code. The financial information contained in or incorporated by reference into this Disclosure Statement has not been audited, except as specifically indicated otherwise. The Debtors’ management, in consultation with their advisors, has prepared the financial projections attached hereto as Exhibit E and described in this Disclosure Statement. The financial projections, while presented with numerical specificity, necessarily were based on a variety of estimates and assumptions that are inherently uncertain and may be beyond the control of the Debtors’ management. Important factors that may affect actual results and cause the management forecasts not to be achieved include, but are not limited to, risks and uncertainties relating to the Debtors’ businesses (including their ability to achieve strategic goals, objectives, and targets over applicable periods), industry performance, the regulatory environment, general business and economic conditions and other factors. The Debtors caution that no representations can be made as to the accuracy of these projections or to their ultimate performance compared to the information contained in the forecasts or that the forecasted results will be achieved. Therefore, the financial projections may not be relied upon as a guarantee or other assurance that the actual results will occur. Regarding contested matters, adversary proceedings, and other pending, threatened, or potential litigation or other actions, this Disclosure Statement does not constitute, and may not be construed as, an admission of fact, liability, stipulation, or waiver by the Debtors or any other party, but rather as a statement made in the context of settlement negotiations in accordance with Rule 408 of the Federal Rules of Evidence and any analogous state or foreign laws or rules. As such, this Disclosure Statement shall not be admissible in any non-bankruptcy proceeding involving the Debtors or any other party in interest, nor shall it be construed to be conclusive advice on the tax, securities, financial or other effects of the Plan to Holders of Claims against or Interests in, the Debtors or any other party in interest. Please refer to Article VII of this Disclosure Statement, entitled “Risk Factors” for a discussion of certain risk factors that Holders of Claims or Interests voting on the Plan should consider. Except as otherwise expressly set forth herein, all information, representations, or statements contained herein have been provided by the Debtors. No person is authorized by the Debtors in connection with this Disclosure Statement, the Plan or the Solicitation to give any information or to make any representation or statement regarding this Disclosure Statement, the Plan, or the Solicitation, in each case, other than as contained in this Disclosure Case 18-10122 Doc 10 Filed 01/22/18 Page 6 of 97 Statement and the exhibits attached hereto or as otherwise incorporated herein by reference or referred to herein. If any such information, representation, or statement is given or made, it may not be relied upon as having been authorized by the Debtors. This Disclosure Statement contains certain forward-looking statements, all of which are based on various estimates and assumptions. Such forward-looking statements are subject to inherent uncertainties and to a wide variety of significant business, economic, and competitive risks, including, but not limited to, those summarized herein. When used in this Disclosure Statement, the words “anticipate,” “believe,” “estimate,” “will,” “may,” “intend,” and “expect” and similar expressions generally identify forward-looking statements. Although the Debtors believe that their plans, intentions, and expectations reflected in the forward-looking statements are reasonable, they cannot be sure that they will be achieved. These statements are only predictions and are not guarantees of future performance or results. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by a forward-looking statement. All forward-looking statements attributable to the Debtors or Persons or Entities acting on their behalf are expressly qualified in their entirety by the cautionary statements set forth in this Disclosure Statement. Forward-looking statements speak only as of the date on which they are made. Except as required by law, the Debtors expressly disclaim any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Case 18-10122 Doc 10 Filed 01/22/18 Page 7 of 97 TABLE OF CONTENTS Page ARTICLE I. PRELIMINARY STATEMENT.......................................................................................................... 1 ARTICLE II. THE PLAN........................................................................................................................................... 2 A. Treatment of Claims and Interests .................................................................................................... 2 B. Unclassified Claims .......................................................................................................................... 3 C. Classified Claims and Interests ......................................................................................................... 5 D. Classified Claims and Interests Details ............................................................................................. 5 E. Special Provision Governing Unimpaired Claims ............................................................................ 9 F. Elimination of Vacant Classes .......................................................................................................... 9 G. Voting Classes; Presumed Acceptance by Non-Voting Classes ....................................................... 9 H. Confirmation Pursuant to Section 1129(a)(10) and 1129(b) of the Bankruptcy Code ...................... 9 I. Intercompany Interests .................................................................................................................... 10 J. Subordination Claims and Interests................................................................................................. 10 K. Liquidation Analysis ....................................................................................................................... 10 L. Valuation Analysis .......................................................................................................................... 10 M. Financial Information and Projections ............................................................................................ 11 ARTICLE III. SOLICITATION AND VOTING PROCEDURES ....................................................................... 11 A. Classes Entitled to Vote on the Plan ............................................................................................... 11 B. Votes Required for Acceptance by a Class ..................................................................................... 12 C. Certain Factors to Be Considered Prior to Voting .......................................................................... 12 D. Classes Not Entitled To Vote on the Plan ....................................................................................... 12 E. Solicitation Procedures ................................................................................................................... 13 F. Voting Procedures ........................................................................................................................... 13 ARTICLE IV. THE DEBTORS’ CORPORATE HISTORY, STRUCTURE, AND BUSINESS OVERVIEW ....................................................................................................................................................... 14 A. The Debtors’ Corporate History...................................................................................................... 15 B. Assets and Operations ..................................................................................................................... 15 C. Logistics Capabilities ...................................................................................................................... 18 D. Formation of Separate Entities and Intercompany Transactions ..................................................... 20 E. The Intermediation Agreement ....................................................................................................... 22 F. Organization and Prepetition Capital Structure............................................................................... 22 ARTICLE V. EVENTS LEADING TO THE CHAPTER 11 CASES .................................................................. 24 A. Environmental Regulatory Burden.................................................................................................. 24 B. Structural Elimination of Domestic Crude oil for PADD I ............................................................. 26 C. Cyclical Compression in Refining Margins .................................................................................... 27 D. The Debtors’ Efforts to Deleverage Their Capital Structure and Increase Liquidity ...................... 28 E. Restructuring Efforts ....................................................................................................................... 29 F. The Special Committee, Restructuring Support Agreement, Chapter 11 Plan and Proposed DIP Financing ................................................................................................................. 29 ARTICLE VI. OTHER KEY ASPECTS OF THE PLAN ..................................................................................... 33 A. Distributions.................................................................................................................................... 33 B. Setoffs ............................................................................................................................................. 34 C. Procedures for Resolving Disputed Claims and Interests ............................................................... 34 D. General Settlement of Claims, Interests, and Causes of Action ...................................................... 35 E. Restructuring Transactions ............................................................................................................. 35 F. Sources of Consideration for Plan Distributions ............................................................................. 37 G. New Intermediation Facility and New First Loss Facility .............................................................. 38 H. Management Incentive Plan ............................................................................................................ 38 i Case 18-10122 I. J. K. L. M. N. O. P. Q. R. S. T. U. V. W. X. Y. Z. AA. BB. CC. DD. EE. FF. Doc 10 Filed 01/22/18 Page 8 of 97 Exemption from Registration Requirements ................................................................................... 38 Vesting of Assets ............................................................................................................................ 39 Cancelation of Instruments, Certificates, and Other Documents .................................................... 39 Corporate Action ............................................................................................................................. 39 Corporate Existence ........................................................................................................................ 40 New Organizational Documents ..................................................................................................... 40 Directors and Officers ..................................................................................................................... 41 Employee Arrangements of the Reorganized Debtors .................................................................... 41 Restructuring Expenses ................................................................................................................... 42 Preservation of Causes of Action .................................................................................................... 42 Wind Down and Dissolution of the Debtors ................................................................................... 43 Treatment of Executory Contracts and Unexpired Leases .............................................................. 43 Release, Injunction, and Related Provisions ................................................................................... 46 Release of Liens .............................................................................................................................. 48 Recoupment .................................................................................................................................... 48 Subordination Rights....................................................................................................................... 48 Modification of Plan ....................................................................................................................... 49 Effect of Confirmation on Modifications ........................................................................................ 49 Revocation or Withdrawal of Plan .................................................................................................. 49 Plan Supplement Exhibits ............................................................................................................... 49 Conditions Precedent to the Effective Date .................................................................................... 49 Waiver of Conditions Precedent ..................................................................................................... 51 Effect of Non-Occurrence of Conditions to Consummation ........................................................... 51 Substantial Consummation ............................................................................................................. 51 ARTICLE VII. RISK FACTORS ............................................................................................................................ 51 A. General ............................................................................................................................................ 51 B. Risks Relating to the Plan and Other Bankruptcy Law Considerations .......................................... 51 C. Risks Relating to the Restructuring Transactions ........................................................................... 57 D. Risks Relating to the New Equity ................................................................................................... 59 E. Risks Relating to the Debtors’ Business ......................................................................................... 61 F. Certain Tax Implications of the Chapter 11 Cases .......................................................................... 63 G. Disclosure Statement Disclaimer .................................................................................................... 63 ARTICLE VIII. CONFIRMATION PROCEDURES ............................................................................................ 66 A. The Confirmation Hearing .............................................................................................................. 66 B. Confirmation Standards .................................................................................................................. 66 C. Best Interests Test / Liquidation Analysis....................................................................................... 68 D. Feasibility........................................................................................................................................ 68 E. Confirmation Without Acceptance by All Impaired Classes .......................................................... 68 F. Alternatives to Confirmation and Consummation of the Plan ........................................................ 69 ARTICLE IX. IMPORTANT SECURITIES LAW DISCLOSURE..................................................................... 69 A. New Equity ..................................................................................................................................... 69 B. Offering, Issuance, and Resale of New Equity ............................................................................... 69 C. Resales of New Equity; Definition of Underwriter ......................................................................... 70 D. New Equity and Management Incentive Plan ................................................................................. 71 ARTICLE X. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES .................................................. 72 A. Introduction ..................................................................................................................................... 72 B. Certain U.S. Federal Income Tax Consequences to the Debtors, the Reorganized Debtors, and Holders of Equity Interests in Parent........................................................................................ 73 C. Certain U.S. Federal Income Tax Consequences to U.S. Holders of Term Loan A Claims and Term Loan B Claims ................................................................................................................ 73 D. Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders of Term Loan A Claims and Term Loan B Claims .................................................................................................... 77 ii Case 18-10122 E. F. G. H. I. Doc 10 Filed 01/22/18 Page 9 of 97 Ownership and Disposition of the New First Lien Term Loan ....................................................... 77 Ownership and Disposition of New Membership Interests ............................................................. 80 Ownership and Disposition of New Class A Common Stock in PES Inc. by Non-U.S. Holders ............................................................................................................................................ 83 Information Reporting and Back-up Withholding .......................................................................... 85 FATCA ........................................................................................................................................... 85 ARTICLE XI. CONCLUSION AND RECOMMENDATION .............................................................................. 87 iii Case 18-10122 Doc 10 Filed 01/22/18 Page 10 of 97 EXHIBITS EXHIBIT A Joint Prepackaged Chapter 11 Plan of Reorganization for PES Holdings, LLC and its Debtor Affiliates EXHIBIT B Restructuring Support Agreement EXHIBIT C Liquidation Analysis EXHIBIT D Valuation Analysis EXHIBIT E Financial Projections EXHIBIT F Corporate Organizational Chart iv Case 18-10122 Doc 10 Filed 01/22/18 Page 11 of 97 ARTICLE I. PRELIMINARY STATEMENT PES Holdings, LLC (“PES Holdings”) and its subsidiaries, as debtors and debtors-in-possession (each, a “Debtor,” and collectively, the “Debtors”), together with Philadelphia Energy Solutions LLC, the non-debtor parent (the “Parent” and, together with the Debtors, the “Company”), operate a refining complex (the “Refining Complex”), that consists of two separate refineries with a combined distillation capacity of 335,000 barrels per day of crude oil on an approximately 1,300 acre industrial site that is 2.5 miles from downtown Philadelphia. The Refining Complex is the Debtors’ principal asset. It benefits from existing industrial infrastructure, as well as access to water, rail, highway and pipeline transportation. It represents approximately 28% of the United States’ east coast’s—a region otherwise known as the Petroleum Administration for Defense District I (“PADD I”)—crude oil refining capacity and employs approximately 1,100 individuals. The Refining Complex produces a full range of transportation fuels, such as gasoline and ultra-low sulfur diesel, as well as other refined products, including home heating oil, jet fuel, kerosene, fuel oil, propane, propylene, butane, cumene and sulfur. These products are marketed and distributed by truck, rail, pipeline and waterborne vessels throughout population centers in the northeastern United States and by waterborne vessels to international markets. In the months and years leading up to their decision to seek relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), the Debtors faced a number of economic hurdles. The Debtors have fallen victim to regulatory compliance costs that specifically penalize independent merchant refiners like the Debtors, adverse macroeconomic trends in the energy sector, and adverse government policy decisions. In particular, Philadelphia Energy Solutions Refining and Marketing LLC (“PESRM”), the Debtor who owns the Refining Complex, must comply with the Clean Air Act’s renewable fuel standard program (42 U.S.C. § 7545(o), including regulations promulgated thereunder, the “RFS Program”), administered by the U.S. Environmental Protection Agency (the “EPA”). The RFS Program requires refiners to blend “biofuels” such as ethanol into the gasoline and diesel fuels they produce and sell in the United States or, if they are unable to do so, to purchase compliance credits known as Renewable Identification Numbers (“RINs,”) instead of blending. PESRM’s ability to blend biofuels is very limited because its position in the fuel distribution chain limits its ability to sell blended gasoline and diesel fuel and capture the RINs needed for compliance with the RFS Program. Specifically, the substantial majority of transportation fuel produced at the Refining Complex is sold neat (unblended) at the refinery gate and delivered into markets in the Central Atlantic and Northeast regions of the U.S. through pipelines that the Debtors do not own and that will not accept blended gasoline. As a result, PESRM must purchase RINs for compliance from market participants that blend biofuels (typically large integrated oil companies and companies that own retail gasoline stations) or from companies that trade in RINs for profit. Significant penalties and fines can be assessed by EPA for failure to comply. Unlike a tax, the amount paid by PESRM for RINs is not remitted to the government but generates profits for the sellers of the RINs. This unpredictable, escalating, and unintended compliance burden has cost the Debtors $832 million since their commencement of operations in September 2012 and, on an annual basis, the Debtors’ expense associated with complying with the RFS Program is twice their annual payroll, nearly one and one-half times their annual average capital expenditures, four times their interest expense, and now represents their single largest expense after crude oil. The effect of the RFS Program on the Debtors’ business is the primary driver behind the Debtors’ decision to seek relief under the Bankruptcy Code. Additionally, refiners generally have faced challenging market conditions in recent years, including the structural elimination of PADD I refiners’ access to discounted domestic crude oil and an extended cyclical compression in refining margins. These financial troubles were exacerbated by a failed initial public offering in 2014 and have directly, and negatively, affected the Debtors’ liquidity, and the Debtors are now facing debt maturities beginning in March 2018. In an effort to mitigate the impact of industry-wide turmoil, the Debtors executed a series of operational changes to achieve expense savings through salaried headcount reductions, benefit plan changes, and vendor rate and usage savings. In addition to these internal initiatives, the Debtors retained Kirkland & Ellis LLP (“K&E”) as their legal advisors, PJT Partners Inc. (“PJT”) as their investment banker, and Alvarez & Marsal North America, LLC (“A&M”) as their restructuring advisors, to advise management and the Debtors’ Boards of Managers regarding potential strategic alternatives to enhance the Debtors’ liquidity and address their capital structure. 1 Case 18-10122 Doc 10 Filed 01/22/18 Page 12 of 97 As detailed herein, the Plan is the result of many months of negotiations among the Debtors and the Restructuring Support Parties, with all parties working towards an outcome that will provide near-term liquidity to the Debtors while maximizing the value of the Debtors’ estates for the benefit of all stakeholders. The negotiations, diligence, and formulation of the comprehensive solution embodied by the Plan culminated in the execution of the Restructuring Support Agreement by the Debtors, the Parent Parties, all of the Term Loan A Lenders, the Term Loan A Agent, the Consenting Term Loan B Lenders, and Sunoco Logistics Partners Operations L.P. (the “Additional Financing Lender”) on January 12, 2018. Crucially, in addition to agreeing to exchange a substantial portion of their claims for equity in the reorganized company, the Consenting Term Loan B Lenders have agreed to invest of $120 million of permanent capital in the Debtors, which will be provided in the form of debtor-in-possession financing and will convert to Tranche A of the New First Lien Term Loan Facility upon exit. In total, The Plan will provide for an infusion of approximately $260 million in capital to the Debtors, reduce the Debtors’ anticipated debt service obligations by approximately $35 million per year, and relieve the Debtors of debt maturities through 2022. While the Debtors reserve the option to pursue a standard reorganization transaction, the Debtors intend to sell all of their assets to the Purchaser (as defined in the Plan) and, in connection with Confirmation of the Plan, to ask the Bankruptcy Court to make a customary “free and clear” finding for the benefit of the Purchaser with respect to the outstanding RIN Liabilities (as defined herein) pursuant to section 363(f) of the Bankruptcy Code. The Debtors will commence the chapter 11 cases with their Plan that, pursuant to that certain Restructuring Support Agreement, dated as of January 12, 2018, by and among the Debtors and the restructuring support parties (the “Restructuring Support Agreement”), is already supported by Holders of 100% of the Debtors’ Term Loan A Debt (as defined below) and over 90% of the Debtors’ Term Loan B Debt (as defined below). The key terms of the prepackaged restructuring contemplate: (i) an equitization of $107 million of the Debtors’ Term Loan B Debt; (ii) a $120 million new money postpetition financing facility that, rather than being repaid at emergence, will convert into the senior most tranche of an exit facility, providing the Reorganized Debtors with continued access to long-term liquidity going forward; (iii) a $65 million contribution by the Parent in exchange for, among other things, a 25% equity interest in the Reorganized Debtors; and (iv) a $75 million new loan from the Additional Financing Lender. The Debtors intend to move swiftly through these cases and obtain confirmation of their prepackaged chapter 11 plan by February 23, 2018. Given the overwhelming level of support for the Debtors’ restructuring, the Debtors elected to pursue a prepackaged restructuring in the weeks leading up to the solicitation period because the Debtors believe a prepackaged plan will maximize value by minimizing both the costs of the Chapter 11 Cases and the effect on the Debtors’ businesses. In addition, the restructuring contemplated by the Plan in a “prepackaged” manner, will reduce the costs and expenses associated therewith that would otherwise be paid by the Debtors’ estates. Thus, the Debtors believe that the Plan represents the most efficient route to effectuate their restructuring and will place the Debtors, their creditors, trade partners, and other stakeholders in an optimal position going forward. The formulation of the Restructuring Support Agreement and the Plan is a significant achievement for the Debtors. Each of the Debtors strongly believes that the Plan is in the best interests of its estate and represents the best available alternative for all of its stakeholders. Given the Debtors’ core strengths, including their experienced management team and strategic business plan going forward, the Debtors are confident that they can implement the Plan’s balance sheet restructuring to ensure the Debtors’ long-term viability. ARTICLE II. THE PLAN A. Treatment of Claims and Interests The Plan provides for the treatment of Claims against and Interests in the Debtors through, among other things: (a) the issuance of New Equity; (b) the Unimpaired treatment of certain Claims and Interests; and (c) conversion of certain Claims into loans under the New First Lien Term Loan. As more fully described herein and in the Plan: 2 Case 18-10122 Doc 10 Filed 01/22/18 Page 13 of 97 • Holders of Allowed Other Secured Claims, Allowed Other Priority Claims, Allowed Refining ABL Claims, Allowed NGL Facility Claims, Allowed Intermediation Claims, Allowed First Loss Claims, and Allowed General Unsecured Claims shall be Unimpaired; • Holders of Allowed Term Loan A Claims shall receive their Pro Rata share of (i) $15,000,000 of Cash, (ii) Tranche B of the New First Lien Term Loan Facility, and (iii) Cash in the amount of any accrued but unpaid interest on the Term Loan A Claims measured through the Effective Date; • Holders of Allowed Term Loan B Claims shall receive their Pro Rata share of: (a) 100% of the New Equity in the form of New Class A Common Stock, less the percentage of the New Equity distributed to (x) the Holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) the Parent pursuant to Article IV.B of the Plan, subject to dilution by the Management Incentive Plan; and (b) Tranche C of the New First Lien Term Loan Facility; • Intercompany Claims shall be Reinstated or canceled and released, as applicable; • Intercompany Interests shall be Reinstated solely to maintain the Debtors’ corporate structure; and • Interests in PES Holdings shall be canceled, released, and extinguished. In addition, the Parent has committed to contribute $65 million Cash to the Reorganized Debtors on the Effective Date, in exchange for, among other things, 25% of the New Equity, subject to dilution by the Management Incentive Plan. Further, certain Term Loan B Lenders have committed to provide the DIP Facility, which will convert into Tranche A of the New First Lien Term Loan Facility upon exit. The DIP Lenders will also receive a conversion fee of 2.5% of the New Equity upon emergence. B. Unclassified Claims 1. Unclassified Claims Summary In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, DIP Claims, Professional Fee Claims, and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims set forth in Article III of the Plan. The Claim recoveries for such unclassified Claims are set forth below: Claim Administrative Claims DIP Facility Claims Professional Fee Claims Priority Tax Claims 2. Plan Treatment Paid in Full in Cash Pro Rata Share of New First Lien Term Loan and 2.5% of the New Equity, subject to dilution by the Management Incentive Plan Paid in Full in Cash Paid in Full in Cash Projected Plan Recovery 100% 100% 100% 100% Administrative Claims Except to the extent that a Holder of an Allowed Administrative Claim agrees to less favorable treatment, each Holder of an Allowed Administrative Claim (other than Holders of Professional Fee Claims and Claims for fees and expenses pursuant to section 1930 of chapter 123 of title 28 of the United States Code) will receive in full and final satisfaction of its Administrative Claim an amount of Cash equal to the amount of such Allowed Administrative Claim in accordance with the following: (1) if an Administrative Claim is Allowed on or prior to the Effective Date, on the Effective Date or as soon as reasonably practicable thereafter (or, if not then due, when such Allowed 3 Case 18-10122 Doc 10 Filed 01/22/18 Page 14 of 97 Administrative Claim is due or as soon as reasonably practicable thereafter); (2) if such Administrative Claim is not Allowed as of the Effective Date, no later than 30 days after the date on which an order Allowing such Administrative Claim becomes a Final Order, or as soon as reasonably practicable thereafter; (3) if such Allowed Administrative Claim is based on liabilities incurred by the Debtors in the ordinary course of their business after the Petition Date in accordance with the terms and conditions of the particular transaction giving rise to such Allowed Administrative Claim without any further action by the Holders of such Allowed Administrative Claim; (4) at such time and upon such terms as may be agreed upon by such Holder and the Debtors or the Reorganized Debtors, as applicable; or (5) at such time and upon such terms as set forth in an order of the Bankruptcy Court. 3. DIP Facility Claims As of the Effective Date, the DIP Facility Claims shall be deemed to be Allowed in the full amount due and owing under the DIP Credit Agreement. On the Effective Date, in full and final satisfaction of and in exchange for each Allowed DIP Facility Claim, each Holder of an Allowed DIP Facility Claim shall receive its Pro Rata share of: (1) Tranche A of the New First Lien Term Loan; and (2) 2.5% of the New Equity in the form of New Class A Common Stock, subject to dilution by the Management Incentive Plan. In addition, each DIP Commitment Party shall receive its Pro Rata share of the DIP Commitment Fee in accordance with the DIP Facility Orders. 4. Professional Fee Claims All requests for payment of Professional Fee Claims for services rendered and reimbursement of expenses incurred prior to the Confirmation Date must be filed no later than 45 days after the Effective Date. The Bankruptcy Court shall determine the Allowed amounts of such Professional Fee Claims after notice and a hearing in accordance with the procedures established by the Bankruptcy Court. The Reorganized Debtors shall pay Professional Fee Claims in Cash in the amount the Bankruptcy Court allows, including from the Professional Fee Escrow Account, which the Reorganized Debtors will establish in trust for the Professionals and fund with Cash equal to the Professional Fee Amount on the Effective Date. Professionals shall deliver to the Debtors their estimates for purposes of the Reorganized Debtors computing the Professional Fee Amount no later than three (3) business days prior to the anticipated Effective Date. For the avoidance of doubt, no such estimate shall be deemed to limit the amount of the fees and expenses that are the subject of a Professional’s final request for payment of Professional Fee Claims filed with the Bankruptcy Court. If a Professional does not provide an estimate, the Debtors may estimate the unpaid and unbilled fees and expenses of such Professional. No funds in the Professional Fee Escrow Account shall be property of the Estates, and the Professional Fee Escrow Account shall be maintained in trust solely for the benefit of Holders of Professional Fee Claims. Any funds remaining in the Professional Fee Escrow Account after all Allowed Professional Fee Claims have been paid shall be turned over to the Reorganized Debtors. From and after the Confirmation Date, any requirement that Professionals comply with sections 327 through 331 and 1103 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date shall terminate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court. 5. Priority Tax Claims Except to the extent that a Holder of an Allowed Priority Tax Claim agrees to a less favorable treatment, in full and final satisfaction, settlement, release, and discharge of and in exchange for each Allowed Priority Tax Claim, each Holder of such Allowed Priority Tax Claim shall be treated in accordance with the terms set forth in section 1129(a)(9)(C) of the Bankruptcy Code and, for the avoidance of doubt, Holders of Allowed Priority Tax Claims will receive interest on such Allowed Priority Tax Claims after the Effective Date in accordance with sections 511 and 1129(a)(9)(C) of the Bankruptcy Code. 4 Case 18-10122 6. Doc 10 Filed 01/22/18 Page 15 of 97 Statutory Fees All fees due and payable pursuant to section 1930 of Title 28 of the U.S. Code prior to the Effective Date shall be paid by the Debtors. On and after the Effective Date, the Reorganized Debtors shall pay any and all such fees when due and payable, and shall file with the Bankruptcy Court quarterly reports in a form reasonably acceptable to the U.S. Trustee. Each Debtor shall remain obligated to pay quarterly fees to the U.S. Trustee until the earliest of that particular Debtor’s case being closed, dismissed, or converted to a case under Chapter 7 of the Bankruptcy Code. C. Classified Claims and Interests The Plan establishes a comprehensive classification of Claims and Interests. The table below summarizes the classification, treatment, voting rights, and estimated recoveries, estimated as of January 17, 2018, of the Claims and Interests, by Class, under the Plan. Amounts in the far right column under the heading “Liquidation Recovery” are estimates only and are based on certain assumptions described herein and set forth in greater detail in the Liquidation Analysis (as defined below) attached hereto as Exhibit C. Accordingly, recoveries actually received by Holders of Claims and Interests in a liquidation scenario may differ materially from the projected liquidation recoveries listed in the table below. Class 1 2 3 4 5 6 7 8 9 10 Claim or Interest Other Secured Claims Other Priority Claims Refining ABL Claims NGL Facility Claims Intermediation Claims First Loss Claims Term Loan A Claims Term Loan B Claims General Unsecured Claims Intercompany Claims 11 12 Intercompany Interests Interests in PES Holdings D. Voting Rights Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Entitled to Vote Entitled to Vote Presumed to Accept Presumed to Accept or Presumed to Reject Presumed to Accept Presumed to Reject Treatment Unimpaired Unimpaired Unimpaired Unimpaired Unimpaired Unimpaired Impaired Impaired Unimpaired Unimpaired or Impaired Unimpaired Impaired Projected Plan Recovery 100% 100% 100% 100% 100% 100% 100% 100%3 100% N/A Liquidation Recovery 100% 100% 100% 100% 100% 100% 75%-98% 63%-67% 0%-3% N/A N/A 0% N/A 0% Classified Claims and Interests Details Except to the extent that the Debtors and a Holder of an Allowed Claim or Allowed Interest, as applicable, agree to less favorable treatment, each such Holder shall receive under the Plan the treatment described below in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Holder’s Allowed Claim or Allowed Interest. Unless otherwise indicated, the Holder of an Allowed Claim or Allowed Interest, as applicable, shall receive such treatment on the Effective Date or as soon as reasonably practicable thereafter. 1. 3 Class 1 — Other Secured Claims a. Classification: Class 1 consists of any Other Secured Claims against any Debtor. b. Treatment: Each Holder of an Allowed Other Secured Claim shall receive, as the Debtors or the Reorganized Debtors (as applicable) determine, either: Based on the negotiated total enterprise and equity values under the Restructuring Support Agreement. 5 Case 18-10122 c. 2. 3. 4. Doc 10 Filed 01/22/18 Page 16 of 97 i. payment in full, in Cash, of the unpaid portion of its Allowed Other Secured Claim, including any interest thereon required to be paid under section 506(b) of the Bankruptcy Code (or if payment is not then due, in accordance with the terms of such Allowed Other Secured Claim) on the latest of: (a) on or as soon as reasonably practicable after the Effective Date if such Allowed Other Secured Claim is Allowed as of the Effective Date; (b) on or as soon as reasonably practicable after the date such Other Secured Claim is Allowed; and (c) the date such Allowed Other Secured Claim becomes due and payable, or as soon thereafter as is reasonably practicable; ii. the collateral securing its Allowed Other Secured Claim, plus any interest thereon required to be paid under section 506(b) of the Bankruptcy Code; iii. Reinstatement of such Other Secured Claim; or iv. such other treatment rendering such Claim Unimpaired. Voting: Class 1 is Unimpaired. Holders of Allowed Other Secured Claims in Class 1 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Other Secured Claims in Class 1 are not entitled to vote to accept or reject the Plan. Class 2 — Other Priority Claims a. Classification: Class 2 consists of any Other Priority Claims against any Debtor. b. Treatment: Each Holder of an Allowed Other Priority Claim shall receive payment in full, in Cash, of the unpaid portion of its Allowed Other Priority Claim on the latest of: (i) on or as soon as reasonably practicable after the Effective Date if such Allowed Other Priority Claim is Allowed as of the Effective Date; (ii) on or as soon as reasonably practicable after the date such Other Priority Claim is Allowed; and (iii) the date such Allowed Other Priority Claim becomes due and payable, or as soon thereafter as is reasonably practicable. c. Voting: Class 2 is Unimpaired. Holders of Allowed Other Priority Claims in Class 2 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Other Priority Claims in Class 2 are not entitled to vote to accept or reject the Plan. Class 3 — Refining ABL Claims a. Classification: Class 3 consists of all Refining ABL Claims against any Debtor. b. Treatment: In full satisfaction of each Refining ABL Claim, each Holder of an Allowed Refining ABL Claim shall receive payment in full in Cash. c. Voting: Class 3 is Unimpaired. Holders of Allowed Refining ABL Claims in Class 3 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Refining ABL Claims in Class 3 are not entitled to vote to accept or reject the Plan. Class 4 — NGL Facility Claims a. Classification: Class 4 consists of all NGL Facility Claims against any Debtor. 6 Case 18-10122 5. 6. 7. Doc 10 Filed 01/22/18 Page 17 of 97 b. Treatment: In full and final satisfaction of each NGL Facility Claim, all NGL Facility Claims shall be Reinstated. c. Voting: Class 4 is Unimpaired. Holders of Allowed NGL Facility Claims in Class 4 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed NGL Facility Claims in Class 4 are not entitled to vote to accept or reject the Plan. Class 5 — Intermediation Claims a. Classification: Class 5 consists of all Intermediation Claims against any Debtor. b. Treatment: In full and final satisfaction of each Allowed Intermediation Claim, each Holder of an Allowed Intermediation Claim shall receive payment in full either (i) in Cash from the proceeds of the New Intermediation Facility or (ii) in accordance with the terms of the New Intermediation Facility. c. Voting: Class 5 is Unimpaired. Holders of Allowed Intermediation Claims in Class 5 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Intermediation Claims in Class 5 are not entitled to vote to accept or reject the Plan. Class 6 — First Loss Claims a. Classification: Class 6 consists of all First Loss Claims against any Debtor. b. Treatment: In full and final satisfaction of each Allowed First Loss Claim, each Holder of an Allowed First Loss Claim shall receive payment in full either (i) in Cash from the proceeds of the New First Loss Facility or New Intermediation Facility; or (ii) in accordance with the terms of the New First Loss Facility. c. Voting: Class 6 is Unimpaired. Holders of Allowed First Loss Claims in Class 6 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed First Loss Claims in Class 6 are not entitled to vote to accept or reject the Plan. Class 7 — Term Loan A Claims a. Classification: Class 7 consists of all Term Loan A Claims against any Debtor. b. Allowance: The Term Loan A Claims shall be Allowed in the aggregate principal amount of $97,500,000 plus any accrued but unpaid interest thereon payable as of the Petition Date, and any accrued but unpaid fees and expenses payable in accordance with the Term Loan A Documents. c. Treatment: Each Holder of an Allowed Term Loan A Claim shall receive its Pro Rata share of: (i) $15,000,000 of Cash; (ii) Tranche B of the New First Lien Term Loan Facility; and (iii) Cash in the amount of any accrued but unpaid interest on the Term Loan A Claims measured through the Effective Date. d. Voting: Class 7 is Impaired. Holders of Allowed Term Loan A Claims in Class 7 are entitled to vote to accept or reject the Plan. 7 Case 18-10122 8. 9. 10. 11. Doc 10 Filed 01/22/18 Page 18 of 97 Class 8 — Term Loan B Claims a. Classification: Class 8 consists of all Term Loan B Claims against any Debtor. b. Allowance: The Term Loan B Claims shall be Allowed in the aggregate principal amount of $523,875,000 plus any accrued but unpaid interest thereon payable as of the Petition Date, and any accrued but unpaid fees and expenses payable in accordance with the Term Loan B Documents. c. Treatment: On the Effective Date, each Holder of an Allowed Term Loan B Claim shall receive on account of such Claim its Pro Rata share of: (i) 100% of the New Equity in the form of New Class A Common Stock, less the percentage of the New Equity distributed to (x) Holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) Parent pursuant to Article IV.B.1 of the Plan, subject to dilution by the Management Incentive Plan; and (ii) Tranche C of the New First Lien Term Loan Facility. d. Voting: Class 8 is Impaired. Holders of Allowed Term Loan B Claims in Class 8 are entitled to vote to accept or reject the Plan. Class 9 — General Unsecured Claims a. Classification: Class 9 consists of any General Unsecured Claims against any Debtor. b. Treatment: In full and final satisfaction of each Allowed General Unsecured Claim, each Holder thereof shall receive Cash in an amount equal to such Allowed General Unsecured Claim on the later of: (i) the Effective Date; or (ii) the date due in the ordinary course of business in accordance with the terms and conditions of the particular transaction or agreement giving rise to such Allowed General Unsecured Claim. c. Voting: Class 9 is Unimpaired. Holders of Allowed General Unsecured Claims in Class 9 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed General Unsecured Claims in Class 9 are not entitled to vote to accept or reject the Plan. Class 10 — Intercompany Claims a. Classification: Class 10 consists of any Intercompany Claims against any Debtor. b. Treatment: Each Allowed Intercompany Claim shall be Reinstated or canceled and released, at the Debtors’ or the Reorganized Debtors’ option; provided, however, that any Intercompany Claims held by or against the Excluded Entities shall be canceled. No distribution shall be made on account of any Allowed Intercompany Claim. c. Voting: Class 10 is either Unimpaired, in which case the Holders of Allowed Intercompany Claims in Class 10 are conclusively presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code, or Impaired, and not receiving any distribution under the Plan, in which case the Holders of such Allowed Intercompany Claims in Class 10 are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. Therefore, each Holder of an Allowed Intercompany Claim in Class 9 will not be entitled to vote to accept or reject the Plan. Class 11 — Intercompany Interests a. Classification: Class 11 consists of any Intercompany Interests in any Debtor. 8 Case 18-10122 12. E. Doc 10 Filed 01/22/18 Page 19 of 97 b. Treatment: In full and final satisfaction of each Allowed Intercompany Interest, each Intercompany Interest shall be Reinstated solely to maintain the Debtors’ corporate structure; provided, however, that any Intercompany Interests in the Excluded Entities shall be canceled and not entitled to any recovery or distribution under the Plan. c. Voting: Class 11 is Unimpaired. Holders of Allowed Intercompany Interests in Class 11 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Intercompany Interests in Class 11 are not entitled to vote to accept or reject the Plan. Class 12 — Interests in PES Holdings a. Classification: Class 12 consists of all Interests in PES Holdings. b. Treatment: In full and final satisfaction of each Interest in PES Holdings, each Allowed Interest in PES Holdings shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Interests in PES Holdings shall be entitled to any recovery or distribution under the Plan on account of such Interests. c. Voting: Class 12 is Impaired. Holders of Interests in Class 12 are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code and are not entitled to vote to accept or reject the Plan. Special Provision Governing Unimpaired Claims Except as otherwise provided in the Plan, nothing under the Plan shall affect the Debtors’ or the Reorganized Debtors’ rights regarding any Unimpaired Claim, including all rights regarding legal and equitable defenses to, or setoffs or recoupments against, any such Unimpaired Claim. F. Elimination of Vacant Classes Any Class of Claims or Interests that does not have a Holder of an Allowed Claim or Allowed Interest, or a Claim or Interest temporarily Allowed by the Bankruptcy Court as of the date of the Confirmation Hearing, shall be deemed eliminated from the Plan for purposes of voting to accept or reject the Plan and for purposes of determining acceptance or rejection of the Plan by such Class pursuant to section 1129(a)(8) of the Bankruptcy Code. G. Voting Classes; Presumed Acceptance by Non-Voting Classes If a Class contains Claims or Interests eligible to vote and no Holder of Claims or Interests eligible to vote in such Class votes to accept or reject the Plan, the Plan shall be presumed accepted by the Holders of such Claims or Interests in such Class. H. Confirmation Pursuant to Section 1129(a)(10) and 1129(b) of the Bankruptcy Code Section 1129(a)(10) of the Bankruptcy Code shall be satisfied for purposes of Confirmation by acceptance of the Plan by at least one Impaired Class of Claims. The Debtors shall seek Confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code with respect to any rejecting Class(es) of Claims or Interests. The Debtors reserve the right to modify the Plan in accordance with Article X of the Plan to the extent, if any, that Confirmation pursuant to section 1129(b) of the Bankruptcy Code requires modification, including by modifying the treatment applicable to a Class of Claims or Interests to render such Class of Claims or Interests Unimpaired to the extent permitted by the Bankruptcy Code and the Bankruptcy Rules. 9 Case 18-10122 I. Doc 10 Filed 01/22/18 Page 20 of 97 Intercompany Interests To the extent Reinstated under the Plan, the Intercompany Interests shall be Reinstated for the ultimate benefit of the Holders of the New Equity, and shall receive no recovery or distribution. For the avoidance of doubt, to the extent Reinstated pursuant to the Plan, on and after the Effective Date, all Intercompany Interests shall be owned by the same Reorganized Debtor that corresponds with the Debtor that owned such Intercompany Interests prior to the Effective Date (subject to the Restructuring Transactions). J. Subordination Claims and Interests The allowance, classification, and treatment of all Allowed Claims and Allowed Interests and their respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal, and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the Bankruptcy Code, the Debtors or Reorganized Debtors, as applicable, reserve the right to re-classify any Allowed Claim or Interest in accordance with any contractual, legal, or equitable subordination relating thereto. K. Liquidation Analysis The Debtors believe that the Plan provides a greater recovery for Holders of Allowed Claims and Interests as would be achieved in the Debtors’ liquidation under chapter 7 of the Bankruptcy Code. This belief is based on a number of considerations, including: (a) the Debtors’ primary assets would likely have to be sold on a piecemeal basis in a chapter 7 liquidation; (b) the additional Administrative Claims generated by conversion to a chapter 7 case and any related costs in connection with a chapter 7 liquidation; and (c) the absence of a robust market for the liquidation of the Debtors’ assets and services. The Debtors, with the assistance of A&M, have prepared an unaudited liquidation analysis, which is attached hereto as Exhibit C (the “Liquidation Analysis”), to assist Holders of Claims and Interests in evaluating the Plan. The Liquidation Analysis compares the projected recoveries that would result from the liquidation of the Debtors in a hypothetical case under chapter 7 of the Bankruptcy Code with the estimated distributions to Holders of Allowed Claims and Interests under the Plan. The Liquidation Analysis is based on the value of the Debtors’ assets and liabilities as of a certain date and incorporates various estimates and assumptions, including a hypothetical conversion to a chapter 7 liquidation as of a certain date. Further, the Liquidation Analysis is subject to potentially material changes, including with respect to economic and business conditions and legal rulings. Therefore, the actual liquidation value of the Debtors could vary materially from the estimate provided in the Liquidation Analysis. L. Valuation Analysis The Plan provides for the distribution of the New Equity to (a) Holders of Term Loan B Claims; (b) Holders of DIP Facility Claims, and (c) the Parent (on account of the Parent Cash Contribution), as applicable, upon consummation of certain of the Restructuring Transactions set forth in the Plan. Accordingly, PJT, at the request of the Debtors, has performed an analysis, which is attached hereto as Exhibit D, of the estimated enterprise value of the Reorganized Debtors on a going-concern basis as of March 31, 2018 (the “Valuation Analysis”). Based on the Valuation Analysis, the Reorganized Debtors’ total enterprise value will range from approximately $725 million to $975 million. The Reorganized Debtors will emerge from chapter 11 with approximately $275 million of net debt and the equity value of the Reorganized Debtors immediately after the Effective Date will range from approximately $450 million to $700 million.4 The Valuation Analysis, including the procedures followed, assumptions made, qualifications, and limitations on review undertaken described therein, should be read in conjunction with Article VII of this Disclosure 4 In the event the Debtors elects to consummate the Plan without completing a section 363 sale of certain of assets, excess cash is estimated to decline by $350 million to $125 million and net debt is estimated to increase by $350 million to $625 million. As a result, in such case, the equity value of the Reorganized Debtors immediately after the Effective Date is estimated to range from $100 million to $350 million. 10 Case 18-10122 Doc 10 Filed 01/22/18 Page 21 of 97 Statement, entitled “Risk Factors.” The Valuation Analysis is based on data and information as of January 17, 2018. PJT makes no representations as to changes to such data and information that may have occurred since the date of the Valuation Analysis. THE VALUATION ANALYSIS REPRESENTS A HYPOTHETICAL VALUATION OF THE REORGANIZED DEBTORS AND THEIR ASSETS AND BUSINESSES, WHICH ASSUMES THAT SUCH REORGANIZED DEBTORS CONTINUE AS AN OPERATING BUSINESS IN SUBSTANTIALLY THE SAME CORPORATE STRUCTURE. THE ESTIMATED VALUE SET FORTH IN THE VALUATION ANALYSIS DOES NOT PURPORT TO CONSTITUTE AN APPRAISAL OR NECESSARILY REFLECT THE ACTUAL MARKET VALUE THAT MIGHT BE REALIZED THROUGH A SALE OR LIQUIDATION OF THE REORGANIZED DEBTORS, THEIR SECURITIES OR THEIR ASSETS, WHICH MAY BE MATERIALLY DIFFERENT THAN THE ESTIMATES SET FORTH IN THE VALUATION ANALYSIS. ACCORDINGLY, SUCH ESTIMATED VALUE IS NOT NECESSARILY INDICATIVE OF THE PRICES AT WHICH ANY SECURITIES OF THE REORGANIZED DEBTORS MAY TRADE AFTER GIVING EFFECT TO THE RESTRUCTURING TRANSACTIONS SET FORTH IN THE PLAN. ANY SUCH PRICES MAY BE MATERIALLY DIFFERENT THAN INDICATED BY THE VALUATION ANALYSIS. M. Financial Information and Projections In connection with the planning and development of the Plan, the Debtors, with the assistance of their advisors, prepared projections for the fiscal years 2018 through 2021, which are attached hereto as Exhibit E (the “Financial Projections”), including management’s assumptions related thereto. For purposes of the Financial Projections, the Debtors have assumed an Effective Date of March 31, 2018. The Financial Projections assume that the Plan will be implemented in accordance with its stated terms. The Debtors are unaware of any circumstances as of the date of this Disclosure Statement that would require the reforecasting of the Financial Projections due to a material change in the Debtors’ prospects. The Financial Projections are based on forecasts of key economic variables and may be significantly impacted by, among other factors, changes in the competitive environment, commodity prices, regulatory changes, and/or a variety of other factors, including the factors listed in this Disclosure Statement. Accordingly, the estimates and assumptions underlying the Financial Projections are inherently uncertain and are subject to significant business, economic, and competitive uncertainties. Therefore, such projections, estimates, and assumptions are not necessarily indicative of current values or future performance, which may be significantly less or more favorable than set forth therein. The Financial Projections should be read in conjunction with the assumptions, qualifications, and explanations set forth in this Disclosure Statement and other financial information. ARTICLE III. SOLICITATION AND VOTING PROCEDURES A. Classes Entitled to Vote on the Plan The following Classes are entitled to vote to accept or reject the Plan (collectively, the “Voting Classes”): Class 7 8 Claim or Interest Term Loan A Claims Term Loan B Claims Status Impaired Impaired If your Claim or Interest is not included in the Voting Classes, you are not entitled to vote and you will not receive a Solicitation Package (as defined below). If you are a Holder of a Claim in one or more of the Voting Classes, you should read your ballot(s) and carefully follow the instructions included in the ballot(s). Please use only the ballot(s) that accompanies this Disclosure Statement or the ballot(s) that the Debtors, or the Solicitation Agent on behalf of the Debtors, otherwise provided to you. If you are a Holder of a Claim in more than one of the Voting Classes, you will receive a ballot for each such Claim. 11 Case 18-10122 B. Doc 10 Filed 01/22/18 Page 22 of 97 Votes Required for Acceptance by a Class Under the Bankruptcy Code, acceptance of a plan of reorganization by a class of claims or interests is determined by calculating the amount and, if a class of claims, the number, of claims and interests voting to accept, as a percentage of the allowed claims or interests, as applicable, that have voted. Acceptance by a class of claims requires an affirmative vote of more than one-half in number of total allowed claims that have voted and an affirmative vote of at least two-thirds in dollar amount of the total allowed claims that have voted. Acceptance by a class of interests requires an affirmative vote of at least two-thirds in amount of the total allowed interests that have voted. C. Certain Factors to Be Considered Prior to Voting There are a variety of factors that all Holders of Claims entitled to vote on the Plan should consider prior to voting to accept or reject the Plan. These factors may impact recoveries under the Plan and include, among other things: • unless otherwise specifically indicated, the financial information contained in the Disclosure Statement has not been audited and is based on an analysis of data available at the time of the preparation of the Plan and the Disclosure Statement; • although the Debtors believe that the Plan complies with all applicable provisions of the Bankruptcy Code, the Debtors can neither assure such compliance nor that the Bankruptcy Court will confirm the Plan; • the Debtors may request Confirmation without the acceptance of all Impaired Classes in accordance with section 1129(b) of the Bankruptcy Code; and • any delays of either Confirmation or Consummation could result in, among other things, increased Administrative Claims and Professional Fee Claims. While these factors could affect distributions available to Holders of Allowed Claims and Interests under the Plan, the occurrence or impact of such factors will not necessarily affect the validity of the vote of the Voting Classes or necessarily require a resolicitation of the votes of Holders of Claims in the Voting Classes. For a further discussion of risk factors, please refer to “Risk Factors” described in Article VII of this Disclosure Statement. D. Classes Not Entitled To Vote on the Plan Under the Bankruptcy Code, holders of claims or interests are not entitled to vote if their contractual rights are unimpaired by the proposed plan or if they will receive no property under the plan. Accordingly, the following Classes of Claims against and Interests in the Debtors are not entitled to vote to accept or reject the Plan: Class 1 2 3 4 5 6 9 10 Claim or Interest Other Secured Claims Other Priority Claims Refining ABL Claims NGL Facility Claims Intermediation Claims First Loss Claims General Unsecured Claims Intercompany Claims 11 Intercompany Interests Status Unimpaired Unimpaired Unimpaired Unimpaired Unimpaired Unimpaired Unimpaired Unimpaired or Impaired Unimpaired 12 Voting Rights Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept Presumed to Accept or Presumed to Reject Presumed to Accept Case 18-10122 12 E. Interests in PES Doc 10 Filed 01/22/18 Impaired Page 23 of 97 Presumed to Reject Solicitation Procedures 1. Solicitation Agent The Debtors have retained Rust Consulting/Omni Bankruptcy (“Rust Omni”), to act, among other things, as the Solicitation Agent in connection with the solicitation of votes to accept or reject the Plan. 2. Solicitation Package The following materials constitute the solicitation package (the “Solicitation Package”) distributed to Holders of Claims in the Voting Classes: • the Debtors’ cover letter in support of the Plan; • a ballot and applicable voting instructions, together with a pre-paid, pre-addressed return envelope; and • this Disclosure Statement and all exhibits hereto, including the Plan and all exhibits thereto; provided that the Plan Supplement documents shall not be part of the Solicitation Package and, pursuant to the Plan, will be filed with the Bankruptcy Court no later than seven (7) days prior to the Confirmation Hearing. 3. Distribution of the Solicitation Package and Plan Supplement The Debtors are causing the Solicitation Agent to distribute the Solicitation Package to Holders of Claims in the Voting Classes on January 17, 2018. The Solicitation Package (without ballots, unless you are an eligible voting party) may also be obtained from the Solicitation Agent by: (1) calling the Solicitation Agent at (844) 459-0695 toll free or at (818) 906-8300 for international calls and asking for the “Solicitation Group,” (2) emailing PESholdings@omnimgt.com and referencing “PES Holdings” in the subject line, and/or (3) writing to the Solicitation Agent at PES Holdings, LLC c/o Rust Consulting/Omni Bankruptcy, 5955 DeSoto Ave., Suite 100, Woodland Hills, California 91367. After the Debtors file the chapter 11 cases, you may also obtain copies of any pleadings filed with the Bankruptcy Court for free by visiting the Debtors’ restructuring website, http://www.omnimgt.com/PhiladelphiaEnergy, or for a fee via PACER at https://www.pacer.gov/. Holders should choose only one method to return their Ballot. At least seven (7) days before the Confirmation Hearing, the Debtors intend to file the Plan Supplement. If the Plan Supplement is updated or otherwise modified, such modified or updated documents will be made available on the Debtors’ restructuring website. The Debtors will not serve copies of the Plan Supplement; however, parties may obtain a copy of the Plan Supplement from the Solicitation Agent by: (1) calling the Solicitation Agent at the telephone number set forth above; (2) visiting the Debtors’ restructuring website, http://www.omnimgt.com/PhiladelphiaEnergy; or (3) writing to the Solicitation Agent at PES Holdings, LLC c/o Rust Consulting/Omni Bankruptcy, 5955 DeSoto Ave., Suite 100, Woodland Hills, California 91367. F. Voting Procedures January 17, 2018 (the “Voting Record Date”), is the date that was used for determining which Holders of Claims are entitled to vote to accept or reject the Plan and receive the Solicitation Package in accordance with the solicitation procedures. Except as otherwise set forth herein, the Voting Record Date and all of the Debtors’ solicitation and voting procedures shall apply to all of the Debtors’ creditors and other parties in interest. In order for the Holder of a Claim in the Voting Classes to have its ballot counted as a vote to accept or reject the Plan, such Holder’s ballot must be properly completed, executed, and delivered by (a) using the enclosed pre-paid, pre-addressed return envelope, (b) via first class mail, overnight courier, or hand delivery to PES Holdings, LLC c/o 13 Case 18-10122 Doc 10 Filed 01/22/18 Page 24 of 97 Rust Consulting/Omni Bankruptcy, 5955 DeSoto Ave., Suite 100, Woodland Hills, California 91367, or (c) via email (attaching a scanned PDF of the fully executed ballot) to PESholdings@omnimtg.com and referencing “PES Holdings” in the subject line, so that such Holder’s ballot is actually received by the Solicitation Agent on or before the Voting Deadline, i.e. January 19, 2018 at 5:00 p.m. (prevailing Eastern Time). If a Holder of a Claim in a Voting Class transfers all of such Claim to one or more parties on or after the Voting Record Date and before the Holder has cast its vote on the Plan, such Claim Holder is automatically deemed to have provided a voting proxy to the purchaser(s) of the Holder’s Claim, and such purchaser(s) shall be deemed to be the Holder(s) thereof as of the Voting Record Date for purposes of voting on the Plan, provided that the transfer complies with the applicable requirements under the Restructuring Support Agreement, if applicable, and the purchaser and agent for the relevant facility provide satisfactory confirmation of the transfer to the Solicitation Agent. If you hold Claims in more than one Voting Class under the Plan, you should receive a separate Ballot for each Class of Claims, coded by Class number, and a set of solicitation materials. You may also receive more than one Ballot if you hold Claims through one or more affiliated funds, in which case the vote cast by each such affiliated fund will be counted separately. Separate Claims held by affiliated funds in a particular Class shall not be aggregated, and the vote of each such affiliated fund related to its Claims shall be treated as a separate vote to accept or reject the Plan (as applicable). If you hold any portion of a single Claim, you and all other Holders of any portion of such Claim will be (a) treated as a single creditor for voting purposes and (b) required to vote every portion of such Claim collectively to either accept or reject the Plan. IF A BALLOT IS RECEIVED AFTER THE VOTING DEADLINE, IT WILL NOT BE COUNTED UNLESS THE DEBTORS DETERMINE OTHERWISE. ANY BALLOT THAT IS PROPERLY EXECUTED BY THE HOLDER OF A CLAIM BUT THAT DOES NOT CLEARLY INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN OR ANY BALLOT THAT INDICATES BOTH AN ACCEPTANCE AND A REJECTION OF THE PLAN WILL NOT BE COUNTED FOR PURPOSES OF ACCEPTING OR REJECTING THE PLAN. EACH HOLDER OF A CLAIM MUST VOTE ALL OF ITS CLAIMS OR INTERESTS WITHIN A PARTICULAR CLASS EITHER TO ACCEPT OR REJECT THE PLAN AND MAY NOT SPLIT SUCH VOTES. BY SIGNING AND RETURNING A BALLOT, EACH HOLDER OF A CLAIM OR INTEREST WILL CERTIFY TO THE BANKRUPTCY COURT AND THE DEBTORS THAT NO OTHER BALLOTS WITH RESPECT TO SUCH CLAIM HAVE BEEN CAST OR, IF ANY OTHER BALLOTS HAVE BEEN CAST WITH RESPECT TO SUCH CLASS OF CLAIMS OR INTERESTS, SUCH OTHER BALLOTS INDICATED THE SAME VOTE TO ACCEPT OR REJECT THE PLAN. IF A HOLDER CASTS MULTIPLE BALLOTS WITH RESPECT TO THE SAME CLAIM AND THOSE BALLOTS ARE IN CONFLICT WITH EACH OTHER, SUCH BALLOTS WILL NOT BE COUNTED FOR PURPOSES OF ACCEPTING OR REJECTING THE PLAN. IT IS IMPORTANT THAT THE HOLDER OF A CLAIM IN THE VOTING CLASSES FOLLOW THE SPECIFIC INSTRUCTIONS PROVIDED ON SUCH HOLDER’S BALLOT AND THE ACCOMPANYING INSTRUCTIONS. SUBJECT TO THE TERMS OF THE RESTRUCTURING SUPPORT AGREEMENT, NO BALLOT MAY BE WITHDRAWN OR MODIFIED AFTER THE VOTING DEADLINE WITHOUT THE DEBTORS’ PRIOR CONSENT OR PERMISSION OF THE BANKRUPTCY COURT. ARTICLE IV. THE DEBTORS’ CORPORATE HISTORY, STRUCTURE, AND BUSINESS OVERVIEW The Debtors are privately held limited liability companies and limited partnerships that are owned and controlled by the Parent. The Debtors employ approximately 1,100 individuals, approximately 650 of whom are unionized members of the United Steelworkers (the “USW”)5 and conduct their operations through two business segments, refining and logistics, which are operated by PESRM and North Yard Logistics, L.P. (“NYL”), respectively. 5 In June 2015, the Debtors renewed the terms of a Collective Bargaining Agreement (the “CBA”) with the USW that covers all represented hourly employees and contains a no-strike clause effective through the CBA’s September 8, 2019 expiration date. 14 Case 18-10122 Doc 10 Filed 01/22/18 Page 25 of 97 The Debtors’ refining segment includes the operations of the Refining Complex. The logistics segment owns and operates the North Yard Terminal (as defined below), which provides rail unloading services to the Refining Complex. A. The Debtors’ Corporate History The Refining Complex has been continuously operating in some form since the mid-1860’s. Today, the Refining Complex has capacity to refine 335,000 barrels per day of crude oil, and is the largest oil refining complex on the U.S. Eastern seaboard. The Refining Complex produces a full range of transportation fuels, such as gasoline and ultra-low sulfur diesel, as well as other refined products, including home heating oil, jet fuel, kerosene, fuel oil, propane, propylene, butane, cumene and sulfur. The Company was formed in 2012 as a holding company by affiliates of the Carlyle Group (“Carlyle”) and Sunoco Inc. (“Sunoco”) (now a subsidiary of Energy Transfer Partners, L.P. (“Energy Transfer Partners”)), in connection with the Debtors’ acquisition of the Refining Complex from Sunoco. Following the acquisition of the Refining Complex, the Debtors believed that rapid growth in the production of light, sweet domestic crude oil from developing shale formations such as the Bakken, Eagle Ford and Permian, coupled with relatively static domestic crude oil distillation capacity, would create opportunities to secure domestic crude oil at advantaged prices relative to other sources of crude oil. Accordingly, in 2013, $100 million was invested to construct a crude oil rail terminal on the North Yard of the Refining Complex (the “North Yard Terminal”) to capitalize on this development. One year later, an additional $30 million investment doubled the North Yard Terminal’s capacity to unload four crude oil unit trains per day, or 280,000 barrels per day, making the North Yard Terminal the largest crude oil unloading terminal on the East Coast. On January 1, 2015, the Debtors began operating the North Yard Terminal as a separate segment from the Refining Complex upon the contribution of the North Yard Terminal from PESRM to NYL. In addition to these investments in the North Yard Terminal, the Debtors have invested approximately $750 million in capital improvements in the Refining Complex infrastructure to enable it to operate safely and efficiently and to position it for success in the highly competitive transportation fuel market and have expanded their employee base by approximately 240 employees to 1,100 employees. The Debtors, unlike some of their larger and more vertically integrated competitors, operate the Refining Complex as an independent “merchant” refiner, which means that the Debtors do not control the downstream blending and retail distribution of the substantial majority of the transportation fuel that they produce. The substantial majority of transportation fuel produced at the Refining Complex is sold neat (unblended) at the refinery gate and delivered into markets in the Central Atlantic and Northeast regions of the U.S. through pipelines that the Debtors do not own and that will not accept blended gasoline. This has implications under the RFS Program, which are detailed herein in the section entitled, “Events Leading to the Chapter 11 Cases”, and has subjected the Debtors to an unpredictable, escalating, and unintended compliance burden that has cost the Debtors $832 million since commencement of operations in September, 2012. This is the fundamental reason for the Debtors’ recent struggles and, combined with the structural elimination of PADD I refiners’ access to discounted domestic crude oil and an extended cyclical compression in refining margins, is what drove the Debtors’ decision to seek relief under the Bankruptcy Code. B. Assets and Operations PESRM PESRM is an independent merchant refiner that operates the Refining Complex. The Refining Complex is located on a 1,300 acre tract of land, 2.5 miles from downtown Philadelphia that holds the Debtors’ two interconnected refineries: Girard Point and Point Breeze. Girard Point and Point Breeze process a mix of predominantly light, sweet crude oils from West Africa, Canada, North Dakota, Texas and other parts of the world and produce a full range of refined products (including gasoline, ultra-low sulfur diesel, home heating oil, jet fuel, kerosene, fuel oil, propane, propylene, butane, cumene and sulfur) which PESRM markets, primarily in the northeastern United States. The specific locations of the Refining Complex’s major refinery units, capacity figures, and year of most recent material upgrade are described in the photograph map below: 15 Case 18-10122 Doc 10 Filed 01/22/18 Page 26 of 97 These refinery units allow Girard Point and Point Breeze to collectively distill up to 335,000 barrels of crude oil per day into a full range of refined products, including but not limited to gasoline (approximately 50% of refined product yields) and diesel (approximately 38% of refined product yields). Over $2.4 billion of capital has been invested by Sunoco and PESRM to improve the Refining Complex in the past 10 years. Since commencement of operations in 2012, PESRM has invested more than $870 million in capital improvements. These investments, together with a culture of continuous improvement have led to improved performance in personal and process safety, environmental compliance, operational availability, operating costs and a number of other important metrics, including overall profitability. PESRM’s earnings and cash flow from operations are primarily affected by the relationship between refined product prices and the prices for crude oil and other non-crude feedstocks which is best illustrated in the financial metric Gross Refining Margin. Gross Refining Margin is the difference between (i) the amount of revenue received for the refined products produced by the Refining Complex (revenue) and (ii) the amount paid for crude oil and the other raw materials that are refined in the Refining Complex (input costs). The proceeds represented by the Gross Refining Margin are used to fund, among other things, operating expenses (direct labor, plant management salaries, engineering and technical salaries, utilities, maintenance expense, operating materials, chemicals and catalyst used in the refining process), administrative expenses, capital expenditures, regulatory compliance costs and debt service. While operating expenses, administrative expenses and capital expenditures are relatively predictable and stable over time, Gross Refining Margin and regulatory compliance costs are volatile and highly unpredictable as is the nature of a commodity business. As a result, the cash available to service debt and provide a return on invested capital, varies widely from period to period and, at times, can be negative for extended periods of time. The cost to acquire crude oil and other non-crude feedstocks and the price of refined products ultimately sold depend on numerous factors beyond PESRM’s control, including the supply of, and demand for, crude oil, gasoline, diesel and other refined products, which in turn depend on other factors, including changes in global and regional economies, weather conditions, global and regional political affairs, crude oil production levels, the availability of imports, the marketing of competitive fuels, pipeline capacity, prevailing exchange rates and the extent of government regulation. While PESRM’s costs of products sold fluctuate significantly with movements in crude oil prices, net 16 Case 18-10122 Doc 10 Filed 01/22/18 Page 27 of 97 sales fluctuate significantly with movements in refined product prices. Therefore, the effect of changes in crude oil prices on PESRM’s operating results is influenced by how the prices of refined products adjust to reflect such changes. PESRM’s most significant cost of regulatory compliance is its cost of complying with the RFS Program. The RFS Program requires refiners to blend “biofuels” such as ethanol into the gasoline and diesel fuels they produce and sell in the United States or, if they are unable to do so, to purchase RINs in lieu of blending. PESRM’s ability to blend biofuels is very limited because it does not own sufficient blending infrastructure and its position in the fuel distribution chain limits its ability to sell blended gasoline and diesel fuel and capture the RINs needed for compliance with the RFS Program. As a result, PESRM must purchase RINs for compliance from market participants who blend biofuels (typically large integrated oil companies and companies that own retail gasoline stations) or from companies that trade in RINs for profit. Significant penalties and fines can be assessed by EPA for failure to comply. Unlike a tax, the amount paid by PESRM for RINs is not remitted to the government but generates profits for the sellers of the RINs. PESRM incurred RINs expense of $13 million, $116 million, $130 million, $124 million, $231 million and $218 million in 2012, 2013, 2014, 2015, 2016 and 2017, respectively. To put this in perspective, PESRM’s 2017 RINs expense is more than twice its annual payroll, nearly one and one-half times its annual average capital expenditures, four times its annual interest expense and now represents its single largest expense after crude oil. The chart below depicts PESRM’s RINs expenses for the years 2012 through 2017.6 RINs Expense ($MM) $250 $231 $218 $200 $150 $116 $130 $124 2014 2015 $100 $50 $13 $2012 2013 2016 2017 To settle its outstanding compliance obligations, PESRM would have to purchase and retire RINs with an aggregate market value of approximately $350 million at current market prices before the compliance deadline of March 31, 2018. NYL NYL owns and operates the North Yard Terminal, the East Coast’s largest crude oil rail unloading terminal, located in the North Yard of the Refining Complex. Following an expansion project completed in October 2014, the North Yard Terminal currently has unloading capacity of four unit trains per day, or 280,000 barrels per day. The major components of the North Yard Terminal include 6.4 miles of track on the Debtors’ property, 1.0 mile of additional track with rights-of-way on adjacent land owned by a third party, two 4,000 foot, 24-inch 6 The Debtors did not commence operations until September 2012. 17 Case 18-10122 Doc 10 Filed 01/22/18 Page 28 of 97 underground pipeline manifolds, a 20,000 barrel per hour pumping station, 1,500 feet of 24-inch pipeline and a custody transfer meter station. NYL provides rail-unloading services to PESRM under the Rail Terminaling Services Agreement (as defined below), a long-term, take-or-pay commercial contract with minimum volume commitments, and currently does not generate unaffiliated third party revenue. NYL generates revenue by charging fees for receiving, handling, and transferring crude oil for PESRM. NYL does not take ownership of, or receive any payments based on the value of the crude oil it handles and as a result, it does not have any direct exposure to the fluctuations in any commodity prices. C. Logistics Capabilities The Debtors optimize their business through access to a wide range of logistics assets and infrastructure that facilitate: (i) crude oil and other feedstock supply; (ii) intermediate blendstock acquisition, storage and handling and (iii) refined product sales and marketing. 1. Crude Oil and Other Feedstock Supply Infrastructure As much as seventy-five percent (75%) of the Refining Complex’s crude oil can be supplied by rail from domestic sources, when those sources are available. The North Yard Terminal, the largest crude oil rail unloading terminal on the East Coast, is designed to receive and unload domestic crude oil supplied by rail. Additionally, as much as one hundred percent (100%) of the Refining Complex’s crude oil can be supplied by ship via the Delaware River. The Debtors have a long-term throughput contract with Sunoco Partners Marketing & Terminals L.P. (“SPMT”) at their Fort Mifflin and Darby Creek crude oil docks and terminal. These facilities have the capability to receive and handle more than 300,000 barrels per day of crude oil as well as other refinery feedstocks delivered by waterborne vessels. Although the majority of the Debtors’ waterborne crude comes from foreign sources, domestic crude oil can be brought in from the U.S. Gulf Coast to the Refining Complex through these facilities, which the Debtors have an option to purchase at fair market value. The photographic map below shows the location of the Debtors’ primary offloading points, in addition to other notable assets. 18 Case 18-10122 2. Doc 10 Filed 01/22/18 Page 29 of 97 Blendstock Acquisition, Storage and Handling Infrastructure To support butane blending into gasoline in the winter, and storage of butane not used in gasoline in the summer (necessitated by the seasonal gasoline RVP regulatory requirements), the Debtors have access to two facilities that collectively allow them to seasonally store, purchase and blend butane. The Debtors have contracted with SPMT at its Marcus Hook terminal for 775,000 barrels of capacity in their underground natural gas liquids storage caverns. These caverns are directly connected to the Refining Complex by pipelines that the Debtors also lease from a SPMT affiliate. Additionally, the Debtors have contractual access to an on-site third-party natural gas liquids rail terminal (the “South Yard Terminal”) that allows them to transport excess summer butane to and from terminals other than Marcus Hook and to purchase additional domestic butane from third parties for blending in the winter months. The South Yard Terminal was constructed by NGL at the Refining Complex. The Debtors have agreed to purchase the terminal from the third party on an installment sale basis over time and have an option to accelerate this purchase and acquire the terminal at any time from the third party at a pre-determined price. 3. Outbound Refined Product Offtake As an independent merchant refiner with the ability to produce a wide range of transportation fuels, the Debtors’ ability to target a multitude of attractive markets is key to maximizing revenue generation. The Debtors have access to a network of truck loading racks, pipelines, barges, refined product storage terminals and docks located at or downstream from the Refining Complex that enable the Debtors to market and distribute their refined products throughout PADD I and internationally. Much of the gasoline and distillate leaves the Refining Complex through pipelines that transport these products as far away as Pittsburgh, Pennsylvania, New York City and Buffalo, New York. Products can also be shipped by barge from the Refining Complex docks or by truck through a SPMT truck rack terminal. PESRM is also able to ship diesel to Europe and gasoline to Africa when economics dictate. A connection to the Harbor pipeline at the Debtors’ Schuylkill River Tank Farm allows the Debtors to transport their products to the New York Harbor, which is the largest refined product market in the world. Access to this market (by barge as well as pipeline), is important as the region is net short refined products, particularly considering the closure of several East Coast and PADD I refineries that traditionally served the New York market in the past. The Debtors’ Schuylkill River Tank Farm also provides a connection to points west via the Laurel pipeline. The Debtors access international markets through exports from SMPT’ terminal on the Delaware River. The chart below highlights the Debtors’ outbound logistical flexibility: 19 Case 18-10122 D. Doc 10 Filed 01/22/18 Page 30 of 97 Formation of Separate Entities and Intercompany Transactions Upon commencement of the Debtors’ operations in September 2012, and as evidenced by the Term Loan B Credit Agreement (as defined below), which included exclusions to the secured collateral to permit PESRM segregating its logistics assets, including the North Yard Terminal, into a separate master limited partnership (“MLP”) (the “Logistics MLP”) or otherwise, the Debtors believed that they could maximize value for the enterprise, provide for superior access to capital and achieve the greatest financial flexibility by separating certain logistical assets into a separate business which would benefit from fees paid to it by the Refining Complex. The structure of separating distinct assets, primarily logistics assets, and creating a fee from the Refining Complex for the use of the assets is commonplace among U.S. refiners as they are able to structure the fee-based business as an MLP. An MLP is a limited partnership that is publicly traded that combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. Generally, entities that meet MLP qualifying criteria benefit from higher valuations on the income transferred to them as a result of creating a stable dividend source to potential MLP investors, increased access to capital markets for both debt and equity and the creation of a potential acquisition vehicle for growth orientated investments. The formation of separate entities preserved future optionality for the Debtors to sell the Refining Complex or Logistics MLP or otherwise transfer the North Yard Terminal as distinct assets or sell the Refining Complex with the Logistics MLP as a consolidated business, in the event such a strategy became desirable. 1. Logistics MLP The Debtors began actively pursuing the Logistics MLP in mid-2014. At the July 10, 2014 meeting of the Boards of Managers, Bank of America Merrill Lynch (“BAML”) presented a proposal for an initial public offering (“IPO”) of the Logistics MLP, with the possibility of a separate refining segment IPO at a later date. At this July 2014 meeting, the Board of Managers provided authorization to file a Registration Statement on Form S-1 (“S-1”) with the SEC. After several confidential filings with the SEC, the S-1 for the IPO of the Logistics MLP was publicly filed on September 22, 2014. 20 Case 18-10122 2. Doc 10 Filed 01/22/18 Page 31 of 97 Logistics Sale Process In the fall of 2014, the Debtors pursued a private sale process while simultaneously progressing the IPO of the Logistics MLP. During the process, market conditions deteriorated, and the price differential between foreign crude oil and domestic crude oil compressed (as described below), reducing the Debtors’ domestic crude oil advantage and chilling the market for the Logistics MLP and the overall MLP market more generally. This drove the Debtors to postpone the sales process as well as the IPO of the Logistics MLP. 3. PES, Inc. IPO In the spring of 2015, financial analysis and market conditions led management and the Board of Managers to explore an IPO of the entirety of the Debtors’ business, effected through the sale of interests in a holding company known as Philadelphia Energy Solutions, Inc. (“PES, Inc.”) (an entity which was intended to hold both PESRM and NYL). The structure also contemplated a subsequent IPO of the Logistics MLP. The Debtors pursued the PES, Inc. IPO through the spring and summer of 2015. As the Debtors’ management team was on the PES, Inc. “road show” in August 2015, energy investors were being impacted by poor financial performance throughout the energy sector, including significant distress affecting companies engaged in the business of crude oil production. As a result of the losses sustained primarily in the upstream energy sectors, a number of potential investors expressed a reluctance to add incremental exposure to companies in the energy industries to their portfolio. Accordingly, interest in the PES, Inc. IPO waned, and the Debtors chose to postpone the PES, Inc. IPO. Through the remainder of 2015 and through 2016, the Debtors engaged in discussions with a series of investors, but continued compression in refining profitability and the broader upstream sector ultimately chilled investor interest in the Debtors’ business. 4. Intercompany Transactions On January 1, 2015, the Debtors executed a series of agreements in connection with the formal separation of the Refining Complex and the North Yard Terminal, creating the two-segment structure that the Debtors operate under today. PESRM, through a series of intercompany transactions, contributed the North Yard Terminal to NYL and under the Easement Agreement (as amended from time to time, the “Easement Agreement”), PESRM granted NYL an easement to the real property on which the North Yard Terminal sits. Additionally, through the Services and Secondment Agreement among PES Holdings, PESRM, PES Administrative Services, LLC (“Admin”), North Yard GP, LLC (“NYGP”), and NYL (the “Services and Secondment Agreement”), PESRM became contractually obligated to provide operational, maintenance and administrative resources to NYL. In exchange for these seconded employees, operating services and insurance, as well as administrative services, NYL has paid an aggregate of approximately $40 million to PESRM, Admin and PES Holdings since 2015 (which includes direct reimbursement to PESRM for the expenses associated with the employees seconded to NYL). To compensate NYL for use of the North Yard Terminal, on January 1, 2015, NYL and PESRM entered into a ten-year, fee-based commercial agreement, the Rail Terminaling Services Agreement (as amended, the “Rail Terminaling Services Agreement” and, together with the Services and Secondment Agreement, the Contribution Agreement and the Easement Agreement, collectively, the “Carve Out Agreements”), pursuant to which NYL receives, handles, and transfers crude oil at the North Yard Terminal. All of NYL’s revenue is currently derived from the Rail Terminaling Services Agreement, which is supported by a quarterly minimum volume commitment of 170,000 barrels per day, at a $1.95 per barrel fee (the “Throughout Fee”). PESRM is obligated to throughput the 170,000 barrels per day through the North Yard Terminal and NYL is required to maintain the available capacity of the North Yard Terminal such that PESRM may satisfy the minimum volume commitment on a quarterly average basis. These throughput estimates were based on projections of the amount of domestic crude PESRM expected to process, the North Yard Terminal’s capacity, and other similar crude by rail unloading contracts, among other considerations. If at the end of a quarter the actual total volumes delivered by NYL to PESRM are less than PESRM’s minimum volume commitment for such quarter, such deficit will be characterized as a “shortfall” and PESRM makes a “shortfall payment” to NYL in an amount equal to the Throughput Fee multiplied by the difference between the minimum volume commitment and the volumes actually delivered during the applicable quarter (the “RTSA Payments”). If PESRM delivers volumes greater than 170,000 barrels per day to NYL, it pays a $0.51 per barrel fee for those incremental volumes. 21 Case 18-10122 Doc 10 Filed 01/22/18 Page 32 of 97 The economic terms of the Rail Terminaling Services Agreement were based on the fees charged by other PADD I crude by rail unloading facilities (including Global Partners LP, Plains All American Pipeline, L.P., Enbridge, Inc., PBF Energy and SMPT), the Debtors’ then-current projections of domestic crude that the Debtors expected to process, and the terminal’s capacity, among other factors. Between the January 1, 2015 execution of the Rail Terminaling Services Agreement and August 31, 2017, PESRM transferred approximately $298 million to NYL under the Rail Terminaling Services Agreement. In 2015, only $131,800 was on account of shortfall RTSA Payments. In addition to the transfers associated with the Carve Out Agreements, the Debtors executed three other significant categories of intercompany payments prior to the date hereof. First, PESRM made three payments to Parent between January 2013 and September 2015, totaling approximately $283 million. The first payment made in January 2013 was a distribution totaling $75.9 million intending to cover taxes potentially due by Parent’s equityholders. The second payment—a $200 million distribution—was supported by a solvency opinion conducted by Valuation Research Corporation in September 2013. This distribution was contemplated and expressly permitted under the terms of the Term Loan B Credit Agreement (as defined below). Solvency was also supported by fair value assessments conducted by Murray Devine in December 2013 and April 2014. The final $7.13 million payment was a distribution that was made in September 2015 intending to cover taxes potentially due by Parent’s equityholders. Second, NYL transferred approximately $311 million in cash to Parent between March 2015 and April 2017 in the form of 10 payments, including a $125 million distribution from the issuance of the Term Loan A Credit Agreement (as defined below), and the funding of a $35 million intercompany note from North Yard Financing, LLC to Parent following a $35 million draw on the revolving loan under the Term Loan A Credit Agreement. Third, PESRM paid approximately $22.3 million of advisory fee payments to the Parent Parties on account of the years 2012, 2014, 2015 and 2016. E. The Intermediation Agreement On October 7, 2014, PESRM entered into that certain Amended and Restated Supply and Offtake Agreement, dated as of October 7, 2014, by and among PESRM, Admin and Merrill Lynch Commodities, Inc. (“MLC”) (as amended, and together with the related ancillary agreements, the “Intermediation Agreement”). The Intermediation Agreement reduces the working capital investment required to operate the Debtors’ refining business as well as the Debtors’ exposure to inventory price volatility. Pursuant to the terms of the Intermediation Agreement, MLC supplies and hedges substantially all of the crude oil and non-crude oil feedstock requirements of the Refining Complex, purchasing these feedstocks from third parties that PESRM identifies and based on pricing mechanisms that PESRM negotiates, in each case subject to certain conditions. The feedstocks are stored in the tanks at the Refining Complex, or at third-party facilities, and are ultimately purchased by PESRM as they are removed from the tanks and processed at the Refining Complex. MLC also purchases substantially all of the refined products produced at the Refining Complex under the Intermediation Agreement at market prices for the respective products. It hedges and then sells these products to third parties that PESRM identifies, based on pricing mechanisms that PESRM negotiates. In connection with these activities, PESRM pays MLC a fixed fee per barrel of feedstocks that MLC sells to PESRM and a separate fixed fee for each barrel of refined product that MLC purchases from PESRM. On November 15, 2017, the Debtors and MLC amended the Intermediation Agreement to extend its expiration to March 4, 2018. This amendment ensured that the Debtors would be able to continue ordering crude as they continued negotiations with their creditor constituencies. F. Organization and Prepetition Capital Structure 1. Organizational Structure An organizational chart illustrating the corporate structure of the Debtors is attached hereto as Exhibit F. Parent is organized in Delaware. Carlyle holds a 65.04% equity interest in Parent, and the remaining 35% equity interest is held by PES Equity Holdings, LLC (“PES Equity Holdings”) (32.52%) (as successor-in-interest to Sunoco and a subsidiary of Energy Transfer Partners, L.P.) and certain of the Debtors’ current and former senior management 22 Case 18-10122 Doc 10 Filed 01/22/18 Page 33 of 97 (2.44%). On a fully diluted basis taking into account incentive units awarded to current and former members of senior management, Carlyle holds 59.11% of the Parent, PES Equity Holdings holds 29.56%, and certain current and former members of the Parent’s senior management team hold 11.33%. PESRM is a Delaware limited liability company and conducts all of the Debtors’ refining operations. Its primary asset is the Refining Complex (including the real estate constituting the Refining Complex). NYL is a Delaware limited partnership that owns and operates the North Yard Terminal. Since completion of its construction in October 2013, the North Yard Terminal has provided PESRM a rail unloading terminal that allows it to source domestic crude oil by rail, primarily light sweet crude extracted from the Bakken shale region of North Dakota. 2. The Debtors’ Prepetition Capital Structure As of January 17, 2018, the Debtors’ funded indebtedness consisted of: (a) approximately $581.2 million in principal amount of secured debt issued by PESRM;7 and (b) approximately $97.5 million in secured debt issued by NYL. 3. Refining ABL Facility PESRM is party to the Amended and Restated Revolving Credit and Guaranty Agreement, dated as of October 7, 2014 (as amended, modified, or supplemented in accordance with the terms thereof, the “Refining ABL Credit Agreement”), by and among PESRM, as borrower, the other loan parties party thereto, the lenders party thereto, Bank of America, N.A., as sole lead arranger, sole bookrunner, swingline lender, administrative agent and collateral agent and JPMorgan Chase Bank, N.A., along with Bank of America N.A. as issuing banks, which provided for a $100 million secured revolving credit facility. Lenders under the Refining ABL Credit Agreement have priority security interests in certain assets of PESRM. These assets also secure the Term Loan B Credit Agreement, with the distribution of the proceeds thereof and the relationships between the relevant secured parties being governed by intercreditor agreements. Liens on intermediated inventory and RINs securing PESRM’s obligations under the Intermediation Agreement are exclusive. Additionally, the Intermediation Agreement also provides for subordinated liens on other assets of PESRM that secure PESRM's obligations under the Refining ABL Credit Agreement and the Term Loan B Credit Agreement, as described above. All obligations under the Refining ABL Credit Agreement are guaranteed by Admin, a subsidiary of PESRM. On November 15, 2017, the Refining ABL Credit Agreement was amended to remove PESRM’s ability to access incremental revolving borrowings above the $12.5 million borrowed in October 2017 (though letters of credit outstanding at such date can convert to borrowings if the letters of credit are drawn on by the beneficiaries) and to decrease the letter of credit availability to $40 million. As of January 17, 2018, PESRM has a $18 million borrowing base and approximately $2.4 million in outstanding letters of credit and approximately $14.9 million in borrowings, leaving up to approximately $1.5 million of availability under the Refining ABL Credit Agreement to issue letters of credit. The Refining ABL Credit Agreement matures on the earliest of (i) March 4, 2018, (ii) the date on which the Intermediation Agreement is terminated or expires, or (iii) the date on which MLC is replaced in the Intermediation Agreement by a party not satisfactory to Bank of America, N.A. 4. Term Loan B Credit Agreement PESRM is the borrower of approximately $523.9 million of secured term loan indebtedness under the Term Loan Agreement, dated as of March 4, 2013 (as amended, modified, or supplemented in accordance with the terms thereof, the “Term Loan B Credit Agreement” and the principal amount outstanding thereunder, the “Term Loan B Debt”), by and among PESRM, as borrower, the lenders from time to time parties thereto (the “Term Loan B 7 This figure includes: (a) debt under that certain Installment Sale and Purchase Agreement (as described herein) which is classified as debt for accounting purposes, but under which title is retained by NGL (as defined herein) and (b) $14,897,248 of borrowings under the Refining ABL Credit Agreement. 23 Case 18-10122 Doc 10 Filed 01/22/18 Page 34 of 97 Lenders”), and JPMorgan Chase Bank N.A., as administrative agent, sole lead arranger, and sole bookrunner (the “Term Loan B Agent”). All obligations under the Term Loan B Credit Agreement are guaranteed by Admin. Lenders under the Term Loan B Credit Agreement have priority security interests in certain assets of PESRM. These assets also secure the Refining ABL Credit Agreement, with the distribution of the proceeds thereof and the relationships between the relevant secured parties being governed by intercreditor agreements. Liens on intermediated inventory and RINs securing PESRM’s obligations under the Intermediation Agreement are exclusive. Additionally, the Intermediation Agreement also provides for subordinated liens on other assets of PESRM that secure PESRM's obligations under the Refining ABL Credit Agreement and the Term Loan B Credit Agreement, as described above. 5. South Yard NGL Terminal Debt PESRM is also a party to an Installment Sale and Purchase Agreement (the “NGL Facility”) dated as of May 7, 2014 (as amended from time to time), by and among PESRM and NGL Energy Partners LP, a Delaware limited partnership (“NGL”). Under the NGL Facility, PESRM agreed to purchase in installments from NGL the South Yard Terminal. PESRM’s obligations under the NGL Facility are approximately $42.4 million as of the date hereof. This obligation matures on May 1, 2021, but PESRM may prepay this obligation at any time without penalty. During the pendency of the installment purchase, NGL retains title to the South Yard Terminal. 6. Term Loan A Credit Agreement NYL incurred secured term loan and revolving indebtedness under the Credit Agreement, dated as of November 24, 2015 (as amended from time to time, the “Term Loan A Credit Agreement”), by and among NYL, as borrower, NYGP as guarantor, the lender parties thereto (the “Term Loan A Lenders”) and PNC Capital Markets LLC along with Goldman Sachs Bank USA as Joint Lead Arrangers. As of the date hereof, NYL has outstanding borrowings of $97.5 million under the Term Loan A Credit Agreement, consisting of $62.5 million of term loans and $35 million of revolving credit loans (together the, “Term Loan A Debt”). PES Holdings is a limited guarantor of collection of NYL’s obligations under the Term Loan A Credit Agreement and such facility is mandatorily prepayable in full on March 4, 2018. The Term Loan A Credit Agreement is secured by substantially all assets of NYGP and NYL (subject to certain exclusions), and the Term Loan A Lenders benefit from a guaranty of collection granted by PES Holdings secured by a pledge of the equity of NYGP. 7. Parent Equity Parent is a privately-held company. As of the date hereof, an affiliate of the Carlyle Group, Carlyle PES, L.L.C., held 65.04% of the Parent’s equity, PES Equity Holdings held 32.52%, and certain current and former members of the Parent’s senior management team held the remaining 2.44%. On a fully diluted basis taking into account incentive units awarded to current and former members of senior management, Carlyle holds 59.11% of the Parent, PES Equity Holdings holds 29.56%, and certain current and former members of the Parent’s senior management team hold 11.33%. ARTICLE V. EVENTS LEADING TO THE CHAPTER 11 CASES A. Environmental Regulatory Burden Enacted in 2005, the RFS Program promotes the use of biofuels in on-road transportation fuel (i.e., gasoline and diesel fuel mixtures) through renewable volume obligation (“RVO”) mandates. U.S. refiners and importers are considered “Obligated Parties” under the RFS Program, which requires these fuel suppliers to blend a minimum RVO of biofuels (mainly ethanol and biodiesel) into on-road transportation fuels. Biofuels have associated RINs attached 24 Case 18-10122 Doc 10 Filed 01/22/18 Page 35 of 97 that can be “separated” once blending has occurred. Obligated Parties demonstrate compliance with the RFS Program by retiring into the EPA controlled EMTS system the RINs that they separate through their own blending activities or those that they purchase from other market participants. PESRM, like other similarly situated independent merchant refiners, is an Obligated Party under the RFS Program but does not generate sufficient RINs through its own blending activities and, therefore, must purchase these RINs from large integrated refiners that generate excess RINs, large retailers (who control their own blending but are not Obligated Parties) and traders. This dynamic has created a thirdparty “market” for RINs in direct contravention of the intention of the RFS Program. Those without an RVO, such as large fuels retailers, can generate RINs and then sell them for a windfall profit to Obligated Parties like PESRM or other third parties for profit. Prior to 2013, ethanol RINs typically cost less than $0.05 per RIN, representing the cost of administering the RFS Program. In fact, from the Debtors’ commencement of operations in September 2012 to the end of 2013, ethanol RINs cost just $0.04 per RIN on average and represented a manageable cost of compliance. But in 2017 ethanol RINs averaged $0.70 per RIN, representing a 17.5 fold average increase from these 2012 levels, and have sold for as much as $1.50 per RIN at their peak. This price increase has been fueled by a combination of escalating RVO requirements promulgated by the EPA through annual rule-making processes, practical limitations of existing downstream infrastructure and vehicle engines to handle the increased volume of biofuels, as well as market speculation. All of these factors create a real or perceived scarcity of RINs, which has had the effect of driving up prices and threatening the existence of independent merchant refiners such as the Debtors. Ethanol RINs Price (cpg) 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 Independent merchant refiners and trade associations have petitioned the EPA to revise the RFS Program regulations, so that blenders are required to meet RVOs. Aligning the point of obligation and the point of physical blending of biofuels would eliminate much of the harm caused to the Debtors and other similarly situated independent merchant refiners by the RFS Program. Regrettably, following the efforts of PESRM and other independent merchant refiners to effect regulatory change, in November 2017, the EPA issued its final 2018 RVO requirements and held those requirements at essentially the same levels as 2017, declined to address the third-party RINs market and denied petitions to move the point of obligation. While non-obligated blenders, large fuel retailers and large integrated refiners receive windfall profits from the RFS Program, independent merchant refiners like PESRM are subjected to a large and increasing compliance cost. In fact, PESRM incurred RINs expense of $130 million, $124 million, $231 million and $218 million in 2014, 2015, 2016 and 2017, respectively. To put this in perspective, PESRM’s 2017 RINs expense is more than twice its annual payroll, nearly one and one-half times its annual average capital expenditures, four times its annual interest expense and now represents its single largest expense after crude oil. 25 Case 18-10122 Doc 10 Filed 01/22/18 Page 36 of 97 To settle its outstanding compliance obligations, PESRM will have to purchase and retire RINs with an aggregate market value of $350 million at current market prices before the compliance deadline of March 31, 2018, putting a significant strain on PESRM’s capital structure. B. Structural Elimination of Domestic Crude oil for PADD I Crude oil is generally sold at a differential to a benchmark and two of the more common such benchmarks, particularly in the Western Hemisphere, are West Texas Intermediate (“WTI”) and Brent crude oil (“Brent”). WTI is a light (low density) sweet (low sulfur) grade of crude oil with a delivery point of Cushing, Oklahoma, which serves as the price settlement point on the New York Mercantile Exchange (“NYMEX”). Crude oil produced in the United States and offered for sale is generally priced relative to WTI and, therefore, WTI is often used as shorthand for the price of domestic crude oil. Brent, on the other hand, is the major trading classification for foreign crude oil. The Intercontinental Exchange (“ICE”) is a major trading hub for Brent and crude oil suppliers in Europe, Africa and the Middle East often set prices relative to Brent on ICE if it is being sold in the Western Hemisphere. In recent years, foreign crude, as represented by Brent, has been more expensive than domestic crude, as represented by WTI. This relationship is often expressed as a differential between Brent and WTI, with a positive price differential between the two benchmarks (i.e. Brent-WTI) indicating that foreign crude oil is more expensive than domestic. For the period from the Debtors’ commencement of operations in September 2012 to the end of 2015, this differential averaged $8.61 per barrel, representing a sizable discount for domestic crude oil relative to foreign. The factors driving this domestic crude oil discount were (a) the surge in domestic crude oil production resulting from the application of horizontal drilling and hydraulic fracturing technologies in inland U.S. shale formations, such as the Bakken (increased supply), (b) pipeline infrastructure that was designed to bring crude oil from the coast to the interior of the United States which was the opposite of what was now required (logistics constraint) and (c) a federal ban on the export of domestic crude oil that limited the number of buyers (limited market). As a result of these constraints, the price of domestic crude oil discounted significantly relative to the foreign alternative and provided those with access to this crude oil with a significant competitive advantage and superior earnings. ICE Brent to WTI ($/bbl) 30.00 25.00 20.00 15.00 Avg Sep '12 - Dec '15: $8.61/bbl 10.00 Avg Jan '15-Dec '17: $2.79/bbl 5.00 0.00 -5.00 The Debtors constructed the North Yard Terminal to avail themselves of this domestic crude oil discount and the additional profit that it provided. In fact, following construction of the North Yard Terminal and through late 2015, PESRM benefited from access to abundant and affordable domestic crude oil supply, sourced predominantly from the Bakken region of North Dakota, delivered to the Refining Complex by unit train and received via the North Yard Terminal. PESRM’s Adjusted EBITDA was $273.6 million and $232.9 in 2014 and 2015, respectively, despite 26 Case 18-10122 Doc 10 Filed 01/22/18 Page 37 of 97 the massive cost imposed on the Debtors by the RFS Program during this period, largely driven by access to this domestic crude oil discount. Following a global collapse in crude oil prices in late 2015 and early 2016, producers in the Bakken suddenly found it uneconomic to continue producing in certain of the higher-cost fields in the region and, as a result, production declined. In fact, crude oil production in the Bakken region declined by approximately 25% from over 1.2 million barrels per day in late 2015 to less than 1.0 million barrels per day in late 2016. At approximately the same time, new pipeline capacity was put in service to connect the Bakken region to the U.S. Gulf Coast, providing crude oil producers with alternatives, and the U.S. government unexpectedly lifted the 40 year-old domestic crude oil export ban in late 2015. As a result of these factors, producers in the Bakken had less crude oil to sell and were now free to export this crude oil to foreign refiners who, unlike PESRM, were not burdened by higher transportation costs associated with the requirement of the Jones Act (which requires U.S.-flagged, constructed and crewed vessels to move goods from one U.S. port to another at significantly greater expense than equivalent foreign-flagged vessels that are allowed for movement from a U.S. port to a foreign port). Perversely, it became cheaper to transport crude oil from North Dakota to points in Western Europe than it was to transport the same crude oil to Philadelphia and, therefore, these foreign refiners could afford to outbid PESRM and other PADD I refiners. With access to a global market, the differential between the price of domestic crude oil, as represented by NYMEX WTI, and the price of foreign crude oil, as represented by ICE Brent, converged to approximately this cost of transportation to foreign markets. For the period spanning 2016 and 2017, this differential dropped to a mere $2.79 on average and created a structural barrier for PADD I refiners in accessing this crude oil. With the crude oil export ban lifted, this combination of curtailed crude oil production in the Bakken along with cheaper transportation via a combination of new pipelines and foreign-flag vessels to foreign refiners, provided producers in the Bakken with a higher realized price for crude oil than they could achieve by selling to PESRM. As a result, the domestic crude discount once enjoyed by PESRM was eroded and PESRM began, once again, relying on foreign, waterborne crude oil at more expensive prices. C. Cyclical Compression in Refining Margins While Gross Refining Margin is the most important indicator of PESRM’s profitability, the industry refers to the “crack spread” as a directional indicator of industry profitability. Crack spreads are expressed in ratios that depict the mix of various products that result from refining crude oil. Among the simplest forms of crack spread is the 2-1-1 crack spread which tracks the profitability of converting two barrels of crude oil into one barrel of gasoline and one barrel of diesel. Crack spreads are expressed in dollars per barrel and in the case of PESRM’s business, a relevant indicator is the 2-1-1 Brent crack spread which uses ICE Brent to represent the cost for each of the two barrels of crude oil and the NYMEX New York Harbor market values for RBOB gasoline and ultra-low sulfur diesel to represent the revenue generated by the products that the crude oil is refined into. Because each refinery sources a unique crude slate and produces a unique product slate, no single crack spread applies universally. Crack spreads are meant to be proxies for the directional profitability of certain refining configurations and do not account for transportation, crude quality differentials, location basis, differences in product mix or the value of products not included in the crack spread like propane, butane, residual fuel, or any petrochemical feedstocks to name just a few. 27 Case 18-10122 Doc 10 Filed 01/22/18 Page 38 of 97 2-1-1 crack to ICE Brent ($/bbl) 35.00 30.00 25.00 20.00 Avg Sep '12 - Sep '15: $14.52/bbl 15.00 10.00 Avg Oct '15 - Dec '17: $13.37/bbl 5.00 0.00 The crack spread, and therefore refining profitability more generally, is subject to a number of factors including global supply and demand for refined products. When the market is undersupplied relative to demand for refined products, then the crack spread generally improves and when the market is oversupplied relative to demand for refined products, the crack spread generally deteriorates. In recent years, U.S. and European refined product demand has been relatively flat while refining capacity in these regions has been rationalizing. By contrast, the Asian and Middle Eastern markets have gone from a relatively balanced supply/demand environment during the “golden age” of refining between 2004 and 2007 to substantially oversupplied following significant refining capacity additions undertaken between 2009 and 2013. This refining capacity was built in expectation of regional demand growth that was slower to materialize than expected and, coupled with crude oversupply that incentivized refiners to run at higher rates, resulted in a refined product supply overhang that led to compressed crack spreads beginning in the fourth quarter of 2015 which has continued through today. As can be seen above, the 2-1-1 ICE Brent crack spread averaged $14.52 per barrel from the Debtors’ commencement of operations in September 2012 through September 2015 and has averaged over $1 per barrel lower since then. Each $1 shift in crack spreads represents approximately $110 million of revenue to PESRM on an annualized basis. At the same time that crack spreads compressed, the cost of RINs also increased and, therefore, the profit available to U.S. refiners and, in particular, independent merchant refiners like PESRM is further compressed. Refining is a cyclical business and the Debtors expect the market for refined products to ultimately rebalance. This can occur through the demand side as global GDP growth creates additional demand for refined products or it can happen through the supply side as compressed crack spreads remove the incentive to refine crude oil into product and ultimately leads to reduced refinery utilization, new capacity additions that fail to keep pace with demand growth or, in the extreme, refinery closures. D. The Debtors’ Efforts to Deleverage Their Capital Structure and Increase Liquidity In response to the operating challenges described above, the Debtors undertook a series of operational and financial measures to improve their liquidity position and stabilize their capital structure. Certain of these measures are described below. The Debtors executed a series of operational changes to achieve expense savings through salaried headcount reductions, benefit plan changes, and vendor rate and usage savings. First, in September of 2016, the Debtors notified employees of “significantly stressed” finances, and required benefit cutbacks. These unpopular cost-cutting measures forced employees to pay more for health plans, suspended Debtor contributions to a defined contribution plan and 28 Case 18-10122 Doc 10 Filed 01/22/18 Page 39 of 97 lead to a salaried headcount reduction (both voluntary and involuntary). Second, the Debtors leveraged modifications to their supply chain model to promote cost savings. This included crude oil sourcing initiatives to screen crude oil and expand the universe of crude oil varieties for purchase, and identification of future projects around the synergistic asset usage and cooperation with Sunoco Logistics Partners, L.P. (now Energy Transfer Partners) regarding crude, propane, butane, pentane, and transmix arenas. The Debtors also improved crude oil yield through a reduction in lowvalue fuel oil production, and optimized crude storage processes. In total, the Debtors’ process and capital improvements led to annual expense and SG&A savings of approximately $50 million per year. Although these cost-cutting measures represented a substantial effort, amid continued challenges and approaching maturities, the Debtors identified a need to refinance their debt. Beginning in the fall of 2016, the Debtors began approaching the Term Loan Lenders regarding a potential refinancing of the Term Loan Debt. As described in more detail herein, these initial negotiations were ultimately unsuccessful. E. Restructuring Efforts Starting at the beginning of 2017, the Debtors, with the assistance of K&E, again attempted to address upcoming debt maturities and their capital structure through a refinancing. These discussions contemplated various structures involving both existing creditors and new lenders. In the spring of 2017, the Debtors were pursuing a fully underwritten refinancing of both the Term Loan B Debt and the Term Loan A Debt. Ultimately, deteriorating market conditions led to the lead arranger in the proposed refinancing being unable to commit to an underwritten debt offering. Nonetheless, after preliminary negotiations with the Term Loan B Lenders and Term Loan A Lenders through the spring of 2017 and into early summer 2017, the Debtors believed they were close to reaching preliminary agreement with a requisite percentage of the Term Loan A Lenders and the Term Loan B Lenders (collectively, the “Term Loan Lenders”) to move the liabilities under the Term Loan Credit Agreements (as defined in the Plan) to PES Holdings in connection with an amendment and extension of the Debtors’ obligations owed to the Term Loan Lenders. In this scenario the Term Loan Lenders would have shared all collateral (including the cash of the Parent) on a pari passu basis. Unfortunately, continued deterioration of market conditions ultimately led to the negotiations unraveling in late-June 2017, and the Debtors and the Term Loan Lenders were unable to reach a deal on terms then under consideration. Given the continued challenges in the Debtors’ operating environment, it became clear that the Debtors’ capital structure was not sustainable without, minimally, modifications to the terms of their debt agreements. Accordingly, the Debtors retained financial advisors to assist in discussions and negotiations with their creditors. The Debtors retained PJT on June 29, 2017 to provide financial advisory services pertaining to a refinancing or restructuring transaction. The Debtors reengaged with the Term Loan Lenders in August 2017 regarding these alternatives. F. The Special Committee, Restructuring Support Agreement, Chapter 11 Plan and Proposed DIP Financing 1. The Appointment of the Special Committees On July 26, 2017, the Boards of Managers of PESRM and NYGP (acting as general partner of NYL) each independently determined to evaluate a potential restructuring transaction. As part of this determination, the Debtors recognized potential conflicts that could result from the intercompany relationship between PESRM, NYL, and the Debtors’ other affiliates. Specifically, the Debtors’ operational challenges required an evaluation of measures to preserve liquidity at PESRM, including potential forbearance of the RTSA Payments, due from PESRM to NYL in the fall of 2017 (as described below). The Debtors determined to ensure the independence of both PESRM and NYGP at the Board level, while facilitating the ability of the Debtors’ Boards of Managers to evaluate any potential restructuring transaction. To this end, uniform written consents were proposed and signed, appointing four individuals, two at PESRM (the “PESRM Independent Directors”), and two at NYGP (the “NYGP Independent Directors,” and together with the 29 Case 18-10122 Doc 10 Filed 01/22/18 Page 40 of 97 PESRM Independent Directors, the “Independent Directors”). In connection with these appointments, the PESRM and NYGP Boards each established a special committee to review and consider potential interested party issues in connection with a potential sale, restructuring, reorganization, or other recapitalization transactions and related financings (respectively, the “PESRM Special Committee” and the “NYGP Special Committee” and, collectively, the “Special Committees”). The duties of the Independent Directors serving on the Special Committees included consulting the fellow members of their respective Boards in evaluating a restructuring transaction, participating in consultation with management and advisors, and if necessary, authorizing approval of a restructuring (subject to approval of the Debtors’ Boards of Managers). Each Special Committee retained its own separate counsel to advise PESRM and NYL, respectively. The uniform written consents approving appointment of the Independent Directors stipulated that any restructuring transaction deemed by an Independent Director as an interested party transaction—either in whole or in part—could not be approved by that Special Committee’s Board of Managers without the recommendation and approval of the Special Committee. The Debtors and their advisors consulted with and took direction from the Special Committees, which approved all amendments, modifications, and authorizations leading up to these chapter 11 cases that occurred subsequent to their appointments and were deemed to be interested party transactions. 2. Hurricane Harvey In late August of 2017, Hurricane Harvey and resulting flooding devastated the U.S. Gulf Coast. As of August 29, 2017, news sources reported that nearly twenty percent of total U.S. refining capacity was offline as a result of this flooding. Stemming from these outages, major pipelines that carry gasoline, diesel and jet fuel from the U.S. Gulf Coast to PADD I adjusted deliveries and closed lines due to these supply shocks. Hurricane Harvey’s disruptions to the refining supply chain in the U.S. Gulf Coast temporarily improved the Debtors’ liquidity in September 2017. Prior to the storm’s landfall, the 2-1-1 ICE Brent crack spread was 16.66 per barrel. Following the storm, at the height of refinery disruption, the 2-1-1 ICE Brent crack spread was 29.47 per barrel. But these benefits from Hurricane Harvey were partly offset by vendor requests for deposits following an August 2017 ratings downgrade and a one-time working capital reduction related to ACH activity. Additionally, the post-Harvey boost to crack spreads proved to be short lived with the 2-1-1 ICE Brent crack spread falling to $14.24 per barrel by the end of September 2017. 3. Continued Term Loan Lender Negotiations Into the fall of 2017, the Debtors and the Term Loan Lenders continued their efforts to reach a consensual restructuring of the Debtors’ balance sheet. More specifically, in September 2017, the Debtors delivered updated proposals to the Term Loan Lenders. The Debtors’ proposals to the Term Loan B Lenders separately included debtfor-equity exchanges and refinancing of debt obligations. In early October 2017, the Debtors received a counter proposal from the Term Loan B Lenders that contemplated a combination of an equitization proposal and a refinancing of Term Loan B Debt. These continuing negotiations involved countless hours of discussions and diligence sessions, several iterations of the various proposals sent back and forth between the parties, and a robust, arm’s length back and forth between the two sides. Negotiations with the Term Loan A Lenders focused primarily on forbearance of the RTSA Payments. Under the terms of the Rail Terminaling Services Agreement, an approximately $30 million RTSA Payment was due from PESRM to NYL on October 10, 2017. In the weeks leading up to October 10, the Debtors, along with their financial and legal advisors, engaged the Term Loan A Lenders with the goal of achieving a consensual forbearance. Eventually, the Term Loan A Lenders and the Debtors reached agreement on amendments to the Term Loan A Credit Agreement (the “Term Loan A Credit Agreement Amendment”) and the Rail Terminaling Services Agreement (the “RTSA Amendment” and together with the Term Loan A Credit Agreement Amendment, collectively the “NYL Amendments”). The NYL Amendments allowed NYL to waive all but $10.5 million of the RTSA Payment and also included options (together, the “Amendment and Forbearance Options”) to: (a) further amend the RTSA Payment to waive all but $15 million of the January 2018 payment due under the Rail Terminaling Services Agreement, and (b) extend the date on which the Term Loan A Credit Agreement is mandatorily prepayable in full to March 4, 2018 (the “Term Loan A Maturity Date”). 30 Case 18-10122 Doc 10 Filed 01/22/18 Page 41 of 97 Following the NYL Amendments, the Debtors’ business conditions failed to improve. Through early November, the Debtors and the Term Loan B Lenders continued discussions on various equitization and partial equitization proposals. Negotiations did not (at that time) result in an agreement. Given the Debtors’ financial challenges and the ongoing nature of negotiations with Term Loan B Lenders, the Debtors determined it was in their best interests to execute the Amendment and Forbearance Options, which, pursuant to the terms of the Term Loan A Credit Agreement Amendment, required that the following conditions precedent be met. First, the aggregate outstanding amount of all revolving loans under the Term Loan A Credit Agreement (such amount, the “Total Revolving Outstandings”) had to not exceed $35,000,000.00 (such condition, the “Revolver Cap”). As of November 15, 2017, the Total Revolving Outstandings were equal to $42,500,000.00. To satisfy the Revolver Cap, NYL paid $7,500,000.00 of the outstanding revolving loans (the “Revolver Paydown”), thereby reducing the Total Revolving Outstandings to $35,000,000.00. Second, by November 15, 2017, the Intermediation Agreement must have been extended to March 4, 2018, or later (the “Extension Requirement”). To satisfy the Extension Requirement, the Debtors executed an amendment that extended the Intermediation Agreement to March 4, 2018 (the “Intermediation Amendment”). Through the Intermediation Amendment, the Debtors extended their ability to purchase crude oil through approximately mid-January of 2018, as the Debtors and the Term Loan Lenders developed the path for a consensual restructuring. As collateral, the Debtors provided MLC the proceeds from the sale of $27.5 million in RINs. Finally, to effectuate the Intermediation Amendment, the Debtors also executed an amendment to the Refining ABL Credit Agreement, which among other changes, established March 4, 2018, as the scheduled maturity date (the “Refining ABL Extension”). Through the Revolver Paydown, the Intermediation Amendment, and the Refining ABL Extension, the Debtors extended the Term Loan A Maturity Date to March 4, 2018. 4. Final Lender Negotiations Unfortunately, conditions in the refining sector did not improve, and the Debtors’ financial condition continued to deteriorate. Following the NYL Amendments, Intermediation Amendment, and Refining ABL Credit Agreement Extension, the Debtors and the Term Loan Lenders continued efforts to restructure the Debtors’ balance sheet. Near the end of 2017, the financial forecasts of the Debtors’ advisors suggested that PESRM’s liquidity would completely erode by the end of January 2018. To preserve overall Debtor liquidity, and provide additional time to solidify negotiations with the Lenders and to finalize a restructuring support agreement (as detailed below) with the Term Loan Lenders and the Additional Financing Lender, in December of 2017 the Debtors entered into agreements to forbear, through January 31, 2018, on amortization payments due December 29, 2017 under the Term Loan A Credit Agreement and to allow the RTSA to be amended such that the January 2018 payment under the RTSA could be postponed, which were effectuated through an amendment to the Term Loan A Credit Agreement (the “Term Loan A Amortization Forbearance”). 5. Restructuring Support Agreement After many months of hard fought, arms’ length negotiations, the Debtors and their key stakeholders reached terms on a consensual prepackaged plan of reorganization, as reflected in the Restructuring Support Agreement executed on January 12, 2018, among the Debtors, the Parent, the Parent Parties, the Term Loan A Lenders, certain of the Term Loan B Lenders, the DIP Commitment Parties, and the Additional Financing Lender. The Restructuring Support Agreement contemplates a comprehensive reorganization, through the Plan, that will result in a substantial new capital infusion, reduction of debt service obligations, and relief from looming debt maturities, each as described herein. 6. Importance of New Capital Infusion, Reduced Debt Services Obligations, and Relief from Looming Maturities The Restructuring Support Agreement secures commitments for approximately $260 million of new capital for the Debtors. Moreover, the Restructuring Support Agreement contemplates extending the Debtors’ currently 31 Case 18-10122 Doc 10 Filed 01/22/18 Page 42 of 97 looming maturities until 2022. Accordingly, the Debtors plan to commence the chapter 11 cases to implement the balance sheet restructuring contemplated under the Restructuring Support Agreement and to put themselves in a position to execute on their business plan. Under the terms of the restructuring, a buyer entity may be formed to acquire the Debtors’ assets free and clear of the Debtors’ 2016 and 2017 RINs Liabilities. Significantly, this reorganization carries the support of: (i) the non-Debtor Parent, which has committed to provide a $65 million cash contribution in exchange for, among other things, 25% of the New Equity (subject to dilution by the Management Incentive Plan); (ii) Holders of 100% of the Term Loan A Debt who, in exchange for their Claims, will receive their pro rata share of $15 million of Cash and Tranche B of the New First Lien Term Loan Facility; and (iii) and Holders of over 90% of the Term Loan B Debt who, in exchange for their Claims, will receive their pro rata share of 100% of the New Equity in the form of the New Class A Common Stock, less the percentage of the New Equity distributed to (x) holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) Parent pursuant to Article IV.B.1, subject to dilution by the Management Incentive Plan, and $417 million of Tranche C of the New First Lien Term Loan Facility. Certain Term Loan B Lenders (the “DIP Commitment Parties”)—each of which are signatories to the Restructuring Support Agreement, which requires the parties to support the reorganization contemplated under the Plan—have also agreed to contribute a $120 million DIP-to-Exit Facility (as defined below). Moreover, the reorganization carries the support of the Additional Financing Lender, which has committed to provide a $75 million Additional Financing Facility (as defined in the Plan). General unsecured claims (“GUCs”) against the Debtors, including trade claims, will be paid in full as they come due in the ordinary course of business. This level of consensus for a comprehensive reorganization reflects the efforts undertaken by the Debtors and the parties to the Restructuring Support Agreement over recent months, but also the parties’ belief in the Debtors’ prospects as a reorganized enterprise. More importantly, the Plan leaves GUCs Unimpaired, truly minimizing any potential adverse effects to the Debtors’ businesses and trade partners as a result of the restructuring and leaving the Debtors poised to swiftly emerge from bankruptcy. 7. Proposed DIP Financing To fund the administration of these chapter 11 cases, the DIP Commitment Parties have agreed to provide debtor-in-possession financing (the “Proposed DIP Financing”) in the form of a postpetition credit facility which shall convert to the senior most tranche of a first lien facility upon emergence in accordance with the Restructuring Support Agreement (the “DIP-to-Exit Facility”). Pursuant to the terms of the DIP Facility Term Sheet, all Term Loan B Lenders had the ability to participate in the DIP-to-Exit Facility by executing the Restructuring Support Agreement and the DIP Election Joinder by January 17, 2018. Additionally, the DIP Commitment Parties committed to backstop the $120 million principal amount of the DIP-to-Exit-Facility to ensure the Debtors would have access to the full DIPto-Exit-Facility. Pursuant to the DIP Credit Agreement the Debtors have agreed to pay certain fees in connection with the extension of credit under the DIP Facility. The Debtors will pay a DIP commitment fee (the “DIP Commitment Fee”) to the DIP Commitment Parties in an amount of 5.0% of the New Equity in the form of New Class A Common Stock (as defined in the Plan), subject to dilution by the Management Incentive Plan. The Debtors will pay a conversion fee to all DIP Lenders in the amount of 2.5% of the New Equity, subject to dilution by the Management Incentive Plan. Finally, the Debtors will pay a cash fee to all the DIP Lenders upon funding of the DIP Facility equal to 2.0% of the DIP Facility, payable in Cash. The Proposed DIP Financing provides liquidity that is essential to fund the administrative cost of these chapter 11 cases and, critically, to pay suppliers and other participants in the Debtors’ supply chain in the ordinary course to ensure the continuing and uninterrupted flow of inputs to the Refining Complex that is the lifeblood of the Debtors’ businesses. Without access to the Proposed DIP Financing, the Debtors likely would need to liquidate in the near term, to the serious detriment of their stakeholders. The Debtors believe that the Proposed DIP Financing gives the Debtors sufficient liquidity to stabilize their operations and fund the administration of these chapter 11 cases as the Debtors seek to implement the restructuring contemplated by the Plan. Finally, the Debtors believe that the Proposed DIP Financing is on the most favorable terms available, presents the best—and likely only—option for the Debtors to reorganize their businesses as a going concern, 32 Case 18-10122 Doc 10 Filed 01/22/18 Page 43 of 97 was negotiated in good faith and at arm’s length, and will allow the Debtors to maximize the value of their estates for the benefit of all parties in interest. ARTICLE VI. OTHER KEY ASPECTS OF THE PLAN A. Distributions One of the key concepts under the Bankruptcy Code is that only claims and interests that are “allowed” may receive distributions under a chapter 11 plan. This term is used throughout the Plan and the descriptions below. In general, an Allowed Claim or Interest means that the Debtors agree, or if there is a dispute, the Bankruptcy Court determines, that the Claim or Interest, and the amount thereof, is in fact a valid obligation of or Interest in the Debtors. 1. Distributions on Account of Claims and Interests Allowed as of the Effective Date Except as otherwise provided herein, a Final Order, or as otherwise agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of the applicable Claim or Interest, on the first Distribution Date, the Distribution Agent shall make initial distributions under the Plan on account of Claims and Interests Allowed on or before the Effective Date; provided, however, that (1) Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice, and (2) Allowed Priority Tax Claims and Allowed Secured Tax Claims shall be paid in accordance with Article III.B.2 and Article III.B.1 of the Plan, respectively. To the extent any Allowed Priority Tax Claim is not due and owing on the Effective Date, such Claim shall be paid in full in Cash in accordance with the terms of any agreement between the Debtors and the Holder of such Claim or as may be due and payable under applicable nonbankruptcy law or in the ordinary course of business. A Distribution Date shall occur no more frequently than once in every 90 day period after the Effective Date, as necessary, in the Reorganized Debtors’ sole discretion. 2. Rights and Powers of Distribution Agent a. Powers of the Distribution Agent The Distribution Agent shall be empowered to: (a) effect all actions and execute all agreements, instruments, and other documents necessary to perform its duties under the Plan; (b) make all distributions contemplated hereby; (c) employ professionals to represent it with respect to its responsibilities; and (d) exercise such other powers as may be vested in the Distribution Agent by order of the Bankruptcy Court, pursuant to the Plan, or as deemed by the Distribution Agent to be necessary and proper to implement the provisions hereof. b. Expenses Incurred on or after the Effective Date Except as otherwise ordered by the Bankruptcy Court, the amount of any reasonable fees and expenses incurred by the Distribution Agent on or after the Effective Date (including taxes) and any reasonable compensation and expense reimbursement claims (including reasonable attorney fees and expenses) made by the Distribution Agent shall be paid in Cash by the Reorganized Debtors. 3. Special Rules for Distributions to Holders of Disputed Claims Notwithstanding any provision otherwise in the Plan and except as otherwise agreed by the relevant parties: (1) no partial payments and no partial distributions shall be made with respect to a Disputed Claim or Interest until all such disputes in connection with such Disputed Claim or Interest have been resolved by settlement or Final Order; and (2) any Entity that holds both an Allowed Claim or Interest and a Disputed Claim or Interest shall not receive any distribution on the Allowed Claim or Interest unless and until all objections to the Disputed Claim or Interest have been resolved by settlement or Final Order or the Claims or Interests have been Allowed or expunged. Any dividends or other distributions arising from property distributed to Holders of Allowed Claims or Interests, as applicable, in a Class and paid to such holders under the Plan shall also be paid, in the applicable amounts, to any Holder of a Disputed 33 Case 18-10122 Doc 10 Filed 01/22/18 Page 44 of 97 Claim or Interest, as applicable, in such Class that becomes an Allowed Claim or Interest after the date or dates that such dividends or other distributions were earlier paid to Holders of Allowed Claims or Interests in such Class. 4. Distribution Process The Distribution Agent shall make all distributions required under the Plan, except that with respect to distributions to Holders of Allowed Claims governed by a separate agreement other than the Term Loan B Credit Agreement, which shall include the DIP Facility, the Term Loan A Credit Agreement, the Intermediation Facility, and the First Loss Facility and administered by a Servicer, including the DIP Administrative Agent, the Term Loan A Agent, the Distribution Agent, the Debtor, the applicable Servicer, as applicable, shall exercise commercially reasonable efforts to implement appropriate mechanics governing such distributions in accordance with the Plan and the terms of the governing agreement. For the avoidance of doubt, in no event shall the (x) Term Loan B Agent be responsible in any respect for distributions to the Term Loan B Lenders or on account of the Term Loan B Claims and (y) Term Loan A Agent be responsible in any respect for distributions to the Term Loan A Lenders or on account of the Term Loan A Claims. Except as otherwise provided herein, and notwithstanding any authority to the contrary, distributions to Holders of Allowed Claims, including Claims that become Allowed after the Effective Date, shall be made to Holders of record or their respective designees as of three business days before the Effective Date: (a) to the address of such Holder or designee as set forth in the applicable register (or if the appropriate notice has been provided pursuant to the governing agreement in writing, on or before the date that is 10 days before the Effective Date, of a change of address or an identification of designee, to the changed address or to such designee, as applicable); or (b) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004, if no address exists in the applicable register, no Proof of Claim has been filed and the Distribution Agent has not received a written notice of a change of address on or before the date that is 10 days before the Effective Date. The Debtors, the Reorganized Debtors, and the Distribution Agent, as applicable, shall not incur any liability whatsoever on account of any distributions under the Plan. Except as otherwise provided in the Plan, Holders of Claims shall not be entitled to interest, dividends, or accruals on the distributions provided for in the Plan, regardless of whether such distributions are delivered on or at any time after the Effective Date. B. Setoffs Except as otherwise expressly provided for herein, each Reorganized Debtor, pursuant to the Bankruptcy Code (including section 553 of the Bankruptcy Code), applicable non-bankruptcy law, or as may be agreed to by the Holder of a Claim, may set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), any claims, rights, and Causes of Action of any nature that such Debtor or Reorganized Debtor, as applicable, may hold against the Holder of such Allowed Claim, to the extent such Claims, rights, or Causes of Action against such Holder have not been otherwise compromised or settled on or prior to the Effective Date (whether pursuant to the Plan or otherwise); provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim pursuant to the Plan shall constitute a waiver or release by such Reorganized Debtor of any such Claims, rights, and Causes of Action that such Reorganized Debtor may possess against such Holder. In no event shall any Holder of Claims be entitled to set off any such Claim against any Claim, right, or Cause of Action of the Debtor or Reorganized Debtor (as applicable), unless such Holder has filed a motion with the Bankruptcy Court requesting the authority to perform such setoff on or before the Confirmation Date, and notwithstanding any indication in any Proof of Claim or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 of the Bankruptcy Code or otherwise. C. Procedures for Resolving Disputed Claims and Interests 1. Disputed Claims Process Except as otherwise provided herein, if a party files a Proof of Claim and the Debtors or the Reorganized Debtors, as applicable, do not determine, and without the need for notice to or action, order, or approval of the Bankruptcy Court, that the Claim subject to such Proof of Claim is Allowed, such Claim shall be Disputed unless Allowed or disallowed by a Final Order or as otherwise set forth in Article VII of the Plan. For the avoidance of doubt, there is no requirement to file a Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed Claim under the Plan. Except as otherwise provided herein, all Proofs of Claim filed after the Effective Date shall be 34 Case 18-10122 Doc 10 Filed 01/22/18 Page 45 of 97 disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Reorganized Debtors or any further notice to or action, order, or approval of the Bankruptcy Court. 2. Claims Administration Responsibilities Except as otherwise specifically provided in the Plan, after the Effective Date, the Reorganized Debtors shall have the sole authority: (1) to file, withdraw, or litigate to judgment, objections to Claims or Interests; (2) to settle or compromise any Disputed Claim without any further notice to or action, order, or approval by the Bankruptcy Court; and (3) to administer and adjust the Claims Register to reflect any such settlements or compromises without any further notice to or action, order, or approval by the Bankruptcy Court. For the avoidance of doubt, except as otherwise provided herein, from and after the Effective Date, each Reorganized Debtor shall have and retain any and all rights and defenses such Debtor had immediately prior to the Effective Date with respect to any Disputed Claim or Interest, including the Causes of Action retained pursuant to Article IV of the Plan. 3. Adjustment to Claims Without Objection Any duplicate Claim or Interest or any Claim or Interest that has been paid, satisfied, amended, or superseded may be adjusted or expunged on the Claims Register by the Reorganized Debtors without the Reorganized Debtors having to File an application, motion, complaint, objection, or any other legal proceeding seeking to object to such Claim or Interest and without any further notice to or action, order, or approval of the Bankruptcy Court. Unless otherwise specifically provided for herein, or by any other order of the Bankruptcy Court, postpetition interest shall not accrue or be paid on Claims, and no Holder of a Claim shall be entitled to interest accruing on or after the Petition Date on any Claim or right. Additionally, and without limiting the foregoing, interest shall not accrue or be paid on any Disputed Claim with respect to the period from the Effective Date to the date a final distribution is made on account of such Disputed Claim, if and when such Disputed Claim becomes an Allowed Claim. 4. Disallowance of Claims and Interests All Claims and Interests of any Entity from which property is sought by the Debtors under sections 542, 543, 550, or 553 of the Bankruptcy Code or that the Debtors or the Reorganized Debtors allege is a transferee of a transfer that is avoidable under sections 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code shall be disallowed if: (1) the Entity, on the one hand, and the Debtors or the Reorganized Debtors, as applicable, on the other hand, agree or the Bankruptcy Court has determined by Final Order that such Entity or transferee is liable to turn over any property or monies under any of the aforementioned sections of the Bankruptcy Code; and (2) such Entity or transferee has failed to turn over such property by the date set forth in such agreement or Final Order. D. General Settlement of Claims, Interests, and Causes of Action Pursuant to section 1123 of the Bankruptcy Code and Bankruptcy Rule 9019, and in consideration for the classification, distributions, releases, and other benefits provided under the Plan, including the Parent Cash Contribution, upon the Effective Date, the provisions of the Plan shall constitute a good faith compromise and settlement of all Claims, Interests, Causes of Action, and controversies released, settled, compromised, discharged, satisfied, or otherwise resolved pursuant to the Plan, including any Causes of Action assertable against the Parent Parties. The entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval of the compromise and settlement of all such Claims, Interests, Causes of Action, and controversies, as well as a finding by the Bankruptcy Court that such compromise and settlement is in the best interests of the Debtors, their Estates, and Holders of Claims and Interests and is fair, equitable, reasonable, and in the best interests of the Debtors and their Estates. E. Restructuring Transactions On the Effective Date or as soon as reasonably practicable thereafter, the Reorganized Debtors, including the Purchaser, shall take all actions reasonably acceptable to the Parent and the Required Consenting Term Loan B Creditors and, solely to the extent adversely affecting their rights or obligations under the Plan, the Required 35 Case 18-10122 Doc 10 Filed 01/22/18 Page 46 of 97 Consenting NYL Creditors, as may be necessary or appropriate to effectuate the Restructuring Transactions, including: (1) the execution and delivery of any appropriate agreements or other documents of merger, consolidation, restructuring, conversion, disposition, transfer, formation, organization, dissolution, or liquidation containing terms that are consistent with the terms of the Plan, and that satisfy the requirements of applicable law and any other terms to which the applicable Entities may agree, including, but not limited to the documents comprising the Plan Supplement and the New Organizational Documents; (2) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, debt, or obligation on terms consistent with the terms of the Plan and having other terms for which the applicable Entities agree; (3) the execution, delivery and filing, if applicable, of appropriate certificates or articles of incorporation, formation, reincorporation, merger, consolidation, conversion, or dissolution pursuant to applicable state law, including any applicable New Organizational Documents; (4) the execution, delivery, and filing, if applicable, of the New First Lien Term Loan Documents, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility; (5) the formation of PES Inc. and, as applicable, the Reorganized Debtors; (6) the issuance and distribution of the New Membership Interests and New Common Stock; (7) any action to effectuate the termination of the Rail Terminaling Services Agreement in accordance with Article V.A of the Plan; (8) any action to effectuate the termination of the PES Advisory Agreement and PES Registration Rights Agreement; (9) any action to effectuate any necessary assignment of the PES Refining Contribution Agreement to PES Inc. or any direct or indirect subsidiary thereof, if required; and (10) all other actions that the applicable Entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable law. 1. Corporate Structure On the Effective Date, PES Inc. and the Reorganized Partnership will be reorganized into a structure in which PES Inc. will hold one New Membership Interest for each issued share of New Class A Common Stock. On the Effective Date, (1) the Reorganized Partnership shall cancel its existing membership interests and distribute 25.0% of the New Equity in the form of New Membership Interests to the Parent or the holders of existing membership interests in Parent, in accordance with the Restructuring Transactions, and Parent or the holders of existing membership interests in Parent shall subscribe for shares of New Class B Common Stock pursuant to Article IV.C.2 of the Plan, in accordance with the Restructuring Transactions, with the Reorganized Partnership being treated as a partnership continuation of Parent for U.S. federal and applicable state and local income tax purposes, and (2) each Holder of an Allowed Term Loan B Claim shall contribute such Term Loan B Claim to PES Inc. in exchange for New Class A Common Stock and PES Inc. shall exchange such Term Loan B Claims for 100% of the New Membership Interests, less the percentage of New Equity distributed to (x) Holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) Parent pursuant to clause (1). If the Required Consenting Term Loan B Creditors decide, each Holder of an Allowed Term Loan B Claim may instead exchange such claim for Membership Interests and then contribute such Membership Interests to PES Inc. for New Class A Common Stock. The Reorganized Partnership shall issue 7.5% of the New Membership Interests to PES Inc. in respect of the shares of New Class A Common Stock to be issued for the treatment of the DIP Commitment Fee and the Allowed DIP Facility Claims pursuant to Article II.B of the Plan. 2. Sale Transaction On the Effective Date, the Debtors shall consummate the Sale Transaction and, among other things, all of the Debtors’ and Parent’s assets other than the Excluded Liabilities and the Excluded Parent Cash shall be transferred to and vest in the Purchaser free and clear of all Liens, Claims, charges, or other encumbrances including the Excluded Liabilities and, unless otherwise ordered by the Bankruptcy Court by Final Order, the RIN Liabilities, pursuant to the terms of the Purchase Agreement. On and after the Effective Date, except as otherwise provided in the Plan, the Reorganized Debtors may operate their businesses and may use, acquire, or dispose of property and compromise any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. Neither the Purchaser nor any of its Affiliates shall be deemed to be a successor of the Debtors. On or before the Effective Date, the Debtors shall have the authority to terminate the Sale Transaction and pursue instead the Reorganization Transaction. If the Debtors consummate the Sale Transaction, the Debtors shall not consummate the Reorganization Transaction. 36 Case 18-10122 F. Doc 10 Filed 01/22/18 Page 47 of 97 Sources of Consideration for Plan Distributions The Reorganized Debtors shall fund distributions under the Plan from the following sources: 1. Cash on Hand The Reorganized Debtors shall use Cash on hand to fund distributions to certain Holders of Allowed Claims in accordance with Article III of the Plan. 2. Issuance of the New Membership Interests and New Class B Common Stock On the Effective Date, the Reorganized Partnership shall cancel all of its existing membership interests and, in accordance with the Restructuring Transactions, issue and distribute the New Membership Interests to Parent or the holders of Parent’s existing membership interests in accordance with Article IV.B of the Plan. Parent or holders of Parent’s existing membership interests shall subscribe for New Class B Common Stock from PES Inc., in accordance with the Restructuring Transactions. Any party that is to receive New Membership Interests and shares of New Class B Common Stock shall be a party to the New LLC Agreement and the New Stockholders Agreement and deemed to be bound to the terms of the New LLC Agreement and New Stockholders Agreement from and after the Effective Date, even if not a signatory thereto. The issuance of the New Membership Interests and New Class B Common Stock under the Plan (as well as equity awards, if any), reserved under the Management Incentive Plan, is duly authorized without the need for further corporate action and without any further action by the Debtors, the Reorganized Debtors, the Purchaser, or the Holders of Claims. The New LLC Agreement shall be effective as of the Effective Date and, as of such date, shall be deemed to be valid, binding, and enforceable in accordance with its terms, and the Reorganized Partnership, PES Inc., and each holder of New Membership Interests shall be bound thereby. 3. Issuance and Distribution of the New Class A Common Stock On the Effective Date, PES Inc. shall issue and distribute certain of the New Common Stock to fund distributions to certain Holders of Allowed Claims in accordance with Article III of the Plan. Any party that is to receive shares of New Class A Common Stock shall be a party to the New Stockholders Agreement and deemed to be bound to the terms of the New Stockholders Agreement from and after the Effective Date, even if not a signatory thereto. The issuance of New Class A Common Stock under the Plan, as well as options, or other equity awards, if any, reserved under the Management Incentive Plan, is duly authorized without the need for any further corporate action and without any further action by the Debtors or Reorganized Debtors, the Purchaser, or the Holders of Claims and the Holders of New Common Stock shall be deemed to have accepted the terms of the New Stockholders Agreement (solely in their capacity as Holders of New Equity) and to be parties thereto without further action or signature. The New Stockholders Agreement shall be effective as of the Effective Date and, as of such date, shall be deemed to be valid, binding, and enforceable in accordance with its terms, and PES Inc., the Reorganized Partnership, and each Holder of New Common Stock shall be bound thereby. 4. New First Lien Term Loan On the Effective Date, the Reorganized Debtors shall enter into the New First Lien Term Loan, the terms of which will be set forth in the New First Lien Term Loan Credit Agreement. Confirmation of the Plan shall be deemed approval of the New First Lien Term Loan Documents, as applicable, and all transactions contemplated thereby, and all actions to be taken, undertakings to be made, and obligations to be incurred by the Reorganized Debtors, in connection therewith, including the payment of all fees, indemnities, and expenses provided for therein, and authorization of the Reorganized Debtors to enter into and execute New First Lien Term Loan Documents and such other documents as may be required to effectuate the treatment afforded by the New First Lien Term Loan. On the Effective Date, all of the Liens and security interests to be granted in accordance with the New First Lien Term Loan Documents (a) shall be deemed to be granted, (b) shall be legal, binding, and enforceable Liens on, and security interests in, the collateral granted thereunder in accordance with the terms of the New First Lien Term Loan Documents, (c) shall be deemed perfected on the Effective Date, subject only to such Liens and security interests as may be permitted under the New First Lien Term Loan Documents, and (d) shall not be subject to recharacterization or equitable subordination for any purposes whatsoever and shall not constitute preferential transfers or fraudulent 37 Case 18-10122 Doc 10 Filed 01/22/18 Page 48 of 97 conveyances under the Bankruptcy Code or any applicable non-bankruptcy law. The Reorganized Debtors and the persons and entities granted such Liens and security interests shall be authorized to make all filings and recordings, and to obtain all governmental approvals and consents necessary to establish and perfect such Liens and security interests under the provisions of the applicable state, federal, or other law that would be applicable in the absence of the Plan and the Confirmation Order (it being understood that perfection shall occur automatically by virtue of the entry of the Confirmation Order and any such filings, recordings, approvals, and consents shall not be required), and will thereafter cooperate to make all other filings and recordings that otherwise would be necessary under applicable law to give notice of such Liens and security interests to third parties. 5. Parent Cash Contribution On the Effective Date, as part of the General Settlement of Claims, Interests and Causes of Action described in Article IV.A of Plan, including a settlement of any Claims, Interests and Causes of Action that may be asserted against the Parent Parties and other related Released Parties, and in consideration of the releases set forth in Articles VIII.B and VIII.C of the Plan, the Parent shall make the Parent Cash Contribution and consummate the other transactions set forth herein. In return, on the Effective Date, the Parent or holders of existing membership interests in Parent shall receive 25.0% of the New Equity, in accordance with the Restructuring Transactions, subject to dilution by the Management Incentive Plan, in the form of New Class B Common Stock and New Membership Interests. 6. Additional Financing Facility On the Effective Date, the Reorganized Debtors shall enter into the Additional Financing Facility with the Additional Financing Lender. The Additional Financing Facility shall include terms in form and substance consistent with the Additional Financing Facility Commitment Letter, attached to Plan as Annex III. G. New Intermediation Facility and New First Loss Facility On the Effective Date, the Reorganized Debtors shall enter into the New Intermediation Facility and New First Loss Facility (if any). On the Effective Date, the Intermediation Lenders shall return the RIN Sale Proceeds and any conditional collateral that may be pledged to the Intermediation Lenders to the Reorganized Debtors. H. Management Incentive Plan The New Board will be authorized to implement the Management Incentive Plan. The Management Incentive Plan shall provide for the issuance of options and/or equity based compensation, or other profit sharing arrangements, to certain members of management of PES Inc. or the Reorganized Partnership, as applicable. New Equity may be reserved for issuance in connection with the Management Incentive Plan. The participants in the Management Incentive Plan, the allocation of Management Incentive Plan compensation to participants (including the amounts allocated, the timing of grants, and the form of options and/or equity compensation allocated) and the terms and conditions of such options and equity compensation (including performance, time based vesting, exercise price, base values, hurdles, forfeiture, repurchase rights and transferability) shall either be (1) as reasonably acceptable to the Debtors and the Required Consenting Term Loan B Creditors, or (2) if no such terms are reached, be determined by the New Board in its sole discretion, it being understood and agreed that the Management Incentive Plan shall dilute all of the New Equity equally. I. Exemption from Registration Requirements The offering, issuance, and distribution of any Securities, including the New Equity, pursuant to the Plan will be exempt from the registration requirements of section 5 of the Securities Act pursuant to section 1145 of the Bankruptcy Code. Pursuant to section 1145 of the Bankruptcy Code, the New Equity issued under the Plan may be sold without registration under the Securities Act by the recipients thereof, subject to: (1) the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act and compliance with any applicable state or foreign securities laws, if any, and the rules and regulations of the SEC, if any, applicable at the time of any future transfer of such Securities or instruments; (2) any other applicable regulatory approval; and (3) the transfer restrictions set forth in the New Organizational Documents. 38 Case 18-10122 J. Doc 10 Filed 01/22/18 Page 49 of 97 Vesting of Assets The Assignee shall have all of the rights, title and interest in all of the Assumed Agreements and Permits free and clear of all Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities, under the Plan. The Assignee will be deemed to be the successor-in-interest of Parent for all of the Assumed Agreements and Permits as of the Effective Date. The Assignee shall assume only the Assumed Agreements and Permits and shall not assume any other liability or obligation of Parent (or any predecessor of Parent or any prior owner of all or part of its business and assets) of whatever nature, whether presently in existence or arising hereafter. 1. Under the Sale Transaction Under the Sale Transaction, except as otherwise provided herein, or in any agreement, instrument, or other document incorporated in the Plan, on the Effective Date, all property in each Debtor’s Estate, all Causes of Action (including Avoidance Actions), and any property acquired by any of the Debtors under the Plan, except for the Interests in the Excluded Entities, shall vest in the Reorganized Debtors, including the Purchaser, free and clear of all Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities, and neither the Purchaser nor any of its Affiliates shall have any liability for any such Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities and, unless otherwise determined by the Bankruptcy Court by Final Order, the RIN Liabilities. On and after the Effective Date, except as otherwise provided herein, the Reorganized Debtors, including the Purchaser, may operate the business of each Debtor or Reorganized Debtor, other than the Excluded Entities, as applicable, and may use, acquire, or dispose of property and pursue, compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. 2. Under the Reorganization Transaction Under the Reorganization Transaction, except as otherwise provided herein, or in any agreement, instrument, or other document incorporated in the Plan, on the Effective Date, all property in each Debtor’s Estate, all Causes of Action (including Avoidance Actions), and any property acquired by any of the Debtors under the Plan shall vest in each respective Reorganized Debtor, free and clear of all Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities and, unless otherwise determined by the Bankruptcy Court by Final Order or the Debtors, the RIN Liabilities. On and after the Effective Date, except as otherwise provided herein, each Reorganized Debtor may operate its business and may use, acquire, or dispose of property and pursue, compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. K. Cancelation of Instruments, Certificates, and Other Documents Except as otherwise provided in the Plan or any agreement, instrument, or other document incorporated in the Plan or the Plan Supplement, on the Effective Date, all notes, instruments, certificates, and other documents evidencing Claims or Interests, including the DIP Credit Agreement, the Term Loan B Documents, the Term Loan A Documents, the Refining ABL Facility, the First Loss Facility, the Intermediation Facility, and the intercompany note, dated as of December 27, 2016, between North Yard Financing, LLC and the Parent, and any other credit agreements and indentures, shall be terminated and canceled and the obligations of the Debtors thereunder or in any way related thereto shall be deemed satisfied in full and discharged; provided, that nothing in the Plan shall release any rights of the (x) Term Loan B Agent against the Term Loan B Lenders under the Term Loan B Loan Documents or (y) Term Loan A Agent against the Term Loan A Lenders under the Term Loan A Loan Documents. L. Corporate Action On the Effective Date, all actions contemplated by the Plan shall be deemed authorized and approved by the Bankruptcy Court in all respects, including, as applicable: (1) the adoption, execution, and/or filing of the New Organizational Documents; (2) the selection of the directors, managers, and officers for the Reorganized Debtors, including the appointment of the New Board; (3) the authorization, issuance, and distribution of New Membership Interests and New Equity; (4) the rejection, assumption, or assumption and assignment, as applicable, of Executory 39 Case 18-10122 Doc 10 Filed 01/22/18 Page 50 of 97 Contracts and Unexpired Leases; (5) the entry into the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility and the execution, delivery, and filing of any documents pertaining thereto, as applicable; (6) the formation of PES Inc.; (7) the implementation of the Restructuring Transactions; (8) the adoption of the Management Incentive Plan by the New Board; and (9) all other actions contemplated by the Plan (whether to occur before, on, or after the Effective Date). Upon the Effective Date, all matters provided for in the Plan involving the corporate structure of Reorganized Debtors, and any corporate, partnership, limited liability company or other governance action required by the Debtors or the other Reorganized Debtors in connection with the Plan shall be deemed to have occurred and shall be in effect, without any requirement of further action by the security Holders, members, directors, or officers of the Debtors or Reorganized Debtors, or the Purchaser, as applicable. On or, as applicable, before, the Effective Date, the appropriate directors and officers of the Debtors, PES Inc., the Reorganized Partnership, or the other Reorganized Debtors shall be (or shall be deemed to have been) authorized and (as applicable) directed to issue, execute, and deliver the agreements, documents, securities, and instruments contemplated by the Plan (or necessary or desirable to effectuate the Restructuring Transactions) in the name of and on behalf of PES Inc., the Reorganized Partnership and the other Reorganized Debtors, including the New First Lien Term Loan Documents, the New Organizational Documents and any and all other agreements, documents, Securities, and instruments relating to the foregoing, to the extent not previously authorized by the Bankruptcy Court. The authorizations and approvals contemplated by Article IV.I of the Plan shall be effective notwithstanding any requirements under non-bankruptcy law. M. Corporate Existence Except as otherwise provided in the Plan or any agreement, instrument, or other document incorporated in the Plan or the Plan Supplement, on the Effective Date, each Debtor shall continue to exist after the Effective Date as a separate corporation, limited liability company, partnership, or other form of entity, as the case may be, with all the powers of a corporation, limited liability company, partnership, or other form of entity, as the case may be, pursuant to the applicable law in the jurisdiction in which each applicable Debtor is incorporated or formed and pursuant to the respective certificate of incorporation and by-laws (or other analogous formation documents) in effect before the Effective Date, except to the extent such certificate of incorporation or bylaws (or other analogous formation documents) is amended by the Plan or otherwise, and to the extent any such document is amended, such document is deemed to be amended pursuant to the Plan and requires no further action or approval (other than any requisite filings required under applicable state or federal law). Notwithstanding the foregoing, the Debtors reserve the right to modify the Debtors’ corporate structure as of the Effective Date, including by merger or liquidation of any Reorganized Debtor or otherwise. N. New Organizational Documents On the Effective Date, or as soon thereafter as is reasonably practicable, the Reorganized Debtors’, the Reorganized Partnership’s and PES Inc.’s respective certificates of incorporation and bylaws (and other formation and constituent documents relating to limited liability companies) shall be amended as may be required to be consistent with the provisions of the Plan, the Governance Term Sheet, the New LLC Agreement, the New Stockholders Agreement, the other New Organizational Documents, the New First Lien Term Loan Documents, as applicable, and the Bankruptcy Code. The New Organizational Documents shall, among other things: (1) authorize the issuance of the New Membership Interests and the New Common Stock; and (2) pursuant to and only to the extent required by section 1123(a)(6) of the Bankruptcy Code, include a provision prohibiting the issuance of non-voting equity Securities. After the Effective Date, each Reorganized Debtor, the Reorganized Partnership and PES Inc. may amend and restate its certificate of incorporation and other formation and constituent documents as permitted by the laws of its respective jurisdiction of formation and the terms of the New LLC Agreement, the New Stockholders Agreement and the other New Organizational Documents. The New Organizational Documents shall provide that each share of the New Class A Common Stock and New Class B Common Stock will have one vote on all matters and vote together as a single class, including irrespective of Section 242(b)(2) of the Delaware General Corporation Law, unless otherwise required by applicable law. To the maximum extent permitted under applicable law, at the option of the Holders of any New Equity, such Holder may convert all or any portion of its New Equity into non-voting New Equity and, subject to any required approvals of a 40 Case 18-10122 Doc 10 Filed 01/22/18 Page 51 of 97 governmental entity, may convert any such non-voting New Equity back to voting New Equity. Any non-voting New Equity shall be deemed not to be outstanding for the purposes of any vote, approval or consent provided under the New Organizational Documents. Each share of New Class B Common Stock will be paired with one New Membership Interest and the New Class B Common Stock shall only be transferable with an equal number of New Membership Interests. In addition, transfers of the New Common Stock and New Membership Interests shall be subject to the transfer restrictions set forth in the Governance Term Sheet. Each share of New Class B Common Stock, together with a corresponding New Membership Interest, may be transferred by its Holder to the Reorganized Partnership in exchange for one share of New Class A Common Stock, pursuant to terms and conditions to be set forth in the New Organizational Documents. Any dividends or distributions or proceeds upon dissolution, liquidation or winding up of the Reorganized Partnership will be shared pro rata among the Holders of the New Membership Interests and to the extent distributed to PES Inc., to the Holders of the New Class A Common Stock pro rata. The New Class B Common Stock will not have any economic rights. Dividends, other distributions and any proceeds from the dissolution, liquidation or winding up of the Reorganized Partnership or PES Inc. shall not be declared or paid to the Holders of shares of the New Class B Common Stock. PES Inc. will be the managing member of the Reorganized Partnership and will have the sole, absolute and exclusive power to manage the Reorganized Partnership and its subsidiaries. Unless otherwise required by law, no other Holder of New Membership Interests shall have the authority to vote, approve or consent to any action involving the Reorganized Partnership and such Holder of New Membership Interests will be deemed to have approved any decision of the managing member. The New LLC Agreement will eliminate fiduciary duties to the furthest extent permitted under the Delaware Limited Liability Company Act, other than the implied covenant of good faith and fair dealing. O. Directors and Officers The New Board shall consist of: (1) two persons to be selected by CSAM, which shall be U.S. citizens; (2) two persons to be selected by Halcyon; (3) one person to be selected by the Parent; (4) one person to be selected by a majority-in-interest of the Consenting Term Loan B Creditors; and (5) the Chief Executive Officer of PES Inc. Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will, to the extent reasonably practicable, disclose in advance of the Confirmation Hearing the identity and affiliations of any Person proposed to serve on the New Boards, as well as those Persons that will serve as officers of the Reorganized Debtors or the Purchaser, as applicable. Such initial officers of the Reorganized Debtors shall be reasonably acceptable to the Required Consenting Term Loan B Creditors as required under the Restructuring Support Agreement. To the extent any such director or officer is an “insider” under the Bankruptcy Code, the nature of any compensation to be paid to such director or officer will also be disclosed. Provisions regarding the removal, appointment, and replacement of members of the New Boards will be disclosed in the New Organizational Documents. P. Employee Arrangements of the Reorganized Debtors On the Effective Date, the Debtors shall have (i) assumed each of the contracts, agreements, policies, programs and plans for compensation, bonuses, reimbursement, health care benefits, disability benefits, deferred compensation benefits, travel benefits, vacation and sick leave benefits, savings, severance benefits, retirement benefits, welfare benefits, relocation programs, life insurance and accidental death and dismemberment insurance, including written contracts, agreements, policies, programs and plans for bonuses and other incentives or compensation for the Debtors’ current and former employees, directors, officers, and managers, including executive compensation programs and existing compensation arrangements for the employees of the Debtors (but excluding any severance agreements with any of Debtors’ former employees) that are not set forth in the Schedule of Rejected Executory Contracts and Unexpired Leases; or (ii) entered into a new employee agreement on terms acceptable to the respective employee and the Reorganized Debtors, and reasonably acceptable to the Required Consenting Term Loan B Creditors; provided, that the Severance Program and employment agreements will be assumed as modified so as to clarify that the Restructuring Transactions will not constitute a “good reason” event for the purposes of the Severance Program or any employment agreement; provided, further, that it is agreed and understood that any employment agreements or arrangements that constitute a component of at will employment arrangements, are provided or determined in the Debtors’ discretion, or are subject to modification or termination by the Debtors in accordance with applicable law will remain as such with respect to the Reorganized Debtors. Except to the extent provided by Article VIII of the Plan, nothing in the Plan shall limit, diminish, or otherwise alter the Debtors’ or the Reorganized Debtors’ defenses, claims, Causes of Action, or other rights with respect to any such employment agreements. 41 Case 18-10122 Doc 10 Filed 01/22/18 Page 52 of 97 Notwithstanding the foregoing, pursuant to section 1129(a)(13) of the Bankruptcy Code, on and after the Effective Date, all retiree benefits (as that term is defined in section 1114 of the Bankruptcy Code), if any, shall continue to be paid in accordance with applicable law. Additionally, the Debtors shall assume all of their obligations under the Collective Bargaining Agreement. Such obligations shall be assumed and remain in full force and effect after the Effective Date, and shall not be modified, reduced, discharged, impaired, or otherwise affected in any way, and shall survive unimpaired and unaffected, irrespective of when such obligations arose. After the Confirmation Date, the Debtors shall be permitted to make payments to employees pursuant to employment programs then in effect, and to implement additional employee programs and make payments thereunder, without any further notice to or action, order, or approval of the Bankruptcy Court. Q. Restructuring Expenses The Restructuring Expenses incurred, or estimated to be incurred, up to and including the Effective Date shall be paid in full in Cash on the Effective Date (to the extent not previously paid during the course of the Chapter 11 Cases on the dates on which such amounts would be required to be paid under the agreements giving rise to such Restructuring Expenses) without the requirement to file a fee application with the Bankruptcy Court and without any requirement for Bankruptcy Court review or approval other than as required in the documents giving rise to such Restructuring Expenses. All Restructuring Expenses to be paid on the Effective Date shall be estimated prior to and as of the Effective Date and such estimates shall be delivered to the Debtors at least five (5) days before the anticipated Effective Date; provided, that such estimates shall not be considered to be admissions or limitations with respect to such Restructuring Expenses. On the Effective Date, final invoices for all Restructuring Expenses incurred prior to and as of the Effective Date shall be submitted to the Debtors, which invoices shall be consistent with the requirements in the documents or orders giving rise to the Restructuring Expenses. In addition, the Reorganized Debtors shall, in the ordinary course of business and without any further notice to or action, order, or approval of the Bankruptcy Court, continue to pay in Cash all post-Effective Date fees, expenses, and disbursements related to implementation, Consummation, and defense of the Plan incurred by the Restructuring Support Parties, DIP Facility Agent, Term Loan A Agent, Term Loan B Agent, or Consenting Creditors as set forth in the documents giving rise to any such Restructuring Expenses or the Plan. R. Preservation of Causes of Action Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan, including pursuant to Article VIII of the Plan, the DIP Facility Orders, or a Final Order, in accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtors shall retain and may enforce all rights to commence and pursue any and all Causes of Action, whether arising before or after the Petition Date, including any actions specifically enumerated in the Plan Supplement, and the Reorganized Debtors’ rights to commence, prosecute, or settle such Causes of Action shall be preserved notwithstanding the occurrence of the Effective Date. No Entity may rely on the absence of a specific reference in the Plan, the Plan Supplement, or the Disclosure Statement to any Cause of Action against them as any indication that the Debtors or the Reorganized Debtors will not pursue any and all available Causes of Action against them. The Debtors and the Reorganized Debtors expressly reserve all rights to prosecute any and all Causes of Action against any Entity, except as otherwise expressly provided herein. Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan, including pursuant to Article VIII of the Plan, the DIP Facility Orders, or a Final Order, the Reorganized Debtors expressly reserve all Causes of Action, for later adjudication, and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable, or otherwise), or laches, shall apply to such Causes of Action upon, after, or as a consequence of the Confirmation or Consummation. For the avoidance of doubt, in no instance will any Cause of Action preserved pursuant to Article IV.P of the Plan include any claim or Cause of Action with respect to, or against, a Released Party. In accordance with section 1123(b)(3) of the Bankruptcy Code, any Causes of Action preserved pursuant to the first paragraph of Article IV.P of the Plan, that a Debtor may hold against any Entity shall vest in the Reorganized 42 Case 18-10122 Doc 10 Filed 01/22/18 Page 53 of 97 Debtors or be transferred pursuant to the Sale Transactions. The applicable Reorganized Debtor, through its authorized agents or representatives, shall retain and may exclusively enforce any and all such Causes of Action. The Reorganized Debtors shall have the exclusive right, authority, and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw, or litigate to judgment any such Causes of Action, or to decline to do any of the foregoing, without the consent or approval of any third party or any further notice to or action, order, or approval of the Bankruptcy Court. S. Wind Down and Dissolution of the Debtors Under the Sale Transaction on and after the Effective Date, the Liquidator will implement any provision of the Plan and any applicable orders of the Bankruptcy Court, and the Liquidator shall have the power and authority to take any action necessary to wind down and dissolve the Excluded Entities. After the Effective Date, the Excluded Entities shall remain in existence for the sole purpose of dissolving. As soon as practicable after the Effective Date, the Liquidator shall: (1) cause the Excluded Entities to comply with, and abide by, the terms of the Purchase Agreement; (2) file for each of the Excluded Entities a certificate of dissolution, together with all other necessary corporate and company documents, to effect the dissolution of the Excluded Entities under the applicable laws of their state of incorporation or formation (as applicable); (3) complete and file all final or otherwise required federal, state, and local tax returns for each of the Excluded Entities, and pursuant to section 505(b) of the Bankruptcy Code, request an expedited determination of any unpaid tax liability of such Debtor or its Estate for any tax incurred during the administration of such Debtor’s Chapter 11 Case, as determined under applicable tax laws; and (4) take such other actions as the Liquidator may determine to be necessary or desirable to carry out the purposes of the Plan. The filing by the Liquidator of any Debtor’s certificate of dissolution shall be authorized and approved in all respects without further action under applicable law, regulation, order, or rule, including any action by the stockholders, members, board of directors, or board of managers of each such Debtor. T. Treatment of Executory Contracts and Unexpired Leases 1. Assumption or Rejection of Executory Contracts and Unexpired Leases Each Executory Contract and Unexpired Lease shall be deemed assumed, without the need for any further notice to or action, order, or approval of the Bankruptcy Court, as of the Effective Date under section 365 of the Bankruptcy Code, unless listed on the Schedule of Rejected Executory Contracts and Unexpired Leases; provided, however, that (i) the Rail Terminaling Services Agreement, and (ii) the PES Advisory Agreement, the PES Registration Rights Agreement and any other Parent Agreement or Parent Permit which is an Excluded Liability shall each be canceled or terminated on the Effective Date, and no rejection damages or other Claims (including any Liabilities arising from or incurred thereunder) shall arise on account of such cancelation; provided, further, that the Debtors shall assume all Executory Contracts and Unexpired Leases between the Debtors and, Sunoco Partners Marketing & Terminals L.P. or Sunoco Pipeline, L.P. The assumption of Executory Contracts and Unexpired Leases under the Plan may include the assignment of certain of such contracts to Affiliates or the Purchaser in a Sale Transaction. The Confirmation Order will constitute an order of the Bankruptcy Court approving the above-described assumptions and assignments. Except as otherwise provided in the Plan or agreed to by the Debtors, (with the consent of the Required Consenting Term Loan B Creditors (such consent not to be unreasonably withheld) and in consultation with the Required Consenting NYL Creditors) and the applicable counterparty, each assumed Executory Contract or Unexpired Lease shall include all modifications, amendments, supplements, restatements, or other agreements related thereto, and all rights related thereto, if any, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests. Modifications, amendments, supplements, and restatements to prepetition Executory Contracts and Unexpired Leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the Executory Contract or Unexpired Lease or the validity, priority, or amount of any Claims that may arise in connection therewith. 2. Claims Based on Rejection of Executory Contracts or Unexpired Leases Counterparties to Executory Contracts or Unexpired Leases listed on the Schedule of Rejected Executory Contracts and Unexpired Leases shall be served with a notice of rejection of Executory Contracts and Unexpired 43 Case 18-10122 Doc 10 Filed 01/22/18 Page 54 of 97 Leases with the Plan Supplement. Proofs of Claim with respect to Claims arising from the rejection of Executory Contracts and Unexpired Leases, if any, must be Filed with the Bankruptcy Court within 30 days after the date of the order of the Bankruptcy Court approving such rejection. Any Claims arising from the rejection of an Executory Contract or Unexpired Lease that are not Filed within such time will be automatically Disallowed, forever barred from assertion, and shall not be enforceable against, as applicable, the Debtors, the Reorganized Debtors, the Purchaser, the Estates, or property of the foregoing parties, without the need for any objection by the Debtors or Reorganized Debtors, as applicable, or further notice to, or action, order, or approval of the Bankruptcy Court or any other Entity, and any Claim arising out of the rejection of the Executory Contract or Unexpired Lease shall be deemed fully satisfied, released, and discharged, notwithstanding anything in a Proof of Claim to the contrary. Claims arising from the rejection of the Debtors’ Executory Contracts and Unexpired Leases shall be classified as General Unsecured Claims and shall be treated in accordance with Article III of the Plan. The Debtors intend to reject their contracts with Trinity Industries Leasing Company and its affiliates in the event that the Debtors and the other parties thereto are unable to reach a settlement. 3. Cure of Defaults and Objections to Cure and Assumption The Debtors or the Reorganized Debtors, as applicable, shall pay Cures, if any, on the Effective Date or as soon as reasonably practicable thereafter. Unless otherwise agreed upon in writing by the parties to the applicable Executory Contract or Unexpired Lease, all requests for payment of Cure that differ from the amounts paid or proposed to be paid by the Debtors or the Reorganized Debtors to a counterparty must be filed with the Solicitation Agent on or before 15 days after the Effective Date. Any such request that is not timely filed shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Reorganized Debtors or any other party in interest or any further notice to or action, order, or approval of the Bankruptcy Court. Any Cure shall be deemed fully satisfied, released, and discharged upon payment by the Debtors or the Reorganized Debtors of the Cure; provided, however, that nothing herein shall prevent the Reorganized Debtors from paying any Cure despite the failure of the relevant counterparty to file such request for payment of such Cure. The Reorganized Debtors also may settle any Cure without any further notice to or action, order, or approval of the Bankruptcy Court. In addition, any objection to the assumption of an Executory Contract or Unexpired Lease under the Plan must be filed with the Bankruptcy Court on or before the Confirmation Hearing. Any such objection will be scheduled to be heard by the Bankruptcy Court at the Confirmation Hearing or at the Debtors’ or Reorganized Debtors,’ as applicable, first scheduled omnibus hearing for which such objection is timely filed. Any counterparty to an Executory Contract or Unexpired Lease that fails to timely object to the proposed assumption of any Executory Contract or Unexpired Lease will be deemed to have consented to such assumption. If there is any dispute regarding any Cure, the ability of the Reorganized Debtors or any assignee to provide “adequate assurance of future performance” within the meaning of section 365 of the Bankruptcy Code, or any other matter pertaining to assumption, then payment of any Cure shall occur as soon as reasonably practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignment), or as may be agreed upon by the Debtors or the Reorganized Debtors, as applicable, and the counterparty to the Executory Contract or Unexpired Lease. The Debtors and Reorganized Debtors, as applicable, reserve the right at any time to move to reject any Executory Contract or Unexpired Lease based upon the existence of any such unresolved dispute. Assumption of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise and full payment of any applicable Cure pursuant to Article V.B of the Plan shall result in the full release and satisfaction of any Cures, Claims, or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults, arising under any assumed Executory Contract or Unexpired Lease at any time prior to the effective date of assumption. Any and all Proofs of Claim based upon Executory Contracts or Unexpired Leases that have been assumed in the Chapter 11 Cases, including pursuant to the Confirmation Order, and for which any Cure has been fully paid pursuant to Article V.B of the Plan shall be deemed disallowed and expunged as of the Effective Date without the need for any objection thereto or any further notice to or action, order, or approval of the Bankruptcy Court. 44 Case 18-10122 4. Doc 10 Filed 01/22/18 Page 55 of 97 Indemnification On and as of the Effective Date, the Indemnification Provisions will be assumed, irrevocable with respect to any claims relating to acts or omissions occurring at or prior to the Effective Date, and will survive the effectiveness of the Plan, and the New Organizational Documents will provide for the indemnification, defense, reimbursement, exculpation, and/or limitation of liability of, and advancement of fees and expenses to the Debtors’ and the Reorganized Debtors’ directors, officers, employees, or agents that were employed by, or serving on the board of directors (or similar governing body) of, any of the Debtors as of the Petition Date, to the fullest extent permitted by law and at least to the same extent as the organizational documents of each of the respective Debtors on the Petition Date, against any Claims or Causes of Action whether direct or derivative, liquidated or unliquidated, fixed or contingent, disputed or undisputed, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted, and, notwithstanding anything in the Plan to the contrary, none of the Reorganized Debtors will amend and/or restate the New Organizational Documents before or after the Effective Date to terminate or adversely affect any of the Reorganized Debtors’ obligations to provide such indemnification rights or such directors’, officers’, employees’, or agents’ indemnification rights with respect to any claims relating to acts or omissions occurring at or prior to the Effective Date. 5. Insurance Policies Notwithstanding anything in the Plan to the contrary, all of the Debtors’ insurance policies and any agreements, documents, or instruments relating thereto, including agreements of the Parent, are treated as and deemed to be Executory Contracts under the Plan. On the Effective Date, pursuant to section 365(a) of the Bankruptcy Code, the Debtors shall be deemed to have assumed all insurance policies and any agreements, documents, and instruments related thereto, including all D&O Liability Insurance Policies (including tail coverage liability insurance). Entry of the Confirmation Order will constitute the Bankruptcy Court’s approval of the Reorganized Debtors’ assumption of all such insurance policies, including the D&O Liability Insurance Policies. Notwithstanding anything to the contrary contained in the Plan, Confirmation of the Plan shall not discharge, impair, or otherwise modify any indemnity obligations assumed by the foregoing assumption of insurance policies, including the D&O Liability Insurance Policies, and each such indemnity obligation will be deemed and treated as an Executory Contract that has been assumed by the Reorganized Debtors under the Plan as to which no Proof of Claim or Cure Claim need be filed, and shall survive the Effective Date. On or before the Effective Date, the Debtors shall purchase and maintain tail coverage under the D&O Liability Insurance Policies for the six-year period following the Effective Date on terms no less favorable than under, and with an aggregate limit of liability no less than the aggregate limit of liability under, the existing D&O Liability Insurance Policies, subject to the reasonable acceptance of the Required Consenting Term Loan B Creditors. In addition to such tail coverage, the D&O Liability Insurance Policies shall remain in place in the ordinary course during the Chapter 11 Cases. 6. Contracts and Leases After the Petition Date Contracts and leases entered into after the Petition Date by any Debtor, including any Executory Contracts and Unexpired Leases assumed under section 365 of the Bankruptcy Code, will be performed by the applicable Debtor or Reorganized Debtor liable thereunder in the ordinary course of its business. Such contracts and leases that are not rejected under the Plan shall survive and remain unaffected by entry of the Confirmation Order. 7. Reservation of Rights Nothing contained in the Plan or the Plan Supplement shall constitute an admission by the Debtors or any other party that any contract or lease is in fact an Executory Contract or Unexpired Lease or that any Reorganized Debtor has any liability thereunder. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption, the Debtors or the Reorganized Debtors, as applicable, shall have 45 days following entry of a Final Order resolving such dispute to alter their treatment of such contract or lease. 45 Case 18-10122 8. Doc 10 Filed 01/22/18 Page 56 of 97 Nonoccurrence of Effective Date In the event that the Effective Date does not occur, the Bankruptcy Court shall retain jurisdiction with respect to any request to extend the deadline for assuming or rejecting Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code. U. Release, Injunction, and Related Provisions 1. Discharge of Claims and Termination of Interests Pursuant to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Debtor Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors before the Effective Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim based upon such debt or right is filed or deemed filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan. Any default or “event of default” by the Debtors or Affiliates with respect to any Claim or Interest that existed immediately before or on account of the filing of the Chapter 11 Cases shall be deemed cured (and no longer continuing) as of the Effective Date. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the Effective Date occurring. 2. Releases by the Debtors Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, and their Estates from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that the Debtors, the Reorganized Debtors, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Interest, or that any Holder of any Claim or Interest could have asserted on behalf of the Debtors, based on or relating to, or in any manner arising from, in whole or in part: a. the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, or the formulation, preparation, dissemination, negotiation, or filing of the Restructuring Support Agreement; b. any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the Restructuring Support Agreement, the Disclosure Statement, or the Plan; c. the Chapter 11 Cases, the Disclosure Statement, the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of Securities 46 Case 18-10122 Doc 10 Filed 01/22/18 Page 57 of 97 pursuant to the Plan, or the distribution of property under the Plan or any other related agreement; or d. any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth in the Plan do not release any post-Effective Date obligations of any party or Entity under the Plan, any Restructuring Transaction, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan. 3. Releases by Holders of Claims and Interests As of the Effective Date, each Releasing Party is deemed to have released and discharged each Debtor, Reorganized Debtor, and Released Party from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part: a. the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, or the formulation, preparation, dissemination, negotiation, or filing of the Restructuring Support Agreement; b. any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the Restructuring Support Agreement, the Disclosure Statement, or the Plan; c. the Chapter 11 Cases, the Disclosure Statement, the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of Securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement; or d. any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth in the Plan do not release any post-Effective Date obligations of any party or Entity under the Plan, any Restructuring Transaction, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan. 4. Exculpation Except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Cause of Action for any claim related to any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, filing, or termination of the Restructuring Support Agreement and related prepetition transactions, the Disclosure Statement, the Plan, or any Restructuring Transaction, contract, instrument, release or other agreement or document created or entered into in connection with the Disclosure Statement or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance of Securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, except for claims related to any act or omission that is determined in a final order to have constituted actual fraud, willful misconduct, or gross negligence, but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Exculpated Parties have, and upon completion of the Plan shall be deemed to have, participated in good faith and in compliance with the applicable laws with regard to the solicitation of, and distribution of, consideration pursuant to the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation 47 Case 18-10122 Doc 10 Filed 01/22/18 Page 58 of 97 of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. 5. Injunction Except as otherwise expressly provided in the Plan or for obligations issued or required to be paid pursuant to the Plan or the Confirmation Order, all Entities that have held, hold, or may hold claims or interests that have been released pursuant to the Plan, shall be discharged pursuant to the Plan, or are subject to exculpation pursuant to the Plan, are permanently enjoined, from and after the Effective Date, from taking any of the following actions against, as applicable, the Debtors, the Reorganized Debtors, the Exculpated Parties, or the Released Parties: (1) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with respect to any such claims or interests; (3) creating, perfecting, or enforcing any lien or encumbrance of any kind against such Entities or the property or the estates of such Entities on account of or in connection with or with respect to any such claims or interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or with respect to any such claims or interests unless such Entity has timely asserted such setoff right in a document filed with the Bankruptcy Court explicitly preserving such setoff, and notwithstanding an indication of a claim or interest or otherwise that such Entity asserts, has, or intends to preserve any right of setoff pursuant to applicable law or otherwise; and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests released or settled pursuant to the Plan. V. Release of Liens Except as otherwise specifically provided in the Plan, the New First Lien Term Loan Documents (including in connection with any express written amendment of any mortgage, deed of trust, Lien, pledge, or other security interest under the New First Lien Term Loan Documents), the New Intermediation Facility, the New First Loss Facility (if any), the Additional Financing Facility, or in any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan and, in the case of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of the Effective Date, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title, and interest of any Holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtors and their successors and assigns, in each case, without any further approval or order of the Bankruptcy Court and without any action or Filing being required to be made by the Debtors, or any other Holder of a Secured Claim. In addition, at the sole expense of the Debtors or the Reorganized Debtors, the Holders of Secured Claims shall execute and deliver all documents reasonably requested by the Debtors, Reorganized Debtors or administrative agent(s) for the New First Lien Term Loan Facility to evidence the release of such mortgages, deeds of trust, Liens, pledges, and other security interests and shall authorize the Reorganized Debtors and their designees to file UCC-3 termination statements and other release documentation (to the extent applicable) with respect thereto. W. Recoupment In no event shall any Holder of a Claim be entitled to recoup such Claim against any Claim, right, or Cause of Action of the Debtors or the Reorganized Debtors, as applicable, unless such Holder actually has performed such recoupment and provided notice thereof in writing to the Debtors on or before the Confirmation Date, notwithstanding any indication in any Proof of Claim or otherwise that such Holder asserts, has, or intends to preserve any right of recoupment. X. Subordination Rights Any distributions under the Plan to Holders of Claims or Interests shall be received and retained free from any obligations to hold or transfer the same to any other Holder and shall not be subject to levy, garnishment, attachment, or other legal process by any Holder by reason of claimed contractual subordination rights. On the 48 Case 18-10122 Doc 10 Filed 01/22/18 Page 59 of 97 Effective Date, any such subordination rights shall be deemed waived, and the Confirmation Order shall constitute an injunction enjoining any Entity from enforcing or attempting to enforce any contractual, legal, or equitable subordination rights to property distributed under the Plan, in each case other than as provided in the Plan; provided, that any such subordination rights shall be preserved in the event the Confirmation Order is vacated, the Effective Date does not occur in accordance with the terms hereunder or the Plan is revoked or withdrawn. Y. Modification of Plan Effective as of the date hereof and subject to the terms of the Restructuring Support Agreement: (1) the Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan before the entry of the Confirmation Order consistent with the terms set forth herein; and (2) after the entry of the Confirmation Order, the Debtors or the Reorganized Debtors, as applicable, may, upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with section 1127(b) of the Bankruptcy Code, remedy any defect or omission, or reconcile any inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan consistent with the terms set forth herein. Z. Effect of Confirmation on Modifications Entry of the Confirmation Order shall constitute approval of all modifications to the Plan occurring after the solicitation of votes thereon pursuant to section 1127(a) of the Bankruptcy Code and a finding that such modifications to the Plan do not require additional disclosure or resolicitation under Bankruptcy Rule 3019. AA. Revocation or Withdrawal of Plan The Debtors reserve the right to revoke or withdraw the Plan with respect to any or all Debtors before the Confirmation Date and to file subsequent chapter 11 plans. If the Debtors revoke or withdraw the Plan, or if Confirmation or the Effective Date does not occur, then: (1) the Plan will be null and void in all respects; (2) any settlement or compromise embodied in the Plan, assumption or rejection of Executory Contracts or Unexpired Leases effectuated by the Plan, and any document or agreement executed pursuant hereto will be null and void in all respects; and (3) nothing contained in the Plan shall (a) constitute a waiver or release of any Claims, Interests, or Causes of Action by any Entity, (b) prejudice in any manner the rights of any Debtor or any other Entity, or (c) constitute an admission, acknowledgement, offer, or undertaking of any sort by any Debtor or any other Entity. BB. Plan Supplement Exhibits After any of such documents included in the Plan Supplement are filed, copies of such documents shall be made available upon written request to the Debtors’ counsel at the address above or by downloading such exhibits and documents from the Solicitation Agent’s website at www.omnimgt.com/PhiladelphiaEnergy or the Bankruptcy Court’s website at https://www.pacer.gov/. CC. Conditions Precedent to the Effective Date It shall be a condition to the Effective Date that the following conditions shall have been satisfied or waived pursuant to Article IX.B of the Plan: 1. The Debtors shall not be in default under the DIP Facility or the DIP Facility Orders (or, to the extent that the Debtors are in default on the proposed Effective Date, such default shall have been waived by the DIP Facility Lenders or cured by the Debtors in a manner consistent with the DIP Facility and the DIP Facility Orders); 2. All conditions precedent to the effectiveness of the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility shall have been satisfied or duly waived; 49 Case 18-10122 Doc 10 Filed 01/22/18 Page 60 of 97 3. The final version of the Plan Supplement and all of the schedules, documents, and exhibits contained therein, and all other schedules, documents, supplements and exhibits to the Plan, shall have been filed and shall be in form and substance reasonably acceptable to the Required Consenting Cash Flow Creditors and the Parent as set forth in the Restructuring Support Agreement; 4. The Professional Fee Escrow Account shall have been established and funded with the Professional Fee Amount; 5. The Debtors shall have implemented the Restructuring Transactions in a manner consistent in all material respects with the Plan; 6. The New First Lien Term Loan Documents, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility shall have been executed and delivered by all of the Entities that are parties thereto, as applicable, and all conditions precedent (other than any conditions related to the occurrence of the Effective Date) to the consummation of the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility, as applicable, shall have been waived or satisfied in accordance with the terms thereof, and the closing of the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility shall each be deemed to occur concurrently with the occurrence of the Effective Date; 7. All governmental and material third party approvals and consents, including Bankruptcy Court approval, that are necessary to implement the Restructuring Transactions, in the Debtors’ discretion with the consent of the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement (such consent not to be unreasonably withheld), shall have been obtained, not be subject to unfulfilled conditions, and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent, or otherwise impose materially adverse conditions on such transactions; 8. If in accordance with the Restructuring Support Agreement, an HSR Filing is required under applicable law in connection with the consummation of the Restructuring, then HSR Approval shall have been obtained; 9. If in accordance with the Restructuring Support Agreement either (1) there is a CFIUS Investigation or (2) CFIUS requests that Parent, any of the Debtors, or the Consenting Creditors make a CFIUS Filing, then CFIUS Approval shall have been obtained; 10. All Restructuring Expenses, to the extent not otherwise paid, shall have been paid in Cash and in accordance with the documents giving rise to such Restructuring Expenses; 11. The Effective Date Milestone set forth in Section 4.01(f) of the Restructuring Support Agreement, as extended or waived in accordance with the terms thereof, shall have been met; and 12. The Assignee shall have all of the rights, title and interest in all of the Assumed Agreements and Permits and be deemed to be the successor-in-interest of Parent for all of the Assumed Agreements and Permits, and the Assignee shall not have assumed any other liability or obligation of Parent (or any predecessor of Parent or any prior owner of all or part of its business and assets) of whatever nature, whether presently in existence or arising hereafter other than the Assumed Agreements and Permits, and such other liabilities and obligations shall be retained by, and remain liabilities and obligations of, Parent from and after the Effective Date, and the Bankruptcy Court shall have found that Debtors have provided adequate notice under the Bankruptcy Code to all parties to the Assumed Agreements and Permits. 50 Case 18-10122 DD. Doc 10 Filed 01/22/18 Page 61 of 97 Waiver of Conditions Precedent The conditions to the Effective Date of the Plan set forth in Article IX of the Plan may be waived only by the consent of the Debtors, the Parent Parties (to the extent set forth in the Restructuring Support Agreement), and the Required Consenting Cash Flow Creditors, as applicable, without notice, leave, or order of the Bankruptcy Court or any formal action other than proceedings to confirm or consummate the Plan. EE. Effect of Non-Occurrence of Conditions to Consummation If the Effective Date does not occur on or before the termination of the Restructuring Support Agreement, the Plan shall be null and void in all respects and nothing contained in the Plan or the Disclosure Statement shall: (1) constitute a waiver or release of any Claims, Interests, or Causes of Action by an Entity; (2) prejudice in any manner the rights of any Debtor or any other Entity; or (3) constitute an admission, acknowledgment, offer, or undertaking of any sort by any Debtor or any other Entity; provided, that all provisions of the Restructuring Support Agreement that survive termination thereof shall remain in effect in accordance with the terms thereof. FF. Substantial Consummation “Substantial Consummation” of the Plan, as defined in 11 U.S.C. § 1101(2), shall be deemed to occur on the Effective Date. ARTICLE VII. RISK FACTORS PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN, ALL HOLDERS OF CLAIMS THAT ARE IMPAIRED SHOULD READ AND CAREFULLY CONSIDER THE FACTORS SET FORTH HEREIN, AS WELL AS ALL OTHER INFORMATION SET FORTH OR OTHERWISE REFERENCED IN THIS DISCLOSURE STATEMENT. ALTHOUGH THESE RISK FACTORS ARE MANY, THESE FACTORS SHOULD NOT BE REGARDED AS CONSTITUTING THE ONLY RISKS PRESENT IN CONNECTION WITH THE DEBTORS’ BUSINESSES OR THE PLAN AND ITS IMPLEMENTATION. A. General The following provides a summary of various important considerations and risk factors associated with the Plan; however, it is not exhaustive. In considering whether to vote to accept or reject the Plan, Holders of Claims should read and carefully consider the factors set forth below, as well as all other information set forth or otherwise referenced or incorporated by reference in this Disclosure Statement. B. Risks Relating to the Plan and Other Bankruptcy Law Considerations 1. A Claim or Interest Holder May Object to, and the Bankruptcy Court May Disagree with, the Debtors’ Classification of Claims and Interests Section 1122 of the Bankruptcy Code provides that a plan may place a claim or an equity interest in a particular class only if such claim or equity interest is substantially similar to the other claims or equity interests in such class. The Debtors believe that the classification of Claims and Interests under the Plan complies with the requirements set forth in the Bankruptcy Code because the Debtors created twelve Classes of Claims and Interests, each encompassing Claims or Interests, as applicable, that are substantially similar to the other Claims and Interests in each such Class. But a Claim or Interest Holder could challenge the Debtors’ classification. In such an event, the cost of the chapter 11 cases and the time needed to confirm the Plan may increase, and there can be no assurance that the Bankruptcy Court will agree with the Debtors’ classification. If the Bankruptcy Court concludes that the classifications of Claims and Interests under the Plan do not comply with the requirements of the Bankruptcy Code, the Debtors may need to modify the Plan (subject to the terms of the Restructuring Support Agreement). Such 51 Case 18-10122 Doc 10 Filed 01/22/18 Page 62 of 97 modification could require re-solicitation of votes on the Plan. The Plan may not be confirmed if the Bankruptcy Court determines that the Debtors’ classification of Claims and Interests is not appropriate. 2. The Debtors May Not Be Able to Satisfy the Voting Requirements for Confirmation of the Plan If votes are received in number and amount sufficient to enable the Bankruptcy Court to confirm the Plan, the Debtors may seek, as promptly as practicable thereafter, Confirmation. If the Plan does not receive the required support from Classes 7 or 8, the Debtors may elect, subject to the terms of the Restructuring Support Agreement, to amend the Plan, or proceed with liquidation. There can be no assurance that the terms of any such alternative chapter 11 plan would be similar or as favorable to the Holders of Allowed Claims as those proposed in the Plan. 3. The Bankruptcy Court May Not Confirm the Plan or May Require the Debtors to Re-Solicit Votes with Respect to the Plan The Debtors cannot assure you that the Plan will be confirmed by the Bankruptcy Court. Section 1129 of the Bankruptcy Code, which sets forth the requirements for confirmation of a plan of reorganization, requires, among other things, a finding by the Bankruptcy Court that the plan of reorganization is “feasible,” that all claims and interests have been classified in compliance with the provisions of section 1122 of the Bankruptcy Code, and that, under the plan of reorganization, each Holder of a claim or interest within each impaired class either accepts the plan of reorganization or receives or retains cash or property of a value, as of the date the plan of reorganization becomes effective, that is not less than the value such Holder would receive or retain if the debtor were liquidated under chapter 7 of the Bankruptcy Code. With respect to impaired classes of claims or interests that do not accept the plan, section 1129(b) requires that the plan be fair and equitable (including, without limitation the “absolute priority rule”) and not discriminate unfairly with respect to such classes. There can be no assurance that the Bankruptcy Court will conclude that the feasibility test and other requirements of section 1129 of the Bankruptcy Code (including, without limitation, finding that the Plan satisfies the “new value” exception to the absolute priority rule, if applicable) have been met with respect to the Plan. If and when the Plan is filed, there can be no assurance that modifications to the Plan would not be required for Confirmation, or that such modifications would not require a re-solicitation of votes on the Plan. The Bankruptcy Court could fail to approve this Disclosure Statement and determine that the votes in favor of the Plan should be disregarded. The Debtors then would be required to recommence the solicitation process, which would include re-filing a plan of reorganization and disclosure statement. Typically, this process involves a 60- to 90-day period and includes a Bankruptcy Court hearing with respect to the required approval of a disclosure statement, followed (after Bankruptcy Court approval) by solicitation of claim and interest Holder votes for the plan of reorganization, followed by a confirmation hearing at which the Bankruptcy Court will determine whether the requirements for confirmation have been satisfied, including the requisite claim and interest Holder acceptances. If the Plan is not confirmed, the chapter 11 cases may be converted into cases under chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be appointed or elected to liquidate the Debtors’ assets for distribution in accordance with the priorities established by the Bankruptcy Code. A discussion of the effects that a chapter 7 liquidation would have on the recoveries of Holders of Claims and Interests and the Debtors’ liquidation analysis are set forth under the unaudited Liquidation Analysis, attached hereto as Exhibit C. The Debtors believe that liquidation under chapter 7 of the Bankruptcy Code would result in, among other things, smaller distributions being made to creditors and interest Holders than those provided for in the Plan because of: • the likelihood that the assets would have to be sold or otherwise disposed of in a disorderly fashion over a short period of time rather than reorganizing or selling in a controlled manner affecting the business as a going concern; • additional administrative expenses involved in the appointment of a trustee; and • additional expenses and Claims, some of which would be entitled to priority, which would be generated during the liquidation and from the rejection of leases and other Executory Contracts in connection with a cessation of the Debtors’ operations. 52 Case 18-10122 4. Doc 10 Filed 01/22/18 Page 63 of 97 The Debtors May Object to the Amount or Classification of a Claim or Interest Except as otherwise provided in the Plan, the Debtors and other parties in interest reserve the right to object to the amount or classification of any Claim or Interest under the Plan. The estimates set forth in this Disclosure Statement cannot be relied on by any Holder of a Claim or Interest where such Claim or Interest is subject to an objection. Any Holder of a Claim or Interest that is subject to an objection thus may not receive its expected share of the estimated distributions described in this Disclosure Statement. 5. Even if the Debtors Receive All Necessary Acceptances for the Plan to Become Effective, the Debtors May Fail to Meet All Conditions Precedent to Effectiveness of the Plan Although the Debtors believe that the Effective Date would occur very shortly after the Confirmation Date, there can be no assurance as to such timing. The Confirmation and effectiveness of the Plan are subject to certain conditions that may or may not be satisfied. The Debtors cannot assure you that all requirements for Confirmation and effectiveness required under the Plan will be satisfied. If each condition precedent to Consummation is not met or waived, the Effective Date will not take place. In the event that the Plan is not Confirmed or is not Consummated, the Debtors may seek Confirmation of a new plan. 6. Contingencies May Affect Distributions to Holders of Allowed Claims The distributions available to Holders of Allowed Claims under the Plan can be affected by a variety of contingencies, including, without limitation, whether the Bankruptcy Court orders certain Allowed Claims to be subordinated to other Allowed Claims. The occurrence of any and all such contingencies, which could affect distributions available to Holders of Allowed Claims under the Plan, will not affect the validity of the vote taken by the Impaired Classes to accept or reject the Plan or require any sort of revote by the Impaired Classes. 7. The Bankruptcy Court May Find the Solicitation of Acceptances Inadequate Usually, votes to accept or reject a plan of reorganization are solicited after the filing of a petition commencing a chapter 11 case. Nevertheless, a debtor may solicit votes prior to the commencement of a chapter 11 case in accordance with sections 1125(g) and 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018(b). Sections 1125(g) and 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018(b) require that: • solicitation comply with applicable nonbankruptcy law; • the plan of reorganization be transmitted to substantially all creditors and other interest Holders entitled to vote; and • the time prescribed for voting is not unreasonably short. In addition, Bankruptcy Rule 3018(b) provides that a Holder of a Claim or Interest who has accepted or rejected a plan before the commencement of the case under the Bankruptcy Code will not be deemed to have accepted or rejected the plan if the court finds after notice and a hearing that the plan was not transmitted in accordance with reasonable solicitation procedures. Section 1126(b) of the Bankruptcy Code provides that a Holder of a Claim or Interest that has accepted or rejected a plan before the commencement of a case under the Bankruptcy Code is deemed to have accepted or rejected the plan if (i) the solicitation of such acceptance or rejection was in compliance with applicable nonbankruptcy law, rule or regulation governing the adequacy of disclosure in connection with such solicitation or (ii) there is no such law, rule, or regulation, and such acceptance or rejection was solicited after disclosure to such Holder of adequate information (as defined by section 1125(a) of the Bankruptcy Code). While the Debtors believe that the requirements of sections 1125(g) and 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018(b) will be met, there can be no assurance that the Bankruptcy Court will reach the same conclusion. 53 Case 18-10122 8. Doc 10 Filed 01/22/18 Page 64 of 97 There is a Risk of Termination of the Restructuring Support Agreement To the extent that events giving rise to termination of the Restructuring Support Agreement occur, the Restructuring Support Agreement may terminate prior to the Confirmation or Consummation of the Plan, which could result in the loss of support for the Plan by important creditor and other constituencies and could result in, among other things, the loss of financing commitments to consummate the Plan, the loss of use of cash collateral, the loss of access to the DIP Facility, and the loss of access to the New Intermediation Facility. Any such loss of support could adversely affect the Debtors’ chapter 11 cases and their ability to confirm and consummate the Plan. 9. The Bankruptcy Court May Dismiss Some or All of the Chapter 11 Cases Certain parties in interest may contest the Debtors’ authority to commence and/or prosecute the chapter 11 cases. If, pursuant to any such proceeding, the Bankruptcy Court finds that some or all of the Debtors could not commence the chapter 11 cases for any reason (including for cause or any grounds supporting abstention), the Debtors may be unable to consummate the transactions contemplated by the Restructuring Support Agreement and the Plan, and the Term Loan B Lenders, in their capacity as DIP Lenders, may be unwilling to proceed with their $120 million new money investment. If some or all of the chapter 11 cases are dismissed, the Debtors may be forced to cease operations due to insufficient funding and/or liquidate their businesses in another forum to the detriment of all parties in interest. 10. The United States Trustee or Other Parties May Object to the Plan on Account of the Third-Party Release Provisions Any party in interest, including the United States Trustee (the “U.S. Trustee”), could object to the Plan on the grounds that the third-party release contained in Article VIII.C of the Plan is not given consensually or in a permissible non-consensual manner. In response to such an objection, the Bankruptcy Court could determine that the third-party release is not valid under the Bankruptcy Code. If the Bankruptcy Court makes such a determination, the Plan could not be confirmed without modifying the Plan to alter or remove the third-party release. This could result in substantial delay in Confirmation of the Plan or the Plan not being confirmed at all. 11. The Debtors May Seek To Amend, Waive, Modify, or Withdraw the Plan at Any Time Prior to Confirmation The Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend the terms of the Plan or waive any conditions thereto. The potential impact of any such amendment or waiver on the Holders of Claims and Interests cannot presently be foreseen but may include a change in the economic impact of the Plan on some or all of the proposed Classes or a change in the relative rights of such Classes. All Holders of Claims and Interests will receive notice of such amendments or waivers required by applicable law and the Bankruptcy Court. If, after receiving sufficient acceptances, but prior to Confirmation of the Plan, the Debtors seek to modify the Plan, the previously solicited acceptances will be valid only if (a) all Classes of adversely affected Claims and Interests accept the modification in writing, or (b) the Bankruptcy Court determines, after notice to designated parties, that such modification was de minimis or purely technical or otherwise did not adversely change the treatment of Holders of accepting Claims and Interests or is otherwise permitted by the Bankruptcy Code. 12. The Plan May Have Material Adverse Effects on the Debtors’ Operations The solicitation of acceptances of the Plan and commencement of the chapter 11 cases could adversely affect the relationships between the Debtors and their respective customers, employees, partners, and other parties. Such adverse effects could materially impair the Debtors’ operations. 13. The Debtors May Not Be Able to Achieve Relief from RIN Liabilities The Debtors have structured the Plan as a sale of all of the Debtors’ assets to the Purchaser, and will seek a ruling from the Bankruptcy Court that the Debtors’ RIN Liabilities that accrue prior to the Effective Date do not transfer to the Purchaser pursuant to section 363(f) of the Bankruptcy Code. But there is no guarantee that the 54 Case 18-10122 Doc 10 Filed 01/22/18 Page 65 of 97 Bankruptcy Court (i) will rule on this issue prior to Confirmation of the Plan or (ii) will rule in the Debtors’ favor. The failure of the Bankruptcy Court to rule in the Debtors’ favor prior to Confirmation of the Plan would jeopardize the ability of the Purchaser to obtain relief from the Debtors’ pre-Effective Date RIN Liabilities, which would materially impair the Reorganized Debtors’ liquidity position. 14. The Debtors Cannot Predict the Amount of Time Spent in Bankruptcy for the Purpose of Implementing the Plan, and a Lengthy Bankruptcy Proceeding Could Disrupt the Debtors’ Businesses, as Well as Impair the Prospect for Reorganization on the Terms Contained in the Plan The Debtors estimate that the process of obtaining Confirmation and Consummation of the Plan by the Bankruptcy Court will last approximately 30 days from the Petition Date, but it could last considerably longer if, for example, Confirmation is contested or the conditions to Confirmation or Consummation are not satisfied or waived. Although the Plan is designed to minimize the length of the bankruptcy proceedings, it is impossible to predict with certainty the amount of time that the Debtors may spend in bankruptcy, and the Debtors cannot be certain that the Plan will be confirmed. Even if confirmed on a timely basis, a bankruptcy proceeding to confirm the Plan could itself have an adverse effect on the Debtors’ businesses. Moreover, to the extent the Debtors continue to implement the Plan as a Sale Transaction, the Purchaser and Debtors may spend a significant amount of time after Confirmation of the Plan to secure the necessary permits, consents, and contracts to operate the businesses upon emergence. This could lead to a significant delay in consummation of the Plan after Confirmation. There is a risk, due to uncertainty about the Debtors’ futures that, among other things: • customers could move to the Debtors’ competitors; • employees could be distracted from performance of their duties or more easily attracted to other career opportunities; and • suppliers, vendors, or other business partners could terminate their relationship with the Debtors or demand financial assurances or enhanced performance, any of which could impair the Debtors’ prospects. A lengthy bankruptcy proceeding also would involve additional expenses and divert the attention of management from the operation of the Debtors’ businesses. The disruption that the bankruptcy process would have on the Debtors’ businesses could increase with the length of time it takes to complete the chapter 11 cases. If the Debtors are unable to obtain Confirmation of the Plan on a timely basis, because of a challenge to the Plan or otherwise, the Debtors may be forced to operate in bankruptcy for an extended period of time while they try to develop a different plan of reorganization that can be confirmed. A protracted bankruptcy case could increase both the probability and the magnitude of the adverse effects described above. 15. Other Parties in Interest Might Be Permitted to Propose Alternative Plans of Reorganization That May Be Less Favorable to Certain of the Debtors’ Constituencies Than the Plan Other parties in interest could seek authority from the Bankruptcy Court to propose an alternative plan of reorganization to the Plan. Under the Bankruptcy Code, a debtor in possession initially has the exclusive right to propose and solicit acceptances of a plan of reorganization for a period of 120 days from the Petition Date. But such exclusivity period can be reduced or terminated upon order of the Bankruptcy Court. If such an order were to be entered, parties in interest other than the Debtors would then have the opportunity to propose alternative plans of reorganization. If another party in interest were to propose an alternative plan of reorganization following expiration or termination of the Debtors’ exclusivity period, such a plan may be less favorable to existing Holders of Claims. An alternative plan of reorganization also may not be predicated on the $120 million new money investment from certain Term Loan B Lenders, in their capacity as DIP Lenders, and the DIP Lenders’ acceptance of, among other things, 55 Case 18-10122 Doc 10 Filed 01/22/18 Page 66 of 97 Tranche A of the New First Lien Term Loan in exchange for the new money investment, which may result in less favorable treatment for a number of other constituencies. The Debtors consider maintaining relationships with their stakeholders, customers, and other partners as critical to maintaining the value of their enterprise following the Effective Date and have sought to treat those constituencies accordingly. But proponents of alternative plans of reorganization may not share the Debtors’ assessments and may seek to impair the Claims or Interests of such constituencies to a greater degree. If there were competing plans of reorganization, the chapter 11 cases likely would become longer, more complicated, more litigious, and much more expensive. If this were to occur, or if the Debtors’ stakeholders or other constituencies important to the Debtors’ business were to react adversely to an alternative plan of reorganization, the adverse consequences discussed in the foregoing sections also could occur. 16. The Debtors’ Business May Be Negatively Affected if the Debtors Are Unable to Assume Their Executory Contracts An executory contract is a contract on which performance remains due to some extent by both parties to the contract. The Debtors intend to preserve as much of the benefit of their existing Executory Contracts and Unexpired Leases as possible. But with respect to some limited classes of Executory Contracts, the Debtors may need to obtain the consent of the counterparty to maintain the benefit of the contract. If such consent is required, there is no guarantee that such consent either would be forthcoming or that conditions would not be attached to any such consent that makes assuming the contracts unattractive. The Debtors then would be required to either forego the benefits offered by such contracts or to find alternative arrangements to replace them. 17. Material Transactions Could Be Set Aside as Fraudulent Conveyances or Preferential Transfers Certain payments received by stakeholders prior to the bankruptcy filing could be challenged under applicable debtor/creditor or bankruptcy laws as either a “fraudulent conveyance” or a “preferential transfer.” A fraudulent conveyance occurs when a transfer of a debtor’s assets is made with the intent to defraud creditors or in exchange for consideration that does not represent reasonably equivalent value to the property transferred. A preferential transfer occurs upon a transfer of property of the debtor while the debtor is insolvent for the benefit of a creditor on account of an antecedent debt owed by the debtor that was made on or within 90 days before the petition date or one year before the petition date, if the creditor, at the time of such transfer, was an insider. If any transfer were challenged in the Bankruptcy Court and found to have occurred with regard to any of the Debtors’ material transactions, the Bankruptcy Court could order the recovery of all amounts received by the recipient of the transfer. 18. The Debtors May Be Unsuccessful in Obtaining First Day Orders To Permit Them to Pay Their Vendors or Continue Operating Their Businesses in the Ordinary Course of Business The Debtors have attempted to address potential concerns of their customers, vendors, and other key parties in interest that might arise from the filing of the Plan through a variety of provisions incorporated into or contemplated by the Plan, including the Debtors’ intention to seek appropriate Bankruptcy Court orders to permit the Debtors to pay their prepetition and postpetition accounts payable to parties in interest in the ordinary course. But there can be no guarantee that the Debtors will be successful in obtaining the necessary approvals of the Bankruptcy Court for such arrangements or for every party in interest the Debtors may seek to treat in this manner, and, as a result, the Debtors’ businesses might suffer. 19. The Bankruptcy Court May Not Approve the Debtors’ Use of Cash Collateral or the DIP Facility Upon commencing the chapter 11 cases, the Debtors will ask the Bankruptcy Court to authorize the Debtors to enter into postpetition financing arrangements and use cash collateral to fund the chapter 11 cases and to provide customary adequate protection to the Prepetition Secured Parties, which requests will be in accordance with the terms of the Restructuring Support Agreement. Such access to postpetition financing and cash collateral will provide liquidity during the pendency of the chapter 11 cases. There can be no assurance that the Bankruptcy Court will approve the DIP Facility and/or such use of cash collateral on the terms requested. Moreover, if the chapter 11 cases take longer than expected to conclude, the Debtors may exhaust their available cash collateral and postpetition 56 Case 18-10122 Doc 10 Filed 01/22/18 Page 67 of 97 financing. There is no assurance that the Debtors will be able to obtain an extension of the right to obtain further postpetition financing or use cash collateral, in which case, the liquidity necessary for the orderly functioning of the Debtors’ businesses may be impaired materially. 20. Certain Claims May Not Be Discharged and Could Have a Material Adverse Effect on the Debtors’ Financial Condition and Results of Operations The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. With few exceptions, all Claims that arise prior to the Petition Date or before Confirmation of the Plan (a) would be subject to compromise and/or treatment under the Plan and/or (b) would be discharged in accordance with the terms of the plan of reorganization. Any Claims not ultimately discharged through the Plan could be asserted against the applicable Reorganized Debtors and may have an adverse effect on the Reorganized Debtors’ financial condition and results of operations on a post-reorganization basis. C. Risks Relating to the Restructuring Transactions 1. The Debtors Will Be Subject to Business Uncertainties and Contractual Restrictions Prior to the Effective Date Uncertainty about the effects of the Plan on employees may have an adverse effect on the Debtors. These uncertainties may impair the Debtors’ ability to retain and motivate key personnel and could cause customers, suppliers, and others that deal with the Debtors to defer entering into contracts with the Debtors or making other decisions concerning the Debtors or seek to change existing business relationships with the Debtors. In addition, the Debtors are highly dependent on the efforts and performance of their senior management team. If key employees depart because of uncertainty about their future roles and potential complexities of the Restructuring Transactions, the Debtors’ business, financial condition, liquidity, and results of operations could be adversely affected. 2. The Support of the Restructuring Support Parties Is Subject to the Terms of the Restructuring Support Agreement Which Is Subject to Termination in Certain Circumstances Pursuant to and subject to the terms of the Restructuring Support Agreement, the Restructuring Support Parties are obligated to support the restructuring discussed above and the Plan. Nevertheless, the Restructuring Support Agreement is subject to termination upon the occurrence of certain termination events. Accordingly, the Restructuring Support Agreement may be terminated after the date of this Disclosure Statement, and such a termination would present a material risk to Confirmation and/or Consummation of the Plan because the Plan may no longer have the support of the Restructuring Support Parties. 3. There Is Inherent Uncertainty in the Debtors’ Financial Projections Such that the Reorganized Debtors May Not Be Able to Meet the Projections The Financial Projections attached hereto as Exhibit E includes projections covering the Debtors’ operations for the final nine months of each year through 2021. These projections are based on assumptions that are an integral part of the projections, including Confirmation and Consummation of the Plan in accordance with its terms, the anticipated future performance of the Debtors, industry performance, general business and economic conditions, and other matters, many of which are beyond the control of the Debtors and some or all of which may not materialize. In addition, unanticipated events and circumstances occurring after the date hereof may affect the actual financial results of the Debtors’ operations. These variations may be material and may adversely affect the value of the New Equity and the ability of the Debtors to make payments with respect to their indebtedness. Because the actual results achieved may vary from projected results, perhaps significantly, the Financial Projections should not be relied upon as a guarantee or other assurance of the actual results that will occur. Further, during the chapter 11 cases, the Debtors expect that their financial results will continue to be volatile as restructuring activities and expenses significantly impact the Debtors’ consolidated financial statements. As a result, the Debtors’ historical financial performance likely will not be indicative of their financial performance after 57 Case 18-10122 Doc 10 Filed 01/22/18 Page 68 of 97 the Petition Date. In addition, if the Debtors emerge from the chapter 11 cases, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to the Debtors’ operating plans pursuant to a plan of reorganization. The Debtors also may be required to adopt fresh start accounting, in which case their assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on the Debtors’ consolidated balance sheets. The Debtors’ financial results after the application of fresh start accounting also may be different from historical trends. Lastly, the business plan was developed by the Debtors with the assistance of their advisors. There can be no assurances that the Debtors’ business plan will not change, perhaps materially, as a result of decisions that the board of directors may make after fully evaluating the strategic direction of the Debtors and their business plan. Any deviations from the Debtors’ existing business plan would necessarily cause a deviation from the Financial Projections, and could result in materially different outcomes from those projected. 4. The Debtors Must Continue to Retain, Motivate, and Recruit Executives and Other Key Employees, Which May Be Difficult in Light of Uncertainty Regarding the Plan, and Failure To Do So Could Negatively Affect the Debtors’ Businesses For the restructuring to be successful, during the period before the Effective Date, the Debtors must continue to retain, motivate, and recruit executives and other key employees and maintain employee morale. Moreover, the Debtors must be successful at retaining and motivating key employees following the Effective Date. Employees of the Debtors may feel uncertainty about their future roles with the Debtors until, or even after, future strategies are announced or executed. The potential distractions of the restructuring may adversely affect the ability of the Debtors to retain, motivate, and recruit executives and other key employees and keep them focused on applicable strategies and goals. Additionally, the Debtors’ employees could seek employment with one of the Debtors’ competitors, which, in light of the chapter 11 cases, may seek to lure the employees at a time when such employees may be fearful about the Debtors’ future. A failure by the Debtors to attract, retain, and motivate executives and other employees during the period prior to or after the Effective Date could have a negative impact on the Debtors’ businesses. 5. Failure to Implement the Restructuring Transactions and Confirm and Consummate the Plan Could Negatively Impact the Debtors If the Restructuring Transactions are not implemented, the Debtors may consider other restructuring alternatives available at that time, subject to the Restructuring Support Agreement, which may include the filing of an alternative chapter 11 plan, conversion to chapter 7, or any other transaction that would maximize value of the Debtors’ estates. Any alternative restructuring proposal may be on terms less favorable to Holders of Claims and Interests in the Debtors than the terms of the Plan as described herein. Any material delay in Confirmation of the Plan, or the chapter 11 cases, or the threat of rejection of the Plan by the Bankruptcy Court, would add substantial expense and uncertainty to the process. If the Plan is not Confirmed and Consummated, the ongoing businesses of the Debtors may be adversely affected and there may be various consequences, including: • the adverse impact to the Debtors’ businesses caused by the failure to pursue other beneficial opportunities due to the focus on the restructuring, without realizing any of the anticipated benefits of the restructuring; • the incurrence of substantial costs by the Debtors in connection with the restructuring, without realizing any of the anticipated benefits of the restructuring; • the possibility, for the Debtors, of being unable to repay indebtedness when due and payable; and 58 Case 18-10122 Doc 10 Filed 01/22/18 Page 69 of 97 • the Debtors pursuing traditional chapter 11 or chapter 7 proceedings, resulting in recoveries for creditors and interest Holders that are less than contemplated under the Plan, or resulting in no recovery for certain creditors and interest Holders. 6. Even if the Restructuring Transactions are Successfully Consummated, the Debtors Will Continue to Face Risks The Restructuring Transactions are generally designed to reduce the amount of the Debtors’ cash interest expense and improve the Debtors’ liquidity and financial and operational flexibility to generate long-term growth. Even if the Restructuring Transactions are implemented, the Debtors will continue to face a number of risks, including certain risks that are beyond the Debtors’ control, such as changes in economic conditions, changes in the Debtors’ industry, and changes in commodity prices. As a result of these risks and others, there is no guarantee that the Restructuring Transactions will achieve the Debtors’ stated goals. D. Risks Relating to the New Equity 1. The Debtors May Not Be Able to Achieve Their Projected Financial Results The Debtors may not be able to meet their projected financial results or achieve the revenue or cash flow that the Debtors have assumed in projecting their future business prospects. If the Debtors do not achieve these projected revenue or cash flow levels, the Debtors may lack sufficient liquidity to continue operating as planned after emergence. The financial projections represent management’s view based on currently known facts and hypothetical assumptions about their future operations. They do not guarantee the Debtors’ future financial performance. 2. The Plan Exchanges Senior Indebtedness for Junior Securities If the Plan is confirmed and consummated, the DIP Commitment Parties, the Holders of Allowed DIP Facility Claims, the Holders of Allowed Term Loan B Claims, and the Parent will receive the New Equity, as applicable. Thus, in agreeing to the Plan, certain of such Holders will be consenting to the exchange a portion of their interests in senior debt, which has, among other things, a stated interest rate, a maturity date, and a liquidation preference over equity Securities, for the New Equity, which are equity Securities that will be subordinate to all future creditor Claims. 3. A Liquid Trading Market for the New Equity May Not Develop The Debtors make no assurance that liquid trading markets for the New Equity will develop. The New Equity will not be listed on any securities exchange. The liquidity of any market for the New Equity will depend, among other things, upon the number of Holders of New Equity, the Reorganized Debtors’ financial performance, and the market for similar Securities, none of which can be determined or predicted. Therefore, the Debtors cannot assure that an active trading market will develop, nor can any assurance be given as to the liquidity or prices at which such securities might be traded. 4. Holders of the New Equity May Be Restricted in their Ability to Transfer or Sell their Securities The New Equity shall be subject to transfer restrictions set forth in the New Organizational Documents and described in the Governance Term Sheet, including tag-along and drag-along rights. For more information, see the Governance Term Sheet attached as Annex I to the Plan. The New Equity shall be issued under the Plan subject to the exemption from registration provided by section 1145(a)(1) of the Bankruptcy Code, and the New Equity may be resold by the holders thereof without registration under the Securities Act unless the holder is an “underwriter,” as defined in section 1145(b) of the Bankruptcy Code. Resales by Holders of Claims or Interests who receive New Equity pursuant to the Plan that are deemed to be “underwriters” would not be exempted by section 1145 of the Bankruptcy Code from the registration requirements under the Securities Act or from applicable state Blue Sky Laws. Such holders would only be permitted to sell such securities without registration if they are able to comply with an applicable exemption from registration, 59 Case 18-10122 Doc 10 Filed 01/22/18 Page 70 of 97 including Rule 144 under the Securities Act. The Debtors make no representation regarding the right of any holder of New Equity to freely resell such New Equity. See Article IX, entitled “Important Securities Law Disclosure.” 5. The Debtors May Be Controlled by Significant Holders If the Plan is Confirmed and Consummated, the DIP Commitment Parties, the Holders of Allowed DIP Facility Claims, the Holders of Allowed Term Loan B Claims, and the Parent will receive the New Equity, as applicable. The Holders of Term Loan B and/or DIP Claims (including on account of the DIP Commitment Fee), on the one hand, and the Parent, on the other hand, will own approximately 75% and 25% of the New Equity (in each case, subject to dilution by the Management Incentive Plan), respectively. As a result, the Holders of Allowed DIP Facility Claims, Holders of Allowed Term Loan B Claims, the DIP Commitment Parties, the Parent, and any other Holders of Claims who receive distributions representing a substantial percentage of the New Equity may be in a position to influence matters requiring approval by the holders of New Equity including, among other things, the election of directors and the approval of a change of control of the Reorganized Debtors. As described in further detail in the Governance Term Sheet, certain parties will have continuing rights to designate directors to the board of directors of the Reorganized Debtors, subject to certain New Equity ownership thresholds. In addition, certain parties will also have consent rights over certain related party transactions, subject to certain New Equity ownership thresholds. The holders of a majority of outstanding New Common Stock shall be required to approve certain corporate actions and significant holders of New Equity could be in a position to control the outcome of actions requiring stockholder approval. In addition, the holders of the outstanding New Common Stock who approve certain sale transactions relating to the Reorganized Debtors can require all holders of the New Equity to sell their New Equity on the same terms and the same per-interest consideration as such holders approving a sale transaction. If required in connection with a sale transaction, all holders of New Equity can be required to vote in favor of such transaction and waive all appraisal or dissenter rights in connection therewith, as more fully set forth in the Governance Term Sheet. Significant holders of New Equity may have interests that differ from those of the other holders of New Equity and may vote in a manner adverse to the interests of other holders of New Equity. The concentration of ownership may facilitate or may delay, prevent, or deter a change of control of the Reorganized Debtors and consequently impact the value of the New Equity. In addition, one or more of these significant holders of New Equity may sell all or a large portion of its New Equity within a short period of time, which sale may adversely affect the value of the New Equity. One or more of the significant holders of New Equity, may, on its own account, pursue acquisition opportunities that may be complementary to the Reorganized Debtors’ businesses and, as a result, such acquisition opportunities may be unavailable to the Reorganized Debtors. Such actions by significant holders of the New Equity may have a material adverse impact on the Reorganized Debtors’ businesses, financial condition, and operating results. 6. The Debtors’ Financial Projections Are Subject to Inherent Uncertainty Due to the Numerous Assumptions Upon Which They Are Based The Debtors’ financial projections are based on numerous assumptions including: timely Confirmation and Consummation pursuant to the terms of the Plan; the anticipated future performance of the Debtors; industry performance; general business and economic conditions; and other matters, many of which are beyond the control of the Debtors and some or all of which may not materialize. In addition, unanticipated events and circumstances occurring subsequent to the date of this Disclosure Statement or subsequent to the date that the Disclosure Statement is approved by the Bankruptcy Court may affect the actual financial results of the Debtors’ operations. These variations may be material and may adversely affect the ability of the Debtors to make payments with respect to indebtedness following Consummation. Because the actual results achieved throughout the periods covered by the projections may vary from the projected results, the projections should not be relied upon as an assurance of the actual results that will occur. Except with respect to the projections and except as otherwise specifically and expressly stated, the Disclosure Statement does not reflect any events that may occur subsequent to the date of the Disclosure Statement. Such events may have a material impact on the information contained in the Disclosure Statement. The Debtors do not intend to update the projections and therefore the projections will not reflect the impact of any subsequent events not already accounted for in the assumptions underlying the projections. 60 Case 18-10122 E. Doc 10 Filed 01/22/18 Page 71 of 97 Risks Relating to the Debtors’ Business 1. The Debtors May Not Be Able to Generate Sufficient Cash to Service All of Their Indebtedness The Debtors’ ability to make scheduled payments on, or refinance their debt obligations, depends on the Debtors’ financial condition and operating performance, which are subject to prevailing economic, industry, and competitive conditions and to certain financial, business, legislative, regulatory, and other factors beyond the Debtors’ control. The Debtors may be unable to maintain a level of cash flow from operating activities sufficient to permit the Debtors to pay the principal, premium, if any, and interest on their indebtedness, including, without limitation, borrowings in connection with emergence. 2. The Debtors’ Substantial Liquidity Needs May Impact Revenue The Debtors’ principal sources of liquidity historically have been cash flow from operations and borrowings under their prepetition credit facilities. If the Debtors’ cash flow from operations decreases, the Debtors’ ability to expend the capital necessary to meet their payment obligations, comply with certain deadlines related to environmental regulations and standards or pursue their business strategies to maintain their reliability and efficiency will be severely strained. The Debtors face uncertainty regarding the adequacy of their liquidity and capital resources and have extremely limited, if any, access to additional financing. In addition to the cash necessary to fund ongoing operations, the Debtors have incurred significant professional fees and other costs in connection with preparing for the chapter 11 cases and expect to continue to incur significant professional fees and costs throughout the chapter 11 cases. The Debtors cannot guarantee that cash on hand, cash flow from operations, and cash provided by the DIP Facility will be sufficient to continue to fund their operations and allow the Debtors to satisfy obligations related to the chapter 11 cases until the Debtors are able to emerge from bankruptcy protection. The Debtors’ liquidity, including the ability to meet ongoing operational obligations, will be dependent upon, among other things: (a) their ability to comply with the terms and condition of any debtor-in-possession financing and/or cash collateral order entered by the Bankruptcy Court in connection with the chapter 11 cases; (b) their ability to maintain adequate cash on hand; (c) their ability to generate cash flow from operations; (d) their ability to develop, confirm, and consummate a chapter 11 plan or other alternative restructuring transaction; (e) the availability of incremental draws under the DIP Facility; and (f) the cost, duration, and outcome of the chapter 11 cases. The Debtors’ ability to maintain adequate liquidity depends, in part, upon industry conditions and general economic, financial, competitive, regulatory, and other factors beyond the Debtors’ control. In the event that cash on hand, cash flow from operations, and cash provided under the DIP Facility are not sufficient to meet the Debtors’ liquidity needs, the Debtors may be required to seek additional financing. The Debtors can provide no assurance that additional financing would be available or, if available, offered to the Debtors on acceptable terms. The Debtors’ access to additional financing is, and for the foreseeable future likely will continue to be, extremely limited if it is available at all. In addition, the Debtors’ ability to consummate the Plan is dependent on, among other things, their ability to satisfy the conditions precedent to the New First Lien Term Loan. The Debtors can provide no assurance that such conditions will be satisfied. The Debtors’ long-term liquidity requirements and the adequacy of their capital resources are difficult to predict at this time. 3. The Price Volatility of Crude Oil, Other Feedstocks, Refined Products, and Fuel and Utility Services May Have a Material Adverse Effect on Debtors’ Financial Condition, Results of Operation, and Cash Flows The Debtors’ earnings, cash flow and liquidity from their refining operations depend primarily on the margin above operating expenses (including, but not limited to, the cost of refinery feedstocks, such as crude oil and natural gas liquids that are processed and blended into refined products, as well as regulatory compliance costs such as the costs of generating and/or obtaining RINs) at which Debtors are able to sell refined products. Refining is primarily a margin-based business and, to increase earnings, it is important to maximize the yields of high-value finished products while minimizing the costs of feedstock and operating expenses. When the margin between refined product prices and crude oil and other feedstock costs narrows, Debtors’ earnings and cash flows are negatively affected. Refining margins historically have been volatile, and are likely to continue to be volatile, as a result of a variety of factors, 61 Case 18-10122 Doc 10 Filed 01/22/18 Page 72 of 97 including fluctuations in the prices of crude oil, other feedstocks, refined products and fuel and utility services. While an increase or decrease in the price of crude oil may result in a similar increase or decrease in prices for refined products, there may be a time lag in the realization of the similar increase or decrease in prices for refined products. The effect of changes in crude oil prices on Debtors’ refining margins therefore depends in part on how quickly and how fully refined product prices adjust to reflect these changes. Prices of crude oil, other feedstocks and refined products depend on numerous factors beyond Debtors’ control, including the supply of and demand for crude oil, other feedstocks, gasoline, diesel, fuel oil and other refined products. Such supply and demand are affected by, among other things, worldwide changes in economic conditions; the level of foreign and domestic production of crude oil and refined products and the volume of crude oil, feedstock and refined products imported into and exported from the United States; demand for fuel products; political conditions; natural disasters; and federal and state government regulations and taxes. The Debtors’ direct operating expenses structure also impacts the Debtors’ earnings. The Debtors’ major direct operating expenses include employee and contract labor, maintenance, chemicals and catalysts and energy costs. The Debtors’ predominant variable direct operating cost is energy, which is comprised primarily of fuel and other utility services. The volatility in costs of fuel, principally natural gas and other utility services, principally electricity, used by the Refining Complex and the Debtors’ other operations affect their operating costs. Fuel and utility prices have been, and will continue to be, affected by factors outside Debtors’ control, such as supply and demand for fuel and utility services in both local and regional markets. Natural gas prices have historically been volatile and, typically, electricity prices fluctuate with natural gas prices. Future increases in fuel and utility prices may have a negative effect on Debtors’ refining margins, earnings and cash flows. Volatility in refined product prices may also affect the Debtors negatively. A decline in prices of Debtors’ refined products will reduce the value of their refined product inventory collateral, if any, or accounts receivable collateral which, in turn, may reduce the Debtors’ borrowing base. There can be no assurances as to the future price volatility of crude oil, other feedstocks, refined products, and fuel and utility services or future conditions in the field of domestic and global energy. 4. Disruption of Refining’s Ability to Obtain an Adequate Supply of Crude Oil Could Reduce the Debtors’ Liquidity and Increase Their Costs All of the Debtors’ crude oil requirements are sourced from production in the Bakken shale in North Dakota, the United States Gulf Coast and midcontinent, West Africa and from other foreign sources. The amount of foreign crude oil purchased by the Debtors is dependent on market and operating conditions and will vary from quarter to quarter. The Debtors are subject to the political, geographic and economic risks attendant to doing business with foreign suppliers. Disruption of production in or transportation from, any of these regions for an extended period for any reason could have a material impact on the Debtors’ financial condition, results of operations and cash flows. The Debtors source a substantial amount of crude oil from the Bakken shale and, as a result, the Debtors may be disproportionately exposed to the impact of delays or interruptions of supply from that region. In the event that one or more of the Debtors’ traditional sources of crude oil supply becomes unavailable, the Debtors may not be able to replace it or may be able to do so only at significantly higher prices. In either case, the Debtors’ refining margins would be lower, which could adversely affect their financial condition, results of operations, and cash flows. 5. Volatility in the Secondary RIN Market To the extent the Debtors’ are unable to blend the required number of biofuels to satisfy their obligations, the Debtors must purchase RINs on the open market to avoid penalties and fines. The cost of RINs is highly volatile and the Debtors may not be able to purchase the RINs they need to remain in compliance with applicable law. 6. Acquisitions of Companies, Products, or Technologies, or Internal Restructuring and Cost Savings Initiatives May Disrupt the Debtors’ Ongoing Businesses The Debtors have acquired and may continue to acquire companies, products, and technologies that complement their strategic direction. Acquisitions involve significant risks and uncertainties, including: 62 Case 18-10122 Doc 10 Filed 01/22/18 Page 73 of 97 • inability to successfully integrate the acquired technology and operations into the Debtors’ business and maintain uniform standards, controls, policies, and procedures; • inability to realize synergies expected to result from an acquisition; • challenges retaining the key employees, customers, resellers and other business partners of the acquired operation; and • the internal control environment of an acquired entity may not be consistent with the Debtors’ standards and may require significant time and resources to improve. Acquisitions and divestitures are inherently risky. The Debtors’ transactions may not be successful and may, in some cases, harm operating results or their financial condition. In addition, if the Debtors use debt to fund acquisitions or for other purposes, their interest expense and leverage may significantly increase. If the Debtors issue equity Securities as consideration in an acquisition, current shareholders’ percentage ownership and earnings per share may be diluted. In addition, from time to time, the Debtors may undertake internal restructurings and other initiatives intended to reduce expenses. These initiatives may not lead to the benefits the Debtors expect, may be disruptive to the Debtors’ personnel and operations, and may require substantial management time and attention. Moreover, the Debtors could encounter delays in executing their plans, which could entail further disruption and associated costs. If these disruptions result in a decline in productivity of the Debtors’ personnel, negative impacts on operations, or if they experience unanticipated expenses associated with these initiatives, the Debtors’ business and operating results may be harmed. 7. The Reorganized Debtors May Be Adversely Affected by Potential Litigation, Including Litigation Arising Out of the Chapter 11 Cases In the future, the Debtors may become a party to litigation. In general, litigation can be expensive and time consuming to bring or defend against. Such litigation could result in settlements or damages that could significantly affect the Debtors’ financial results. It is also possible that certain parties will commence litigation with respect to the treatment of their Claims under the Plan. It is not possible to predict the potential litigation that the Debtors may become party to, nor the final resolution of such litigation. The impact of any such litigation on the Reorganized Debtors’ businesses and financial stability could be material. F. Certain Tax Implications of the Chapter 11 Cases The DIP Commitment Parties, the Holders of Allowed DIP Facility Claims, the Holders of Allowed Term Loan B Claims, and the Parent should carefully review Article X of this Disclosure Statement, “Certain U.S. Federal Income Tax Consequences,” to determine how the tax implications of the Plan and the chapter 11 cases may adversely affect the Reorganized Debtors and Holders of Claims, and the Parent. G. Disclosure Statement Disclaimer 1. Information Contained Herein Is Solely for Soliciting Votes The information contained in this Disclosure Statement is for the purpose of soliciting acceptances of the Plan and may not be relied upon for any other purpose. Specifically, this Disclosure Statement is not legal advice to any Person or Entity. The contents of this Disclosure Statement should not be construed as legal, business, or tax advice. Each reader should consult its own legal counsel and accountant with regard to any legal, tax, and other matters concerning its Claim or Interest. This Disclosure Statement may not be relied upon for any purpose other than to determine how to vote to accept or reject the Plan and whether to object to Confirmation. 63 Case 18-10122 2. Doc 10 Filed 01/22/18 Page 74 of 97 Disclosure Statement May Contain Forward-Looking Statements This Disclosure Statement may contain “forward-looking statements.” Such statements consist of any statement other than a recitation of historical fact and can be identified by the use of forward-looking terminology such as “may,” “expect,” “anticipate,” “estimate,” or “continue,” the negative thereof, or other variations thereon or comparable terminology. The Debtors consider all statements regarding anticipated or future matters, including the following, to be forward-looking statements: • business strategy; • technology; • financial condition, revenues, cash flows, and expenses; • levels of indebtedness, liquidity, and compliance with debt covenants; • financial strategy, budget, projections, and operating results; • refined product prices and the overall health of the refined products industry; • the amount, nature, and timing of capital expenditures, including future development costs; • availability and terms of capital; • successful results from the Debtors’ operations; • the integration and benefits of asset and property acquisitions or the effects of asset and property acquisitions or dispositions on the Debtors’ cash position and levels of indebtedness; • costs of conducting the Debtors’ operations; • general economic and business conditions; • effectiveness of the Debtors’ risk management activities; • environmental liabilities; • counterparty credit risk; • the outcome of pending and future litigation; • governmental regulation and taxation of the refined products industry; • developments in supplier countries; • uncertainty regarding the Debtors’ future operating results; • plans, objectives, and expectations; • variations in the market demand for, and prices of, refined products; 64 Case 18-10122 Doc 10 Filed 01/22/18 Page 75 of 97 • the adequacy of the Debtors’ capital resources and liquidity; • access to capital and general economic and business conditions; • risks in connection with acquisitions; • the potential adoption of new governmental regulations impacting the Debtors’ businesses; and • the Debtors’ ability to satisfy future cash obligations and environmental costs. Statements concerning these and other matters are not guarantees of the Debtors’ future performance. The reader is cautioned that all forward-looking statements are necessarily speculative. The Valuation Analysis, the Liquidation Analysis, the recovery projections, and other information contained herein and attached hereto are estimates only, and the timing and amount of actual distributions to Holders of Allowed Claims and Interests may be affected by many factors that cannot be predicted. Forward-looking statements represent the Debtors’ estimates and assumptions only as of the date such statements were made. There are risks, uncertainties, and other important factors that could cause the Debtors’ actual performance or achievements to be materially different from those they may project, and the Debtors undertake no obligation to update any such statement. 3. No Legal, Business, or Tax Advice Is Provided to You by This Disclosure Statement THIS DISCLOSURE STATEMENT IS NOT LEGAL, BUSINESS, OR TAX ADVICE TO YOU. The contents of this Disclosure Statement should not be construed as legal, business, or tax advice. Each Holder of a Claim or Interest should consult his or her own legal counsel and accountant with regard to any legal, tax, and other matters concerning his or her Claim or Interest. This Disclosure Statement may not be relied upon for any purpose other than to determine how to vote on the Plan or object to Confirmation. 4. No Admissions Made The information and statements contained in this Disclosure Statement will neither (1) constitute an admission of any fact or liability by any entity (including the Debtors) nor (2) be deemed evidence of the tax or other legal effects of the Plan on the Debtors, Holders of Allowed Claims or Interests, or any other parties-in-interest. 5. Failure to Identify Litigation Claims or Projected Objections No reliance should be placed on the fact that a particular litigation Claim or projected objection to a particular Claim or Interest is, or is not, identified in this Disclosure Statement. All parties, including the Debtors, reserve the right to continue to investigate Claims and Interests and file and prosecute objections to Claims and Interests. 6. No Waiver of Right to Object or Right to Recover Transfers and Assets Except as otherwise provided in the Plan, the vote by a Holder of an Allowed Claim or Interest for or against the Plan does not constitute a waiver or release of any Claims or rights of the Debtors to object to that Holder’s Allowed Claim or Interest, or to bring Causes of Action or recover any preferential, fraudulent, or other voidable transfer of assets, regardless of whether any Claims or Causes of Action of the Debtors or their respective Estates are specifically or generally identified in the Plan. 7. Information Was Provided by the Debtors and Was Relied Upon by the Debtors’ Advisors Counsel to and other advisors retained by the Debtors have relied upon information provided by the Debtors in connection with the preparation of this Disclosure Statement. Although counsel to and other advisors retained by the Debtors have performed certain limited due diligence in connection with the preparation of this Disclosure Statement, they have not independently verified the information contained herein. 65 Case 18-10122 8. Doc 10 Filed 01/22/18 Page 76 of 97 The Potential Exists for Inaccuracies and the Debtors Have No Duty to Update The Debtors make the statements contained in this Disclosure Statement as of the date hereof, unless otherwise specified herein, and the delivery of this Disclosure Statement after that date does not imply that there has not been a change in the information set forth herein since such date. Although the Debtors have used their reasonable business judgment to ensure the accuracy of all of the information provided in this Disclosure Statement and in the Plan, the Debtors nonetheless cannot, and do not, confirm the current accuracy of all statements appearing in this Disclosure Statement. Further, although the Debtors may subsequently update the information in this Disclosure Statement, the Debtors have no affirmative duty to do so unless ordered by the Bankruptcy Court. 9. No Representations Outside of the Disclosure Statement Are Authorized No representations concerning or relating to the Debtors, the chapter 11 cases, or the Plan are authorized by the Bankruptcy Court or the Bankruptcy Code, other than as set forth in this Disclosure Statement. In deciding whether to vote to accept or reject the Plan, you should not rely upon any representations or inducements made to secure your acceptance or rejection of the Plan that are other than as contained in, or included with, this Disclosure Statement, unless otherwise indicated herein. You should promptly report unauthorized representations or inducements to the counsel to the Debtors and the U.S. Trustee. ARTICLE VIII. CONFIRMATION PROCEDURES The following is a brief summary of the Confirmation process. Holders of Claims and Interests are encouraged to review the relevant provisions of the Bankruptcy Code and to consult with their own advisors. A. The Confirmation Hearing Under section 1128(a) of the Bankruptcy Code, the Bankruptcy Court, after notice, may hold a hearing to confirm a plan of reorganization. On the Petition Date, the Debtors will file a motion requesting that the Bankruptcy Court set a date and time within approximately 30 days after the Petition Date for the Confirmation Hearing. In this case, the Debtors will also request that the Bankruptcy Court approve this Disclosure Statement at the Confirmation Hearing. The Confirmation Hearing, once set, may be continued from time to time without further notice other than an adjournment announced in open court or a notice of adjournment filed with the Bankruptcy Court and served in accordance with the Bankruptcy Rules, without further notice to parties in interest. The Bankruptcy Court, in its discretion and prior to the Confirmation Hearing, may put in place additional procedures governing the Confirmation Hearing. Subject to section 1127 of the Bankruptcy Code, the Plan may be modified, if necessary, prior to, during, or as a result of the Confirmation Hearing, without further notice to parties in interest. Additionally, section 1128(b) of the Bankruptcy Code provides that a party in interest may object to Confirmation. The Debtors, in the same motion requesting a date for the Confirmation Hearing, will request that the Bankruptcy Court set a date and time for parties in interest to file objections to Confirmation of the Plan. An objection to Confirmation of the Plan must be filed with the Bankruptcy Court and served on the Debtors and certain other parties in interest in accordance with the applicable order of the Bankruptcy Court so that it is actually received on or before the deadline to file such objections as set forth therein. B. Confirmation Standards Among the requirements for Confirmation are that the Plan: (a) is accepted by all Impaired Classes of Claims and Interests or, if rejected by an Impaired Class, that the Plan “does not discriminate unfairly” and is “fair and equitable” as to such Class; (b) is feasible; and (c) is in the “best interests” of Holders of Claims and Interests that are Impaired under the Plan. The following requirements must be satisfied pursuant to section 1129(a) of the Bankruptcy Code before a bankruptcy court may confirm a plan of reorganization. The Debtors believe that the Plan fully complies with all the 66 Case 18-10122 Doc 10 Filed 01/22/18 Page 77 of 97 applicable requirements of section 1129 of the Bankruptcy Code set forth below, other than those pertaining to voting, which has not yet taken place. • The Plan complies with the applicable provisions of the Bankruptcy Code. • The Debtors (or any other proponent of the Plan) have complied with the applicable provisions of the Bankruptcy Code. • The Plan has been proposed in good faith and not by any means forbidden by law. • Any payment made or to be made by the Debtors (or any other proponent of the Plan) or by a Person issuing Securities or acquiring property under the Plan, for services or for costs and expenses in or in connection with the chapter 11 cases, in connection with the Plan and incident to the chapter 11 cases is subject to the approval of the Bankruptcy Court as reasonable. • The Debtors (or any other proponent of the Plan) have disclosed the identity and affiliations of any individual proposed to serve, after Confirmation, as a director, or officer, the Reorganized Debtors, any Affiliate of the Debtors reorganized under the Plan, or any successor to the Debtors under the Plan, and the appointment to, or continuance in, such office of such individual is consistent with the interests of creditors and equity security Holders and with public policy. • The Debtors (or any other proponent of the Plan) have disclosed the identity of any Insider that will be employed or retained the Reorganized Debtors and the nature of any compensation for such Insider. • With respect to each Holder within an Impaired Class of Claims or Interests, as applicable, each such Holder (a) has accepted the Plan or (b) will receive or retain under the Plan on account of such Claim or Interest property of a value, as of the Effective Date, that is not less than the amount that such Holder would so receive or retain if the Debtors were liquidated under chapter 7 of the Bankruptcy Code on such date. • With respect to each Class of Claims or Interests, such Class (a) has accepted the Plan or (b) is Unimpaired under the Plan (subject to the “cram-down” provisions discussed below); see Section (e) hereof (“Confirmation Without Acceptance by All Impaired Classes”). • The Plan provides for treatment of Claims, as applicable, in accordance with the provisions of section 507(a) of the Bankruptcy Code. • If a Class of Claims is Impaired under the Plan, at least one Class of Claims that is Impaired under the Plan has accepted the Plan, determined without including any acceptance of the Plan by any Insider. • Confirmation is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Reorganized Debtors, or any successor to the Debtors under the Plan, unless such liquidation or reorganization is proposed in the Plan. • All fees payable under 28 U.S.C. § 1930 have been paid or the Plan provides for the payment of all such fees on the Effective Date. • The Plan provides for the continuation after its Effective Date of payment of all retiree benefits, as that term is defined in section 1114 of the Bankruptcy Code, at the level established pursuant to subsection I(1)(B) or (g) of section 1114 of the Bankruptcy Code, at any time prior to Confirmation, for the duration of the period the applicable Debtor has obligated itself to provide such benefits. 67 Case 18-10122 C. Doc 10 Filed 01/22/18 Page 78 of 97 Best Interests Test / Liquidation Analysis As described above, section 1129(a)(7) of the Bankruptcy Code requires that each Holder of an Impaired Claim or Interest either (a) accept the Plan or (b) receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the value such Holder would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. Based on the unaudited Liquidation Analysis attached hereto as Exhibit C, the Debtors believe that the value of any distributions if the chapter 11 cases were converted to cases under chapter 7 of the Bankruptcy Code would be no greater than the value of distributions under the Plan. As a result, the Debtors believe Holders of Claims and Interests in all Impaired Classes will recover at least as much as a result of Confirmation of the Plan as they would recover through a hypothetical chapter 7 liquidation. THE LIQUIDATION ANALYSIS HAS BEEN PREPARED SOLELY FOR USE IN THIS DISCLOSURE STATEMENT AND DOES NOT REPRESENT VALUES THAT ARE APPROPRIATE FOR ANY OTHER PURPOSE. NOTHING CONTAINED IN THE LIQUIDATION ANALYSIS IS INTENDED TO BE OR CONSTITUTES A CONCESSION BY OR ADMISSION OF ANY DEBTOR FOR ANY PURPOSE. D. Feasibility The Bankruptcy Code requires that a debtor demonstrate that confirmation of a plan of reorganization is not likely to be followed by liquidation or the need for further financial reorganization. For purposes of determining whether the Plan meets this requirement, the Debtors have analyzed their ability to meet their obligations under the Plan. As part of this analysis, the Debtors have prepared the Financial Projections, which, together with the assumptions on which they are based, are attached hereto as Exhibit E. Based on such Financial Projections, the Debtors believe that they will be able to make all payments required under the Plan while conducting ongoing business operations. Therefore, Confirmation of the Plan is not likely to be followed by liquidation or the need for further reorganization. E. Confirmation Without Acceptance by All Impaired Classes The Bankruptcy Code permits confirmation of a plan even if it is not accepted by all impaired classes, as long as (a) the plan otherwise satisfies the requirements for confirmation, (b) at least one impaired class of claims has accepted the plan without taking into consideration the votes of any insiders in such class and (c) the plan is “fair and equitable” and does not “discriminate unfairly” as to any impaired class that has not accepted the plan. These socalled “cram down” provisions are set forth in section 1129(b) of the Bankruptcy Code. 1. No Unfair Discrimination The no “unfair discrimination” test applies to Classes of Claims or Interests that are of equal priority and are receiving different treatment under the Plan. The test does not require that the treatment be the same or equivalent, but that such treatment be “fair.” The Debtors do not believe the Plan discriminates unfairly against any Impaired Class of Claims or Interests. The Debtors believe the Plan and the treatment of all Classes of Claims and Interests under the Plan satisfy the foregoing requirements for nonconsensual confirmation. 2. Fair and Equitable Test This test applies to Classes of different priority and status (e.g., secured versus unsecured) and includes the general requirement that no Class of Claims or Interests receive more than 100% of the amount of the allowed Claims or Interests in such Class. As to the dissenting Class, the test sets different standards depending on the type of Claims or Interests in such Class. To demonstrate that a plan is fair and equitable, the plan proponent must demonstrate: • Secured Creditors: Each Holder of a secured claim: (1) retains its liens on the property, to the extent of the allowed amount of its secured claim, and receives deferred cash payments having a value, as of the effective date of the chapter 11 plan, of at least the allowed amount of such claim; (2) has the right to credit bid the amount of its claim if its property is sold and retains its liens on the proceeds of the sale 68 Case 18-10122 Doc 10 Filed 01/22/18 Page 79 of 97 (or if sold, on the proceeds thereof); or (3) receives the “indubitable equivalent” of its allowed secured claim. • Unsecured Creditors: Either (1) each Holder of an impaired unsecured claim receives or retains under the chapter 11 plan property of a value equal to the amount of its allowed claim or (2) the Holders of claims and interests that are junior to the claims of the non-accepting class will not receive any property under the chapter 11 plan. • Holders of Interests: Either (1) each Holder of an impaired interest will receive or retain under the chapter 11 plan property of a value equal to the greatest of the fixed liquidation preference to which such Holder is entitled, the fixed redemption price to which such Holder is entitled, or the value of the interest or (2) the Holders of interests that are junior to the non-accepting class will not receive or retain any property under the chapter 11 plan. The Debtors believe the Plan satisfies the “fair and equitable” requirement notwithstanding that Class 12 (the Interests in PES Holdings) are deemed to reject the Plan, because, as to such Class, there is no Class of equal priority receiving more favorable treatment and no Class that is junior to such Classes will receive or retain any property on account of the Claims or Interests in such Class. The Debtors believe that the Plan and the treatment of all Classes of Claims and Interests under the Plan satisfy the foregoing requirements for “cram down” (or non-consensual Confirmation of the Plan) pursuant to section 1129(b) of the Bankruptcy Code. F. Alternatives to Confirmation and Consummation of the Plan If the Plan cannot be confirmed, subject to the requirements of the Restructuring Support Agreement, the Debtors may seek to (1) prepare and present to the Bankruptcy Court an alternative chapter 11 plan for confirmation, (2) effect a merger or sale transaction, including, potentially, a sale of all or substantially all of the Debtors’ assets pursuant to section 363 of the Bankruptcy Code, or (3) liquidate their assets and businesses under chapter 7 of the Bankruptcy Code. If the Debtors were to pursue a liquidation of their assets and businesses in chapter 7, the Debtors would convert these chapter 11 cases to cases under chapter 7 of the Bankruptcy Code, and a trustee would be appointed to liquidate the assets of the Debtors for distribution in accordance with the priorities established by the Bankruptcy Code. A discussion of the effects that a chapter 7 liquidation would have on creditors’ recoveries and the Debtors is described in the unaudited Liquidation Analysis attached hereto as Exhibit C. ARTICLE IX. IMPORTANT SECURITIES LAW DISCLOSURE A. New Equity As discussed herein, the Plan provides for the Reorganized Debtors to distribute the New Membership Interests to the Holders of Term Loan B Claims and the Parent in accordance with Article III of the Plan. The Debtors believe that the class of New Membership Interests will be “securities,” as defined in section 2(a)(1) of the Securities Act, section 101 of the Bankruptcy Code and any applicable state Blue Sky Laws. The Debtors further believe that the offer and sale of the New Membership Interests pursuant to the Plan is, and subsequent transfers of the New Membership Interests by the Holders thereof that are not “underwriters” (as defined in section 2(a)(11) of the Securities Act and in the Bankruptcy Code) will be, exempt from federal and state securities registration requirements under the Bankruptcy Code and any applicable state Blue Sky Law as described in more detail below. B. Offering, Issuance, and Resale of New Equity The Debtors are relying on exemptions from the registration requirements of the Securities Act, including, without limitation, section 4(a)(2) thereof, to exempt the offer of the New Equity that may be deemed to be made 69 Case 18-10122 Doc 10 Filed 01/22/18 Page 80 of 97 pursuant to the solicitation of votes on, or otherwise in connection with, the Plan. Section 4(a)(2) of the Securities Act exempts transactions not involving a public offering. Section 1145 of the Bankruptcy Code provides that the registration requirements of section 5 of the Securities Act (and any applicable state Blue Sky Laws) shall not apply to the offer or sale of stock, options, warrants, or other securities by a debtor if: (x) the offer or sale occurs under a plan of reorganization; (y) the recipients of the securities hold a claim against, an interest in, or claim for administrative expense against, the debtor; and (z) the securities are issued in exchange for a claim against or interest in a debtor or are issued principally in such exchange and partly for cash and property. In reliance upon these exemptions, the offer, issuance and distribution of the New Equity to Holders of Claims will not be registered under the Securities Act or any applicable state Blue Sky Laws. The Debtors believe that the issuance of the New Equity is covered by section 1145 of the Bankruptcy Code. Accordingly, the Debtors believe that the New Equity may be resold without registration under the Securities Act or other federal securities laws, unless the Holder is an “underwriter” (as discussed below) with respect to such securities, as that term is defined in 1145 of the Bankruptcy Code. The Debtors will seek to obtain, as part of the Confirmation Order, a provision confirming such exemption. In addition, the New Equity is generally able to be resold without registration under applicable state Blue Sky Laws subject to the provisions of section 1145 of the Bankruptcy Code. Recipients of the New Equity are advised to consult with their own legal advisors as to the availability and applicability of section 1145 of the Bankruptcy Code to the Plan Securities and any other potential exemption from registration under the Securities Act or applicable state Blue Sky Laws in any given instance and as to any applicable requirements or conditions to such availability. Subject to the Restructuring Transactions, Reorganized PES Holdings shall issue and distribute the New Equity to Holders of Claims entitled to receive New Equity, pursuant to the Plan in full and final satisfaction of all Interests and Claims. The issuance of the New Equity shall be authorized without the need for any further corporate action and without any further action by the Debtors, Reorganized Debtors, or Reorganized PES Holdings, as applicable. Reorganized PES Holdings’ New Organizational Documents shall authorize the issuance and distribution on the Effective Date of the New Equity to the applicable Distribution Agent for the benefit of the following parties, in accordance with the terms of Article III of the Plan: (a) the DIP Commitment Parties; (b) the Holders of Allowed DIP Facility Claims; (c) the Holders of Allowed Term Loan B Claims; and (d) the Parent. All New Equity issued under the Plan shall be duly authorized, validly issued, fully paid, and non-assessable, and the Holders of New Equity shall be deemed to have accepted the terms of the New Stockholders’ Agreement (solely in their capacity as shareholders of Reorganized PES Holdings) and to be parties thereto without further action or signature. The New Stockholders’ Agreement shall be effective as of the Effective Date and, as of such date, shall be deemed to be valid, binding, and enforceable in accordance with its terms, and each Holder of New Equity shall be deemed a party and bound thereby. The New LLC Agreement shall be effective as of the Effective Date and, as of such date, shall be deemed to be valid, binding and enforceable in accordance with its terms, and each holder of New Membership Interests shall be deemed a party and bound thereby. C. Resales of New Equity; Definition of Underwriter Section 1145(b)(1) of the Bankruptcy Code defines an “underwriter” as one who, except with respect to “ordinary trading transactions” of an entity that is not an “issuer”: (a) purchases a claim against, interest in, or claim for an administrative expense in the case concerning, the debtor, if such purchase is with a view to distribution of any security received or to be received in exchange for such claim or interest; (b) offers to sell securities offered or sold under a plan for the holders of such securities; (c) offers to buy securities offered or sold under a plan from the holders of such securities, if such offer to buy is (i) with a view to distribution of such securities and (ii) under an agreement made in connection with the plan, with the consummation of the plan, or with the offer or sale of securities under the plan; or (d) is an issuer of the securities within the meaning of section 2(a)(11) of the Securities Act. In addition, a person who receives a fee in exchange for purchasing an issuer’s securities could also be considered an underwriter within the meaning of section 2(a)(11) of the Securities Act. The definition of an “issuer” for purposes of whether a person is an underwriter under section 1145(b)(1)(D) of the Bankruptcy Code, by reference to section 2(a)(11) of the Securities Act, includes as “statutory underwriters” all “affiliates,” which are all persons who, directly or indirectly, through one or more intermediaries, control, are 70 Case 18-10122 Doc 10 Filed 01/22/18 Page 81 of 97 controlled by, or are under common control with, an issuer of securities. The reference to “issuer,” as used in the definition of “underwriter” contained in section 2(a)(11) of the Securities Act, is intended to cover “Controlling Persons” of the issuer of the securities. “Control,” as defined in Rule 405 of the Securities Act, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Accordingly, an officer or director of a reorganized debtor or its successor under a plan of reorganization may be deemed to be a “Controlling Person” of the debtor or successor, particularly if the management position or directorship is coupled with ownership of a significant percentage of the reorganized debtor’s or its successor’s voting securities. In addition, the legislative history of section 1145 of the Bankruptcy Code suggests that a creditor who owns 10% or more of a class of securities of a reorganized debtor may be presumed to be a “Controlling Person” and, therefore, an underwriter. Resales of the New Equity by entities deemed to be “underwriters” (which definition includes “Controlling Persons”) are not exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act or other applicable law. Under certain circumstances, Holders of New Equity who are deemed to be “underwriters” may be entitled to resell their New Equity pursuant to the limited safe harbor resale provisions of Rule 144 of the Securities Act. Generally, Rule 144 of the Securities Act would permit the public sale of securities received by such Person if the required holding period has been met and, under certain circumstances, current information regarding the issuer is publicly available and volume limitations, manner of sale requirements and certain other conditions are met. The Debtors do not intend to make any current information publically available on the Effective Date or afterwards, and there can be no assurances that the Debtors will make such information available. Whether any particular Person would be deemed to be an “underwriter” (including whether the Person is a “Controlling Person”) with respect to the New Equity would depend upon various facts and circumstances applicable to that Person. Accordingly, the Debtors express no view as to whether any Person would be deemed an “underwriter” with respect to the New Equity and, in turn, whether any Person may freely resell New Equity. The Debtors do not intend to make publicly available the requisite information regarding the Debtors, and, as a result, after the holding period, Rule 144 will not be available for resales of the New Equity by Persons deemed to be underwriters or otherwise. Notwithstanding the foregoing, the New Equity will be subject to transfer restrictions set forth in the New Organizational Documents and the Governance Term Sheet, including tag-along and drag-along rights. The Debtors recommend that Holders of Claims review the Governance Term Sheet to understand the applicable transfer restrictions. Accordingly, the Debtors recommend that potential recipients of the New Equity consult their own counsel concerning their ability to freely trade such securities in compliance with the federal securities laws and any applicable state Blue Sky Laws. In addition, these securities will not be registered under the Exchange Act or listed on any national securities exchange. The Debtors make no representation concerning the ability of a person to dispose of the New Equity. GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A PARTICULAR PERSON MAY BE AN UNDERWRITER AND OTHER ISSUES ARISING UNDER APPLICABLE SECURITIES LAWS, THE DEBTORS MAKE NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRANSFER NEW EQUITY ISSUED PURSUANT TO THE PLAN. THE DEBTORS RECOMMEND THAT HOLDERS OF CLAIMS CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES. D. Management Incentive Plan The New Board will be authorized to implement the Management Incentive Plan. The Management Incentive Plan shall provide for the issuance of options and/or equity based compensation to certain members of management of PES Inc. or the Reorganized Partnership, as applicable. New Equity may be reserved for issuance in connection with the Management Incentive Plan. The participants in the Management Incentive Plan, the allocation of Management Incentive Plan compensation to participants (including the amounts allocated, the timing of grants, and the form of options and/or equity compensation allocated) and the terms and conditions of such options and equity compensation (including performance, time based vesting, exercise price, base values, hurdles, forfeiture, repurchase rights and transferability) shall either be (1) as reasonably acceptable to the Debtors and the Required Consenting 71 Case 18-10122 Doc 10 Filed 01/22/18 Page 82 of 97 Term Loan B Lenders or, (2) if no such terms are reached, be determined by the New Board in its sole discretion, it being understood and agreed that the Management Incentive Plan shall dilute all of the New Equity equally. ARTICLE X. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES A. Introduction The following discussion summarizes certain United States (“U.S.”) federal income tax consequences of the implementation of the Plan to the Debtors, the Reorganized Debtors, and Holders of Claims entitled to vote on the Plan (i.e., Holders of Term Loan A Claims and Term Loan B Claims) and Holders of equity in Parent. It does not address the U.S. federal income tax consequences to Holders of Claims not entitled to vote on the Plan. This summary is based on the Internal Revenue Code of 1986, as amended (the “Tax Code”), the U.S. Treasury Regulations promulgated thereunder (the “Treasury Regulations”), judicial decisions, and published administrative rules and pronouncements of the Internal Revenue Service (the “IRS”), all as in effect on the date hereof (collectively, “Applicable Tax Law”). Changes in the rules or new interpretations of the rules may have retroactive effect and could significantly affect the U.S. federal income tax consequences described below. The Debtors have not requested, and will not request, any ruling or determination from the IRS or any other taxing authority with respect to the tax consequences discussed herein, and the discussion below is not binding upon the IRS or the courts. No assurance can be given that the IRS would not assert, or that a court would not sustain, a different position than any position discussed herein. This summary does not address non-U.S., state, local or non-income tax consequences of the Plan (including such consequences with respect to the Debtors or the Reorganized Debtors), nor does it purport to address all aspects of U.S. federal income taxation that may be relevant to a Holder in light of its individual circumstances or to a Holder that may be subject to special tax rules (such as persons who are related to the Debtors within the meaning of the Tax Code, persons liable for alternative minimum tax, U.S. Holders whose functional currency is not the U.S. dollar, U.S. expatriates, broker-dealers, banks, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax exempt organizations, controlled foreign corporations, passive foreign investment companies, partnerships (or other entities treated as partnerships or other pass-through entities), beneficial owners of partnerships (or other entities treated as partnerships or other pass-through entities), subchapter S corporations, persons who hold Claims or who will hold the New Common Stock as part of a straddle, hedge, conversion transaction, or other integrated investment, persons using a mark-to-market method of accounting, and Holders of Claims who are themselves in bankruptcy). Furthermore, this summary assumes that a Holder of a Claim holds only Claims in a single Class and holds a Claim only as a “capital asset” (within the meaning of section 1221 of the Tax Code). The U.S. federal income tax consequences of the implementation of the Plan to the Debtors, the Reorganized Debtors and Holders of Term Loan A Claims and Term Loan B Claims described below also may vary depending on the nature of any Restructuring Transactions that the Debtors and/or Reorganized Debtors engage in. This summary does not address the receipt, if any, of property by Holders of Claims other than in their capacity as such (e.g., this summary does not discuss the treatment of any commitment fee or similar arrangement). For purposes of this discussion, a “U.S. Holder” is a Holder of a Claim that is: (1) an individual citizen or resident of the United States for U.S. federal income tax purposes; (2) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income taxation regardless of the source of such income; or (4) a trust (A) if a court within the United States is able to exercise primary jurisdiction over the trust’s administration and one or more United States persons (within the meaning of section 7701(a)(30) of the Tax Code) have authority to control all substantial decisions of the trust or (B) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person. For purposes of this discussion, a “non-U.S. Holder” is any Holder of a Claim that is neither a U.S. Holder nor a partnership (or other entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes). If a partnership (or other entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes) is a Holder of a Claim, the tax treatment of a partner (or other beneficial owner) generally will depend 72 Case 18-10122 Doc 10 Filed 01/22/18 Page 83 of 97 upon the status of the partner (or other beneficial owner) and the activities of the entity. Partners (or other beneficial owners) of partnerships (or other entities treated as partnerships or other pass-through entities) that are Holders of Claims should consult their respective tax advisors regarding the U.S. federal income tax consequences of the Plan. THE FOLLOWING SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, NON-U.S., NON-INCOME, AND OTHER TAX CONSEQUENCES OF THE PLAN. B. Certain U.S. Federal Income Tax Consequences to the Debtors, the Reorganized Debtors, and Holders of Equity Interests in Parent Parent is treated as a partnership for U.S. tax purposes and the Debtors, which are directly or indirectly owned by Parent, are currently, or will be pursuant to the Restructuring Transactions, treated as disregarded entities for U.S. federal income tax purposes. Accordingly, the U.S. federal income tax consequences of consummating the Plan will generally not be borne by the Debtors or Parent, but by Parent’s partners (i.e., the Holders of equity in Parent). 1. COD Income In general, absent an exception, a taxpayer will realize and recognize cancelation of indebtedness income (“COD Income”) upon satisfaction of its outstanding indebtedness for total consideration less than the amount of such indebtedness. The amount of COD Income, in general, is the excess of (a) the adjusted issue price of the indebtedness satisfied, over (b) the fair market value of any consideration given in satisfaction of such indebtedness at the time of the exchange. Under section 108 of the Tax Code, a taxpayer is not required to include COD Income in gross income (a) if the taxpayer is under the jurisdiction of a court in a case under chapter 11 of the Bankruptcy Code and the discharge of debt occurs pursuant to that case (the “Bankruptcy Exception”), or (b), to the extent that the taxpayer is insolvent immediately before the discharge (the “Insolvency Exception”). Instead, as a consequence of such exclusion, a taxpayer-debtor must reduce its tax attributes by the amount of COD Income that it excluded from gross income. In general, tax attributes will be reduced in the following order: (a) net operating losses (“NOLs”); (b) most tax credits; (c) capital loss carryovers; (d) tax basis in assets (but not below the amount of liabilities to which the debtor remains subject); (e) passive activity loss and credit carryovers; and (f) foreign tax credits. Alternatively, the taxpayer can elect first to reduce the basis of its depreciable assets pursuant to section 108(b)(5) of the Tax Code. Under section 108(d)(6) of the Tax Code, when an entity that is a flow-through entity (such as Parent and each of the Debtors) realizes COD Income, its partners are treated as receiving their allocable share of such COD Income and the Bankruptcy Exception and the Insolvency Exception (and related attribute reduction) are applied at the partner level rather than at the entity level. Accordingly, the Holders of equity in Parent will be treated as receiving their allocable share, if any, of the COD Income realized by the Debtors. C. Certain U.S. Federal Income Tax Consequences to U.S. Holders of Term Loan A Claims and Term Loan B Claims The following discussion assumes that the Debtors will undertake the Restructuring Transactions currently contemplated by the Plan. Holders of Claims are urged to consult their tax advisors regarding the tax consequences of the Restructuring Transactions. 1. U.S. Federal Income Tax Consequences to U.S. Holders of Term Loan A Claims Pursuant to the Plan, a U.S. Holder of a Term Loan A Claim shall receive a Pro Rata share of (a) $15,000,000 of Cash, (b) Tranche B of the New First Lien Term Loan, and (c) Cash in the amount of any accrued but unpaid interest on the Term Loan A Claims measured through the Effective Date. 73 Case 18-10122 Doc 10 Filed 01/22/18 Page 84 of 97 A U.S. Holder of a Term Loan A Claim will generally be treated as having exchanged its Term Loan A Claim for its Pro Rata share of the cash and Tranche B of the New First Lien Term Loan in an exchange governed by Section 1001 of the Tax Code on which taxable gain or loss is realized in an amount equal to the difference between (i) the sum of (A) the cash received and (B) the issue price of Tranche B of the New First Lien Term Loan received and (ii) such U.S. Holder’s adjusted basis, if any, in such Term Loan A Claim. Any cash received in respect of accrued but untaxed interest will be taxed as set forth below under “--Accrued but Untaxed Interest.” A U.S. Holder’s tax basis in the Tranche B of the New First Lien Term Loan received should be equal to the “issue price” of such Tranche B of the New First Lien Term Loan (as described below) and a U.S. Holder’s holding period would begin on the day after the Effective Date. 2. U.S. Federal Income Tax Consequences to U.S. Holders of Term Loan B Claims Pursuant to the Plan, a U.S. Holder of a Term Loan B Claim shall receive its Pro Rata share of (a) Tranche C of the New First Lien Term Loan and (b) 100% of the New Equity in the form of New Class A Common Stock, less the percentage of the New Equity distributed to (x) holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) Parent pursuant to Article IV.B.1, subject to dilution by the Management Incentive Plan. A Holder of a Term Loan B Claim will generally be treated as having exchanged (i) a portion of its Term Loan B Claim for its share of Tranche C of the New First Lien Term Loan in an exchange governed Section 1001 of the Tax Code on which taxable gain or loss is realized in an amount equal to the difference between (A) the issue price of Tranche C of the New First Lien Term Loan and (B) such U.S. Holders adjusted basis, if any, in such portion of the Term Loan B Claim exchanged therefor and (ii) the remaining portion of its Term Loan B Claim for its share of the New Class A Common Stock in a tax-free exchange governed by Section 351 of the Tax Code on which no gain or loss is realized (except as described below in “--Accrued but Untaxed Interest”). The portion of the Term Loan B Claim exchanged for Tranche C of the New First Lien Term Loan and the portion of the Term Loan B Claim exchanged for the New Class A Common Stock shall be determined in proportion to the relative fair market values of the Tranche C of the New First Lien Term Loan (which would generally be the “issue price” as discussed below) and the New Class A Common Stock. A U.S. Holder’s aggregate tax basis in Tranche C of the New First Lien Term Loan received in exchange should be equal to its issue price (as discussed below) and a U.S. Holder’s holding period would begin on the day after the Effective Date. A U.S. Holder’s initial aggregate tax basis in the New Class A Common Stock should be equal to the sum of (i) the fair market value of the New Class A Common Stock received on account of accrued but untaxed interest (see below under “--Accrued but Untaxed Interest”) and (ii) the U.S. Holder’s tax basis in the portion of the Term Loan B Claim exchanged for the New Class A Common Stock (other than in respect of accrued but untaxed interest). A U.S. Holder’s holding period of the New Class A Common Stock should include the period that the U.S. Holder held the Term Loan B Claim, except to the extent such New Class A Common Stock is received on account of accrued but untaxed interest, in which case the holding period would begin on the day following the Effective Date. Pursuant to the Plan, if the Required Consenting Term Loan B Creditors decide, Holders of Term Loan B Claims may, instead of receiving New Class A Common Stock, receive equity directly in Reorganized Partnership, which may then be contributed to PES Inc. in exchange for New Class A Common Stock. If this option is exercised, such U.S. Holder of Term Loan B Claims generally will be treated as having exchanged a portion of its Term Loan B Claim for its share of New Membership Interests in a tax-free exchange governed by Section 721 of the Tax Code on which no gain or loss is realized (except as described below in “--Accrued but Untaxed Interest”). A U.S. Holders initial aggregate tax basis in the New Membership Interests should be equal to the sum of (i) the fair market value of the New Membership Interests received on account of accrued but untaxed interest (see below under “--Accrued but Untaxed Interest”), (ii) the U.S. Holder’s tax basis in the portion of the Term Loan B Claim exchanged for the New Membership Interests (other than in respect of accrued but unpaid interest) and (iii) such U.S. Holder’s allocable portion of Reorganized Partnership’s liabilities. A U.S. Holder’s holding period of the New Membership Interests should include the period that the U.S. Holder held the Term Loan B Claim, except to the extent such New Membership Interests are received on account of accrued but untaxed interest, in which case the holding period would begin on the day following the Effective Date. 74 Case 18-10122 Doc 10 Filed 01/22/18 Page 85 of 97 If a U.S. Holder immediately contributes its New Membership Interests to PES Inc., such contribution would generally be a tax-free contribution and exchange under Code Section 351. A U.S. Holder’s initial tax basis in the New Class A Common Stock received generally should be equal to its basis in the New Membership Interests contributed to PES, Inc., reduced by the amount partnership liabilities assumed by PES Inc. in connection with the contribution. 3. U.S. Federal Income Tax Consequences to U.S. Holders of Equity in Parent Pursuant to the Plan, Parent or holders of equity in Parent shall receive New Membership Interests in the Reorganized Partnership in exchange for Parent’s contribution of cash and any requisite contracts or assets by Parent. Additionally, PES Inc. shall issue New Class B Common Stock to such equityholders in exchange for cash. For U.S. federal income tax purposes, Parent shall be treated as receiving New Membership Interests in exchange for such contribution and immediately liquidating, distributing its New Membership Interests to its equityholders. The Reorganized Partnership should be treated as a partnership continuation of Parent. As a result, for U.S. federal income tax purposes, U.S. Holders of equity in Parent continue to be treated as if they owned equity in Parent, now renamed Reorganized Partnership. Importantly, a U.S. Holder’s negative capital account in Parent is expected to carry over to its capital account in Reorganized Partnership and U.S. Holders with negative capital accounts are not expected to recognize gain as a direct result of such negative capital account due to any of the transactions contemplated by the Plan. Because a U.S. Holder’s ownership in the Reorganized Partnership is expected to be reduced when compared to its ownership in Parent, a Holder with a negative capital account may recognize gain as a result of a reduction in the amount of liabilities allocated to such U.S. Holder under the partnership tax rules. As described above, U.S. Holders of equity in parent may still recognize COD Income. 4. Character of Gain or Loss To the extent a U.S. Holder of Claims recognizes gain or loss as described in Sections (1) and (2) above, and subject to the discussion below on accrued but untaxed interest and market discount, any gain or loss realized on the exchange of Claims should be capital gain or loss and will generally be long-term capital gain or loss if the U.S. Holder held his Claims for more than one year on the Effective Date. Under current U.S. federal income tax law, certain non-corporate U.S. Holders (including individuals) are eligible for preferential rates of U.S. federal income tax on long-term capital gains. The deductibility of capital losses is subject to limitation. 5. Accrued but Untaxed Interest To the extent that any amount received by a U.S. Holder of a Claim is attributable to accrued but untaxed interest on the debt instruments constituting the surrendered Claim, the receipt of such amount should be taxable to the U.S. Holder as ordinary interest income (to the extent not already taken into income by the U.S. Holder). Conversely, a U.S. Holder of a Claim may be able to recognize a deductible loss to the extent that any accrued interest previously was included in the U.S. Holder’s gross income but was not paid in full by the Debtors. If the fair market value of the consideration is not sufficient to fully satisfy all principal and interest on Allowed Claims, the extent to which such consideration will be attributable to accrued interest is unclear. Under the Plan, the aggregate consideration to be distributed to Holders of Allowed Claims in each Class will be allocated first to the principal amount of Allowed Claims, with any excess allocated to unpaid interest that accrued on these Claims, if any. Certain legislative history indicates that an allocation of consideration as between principal and interest provided in a chapter 11 plan of reorganization is binding for U.S. federal income tax purposes, and certain case law generally indicates that a final payment on a distressed debt instrument that is insufficient to repay outstanding principal and interest will be allocated to principal, rather than interest. Certain Treasury Regulations treat payments as allocated first to any accrued but unpaid interest. The IRS could take the position that the consideration received by the Holder should be allocated in some way other than as provided in the Plan. U.S. Holders of Claims should consult their own tax advisors regarding the proper allocation of the consideration received by them under the Plan. 75 Case 18-10122 6. Doc 10 Filed 01/22/18 Page 86 of 97 Market Discount Under the “market discount” provisions of the Tax Code, some or all of any gain realized by a U.S. Holder of a Claim who exchanges the Claim for an amount on the Effective Date may be treated as ordinary income (instead of capital gain), to the extent of the amount of “market discount” on the debt instruments constituting the exchanged Claim. In general, a debt instrument is considered to have been acquired with “market discount” if it is acquired other than on original issue and if its Holder’s initial tax basis in the debt instrument is less than (a) the sum of all remaining payments to be made on the debt instrument, excluding “qualified stated interest” or (b) in the case of a debt instrument issued with OID, its adjusted issue price, by at least a de minimis amount (equal to 0.25% of the sum of all remaining payments to be made on the debt instrument, excluding “qualified stated interest” multiplied by the number of remaining whole years to maturity). Any gain recognized by a U.S. Holder on the taxable disposition of a Claim that had been acquired with market discount should be treated as ordinary income to the extent of the market discount that accrued thereon while the Claim was considered to be held by the U.S. Holder (unless the U.S. Holder elected to include market discount in income as it accrued). To the extent that the surrendered debt instruments that had been acquired with market discount are exchanged in a tax-free or other reorganization transaction for other property, any market discount that accrued on such debt instruments but was not recognized by the U.S. Holder may be required to be carried over to the property received therefor and any gain recognized on the subsequent sale, exchange, redemption, or other disposition of such property may be treated as ordinary income to the extent of the accrued but unrecognized market discount with respect to the exchanged debt instrument. 7. Issue Price of Tranche B of the New First Lien Term Loan and Tranche C of the New First Lien Term Loan The issue price of Tranche B and Tranche C of the New First Lien Term Loan will depend on whether the applicable loan (or, if applicable the applicable Claims exchanged for the applicable loan) is considered to be “traded on an established market” at the time of the exchange. In general, a debt instrument will be treated as traded on an established market if, at any time during the 31-day period ending 15 days after the applicable measurement date: (a) a “sales price” for an executed purchase of the debt instrument appears on a medium that is made available to issuers of debt instruments, persons that regularly purchase or sell debt instruments, or persons that broker purchases or sales of debt instruments; (b) a “firm” price quote for the debt instrument is available from at least one broker, dealer, or pricing service for property and the quoted price is substantially the same as the price for which the person receiving the quoted price could purchase or sell the property; or (c) there are one or more “indicative” quotes available from at least one broker, dealer, or pricing service for property. However, a debt instrument will not be treated as traded on an established market if at the time the determination is made the outstanding stated principal amount of the issue that includes the debt instrument does not exceed $100 million. The outstanding stated principal amount on both Tranche B of the New First Lien Term Loan, and the Term Loan A Claims for which it will be exchanged, is less than $100 million. As a result, Tranche B of the New First Lien Term Loan is not expected to be traded on an established market, and the issue price of Tranche B of the New First Lien Term Loan generally will be its stated principal amount. If Tranche C of the New First Lien Term Loan is traded on an established market at the time of the exchange, the issue price of Tranche C of the New First Lien Term Loan received in respect of the Term Loan B Claims will equal the fair market value of Tranche C of the New First Lien Term Loan (as indicated by the sources indicated in (a) through (c) above). If Tranche C of the New First Lien Term Loan is not traded on an established market at the time of the exchange, but the Term Loan B Claims exchanged for Tranche C of the New First Lien Term Loan are traded on an established market, then the issue price of Tranche C of the New First Lien Term Loan will generally equal the fair market value of the Term Loan B Claims exchanged for Tranche C of the New First Lien Term Loan (as indicated by the sources indicated in (a) through (c) above). If neither Tranche C of the New First Lien Term Loan nor the Term Loan B Claims are traded on an established market, then the issue price of the Tranche C of the New First Lien Term Loan generally will be its stated principal amount. 76 Case 18-10122 D. Doc 10 Filed 01/22/18 Page 87 of 97 Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders of Term Loan A Claims and Term Loan B Claims 1. In General This following discussion includes only certain U.S. federal income tax consequences of the Restructuring Transactions to non-U.S. Holders. The discussion does not include any non-U.S. tax considerations. The rules governing the U.S. federal income tax consequences to non-U.S. Holders are complex. Non-U.S. Holders should consult their own tax advisors regarding the U.S. federal, state, and local and non-U.S. tax consequences of the consummation of the Plan to such non-U.S. Holders and the ownership and disposition of the New Membership Interests. Whether a non-U.S. Holder realizes gain or loss on the exchange of Claims pursuant to the Plan, or upon a subsequent disposition of the consideration received under the Plan, the amount of such gain or loss is determined in the same manner as set forth above in connection with U.S. Holders. a. Gain Recognition in Connection with the Plan Other than with respect to any amounts received that are attributable to accrued but untaxed interest (or OID, if any), any gain realized by a non-U.S. Holder on the exchange of its Claim generally will not be subject to U.S. federal income taxation unless (i) the non-U.S. Holder is an individual who was present in the United States for 183 days or more during the taxable year in which the gain is realized and certain other conditions are met or (ii) such gain is effectively connected with the conduct by such non-U.S. Holder of a trade or business in the United States (and if an income tax treaty applies, such gain is attributable to a permanent establishment or fixed base maintained by such non-U.S. Holder in the United States). If the first exception applies, the non-U.S. Holder generally will be subject to U.S. federal income tax at a rate of 30% (or at a reduced rate or exemption from tax under an applicable income tax treaty) on the amount by which such non-U.S. Holder’s capital gains allocable to U.S. sources exceed capital losses allocable to U.S. sources during the taxable year. If the second exception applies, the non-U.S. Holder generally will be subject to U.S. federal income tax in the same manner as a U.S. Holder with respect to such gain. In addition, if such a non-U.S. Holder is a corporation, it may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable tax treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. If, as described above under “--U.S. federal income tax consequences to Holders of Term Loan B Claims”, the Required Consenting Term Loan B Creditors decide that Holders of Term Loan B Claims may receive New Membership Interests directly in Reorganized Partnership rather than New Class A Common Stock, non-U.S. Holders may be subject to U.S. federal income tax as described below under “--Ownership and Disposition of New Membership Interest--Non-U.S. Holders.” E. Ownership and Disposition of the New First Lien Term Loan 1. a. U.S. Holders Payments of Qualified Stated Interest Payments or accruals of “qualified stated interest” (as defined below) on Tranches B and C of New First Lien Term Loan will be taxable to a U.S. Holder as ordinary income at the time that such payments are accrued or are received in accordance with such Holder’s regular method of accounting for U.S. federal income tax purposes. The term “qualified stated interest” generally means stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually during the entire term of the Tranches B and C of the New First Lien Term Loan, as applicable, at a single fixed rate of interest, or, subject to certain conditions, based on one or more interest indices. 77 Case 18-10122 Doc 10 Filed 01/22/18 Page 88 of 97 All stated interest on Tranche B of the New First Lien Term Loan should be qualified stated interest and all stated interest on Tranche C of the New First Lien Term Loan other than payment in kind (“PIK”) interest (and other than cash pay interest attributable to the “step up” in interest rate after the Hinge Date) should be qualified stated interest. b. Original Issue Discount A debt instrument, such as the New First Lien Term Loan, is treated as issued with original issue discount (“OID”) for U.S. federal income tax purposes if its issue price is less than its stated redemption price at maturity by at least a de minimis amount. Because PIK interest on Tranche C of the New First Lien Term Loan will not be unconditionally payable in cash at least annually, Tranche C of the New First Lien Term Loan will be considered to be issued with OID. The amount of OID on each tranche of the New First Lien Term Loan will be the difference between the “stated redemption price at maturity” (the sum of all payments to be made on the debt instrument other than “qualified stated interest”) of such tranche and the “issue price” (as discussed above) of such tranche. A U.S. Holder (whether a cash or accrual method taxpayer) generally will be required to include the OID in gross income (as ordinary income) as the OID accrues (on a constant yield to maturity basis), in advance of the Holder’s receipt of cash payments attributable to this OID. In general, the amount of OID includible in the gross income of a U.S. Holder will be equal to a ratable amount of OID with respect to the note for each day in an accrual period during the taxable year or portion of the taxable year on which a U.S. Holder held the note. An accrual period may be of any length and the accrual periods may vary in length over the term of the note, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the final day of an accrual period or on the first day of an accrual period. The amount of OID allocable to any accrual period is an amount equal to the excess, if any, of (i) the product of the note’s adjusted issue price at the beginning of such accrual period and its yield to maturity, determined on the basis of a compounding assumption that reflects the length of the accrual period over (ii) the sum of the qualified stated interest payments on the notes allocable to the accrual period. The adjusted issue price of a note at the beginning of any accrual period generally equals the issue price of the note increased by the amount of all previously accrued OID and decreased by any cash payments previously made on the note other than payments of qualified stated interest. The rules regarding OID are complex. You should consult your own tax advisors regarding the consequences of OID, including the amount of OID that you would include in gross income for a taxable year. c. Acceleration of Income Recognition for Certain U.S. Holders Accrual method U.S. Holders that prepare “applicable financial statement” (as defined in Section 451 of the Code) generally would be required to include certain items of income such as OID no later than the time such amounts are reflected on such a financial statement. The application of this rule to income of a debt instrument with OID is effective for taxable years beginning after December 31, 2018. This could result in an acceleration of income recognition for income items differing from the above description. Holders should consult their tax advisors with regard to interest and OID concerning the New First Lien Term Loan. d. Sale, Taxable Exchange or Other Taxable Disposition Upon the disposition of the New First Lien Term Loan by sale, exchange, retirement, redemption or other taxable disposition, a U.S. Holder will generally recognize gain or loss equal to the difference, if any, between (i) the amount realized on the disposition (other than amounts attributable to accrued but unpaid interest, which will be taxed as ordinary interest income to the extent not previously so taxed) and (ii) the U.S. Holder’s adjusted tax basis in the New First Lien Term Loan, as applicable. A U.S. Holder’s adjusted tax basis will generally be equal to the holder’s initial tax basis in the New First Lien Term Loan, as applicable, increased by any accrued OID previously included in such holder’s gross income. A U.S. Holder’s gain or loss will generally constitute capital gain or loss and will be long-term capital gain or loss if the U.S. Holder has held such New First Lien Term Loan for longer than one year. Non-corporate taxpayers are generally subject to a reduced federal income tax rate on a net long-term capital gains. The deductibility of capital losses is subject to certain limitations. 78 Case 18-10122 2. a. Doc 10 Filed 01/22/18 Page 89 of 97 Non-U.S. Holders Payments of Interest Subject to the discussion of backup withholding and FATCA below, interest income (which, for purposes of this discussion of Non-U.S. Holders, includes OID) of a Non-U.S. Holder that is not effectively connected with a U.S. trade or business carried on by the Non-U.S. Holder will qualify for the so-called “portfolio interest exemption” and, therefore, will not be subject to U.S. federal income tax or withholding, provided that: • the Non-U.S. Holder does not own, actually or constructively, a 10% or greater interest in the Reorganized Partnership’ capital or profits within the meaning of Section 871(h)(3) of the Tax Code and Treasury Regulations thereunder; • the Non-U.S. Holder is not a controlled foreign corporation related to us, actually or constructively through the ownership rules under Section 864(d)(4) of the Tax Code; • the Non-U.S. Holder is not a bank that is receiving the interest on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; and • the beneficial owner gives the Reorganized Partnership or the Reorganized Partnership’s paying agent an appropriate IRS Form W-8 (or suitable substitute or successor form or such other form as the IRS may prescribe) that has been properly completed and duly executed establishing its status as a Non-U.S. Holder. If not all of these conditions are met, interest on the New First Lien Term Loan paid to a Non-U.S. Holder that is not effectively connected with a U.S. trade or business carried on by the Non-U.S. Holder will generally be subject to U.S. federal income tax and withholding at a 30% rate, unless an applicable income tax treaty reduces or eliminates such withholding and the Non-U.S. Holder claims the benefit of that treaty by providing an appropriate IRS Form W-8 (or a suitable substitute or successor form or such other form as the IRS may prescribe) that has been properly completed and duly executed. If interest on the New First Lien Term Loan is effectively connected with a U.S. trade or business carried on by the Non-U.S. Holder (“ECI”), the Non-U.S. Holder will be required to pay U.S. federal income tax on that interest on a net income basis generally in the same manner as a U.S. Holder (and the 30% withholding tax described above will not apply, provided the appropriate statement is provided to the Reorganized Partnership or its paying agent) unless an applicable income tax treaty provides otherwise. To claim an exemption from withholding, such non-U.S. Holder will be required to provide a properly executed IRS Form W-8ECI (or suitable substitute or successor form or such other form as the IRS may prescribe). If a Non-U.S. Holder is eligible for the benefits of any income tax treaty between the United States and its country of residence, any interest income that is ECI will be subject to U.S. federal income tax in the manner specified by the treaty if the Non-U.S. Holder claims the benefit of the treaty by providing an appropriate IRS Form W-8 (or a suitable substitute or successor form or such other form as the IRS may prescribe) that has been properly completed and duly executed. In addition, a corporate Non- U.S. Holder may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate, or, if applicable, a lower treaty rate, on its effectively connected earnings and profits attributable to such interest (subject to adjustments). The certifications described above must be provided to the applicable withholding agent prior to the payment of interest and must be updated periodically. Non-U.S. Holders that do not timely provide the applicable withholding agent with the required certification, but that qualify for a reduced rate under an applicable income tax treaty, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. NonU.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty. 79 Case 18-10122 b. Doc 10 Filed 01/22/18 Page 90 of 97 Sale, Taxable Exchange, or Other Disposition of the New Notes A Non-U.S. Holder will generally not be subject to U.S. federal income tax on any gain realized on a sale, exchange, retirement, redemption or other taxable disposition of the New First Lien Term Loan (other than any amount representing accrued but unpaid interest on the loan, which will be treated as interest and may be subject to the rules discussed above under “--Non-U.S. Holders--Payments of Interest”) unless: • the gain is ECI (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment that such Non-U.S. Holder maintains), or • in the case of a Non-U.S. Holder who is a nonresident alien individual, such Holder is present in the United States for 183 or more days in the taxable year and certain other requirements are met. If a Non-U.S. Holder falls under the first of these exceptions, unless an applicable income tax treaty provides otherwise, the holder will generally be taxed on the net gain derived from the disposition of the New Notes under the graduated U.S. federal income tax rates that are applicable to U.S. Holders and, if the Non-U.S. Holder is a foreign corporation, it may also be subject to the branch profits tax described above. To claim an exemption from withholding, such non-U.S. Holder will be required to provide a properly executed IRS Form W-8ECI (or suitable substitute or successor form or such other form as the IRS may prescribe). If an individual Non-U.S. Holder falls under the second of these exceptions, the holder generally will be subject to U.S. federal income tax at a rate of 30% (unless a lower applicable treaty rate applies) on the amount by which the gain derived from the disposition exceeds such Holder’s capital losses allocable to sources within the United States for the taxable year of the sale. F. Ownership and Disposition of New Membership Interests 1. Tax Classification of the Reorganized Partnership Under applicable Treasury Regulations, a limited liability company with at least two members may either be treated as an association taxable as a corporation or as a partnership for U.S. federal income tax purposes. If a limited liability company does not make an election to be an association taxable as a corporation, it will be treated as a partnership for U.S. federal income tax purposes by default. The Reorganized Partnership, a Delaware limited liability company, has not made an election to be treated as an association taxable as a corporation and intends to be classified as a partnership for U.S. federal income tax purposes. Under the “publicly traded partnership” provisions of the Tax Code, an entity that would otherwise be treated as a partnership whose interests are considered to be publicly traded and does not meet a qualifying income test will be taxable as a corporation. It is anticipated that the New LLC Agreement will prohibit certain transfers of New Membership Interests (and, in particular, any such transfer that would jeopardize the status of the Reorganized Partnership as a partnership for U.S. federal income tax purposes). Any purported transfer in violation of such provisions will be null and void and would not be recognized by the Reorganized Partnership. If the Reorganized Partnership is treated as a “publicly traded partnership,” the Reorganized Partnership will be treated as if it had transferred all of its assets, subject to liabilities, to a newly formed corporation, on the first day of the year in which it was a “publicly traded partnership,” in return for stock in that corporation, and then distributed that stock to the unitholders in liquidation of their interests in the Reorganized Partnership. This deemed contribution and liquidation, in certain circumstances, could be taxable to a Holder of New Membership Interests (an “Equityholder”). Thereafter, the Reorganized Partnership would be treated as a corporation for U.S. federal income tax purposes. If the Reorganized Partnership were taxable as a corporation in any taxable year, the Reorganized Partnership’s items of income, gain, loss and deduction would be reflected only on its tax return rather than being passed through to the Equityholders, and the Reorganized Partnership’s net income would be taxed at corporate rates. In addition, pursuant to Section 301 of the Tax Code, any distribution made to an Equityholder that is a U.S. Holder would be treated as either taxable dividend income, to the extent of the Reorganized Partnership’s current or accumulated earnings and profits, or, in the absence of earnings and profits, a nontaxable return of capital, to the extent 80 Case 18-10122 Doc 10 Filed 01/22/18 Page 91 of 97 of the Equityholder’s tax basis in its New Membership Interests, or taxable gain, after the Equityholder’s tax basis in its New Membership Interests is reduced to zero and for an Equityholder that is a non-U.S. Holder, would be treated in a similar manner as described under “--Ownership and Disposition of New Class A Common Stock in PES, Inc. by Non-U.S. Holders.” Accordingly, taxation as a corporation could result in a material reduction in an Equityholder’s after-tax return and thus would likely result in a substantial reduction of the value of the New Membership Interests. The remainder of the discussion assumes that the Reorganized Partnership will be treated as a partnership for U.S. federal income tax purposes. 2. U.S. Holders As a partnership, the Reorganized Partnership itself will not be subject to U.S. federal income tax. Instead, the Reorganized Partnership will file an annual partnership information return with the IRS which will report the results of the Reorganized Partnership’s operations. Each Equityholder will be required to report on its U.S. federal income tax return, and will be subject to tax in respect of, its distributive share of each item of the Reorganized Partnership’s income, gain, loss, deduction and credit for each taxable year of the Reorganized Partnership ending with or within the Equityholder’s taxable year. Each item generally will have the same character as if the Equityholder had realized the item directly. Equityholders will be required to report these items regardless of the extent to which, or whether, they receive cash distributions from the Reorganized Partnership for such taxable year, and thus may incur income tax liabilities in excess of any cash distributions from the Reorganized Partnership. An Equityholder is allowed to deduct its allocable share of the Reorganized Partnership’s losses (if any) only to the extent of such Equityholder’s adjusted tax basis (discussed below) in its New Membership Interests at the end of the taxable year in which the losses occur. In addition, various other limitations in the Tax Code may significantly limit an Equityholder’s ability to deduct its allocable share of deductions and losses of the Reorganized Partnership against other income. The Reorganized Partnership will provide each Equityholder with the necessary information to report its allocable share of the the Reorganized Partnership’s tax items for U.S. federal income tax purposes. However, no assurance can be given that the Reorganized Partnership will be able to provide such information prior to the initial due date of the Equityholder’s U.S. federal income tax return and Equityholders may therefore be required to apply to the IRS for an extension of time to file their tax returns. The Reorganized Partnership’s board will decide how items will be reported on the Reorganized Partnership’s U.S. federal income tax returns, and all Equityholders will be required under the Tax Code to treat the items consistently on their own returns, unless they file a statement with the IRS disclosing the inconsistency. In the event that the Reorganized Partnership’s income tax returns are audited by the IRS, the tax treatment of the Reorganized Partnership’s income and deductions generally will be determined at the Reorganized Partnership level in a single proceeding, rather than in individual audits of the Equityholders. The Reorganized Partnership’s “tax matters partner” or “partnership representative” (as those terms are used in the Tax Code) will have considerable authority under the Tax Code and the New LLC Agreement to make decisions affecting the tax treatment and procedural rights of the Equityholders. An Equityholder generally will not recognize gain or loss on the receipt of a distribution of cash or property from us (provided that the Equityholder is not treated as exchanging such Equityholder’s share of the Reorganized Partnership’s “unrealized receivables” and/or certain “inventory items” (as those terms are defined in the Tax Code, and together “ordinary income items”) for other partnership property). An Equityholder, however, will recognize gain on the receipt of a distribution of cash and, in some cases, marketable securities, from the us (including any constructive distribution of money resulting from a reduction of the Equityholder’s share of the Reorganized Partnership’s indebtedness) to the extent such distribution or the fair market value of such marketable securities distributed exceeds such Equityholder’s adjusted tax basis in its New Membership Interests. Such distribution would be treated as gain from the sale or exchange of the New Membership Interests, which is described below. An Equityholder’s adjusted tax basis in its New Membership Interests generally will be equal to such member’s initial tax basis (discussed above), increased by the sum of (i) any additional capital contribution such Equityholder makes to us, (ii) the Equityholder’s allocable share of the income of the Reorganized Partnership, and 81 Case 18-10122 Doc 10 Filed 01/22/18 Page 92 of 97 (iii) increases in the Equityholder’s allocable share of the Reorganized Partnership’s indebtedness, and reduced, but not below zero, by the sum of (i) the Equityholder’s allocable share of the Reorganized Partnership’s losses, and (ii) the amount of money or the adjusted tax basis of property distributed to such Equityholder, including constructive distributions of cash resulting from reductions in such Equityholder’s allocable share of the Reorganized Partnership’s indebtedness. A sale of all or part of the New Membership Interests will result in the recognition of gain or loss in an amount equal to the difference between the amount of the sales proceeds or distribution (including any constructive distribution) and such member’s adjusted tax basis for the portion of the New Membership Interests disposed of. Any gain or loss recognized with respect to such a sale generally will be treated as capital gain or loss, and will be longterm capital gain or loss if the New Membership Interests have been held for more than one year, except to the extent (i) that the proceeds of the sale are attributable to a member’s allocable share of certain of the Reorganized Partnership’s ordinary income items and such proceeds exceed the Equityholder’s adjusted tax basis attributable to such ordinary income items and (ii) of previously allowed bad debt or ordinary loss deductions. An Equityholder’s ability to deduct any loss recognized on the sale of its New Membership Interests will depend on the Equityholder’s own circumstances and may be restricted under the Tax Code. 3. Tax-Exempt U.S. Holders It is expected that the Reorganized Partnership will derive income that constitutes unrelated business taxable income (“UBTI”). Consequently, an Equityholder that is a tax-exempt organization will generally be subject to “unrelated business income tax” to the extent that its allocable share of the Reorganized Partnership’s income consists of UBTI. Tax-exempt entities face unique tax issues from owning New Membership Interests that may result in adverse tax consequences. U.S. Holders that are tax-exempt are urged to consult their tax advisors regarding the tax consequences of the direct ownership of the New Membership Interests. 4. Non-U.S .Holders Non-U.S. Holders treated as engaged in a U.S. trade or business are subject to U.S. federal income tax at the graduated rates applicable to U.S. persons on their net income that is considered to be effectively connected with such U.S. trade or business. Non-U.S. Holders that are corporations may also be subject to a 30% branch profits tax on such effectively connected income. The 30% rate applicable to branch profits may be reduced or eliminated under the provisions of an applicable income tax treaty between the United States and the country in which the Non-U.S. Holder resides or is organized. It is expected that the Reorganized Partnership’s method of operation will result in a determination that the Reorganized Partnership is engaged in a U.S. trade or business with the result that some portion of the Reorganized Partnership’s income is properly treated as effectively connected income with respect to Non-U.S. Holders. If a NonU.S. Holder were treated as being engaged in a U.S. trade or business in any year because of an investment in New Membership Interests in such year, such Non-U.S. Holder generally would be (i) subject to withholding on its distributive share of the Reorganized Partnership’s income effectively connected with such U.S. trade or business, (ii) required to file a U.S. federal income tax return for such year reporting its allocable share, if any, of income or loss effectively connected with such trade or business and (iii) required to pay U.S. federal income tax at regular U.S. federal income tax rates on any such income. Moreover, a Non-U.S. Holder who is a corporation might be subject to a U.S. branch profits tax on its allocable share of its effectively connected income. Any amount so withheld would be creditable against such Non-U.S. Holder’s U.S. federal income tax liability, and such Non-U.S. Holder could claim a refund to the extent that the amount withheld exceeded such Non-U.S. Holder’s U.S. federal income tax liability for the taxable year. Finally, if the Reorganized Partnership were treated as being engaged in a U.S. trade or business, a portion of any gain recognized by a Non-U.S. Holder on the sale or exchange of its Reorganized Partnership units could be treated for U.S. federal income tax purposes as effectively connected income, and hence such Non-U.S. Holder could be subject to U.S. federal income tax on the sale or exchange. Furthermore, all or a portion of a NonU.S. Holder’s New Membership Interests may be attributable to U.S. real property, in which case gain on sale or exchange of such New Membership Units could be treated for U.S federal income tax purposes as effectively connected income, even if the Reorganized Partnership were not otherwise treated as engaged in a U.S. trade or business. 82 Case 18-10122 Doc 10 Filed 01/22/18 Page 93 of 97 Non-U.S. Holders may have to supply certain beneficial ownership statements to the Reorganized Partnership (which would be available to the IRS) to obtain reductions in U.S. federal withholding tax on interest and to obtain benefits under U.S. income tax treaties, to the extent applicable. In general, different rules from those described above apply in the case of Non-U.S. Holder subject to special treatment under U.S. federal income tax law, including a Non-U.S. Holder (i) who has an office or fixed place of business in the United States or is otherwise carrying on a U.S. trade or business; (ii) who is an individual present in the United States for 183 or more days or has a “tax home” in the United States for U.S. federal income tax purposes; or (iii) who is a former citizen or resident of the United States. Non-U.S. Holders are urged to consult their tax advisors with regard to the U.S. federal income tax consequences to them of acquiring, holding and disposing of the New Membership Interests, as well as the effects of state, local and non-U.S. tax laws, as well as eligibility for any reduced withholding benefits. 5. Conversion of New Membership Interests (and Class B Common Stock) into Class A Common Stock Holders of New Membership Interests and New Class B Common Stock (generally non-economic voting stock in PES Inc.) are permitted to convert such New Membership Interests and Class B Common Stock into Class A Common Stock of PES Inc. If a Holder of New Membership Interests opts to convert after the Effective Date, such transaction should be treated as taxable disposition of (i) New Membership Interests that generally will cause such Holder to recognize gain or loss as described above under “--U.S. Holders” and “--Non-U.S. Holders” and (ii) New Class B Common Stock that will generally cause such a Non-U.S. Holder to recognize gain or loss in the same manner as a disposition of New Class A Common Stock, as described below under “Ownership and Disposition of New Class A Common Stock in PES, Inc. by Non-U.S. Holders--Gain on Disposition of New Class A Common Stock.” G. Ownership and Disposition of New Class A Common Stock in PES Inc. by Non-U.S. Holders 1. Dividends Distributions on New Class A Common Stock will generally constitute dividends for U.S. federal income tax purposes to the extent paid out of PES, Inc.’s accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of PES Inc.’s current and accumulated earnings and profits will generally constitute a return of capital and will first be applied against and reduce a non-U.S. Holder’s adjusted tax basis in PES Inc.’s common stock, but not below zero. Distributions not treated as dividends and in excess of a Holder’s adjusted basis will generally be treated as capital gain subject to the rules discussed under “--Gain on Disposition of New Class A Common Stock”. Dividends paid to a non-U.S. Holder of New Class A Common Stock will generally be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. Holder within the United States (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment of the non-U.S. Holder) are not subject to withholding, provided certain certification and disclosure requirements are satisfied. Instead, such dividends are generally subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. Holder were a United States person as defined under the Tax Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. A non-U.S. Holder of New Class A Common Stock who wishes to claim the benefit of an applicable income tax treaty and avoid backup withholding, as discussed below, for dividends, will be required (a) to complete the applicable IRS Form W-8BEN or Form W-8BEN-E and certify under penalty of perjury that such Holder is not a United States person as defined under the Tax Code and is eligible for treaty benefits or (b) if the New Class A Common Stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special certification and other requirements apply to certain non-U.S. Holders that are passthrough entities rather than corporations or individuals. A non-U.S. Holder of New Class A Common 83 Case 18-10122 Doc 10 Filed 01/22/18 Page 94 of 97 Stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. 2. Gain on Disposition of New Class A Common Stock Any gain realized on the sale, exchange, or other taxable disposition of New Class A Common Stock generally will not be subject to U.S. federal income tax unless: • the gain is effectively connected with a trade or business of the non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. Holder); • the non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or • PES Inc. is a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. Holder’s holding period for New Class A Common Stock. A non-U.S. Holder described in the first bullet point above will generally be subject to tax on the net gain derived from the sale or other disposition under regular graduated U.S. federal income tax rates applicable to such Holder as if it were a United States person as defined under the Tax Code. In addition, if a non-U.S. Holder described in the first bullet point above is a corporation for U.S. federal income tax purposes, it may be subject to a “branch profits tax” equal to 30% of its effectively connected earnings and profits (subject to adjustments) or at such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. Holder described in the second bullet point above will generally be subject to a flat 30% (or such lower rate as may be specified by an applicable income tax treaty) tax on the gain derived from the sale or other disposition, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States, provided such non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses. If the exception in the third bullet applies, a Non-U.S. Holder generally will be subject to U.S. federal income tax on any gain recognized on the disposition of all or a portion of its New Class A Common Stock under the Foreign Investment in Real Property Tax Act (“FIRPTA”). Taxable gain from the disposition of an interest in a USRPHC (generally equal to the difference between the amount realized and such Non-U.S. Holder’s adjusted tax basis in such interest) will constitute effectively connected income. Further the buyer of the New Class A Common Stock generally will be required to withhold tax equal to 15% of the amount realized on the sale and the Non-U.S. Holder generally will be required to file a U.S. federal income tax return. The amount of any such withholding would be allowed as a credit against the Non-U.S. Holder’s federal income tax liability and may entitle the Non-U.S. Holder to a refund, provided that the Non-U.S. Holder properly and timely files a tax return with the IRS. In general, the FIRPTA provisions will not apply if (a) the Non-U.S. Holder does not directly or indirectly own more than 5% of the value of such interests during a specified testing period and (b) such interest is regularly traded on an established securities market. At this time PES Inc. has not determined whether it is likely to be a USRPHC for U.S. federal income tax purposes. In general, a corporation is a USRPHC as to a Non-U.S. Holder if the fair market value of the corporation’s U.S. real property interests (as defined in the Tax Code and applicable Treasury Regulations) equals or exceeds 50% of the aggregate fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business (applying certain look-through rules to evaluate the assets of subsidiaries) at any time within the shorter of the 5-year period ending on the effective time of the applicable disposition or the period of time the NonU.S. Holder held such interest. 84 Case 18-10122 H. Doc 10 Filed 01/22/18 Page 95 of 97 Information Reporting and Back-up Withholding The Debtors and Reorganized Debtors (including PES Inc.) will withhold all amounts required by law to be withheld from payments of interest and dividends. The Debtors and Reorganized Debtors (including PES Inc.) will also comply with all applicable reporting requirements of the Tax Code. In general, information reporting requirements may apply to distributions or payments made to a Holder of a Claim under the Plan, as well as future payments made with respect to consideration received under the Plan. In addition, backup withholding of taxes will generally apply to payments in respect of an Allowed Claim under the Plan, as well as future payments with respect to the consideration received under the Plan, unless, in the case of a U.S. Holder, such U.S. Holder provides a properly executed IRS Form W-9 and, in the case of a non-U.S. Holder, such non-U.S. Holder provides a properly executed applicable IRS Form W-8 (or, in each case, such Holder otherwise establishes eligibility for an exemption). Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a Holder’s U.S. federal income tax liability, and a Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing an appropriate claim for refund with the IRS (generally, a U.S. federal income tax return). In addition, from an information reporting perspective, the Treasury Regulations generally require disclosure by a taxpayer on its U.S. federal income tax return of certain types of transactions in which the taxpayer participated, including, among other types of transactions, certain transactions that result in the taxpayer’s claiming a loss in excess of specified thresholds. Holders are urged to consult their tax advisors regarding these regulations and whether the transactions contemplated by the Plan would be subject to these regulations and require disclosure on the Holders’ tax returns. I. FATCA Pursuant to the Foreign Account Tax Compliance Act (“FATCA”), withholding at a rate of 30% generally will be required on interest (including OID) in respect of (and, after December 31, 2018, gross proceeds from the sale, redemption, retirement or other disposition of) the New First Lien Term Loan and other U.S.-source payments such as gross proceeds from the disposition of New Membership Interests or New Class A Common Stock, in each case, held by or through (i) a foreign financial institution (including investment funds) that does not qualify under certain exemptions, unless such institution enters into, and complies with, an agreement with the United States government to collect and provide to the United States tax authorities (or, pursuant to an applicable intergovernmental agreement, such institution provides the required information to the tax authority of such institution’s jurisdiction of tax residence) substantial information regarding United States account Holders of such institution (which would include certain equity and debt Holders of such institution, as well as certain account Holders that are foreign entities with United States owners) and agrees to withhold on certain payments or (ii) a foreign entity that is not a financial institution that does not qualify under certain exemptions, unless such entity certifies to the applicable withholding agent that such entity does not have “substantial United States owners” (as defined in the Tax Code) (which generally includes any United States person who directly or indirectly owns more than 10% of the entity) or provides the applicable withholding agent with information regarding the entity’s substantial United States owners, which the withholding agent will in turn provide to the United States government. Accordingly, the entity through which the New First Lien Term Loan, New Membership Interest, and New Class A Common Stock are held will affect the determination of whether such withholding is required. Foreign financial institutions and foreign entities that are not financial institutions may be subject to the provisions of an intergovernmental agreement between the United States and the jurisdiction in which such financial institution or foreign entity is located that may modify these requirements. A Holder of consideration received pursuant to the Plan should consult its own tax advisors regarding these rules and whether they may be relevant to the ownership and disposition of the consideration received pursuant to the Plan. THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX. THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF SUCH HOLDER’S CIRCUMSTANCES AND INCOME TAX SITUATION. ALL HOLDERS OF CLAIMS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN, INCLUDING THE 85 Case 18-10122 Doc 10 Filed 01/22/18 Page 96 of 97 APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, NON-U.S., OR NON-INCOME TAX LAW, AND OF ANY CHANGE IN APPLICABLE TAX LAW. [Remainder of Page Intentionally Left Blank] 86 Case 18-10122 Doc 10 Filed 01/22/18 Page 97 of 97 ARTICLE XI. CONCLUSION AND RECOMMENDATION The Debtors believe that Confirmation and Consummation of the Plan is preferable to all other alternatives. Consequently, the Debtors urge all Holders of Claims or Interests entitled to vote to accept the Plan and to evidence such acceptance by returning their ballots so they will be received by the Solicitation Agent no later than 5:00 p.m. (prevailing Eastern Time) on January 19, 2018. Dated: January 17, 2018 Respectfully submitted, PES HOLDINGS, LLC on behalf of itself and each of its Debtor affiliates By: /s/ Gregory Gatta Name: Gregory Gatta Title: Chief Executive Officer Prepared by: James H.M. Sprayregen, P.C. (pro hac vice admission pending) Steven N. Serajeddini (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 300 North LaSalle Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 -andEdward O. Sassower, P.C. (pro hac vice admission pending) Matthew C. Fagen (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 Proposed Co-Counsel to the Debtors and Debtors in Possession Laura Davis Jones (DE Bar No. 2436) Timothy P. Cairns (DE Bar No. 4228) Peter J. Keane (DE Bar No. 5503) PACHULSKI STANG ZIEHL & JONES LLP 919 North Market Street, 17th Floor Wilmington, Delaware 19801 Telephone: (302) 652-4100 Facsimile: (302) 652-4400 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 1 of 122 EXHIBIT A TO THE DISCLOSURE STATEMENT JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION FOR PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES Case 18-10122 Doc 10-1 Filed 01/22/18 Page SOLICITATION 2 of 122 VERSION IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: PES HOLDINGS, LLC, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 18-[_______] (____) (Jointly Administered) JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF PES HOLDINGS, LLC AND ITS DEBTOR AFFILIATES James H.M. Sprayregen, P.C. (pro hac vice admission pending) Steven N. Serajeddini (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 300 North LaSalle Street Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Email: james.sprayregen@kirkland.com steven.serajeddini@kirkland.com Laura Davis Jones (DE Bar No. 2436) Timothy Cairns (DE Bar No. 4228) Peter J. Keane (DE Bar No. 5503) PACHULSKI STANG ZIEHL & JONES LLP 919 North Market Street, 17th Floor P.O. Box 870 Wilmington, Delaware 19899 Telephone: (302) 652-4100 Facsimile: (302) 652-4400 Email: ljones@pszjlaw.com tcairns@pszjlaw.com pkeane@pszjlaw.com - and Edward O. Sassower, P.C. (pro hac vice admission pending) Matthew C. Fagen (pro hac vice admission pending) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 edward.sassower@kirkland.com Email: matthew.fagen@kirkland.com THIS CHAPTER 11 PLAN IS BEING SOLICITED FOR ACCEPTANCE OR REJECTION IN ACCORDANCE WITH BANKRUPTCY CODE SECTION 1125 AND WITHIN THE MEANING OF BANKRUPTCY CODE SECTION 1126. THIS CHAPTER 11 PLAN WILL BE SUBMITTED TO THE BANKRUPTCY COURT FOR APPROVAL FOLLOWING SOLICITATION AND THE DEBTORS’ FILING FOR CHAPTER 11 BANKRUPTCY. 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: PES Holdings, LLC (8157); North Yard Financing, LLC (6284); North Yard GP, LLC (5458); North Yard Logistics, L.P. (5952); PES Administrative Services, LLC (3022); PES Logistics GP, LLC (9202); PES Logistics Partners, L.P. (1288); PESRM Holdings, LLC (2107); and Philadelphia Energy Solutions Refining and Marketing LLC (9574). The Debtors’ service address is: 1735 Market Street, Philadelphia, Pennsylvania 19103. Case 18-10122 Doc 10-1 Filed 01/22/18 Page 3 of 122 TABLE OF CONTENTS Page INTRODUCTION ....................................................................................................................................................... 1 ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME, GOVERNING LAW, AND OTHER REFERENCES ....................................................................................... 1 A. Defined Terms .................................................................................................................................. 1 B. Rules of Interpretation .................................................................................................................... 15 C. Computation of Time ...................................................................................................................... 15 D. Governing Law ............................................................................................................................... 15 E. Reference to Monetary Figures ....................................................................................................... 16 F. Reference to the Debtors or the Reorganized Debtors .................................................................... 16 G. Controlling Document..................................................................................................................... 16 ARTICLE II. ADMINISTRATIVE AND PRIORITY CLAIMS .......................................................................... 16 A. Administrative Claims .................................................................................................................... 16 B. DIP Facility Claims......................................................................................................................... 16 C. Professional Fee Claims .................................................................................................................. 17 D. Priority Tax Claims ......................................................................................................................... 17 E. Statutory Fees.................................................................................................................................. 17 ARTICLE III. CLASSIFICATION, TREATMENT, AND VOTING OF CLAIMS AND INTERESTS .......... 17 A. Classification of Claims and Interests ............................................................................................. 17 B. Treatment of Classes of Claims and Interests ................................................................................. 18 C. Special Provision Governing Unimpaired Claims .......................................................................... 22 D. Elimination of Vacant Classes ........................................................................................................ 22 E. Voting Classes; Presumed Acceptance by Non-Voting Classes ..................................................... 22 F. Confirmation Pursuant to Sections 1129(a)(10) and 1129(b) of the Bankruptcy Code .................. 22 G. Intercompany Interests .................................................................................................................... 22 H. Subordinated Claims and Interests .................................................................................................. 22 ARTICLE IV. PROVISIONS FOR IMPLEMENTATION OF THE PLAN ....................................................... 23 A. General Settlement of Claims, Interests, and Causes of Action ...................................................... 23 B. Restructuring Transactions ............................................................................................................. 23 C. Sources of Consideration for Plan Distributions ............................................................................. 24 D. New Intermediation Facility and New First Loss Facility .............................................................. 25 E. Management Incentive Plan ............................................................................................................ 26 F. Exemption from Registration Requirements ................................................................................... 26 G. Vesting of Assets ............................................................................................................................ 26 H. Cancelation of Instruments, Certificates, and Other Documents .................................................... 27 I. Corporate Action ............................................................................................................................. 27 J. Corporate Existence ........................................................................................................................ 27 K. New Organizational Documents ..................................................................................................... 28 L. Effectuating Documents; Further Transactions............................................................................... 28 M. Section 1146(a) Exemption ............................................................................................................. 29 N. Directors and Officers ..................................................................................................................... 29 O. Employee Arrangements of the Reorganized Debtors .................................................................... 29 P. Restructuring Expenses ................................................................................................................... 30 Q. Preservation of Causes of Action .................................................................................................... 30 R. Wind Down and Dissolution of the Debtors ................................................................................... 31 ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES ...................... 31 A. Assumption or Rejection of Executory Contracts and Unexpired Leases....................................... 31 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 4 of 122 TABLE OF CONTENTS (CONT’D) Page B. C. D. E. F. G. H. Claims Based on Rejection of Executory Contracts or Unexpired Leases ...................................... 32 Cure of Defaults for Assumed Executory Contracts and Unexpired Leases ................................... 32 Indemnification ............................................................................................................................... 33 Insurance Policies ........................................................................................................................... 33 Contracts and Leases After the Petition Date.................................................................................. 33 Reservation of Rights ...................................................................................................................... 33 Nonoccurrence of Effective Date .................................................................................................... 34 ARTICLE VI. PROVISIONS GOVERNING DISTRIBUTIONS ........................................................................ 34 A. Distributions on Account of Claims and Interests Allowed as of the Effective Date ..................... 34 B. Rights and Powers of the Distribution Agent.................................................................................. 34 C. Special Rules for Distributions to Holders of Disputed Claims ...................................................... 34 D. Delivery of Distributions ................................................................................................................ 35 E. Claims Paid or Payable by Third Parties ......................................................................................... 36 F. Setoffs ............................................................................................................................................. 37 G. Allocation Between Principal and Accrued Interest ....................................................................... 37 ARTICLE VII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS AND INTERESTS...................... 37 A. Disputed Claims Process ................................................................................................................. 37 B. Claims Administration Responsibilities .......................................................................................... 38 C. Adjustment to Claims Without Objection ....................................................................................... 38 D. Disallowance of Claims and Interests ............................................................................................. 38 ARTICLE VIII. EFFECT OF CONFIRMATION OF THE PLAN ..................................................................... 38 A. Discharge of Claims and Termination of Interests .......................................................................... 38 B. Releases by the Debtors .................................................................................................................. 39 C. Releases by Holders of Claims and Interests .................................................................................. 39 D. Exculpation ..................................................................................................................................... 40 E. Injunction ........................................................................................................................................ 40 F. Protection Against Discriminatory Treatment ................................................................................ 41 G. Release of Liens .............................................................................................................................. 41 H. Reimbursement or Contribution ...................................................................................................... 41 I. Recoupment .................................................................................................................................... 41 J. Subordination Rights....................................................................................................................... 41 ARTICLE IX. CONDITIONS PRECEDENT TO THE EFFECTIVE DATE..................................................... 42 A. Conditions Precedent to the Effective Date .................................................................................... 42 B. Waiver of Conditions ...................................................................................................................... 43 C. Effect of Non-Occurrence of Conditions to Consummation ........................................................... 43 D. Substantial Consummation ............................................................................................................. 43 ARTICLE X. MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN ............................... 43 A. Modification of Plan ....................................................................................................................... 43 B. Effect of Confirmation on Modifications ........................................................................................ 43 C. Revocation or Withdrawal of Plan .................................................................................................. 44 ARTICLE XI. RETENTION OF JURISDICTION ............................................................................................... 44 ARTICLE XII. MISCELLANEOUS PROVISIONS ............................................................................................. 45 A. Immediate Binding Effect ............................................................................................................... 45 B. Additional Documents .................................................................................................................... 45 C. Dissolution of the Creditors’ Committee ........................................................................................ 46 D. Payment of Statutory Fees .............................................................................................................. 46 E. Reservation of Rights ...................................................................................................................... 46 ii Case 18-10122 Doc 10-1 Filed 01/22/18 Page 5 of 122 TABLE OF CONTENTS (CONT’D) Page F. G. H. I. J. K. L. M. N. Successors and Assigns................................................................................................................... 46 Service of Documents ..................................................................................................................... 46 Term of Injunctions or Stays ........................................................................................................... 47 Entire Agreement ............................................................................................................................ 48 Plan Supplement ............................................................................................................................. 48 Non-Severability ............................................................................................................................. 48 Votes Solicited in Good Faith ......................................................................................................... 48 Closing of Chapter 11 Cases ........................................................................................................... 48 Waiver or Estoppel.......................................................................................................................... 48 Annex I ....................................................................................................................................................................... 50 Annex II ...................................................................................................................................................................... 51 Annex III .................................................................................................................................................................... 52 iii Case 18-10122 Doc 10-1 Filed 01/22/18 Page 6 of 122 INTRODUCTION PES Holdings, LLC and its affiliated debtors and debtors in possession in the above-captioned chapter 11 cases jointly propose this chapter 11 plan of reorganization (the “Plan”) pursuant to section 1121(a) of the Bankruptcy Code. Although proposed jointly for administrative purposes, the Plan constitutes a separate plan for each of the foregoing entities and each of the foregoing entities is a proponent of the Plan within the meaning of section 1129 of the Bankruptcy Code. Reference is made to the accompanying Disclosure Statement for the Joint Prepackaged Chapter 11 Plan of Reorganization of PES Holdings, LLC and its Debtors Affiliates for a discussion of the Debtors’ history, business, properties and operations, valuation, projections, risk factors, a summary and analysis of the Plan and the transactions contemplated thereby, and certain related matters. ALL HOLDERS OF CLAIMS AND INTERESTS, TO THE EXTENT APPLICABLE, ARE ENCOURAGED TO READ THIS PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THIS PLAN. ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME, GOVERNING LAW, AND OTHER REFERENCES A. Defined Terms 1. “Additional Financing” means $75 million of additional liquidity, to be funded from the Additional Financing Facility Documents with the Additional Financing Lender pursuant to the Additional Financing Facility Documents. 2. “Additional Financing Facility” means the $75 million loan provided by the Additional Financing Lender pursuant to the Additional Financing Facility Documents. 3. “Additional Financing Facility Commitment Letter” means the commitment letter attached as Annex III to the Plan, including the term sheets attached thereto. 4. “Additional Financing Facility Documents” means the credit agreement and all other documents to be entered into in connection with the financing of the Additional Financing, on terms materially consistent with the Additional Financing Facility Commitment Letter and otherwise reasonably acceptable to the Required Consenting Cash Flow Creditors and the Additional Financing Lender as set forth in the Restructuring Support Agreement. 5. “Additional Financing Lender” means Sunoco Logistics Partners Operations L.P. (or an affiliate 6. “Admin” means PES Administrative Services, LLC. thereof). 7. “Administrative Claim” means a Claim incurred by the Debtors on or after the Petition Date and before the Effective Date for a cost or expense of administration of the Chapter 11 Cases entitled to priority under sections 503(b), 507(a)(2), or 507(b) of the Bankruptcy Code. 8. “Affiliate” means, with respect to any Person, all Persons that would fall within the definition assigned to such term in section 101(2) of the Bankruptcy Code, if such Person was a debtor in a case under the Bankruptcy Code. 9. “Allowed” means, as to a Claim or an Interest, a Claim or an Interest allowed under the Plan, under the Bankruptcy Code, or by a Final Order, as applicable. For the avoidance of doubt, (a) there is no requirement to file a Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed Claim under the Plan, and (b) Case 18-10122 Doc 10-1 Filed 01/22/18 Page 7 of 122 Unimpaired Claims shall be affirmatively determined to be Allowed Claims to the same extent such Claims would be allowed under applicable nonbankruptcy law. 10. “Assignee” means PES Inc., the Reorganized Debtors, or any subsidiary thereof, as reasonably determined by the Debtors, the Parent, the Required Consenting Term Loan B Creditors, and, solely to the extent adversely affecting their rights, the Required Consenting NYL Creditors. 11. “Assumed Agreements and Permits” means all of the rights, title and interest of Parent in, to and under the Parent Agreements and Parent Permits other than the Excluded Liabilities, Excluded Parent Cash, and Excluded Contracts. 12. “Avoidance Actions” means any and all avoidance, recovery, subordination, or other Claims, actions, or remedies that may be brought by or on behalf of the Debtors or their Estates or other authorized parties in interest under the Bankruptcy Code or applicable non-bankruptcy law, including actions or remedies under sections 502, 510, 542, 544, 545, and 547 through and including 553 of the Bankruptcy Code. 13. “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as may be amended from time to time. 14. “Bankruptcy Court” means the United States Bankruptcy Court for the District of Delaware or such other court having jurisdiction over the Chapter 11 Cases. 15. “Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075 of title 28 of the United States Code, 28 U.S.C. § 2075, as applicable to the Chapter 11 Cases, and the general, local, and chambers rules of the Bankruptcy Court. 16. “Cash” means the legal tender of the United States of America or the equivalent thereof, including bank deposits and checks. 17. “Causes of Action” means any claims, interests, damages, remedies, causes of action, demands, rights, actions, suits, obligations, liabilities, accounts, defenses, offsets, powers, privileges, licenses, liens, indemnities, guarantees, and franchises of any kind or character whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, contingent or non-contingent, liquidated or unliquidated, secured or unsecured, assertable directly or derivatively, matured or unmatured, suspected or unsuspected, in contract, tort, law, equity, or otherwise. Causes of Action also include: (a) all rights of setoff, counterclaim, or recoupment and claims under contracts or for breaches of duties imposed by law; (b) the right to object to or otherwise contest Claims or Interests; (c) claims pursuant to sections 362, 510, 542, 543, 544 through and including 550, or 553 of the Bankruptcy Code; and (d) such claims and defenses as fraud, mistake, duress, and usury, and any other defenses set forth in section 558 of the Bankruptcy Code. 18. “Certificate” means any instrument evidencing a Claim or an Interest. 19. “CFIUS” means the Committee on Foreign Investment in the United States. 20. “CFIUS Approval” means written notice from CFIUS stating that: (a) the Restructuring Transactions are not “covered transactions” and are not subject to review under the Defense Production Act of 1950, as amended and codified at 50 U.S.C. 4565 (the “DPA”); (b) the review of the Restructuring Transactions under Section 721 of the DPA, including any subsequent investigation, has been concluded, and there are no unresolved national security concerns with respect to the Restructuring Transactions; or (c) CFIUS has sent a report to the President of the United States requesting the President’s decision on the CFIUS notice submitted by any of Parent, the Debtors and the Consenting Creditors and either (i) the period under the DPA during which the President may announce his decision to take action to suspend, prohibit or place any limitations on the Restructuring Transactions has expired without any such action being threatened, announced or taken or (ii) the President has announced a decision not to take any action to suspend, prohibit or place any limitations on the Restructuring Transactions. 2 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 8 of 122 21. “CFIUS Filing” means a joint voluntary notice by any of the Parent, the Debtors and the Consenting Creditors contemplated under 31 C.F.R. § 800.402 with respect to the Restructuring Transactions. 22. “CFIUS Investigation” means prior to the Effective Date, CFIUS has initiated or prompted Parent, any of the Debtors or Consenting Creditors to initiate and has not closed a review or investigation under section 721 of the DPA of the Restructuring Transactions. 23. “Chapter 11 Cases” means the procedurally consolidated and jointly administered chapter 11 cases pending for the Debtors in the Bankruptcy Court. 24. “Claim” has the meaning set forth in section 101(5) of the Bankruptcy Code and shall exclude, for the avoidance of doubt, a RIN Liability. 25. “Class” means a category of Holders of Claims or Interests under section 1122(a) of the Bankruptcy Code. 26. “Collective Bargaining Agreement” means the Collective Bargaining Agreement, dated as of June 29, 2015 (as amended from time to time), between PESRM and the Unions. 27. “Confirmation” means the entry of the Confirmation Order on the docket of the Chapter 11 Cases. 28. “Confirmation Date” means the date on which the Bankruptcy Court enters the Confirmation Order on the docket of the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and 9021. 29. “Confirmation Hearing” means the hearing(s) before the Bankruptcy Court under section 1128 of the Bankruptcy Code at which the Debtors seek entry of the Confirmation Order. 30. “Confirmation Order” means an order entered by the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code and approving the Disclosure Statement. 31. “Consenting Creditors” means each Term Loan Lender, DIP Commitment Party, Additional Financing Lender, and Intermediation Lender (if applicable) that executes a signature page, or is otherwise a party, to the Restructuring Support Agreement. 32. “Consenting NYL Creditors” means, collectively, the Term Loan A Lenders that are parties to the Restructuring Support Agreement. 33. “Consenting Term Loan B Creditors” means, collectively, the Term Loan B Lenders that are parties to the Restructuring Support Agreement. 34. “Consummation” means the occurrence of the Effective Date. 35. “Creditor” has the meaning set forth in section 101(10) of the Bankruptcy Code. 36. “Creditors’ Committee” means the official committee of unsecured creditors, if any, appointed in the Chapter 11 Cases. 37. “Cure” means a Claim (unless waived or modified by the applicable counterparty) based upon a Debtor’s defaults under an Executory Contract or an Unexpired Lease assumed by such Debtor under section 365 of the Bankruptcy Code, other than a default that is not required to be cured pursuant to section 365(b)(2) of the Bankruptcy Code. 38. “CSAM” means Credit Suisse Asset Management, LLC, on behalf of, as the investment advisor to, or manager of, certain investment vehicles. 3 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 9 of 122 39. “D&O Liability Insurance Policies” means all unexpired directors’, managers’, and officers’ liability insurance policies (including any “tail policy”) of any of the Debtors for current or former directors’, managers’, officers’, and employees’ liability. 40. “Debtors” means, collectively, PES Holdings, PESRM Holdings, LLC, PES Logistics GP, LLC, PESRM, PES Logistics Partners, L.P., Admin, NYGP, NYL, and North Yard Financing, LLC. 41. “DIP Commitment” means the commitment of the DIP Commitment Parties to backstop the funding of the DIP Facility. 42. “DIP Commitment Fee” means 5.0% of the New Equity in the form of shares of New Class A Common Stock, subject to dilution by the Management Incentive Plan. 43. “DIP Commitment Parties” means CSAM and Halcyon. 44. “DIP Credit Agreement” means that certain Credit Agreement, by and among PESRM, Admin, the DIP Facility Lenders, and the DIP Facility Agent, as may be amended, restated, supplemented, or otherwise modified from time to time. 45. “DIP Election Date” has the meaning set forth in the Restructuring Support Agreement. 46. “DIP Election Joinder” means a joinder to the Restructuring Support Agreement pursuant to which a Consenting Term Loan B Creditor may, prior to the DIP Election Date, commit to, among other things, (a) fund its ratable share of the DIP Facility, (b) support the Plan, and (c) timely fulfill such commitments. 47. “DIP Facility” means that certain $120,000,000.00 senior secured term loan debtor in possession credit facility under the DIP Credit Agreement. 48. “DIP Facility Agent” means Cortland Capital Markets Services LLC, in its capacity as administrative agent and collateral agent under the DIP Credit Agreement, or its successor thereunder. 49. “DIP Facility Amount” means $120,000,000. 50. “DIP Facility Claims” means any and all Claims derived from, based upon, or secured by, the DIP Facility Loan Documents. 51. “DIP Facility Lenders” means, collectively, the lenders party from time to time to the DIP Credit Agreement, which initially, shall be the DIP Commitment Parties and the Electing DIP Facility Lenders. 52. “DIP Facility Loan Documents” means the DIP Credit Agreement and any amendments, modifications, supplements thereto, as well as any related notes, certificates, agreements, security agreements, documents and instruments (including any amendments, restatements, supplements, or modifications of any of the foregoing) related to or executed in connection with the DIP Credit Agreement. 53. “DIP Facility Orders” means, collectively, the interim and final orders entered by the Bankruptcy Court (a) authorizing certain Debtors to enter into the DIP Credit Agreement and incur postpetition obligations thereunder, (b) granting certain Debtors the authority to use cash collateral and prepetition collateral and (c) granting adequate protection to the Holders of certain Secured Claims. 54. “Disallowed” means any claim that is not Allowed. 55. “Disclosure Statement” means the disclosure statement for the Plan, including all exhibits and schedules thereto, to be approved by the Confirmation Order. 4 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 10 of 122 56. “Disputed” means, as to a Claim or an Interest, a Claim or an Interest: (a) that is not Allowed; (b) that is not disallowed under the Plan, the Bankruptcy Code, or a Final Order, as applicable; and (c) with respect to which a party in interest has filed a Proof of Claim or otherwise made a written request to a Debtor for payment, without any further notice to or action, order, or approval of the Bankruptcy Court. 57. “Distribution Agent” means, as applicable, the Reorganized Debtors or any Entity the Reorganized Debtors select, in consultation with the Required Consenting Term Loan B Creditors, to make or to facilitate distributions in accordance with the Plan. 58. “Distribution Date” means, except as otherwise set forth herein, the date or dates determined by the Debtors or the Reorganized Debtors, on or after the Effective Date, upon which the Distribution Agent shall make distributions to holders of Allowed Claims and Interests entitled to receive distributions under the Plan. 59. “Effective Date” means the date that is the first business day after the Confirmation Date on which all conditions precedent to the occurrence of the Effective Date set forth in Article IX.A of the Plan have been satisfied or waived in accordance with Article IX.B of the Plan and the Plan is deemed effective by the Debtors. 60. “Electing DIP Facility Lenders” means the Consenting Term Loan B Creditors who executed a DIP Election Joinder prior to the DIP Election Date. 61. “Entity” has the meaning set forth in section 101(15) of the Bankruptcy Code. 62. “Estate” means the estate of any Debtor created under section 541 of the Bankruptcy Code upon the commencement of the applicable Debtor’s Chapter 11 Case. 63. “Exculpated Parties” means collectively, and in each case in its capacity as such: (a) the Debtors and Reorganized Debtors; (b) to the maximum extent permitted under law, (i) the Consenting NYL Creditors, (ii) the Consenting Term Loan B Creditors, (iii) the Term Loan A Agent, (iv) the Term Loan B Agent, (v) the Refining ABL Lenders, (vi) the Refining ABL Agent, (vii) the Parent Parties, (viii) the DIP Facility Lenders, (ix) the DIP Agent, (x) the DIP Commitment Parties, (xi) the Additional Financing Lender, (xii) the Purchaser, and (xiii) the Intermediation Lenders; (c) with respect to each of the foregoing entities in clauses (a) and, to the extent applicable, (b), each such Entity’s current and former predecessors, successors, Affiliates (regardless of whether such interests are held directly or indirectly), subsidiaries, direct and indirect equityholders, funds, portfolio companies, management companies; and (d) with respect to each of the foregoing Entities in clauses (a) and, to the extent applicable, (b) and (c), each of their respective current and former directors, officers, members, employees, partners, managers, independent contractors, agents, representatives, principals, professionals, consultants, financial advisors, attorneys, accountants, investment bankers, and other professional advisors (with respect to clause (c), each solely in their capacity as such). 64. agreements. “Excluded Contracts” means the Parent equity agreements, subscription agreements, and related 65. “Excluded Parent Cash” means any Cash of the Parent other than the Parent Cash Contribution. 66. “Excluded Entities” means PESRM, PES Holdings, and PES Admin under the Sale Transaction. 67. “Excluded Liabilities” means any and all Liabilities arising from or incurred under (i) the PES Advisory Agreement, the PES Registration Rights Agreement or the Parent LLC Agreement; and (ii) any other Parent Agreements, Parent Permits, or Liabilities of Parent in each case under this clause (ii) based on the reasonable agreement of the Debtors and the Required Consenting Term Loan B Creditors, Parent, and, solely to the extent adversely affecting their rights or obligations under the Plan, the Required Consenting NYL Creditors, other than the PES Refining Contribution Agreement and the Parent Employment Agreements and any rights, title, interest and Liabilities thereunder, which are agreed to not be Excluded Liabilities. 68. “Executory Contract” means a contract or lease to which one or more of the Debtors is a party that is subject to assumption or rejection under section 365 of the Bankruptcy Code. 5 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 11 of 122 69. “Federal Judgment Rate” means the federal judgment rate in effect pursuant to 28 U.S.C. § 1961 as of the Petition Date, compounded annually. 70. “File,” “Filed,” or “Filing” means file, filed, or filing in the Chapter 11 Cases with the Bankruptcy 71. “Final Decree” means the decree contemplated under Bankruptcy Rule 3022. Court. 72. “Final Order” means, as applicable, an order or judgment of the Bankruptcy Court or other court of competent jurisdiction with respect to the relevant subject matter that has not been reversed, stayed, modified, or amended, and as to which the time to appeal or seek certiorari has expired and no appeal or petition for certiorari has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been or may be filed has been resolved by the highest court to which the order or judgment could be appealed or from which certiorari could be sought or the new trial, reargument, or rehearing shall have been denied, resulted in no modification of such order, or has otherwise been dismissed with prejudice. 73. “First Loss Claim” means any Claim held by a First Loss Lender arising under, derived from, or based on the First Loss Facility. 74. “First Loss Facility” means that certain schedule to the 2002 Master Agreement, dated as of October 7, 2014, between Merrill Lynch Commodities, Inc. and PES Inventory Company, LLC and the related ancillary agreements. 75. “First Loss Lender” means BTO Commodities L.P. 76. “General Unsecured Claim” means any Claim other than an Administrative Claim, a Professional Fee Claim, a Secured Tax Claim, an Other Secured Claim, a Priority Tax Claim, an Other Priority Claim, a Refining ABL Claim, a Term Loan Claim, an NGL Facility Claim, an Intermediation Claim, a First Loss Claim, or a DIP Facility Claim. 77. “Governance Term Sheet” means the term sheet attached as Annex I to the Plan. 78. “Governmental Unit” has the meaning set forth in section 101(27) of the Bankruptcy Code. 79. “Halcyon” means Halcyon Capital Management LP and its subsidiary management companies on behalf of, as the investment advisors to, or managers of, certain investment vehicles. 80. “Holder” means an Entity holding a Claim or Interest, as applicable. 81. “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as may be amended from time to time. 82. “HSR Approval” means the waiting period (and any extension thereof) applicable to the consummation of the Restructuring Transactions under the HSR Act shall have expired or early termination thereof shall have been granted. 83. “HSR Filing” means an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the Restructuring Transactions. 84. “Impaired” means, with respect to any Class of Claims or Interests, a Class of Claims or Interests that is impaired within the meaning of section 1124 of the Bankruptcy Code. 85. “Indemnification Provisions” means each of the Debtors’ indemnification provisions in place whether in the Debtors’ bylaws, certificates of incorporation, other formation documents, board resolutions, management or indemnification agreements, employment contracts, or otherwise, for the current and former directors, 6 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 12 of 122 officers, managers, employees, attorneys, other professionals, and agents of the Debtors and such current and former directors’, officers’, and managers’ respective Affiliates. 86. “Insider” has the meaning set forth in section 101(31) of the Bankruptcy Code. 87. “Intercompany Claim” means any Claim held by a Debtor against another Debtor. 88. by a Debtor. “Intercompany Interest” means, other than an Interest in PES Holdings, an Interest in a Debtor held 89. “Interest” means the membership interest, common stock, preferred stock, limited liability company interests, and any other equity, ownership, or profits interests of any Debtor and options, warrants, rights, or other securities or agreements to acquire the common stock, preferred stock, limited liability company interests, or other equity, ownership, or profits interests of any Debtor (whether or not arising under or in connection with any employment agreement), including any claim against the Debtors subject to subordination pursuant to section 510(b) of the Bankruptcy Code arising from or related to any of the foregoing. 90. “Intermediation Claim” means any Claim held by an Intermediation Lender, in its capacity as such, arising under, derived from, or based on the Intermediation Facility. 91. “Intermediation Facility” means that certain Amended and Restated Supply and Offtake Agreement, dated as of October 7, 2014, by and among PESRM, Admin, and Merrill Lynch Commodities, Inc. and the related ancillary agreements (in each case, as amended from time to time). 92. “Intermediation Lenders” means Merrill Lynch Commodities, Inc. and PES Inventory Company, LLC. 93. “Liabilities” means any and all liabilities, obligations, commitments, undertakings, fines, indemnities, fees, debts, payments, Liens, Claims, charges or other encumbrances. 94. 95. Wind Down. “Lien” has the meaning set forth in section 101(37) of the Bankruptcy Code. “Liquidator” means such Entity as may be designated by the Debtors as liquidator to effectuate the 96. “Management Incentive Plan” means the Reorganized Debtors’ management incentive plan. 97. “New Board” means the Board of Directors of PES Inc. 98. “New Class A Common Stock” means new shares of Class A common stock of PES Inc. 99. “New Class B Common Stock” means new shares of Class B common stock of PES Inc. 100. “New Common Stock” means the New Class A Common Stock and the New Class B Common Stock. 101. “New Equity” means (i) the shares of the New Class A Common Stock and (ii) the New Membership Interests with paired shares of New Class B Common Stock. For purposes of calculating a percentage amount of New Equity to be issued to any one or more persons, such percentage shall be calculated as a fraction with: (a) the numerator representing such number of shares of New Class A Common Stock (with an equal number of New Membership Interests to be issued to PES Inc.) or such number of New Membership Interests (with an equal number of shares of New Class B Common Stock to be issued to such persons) to be issued, as applicable, and (b) the denominator representing all New Membership Interests to be outstanding on the Effective Date immediately upon consummation of the Restructuring Transactions, subject to dilution by the Management Incentive Plan. 7 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 13 of 122 102. “New First Lien Facility Administrative Agent” means Cortland Capital Markets Services LLC, in its capacity as administrative agent under the New First Lien Term Loan Credit Agreement, and any successor thereto. 103. “New First Lien Term Loan” means that certain term loan facility, consisting of Tranche A, Tranche B and Tranche C, that PES Holdings will incur on the Effective Date, on terms consistent with the New First Lien Term Loan Term Sheet and reasonably acceptable to the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement. 104. “New First Lien Term Loan Credit Agreement” means the credit agreement evidencing the New First Lien Term Loan and reasonably acceptable to the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement. 105. “New First Lien Term Loan Documents” means the New First Lien Term Loan Credit Agreement, and any guarantee, security agreement, deed of trust, mortgage, and other relevant documentation entered into in connection therewith that shall be reasonably acceptable to the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement. 106. “New First Lien Term Loan Term Sheet” means the term sheet attached as Annex II to the Plan. 107. “New First Loss Facility” means that certain first loss facility (if any) reasonably acceptable to the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement. 108. “New Intermediation Facility” means that certain intermediation facility reasonably acceptable to the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement. 109. “New LLC Agreement” means the amended and restated limited liability company agreement of the Reorganized Partnership, which shall be consistent in all material respects with the Governance Term Sheet and reasonably acceptable to the Required Consenting Term Loan B Creditors and Parent as set forth in the Restructuring Support Agreement. 110. “New Membership Interests” means the new membership interests in the Reorganized Partnership to be issued and distributed under the Plan. 111. “New Organizational Documents” means the form of the certificates or articles of incorporation, bylaws, or such other applicable formation documents of each of the Reorganized Partnership, the Reorganized Debtors and PES Inc., including the New LLC Agreement and the New Stockholders Agreement, which shall be consistent in all material respects with the Governance Term Sheet and reasonably acceptable to the Required Consenting Term Loan B Creditors and Parent as set forth in the Restructuring Support Agreement. 112. “New Stockholders Agreement” means a stockholders agreement, to become effective on the Effective Date, by and among PES Inc., the Reorganized Partnership, and all recipients of New Equity under the Plan, which shall be consistent in all material respects with the Governance Term Sheet and reasonably acceptable to the Required Consenting Term Loan B Creditors and Parent as set forth in the Restructuring Support Agreement. 113. “NGL” means NGL Energy Partners LP, a Delaware master limited partnership. 114. “NGL Facility” means the Installment Sale and Purchase Agreement, dated as of May 7, 2014 (as amended from time to time), by and among PESRM, as the purchaser, and NGL, as the seller. 115. NGL Facility. “NGL Facility Claim” means any Claim held by NGL, arising under, derived from, or based on the 116. “NYGP” means North Yard GP, LLC. 117. “NYL” means North Yard Logistics, L.P. 8 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 14 of 122 118. “Other Priority Claim” means any Claim other than an Administrative Claim or a Priority Tax Claim entitled to priority in right of payment under section 507(a) of the Bankruptcy Code. 119. “Other Secured Claim” means any Secured Claim against any of the Debtors, other than a Refining ABL Claim, DIP Facility Claim, NGL Facility Claim, First Loss Claim, Intermediation Claim, Term Loan A Claim, or Term Loan B Claim. 120. “Parent” means Philadelphia Energy Solutions LLC. 121. “Parent Agreements” means agreements or contracts to which Parent is a party or a beneficiary and has rights or interests exclusive of the rights and interest of the Debtors, including the PES Advisory Agreement, PES Registration Rights Agreement, PES Refining Contribution Agreement, the Parent Employment Agreements, and the Parent LLC Agreement. 122. “Parent Cash Contribution” means the $65.0 million in Cash, payable by the Parent to the Debtors on the Effective Date, in accordance with the Plan. 123. “Parent Employment Agreements” means the Severance Program. 124. “Parent LLC Agreement” means that certain Amended and Restated Limited Liability Company Agreement of Parent, dated as of September 8, 2012, and as amended from time to time. 125. “Parent Parties” shall have the meaning set forth in the Restructuring Support Agreement. 126. “Parent Permits” means licenses, franchises, permits, certificates, approvals or other similar authorizations of the Parent. 127. “Person” shall have the meaning set forth in section 101(41) of the Bankruptcy Code. 128. “PES Holdings” means PES Holdings, LLC, a Delaware limited liability company, the parent of PESRM Holdings, LLC, PES Logistics GP, LLC, PESRM, PES Logistics Partners, L.P., Admin, NYGP, NYL, and North Yard Financing, LLC. 129. “PES Inc.” means a newly formed Delaware corporation to be the new top level parent entity of the Reorganized Debtors. 130. “PESRM” means Philadelphia Energy Solutions Refining and Marketing LLC. 131. “PES Advisory Agreement” means that certain Advisory Agreement, dated as of September 8, 2012, by and among Parent and the other parties thereto. 132. “PES Advisory Agreement Liabilities” means any and all Liabilities arising from or incurred under the PES Advisory Agreement, which, for the avoidance of doubt, are to be released by the Parent Parties pursuant to Article VIII.C of the Plan. 133. “PES Refining Contribution Agreement” means that certain Refining Contribution Agreement, dated as of July 2, 2012 and amended as of September 8, 2012, by and among Parent, PESRM and the other parties thereto. 134. “PES Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of September 8, 2012, by and among Parent and the other parties thereto. 135. “Petition Date” means the date on which the Debtors commenced the Chapter 11 Cases. 9 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 15 of 122 136. “Plan” means this joint prepackaged chapter 11 plan, including all appendices, exhibits, schedules and supplements hereto (including any appendices, exhibits, schedules and supplements to the Plan that are contained in the Plan Supplement), as it may be altered, amended, modified, or supplemented from time to time in accordance with the terms hereof. 137. “Plan Supplement” means the compilation of documents and forms of documents, schedules, and exhibits to the Plan (as amended, supplemented, or modified from time to time in accordance with the terms hereof, the Bankruptcy Code and the Bankruptcy Rules), to be Filed by the Debtors no later than 7 days before the Confirmation Hearing or such later date as may be approved by the Bankruptcy Court on notice to parties in interest, and additional documents or amendments to previously Filed documents, Filed before the Effective Date as amendments to the Plan Supplement, including the following, as applicable: (a) the New Organizational Documents; (b) the New First Lien Term Loan Credit Agreement; (c) the New First Loss Facility (if any); (d) the New Intermediation Facility; (e) the Additional Financing Facility Documents; (f) a list of retained Causes of Action; (g) a disclosure of the members of the New Board; (h) the Purchase Agreement; (i) the Schedule of Rejected Executory Contracts and Unexpired Leases; and (j) the Restructuring Transactions Exhibit. The Debtors shall have the right to amend the documents contained in, and exhibits to, the Plan Supplement through the Effective Date. 138. “PNC Fee” has the meaning set forth in Restructuring Support Agreement. 139. “Prepetition Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of April 4, 2013, by and among the Refining ABL Agent and the Term Loan B Agent, and acknowledged and agreed to by the Debtors. 140. “Priority Tax Claim” means any Claim of a Governmental Unit of the kind specified in section 507(a)(8) of the Bankruptcy Code. 141. “Pro Rata” means the proportion that an Allowed Claim or Allowed Interest in a particular Class bears to the aggregate amount of Allowed Claims or Allowed Interests in that respective Class, or the proportion that Allowed Claims or Allowed Interests in a particular Class bear to the aggregate amount of Allowed Claims or Allowed Interests in a particular Class and other Classes entitled to share in the same recovery as such Allowed Claims or Allowed Interests under the Plan. 142. “Professional” means an Entity: (a) employed in the Chapter 11 Cases pursuant to a Final Order in accordance with sections 327, 363, or 1103 of the Bankruptcy Code and to be compensated for services rendered prior to or on the Effective Date pursuant to sections 327, 328, 329, 330, or 331 of the Bankruptcy Code or (b) for which compensation and reimbursement has been Allowed by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code. 143. “Professional Fee Amount” means the aggregate amount of Professional Fee Claims and other unpaid fees and expenses that the Professionals estimate they have incurred or will incur in rendering services to the Debtors prior to and as of the Confirmation Date, which estimates Professionals shall deliver to the Debtors as set forth in Article II.C of the Plan. 144. “Professional Fee Claims” means all Administrative Claims for the compensation of Professionals and the reimbursement of expenses incurred by such Professionals through and including the Confirmation Date to the extent such fees and expenses have not been previously paid. 145. “Professional Fee Escrow Account” means an interest-bearing account funded by the Debtors with Cash on the Effective Date in an amount equal to the Professional Fee Amount as set forth in Article II.C of the Plan. 146. “Proof of Claim” means a proof of Claim Filed against any of the Debtors in the Chapter 11 Cases. 147. “Purchase Agreement” means that certain asset purchase agreement between the Debtors and the Purchaser, to be included in the Plan Supplement, and which shall be in form and substance reasonably acceptable to 10 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 16 of 122 the Parent, the Required Consenting Term Loan B Creditors, and, solely to the extent adversely affecting their rights or obligations under the Plan, the Required Consenting NYL Creditors. 148. “Purchaser” shall have the meaning set forth in the Purchase Agreement. 149. “Rail Terminaling Services Agreement” means the Rail Terminaling Services Agreement, dated as of January 1, 2015 (as amended from time to time), by and between PESRM and NYL, and related agreements including the services and secondment and easement agreements. 150. “Rail Terminaling Services Agreement Liabilities” means any and all liabilities, obligations, commitments, undertakings, fines, indemnities, fees, debts, or payments arising from or incurred under the Rail Terminaling Services Agreement, which, for the avoidance of doubt, are to be canceled and released pursuant to Article III.B.10 and Article V.A of the Plan. 151. “Refining ABL Agent” means Bank of America, N.A., in its capacity as administrative agent for the Refining ABL Lenders. 152. “Refining ABL Claims” means any Claim held by the Refining ABL Lenders, in their capacity as such, arising under, derived from, or based on the Refining ABL Credit Agreement. 153. “Refining ABL Credit Agreement” means the Amended and Restated Revolving Credit and Guaranty Agreement, dated as of October 7, 2014 (as amended from time to time), by and among PESRM, as the borrower, Admin, as guarantor, the Refining ABL Agent, and the Refining ABL Lenders. 154. Agreement. “Refining ABL Facility” means the Revolving Credit Loans, as defined in the Refining ABL Credit 155. Agreement. “Refining ABL Lenders” means any Revolving Lender, as defined in the Refining ABL Credit 156. “Reinstate,” “Reinstated,” or “Reinstatement” means, with respect to Claims or Interests, that the Claim or Interest shall be rendered Unimpaired in accordance with section 1124 of the Bankruptcy Code. 157. “Released Parties” means, collectively, and in each case in its capacity as such: (a) the Debtors and Reorganized Debtors; (b) the Parent Parties; (c) the Term Loan A Lenders; (d) the Term Loan B Lenders; (e) the Term Loan A Agent; (f) the Term Loan B Agent; (g) the Intermediation Lenders; (h) the First Loss Lenders; (i) the Refining ABL Lenders; (j) the Refining ABL Agent; (k) the DIP Facility Lenders; (l) the DIP Facility Agent; (m) the DIP Commitment Parties; (n) the Additional Financing Lender; (o) the Purchaser; (p) with respect to each of the foregoing entities in clauses (a) through (o), each such Entity’s current and former predecessors, successors, Affiliates (regardless of whether such interests are held directly or indirectly), subsidiaries, direct and indirect equityholders, funds, portfolio companies, management companies; and (q) with respect to each of the foregoing Entities in clauses (a) through (p), each of their respective current and former directors, officers, members, employees, partners, managers, independent contractors, agents, representatives, principals, professionals, consultants, financial advisors, attorneys, accountants, investment bankers, and other professional advisors (with respect to clause (p), each solely in their capacity as such); provided, however, that any Holder of a Claim or Interest that (i) votes to reject the Plan and (ii) objects to the releases in the Plan shall not be a “Released Party.” 158. “Releasing Parties” means collectively, and in each case solely in its capacity as such: (a) the Debtors and Reorganized Debtors; (b) the Parent Parties; (c) the Term Loan A Lenders; (d) the Term Loan B Lenders; (e) the Term Loan A Agent; (f) the Term Loan B Agent; (g) the Intermediation Lenders; (h) the First Loss Lenders; (i) the Refining ABL Lenders; (j) the Refining ABL Agent; (k) the DIP Facility Lenders; (l) the DIP Facility Agent; (m) the DIP Commitment Parties; (n) the Additional Financing Lender; (o) the Purchaser; (p) with respect to each of the foregoing entities in clauses (a) through (o), each such Entity’s current and former predecessors, successors, Affiliates (regardless of whether such interests are held directly or indirectly), subsidiaries, direct and indirect equityholders, funds, portfolio companies, management companies; (q) with respect to each of the foregoing Entities 11 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 17 of 122 in clauses (a) through (p), each of their respective current and former directors, officers, members, employees, partners, managers, independent contractors, agents, representatives, principals, professionals, consultants, financial advisors, attorneys, accountants, investment bankers, and other professional advisors (with respect to clause (p), each solely in their capacity as such); and (r) all Holders of Claims and Interests not described in the foregoing clauses (a) through (q); provided, however, that any Holder of a Claim or Interest that (i) votes to reject the Plan and (ii) objects to the releases in the Plan shall not be a “Releasing Party.” 159. “Reorganization Transaction” means the form of Restructuring Transaction under which the Debtors’ assets shall vest in the Reorganized Debtors in accordance with the Plan. “Reorganized Debtors” means the Debtors, as reorganized pursuant to and under the Plan or any 160. successor thereto and the Purchaser. 161. “Reorganized Partnership” means (i) in the event of a Sale Transaction, Purchaser, or (ii) in the event of a Reorganization Transaction, Reorganized PES Holdings or Parent. 162. “Reorganized PES Holdings” means PES Holdings, as reorganized pursuant to and under the Plan or any successor thereto. “Required Consenting Cash Flow Creditors” has the meaning assigned to such term in the 163. Restructuring Support Agreement. “Required Consenting Creditors” has the meaning ascribed to such term in the Restructuring 164. Support Agreement. 165. “Required Consenting NYL Creditors” has the meaning ascribed to such term in the Restructuring Support Agreement. 166. “Required Consenting Term Loan B Creditors” has the meaning ascribed to such term in the Restructuring Support Agreement. “Restructuring Expenses” means all fees, expenses and disbursements of the DIP Facility Agent, 167. the DIP Commitment Parties, the DIP Facility Lenders, the Additional Financing Lender, the Term Loan Agents, and the Restructuring Support Parties that are required to be paid under or pursuant to the DIP Credit Agreement, the DIP Facility Orders, the Term Loan B Credit Agreement, the Term Loan A Credit Agreement, or the Restructuring Support Agreement. 168. “Restructuring Support Agreement” means that certain Restructuring Support Agreement, dated as of January 12, 2018 by and among the Debtors and the Restructuring Support Parties, including all exhibits and schedules attached thereto, as such agreement may be amended from time to time in accordance with the terms thereof, which shall be attached as Exhibit B to the Disclosure Statement. 169. “Restructuring Support Parties” means, collectively, the Consenting Creditors, and the Parent Parties, in each case, that are party to the Restructuring Support Agreement. 170. “Restructuring Transactions” mean those mergers, amalgamations, consolidations, arrangements, continuances, restructurings, transfers, conversions, dispositions, liquidations, dissolutions, or other corporate transactions, that the Debtors reasonably determine, with the consent of the Required Consenting Term Loan B Creditors, Parent, and, solely to the extent adversely affecting their rights or obligations under the Plan, the Required Consenting NYL Creditors (in each case, such consent not to be unreasonably withheld), to be necessary to implement the Plan. 171. “Restructuring Transactions Exhibit” means an exhibit, which may be included, as needed, in the Plan Supplement, and which sets forth the Restructuring Transactions the Debtors shall implement on the Effective Date. 12 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 18 of 122 172. “RFS Program” means the Clean Air Act’s renewable fuel standard program at 42 U.S.C. § 7545(o), including regulations promulgated thereunder, which is administered by the U.S. Environmental Protection Agency. 173. “RIN” means renewable identification numbers under the RFS Program, as defined in 40 C.F.R. § 80.1401. 174. “RIN Liabilities” means any liabilities or obligations of the Debtors or Reorganized Debtors under the Clean Air Act, including regulations promulgated thereunder, including any obligation to generate, acquire or otherwise obtain or retire RINs, and any commitments, undertakings, fines, or Liabilities of the Debtors or Reorganized Debtors relating to the RFS Program, that accrue or arise prior to the Effective Date. 175. “RIN Sale Proceeds” means $27.5 million of proceeds from the Debtors’ sale of RINs. 176. “Sale Transaction” means the form of Restructuring Transactions under the Plan consummated between the Debtors and the Purchaser in accordance with the Plan, the Purchase Agreement, and the Restructuring Transactions Exhibit which shall be on terms reasonably acceptable to the Required Consenting Term Loan B Creditors and the Parent and, solely to the extent adversely affecting their rights or obligations under the Plan, the Required Consenting NYL Creditors. 177. “Schedule of Rejected Executory Contracts and Unexpired Leases” means the schedule (including any amendments or modifications thereto), if any, of certain Executory Contracts and Unexpired Leases to be rejected by the Debtors pursuant to the Plan, as set forth in the Plan Supplement, as amended by the Debtors from time to time before the Confirmation Date. 178. “SEC” means the Securities and Exchange Commission. 179. “Secured” means, when referring to a Claim: (a) secured by a Lien on property of any Estate, which lien is valid, perfected and enforceable pursuant to applicable law or by reason of a Bankruptcy Court order, to the extent of the value of such collateral, as determined in accordance with section 506(a) of the Bankruptcy Code or (b) subject to a valid right of setoff pursuant to section 553 of the Bankruptcy Code. 180. “Secured Tax Claim” means any Secured Claim that, absent its secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations), including any related Secured Claim for penalties. 181. “Securities Act” means the Securities Act of 1933, 15 U.S.C. §§ 77a–77aa, together with the rules and regulations promulgated thereunder, as amended from time to time. 182. “Security” has the meaning set forth in section 2(a)(1) of the Securities Act. “Securities” shall have a correlative meaning. 183. “Servicer” means an agent or other authorized representative of holders of Claims or Interests. 184. “Severance Program” means that certain severance program by and between the Debtors and certain current executive and senior management employees, in effect as of the date hereof, including any letters, contracts, agreements, or obligations with respect thereto. 185. “Solicitation Agent” means Rust Consulting/Omni Bankruptcy, the notice, claims, and solicitation agent retained by the Debtors in the Chapter 11 Cases by Bankruptcy Court order. 186. “Solicitation Commencement Date” means the date of distribution of the Solicitation Materials to holders of Claims in Impaired Classes. 187. “Solicitation Materials” means, collectively, the solicitation materials with respect to the Plan. 13 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 19 of 122 188. “Term Loan A Agent” means PNC Bank, National Association, in its capacity as administrative agent under the Term Loan A Credit Agreement, and any successor thereto. 189. “Term Loan A Claims” means any Claims of the Term Loan A Lenders derived from or based upon the Term Loan A Credit Agreement. 190. “Term Loan A Credit Agreement” means that certain Credit Agreement, dated as of November 24, 2015 (as amended from time to time), by and among NYL, as borrower, NYGP, as guarantor, the Term Loan A Agent, and the Term Loan A Lenders. 191. “Term Loan A Lenders” means the lending institutions party from time to time to the Term Loan A Credit Agreement 192. “Term Loan A Loan Documents” means, collectively, the Term Loan A Credit Agreement, and any security documents, including the letter of credit documentation, and any other collateral and ancillary documents, including any applicable forbearance agreement, executed in connection with the Term Loan A Credit Agreement. 193. “Term Loan Agents” means the Term Loan A Agent and the Term Loan B Agent. 194. “Term Loan B Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent under the Term Loan B Credit Agreement, and any successor thereto. 195. “Term Loan B Claims” means any Claims of the Term Loan B Lenders derived from or based upon the Term Loan B Credit Agreement. 196. “Term Loan B Credit Agreement” means that certain Term Loan Agreement, dated as of April 4, 2013 (as amended from time to time), by and among PESRM, as borrower, the Term Loan B Agent, and the Term Loan B Lenders. 197. “Term Loan B Lenders” means the lending institutions party from time to time to the Term Loan B Credit Agreement. 198. “Term Loan B Loan Documents” means, collectively, the Term Loan B Credit Agreement, and any security documents, including the Prepetition Intercreditor Agreement, the letter of credit documentation, and any other collateral and ancillary documents, including any applicable forbearance agreement, executed in connection with the Term Loan B Credit Agreement. 199. Agreements. “Term Loan Claims” means any Claim derived from or based upon the Term Loan Credit 200. “Term Loan Credit Agreements” means the Term Loan A Credit Agreement and the Term Loan B Credit Agreement. 201. “Term Loan Lenders” means the Term Loan A Lenders and the Term Loan B Lenders. 202. “Third-Party Release” means the releases set forth in Article VIII.C of the Plan. 203. “U.S. Trustee” means the Office of the United States Trustee for the District of Delaware. 204. “Unclaimed Distribution” means any distribution under the Plan on account of an Allowed Claim or Allowed Interest to a holder that has not: (a) accepted a particular distribution or, in the case of distributions made by check, negotiated such check; (b) given notice to the Reorganized Debtors of an intent to accept a particular distribution; (c) responded to the Debtors’ or Reorganized Debtors’ requests for information necessary to facilitate a particular distribution; or (d) taken any other action necessary to facilitate such distribution. 14 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 20 of 122 205. “Unexpired Lease” means a lease of nonresidential real property to which one or more of the Debtors is a party that is subject to assumption or rejection under section 365 of the Bankruptcy Code. 206. “Unimpaired” means, with respect to a Class of Claims or Interests, a Class consisting of Claims or Interests that are not impaired within the meaning of section 1124 of the Bankruptcy Code. 207. “Unions” means United Steel, Paper and Forestry Rubber, Manufacturing, Energy Allied Industrial and Service Workers International Union, AFL-CIO-CLC and its Philadelphia Local 10-1. 208. “Wind Down” means, in the event of a Sale Transaction, the wind down, dissolution, and liquidation after the Effective Date of the Excluded Entities. B. Rules of Interpretation For purposes of the Plan: (1) in the appropriate context, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine, or neuter gender shall include the masculine, feminine, and the neuter gender; (2) unless otherwise specified, any reference herein to a contract, lease, instrument, release, indenture, or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (3) unless otherwise specified, any reference herein to an existing document, schedule, or exhibit, shall mean such document, schedule, or exhibit, as it may have been or may be amended, modified, or supplemented; (4) unless otherwise specified, all references herein to “Articles” and “Sections” are references to Articles and Sections, respectively, hereof or hereto; (5) the words “herein,” “hereof,” and “hereto” refer to the Plan in its entirety rather than to any particular portion of the Plan; (6) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (7) unless otherwise specified herein, the rules of construction set forth in section 102 of the Bankruptcy Code shall apply; (8) any term used in capitalized form herein that is not otherwise defined but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as applicable; (9) references to docket numbers of documents Filed in the Chapter 11 Cases are references to the docket numbers under the Bankruptcy Court’s CM/ECF system; (10) references to “Proofs of Claim,” “holders of Claims,” “Disputed Claims,” and the like shall include “Proofs of Interest,” “holders of Interests,” “Disputed Interests,” and the like as applicable; (11) references to “shareholders,” “directors,” and/or “officers” shall also include “members” and/or “managers,” as applicable, as such terms are defined under the applicable state limited liability company laws; (12) the words “include” and “including” and variations thereof shall not be deemed to be terms of limitation, and shall be deemed to be followed by the words “without limitation,” and (13) any immaterial effectuating provisions may be interpreted by the Debtors or the Reorganized Debtors in such a manner that is consistent with the overall purpose and intent of the Plan and without further notice to or action, order, or approval of the Bankruptcy Court or any other Entity. C. Computation of Time Unless otherwise specifically stated herein, the provisions of Bankruptcy Rule 9006(a) shall apply in computing any period of time prescribed or allowed herein. If the date on which a transaction may occur pursuant to the Plan shall occur on a day that is not a business day, then such transaction shall instead occur on the next succeeding business day. D. Governing Law Except to the extent a rule of law or procedure is supplied by federal law (including the Bankruptcy Code or Bankruptcy Rules), and subject to the provisions of any contract, lease, instrument, release, indenture, or other agreement or document entered into expressly in connection herewith, the rights and obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to conflict of laws principles. 15 Case 18-10122 E. Doc 10-1 Filed 01/22/18 Page 21 of 122 Reference to Monetary Figures All references in the Plan to monetary figures refer to currency of the United States of America, unless otherwise expressly provided. F. Reference to the Debtors or the Reorganized Debtors Except as otherwise specifically provided in the Plan to the contrary, references in the Plan to the Debtors or to the Reorganized Debtors mean the Debtors and the Reorganized Debtors, as applicable, to the extent the context requires. G. Controlling Document In the event of an inconsistency between the Plan, the Restructuring Support Agreement, and the Disclosure Statement, the terms of the Plan shall control in all respects. In the event of an inconsistency between the Plan and any document included in the Plan Supplement, the Plan shall control. In the event of an inconsistency between the Confirmation Order and any of the Plan, the Restructuring Support Agreement, or the Disclosure Statement, the Confirmation Order shall control. ARTICLE II. ADMINISTRATIVE AND PRIORITY CLAIMS In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, DIP Facility Claims, Professional Fee Claims, and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims and Interests set forth in Article III of the Plan. A. Administrative Claims Except to the extent that a holder of an Allowed Administrative Claim agrees to less favorable treatment, each holder of an Allowed Administrative Claim (other than holders of Professional Fee Claims and Claims for fees and expenses pursuant to section 1930 of chapter 123 of title 28 of the United States Code) will receive in full and final satisfaction of its Administrative Claim an amount of Cash equal to the amount of such Allowed Administrative Claim in accordance with the following: (1) if an Administrative Claim is Allowed on or prior to the Effective Date, on the Effective Date or as soon as reasonably practicable thereafter (or, if not then due, when such Allowed Administrative Claim is due or as soon as reasonably practicable thereafter); (2) if such Administrative Claim is not Allowed as of the Effective Date, no later than 30 days after the date on which an order Allowing such Administrative Claim becomes a Final Order, or as soon as reasonably practicable thereafter; (3) if such Allowed Administrative Claim is based on liabilities incurred by the Debtors in the ordinary course of their business after the Petition Date in accordance with the terms and conditions of the particular transaction giving rise to such Allowed Administrative Claim without any further action by the holders of such Allowed Administrative Claim; (4) at such time and upon such terms as may be agreed upon by such holder and the Debtors or the Reorganized Debtors, as applicable; or (5) at such time and upon such terms as set forth in an order of the Bankruptcy Court. B. DIP Facility Claims As of the Effective Date, the DIP Facility Claims shall be deemed to be Allowed in the full amount due and owing under the DIP Credit Agreement. On the Effective Date, in full and final satisfaction of and in exchange for each Allowed DIP Facility Claim, each Holder of an Allowed DIP Facility Claim shall receive its Pro Rata share of: (1) Tranche A of the New First Lien Term Loan; and (2) 2.5% of the New Equity in the form of New Class A Common Stock, subject to dilution by the Management Incentive Plan. In addition, each DIP Commitment Party shall receive its Pro Rata share of the DIP Commitment Fee in accordance with the DIP Facility Orders. 16 Case 18-10122 C. Doc 10-1 Filed 01/22/18 Page 22 of 122 Professional Fee Claims All requests for payment of Professional Fee Claims for services rendered and reimbursement of expenses incurred prior to the Confirmation Date must be filed no later than 45 days after the Effective Date. The Bankruptcy Court shall determine the Allowed amounts of such Professional Fee Claims after notice and a hearing in accordance with the procedures established by the Bankruptcy Court. The Reorganized Debtors shall pay Professional Fee Claims in Cash in the amount the Bankruptcy Court allows, including from the Professional Fee Escrow Account, which the Reorganized Debtors will establish in trust for the Professionals and fund with Cash equal to the Professional Fee Amount on the Effective Date. Professionals shall deliver to the Debtors their estimates for purposes of the Reorganized Debtors computing the Professional Fee Amount no later than three (3) business days prior to the anticipated Effective Date. For the avoidance of doubt, no such estimate shall be deemed to limit the amount of the fees and expenses that are the subject of a Professional’s final request for payment of Professional Fee Claims filed with the Bankruptcy Court. If a Professional does not provide an estimate, the Debtors may estimate the unpaid and unbilled fees and expenses of such Professional. No funds in the Professional Fee Escrow Account shall be property of the Estates, and the Professional Fee Escrow Account shall be maintained in trust solely for the benefit of holders of Professional Fee Claims. Any funds remaining in the Professional Fee Escrow Account after all Allowed Professional Fee Claims have been paid shall be turned over to the Reorganized Debtors. From and after the Confirmation Date, any requirement that Professionals comply with sections 327 through 331 and 1103 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date shall terminate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court. D. Priority Tax Claims Except to the extent that a holder of an Allowed Priority Tax Claim agrees to a less favorable treatment, in full and final satisfaction, settlement, release, and discharge of and in exchange for each Allowed Priority Tax Claim, each holder of such Allowed Priority Tax Claim shall be treated in accordance with the terms set forth in section 1129(a)(9)(C) of the Bankruptcy Code and, for the avoidance of doubt, holders of Allowed Priority Tax Claims will receive interest on such Allowed Priority Tax Claims after the Effective Date in accordance with sections 511 and 1129(a)(9)(C) of the Bankruptcy Code. E. Statutory Fees All fees due and payable pursuant to section 1930 of Title 28 of the U.S. Code prior to the Effective Date shall be paid by the Debtors. On and after the Effective Date, the Reorganized Debtors shall pay any and all such fees when due and payable, and shall File with the Bankruptcy Court quarterly reports in a form reasonably acceptable to the U.S. Trustee. Each Debtor shall remain obligated to pay quarterly fees to the U.S. Trustee until the earliest of that particular Debtor’s case being closed, dismissed, or converted to a case under Chapter 7 of the Bankruptcy Code. ARTICLE III. CLASSIFICATION, TREATMENT, AND VOTING OF CLAIMS AND INTERESTS A. Classification of Claims and Interests The Plan constitutes a separate plan proposed by each Debtor within the meaning of section 1121 of the Bankruptcy Code. Except for the Claims addressed in Article II of the Plan, all Claims and Interests are classified in the Classes set forth below in accordance with section 1122 of the Bankruptcy Code. A Claim or an Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Claim or an Interest also is classified in a particular Class for the purpose of receiving distributions under the Plan only to the extent that such Claim or Interest is an Allowed Claim or Allowed Interest in that Class and has not been paid, released, or otherwise satisfied or disallowed by Final Order prior to the Effective Date. For all purposes under the Plan, each Class will contain sub-Classes for each of the Debtors, as applicable; 17 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 23 of 122 provided that any Class that does not contain any Allowed Claims or Allowed Interests with respect to a particular Debtor will be treated in accordance with Article III.D below. Below is a chart assigning each Class a number for purposes of identifying each separate Class. Claim or Interest Status Voting Rights 1 Other Secured Claims Unimpaired Presumed to Accept 2 Other Priority Claims Unimpaired Presumed to Accept 3 Refining ABL Claims Unimpaired Presumed to Accept 4 NGL Facility Claims Unimpaired Presumed to Accept 5 Intermediation Claims Unimpaired Presumed to Accept 6 First Loss Claims Unimpaired Presumed to Accept 7 Term Loan A Claims Impaired Entitled to Vote 8 Term Loan B Claims Impaired Entitled to Vote 9 General Unsecured Claims Unimpaired Presumed to Accept 10 Intercompany Claims Unimpaired, or Impaired Presumed to Accept or Presumed to Reject 11 Intercompany Interests Unimpaired Presumed to Accept 12 Interests in PES Holdings Impaired Presumed to Reject Class B. Treatment of Classes of Claims and Interests Except to the extent that the Debtors and a Holder of an Allowed Claim or Allowed Interest, as applicable, agree to less favorable treatment, each such Holder shall receive under the Plan the treatment described below in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Holder’s Allowed Claim or Allowed Interest. Unless otherwise indicated, the Holder of an Allowed Claim or Allowed Interest, as applicable, shall receive such treatment on the Effective Date or as soon as reasonably practicable thereafter. 1. Class 1 — Other Secured Claims a. Classification: Class 1 consists of any Other Secured Claims against any Debtor. b. Treatment: Each holder of an Allowed Other Secured Claim shall receive, as the Debtors or the Reorganized Debtors (as applicable) determine, either: i. payment in full, in Cash, of the unpaid portion of its Allowed Other Secured Claim, including any interest thereon required to be paid under section 506(b) of the Bankruptcy Code (or if payment is not then due, in accordance with the terms of such Allowed Other Secured Claim) on the latest of: (a) on or as soon as reasonably practicable after the Effective Date if such Allowed Other Secured Claim is Allowed as of the Effective Date; (b) on or as soon as reasonably practicable after the date such Other Secured Claim is Allowed; and (c) the date such Allowed Other Secured Claim becomes due and payable, or as soon thereafter as is reasonably practicable; 18 Case 18-10122 c. 2. 3. 4. Doc 10-1 Filed 01/22/18 Page 24 of 122 ii. the collateral securing its Allowed Other Secured Claim, plus any interest thereon required to be paid under section 506(b) of the Bankruptcy Code; iii. Reinstatement of such Other Secured Claim; or iv. such other treatment rendering such Claim Unimpaired. Voting: Class 1 is Unimpaired. Holders of Allowed Other Secured Claims in Class 1 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Other Secured Claims in Class 1 are not entitled to vote to accept or reject the Plan. Class 2 — Other Priority Claims a. Classification: Class 2 consists of any Other Priority Claims against any Debtor. b. Treatment: Each holder of an Allowed Other Priority Claim shall receive payment in full, in Cash, of the unpaid portion of its Allowed Other Priority Claim on the latest of: (i) on or as soon as reasonably practicable after the Effective Date if such Allowed Other Priority Claim is Allowed as of the Effective Date; (ii) on or as soon as reasonably practicable after the date such Other Priority Claim is Allowed; and (iii) the date such Allowed Other Priority Claim becomes due and payable, or as soon thereafter as is reasonably practicable. c. Voting: Class 2 is Unimpaired. Holders of Allowed Other Priority Claims in Class 2 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Other Priority Claims in Class 2 are not entitled to vote to accept or reject the Plan. Class 3 — Refining ABL Claims a. Classification: Class 3 consists of all Refining ABL Claims against any Debtor. b. Treatment: In full satisfaction of each Refining ABL Claim, each holder of an Allowed Refining ABL Claim shall receive payment in full in Cash. c. Voting: Class 3 is Unimpaired. Holders of Allowed Refining ABL Claims in Class 3 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Refining ABL Claims in Class 3 are not entitled to vote to accept or reject the Plan. Class 4 — NGL Facility Claims a. Classification: Class 4 consists of all NGL Facility Claims against any Debtor. b. Treatment: In full and final satisfaction of each NGL Facility Claim, all NGL Facility Claims shall be Reinstated. c. Voting: Class 4 is Unimpaired. Holders of Allowed NGL Facility Claims in Class 4 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed NGL Facility Claims in Class 4 are not entitled to vote to accept or reject the Plan. 19 Case 18-10122 5. 6. 7. 8. Doc 10-1 Filed 01/22/18 Page 25 of 122 Class 5 — Intermediation Claims a. Classification: Class 5 consists of all Intermediation Claims against any Debtor. b. Treatment: In full and final satisfaction of each Allowed Intermediation Claim, each Holder of an Allowed Intermediation Claim shall receive payment in full either (i) in Cash from the proceeds of the New Intermediation Facility or (ii) in accordance with the terms of the New Intermediation Facility. c. Voting: Class 5 is Unimpaired. Holders of Allowed Intermediation Claims in Class 5 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Intermediation Claims in Class 5 are not entitled to vote to accept or reject the Plan. Class 6 — First Loss Claims a. Classification: Class 6 consists of all First Loss Claims against any Debtor. b. Treatment: In full and final satisfaction of each Allowed First Loss Claim, each Holder of an Allowed First Loss Claim shall receive payment in full either (i) in Cash from the proceeds of the New First Loss Facility or New Intermediation Facility; or (ii) in accordance with the terms of the New First Loss Facility. c. Voting: Class 6 is Unimpaired. Holders of Allowed First Loss Claims in Class 6 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed First Loss Claims in Class 6 are not entitled to vote to accept or reject the Plan. Class 7 — Term Loan A Claims a. Classification: Class 7 consists of all Term Loan A Claims against any Debtor. b. Allowance: The Term Loan A Claims shall be Allowed in the aggregate principal amount of $97,500,000 plus any accrued but unpaid interest thereon payable as of the Petition Date, and any accrued but unpaid fees and expenses payable in accordance with the Term Loan A Documents. c. Treatment: Each holder of an Allowed Term Loan A Claim shall receive its Pro Rata share of: (i) $15,000,000 of Cash; (ii) Tranche B of the New First Lien Term Loan Facility; and (iii) Cash in the amount of any accrued but unpaid interest on the Term Loan A Claims measured through the Effective Date. d. Voting: Class 7 is Impaired. Holders of Allowed Term Loan A Claims in Class 7 are entitled to vote to accept or reject the Plan. Class 8 — Term Loan B Claims a. Classification: Class 8 consists of all Term Loan B Claims against any Debtor. b. Allowance: The Term Loan B Claims shall be Allowed in the aggregate principal amount of $523,875,000 plus any accrued but unpaid interest thereon payable as of the Petition Date, and any accrued but unpaid fees and expenses payable in accordance with the Term Loan B Documents. 20 Case 18-10122 9. 10. 11. Doc 10-1 Filed 01/22/18 Page 26 of 122 c. Treatment: On the Effective Date, each holder of an Allowed Term Loan B Claim shall receive on account of such Claim its Pro Rata share of: (i) 100% of the New Equity in the form of New Class A Common Stock, less the percentage of the New Equity distributed to (x) holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) Parent pursuant to Article IV.B.1, subject to dilution by the Management Incentive Plan; and (ii) Tranche C of the New First Lien Term Loan Facility. d. Voting: Class 8 is Impaired. Holders of Allowed Term Loan B Claims in Class 8 are entitled to vote to accept or reject the Plan. Class 9 — General Unsecured Claims a. Classification: Class 9 consists of any General Unsecured Claims against any Debtor. b. Treatment: In full and final satisfaction of each Allowed General Unsecured Claim, each Holder thereof shall receive Cash in an amount equal to such Allowed General Unsecured Claim on the later of: (i) the Effective Date; or (ii) the date due in the ordinary course of business in accordance with the terms and conditions of the particular transaction or agreement giving rise to such Allowed General Unsecured Claim. c. Voting: Class 9 is Unimpaired. Holders of Allowed General Unsecured Claims in Class 9 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed General Unsecured Claims in Class 9 are not entitled to vote to accept or reject the Plan. Class 10 — Intercompany Claims a. Classification: Class 10 consists of any Intercompany Claims against any Debtor. b. Treatment: Each Allowed Intercompany Claim shall be Reinstated or canceled and released, at the Debtors’ or the Reorganized Debtors’ option; provided, however, that any Intercompany Claims held by or against the Excluded Entities shall be canceled. No distribution shall be made on account of any Allowed Intercompany Claim. c. Voting: Class 10 is either Unimpaired, in which case the holders of Allowed Intercompany Claims in Class 10 are conclusively presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code, or Impaired, and not receiving any distribution under the Plan, in which case the holders of such Allowed Intercompany Claims in Class 10 are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. Therefore, each holder of an Allowed Intercompany Claim in Class 9 will not be entitled to vote to accept or reject the Plan. Class 11 — Intercompany Interests a. Classification: Class 11 consists of any Intercompany Interests in any Debtor. b. Treatment: In full and final satisfaction of each Allowed Intercompany Interest, each Intercompany Interest shall be Reinstated solely to maintain the Debtors’ corporate structure; provided, however, that any Intercompany Interests in the Excluded Entities shall be canceled and not entitled to any recovery or distribution under the Plan. c. Voting: Class 11 is Unimpaired. Holders of Allowed Intercompany Interests in Class 11 are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code. Holders of Allowed Intercompany Interests in Class 11 are not entitled to vote to accept or reject the Plan. 21 Case 18-10122 12. C. Doc 10-1 Filed 01/22/18 Page 27 of 122 Class 12 — Interests in PES Holdings a. Classification: Class 12 consists of all Interests in PES Holdings. b. Treatment: In full and final satisfaction of each Interest in PES Holdings, each Allowed Interest in PES Holdings shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Interests in PES Holdings shall be entitled to any recovery or distribution under the Plan on account of such Interests. c. Voting: Class 12 is Impaired. Holders of Interests in Class 12 are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code and are not entitled to vote to accept or reject the Plan. Special Provision Governing Unimpaired Claims Except as otherwise provided in the Plan, nothing under the Plan shall affect the Debtors’ or the Reorganized Debtors’ rights regarding any Unimpaired Claim, including all rights regarding legal and equitable defenses to, or setoffs or recoupments against, any such Unimpaired Claim. D. Elimination of Vacant Classes Any Class of Claims or Interests that does not have a holder of an Allowed Claim or Allowed Interest, or a Claim or Interest temporarily Allowed by the Bankruptcy Court as of the date of the Confirmation Hearing, shall be deemed eliminated from the Plan for purposes of voting to accept or reject the Plan and for purposes of determining acceptance or rejection of the Plan by such Class pursuant to section 1129(a)(8) of the Bankruptcy Code. E. Voting Classes; Presumed Acceptance by Non-Voting Classes If a Class contains Claims or Interests eligible to vote and no holder of Claims or Interests eligible to vote in such Class votes to accept or reject the Plan, the Plan shall be presumed accepted by the holders of such Claims or Interests in such Class. F. Confirmation Pursuant to Sections 1129(a)(10) and 1129(b) of the Bankruptcy Code Section 1129(a)(10) of the Bankruptcy Code shall be satisfied for purposes of Confirmation by acceptance of the Plan by at least one Impaired Class of Claims. The Debtors shall seek Confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code with respect to any rejecting Class(es) of Claims or Interests. The Debtors reserve the right to modify the Plan in accordance with Article X of the Plan to the extent, if any, that Confirmation pursuant to section 1129(b) of the Bankruptcy Code requires modification, including by modifying the treatment applicable to a Class of Claims or Interests to render such Class of Claims or Interests Unimpaired to the extent permitted by the Bankruptcy Code and the Bankruptcy Rules. G. Intercompany Interests To the extent Reinstated under the Plan, the Intercompany Interests shall be Reinstated for the ultimate benefit of the Holders of the New Equity, and shall receive no recovery or distribution. For the avoidance of doubt, to the extent Reinstated pursuant to the Plan, on and after the Effective Date, all Intercompany Interests shall be owned by the same Reorganized Debtor that corresponds with the Debtor that owned such Intercompany Interests prior to the Effective Date (subject to the Restructuring Transactions). H. Subordinated Claims and Interests The allowance, classification, and treatment of all Allowed Claims and Allowed Interests and their respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal, and equitable subordination rights relating 22 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 28 of 122 thereto, whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the Bankruptcy Code, the Debtors or Reorganized Debtors, as applicable, reserve the right to re-classify any Allowed Claim or Interest in accordance with any contractual, legal, or equitable subordination relating thereto. ARTICLE IV. PROVISIONS FOR IMPLEMENTATION OF THE PLAN A. General Settlement of Claims, Interests, and Causes of Action Pursuant to section 1123 of the Bankruptcy Code and Bankruptcy Rule 9019, and in consideration for the classification, distributions, releases, and other benefits provided under the Plan, including the Parent Cash Contribution, upon the Effective Date, the provisions of the Plan shall constitute a good faith compromise and settlement of all Claims, Interests, Causes of Action, and controversies released, settled, compromised, discharged, satisfied, or otherwise resolved pursuant to the Plan, including any Causes of Action assertable against the Parent Parties. The entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval of the compromise and settlement of all such Claims, Interests, Causes of Action, and controversies, as well as a finding by the Bankruptcy Court that such compromise and settlement is in the best interests of the Debtors, their Estates, and holders of Claims and Interests and is fair, equitable, reasonable, and in the best interests of the Debtors and their Estates. B. Restructuring Transactions On the Effective Date or as soon as reasonably practicable thereafter, the Reorganized Debtors, including the Purchaser, shall take all actions reasonably acceptable to the Parent and the Required Consenting Term Loan B Creditors and, solely to the extent adversely affecting their rights or obligations under the Plan, the Required Consenting NYL Creditors, as may be necessary or appropriate to effectuate the Restructuring Transactions, including: (1) the execution and delivery of any appropriate agreements or other documents of merger, consolidation, restructuring, conversion, disposition, transfer, formation, organization, dissolution, or liquidation containing terms that are consistent with the terms of the Plan, and that satisfy the requirements of applicable law and any other terms to which the applicable Entities may agree, including, but not limited to the documents comprising the Plan Supplement and the New Organizational Documents; (2) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, debt, or obligation on terms consistent with the terms of the Plan and having other terms for which the applicable Entities agree; (3) the execution, delivery and filing, if applicable, of appropriate certificates or articles of incorporation, formation, reincorporation, merger, consolidation, conversion, or dissolution pursuant to applicable state law, including any applicable New Organizational Documents; (4) the execution, delivery, and filing, if applicable, of the New First Lien Term Loan Documents, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility; (5) the formation of PES Inc. and, as applicable, the Reorganized Debtors; (6) the issuance and distribution of the New Membership Interests and New Common Stock; (7) any action to effectuate the termination of the Rail Terminaling Services Agreement in accordance with Article V.A hereof; (8) any action to effectuate the termination of the PES Advisory Agreement and PES Registration Rights Agreement; (9) any action to effectuate any necessary assignment of the PES Refining Contribution Agreement to PES Inc. or any direct or indirect subsidiary thereof, if required; and (10) all other actions that the applicable Entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable law. 1. Corporate Structure On the Effective Date, PES Inc. and the Reorganized Partnership will be reorganized into a structure in which PES Inc. will hold one New Membership Interest for each issued share of New Class A Common Stock. On the Effective Date, (1) the Reorganized Partnership shall cancel its existing membership interests and distribute 25.0% of the New Equity in the form of New Membership Interests to the Parent or the holders of existing membership interests in Parent, in accordance with the Restructuring Transactions, and Parent or the holders of existing membership interests in Parent shall subscribe for shares of New Class B Common Stock pursuant to Article IV.C.2 of the Plan, in accordance with the Restructuring Transactions, with the Reorganized Partnership being treated as a partnership continuation of Parent for U.S. federal and applicable state and local income tax purposes, and 23 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 29 of 122 (2) each Holder of an Allowed Term Loan B Claim shall contribute such Term Loan B Claim to PES Inc. in exchange for New Class A Common Stock and PES Inc. shall exchange such Term Loan B Claims for 100% of the New Membership Interests, less the percentage of New Equity distributed to (x) holders of Allowed DIP Facility Claims and the DIP Commitment Parties pursuant to Article II.B of the Plan and (y) Parent pursuant to clause (1). If the Required Consenting Term Loan B Creditors decide, each Holder of an Allowed Term Loan B Claim may instead exchange such claim for Membership Interests and then contribute such Membership Interests to PES Inc. for New Class A Common Stock. The Reorganized Partnership shall issue 7.5% of the New Membership Interests to PES Inc. in respect of the shares of New Class A Common Stock to be issued for the treatment of the DIP Commitment Fee and the Allowed DIP Facility Claims pursuant to Article II.B of the Plan. 2. Sale Transaction On the Effective Date, the Debtors shall consummate the Sale Transaction and, among other things, all of the Debtors’ and Parent’s assets other than the Excluded Liabilities and the Excluded Parent Cash shall be transferred to and vest in the Purchaser free and clear of all Liens, Claims, charges, or other encumbrances including the Excluded Liabilities and, unless otherwise ordered by the Bankruptcy Court by Final Order, the RIN Liabilities, pursuant to the terms of the Purchase Agreement. On and after the Effective Date, except as otherwise provided in the Plan, the Reorganized Debtors may operate their businesses and may use, acquire, or dispose of property and compromise any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. Neither the Purchaser nor any of its Affiliates shall be deemed to be a successor of the Debtors. On or before the Effective Date, the Debtors shall have the authority to terminate the Sale Transaction and pursue instead the Reorganization Transaction. If the Debtors consummate the Sale Transaction, the Debtors shall not consummate the Reorganization Transaction. C. Sources of Consideration for Plan Distributions The Reorganized Debtors shall fund distributions under the Plan from the following sources: 1. Cash on Hand The Reorganized Debtors shall use Cash on hand to fund distributions to certain Holders of Allowed Claims in accordance with Article III of the Plan. 2. Issuance of the New Membership Interests and New Class B Common Stock On the Effective Date, the Reorganized Partnership shall cancel all of its existing membership interests and, in accordance with the Restructuring Transactions, issue and distribute the New Membership Interests to Parent or the holders of Parent’s existing membership interests in accordance with Article IV.B of the Plan. Parent or holders of Parent’s existing membership interests shall subscribe for New Class B Common Stock from PES Inc., in accordance with the Restructuring Transactions. Any party that is to receive New Membership Interests and shares of New Class B Common Stock shall be a party to the New LLC Agreement and the New Stockholders Agreement and deemed to be bound to the terms of the New LLC Agreement and New Stockholders Agreement from and after the Effective Date, even if not a signatory thereto. The issuance of the New Membership Interests and New Class B Common Stock under the Plan (as well as equity awards, if any), reserved under the Management Incentive Plan, is duly authorized without the need for further corporate action and without any further action by the Debtors, the Reorganized Debtors, the Purchaser, or the Holders of Claims. The New LLC Agreement shall be effective as of the Effective Date and, as of such date, shall be deemed to be valid, binding, and enforceable in accordance with its terms, and the Reorganized Partnership, PES Inc., and each holder of New Membership Interests shall be bound thereby. 3. Issuance and Distribution of the New Class A Common Stock On the Effective Date, PES Inc. shall issue and distribute certain of the New Common Stock to fund distributions to certain Holders of Allowed Claims in accordance with Article III of the Plan. Any party that is to 24 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 30 of 122 receive shares of New Class A Common Stock shall be a party to the New Stockholders Agreement and deemed to be bound to the terms of the New Stockholders Agreement from and after the Effective Date, even if not a signatory thereto. The issuance of New Class A Common Stock under the Plan, as well as options, or other equity awards, if any, reserved under the Management Incentive Plan, is duly authorized without the need for any further corporate action and without any further action by the Debtors or Reorganized Debtors, the Purchaser, or the Holders of Claims and the holders of New Common Stock shall be deemed to have accepted the terms of the New Stockholders Agreement (solely in their capacity as holders of New Equity) and to be parties thereto without further action or signature. The New Stockholders Agreement shall be effective as of the Effective Date and, as of such date, shall be deemed to be valid, binding, and enforceable in accordance with its terms, and PES Inc., the Reorganized Partnership, and each holder of New Common Stock shall be bound thereby. 4. New First Lien Term Loan On the Effective Date the Reorganized Debtors shall enter into the New First Lien Term Loan, the terms of which will be set forth in the New First Lien Term Loan Credit Agreement. Confirmation of the Plan shall be deemed approval of the New First Lien Term Loan Documents, as applicable, and all transactions contemplated thereby, and all actions to be taken, undertakings to be made, and obligations to be incurred by the Reorganized Debtors, in connection therewith, including the payment of all fees, indemnities, and expenses provided for therein, and authorization of the Reorganized Debtors to enter into and execute New First Lien Term Loan Documents and such other documents as may be required to effectuate the treatment afforded by the New First Lien Term Loan. On the Effective Date, all of the Liens and security interests to be granted in accordance with the New First Lien Term Loan Documents (a) shall be deemed to be granted, (b) shall be legal, binding, and enforceable Liens on, and security interests in, the collateral granted thereunder in accordance with the terms of the New First Lien Term Loan Documents, (c) shall be deemed perfected on the Effective Date, subject only to such Liens and security interests as may be permitted under the New First Lien Term Loan Documents, and (d) shall not be subject to recharacterization or equitable subordination for any purposes whatsoever and shall not constitute preferential transfers or fraudulent conveyances under the Bankruptcy Code or any applicable non-bankruptcy law. The Reorganized Debtors and the persons and entities granted such Liens and security interests shall be authorized to make all filings and recordings, and to obtain all governmental approvals and consents necessary to establish and perfect such Liens and security interests under the provisions of the applicable state, federal, or other law that would be applicable in the absence of the Plan and the Confirmation Order (it being understood that perfection shall occur automatically by virtue of the entry of the Confirmation Order and any such filings, recordings, approvals, and consents shall not be required), and will thereafter cooperate to make all other filings and recordings that otherwise would be necessary under applicable law to give notice of such Liens and security interests to third parties. 5. Parent Cash Contribution On the Effective Date, as part of the General Settlement of Claims, Interests and Causes of Action described in Article IV.A, including a settlement of any Claims, Interests and Causes of Action that may be asserted against the Parent Parties and other related Released Parties, and in consideration of the releases set forth in Article VIII.B and VIII.C of the Plan, the Parent shall make the Parent Cash Contribution and consummate the other transactions set forth herein. In return, on the Effective Date, the Parent or holders of existing membership interests in Parent shall receive 25.0% of the New Equity, in accordance with the Restructuring Transactions, subject to dilution by the Management Incentive Plan, in the form of New Class B Common Stock and New Membership Interests. 6. Additional Financing Facility On the Effective Date, the Reorganized Debtors shall enter into the Additional Financing Facility with the Additional Financing Lender. The Additional Financing Facility shall include terms in form and substance consistent with the Additional Financing Facility Commitment Letter, attached hereto as Annex III. D. New Intermediation Facility and New First Loss Facility On the Effective Date, the Reorganized Debtors shall enter into the New Intermediation Facility and New First Loss Facility (if any). On the Effective Date, the Intermediation Lenders shall return the RIN Sale Proceeds and any conditional collateral that may be pledged to the Intermediation Lenders to the Reorganized Debtors. 25 Case 18-10122 E. Doc 10-1 Filed 01/22/18 Page 31 of 122 Management Incentive Plan The New Board will be authorized to implement the Management Incentive Plan. The Management Incentive Plan shall provide for the issuance of options and/or equity based compensation, or other profit sharing arrangements, to certain members of management of PES Inc. or the Reorganized Partnership, as applicable. New Equity may be reserved for issuance in connection with the Management Incentive Plan. The participants in the Management Incentive Plan, the allocation of Management Incentive Plan compensation to participants (including the amounts allocated, the timing of grants, and the form of options and/or equity compensation allocated) and the terms and conditions of such options and equity compensation (including performance, time based vesting, exercise price, base values, hurdles, forfeiture, repurchase rights and transferability) shall either be (1) as reasonably acceptable to the Debtors and the Required Consenting Term Loan B Creditors, or (2) if no such terms are reached, be determined by the New Board in its sole discretion, it being understood and agreed that the Management Incentive Plan shall dilute all of the New Equity equally. F. Exemption from Registration Requirements The offering, issuance, and distribution of any Securities, including the New Equity, pursuant to the Plan will be exempt from the registration requirements of section 5 of the Securities Act pursuant to section 1145 of the Bankruptcy Code. Pursuant to section 1145 of the Bankruptcy Code, the New Equity issued under the Plan may be sold without registration under the Securities Act by the recipients thereof, subject to: (1) the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act and compliance with any applicable state or foreign securities laws, if any, and the rules and regulations of the SEC, if any, applicable at the time of any future transfer of such Securities or instruments; (2) any other applicable regulatory approval; and (3) the transfer restrictions set forth in the New Organizational Documents. G. Vesting of Assets The Assignee shall have all of the rights, title and interest in all of the Assumed Agreements and Permits free and clear of all Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities, under the Plan. The Assignee will be deemed to be the successor-in-interest of Parent for all of the Assumed Agreements and Permits as of the Effective Date. The Assignee shall assume only the Assumed Agreements and Permits and shall not assume any other liability or obligation of Parent (or any predecessor of Parent or any prior owner of all or part of its business and assets) of whatever nature, whether presently in existence or arising hereafter. 1. Under the Sale Transaction Under the Sale Transaction, except as otherwise provided herein, or in any agreement, instrument, or other document incorporated in the Plan, on the Effective Date, all property in each Debtor’s Estate, all Causes of Action (including Avoidance Actions), and any property acquired by any of the Debtors under the Plan, except for the Interests in the Excluded Entities, shall vest in the Reorganized Debtors, including the Purchaser, free and clear of all Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities, and neither the Purchaser nor any of its Affiliates shall have any liability for any such Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities and, unless otherwise determined by the Bankruptcy Court by Final Order, the RIN Liabilities. On and after the Effective Date, except as otherwise provided herein, the Reorganized Debtors, including the Purchaser, may operate the business of each Debtor or Reorganized Debtor, other than the Excluded Entities, as applicable, and may use, acquire, or dispose of property and pursue, compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. 2. Under the Reorganization Transaction Under the Reorganization Transaction, except as otherwise provided herein, or in any agreement, instrument, or other document incorporated in the Plan, on the Effective Date, all property in each Debtor’s Estate, all Causes of Action (including Avoidance Actions), and any property acquired by any of the Debtors under the Plan shall vest in each respective Reorganized Debtor, free and clear of all Liens, Claims, charges, or other encumbrances, including 26 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 32 of 122 the Excluded Liabilities and, unless otherwise determined by the Bankruptcy Court by Final Order or the Debtors, the RIN Liabilities. On and after the Effective Date, except as otherwise provided herein, each Reorganized Debtor may operate its business and may use, acquire, or dispose of property and pursue, compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. H. Cancelation of Instruments, Certificates, and Other Documents Except as otherwise provided in the Plan or any agreement, instrument, or other document incorporated in the Plan or the Plan Supplement, on the Effective Date, all notes, instruments, certificates, and other documents evidencing Claims or Interests, including the DIP Credit Agreement, the Term Loan B Documents, the Term Loan A Documents, the Refining ABL Facility, the First Loss Facility, the Intermediation Facility, and the intercompany note, dated as of December 27, 2016, between North Yard Financing, LLC and the Parent, and any other credit agreements and indentures, shall be terminated and canceled and the obligations of the Debtors thereunder or in any way related thereto shall be deemed satisfied in full and discharged; provided, that nothing in the Plan shall release any rights of the (x) Term Loan B Agent against the Term Loan B Lenders under the Term Loan B Loan Documents or (y) Term Loan A Agent against the Term Loan A Lenders under the Term Loan A Loan Documents. I. Corporate Action On the Effective Date, all actions contemplated by the Plan shall be deemed authorized and approved by the Bankruptcy Court in all respects, including, as applicable: (1) the adoption, execution, and/or filing of the New Organizational Documents; (2) the selection of the directors, managers, and officers for the Reorganized Debtors, including the appointment of the New Board; (3) the authorization, issuance, and distribution of New Membership Interests and New Equity; (4) the rejection, assumption, or assumption and assignment, as applicable, of Executory Contracts and Unexpired Leases; (5) the entry into the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility and the execution, delivery, and filing of any documents pertaining thereto, as applicable; (6) the formation of PES Inc.; (7) the implementation of the Restructuring Transactions; (8) the adoption of the Management Incentive Plan by the New Board; and (9) all other actions contemplated by the Plan (whether to occur before, on, or after the Effective Date). Upon the Effective Date, all matters provided for in the Plan involving the corporate structure of Reorganized Debtors, and any corporate, partnership, limited liability company or other governance action required by the Debtors or the other Reorganized Debtors in connection with the Plan shall be deemed to have occurred and shall be in effect, without any requirement of further action by the security holders, members, directors, or officers of the Debtors or Reorganized Debtors, or the Purchaser, as applicable. On or, as applicable, before, the Effective Date, the appropriate directors and officers of the Debtors, PES Inc., the Reorganized Partnership, or the other Reorganized Debtors shall be (or shall be deemed to have been) authorized and (as applicable) directed to issue, execute, and deliver the agreements, documents, securities, and instruments contemplated by the Plan (or necessary or desirable to effectuate the Restructuring Transactions) in the name of and on behalf of PES Inc., the Reorganized Partnership and the other Reorganized Debtors, including the New First Lien Term Loan Documents, the New Organizational Documents and any and all other agreements, documents, Securities, and instruments relating to the foregoing, to the extent not previously authorized by the Bankruptcy Court. The authorizations and approvals contemplated by this Article IV.I shall be effective notwithstanding any requirements under non-bankruptcy law. J. Corporate Existence Except as otherwise provided in the Plan or any agreement, instrument, or other document incorporated in the Plan or the Plan Supplement, on the Effective Date, each Debtor shall continue to exist after the Effective Date as a separate corporation, limited liability company, partnership, or other form of entity, as the case may be, with all the powers of a corporation, limited liability company, partnership, or other form of entity, as the case may be, pursuant to the applicable law in the jurisdiction in which each applicable Debtor is incorporated or formed and pursuant to the respective certificate of incorporation and by-laws (or other analogous formation documents) in effect before the Effective Date, except to the extent such certificate of incorporation or bylaws (or other analogous formation documents) is amended by the Plan or otherwise, and to the extent any such document is amended, such document is 27 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 33 of 122 deemed to be amended pursuant to the Plan and requires no further action or approval (other than any requisite filings required under applicable state or federal law). Notwithstanding the foregoing, the Debtors reserve the right to modify the Debtors’ corporate structure as of the Effective Date, including by merger or liquidation of any Reorganized Debtor or otherwise. K. New Organizational Documents On the Effective Date, or as soon thereafter as is reasonably practicable, the Reorganized Debtors’, the Reorganized Partnership’s and PES Inc.’s respective certificates of incorporation and bylaws (and other formation and constituent documents relating to limited liability companies) shall be amended as may be required to be consistent with the provisions of the Plan, the Governance Term Sheet, the New LLC Agreement, the New Stockholders Agreement, the other New Organizational Documents, the New First Lien Term Loan Documents, as applicable, and the Bankruptcy Code. The New Organizational Documents shall, among other things: (1) authorize the issuance of the New Membership Interests and the New Common Stock; and (2) pursuant to and only to the extent required by section 1123(a)(6) of the Bankruptcy Code, include a provision prohibiting the issuance of non-voting equity Securities. After the Effective Date, each Reorganized Debtor, the Reorganized Partnership and PES Inc. may amend and restate its certificate of incorporation and other formation and constituent documents as permitted by the laws of its respective jurisdiction of formation and the terms of the New LLC Agreement, the New Stockholders Agreement and the other New Organizational Documents. The New Organizational Documents shall provide that each share of the New Class A Common Stock and New Class B Common Stock will have one vote on all matters and vote together as a single class, including irrespective of Section 242(b)(2) of the Delaware General Corporation Law, unless otherwise required by applicable law. To the maximum extent permitted under applicable law, at the option of the holders of any New Equity, such holder may convert all or any portion of its New Equity into non-voting New Equity and, subject to any required approvals of a governmental entity, may convert any such non-voting New Equity back to voting New Equity. Any non-voting New Equity shall be deemed not to be outstanding for the purposes of any vote, approval or consent provided under the New Organizational Documents. Each share of New Class B Common Stock will be paired with one New Membership Interest and the New Class B Common Stock shall only be transferable with an equal number of New Membership Interests. In addition, transfers of the New Common Stock and New Membership Interests shall be subject to the transfer restrictions set forth in the Governance Term Sheet. Each share of New Class B Common Stock, together with a corresponding New Membership Interest, may be transferred by its holder to the Reorganized Partnership in exchange for one share of New Class A Common Stock, pursuant to terms and conditions to be set forth in the New Organizational Documents. Any dividends or distributions or proceeds upon dissolution, liquidation or winding up of the Reorganized Partnership will be shared pro rata among the holders of the New Membership Interests and to the extent distributed to PES Inc., to the holders of the New Class A Common Stock pro rata. The New Class B Common Stock will not have any economic rights. Dividends, other distributions and any proceeds from the dissolution, liquidation or winding up of the Reorganized Partnership or PES Inc. shall not be declared or paid to the holders of shares of the New Class B Common Stock. PES Inc. will be the managing member of the Reorganized Partnership and will have the sole, absolute and exclusive power to manage the Reorganized Partnership and its subsidiaries. Unless otherwise required by law, no other holder of New Membership Interests shall have the authority to vote, approve or consent to any action involving the Reorganized Partnership and such holder of New Membership Interests will be deemed to have approved any decision of the managing member. The New LLC Agreement will eliminate fiduciary duties to the furthest extent permitted under the Delaware Limited Liability Company Act, other than the implied covenant of good faith and fair dealing. L. Effectuating Documents; Further Transactions On and after the Effective Date, the Reorganized Debtors and the Purchaser, as applicable, and the officers and members of the boards of directors and managers thereof, shall be authorized to and may issue, execute, deliver, file, or record such contracts, Securities, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan, the New First Lien Term Loan Documents, as applicable, and the Securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors without the need for any approvals, authorizations, or consents except for those expressly required under the Plan. 28 Case 18-10122 M. Doc 10-1 Filed 01/22/18 Page 34 of 122 Section 1146(a) Exemption To the fullest extent permitted by section 1146(a) of the Bankruptcy Code, any transfers (whether from a Debtor to a Reorganized Debtor or to any other Person) of property under the Plan (including the Restructuring Transactions and, if applicable, the Sale Transaction) or pursuant to: (1) the issuance, distribution, transfer, or exchange of any debt, equity security, or other interest in the Debtors or the Reorganized Debtors; (2) the creation, modification, consolidation, termination, refinancing, and/or recording of any mortgage, deed of trust, or other security interest, or the securing of additional indebtedness by such or other means; (3) the making, assignment, or recording of any lease or sublease; (4) the grant of collateral as security for any or all of the New First Lien Term Loan, as applicable; or (5) the making, delivery, or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including any deeds, bills of sale, assignments, or other instrument of transfer executed in connection with any transaction arising out of, contemplated by, or in any way related to the Plan (including the Restructuring Transactions), shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real estate transfer tax, mortgage recording tax, Uniform Commercial Code filing or recording fee, regulatory filing or recording fee, or other similar tax or governmental assessment, and upon entry of the Confirmation Order, the appropriate state or local governmental officials or agents shall forego the collection of any such tax or governmental assessment and accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax, recordation fee, or governmental assessment. All filing or recording officers (or any other Person with authority over any of the foregoing), wherever located and by whomever appointed, shall comply with the requirements of section 1146(a) of the Bankruptcy Code, shall forego the collection of any such tax or governmental assessment, and shall accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment. N. Directors and Officers The New Board shall consist of: (1) two persons to be selected by CSAM, which shall be U.S. citizens; (2) two persons to be selected by Halcyon; (3) one person to be selected by the Parent; (4) one person to be selected by a majority-in-interest of the Consenting Term Loan B Creditors; and (5) the Chief Executive Officer of PES Inc. Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will, to the extent reasonably practicable, disclose in advance of the Confirmation Hearing the identity and affiliations of any Person proposed to serve on the New Boards, as well as those Persons that will serve as officers of the Reorganized Debtors or the Purchaser, as applicable. Such initial officers of the Reorganized Debtors shall be reasonably acceptable to the Required Consenting Term Loan B Creditors as required under the Restructuring Support Agreement. To the extent any such director or officer is an “insider” under the Bankruptcy Code, the nature of any compensation to be paid to such director or officer will also be disclosed. Provisions regarding the removal, appointment, and replacement of members of the New Boards will be disclosed in the New Organizational Documents. O. Employee Arrangements of the Reorganized Debtors On the Effective Date, the Debtors shall have (i) assumed each of the contracts, agreements, policies, programs and plans for compensation, bonuses, reimbursement, health care benefits, disability benefits, deferred compensation benefits, travel benefits, vacation and sick leave benefits, savings, severance benefits, retirement benefits, welfare benefits, relocation programs, life insurance and accidental death and dismemberment insurance, including written contracts, agreements, policies, programs and plans for bonuses and other incentives or compensation for the Debtors’ current and former employees, directors, officers, and managers, including executive compensation programs and existing compensation arrangements for the employees of the Debtors (but excluding any severance agreements with any of Debtors’ former employees) that are not set forth in the Schedule of Rejected Executory Contracts and Unexpired Leases; or (ii) entered into a new employee agreement on terms acceptable to the respective employee and the Reorganized Debtors, and reasonably acceptable to the Required Consenting Term Loan B Creditors; provided, that the Severance Program and employment agreements will be assumed as modified so as to clarify that the Restructuring Transactions will not constitute a “good reason” event for the purposes of the Severance Program or any employment agreement; provided, further, that it is agreed and understood that any employment agreements or arrangements that constitute a component of at will employment arrangements, are provided or determined in the Debtors’ discretion, or are subject to modification or termination by the Debtors in accordance with applicable law will remain as such with respect to the Reorganized Debtors. Except to the extent provided by Article 29 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 35 of 122 VIII of the Plan, nothing in the Plan shall limit, diminish, or otherwise alter the Debtors’ or the Reorganized Debtors’ defenses, claims, Causes of Action, or other rights with respect to any such employment agreements. Notwithstanding the foregoing, pursuant to section 1129(a)(13) of the Bankruptcy Code, on and after the Effective Date, all retiree benefits (as that term is defined in section 1114 of the Bankruptcy Code), if any, shall continue to be paid in accordance with applicable law. Additionally, the Debtors shall assume all of their obligations under the Collective Bargaining Agreement. Such obligations shall be assumed and remain in full force and effect after the Effective Date, and shall not be modified, reduced, discharged, impaired, or otherwise affected in any way, and shall survive unimpaired and unaffected, irrespective of when such obligations arose. After the Confirmation Date, the Debtors shall be permitted to make payments to employees pursuant to employment programs then in effect, and to implement additional employee programs and make payments thereunder, without any further notice to or action, order, or approval of the Bankruptcy Court. P. Restructuring Expenses The Restructuring Expenses incurred, or estimated to be incurred, up to and including the Effective Date shall be paid in full in Cash on the Effective Date (to the extent not previously paid during the course of the Chapter 11 Cases on the dates on which such amounts would be required to be paid under the agreements giving rise to such Restructuring Expenses) without the requirement to file a fee application with the Bankruptcy Court and without any requirement for Bankruptcy Court review or approval other than as required in the documents giving rise to such Restructuring Expenses. All Restructuring Expenses to be paid on the Effective Date shall be estimated prior to and as of the Effective Date and such estimates shall be delivered to the Debtors at least five (5) days before the anticipated Effective Date; provided, that such estimates shall not be considered to be admissions or limitations with respect to such Restructuring Expenses. On the Effective Date, final invoices for all Restructuring Expenses incurred prior to and as of the Effective Date shall be submitted to the Debtors, which invoices shall be consistent with the requirements in the documents or orders giving rise to the Restructuring Expenses. In addition, the Reorganized Debtors shall, in the ordinary course of business and without any further notice to or action, order, or approval of the Bankruptcy Court, continue to pay in Cash all post-Effective Date fees, expenses, and disbursements related to implementation, Consummation, and defense of the Plan incurred by the Restructuring Support Parties, DIP Facility Agent, Term Loan A Agent, Term Loan B Agent, or Consenting Creditors as set forth in the documents giving rise to any such Restructuring Expenses or the Plan. Q. Preservation of Causes of Action Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan, including pursuant to Article VIII of the Plan, the DIP Facility Orders, or a Final Order, in accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtors shall retain and may enforce all rights to commence and pursue any and all Causes of Action, whether arising before or after the Petition Date, including any actions specifically enumerated in the Plan Supplement, and the Reorganized Debtors’ rights to commence, prosecute, or settle such Causes of Action shall be preserved notwithstanding the occurrence of the Effective Date. No Entity may rely on the absence of a specific reference in the Plan, the Plan Supplement, or the Disclosure Statement to any Cause of Action against them as any indication that the Debtors or the Reorganized Debtors will not pursue any and all available Causes of Action against them. The Debtors and the Reorganized Debtors expressly reserve all rights to prosecute any and all Causes of Action against any Entity, except as otherwise expressly provided herein. Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan, including pursuant to Article VIII of the Plan, the DIP Facility Orders, or a Final Order, the Reorganized Debtors expressly reserve all Causes of Action, for later adjudication, and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable, or otherwise), or laches, shall apply to such Causes of Action upon, after, or as a consequence of the Confirmation or Consummation. For the avoidance of doubt, in no instance will any Cause of Action preserved pursuant to this Article IV.P include any claim or Cause of Action with respect to, or against, a Released Party. 30 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 36 of 122 In accordance with section 1123(b)(3) of the Bankruptcy Code, any Causes of Action preserved pursuant to the first paragraph of this Article IV.P that a Debtor may hold against any Entity shall vest in the Reorganized Debtors or be transferred pursuant to the Sale Transactions. The applicable Reorganized Debtor, through its authorized agents or representatives, shall retain and may exclusively enforce any and all such Causes of Action. The Reorganized Debtors shall have the exclusive right, authority, and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw, or litigate to judgment any such Causes of Action, or to decline to do any of the foregoing, without the consent or approval of any third party or any further notice to or action, order, or approval of the Bankruptcy Court. R. Wind Down and Dissolution of the Debtors Under the Sale Transaction on and after the Effective Date, the Liquidator will implement any provision of the Plan and any applicable orders of the Bankruptcy Court, and the Liquidator shall have the power and authority to take any action necessary to wind down and dissolve the Excluded Entities. After the Effective Date, the Excluded Entities shall remain in existence for the sole purpose of dissolving. As soon as practicable after the Effective Date, the Liquidator shall: (1) cause the Excluded Entities to comply with, and abide by, the terms of the Purchase Agreement; (2) file for each of the Excluded Entities a certificate of dissolution, together with all other necessary corporate and company documents, to effect the dissolution of the Excluded Entities under the applicable laws of their state of incorporation or formation (as applicable); (3) complete and file all final or otherwise required federal, state, and local tax returns for each of the Excluded Entities, and pursuant to section 505(b) of the Bankruptcy Code, request an expedited determination of any unpaid tax liability of such Debtor or its Estate for any tax incurred during the administration of such Debtor’s Chapter 11 Case, as determined under applicable tax laws; and (4) take such other actions as the Liquidator may determine to be necessary or desirable to carry out the purposes of the Plan. The filing by the Liquidator of any Debtor’s certificate of dissolution shall be authorized and approved in all respects without further action under applicable law, regulation, order, or rule, including any action by the stockholders, members, board of directors, or board of managers of each such Debtor. ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. Assumption or Rejection of Executory Contracts and Unexpired Leases Each Executory Contract and Unexpired Lease shall be deemed assumed, without the need for any further notice to or action, order, or approval of the Bankruptcy Court, as of the Effective Date under section 365 of the Bankruptcy Code, unless listed on the Schedule of Rejected Executory Contracts and Unexpired Leases; provided, however, that (i) the Rail Terminaling Services Agreement, and (ii) the PES Advisory Agreement, the PES Registration Rights Agreement and any other Parent Agreement or Parent Permit which is an Excluded Liability shall each be canceled or terminated on the Effective Date, and no rejection damages or other Claims (including any Liabilities arising from or incurred thereunder) shall arise on account of such cancelation; provided, further, that the Debtors shall assume all Executory Contracts and Unexpired Leases between the Debtors and, Sunoco Partners Marketing & Terminals L.P. or Sunoco Pipeline, L.P. The assumption of Executory Contracts and Unexpired Leases hereunder may include the assignment of certain of such contracts to Affiliates or the Purchaser in a Sale Transaction. The Confirmation Order will constitute an order of the Bankruptcy Court approving the above-described assumptions and assignments. Except as otherwise provided herein or agreed to by the Debtors, (with the consent of the Required Consenting Term Loan B Creditors (such consent not to be unreasonably withheld) and in consultation with the Required Consenting NYL Creditors) and the applicable counterparty, each assumed Executory Contract or Unexpired Lease shall include all modifications, amendments, supplements, restatements, or other agreements related thereto, and all rights related thereto, if any, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests. Modifications, amendments, supplements, and restatements to prepetition Executory Contracts and Unexpired Leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the Executory Contract or Unexpired Lease or the validity, priority, or amount of any Claims that may arise in connection therewith. 31 Case 18-10122 B. Doc 10-1 Filed 01/22/18 Page 37 of 122 Claims Based on Rejection of Executory Contracts or Unexpired Leases Counterparties to Executory Contracts or Unexpired Leases listed on the Schedule of Rejected Executory Contracts and Unexpired Leases shall be served with a notice of rejection of Executory Contracts and Unexpired Leases with the Plan Supplement. Proofs of Claim with respect to Claims arising from the rejection of Executory Contracts and Unexpired Leases, if any, must be Filed with the Bankruptcy Court within 30 days after the date of the order of the Bankruptcy Court approving such rejection. Any Claims arising from the rejection of an Executory Contract or Unexpired Lease that are not Filed within such time will be automatically Disallowed, forever barred from assertion, and shall not be enforceable against, as applicable, the Debtors, the Reorganized Debtors, the Purchaser, the Estates, or property of the foregoing parties, without the need for any objection by the Debtors or Reorganized Debtors, as applicable, or further notice to, or action, order, or approval of the Bankruptcy Court or any other Entity, and any Claim arising out of the rejection of the Executory Contract or Unexpired Lease shall be deemed fully satisfied, released, and discharged, notwithstanding anything in a Proof of Claim to the contrary. Claims arising from the rejection of the Debtors’ Executory Contracts and Unexpired Leases shall be classified as General Unsecured Claims and shall be treated in accordance with Article III of the Plan. C. Cure of Defaults for Assumed Executory Contracts and Unexpired Leases The Debtors or the Reorganized Debtors, as applicable, shall pay Cures, if any, on the Effective Date or as soon as reasonably practicable thereafter. Unless otherwise agreed upon in writing by the parties to the applicable Executory Contract or Unexpired Lease, all requests for payment of Cure that differ from the amounts paid or proposed to be paid by the Debtors or the Reorganized Debtors to a counterparty must be filed with the Solicitation Agent on or before 15 days after the Effective Date. Any such request that is not timely filed shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Reorganized Debtors or any other party in interest or any further notice to or action, order, or approval of the Bankruptcy Court. Any Cure shall be deemed fully satisfied, released, and discharged upon payment by the Debtors or the Reorganized Debtors of the Cure; provided, however, that nothing herein shall prevent the Reorganized Debtors from paying any Cure despite the failure of the relevant counterparty to file such request for payment of such Cure. The Reorganized Debtors also may settle any Cure without any further notice to or action, order, or approval of the Bankruptcy Court. In addition, any objection to the assumption of an Executory Contract or Unexpired Lease under the Plan must be filed with the Bankruptcy Court on or before the Confirmation Hearing. Any such objection will be scheduled to be heard by the Bankruptcy Court at the Confirmation Hearing or at the Debtors’ or Reorganized Debtors’, as applicable, first scheduled omnibus hearing for which such objection is timely filed. Any counterparty to an Executory Contract or Unexpired Lease that fails to timely object to the proposed assumption of any Executory Contract or Unexpired Lease will be deemed to have consented to such assumption. If there is any dispute regarding any Cure, the ability of the Reorganized Debtors or any assignee to provide “adequate assurance of future performance” within the meaning of section 365 of the Bankruptcy Code, or any other matter pertaining to assumption, then payment of any Cure shall occur as soon as reasonably practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignment), or as may be agreed upon by the Debtors or the Reorganized Debtors, as applicable, and the counterparty to the Executory Contract or Unexpired Lease. The Debtors and Reorganized Debtors, as applicable, reserve the right at any time to move to reject any Executory Contract or Unexpired Lease based upon the existence of any such unresolved dispute. Assumption of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise and full payment of any applicable Cure pursuant to this Article V.B shall result in the full release and satisfaction of any Cures, Claims, or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults, arising under any assumed Executory Contract or Unexpired Lease at any time prior to the effective date of assumption. Any and all Proofs of Claim based upon Executory Contracts or Unexpired Leases that have been assumed in the Chapter 11 Cases, including pursuant to the Confirmation Order, and for which any Cure has been fully paid pursuant to this Article V.B, shall be deemed disallowed and expunged as of the Effective Date without the need for any objection thereto or any further notice to or action, order, or approval of the Bankruptcy Court. 32 Case 18-10122 D. Doc 10-1 Filed 01/22/18 Page 38 of 122 Indemnification On and as of the Effective Date, the Indemnification Provisions will be assumed, irrevocable with respect to any claims relating to acts or omissions occurring at or prior to the Effective Date, and will survive the effectiveness of the Plan, and the New Organizational Documents will provide for the indemnification, defense, reimbursement, exculpation, and/or limitation of liability of, and advancement of fees and expenses to the Debtors’ and the Reorganized Debtors’ directors, officers, employees, or agents that were employed by, or serving on the board of directors (or similar governing body) of, any of the Debtors as of the Petition Date, to the fullest extent permitted by law and at least to the same extent as the organizational documents of each of the respective Debtors on the Petition Date, against any Claims or Causes of Action whether direct or derivative, liquidated or unliquidated, fixed or contingent, disputed or undisputed, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted, and, notwithstanding anything in the Plan to the contrary, none of the Reorganized Debtors will amend and/or restate the New Organizational Documents before or after the Effective Date to terminate or adversely affect any of the Reorganized Debtors’ obligations to provide such indemnification rights or such directors’, officers’, employees’, or agents’ indemnification rights with respect to any claims relating to acts or omissions occurring at or prior to the Effective Date. E. Insurance Policies Notwithstanding anything in the Plan to the contrary, all of the Debtors’ insurance policies and any agreements, documents, or instruments relating thereto, including agreements of the Parent, are treated as and deemed to be Executory Contracts under the Plan. On the Effective Date, pursuant to section 365(a) of the Bankruptcy Code, the Debtors shall be deemed to have assumed all insurance policies and any agreements, documents, and instruments related thereto, including all D&O Liability Insurance Policies (including tail coverage liability insurance). Entry of the Confirmation Order will constitute the Bankruptcy Court’s approval of the Reorganized Debtors’ assumption of all such insurance policies, including the D&O Liability Insurance Policies. Notwithstanding anything to the contrary contained in the Plan, Confirmation of the Plan shall not discharge, impair, or otherwise modify any indemnity obligations assumed by the foregoing assumption of insurance policies, including the D&O Liability Insurance Policies, and each such indemnity obligation will be deemed and treated as an Executory Contract that has been assumed by the Reorganized Debtors under the Plan as to which no Proof of Claim or Cure Claim need be filed, and shall survive the Effective Date. On or before the Effective Date, the Debtors shall purchase and maintain tail coverage under the D&O Liability Insurance Policies for the six-year period following the Effective Date on terms no less favorable than under, and with an aggregate limit of liability no less than the aggregate limit of liability under, the existing D&O Liability Insurance Policies, subject to the reasonable acceptance of the Required Consenting Term Loan B Creditors. In addition to such tail coverage, the D&O Liability Insurance Policies shall remain in place in the ordinary course during the Chapter 11 Cases. F. Contracts and Leases After the Petition Date Contracts and leases entered into after the Petition Date by any Debtor, including any Executory Contracts and Unexpired Leases assumed under section 365 of the Bankruptcy Code, will be performed by the applicable Debtor or Reorganized Debtor liable thereunder in the ordinary course of its business. Such contracts and leases that are not rejected under the Plan shall survive and remain unaffected by entry of the Confirmation Order. G. Reservation of Rights Nothing contained in the Plan or the Plan Supplement shall constitute an admission by the Debtors or any other party that any contract or lease is in fact an Executory Contract or Unexpired Lease or that any Reorganized Debtor has any liability thereunder. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption, the Debtors or the Reorganized Debtors, as applicable, shall have 45 days following entry of a Final Order resolving such dispute to alter their treatment of such contract or lease. 33 Case 18-10122 H. Doc 10-1 Filed 01/22/18 Page 39 of 122 Nonoccurrence of Effective Date In the event that the Effective Date does not occur, the Bankruptcy Court shall retain jurisdiction with respect to any request to extend the deadline for assuming or rejecting Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code. ARTICLE VI. PROVISIONS GOVERNING DISTRIBUTIONS A. Distributions on Account of Claims and Interests Allowed as of the Effective Date Except as otherwise provided herein, a Final Order, or as otherwise agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the holder of the applicable Claim or Interest, on the first Distribution Date, the Distribution Agent shall make initial distributions under the Plan on account of Claims and Interests Allowed on or before the Effective Date; provided, however, that (1) Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice, and (2) Allowed Priority Tax Claims and Allowed Secured Tax Claims shall be paid in accordance with Article III.B.2 and Article III.B.1, respectively. To the extent any Allowed Priority Tax Claim is not due and owing on the Effective Date, such Claim shall be paid in full in Cash in accordance with the terms of any agreement between the Debtors and the holder of such Claim or as may be due and payable under applicable non-bankruptcy law or in the ordinary course of business. A Distribution Date shall occur no more frequently than once in every 90-day period after the Effective Date, as necessary, in the Reorganized Debtors’ sole discretion. B. Rights and Powers of the Distribution Agent 1. Powers of Distribution Agent The Distribution Agent shall be empowered to: (a) effect all actions and execute all agreements, instruments, and other documents necessary to perform its duties under the Plan; (b) make all distributions contemplated hereby; (c) employ professionals to represent it with respect to its responsibilities; and (d) exercise such other powers as may be vested in the Distribution Agent by order of the Bankruptcy Court, pursuant to the Plan, or as deemed by the Distribution Agent to be necessary and proper to implement the provisions hereof. 2. Expenses Incurred On or After the Effective Date Except as otherwise ordered by the Bankruptcy Court, the amount of any reasonable fees and expenses incurred by the Distribution Agent on or after the Effective Date (including taxes) and any reasonable compensation and expense reimbursement claims (including reasonable attorney fees and expenses) made by the Distribution Agent shall be paid in Cash by the Reorganized Debtors. C. Special Rules for Distributions to Holders of Disputed Claims Notwithstanding any provision otherwise in the Plan and except as otherwise agreed by the relevant parties: (1) no partial payments and no partial distributions shall be made with respect to a Disputed Claim or Interest until all such disputes in connection with such Disputed Claim or Interest have been resolved by settlement or Final Order; and (2) any Entity that holds both an Allowed Claim or Interest and a Disputed Claim or Interest shall not receive any distribution on the Allowed Claim or Interest unless and until all objections to the Disputed Claim or Interest have been resolved by settlement or Final Order or the Claims or Interests have been Allowed or expunged. Any dividends or other distributions arising from property distributed to Holders of Allowed Claims or Interests, as applicable, in a Class and paid to such holders under the Plan shall also be paid, in the applicable amounts, to any Holder of a Disputed Claim or Interest, as applicable, in such Class that becomes an Allowed Claim or Interest after the date or dates that such dividends or other distributions were earlier paid to holders of Allowed Claims or Interests in such Class. 34 Case 18-10122 D. Doc 10-1 Filed 01/22/18 Page 40 of 122 Delivery of Distributions 1. Record Date for Distributions Three business days before the Effective Date, the various transfer registers for each class of Claims or Interests as maintained by the Debtors or their respective agents shall be deemed closed, and there shall be no further changes in the record holders of any Claims or Interests. The Distribution Agent shall have no obligation to recognize any transfer of Claims or Interests occurring on or after three business days before the Effective Date. In addition, with respect to payment of any Cure amounts or disputes over any Cure amounts, neither the Debtors nor the Distribution Agent shall have any obligation to recognize or deal with any party other than the non-Debtor party to the applicable executory contract or unexpired lease as of the Effective Date, even if such non-Debtor party has sold, assigned, or otherwise transferred its Claim for a Cure amount. 2. Distribution Process The Distribution Agent shall make all distributions required under the Plan, except that with respect to distributions to holders of Allowed Claims governed by a separate agreement other than the Term Loan B Credit Agreement, which shall include the DIP Facility, the Term Loan A Credit Agreement, the Intermediation Facility, and the First Loss Facility and administered by a Servicer, including the DIP Administrative Agent, the Term Loan A Agent, the Distribution Agent, the Debtor, the applicable Servicer, as applicable, shall exercise commercially reasonable efforts to implement appropriate mechanics governing such distributions in accordance with the Plan and the terms of the governing agreement. For the avoidance of doubt, in no event shall the (x) Term Loan B Agent be responsible in any respect for distributions to the Term Loan B Lenders or on account of the Term Loan B Claims and (y) Term Loan A Agent be responsible in any respect for distributions to the Term Loan A Lenders or on account of the Term Loan A Claims. Except as otherwise provided herein, and notwithstanding any authority to the contrary, distributions to holders of Allowed Claims, including Claims that become Allowed after the Effective Date, shall be made to holders of record or their respective designees as of three business days before the Effective Date: (a) to the address of such holder or designee as set forth in the applicable register (or if the appropriate notice has been provided pursuant to the governing agreement in writing, on or before the date that is 10 days before the Effective Date, of a change of address or an identification of designee, to the changed address or to such designee, as applicable); or (b) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004, if no address exists in the applicable register, no Proof of Claim has been filed and the Distribution Agent has not received a written notice of a change of address on or before the date that is 10 days before the Effective Date. The Debtors, the Reorganized Debtors, and the Distribution Agent, as applicable, shall not incur any liability whatsoever on account of any distributions under the Plan. Except as otherwise provided in the Plan, holders of Claims shall not be entitled to interest, dividends, or accruals on the distributions provided for in the Plan, regardless of whether such distributions are delivered on or at any time after the Effective Date. 3. Compliance Matters In connection with the Plan, to the extent applicable, the Reorganized Debtors and the Distribution Agent shall comply with all tax withholding and reporting requirements imposed on them by any Governmental Unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements. Notwithstanding any provision in the Plan to the contrary, the Reorganized Debtors and the Distribution Agent shall be authorized to take all actions necessary or appropriate to comply with such withholding and reporting requirements, including liquidating a portion of the distribution to be made under the Plan to generate sufficient funds to pay applicable withholding taxes, or withholding distributions pending receipt of information necessary to facilitate such distributions. The Reorganized Debtors reserve the right to allocate all distributions made under the Plan in compliance with all applicable wage garnishments, alimony, child support, and other spousal awards, liens, and encumbrances. 4. Foreign Currency Exchange Rate Except as otherwise provided in a Bankruptcy Court order, as of the Effective Date, any Claim asserted in currency other than U.S. dollars shall be automatically deemed converted to the equivalent U.S. dollar value using the 35 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 41 of 122 exchange rate for the applicable currency as published in The Wall Street Journal, National Edition, on the Effective Date. 5. 6. Fractional, Undeliverable, and Unclaimed Distributions a. Fractional Distributions. Whenever any distribution of fractional shares of New Membership Interests or New Common Stock would otherwise be required pursuant to the Plan, the actual distribution shall reflect a rounding of such fraction to the nearest interest or share, as applicable, (up or down), with half interests or shares or less being rounded down. b. Undeliverable Distributions. If any distribution to a holder of an Allowed Claim is returned to the Distribution Agent as undeliverable, no further distributions shall be made to such holder unless and until the Distribution Agent is notified in writing of such holder’s then-current address or other necessary information for delivery, at which time all currently due missed distributions shall be made to such holder on the next Distribution Date. Undeliverable distributions shall remain in the possession of the Reorganized Debtors until such time as a distribution becomes deliverable, or such distribution reverts to the Reorganized Debtors or is canceled pursuant to Article VI.D.5.c below, and shall not be supplemented with any interest, dividends, or other accruals of any kind. c. Reversion. Any distribution under the Plan that is an Unclaimed Distribution for a period of six months after distribution shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and such Unclaimed Distribution shall revest in the applicable Reorganized Debtor and, to the extent such Unclaimed Distribution is comprised of New Membership Interests and/or New Common Stock, each shall be deemed canceled. Upon such revesting, the Claim of the holder or its successors with respect to such property shall be canceled, discharged, and forever barred notwithstanding any applicable federal or state escheat, abandoned, or unclaimed property laws, or any provisions in any document governing the distribution that is an Unclaimed Distribution, to the contrary. Surrender of Canceled Instruments or Securities On the Effective Date, each holder of a Certificate shall be deemed to have surrendered such Certificate to the Distribution Agent or a Servicer (to the extent the relevant Claim is governed by an agreement and administered by a Servicer). Such Certificate shall be canceled solely with respect to the Debtors, and such cancelation shall not alter the obligations or rights of any non-Debtor third parties vis-à-vis one another with respect to such Certificate. Notwithstanding the foregoing paragraph, this Article VI.D.6 shall not apply to any Claims and Interests Reinstated pursuant to the terms of the Plan. E. Claims Paid or Payable by Third Parties 1. Claims Paid by Third Parties A Claim shall be correspondingly reduced, and the applicable portion of such Claim shall be Disallowed without an objection to such Claim having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court, to the extent that the holder of such Claim receives a payment on account of such Claim from a party that is not a Debtor or Reorganized Debtor; provided that the Debtors shall provide 21 days’ notice to the holder prior to any disallowance of such Claim during which period the holder may object to such disallowance, and if the parties cannot reach an agreed resolution, the matter shall be decided by the Bankruptcy Court. Subject to the last sentence of this paragraph, to the extent a holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a Reorganized Debtor on account of such Claim, such holder shall, within 14 days of receipt thereof, repay or return the distribution to the Reorganized Debtors to the extent the holder’s total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan. The failure of such holder to timely repay or return such 36 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 42 of 122 distribution shall result in the holder owing the Reorganized Debtors annualized interest at the Federal Judgment Rate on such amount owed for each business day after the 14-day grace period specified above until the amount is repaid. 2. Claims Payable by Insurance Carriers No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant to one of the Debtors’ insurance policies until the holder of such Allowed Claim has exhausted all remedies with respect to such insurance policy. To the extent that one or more of the Debtors’ insurers agrees to satisfy in full or in part a Claim (if and to the extent adjudicated by a court of competent jurisdiction), then immediately upon such insurers’ agreement, the applicable portion of such Claim may be expunged without a Claim objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court; provided that the Debtors shall provide 21 days’ notice to the holder of such Claim prior to any disallowance of such Claim during which period the holder may object to such disallowance, and if the parties cannot reach an agreed resolution, the matter shall be decided by the Bankruptcy Court. 3. Applicability of Insurance Policies Except as otherwise provided in the Plan, distributions to holders of Allowed Claims shall be in accordance with the provisions of any applicable insurance policy. Notwithstanding anything to the contrary contained herein (including Article VIII), nothing contained in the Plan shall constitute or be deemed a release, settlement, satisfaction, compromise, or waiver of any Cause of Action that the Debtors or any other Entity may hold against any other Entity, including insurers, under any policies of insurance or applicable indemnity, nor shall anything contained herein constitute or be deemed a waiver by such insurers of any defenses, including coverage defenses, held by such insurers. F. Setoffs Except as otherwise expressly provided for herein, each Reorganized Debtor, pursuant to the Bankruptcy Code (including section 553 of the Bankruptcy Code), applicable non-bankruptcy law, or as may be agreed to by the holder of a Claim, may set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), any claims, rights, and Causes of Action of any nature that such Debtor or Reorganized Debtor, as applicable, may hold against the holder of such Allowed Claim, to the extent such Claims, rights, or Causes of Action against such holder have not been otherwise compromised or settled on or prior to the Effective Date (whether pursuant to the Plan or otherwise); provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim pursuant to the Plan shall constitute a waiver or release by such Reorganized Debtor of any such Claims, rights, and Causes of Action that such Reorganized Debtor may possess against such holder. In no event shall any holder of Claims be entitled to set off any such Claim against any Claim, right, or Cause of Action of the Debtor or Reorganized Debtor (as applicable), unless such holder has filed a motion with the Bankruptcy Court requesting the authority to perform such setoff on or before the Confirmation Date, and notwithstanding any indication in any Proof of Claim or otherwise that such holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 of the Bankruptcy Code or otherwise. G. Allocation Between Principal and Accrued Interest Except as otherwise provided herein, the aggregate consideration paid to holders with respect to their Allowed Claims shall be treated pursuant to the Plan as allocated first to the principal amount of such Allowed Claims (to the extent thereof) and, thereafter, to interest, if any, on such Allowed Claim accrued through the Effective Date. ARTICLE VII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS AND INTERESTS A. Disputed Claims Process Except as otherwise provided herein, if a party files a Proof of Claim and the Debtors or the Reorganized Debtors, as applicable, do not determine, and without the need for notice to or action, order, or approval of the Bankruptcy Court, that the Claim subject to such Proof of Claim is Allowed, such Claim shall be Disputed unless 37 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 43 of 122 Allowed or disallowed by a Final Order or as otherwise set forth in this Article VII of the Plan. For the avoidance of doubt, there is no requirement to file a Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed Claim under the Plan. Except as otherwise provided herein, all Proofs of Claim filed after the Effective Date shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Reorganized Debtors or any further notice to or action, order, or approval of the Bankruptcy Court. B. Claims Administration Responsibilities Except as otherwise specifically provided in the Plan, after the Effective Date, the Reorganized Debtors shall have the sole authority: (1) to file, withdraw, or litigate to judgment, objections to Claims or Interests; (2) to settle or compromise any Disputed Claim without any further notice to or action, order, or approval by the Bankruptcy Court; and (3) to administer and adjust the Claims Register to reflect any such settlements or compromises without any further notice to or action, order, or approval by the Bankruptcy Court. For the avoidance of doubt, except as otherwise provided herein, from and after the Effective Date, each Reorganized Debtor shall have and retain any and all rights and defenses such Debtor had immediately prior to the Effective Date with respect to any Disputed Claim or Interest, including the Causes of Action retained pursuant to Article IV of the Plan. C. Adjustment to Claims Without Objection Any duplicate Claim or Interest or any Claim or Interest that has been paid, satisfied, amended, or superseded may be adjusted or expunged on the Claims Register by the Reorganized Debtors without the Reorganized Debtors having to File an application, motion, complaint, objection, or any other legal proceeding seeking to object to such Claim or Interest and without any further notice to or action, order, or approval of the Bankruptcy Court. Unless otherwise specifically provided for herein, or by any other order of the Bankruptcy Court, postpetition interest shall not accrue or be paid on Claims, and no holder of a Claim shall be entitled to interest accruing on or after the Petition Date on any Claim or right. Additionally, and without limiting the foregoing, interest shall not accrue or be paid on any Disputed Claim with respect to the period from the Effective Date to the date a final distribution is made on account of such Disputed Claim, if and when such Disputed Claim becomes an Allowed Claim. D. Disallowance of Claims and Interests All Claims and Interests of any Entity from which property is sought by the Debtors under sections 542, 543, 550, or 553 of the Bankruptcy Code or that the Debtors or the Reorganized Debtors allege is a transferee of a transfer that is avoidable under sections 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code shall be disallowed if: (1) the Entity, on the one hand, and the Debtors or the Reorganized Debtors, as applicable, on the other hand, agree or the Bankruptcy Court has determined by Final Order that such Entity or transferee is liable to turn over any property or monies under any of the aforementioned sections of the Bankruptcy Code; and (2) such Entity or transferee has failed to turn over such property by the date set forth in such agreement or Final Order. ARTICLE VIII. EFFECT OF CONFIRMATION OF THE PLAN A. Discharge of Claims and Termination of Interests Pursuant to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Debtor Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in, the 38 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 44 of 122 Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors before the Effective Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim based upon such debt or right is filed or deemed filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan. Any default or “event of default” by the Debtors or Affiliates with respect to any Claim or Interest that existed immediately before or on account of the filing of the Chapter 11 Cases shall be deemed cured (and no longer continuing) as of the Effective Date. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the Effective Date occurring. B. Releases by the Debtors Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, and their Estates from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that the Debtors, the Reorganized Debtors, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Interest, or that any Holder of any Claim or Interest could have asserted on behalf of the Debtors, based on or relating to, or in any manner arising from, in whole or in part: 1. the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, or the formulation, preparation, dissemination, negotiation, or filing of the Restructuring Support Agreement; 2. any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the Restructuring Support Agreement, the Disclosure Statement, or the Plan; 3. the Chapter 11 Cases, the Disclosure Statement, the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of Securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement; or 4. any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release any post-Effective Date obligations of any party or Entity under the Plan, any Restructuring Transaction, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan. C. Releases by Holders of Claims and Interests As of the Effective Date, each Releasing Party is deemed to have released and discharged each Debtor, Reorganized Debtor, and Released Party from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part: 1. the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, or the formulation, preparation, dissemination, negotiation, or filing of the Restructuring Support Agreement; 39 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 45 of 122 2. any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the Restructuring Support Agreement, the Disclosure Statement, or the Plan; 3. the Chapter 11 Cases, the Disclosure Statement, the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of Securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement; or 4. any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release any post-Effective Date obligations of any party or Entity under the Plan, any Restructuring Transaction, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan. D. Exculpation Except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Cause of Action for any claim related to any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, filing, or termination of the Restructuring Support Agreement and related prepetition transactions, the Disclosure Statement, the Plan, or any Restructuring Transaction, contract, instrument, release or other agreement or document created or entered into in connection with the Disclosure Statement or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance of Securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, except for claims related to any act or omission that is determined in a final order to have constituted actual fraud, willful misconduct, or gross negligence, but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Exculpated Parties have, and upon completion of the Plan shall be deemed to have, participated in good faith and in compliance with the applicable laws with regard to the solicitation of, and distribution of, consideration pursuant to the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. E. Injunction Except as otherwise expressly provided in the Plan or for obligations issued or required to be paid pursuant to the Plan or the Confirmation Order, all Entities that have held, hold, or may hold claims or interests that have been released pursuant to the Plan, shall be discharged pursuant to the Plan, or are subject to exculpation pursuant to the Plan, are permanently enjoined, from and after the Effective Date, from taking any of the following actions against, as applicable, the Debtors, the Reorganized Debtors, the Exculpated Parties, or the Released Parties: (1) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with respect to any such claims or interests; (3) creating, perfecting, or enforcing any lien or encumbrance of any kind against such Entities or the property or the estates of such Entities on account of or in connection with or with respect to any such claims or interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or with respect to any such claims or interests unless such Entity has timely asserted such setoff right in a document filed with the Bankruptcy Court explicitly preserving such setoff, and notwithstanding an indication of a claim or interest or otherwise that such Entity asserts, has, or intends to preserve any right of setoff pursuant to applicable law or otherwise; and 40 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 46 of 122 (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests released or settled pursuant to the Plan. F. Protection Against Discriminatory Treatment In accordance with section 525 of the Bankruptcy Code, and consistent with Article VI of the United States Constitution, no Governmental Unit shall discriminate against any Reorganized Debtor, or any Entity with which a Reorganized Debtor has been or is associated, solely because such Reorganized Debtor was a Debtor under chapter 11, may have been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before such Debtor was granted or denied a discharge), or has not paid a debt that is dischargeable in the Chapter 11 Cases. G. Release of Liens Except as otherwise specifically provided in the Plan, the New First Lien Term Loan Documents (including in connection with any express written amendment of any mortgage, deed of trust, Lien, pledge, or other security interest under the New First Lien Term Loan Documents), the New Intermediation Facility, the New First Loss Facility (if any), the Additional Financing Facility, or in any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan and, in the case of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of the Effective Date, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title, and interest of any holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtors and their successors and assigns, in each case, without any further approval or order of the Bankruptcy Court and without any action or Filing being required to be made by the Debtors, or any other holder of a Secured Claim. In addition, at the sole expense of the Debtors or the Reorganized Debtors, the holders of Secured Claims shall execute and deliver all documents reasonably requested by the Debtors, Reorganized Debtors or administrative agent(s) for the New First Lien Term Loan Facility to evidence the release of such mortgages, deeds of trust, Liens, pledges, and other security interests and shall authorize the Reorganized Debtors and their designees to file UCC-3 termination statements and other release documentation (to the extent applicable) with respect thereto. H. Reimbursement or Contribution If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(1)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the Effective Date, such Claim shall be forever Disallowed notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the Effective Date (1) such Claim has been adjudicated as noncontingent, or (2) the relevant holder of a Claim has filed a noncontingent Proof of Claim on account of such Claim and a Final Order has been entered determining such Claim as no longer contingent. I. Recoupment In no event shall any holder of a Claim be entitled to recoup such Claim against any Claim, right, or Cause of Action of the Debtors or the Reorganized Debtors, as applicable, unless such holder actually has performed such recoupment and provided notice thereof in writing to the Debtors on or before the Confirmation Date, notwithstanding any indication in any Proof of Claim or otherwise that such holder asserts, has, or intends to preserve any right of recoupment. J. Subordination Rights Any distributions under the Plan to holders of Claims or Interests shall be received and retained free from any obligations to hold or transfer the same to any other holder and shall not be subject to levy, garnishment, attachment, or other legal process by any holder by reason of claimed contractual subordination rights. On the Effective Date, any such subordination rights shall be deemed waived, and the Confirmation Order shall constitute an injunction enjoining any Entity from enforcing or attempting to enforce any contractual, legal, or equitable 41 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 47 of 122 subordination rights to property distributed under the Plan, in each case other than as provided in the Plan; provided, that any such subordination rights shall be preserved in the event the Confirmation Order is vacated, the Effective Date does not occur in accordance with the terms hereunder or the Plan is revoked or withdrawn. ARTICLE IX. CONDITIONS PRECEDENT TO THE EFFECTIVE DATE A. Conditions Precedent to the Effective Date It shall be a condition to the Effective Date that the following conditions shall have been satisfied or waived pursuant to Article IX.B of the Plan: 1. The Debtors shall not be in default under the DIP Facility or the DIP Facility Orders (or, to the extent that the Debtors are in default on the proposed Effective Date, such default shall have been waived by the DIP Facility Lenders or cured by the Debtors in a manner consistent with the DIP Facility and the DIP Facility Orders); 2. All conditions precedent to the effectiveness of the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility shall have been satisfied or duly waived; 3. The final version of the Plan Supplement and all of the schedules, documents, and exhibits contained therein, and all other schedules, documents, supplements and exhibits to the Plan, shall have been filed and shall be in form and substance reasonably acceptable to the Required Consenting Cash Flow Creditors and the Parent as set forth in the Restructuring Support Agreement; 4. Fee Amount; The Professional Fee Escrow Account shall have been established and funded with the Professional 5. The Debtors shall have implemented the Restructuring Transactions in a manner consistent in all material respects with the Plan; 6. The New First Lien Term Loan Documents, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility shall have been executed and delivered by all of the Entities that are parties thereto, as applicable, and all conditions precedent (other than any conditions related to the occurrence of the Effective Date) to the consummation of the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility, as applicable, shall have been waived or satisfied in accordance with the terms thereof, and the closing of the New First Lien Term Loan, the New Intermediation Facility, the New First Loss Facility (if any), and the Additional Financing Facility shall each be deemed to occur concurrently with the occurrence of the Effective Date; 7. All governmental and material third party approvals and consents, including Bankruptcy Court approval, that are necessary to implement the Restructuring Transactions, in the Debtors’ discretion with the consent of the Required Consenting Cash Flow Creditors as set forth in the Restructuring Support Agreement (such consent not to be unreasonably withheld), shall have been obtained, not be subject to unfulfilled conditions, and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent, or otherwise impose materially adverse conditions on such transactions; 8. If in accordance with the Restructuring Support Agreement, an HSR Filing is required under applicable law in connection with the consummation of the Restructuring, then HSR Approval shall have been obtained; 9. If in accordance with the Restructuring Support Agreement either (1) there is a CFIUS Investigation or (2) CFIUS requests that Parent, any of the Debtors, or the Consenting Creditors make a CFIUS Filing, then CFIUS Approval shall have been obtained; 42 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 48 of 122 10. All Restructuring Expenses, to the extent not otherwise paid, shall have been paid in Cash and in accordance with the documents giving rise to such Restructuring Expenses; 11. The Effective Date Milestone set forth in Section 4.01(f) of the Restructuring Support Agreement, as extended or waived in accordance with the terms thereof, shall have been met; and 12. The Assignee shall have all of the rights, title and interest in all of the Assumed Agreements and Permits and be deemed to be the successor-in-interest of Parent for all of the Assumed Agreements and Permits, and the Assignee shall not have assumed any other liability or obligation of Parent (or any predecessor of Parent or any prior owner of all or part of its business and assets) of whatever nature, whether presently in existence or arising hereafter other than the Assumed Agreements and Permits, and such other liabilities and obligations shall be retained by, and remain liabilities and obligations of, Parent from and after the Effective Date, and the Bankruptcy Court shall have found that Debtors have provided adequate notice under the Bankruptcy Code to all parties to the Assumed Agreements and Permits. B. Waiver of Conditions The conditions to the Effective Date of the Plan set forth in this Article IX may be waived only by the consent of the Debtors, the Parent Parties (to the extent set forth in the Restructuring Support Agreement), and the Required Consenting Cash Flow Creditors, as applicable, without notice, leave, or order of the Bankruptcy Court or any formal action other than proceedings to confirm or consummate the Plan. C. Effect of Non-Occurrence of Conditions to Consummation If the Effective Date does not occur on or before the termination of the Restructuring Support Agreement, the Plan shall be null and void in all respects and nothing contained in the Plan or the Disclosure Statement shall: (1) constitute a waiver or release of any Claims, Interests, or Causes of Action by an Entity; (2) prejudice in any manner the rights of any Debtor or any other Entity; or (3) constitute an admission, acknowledgment, offer, or undertaking of any sort by any Debtor or any other Entity; provided, that all provisions of the Restructuring Support Agreement that survive termination thereof shall remain in effect in accordance with the terms thereof. D. Substantial Consummation “Substantial Consummation” of the Plan, as defined in 11 U.S.C. § 1101(2), shall be deemed to occur on the Effective Date. ARTICLE X. MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN A. Modification of Plan Effective as of the date hereof and subject to the terms of the Restructuring Support Agreement: (1) the Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan before the entry of the Confirmation Order consistent with the terms set forth herein; and (2) after the entry of the Confirmation Order, the Debtors or the Reorganized Debtors, as applicable, may, upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with section 1127(b) of the Bankruptcy Code, remedy any defect or omission, or reconcile any inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan consistent with the terms set forth herein. B. Effect of Confirmation on Modifications Entry of the Confirmation Order shall constitute approval of all modifications to the Plan occurring after the solicitation of votes thereon pursuant to section 1127(a) of the Bankruptcy Code and a finding that such modifications to the Plan do not require additional disclosure or resolicitation under Bankruptcy Rule 3019. 43 Case 18-10122 C. Doc 10-1 Filed 01/22/18 Page 49 of 122 Revocation or Withdrawal of Plan The Debtors reserve the right to revoke or withdraw the Plan with respect to any or all Debtors before the Confirmation Date and to file subsequent chapter 11 plans. If the Debtors revoke or withdraw the Plan, or if Confirmation or the Effective Date does not occur, then: (1) the Plan will be null and void in all respects; (2) any settlement or compromise embodied in the Plan, assumption or rejection of Executory Contracts or Unexpired Leases effectuated by the Plan, and any document or agreement executed pursuant hereto will be null and void in all respects; and (3) nothing contained in the Plan shall (a) constitute a waiver or release of any Claims, Interests, or Causes of Action by any Entity, (b) prejudice in any manner the rights of any Debtor or any other Entity, or (c) constitute an admission, acknowledgement, offer, or undertaking of any sort by any Debtor or any other Entity. ARTICLE XI. RETENTION OF JURISDICTION Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code, including jurisdiction to: 1. allow, disallow, determine, liquidate, classify, estimate, or establish the priority, secured or unsecured status, or amount of any Claim against a Debtor, including the resolution of any request for payment of any Claim and the resolution of any and all objections to the secured or unsecured status, priority, amount, or allowance of Claims; 2. decide and resolve all matters related to the granting and denying, in whole or in part, any applications for allowance of compensation or reimbursement of expenses to Professionals authorized pursuant to the Bankruptcy Code or the Plan; 3. resolve any matters related to Executory Contracts or Unexpired Leases, including: (a) the assumption or assumption and assignment of any Executory Contract or Unexpired Lease to which a Debtor is party or with respect to which a Debtor may be liable and to hear, determine, and, if necessary, liquidate, any Cure or Claims arising therefrom, including pursuant to section 365 of the Bankruptcy Code; (b) any potential contractual obligation under any Executory Contract or Unexpired Lease that is assumed; and (c) any dispute regarding whether a contract or lease is or was executory or expired; 4. ensure that distributions to holders of Allowed Claims are accomplished pursuant to the provisions of the Plan and adjudicate any and all disputes arising from or relating to distributions under the Plan; 5. adjudicate, decide, or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters, and grant or deny any applications involving a Debtor that may be pending on the Effective Date; 6. enter and implement such orders as may be necessary or appropriate to execute, implement, or consummate the provisions of (a) contracts, instruments, releases, indentures, and other agreements or documents approved by Final Order in the Chapter 11 Cases and (b) the Plan, the Confirmation Order, and contracts, instruments, releases, indentures, and other agreements or documents created in connection with the Plan; 7. enforce any order for the sale of property pursuant to sections 363, 1123, or 1146(a) of the Bankruptcy Code; 8. grant any consensual request to extend the deadline for assuming or rejecting Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code; 9. issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Entity with Consummation or enforcement of the Plan; 44 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 50 of 122 10. hear, determine, and resolve any cases, matters, controversies, suits, disputes, or Causes of Action in connection with or in any way related to the Chapter 11 Cases, including: (a) with respect to the repayment or return of distributions and the recovery of additional amounts owed by the holder of a Claim for amounts not timely repaid pursuant to Article VI.E.1 of the Plan; (b) with respect to the releases, injunctions, and other provisions contained in Article VIII of the Plan, including entry of such orders as may be necessary or appropriate to implement such releases, injunctions, and other provisions; (c) that may arise in connection with the Consummation, interpretation, implementation, or enforcement of the Plan, the Confirmation Order, and contracts, instruments, releases, and other agreements or documents created in connection with the Plan; or (d) related to section 1141 of the Bankruptcy Code; 11. enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked, or vacated; 12. consider any modifications of the Plan, to cure any defect or omission, or to reconcile any inconsistency in any Bankruptcy Court order, including the Confirmation Order; 13. hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code; 14. enter an order or Final Decree concluding or closing the Chapter 11 Cases; 15. enforce all orders previously entered by the Bankruptcy Court; 16. hear and determine all disputes regarding the Debtors’, Reorganized Debtors’, or Purchaser’s RIN Liabilities that accrue or arise prior to the Effective Date; 17. hear and determine disputes involving all matters the implementation of the Plan, including the New First Lien Term Loan, the New Intermediation Agreement, the New First Loss Facility (if any), and the Additional Financing Facility, to the extent required to adjudicate the foregoing, provided, however, that upon the closing of the relevant facilities and execution of the New Organizational Documents, disputes with respect to the New First Lien Term Loan, the New Intermediation Agreement, the New First Loss Facility (if any), the Additional Financing Facility, and the New Organizational Documents that are not related to the Plan shall otherwise be governed by the jurisdictional, forum selection or dispute resolution clause contained in such document; and 18. hear any other matter not inconsistent with the Bankruptcy Code. ARTICLE XII. MISCELLANEOUS PROVISIONS A. Immediate Binding Effect Subject to Article IX.A hereof, and notwithstanding Bankruptcy Rules 3020(e), 6004(h), or 7062 or otherwise, upon the occurrence of the Effective Date, the terms of the Plan and the Plan Supplement shall be immediately effective and enforceable and deemed binding upon the Debtors, the Reorganized Debtors, and any and all holders of Claims or Interests (irrespective of whether such Claims or Interests are deemed to have accepted the Plan), all Entities that are parties to or are subject to the settlements, compromises, releases, discharges, and injunctions described in the Plan, each Entity acquiring property under the Plan, and any and all non-Debtor parties to Executory Contracts and Unexpired Leases with the Debtors. B. Additional Documents On or before the Effective Date, the Debtors may file with the Bankruptcy Court such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. The Debtors or the Reorganized Debtors, as applicable, and all holders of Claims receiving distributions pursuant to the Plan and all other parties in interest shall, from time to time, prepare, execute, and deliver any agreements or 45 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 51 of 122 documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan. C. Dissolution of the Creditors’ Committee On the Confirmation Date, the Creditors’ Committee, if any is appointed, shall dissolve automatically and the members thereof shall be released and discharged from all rights, duties, responsibilities, and liabilities arising from, or related to, the Chapter 11 Cases and under the Bankruptcy Code, except for the limited purpose of prosecuting requests for payment of Professional Fee Claims for services rendered and reimbursement of expenses incurred prior to the Effective Date by the Creditors’ Committee and its Professionals. The Debtors shall no longer be responsible for paying any fees or expenses incurred by the members of or advisors to the Creditors’ Committee after the Confirmation Date. D. Payment of Statutory Fees All fees payable pursuant to 28 U.S.C. § 1930(a) shall be paid for each quarter (including any fraction thereof) until the Chapter 11 Cases are converted, dismissed, or a Final Decree is issued, whichever occurs first. E. Reservation of Rights The Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Order. None of the filing of the Plan, any statement or provision contained in the Plan, or the taking of any action by any Debtor with respect to the Plan, the Disclosure Statement, or the Plan Supplement shall be or shall be deemed to be an admission or waiver of any rights of any Debtor with respect to the holders of Claims or Interests prior to the Effective Date. F. Successors and Assigns The rights, benefits, and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign, Affiliate, officer, director, agent, representative, attorney, beneficiaries, or guardian, if any, of each Entity. G. Service of Documents After the Effective Date, any pleading, notice, or other document required by the Plan to be served on or delivered to the Reorganized Debtors shall be served on: Reorganized Debtors PES Holdings, LLC 1735 Market Street, 11th Floor Philadelphia, Pennsylvania 19103 Attn: John B. McShane with copies to: 46 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 52 of 122 Kirkland & Ellis LLP Kirkland & Ellis International LLP 300 North LaSalle Street Chicago, Illinois 60654 Attn: James H.M. Sprayregen, P.C. Steven Serajeddini Kirkland & Ellis LLP Kirkland & Ellis International LLP 601 Lexington Avenue New York, New York 10022 Attn: Edward O. Sassower, P.C. Matthew Fagen Pachulski Stang Ziehl & Jones LLP 919 North Market Street # 1700 Wilmington, Delaware 19801 Attn: Laura Davis Jones Timothy Cairns The Parent Parties Philadelphia Energy Solutions LLC 1735 Market Street, 11th Floor Philadelphia, Pennsylvania 19103 Attn: General Counsel With copies to: Latham & Watkins LLP 885 Third Avenue New York, New York 10022 Attn: Keith A. Simon Paul F. Sheridan, Jr. and Akerman LLP 2001 Ross Avenue, Suite 3600 Dallas, Texas 75201 Attn: John Mitchell Counsel to the Consenting NYL Creditors Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attn: Susanna M. Suh Joel H. Levitin Darren Silver Counsel to the Consenting Term Loan B Creditors Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Attn: Damian S. Schaible Aryeh E. Falk H. Term of Injunctions or Stays Unless otherwise provided herein or in the Confirmation Order, all injunctions or stays in effect in the Chapter 11 Cases (pursuant to sections 105 or 362 of the Bankruptcy Code or any order of the Bankruptcy 47 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 53 of 122 Court) and existing on the Confirmation Date (excluding any injunctions or stays contained in the Plan or the Confirmation Order) shall remain in full force and effect until the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall remain in full force and effect in accordance with their terms. I. Entire Agreement Except as otherwise indicated, the Plan supersedes all previous and contemporaneous negotiations, promises, covenants, agreements, understandings, and representations on such subjects, all of which have become merged and integrated into the Plan. J. Plan Supplement After any of such documents included in the Plan Supplement are filed, copies of such documents shall be made available upon written request to the Debtors’ counsel at the address above or by downloading such exhibits and documents from the Solicitation Agent’s website at www.omnimgt.com/PhiladelphiaEnergy or the Bankruptcy Court’s website at https://www.pacer.gov/. K. Non-Severability If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration, or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is: (1) valid and enforceable pursuant to its terms; (2) integral to the Plan and may not be deleted or modified without the consent of the Debtors, or the Required Consenting Creditors; and (3) nonseverable and mutually dependent. L. Votes Solicited in Good Faith Upon entry of the Confirmation Order, the Debtors will be deemed to have solicited votes on the Plan in good faith and in compliance with the Bankruptcy Code, and pursuant to section 1125(e) of the Bankruptcy Code, the Debtors and each of the Restructuring Support Parties and each of their respective Affiliates, agents, representatives, members, principals, equity holders (regardless of whether such interests are held directly or indirectly), officers, directors, managers, employees, advisors, and attorneys will be deemed to have participated in good faith and in compliance with the Bankruptcy Code in the offer, issuance, sale, and purchase of Securities offered and sold under the Plan, and, therefore, neither any of such parties or individuals or the Reorganized Debtors will have any liability for the violation of any applicable law, rule, or regulation governing the solicitation of votes on the Plan or the offer, issuance, sale, or purchase of the Securities offered and sold under the Plan. M. Closing of Chapter 11 Cases The Reorganized Debtors shall, promptly after the full administration of the Chapter 11 Cases, File with the Bankruptcy Court all documents required by Bankruptcy Rule 3022 and any applicable order of the Bankruptcy Court to close the Chapter 11 Cases. N. Waiver or Estoppel Each holder of a Claim or an Interest shall be deemed to have waived any right to assert any argument, including the right to argue that its Claim or Interest should be Allowed in a certain amount, in a certain priority, secured or not subordinated by virtue of an agreement made with the Debtors or their counsel, or any other Entity, if 48 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 54 of 122 such agreement was not disclosed in the Plan, the Disclosure Statement, the Restructuring Support Agreement, or papers filed with the Bankruptcy Court prior to the Confirmation Date. PES HOLDINGS, LLC on behalf of itself and each of its Debtor affiliates Dated: January 17, 2018 /s/ Gregory G. Gatta Name: Gregory G. Gatta Title: CEO 49 Case 18-10122 DOC 10-1 Filed 01/22/18 Page 55 Of 122 Annex I GOVERNANCE TERM SHEET Case 18-10122 Doc 10-1 Filed 01/22/18 Page 56 of 122 Execution Version ANNEX I TO THE PLAN OF REORGANIZATION GOVERNANCE TERM SHEET This non-binding indicative term sheet (the “Governance Term Sheet”) sets forth the principal terms of governance to be implemented by the filing of cases under chapter 11 (the “Chapter 11 Cases”) of title 11 of the United States Code (the “Bankruptcy Code”). This Governance Term Sheet is proffered in the nature of a settlement proposal in furtherance of settlement discussions, and is intended to be entitled to the protections of Federal Rule of Evidence 408 and any other applicable statutes or doctrines protecting the disclosure of confidential information and information exchanged in the context of settlement discussions. Any capitalized term used herein without definition shall have the meaning set forth for such term in the Plan to which this Governance Term Sheet is attached. Governance Term Sheet Transfers 1 The New Class B Common Stock shall only be transferable together with an equal number of New Membership Interests. Shares of New Class B Common Stock, together with an equal number of New Membership Interests, may be transferred by its holder at any time to the Reorganized Partnership in exchange for a number of shares of New Class A Common Stock at the applicable exchange rate which shall initially be one (1) share of New Class A Common Stock for each New Membership Interest and share of New Class B Common Stock (the “Exchange Rate”).1 The following transfer restrictions shall apply to the New Common Stock and the New Membership Interests: • the number of holders of record shall not exceed the number that would trigger the requirements for PES Inc. to become required to file with the Securities and Exchange Commission (the “SEC”) under the Exchange Act of 1934, as amended (the “Exchange Act”); • no transfers that do not comply with U.S. federal or state securities laws or other applicable securities law; • no transfers shall be permitted to entities that directly and The Consenting Term Loan B Creditors agree to consider in good faith any request of a Parent Party to permit the contribution (the “Contribution”) to PES Inc. of 100% of the equity interests in those certain holding entities controlled by such Parent Party (classified as corporations for United States federal income tax purposes) that own no assets other than cash and/or direct or indirect interests in the Reorganized Partnership (such entities, the “Blocker Corporations”) in exchange for New Class A Common Stock as part of the Restructuring Transactions so long as (i) the Blocker Corporations, at the time of such Contribution, own interests in the Reorganized Partnership directly and own no other assets (other than cash or prepaid taxes), (ii) such Parent Party makes representations to PES Inc. reasonably satisfactory to PES Inc. to the effect that the Blocker Corporations have no liabilities (other than tax liabilities) and (iii) such Parent Party provides PES Inc. with indemnification on terms reasonably satisfactory to PES Inc. for any inaccuracy of the representation described in (ii) and for any tax liability of the Blocker Corporations arising in a tax period (or portion thereof) ending on or before the closing (for the avoidance of doubt, taking into account the Restructuring Transactions) in excess of the cash held by such Blocker Corporations. Case 18-10122 Doc 10-1 Filed 01/22/18 Page 57 of 122 materially compete with PES Inc., the Reorganized Partnership or any of their respective material subsidiaries, as reasonably determined by the New Board, provided that this provision shall not restrict a transfer to any financial investment firm or collective investment vehicle solely by virtue of its ownership (and/or its affiliates’ ownership) of an equity interest in any competitor held for investment purposes; and • all transferees of the New Equity must sign a joinder to the Stockholders Agreement. Subject to the right of a holder of a share of New Class B Common Stock to transfer such share at any time together with a corresponding New Membership Interest for one share of New Class A Common Stock, no transfer of the New Class B Common Stock or New Membership Interests will be permitted if it would cause the Reorganized Partnership to become a “publicly traded partnership.” All transferees of the New Membership Interests must sign a joinder to the New LLC Agreement. The New Common Stock and New Membership Interests shall be held electronically on the books and records of the transfer agent only and shall not be in certificated form unless authorized by the New Board. Each share or certificate shall bear a legend stating that such securities are subject to transfer restrictions set forth in the New Organizational Documents. Additional New Board Provisions 2 After the Effective Date, (i) CSAM, (ii) Halcyon and (iii) Carlyle PES, L.L.C. (“TCG”) shall have continuing rights to nominate and elect directors to the New Board consistent with the initial designation rights set forth in Article IV.N of the Plan (in the case of TCG, such rights refers to the rights provided to the Parent), provided that (x) from the time each of CSAM or Halcyon ceases to have an Ownership Percentage2 of at least 20% but still has an Ownership Percentage of at least 10%, it will be entitled to designate one director; and (y) from the time each of CSAM, Halcyon or TCG ceases to have an Ownership Percentage of at least 10%, such party shall not have any further designation rights. The CEO shall also be entitled to be a director. The Stockholders Agreement shall provide that all holders of the New Common Stock shall be required to vote in favor of the election of (i) any directors designated by CSAM, Halcyon or TCG and (ii) the CEO. Any directors not subject to the foregoing continuing rights shall be elected by holders of a majority of the outstanding New Common Stock. Until each of CSAM, TCG or Halcyon cease to have an Ownership Percentage of at least 10%, each may designate an observer to the New Board (a “Board Observer”) and may require PES Inc. to enter into a customary management rights letter with it. All expenses incurred for a Board Observer to attend a meeting shall be paid for Board Observers on “Ownership Percentage” means, with respect to any holder of New Common Stock at any particular time, the percentage resulting from a fraction, (i) the numerator of which is the number of outstanding shares of New Common Stock beneficially owned by such holder, collectively with its affiliates, funds managed by it or its affiliates, and on an institutional basis, as of such time and (ii) the denominator of which is the number of outstanding shares of New Common Stock immediately outstanding on the Effective Date (giving effect to the Restructuring Transactions). 2 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 58 of 122 the same terms as directors, and Board Observers shall be entitled to attend all meetings of the Board and of its committees and receive all materials delivered in connection therewith, subject to entering into a customary confidentiality agreement and redaction and recusal for the purposes of protecting the attorney-client privilege or any intellectual property (including trade secrets) or preventing a conflict of interest or violation of applicable law. The identity of each Board Observer, if any, designated by any of CSAM, Halcyon or TCG is subject to the prior written consent of the New Board, such consent not to be unreasonably withheld; provided that in the event such consent is not given for a Board Observer designated by CSAM, Halcyon or TCG, such party may designate a different person as the Board Observer, subject to the prior written consent of the New Board, such consent not to be unreasonably withheld. Any person with a Board designation right or Board Observer right shall be permitted to assign such rights so long as the transferee shall have the requisite Ownership Percentage applicable to such transferor after giving effect to such transfer and the transferor elects to make such assignment in its sole discretion. Board members will have customary indemnification protections, and PES Inc., the Reorganized Partnership and their respective subsidiaries will waive corporate opportunities on customary terms and conditions with respect to each of CSAM, Halcyon, TCG and any non-employee directors. Any person with director designation or Board Observer rights may suspend such rights either in connection with a conversion of voting New Common Stock to non-voting New Common Stock or otherwise. Any such suspension or conversion may be canceled by such person at any time subject to any required approvals of an applicable governmental entity. New Common Stock Consent Rights The approval of the holders of a majority of the outstanding New Common Stock shall be required for PES Inc., the Reorganized Partnership or any of their respective subsidiaries to conduct any of the following actions, directly or indirectly, from and after the Effective Date: • a Deemed Liquidation Event (as defined below), voluntary liquidation, dissolution, winding up, commencement of or consent to bankruptcy, insolvency, liquidation or similar proceedings of PES Inc. or the Reorganized Partnership; • issue or sell any new capital stock of PES Inc., equity interest in the Reorganized Partnership, or any security of their respective subsidiaries, or any right, option or warrant (including convertible debt), convertible into or exercisable or exchangeable for such capital stock, equity interest or other security other than: (w) in connection with an Excess Tax Distribution Contribution (as defined below); (x) capital stock issued as part of a bona fide acquisition; (y) employee equity awards or capital stock issued upon the exercise, conversion or exchange of outstanding securities; and (z) any SEC-registered public offering following a Qualified IPO (collectively, the “Excluded Issuances”); • incur indebtedness in excess of $50 million in principal amount in the aggregate unless in the ordinary course of business; 3 Case 18-10122 Doc 10-1 • • • • • • • • Filed 01/22/18 Page 59 of 122 enter into or amend any agreement or series of related agreements to which PES Inc., the Reorganized Partnership or any of their respective subsidiaries are expected to receive or make aggregate payments in excess of $50 million unless in the ordinary course of business; consummate any acquisition of assets or another person (including by a merger or consolidation) for consideration in excess of $50 million in fair market value unless in the ordinary course of business; any sale or other transfer (including an exclusive license) of assets with a fair market value in excess of $50 million unless in the ordinary course of business; any voluntary registration of the New Common Stock under the Exchange Act; any listing of the New Common Stock on a national securities exchange or over-the-counter market; amend any of the New Organizational Documents; consummate a public offering pursuant to a registration statement filed with the SEC, including a Qualified IPO; or enter into any agreement or other binding obligation to do any of the foregoing. New Class A Common Stock Consent Rights The approval of the holders of a majority of the outstanding New Class A Common Stock shall be required for PES Inc., the Reorganized Partnership or any of their respective subsidiaries to conduct any of the following actions, directly or indirectly, from and after the Effective Date: • amend, alter, waive or repeal any of the New Organizational Documents to materially adversely and disproportionately affect the powers, preferences or rights of the outstanding New Class A Common Stock; or • enter into any agreement or other binding obligation to do any of the foregoing. New Class B Common Stock Consent Rights The approval of the holders of a majority of the outstanding New Class B Common Stock shall be required for PES Inc., the Reorganized Partnership or any of their respective subsidiaries to conduct any of the following actions, directly or indirectly, from and after the Effective Date: • amend, alter, waive or repeal any of the New Organizational Documents to materially adversely and disproportionately affect the powers, preferences or rights of the outstanding New Class B Common Stock; • engage in any business activity other than the direct or indirect management and ownership of the Reorganized Partnership or any of its subsidiaries other than any action, including issuing equity or incurring its own indebtedness, if the New Board determines in good faith that such actions are in the best interest 4 Case 18-10122 Doc 10-1 • Filed 01/22/18 Page 60 of 122 of the holders of the New Membership Interests and the Reorganized Partnership;3 or enter into any agreement or other binding obligation to do any of the foregoing. Related Party Agreements PES Inc. and the Reorganized Partnership shall not, and shall not permit any of their respective subsidiaries to, enter into, amend or renew an agreement with (a) an affiliate of PES Inc. or the Reorganized Partnership, or (b) an owner of New Common Stock or of a New Membership Interest, or an affiliate of such owner, if such agreement or the performance of such agreement would materially and adversely impact the holders of the New Class A Common Stock, of the New Class B Common Stock or of the New Membership Interests, unless such agreement, amendment or renewal: (i) is entered into on an arm’s-length basis on terms no less favorable than those available from an unaffiliated third party; (ii) is, or is pursuant to, a compensation and benefits agreement with a director, officer or other employee of PES Inc., the Reorganized Partnership and any of its subsidiaries entered into in the ordinary course of business (and other similar, customary exclusions for intra-company matters); or (iii) is approved with the prior written consent of each of CSAM, Halcyon, TCG and Energy Transfer Partners, so long as such party has an Ownership Percentage of at least 5.0%. Existing Agreements For the avoidance of doubt, the consent rights set forth above under “New Common Stock Consent Rights,” “New Class A Common Stock Consent Rights,” “New Class B Common Stock Consent Rights” and “Related Party Agreements” shall not apply in respect of actions taken from and after the Effective Date pursuant to any agreement during its term, so long as it is not materially amended, to which PES Inc., the Reorganized Partnership or any of their respective subsidiaries is bound and was entered into prior to the Effective Date, including the Intermediation Facility or a replacement therefor. In addition, any direct or indirect sale, other transfer (including an exclusive license) or purchase of, or investment in, a company or other corporate entity or a business or substantially all of the assets thereof, whether by merger, consolidation or otherwise, shall not be considered to be in the “ordinary course of business.” Other Provisions The New Organizational Documents will contain certain provisions, including, among other things: • (i) Key Holders4 will have tag-along rights for a transfer or series of related transfers for more than 25% of any of the outstanding New 3 To protect the principle that the holders of the New Class B Common Stock receive their economics through their New Membership Interests, the New Organizational Documents shall contain appropriate provisions generally (i) to provide for economic parity between a share of New Class A Common Stock and a New Membership Interest, subject to adjustments to the Exchange Rate as provided in footnote 6 herein; and (ii) to ensure that no business activity is taken at sister or parent entities of the Reorganized Partnership. 4 “Key Holder” means (i) a holder (when combined with its affiliates and funds managed by it and its affiliates) of New Common Stock with an Ownership Percentage of at least 1.0% that is a party to the Stockholders 5 Case 18-10122 • Doc 10-1 Filed 01/22/18 Page 61 of 122 Equity, and (ii) Management Holders will also have tag-along rights for a transfer or series of related transfers for more than 5% of any of the outstanding New Equity ((i) and (ii) collectively, the “tag-along rights”); provided such tag-along rights shall not apply to (w) any transfer that is required by law or a governmental entity with jurisdiction over either PES Inc., the Reorganized Partnership or the transferor; (x) a transfer as part of an underwritten public offering pursuant to an SEC registration statement for which piggyback registration rights apply; (y) a transfer to any affiliate of the transferor, including any fund managed by the transferor or an affiliate thereof or (z) pursuant to the drag-along rights; and provided that each such holder will be provided the opportunity at its discretion to transfer its shares of New Class B Common Stock with a corresponding amount of New Membership Interests to the Reorganized Partnership for shares of New Class A Common Stock based on the Exchange Rate prior to any such transfer. If requested by holders of at least a majority of the outstanding New Common Stock (the “Dragging Holders”) in connection with a Sale Event5, all holders of the New Equity shall be required to sell their New Equity on the same terms and the same per-interest consideration as the Dragging Holders and, if a stockholder vote is required, vote in favor of such transaction and waive all appraisal or dissenter rights in connection therewith (the “drag-along rights”); provided if the acquiring person or group includes one or more affiliate stockholders of PES Inc., including any person which, together with its affiliates and on an institutional basis, beneficially owns 10% or more of the outstanding New Common Stock (an “Affiliated Buyer”), the dragalong rights shall only apply if such transaction is approved by (x) a majority of disinterested directors (even if less than a quorum) or (y) a majority of the outstanding New Common Stock not held by an Affiliated Buyer; provided further that each such holder will be provided the opportunity at its discretion to transfer its shares of New Class B Common Stock with a corresponding amount of New Agreement and (ii) each member of management (former or current) of Parent and its affiliates who is receiving New Equity on the Effective Date pursuant to the Restructuring Transactions (and exclusive of the new Management Incentive Plan), such number of members of management not to exceed twenty (20) persons (a “Management Holder”); provided that if any Management Holder transfers 50% or more of its initial ownership of New Equity following the Restructuring and has an Ownership Percentage of less than 1.0% after giving effect to such transfer, such Management Holder shall no longer be a Key Holder except that such Management Holder shall still be eligible to exercise the tag-along rights and shelf registration rights provided hereunder; provided further that any Management Holder with an Ownership Percentage less than 1.0% shall not have any preemptive rights; provided further that no direct, material competitor, as reasonably determined by the New Board, may be a Key Holder. 5 “Sale Event” means: (i) A merger or consolidation (other than one in which holders of the voting power of PES Inc. own a majority by voting power of the outstanding shares of the surviving or acquiring corporation); (ii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of PES Inc. or the Reorganized Partnership; ((i) or (ii), a “Deemed Liquidation Event”); or (iii) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of PES Inc. shares of capital stock representing more than fifty percent (50%) of the outstanding voting power of PES Inc. 6 Case 18-10122 • • • • • Doc 10-1 Filed 01/22/18 Page 62 of 122 Membership Interests to the Reorganized Partnership for shares of New Class A Common Stock based on the Exchange Rate prior to any such transfer; Key Holders will have customary information rights providing for at least the same information as provided under Section 5.1 of the Term Loan B Credit Agreement; So long as PES Inc. is not required to file public reports with the SEC, PES Inc. shall use commercially reasonable efforts to assist any Key Holder with a transfer of its New Equity by (i) providing reasonable access to PES Inc.’s and its subsidiaries’ books and records, financial and operating data and any other information reasonably appropriate for a proposed transferee to conduct a reasonable and customary due diligence review and (ii) providing any reasonably requested legal opinions in connection with such a transfer upon the receipt of reasonable evidence and certifications that there is an applicable exemption from registration under the Securities Act (the “sale support rights”). Each Key Holder will, collectively with its affiliates (including any funds managed by such Key Holder or its affiliates), have the right to participate on a pro rata basis in any issuance by PES Inc. or the Reorganized Partnership of any capital stock or securities exchangeable or exercisable for or convertible into its capital stock (the “preemptive rights”), except for (x) Excluded Issuances, provided that an issuance in connection with an Excess Tax Distribution Contribution shall not be considered an Excluded Issuance for purposes of the preemptive rights; or (y) in connection with any bona fide, arm’s-length restructuring of outstanding debt of PES Inc., the Reorganized Partnership or any subsidiary (for the avoidance of doubt, a Key Holder may allocate its aggregate preemptive rights among its affiliates, including any funds managed by such Key Holder or its affiliates, in its sole discretion); All holders of the New Equity shall be party to the Stockholders Agreement as a precondition to receiving any of the New Equity and shall also grant a power of attorney and voting proxy to the New Board with respect to the Board designation and nomination rights and the drag-along rights; provided that any amendment to such rights shall require the prior written consent of each of CSAM, Halcyon and TCG so long as such party has an Ownership Percentage of at least 10.0%; To the extent that a tax distribution to PES Inc. by the Reorganized Partnership exceeds the amount of any taxes required to be paid by PES Inc. in respect of its ownership of the Reorganized Partnership for the applicable fiscal year, PES Inc. may use all or a portion of such excess cash to make a capital contribution to the Reorganized Partnership in return for a number of New Membership Interests based on the fair market value thereof (an “Excess Tax Distribution Contribution”);6 and 6 In the event of an Excess Tax Distribution Contribution or any other purchase of New Membership Interests by PES Inc., the Exchange Rate shall be adjusted immediately following such purchase (and prior to any related 7 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 63 of 122 • Registration Rights Other reasonable provisions in the discretion of the Required Consenting Term Loan B Lenders acting in good faith and after consulting with the Parent Parties. If PES Inc. consummates an underwritten, SEC-registered initial public offering with gross primary proceeds of at least $75 million (a “Qualified IPO”), the consent rights, tag-along rights, drag-along rights, preemptive rights, information rights and sale support rights shall automatically terminate. From the earlier of (i) the date of consummation of a Qualified IPO or (ii) the date on which PES Inc. becomes obligated to publicly file SEC reports under the Exchange Act, the following registration rights will apply: • Shelf Registration Rights: PES Inc. will use commercially reasonable efforts to file a shelf registration statement on Form S-1 (or Form S-3, if PES Inc. is eligible to use such form, it being understood that the obligation to file a shelf registration statement pursuant to this provision shall not be dependent on such eligibility), or any other applicable form, to cause such shelf registration statement to be declared effective by the earlier of (1) the 60th day following the date on which PES Inc. becomes obligated to publicly file SEC reports under the Exchange Act or (2) the 181st day following the pricing of a Qualified IPO and keep it effective to register the resale of any shares of New Class A Common Stock received in the Restructuring Transactions or thereafter acquired held by Key Holders, unless the resale of such New Class A Common Stock does not require registration to be resold without any holding period, volume or manner of sale restrictions in the reasonable opinion of the Board; provided that any Key Holder or Management Holder (i) with an Ownership Percentage of at least 10%, (ii) who is, or has an employee who is, an officer of PES Inc. or member of the New Board or (iii) that otherwise reasonably concludes based on advice of counsel that it may be considered an “affiliate” of PES Inc. will be deemed eligible to include its New Class A Common Stock in such shelf registration statement. transfer or exchange of New Membership Interests and New Class B Common Stock for New Class A Common Stock) to equal the quotient of (x) the aggregate number of shares of New Class A Common Stock outstanding immediately following such purchase of additional New Membership Interests divided by (y) the aggregate number of New Membership Interests held by PES Inc. immediately following such purchase. For example, if there are initially 100 outstanding shares of New Class A Common Stock and PES Inc. holds 100 New Membership Interests, the Exchange Rate will be one (1). If PES Inc. subsequently acquires 25 New Membership Interests (whether or not holders of New Membership Interests exercise any preemptive rights) without issuing any additional New Class A Common Stock, the Exchange Rate will be adjusted to equal 0.8, so each New Membership Interest together with a share of New Class B Common Stock will be exchangeable for 0.8 shares of New Class A Common Stock. The Exchange Rate will be similarly adjusted if PES Inc. repurchases or redeems any outstanding shares of New Class A Common Stock and there is no corresponding repurchase or redemption of New Membership Interests by the Reorganized Partnership. Furthermore, the Exchange Rate will also be adjusted if there is any subdivision or combination (whether by split, dividend, distribution, reclassification, recapitalization or otherwise) of either the New Class A Common Stock or the New Class B Common Stock and the New Membership Interests without a substantively identical subdivision or combination to provide for equal treatment of the New Class A Common Stock and New Class B Common Stock and New Membership Interests. 8 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 64 of 122 • Demand Registration Rights: Beginning on the date that is 180 days following the pricing of a Qualified IPO (or such earlier date on which the underwriters in such offering have agreed for the lock-up restrictions relating thereto to terminate), if one or more Key Holders with an aggregate Ownership Percentage of least 10% request it, PES Inc. will use commercially reasonable efforts to file a registration statement for the sale of such shares of New Class A Common Stock and such demanding Key Holders may require, in connection with any such demand registration, that PES Inc. conduct a firm commitment underwritten offering; provided such registration must cover the sale of at least 5% of the outstanding New Class A Common Stock and such demand may only be made once every six months. • Piggyback Registration Rights: All Key Holders will have customary piggyback rights for any public offering of the New Class A Common Stock pursuant to an effective SEC registration statement, whether initiated by other Key Holders, PES Inc. or otherwise, with priority given to securities issued by PES Inc. in the case of an offering initiated by PES Inc. and otherwise with priority given to the initiating and other Key Holders on a pro rata basis. • Lockup; Market Standoff PES Inc. will pay all registration expenses including reasonable expenses of one counsel to the holders plus any necessary local counsel, except for the underwriting discounts and commissions of any Key Holders selling in any offering. In connection with a Qualified IPO and if required by the New Board, all directors and officers of PES Inc. and all holders of the New Equity will agree to not transfer any New Equity (and any securities exercisable or exchange for, or convertible into, New Equity) from the time a preliminary prospectus with a price range is publicly filed for up to 180 days following the date of a final prospectus, subject to certain exceptions. For any SECregistered public offering following a Qualified IPO, if the New Board requires it, all directors and officers and all holders participating in such offering shall agree to the same terms as described above except such lockup agreement shall not last for more than 90 days following the date of any final prospectus for such offering. All directors and officers of PES Inc. and the relevant holders of New Equity referred to in the preceding paragraph will agree to execute a customary lock-up agreement with the underwriters consistent with these provisions and any waiver of such provisions granted by the underwriters to (i) any person or entity that beneficially owns 1% or more of the outstanding New Equity or (ii) any director or officer, in each case shall also apply to the same extent to all holders of New Equity for the same amount of New Equity waived for such other person (the “MFN Release”) except if such waiver is in connection with an underwritten offering pursuant to an effective SEC registration statement, all Key Holders shall be eligible to participate in such offering and the MFN Release shall only apply with respect to such holder’s sales in such offering. 9 Case 18-10122 Rule 144 Cooperation Doc 10-1 Filed 01/22/18 Page 65 of 122 During any period in which PES Inc. is subject to reporting under the Exchange Act, PES Inc. will use its commercially reasonable efforts to: (a) make and keep public information regarding PES Inc. available, as those terms are understood and defined in Rule 144 under the Securities Act (or any similar provision then in effect), at all times during such period; (b) file with the SEC in a timely manner all reports and other documents required of PES Inc. under the Securities Act and the Exchange Act at all times during such period; and (c) so long as a Key Holder owns any New Common Stock subject to registration rights, furnish (i) upon request, a written statement of PES Inc. that it has complied with the reporting requirements of Rule 144 under the Securities Act (or any similar provision then in effect), to the extent accurate and (ii) unless otherwise available via the SEC’s EDGAR filing system, to furnish such Key Holder upon request a copy of the most recent annual or quarterly report of PES Inc., and such other reports and documents so filed as such Key Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing such Key Holder to sell any such securities without registration. 10 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 66 of 122 Annex II NEW FIRST LIEN TERM LOAN TERM SHEET Case 18-10122 Doc 10-1 Filed 01/22/18 Page 67 of 122 Execution Version ANNEX II TO THE PLAN OF REORGANIZATION NEW FIRST LIEN FACILITY TERM SHEET This term sheet (the "New First Lien Facility Term Sheet") is Annex II to the Plan of Reorganization (the "Plan") attached as Exhibit A to the Restructuring Support Agreement (the "Restructuring Support Agreement"). Capitalized terms used without definition have the meanings given to them in the Plan or the Restructuring Support Agreement. This New First Lien Facility Term Sheet sets forth the principal terms of a potential first lien term loan facility (the "New First Lien Facility"; the credit agreement evidencing the New First Lien Facility, the "New First Lien Credit Agreement" and, together with the other definitive documents governing the New First Lien Facility, the Plan and the Final Orders, the "New First Lien Facility Documents," each of which shall be in form and substance acceptable to the New First Lien Facility Agent and the New First Lien Facility Lenders (each as defined herein)) to be entered into with the Loan Parties (as defined herein) in the event of the filing of the Chapter 11 Cases. The New First Lien Facility will be subject to (a) the approval of the Bankruptcy Court and (b) emergence from the Chapter 11 Cases, in accordance with (i) the Plan and Final Orders of the Bankruptcy Court authorizing the Loan Parties to enter into the New First Lien Facility, each of which shall be in form and substance acceptable to the New First Lien Facility Agent and the New First Lien Facility Lenders, and (ii) the New First Lien Facility Documents to be executed by the Loan Parties, the New First Lien Facility Agent and the New First Lien Facility Lenders. NEW FIRST LIEN FACILITY TERM SHEET Borrower PES Holdings, LLC, as borrower (the "Borrower") Guarantors All subsidiaries of the Borrower (the "Guarantors" and, together with the Borrower, the "Loan Parties"). New First Lien Facility Agent Cortland Capital Markets Services LLC, as administrative agent and collateral agent (the "New First Lien Facility Agent") Upon consummation of the Plan and the emergence (the "Emergence") of the Borrower and those of its affiliates for which cases were filed under Chapter 11 of the United States Bankruptcy Code from the Chapter 11 Cases, the DIP Facility will convert to Tranche A loans under the New First Lien Facility, subject to the terms and conditions of this New First Lien Facility Term Sheet and the New First Lien Facility Documents. Upon Emergence:  the DIP Facility will convert to Tranche A of the New First Lien Facility, such Tranche A having a principal amount of $120 million;  as described in and in accordance with the Plan, each Holder of an Allowed Term Loan A Claim will receive its Pro Rata share of (i) Tranche B of the New First Lien Facility, such Tranche B having a principal amount of $82.5 million (for the avoidance of doubt, $82.5 million after giving effect to the cash repayment described in (ii)) and (ii) a permanent cash repayment in an aggregate principal amount of $15 million in respect of loans under the NYL Credit Agreement, plus all accrued and unpaid interest under the NYL Credit Agreement; and  as described in and in accordance with the Plan, each Holder of an Allowed Term Loan B Claim will received its Pro Rata share of Tranche C of the New First Lien Facility, such Tranche C having a principal amount of $417 million, in each case subject to the terms and conditions of this New First Lien Facility New First Lien Facility Lenders Amount & Type (Tranches A, B and C of the New First Lien Facility) Case 18-10122 Doc 10-1 Filed 01/22/18 Page 68 of 122 Term Sheet and the New First Lien Facility Documents. The holders of the Tranche A loans are referred to as the "Tranche A Lenders," the holders of the Tranche B loans are referred to as the "Tranche B Lenders" and the holders of the Tranche C loans are referred to as the "Tranche C Lenders." Maturity Date December 31, 2022 Tranche A Interest Rate Cash pay interest of LIBOR + 625 bps Tranche B Interest Rate Cash pay interest of LIBOR + 450 bps Tranche C Interest Rate (A) From Emergence to the business day falling two years and six months after Emergence (such business day, the "Hinge Date"), cash pay interest of LIBOR + 350 bps and payment-in-kind interest of 300 bps and (B) from and after the Hinge Date, cash pay interest of LIBOR + 400 bps and payment-inkind interest of 250 bps. LIBOR/Base Rate floor 100/200 bps Tranche A Amortization None. Tranche B Amortization $2,500,000.00 in 2018; $5,000,000.00 in 2019; $7,500,000.00 in 2020; and $10,000,000.00 each year thereafter, payable in equal quarterly installments. Tranche C Amortization None. Tranche C PIK Toggle If at any time up to and including the Hinge Date, the projected liquidity of the Loan Parties, on a consolidated basis (as defined in a manner to be agreed) over a prospective twelve month period is equal to or less than $115 million, the Borrower may elect to decrease the amount of the cash pay interest of the Tranche C Interest Rate by 300 bps by increasing the amount of the paymentin-kind interest by 400 bps up to an aggregate cap of $15 million in aggregate principal of such proposed in lieu payment-in-kind interest over the life of the New First Lien Facility. Collateral Subject to the below, substantially all of the assets of the Borrower and its subsidiaries, subject to customary carveouts and thresholds to be mutually agreed provided that the Excluded Collateral (as defined below) shall be excluded from the collateral securing the New First Lien Facility. Certain immaterial buildings identified by the Term Loan A Agent prior to the execution of the Restructuring Support Agreement will not secure the Tranche B (the "Specified Tranche B Excluded Buildings"). Prior to Emergence, the Borrower shall deliver evidence of flood insurance coverage to satisfy FEMA's flood insurance requirements on all existing properties (other than Specified Tranche B Excluded Buildings) of the Borrower and its subsidiaries that are located in a flood zone, as specified to the Borrower by the Term Loan A Agent or any Term Loan A Lender prior to the execution of the Restructuring Support Agreement. Notwithstanding anything to the contrary herein or in any New First Lien Facility Document, no building (as defined under the flood laws) acquired by the Borrower or any of its subsidiaries after Emergence shall secure the Tranche B if a Tranche B Lender notifies the New First Lien Facility Agent that such building (i) is located in a flood zone (unless otherwise not subject to the flood insurance requirements of the Federal Emergency Management Agency (FEMA)), and (ii) evidence of sufficient flood insurance coverage to satisfy FEMA's flood insurance 2 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 69 of 122 requirements has not been received (any such additional building that does not secure the Tranche B but secures the Tranche A and Tranche C by operation of this sentence, an "Additional Tranche B Excluded Building," and together with the Specified Tranche B Excluded Buildings, the "Tranche B Excluded Buildings"); it being understood that the Borrower shall be obligated to obtain flood insurance acceptable to each Tranche B Lender with respect to each building unless the Tranche B Lenders, in their discretion, determine to exclude any building from the mortgage requirement. Excluded Collateral The New First Lien Facility will not be secured by the MLC Separate Assets and Collateral (as defined in the Amended and Restated Intercreditor Agreement, dated as of October 7, 2014, among the Borrower, the other grantors party thereto, Bank of America, N.A., as revolving collateral agent and Merrill Lynch Commodities, Inc., as SOA collateral agent and as MLC, as in effect on the Petition Date) and all catalyst assets and catalyst inventory, precious metals assets and precious metals inventory and all additions, accessions and all rights and privileges related thereto. The New First Lien Facility will not be secured by the Collateral (as defined in Annex III Plan) for the Additional Financing Facility. Application of Proceeds All repayments after acceleration, an exercise of remedies or an Event of Default of the New First Lien Facility (i) from proceeds of Collateral will be applied (a) first, to the pro rata repayment of the loans and related obligations under Tranche A until such obligations have been paid in full and (b) second, to the pro rata repayment of the loans and related obligations under Tranche B and Tranche C (treated, for purposes of this paragraph, as a single tranche) until such obligations have been paid in full and (ii) if other than from proceeds of Collateral, to the pro rata repayment of the loans and related obligations under Tranche A, Tranche B and Tranche C until such obligations have been paid in full. If proceeds from any Tranche B Excluded Buildings are received before or at the same time as proceeds from other collateral, the proceeds from the Tranche B Excluded Buildings shall be applied toward the Tranche A and, subject to the waterfall in the preceding sentence, the Tranche C, and, subject to the waterfall in the preceding sentence, the Tranche B shall receive an equivalent amount from proceeds of collateral other than the Tranche B Excluded Buildings. Prepayments Prepayments of Tranche B and Tranche C will be made on a no less than ratable basis with respect to Tranche A, and prepayments of Tranche B will be made on a basis that is no less than ratable with respect to the Tranche C. All prepayments of Tranche B loans shall be applied to the amortization payments on the Tranche B loans in direct order of maturity. Events of Default Customary and appropriate for similar facilities, including, without limitation, payment default, breaches of loan documents, cross default and cross acceleration to material debt, undischarged judgments, ERISA events, change of control, breach of reps and warranties, bankruptcy related defaults, lien related defaults, invalidity of New First Lien Facility Documents and suspension or termination of intermediation agreement or refinery operations (in each case subject to baskets, thresholds and carveouts to be agreed). Covenants Affirmative and negative covenants customary and appropriate for similar first lien term loans, together with such additions and modifications as determined by the New First Lien Facility Lenders and the Borrower; provided that such 3 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 70 of 122 negative covenants shall include (in certain cases, subject to customary exceptions, carveouts and thresholds):  a prohibition on dividends, distributions, share buybacks or shareholder loans until the complete repayment of all Tranche B loans (the "Tranche B Dividend Block");  a prohibition on incurring any additional debt (including any additional Tranche A loans) that has priority of payment or priority in proceeds of Collateral over the Tranche B; provided that, subject to receipt of a budget reasonably satisfactory to the Required Tranche B Lenders demonstrating the need for a use for such additional borrowing within the two quarters on and following the time of such additional borrowings for ordinary working capital purposes, the Borrower may borrow for cash up to an additional $15 million in aggregate principal amount of the Tranche A (provided that the Tranche B Lenders shall be afforded the opportunity to participate in such increase on a ratable basis) (the "Anti-Layering Covenant");  a restriction on modifications to the terms of the Additional Financing Facility that are materially adverse to the New First Lien Facility Lenders; and  a $100 million restriction on asset sales subject to ordinary course transactions. Financial Covenants None. Representations and Warranties Certain representations and warranties, affirmative and negative covenants and events of default will, in certain cases, contain materiality and knowledge qualifications, limitations, exceptions, dollar thresholds and baskets to be agreed. Voting Amendments and waivers of the New First Lien Facility will require (a) the approval of Tranche A Lenders holding more than 50% of the Tranche A loans (the "Required Tranche A Lenders") (provided that the consent of at least two Tranche A Lenders (including Tranche A Lenders affiliated to each other or under common management) shall be required) and (b) the approval of Tranche B Lenders and Tranche C Lenders holding more than 50% of the Tranche B loans and the Tranche C loans voting as a single class (the "Required Tranche B/C Lenders"); provided that, notwithstanding the foregoing (A) the vote of each affected New First Lien Facility Lender shall be required for (i) reductions of interest (or the rate thereon (including without limitation any change in LIBOR or the LIBOR floor or Base Rate or Base Rate Floor) or any increase in the allowed amount of, or acceleration in the allowed or prescribed date with respect to, interest payable in kind) or principal or fees or any postponement of any date for payment for any of the foregoing, (ii) changes to the sections entitled "Application of Proceeds" and "Prepayments" above, (iii) changes to certain customary pro rata provisions, (iv) releases of all or substantially all of the value of the guarantees of the Guarantors or a release of all or substantially all of the Collateral and (v) changes in the voting provisions, the definition of required lenders (or similar terms) or voting percentages specified in the definition of required lenders or related terms and (B) consent of Tranche B Lenders holding more than 50% of the Tranche B loans (the "Required Tranche B Lenders") will be required to change (I) any provision related to the Tranche B Dividend Block or the Anti- 4 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 71 of 122 Layering Covenant or (II) any provision under the New First Lien Facility (other than as otherwise specified in (A) of this section) that affects or benefits the Tranche A Lenders or the Tranche C Lenders disproportionately as compared to the Tranche B Lenders or would disproportionately adversely affect the Tranche B Lenders as compared to the Tranche A Lenders or the Tranche C Lenders. Remedies Following an Event of Default, the Required Tranche A Lenders shall control any remedies against the Collateral, subject to the ability of the Required Tranche B Lenders or the Required Tranche C Lenders to exercise remedies after a standstill period of 30 days (which 30-day period will commence upon the occurrence of such Event of Default), subject, in all cases, to the following modifications:  Subject in all cases to the following bullet points, after the discharge in full of Tranche A, the exercise of remedies shall be controlled by the Required Tranche B/C Lenders (the "Discharge Control Shift"); provided that, whether or not a Discharge Control Shift shall have occurred, after a standstill period of 30 days (beginning with the occurrence of the relevant Event of Default), the Required Tranche B Lenders or the Tranche C Lenders holding more than 50% of the Tranche C loans (the "Required Tranche C Lenders") shall each have the ability to initially trigger the exercise of remedies against the Collateral ("Remedies Shift")  Any exercise of remedies against the Collateral solely resulting from any of the following Event of Defaults (each a "Tranche B Specific Event of Default") for failure (i) to pay interest on the Tranche B loans when due (unless all interest (other than pay in kind interest) under the New First Lien Facility is then not being paid on such due date), (ii) to pay any amortization payment under the Tranche B loans (each Event of Default described in each of (i) and (ii), a "Tranche B Payment Event of Default") or (iii) to comply with the Tranche B Dividend Block or the Anti-Layering Covenant shall in the case of each of (i), (ii) and (iii) be controlled by the Required Tranche B Lenders without the requirement of the consent of any other New First Lien Facility Lenders or the New First Lien Facility Agent, subject, in the case of a Tranche B Payment Event of Default only, to a standstill period (beginning with the occurrence of such Tranche B Payment Event of Default) of 10 business days  if any Event of Default has occurred and is continuing in addition to a Tranche B Specific Event of Default (a "Dual Event of Default"), both the Required Tranche A Lenders (subject to the Discharge Control Shift) and the Required Tranche B Lenders shall each have the ability to initially trigger the exercise of remedies against the Collateral  notwithstanding anything to the contrary herein, subject to the proviso below, (i) if and as long as the Required Tranche A Lenders (subject to the Discharge Control Shift, Remedies Shift and except following a Tranche B Specific Event of Default where there is not then a Dual Event of Default) pursue the exercise of remedies following an Event of Default, such exercise of remedies will be exclusively controlled by 5 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 72 of 122 the Required Tranche A Lenders (subject to the Discharge Control Shift and/or Remedies Shift) without the requirement of the consent of any other New First Lien Facility Lenders or the New First Lien Facility Agent, (ii) if and as long as the Required Tranche B Lenders pursue the exercise of remedies following a Tranche B Specific Event of Default where there is not then a Dual Event of Default, such exercise of remedies will be exclusively controlled by the Required Tranche B Lenders without the requirement of the consent of any other New First Lien Facility Lenders or the New First Lien Facility Agent, and (iii) upon a Discharge Control Shift or a Remedies Shift (other than in an event where clause (ii) is applicable), if the Required Tranche B Lenders or the Required Tranche C Lenders have initially triggered the exercise of remedies against the Collateral, such exercise of remedies will be controlled by the Required Tranche B/C Lenders; provided that (A) if clause (i) of this bullet is applicable and the Required Tranche A Lenders are not diligently pursuing remedies against a substantial portion of the Collateral, the exercise of remedies shall be controlled by the Required Tranche B/C Lenders and (B) if either clause (A) of this proviso or clause (iii) of this bullet is applicable and the Required Tranche B/C Lenders are not diligently pursuing remedies against a substantial portion of the Collateral, then the exercise of remedies shall be controlled by the Required Tranche B Lenders. Furthermore, upon the occurrence of (w) any acceleration of the Tranche A Facility, (x) any payment Event of Default under the Tranche A Facility and expiration of a standstill period of 30 days (beginning with the occurrence of the relevant Event of Default), (y) a bankruptcy or insolvency Event of Default with respect to the Borrower or any material subsidiary of the Borrower or (z) any exercise of remedies against a substantial portion of the Collateral by or at the direction of the Tranche A Lenders, the Tranche B Lenders and Tranche C Lenders shall have the option (on customary terms), but not the obligation, to purchase (pro rata among them based on the principal amount of such Tranche B Lenders' and Tranche C Lenders' loans then outstanding under the New First Lien Facility) the Tranche A loans (in full but not in part) at par plus accrued and unpaid interest (it being understood that to the extent any Tranche B Lender or Tranche C Lender does not exercise its right to participate in such purchase option, the participating Tranche B Lenders and Tranche C Lenders may, if they wish to exercise such option, ratably increase their participation in such purchase option). Fees and Expenses Indemnification The Loan Parties shall pay all reasonable, documented out-of-pocket fees, costs and expenses incurred or accrued by the New First Lien Facility Agent and/or the New First Lien Facility Lenders in connection with any and all aspects of the New First Lien Facility, including, without limitation, the reasonable fees and expenses of legal counsel, hired by the New First Lien Facility Agent and/or the applicable New First Lien Facility Lenders (limited to (i) one primary counsel and one local counsel for the New First Lien Facility Agent, (ii) one primary counsel for the Tranche A Lenders and Tranche C Lenders, (iii) one primary counsel for the Tranche B Lenders (plus 6 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 73 of 122 conflicts counsel in certain customary cases) and (iv) one local counsel in each applicable jurisdiction for the Tranche A Lenders, Tranche B Lenders and Tranche C Lenders). The Loan Parties will indemnify the New First Lien Facility Agent and New First Lien Facility Lenders and their affiliates and related parties, and hold them harmless from and against all reasonable, documented out-of-pocket costs, expenses and liabilities arising out of or relating to the transactions contemplated hereby, except to the extent arising solely out of the gross negligence, bad faith or willful misconduct of such indemnified party as determined by a court of competent jurisdiction in a final and nonappealable judgment. New Money Participant Fee Upon the conversion of the DIP Facility to Tranche A loans under the New First Lien Facility, each DIP Facility Lender shall, at the time of Emergence, receive its Pro Rata share of 2.5% of the New Equity issued after Emergence (for the avoidance of doubt, this 2.5% of the New Equity shall be a part of and not in addition to the 75% of the New Equity to be distributed to the Term Loan B Creditors and DIP Facility Lenders at the time of Emergence). Tranche B Participant Fee; Term Loan A Agent Fee Upon Emergence, the Debtors will pay the Tranche B Lenders a fee equal to 70 bps calculated with respect to the aggregate principal amount of Tranche B. PNC Capital Markets LLC, an affiliate of the Term Loan A Agent, will receive a fee equal to $500,000, of which one-half will be paid by North Yard Entities upon execution of the Restructuring Support Agreement and one-half will be paid by the Debtors upon Emergence. Governing Law The laws of the State of New York. Miscellaneous The New First Lien Facility Term Sheet does not purport to summarize all of the conditions, covenants, representations, warranties, events of default and other terms and provisions which would be contained in definitive credit documentation, if any, relating to matters covered hereby, all of which shall be acceptable in form and substance to the New First Lien Facility Agent and New First Lien Facility Lenders. 7 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 74 of 122 Annex III ADDITIONAL FINANCING FACILITY COMMITMENT LETTER Case 18-10122 Doc 10-1 Filed 01/22/18 Page 75 of 122 Execution Version Sunoco Logistics Partners Operations L.P. 3807 West Chester Pike Newtown Square, PA 19073 January 11, 2018 Philadelphia Energy Solutions Refining and Marketing LLC 1735 Market Street Philadelphia, PA 19103 Attention: John B. McShane Re: $75,000,000 Senior Secured Exit Financing AMENDED AND RESTATED COMMITMENT LETTER Ladies and Gentlemen: 1. Commitment. Sunoco Logistics Partners Operations L.P. (“SXL”, “we” or “us”) is pleased to advise you of its commitment to provide financing to Philadelphia Energy Solutions Refining and Marketing LLC (“PES” or “you”) in the principal amount of $75,000,000 on the terms and subject to the conditions expressly set forth in this amended and restated commitment letter (collectively with all exhibits hereto, the “Commitment Letter”) (such financing, the “PES Loan”). This Commitment Letter amends, restates and supersedes in its entirety that certain commitment letter dated April 7, 2017 from SXL to you. Each capitalized term used but not defined in this Commitment Letter shall have the meaning assigned thereto in the term sheet for the PES Loan attached hereto as Exhibit A (the “Term Sheet”). 2. Conditions. SXL’s commitment hereunder to make the PES Loan is subject solely to the prior or concurrent satisfaction of the conditions set forth on Exhibit B attached hereto. 3. Information. PES hereby represents and warrants that (i) all written information other than the Projections (as defined below) and other than general economic or specific industry information developed by, and obtained from, third party sources (the “Information”), when taken as a whole, that has been or will hereafter be made available to SXL by PES or any of its representatives in connection with the transactions contemplated hereby, is and will be, when furnished and taken as a whole, complete and correct in all material respects and does not and will not, when furnished and taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made and (ii) all financial projections, if any, that have been or will be prepared by PES and made available to SXL (the “Projections”) have been or will be prepared in good faith based upon assumptions believed by you to be reasonable as of the date of preparation and when furnished (it being understood that such Projections are subject to significant uncertainties and contingencies, many of which are beyond PES’s control, that no assurance can be given that the Projections will be realized and that actual results may vary materially from the Projections). If, at any time from the date hereof until the termination of this Case 18-10122 Doc 10-1 Filed 01/22/18 Page 76 of 122 Page 2 Commitment Letter, any of the representations and warranties in the preceding sentence would not be accurate and complete in any material respect if the Information or such Projections were being furnished, and such representations and warranties were being made, at such time, then PES agrees to promptly supplement the Information and/or such Projections from time to time so that the representations and warranties contained in this paragraph remain accurate and complete in all material respects under those circumstances. In providing this Commitment Letter, SXL is relying on the accuracy of the information furnished to it by or on behalf of PES and its affiliates without independent verification thereof. 4. Indemnity. PES shall indemnify and hold harmless SXL and its affiliates and each of their respective officers, directors, employees, agents, advisors and representatives (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and out-of-pocket expenses (including reasonable and documented attorneys’ fees, out-of-pocket expenses and charges), to which any such Indemnified Party may become subject (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with or by reason of this Commitment Letter, the Loan Documentation or the transactions contemplated hereby or thereby (for the avoidance of doubt, the indemnity herein shall not be applicable to any other contractual arrangements not entered into in connection with this Commitment Letter, the Loan Documentation or the transactions contemplated hereby or thereby), provided that (x) no Indemnified Party will have any right to indemnification for any of the foregoing to the extent resulting from such Indemnified Party’s own gross negligence, bad faith or willful misconduct or a material breach of such Indemnified Party’s obligations under this Commitment Letter or the Loan Documentation, in each case as determined by a final non-appealable judgment of a court of competent jurisdiction and (y) no Indemnified Party will have a right to indemnification for any of the foregoing to the extent resulting from any dispute among Indemnified Parties other than as a result of any act or omission by PES or its affiliates. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by PES, any of its directors, security holders or creditors, an Indemnified Party or any other person or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. No Indemnified Party shall have any liability (whether in contract, tort or otherwise) to PES or any of its affiliates or any of their respective security holders or creditors for or in connection with the transactions contemplated hereby except to the extent such liability is determined in a final nonappealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnified Party’s gross negligence, bad faith, willful misconduct or a material breach of such Indemnified Party’s obligations under this Commitment Letter or the Loan Documentation. In no event, however, shall (i) PES, any of its affiliates or any of its or their officers, directors, employees, agents, advisors and representatives or (ii) any Indemnified Party be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings); provided that the foregoing shall not limit PES’s indemnity obligations under the preceding paragraph of this Section 4. 5. Costs and Expenses. From time to time and promptly upon demand therefor, PES shall pay and/or reimburse all reasonable and documented out-of-pocket fees, costs and expenses (including, without limitation, due diligence expenses and fees and expenses of third party advisors, consultants and legal counsel) of SXL and its affiliates (including Sunoco Partners Marketing & Terminals L.P.) arising in connection with this Case 18-10122 Doc 10-1 Filed 01/22/18 Page 77 of 122 Page 3 Commitment Letter, the PES Loan, the Loan Documentation or the Restructuring, regardless of whether the Funding Date occurs. 6. Confidentiality. This Commitment Letter is delivered to you on the understanding that neither the existence of this Commitment Letter nor the contents hereof, nor the activities of SXL pursuant hereto, shall be disclosed, directly or indirectly, to any other person except that such existence and contents may be disclosed, subject in all respects to the following paragraph hereof, (a) to you and your affiliates and your and their respective officers, directors, employees, attorneys, accountants and professional advisors on a confidential basis, (b) as required by applicable law or compulsory legal process or to the extent requested or required by applicable ratings agencies, governmental and/or regulatory authorities (in which case you agree to inform us promptly thereof to the extent not prohibited by law), (c) to the extent that such information becomes publicly available other than by reason of improper disclosure by you or any of your affiliates or (d) if SXL consents to such proposed disclosure; provided that following and/or substantially concurrently with your execution and delivery of this Commitment Letter, you may make such disclosures to the other Consenting Creditors that are party to, and as defined in, the Restructuring Support Agreement (as hereinafter defined) and their respective officers, directors, employees, attorneys, accountants and professional advisors on a confidential basis. 7. Termination; Survival. SXL’s commitment and other obligations set forth in this Commitment Letter will automatically terminate on the earliest to occur of (a) the date on which all conditions precedent set forth on Exhibit B hereto are satisfied in full, the Loan Documentation is duly executed and delivered by you to us and the PES Loan is funded (such date, the “Funding Date”), (b) July 31, 2018 and (c) the “Termination Date” under and as defined in that certain Restructuring Support Agreement in respect of the Restructuring of PES and its affiliates to which SXL is party as “Additional Financing Lender” thereunder (the “Restructuring Support Agreement”). PES may terminate the commitment and other obligations of SXL hereunder at any prior time by delivering written notice of such termination to SXL. The indemnification, expense reimbursement, jurisdiction, waiver of jury trial, service of process, venue, governing law, no agency or fiduciary duty and confidentiality provisions contained herein shall remain in full force and effect regardless of whether the Loan Documentation is executed and delivered and notwithstanding the termination of this Commitment Letter or the commitment hereunder; provided that your obligations under this Commitment Letter insofar as they relate to the Loan Documentation shall automatically terminate and be superseded by the Loan Documentation upon execution and delivery thereof, and you shall be released from all liability in connection therewith at such time. 8. Miscellaneous. This Commitment Letter may not be assigned by any party hereto without the prior written consent of the other party hereto (and any purported assignment without such consent will be null and void); provided, that SXL may assign its commitment and agreements hereunder, in whole or in part, to any of its affiliates without the consent of PES or any other person. Notwithstanding the foregoing, no such assignment by SXL shall relieve it of its obligations hereunder unless its assignee shall agree with PES in writing to fully assume SXL’s obligations hereunder (for the avoidance of doubt, PES shall have no obligation to execute any such assumption agreement; provided, however, that PES shall not unreasonably withhold, condition or delay its execution of any such agreement). This Commitment Letter is intended to be solely for the benefit of the parties hereto (and their successors and permitted assignees Case 18-10122 Doc 10-1 Filed 01/22/18 Page 78 of 122 Page 4 in accordance with the foregoing sentence) and is not intended to confer any benefits upon, or create any rights in favor of, any other person (other than Indemnified Parties). You acknowledge that SXL and its affiliates may have commercial or other relationships with or engage in transactions, activities, investments or holdings involving other companies in respect of which you or your affiliates may have conflicting interests, and you acknowledge and agree, on your own behalf and on behalf of each of your affiliates, that SXL has no obligation to disclose such interests to you. Neither we nor any of our affiliates will use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or our other relationships with you in connection with such transactions, and we will not furnish any such information to other companies except to the extent permitted under Section 6 above. You further acknowledge and agree, on your own behalf and on behalf of each of your affiliates, that nothing in this Commitment Letter or the Loan Documentation or the nature of our services herein or in any prior relationship will be deemed to create an advisory, fiduciary or agency relationship between us, on the one hand, and you, your equity holders or your affiliates, on the other hand, and you waive, on your own behalf and on behalf of each of your affiliates, to the fullest extent permitted by law, any claims you or your affiliates may have against SXL for breach of fiduciary duty or alleged breach of fiduciary duty and agree that SXL will have no liability (whether direct or indirect) to you or your affiliates in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on your behalf, including your equity holders, employees or creditors. You acknowledge, on your own behalf and on behalf of each of your affiliates, that the transactions contemplated hereby (including the exercise of rights and remedies hereunder and under the Loan Documentation) are arms’ length commercial transactions and that we are acting as principal and in our own best interests. You are relying on your own experts and advisors to determine whether such transactions are in your best interests and are capable of evaluating and understanding, and understand and accept, the terms, risks and conditions of the transactions contemplated hereby. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by you and us. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Headings are for convenience of reference only and shall not affect the construction of, or be taken into consideration when interpreting, this Commitment Letter. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Loan Documentation supersede all prior understandings, whether written or oral, between us with respect to the PES Loan. 9. Governing Law; Etc. This Commitment Letter shall be governed by, and construed and interpreted in accordance with, the laws of the state of New York without regard to principles of conflicts of law. Each of the parties hereto hereby irrevocably and unconditionally (a) submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Commitment Letter or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court, (b) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or Case 18-10122 Doc 10-1 Filed 01/22/18 Page 79 of 122 Page 5 proceeding arising out of or relating to this Commitment Letter or the transactions contemplated hereby or thereby in any New York State court or in any such Federal court and (c) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. You and we agree that service of any process, summons, notice or document by registered mail addressed to any of the parties hereto at the applicable addresses above shall be effective service of process for any suit, action or proceeding brought in any such court. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER, THE LOAN DOCUMENTATION OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 10. Patriot Act. SXL hereby notifies you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”), SXL may be required to obtain, verify and record information that identifies you or your affiliates, which information includes the name, address, tax identification number and other information regarding such person that will allow SXL to identify such person in accordance with the PATRIOT Act. * * * If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms of this Commitment Letter by returning to us your executed counterpart hereof not later than 5:00 p.m. Eastern Standard Time on the date hereof. This Commitment Letter shall become effective when both PES and SXL have executed and delivered counterparts of this Commitment Letter. This Commitment Letter and the agreements contained herein will automatically expire at the aforementioned time in the event that we have not received such executed counterparts from you by such time. [Remainder of this page intentionally left blank] Case 18-10122 Doc 10-1 Filed 01/22/18 Page 80 of 122 EXHIBIT A TO COMMITMENT LETTER TERM SHEET [attached] Case 18-10122 Doc 10-1 Filed 01/22/18 Page 81 of 122 Execution Version EXHIBIT A TO COMMITMENT LETTER Summary of Principal Terms Set forth below is a summary of the principal terms for the PES Loan to be provided pursuant to the Commitment Letter to which this Exhibit A is attached. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Commitment Letter to which this Exhibit A is attached or in the other Exhibits (including the Annexes hereto and thereto) attached thereto. Borrower: Philadelphia Energy Solutions Refining and Marketing LLC, a Delaware limited liability company (“Borrower”). Lender: Sunoco Logistics Partners Operations L.P. or an affiliate thereof (“Lender”). Amount: Up to $75,000,000 in aggregate principal amount. Loan Documentation: The PES Loan will be documented pursuant to a definitive loan agreement and/or promissory note and other definitive financing documentation including, without limitation, the Security Documents and the Sharing Agreement (each as hereinafter defined), in each case, reflecting the applicable terms and conditions set forth in this Term Sheet and in the Commitment Letter, all of which shall be in form and substance satisfactory to Lender and entered into by the parties thereto on and as of the Funding Date (collectively, the “Credit Documentation”). Purpose: The proceeds of the PES Loan will be used to provide additional liquidity in connection with the restructuring (the “Restructuring”) of the Borrower, the Parent Companies (as defined below) and their affiliates (collectively, the “Company”). Availability: The PES Loan will be made available in a single drawing on the Funding Date. Maturity: The PES Loan will mature on the earlier of (x) the tenth (10th) anniversary of the Funding Date and (y) one business day following the date on which all other financing facilities made available to the Company in connection with the Restructuring have been paid in full or have otherwise terminated. Amortization: None. Interest Rate: 8.30% per annum, payable monthly in arrears. Sharing Agreement: Borrower will agree to pay to Lender certain amounts not to exceed $12,500,000 per annum (one-fourth of such amount, the “Maximum Quarterly Payment”), payable quarterly as set forth in, and subject to adjustment in accordance with, Annex 1 hereto. The Loan Documentation reflecting the foregoing agreement of Borrower and the terms set forth in such Annex 1 are collectively referred to herein Case 18-10122 Doc 10-1 Filed 01/22/18 Page 82 of 122 as the “Sharing Agreement”. Ranking: Pari passu in right of payment with all senior debt of Borrower. Security and Collateral: Pursuant to the Mortgage and other collateral documentation and instruments of perfection in form and substance satisfactory to Lender (the “Security Documents”), the PES Loan will be secured by a firstpriority security interest in all of Borrower’s right, title and interest in, to and under those “aboveground storage tanks” (as defined by the Pennsylvania Tank Act at 25 Pa. Code § 245.1) more particularly identified in the Mortgage and any substitutes or replacements for such aboveground storage tanks which are in the exact locations of such aboveground storage tanks, together with all Proceeds, products, replacements, additions, substitutions for, accessions to, rents and profits of or in respect of such aboveground storage tanks, and any and all proceeds of any insurance (whether or not Lender is loss payee), indemnity, warranty or guaranty payable from time to time in respect of such aboveground storage tanks (collectively, the “Collateral”). Voluntary Prepayments: The PES Loan may be prepaid in whole or in part without premium or penalty, together with all unpaid interest accrued thereon to the date fixed for such prepayment and subject in all respects to the Sharing Agreement. Mandatory Prepayments: Borrower will be required to make mandatory prepayments of the PES Loan from 100% of the net cash proceeds of (x) any sale of all or any part of the Collateral or (y) any casualty or condemnation with respect to all or any material part of the Collateral. Lender Adverse Investments: If Borrower enters into any Lender Adverse Investment during the term of the PES Loan, Borrower will be required to prepay the PES Loan in full concurrently therewith, where “Lender Adverse Investment” shall mean any transaction in which Borrower, any Parent Company or any subsidiary thereof uses any proceeds of the PES Loan (or any funds made available to such persons by the PES Loan) to directly or indirectly own, construct, manage, operate or control, or participate in the ownership, construction, management, operation or control, of any assets or business, whether in corporate, partnership, limited liability or proprietorship form or otherwise, that compete (or could reasonably be expected to compete) with the business currently conducted by Lender, its parent companies or any subsidiary thereof in providing pipeline transportation and/or terminalling of natural gas liquids or ethane in Pennsylvania, New Jersey, New York, Delaware, Ohio, Texas and/or West Virginia; provided, however, that the foregoing shall not prohibit Borrower, any Parent Company or any subsidiary thereof from (i) utilizing existing infrastructure owned and/or operated by such person as of the Funding Date so long as such utilization is solely to support Borrower’s refining business in Philadelphia or (ii) distributing, purchasing and/or selling refined product produced or processed at Exhibit A-2 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 83 of 122 Borrower’s Philadelphia refining complex. “Parent Companies” shall mean Philadelphia Energy Solutions LLC and PES Holdings, LLC. Conditions Precedent to Borrowing: Those conditions expressly set forth in Exhibit B to the Commitment Letter. Material Contracts: All executory contracts and unexpired leases by and between Borrower, on the one hand, and either Sunoco Partners Marketing & Terminals L.P. or Sunoco Pipeline L.P., on the other, shall be assumed on the “Effective Date” of the “Plan” (as such terms are defined in the Restructuring Support Agreement) (or in the case of an asset sale, assumed and assigned to the successor entity as of the effective date of such sale) pursuant to Bankruptcy Code Section 365. The Loan Documentation will include representations and warranties, covenants and other terms reasonably required by Lender with respect to the Pipeline Consent Agreement and those executory contracts and unexpired leases by and between Borrower and Sunoco Partners Marketing & Terminals L.P. that are assumed in connection with the Restructuring. Representations and Warranties: Usual and customary for exit financings of this type, in form, scope and substance reasonably satisfactory to Lender. Affirmative Covenants: Usual and customary for exit financings of this type, in form, scope and substance reasonably satisfactory to Lender. Negative Covenants: Usual and customary for exit financings of this type, in form, scope and substance reasonably satisfactory to Lender. Financial Covenants: None. Events of Default: Usual and customary for exit financings of this type, in form, scope and substance reasonably satisfactory to Lender. Assignments: Usual and customary for exit financings of this type and consistent with the Commitment Letter. Expenses and Indemnification: Usual and customary for exit financings of this type and consistent with the Commitment Letter. The Loan Documentation will provide for the payment and/or reimbursement by Borrower of all reasonable fees and expenses (including, without limitation, the reasonable fees and expenses of counsel and other advisors) incurred by Lender and Sunoco Partners Marketing & Terminals L.P. in connection with the Restructuring. Exhibit A-3 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 84 of 122 Annex 1 to Exhibit A to Commitment Letter Sharing Agreement—Credit Calculations The Term Sheet to which this Annex 1 is attached provides for a Maximum Quarterly Payment to be paid by Borrower (also referred to herein as “PES”) to Lender (also referred to herein as “SXL”) each quarter, which maximum payment is subject to reduction (on a going-forward basis only) in proportion to any reduction of the principal amount of the PES Loan as a result of voluntary prepayments made by PES. Such Maximum Quarterly Payment, as it may be reduced, if at all, is referred to as the “Applicable Maximum Quarterly Payment”. The aggregate interest payments remitted by PES to SXL in cash pursuant to the Term Sheet during each three month period during the term of the PES Loan (each such three month period is a “Quarter”) shall be referred to herein as the “Quarterly Interest Paid.” The first Quarter shall end on __________. Credit, Banked Credit & Quarterly True-Up Within ten (10) Business Days after the end of each Quarter, SXL will calculate, and provide to PES for review, the following with respect to the immediately previous Quarter: (i) the Quarterly Interest Paid, (ii) the Shortfall, (iii) the aggregate PES Benefits, (iv) the aggregate SXL Benefits, (v) the Banked Excess PES Benefits as of the end of that Quarter, (vi) the Banked Excess SXL Benefits as of the end of that Quarter, (vii) the Total SXL Benefits, and (vii) the Credit. Within 5 Business Days after receiving the calculations from SXL, PES shall either confirm its agreement with SXL’s calculations or dispute the accuracy of any such calculation, providing notice stating the reasons why the disputed amount is incorrect. SXL and PES shall work together in good faith to resolve any such dispute reasonably promptly. Credit Calculation A “Shortfall” is the (A) aggregate Applicable Maximum Quarterly Payment for the Quarter less (B) the sum of (i) the aggregate of PES Benefits for the Quarter, (ii) the Banked Excess PES Benefits available for draw that Quarter and (iii) any Carry Forward Amount (as defined below). The “PES Benefits” and the “SXL Benefits” for the applicable Quarter shall be determined in accordance with the calculations set forth in Schedule I attached to this Annex. The “Banked Excess PES Benefits” is the portion of PES Benefits for the Quarter that caused the Shortfall for such Quarter to equal a negative number, which portion of the benefits, together with any prior unused Banked Excess PES Benefits, shall be “banked” for use in calculating the Shortfall in subsequent Quarters. The “Banked Excess SXL Benefits” is the portion of SXL Benefits for the Quarter that exceed the Credit for the Quarter, which portion of the benefits shall be “banked” for use in calculating the Credit in subsequent Quarters. Banked Excess SXL Benefits shall not be available for draw and accordingly not used in calculating the Credit for a Quarter unless and until all available Banked Excess PES Benefits have been applied to the calculation of the Shortfall. The “Credit” for the applicable Quarter shall be determined as follows: • If the Shortfall is zero or such calculation results in a negative number, then no Credit shall be provided for the applicable Quarter. Case 18-10122 Doc 10-1 Filed 01/22/18 Page 85 of 122 • If the sum of the (i) aggregate of SXL Benefits for the Quarter and (ii) the Banked Excess SXL Benefits available for draw at that time (collectively, the “Total SXL Benefits”) is equal to or less than the Shortfall, then the Credit for such Quarter shall equal the Total SXL Benefits. • If the sum of the Total SXL Benefits is greater than the Shortfall, then the Credit for such Quarter shall equal the Shortfall. The amount by which the Total SXL Benefits that exceeds the Credit shall continue to be “banked” until applied. For avoidance of doubt, the Credit for any Quarter shall never exceed the Applicable Maximum Quarterly Payment for that Quarter under any circumstances. Quarterly True-Up PES shall pay SXL the amount by which the Applicable Maximum Quarterly Payment exceeds the Quarterly Interest Paid less, to the extent that a Credit is payable in a Quarter, the amount of the Credit. To the extent the foregoing results in a negative number, such amount (the “Carry Forward Amount”) shall be “banked” by PES for use in calculating the Shortfall in future Quarters. Unless any such amounts are under dispute and remain in dispute, any amounts payable hereunder shall be paid within 15 Business Days of the end of the applicable Quarter. If any such amounts are under dispute beyond such 15 Business Day period, payor shall promptly refund to payee such amount upon the resolution of such dispute. Quarterly True-Up Example: Assumptions: Quarterly Interest Paid = $1.55625MM Applicable Maximum Quarterly Payment = $3.125MM PES Benefits = $2.0MM Banked Excess PES Benefits in Bank = $125M SXL Benefits = $500M Banked Excess SXL Benefits in Bank: $1MM Total SXL Benefits: $1.5MM ($500M+$1MM) Calculation of Shortfall: 3.125MM – ($2.0MM+$125M) = $1.0MM Banked Excess PES Benefits for Future Quarters = $0 Calculation of Credit: Shortfall ($1MM) < Total SXL Benefits ($1.5MM) Credit = $1MM Banked Excess SXL Benefits for Future Quarters = $500M Calculation of Quarterly True-Up: $3.125 MM (Applicable Maximum Quarterly Payment) -$1.55625 MM (Quarterly Interest Paid) -$1 MM (Credit) $.71875MM payable by PES to SXL Exhibit A-5 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 86 of 122 PES and SXL shall endeavor to resolve any dispute, controversy or claim (a “Dispute”) arising from or in connection with the calculations set forth in this Annex 1 in a fair and equitable manner. Prior to initiating legal proceedings with respect to any such Dispute, the parties hereto will seek resolution through discussions between senior executives of the respective parties. In addition, SXL and PES may agree to engage in mediation of a Dispute, in which case the cost of the mediator shall be shared equally. Exhibit A-6 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 87 of 122 SCHEDULE I to Annex 1 Calculation of PES Benefits & SXL Benefits Set forth below is a list of arrangements between SXL’s subsidiaries and PES that are used above in the determination of the Shortfall and the Credit. For each arrangement, there is a description of the calculation of the benefit, if applicable, that will be attributed to each of SXL’s subsidiaries (the “SXL Benefits”) and PES (the “PES Benefits”) for a Quarter. From time to time, PES and SXL’s subsidiaries may enter into new or amended commercial arrangements. PES and SXL may mutually agree to make such arrangements a party of the calculation of the Credit but solely to the extent that PES and SXL agree in writing to an amendment to this Annex. 1. Amendment No. 1 to the Terminaling & Storage Agreement between Sunoco Partners Marketing & Terminals L.P. (“SPMT”) and PES dated as of December 15, 2016, amending the Terminaling & Storage Agreement effective as of February l, 2015 (Eagle Point Terminal) – Tanks 117, 118, 119 Amendment #1 provides for monthly storage fees due to SPMT by PES for SPMT Tanks 117, 118, 119. The SPMT tanks have a Shell Capacity of 686,212 bbls and the agreement has a term ending January 31, 2019 (which will be further amended to extend the term to 2020). For purposes of calculating the Credit, the benefits shall be calculated based upon the monthly storage fees actually paid by PES to SPMT during the Quarter. PES Benefits Calculation SXL Benefits Calculation PES Benefits will equal the difference between SXL Benefits will equal the new monthly storage the prior monthly storage fee of $.62/bbl and the fee of $.30/bbl multiplied by the Shell Capacity of new monthly storage fee of $.30/bbl multiplied by 686,212 bbls. the Shell Capacity of 686,212 bbls. * Example of Calculations: Monthly PES Benefit: ($.62/bbl -$.30/bbl)*686,212 bbls = $219,588 Monthly SXL Benefit: $.30/bbl*686,212 bbls = $205,864 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 88 of 122 5. 2. Inter-Refinery Pipeline Lease between Sunoco Pipeline L.P. (“SPLP”) and PES dated November 30, 2012 (the “IRPL”) Pursuant to the IRPL, PES is obligated to pay to SPLP in 2018 and 2019 amounts related to certain meter installation work by SPLP on the inter-refinery pipeline, which pipeline is the subject of the IRPL. Because PES is currently not using IRPL lines 3N and 5N, SPLP has agreed to waive $3.0 million of these payments due from PES. For avoidance of doubt, if at some point in the future PES begins to use IRPL lines 3N and 5N, PES will be obligated for the cost of the meter installations, and the applicable adjustment will be made to the PES Benefit calculation. For purposes of calculating PES Benefits, the value of the meter work not being installed is $3.0 million, which will be divided by 24, with the resulting quotient being PES Benefit for the applicable month. There shall be no SXL Benefit with respect to this item. This PES Benefit shall be capped at $3 million in the aggregate and the monthly application of PES Benefit shall terminate 24 months after the Funding Date. PES Benefits Calculation: PES Benefits shall equal $125,000.00/month (i.e., the quotient of $3,000,000.00 divided by 24) SXL Benefits Calculation: SXL Benefits Calculation shall be $-0-. Case 18-10122 Doc 10-1 Filed 01/22/18 Page 89 of 122 3. Rack Throughput Agreement dated September 8, 2012 between SPMT and PES (Belmont Terminal) SXL and SPMT are parties to a Rack Throughput Agreement for SPMT’s Belmont terminal that was amended (Amendment 6) effective July 1, 2017 providing a $.0050/gallon (50 point) discount to the existing throughput fees for any volume moved across the Belmont rack above 30,000 barrels/day. SPMT will effectively cancel this discount and further amend the existing contract with a new discount of $.0040/gallon (40 point) for all PES volume moved across the Belmont terminal rack. For purposes of calculating the Credit, the benefits shall be calculated based upon fees actually paid by PES to SPMT during the Quarter for products sold across the Belmont rack by PES. PES Benefits Calculation SXL Benefits Calculation PES Benefits will equal the volume of PES products sold by PES across SPMT’S Belmont rack multiplied by the rates as stipulated in Amendment 6 less the volume of PES products sold by PES across SPMT’S Belmont rack multiplied by the rate to be stipulated in Amendment 7 ($.0040 discount). SXL Benefits will equal the revenue generated from PES using the new discount structure of $.0040/gallon less the revenue generated from PES using the Amendment 6 discount structure. For clarity, there is no benefit until this calculation is greater than zero. Also, for clarity, currently PES transfers product to Sunoco, L.P. at Belmont (as Sunoco, L.P. is also a customer of SPMT at Belmont). If in lieu of those historical transfers, PES chooses to instead sell that volume of product across the rack to Sunoco, L.P, at Belmont, that volume of product will be deducted from the “Belmont volume” used in the SXL Benefit Calculation. Example of Calculations: Assumptions: PES 2017 avg Belmont volume through June 30, 2017 = 28,971 bbls/day PES 2017 July through November 2017 avg Belmont volume = 35,328 with a $.0050/ Gallon discount for any volume moved above 30,000 bbls/day as per Amendment 6 New Discount: Amendment 7 will be written with a $.0040/gallon discount across all PES volume moved at the Belmont rack The Quarterly PES Benefit: (Belmont volume * Amendment 6 rates) – (Belmont volume * Amendment 7 rates) The Quarterly SXL Benefit: SXL benefit will equal the revenue generated from PES using the new discount rate of $.0040/gallon versus the rates contained in Amendment 6. For clarity, there is no benefit until this calculation is greater than zero. Case 18-10122 Doc 10-1 Filed 01/22/18 Page 90 of 122 EXHIBIT B TO COMMITMENT LETTER CONDITIONS PRECEDENT (a) Pipeline Consent Agreement. SXL shall have received from PES the duly executed Pipeline Consent Agreement dated on or prior to the date of this Commitment Letter by and between Sunoco Pipeline L.P. and PES (the “Pipeline Consent Agreement”) and such Pipeline Consent Agreement shall be valid and binding on PES and in full force and effect. (b) Restructuring. (i) In the event of an Out-of-Court Restructuring, all conditions precedent thereto set forth in the Restructuring Support Agreement shall have been satisfied in full in accordance therewith; or (ii) in the event of an In-Court Restructuring, the Plan shall be in full force and effect (all capitalized terms in this clause (b) having the meanings assigned thereto in the Restructuring Support Agreement). (c) Borrowing Notice. SXL shall have received from PES at least five (5) business days’ prior written notice of the requested Funding Date (for the avoidance of doubt, such notice may be revocable and conditioned on, among other things, the consummation of the transactions contemplated by the Plan). (d) Loan Documentation. SXL shall have received from PES the duly executed Loan Documentation, which shall be consistent in all material respects with the Term Sheet and the Restructuring Support Agreement and otherwise in form and substance reasonably satisfactory to SXL, and each of which shall be in full force and effect. (e) Representations. The representations and warranties of PES under the Loan Documentation shall be true and correct in all respects on and as of the date thereof (immediately prior to and after the funding of the PES Loan). (f) Security and Collateral. (g) i. SXL shall have received a duly executed release of any and all existing security interests or liens on the Collateral from any person holding any such security interest or lien. ii. SXL shall have received from PES, UCC financing statements in form ready for filing in all applicable jurisdictions in accordance with applicable law, and PES shall have taken all other actions necessary or reasonably requested by SXL to establish that SXL will have a perfected first priority security interest (subject to liens permitted under the Loan Documentation) in the Collateral. Real Property. i. SXL shall have received from PES a duly executed mortgage substantially in the form attached as Annex 1 to this Exhibit B (the “Mortgage”), to be recorded in all applicable recording offices in accordance with applicable law, together with all other instruments necessary to grant a mortgage lien under applicable law. ii. SXL shall have received from PES real property lien search results as of a recent date showing no security interests or liens on the applicable real estate interests other than as permitted under the Loan Documentation and other liens securing indebtedness Case 18-10122 Doc 10-1 Filed 01/22/18 Page 91 of 122 that will be released prior to or substantially contemporaneously with the funding date of the PES Loan. (h) Insurance. SXL shall have received customary insurance certificates in respect of material insurance policies relating to the Collateral. (i) Opinion. SXL shall have received a legal opinion from counsel to PES in form and substance customary for transactions of this type. (j) Solvency. SXL shall have received a solvency certificate in respect of PES duly executed by the chief financial officer or treasurer thereof, in form and substance reasonably satisfactory to SXL and customary for transactions of this type (for the avoidance of doubt, such solvency shall be tested on a pro forma basis after giving effect to the transactions contemplated by the Plan). (k) Commitment Letter. PES shall not be in material breach of any of its obligations under this Commitment Letter. Case 18-10122 Doc 10-1 Filed 01/22/18 Annex 1 to Exhibit B Form of Mortgage [attached] Page 92 of 122 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 93 of 122 ANNEX 1 TO EXHIBIT B TO THE COMMITMENT LETTER THIS INSTRUMENT PREPARED BY, AND AFTER RECORDING PLEASE RETURN TO: Vinson & Elkins LLP 1001 Fannin, Suite 2500 Houston, Texas 77002 Attention: E. Scot Dixon, Esq. Property Parcel Number(s): 884096701; 884096702; & 884096703 OPEN END MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING FROM PHILADELPHIA ENERGY SOLUTIONS REFINING AND MARKETING LLC, as Mortgagor, TO SUNOCO LOGISTICS PARTNERS OPERATIONS L.P., as Mortgagee Dated: _______________ ____, 2018 Effective as of: _________________ ____, 2018 THIS OPEN-END MORTGAGE SECURES FUTURE ADVANCES AND RE-ADVANCES UP TO A MAXIMUM PRINCIPAL AMOUNT OF $75,000,000.00 AT ANY TIME OUTSTANDING PLUS ACCRUED INTEREST AND OTHER INDEBTEDNESS DESCRIBED IN 42 PA.C.S.A. §8143. ATTENTION: FILING OFFICER--THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE MORTGAGES ON REAL PROPERTY ARE RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A MORTGAGE BUT ALSO AS A FINANCING STATEMENT FILED AS A FIXTURE FILING COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF MORTGAGOR AND MORTGAGEE ARE SET FORTH IN THIS INSTRUMENT Case 18-10122 Doc 10-1 Filed 01/22/18 Page 94 of 122 OPEN END MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING THIS OPEN END MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING, dated _________________ ____, 2018, but effective as of ______________________ ______, 2018, is from PHILADELPHIA ENERGY SOLUTIONS REFINING AND MARKETING LLC, a Delaware limited liability company (“Mortgagor”), having an office at 1735 Market Street, Philadelphia, Pennsylvania 19103, to SUNOCO LOGISTICS PARTNERS OPERATIONS L.P., a Delaware limited partnership (“Mortgagee”), having an office at 3807 West Chester Pike, Newtown Square PA 19073. References to this "Mortgage" shall mean this instrument and any and all renewals, modifications, amendments, amendments and restatements, supplements, extensions, consolidations, substitutions, spreaders and replacements of this instrument. BACKGROUND WHEREAS, Mortgagor has executed and delivered to Mortgagee that certain [Loan Agreement], dated of even date with this Mortgage and payable to the order of Mortgagee in the original principal amount of Seventy Five Million and No/100ths Dollars ($75,000,000.00), lawful money of the United States (the [“Note”]); WHEREAS, Mortgagor is the owner of the fee simple estate in and to the parcel or parcels of real property described on Exhibit “A” attached hereto (the “Land”), and Mortgagor further owns certain improvements, structures, and fixtures now or subsequently located on the Land, all as more particularly described below; WHEREAS, it is a requirement under the [Note] that Mortgagor shall have executed and delivered this Mortgage to Mortgagee; GRANTING CLAUSES NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) paid and other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged and in order to secure the full and timely payment and performance of the Obligations (as defined in the [Note]), Mortgagor hereby MORTGAGES, GRANTS, ASSIGNS, RELEASES, TRANSFERS, PLEDGES AND SETS OVER UNTO MORTGAGEE, and has by these presents MORTGAGED, GRANTED, ASSIGNED, RELEASED, TRANSFERRED, PLEDGED AND SET OVER UNTO MORTGAGEE, to the extent provided herein or by law, and confirms that this Mortgage constitutes a valid first lien upon, and grants to Mortgagee a security interest in, the following property: (a) all estate, right, title, claim, interest or demand whatsoever Mortgagor now has or may hereafter acquire in and to those certain “Aboveground storage tanks” (as defined by the Pennsylvania Tank Act at 25 Pa. Code § 245.1) situated on the Land and more particularly identified on Exhibit “B” attached hereto as a circle with an “X” in the same (collectively, the “ASTs”); 1 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 95 of 122 (b) all right, title and interest of Mortgagor in and to all substitutes and replacements of, and all additions and improvements to, the ASTs subsequently acquired by or released to Mortgagor (for avoidance of doubt, the only stationary Aboveground storage tanks encumbered by the lien and /or security interest granted by this is Mortgage and included in the defined term “ASTs” are those Aboveground storage tanks specifically identified on Exhibit B and any substitutes or replacements for such Aboveground storage tanks which are in the exact locations of the Aboveground storage tanks identified on Exhibit B); (c) all rights of Mortgagor to receive and collect the revenues, income and rents from Mortgagor’s leasing or licensing of the use of the ASTs by any Person other than Mortgagor (collectively, the “Rents”; for avoidance of doubt, under no circumstance does the term “Rents” include any revenue, income, profit, royalty or the like derived from the sale, transfer or use of any product, substance, liquid or gas stored in any of the ASTs); (d) all unearned premiums under insurance policies now or subsequently obtained by Mortgagor relating to the ASTs and Mortgagor's interest in and to all proceeds of any such insurance policies including the right to collect and receive such proceeds, and Mortgagor's interest in any and all awards and other compensation, including the interest payable thereon and the right to collect and receive the same, made to the present or any subsequent owner of the ASTs for the taking by eminent domain, condemnation or otherwise, of all or any part of the ASTs (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such right), or for a change of grade, or for any other injury to or decrease in the value of the foregoing; (e) to the extent permitted by applicable law and not prohibited under the applicable contract, consent, license or other item unless the appropriate consent has been obtained, all right, title and interest of Mortgagor in and to (i) all contracts from time to time executed by Mortgagor or any manager or agent on its behalf relating to the ownership, construction, maintenance, repair, operation, occupancy, sale or financing of the ASTs or any part thereof and all leases of the ASTs, (ii) all consents, licenses, building permits, certificates of occupancy and other governmental approvals relating to construction, completion, occupancy, use or operation of the ASTs or any part thereof, and (iii) all drawings, plans, specifications and similar or related items relating to the ASTs; (f) all proceeds, products, replacements, additions, substitutions, renewals and accessions of any of the foregoing, including personal property acquired with cash proceeds; and (g) all proceeds, both cash and noncash, of the foregoing. All of the foregoing property and rights and interests now owned or held or subsequently acquired by Mortgagor are collectively referred to as the “Mortgaged Property”. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS MORTGAGE, THE LIEN AND SECURITY INTEREST CREATED BY THIS 2 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 96 of 122 MORTGAGE SHALL NOT EXTEND TO, AND THE TERM "MORTGAGED PROPERTY" EXPRESSLY EXCLUDES, ANY INTEREST IN OR TO THE LAND AND ANY AND ALL OTHER FIXTURES, IMPROVEMENTS, PERSONAL PROPERTY OF THE MORTGAGOR (INCLUDING, ANY AND ALL ABOVEGROUND STORAGE TANKS SITUATED ON THE LAND AND NOT DESCRIBED OR IDENTIFIED ON EXHIBIT “B”), WHETHER OR NOT, NOW OR HEREAFTER, LOCATED ON, ATTACHED TO, OR FORMING A PART OF THE LAND. TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges hereby mortgaged unto Mortgagee, its successors and assigns for the uses and purposes set forth, until the Obligations are fully paid and performed. This Mortgage shall terminate and be of no further force or effect (and shall be released on Mortgagor’s written request and at Mortgagor’s cost and expense) upon full payment and performance of the Obligations (other than unmatured or contingent indemnity or reimbursement obligations and those Obligations which, by their terms, expressly survive the repayment and satisfaction of the [Note]). TERMS AND CONDITIONS Mortgagor further represents, warrants, covenants and agrees with Mortgagee as follows: 1. Defined Terms. Capitalized terms used herein (including in the "Background" and "Granting Clauses" sections above) and not otherwise defined herein shall have the meanings ascribed thereto in the [Note], mutatis mutandis. 2. Warranty of Title. Mortgagor warrants that it has good title to the Mortgaged Property, free and clear of all Liens other than as permitted by Section [__] of the [Note] (“Permitted Exceptions”). Mortgagor shall warrant, defend and preserve such title and the lien of this Mortgage against all claims of all persons and entities, subject to Permitted Exceptions. Mortgagor represents and warrants that, as of the date hereof it has the right to mortgage the Mortgaged Property. 3. Payment and Performance of Obligations. Mortgagor shall pay and perform the Obligations at the times and places and in the manner specified in the [Note Documents]. 4. Certain Terms of [Note] Incorporated into Mortgage. The terms and provision provisions of: Section [__] (Compliance with Laws; Taxes), Section [__] (Maintenance of Property), Section [__] (Maintenance of Insurance), Section [__] (Liens), and Section [__] (Sale of Assets) of the [Note] are each hereby incorporated herein by reference. 5. Condemnation/Eminent Domain. Promptly upon obtaining notice of the institution of any proceedings for the condemnation of all or any portion of the Mortgaged Property or the Land, Mortgagor will notify Mortgagee of the pendency of such proceedings. 6. Further Assurances. To further assure Mortgagee's rights under this Mortgage, Mortgagor agrees promptly upon demand of Mortgagee to do any reasonable act or execute any additional documents (including, but not limited to, security agreements on any personalty included or to be included in the Mortgaged Property) as may be reasonably required by 3 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 97 of 122 Mortgagee to confirm the lien of this Mortgage and all other rights or benefits conferred on Mortgagee by this Mortgage. 7. Mortgagee's Right to Perform. If Mortgagor fails to perform any of the covenants or agreements of Mortgagor, within the applicable grace period, if any, provided for in the [Note], Mortgagee, without waiving or releasing Mortgagor from any obligation or default under this Mortgage, may, at any time upon ten (10) Business Days' written notice to Mortgagor ( if during such ten (10) Business Day period such failure continues), but shall be under no obligation to, pay or perform the same, and the out-of-pocket amount or cost thereof, with interest at the rate provided for in the [Note], shall be due from Mortgagor to Mortgagee within ten (10) days after demand by Mortgagee together with supporting documentation and the same shall be secured by this Mortgage and shall be a lien on the Mortgaged Property to the fullest extent permitted by applicable law prior to any right, title to, interest in, or claim upon the Mortgaged Property attaching subsequent to the lien of this Mortgage. No payment or advance of money by Mortgagee under this Section 7 shall be deemed or construed to cure Mortgagor's default or waive any right or remedy of Mortgagee. 8. Remedies. a. Upon the occurrence and during the continuance of any Event of Default, Mortgagee may immediately take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Mortgagor and in and to the Mortgaged Property, including, but not limited to, the following actions, each of which shall be in accordance with applicable law and may be pursued concurrently or otherwise, at such time and in such manner as Mortgagee may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Mortgagee, Mortgagee may, to the extent permitted by applicable law, (A) institute and maintain an action of mortgage foreclosure against all or any part of the Mortgaged Property, (B) institute and maintain an action on the [Note or any other Note Document], or (C) take such other action at law or in equity for the enforcement of this Mortgage or any of the other [Note] Documents as the law may allow. Mortgagee may proceed in any such action to final judgment and execution thereon for all sums due hereunder, together with interest thereon at the rate provided for in the [Note] and all costs of suit, including, without limitation, reasonable attorneys' fees and disbursements. Interest at the rate provided for in the [Note] shall be due on any judgment obtained by Mortgagee from the date of judgment until actual payment is made of the full amount of the judgment. b. In case of a foreclosure sale, the Mortgaged Property may be sold in accordance with applicable law, at Mortgagee's election, in one parcel or in more than one parcel and Mortgagee is specifically empowered (without being required to do so, and in its sole and absolute discretion) to cause successive sales of portions of the Mortgaged Property to be held. c. In the event of any breach of any of the covenants, agreements, terms or conditions contained in this Mortgage which continues beyond any applicable notice and grace period, Mortgagee shall be entitled to enjoin such breach and obtain specific performance of any covenant, agreement, term or condition and Mortgagee shall have the right to invoke any equitable right or remedy as though other remedies were not provided for in this Mortgage. 4 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 98 of 122 d. It is agreed that if an Event of Default shall occur and be continuing, any and all proceeds of the Mortgaged Property received by Mortgagee shall be held by Mortgagee as collateral security for the Obligations (whether matured or unmatured), and shall be applied in payment of the Obligations in the manner set forth in the [Note] e. After entry of a judgment on any of the [Note Documents] or a judgment in mortgage foreclosure hereunder, interest shall continue to accrue under the [Note] and this Mortgage at the rate of interest provided for in the [Note]. This Mortgage shall not, solely for purposes of determining interest payable under the [Note], merge with any judgment on any [Note Document] or a judgment in mortgage foreclosure under this Mortgage. 9. Right of Mortgagee to Credit Sale. Upon the occurrence of any sale made under this Mortgage, whether made by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, to the extent permitted by applicable law Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In lieu of paying cash therefor, Mortgagee may make settlement for the purchase price by crediting upon the Obligations or other sums secured by this Mortgage, the net sales price after deducting therefrom the expenses of sale and the cost of the action and any other sums which Mortgagee is authorized to deduct under this Mortgage. In such event, this Mortgage, the [Note], and the other documents evidencing expenditures secured hereby may be presented to the person or persons conducting the sale in order that the amount so used or applied may be credited upon the Obligations as having been paid. 10. Appointment of Receiver. If an Event of Default shall have occurred and be continuing, Mortgagee upon notice to Mortgagor, and without regard to the adequacy or inadequacy of the Mortgaged Property or any other collateral or the interest of Mortgagor therein as security for the Obligations, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers or other manager of the Mortgaged Property, without requiring the posting of a surety bond, and, to the extent permitted by applicable law, without reference to the adequacy or inadequacy of the value of the Mortgaged Property or the solvency or insolvency of Mortgagor or any other party obligated for payment of all or any part of the Obligations, and whether or not waste has occurred with respect to the Mortgaged Property, and Mortgagor hereby irrevocably consents to such appointment and waives notice of any application therefor (except as may be required by law). Any such receiver or receivers or manager shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Mortgagee in case of entry as provided in this Mortgage, including, without limitation and to the extent permitted by law, the right to enter into leases of and other contracts or agreements relating to all or any part of the Mortgaged Property, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Mortgaged Property unless such receivership is sooner terminated. In no event shall any such receiver have the power or authority to sell any of the Mortgaged Property. 11. Entry. Prior to the occurrence of an Event of Default, Mortgagee, personally, or by its agents, attorneys or representatives, may enter upon all or any part of Mortgaged Property and any portion of the Land containing the Mortgaged Property and inspect the Mortgaged Property at all reasonable times and upon reasonable prior notice (other than in cases of emergency). If an Event of Default shall have occurred and be continuing, Mortgagee personally, or by its agents, attorneys, or representatives, may enter upon all or any part of Mortgaged 5 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 99 of 122 Property and any portion of the Land containing the Mortgaged Property, without prior notice, and may inspect the Mortgaged Property and/or take such action as Mortgagee may deem necessary or appropriate in order to protect, preserve and maintain the Mortgaged Property. Any and all such rights of access by Mortgagee shall be without liability for trespass, damages or otherwise. Upon each such entry, Mortgagee, at the expense of Mortgagor from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, and, at the expense of Mortgagor, Mortgagee may make, from time to time, all necessary or desirable repairs, renewals and replacements and such alterations, additions, betterments and improvements thereto and thereon as Mortgagee may deem advisable. This Section 11 shall survive any exercise of Mortgagee’s rights and remedies pursuant hereto, including, but not limited to, foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any rights and remedies pursuant to the [Note or any of the other Note Documents], or any transfer of all or any portion of the Mortgaged Property (whether by Mortgagor or by Mortgagee following foreclosure or acceptance of a deed in lieu of foreclosure or at any other time). Notwithstanding anything to the contrary in this Section 11, Mortgagee, personally, or by its agents, attorneys or representatives, shall not enter upon the Land without first complying with and satisfying all of the reasonable safety, security and other site procedures, requirements and standards promulgated by Mortgagor, from time to time, and Mortgagee’s exercise of any and all rights to access the Land under or pursuant to this Section 11 or otherwise under or pursuant to this Mortgage shall be subject to any and all such standards, provided that (i) Mortgagee shall have been previously provided with written notice of same (and written notice of any revisions or modifications to same) and (ii) such safety, security and other site procedures, requirements and standards shall be uniformly enforced by Mortgagor. 12. Post-Foreclosure Easements and Rights of Use and Access; Certain Other Obligations of Mortgagor. a. Without limiting the provisions of this Mortgage, including, without limitation, the provisions of Section 11, in the event of a foreclosure sale against all or any part of the Mortgaged Property, or if Mortgagee or any other Person acquires title to or possession of all or any portion of the Mortgaged Property pursuant to a conveyance in lieu of foreclosure of the Mortgaged Property or pursuant to the exercise of any other remedy provided for in this Mortgage, at law or otherwise (in each such case as described above, a “Foreclosure Sale”), then Mortgagor hereby grants and conveys to Mortgagee and to any such other Person who acquires title to or possession of all or such applicable portion of the Mortgaged Property (in each case, including Mortgagee, whether pursuant to Mortgagee’s rights under Section 9 hereof or otherwise, a “Foreclosure Purchaser”) non-exclusive easements and rights-of-way in, on, over, under and across the Land for the purposes of: (i) the maintenance, repair and removal of the ASTs, and (ii) vehicular and pedestrian ingress, egress and access by Foreclosure Purchaser, its employees, agents, invitees, guests, contractors and subcontractors to and from the ASTs on, along and across the roads, rights-of-way, entrances, exits, walkways, and other areas at the Land from time to time used for pedestrian and vehicular use (collectively, the “Access Areas”) as reasonably necessary for Foreclosure Purchaser’s maintenance, repair and removal of the ASTs. b. In addition to those easements and other rights granted in Section 12.a above, in the event of a Foreclosure Sale, Mortgagor hereby grants and conveys to a Foreclosure 6 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 100 of 122 Purchaser the right to access and use (and does hereby grant a non-exclusive easement and rightof-way for the access and use of) the following assets and utilities to the extent reasonably necessary to remove any and all products and other contents from the ASTs (including, without limitation, any hydrocarbons or other goods, including crude oil, natural gas, natural gas liquids condensate, refined products or asphalt, collectively, “Products”): (i) all parts of the “storage tank systems” (as defined by the Pennsylvania Tank Act at 25 Pa. Code § 245.1) at the Land of which the ASTs are a part, and (ii) all related systems, equipment and utilities, including but not limited to functional foam firefighting systems, separators, pumps, steam, electricity, alarms and gauging.1 c. Except in cases of emergency, where no prior written notice shall be required, Foreclosure Purchaser shall provide to Mortgagor prior written notice not less than five (5) Business Days before maintaining, repairing or removing any of the ASTs, or any undertaking activity affecting any of the Access Areas (excluding, however, any routine maintenance of such items) and Foreclosure Purchaser shall communicate with Mortgagor regarding the performance and progress for such work. Foreclosure Purchaser shall perform any maintenance, repair or removal of the ASTs, or any activity affecting any Access Areas diligently in a good and workmanlike manner, in compliance, in all material respects, with all applicable Laws, free and clear of all liens or claims of subcontractors, mechanics, laborers, or materialmen. d. After any period of maintenance, repair, and/or removal of any of the ASTs, Foreclosure Purchaser shall, at its sole cost and expense, restore the surface of the affected portions of the Land (including without limitation any Access Areas) to the same or better condition than which it existed immediately prior to Foreclosure Purchaser’s undertaking such activities. e. Mortgagor reserves the right to modify, relocate, alter or otherwise change the location or configuration of the Access Areas, so long as: (i) all such modifications, relocations, alterations or changes are made diligently by Mortgagor at its expense and in a manner that minimizes, to the extent reasonably practicable, any interruption of, or material adverse effect on, the operation of the ASTs, and (ii) such modifications, relocations, alterations or changes do not impair the use of, or deprive Foreclosure Purchaser of the use and benefit of, the easements and rights-of-way granted pursuant to this Section 12 so as to result in a material adverse effect upon the maintenance, repair and/or removal of the ASTs and/or any Products or related contents contained therein. f. While the commencement or exercise of certain easements, rights of way and related access rights granted and conveyed by this Mortgage, including without limitation, those described in Section 11, and this Section 12 may be subsequent to the Effective Date of this Mortgage and may, in some respects, be initially “blanket” in nature, it is expressly agreed and understood by Mortgagor that such easements and rights of way shall be and hereby are currently presently granted and conveyed by this Mortgage and shall be considered presently vested, and shall not be construed as contingent, “springing” or otherwise executory in nature. 1 Subject to PES lender discussion 7 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 101 of 122 g. Notwithstanding anything to the contrary in this Section 12, Mortgagee, personally, or by its agents, attorneys or representatives, shall not enter upon the Land without first complying with and satisfying all of the reasonable safety, security and other site procedures, requirements and standards promulgated by Mortgagor, from time to time, and Mortgagee’s exercise of any and all rights to access the Land under or pursuant to this Section 12 or otherwise under or pursuant to this Mortgage shall be subject to any and all such standards, provided that (i) Mortgagee shall have been previously provided with written notice of same (and written notice of any revisions or modifications to same) and (ii) such safety, security and other site procedures, requirements and standards shall be uniformly enforced by Mortgagor. h. In the event of a Foreclosure Sale, Mortgagor shall be obligated, at its sole cost and expense, to surrender the ASTs free and clear of any Products. i. This Section 12 shall survive any exercise of Mortgagee’s rights and remedies pursuant hereto, including, but not limited to, foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any rights and remedies pursuant to the [Note or any of the other Note Documents], or any transfer of all or any portion of the Mortgaged Property (whether by Mortgagor or by Mortgagee following foreclosure or acceptance of a deed in lieu of foreclosure or at any other time). 13. Collection of Rents, etc. If an Event of Default shall have occurred and be continuing, Mortgagee may collect and receive all Rents. Mortgagee may deduct, from the monies so collected and received, after Mortgagee first paying for all costs, expenses and liabilities to be paid for in the satisfaction and performance of any and all terms, covenants, obligations and liabilities of the lessor under and pursuant to any lease of any of the ASTs, all expenses of all maintenance, repairs, and removals and amounts necessary to pay for insurance, Taxes and assessments, liens or other charges upon the Mortgaged Property or any part thereof, as well as reasonable compensation for the services of Mortgagee and for all attorneys, agents, clerks, servants, and other employees engaged and employed by Mortgagee. After such deductions and the establishment of all reasonable reserves, Mortgagee shall apply all such monies to the payment of the unpaid Obligations. Mortgagee shall account only for Rents actually received by Mortgagee. 14. Extension, Release, etc. a. Without affecting the lien or charge of this Mortgage upon any portion of the Mortgaged Property not then or theretofore released as security for the full amount of the Obligations, Mortgagee may, from time to time and without notice, agree to (i) release any person liable for the indebtedness borrowed or guaranteed under the [Note Documents], (ii) extend the maturity or alter any of the terms of the indebtedness borrowed or guaranteed under the [Note Documents] or any other guaranty thereof, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed at any time at Mortgagee's option any parcel, portion or all of the Mortgaged Property, (v) take or release any other or additional security for any obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto. 8 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 102 of 122 b. Subject to applicable law, no recovery of any judgment by Mortgagee and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of Mortgagor shall affect the lien of this Mortgage or any liens, rights, powers or remedies of Mortgagee hereunder, and such liens, rights, powers and remedies shall continue unimpaired. 15. Security Agreement under Uniform Commercial Code; Fixture Filing. a. It is the intention of the parties hereto that this Mortgage shall constitute a security agreement within the meaning of the Uniform Commercial Code (the “Code”) of the State in which the Mortgaged Property is located. If an Event of Default shall occur and be continuing, then in addition to having any other right or remedy available at law or in equity, Mortgagee shall have the option of either (i) proceeding under the Code and exercising such rights and remedies as may be provided to a secured party by the Code with respect to all or any portion of the Mortgaged Property which is personal property (including, without limitation, taking possession of and selling such property) or (ii) to the extent permitted by applicable law, treating such property as real property and proceeding with respect to both the real and personal property constituting the Mortgaged Property in accordance with Mortgagee's rights, powers and remedies with respect to the real property (in which event the default provisions of the Code shall not apply). If Mortgagee shall elect to proceed under the Code, then ten (10) days' notice of sale of the personal property shall be deemed reasonable notice and the reasonable expenses of retaking, holding, preparing for sale, selling and the like incurred by Mortgagee shall include, but not be limited to, reasonable attorneys' fees and legal expenses. At Mortgagee's request, Mortgagor shall assemble the personal property and make it available to Mortgagee at a place designated by Mortgagee which is reasonably convenient to both parties. b. Certain portions of the Mortgaged Property are or will become "fixtures" (as that term is defined in the Code) on the Land, and this Mortgage, upon being filed for record in the real estate records of the county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said Code upon such portions of the Mortgaged Property that are or become fixtures. The real property to which the fixtures relate is described in Exhibit A attached hereto. The record owner of the real property described in Exhibit A hereto is Mortgagor. The name, type of organization and jurisdiction of organization of the debtor for purposes of this financing statement are the name, type of organization and jurisdiction of organization of Mortgagor set forth in the first paragraph of this Mortgage, and the name of the secured party for purposes of this financing statement is the name of Mortgagee set forth in the first paragraph of this Mortgage. The mailing address of Mortgagor/debtor is the address of Mortgagor set forth in the first paragraph of this Mortgage. The mailing address of Mortgagee/secured party from which information concerning the security interest hereunder may be obtained is the address of Mortgagee set forth in the first paragraph of this Mortgage. Mortgagor's organizational identification number is __________________ 16. Assignment of Rents. a. Mortgagor hereby assigns to Mortgagee the Rents as further security for the payment of and performance of the Obligations. The foregoing assignment and grant is present and absolute and shall continue in effect until the Obligations are fully paid and performed, but Mortgagor shall be entitled to collect, receive, use and retain the Rents, and to commence and 9 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 103 of 122 prosecute to completion actions, arbitrations and proceedings with tenants and to sue for and to collect Rents, until the occurrence and during the continuance of an Event of Default; such right of Mortgagor to collect, receive, use and retain the Rents may be revoked by Mortgagee upon the occurrence and during the continuance of any Event of Default by giving not less than five (5) Business Days' written notice of such revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay over to Mortgagee, or to any receiver appointed to collect the Rents, any lease security deposits allocated to any period commencing from and after the occurrence of such Event of Default. Any Rents received hereunder by Mortgagee shall be first applied and disbursed in payment of all costs, expenses and liabilities to be paid for in the satisfaction and performance of any and all terms, covenants, obligations and liabilities of the lessor under and pursuant to any lease of any of the ASTs, then to the payment of Taxes and insurance and other costs of all maintaining, repairing, and removing the ASTs, and then to the payment, performance and discharge of the Obligations, subject to the terms of the other [Note Documents]. b. Mortgagor represents and warrants to Mortgagee that Mortgagor has not affirmatively done any act which would prevent Mortgagee from, or limit Mortgagee in, acting under any of the provisions of the foregoing assignment. c. Mortgagor represents and warrants to Mortgagee that, except for any matter disclosed in the other [Note Documents], no action has been brought or, so far as is known to Mortgagor, is threatened in writing, which would interfere in any way with the right of Mortgagor to execute the foregoing assignment and perform all of Mortgagor's obligations contained in this Section 16. 17. Notices. All notices, requests and demands to or upon the Mortgagee or the Mortgagor hereunder shall be effected in the manner provided for in the [Note]; provided that any such notice, request or demand to or upon Mortgagor shall be addressed to Mortgagor at its address set forth above. 18. Modification in Writing. No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be made in accordance with the terms of the [Note] and shall be in writing and signed by the Mortgagee. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof in each case shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other document evidencing the Obligations, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. Any agreement made by Mortgagor and Mortgagee after the date of this Mortgage relating to this Mortgage shall, to the extent permitted by applicable law, be superior to the rights of the holder of any intervening or subordinate lien or encumbrance. 19. Partial Invalidity. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, but each shall be construed as if such invalid, illegal or unenforceable provision had never been included. 10 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 104 of 122 Notwithstanding to the contrary anything contained in this Mortgage or in any provisions of any [Note Document], the obligations of Mortgagor and of any other obligor under any [Note Documents] shall be subject to the limitation that Mortgagee shall not charge, take or receive, nor shall Mortgagor or any other obligor be obligated to pay to Mortgagee, any amounts constituting interest in excess of the maximum rate permitted by law to be charged by Mortgagee. 20. Mortgagor's Waiver of Rights. a. Mortgagor hereby voluntarily and knowingly releases and waives any and all rights to retain possession of the Mortgaged Property after the occurrence and during the continuance of an Event of Default and any and all rights of redemption from sale under any order or decree of foreclosure (whether full or partial), pursuant to rights, if any, therein granted, as allowed under any applicable law, on its own behalf, on behalf of all persons claiming or having an interest (direct or indirectly) by, through or under each constituent of Mortgagor and on behalf of each and every person acquiring any interest in the Mortgaged Property subsequent to the date hereof, it being the intent hereof that any and all such rights or redemption of each constituent of Mortgagor and all such other persons are and shall be deemed to be hereby waived to the fullest extent permitted by applicable law or replacement statute. Each constituent of Mortgagor shall not invoke or utilize any such law or laws or otherwise hinder, delay, or impede, in each case in bad faith, the execution of any right, power, or remedy herein or otherwise granted or delegated to Mortgagee, but shall permit the execution of every such right, power, and remedy as though no such law or laws had been made or enacted. b. To the fullest extent permitted by law, Mortgagor waives the benefit of all laws now existing or that may subsequently be enacted providing for (i) any appraisement before sale of any portion of the Mortgaged Property, (ii) any extension of the time for the enforcement of the collection of the Obligations or the creation or extension of a period of redemption from any sale made in collecting such debt and (iii) exemption of the Mortgaged Property from attachment, levy or sale under execution or exemption from civil process. To the full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force, in each case in bad faith, providing for any appraisement, valuation, stay, exemption, extension or redemption, or requiring foreclosure of this Mortgage before exercising any other remedy granted hereunder and Mortgagor, for Mortgagor and its successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Property by, through or under Mortgagor, to the extent permitted by law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature (except as expressly provided in the Note) or declare due the whole of the secured indebtedness and marshalling in the event of exercise by Mortgagee of the foreclosure rights or other rights hereby created. 21. Remedies Not Exclusive. Mortgagee shall be entitled to enforce payment and performance of the Obligations and to exercise all rights and powers under this Mortgage or under any of the other [Note Documents] or other agreement or any laws now or hereafter in force, notwithstanding some or all of the Obligations may now or hereafter be otherwise secured, whether by deed of trust, mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its enforcement, shall prejudice or in any manner affect Mortgagee's rights to realize upon or enforce any other security now or hereafter held by 11 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 105 of 122 Mortgagee, it being agreed that Mortgagee shall be entitled to enforce this Mortgage and any other security now or hereafter held by Mortgagee in such order and manner as Mortgagee may determine in its absolute discretion. No remedy herein conferred upon or reserved to Mortgagee is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the [Note Documents] to Mortgagee or to which either may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Mortgagee, as the case may be. In no event shall Mortgagee, in the exercise of the remedies provided in this Mortgage (including, without limitation, in connection with the assignment of Rents to Mortgagee, or the appointment of a receiver and the entry of such receiver on to all or any part of the Mortgaged Property), be deemed a "mortgagee in possession," and Mortgagee shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies, except for Mortgagee's gross negligence or willful misconduct. 22. Multiple Security. If (a) the Mortgaged Property shall consist of one or more discrete parcels or units, whether or not contiguous and whether or not located in the same county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter hold or be the beneficiary of one or more additional mortgages, liens, deeds of trust or other security (directly or indirectly) for the Obligations upon other property in the State in which the Mortgaged Property is located (whether or not such property is owned by Mortgagor or by others) or (c) both the circumstances described in clauses (a) and (b) shall be true, then to the fullest extent permitted by law, Mortgagee may, at its election, commence or consolidate in a single foreclosure action all foreclosure proceedings against all such collateral securing the Obligations (including the Mortgaged Property), which action may be brought or consolidated in the courts of, or sale conducted in, any county in which any of such collateral is located. Mortgagor acknowledges that the right to maintain a consolidated foreclosure action is a specific inducement to Mortgagee to extend the indebtedness borrowed pursuant to or guaranteed by the [Note Documents], and Mortgagor expressly and irrevocably waives any objections to the commencement or consolidation of the foreclosure proceedings in a single action and any objections to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have. Mortgagor further agrees that if Mortgagee shall be prosecuting one or more foreclosure or other proceedings against a portion of the Mortgaged Property or against any collateral other than the Mortgaged Property, which collateral directly or indirectly secures the Obligations, or if Mortgagee shall have obtained a judgment of foreclosure and sale or similar judgment against such collateral, then, whether or not such proceedings are being maintained or judgments were obtained in or outside the State in which the Mortgaged Property is located, Mortgagee may commence or continue any foreclosure proceedings and exercise its other remedies granted in this Mortgage against all or any part of the Mortgaged Property and Mortgagor waives any objections to the commencement or continuation of a foreclosure of this Mortgage or exercise of any other remedies hereunder based on such other proceedings or judgments, and waives any right to seek to dismiss, stay, remove, transfer or consolidate either any action under this Mortgage or such other proceedings on such basis. Neither the commencement nor continuation of proceedings to foreclose this Mortgage, nor the exercise of any other rights hereunder nor the recovery of any judgment by Mortgagee in any such proceedings or the occurrence of any sale in any such proceedings shall prejudice, limit or preclude Mortgagee's right to commence or continue one or more foreclosure or other proceedings or obtain a judgment against any other collateral (either in or outside the State in 12 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 106 of 122 which the Mortgaged Property is located) which directly or indirectly secures the Obligations, and Mortgagor expressly waives any objections to the commencement of, continuation of, or entry of a judgment in such other sales or proceedings or exercise of any remedies in such sales or proceedings based upon any action or judgment connected to this Mortgage, and Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or consolidate either such other sales or proceedings or any sale or action under this Mortgage on such basis. It is expressly understood and agreed that to the fullest extent permitted by law, Mortgagee may, at its election, cause the sale of all collateral which is the subject of a single foreclosure action at either a single sale or at multiple sales conducted simultaneously and take such other measures as are appropriate in order to effect the agreement of the parties to dispose of and administer all collateral securing the Obligations (directly or indirectly) in the most economical and least timeconsuming manner. 23. Successors and Assigns. All covenants of Mortgagor contained in this Mortgage are imposed solely and exclusively for the benefit of Mortgagee and Mortgagor, and their respective successors and assigns, and no other person or entity shall have standing to require compliance with such covenants or be deemed, under any circumstances, to be a beneficiary of such covenants, any or all of which may be freely waived in whole or in part by Mortgagee or Mortgagor, as the case may be, at any time if in the sole discretion of either of them such a waiver is deemed advisable. All such covenants of Mortgagor shall run with the land and bind Mortgagor, the successors and assigns of Mortgagor (and each of them) and all subsequent owners, encumbrancers and tenants of the Mortgaged Property, and shall inure to the benefit of Mortgagee and its successors and assigns. The word "Mortgagor" shall be construed as if it read "Mortgagors" whenever the sense of this Mortgage so requires and if there shall be more than one Mortgagor, the obligations of the Mortgagors shall be joint and several. 24. No Waivers, etc. Any failure by Mortgagee to insist upon the strict performance by Mortgagor of any of the terms and provisions of this Mortgage shall not be deemed to be a waiver of any of the terms and provisions hereof, and Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Mortgagor of any and all of the terms and provisions of this Mortgage to be performed by Mortgagor. Mortgagee may release, regardless of consideration and without the necessity for any notice to or consent by the holder of any subordinate lien on the Mortgaged Property, any part of the security held for the obligations secured by this Mortgage without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or the priority of such lien over any subordinate lien or deed of trust. 25. Governing Law, etc. This Mortgage shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania. 26. Certain Definitions. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Mortgage shall be used interchangeably in singular or plural form and the word “Mortgagor” shall mean “each Mortgagor or any subsequent owner or owners of the Mortgaged Property or any part thereof or interest therein,” the word “Mortgagee” shall mean “"Mortgagee or any successor-in-interest to Mortgagee,” the word “person” shall include any individual, corporation, partnership, limited liability company, trust, unincorporated association, government, governmental authority, or other 13 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 107 of 122 entity, and the words “Mortgaged Property” shall include any portion of the Mortgaged Property or interest therein. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. The captions in this Mortgage are for convenience or reference only and in no way limit or amplify the provisions hereof. 27. Last Dollars Secured; Priority. To the extent that this Mortgage secures only a portion of the indebtedness owing or which may become owing by Mortgagor to Mortgagee, the parties agree that any payments or repayments of such indebtedness shall be and be deemed to be applied first to the portion of the indebtedness that is not secured hereby, it being the parties' intent that the portion of the indebtedness last remaining unpaid shall be secured hereby. If at any time this Mortgage shall secure less than all of the principal amount of the Obligations, it is expressly agreed that any repayments of the principal amount of the Obligations shall not reduce the amount of the lien of this Mortgage until the lien amount shall equal the principal amount of the Obligations outstanding. 28. Enforcement Expenses Indemnification. Mortgagor agrees to pay, and to save the Mortgagee harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Mortgaged Property or in connection with any of the transactions contemplated by this Mortgage Mortgagor agrees to pay, and to save the Mortgagee harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Mortgage to the extent the Mortgagor would be required to do so pursuant to the [Note]. The agreements in this Section 28 shall survive repayment of the Obligations and all other amounts payable. 29. Release. If any of the Mortgaged Property shall be sold, transferred or otherwise disposed of by any Mortgagor in a transaction permitted by the [Note] or if all of the Obligations shall be paid, performed and discharged (other than unmatured or contingent indemnity or reimbursement obligations and those Obligations which, by their terms, expressly survive the repayment and satisfaction of the [Note]), then the Mortgagee, at the request and sole expense of such Mortgagor, shall execute and deliver to such Mortgagor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Mortgaged Property. 30. Future Advances. a. This Mortgage shall constitute an "Open-End Mortgage" as such term is defined in 42 Pa.C.S. §8143(f), and shall secure future advances and shall have lien priority in accordance with the provisions of 42 Pa.C.S. §§8143 and 8144. Notwithstanding the foregoing, to the maximum extent permitted by law, Mortgagor hereby unconditionally and irrevocably waives its right to submit a notice to Mortgagee under 42 Pa.C.S. §8143(c). In addition to the other remedies available hereunder and under the other [Note Documents], any advances made after receipt of any such notice, whether or not made pursuant to 42 Pa. C.S. §8143 and/or §8144, shall be secured hereby and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. In the event any Person or entity shall submit a notice to Mortgagee 14 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 108 of 122 under 42 Pa.C.S. §8143(b), in addition to the other remedies available hereunder and under the other [Note Documents], Mortgagor shall have the lien or encumbrance which is the subject of such notice removed of record in accordance with this Mortgage; and any advances made by Mortgagee after receipt of any such notice whether or not made under 42 Pa.C.S. §8143(b) shall be deemed to be obligatory advances made under, shall be secured hereby, and shall relate back to the date when this Mortgage was left for recording with the recorder of deeds. By placing or accepting any such lien or encumbrance against any or all of the Mortgaged Property, the holder thereof shall be deemed to have agreed to the maximum extent permitted by law that its lien or encumbrance shall be subject and subordinate in lien priority to this Mortgage and to any subsequent advances made under the [Note] to all accrued and unpaid interest and to all other sums secured hereby. b. The amount of principal indebtedness that may be secured by this Mortgage may increase or decrease from time to time. The maximum amount of principal indebtedness outstanding at any one time shall not exceed $75,000,000.00, exclusive of accrued and unpaid interest and unpaid balances of advances and other extensions of credit secured by this Mortgage made for the payment of taxes, assessments, maintenance charges, insurance premiums and costs incurred for the protection of the Mortgaged Property within the meaning of 42 Pa. C.S.A. § 8143(f), and expenses incurred by Mortgagee by reason of the default by Mortgagor under this Mortgage and other costs and advances to the fullest extent permitted by the terms of 42 Pa. C.S.A. § 8144. c. Mortgagor shall not give any notice pursuant to 42 Pa. C.S. §8143(c) or otherwise terminate the operation of this Mortgage as security for future advance or future obligations made or incurred after the date Mortgagee receive such notice, nor shall Mortgagor take any other similar action for the purpose of limiting or attempting to limit the operation of this Mortgage as such security d. Mortgagor shall ensure that the Mortgagee shall not receive any notice pursuant to 42 Pa. C.S. §8143(b) which such notice is not rescinded or any related lien otherwise discharged or bonded against to Mortgagee's satisfaction, in its sole discretion, within thirty (30) days thereafter. 31. Waiver of Jury Trial. MORTGAGOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS MORTGAGE, THE [NOTE], OR THE OTHER LOAN INSTRUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY MORTGAGOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR. 32. Recorded Environmental Covenants. 15 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 109 of 122 MORTGAGEE ACKNOWLEDGES AND AGREES THAT IT IS AWARE THAT THE LAND IS SUBJECT TO THE COVENANTS AND RESTRICTIONS, AS COVENANTS RUNNING WITH THE LAND, SET FORTH IN THAT CERTAIN SPECIAL WARRANTY DEED DATED SEPTEMBER 7, 2012, EFFECTIVE SEPTEMBER 8, 2012, FROM SUNOCO INC. (R & M) TO PHILADELPHIA ENERGY SOLUTIONS REFINING AND MARKETING LLC, FILED OF RECORD IN THE OFFICE OF THE DEPARTMENT OF RECORDS, CITY AND COUNTY OF PHILADELPHIA, PENNSYLVANIA ON OCTOBER 3, 2012 AS DOCUMENT ID 52542486 AND THAT CERTAIN DEED OF CONFIRMATION OF MORTGAGOR DATED FEBRUARY 16, 2015 AND FILED OF RECORD IN THE OFFICE OF THE DEPARTMENT OF RECORDS, CITY AND COUNTY OF PHILADELPHIA, PENNSYLVANIA ON FEBRUARY 23, 2015 AS DOCUMENT ID 52884740 AND THAT THIS MORTGAGE IS SUBJECT, IN ALL RESPECTS, TO THE SAME. REMAINDER INTENTIONALLY LEFT BLANK 16 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 110 of 122 IN WITNESS WHEREOF, Mortgage has been duly executed by Mortgagor as of the date first above written and is intended to be effective as of such date. PHILADELPHIA ENERGY SOLUTIONS REFINING AND MARKETING LLC a Delaware limited liability company By: STATE OF _________________ COUNTY OF ____________________ __________________________________ Name: Title: § § § BEFORE ME, ______________________________, the undersigned Notary Public, personally appeared _____________________________________, with whom I am personally acquainted and who acknowledges that he/she executed the within instrument for the purposes therein contained and further acknowledges that he/she executed the document as a(n) _________________________________ of (and thereby as the act and deed of) PHILADELPHIA ENERGY SOLUTIONS REFINING AND MARKETING LLC, a Delaware limited liability company after first having been duly authorized by said entity so to do. Given this _____ day of _____________________, 2018. [S E A L] Notary Public, State of My Commission Expires: Printed Name of Notary Public ______________________ [signature page for Pennsylvania Mortgage] Case 18-10122 Doc 10-1 Filed 01/22/18 Page 111 of 122 CERTIFICATION OF MAILING ADDRESS OF MORTGAGEE The undersigned hereby certifies that the mailing address of SUNOCO LOGISTICS PARTNERS OPERATIONS L.P., is 3807 West Chester Pike, Newtown Square PA 19073 SUNOCO LOGISTICS PARTNERS OPERATIONS L.P. By: Sunoco Logistics Partners GP LLC, its general partner By:_______________________________ Name: Title: [signature page for Pennsylvania Mortgage] Case 18-10122 Doc 10-1 Filed 01/22/18 Page 112 of 122 EXHIBIT A Legal Description of Land Lot #10 Beginning at a point on the eastern side of Essington Avenue and a corner of lands of Pacific Atlantic Terminal; thence along lands of Pacific Atlantic Terminal the four following courses and distances: (1) South 78°40'08" East, a distance of 364.693 feet; (2) South 74°29'09" East, a distance of 666.454 feet to a point of curvature; (3) By a curve to the left having a radius of 1463.349 feet and a central angle of 25°40'33.76" an arc length of 655.772 feet a chord which bears South 15°28’35.12 East 650.299 feet; (4) South 28°18‘52" East a distance of 1586.100 feet to a point a corner of Lot #11; thence along Lot #11 the 14 following courses and distances: (1) North 73°45'55.82" West, a distance of 316.884 feet; (2) North 73°39’19.79" West, a distance of 655.756 feet; (3) South 16°12'18.33 West, a distance of 34.507 feet; (4) North 73°47'41.67" West, a distance of 270.118 feet; (5) North 16°11'09.17" East, a distance of 290.706 feet; (6) North 73°52'15.18" West, a distance of 360.233 feet; (7) North 16°12'18.33" East, a distance of 1095.661 feet; (8) North 74°20'38.45 West, a distance of 157.207 feet; (9) South 16°04'45.41" West, a distance of 35.834 feet; (10) North 75°22'14.72" West, a distance of 75.952 feet; (11) South 16°14'57.70" West, a distance of 124.820 feet; (12) North 74°11'14.92" West, a distance of 215.977 feet; (13) South 16°20'02.25” West, a distance of 178.945 feet; Case 18-10122 Doc 10-1 Filed 01/22/18 Page 113 of 122 (14) North 73°15'29.97" West, a distance of 410.393 feet to a point on the eastern side of Essington Avenue. thence along Essington Avenue North 14°21'18" East, a distance of 633.298 feet to the Point of Beginning. Containing 39.50 Acres / 1,720,972 sq.ft. Being known as 6904 Essington Avenue. OPA #88-4-0967-03 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 114 of 122 Lot #11 Beginning at a point on the eastern side of Essington Avenue and a corner of Lot #10; Thence along Lot #10 the 14 following courses and distances: (1) South 73°15'29.97" East, a distance of 410.393 feet; (2) North 16°20'02.25" East, a distance of 178.945 feet; (3) South 74°11'14.92" East, a distance of 215.977 feet; (4) North 16°14'57.70" East, a distance of 124.820 feet; (5) South 75°22'14.72" East, a distance of 75.952 feet; (6) North 16°04'45.41" East, a distance of 35.834 feet; (7) South 74°20'38.45 East, a distance of 157.207 feet; (8) South 16°12'18.33" West, a distance of 1095.661 feet; (9) South 73°52'15.18” East, a distance of 360.233 feet; (10) South 16°11'09.17" West, a distance of 290.706 feet; (11) South 73°47'41.67" East, a distance of 270.118 feet; (12) North 16°12'18.33" East, a distance of 34.507 feet; (13) South 73°39'19.79" East, a distance of 655.756 feet; (14) South 73°45'55.82" East, a distance of 316.884 feet to a point in line of lands of Pacific Atlantic Terminal ; Thence along lands of Pacific Atlantic Terminal South 28°18'52" East, a distance of 692.486 feet; thence along Mingo Creek South 61°46'72" West, a distance of 531.355 feet to a point a corner of Lot #12; thence along Lot #12 the 13 following courses and distances: (1) North 73°21'23.85" West, a distance of 817.222 feet; (2) North 16°13'40.59" East, a distance of 58.863 feet; (3) North 73°21'23.85" West, a distance of 291.434 feet; Case 18-10122 Doc 10-1 Filed 01/22/18 Page 115 of 122 (4) North 16°13'14.08 East, a distance of 629.875 feet; (5) North 73°46'45.92" West, a distance of 498.753 feet; (6) South 16°13'14.08" West, a distance of 725.198 feet; (7) North 73°46'45.92" West, a distance of 101.252feet; (8) South 16°13'14.08" West, a distance of 1225.421 feet; (9) North 64°57'05.99" West, a distance of 241.292 feet; (10) North 16°20'07.97" East, a distance of 517.687 feet; (11) North 73°39'52.03" West, a distance of 214.664 feet; (12) North 16°20'07.97" East, a distance of 1451.316 feet; (13) North 75°50'45.56" West, a distance of 374.920 feet to the eastern side of Essington Avenue ; Thence along the eastern side of Essington Avenue North 14°21'18" East, a distance of 1138.651 feet to the Point of Beginning. Containing 72.99 Acres / 3,179,527 sq.ft. Being known as 6902 Essington Avenue. OPA #88-4-0967-02 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 116 of 122 Lot #12 Beginning at a point on the eastern side of Essington Avenue and a corner of Lot #11; Thence along Lot #11 the 13 following courses and distances: (1) South 75°50'45.56” East, a distance of 374.920 feet; (2) South 16°20'07.97" West, a distance of 1451.316 feet; (3) South 73°39'52.03" East, a distance of 214.664 feet; (4) South 16°20'07.97" West, a distance of 517.687 feet; (5) South 64°57'05.99" East, a distance of 241.292 feet; (6) North 16°13'14.08" East, a distance of 1225.421 feet; (7) South 73°46'45.92" East, a distance of 101.252 feet; (8) North 16°13'14.08" East, a distance of 725.198 feet; (9) South 73°46'45.92" East, a distance of 498.753 feet; (10) South 16°13'14.08" West, a distance of 629.875 feet; (11) South 73°21'23.85" East, a distance of 291.434 feet; (12) South 16°13'40.59" West, a distance of 58.863 feet; (13) South 73°21'23.85" East, a distance of 817.222 feet to a point. Thence along the north side of Mingo Creek South 61°46'58.72" West, a distance of 2159.913 feet to a monument; Thence North 61°09'05.89" West a distance of 671.429 feet to a point on the eastern side of Mingo Avenue; Thence along the eastern side of Mingo Avenue North 03°30'13.66" West, a distance of 1414.856 feet to the eastern side of Essington Avenue ; Thence along the eastern side of Essington Avenue North 14°21'18" East, a distance of 724.906 feet to the Point of Beginning. Containing 57.68 Acres / 2,512,561 sq.ft. Being known as 6900 Essington Avenue. OPA #88-4-0967-01 1 Case 18-10122 Doc 10-1 Filed 01/22/18 EXHIBIT B [Description of Storage Tanks] 1 Page 117 of 122 i. ?ag M. I 3.2.136 2.lug-l Incl I'll. lav-?l 51% no.3.- rnnajs?o d: INTiin ml .mchSAom 552w A .3 Em mum. mnum who; PEH a a who; mdumE mo onmH>Hogm ommOn?ama . f! If! 1/ -. _h ix ?uffy/I'll. Aw Case 18-10122 Doc 10-1 Filed 01/22/18 Page 119 of 122 Schedule 2.1(a) Tank Number Tank Status Tank Type Floating Roof Type Dia (FT) HT (FT) Capacity (GAL) Capacity (BBL) Prim. Prod. Connectivity in Connectivity Out SR-6 IS IFR Pontoon 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-8 TOOU IFR Pan, W/Bulkheads 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-7 IS IFR Pontoon 120 40 2,982,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-14 IS IFR Pontoon 120 40 3,010,000 70,526 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-15 IS IFR Pan, W/Bulkheads 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-16 IS IFR Pan, W/Bulkheads 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-18 IS IFR Pan, W/Bulkheads 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-19 IS IFR Pontoon 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-20 IS IFR Pontoon 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-22 IS IFR Pontoon 120 40 2,834,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-23 IS IFR Pontoon 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone Case 18-10122 Doc 10-1 Filed 01/22/18 Page 120 of 122 Tank Number Tank Status Tank Type Floating Roof Type Dia (FT) HT (FT) Capacity (GAL) Capacity (BBL) Prim. Prod. Connectivity in Connectivity Out SR-24 IS IFR Pontoon 120 40 3,384,360 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-25 IS IFR Pan, W/Bulkheads 120 40 3,045,000 72,500 Gasoline Blender, CPL, Barge GP Dock, HPL, LPL, Keystone SR-35 IS IFR Pontoon 140 48 5,065,200 120,600 Gasoline Component HIW,GP Docks, Unit Production Blender, GP Docks SR-36 IS IFR Pontoon 140 48 5,527,200 120,600 Gasoline Component HIW,GP Docks, Unit Production Blender, GP Docks SR-37 TOOU IFR Pontoon 140 48 5,065,200 120,600 Gasoline Component HIW,GP Docks, Unit Production Blender, GP Docks SR-56 IS EFR Pontoon 140 48 5,527,200 131,600 Heavy Cat Gas Unit Production Blender, GP Docks SR-59 IS IFR Pan, W/Bulkheads 140 48 5,065,200 120,600 Heavy Reformate Unit Production Blender, GP Docks SR-60 IS IFR Pontoon 140 48 5,065,200 120,600 Raffinate Unit Production Blender, GP Docks SR-62 IS EFR Pontoon 140 48 5,527,200 131,600 Alkylate Unit Production Blender, GP Docks SR-63 IS IFR Pan, W/Bulkheads 140 48 5,065,200 120,600 Light Cat Gas Unit Production Blender, GP Docks SR-64 TOOU IFR Pontoon 140 48 5,065,200 120,600 Alkylate Unit Production Blender, GP Docks SR-38 IS Cone Roof (none) 140 48 5,527,200 131,600 #2 Furnace Oil Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2 Case 18-10122 Doc 10-1 Filed 01/22/18 Page 121 of 122 Tank Number Tank Status Tank Type Floating Roof Type Dia (FT) HT (FT) Capacity (GAL) Capacity (BBL) Prim. Prod. Connectivity in Connectivity Out SR-39 IS Cone Roof (none) 140 48 5,527,200 131,600 #2 Furnace Oil Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2 SR-40 IS Cone Roof (none) 140 48 5,527,200 131,600 ULSD#2 Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2 SR-41 IS Cone Roof (none) 140 48 5,527,200 131,600 ULSD#2 Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2 SR-42 IS Cone Roof (none) 140 48 5,527,200 131,600 ULSD#2 Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2 SR-43 TOOU Cone Roof (none) 140 48 5,527,200 131,600 ULSD#2 Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2 SR-61 IS Cone Roof (none) 140 48 5,527,200 131,600 Jet / Kero Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL, LPL, FM2, CPL SR-65 IS Cone Roof (none) 140 48 5,527,200 131,600 ULSD #2 Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL,LPL, FM2, CPL SR-66 IS Cone Roof (none) 140 47 5,253,035 125,072 ULSD#2 Unit Production, CPL, barge, PB LSD Tankage GP Docks, HPL,LPL, FM2, CPL Case 18-10122 Doc 10-1 Filed 01/22/18 Page 122 of 122 Tank Number Tank Status Tank Type Floating Roof Type Dia (FT) HT (FT) Capacity (GAL) Capacity (BBL) Prim. Prod. Connectivity in Connectivity Out SR-52 IS Cone Roof (none) 140 48 5,527,200 131,600 Heavy Gas Oil Unit Production, GP GO & MFB Tankage Barge, GP Hv Oil Tankage, PBNYOM SR-90 IS Cone Roof (none) 190 48 10,188,780 242,590 Heavy Gas Oil Unit Production, GP GO & MFB Tankage Barge, GP Hv Oil Tankage, PBNYOM SR-33 IS Cone Roof (none) 140 48 5,527,200 131,600 #6 Fuel Oil Unit Production, NYOM tankage, GP Hv Oil tankage Barge, GP Hv Oil Tankage SR-34 TOOU Cone Roof (none) 140 48 5,527,200 131,600 #6 Fuel Oil Unit Production, NYOM tankage, GP Hv Oil tankage Barge, GP Hv Oil Tankage SR-30 IS Cone Roof (none) 140 48 5,527,200 131,600 #6 Fuel Oil Unit Production, NYOM tankage, GP Hv Oil tankage Barge, GP Hv Oil Tankage Case 18-10122 Doc 10-2 Filed 01/22/18 Page 1 of 57 EXHIBIT B TO THE DISCLOSURE STATEMENT RESTRUCTURING SUPPORT AGREEMENT Case 18-10122 Doc 10-2 Filed 01/22/18 Page 2 of 57 SOLICITATION VERSION THIS RESTRUCTURING SUPPORT AGREEMENT IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN THE MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE. ANY SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE. NOTHING CONTAINED IN THIS RESTRUCTURING SUPPORT AGREEMENT SHALL BE AN ADMISSION OF FACT OR LIABILITY OR, UNTIL THE OCCURRENCE OF THE AGREEMENT EFFECTIVE DATE ON THE TERMS DESCRIBED HEREIN, DEEMED BINDING ON ANY OF THE PARTIES HERETO. RESTRUCTURING SUPPORT AGREEMENT This Restructuring Support Agreement (including all exhibits and schedules attached hereto and in accordance with Section 2, this “Agreement”)1 is made and entered into as of January 12, 2018, by and among the following parties and any such party that subsequent to the date hereof executes and delivers a joinder to this Agreement (“Joinder Agreement”) in the form of Exhibit C (each of the foregoing described in sub-clauses (i), (ii), (iii), (iv), (v), and (vi), a “Party” and, collectively, the “Parties”): 1 i. PES Holdings, LLC, North Yard Financing, LLC (“North Yard Financing”), North Yard GP, LLC (“North Yard GP”), North Yard Logistics, L.P. (“North Yard Logistics” and together with North Yard Financing and North Yard GP, the “North Yard Entities”), PES Administrative Services, LLC (“PES Admin”), PES Logistics GP, LLC, PES Logistics Partners, L.P., Philadelphia Energy Solutions Refining and Marketing LLC (“PESRM”), and PESRM Holdings, LLC (each a “Debtor,” and together, collectively, the “Debtors”); ii. Philadelphia Energy Solutions LLC (the “Parent”) and its undersigned members (collectively, the “Parent Parties”); iii. (x) the undersigned lenders or investment advisors or managers of discretionary accounts that hold Claims against the Debtors and who have signed this Agreement in a capacity as a lender under the NYL Credit Agreement, and (y) PNC Bank, National Association, in its capacity as administrative agent (the “Consenting Term Loan A Agent”) under that certain Credit Agreement, dated as of November 24, 2015 (as amended from time to time, the “NYL Credit Agreement”), by and among North Yard Logistics, as borrower, certain of the other Debtors, as guarantors, the Consenting Term Loan A Agent, and the lenders party thereto, including any Permitted Transferee (as defined below) of such claims in accordance with Section 6 of this Agreement (such claims, the “NYL Credit Agreement Claims” and, collectively, the “Consenting NYL Creditors”); iv. the undersigned lenders or investment advisors or managers of discretionary accounts that hold Claims against the Debtors under that certain Term Loan Agreement, dated Capitalized terms used but not otherwise defined herein have the meaning ascribed to such terms in the Plan (as defined herein), attached hereto as Exhibit A, subject to Section 2 hereof. Case 18-10122 Doc 10-2 Filed 01/22/18 Page 3 of 57 as of April 4, 2013 (as amended from time to time, the “Term Loan B Credit Agreement” and, together with the NYL Credit Agreement, the “Credit Agreements”), by and among PESRM, as borrower, certain of the other Debtors, as guarantors, the Term Loan B Agent, and the lenders party thereto, including any Permitted Transferee (as defined below) of such Claims in accordance with Section 6 of this Agreement (such claims, the “Term Loan B Claims” and together with the NYL Credit Agreement Claims, the “Outstanding Claims”) (collectively, the “Consenting Term Loan B Creditors,” and, together with the Consenting NYL Creditors, the “Consenting Cash Flow Creditors”); v. Halcyon Capital Management LP (“HCM”) and its subsidiary management companies and Credit Suisse Asset Management, LLC (“CSAM”), in each case on behalf of certain investment vehicles that will commit to provide the postpetition financing to the Debtors pursuant to the Restructuring (collectively, the “DIP Commitment Parties” and together with the Consenting Cash Flow Creditors, the “Consenting Creditors”); and vi. Sunoco Logistics Partners Operations L.P., or an affiliate thereof (the “Additional Financing Lender”) that will commit to provide a financing facility of $75,000,000.00 (the “Additional Financing Facility”). provided, however, that unless otherwise specified herein, (x) the term “Consenting NYL Creditor,” shall not include any distinct business unit of a Party or an entity other than such business unit or a Party expressly identified on the signature pages hereto with respect to the Outstanding Claim held by such Consenting NYL Creditor and specified on the signature page of such Consenting NYL Creditor unless such other business unit or entity is or becomes party to this Agreement with respect to the specific Outstanding Claim and (y) the term “NYL Credit Agreement Claim,” shall not include any Claim held in a fiduciary capacity or held by any other distinct business unit of a Party or an entity other than the business unit or Party expressly identified on the signature pages hereto with respect to the specific Outstanding Claim unless such other business unit or entity is or becomes party to this Agreement with respect to the specific Outstanding Claim. RECITALS WHEREAS, the Debtors, the Parent, and the Consenting Creditors have negotiated certain restructuring and recapitalization transactions with respect to the Debtors’ capital structure, including the Debtors’ respective obligations under the Credit Agreements; and WHEREAS, the Debtors intend to undertake a financial restructuring of the Debtors and certain related transactions, all of which shall be on terms and conditions described in this Agreement (such transactions, the “Restructuring”) which are to be effected by commencing voluntary reorganization cases (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to effectuate the Restructuring through a prepackaged chapter 11 plan of reorganization substantially in the form attached hereto 2 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 4 of 57 as Exhibit A, as may be amended or supplemented from time to time in accordance with the terms of this Agreement (the “Plan”). NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Party, intending to be legally bound hereby, agrees as follows: AGREEMENT Section 1. Agreement Effective Date. This Agreement shall become effective and binding upon each of the Parties at 12:00 a.m. (prevailing Eastern Time), on the date on which: (a) the Debtors have executed and delivered counterpart signature pages of this Agreement to counsel to each of the Consenting Creditors and the Parent Parties; (b) the Parent Parties shall have executed and delivered counterpart signature pages of this Agreement to counsel to each of the Consenting Creditors and the Debtors; (c) lenders under the NYL Credit Agreement holding at least 66.67% of the aggregate outstanding principal amount of the NYL Credit Agreement Claims (in each case determined without regard to any claims held by a person or entity that is an “insider” as that term is defined in section 101(31) of the Bankruptcy Code) shall have executed and delivered to the Debtors and the Parent Parties counterpart signature pages of this Agreement; (d) lenders under the Term Loan B Credit Agreement holding at least 66.67% of the aggregate outstanding principal amount of the Term Loan B Claims (in each case determined without regard to any claims held by a person or entity that is an “insider” as that term is defined in section 101(31) of the Bankruptcy Code) shall have executed and delivered to the Debtors and the Parent Parties counterpart signature pages of this Agreement; (e) the Additional Financing Lender shall have executed and delivered to the Debtors: (i) counterpart signature pages to this Agreement; and (ii) a commitment letter (the “Additional Financing Facility Commitment Letter”) to provide the Additional Financing Facility; and (f) PESRM, PES Admin, and the DIP Commitment Parties shall have executed that certain Fee Letter, dated January 11, 2018, providing for payment of the DIP Commitment Fee; and (g) The Term Loan A Agent, PNC Capital Markets LLC (“PNCCM”) and North Yard Logistics shall have executed that certain Restructuring Support Agreement Fee Letter dated as of January 11, 2018 (the “PNC Fee Letter”), providing for payment of the Fee (as defined in the PNC Fee Letter (the “PNC Fee”)). The Debtors have given notice to counsel to each of the Consenting Creditors and the Parent in accordance with Section 19.09 hereof that each of the foregoing conditions set forth in this Section 3 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 5 of 57 1, in each case, has been satisfied and this Agreement is effective (such date, the “Agreement Effective Date”).2 Section 2. Exhibits Incorporated by Reference. Each of the exhibits attached hereto (including the Plan) and any annexes, schedules or exhibits to such exhibits (collectively, the “Exhibits and Schedules”) is expressly incorporated herein and made a part of this Agreement, and as used in this Agreement, all references to this Agreement shall include the Exhibits and Schedules. In the event of any inconsistency between this Agreement (without reference to the Exhibits and Schedules) and the Exhibits and Schedules, this Agreement (without reference to the Exhibits and Schedules) shall govern. Section 3. Definitive Documentation. The definitive documents and agreements governing the Restructuring (collectively, the “Restructuring Documents”) shall consist of any material document relating to the Restructuring, including: (a) the Plan (and all exhibits and supplements thereto); (b) an order confirming the Plan (the “Confirmation Order”) and pleadings in support of entry of the Confirmation Order; (c) the Disclosure Statement and the other solicitation materials in respect of the Plan (such materials, collectively, the “Solicitation Materials”); (d) the order entered by the Bankruptcy Court approving the Disclosure Statement and Solicitation Materials as containing, among other things, “adequate information” as required by section 1125 of the Bankruptcy Code (the “Disclosure Statement Order”); (e) the credit agreement and all other loan documents to be entered into in connection with the debtor-in-possession financing facility provided by the DIP Commitment Parties (or their affiliates or funds managed by them) on the terms and conditions set forth in the DIP Facility and Adequate Protection Term Sheet attached hereto as Exhibit B (such term sheet, the “DIP Facility Term Sheet”, such credit agreement and documents the “DIP Documents” and the financing facility provided thereunder, the “DIP Facility”); (f) the orders authorizing certain Debtors to enter into the DIP Documents, obtain financing thereunder and use cash collateral and granting adequate protection to prepetition secured creditors on an interim basis (the “Interim DIP Order”) and on a final basis (the “Final DIP Order” and, together with the Interim DIP Order, the “DIP Orders”); (g) the order or orders granting relief in respect of the Amended and Restated Supply and Offtake Agreement, dated as of October 7, 2014, by and among PESRM and Merrill Lynch Commodities, Inc. (together with the related ancillary agreements, the “Intermediation Agreement,” and the claims thereunder, the “Intermediation Claims,”) including any relief from 2 For the avoidance of doubt, the obligations and rights of the Consenting Creditors described in this Agreement shall apply to any postpetition claims acquired by such Consenting Creditors in accordance with the Restructuring. 4 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 6 of 57 the automatic stay, as contemplated by any assurance agreement related thereto (the “Intermediation Assurance Agreement”) (the “Intermediation Order”); (h) the motions and pleadings filed with the Bankruptcy Court seeking certain “first day” relief (the “First Day Pleadings”); (i) the organizational and corporate governance documents of the Debtors and any other person of which a Consenting Creditor will become an equity holder pursuant to the Restructuring, including any stockholders agreements, registration rights agreements or similar agreements, charters, bylaws, operating agreements, certificates of formation, LLC agreements and other formation documents, and any plans, agreements, documents or instruments to give effect to any mergers, amalgamations, consolidations, arrangements, continuances, restructurings, transfers, contributions, conversions, dispositions, liquidations, dissolutions, or other corporate transactions to consummate the Restructuring (the “Governance Documents”), which shall be substantially consistent with the term sheet attached as Annex I to the Plan; (j) the documents governing the New First Lien Term Loan to be issued to prepetition and postpetition creditors pursuant to the terms of the Plan (as applicable and substantially consistent with the term sheet attached as Annex II to the Plan) (the “New First Lien Term Loan Documents”); (k) the credit agreement, Pipeline Consent Agreement, and all other loan documents to be entered into in connection with the Additional Financing Facility (as amended from time to time, the “Additional Financing Facility Documents”), substantially consistent with the Additional Financing Facility Commitment Letter attached as Annex III to the Plan; and (l) the agreement and all other documents to be entered into in connection with a new facility for the Debtors to purchase and sell crude oil, certain non-crude feedstocks, refined product, and, as required, other goods (the “New Intermediation Facility”) and, if applicable, a first loss facility thereunder (the “New First Loss Facility”). Certain of the Restructuring Documents remain subject to negotiation and completion and shall, upon completion, contain terms, conditions, representations, warranties, and covenants consistent with the terms of this Agreement. The Restructuring Documents shall otherwise be reasonably acceptable to the Debtors, the Parent (to the extent that the Parent is a party thereto), the Required Consenting Term Loan B Creditors and the Required Consenting NYL Creditors, and, solely with respect to provisions relating to their treatment or rights, the DIP Commitment Parties and the Parent Parties; provided that (a) the DIP Documents and DIP Orders shall also be in form and substance reasonably acceptable to each DIP Commitment Party; (b) the Additional Financing Facility Documents shall also be in form and substance reasonably acceptable to the Additional Financing Lender; and (c) the Governance Documents shall also be in form and substance reasonably acceptable to the Parent and the Required Consenting Term Loan B Creditors. 5 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 7 of 57 As used herein, the term “Required Consenting Term Loan B Creditors” means, at any relevant time, Consenting Term Loan B Creditors holding greater than 66.67% by principal amount outstanding of the Term Loan B Claims held by the Consenting Term Loan B Creditors. As used herein, the term “Required Consenting NYL Creditors” means, at any relevant time, Consenting NYL Creditors holding greater than the greater of (x) 66.67% by principal amount outstanding of the NYL Credit Agreement Claims held by the Consenting NYL Creditors and (y) such percentage by principal amount outstanding of the NYL Credit Agreement Claims as would then constitute at least a majority by principal amount of NYL Credit Agreement Claims; provided that with respect to the flood due diligence provisions of the New First Lien Term Loan Documents (or any changes therein), the Required Consenting NYL Creditors shall mean each Consenting NYL Creditor. As used herein, the term “Required Consenting Cash Flow Creditors” means the Required Consenting Term Loan B Creditors and the Required Consenting NYL Creditors. As used herein, the term “Required Consenting Creditors” means the Required Consenting Cash Flow Creditors. Section 4. Milestones 4.01. The following milestones (the “Milestones”) shall apply to this agreement unless extended or waived in writing by counsel to the Debtors and (x) in the case of clauses (b), and (e) below, the Required Consenting Cash Flow Creditors, (y) in the case of clauses (a), (c), (d), and (f) below, the Required Consenting Term Loan B Creditors and (z) in the case of clause (g) below, the Required Consenting NYL Creditors: (a) the Debtors shall commence solicitation of the Restructuring no later than five (5) business days after the Agreement Effective Date; (b) the Chapter 11 Cases shall be commenced in each case no later than January 16, 2018 (or, if North Yard Logistics, L.P. waives or defers the fourth quarter payment due under the Rail Terminaling Services Agreement, as amended, January 31, 2018), and the Plan and Disclosure Statement shall be filed with the Bankruptcy Court on such date; (c) the Interim DIP Order shall be entered within five days of the Petition Date; (d) the Final DIP Order shall be entered within 45 days of the Petition Date; (e) the Disclosure Statement Order and Confirmation Order shall be entered within 90 days of the Petition Date; (f) the Effective Date shall have occurred no later than 120 days after the Confirmation Order is entered unless, after entry of the Confirmation Order, the Required Consenting Term Loan B Creditors deliver notice to the Debtors, which notice may shorten the Effective Date Milestone under this Section 4.01(f) to no later than 30 days after delivery of such notice; and (g) the Effective Date shall have not occurred on or before the Outside Date. 6 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 8 of 57 Section 5. Commitments Regarding the Restructuring. 5.01. Mutual Commitments. (a) During the period beginning on the Agreement Effective Date and ending on a Termination Date (as defined in Section 13.07) (such period, the “Effective Period”), each of the Parties shall: (i) support the Restructuring and the transactions contemplated by the Plan, and act in good faith and take all commercially reasonable actions necessary to consummate the Restructuring and the transactions contemplated by the Plan, in a manner consistent with this Agreement; and (ii) not directly or indirectly (A) object to, delay, impede, or take any other action to interfere with the acceptance, implementation, or consummation of the Restructuring or (B) propose, file, support, or vote for any restructuring, workout, plan of arrangement, or plan of reorganization for the Debtors other than the Restructuring (such transaction, an “Alternative Transaction”). 5.02. Commitment of the Consenting Creditors and Consenting Term Loan A Agent. (a) During the Effective Period, each of the Consenting Creditors and Consenting Term Loan A Agent shall: (i) in good faith negotiate any applicable definitive documentation for the Restructuring, including the Restructuring Documents, which will contain terms consistent with this Agreement; (ii) not direct the applicable agents under the NYL Credit Agreement or Term Loan B Credit Agreement, as applicable, to take any action contemplated in clause (A) or (B) of Section 5.01(a)(ii); (iii) use commercially reasonable efforts to oppose any party or person from taking any actions contemplated in Section 5.02(a)(ii), including by directing the applicable agent to join in such opposition; provided, that the Debtors agree to reimburse any reasonable and documented out-of-pocket fees and expenses incurred by the Consenting Creditors pursuant to such commercially reasonable efforts; (iv) not, and shall not direct any other person to, exercise any right or remedy for the enforcement, collection, or recovery of any of the Claims or Interests against the Parent or the Parent Parties; (v) subject to the receipt by such Consenting Creditor of the Disclosure Statement and the Solicitation Materials, in each case, to the extent a class of Claims is permitted to vote to accept or reject the Plan, vote each of its Claims against the Debtors (including each of its NYL Credit Agreement Claims, Term Loan B Claims, or Intermediation Claims, as applicable, and any other claims against the Debtors); but in the case of any Consenting NYL Creditor, only with respect to the Outstanding Claims held by such Consenting NYL Creditor identified on such 7 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 9 of 57 Consenting NYL Creditor’s signature page (such claims or interests, as applicable, collectively, the “Debtors Claims/Interests”) to accept the Plan by delivering its duly executed and completed ballot(s) accepting the Plan on a timely basis following the commencement of the solicitation and its actual receipt of the Solicitation Materials and ballot, and not change or withdraw (or cause to be changed or withdrawn) such vote; (vi) support and take all commercially reasonable actions necessary or reasonably requested by the Debtors to facilitate the solicitation of votes on the Plan, approval of the Disclosure Statement and the Solicitation Materials, and confirmation and consummation of the Plan; and (vii) support and consent to the release, discharge, exculpation, and injunctive provisions contained in the Plan. (b) Subject to the termination rights of each DIP Commitment Party set forth in Section 13, each DIP Commitment Party commits to provide its share of the DIP Facility as set forth on Schedule 1 hereto on the terms and conditions substantially as set forth in the DIP Facility Term Sheet and otherwise subject to relevant Restructuring Documents, provided that any Consenting Term Loan B Creditor that executes a Joinder to this Agreement by the earlier of (i) seven days following the Agreement Effective Date and (ii) the Solicitation Commencement Date (as defined in the Plan) (provided that if the Solicitation Commencement Date is not a business day, the Solicitation Commencement Date shall be deemed to be the last business day prior to the Solicitation Commencement Date for purposes of this section 5.02(b)) (the “DIP Election Date”) may, by making the appropriate election on such Joinder, commit to provide a share of the DIP Facility equal in percentage to the pro rata percentage of Term Loan B Claims held by such Consenting Term Loan B Creditor as of the Agreement Effective Date, and otherwise on the terms and conditions agreed to by the DIP Commitment Parties in the DIP Facility Term Sheet and the DIP Credit Agreement, as applicable (any Consenting Term Loan B Creditor that elects to make such commitment, a “Joining DIP Creditor”); provided, further that each DIP Commitment Party’s commitment to provide its share of the DIP Facility shall be reduced, pro rata, based on the percentages set forth on Schedule 1 hereto, for the share of the DIP Facility to be provided by the Joining DIP Creditors; provided, further that upon a termination of this Agreement as to the DIP Commitment Parties by the DIP Commitment Parties in accordance with the provisions hereof prior to the funding of the DIP Facility, the commitment of any Joining DIP Creditor to provide its share of the DIP Facility as set forth in this paragraph 5.02(b) shall also terminate. 5.03. Rights of Consenting Creditors and Consenting Term Loan A Agent Unaffected. Nothing contained herein shall limit: (a) the rights of a Consenting Creditor or Consenting Term Loan A Agent under any applicable bankruptcy, insolvency, foreclosure or similar proceeding, including appearing as a party in interest in any matter to be adjudicated in order to be heard concerning any matter arising in the Bankruptcy Cases, in each case, so long as the exercise of any such right is consistent with such obligations hereunder; 8 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 10 of 57 (b) the ability of a Consenting Creditor or Consenting Term Loan A Agent to purchase, sell, or enter into any transactions in connection with its Claims or Interests, subject to the terms hereof and applicable law; (c) any right of a Consenting Creditor or Consenting Term Loan A Agent to take or direct any action relating to the maintenance, protection, or preservation of any collateral; provided that such action is consistent with this Agreement; (d) subject to the terms hereof, any right of a Consenting Creditor or Consenting Term Loan A Agent under (x) the Term Loan B Credit Agreement, or constitute a waiver or amendment of any provision of the Term Loan B Credit Agreement, (y) the NYL Credit Agreement (including without limitation the right to receive payments of amortization and interest thereunder and the right to enforce the covenant for North Yard Logistics to receive payments under the Rail Terminaling Service Agreement), or constitute a waiver or amendment of any provision of the NYL Credit Agreement, or (z) any other applicable agreement, instrument or document that gives rise to a Consenting Creditor’s Claims or Interests, as applicable, or constitute a waiver or amendment of any provision of any such agreement, instrument or document; (e) the ability of a Consenting Creditor or Consenting Term Loan A Agent to consult with any holder of any Claim or Interest or the Debtors; or (f) the ability of a Consenting Creditor or Consenting Term Loan A Agent to enforce any right, remedy, condition, consent or approval requirement under this Agreement or any of the Restructuring Documents. 5.04. Commitment of the Parent Parties. (a) During the Effective Period, each of the Parent Parties agrees that it shall: (i) subject to the receipt by the Parent of the Disclosure Statement and the Solicitation Materials, in each case, to the extent a class of Claims or Interests is permitted to vote to accept or reject the Plan, vote each of its Claims against the Debtors and any Interests in the Debtors to accept the Plan by delivering its duly executed and completed ballot(s) accepting the Plan on a timely basis following the commencement of the solicitation and its actual receipt of the Solicitation Materials and ballot, and not change or withdraw (or cause to be changed or withdrawn) such vote; (ii) continue to file all tax-related documentation that the Parent Parties typically filed in the ordinary course before the Agreement Effective Date with the relevant federal, state, and/or local taxing authorities. (iii) unless (a) otherwise expressly permitted or required by this Agreement, (b) any of the employees, directors, and officers of the Parent, in their capacity as a member, director, or officer of the Debtors, take any alternative action consistent with the Debtors’ fiduciary duties pursuant to Section 17 hereof, or (c) otherwise consented to in writing by the Consenting Creditors, it shall (i) support and use commercially reasonable efforts to take all actions necessary or reasonably requested by the Debtors to facilitate the solicitation, confirmation and consummation of the Plan, (ii) support and consent to the release, discharge, exculpation, and 9 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 11 of 57 injunction provisions contained in the Plan, and (iii) comply with all of its obligations under this Agreement (including the Plan); (iv) not be entitled to (i) any management fees or similar fees payable by the Debtors or any of their affiliates and hereby waives the right to receive payment on account of any such fees, whether arising from the PES Advisory Agreement or otherwise or (ii) any dividends, distributions, or other payment in respect of its Interests in any Debtor (other than, for the avoidance of doubt, guaranteed distributions to members of management in lieu of salaries); and (v) upon the Effective Date (as defined in the Plan), the Parent shall provide the Parent Cash Contribution on the terms and conditions set forth in the Plan. (b) The Parent Parties agree to cause Parent to assign, sell, transfer, and deliver to the Assignee all of the rights, title and interest of Parent in, to and under the Assumed Agreements and Permits (as defined in the Plan), effective as of the Effective Date, free and clear of all Liens, Claims, charges, or other encumbrances, including the Excluded Liabilities. The Assignee will be deemed to be the successor-in-interest of Parent for all of the Assumed Agreements and Permits as of the Effective Date. The Assignee shall assume only the Assumed Agreements and Permits and shall not assume any other liability or obligation of Parent (or any predecessor of Parent or any prior owner of all or part of its businesses and assets) of whatever nature, whether presently in existence or arising hereafter. (c) Without limiting the scope of Section 5.04(b) or 13.02(m) hereof, the Parent Parties hereby mutually agree to sell, assign, grant, convey and transfer all of Parent’s rights, indemnities, title, and interests in the PES Refining Contribution Agreement to the Assignee, from and after, and subject to the occurrence of, the Effective Date. The Parent Parties further mutually agree that the PES Refining Contribution Agreement shall survive the Restructuring Transactions, irrespective of any assignment, and remain in full force and effect. 5.05. Commitment of the Debtors. (a) During the Effective Period, subject to Section 17 hereof, the Debtors shall use commercially reasonable efforts to, in good faith, take all steps, as applicable, reasonably necessary or desirable to: (i) obtain orders of the Bankruptcy Court in respect of the Restructuring, including obtaining entry of the Confirmation Order; (ii) support and consummate the Restructuring in accordance with this Agreement, including the preparation and filing of the Restructuring Documents within the timeframe provided herein and in the Plan; (iii) execute and deliver any other required agreements to effectuate and consummate the Restructuring; (iv) obtain any and all required regulatory and/or third-party approvals for the Restructuring; 10 Case 18-10122 (v) (vi) Restructuring; and Doc 10-2 Filed 01/22/18 Page 12 of 57 complete the Restructuring within the time-frame provided herein; operate their business in the ordinary course, taking into account the (vii) take all actions reasonably necessary or requested by the Consenting Creditors to obtain any and all required regulatory and/or third-party approvals for the Restructuring. (b) During the Effective Period, the Debtors shall: (i) not enter into any material non-ordinary course transactions or make any material non-ordinary course payments inconsistent with this Agreement or the Plan, including entering into any new key employee incentive plan or key employee retention plan or similar arrangement, or any new or amended agreement regarding executive compensation, without the consent of the Required Consenting Cash Flow Creditors (provided that, in the case of entering into any new key employee incentive plan or key employee retention plan or similar arrangement, or any new or amended agreement regarding executive compensation, only the consent of the Required Consenting Term Loan B Creditors, and not the consent of the Required Consenting NYL Creditors, shall be required), such consent not to be unreasonably withheld; and (ii) not file any pleading inconsistent with the Restructuring or the terms of this Agreement, (iii) not seek to amend or modify, or file a pleading seeking authority to amend or modify, the Restructuring Documents in a manner that is inconsistent with this Agreement; (iv) not directly or indirectly object to, delay, impede, or take any other action to interfere with or delay or that is inconsistent with acceptance or implementation of the Restructuring; and (v) before the Effective Date, not use cash, cash equivalents or other assets held or owned by any North Yard Entity, and not grant or suffer to exist any lien or security interest with respect to such cash, cash equivalents or other assets, directly or indirectly, in each case for any purpose other than (x) exclusively for the operations of any North Yard Entity in the ordinary course of business of such North Yard Entity consistent with past practices of such North Yard Entity, (y) to satisfy any obligation to holders of NYL Credit Agreement Claims or the Consenting Term Loan A Agent under the NYL Credit Agreement (or any document or fee letter entered into in connection with the NYL Credit Agreement) or the DIP Orders, or (z) the payment of fees and expenses specified in Section 10(B) and Section 10(E) of this Agreement. (c) Notwithstanding anything to the contrary herein and without duplication of Section 17 hereof, nothing in this Agreement shall require the board of directors, board of managers, directors, managers, or officers or any other fiduciary of the Debtors to take any action, or to refrain from taking any action, with respect to the Restructuring to the extent such person or persons determines, upon the advice of counsel, that taking such action, or refraining from taking such action, as applicable, would be inconsistent with applicable law, or its fiduciary obligations under applicable law. 11 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 13 of 57 (d) During the Effective Period, the Debtors, jointly and severally, shall use commercially reasonable efforts to: (i) provide the Consenting Term Loan B Creditors’ advisors (upon request) or the Consenting NYL Creditors’ advisors (upon request), as the case may be, with (A) reasonable access (without any material disruption to the conduct of the Debtors’ businesses) during normal business hours to the Debtors’ books, records and facilities, (B) reasonable access to the management and advisors of the Debtors for the purposes of evaluating the Debtors’ assets, liabilities, operations, businesses, finances, strategies, prospects and affairs, (C) prompt responses to all reasonable diligence requests, (D) the terms of any agreements regarding executive compensation and (E) reasonable information with respect to all material executory contracts and unexpired leases of the Debtors; (ii) subject to applicable law and privileges, promptly notify counsel to the Consenting Term Loan B Creditors and counsel to the Consenting NYL Creditors of any material governmental or third party complaints, litigations, investigations, or hearings; and (iii) provide the Consenting Cash Flow Creditors’ advisors with copies of any director and officer liability insurance policies and employee arrangements, including with respect to the Severance Program, as soon as reasonably practicable after the Agreement Effective Date. 5.06. CFIUS / HSR Cooperation. (a) if (1) there is a CFIUS Investigation or (2) CFIUS requests that Parent, any of the Debtors or the Consenting Creditors make a CFIUS Filing then each of Parent, the Debtors and the Consenting Creditors shall cooperate with such CFIUS Investigation, including using its commercially reasonable efforts to: (i) if Parent, any of the Debtors or any Consenting Creditor receives any request from CFIUS for information with respect to a CFIUS Investigation, a CFIUS Filing or otherwise, the requested party shall (A) promptly provide notice to counsel to Parent and counsel to the other Consenting Creditors, (B) provide any such requested information (1) to CFIUS within three business days of such request, and (2) to counsel to Parent, counsel to the Debtors and counsel to the other Consenting Creditors as far in advance of the disclosure of such requested information to CFIUS as is reasonably practicable to permit review and discussion in advance, and shall consider in good faith the views of the other parties in connection with, any material written analyses or arguments or other materials to be submitted to CFIUS; (ii) if a CFIUS Filing is to be made pursuant to this Section 5.06(a), (A) promptly provide all necessary information within their respective control to complete a CFIUS Filing and thereafter to respond promptly to any request for additional information or documentary material that may be made by CFIUS pursuant to 31 C.F.R. Part 800 and 50 U.S.C. App. § 2170; 12 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 14 of 57 (B) as promptly as practicable, jointly submit a draft of the CFIUS Filing to CFIUS as contemplated under 31 C.F.R. § 800.401(f); and (C) as soon as practicable, and in any event no more than five business days after receiving notification from CFIUS that the CFIUS Filing meets all requirements of 31 C.F.R. § 800.402 and is, accordingly, complete, together file with CFIUS the CFIUS Filing as contemplated by 31 C.F.R. § 800.401(a). (b) If in the reasonable judgment of the Debtors and the Required Consenting Term Loan B Creditors an HSR filing is required under applicable law in connection with the consummation of the Restructuring before the Effective Date, each of Parent, the Debtors and the Consenting Creditors shall use commercially reasonable efforts to: (i) make an HSR Filing as promptly as practicable; and (ii) supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to use their reasonable best efforts to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act, as applicable, as soon as practicable. 5.07. Interest on Credit Agreements. For the avoidance of doubt, it is understood and agreed that the Debtors shall use commercially reasonable efforts to pay all interest payments under the Credit Agreements as they come due and nothing in this Agreement or any Restructuring Document shall prohibit or limit any ability to make any such interest payments. Section 6. Transfer of Interests and Securities. (a) During the Effective Period, no Consenting Creditor shall sell, use, pledge, assign, transfer, permit the participation in, or otherwise dispose of (each, a “Transfer”) any ownership (including any beneficial ownership3) in the Debtors Claims/Interests to any unaffiliated party, unless it satisfies all of the following requirements (a transferee that satisfies such requirements, a “Permitted Transferee,” and such Transfer, a “Permitted Transfer”), provided that the following provisions shall not apply to any Transfer in the Debtors Claims/Interests between affiliated parties: (i) the intended transferee executes and delivers to counsel to the Debtors on the terms set forth below an executed form of the transfer agreement in the form attached hereto as Exhibit D (a “Transfer Agreement”) (it being understood that the effectiveness of any Transfer shall be subject to Section 6(a)(ii) and Section 6(b), below); and 3 As used herein, the term “beneficial ownership” means the direct or indirect economic ownership of, and/or the power, whether by contract or otherwise, to direct the exercise of the voting rights and the disposition of, Debtors Claims/Interests or the right to acquire Debtors Claims/Interests. 13 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 15 of 57 (ii) other than in the case of any Transfer of any NYL Credit Agreement Claims, the Transfer shall not, in the reasonable business judgment of the Debtors and their legal advisors, adversely affect the Debtors’ ability to obtain the regulatory consents or approval necessary to effectuate the Restructuring. (b) Other than in the case of any Transfer of any NYL Credit Agreement Claims, the Debtors shall have five (5) business days from receiving notice of the Transfer Agreement in accordance with Section 6(a)(i) to object to such Transfer Agreement for the reasons described in Section 6(a)(ii). Failure of the Debtors to object to such Transfer Agreement within five (5) business days of receiving notice of the Transfer Agreement shall be deemed a determination that the requirements of Section 6(a)(ii) have been satisfied with respect to such transfer. (c) Notwithstanding Section 6(a) and Section 6(b), a Qualified Marketmaker4 that acquires any Debtors Claims/Interests subject to this Agreement with the purpose and intent of acting as a Qualified Marketmaker for such Debtors Claims/Interests, shall not be required to execute and deliver to counsel a Transfer Agreement in respect of such Debtors Claims/Interests if (i) such Qualified Marketmaker transfers such Debtors Claims/Interests (by purchase, sale, assignment, participation, or otherwise) to a transferee that is an entity that is not an affiliate, affiliated fund, or affiliated entity with a common investment advisor; (ii) if the Transfer relates to a Debtor Claim/Interest with respect to which the holder is a Party to this Agreement, the transferee otherwise is a Permitted Transferee (including, for the avoidance of doubt, the requirement that such transferee execute a Transfer Agreement); and (iii) the transfer otherwise is a Permitted Transfer. Notwithstanding the foregoing, if, at the time of the proposed Transfer of such Notes to the Qualified Marketmaker, such Claims (A) may be voted on the Plan, the proposed transferor must first vote such Claims in accordance with the requirements of this Agreement or (B) have not yet been and may not yet be voted on the Agreed Plan and such Qualified Marketmaker does not effect a Transfer of such Claims to a Permitted Transferee prior to the third (3rd) business day prior to the expiration of the voting deadline (such date, the “Qualified Marketmaker Joinder Date”), such Qualified Marketmaker shall be required to (and the Transfer documentation to the Qualified Marketmaker shall have provided that it shall), on the first (1st) business day immediately following the Qualified Marketmaker Joinder Date, become a Party with respect to such Notes in accordance with the terms hereof for the purposes of voting in favor of the Plan as contemplated hereunder (provided that the Qualified Marketmaker shall automatically, and without further notice or action, no longer be a Party with respect to such Claims at such time that the transferee of such Notes becomes a Party with respect to such Claims). (d) This Agreement shall in no way be construed to preclude the Consenting Creditors from acquiring additional Debtors Claims/Interests; provided that (i) any Consenting Creditor that acquires additional Debtors Claims/Interests, as applicable, after the Agreement Effective Date shall promptly notify the Debtors and the Consenting Cash Flow Creditors of such acquisition including the amount of such acquisition and (ii) such additional Debtors Claims/Interests shall 4 As used herein, the term “Qualified Marketmaker” means an entity that (a) holds itself out to the public or the applicable private markets as standing ready in the ordinary course of business to purchase from customers and sell to customers claims of any Debtor (or enter with customers into long and short positions in claims against any Debtor), in its capacity as a dealer or market maker in claims against any Debtor and (b) is, in fact, regularly in the business of making a market in claims against issuers or borrowers (including debt securities or other debt). 14 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 16 of 57 automatically and immediately upon acquisition by a Consenting Creditor, as applicable, be deemed subject to the terms of this Agreement (regardless of when or whether notice of such acquisition is given to the Debtors or counsel to the Consenting Creditors). (e) This Section 6 shall not impose any obligation on the Debtors to issue any “cleansing letter” or otherwise publicly disclose information for the purpose of enabling a Consenting Creditor to Transfer any Debtors Claims/Interests. Notwithstanding anything to the contrary herein, to the extent the Debtors and another Party have entered into a separate agreement with respect to the issuance of a “cleansing letter” or other public disclosure of information in connection with any proposed Restructuring (each such executed agreement, a “Confidentiality Agreement”), the terms of such Confidentiality Agreement shall continue to apply and remain in full force and effect according to its terms. The filing of this Agreement and related exhibits hereto shall satisfy the Debtors’ existing obligations under any such Confidentiality Agreements. (f) Any Transfer made in violation of this Section 6 shall be void ab initio and of no force and effect and shall not create any obligation or liability of any Consenting Creditor or the Debtors to any purported transferee. Any Consenting Creditor that effectuates a Permitted Transfer to a Permitted Transferee shall have no liability under this Agreement arising from or related to the failure of the Permitted Transferee to comply with the terms of this Agreement. (g) The restrictions on Transfer set forth in this Section 6 shall not apply to the grant of any liens or encumbrances on any Debtors Claims/Interests (i) by any collateralized loan obligation or in favor of a bank or broker dealer holding custody of such Debtors Claims/Interests in the ordinary course of business and which lien or encumbrance is released automatically upon the Transfer of such Debtors Claims/Interests and (ii) by any holder of NYL Credit Agreement Claims or Term Loan B Claims to secure obligations of such holder or any of its affiliates to any Federal Reserve Bank or other central bank having jurisdiction over such holder or any of such holder’s affiliates. Section 7. Representations and Warranties of Consenting Creditors. Each Consenting Creditor, severally, and not jointly, represents and warrants that: (a) it is the beneficial owner of the face amount of the Debtors Claims/Interests, or is the nominee, investment manager, or advisor for beneficial holders of the Debtors Claims/Interests, as reflected in such Consenting Creditor’s signature block to this Agreement (such Debtors Claims/Interests, the “Owned Debtors Claims/Interests”); (b) it has the full power and authority to act on behalf of, vote and consent to matters concerning the Owned Debtors Claims/Interests; (c) the Owned Debtors Claims/Interests are free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal, or other limitation on disposition, transfer, or encumbrances of any kind, that would adversely affect in any way such Consenting Creditor’s ability to perform any of its obligations under this Agreement at the time such obligations are required to be performed; (d) in the case of a Consenting Term Loan B Creditor, (i) it or each beneficial owner it represents herein is either (A) a qualified institutional buyer as defined in Rule 144A of the 15 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 17 of 57 Securities Act, (B) an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3), or (7) under the Securities Act of 1933, as amended (the “Securities Act”), (C) a Regulation S non-U.S. person, or (D) the foreign equivalent of (A) or (B) above, and (ii) any securities of the Debtors acquired by the applicable Consenting Creditor in connection with the Restructuring will have been acquired for investment and not with a view to distribution or resale in violation of the Securities Act; and (e) as of the date such Party executes this Agreement, Joinder Agreement or Transfer Agreement, as applicable, it has no actual knowledge of any event that, due to any fiduciary or similar duty to any other person or entity, would prevent it from taking any action required of it under this Agreement. Section 8. Representations of the Parent. Each of the Parent and the Debtors represents and warrants that: 8.01. No Assets or Rights. Other than as set forth on Schedule 2 to this Agreement, as of the date hereof, Parent has no other assets (other than the Excluded Parent Cash and Parent Cash Contribution (as defined in the Plan)) or material rights, whether contractual or otherwise and is not a party to, or beneficiary under, any other material agreements, contracts, licenses, franchises, permits, certifications, approvals or other similar authorizations. Parent has delivered to counsel to the Required Consenting Cash Flow Creditors true and complete copies of all Parent Agreements and Parent Permits, set forth on Schedule 2 to this Agreement. The amount of Excluded Parent Cash held by Parent immediately prior to the entry of the Parties into this Agreement is as separately communicated in writing to counsel to the Required Consenting Term Loan B Creditors. 8.02. No Consents. There are no material Parent Agreements or material Parent Permits (each as defined in the Plan), in each case that may require a consent or other action by a governmental authority, a Party hereto or any other person other than Parent (i) as a result of the execution, delivery and performance of this Agreement or (ii) to effectuate the Restructuring contemplated by this Agreement, other than as set forth on Schedule 3 to this Agreement. Section 9. Mutual Representations, Warranties, and Covenants. Each of the Parties represents, warrants, and covenants to each other Party: 9.01. Enforceability. It is validly existing and in good standing under the laws of the state of its organization, and this Agreement is a legal, valid, and binding obligation of such Party, enforceable against it in accordance with its terms, except as enforcement may be limited by applicable laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability. 9.02. No Consent or Approval. Except as expressly provided in this Agreement, including Section 8.02 with respect to Parent and the Debtors, the Plan, or the Bankruptcy Code, no consent or approval from any other person or entity (i) is required under such Party’s certificate of incorporation, bylaws, partnership or LLC agreement or similar governing documents; (ii) is required pursuant to law applicable to such Party or from a governmental entity, agency or court with jurisdiction over such party; (iii) is required under an agreement that is binding on such Party 16 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 18 of 57 or its subsidiaries which is material to such Party and its subsidiaries, taken as a whole; or (iv) where the failure to obtain such consent or approval would have a material adverse effect on the Restructuring or such Party, in each case, in order for it to effectuate the Restructuring contemplated by, and perform the respective obligations under, this Agreement. 9.03. Power and Authority; Due Authorization. Except as expressly provided in this Agreement, it has all requisite corporate or other power and authority to enter into, execute, and deliver this Agreement and to effectuate the Restructuring contemplated by, and perform its respective obligations under, this Agreement, and the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate action. Without limiting the foregoing, the Parent Parties have authorized the Restructuring and all necessary actions pursuant thereto, in each case subject to the occurrence of the Effective Date. 9.04. Governmental Consents. Except for CFIUS Approval (to the extent required), HSR Approval (to the extent required), or as expressly set forth herein and with respect to the Debtors’ performance of this Agreement (and subject to necessary Bankruptcy Court approval and/or regulatory approvals associated with the Restructuring), the execution, delivery, and performance by it of this Agreement does not, and shall not, require any registration or filing with consent or approval of, or notice to, or other action to, with or by, any federal, state, or other governmental authority or regulatory body. 9.05. No Conflicts. The execution, delivery, and performance of this Agreement does not and shall not: (a) violate any provision of law, rules or regulations applicable to it or any of its subsidiaries in any material respect; (b) violate its certificate of incorporation, bylaws, or other organizational documents or those of any of its subsidiaries; or (c) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any contractual obligation to which it is a party, which conflict, breach, or default, would have a material and adverse effect on the Restructuring. Section 10. Fees and Expenses. The Debtors hereby agree, and each Debtor agrees jointly and severally, to pay in cash, in full: (A) in accordance with their respective engagement letters and fee letters, as applicable, and the Term Loan B Credit Agreement (and in any case within three (3) business days), all invoiced and out-of-pocket expenses of the Consenting Term Loan B Creditors’ advisors, including (a) Davis Polk & Wardwell LLP, (b) Houlihan Lokey Capital, Inc., including, for the avoidance of doubt, the financing fee and completion fee payable in accordance with the terms of the Houlihan Lokey Engagement Letter, (c) Morris, Nichols, Arsht & Tunnell LLP, (d) Norton Rose Fulbright US LLP as counsel to the administrative agent under the DIP Facility to represent it in its own capacity, and (e) Ramboll Environ US Corporation (subject to execution of an engagement letter therefor in form and substance reasonably satisfactory to the Debtors which shall require the Debtors’ consent before Ramboll incurs fees on account of services in excess of $75,000, such consent not to be unreasonably withheld) in each case incurred prior to the earlier of the Effective Date and the termination of this Agreement; provided, following the Petition Date, payment of fees and expenses pursuant to this clause (A) of this Section 10 shall be subject to the terms of the Interim DIP Order and Final DIP Order, as applicable; (B) the fees and expenses of one primary counsel to the Consenting NYL Creditors (which counsel shall be Cahill Gordon & Reindel LLP) and local counsel to the Consenting NYL Creditors in the relevant jurisdiction of the Chapter 11 Cases (the fees and expenses paid pursuant to this clause (B) to be payable solely 17 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 19 of 57 from assets held or owned by the North Yard Entities), in each case incurred prior to the earlier of the Effective Date and the termination of this Agreement; provided, that following the Petition Date, the Debtors shall use commercially reasonable efforts to provide the adequate protection set forth in the DIP Facility Term Sheet attached hereto as Exhibit B, including pursuant to clause (B) of this Section 10, under the Interim DIP Order and Final DIP Order, as applicable, with any payments on account thereof to be payable solely from assets held or owned by the North Yard Entities; (C) in accordance with applicable Commitment Letter(s), all reasonable fees and expenses incurred by the Additional Financing Lender, Sunoco Pipeline L.P., Sunoco Partners Marketing & Terminals L.P. and PES Equity Holdings, LLC in connection with the Restructuring; (D) all reasonable fees and expenses of Latham & Watkins LLP incurred in connection with the Restructuring on behalf of certain Parent Parties; provided, that the fees and expenses pursuant to clause (C) and (D) of this Section 10 shall not be payable if this Agreement is terminated other than pursuant to Section 13.06 hereof; and (E) in accordance with the PNC Fee Letter, the PNC Fee. Section 11. Acknowledgement. Notwithstanding any other provision herein, this Agreement is not and shall not be deemed to be an offer with respect to any securities or solicitation of votes for the acceptance of a plan of reorganization for purposes of sections 1125 and 1126 of the Bankruptcy Code or otherwise. Any such offer or solicitation will be made only in compliance with all applicable securities laws and provisions of the Bankruptcy Code. The Debtors will not solicit acceptances of any Plan from Consenting Creditors in any manner inconsistent with the Bankruptcy Code or applicable bankruptcy law. Section 12. Bankruptcy Court Pleadings. During the Effective Period, the Debtors will use commercially reasonable efforts to provide draft copies of all material motions, pleadings, and documents other than the First Day Pleadings that the Debtors intend to file with the Bankruptcy Court to counsel to the Consenting Creditors and counsel to the Parent at least four (4) days before the date on which Debtors intend to file such motions. To the extent such documents do not constitute Restructuring Documents (which shall be approved in accordance with Section 3 of this Agreement), the Debtors shall consult in good faith with counsel to the Consenting Creditors and counsel to the Parent regarding the form and substance of such documents. Section 13. Termination Events. 13.01. Consenting Creditor Termination Events. This Agreement may be terminated upon five (5) business days’ written notice, delivered in accordance with Section 19.09 hereof by (x) Consenting NYL Creditors constituting the Required Consenting NYL Creditors, or (y) Consenting Term Loan B Creditors representing the Required Consenting Term Loan B Creditors, in each case as to such Consenting Creditors (such terminating Consenting Creditors, the “Terminating Consenting Creditors”), upon the occurrence and continuation of any of the following events. (a) the Effective Date of the Plan shall not have occurred on or before July 31, 2018 (the “Outside Date”); 18 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 20 of 57 (b) the breach by any Party other than the Terminating Consenting Creditors of any of the representations, warranties, or covenants of such breaching Party as set forth in this Agreement that would have, or could reasonably be expected to have, a material adverse effect on the Restructuring; provided, that such Terminating Consenting Creditors shall transmit a notice to the Debtors, counsel to the other Consenting Creditors and the breaching Party pursuant to Section 19.09 hereof, detailing any such breach and, if such breach is capable of being cured, the breaching Party shall have five (5) business days after receiving such notice to cure any breach; provided, further, that any breach of a representation, warranty, covenant or agreement under Sections 5.04, 8.01, 8.02, or 9.02 of this Agreement may be cured by (i) a conveyance to the Reorganized Debtors of such assets, rights, Parent Agreements or Parent Permits (the lack or absence of which caused such breach), or causing such Parent Agreements (the lack or absence of which caused such breach), or Parent Permits (the lack or absence of which caused such breach) (or their equivalent) to vest in the Reorganized Debtors; or (ii) modifying the Plan to include the Parent as a Reorganized Debtor under the Plan, which modification shall not require the consent of any Party other than the Debtors and the Parent notwithstanding anything in this Agreement to the contrary; (c) the issuance by any governmental authority, including any regulatory authority, the Bankruptcy Court, or another court of competent jurisdiction, of any injunction, judgment, decree, charge, ruling, or order that, in each case, would have, or could reasonably be expected to have, a material and adverse effect on the consummation of the Restructuring; provided, that the Debtors shall have ten (10) business days after issuance of such injunction, judgment, decree, charge, ruling, or order to obtain relief that would allow consummation of the Restructuring; (d) the Debtors propose, support, assist, solicit, or file a pleading seeking approval of any Alternative Transaction for the Debtors (or any approval of any sales, voting or other procedures in connection with such Alternative Transaction) without the consent of the Required Consenting Creditors; (e) the Debtors’ loss of the exclusive right to file a plan of reorganization; (f) the (i) conversion of one or more of the Chapter 11 Cases of the Debtors to a case under chapter 7 of the Bankruptcy Code; or (ii) dismissal of one or more of the Chapter 11 Cases of the Debtors, unless such conversion or dismissal, as applicable, is made with the prior written consent of the Required Consenting Creditors (as represented by counsel to the applicable Consenting Creditors); or (iii) appointment of a trustee, receiver, examiner with expanded power, responsible person or responsible officer in the Chapter 11 Cases; (g) the Debtors file any motion or pleading seeking to avoid, disallow, subordinate or recharacterize any claim held by any Terminating Consenting Creditors arising under the NYL Credit Agreement, or Term Loan B Credit Agreement, as applicable, or the Debtors file any motion or pleading seeking to avoid and recover any payment previously made to any of the Debtors or any of the Terminating Consenting Creditors; (h) the Bankruptcy Court grants relief terminating, annulling, or modifying the automatic stay (as set forth in section 362 of the Bankruptcy Code) with regard to any assets of the Debtors and such relief would have, or could reasonably be expected to have a material and adverse effect on the Restructuring; 19 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 21 of 57 (i) (a) the Debtors make any payment on account of management fees or similar fees payable to the Debtors obligations under the PES Advisory Agreement or otherwise, or (b) any Debtor makes any dividends, distributions or other payment in respect of any of its Interests in any Debtor (other than, for the avoidance of doubt, guaranteed distributions to members of management in lieu of salaries); (j) entry into an agreement regarding an in-court or out-of-court restructuring or recapitalization transaction involving the Debtors or any subsidiary, without the prior written consent of the Required Consenting Creditors; (k) the termination by any of (i) the Parent under Section 13.03 or (ii) the Debtors under Section 13.04; (l) any of the Restructuring Documents shall have been materially and adversely modified or withdrawn without the requisite prior written consent set forth in Section 3 with respect to such Restructuring Document; (m) in the case of the Consenting Term Loan B Creditors, the payment of principal or amortization on account of the NYL Credit Agreement Claims other than in accordance with the Plan; (n) in the case of the Consenting NYL Creditors, the payment of principal or amortization on account of the Term Loan B Claims other than in accordance with the Plan; (o) in the case of the Consenting Term Loan B Creditors, the payment by Philadelphia Energy Solutions Refining and Marketing LLC of any amounts due under the Rail Terminaling Services Agreement, as amended; or (p) in the case of the Consenting Term Loan B Creditors or Consenting NYL Creditors, except to the extent the Consenting Term Loan B Creditors or Consenting NYL Creditors, as applicable, have waived such Milestone in accordance with Section 4.01 of this Agreement, the failure to meet any of the Milestones. 13.02. DIP Commitment Parties’ Termination Events. This Agreement may be terminated (i) in the case of subsections (a) through (l) of this Section 13.02, upon five (5) business days’ written notice, and (ii) in the case of subsections (m) and (n) of this Section 13.02, immediately upon written notice, such notice in each case delivered in accordance with Section 19.09 hereof by DIP Commitment Parties (such DIP Commitment Parties, the “Terminating DIP Commitment Parties”) representing each DIP Commitment Party upon the occurrence and continuation of any of the following events: (a) the Effective Date of the Plan shall not have occurred on or before the Outside Date; (b) the breach by any Party other than the Terminating DIP Commitment Parties of any of the representations, warranties, or covenants of such breaching Party as set forth in this Agreement that would have, or could reasonably be expected to have, a material adverse effect on the Restructuring; provided, that such Terminating DIP Commitment Parties shall transmit a notice to the Debtors, counsel to the Consenting Creditors and the breaching Party pursuant to Section 20 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 22 of 57 19.09 hereof, detailing any such breach and, if such breach is capable of being cured, the breaching Party shall have five (5) business days after receiving such notice to cure any breach; provided, further that any breach of a representation under Section 8.01, 8.02, or 9.02 of this Agreement may be cured by (i) a conveyance to the Reorganized Debtors of such assets, rights, Agreements or Permits, or causing such Agreements, or Permits (or their equivalent) to vest in the Reorganized Debtors; or (ii) modifying the Plan to include the Parent as a Reorganized Debtor under the Plan, which modification shall not require the consent of any Party other than the Debtors and the Parent notwithstanding anything in this Agreement to the contrary. (c) the issuance by any governmental authority, including any regulatory authority, the Bankruptcy Court, or another court of competent jurisdiction, of any injunction, judgment, decree, charge, ruling, or order that, in each case, would have, or could reasonably be expected to have, a material adverse effect on the Restructuring; provided, that the Debtors shall have ten (10) business days after issuance of such injunction, judgment, decree, charge, ruling, or order to obtain relief that would allow consummation of the Restructuring; (d) the Debtors propose, support, assist, solicit, or file a pleading seeking approval of any Alternative Transaction (or any approval of any sales, voting or other procedures in connection with such Alternative Transaction) without the consent of the Required Consenting Creditors; (e) the Debtors’ loss of the exclusive right to file a plan of reorganization; (f) the (i) conversion of one or more of the Chapter 11 Cases of the Debtors to a case under chapter 7 of the Bankruptcy Code; or (ii) dismissal of one or more of the Chapter 11 Cases of the Debtors, unless such conversion or dismissal, as applicable, is made with the prior written consent of the Required Consenting Creditors (as represented by counsel to the applicable Consenting Creditors); or (iii) appointment of a trustee, receiver, examiner with expanded power, responsible person or responsible officer in the Chapter 11 Cases; (g) the Debtors file any motion or pleading seeking to avoid, disallow, subordinate or recharacterize any claim held by any Terminating Consenting Creditors arising under the NYL Credit Agreement or the Term Loan B Credit Agreement, as applicable; (h) the termination by any of (i) the Consenting Creditors under Section 13.01, (ii) the Parent under Section 13.03 or (iii) the Debtors under Section 13.04; (i) entry into an agreement regarding an in-court or out-of-court restructuring or recapitalization transaction involving the Debtors or any subsidiary, without the prior written consent of the DIP Commitment Parties, such consent not to be unreasonably withheld; (j) any of the Restructuring Documents shall have been materially and adversely modified or withdrawn without the requisite prior written consent set forth in Section 3 with respect to such Restructuring Document; (k) the payment by Philadelphia Energy Solutions Refining and Marketing LLC of any amounts due under the Rail Terminaling Services Agreement, as amended; 21 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 23 of 57 (l) the failure to meet any of the Milestones unless such Milestones have been waived or extended in accordance with Section 4.01 of this Agreement; (m) prior to the Solicitation Commencement Date, the failure by the Parent and the other parties to the PES Refining Contribution Agreement to have mutually agreed in writing (such agreement to be in form and substance acceptable to the DIP Commitment Parties) to sell, assign, grant, convey and transfer all of Parent’s rights, indemnities, title, and interests in the PES Refining Contribution Agreement to the Assignee, from and after, and subject to the occurrence of, the Effective Date; provided, that such written agreement shall provide that the PES Refining Contribution Agreement shall survive the Restructuring Transactions, irrespective of any assignment, and remain in full force and effect; or (n) prior to the Solicitation Commencement Date, the failure by the Parent and the other parties to the PES Advisory Agreement to have mutually agreed in writing (such agreement to be in form and substance acceptable to the DIP Commitment Parties) to the termination of the PES Advisory Agreement from and after, and subject to the occurrence of, the Effective Date; provided, that such written agreement shall provide that any and all PES Advisory Agreement Liabilities shall be released and deemed satisfied in full and with no further force and effect from and after, and subject to the occurrence of, the Effective Date. 13.03. Parent’s Termination Events. This Agreement may be terminated by the Parent (on behalf of itself and the other Parent Parties) upon five (5) business days’ written notice, delivered in accordance with Section 19.09 hereof, upon the occurrence and continuation of any of the following events: (a) the Effective Date of the Plan shall not have occurred on or before the Outside Date; (b) the breach by any of the Consenting Creditors or the Debtors of any material provision set forth in this Agreement that would have, or could reasonably be expected to have, a material adverse effect on the Restructuring and if such breach is capable of being cured, remains uncured for a period of ten (10) business days after the receipt by the Consenting Creditors or the Debtors, as applicable, of notice of such breach; (c) the termination by any of (i) the Consenting Creditors under Section 13.01 or (ii) the Debtors under Section 13.04; (d) any of the Restructuring Documents shall have been materially and adversely modified or withdrawn without the requisite prior written consent set forth in Section 3 with respect to such Restructuring Document; or (e) the issuance by any governmental authority, including any regulatory authority, the Bankruptcy Court, or another court of competent jurisdiction, of any injunction, judgment, decree, charge, ruling, or order that, in each case, would have, or could reasonably be expected to have, a material adverse effect on the consummation of the Restructuring; provided, that, to the extent such relief is capable of being obtained, the Consenting Creditors, Debtors or DIP Commitment Parties, as applicable, shall have ten (10) business days after issuance of such injunction, judgment, decree, charge, ruling, or order to obtain relief that would allow consummation of the Restructuring. 22 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 24 of 57 13.04. Debtors’ Termination Events. The Debtors may terminate this Agreement as to all Parties upon five (5) business days’ prior written notice, delivered in accordance with Section 19.09 hereof, upon the occurrence of any of the following events: (a) the Effective Date of the Plan shall not have occurred on or before the Outside Date; (b) the breach by any of the Consenting Creditors or the Parent of any material provision set forth in this Agreement that would have, or could reasonably be expected to have, a material adverse effect on the Restructuring and if such breach is capable of being cured, remains uncured for a period of ten (10) business days after the receipt by the Consenting Creditors or the Parent, as applicable, of notice of such breach; (c) the board of directors, board of managers, or a similar governing body of either a Debtor, on its own, or the Debtors, collectively, determines in good faith based on advice of counsel that proceeding with the Restructuring would be inconsistent with applicable law or its fiduciary obligations under applicable law; or (d) the issuance by any governmental authority, including any regulatory authority, the Bankruptcy Court, or another court of competent jurisdiction, of any injunction, judgment, decree, charge, ruling, or order that, in each case, would have, or could reasonably be expected to have, a material adverse effect on the consummation of the Restructuring; provided, that, to the extent such relief is capable of being obtained, the Consenting Creditors, Parent or the DIP Commitment Parties, as applicable, shall have ten (10) business days after issuance of such injunction, judgment, decree, charge, ruling, or order to obtain relief that would allow consummation of the Restructuring. 13.05. Mutual Termination. This Agreement, and the obligations of all Parties hereunder, may be terminated by mutual agreement among the Debtors and the Required Consenting Creditors. 13.06. Termination Upon Completion of the Restructuring. This Agreement shall terminate automatically without any further required action or notice upon the Effective Date. 13.07. Effect of Termination. No Party may terminate this Agreement if such Party failed to perform or comply in all material respects with the terms and conditions of this Agreement, with such failure to perform or comply causing, or resulting in, the occurrence of one or more termination events specified herein. The date on which termination of this Agreement as to a Party is effective in accordance with this Section 13 shall be referred to as a “Termination Date.” Upon the occurrence of a Termination Date as to a Party, other than as otherwise specified in Section 16, this Agreement shall be of no further force and effect and each Party subject to such termination shall be released from its commitments, undertakings, and agreements under or related to this Agreement and shall have the rights and remedies that it would have had, had it not entered into this Agreement, and shall be entitled to take all actions, whether with respect to the Restructuring or otherwise, that it would have been entitled to take had it not entered into this Agreement. Upon the occurrence of a Termination Date, any and all consents or ballots tendered by the Parties subject to such termination before a Termination Date shall be deemed, for all purposes, to be null and void from the first instance and shall not be considered or otherwise used in any manner by 23 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 25 of 57 the Parties in connection with the Restructuring and this Agreement or otherwise. Notwithstanding anything to the contrary in this Agreement, other than in the case of a termination under Section 13.06, the foregoing shall not be construed to prohibit the Debtors, the Parent Parties, or any of the Consenting Creditors from contesting whether any such termination is in accordance with its terms or to seek enforcement of any rights under this Agreement that arose or existed before a Termination Date. Except as expressly provided in this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair, or restrict (a) any right of the Debtors or the ability of the Debtors to protect and preserve their rights (including rights under this Agreement), remedies, and interests, including their claims against any Consenting Creditor, (b) any right of any Consenting Creditor, or the ability of any Consenting Creditor, to protect and preserve its rights (including rights under this Agreement), remedies, and interests, including their claims against the Debtors or any Consenting Creditor, and (c) any right of the Parent Parties or the ability of the Parent Parties to protect and preserve their rights (including rights under this Agreement), remedies, and interests, including their claims against the Debtors or any Consenting Creditor. Nothing in this Section 13.07 shall restrict any of the Debtors’ right to terminate this Agreement in accordance with Section 13.04. For the avoidance of doubt, the occurrence or non-occurrence of any of the event or circumstance in Sections 13.01(o) or 13.02(k) (or any termination of this Agreement upon or following any such event or circumstance) shall in no way limit any right or remedy of the Consenting Term Loan A Agent or any holder of any NYL Credit Agreement Claim under the NYL Credit Agreement or otherwise as a result of such event or circumstance. Section 14. Reserved. Section 15. Reserved. Section 16. Survival. Notwithstanding the termination of this Agreement pursuant to Section 13, the agreements and obligations of the Parties in Sections 10, 17, 18 and 19 hereof (and any defined terms needed for the interpretation of any such Sections) shall survive such termination and shall continue in full force and effect in accordance with the terms hereof. Section 17. Fiduciary Duties. Nothing in this Agreement shall require the Debtors, including any of the Debtors’ directors, managers, and officers in their capacities as such (including any employee, director or officer of the Parent serving in such capacity) to take or refrain from taking any action, with respect to the Restructuring (including terminating this Agreement under Section 13) to the extent such person or persons determines, based on the advice of counsel, that taking, or refraining from taking, such action, as applicable, would be inconsistent with applicable law or its fiduciary obligations under applicable law. The Debtors shall give prompt written notice of any determination made in accordance with this Section 17. Section 18. Amendments. Except to the extent otherwise specified herein, this Agreement may not be modified, amended, supplemented or waived, and no consent may be granted hereunder, in each case in any manner except in writing signed by each of the Debtors and the Required Consenting Cash Flow Creditors; provided however, that (a) if the proposed modification, amendment, supplement or consent could reasonably be expected to have a direct, material and adverse effect on any of the rights or obligations of, or the treatment of the Claims held by, the DIP Commitment Parties, the Parent Parties, or the Additional Financing Lender, then the consent of the DIP Commitment Parties, the Parent Parties, or the Additional Financing Lender, as 24 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 26 of 57 applicable, shall also be required to effectuate such modification, amendment, supplement or consent and (b) no provision of this Agreement which provides for benefits or rights of the Consenting Term Loan A Agent or PNCCM may be amended, modified, consented to or supplemented without the prior written consent of the Consenting Term Loan A Agent and PNCCM. Any proposed modification, amendment, supplement or consent that is not approved by the requisite Parties as set forth above shall be ineffective and void ab initio. Section 19. Miscellaneous. 19.01. Further Assurances. Subject to the other terms of this Agreement, the Parties agree to execute and deliver such other instruments and perform such acts, in addition to the matters herein specified, as may be reasonably appropriate or necessary, or as may be required by order of the Bankruptcy Court, from time to time, to effectuate the Restructuring, as applicable, including (i) preparing and filing as promptly as practicable with any governmental authority or third party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications, consents to assignment or otherwise and other documents and (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any governmental authority, a Party hereto or other third party that are necessary, proper or advisable to consummate the Restructuring. 19.02. Complete Agreement. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements, oral, or written, among the Parties with respect thereto. 19.03. Headings. The headings of all sections of this Agreement are inserted solely for the convenience of reference and are not a part of and are not intended to govern, limit, or aid in the construction or interpretation of any term or provision hereof. 19.04. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM; WAIVER OF TRIAL BY JURY. THIS AGREEMENT, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. Each Party hereto agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement in either the United States District Court for the Southern District of New York or any New York state court located in the County of New York (the “Chosen Courts”), and solely in connection with claims arising under this Agreement: (a) irrevocably submits to the exclusive jurisdiction of the Chosen Courts; (b) waives any objection to laying venue in any such action or proceeding in the Chosen Courts; and (c) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any Party hereto or constitutional authority to finally adjudicate the matter; provided that after the Debtors commence the Chapter 11 Cases, then the Bankruptcy Court (or court of proper appellate jurisdiction) shall be the exclusive Chosen Court. 25 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 27 of 57 19.05. Trial by Jury Waiver. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 19.06. Execution of Agreement. This Agreement may be executed and delivered in any number of counterparts and by way of electronic signature and delivery, each such counterpart, when executed and delivered, shall be deemed an original, and all of which together shall constitute the same agreement. Except as expressly provided in this Agreement, each individual executing this Agreement on behalf of a Party has been duly authorized and empowered to execute and deliver this Agreement on behalf of said Party. 19.07. Interpretation and Rules of Construction. This Agreement is the product of negotiations among the Debtors and the Consenting Creditors, and in the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard to the interpretation hereof. The Debtors and the Consenting Creditors were each represented by counsel during the negotiations and drafting of this Agreement and continue to be represented by counsel. In addition, this Agreement shall be interpreted in accordance with section 102 of the Bankruptcy Code. 19.08. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of the Parties and their respective successors and permitted assigns, as applicable. There are no third party beneficiaries under this Agreement, and the rights or obligations of any Party under this Agreement may not be assigned, delegated, or transferred to any other person or entity. 19.09. Notices. All notices hereunder shall be deemed given if in writing and delivered by electronic mail, courier, or registered or certified mail (return receipt requested) to the following addresses (or at such other addresses as shall be specified by like notice): (a) if to the Debtors, to: PES Holdings, LLC 1735 Market Street Philadelphia, PA 19103 Attention: John McShane john.mcshane@pes-companies.com with copies (which shall not constitute notice) to: Kirkland & Ellis LLP 300 North LaSalle Street Chicago, IL 60654 Attention: Steven N. Serajeddini steven.serajeddini@kirkland.com -and26 Case 18-10122 Doc 10-2 Filed 01/22/18 Kirkland & Ellis LLP 601 Lexington Avenue New York, New York 10022 Attention: Edward O. Sassower, P.C. esassower@kirkland.com Matthew C. Fagen matthew.fagen@kirkland.com (b) if to PESRM, to: Curtis, Mallet-Prevost, Colt & Mosle LLP 101 Park Avenue New York, New York 10178 Attention: Steven Reisman sreisman@curtis.com Theresa Foudy tfoudy@curtis.com (c) if to NY GP, to: Proskauer Rose LLP 70 W. Madison, Suite 3800 Chicago, Illinois Attention: Mark Thomas mthomas@proskauer.com -andProskauer Rose LLP 2049 Century Park East Los Angeles, California Attention: Peter Young pyoung@proskauer.com (d) if to a Consenting NYL Creditor, to: Cahill Gordon & Reindel LLP 80 Pine Street New York, NY 10005-1702 Attention: Susanna M. Suh ssuh@cahill.com Joel Levitin jlevitin@cahill.com 27 Page 28 of 57 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 29 of 57 Darren Silver dsilver@cahill.com (e) if to a Consenting Term Loan A Agent, to: PNC Bank, National Association 201 East Fifth Street Cincinnati, OH 45202 Attention: S. Griffin Vollmer, Jr. stephen.vollmer@pnc.com (f) if to a Consenting Term Loan B Lender or DIP Commitment Party, to: Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 Attention: Damian Schaible damian.schaible@davispolk.com (g) if to a Consenting Additional Financing Lender, to: Energy Transfer Partners, L.P. 1300 Main Street, Houston, TX 77002 Houston, Texas 75231 Attention: Jim Wright jim.wright@energytransfer.com and Akerman LLP 2001 Ross Avenue, Suite 3600 Dallas, Texas 75201 Attention: John E. Mitchell (h) if to the Parent Parties to: Philadelphia Energy Solutions LLC 1735 Market Street Philadelphia, PA 19103 Attention: General Counsel and 28 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 30 of 57 Akerman LLP 2001 Ross Avenue, Suite 3600 Dallas, Texas 75201 Attention: John E. Mitchell and Latham and Watkins LLP 885 Third Avenue New York, New York 10022 Attention: Keith A. Simon Paul Sheridan or such other address as may have been furnished by a Party to each of the other Parties by notice given in accordance with the requirements set forth above. Any notice given by delivery, mail (electronic or otherwise), or courier shall be effective when received. 19.10. Independent Due Diligence and Decision Making. Each Party hereby confirms that its decision to execute this agreement has been based upon its independent investigation of the operations, businesses, financial and other conditions, and prospects of the Debtors. 19.11. Waiver. If the Restructuring is not consummated, or if this Agreement is terminated for any reason, the Parties fully reserve any and all of their rights. Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence and to the extent provided therein, this Agreement and all negotiations relating hereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms, pursue the consummation of the Restructuring, or the payment of damages to which a Party may be entitled under this Agreement. 19.12. Specific Performance. It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief (without the posting of any bond and without proof of actual damages) as a remedy of any such breach, including an order of the Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder, in addition to any other remedy to which such non-breaching Party may be entitled at law or in equity. 19.13. Several, Not Joint, Claims. The agreements, representations, warranties, and obligations of the Parties under this Agreement are, in all respects, several and not joint. 19.14. Severability and Construction. If any provision of this Agreement shall be held by a court of competent jurisdiction to be illegal, invalid, or unenforceable, the remaining provisions shall remain in full force and effect if essential terms and conditions of this Agreement for each Party remain valid, binding, and enforceable. 29 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 31 of 57 19.15. Remedies Cumulative. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power, or remedy thereof by any Party shall not preclude the simultaneous or later exercise of any other such right, power, or remedy by such Party. IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first above written. [Remainder of page intentionally left blank.] 30 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 32 of 57 EXECUTION VERSION Schedule 1 to Restructuring Support Agreement DIP Commitments See attached Case 18-10122 Doc 10-2 Filed 01/22/18 Page 33 of 57 EXECUTION VERSION Schedule 2 to Restructuring Support Agreement Assets or Rights The Parent owns (i) the Equity Interests in PES Holdings, LLC, and has $108,954,488 in cash, (ii) the trademark “Philadelphia Energy Solutions” (Registration # 4426486). All of the material Parent Agreements and material Parent Permits are listed in the table below: Type of Agreement Party Execution Date NDA Holt Logistics Corp 5/17/2016 NDA Edgewood Holdings LLC 5/20/2016 NDA Trafigura 5/20/2016 NDA ARFA Enterprises, Inc. 9/7/2017 NDA Tudor, Pickering, Holt & Co. Calumet Lubricants Co. Limited Partnership 2/3/2017 Contribution Agreement PES Holdings, LLC 7/19/2012 Contribution Agreement PES Holdings, LLC, PESRM 11/30/12 Master Services Agreement (as amended) Quality Transportation Services, Inc. 2/1/2013 Addendum Agreement Sunoco, Inc., Sunoco, Inc. (R&M), PES Equity Holdings, LLC 6/25/2014 Incentive Unit Agreement Michael Colavita 2/4/2014 Incentive Unit Agreement Greg Gatta 12/19/2012 Incentive Unit Agreement Steve Herzog 12/19/2012 Incentive Unit Agreement Abraham Kaplan 12/6/2012 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 34 of 57 EXECUTION VERSION Type of Agreement Party Execution Date Incentive Unit Agreement James Keeler 2/14/2014 Incentive Unit Agreement Gregory King 2/14/2014 Incentive Unit Agreement John McShane 12/19/2012 Incentive Unit Agreement John Pickering 2/14/2014 Incentive Unit Agreement James T. Rens 12/6/2012 Incentive Unit Agreement Philip Rinaldi 12/6/2012 Incentive Unit Agreement David Ritter 8/1/2014 Incentive Unit Agreement Lisa A Runyon 12/19/2012 Incentive Unit Agreement Thomas Scargle 2/14/2014 Incentive Unit Agreement Robert C. Stewart 12/19/2012 Incentive Unit Agreement Nithia Thaver 12/19/2012 Confidentiality, NonCompete and NonSolicit Agreement Mark Brandon 1/15/2016 Confidentiality, NonCompete and NonSolicit Agreement Michael Colavita 2/14/2014 Confidentiality, NonCompete and NonSolicit Agreement Gregory G. Gatta 12/19/2012 Confidentiality, NonCompete and NonSolicit Agreement Steve Herzog 12/19/2012 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 35 of 57 EXECUTION VERSION Type of Agreement Party Execution Date Confidentiality, NonCompete and NonSolicit Agreement James Keeler 2/14/2014 Confidentiality, NonCompete and NonSolicit Agreement Gregory King 2/14/2014 Confidentiality, NonCompete and NonSolicit Agreement John McShane 12/19/2012 Confidentiality, NonCompete and NonSolicit Agreement John Pickering 2/14/2014 Confidentiality, NonCompete and NonSolicit Agreement Lisa A Runyon 12/19/2012 Confidentiality, NonCompete and NonSolicit Agreement John Sadlowski 1/15/2016 Confidentiality, NonCompete and NonSolicit Agreement Thomas Scargle 2/14/2014 Confidentiality, NonCompete and NonSolicit Agreement Robert C. Stewart 12/19/2012 Confidentiality, NonCompete and NonSolicit Agreement Nithia Thaver 12/19/2012 Confidentiality, NonCompete and NonSolicit Agreement James T. Rens 1/19/2016 Severance Agreements (as amended) Valentine Steve Herzog 1/26/2015 Severance Agreements (as amended) Thomas Scargle 1/26/2015 Severance Agreements James T. Rens 1/19/2016 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 36 of 57 EXECUTION VERSION Type of Agreement Party Execution Date Severance Agreements Gregory G. Gatta 1/26/2015 Severance Agreements John B. McShane 1/26/2015 Severance Agreements Nithia K. Thaver 1/26/2015 Severance Agreements Mark Brandon 1/15/2016 Severance Agreements John Sadlowski 1/15/2016 Subscription Agreement Abraham Kaplan 12/6/2012 Subscription Agreement Philip Rinaldi 12/6/2012 Subscription Agreement James T. Rens 12/6/2012 Guaranty (as amended) PES Equity Holdings LLC 6/25/2014 Publicity Agreement GE (General Electric International, Inc., GE Energy (USA) LLC, GE Wired energy LLC) 4/22/2014 Refining Contribution Agreement Sunoco, Inc. & Carlyle PES, LLC 7/2/2012 Amendment No. 1 to Refining Contribution Agreement Philadelphia Energy Solutions Refining and Marketing, LLC, Sunoco, Inc. & Carlyle PES, LLC 9/8/2012 Registration Rights Sunoco, Inc. & Carlyle PES, LLC 9/8/2012 Advisory Agreement Carlyle Investment Management, LLC & Sunoco, Inc. 9/8/2012 Amended & Restated Limited Liability Company Agreement (as amended) Agreement 9/8/2012 Psychemedics Corporation 1/8/2013 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 37 of 57 EXECUTION VERSION Type of Agreement Party Execution Date Pilot Agreement City of Philadelphia, The School District of Philadelphia, PES Holdings, LLC, PESRM Holdings LLC, PESRM, LLC, PES Admin Services, LLC, North Yard GP, LLC & North Yard Logistics, LP 6/13/2016 Engagement Letter Akin Gump 8/2/2017 Engagement Letter Buchanan Ingersoll 2/4/2015 Engagement Letter McNees Wallace & Nurick LLC 4/24/2015 Engagement Letter McNees Wallace & Nurick LLC 2/3/2016 Engagement Letter Skadden, Arps, Slate, Meagher & Flom LLP 10/10/2017 Engagement Letter KPMG LLP 9/21/2015 Engagement Letter KPMG LLP 10/16/2017 Engagement Letter (Restructuring) KPMG LLP 8/17/2017 Engagement Letter (Tax opinion) KPMG LLP 8/17/2017 Engagement Letter Stradley Ronon 12/23/2013 Legal Tracker Thomson Reuters 4/20/2017 Practice Point Thomson Reuters 5/25/2017 Prospective Purchaser Agreement (Settlement Agreement and Covenant Not to Sue) PESRM LLC & Sunoco, Inc. 7/27/2012 Buyer - Seller Consent Order Agreement Sunoco, Inc. 8/14/2012 Fourth Amendment to Consent Decree United States of America, 8/4/2012 Commonwealth of Pennsylvania, City of Philadelphia, State of Oklahoma, State of Ohio & Sunoco, Inc. Case 18-10122 Doc 10-2 Filed 01/22/18 Page 38 of 57 EXECUTION VERSION Type of Agreement Party Execution Date General Release of Claims Michael Colavita 10/31/2016 Release Agreement David Ritter 4/1/2015 General Release of Claims James Keeler 12/18/2015 General Release of Claims John Pickering 12/18/2015 Release Agreement Philip Rinaldi 3/31/2017 General Release of Claims Robert C. Stewart 4/21/2017 Separation Agreement Philip Rinaldi 3/31/2017 Separation Agreement David Ritter 4/1/2015 Guaranty Valero and PESRM 3/27/2017 Guaranty Sunoco Partners Marketing & Terminals L.P. and /or Sunoco Pipeline L.P. and PESRM 6/28/2017 Agreement Sheraton Suites 1/1/2018 Aon Contract for Insurance Policy MACAR1700076 Aon UK Limited 2/1/2017 AFCO Ins Premium Finance Agreement (Aon) PES LLC & PESRM LLC AFCO Ins Premium Finance Agreement (Aon Other) PES LLC & PESRM LLC AFCO Ins Premium Finance Agreement (Lockton) PES LLC AFCO Ins Premium Finance Agreement (Lockton) Joint & Several PES LLC & PESRM LLC Case 18-10122 Doc 10-2 Filed 01/22/18 Type of Agreement Party Lockton Fee Arrangement PES LLC Chubb Global Casualty Program Proposal 2-117 - 2-1-18 PES LLC ACE (Chubb) Collateral & Payment Agreement PES LLC BAML Signature Card, Banking Resolution, & Certificate of Incumbency PES LLC BAML Authorization and Agreement for Treasury Services PES LLC ACE (Chubb) Surety Agreement of Indemnity PES LLC ACE (Chubb) Surety Agreement of Indemnity Addendum per Oct 2014 ACE (Chubb) LC for Primary Insurance Program PES LLC & PESRM LLC ACE (Chubb) LC for Primary Insurance Program Admendment 1 PES LLC & PESRM LLC ACE (Chubb) LC for Primary Insurance Program Admendment 2 PES LLC & PESRM LLC ACE (Chubb) Workers Compensation Insurance Policy No. C49107912 Ace American Insurance Company Page 39 of 57 EXECUTION VERSION Execution Date SOA (adding PESIC LLC) 2/1/2017 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 40 of 57 EXECUTION VERSION Type of Agreement Party Execution Date ACE (Chubb) Commercial Umbrella Liability Policy No. G27833056 002 Ace Property and Casualty Insurance Company 2/1/2017 ACE Catastrophe Liability Plus Policy No. G24317092 005 Ace American Insurance Company 2/1/2017 Commercial Liability Ironhorse Specialty Insurance Insurance Policy Nos. Company 001452904; 002583001 2/1/2017 Excess Liability Policy No. EAU76934 2/1/2017 Axis Surplus Insurance Company Excess Liability Policy Lockton Companies, LLC No. 10F152461-20171; 1000030402171; US00073774LI17A; 1000030578171; B0713ENGLO1700260 2/1/2017 AIG Marine Terminal Operators Liability Policy No. 045779282 American International Group, Inc. 2/1/2017 AIG Marine Terminal Operators Liability Policy No. 045779283 American International Group, Inc. 2/1/2017 Pollution Insurance Policy No. PEC004698301 Lockton Companies, LLC 2/1/2017 Excess Environmental Insurance Policy No. AEC 0117876-01 Zurich American Insurance Company 2/1/2017 ESIS Risk Mangement Services Agreement (Sep 2012 Original) PES LLC ESIS Risk Mangement Services Agreement (Amendment through Jan 2018) PES LLC Case 18-10122 Doc 10-2 Filed 01/22/18 Type of Agreement Party Lockton Casualty Insurance Schedule PES LLC & PESRM LLC Page 41 of 57 EXECUTION VERSION Execution Date Aon Property Insurance PES LLC & PESRM LLC Schedule Databank Philadelphia Energy Solutions Cisco PES LLC Oracle Philadelphia Energy Solutions Igen Fuels Philadelphia Energy Solutions Merrill Philadelphia Energy Solutions Thompson Reuters Philadelphia Energy Solutions SABA Philadelphia Energy Solutions SolarWinds Philadelphia Energy Solutions Symantec Philadelphia Energy Solutions Integration Point Philadelphia Energy Solutions Citrix Philadelphia Energy Solutions Iron Mountain Philadelphia Energy Solutions Click Here Labs Philadelphia Energy Solutions Sysaid Philadelphia Energy Solutions SOTI Inc. Philadelphia Energy Solutions Avalon Philadelphia Energy Solutions R.M. Stoof & Associates, Inc. Philadelphia Energy Solutions MessageOPS PES Purchase Order CDW Direct 10/31/2017 Purchase Order Presidio Networked Solutions 12/20/2017 7/27/2012 2/2/2016 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 42 of 57 EXECUTION VERSION Licenses, Permits and Approvals LICENSES, PERMITS AND APPROVALS 433 Heater 1H1 NOx Limit Change Request – submitted July 30, 2014 to City of Philadelphia, Department of Public Health, Air Management Services. Revised permit 06050A issued March 20, 2015. AMS Permit #17000061 issued February 10, 2017 to allow reactivation of Schuylkill River Tank Farm tank SR-64. Girard Point Wharf – DEP File No. CZ7;E51-128 Maintenance, including mechanical dredging (CENAP-OP-R-200002383-46) 082003. Issued by the Pennsylvania Department of Environmental Protection – Office for River Basin Cooperation. Effective Date: August 20, 2003. No Termination Date. Additional Army Corps of Engineers approval under Nationwide Permit and E51-128 for bulkhead repairs dated December 20, 2016 and August 28, 2017. Similar PADEP acknowledgement and approval signed August 23, 2016 (3 areas) and April 24, 2017. Girard Point Wharf – mechanical maintenance dredging. CENAP-OP-R-2011-1083-46. Issued by Army Corps of Engineers. Effective Date: January 15, 2014. Expires December 31, 2023. Army Corps approved revision on June 3, 2014. NJDEP Permit – maintenance dredging – NJDEP Permit # 0000-13-0014.1, CDT14001 approval for disposal at Weeks Marine Whites Basin, Logan Township, Gloucester County. Approval Date: January 14, 2014. Expiration date: January 13, 2019. PADEP Approval Letter – May 13, 2014 – approval for disposal of maintenance dredging material at Biles Island CDF. No expiration date. 401 Certification Fort Mifflin Confined Disposal Facility - 091903. Request for Water Quality Certification. Effective Date: October 27, 2003. No Termination Date. 401 Certification Fort Mifflin Confined Disposal Facility - 102703. Water Quality Certification. Effective Date: October 27, 2003. No Termination Date. Certificate of Boiler of Pressure Vessel Operation, Water Tube Power Boiler 45 #3 BLRHS. Certificate issued by the Commonwealth of Pennsylvania Department of Labor and Industry. Inspection completed; awaiting certificate. Settlement Agreement and Covenant Not to Sue in Docket No. CERC/RCRA-03-2012-0224DC, by and among PES LLC, PESRM, the City of Philadelphia, the PADEP and the U.S. Effective August 9, 2012. Applications Submitted For Review AMS Permit #16000225 application to allow ammonia injection for opacity control in the 868 FCCU Electrostatic Precipitator submitted October 13, 2016. Revised application submitted February 13, 2017. Draft permit went through public comment period that ended November 20, 2017. Clean Air Council submitted two comments that have delayed issuance of the permit. Health and Safety Operation Permit No. 25116 for Hotworks Installation. Issued by the PADEP on August 29, 2017. Expires August 29, 2018. Case 18-10122 Doc 10-2 Filed 01/22/18 Page 43 of 57 EXECUTION VERSION Operation Permit No. 25117 for Hotworks Installation. Issued by the PADEP on August 29, 2017. Expires August 29, 2018. Operation Permit No. 25118 for Hotworks Installation. Issued by the PADEP on August 29, 2017. Expires August 29, 2018. Case 18-10122 Doc 10-2 Filed 01/22/18 Page 44 of 57 EXECUTION VERSION Schedule 3 to Restructuring Support Agreement Agreements and Permits Consents Type of Agreement Party Execution Date NDA Edgewood Holdings LLC 5/20/2016 NDA Trafigura 5/20/2016 NDA Tudor, Pickering, Holt & Co. Calumet Lubricants Co. Limited Partnership 2/3/2017 Severance Agreements (as amended) Valentine Steve Herzog 1/26/2015 Severance Agreements (as amended) Thomas Scargle 1/26/2015 Severance Agreements James T. Rens 1/19/2016 Severance Agreements Gregory G. Gatta 1/26/2015 Severance Agreements John B. McShane 1/26/2015 Severance Agreements Nithia K. Thaver 1/26/2015 Severance Agreements Mark Brandon 1/15/2016 Severance Agreements John Sadlowski 1/15/2016 Guaranty (as amended) PES Equity Holdings LLC 6/25/2014 Refining Contribution Agreement Sunoco, Inc. & Carlyle PES, LLC 7/2/2012 Amendment No. 1 to Refining Contribution Agreement Philadelphia Energy Solutions Refining and Marketing, LLC, Sunoco, Inc. & Carlyle PES, LLC 9/8/2012 Registration Rights Sunoco, Inc. & Carlyle PES, LLC 9/8/2012 Advisory Agreement Carlyle Investment Management, LLC & Sunoco, Inc. 9/8/2012 Case 18-10122 Type of Agreement Doc 10-2 Filed 01/22/18 Party Amended & Restated Limited Liability Company Agreement (as amended) Page 45 of 57 EXECUTION VERSION Execution Date 9/8/2012 Agreement Psychemedics Corporation 1/8/2013 Pilot Agreement City of Philadelphia, The School District of Philadelphia, PES Holdings, LLC, PESRM Holdings LLC, PESRM, LLC, PES Admin Services, LLC, North Yard GP, LLC & North Yard Logistics, LP 6/13/2016 Prospective Purchaser Agreement (Settlement Agreement and Covenant Not to Sue) PESRM LLC & Sunoco, Inc. 7/27/2012 Buyer - Seller Consent Order Agreement Sunoco, Inc. 8/14/2012 Separation Agreement Philip Rinaldi 3/31/2017 Separation Agreement David Ritter 4/1/2015 Guaranty Valero and PESRM 3/27/2017 Guaranty Sunoco Partners Marketing & Terminals L.P. and /or Sunoco Pipeline L.P. and PESRM 6/28/2017 Aon Contract for Insurance Policy MACAR1700076 Aon UK Limited 2/1/2017 AFCO Ins Premium Finance Agreement (Aon) PES LLC & PESRM LLC AFCO Ins Premium Finance Agreement (Aon Other) PES LLC & PESRM LLC AFCO Ins Premium Finance Agreement (Lockton) PES LLC Case 18-10122 Doc 10-2 Filed 01/22/18 Type of Agreement Party AFCO Ins Premium Finance Agreement (Lockton) Joint & Several PES LLC & PESRM LLC Lockton Fee Arrangement PES LLC Chubb Global Casualty Program Proposal 2-117 - 2-1-18 PES LLC ACE (Chubb) Collateral & Payment Agreement PES LLC BAML Signature Card, Banking Resolution, & Certificate of Incumbency PES LLC BAML Authorization and Agreement for Treasury Services PES LLC ACE (Chubb) Surety Agreement of Indemnity PES LLC ACE (Chubb) Surety Agreement of Indemnity Addendum per Oct 2014 ACE (Chubb) LC for Primary Insurance Program PES LLC & PESRM LLC ACE (Chubb) LC for Primary Insurance Program Admendment 1 PES LLC & PESRM LLC ACE (Chubb) LC for Primary Insurance Program Admendment 2 PES LLC & PESRM LLC SOA (adding PESIC LLC) Page 46 of 57 EXECUTION VERSION Execution Date Case 18-10122 Doc 10-2 Filed 01/22/18 Page 47 of 57 EXECUTION VERSION Type of Agreement Party Execution Date ACE (Chubb) Workers Compensation Insurance Policy No. C49107912 Ace American Insurance Company 2/1/2017 ACE (Chubb) Commercial Umbrella Liability Policy No. G27833056 002 Ace Property and Casualty Insurance 2/1/2017 Company ACE Catastrophe Liability Plus Policy No. G24317092 005 Ace American Insurance Company 2/1/2017 Commercial Liability Ironhorse Specialty Insurance Insurance Policy Nos. Company 001452904; 002583001 2/1/2017 Excess Liability Policy No. EAU76934 2/1/2017 Axis Surplus Insurance Company Excess Liability Policy Lockton Companies, LLC No. 10F152461-20171; 1000030402171; US00073774LI17A; 1000030578171; B0713ENGLO1700260 2/1/2017 AIG Marine Terminal Operators Liability Policy No. 045779282 American International Group, Inc. 2/1/2017 AIG Marine Terminal Operators Liability Policy No. 045779283 American International Group, Inc. 2/1/2017 Pollution Insurance Policy No. PEC004698301 Lockton Companies, LLC 2/1/2017 Excess Environmental Insurance Policy No. AEC 0117876-01 Zurich American Insurance Company 2/1/2017 ESIS Risk Mangement Services Agreement (Sep 2012 Original) PES LLC Case 18-10122 Doc 10-2 Filed 01/22/18 Type of Agreement Party ESIS Risk Mangement Services Agreement (Amendment through Jan 2018) PES LLC Lockton Casualty Insurance Schedule PES LLC & PESRM LLC Page 48 of 57 EXECUTION VERSION Execution Date Aon Property Insurance PES LLC & PESRM LLC Schedule Databank Philadelphia Energy Solutions Cisco PES LLC Oracle Philadelphia Energy Solutions Igen Fuels Philadelphia Energy Solutions Merrill Philadelphia Energy Solutions Thompson Reuters Philadelphia Energy Solutions SABA Philadelphia Energy Solutions SolarWinds Philadelphia Energy Solutions Symantec Philadelphia Energy Solutions Integration Point Philadelphia Energy Solutions Citrix Philadelphia Energy Solutions Iron Mountain Philadelphia Energy Solutions Click Here Labs Philadelphia Energy Solutions Sysaid Philadelphia Energy Solutions SOTI Inc. Philadelphia Energy Solutions Avalon Philadelphia Energy Solutions R.M. Stoof & Associates, Inc. Philadelphia Energy Solutions MessageOPS PES 7/27/2012 2/2/2016 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 49 of 57 EXECUTION VERSION Type of Agreement Party Execution Date Engagement Letter KPMG LLP 9/21/2015 Engagement Letter KPMG LLP 10/16/2017 Engagement Letter (Restructuring) KPMG LLP 8/17/2017 Engagement Letter (Tax opinion) KPMG LLP 8/17/2017 Purchase Order CDW Direct 10/31/2017 LICENSES, PERMITS AND APPROVALS 1. AMS Permit #17000061 issued February 10, 2017 to allow reactivation of Schuylkill River Tank Farm tank SR-64. 2. Girard Point Wharf – DEP File No. CZ7;E51-128 Maintenance, including mechanical dredging (CENAP-OP-R-200002383-46) 082003. Issued by the Pennsylvania Department of Environmental Protection – Office for River Basin Cooperation. Effective Date: August 20, 2003. No Termination Date. Additional Army Corps of Engineers approval under Nationwide Permit and E51-128 for bulkhead repairs dated December 20, 2016 and August 28, 2017. Similar PADEP acknowledgement and approval signed August 23, 2016 (3 areas) and April 24, 2017. 3. Girard Point Wharf – mechanical maintenance dredging. CENAP-OP-R-2011-1083-46. Issued by Army Corps of Engineers. Effective Date: January 15, 2014. Expires December 31, 2023. Army Corps approved revision on June 3, 2014. 4. NJDEP Permit – maintenance dredging – NJDEP Permit # 0000-13-0014.1, CDT14001 approval for disposal at Weeks Marine Whites Basin, Logan Township, Gloucester County. Approval Date: January 14, 2014. Expiration date: January 13, 2019. 5. Certificate of Boiler of Pressure Vessel Operation, Water Tube Power Boiler 45 #3 BLRHS. Certificate issued by the Commonwealth of Pennsylvania Department of Labor and Industry. Inspection completed; awaiting certificate. 6. Settlement Agreement and Covenant Not to Sue in Docket No. CERC/RCRA-03-20120224DC, by and among PES LLC, PESRM, the City of Philadelphia, the PADEP and the U.S. Effective August 9, 2012. Applications Submitted For Review 1. AMS Permit #16000225 application to allow ammonia injection for opacity control in the 868 FCCU Electrostatic Precipitator submitted October 13, 2016. Revised application submitted February 13, 2017. Draft permit went through public comment period that ended November 20, 2017. Clean Air Council submitted two comments that have delayed issuance of the permit. Case 18-10122 Doc 10-2 Filed 01/22/18 Page 50 of 57 EXHIBIT B to the Restructuring Support Agreement DIP Facility Term Sheet Case 18-10122 Doc 10-2 Filed 01/22/18 Page 51 of 57 Execution Version EXHIBIT B TO RESTRUCTURING SUPPORT AGREEMENT DIP FACILITY AND ADEQUATE PROTECTION TERM SHEET Capitalized terms used without definition herein have the meanings given to them in the Restructuring Support Agreement to which this term sheet is attached as Exhibit B (the "Restructuring Support Agreement"). This term sheet (the "DIP Facility Term Sheet") sets forth the principal terms of a potential superpriority, secured debtor-in-possession credit facility (the "DIP Facility"; the credit agreement evidencing the DIP Facility, the "DIP Credit Agreement" and, together with the other definitive documents governing the DIP Facility and the DIP Order (as defined herein), the "DIP Documents," each of which shall be in form and substance acceptable to the DIP Facility Agent and the DIP Facility Lenders (each as defined herein)) to be entered into with the Loan Parties (as defined herein) in the event the company's restructuring is implemented by the filing of cases under chapter 11 (the "Chapter 11 Cases") of title 11 of the United States Code (the "Bankruptcy Code"), as well as the terms of adequate protection for the Term Loan A Agent and for the holders of NYL Credit Agreement Claims (the "NYL Adequate Protection"). The DIP Facility and the NYL Adequate Protection will be subject to the approval of the Bankruptcy Court (as defined herein) and consummated in the Chapter 11 Cases in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), in accordance with (i) the DIP Order (as defined in the Restructuring Support Agreement) of the Bankruptcy Court authorizing the Loan Parties to enter into the DIP Facility and to provide the NYL Adequate Protection and (ii) the DIP Documents to be executed by the Loan Parties. Each of the DIP Order and DIP Documents shall be in form and substance acceptable to the DIP Facility Agent and the DIP Facility Lenders and the provisions of the NYL Adequate Protection contained in the DIP Order or otherwise shall be consistent with this DIP Facility Term Sheet and otherwise in form and substance acceptable to the Term Loan A Agent DIP FACILITY AND ADEQUATE PROTECTION TERM SHEET DIP Facility Borrower Philadelphia Energy Solutions Refining and Marketing LLC, as debtor-inpossession (the "DIP Facility Borrower") Subsidiary Guarantors All subsidiaries of the DIP Facility Borrower (the "Subsidiary Guarantors" and, together with the DIP Facility Borrower, the "Loan Parties"). For the avoidance of doubt, the Loan Parties shall not include any of the North Yard Entities. DIP Facility Agent Cortland Capital Markets Services LLC, as administrative agent and collateral agent (the "DIP Facility Agent") All Term Loan B Lenders will have the ability to participate in the DIP DIP Facility Lenders Facility by executing the Restructuring Support Agreement on or before [●], 2018 (such participating lenders, the "DIP Facility Lenders"). The obligation of any DIP Facility Lender to fund any loan under the DIP Facility may be fulfilled on behalf of such DIP Facility Lender by any of such DIP Facility Lender's affiliated or related investment vehicles. The DIP Facility Lenders may, by notice to the DIP Facility Borrower, modify the funding mechanics of the DIP Facility to mitigate or avoid any adverse tax effects on the DIP Facility Lenders, provided that any such change shall not result in a material cost or expense (other than fronting or similar fees) to the DIP Facility Lenders or the Loan Parties. Amount & Type A superpriority senior secured debtor-in-possession credit facility in an aggregate principal amount equal to $120 million, subject to the terms and Case 18-10122 Doc 10-2 Filed 01/22/18 Page 52 of 57 conditions of this DIP Facility Term Sheet and the DIP Documents. Maturity Date The earliest of (i) July 31, 2018, (ii) the Effective Date, (iii) the consummation of a sale or other disposition of all or substantially all assets of the Debtors under Bankruptcy Code section 363, and (iv) the date of acceleration of the DIP Facility in accordance with its terms. Interest Rate LIBOR + 625 bps LIBOR floor 100 bps Amortization None. Conversion DIP Facility Lenders to convert DIP Facility into the New First Lien Term Loan Facility upon the Effective Date in accordance with the Restructuring Support Agreement. DIP Order The DIP Order, which shall be in form and substance acceptable to the Required Lenders, shall, among other things, authorize and approve (i) the borrowing under the DIP Facility and the making of the DIP Loans, (ii) the granting of the super-priority claims and liens against the Loan Parties and their assets in accordance with this DIP Facility Term Sheet and the definitive documentation with respect to the Debtor Collateral (as defined below), (iii) the payment of all reasonable and documented fees and expenses (including the fees and expenses of outside counsel and financial advisors), (iv) the use of cash collateral, subject to Adequate Protection (as defined below), and (v) the payment of the upfront fees payable on the closing date, which payment shall not be subject to reduction, setoff or recoupment. For the avoidance of doubt, the DIP Order shall not permit the use of cash collateral securing the NYL Credit Agreement, provided that none of the DIP Proceeds or property of the Loan Parties shall be used to pay any obligation or expense of any Debtor other than the Loan Parties. The DIP Order shall provide that, in the event that the Restructuring Support Agreement is terminated, the DIP Facility Lenders and the Term Loan B Lenders reserve the right to seek to surcharge the collateral securing the NYL Credit Agreement to the extent permitted by Section 506(c) of the Bankruptcy Code, with all rights of holders of the NYL Credit Agreement Claims and the Term Loan A Agent to oppose any such surcharge reserved. Collateral All obligations of the Loan Parties under the DIP Facility (the "DIP Obligations") shall be secured, pursuant to Bankruptcy Code sections 361, 362, 364(c)(2), 364(c)(3) and 364(d), by a valid, binding, continuing, enforceable, fully-perfected, non-avoidable, automatically and properly perfected first priority senior priming lien on, and security interest in (such liens and security interests, the "DIP Liens"), all present and after acquired property (whether tangible, intangible, real, personal or mixed) of the Loan Parties, wherever located, including, without limitation, all accounts, inventory, equipment, capital stock in subsidiaries of the Loan Parties, investment property, instruments, chattel paper, real estate, leasehold interests, contracts, patents, copyrights, trademarks and other general intangibles, and all products and proceeds thereof, excluding any causes of action under Bankruptcy Code sections 502(d), 544, 545, 547, 548, 549, 550 or 553 or any other avoidance actions under the Bankruptcy Code or applicable nonbankruptcy law; provided that, upon the entry of the DIP Order, the DIP Obligations shall be secured by the proceeds thereof (all such property, the 2 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 53 of 57 "Debtor Collateral"). Notwithstanding anything to the contrary in the foregoing, the Debtor Collateral will not include (x) the MLC Separate Assets and Collateral (as defined in the Prepetition ABL/Term Loan Intercreditor Agreement) or (y) any assets of any North Yard Entity. The liens and security interests on the Debtor Collateral securing the DIP Obligations (including with respect to (i) assets owned by the Debtors that are not subject to any perfected and unavoidable liens in effect on the date of the filing of the Chapter 11 cases (the "Petition Date") and (ii) assets of the type constituting Term Loan Priority Collateral (as defined in the Prepetition ABL/Term Loan Intercreditor Agreement)) shall be senior to any and all other liens and security interests, including the adequate protection liens granted under the DIP Order, other than: (i) the Carve-Out (to be defined in a manner to be agreed), and (ii) solely with respect to assets of the type constituting ABL/SOA Priority Collateral (as in the Prepetition ABL/Term Loan Intercreditor Agreement), the perfected and unavoidable liens in effect on the Petition Date with respect to the Refining ABL Credit Agreement and the Supply and Offtake Agreement. As used herein, "Prepetition ABL/Term Loan Intercreditor Agreement" means the Intercreditor Agreement, dated as of April 4, 2013 by and among JPMorgan Chase Bank, N.A. as agent for the ABL Secured Parties and JPMorgan Chase Bank, N.A, as agent for the Term Loan Secured Parties, as in effect on the Petition Date. Adequate Protection for Term Loan B Agent and Term Loan B Lenders Pursuant to Sections 361, 363(e) and 364(d)(1) of the Bankruptcy Code, as protection in respect of (x) the incurrence of the DIP Facility, (y) the imposition of the automatic stay, and (z) the Debtors' use of the collateral, the Loan Parties and the DIP Facility Lenders agree, subject to Bankruptcy Court approval, to all of the following forms of adequate protection (the "Adequate Protection"): (a) Payment of interest and fees to the holders of Term Loan B Claims (as defined in the Restructuring Support Agreement) at the non-default contract rate and accrual of interest to each of the foregoing at the default contract rate (in each case, from the Petition Date through the Effective Date); (b) Payment of reasonable fees and expenses for each of the (i) ABL Agent, (ii) Term Loan B Agent and (iii) ad hoc group of Term Loan B Lenders, in each case including fees and expenses of counsel, financial and other reasonably necessary advisors; (c) Liens on unencumbered assets, replacement liens on all other assets (excluding cash collateral securing the NYL Credit Agreement) and superpriority claims as provided for in section 507(b) of the Bankruptcy Code for any diminution in the value of the interest in collateral of the holders of Refining ABL Claims1 and Term Loan B Claims. All liens perfected via cash 1 If the ABL does not consent to the use of cash collateral, solely with respect to the term priority collateral. 3 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 54 of 57 collateral order; and (d) No senior or pari passu claims (other than those secured by valid and perfected senior pre-petition liens and those encumbering ABL/SOA Priority Collateral). Adequate Protection for Term Loan A Agent and Holders of NYL Credit Agreement Claims Pursuant to Sections 361 and 363(e) of the Bankruptcy Code, as protection in respect of (x) the imposition of the automatic stay as to the North Yard Entities, and (y) the North Yard Entities' potential use of the collateral to the extent permitted under the Restructuring Support Agreement, the North Yard Entities agree, subject to Bankruptcy Court approval, to all of the following forms of adequate protection: (a) Payment of interest and fees to the holders of NYL Credit Agreement Claims at the non-default contract rate and accrual of interest to each of the foregoing at the default contract rate (in each case, from the Petition Date through the Effective Date), in each case payable solely from the assets of the North Yard Entities; (b) Payment of reasonable fees and expenses for each of the (i) Term Loan A Agent and (ii) the Consenting NYL Creditors, in each case including fees and expenses of counsel, financial and other reasonably necessary advisors, in each case payable solely from the assets of the North Yard Entities; (c) Liens on unencumbered assets (other than all or any portion of a building (as defined under the flood laws) that is located in a special flood hazard area unless covered by flood insurance reasonably satisfactory to each Consenting NYL Creditor), replacement liens on all other assets of the North Yard Entities and superpriority claims as provided for in section 507(b) of the Bankruptcy Code for any diminution in the value of the interest in collateral of the holders of NYL Credit Agreement Claims, with all liens being perfected via the DIP Order or another order of the Bankruptcy Court; and (d) No senior or pari passu claims (other than those secured by valid and perfected senior pre-petition liens) on any of the assets of the North Yard Entities. Events of Default Customary and appropriate for similar debtor-in-possession financings, including, without limitation, payment default, breaches of loan documents, reps and warranties, bankruptcy and lien related defaults. Covenants Affirmative and negative covenants customary and appropriate for similar covenant-lite debtor-in-possession financings, together with such additions and modifications as determined by the DIP Facility Lenders and the DIP Facility Borrower, including, without limitation, bankruptcy related covenants. Financial Covenants Minimum liquidity to be no less than $10,000,000, subject to the following step downs: 1. Thirty (30) days after the Petition Date, $5,000,000. 2. Forty five (45) days after the Petition Date, $0.00. Milestones Consistent with the Restructuring Support Agreement. Representations and Warranties Certain representations and warranties, affirmative and negative covenants and events of default will contain materiality and knowledge qualifications, limitations, exceptions, dollar thresholds, baskets and cure periods to be 4 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 55 of 57 agreed. Voting Amendments and waivers of the DIP Facility will require the approval of lenders holding more than 66 2/3% of the DIP loans. Fees and Expenses Indemnification Loan Parties obligated under the DIP Facility to pay all reasonable, documented out-of-pocket fees, costs and expenses incurred or accrued by the DIP Facility Agent and/or the DIP Facility Lenders in connection with any and all aspects of the DIP Facility and the Chapter 11 Cases, including, without limitation, the reasonable fees and expenses of legal counsel, hired by or on behalf of the DIP Facility Agent and/or the DIP Facility Lenders (limited to one primary counsel and one local counsel for the DIP Facility Agent and one primary counsel and one local counsel for the DIP Facility Lenders). The Loan Parties will indemnify the DIP Facility Agent and DIP Facility Lenders, and hold them harmless from and against all reasonable, documented out-of-pocket costs, expenses and liabilities arising out of or relating to the transactions contemplated hereby, except solely for gross negligence, bad faith or willful misconduct of such indemnified party to the extent determined by a court of competent jurisdiction. DIP Funding Fee Each DIP Facility Lender shall receive its pro rata share of 2.0% of the DIP Facility, payable in cash upon funding of the DIP Facility. DIP Commitment Fee A fee equal to 5.0 % of the New Equity, due and payable upon the Effective Date on a ratable basis to the entities that are commitment parties. For the avoidance of doubt, fees payable pursuant to this section shall be a part of and not in addition to the 75% of New Equity to be distributed to the Term Loan B Creditors and DIP Facility Lenders at the Effective Date. Waivers The DIP Order shall include waivers of the "equities of the case" exception to section 552(b), a 506(c) waiver and a marshaling waiver. Governing Law The laws of the State of New York (excluding the laws applicable to conflicts or choice of law), except as governed by the Bankruptcy Code. Miscellaneous This DIP Facility Term Sheet does not purport to summarize all of the conditions, covenants, representations, warranties, events of default and other terms and provisions which would be contained in definitive credit documentation, if any, relating to matters covered hereby, all of which shall be acceptable in form and substance to the DIP Facility Agent and DIP Facility Lenders. 5 Case 18-10122 Doc 10-2 Filed 01/22/18 Page 56 of 57 EXHIBIT C to the Restructuring Support Agreement Joinder Agreement The undersigned (“Additional Party”) hereby acknowledges that it has read and understands the Restructuring Support Agreement, dated as of January 12, 2018 (the “Agreement”),1 by and among PES Holdings, LLC and its affiliates and subsidiaries bound thereto, the Consenting Creditors, and certain other parties and agrees to be bound by the terms and conditions thereof to the extent all other Consenting Creditors are thereby bound, and shall be deemed a “Consenting Creditor” and a “Party” under the terms of the Agreement; in the case of a Consenting NYL Creditor with respect to the specific Outstanding Claim identified in the table below. The Additional Party specifically agrees to be bound by the terms and conditions of the Agreement and makes all representations and warranties contained therein as of the date hereof as a Consenting Creditor with respect to the specific Outstanding Claim identified in the table below. DIP Commitment Election: □ By checking this box before the Solicitation Commencement Date, the Additional Party hereby represents and warrants that it holds Term Loan B Claims in the amount set forth below, and hereby commits to provide a share of the DIP Facility equal in percentage to the pro rata percentage of Term Loan B Claims held by such Additional Party as of the Agreement Effective Date, and otherwise on the terms and conditions agreed to by the DIP Commitment Parties in the DIP Facility Term Sheet and/or the DIP Credit Agreement, as applicable. Date Executed: Name of Additional Party:________________________________ By: ______________________________________ Name: Title: Address: E-mail address(es): Telephone: Facsimile: Aggregate Amounts Beneficially Owned or Managed on Account of: NYL Credit Agreement Claims (principal amount only) Term Loan B Claims (principal amount only) 1 $[__] $[__] Capitalized terms not used but not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. Case 18-10122 Doc 10-2 Filed 01/22/18 Page 57 of 57 EXHIBIT D to the Restructuring Support Agreement Transfer Agreement The undersigned (“Transferee”) hereby acknowledges that it has read and understands the Restructuring Support Agreement, dated as of January 12, 2018 (the “Agreement”),1 by and among PES Holdings, LLC and its affiliates and subsidiaries bound thereto, the Consenting Creditors, and certain other parties, including the transferor to the Transferee of any NYL Credit Agreement Claims, Term Loan B Claims, Intermediation Claims, or Debtors Claims/Interests (each such transferor, a “Transferor”), and agrees to be bound by the terms and conditions thereof to the extent the Transferor was thereby bound, and shall be deemed a “Consenting Creditor” and a “Party” under the terms of the Agreement with respect to the specific Outstanding Claim identified in the table below. The Transferee specifically agrees to be bound by the terms and conditions of the Agreement and makes all representations and warranties contained therein as of the date of the Transfer, as a Consenting Term Loan B Creditor or Consenting NYL Creditor, as applicable, including the agreement to be bound by the vote of the Transferor if such vote was cast before the effectiveness of the Transfer discussed herein. Date Executed: Name of Transferee: ___________________________________ By: ______________________________________ Name: Title: Address: E-mail address(es): Telephone: Facsimile: Aggregate Amounts Beneficially Owned or Managed on Account of: NYL Credit Agreement Claims (principal amount only) Term Loan B Claims (principal amount only) 1 $[__] $[__] Capitalized terms not used but not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. Case 18-10122 Doc 10-3 Filed 01/22/18 Page 1 of 9 EXHIBIT C TO THE DISCLOSURE STATEMENT LIQUIDATION ANALYSIS Case 18-10122 Doc 10-3 Filed 01/22/18 Page 2 of 9 CHAPTER 7 LIQUIDATION ANALYSIS The Debtors have prepared this Liquidation Analysis (the “Liquidation Analysis”) based on a hypothetical liquidation under chapter 7 of the Bankruptcy Code. It is assumed, among other things, that the hypothetical liquidation under chapter 7 would commence under the direction of a Court-appointed trustee and would continue for a period of time, during which time all of the Debtors’ major assets would be sold or surrendered to the respective lien holders, and the cash proceeds, net of liquidation-related costs, would then be distributed to creditors in accordance with relevant law. The determination of the costs of, and proceeds from, the hypothetical liquidation of the Debtors’ assets in a chapter 7 case is an uncertain process involving the extensive use of estimates and assumptions that, although considered reasonable by the Debtors, are inherently subject to significant business, economic, and competitive uncertainties and contingencies beyond the control of the Debtors, their management, and their advisors. Inevitably, some assumptions in the Liquidation Analysis would not materialize in an actual chapter 7 liquidation, and unanticipated events and circumstances could affect the ultimate results in an actual chapter 7 liquidation. The Liquidation Analysis is a hypothetical exercise that has been prepared for the sole purpose of generating a reasonable good-faith estimate of the proceeds that would be realized if the Debtors were liquidated in accordance with chapter 7 of the Bankruptcy Code. The Liquidation Analysis is used to satisfy the “best interest of creditors” test set forth in section 1129(a)(7) of the Bankruptcy Code, because it indicates whether the members of an Impaired Class that vote to reject the Plan will receive at least as much under the Plan as they would in a liquidation under a hypothetical chapter 7 case. THE LIQUIDATION ANALYSIS IS NOT INTENDED TO, AND SHOULD NOT BE, USED FOR ANY OTHER PURPOSE. THE LIQUIDATION ANALYSIS DOES NOT PURPORT TO BE A VALUATION OF THE DEBTORS’ ASSETS AS A GOING CONCERN, AND THERE MAY BE A SIGNIFICANT DIFFERENCE BETWEEN THE LIQUIDATION ANALYSIS AND THE VALUES THAT MAY BE REALIZED IN AN ACTUAL LIQUIDATION. THIS ANALYSIS ASSUMES “LIQUIDATION VALUES” BASED ON APPRAISALS, WHERE AVAILABLE, AND THE DEBTORS’ BUSINESS JUDGMENT, WHERE APPRAISALS ARE NOT AVAILABLE. The underlying financial information in the Liquidation Analysis was not compiled or examined by any independent accountants. Limited independent appraisals were available in preparing the Liquidation Analysis. NEITHER THE DEBTORS NOR THEIR ADVISORS MAKE ANY REPRESENTATION OR WARRANTY THAT THE ACTUAL RESULTS WOULD OR WOULD NOT APPROXIMATE THE ESTIMATES AND ASSUMPTIONS REPRESENTED IN THE LIQUIDATION ANALYSIS. ACTUAL RESULTS COULD VARY MATERIALLY. This Liquidation Analysis assumes that a liquidation of the Debtors would occur over approximately nine (9) months. The Liquidation Analysis should be read in conjunction with the following notes and assumptions: Case 18-10122 Doc 10-3 Filed 01/22/18 Page 3 of 9 Notes to the Liquidation Analysis 1. Dependence on assumptions. The Liquidation Analysis is based on a number of estimates and assumptions that, although developed and considered reasonable by the management and the advisors of the Debtors at the time of preparation, are inherently subject to significant economic, business, regulatory and competitive uncertainties and contingencies beyond the control of the Debtors or their management and advisors. The Liquidation Analysis is also based on the Debtors’ best judgment of how numerous decisions in the liquidation process would be resolved. Accordingly, there can be no assurance that the values reflected in this Liquidation Analysis would be realized if the Debtors were, in fact, to undergo such a liquidation, and actual results could vary materially and adversely from those contained herein. 2. Additional unsecured claims. The cessation of business in a liquidation will trigger certain claims that otherwise would not exist under the Plan absent a liquidation. Examples of these kinds of claims include various potential employee claims (for such items as severance and potential WARN Act claims) and executory contract and unexpired lease rejection damages. Some of these claims could be significant and might be entitled to priority in payment over general unsecured claims. To the extent proceeds remained after satisfying secured claims, any priority claims would be paid in full from the liquidation proceeds before the balance would be made available to pay general unsecured claims or to make any distribution in respect of equity interests. 3. Dependence on unaudited financial statements. This Liquidation Analysis contains numerous estimates and is based upon the Debtors’ unaudited financial statements as of November 30, 2017. 4. Preference or fraudulent transfers. No recovery or related litigation costs attributed to any potential avoidance actions under the Bankruptcy Code, including potential preference or fraudulent transfer actions, are assumed within this Analysis. 5. Chapter 7 liquidation costs and length of liquidation process. This Liquidation Analysis assumes the liquidation would be completed within 9 months. In an actual liquidation, the wind down process and time period(s) could vary thereby affecting recoveries. For example, the potential for priority, contingent and other claims, litigation, rejection costs, and the final determination of allowed claims could substantially impact both the timing and amount of the distribution of the asset proceeds to the creditors. Accordingly, there can be no assurance that the values reflected in this Liquidation Analysis would be realized if the Debtors were, in fact, to undergo such a liquidation. Pursuant to section 726 of the Bankruptcy Code, the allowed administrative expenses incurred by the chapter 7 trustee, including, but not limited to, expenses affiliated with selling the Debtors’ assets, will be entitled to payment in full prior to any distribution to chapter 11 administrative and other priority claims. The estimate used in the Liquidation Analysis for these expenses includes estimates for certain legal, accounting, broker, and other professionals, and potential fees and expenses payable to the chapter 7 trustee. 6. Debtors. The Liquidation Analysis separately analyzes the value the creditors would receive in the separate liquidations of Philadelphia Energy Solutions Refining and Marketing LLC (“PESRM”) and North Yard Logistics, L.P. (“NYL”). 7. Renewable Identification Numbers (“RINs”). As of December 31, 2017, PESRM had a gross Renewable Volume Obligation (“RVO”) equivalent to approximately 467 million gallons, and held Case 18-10122 Doc 10-3 Filed 01/22/18 Page 4 of 9 approximately 210 million gallons of RINs. The analysis assumes that all RINs will be sold after conversion to chapter 7, and that the Debtors will not be able to satisfy the RVO for 2016 and 2017. 8. Environmental / Clean Up Costs. The Debtors have been indemnified for the costs of all environmental items pre-dating the formation of the Debtors. As such, the Liquidation Analysis does not assume any costs related to these items. Operating Assumptions to the Liquidation Analysis 1. Adjusted Net Book Value. The analysis is based on the balance sheet as of November 30, 2017. The balance sheet for PESRM includes various adjustments to reflect the net impact of intermediation, and derivatives to the respective balance sheet accounts. Adjustments were also made to reflect projected cash and debt balances as of the petition date, including the funding of the DIP Facility. 2. Refinery Operations. Partially due to limitations in PESRM’s ability to load outbound crude quantities, the analysis assumes that the refining operations would continue to run for a period of two weeks (the “Refining Period”) as crude is processed into Refined Products. Through the refining process PESRM will generate cash through refining margins, which will be used to fund the costs of the refining operations, and logistics costs associated with the sale of Refined Products. 3. Intermediated Assets and Claims. PESRM is party to the Amended and Restated Supply and Offtake Agreement, dated as of October 7, 2014 with Merrill Lynch Commodities, Inc. ("MLC") (as amended, and together with the related ancillary agreements, the "Intermediation Agreement"). Pursuant to the terms of the agreement, MLC supplies substantially all of the crude oil and noncrude oil feedstock requirements of the refining complex, purchasing these feedstocks from third parties that PESRM identifies and is based on pricing mechanisms that the Debtor negotiates. The feedstocks are stored in the tanks at the refining complex, or at third-party facilities, and are ultimately purchased by PESRM as they are removed from the tanks and processed at the Refining Complex. MLC also purchases substantially all of the barrels processed through the refining complex (the “Refined Products”) under the Intermediation Agreement at market prices for the respective products and then sells these products to third parties that PESRM identifies and based on pricing mechanisms that PESRM negotiates, in each case subject to certain conditions. The liquidation analysis assumes that all Refined Products at PESRM, which have been sold to MLC, are distributed in the ordinary course over a period of five weeks, including any Refined Products generated through the liquidation period. The Liquidation Analysis assumes that all product is sold through normal channels, at market prices. MLC is holding a deposit from PESRM of approximately $27.7 million. In estimating the low range of recovery to creditors, the Liquidation Analysis assumes that the deposit is not returned to PESRM. In estimating the high range of recovery, the Liquidation Analysis assumes that the deposited collateral will be returned to PESRM. 4. Crude in Transit. The analysis assumes that all crude in transit is diverted to a third party at the direction of MLC. Case 18-10122 Doc 10-3 Filed 01/22/18 Page 5 of 9 Philadelphia Energy Solutions Refining and Marketing, LLC ($ in Millions) Recoverable Assets (a) Cash & Equivalents Intermediation Collateral (b) Accounts Receivable (c) Inventory (d) Prepaid Expenses & Other Assets (e) Net PP&E (f) Precious Metals (g) RINs (h) Post Chapter 7 Refining Margin Produced Total (i) Estimated Recovery ($) 11/30/2017 NBV $ 62.8 27.7 200.7 777.1 92.8 576.8 21.0 $ 1,759.0 $ $ Adjustments 64.8 (134.1) (720.3) (2.7) 158.8 (633.5) $ $ Adjusted NBV 127.6 27.7 66.6 56.8 90.1 576.8 21.0 158.8 1,125.5 $ Low 127.6 $ 53.3 28.1 22.4 260.0 21.0 118.6 11.9 High 127.6 27.7 60.0 31.2 27.2 260.0 21.0 135.5 17.8 $ 643.0 $ 708.1 (99.5) (100.6) $ 543.4 $ $ $ (120.0) $ (17.3) (42.4) (328.0) (507.8) $ $ 35.7 $ 75.9 $ (13.0) $ (22.7) (35.7) $ (13.4) (23.4) (36.8) Chapter 7 Administrative Expenses Net Liquidation Proceeds Available for Distribution to Secured Claims Secured Claims (j) DIP Financing (k) ABL Revolver (l) Installment Loan (NGL) (m) Term Loan B Total Secured Claims $ $ (120.0) (17.3) (42.4) (523.9) (703.6) Net Liquidation Proceeds Available to satisfy Administrative and Priority Claims Priority/Administrative Claims (n) Priority Tax (o) Employee Related Total Priority/Administrative Claims $ $ (13.4) (23.4) (36.8) Net Liquidation Proceeds Available for Distribution to General Unsecured Claims Unsecured Claims (p) General Unsecured Claims $ (1.6 - 1.8 billion) $ $ $ - Estimated Recovery (%) Low High 100% 0% 80% 50% 25% 45% 100% 75% n.a. 100% 100% 90% 55% 30% 45% 100% 85% n.a. 607.4 48% 54% (120.0) (17.3) (42.4) (351.8) (531.6) 100% 100% 100% 63% 100% 100% 100% 67% 97% 97% 100% 100% 0% 3% $ 39.1 $ (39.1) AS DESCRIBED IN GREATER DETAIL IN THE INTRODUCTION TO THIS LIQUIDATION ANALYSIS, THE LIQUIDATION ANALYSIS IS A HYPOTHETICAL EXERCISE THAT HAS BEEN PREPARED FOR THE SOLE PURPOSE OF GENERATING A REASONABLE GOOD-FAITH ESTIMATE OF THE PROCEEDS THAT WOULD BE REALIZED IF THE DEBTORS WERE LIQUIDATED IN ACCORDANCE WITH CHAPTER 7 OF THE BANKRUPTCY CODE WHEN COMPARED TO RECOVERIES UNDER THE PLAN. THE LIQUIDATION ANALYSIS IS NOT INTENDED AND SHOULD NOT BE USED FOR ANY OTHER PURPOSE. THE LIQUIDATION ANALYSIS DOES NOT PURPORT TO BE A VALUATION OF THE DEBTORS’ ASSETS AS A GOING CONCERN, AND THERE MAY BE A SIGNIFICANT DIFFERENCE BETWEEN THE LIQUIDATION ANALYSIS AND THE VALUES THAT MAY BE REALIZED IN AN ACTUAL LIQUIDATION. Case 18-10122 Doc 10-3 Filed 01/22/18 Page 6 of 9 [A] Cash & Equivalents: The Liquidation Analysis assumes that PESRM will have approximately $127.6 million of cash at the time that its cases are converted to chapter 7, including $120 million, less fees, funded through the DIP Facility. [B] Accounts Receivable: Accounts receivable primarily consists of trade related receivables. The net book value also includes receivables for which PESRM has received payment, but for which such payment has not been made available to PESRM in available funds. These receivables represent just under half of the total Adjusted NBV. Based on a review of the total receivables, a net recovery of 80-90% was assumed on the total Adjusted NBV of receivables. [C] Inventory: The non-intermediated inventory of $56.8 million primarily consists of other feedstock, chemicals, catalysts and refined purchases. The analysis assumes that many of these items would be used to support the production of the crude units during the Refining Period, and that certain residual amounts will be sold. [D] Prepaid Expenses & Other Assets: Included in Prepaid Expenses & Other Assets are sulfur credits with a net book value of approximately $12.1 million. The sulfur credits are assumed to be marketable at a discount to net book value. [E] Net PP&E: The value of PP&E was assessed based on the appraised liquidation value in place of the assets. ALTHOUGH THE DEBTORS HAVE REVIEWED THE APPRAISAL REPORT, THE DEBTORS HAVE NOT PERFORMED AN INDEPENDENT VALUATION OF THE ASSETS, ON A LIQUIDATION BASIS. AS SUCH, THE ASSUMED RECOVERY RATES ON THESE ASSETS REPRESENT A SIGNIFICANT RISK TO ACHIEVING THE VALUES REFLECTED IN THE LIQUIDATION ANALYSIS. [F] Precious Metals: Precious Metals are assumed to be marketable and hold a fair market value of approximately $21 million. [G] RINs: As of December 31, 2017, PESRM held approximately 210 million gallons of RINs that are assumed to be marketable. A discount of 15% to 25% was applied to the book value of RINs on hand to account for the vintage and timeline required to sell them. [H] Refining Margin: During the Refining Period, PESRM will generate incremental margin as it converts crude inventory into higher margin Refined Products. [I] Chapter 7 Administrative Expenses: Includes all expenses incurred after the conversion of the case to chapter 7. The estimated costs include (1) the cost of operating the refinery and selling refined product, (2) $25 million of costs to clean up the facilities, (3) fees of the chapter 7 trustee, and (4) the costs of maintaining, marketing and monetizing the other assets of PESRM, including legal and brokerage fees. [J] DIP Facility: Based on the value of the underlying collateral the DIP Facility is anticipated to receive a full recovery. The analysis assumes that DIP Facility claims are paid from collateral that is otherwise unencumbered, including the proceeds from the sale of RINs. [K] ABL Revolver: Based on the value of the underlying collateral, including Accounts Receivable, the Revolver is anticipated to receive a full recovery. [L] Installment Loan (NGL): The Liquidation Analysis assumes that these obligations would be satisfied in full to ensure that any purchaser of the refining assets would have access to the assets securing this facility. Case 18-10122 Doc 10-3 Filed 01/22/18 Page 7 of 9 [M] Term Loan B: The Liquidation Analysis assumes that Term Loan B will receive a recovery on its claim based on its security interest in assets, primarily Property, Plant & Equipment (net of costs) and Cash & Equivalents. [N] Priority Tax Claims: Priority Tax Claims were estimated based on their value as of the November 30, 2018 balance sheet. [O] Employee Related Claims: Includes estimates for employee claims for pre-petition severance, vacation and wages, subject to a cap of $12,850 per employee. Also includes an estimate for potential WARN Act related claims. [P] General Unsecured Claims: Estimate for General Unsecured Claims includes (1) potential rejection damage claims, (2) Term Loan B deficiency claims, and (3) other general unsecured claims. Recoveries to general unsecured claims are based on the estimated value of unencumbered assets, net of costs. Case 18-10122 Doc 10-3 Filed 01/22/18 Page 8 of 9 North Yard Logistics, L.P. ($ in Millions) Recoverable Assets Cash & Equivalents (a) Net PP&E (b) Intercompany Receivable (c) Damage Claim Other Assets Total Estimated Recovery ($) 11/30/2017 NBV $ 39.6 85.5 35.0 37.5 $ 197.6 $ $ Adjustments 2.4 2.4 Adjusted NBV Low Secured Claims Term Loan A $ Net Liquidation Proceeds Available to satisfy Other Claims or Interests (97.5) High Low $ 42.0 85.5 35.0 37.5 $ 42.0 $ 0.1 35.0 - 42.0 0.5 35.0 23.2 - $ 200.1 $ 77.1 $ 100.7 (3.9) (5.0) $ 73.2 $ 95.6 $ (73.2) $ (95.6) Chapter 7 Administrative Expenses Net Liquidation Proceeds Available for Distribution to Secured Claims Estimated Recovery (%) $ - $ High 100% 0% 100% n.a. 0% 100% 1% 100% n.a. 0% 75% 98% - AS DESCRIBED IN GREATER DETAIL IN THE INTRODUCTION TO THIS LIQUIDATION ANALYSIS, THE LIQUIDATION ANALYSIS IS A HYPOTHETICAL EXERCISE THAT HAS BEEN PREPARED FOR THE SOLE PURPOSE OF GENERATING A REASONABLE GOOD-FAITH ESTIMATE OF THE PROCEEDS THAT WOULD BE REALIZED IF THE DEBTORS WERE LIQUIDATED IN ACCORDANCE WITH CHAPTER 7 OF THE BANKRUPTCY CODE WHEN COMPARED TO RECOVERIES UNDER THE PLAN. THE LIQUIDATION ANALYSIS IS NOT INTENDED AND SHOULD NOT BE USED FOR ANY OTHER PURPOSE. THE LIQUIDATION ANALYSIS DOES NOT PURPORT TO BE A VALUATION OF THE DEBTORS’ ASSETS AS A GOING CONCERN, AND THERE MAY BE A SIGNIFICANT DIFFERENCE BETWEEN THE LIQUIDATION ANALYSIS AND THE VALUES THAT MAY BE REALIZED IN AN ACTUAL LIQUIDATION. Case 18-10122 Doc 10-3 Filed 01/22/18 Page 9 of 9 [A] Net PP&E: No separate appraisal data was available for the assets of NYL. Given the nature of the assets, nominal value was attributed. THE DEBTORS HAVE NOT PERFORMED AN INDEPENDENT VALUATION OF THE ASSETS, ON A LIQUIDATION BASIS. [B] Intercompany Receivable: NYL is due a $35 million receivable from PES LLC that is assumed to be fully recoverable. [C] Damages Claim: Includes an estimated recovery from PESRM resulting from NYL’s assumed rejection damages claim against PESRM under the contract. Case 18-10122 Doc 10-4 Filed 01/22/18 Page 1 of 2 EXHIBIT D TO THE DISCLOSURE STATEMENT VALUATION ANALYSIS Case 18-10122 Doc 10-4 Filed 01/22/18 Page 2 of 2 VALUATION ANALYSIS ASSUMED VALUATION OF THE REORGANIZED DEBTORS As discussed in Section II. E. of this Disclosure Statement, the Reorganized Debtors will issue primary shares of New Equity to Holders of Term Loan B Claims, Holders of DIP Facility Claims, and the Parent (in exchange for the Parent Cash Contribution). The recovery value for Holders of Voting Claims will depend on the actual value of the New Equity. Over the course of the negotiations that resulted in the Restructuring Support Agreement, the RSA Parties and the Debtors did not reach a consensus regarding a Reorganized Debtors Total Enterprise Value (“Reorganized Debtors TEV”). However, the calculation of a precise Reorganized Debtors TEV was unnecessary for the Debtors and the RSA Parties to reach agreement on the terms of the Restructuring Support Agreement. At the request of the Debtors, PJT Partners performed an analysis of the value of the Reorganized Debtors on a going-concern basis. In conducting its analysis of the Reorganized Debtors TEV, PJT Partners considered, among other things, a discounted cash flow of the Debtors’ financial projections and select publicly traded comparable company multiples. The underlying information PJT Partners reviewed in preparing its analysis was either publicly available or was provided by the Debtors to the RSA Parties for purposes of assisting with the negotiations. Based upon the analyses described herein, PJT Partners estimates that the Reorganized Debtors TEV will range from approximately $725 million to $975 million and that the Reorganized Debtors will emerge from chapter 11 with approximately $275 million of net debt ($750 million total debt less $475 million of unrestricted cash). Accordingly, the equity value of the Reorganized Debtors immediately after the Effective Date is estimated to range from approximately $450 million to $700 million.1 1 In the event the Debtors elects to consummate the Plan without completing a section 363 sale of certain of its assets, excess cash is estimated to decline by $350 million to $125 million and net debt is estimated to increase by $350 million to $625 million. As a result, in such case, the equity value of the Reorganized Debtors immediately after the Effective Date is estimated to range from $100 million to $350 million. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 1 of 10 EXHIBIT E TO THE DISCLOSURE STATEMENT FINANCIAL PROJECTIONS Case 18-10122 Doc 10-5 Filed 01/22/18 Page 2 of 10 Financial Projections The Debtors believe that the Plan meets the feasibility requirement set forth in section 1129(a)(11) of the Bankruptcy Code, as confirmation is not likely to be followed by liquidation or the need for further financial reorganization of the Debtors or any successor under the Plan. Regarding the planning and development of a plan of reorganization and for the purposes of determining whether such plan would satisfy this feasibility standard, the Debtors analyzed their ability to satisfy their financial obligations while maintaining sufficient liquidity and capital resources. Regarding the Disclosure Statement, the Debtors’ management team (“Management”) prepared financial projections (the “Projections”) for the period 2018 through 2021 (the “Projection Period”). The Projections were prepared by Management and are based on a number of assumptions made by Management with respect to the future performance of the Reorganized Debtors’ operations. The Debtors’ board of directors was not asked to, and thus did not, approve the Projections or evaluate or endorse the Projections or the assumptions underlying the Projections. The Debtors have prepared the Projections based on information available to them, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness, or reliability of the information, opinions, or conclusions expressed herein. THESE FINANCIAL PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH PUBLISHED GUIDELINES OF CERTIFIED PUBLIC ACCOUNTANTS FOR PREPARATION AND PRESENTATION OF PROSPECTIVE FINANCIAL INFORMATION. THE PRO FORMA BALANCE SHEET DOES NOT REFLECT THE IMPACT OF FRESH START ACCOUNTING, WHICH COULD RESULT IN A MATERIAL CHANGE TO ANY OF THE PROJECTED VALUES. ALTHOUGH MANAGEMENT HAS PREPARED THE PROJECTIONS IN GOOD FAITH AND BELIEVES THE ASSUMPTIONS TO BE REASONABLE AT THE TIME OF PREPARATION, IT IS IMPORTANT TO NOTE THAT NEITHER THE DEBTORS NOR THE REORGANIZED DEBTORS CAN PROVIDE ANY ASSURANCE THAT SUCH ASSUMPTIONS WILL BE REALIZED. AS DESCRIBED IN DETAIL IN THE DISCLOSURE STATEMENT, A VARIETY OF RISK FACTORS COULD AFFECT THE REORGANIZED DEBTORS’ FINANCIAL RESULTS AND MUST BE CONSIDERED. ACCORDINGLY, THE PROJECTIONS SHOULD BE REVIEWED IN CONJUNCTION WITH A REVIEW OF THE RISK FACTORS SET FORTH IN THE DISCLOSURE STATEMENT AND THE ASSUMPTIONS DESCRIBED HEREIN, INCLUDING ALL RELEVANT QUALIFICATIONS AND FOOTNOTES. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 3 of 10 THE PROJECTIONS MAY INCLUDE CERTAIN FORWARD-LOOKING STATEMENTS AND PROJECTIONS PROVIDED BY OR ON BEHALF OF THE COMPANY. ANY SUCH STATEMENTS AND PROJECTIONS REFLECT VARIOUS ESTIMATES AND ASSUMPTIONS BY THE COMPANY CONCERNING ANTICIPATED RESULTS. NO REPRESENTATIONS OR WARRANTIES ARE MADE BY THE COMPANY OR ANY OF ITS AFFILIATES AS TO THE ACCURACY OF ANY SUCH STATEMENTS OR PROJECTIONS. SUCH PROECTIONS AND FORWARD-LOOKING STATEMENTS ARE SUBJECT TO SIGNIFICANT UNCERTANTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY, AND NO ASSURANCE CAN BE GIVEN THAT SUCH PROJECTIONS OR FORWARD-LOOKING STATEMENTS WILL BE REALIZED. ACCORDINGLY, ACTUAL RESULTS MAY VARY FROM THE PROJECTED RESULTS AND SUCH VARIATIONS MAY BE MATERIAL. STATEMENTS CONTAINED HEREIN DESCRIBING DOCUMENTS AND AGREEMENTS ARE SUMMARIES ONLY AND SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH DOCUMENTS AND AGREEMENTS. The Projections should be read in conjunction with the Disclosure Statement and the Plan in their entirety as well as the notes and assumptions set forth below. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 4 of 10 General Assumptions a. Accounting Policies The Projections have been prepared using accounting policies that are materially consistent with those applied in the Debtors’ historical financial statements and projections. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. In recording transactions and balances resulting from business operations, management uses estimates based on the best information available. As better information becomes available or actual amounts are determinable, the recorded estimates are revised. Although management will base its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results may differ to some extent from the estimates on which our consolidated financial statements are prepared at any point in time. The Projections may not reflect all the adjustments necessary to implement fresh-start accounting pursuant to ASC 852-10, as issued by the American Institute of Public Accountants, or in accordance with purchase price accounting, if applicable. b. Methodology Key personnel from all the Debtors’ operating business lines and across various functions provided input. The Projections incorporate Management’s operating assumptions and capital plan and are based on various strategic reviews, historical performance, management’s views of market dynamics, as well as corresponding assumptions regarding pricing, competition and cost structure. c. Plan Consummation The operating assumptions assume that the Plan will be confirmed and consummated by March 31, 2018, and reflects the estimated cash impact of claim class treatments. Assumptions with Respect to the Financial Statement Projections a. Operating Expenses The operating expense (“Opex”) forecast is based on Management’s review of forecasted variable costs, historical operating results and discussions regarding the planned operating levels of the refinery. Opex is primarily comprised of labor costs, materials and supplies, contractor fees and services to support refinery operations, taxes, and utilities costs incurred in the normal course of business. b. General and Administrative General and Administrative Costs (“G&A”) are primarily comprised of corporate salaries and benefits, annual employee bonuses, rent, and third–party professional fees associated with the Debtors’ corporate overhead. Projected G&A is based primarily on historical G&A costs. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 5 of 10 c. Taxes Taxes are projected to remain at an effective rate near zero through the Projection Period. d. Depreciation and Amortization Depreciation and amortization reflects the anticipated depreciation and amortization of the Debtors’ net property, plant & equipment and intangible assets based on book values, adjusted for forecasted capital spending and planned turnarounds. No adjustment has been made for asset value adjustments resulting from the application of “fresh start” reporting as required by Topic 852, Reorganizations, of the Financial Accounting Standards Board Accounting Standards Codification. e. Capital Expenditures The Debtors’ analyze capital spending into two categories: non-discretionary and discretionary. Non-discretionary capital spending includes planned turnarounds and other maintenance, while discretionary capital spending generally involves an expansion of existing capacity, improvement in product yields, and/or a reduction in direct operating expenses. Annual Capital Spending from 2018 through 2021 is projected to range from $139MM to $191MM and assumes the Girard Point FCC/Crude Unit Turnaround in 1Q19 and Point Breeze FCC/Crude Unit Turnaround in 2021. Assumptions with Respect to Operations and Pricing Inputs a. Crude Run and Product Summary Forecasted crude run rates, exclusive of the planned turnarounds for Girard Point and Point Breeze, are projected to average ~315 mbpd throughout the forecast period. The assumed product mix is projected to be approximately 50% Gasoline, 40% Distillate and 10% Other Products. b. ICE & Dated Brent Pricing ICE Brent is forecasted at an average of $61.32 / bbl throughout the projection period while Dated Brent is forecasted at $61.10 / bbl, resulting in an implied average DFL (Dated Brent – ICE Brent) of $0.22 / bbl. c. Crude Differential Consumed crude differential for the projection period is the spread between the delivered cost of processed crude and the average price of the ICE Brent benchmark crude oil for the period. PES Consumed Crude Differential over ICE Brent for the projection period, excluding Logistics fees, is forecasted at ~$2.51 / bbl over ICE Brent d. 2-1-1 Crack The 2-1-1 ICE Crack Spread refers to the approximate refining margin resulting from processing two barrels of crude oil to produce one barrel of gasoline and one barrel of distillate. From 2Q, 2018 to 2021, the 2-1-1 crack (net of RINs) is forecasted at an average of ~ $13.25 / bbl. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 6 of 10 e. RINs Refining currently blends renewable fuels and purchases Renewable Identification Numbers (“RINs”) in order to comply with the Renewable Fuel Standards ("RFS"). To the degree Refining is unable to blend the required number of biofuels to satisfy its obligation, Refining must purchase RINs on the open market to avoid penalties and fines. The projections assume that Ethanol RINs pricing will be 67 cpg resulting in an annual RINs expense of $232 - $245 million annually for 2018 through 2021. In accordance with the Plan, the Projections assume that the Debtors will not have to satisfy any RINs obligations related to 2017 operations and will therefore sell approximately $150 million of RINs in Q1 2018. If the Reorganized Debtors were required to satisfy the pre-petition RIN obligations, they would not sell these RINs in Q1 2018, and be required to purchase approximately $200 million of additional RINs in Q1 2018, having an adverse impact on the projections. In such case, the cash balances reported in the Projections would be reduced by $350 million by the end of Q1 2018, and in each subsequent period. Restructuring Adjustments a. Pro Forma Adjustments Related to Emergence The balance sheet (the “Balance Sheet”) included in the Projections presents a pro forma view of March 2018, assuming the effect of the below capital structure adjustments related to the Debtors’ emergence from bankruptcy. No adjustment has been made for asset value adjustments resulting from the application of “fresh start” reporting as required by Topic 852, Reorganizations, of the Financial Accounting Standards Board Accounting Standards Codification. b. Capital Structure The pro forma March 2018 Balance Sheet reflects the following key assumptions:  Assumes a new $620.4 million New First-Lien Term Loan facility consisting of a $120.0 million Tranche A, $82.5 million Tranche B and $417.9 million Tranche C with a December 31, 2022 maturity;  $65.0 million of incremental cash is contributed by the parent company Philadelphia Energy Solutions LLC to fund cash requirements of the business and to facilitate the restructuring;  The $35.0 million outstanding Logistics revolver and $12.5 million PESRM ABL are paid down;  Assumes a $75.0 million Additional Financing Facility. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 7 of 10 Safe Harbor Under The Private Securities Litigation Reform Act of 1995 The Financial Projections contain statements which constitute “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 (the “Exchange Act”). Forward-looking statements in the Financial Projections include the intent, belief, or current expectations of the Debtors and members of its management team with respect to the timing of, completion of, and scope of the current restructuring, reorganization plan, business plan, bank financing, and debt and equity market conditions and the Company’s future liquidity, as well as the assumptions upon which such statements are based. While the Debtors believe that the expectations are based on reasonable assumptions within the bounds of their knowledge of their business and operations, parties in interest are cautioned that any such forwardlooking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Case 18-10122 Doc 10-5 Filed 01/22/18 Page 8 of 10 Income Statement PES Holdings, LLC Consolidated Statements of Operations and Comprehensive (in millions) Year ended Year ended December 31, December 31, 2018 2019 Net sales $ 8,608 $ 8,210 Operating costs and expenses: Cost of sales 7,887 7,496 Operating expenses 467 468 General and administrative expenses 86 68 Depreciation and amortization 64 78 Total operating costs and expenses 8,504 8,110 Operating income 104 100 Interest expense, net 68 67 Other income (expense) 350 Income before income tax expense $ 386 $ 33 Income tax benefit (expense) 0 0 Net income $ 386 $ 33 Income - (Unaudited) Year ended December 31, 2020 $ 8,799 $ $ Year ended December 31, 2021 $ 8,890 8,011 468 70 84 8,634 165 66 99 $ (0) 99 $ 8,077 468 71 89 8,704 185 64 121 (0) 121 Case 18-10122 Doc 10-5 Filed 01/22/18 Page 9 of 10 Balance Sheet PES Holdings, LLC Consolidated Balance Sheets (Unaudited) (in millions) Forecast Forecast Forecast Forecast Forecast March 31, December 31, December 31, December 31, December 31, 2018 2018 2019 2020 2021 ASSETS Cash and cash equivalents Accounts Recivable and Other Current Assets Total current assets Property, plant and equipment, net of accumulated depreciation Other long-term assets Total assets LIABILITIES AND MEMBERS' EQUITY Accounts Payable and Accrued Liabilities Total current liabilities Long-term debt and other obligations Other long-term liabilities Total liabilities $ $ $ (1) Member's Equity Total liabilities and members' equity 516 914 1,430 683 25 2,138 $ 945 945 727 $ $ 35 1,707 $ 431 2,138 556 931 1,487 747 25 2,259 $ 980 980 728 $ $ 32 1,740 $ 519 2,259 476 947 1,423 859 25 2,307 1,001 1,001 725 $ $ $ 29 1,755 $ 552 2,307 492 884 1,376 954 25 2,355 960 960 719 $ $ $ 25 1,704 $ 651 2,355 559 886 1,444 1,004 25 2,474 964 964 717 22 1,702 $ 772 2,474 Case 18-10122 Doc 10-5 Filed 01/22/18 Page 10 of 10 Cash Flow Statement PES Holdings, LLC Consolidated Statements of Cash Flows (Unaudited) (in millions) Year ended Year ended December 31, December 31, 2018 2019 Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization Changes in assets and liabilities: Accounts Recivable and Other Current Assets Other long-term assets Accounts Payable and Accrued Liabilities Other long-term liabilities Net cash provided by (used in) operating activities Cash flows from investing activities: Capital expenditures Net cash provided by (used in) investing activities Cash flows from financing activities: Cash flows from financing activities Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period $ $ 386 $ 33 Year ended December 31, 2020 Year ended December 31, 2021 $ $ 99 121 64 78 84 58 (157) (4) 347 (16) 21 (4) 113 63 (41) (4) 202 3 (4) 208 (127) (127) (191) (191) (179) (179) (139) (139) 129 129 350 206 556 $ (3) (3) (80) 556 476 $ (7) (7) 16 476 492 $ 89 (2) - (2) (2) 67 492 559 Case 18-10122 Doc 10-6 Filed 01/22/18 Page 1 of 2 EXHIBIT F TO THE DISCLOSURE STATEMENT CORPORATE ORGANIZATIONAL CHART Case 18-10122 Senior Management Doc 10-6 Filed 01/22/18 Page 2 of 2 PES Equity Holdings, LLC (1) Carlyle PES, LLC, (“Carlyle”) C/IU 2.44% Capital / 11.33% Profits C 65.04% Capital / 59.11% Profits C 32.52% Capital / 29.56% Profits Philadelphia Energy Solutions LLC (“PES”) PES Holdings, LLC (“Holdings”) PESRM Holdings, LLC (“PESRM GP”) 99.99% L 99.99% .01% Philadelphia Energy Solutions Refining and Marketing LLC (“PESRM”) L .01% PES Logistics Partners, L.P. (“Logistics MLP”) = ownership = disregarded entity for U.S. federal income tax purposes = partnership of U.S. federal income tax purposes = corporation for U.S. federal income tax purposes = indebtedness = general partner = limited partner = common units = subordinated units = incentive distribution rights = Common Units = Incentive Units North Yard GP, LLC (“NYGP”) L 100% G 0% PES Administrative Services, LLC (“Admin”) G L C S IDRs C IU PES Logistics GP, LLC (“Logistics GP”) G 0% North Yard Logistics, L.P. (“NYL”) North Yard Financing, LLC (“NY Financing”) (1) PES Equity Holdings, LLC is a subsidiary of Energy Transfer Partners, L.P.