PBF Energy 2013 Annual Report Download - page 43

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interests in businesses that compete directly or indirectly with us. Our certificate of incorporation contains a
provision renouncing our interest and expectancy in certain corporate opportunities identified by Blackstone or
First Reserve. They may also pursue acquisition opportunities that are complementary to our business and, as a
result, those acquisition opportunities may not be available to us.
Although we are no longer a “controlled company” within the meaning of the NYSE rules, we may rely on
exemptions from certain corporate governance requirements during a one-year transition period.
Following our January 2014 Secondary Offering, Blackstone and First Reserve no longer control a majority
of the combined voting power of all classes of our voting stock. As a result, we no longer are a “controlled company”
within the meaning of the NYSE corporate governance standards. Under the NYSE rules, a majority of our directors
must be independent within one year of the date we no longer qualify as a “controlled company.” The NYSE rules
also require that we have at least one independent director on each of the compensation and nominating and
corporate governance committees prior to the date we no longer qualify as a “controlled company,” at least a
majority of independent members within 90 days of such date and that the compensation and nominating and
corporate governance committees be composed entirely of independent directors within one year of such date. We
might utilize certain of these exemptions during these transition periods. Accordingly, until January 2015, our
stockholders may not have the same protections afforded to stockholders of companies that are subject to all of
the corporate governance requirements of the NYSE. See “Item 13. Certain Relationships and Related Transactions
and Director Independence.”
We will be required to pay the holders of PBF LLC Series A Units and PBF LLC Series B Units for certain tax
benefits we may claim arising in connection with our prior offerings and future exchanges of PBF LLC Series
A Units for shares of our Class A Common Stock and related transactions, and the amounts we may pay could
be significant.
We are party to a tax receivable agreement that provides for the payment from time to time by PBF Energy
to the holders of PBF LLC Series A Units and PBF LLC Series B Units of 85% of the benefits, if any, that PBF
Energy is deemed to realize as a result of (i) the increases in tax basis resulting from its acquisitions of PBF LLC
Series A Units, including such acquisitions in connection with our prior offerings or in the future and (ii) certain
other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to
payments under the tax receivable agreement. See “Item 13. Certain Relationships and Related Transactions, and
Director Independence.”
We expect that the payments that we may make under the tax receivable agreement will be substantial. As
of December 31, 2013, we have recognized a liability for the tax receivable agreement of $287.3 million reflecting
our estimate of the undiscounted amounts that we expect to pay under the agreement due to exchanges that occurred
prior to that date, and to range over the next five years from approximately $12.5 million to $34.6 million per year
and decline thereafter. Assuming no material changes in the relevant tax law, and that we earn sufficient taxable
income to realize all tax benefits that are subject to the tax receivable agreement, we expect that additional future
payments under the tax receivable agreement relating to the exchange by the selling stockholders in connection
with the January 2014 Secondary Offering to aggregate $140.5 million. Future payments by us in respect of
subsequent exchanges of PBF LLC Series A Units would be in addition to these amounts and are expected to be
substantial as well. For example, if 50%, with respect to the amount and timing of PBF Energy income, or more
of the capital and profits interests in PBF LLC are transferred in a taxable sale or exchange within a period of 12
consecutive months, PBF LLC will undergo, for federal income tax purposes, a “technical termination” that could
affect the amount of PBF LLC’s taxable income in any year and the allocation of taxable income among the
members of PBF LLC, including PBF Energy. If PBF Energy does not have taxable income, PBF Energy generally
is not required (absent a change of control or circumstances requiring an early termination payment) to make
payments under the tax receivable agreement for that taxable year because no benefit will have been actually
realized. However, any tax benefits that do not result in realized benefits in a given tax year will likely generate
tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax
attributes will result in payments under the tax receivable agreement. The foregoing numbers are merely estimates