srlp-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36137

Sprague Resources LP

(Exact name of registrant as specified in its charter)


Delaware						45-2637964
(State of incorporation)						(I.R.S. Employer Identification No.)

185 International Drive

Portsmouth, New Hampshire 03801

(Address of principal executive offices)

Registrant’s telephone number, including area code: (800) 225-1560

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units Representing Limited Partner Interests	SRLP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 26,238,232 common units outstanding as of August 4, 2022.

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		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30 , 2022 (unaudited) and December 31, 2021	1
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30 , 2022 and June 30 , 2021	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30 , 2022 and June 30 , 2021	3
	Unaudited Condensed Consolidated Statements of Unitholders’ Equity for the three and six months ended June 30 , 2022 and June 30 , 2021	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and June 30, 2021	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	43

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		48

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Part I – FINANCIAL INFORMATION


Item 1 — Condensed Consolidated Financial Statements

Sprague Resources LP

Condensed Consolidated Balance Sheets

(in thousands except unit amounts)


	June 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,449	$	669
Accounts receivable, net	279,323		280,407
Inventories	239,144		439,820
Fair value of derivative assets	243,426		141,018
Other current assets	23,188		22,066
Total current assets	791,530		883,980
Fair value of derivative assets, long-term	55,447		33,111
Property, plant and equipment, net	317,818		323,630
Intangibles, net	30,974		34,007
Other assets, net	23,464		28,490
Goodwill	115,036		115,037
Total assets	$	1,334,269	$	1,418,255
Liabilities and unitholders’ equity
Current liabilities:
Accounts payable	$	135,659	$	193,843
Accrued liabilities	142,815		76,667
Fair value of derivative liabilities	365,681		195,508
Due to General Partner	10,485		11,077
Current portion of working capital and acquisition facilities	647,941		497,578
Current portion of other obligations	8,642		8,594
Total current liabilities	1,311,223		983,267
Commitments and contingencies

Acquisition facility	—		377,400
Fair value of derivative liabilities, long-term	66,785		64,415
Other obligations, less current portion	28,481		31,664
Operating lease liabilities, less current portion	7,879		11,067
Due to General Partner	2,564		2,291
Deferred income taxes	12,497		13,733
Total liabilities	1,429,429		1,483,837
Unitholders’ equity:
Common unitholders - public (6,689,383 and 6,685,698 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)	49,241		62,090
Common unitholders - affiliated (19,548,849 and 19,548,849 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)	(148,514)		(111,175)
Accumulated other comprehensive loss, net of tax	4,113		(16,497)
Total unitholders’ equity	(95,160)		(65,582)
Total liabilities and unitholders’ equity	$	1,334,269	$	1,418,255

The accompanying notes are an integral part of these financial statements.

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Sprague Resources LP

Unaudited Condensed Consolidated Statements of Operations

(in thousands except unit and per unit amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	1,278,310	$	657,672	$	3,091,625	$	1,693,805
Cost of products sold (exclusive of depreciation and amortization)	1,261,935		659,803		2,991,013		1,584,585
Operating expenses	22,092		19,148		45,327		38,379
Selling, general and administrative	21,941		16,719		50,661		41,958
Depreciation and amortization	8,049		8,258		16,175		16,741
Total operating costs and expenses	1,314,017		703,928		3,103,176		1,681,663
Other operating income	—		9,725		—		9,725
Operating (loss) income	(35,707)		(36,531)		(11,551)		21,867
Other (loss) income	—		—		(1)		2
Interest income	115		77		143		143
Interest expense	(9,242)		(8,587)		(19,814)		(17,402)
(Loss) income before income taxes	(44,834)		(45,041)		(31,223)		4,610
Income tax (provision) benefit	(461)		(562)		3,874		(1,433)
Net (loss) income	(45,295)		(45,603)		(27,349)		3,177

Limited partners' interest in net (loss) income	$	(45,295)	$	(45,603)	$	(27,349)	$	3,177

Net (loss) income per limited partner unit:
Common - basic	$	(1.73)	$	(1.74)	$	(1.04)	$	0.13
Common - diluted	$	(1.73)	$	(1.74)	$	(1.04)	$	0.13
Units used to compute net income per limited partner unit:
Common - basic	26,236,612		26,226,255		26,235,585		25,066,494
Common - diluted	26,236,612		26,226,255		26,235,585		25,066,494
Distribution declared per unit	$	0.4338	$	0.6675	$	0.8676	$	1.3350

The accompanying notes are an integral part of these financial statements.

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Sprague Resources LP

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net (loss) income	$	(45,295)	$	(45,603)	$	(27,349)	$	3,177
Other comprehensive income, net of tax:
Unrealized gain on interest rate swaps
Net income (loss) arising in the period	6,446		(208)		18,268		1,598
Reclassification adjustment related to loss (gain) realized in income	1,044		1,459		2,543		2,815
Net change in unrealized gain on interest rate swaps	7,490		1,251		20,811		4,413
Tax effect	(58)		(10)		(162)		(34)
	7,432		1,241		20,649		4,379
Foreign currency translation adjustment	(72)		42		(39)		78
Other comprehensive income	7,360		1,283		20,610		4,457
Comprehensive (loss) income	$	(37,935)	$	(44,320)	$	(6,739)	$	7,634

The accompanying notes are an integral part of these financial statements.

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Sprague Resources LP

Unaudited Condensed Consolidated Statements of Unitholders’ Equity

(in thousands)


	Common- Public		Common- Affiliated		Incentive Distribution Rights		Accumulated Other Comprehensive Loss		Total

Three Months Ended June 30, 2021 and 2022
Balance at March 31, 2021	$	166,680	$	(51,855)	$	—	$	(22,808)	$	92,017
Net loss	(16,346)		(29,257)		—		—		(45,603)
Other comprehensive income	—		—		—		1,283		1,283
Distributions paid in cash	(6,787)		(10,719)		—		—		(17,506)
Increase in affiliated units as a result of acquisition by Hartree Partners, LP	(30,921)		30,921		—		—		—
Balance at June 30, 2021	$	112,626	$	(60,910)	$	—	$	(21,525)	$	30,191

Balance at March 31, 2022	$	63,763	$	(106,282)	$	—	$	(3,247)	$	(45,766)
Net loss	(11,544)		(33,751)		—		—		(45,295)
Other comprehensive income	—		—		—		7,360		7,360
Unit-based compensation	(78)		—		—		—		(78)
Distributions paid in cash	(2,900)		(8,481)		—		—		(11,381)

Balance at June 30, 2022	$	49,241	$	(148,514)	$	—	$	4,113	$	(95,160)

Six Months Ended June 30, 2021 and 2022
Balance at December 31, 2020	$	154,238	$	(69,561)	$	—	$	(25,982)	$	58,695
Net income	3,289		(2,186)		2,074		—		3,177
Other comprehensive income	—		—		—		4,457		4,457
Unit-based compensation	(1,373)		(1,894)		—		—		(3,267)
Distributions paid in cash	(13,459)		(19,364)		(2,074)		—		(34,897)
Increase in affiliated units as a result of acquisition by Hartree Partners, LP	(30,921)		30,921		—		—		—
Common units issued in connection with annual bonus	1,461		2,014		—		—		3,475
Units withheld for employee tax obligations	(609)		(840)		—		—		(1,449)
Balance at June 30, 2021	$	112,626	$	(60,910)	$	—	$	(21,525)	$	30,191

Balance at December 31, 2021	$	62,090	$	(111,175)	$	—	$	(16,497)	$	(65,582)
Net (loss)	(6,971)		(20,378)		—		—		(27,349)
Other comprehensive income	—		—		—		20,610		20,610
Unit-based compensation	(78)		—		—		—		(78)
Distributions paid in cash	(5,800)		(16,961)		—		—		(22,761)

Balance at June 30, 2022	$	49,241	$	(148,514)	$	—	$	4,113	$	(95,160)

The accompanying notes are an integral part of these financial statements.

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Sprague Resources LP

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities
Net (loss) income	$	(27,349)	$	3,177
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (includes amortization of deferred debt issuance costs)	18,362		19,297
(Gain) loss on sale of assets	(83)		(9,840)

Provision for doubtful accounts	(20)		98
Non-cash unit-based compensation	(78)		208

Deferred income taxes	(1,399)		(246)
Changes in assets and liabilities:
Accounts receivable	1,105		34,716
Inventories	200,676		52,888
Other assets	2,574		54,266
Fair value of commodity derivative instruments	68,610		29,933
Due to General Partner and affiliates	(319)		(6,295)
Accounts payable, accrued liabilities and other	4,126		(19,050)
Net cash provided by operating activities	266,205		159,152
Cash flows from investing activities
Purchases of property, plant and equipment	(6,582)		(5,799)
Proceeds from sale of assets	218		11,125
Net cash (used in) provided by investing activities	(6,364)		5,326
Cash flows from financing activities
Net payments under credit agreements	(226,941)		(117,383)
Payments on finance leases and other obligations	(3,499)		(3,335)
Debt issuance costs	(857)		(4,430)
Distributions to unitholders	(22,761)		(34,897)
Units withheld for employee tax obligations	—		(1,450)
Net cash (used in) financing activities	(254,058)		(161,495)
Effect of exchange rate changes on cash balances held in foreign currencies	(3)		(4)
Net change in cash and cash equivalents	5,780		2,979
Cash and cash equivalents, beginning of period	669		3,771
Cash and cash equivalents, end of period	$	6,449	$	6,750
Supplemental disclosure of cash flow information
Cash paid for interest	$	18,065	$	14,476
Cash paid for taxes	$	3,583	$	6,165
Assets acquired under finance lease obligations	$	912	$	1,580
Cash paid for operating leases	$	3,713	$	3,068

The accompanying notes are an integral part of these financial statements.

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Sprague Resources LP

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands unless otherwise stated)

1. Description of Business and Summary of Significant Accounting Policies

Partnership Businesses

Sprague Resources LP (the “Partnership”) is a Delaware limited partnership formed on June 23, 2011 by Sprague Holdings and its General Partner (defined below) and engages in the purchase, storage, distribution and sale of refined products and natural gas, and provides storage and handling services for a broad range of materials.

Unless the context otherwise requires, prior to May 28, 2021, references referring to “Sprague Resources,” and the “Partnership,” refer to Sprague Resources LP and its subsidiaries; references to the "General Partner" refer to Sprague Resources GP LLC; references to “Axel Johnson” or the "Sponsor" refer to Axel Johnson Inc. and its controlled affiliates, collectively, other than Sprague Resources, its subsidiaries and its General Partner; references to “Sprague Holdings” refer to Sprague Resources Holdings LLC, a wholly owned subsidiary of Axel Johnson and the owner of the General Partner.

Unless the context otherwise requires, effective May 28, 2021, references referring to Sprague Resources, and the Partnership, refer to Sprague Resources LP and its subsidiaries; references to the General Partner refer to Sprague Resources GP LLC; references to “Hartree” or the "Sponsor" refer to Hartree Partners, LP, and its controlled affiliates, collectively, other than Sprague Resources, its subsidiaries and its General Partner; references to “Sprague Holdings” refer to Sprague HP Holdings LLC, a wholly owned subsidiary of Hartree and the owner of the General Partner.

On April 20, 2021, the Partnership and Hartree Partners, LP ("Hartree") announced that Sprague Holdings entered into an agreement to sell to Sprague HP Holdings, LLC (a wholly-owned subsidiary of Hartree) the interest of Sprague Holdings in the General Partner, the incentive distribution rights and all of the common units representing limited partner interests that Sprague Holdings owned in the Partnership (the “Transaction”). The Transaction was completed and effective on May 28, 2021 and the aggregate purchase price was $290.0 million, consisting of approximately $265.0 million attributable to the purchase of 16,058,484 common units and approximately $25.0 million attributable to the general partner interest and incentive distribution rights. The Partnership elected not to apply push-down accounting in its consolidated financial statements upon the change in control on May 28, 2021.

On June 2, 2022, in response to an unsolicited non-binding proposal received from Hartree on January 11, 2022 and following negotiations between Hartree and the conflicts committee of the board of directors of the Partnership, the Partnership, and its General Partner entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sprague Holdings and Sparrow HP Merger Sub, LLC (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as a direct wholly owned subsidiary of the General Partner and Hartree (the “Merger”). Under the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding common unit, other than those held by Sprague Holdings or its permitted transferees, will be converted into the right to receive $19.00 per common unit in cash without any interest thereon (the “Merger Consideration”). The common units and incentive distribution rights in the Partnership held by Sprague Holdings and its permitted transferees and the General Partner immediately prior to the effective time of the Merger shall be unaffected by the Merger and shall remain outstanding. The closing of the transactions contemplated by the Merger Agreement are expected to occur in the third quarter of 2022.

The Partnership owns, operates and/or controls a network of refined products and materials handling terminals located in the Northeast United States and in Quebec, Canada. The Partnership also utilizes third-party terminals in the Northeast United States through which it sells or distributes refined products pursuant to rack, exchange and throughput agreements. The Partnership has four reportable segments: refined products, natural gas, materials handling and other operations.

•The refined products segment purchases a variety of refined products, such as heating oil, diesel fuel, residual fuel oil, kerosene, jet fuel and gasoline - primarily from refining companies, trading organizations and producers - and sells them to wholesale and commercial customers.

•The natural gas segment purchases natural gas from natural gas producers and trading companies and sells and distributes natural gas to commercial and industrial customers.

•The materials handling segment offloads, stores and prepares for delivery a variety of customer-owned products, including asphalt, clay slurry, salt, gypsum, crude oil, residual fuel oil, coal, petroleum coke, caustic soda, tallow, pulp, and heavy equipment.

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•The other operations segment primarily includes the marketing and distribution of coal and certain commercial trucking activities.

See Note 2 - Revenue for a description of the Partnership's revenue activities within these business segments.

As of June 30, 2022, the Sponsor, through its ownership of Sprague Holdings, owned 19,548,849 common units representing 74.5% of the limited partner interest in the Partnership. Sprague Holdings also owns the General Partner, which in turn owns a non-economic interest in the Partnership. Sprague Holdings currently holds incentive distribution rights ("IDRs") that entitle it to receive increasing percentages of the cash the Partnership distributes from distributable cash flow in excess of $0.7676 per unit per quarter, up to maximum of 50.0%. The maximum distribution of 50% does not include any distributions that Sprague Holdings may receive on any limited partner units that it owns.

Basis of Presentation

The Condensed Consolidated Financial Statements include the accounts of the Partnership and its wholly-owned subsidiaries. Intercompany transactions between the Partnership and its subsidiaries have been eliminated. The accompanying unaudited Condensed Consolidated Financial Statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim financial information. As permitted under those rules, certain notes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) to be included in annual financial statements have been condensed or omitted from these interim financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and related notes of the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 4, 2022 (the “2021 Annual Report”).

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and the reported net sales and expenses in the income statement. Actual results could differ from those estimates. Among the estimates made by management are the fair value of derivative assets and liabilities, valuation of contingent consideration, valuation of reporting units within the goodwill impairment assessment, and if necessary long-lived asset impairments and environmental and legal obligations.

The Condensed Consolidated Financial Statements included herein reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the Partnership’s consolidated financial position at June 30, 2022 and December 31, 2021, the consolidated results of operations for the three and six months ended June 30, 2022 and 2021, consolidated statement of changes in unitholders' equity for the three and six months ended June 30, 2022 and 2021, and the consolidated cash flows for the six months ended June 30, 2022 and 2021. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year. Demand for some of the Partnership’s refined petroleum products, specifically heating oil and residual oil for space heating purposes, and to a lesser extent natural gas, are generally higher during the first and fourth quarters of the calendar year which may result in significant fluctuations in the Partnership’s quarterly operating results.

Going Concern Assessment

Pursuant to FASB ASC 205-40, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, the Partnership is required to assess its ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, the Partnerships’s management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Partnerships’s ability to continue as a going concern. The mitigating effect of the Partnerships’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Partnership’s Credit Agreement matures on May 19, 2023 and has not been renewed as of the date of the issuance of these condensed consolidated financial statements. On June 2, 2022, the Partnership entered in a Merger Agreement with Sprague Holdings and Merger Sub, pursuant to which Sprague Holdings will acquire the common units that it does not already own. As the Merger Agreement is subject to customary closing conditions and because the pending Merger may affect how, or

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if, the Partnership elects to obtain a maturity extension, management has deferred the process to extend the maturity date of its Credit Agreement..

While we plan to renew or extend the terms of the Credit Agreement prior to the stated maturity date, until such time as we have executed an agreement to refinance or extend the maturity of the Credit Agreement, we cannot conclude that it is probable we will do so. Accordingly, the Partnership concluded that there is substantial doubt about its ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts or other amounts and classifications of liabilities, other than obligations under the Credit Agreement classified as current, that might result from the outcome of the uncertainties described above.

COVID-19

In 2022, a wide array of sectors continue to be affected by COVID-19, its variants and the related supply chain disruptions brought on by the pandemic, including but not limited to energy, transportation, manufacturing and commercial and retail businesses and global economic conditions continued to be volatile. With the easing of restrictions, health advancements and other ongoing measures to alleviate the pandemic in 2021 and through the second quarter of 2022, demand for refined products appears to have normalized. In order to continue to mitigate the effects of the pandemic, we continue to focus on the safety of employees and other stakeholders as well as a number of initiatives relating to cost reduction, liquidity and operating efficiencies.

The Partnership makes estimates and assumptions that affect the reported amounts on these consolidated financial statements and accompanying notes as of the date of the financial statements. The Partnership assessed accounting estimates that require consideration of forecasted financial information, including, but not limited to, the allowance for credit losses, the carrying value of goodwill, intangible assets, and other long-lived assets. This assessment was conducted in the context of information reasonably available to the Partnership, as well as consideration of the future potential impacts of COVID-19, and its variants, on the Partnership’s business as of June 30, 2022. While market conditions for our products and services appear to have stabilized as compared to the onset of the pandemic, the pandemic remains fluid. The economic and operational landscape has been altered, and it is difficult to determine whether such changes are temporary or permanent, with challenges related to staffing, supply chain, and transportation globally. Accordingly, if the impact is more severe or longer in duration than the Partnership has assumed, such impact could potentially result in impairments and increases in credit allowances. As we strategize with regard to fiscal year 2022 and beyond, the Partnership continues to monitor the evolving impacts of COVID-19 and its variants closely and adapting our operations to changing demand patterns and the potential impact of the COVID-19 pandemic on future cash flows and access to adequate liquidity.

Significant Accounting Policies

The Partnership's significant accounting policies are described in Note 1 - Description of Business and Summary of Significant Accounting Policies in the Partnership’s audited consolidated financial statements included in the 2021 Annual Report and are the same as are used in preparing these unaudited interim Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Partnership adopted this guidance on a prospective basis with regard to the Partnership's interest rate swaps. The guidance did not have a material impact on our financial position, results of operations or disclosures at transition, but we will continue to evaluate its impact on contracts modified on or before December 31, 2022.

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In May 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842), Lessors - Certain Leases with Variable Lease Payments. This ASU addresses an issue related to a lessor's accounting for certain leases with variable lease payments. The amendments in this Update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as a sales-type lease or a direct financing lease. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. The adoption of this guidance did not have a material impact to the Partnership's Condensed Consolidated Financial Statements.

2. Revenue

Disaggregated Revenue

In general, the Partnership's business segmentation is aligned according to the nature and economic characteristics of its products and customer relationships which provides meaningful disaggregation of each business segment's results of operations. The Partnership operates its businesses in the Northeast and Mid-Atlantic United States and Eastern Canada.

The refined products segment purchases a variety of refined products, such as heating oil, diesel fuel, residual fuel oil, kerosene, jet fuel and gasoline (primarily from refining companies, trading organizations and producers), and sells them to wholesale and commercial customers. Refined products revenue-producing activities are direct sales to customers, including throughput transactions. Revenue is recognized when the product is delivered. Revenue is not recognized on exchange agreements, which are entered into primarily to acquire refined products by taking delivery of products closer to the Partnership’s end markets. Rather, net differentials or fees for exchange agreements are recorded within cost of products sold (exclusive of depreciation and amortization).

The natural gas segment purchases natural gas from natural gas producers and trading companies and sells and distributes natural gas to commercial and industrial customers. Natural gas revenue-producing activities are sales to customers at various points on natural gas pipelines or at local distribution companies (i.e., utilities). Natural gas sales not billed by month-end are accrued based upon gas volumes delivered.

The materials handling segment offloads, stores and prepares for delivery a variety of customer-owned products. A majority of the materials handling segment revenue is generated under leasing arrangements with revenue recorded over the lease term generally on a straight-line basis. Contingent rentals are recorded as revenue only when billable under the arrangement. For materials handling contracts that are not leases, the Partnership recognizes revenue either at a point in time after services are performed or over a period of time if the services are performed in a continuous fashion over the period of the contract as these methods represent a faithful depiction of the transfer of goods and services.

The other operations segment primarily includes the marketing and distribution of coal and certain commercial trucking activities. Revenue from other operations is recognized when the product is delivered or the services are rendered.

Further disaggregation of net sales by business segment and geographic destination is as follows:

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	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales:
Refined products
Distillates	$	800,013	$	410,551	$	2,172,098	$	1,163,478
Gasoline	314,309		124,550		501,880		219,596
Heavy fuel oil and asphalt	74,891		54,041		182,065		122,268
Total refined products	$	1,189,213	$	589,142	$	2,856,043	$	1,505,342
Natural gas	70,510		51,360		196,354		153,935
Materials handling	12,871		12,725		25,964		24,771
Other operations	5,716		4,445		13,264		9,757
Net sales	$	1,278,310	$	657,672	$	3,091,625	$	1,693,805

Net sales by country:
United States	$	1,178,954	$	584,726	$	2,891,332	$	1,554,617
Canada	99,356		72,946		200,293		139,188
Net sales	$	1,278,310	$	657,672	$	3,091,625	$	1,693,805

Contract Balances

Contract liabilities primarily relate to advances or deposits received from the Partnership's customers before revenue is recognized. These amounts are included in accrued liabilities and amounted to $9.3 million and $9.8 million as of June 30, 2022 and December 31, 2021, respectively. A substantial portion of the contract liabilities as of December 31, 2021 remains outstanding as of June 30, 2022 as they are primarily deposits. The Partnership does not have any material contract assets as of June 30, 2022 or December 31, 2021.

3. Leases

From a lessor perspective, the Partnership has entered into various throughput and materials handling arrangements with customers. These arrangements are accounted for as operating leases as determined by the use terms and rights outlined in the underlying agreements. The throughput contracts are agreements with refined products wholesalers that use the Partnership’s terminal facilities for a fee. The materials handling contracts are arrangements involving rentals of dedicated tanks, pads, land and small office locations for the purposes of storage, parking and other related uses. Income related to the operating leases with the Partnership as the lessor, as described above, totaled $9.3 million and $9.8 million for the three months ended June 30, 2022 and 2021, respectively, and $18.7 million and $20.3 million for the six months ended June 30, 2022 and 2021, respectively.

4. Accumulated Other Comprehensive Loss, Net of Tax

Amounts included in accumulated other comprehensive loss, net of tax, consisted of the following:


	June 30, 2022		December 31, 2021
Fair value of interest rate swaps, net of tax	$	15,694	$	(4,954)
Cumulative foreign currency translation adjustment	(11,581)		(11,543)
Accumulated other comprehensive loss, net of tax	$	4,113	$	(16,497)

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5. Inventories


	June 30, 2022		December 31, 2021
Petroleum and related products	$	230,705	$	426,323
Coal	2,156		6,870
Natural gas	6,283		6,627
Inventories	$	239,144	$	439,820

6. Credit Agreement


	June 30, 2022		December 31, 2021
Working capital facilities	$	290,541	$	497,578
Acquisition facility	357,400		377,400
Total credit agreement	647,941		874,978
Less: current portion of working capital facilities	(647,941)		(497,578)
Long-term portion	$	—	$	377,400

On April 13, 2022, Sprague Operating Resources LLC (the "U.S. Borrower") and Kildair Service ULC (the "Canadian Borrower" and, together with the U.S. Borrower, the "Borrowers"), wholly owned subsidiaries of the Partnership, entered into a second amendment (the "Second Amendment") to the second amended and restated credit agreement, dated as of May 19, 2020 (the "Original Credit Agreement," the Original Credit Agreement as amended by the first amendment on May 11, 2021 and the Second Amendment, (the "Credit Agreement"). Upon the effective date, the Second Amendment increased the committed U.S. dollar revolving working capital facility from $465.0 million to $535.9 million, the uncommitted U.S. dollar revolving working capital facility from $200.0 million to $255.0 million, and the multicurrency revolving working capital facility from $85.0 million to $96.6 million. In addition, the Second Amendment included transition changes from LIBOR to the Secured Overnight Financing Rate ("SOFR") plus a SOFR spread adjustment ("Term SOFR") and extended the permitted expiration of letters of credit from six months to one year after the applicable facility termination date. The Second Amendment was accounted for as a modification of a syndicated loan arrangement with partial extinguishment to the extent there was a decrease in the borrowing capacity on a creditor by creditor basis. The Credit Agreement matures on May 19, 2023. The Partnership and certain of its subsidiaries (the "Subsidiary Guarantors") are guarantors of the obligations under the Credit Agreement. Obligations under the Credit Agreement are secured by substantially all of the assets of the Partnership, the Borrowers and the Subsidiary Guarantors (collectively, the "Loan Parties").

At June 30, 2022, the revolving credit facilities under the Credit Agreement contained, among other items, the following:

•A committed U.S. dollar revolving working capital facility of up to $535.9 million, subject to borrowing base limits, to be used for working capital loans and letters of credit;

•An uncommitted U.S. dollar revolving working capital facility of up to $255.0 million, subject to borrowing base limits and the sole discretion of the lenders, to be used for working capital loans and letters of credit;

•A multicurrency revolving working capital facility of up to $96.6 million, subject to borrowing base limits, to be used for working capital loans and letters of credit;

•A revolving acquisition facility of up to $450.0 million, subject to covenants, to be used for loans and letters of credit to fund capital expenditures and acquisitions and other general corporate purposes; and

•Subject to certain conditions, including the receipt of additional commitments from lenders, the ability to increase the U.S. dollar revolving working capital facility to up to $1.2 billion and the multicurrency revolving working capital facility to up to $320.0 million. Additionally, subject to certain conditions, the revolving acquisition facility may be increased to up to $750.0 million.

At June 30, 2022, indebtedness under the Credit Agreement bore interest, at the Borrowers’ option, at a rate per annum equal to either (i) the Eurocurrency Rate (which is the Term SOFR Rate for loans denominated in U.S. dollars and Term SOFR for loans denominated in Canadian dollars, in each case adjusted for certain regulatory costs, and in each case with a floor of 0.25%) for interest periods of one, two (solely with respect to Eurocurrency Rate loans denominated in Canadian dollars), three or six (solely with respect to Eurocurrency Rate loans denominated in U.S. dollars) months plus a specified margin or (ii) an alternate rate plus a specified margin.

At June 30, 2022, loans denominated in U.S. dollars, the alternate rate was the Base Rate which is the highest of (a) the U.S. Prime Rate as in effect from time to time, (b) the greater of the Federal Funds Effective Rate and the Overnight Bank

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Funding Rate as in effect from time to time plus 0.50% and (c) the one-month Eurocurrency Rate for U.S. dollars as in effect from time to time plus 1.00%. For loans denominated in Canadian dollars, the alternate rate was the Prime Rate which is the higher of (a) the Canadian Prime Rate as in effect from time to time and (b) the one-month Eurocurrency Rate for U.S. dollars as in effect from time to time plus 1.00%.

At June 30, 2022, the specified margins for the revolving working capital facilities varied based on the utilization of the working capital facilities as a whole, measured on a quarterly basis. The specified margin for (x) the committed U.S. dollar revolving working capital facility ranged from 1.00% to 1.50% for loans bearing interest at the Base Rate and from 2.00% to 2.50% for loans bearing interest at the Eurocurrency Rate, (y) the uncommitted U.S. dollar revolving working capital facility ranged from 0.75% to 1.25% for loans bearing interest at the Base Rate and 1.75% to 2.25% for loans that bore interest at the Eurocurrency Rate and (z) the multicurrency revolving working capital facility ranged from 1.00% to 1.50% for loans that bore interest at the Base Rate and 2.00% to 2.50% for loans that bore interest at the Eurocurrency Rate.

At June 30, 2022, the specified margin for the revolving acquisition facility varies based on the consolidated total leverage of the Loan Parties. The specified margin for the revolving acquisition facility range from 1.25% to 2.25% for loans bearing interest at the Base Rate and from 2.25% to 3.25% for loans bearing interest at the Eurocurrency Rate.

In addition, the Borrowers will incur a commitment fee on the unused portion of (x) the committed U.S. dollar revolving working capital facility and multicurrency revolving working capital facility that ranged from 0.375% to 0.500% per annum and (y) the revolving acquisition facility at a rate that ranged from 0.375% to 0.500% per annum. Overdue amounts bore interest at the applicable rates described above plus an additional margin of 2%.

The working capital facilities are subject to borrowing base reporting and as of June 30, 2022 and December 31, 2021, had a borrowing base of $591.3 million and $750.0 million, respectively. As of June 30, 2022 and December 31, 2021, outstanding letters of credit related to the working capital facilities were $76.9 million and $80.6 million, respectively. As of June 30, 2022 and December 31, 2021, outstanding letters of credit related to the acquisition facility were $19.6 million and $18.8 million, respectively. As of June 30, 2022, excess availability under the working capital facilities was $223.9 million and excess availability under the acquisition facility was $73.0 million.

The weighted average interest rate was 4.3% at June 30, 2022 and 3.2% at December 31, 2021. No amounts are due under the Credit Agreement until the maturity date. However, the current portion at June 30, 2022 represents both the amounts of the working capital facility and the acquisition facility.

The Credit Agreement contains various covenants and restrictive provisions that, among other things, prohibit the Partnership from making distributions to unitholders if any event of default occurs or would result from the distribution or if the Loan Parties would not be in pro forma compliance with the financial covenants after giving effect to the distribution. In addition, the Credit Agreement contains various covenants that are usual and customary for a financing of this type, size and purpose, including, but not limited to, covenants that require the Loan Parties to maintain: a minimum consolidated EBITDA-to fixed-charge ratio, a minimum consolidated net working capital amount and a maximum consolidated total leverage-to-EBITDA ratio. The Credit Agreement also limits the Loan Parties ability to incur debt, grant liens, make certain investments or acquisitions, enter into affiliate transactions and dispose of assets. The Partnership was in compliance with the covenants under the Credit Agreement at June 30, 2022.

The Credit Agreement also contains events of default that are usual and customary for a financing of this type, size and purpose including, among others, non-payment of principal, interest or fees, violation of certain covenants, material inaccuracy of representations and warranties, bankruptcy and insolvency events, cross-payment default and cross-acceleration, material judgments and events constituting a change of control. If an event of default exists under the Credit Agreement, the lenders will be able to terminate the lending commitments, accelerate the maturity of the Credit Agreement and exercise other rights and remedies with respect to the collateral.

7. Related Party Transactions

The General Partner charges the Partnership for the reimbursements of employee costs and related employee benefits and other overhead costs supporting the Partnership’s operations which amounted to $23.0 million and $20.2 million for the three months ended June 30, 2022 and 2021, and $54.0 million and $46.5 million for the six months ended June 30, 2022 and 2021, respectively. Through the General Partner, the Partnership participates in pension plans sponsored by Axel Johnson, in which the General Partner has indemnified the Partnership of any future payments to maintain these plans, as well as an other post-retirement benefits plan, which was previously sponsored by Axel Johnson, but is now sponsored by the General Partner

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beginning in June 2021. At June 30, 2022 and December 31, 2021, total amounts due to the General Partner with respect to these benefits and overhead costs were $13.0 million and $13.4 million, respectively.

During the three and six months ended June 30, 2022, the Partnership made oil and natural gas product purchases from Hartree totaling $49.7 million and $58.8 million, respectively, and generated sales of natural gas products to Hartree of $2.1 million and $2.8 million, respectively. There were no amounts recorded for tank fee and storage revenue for the three and six months ended June 30, 2022 as the lease agreement expired in 2021 and was not renewed. As of June 30, 2022, the Partnership is party to four credit guarantee arrangements with third party beneficiaries, totaling $73.0 million in credit support, for which Hartree acts as the guarantor.

During the three and six months ended June 30, 2021, the Partnership recorded tank use and storage fee revenue of $0.2 million and $0.7 million, respectively, from lease agreements entered into with Hartree, a related party. In addition, the Partnership made net inventory purchases from Hartree totaling $29.8 million and $97.8 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, the Partnership had a receivable of $0.5 million from Hartree related to certain fees paid on their behalf.

8. Segment Reporting

The Partnership has four reportable segments that comprise the structure used by the chief operating decision makers (CEO and CFO) to make key operating decisions and assess performance. When establishing a reporting segment, the Partnership aggregates individual operating units that are in the same line of business and have similar economic characteristics. These reportable segments are refined products, natural gas, materials handling and other operations.

The Partnership's refined products segment purchases a variety of refined products, such as heating oil, diesel fuel, residual fuel oil, kerosene, jet fuel and gasoline (primarily from refining companies, trading organizations and producers), and sells them to its customers. The Partnership has wholesale customers who resell the refined products they purchase from the Partnership and commercial customers who consume the refined products they purchase. The Partnership’s wholesale customers consist of home heating oil retailers and diesel fuel and gasoline resellers. The Partnership’s commercial customers include federal and state agencies, municipalities, regional transit authorities, drill sites, large industrial companies, real estate management companies, hospitals, educational institutions and asphalt paving companies. The refined products reportable segment consists of two operating segments.

The Partnership's natural gas segment purchases natural gas from natural gas producers and trading companies and sells and manages distribution of natural gas to commercial and industrial customer locations across 13 states in the Northeast and Mid-Atlantic United States and Canada. The natural gas reportable segment consists of one operating segment.

The Partnership's materials handling segment offloads, stores, and prepares for delivery a variety of customer-owned products, including asphalt, clay slurry, salt, gypsum, crude oil, residual fuel oil, coal, petroleum coke, caustic soda, tallow, pulp and heavy equipment. These services are generally conducted under multi-year agreements as either fee-based activities or as leasing arrangements when the right to use an identified asset (such as storage tanks or storage locations) has been conveyed in the agreement. The materials handling reportable segment consists of two operating segments.

The Partnership's other operations segment primarily consists of the purchase, sale and distribution of coal, and commercial trucking activities unrelated to its refined products segment. Other operations are not reported separately as they represent less than 10% of consolidated net sales and adjusted gross margin. The other operations reporting segment consists of two operating segments.

The Partnership evaluates segment performance based on adjusted gross margin, a non-GAAP measure, which is net sales less cost of products sold (exclusive of depreciation and amortization) increased by unrealized hedging losses and decreased by unrealized hedging gains, in each case with respect to refined products and natural gas inventory, and natural gas transportation contracts.

Based on the way the business is managed, it is not reasonably possible for the Partnership to allocate the components of operating costs and expenses among the operating segments. There were no significant intersegment sales for any of the years presented below.

The Partnership had no single customer that accounted for more than 10% of total net sales for the three and six months ended June 30, 2022 and 2021, respectively. The Partnership’s foreign sales, primarily sales of refined products and natural gas to its customers in Canada, were $99.4 million and $72.9 million for the three months ended June 30, 2022 and 2021, respectively, and $200.3 million and $139.2 million for the six months ended June 30, 2022 and 2021, respectively.

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Summarized financial information for the Partnership's reportable segments is presented in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales:
Refined products	$	1,189,213	$	589,142	$	2,856,043	$	1,505,342
Natural gas	70,510		51,360		196,354		153,935
Materials handling	12,871		12,725		25,964		24,771
Other operations	5,716		4,445		13,264		9,757
Net sales	$	1,278,310	$	657,672	$	3,091,625	$	1,693,805
Adjusted gross margin (1):
Refined products	$	29,868	$	27,165	$	83,994	$	78,198
Natural gas	5,755		(2,725)		77,106		38,364
Materials handling	12,799		12,694		25,929		24,770
Other operations	2,628		1,696		5,550		3,709
Adjusted gross margin	51,050		38,830		192,579		145,041
Reconciliation to operating income (2):
Add/(deduct):
Change in unrealized gain (loss) on inventory (3)	21,998		(5,369)		6,629		20,888
Change in unrealized value on natural gas transportation contracts (4)	(56,673)		(35,592)		(98,596)		(56,709)
Operating costs and expenses not allocated to operating segments:
Operating expenses	(22,092)		(19,148)		(45,327)		(38,379)
Selling, general and administrative	(21,941)		(16,719)		(50,661)		(41,958)
Depreciation and amortization	(8,049)		(8,258)		(16,175)		(16,741)
Other operating (loss) income	—		9,725		—		9,725
Operating (loss) income	(35,707)		(36,531)		(11,551)		21,867
Other income	—		—		(1)		2
Interest income	115		77		143		143
Interest expense	(9,242)		(8,587)		(19,814)		(17,402)
Income tax (provision) benefit	(461)		(562)		3,874		(1,433)
Net (loss) income	$	(45,295)	$	(45,603)	$	(27,349)	$	3,177

(1)The Partnership trades, purchases, stores and sells energy commodities that experience market value fluctuations. To manage the Partnership’s underlying performance, including its physical and derivative positions, management utilizes adjusted gross margin, which is a non-GAAP financial measure. Adjusted gross margin is also used by external users of the Partnership’s consolidated financial statements to assess the Partnership’s economic results of operations and its commodity market value reporting to lenders. In determining adjusted gross margin, the Partnership adjusts its segment results for the impact of the changes in unrealized gains and losses with regard to refined products and natural gas inventory, and natural gas transportation contracts, which are not marked to market for the purpose of recording unrealized gains or losses in net income. These adjustments align the unrealized hedging gains and losses to the period in which the revenue from the sale of inventory, prepaid fixed forwards and the utilization of transportation contracts relating to those hedges is realized in net income. Adjusted gross margin has no impact on reported volumes or net sales.

(2)Reconciliation of adjusted gross margin to operating income, the most directly comparable GAAP measure.

(3)Inventory is valued at the lower of cost or net realizable value. The adjustment related to change in the unrealized gain on inventory which is not included in net income, represents the estimated difference between inventory valued at the lower of cost or net realizable value as compared to market values. The fair value of the derivatives the Partnership uses to economically hedge its inventory declines or appreciates in value as the value of the underlying inventory appreciates or declines, which creates unrealized hedging losses (gains) with respect to the derivatives that are included in net income.

(4)Represents the Partnership’s estimate of the change in fair value of the natural gas transportation contracts which are not recorded in net income until the transportation is utilized in the future (i.e., when natural gas is delivered to the customer), as these contracts are executory contracts that do not qualify as derivatives. As the fair value of the natural gas transportation contracts decline or appreciate, the offsetting physical or financial derivative will also appreciate or decline creating unmatched unrealized hedging (gains) losses in net income.

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Segment Assets

Due to the commingled nature and uses of the Partnership’s fixed assets, the Partnership does not track its fixed assets between its refined products and materials handling operating segments or its other operations. There are no significant fixed assets attributable to the natural gas reportable segment.

As of June 30, 2022, goodwill recorded for the refined products, natural gas, materials handling and other operations segments amounted to $71.4 million, $35.5 million, $6.9 million and $1.2 million, respectively.

9. Financial Instruments and Off-Balance Sheet Risk

As of June 30, 2022 and December 31, 2021, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated fair value because of the short maturity of these instruments. As of June 30, 2022 and December 31, 2021, the carrying value of the Partnership’s margin deposits with brokers approximates fair value and consists of initial margin with futures transaction brokers, along with variation margin, which is paid or received on a daily basis, and is included in other current assets or other current liabilities. As of June 30, 2022 and December 31, 2021, the carrying value of the Partnership’s debt approximated fair value due to the variable interest nature of these instruments.

The following table presents financial assets and financial liabilities of the Partnership measured at fair value on a recurring basis:


	As of June 30, 2022
	Fair Value Measurement		Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Derivative assets:

Commodity fixed forwards	$	21,203	$	—	$	21,203	$	—
Futures, swaps and options	261,852		261,852		—		—
Commodity derivatives	283,055		261,852		21,203		—
Interest rate swaps	15,818		—		15,818		—

Total derivative assets	$	298,873	$	261,852	$	37,021	$	—
Derivative liabilities:

Commodity fixed forwards	274,141		—		274,141		—
Futures, swaps and options	158,325		158,260		65		—
Commodity derivatives	432,466		158,260		274,206		—
Interest rate swaps	—		—		—		—

Total derivative liabilities	$	432,466	$	158,260	$	274,206	$	—


	As of December 31, 2021
	Fair Value Measurement		Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Derivative assets:
Commodity fixed forwards	$	25,793	$	—	$	25,793	$	—
Futures, swaps and options	148,034		148,029		5		—
Commodity derivatives	173,827		148,029		25,798		—
Interest rate swaps	302		—		302		—

Total derivative assets	$	174,129	$	148,029	$	26,100	$	—
Derivative liabilities:

Commodity fixed forwards	176,602		—		176,602		—
Futures, swaps and options	78,026		77,948		78		—
Commodity derivatives	254,628		77,948		176,680		—
Interest rate swaps	5,295		—		5,295		—

Total derivative liabilities	$	259,923	$	77,948	$	181,975	$	—

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Commodity Derivative Instruments

The Partnership utilizes derivative instruments consisting of futures contracts, forward contracts, swaps, options and other derivatives individually or in combination, to mitigate its exposure to fluctuations in prices of refined petroleum products and natural gas. The use of these derivative instruments within the Partnership's risk management policy may, on a limited basis, generate gains or losses from changes in market prices. The Partnership enters into futures and over-the-counter (“OTC”) transactions either on regulated exchanges or in the OTC market. Futures contracts are exchange-traded contractual commitments to either receive or deliver a standard amount or value of a commodity at a specified future date and price, with some futures contracts based on cash settlement rather than a delivery requirement. Futures exchanges typically require margin deposits as security. OTC contracts, which may or may not require margin deposits as security, involve parties that have agreed either to exchange cash payments or deliver or receive the underlying commodity at a specified future date and price. The Partnership posts initial margin with futures transaction brokers, along with variation margin, which is paid or received on a daily basis, and is included in other current assets or other current liabilities. In addition, the Partnership may either pay or receive margin based upon exposure with counterparties. Payments made by the Partnership are included in other current assets, whereas payments received by the Partnership are included in accrued liabilities. Substantially of all of the Partnership’s commodity derivative contracts outstanding as of June 30, 2022 will settle prior to December 31, 2023.

The Partnership enters into some master netting arrangements to mitigate credit risk with significant counterparties. Master netting arrangements are standardized contracts that govern all specified transactions with the same counterparty and allow the Partnership to terminate all contracts upon occurrence of certain events, such as a counterparty’s default. The Partnership has elected not to offset the fair value of its derivatives, even where these arrangements provide the right to do so.

The Partnership’s derivative instruments are recorded at fair value, with changes in fair value recognized in net income each period. The Partnership’s fair value measurements are determined using the market approach and includes non-performance risk and time value of money considerations. Counterparty credit is considered for receivable balances, and the Partnership’s credit is considered for payable balances. In accordance with fair value standards under GAAP, there was a $4.0 million gain and $12.8 million gain recorded during the three and six months ended June 30, 2022, respectively, associated with the quarterly fair value measurement of the credit risk associated with our refined product and natural gas derivative assets and liabilities. There were no such amounts recorded in 2021.

The Partnership determines fair value based on a hierarchy for the inputs used to measure the fair value of financial assets and liabilities based on the source of the input, which generally range from quoted prices for identical instruments in a principal trading market (Level 1) to estimates determined using significant unobservable inputs (Level 3). Multiple inputs may be used to measure fair value; however, the level of fair value is based on the lowest significant input level within this fair value hierarchy.

Details on the methods and assumptions used to determine the fair values are as follows:

Fair value measurements based on Level 1 inputs: Measurements that are most observable and are based on quoted prices of identical instruments obtained from the principal markets in which they are traded. Closing prices are both readily available and representative of fair value. Market transactions occur with sufficient frequency and volume to assure liquidity.

Fair value measurements based on Level 2 inputs: Measurements derived indirectly from observable inputs or from quoted prices from markets that are less liquid are considered Level 2. Measurements based on Level 2 inputs include OTC derivative instruments that are priced on an exchange traded curve, but have contractual terms that are not identical to exchange traded contracts. The Partnership utilizes fair value measurements based on Level 2 inputs for its fixed forward contracts, over-the-counter commodity price swaps, interest rate swaps and forward currency contracts.

Fair value measurements based on Level 3 inputs: Measurements that are least observable are estimated from significant unobservable inputs determined from sources with little or no market activity for comparable contracts or for positions with longer durations.

The Partnership does not offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against the fair value of derivative instruments executed with the same counterparty under the same master netting arrangement. The Partnership had no right to reclaim or obligation to return cash collateral as of June 30, 2022 and December 31, 2021.

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The Partnership enters into derivative contracts with counterparties, some of which are subject to master netting arrangements, which allow net settlements under certain conditions. The Partnership presents derivatives at gross fair values in the Condensed Consolidated Balance Sheets. The maximum amount of loss due to credit risk that the Partnership would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the net fair value of these financial instruments, exclusive of cash collateral, was $137.8 million at June 30, 2022.

Information related to these offsetting arrangements is set forth below:


	As of June 30, 2022
			Gross Amount Not Offset in the Balance Sheet
	Gross Amount of Assets/Liabilities in the Balance Sheet		Financial Instruments		Cash Collateral Posted		Net Amount
Commodity derivative assets	$	283,055	$	(161,036)	$	(86,281)	$	35,738
Interest rate swap derivative assets	15,818		—		—		15,818

Fair value of derivative assets	$	298,873	$	(161,036)	$	(86,281)	$	51,556

Commodity derivative liabilities	(432,466)		161,036		—		(271,430)


Fair value of derivative liabilities	$	(432,466)	$	161,036	$	—	$	(271,430)


	As of December 31, 2021
			Gross Amount Not Offset in the Balance Sheet
	Gross Amount of Assets/Liabilities in the Balance Sheet		Financial Instruments		Cash Collateral Posted		Net Amount
Commodity derivative assets	$	173,827	$	(77,927)	$	(22,623)	$	73,277
Interest rate swap derivative assets	302		—		—		302

Fair value of derivative assets	$	174,129	$	(77,927)	$	(22,623)	$	73,579

Commodity derivative liabilities	$	(254,628)	$	77,927	$	1,313	$	(175,388)
Interest rate swap derivative liabilities	(5,295)		—		—		(5,295)

Fair value of derivative liabilities	$	(259,923)	$	77,927	$	1,313	$	(180,683)

The following table presents total realized and unrealized gains (losses) on derivative instruments utilized for commodity risk management purposes included in cost of products sold (exclusive of depreciation and amortization):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Refined products contracts	$	(37,995)	$	(19,503)	$	(171,054)	$	(39,277)
Natural gas contracts	4,112		(34,447)		172,873		(33,138)
Total	$	(33,883)	$	(53,950)	$	1,819	$	(72,415)

There were no discretionary trading activities for the three and six months ended June 30, 2022 and 2021. The following table presents gross volume of commodity derivative instruments outstanding for the periods indicated:


	As of June 30, 2022		As of December 31, 2021
	Refined Products (Barrels)	Natural Gas (MMBtus)	Refined Products (Barrels)	Natural Gas (MMBtus)
Long contracts	4,327	145,722	10,034	167,709
Short contracts	(4,983)	(88,320)	(14,483)	(98,152)

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Interest Rate Derivatives

We enter into interest rate swaps to manage exposures in changing interest rates. We swap the variable SOFR interest rate payable under our Credit Agreement for fixed LIBOR or equivalent SOFR interest rates. These interest rate swaps meet the criteria to receive cash flow hedge accounting treatment. Counterparties to the Partnership’s interest rate swaps are large multinational banks and the Partnership does not believe there is a material risk of counterparty non-performance. The Partnership expects to continue to utilize interest rate swaps to hedge cash flow risk and to manage its exposure to SOFR interest rates for the foreseeable future.

The Partnership's interest rate swap agreements outstanding as of June 30, 2022 were as follows:

Beginning

Ending

Notional Amount

January 2022

December 2022

425,000

January 2023

March 2023

475,000

April 2023

December 2023

450,000

January 2024

December 2024

500,000

January 2025

December 2026

450,000

January 2027

300,000


* During the months of May through October, one interest rate swap agreement decreases by $100 million . This decrease is not reflected in the notional amount in the table above.
** During the months of May through October, two interest rate swap agreements decrease by $100 million each. These decreases are not reflected in the notional amount in the table above.

The Partnership records unrealized gains and losses on its interest rate swaps as a component of accumulated other comprehensive loss, net of tax, which is reclassified to earnings as interest expense when the payments are made. As of June 30, 2022, the amount of unrealized gains, net of tax, expected to be reclassified to earnings during the following twelve-month period was $5.2 million.

10. Commitments and Contingencies

Legal, Environmental and Other Proceedings

On July 26, 2022, a purported unitholder of the Partnership filed a lawsuit, entitled Mark Giddings vs. Sprague Resources LP, et al., in the United States District Court for the Southern District of New York. The plaintiff alleges that the preliminary information statement filed by the Partnership with the SEC on July 7, 2022, contains materially incomplete and misleading information and omits material information with respect to the Merger, rendering the preliminary information statement materially incomplete and misleading in violation of Sections 14(a) and 20(a) of the Exchange Act. The plaintiff seeks, among other things, (i) injunctive relief enjoining the Merger, (ii) in the event the Merger is consummated, the rescission and setting aside of the Merger or an award of rescissory damages to the plaintiff (iii) an injunction directing the Partnership, the General Partner and our board of directors to disseminate an amended information statement that is not materially incomplete or misleading, and (iv) costs and attorneys’ fees. The Partnership believes that the claims asserted in this lawsuit are without merit and intends to defend itself against all claims. Additional lawsuits arising out of or relating to the Merger Agreement and the transactions contemplated thereby may be filed in the future.

The Partnership is subject to a tax on sales made in Quebec from product it imports into the province. During an audit by the Quebec Energy Board (QEB) of the annual filings, the Partnership initiated legal action seeking a declaration to limit the applicability of the tax to direct imports, as well as the periods subject to review. Since filing this legal action in June 2018, the Partnership has been assessed $9.0 million of tax, including interest and penalties, for the period of 2007 to 2021. Similarly, since the filing, the Partnership has been assessed $10.3 million, including a 15% penalty and interest, from the Ministry of the Environment, and the Fight Against Climate Change (known as MELCC) under separate regulation that was in effect for the period from 2007 through 2014. The Partnership is disputing this assessment on the same basis as set out in the QEB legal action described above. The Partnership has accrued an amount which it believes to be a reasonable estimate of the low end of a range of loss related to these matters and such amount is not material to the consolidated financial statements.

On September 14, 2020, a purported class action complaint was filed against Sprague Operating Resources, LLC ("SOR"), one of the Partnership’s subsidiaries, in the U.S. District Court for the District of Rhode Island. The complaint, since amended,

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alleges causes of action for private nuisance, public nuisance, and negligence, each based on emission impacts to nearby occupants from the Partnership’s oil and natural gas facility located in Providence, Rhode Island. The complaint also alleges that the amount in controversy exceeds $5.0 million. At this early stage in the litigation, the Partnership cannot predict whether the plaintiff will succeed in getting the court to certify a class. Based upon the information currently available to it, the Partnership believes that the complaint is without merit and intends to vigorously defend against it.

In May 2021, the New York City Department of Citywide Administrative Services (DCAS) initiated legal action against SOR, alleging that the SOR failed to pay the city $8.5 million in biodiesel tax credits for product purchased for the period of 2017 through 2019. SOR is disputing the claim and the Partnership has accrued an amount which it believes to be a reasonable estimate of the low end of a range of loss related to this matter and such amount is not material to the consolidated financial statements.

The Partnership is involved in other various lawsuits, other proceedings and environmental matters, all of which arose in the normal course of business. The Partnership believes, based upon its examination of currently available information, its experience to date, and advice from legal counsel, that the individual and aggregate liabilities resulting from the resolution of these contingent matters will not have a material adverse impact on the Partnership’s consolidated results of operations, financial position or cash flows.

11. Equity and Equity-Based Compensation

Equity Awards - Performance-based Phantom Units

Effective March 5, 2021, the board of directors used its discretion to terminate all phantom unit awards granted in 2018, 2019 and 2020. In consideration for this termination, the board of directors paid a higher 2020 cash bonus, issued 172,702 vested common units to each of the Partnership's Named Executive Officers and certain other employees and issued new long-term incentive awards payable in units or cash which vest over a three-year service period. The 2020 cash bonus amounts were expensed during the year ended December 31, 2020 and accrued for as of December 31, 2020. The Partnership accounted for the cancellation of the previously outstanding phantom unit awards and the issuance of the vested units and long term incentive awards as a modification which resulted in immaterial incremental compensation expense.

Unit-based compensation is included in selling, general and administrative expenses. Unit-based compensation expense for the six months ended June 30, 2022 was $0.1 million as compared to $0.2 million for the six months ended June 30, 2021. The Partnership didn't have any unrecognized compensation cost related to performance-based phantom units as of June 30, 2022.

Equity - Changes in Partnership's Units

The following table provides information with respect to changes in the Partnership’s units:


	Common Units
	Public	Sprague Holdings
Balance as of December 31, 2020	9,995,069	12,951,236
Units issued in connection with employee bonus	172,702	—
Director vested awards	8,292	—
Units issued in conjunction with IDR Reset Election	—	3,107,248
Increase in affiliated units as a result of acquisition by Hartree Partners, LP	(2,115,365)	2,115,365
Increase in affiliated units as a result of change in beneficial ownership of Hartree Bulk Storage LLC	(1,375,000)	1,375,000
Balance as of December 31, 2021	6,685,698	19,548,849
Units issued in connection with employee awards	3,685	—
Balance as of June 30, 2022	6,689,383	19,548,849

IDR Reset Election

On February 11, 2021, Sprague Holdings provided notice to the Partnership that Sprague Holdings had made the IDR Reset Election. Pursuant to the IDR Reset Election, Sprague Holdings relinquished the right to receive incentive distribution

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payments based on the minimum quarterly and target cash distribution levels set at the time of the Partnership’s initial public offering and the Partnership issued 3,107,248 common units to Sprague Holdings. Pursuant to the IDR Reset Election, the levels at which the incentive distribution rights participate in distributions were reset at higher amounts based on then-current common unit distribution rates and a formula in the Partnership Agreement. The IDR Reset Election was effective on March 5, 2021.

12. Earnings Per Unit

The Partnership has identified the IDRs as participating securities and uses the two-class method when calculating the net income per unit applicable to limited partners. Earnings per unit applicable to limited partners is computed by dividing limited partners’ interest in net income, after deducting any incentive distributions, by the weighted-average number of outstanding common units. The Partnership’s net income is allocated to the limited partners in accordance with their respective ownership percentages, after giving effect to priority income allocations for incentive distributions, which are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests. Payments made to the Partnership’s unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of earnings per unit.

The weighted average common units outstanding used to compute net income per common unit for the three months ended June 30, 2022 and 2021 were 26,236,612 and 26,226,255, respectively, and 26,235,585 and 25,066,494 for the six months ended June 30, 2022 and 2021, respectively. There was no dilutive effect on units for June 30, 2022 or June 30, 2021.

13. Partnership Distributions

The Partnership's partnership agreement sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders will receive.

Cash distributions for the periods indicated were as follows:


Quarter Ended	Payment Date	Per Unit	Common		IDR		Total
December 31, 2021	February 9, 2022	$0.4338	$	11,380	$	—	$	11,380
March 31, 2022	May 11, 2022	$0.4338	$	11,380	$	—	$	11,380

In addition, on July 25, 2022, the Partnership declared a cash distribution for the three months ended June 30, 2022, of $0.4338 per unit, totaling $11.4 million. Such distribution will be paid on August 10, 2022, to unitholders of record on August 5, 2022.

14. Subsequent Events

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Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Quarterly Report on Form 10-Q ("Quarterly Report"), unless the context otherwise requires, prior to May 28, 2021, references to "Sprague Resources," the "Partnership," "we," "our," "us," or like terms, refer to Sprague Resources LP and its subsidiaries; references to our "General Partner" refer to Sprague Resources GP LLC; references to "Axel Johnson" or the "Sponsor" refer to Axel Johnson Inc. and its controlled affiliates, collectively, other than Sprague Resources, its subsidiaries and its General Partner; and references to "Sprague Holdings" refer to Sprague Resources Holdings LLC, a wholly owned subsidiary of Axel Johnson and the owner of our General Partner. Prior to May 28, 2021, our General Partner was a wholly owned subsidiary of Axel Johnson.

As used in this Quarterly Report, unless the context otherwise requires, effective May 28, 2021, references to "Sprague Resources," the "Partnership," "we," "our," "us," or like terms, refer to Sprague Resources LP and its subsidiaries; references to our "General Partner" refer to Sprague Resources GP LLC; references to "Hartree" or the "Sponsor" refer to Hartree Partners, LP and its controlled affiliates, collectively, other than Sprague Resources, its subsidiaries and its General Partner; and references to "Sprague Holdings" refer to Sprague HP Holdings, LLC, a wholly owned subsidiary of Hartree and the owner of our General Partner. Effective May 28, 2021, our General Partner is a wholly owned subsidiary of Hartree.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report and any information incorporated by reference, contains statements that we believe are “forward-looking statements”. Forward looking statements are statements that express our belief, expectations, estimates, or intentions, as well as those statements we make that are not statements of historical fact, including, among other things, statements relating to the Merger (as defined below) and the expected benefits thereof. Forward-looking statements provide our current expectations and contain projections of results of operations, or financial condition, and/ or forecasts of future events. Words such as “may”, “assume”, “forecast”, “position”, “seek”, “predict”, “strategy”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe”, “project”, “budget”, “outlook”, “potential”, “will”, “could”, “should”, or “continue”, and similar expressions are used to identify forward-looking statements. They can be affected by assumptions used or by known or unknown risks or uncertainties which could cause our actual results to differ materially from those contained in any forward-looking statement. Consequently, no forward-looking statements can be guaranteed. You are cautioned not to place undue reliance on any forward-looking statements.

Factors that could cause actual results to differ from those in the forward-looking statements include, but are not limited to: (i) our ability to complete the Merger in a timely manner, or at all; (ii) greater than expected operating costs, customer loss, business disruption and employee attrition as a result of the proposed Merger; (iii) diversion of management time on the proposed Merger and changes in management and other personnel before the closing of the Merger; (iv) changes in federal, state, local, and foreign laws or regulations including those that permit us to be treated as a partnership for federal income tax purposes, those that govern environmental protection and those that regulate the sale of our products to our customers; (v) changes in the marketplace for our products or services resulting from events such as dramatic changes in commodity prices, increased competition, increased energy conservation, increased use of alternative fuels and new technologies, changes in local, domestic or international inventory levels, seasonality, changes in supply, weather and logistics disruptions, or general reductions in demand; (vi) security risks including terrorism and cyber-risk, (vii) adverse weather conditions, particularly warmer winter seasons and cooler summer seasons, climate change, environmental releases and natural disasters; (viii) adverse local, regional, national, or international economic conditions, including but not limited to, public health crises that reduce economic activity, affect the demand for travel (public and private), as well as impacting costs of operation and availability of supply (including the coronavirus COVID-19 outbreak), unfavorable capital market conditions and detrimental political developments such as the inability to move products between foreign locales and the United States; (ix) nonpayment or nonperformance by our customers or suppliers; (x) shutdowns or interruptions at our terminals and storage assets or at the source points for the products we store or sell, disruptions in our labor force, as well as disruptions in our information technology systems; (xi) unanticipated capital expenditures in connection with the construction, repair, or replacement of our assets; (xii) our ability to integrate acquired assets with our existing assets and to realize anticipated cost savings and other efficiencies and benefits; (xiii) our ability to successfully complete our organic growth and acquisition projects and/or to realize the anticipated financial and operational benefits; and, (xiv) the inability to amend or extend the maturity of our Credit Agreement. These are not all of the important factors that could cause actual results to differ materially from those expressed in our forward-looking statements. Other known or unpredictable factors could also have material adverse effects on future results. Consequently, all of the forward-looking statements made in this Quarterly Report are qualified by these cautionary statements, and we cannot assure you that actual results or developments that we anticipate will be realized or, even if realized, will have the expected consequences to or effect on us or our business or operations. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report may not occur.

When considering these forward-looking statements, please note that we provide additional cautionary discussion of risks and uncertainties in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 4, 2022 (the “2021 Annual Report”), in Part I, Item 1A “Risk Factors”, in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk”. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report may not occur.

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Forward-looking statements contained in this Quarterly Report speak only as of the date of this Quarterly Report (or other date as specified in this Quarterly Report) or as of the date given if provided in another filing with the SEC. We undertake no obligation, and disclaim any obligation, to publicly update, review or revise any forward-looking statements to reflect events or circumstances after the date of such statements. All forward looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in our existing and future periodic reports filed with the SEC.

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Overview

We are a Delaware limited partnership formed in June 2011 by Sprague Holdings and our General Partner. We engage in the purchase, storage, distribution and sale of refined products and natural gas, and provide storage and handling services for a broad range of materials. In October 2013, we became a publicly traded master limited partnership ("MLP") and our common units representing limited partner interests are listed on the New York Stock Exchange ("NYSE") under the ticker symbol “SRLP".

Our Predecessor was founded in 1870 as the Charles H. Sprague Company in Boston, Massachusetts; and, in 1905, the company opened the Penobscot Coal and Wharf Company, a tidewater terminal located in Searsport, Maine. By World War II, the company was operating eleven terminals and a fleet of two dozen vessels transporting coal and other products throughout the world. As fuel needs diversified in the United States, the company expanded its product offerings and invested in terminals, tankers, and product handling activities. In 1959, the company expanded its oil marketing activities via entry into the distillate oil market. In 1970, the company was sold to Royal Dutch Shell’s Asiatic Petroleum subsidiary; and, in 1972, Royal Dutch Shell sold the company to Axel Johnson Inc., a member of the Axel Johnson Group of Stockholm, Sweden.

On April 20, 2021, the Partnership and Hartree Partner, LP ("Hartree") announced that Sprague Holdings entered into an agreement to sell to Sprague HP Holdings, LLC (a wholly-owned subsidiary of Hartree) the interest of Sprague Holdings in the General Partner, the incentive distribution rights and all of the common units representing limited partner interests that Sprague Holdings owned in the Partnership (the “Transaction”). The Transaction was completed and effective on May 28, 2021.

On June 2, 2022, in response to an unsolicited non-binding proposal received from Hartree on January 11, 2022, the Partnership, and our General Partner entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sprague Holdings and Sparrow HP Merger Sub, LLC (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as a direct wholly owned subsidiary of our General Partner and Hartree (the “Merger”). Under the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding common unit, other than those held by Sprague Holdings or its permitted transferees, will be converted into the right to receive $19.00 per Common Unit in cash without any interest thereon (the “Merger Consideration”). The common units and incentive distribution rights in the Partnership held by Sprague Holdings and its permitted transferees and the General Partner immediately prior to the effective time of the Merger shall be unaffected by the Merger and shall remain outstanding. The closing of the transactions contemplated by the Merger Agreement are expected to occur in the third quarter of 2022.

The Partnership is one of the largest independent wholesale distributors of refined products in the Northeast United States based on aggregate terminal capacity. We own, operate and/or control a network of refined products and materials handling terminals and storage facilities predominantly located in the Northeast United States from New York to Maine and in Quebec, Canada that have a combined storage tank capacity of approximately 14.3 million barrels for refined products and other liquid materials, as well as approximately 2.0 million square feet of materials handling capacity. We also have access to approximately 44 third-party terminals in the Northeast United States through which we sell or distribute refined products pursuant to rack, exchange and throughput agreements.

We operate under four business segments: refined products, natural gas, materials handling and other operations. See Note 8 - Segment Reporting to our Condensed Consolidated Financial Statements for a presentation of financial results by reportable segment and see Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations for a discussion of financial results by segment.

In our refined products segment we purchase a variety of refined products, such as heating oil, diesel fuel, residual fuel oil, kerosene, jet fuel and gasoline (primarily from refining companies, trading organizations and producers), and sell them to our customers. We have wholesale customers who resell the refined products we sell to them and commercial customers who consume the refined products directly. Our wholesale customers consist of approximately 900 home heating oil retailers and diesel fuel and gasoline resellers. Our commercial customers include federal and state agencies, municipalities, regional transit authorities, drill sites, large industrial companies, real estate management companies, hospitals, educational institutions, and asphalt paving companies. Our customers also include businesses engaged in the development of natural gas resources in Pennsylvania and surrounding states.

In our natural gas segment we purchase natural gas from natural gas producers and trading companies and sell and distribute natural gas to approximately 14,000 commercial and industrial customer locations across 13 states in the Northeast and Mid-Atlantic United States and Canada.

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Our materials handling segment is generally conducted under multi-year agreements as either fee-based activities or as leasing arrangements when the right to use an identified asset (such as storage tanks or storage locations) has been conveyed in the agreement. We offload, store and/or prepare for delivery a variety of customer-owned products, including asphalt, clay slurry, salt, gypsum, crude oil, residual fuel oil, coal, petroleum coke, caustic soda, tallow, pulp and heavy equipment. Historically, a majority of our materials handling activity has generated qualified income.

Our other operations segment primarily includes the marketing and distribution of coal conducted in our Portland, Maine terminal, and commercial trucking activity conducted by our Canadian subsidiary.

We take title to the products we sell in our refined products and natural gas segments. In order to manage our exposure to commodity price fluctuations, we use derivatives and forward contracts to maintain a position that is substantially balanced between product purchases and product sales. We do not take title to any of the products in our materials handling segment.

As of June 30, 2022, our Sponsor, through its ownership of Sprague Holdings, owns 19,548,849 common units representing an aggregate of 74.5% of the limited partner interest in the Partnership. Sprague Holdings also owns the General Partner, which in turn owns a non-economic interest in the Partnership. Sprague Holdings currently holds incentive distribution rights (“IDRs”) which entitle it to receive increasing percentages of the cash the Partnership distributes from distributable cash flow in excess of $0.7676 per unit per quarter, up to a maximum of 50.0%. The maximum distribution of 50% does not include any distributions that Sprague Holdings may receive on any limited partner units that it owns.

Going Concern Assessment and Management's Plans

COVID-19

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appears to have normalized. In order to continue to mitigate the effects of the pandemic, we continue to focus on the safety of employees and other stakeholders as well as initiatives relating to cost reduction, liquidity and operating efficiencies.

The Partnership makes estimates and assumptions that affect the reported amounts on these consolidated financial statements and accompanying notes as of the date of the financial statements. The Partnership assessed accounting estimates that require consideration of forecasted financial information, including, but not limited to, the allowance for credit losses, the carrying value of goodwill, intangible assets, and other long-lived assets. This assessment was conducted in the context of information reasonably available to the Partnership, as well as consideration of the future potential impacts of COVID-19, and its variants, on the Partnership’s business as of June 30, 2022. While market conditions for our products and services appear to have stabilized as compared to a year ago, the pandemic remains fluid, indicating that the full impact may not have been realized across our business and operations. The economic and operational landscape has been altered, and it is difficult to determine whether such changes are temporary or permanent, with challenges related to staffing, supply chain, and transportation globally. Accordingly if the impact is more severe or longer in duration than the partnership has assumed, such impact could potentially result in impairments and increases in credit allowances. As we strategize with regard to fiscal year 2022 and beyond, we continue to monitor the evolving impacts of COVID-19 and its variants closely and adapting our operations to changing demand patterns and the potential impact of the COVID-19 pandemic on future cash flows and access to adequate liquidity.

How Management Evaluates Our Results of Operations

Our management uses a variety of financial and operational measurements to analyze our performance. These measurements include: (1) adjusted EBITDA and adjusted gross margin, (2) operating expenses, (3) selling, general and administrative (or SG&A) expenses and (4) heating degree days.

EBITDA, adjusted EBITDA and adjusted gross margin used in this Quarterly Report are non-GAAP financial measures.

EBITDA and Adjusted EBITDA

Management believes that adjusted EBITDA is an aid in assessing repeatable operating performance that is not distorted by non-recurring items or market volatility and the ability of our assets to generate sufficient revenue, that when rendered to cash, will be available to pay interest on our indebtedness and make distributions to our unitholders.

We define EBITDA as net income before interest, income taxes, depreciation and amortization. We define adjusted EBITDA as EBITDA adjusted for the change in unrealized hedging gains (losses) with respect to refined products and natural gas inventory, and natural gas transportation contracts, adjusted for changes in the fair value of contingent consideration, and adjusted for the impact of acquisition related expenses.

EBITDA and adjusted EBITDA are used as supplemental financial measures by external users of our financial statements, such as investors, trade suppliers, research analysts and commercial banks to assess:

•The financial performance of our assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis;

•The ability of our assets to generate sufficient revenue, that when rendered to cash, will be available to pay interest on our indebtedness and make distributions to our equity holders;

•Repeatable operating performance that is not distorted by non-recurring items or market volatility; and

•The viability of acquisitions and capital expenditure projects.

EBITDA and adjusted EBITDA are not prepared in accordance with GAAP and should not be considered alternatives to net income or operating income, or any other measure of financial performance presented in accordance with GAAP. EBITDA and adjusted EBITDA exclude some, but not all, items that affect net income and operating income.

The GAAP measure most directly comparable to EBITDA and adjusted EBITDA is net income. EBITDA and adjusted EBITDA should not be considered as alternatives to net income or cash provided by (used in) operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and adjusted EBITDA are not presentations made in accordance with GAAP and have important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Because EBITDA and adjusted EBITDA exclude some, but not all, items that affect net income and are defined differently by different companies, our definitions of EBITDA and adjusted EBITDA may not be comparable to similarly titled measures of other companies.

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We recognize that the usefulness of EBITDA and adjusted EBITDA as evaluative tools may have certain limitations, including:

•EBITDA and adjusted EBITDA do not include interest expense. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and impacts our ability to generate profits and cash flows. Therefore, any measure that excludes interest expense may have material limitations;

•EBITDA and adjusted EBITDA do not include depreciation and amortization expense. Because capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits, any measure that excludes depreciation and amortization expense may have material limitations;

•EBITDA and adjusted EBITDA do not include provision for income taxes. Because the payment of income taxes is a necessary element of our costs, any measure that excludes income tax expense may have material limitations;

•EBITDA and adjusted EBITDA do not reflect capital expenditures or future requirements for capital expenditures or contractual commitments;

•EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; and

•EBITDA and adjusted EBITDA do not allow us to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss.

Adjusted Gross Margin

Management purchases, stores and sells energy commodities that experience market value fluctuations. To manage the Partnership’s underlying performance, including its physical and derivative positions, management utilizes adjusted gross margin. In determining adjusted gross margin, management adjusts its segment results for the impact of the changes in unrealized gains and losses with regard to refined products and natural gas inventory, and natural gas transportation contracts, which are not marked to market for the purpose of recording unrealized gains or losses in net income. Adjusted gross margin is also used by external users of our consolidated financial statements to assess our economic results of operations and our commodity market value reporting to lenders.

We define adjusted gross margin as net sales less cost of products sold (exclusive of depreciation and amortization) adjusted for the impact of the changes in unrealized gains and losses with regard to refined products and natural gas inventory, and natural gas transportation contracts, which are not marked to market for the purpose of recording unrealized gains or losses in net income. Adjusted gross margin has no impact on reported volumes or net sales.

Adjusted gross margin is used as a supplemental financial measure by management to describe our operations and economic performance to investors, trade suppliers, research analysts and commercial banks to assess:

•The economic results of our operations;

•The market value of our inventory and natural gas transportation contracts for financial reporting to our lenders, as well as for borrowing base purposes; and

•Repeatable operating performance that is not distorted by non-recurring items or market volatility.

Adjusted gross margin is not prepared in accordance with GAAP and should not be considered as an alternative to net income or operating income or any other measure of financial performance presented in accordance with GAAP.

We define adjusted unit gross margin as adjusted gross margin divided by units sold, as expressed in gallons for refined products and in MMBtus for natural gas.

For a reconciliation of adjusted gross margin and adjusted EBITDA to the GAAP measures most directly comparable, see the reconciliation tables included in "Results of Operations." See Note 8 - Segment Reporting to our Condensed Consolidated Financial Statements for a presentation of our financial results by reportable segment.

Management evaluates our segment performance based on adjusted gross margin. Based on the way we manage our business, it is not reasonably possible for us to allocate the components of operating expenses, selling, general and administrative expenses and depreciation and amortization among the operating segments.

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Operating Expenses

Operating expenses are costs associated with the operation of the terminals and truck fleet used in our business. Employee wages, pension and 401(k) plan expenses, boiler fuel, repairs and maintenance, utilities, insurance, property taxes, services and lease payments comprise the most significant portions of our operating expenses. Employee wages and related employee expenses included in our operating expenses are incurred on our behalf by our General Partner and reimbursed by us. These expenses remain relatively stable independent of the volumes through our system but can fluctuate depending on the activities performed during a specific period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") include employee salaries and benefits, discretionary bonus, marketing costs, corporate overhead, professional fees, information technology and office space expenses. Employee wages, related employee expenses and certain rental costs included in our SG&A expenses are incurred on our behalf by our General Partner and reimbursed by us.

Heating Degree Days

A “degree day” is an industry measurement of temperature designed to evaluate energy demand and consumption. Degree days are based on how much the average temperature departs from a human comfort level of 65°F. Each degree of temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one heating degree day. Degree days are accumulated over the course of a year and can be compared to a monthly or a long-term average ("normal") to see if a month or a year was warmer or cooler than usual. Degree days are officially observed by the National Weather Service and archived by the National Climate Data Center. In order to incorporate more recent average information and to better reflect the geographic locations of our customer base, we report degree day information for Boston and New York City (weighted equally) with a historical average for the same geographic locations over the previous ten-year period.

Hedging Activities

We hedge our inventory within the guidelines set in our risk management policies. In a rising commodity price environment, the market value of our inventory will generally be higher than the cost of our inventory. For GAAP purposes, we are required to value our inventory at the lower of cost or net realizable value. The hedges on this inventory will lose value as the value of the underlying commodity rises, creating hedging losses. Because we do not utilize hedge accounting, GAAP requires us to record those hedging losses in our income statements. In contrast, in a declining commodity price market we generally incur hedging gains. GAAP requires us to record those hedging gains in our income statements.

The refined products inventory market valuation is calculated using daily independent bulk market price assessments from major pricing services (either Platts or Argus). These third-party price assessments are primarily based in large, liquid trading hubs including but not limited to, New York Harbor (NYH) or US Gulf Coast (USGC), with our inventory values determined after adjusting these prices to the various inventory locations by adding expected cost differentials (primarily freight) compared to one of these supply sources. Our natural gas inventory is limited, with the valuation updated monthly based on the volume and prices at the corresponding inventory locations. The prices are based on the most applicable monthly Inside FERC, or IFERC, assessments published by Platts near the beginning of the following month.

Similarly, we can hedge our natural gas transportation assets (i.e., pipeline capacity) within the guidelines set in our risk management policy. Although we do not own any natural gas pipelines, we secure the use of pipeline capacity to support our natural gas requirements by either leasing capacity over a pipeline for a defined time period or by being assigned capacity from a local distribution company for supplying our customers. As the spread between the price of gas between the origin and delivery point widens (assuming the value exceeds the fixed charge of the transportation), the market value of the natural gas transportation contracts assets will typically increase. If the market value of the transportation asset exceeds costs, we may seek to hedge or “lock in” the value of the transportation asset for future periods using available financial instruments. For GAAP purposes, the increase in value of the natural gas transportation assets is not recorded as income in the income statements until the transportation is utilized in the future (i.e., when natural gas is delivered to our customer). If the value of the natural gas transportation assets increase, the hedges on the natural gas transportation assets lose value, creating hedging losses in our income statements. The natural gas transportation assets market value is calculated daily based on the volume and prices at the corresponding pipeline locations. The daily prices are based on trader assessed quotes which represent observable transactions in the market place, with the end-month valuations primarily based on Platts prices where available or adding a location differential to the price assessment of a more liquid location.

As described above, pursuant to GAAP, we value our commodity derivative hedges at the end of each reporting period based on current commodity prices and record hedging gains or losses, as appropriate. Also as described above, and pursuant to

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GAAP, our refined products and natural gas inventory and natural gas transportation contract rights, to which the commodity derivative hedges relate, are not marked to market for the purpose of recording gains or losses. In measuring our operating performance, we rely on our GAAP financial results, but we also find it useful to adjust those numbers to reflect the changes in unrealized gains and losses with regard to refined products and natural gas inventory, and natural gas transportation contracts. By making such adjustments, as reflected in adjusted gross margin and adjusted EBITDA, we believe that we are able to align more closely hedging gains and losses to the period in which the revenue from the sale of inventory and income from transportation contracts relating to those hedges is realized.

Trends and Factors that Impact our Business

In addition to the other information set forth in this report, please refer to our 2021 Annual Report for a discussion of the trends and factors that impact our business.

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Results of Operations

Our current and future results of operations may not be comparable to our historical results of operations. Our results of operations may be impacted by, among other things, swings in commodity prices, primarily in refined products and natural gas, and acquisitions or dispositions. We use economic hedges to minimize the impact of changing prices on refined products and natural gas inventory. As a result, commodity price increases at the end of a period can create lower gross margins as the economic hedges, or derivatives, for such inventory may lose value, whereas an increase in the value of such inventory is disregarded for GAAP financial reporting purposes and recorded at the lower of cost or net realizable value. Please read “How Management Evaluates Our Results of Operations.”

The following tables set forth information regarding our results of operations for the periods presented:



	Three Months Ended June 30,				Increase/(Decrease)
	2022		2021		$		%
	(in thousands)
Net sales	$	1,278,310	$	657,672	$	620,638	94	%
Cost of products sold (exclusive of depreciation and amortization)	1,261,935		659,803		602,132		91	%
Operating expenses	22,092		19,148		2,944		15	%
Selling, general and administrative	21,941		16,719		5,222		31	%
Depreciation and amortization	8,049		8,258		(209)		(3)	%
Total operating costs and expenses	1,314,017		703,928		610,089		87	%
Other operating income	—		9,725		(9,725)		N/A

Operating loss	(35,707)		(36,531)		824		(2)	%
Interest income	115		77		38		49	%
Interest expense	(9,242)		(8,587)		(655)		8	%
Loss before income taxes	(44,834)		(45,041)		207		—	%
Income tax provision	(461)		(562)		101		(18)	%
Net loss	$	(45,295)	$	(45,603)	$	308	(1)	%



	Six months ended June 30,				Increase/(Decrease)
	2022		2021		$		%
	(in thousands)
Net sales	3,091,625		1,693,805		$	1,397,820	83	%
Cost of products sold (exclusive of depreciation and amortization)	2,991,013		1,584,585		1,406,428		89	%
Operating expenses	45,327		38,379		6,948		18	%
Selling, general and administrative	50,661		41,958		8,703		21	%
Depreciation and amortization	16,175		16,741		(566)		(3)	%
Total operating costs and expenses	3,103,176		1,681,663		2,819,333		168	%
Other operating income	—		9,725		(9,725)		N/A
Operating (loss) income	(11,551)		21,867		(33,418)		(153)	%
Other (loss) income	(1)		2		(3)		(150)	%
Interest income	143		143		—		—	%
Interest expense	(19,814)		(17,402)		(2,412)		14	%
Income (loss) before income taxes	(31,223)		4,610		(35,833)		(777)	%
Income tax benefit (provision)	3,874		(1,433)		5,307		(370)	%
Net (loss) income	$	(27,349)	$	3,177	$	(30,526)	(961)	%

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Reconciliation to Adjusted Gross Margin, EBITDA and Adjusted EBITDA

The following table sets forth a reconciliation of our consolidated operating income to our total adjusted gross margin, a non-GAAP measure, for the periods presented and a reconciliation of our consolidated net income to EBITDA and Adjusted EBITDA, non-GAAP measures, for the periods presented. See above “Management’s Discussion and Analysis of Financial Condition and Results of Operations - How Management Evaluates Our Results of Operations - EBITDA and Adjusted EBITDA” of this report. The table below also presents information on weather conditions for the periods presented.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(in thousands)
Reconciliation of Operating Income to Adjusted Gross Margin:
Operating (loss) income	$	(35,707)		$	(36,531)		$	(11,551)		$	21,867
Operating costs and expenses not allocated to operating segments:
Operating expenses	22,092			19,148			45,327			38,379
Selling, general and administrative	21,941			16,719			50,661			41,958
Depreciation and amortization	8,049			8,258			16,175			16,741
Other operating (income) (5)	—			(9,725)			—			(9,727)
Add/(deduct):
Change in unrealized (gain) loss on inventory (1)	(21,998)			5,369			(6,629)			(20,888)
Change in unrealized value on natural gas transportation contracts (2)	56,673			35,592			98,596			56,711
Total adjusted gross margin (3):	$	51,050		$	38,830		$	192,579		$	145,041
Adjusted Gross Margin by Segment:
Refined products	$	29,868		$	27,165		$	83,994		$	78,198
Natural gas	5,755			(2,725)			77,106			38,364
Materials handling	12,799			12,694			25,929			24,770
Other operations	2,628			1,696			5,550			3,709
Total adjusted gross margin	$	51,050		$	38,830		$	192,579		$	145,041
Reconciliation of Net Income to Adjusted EBITDA
Net (loss) income	$	(45,295)		$	(45,603)		$	(27,349)		$	3,177
Add/(deduct):
Interest expense, net	9,127			8,510			19,671			17,259
Tax provision	461			562			(3,874)			1,433
Depreciation and amortization	8,049			8,258			16,175			16,741
EBITDA (3):	$	(27,658)		$	(28,273)		$	4,623		$	38,610
Add/(deduct):
Change in unrealized (gain) loss on inventory (1)	(21,998)			5,369			(6,629)			(20,888)
Change in unrealized value on natural gas transportation contracts (2)	56,673			35,592			98,596			56,711
Gain on sale of fixed assets not in the ordinary course of business including gain on insurance recoveries (5)	—			(9,725)			—			(9,727)

Other adjustments (4)	31			35			62			65
Adjusted EBITDA	$	7,048		$	2,998		$	96,652		$	64,771
Other Data:
Ten Year Average Heating Degree Days (6)	604			611			3,190			3,217
Heating Degree Days (6)	563			520			3,166			3,059
Variance from average heating degree days	(7)		%	(15)		%	(1)		%	(5)		%
Variance from prior period heating degree days	8		%	(33)		%	3		%	4		%

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(1)Inventory is valued at the lower of cost or net realizable value. The adjustment related to change in unrealized gain on inventory which is not included in net income, represents the estimated difference between inventory valued at the lower of cost or net realizable value as compared to market values. The fair value of the derivatives we use to economically hedge our inventory declines or appreciates in value as the value of the underlying inventory appreciates or declines, which creates unrealized hedging losses (gains) with respect to the derivatives that are included in net income.

(2)Represents our estimate of the change in fair value of the natural gas transportation contracts which are not recorded in net income until the transportation is utilized in the future (i.e., when natural gas is delivered to the customer), as these contracts are executory contracts that do not qualify as derivatives. As the fair value of the natural gas transportation contracts decline or appreciate, the offsetting physical or financial derivative will also appreciate or decline creating unmatched unrealized hedging losses (gains) in net income.

(3)For a discussion of the non-GAAP financial measures EBITDA, adjusted EBITDA and adjusted gross margin, see “How Management Evaluates Our Results of Operations.”

(4)Represents accretion expense related to asset retirement obligations.

(5)On April 29, 2021, we sold the Oswego terminal to an unaffiliated buyer. In connection with the sale, we recorded a net gain on the sale of $9.0 million for the quarter ended June 30, 2021, which is included within other operating income in the consolidated statements of income. The remaining $0.7 million of other operating income relates to a gain associated with a parcel of land sold at the Bronx terminal.

(6)For purposes of evaluating our results of operations, we use heating degree day amounts as reported by the NOAA Regional Climate Center. In order to incorporate recent average information and to reflect the geographic locations of our customer base, we report degree day information for Boston and New York City (weighted equally) with a historical average for the same geographic locations over the previous ten-year period.

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Analysis of Operating Segments

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021



	Three Months Ended June 30,				Increase/(Decrease)
	2022		2021		$		%
	(in thousands, except adjusted unit gross margin)
Volumes:
Refined products (gallons)	293,810		289,458		4,352		2	%
Natural gas (MMBtus)	10,895		11,692		(797)		(7)	%
Materials handling (short tons)	407		507		(100)		(20)	%
Materials handling (gallons)	96,697		124,444		(27,747)		(22)	%
Net Sales:
Refined products	$	1,189,213	$	589,142	$	600,071	102	%
Natural gas	70,510		51,360		19,150		37	%
Materials handling	12,871		12,725		146		1	%
Other operations	5,716		4,445		1,271		29	%
Total net sales	$	1,278,310	$	657,672	$	620,638	94	%
Adjusted Gross Margin:
Refined products	$	29,868	$	27,165	$	2,703	10	%
Natural gas	5,755		(2,725)		8,480		311	%
Materials handling	12,799		12,694		105		1	%
Other operations	2,628		1,696		932		55	%
Total adjusted gross margin	$	51,050	$	38,830	$	12,220	31	%
Adjusted Unit Gross Margin:
Refined products	$	0.102	$	0.094	$	0.008	9	%
Natural gas	$	0.528	$	(0.233)	$	0.761	327	%

Refined Products

Refined products net sales increased $600.1 million, or 102%, compared to the same period last year, with the 99% higher average sales price the key factor. Volumes were 2% higher, also contributing to the higher net sales gain. The near doubling of the average sales price was a result of prices remaining high following the price escalation spurred on by the late February invasion of the Ukraine by Russia and the associated geopolitical unrest. The volume gain was a result of an increase in gasoline, with distillate and heavy oil volumes lower than the same period last year.

Refined products adjusted gross margin increased $2.7 million, or 10%, compared to the same period last year, due to a combination of the higher volumes and an increase in the average unit margin. Although the environment to purchase, store, and hedge oil inventory was poorer than the same period last year, realizations on sales to customers were adequate to lead to the slight increase in the average unit margin.

Natural Gas

Natural gas net sales increased $19.2 million, or 37%, compared to the same period last year due to a 47% gain in average sales price. Volumes declined by 7% compared to the same period last year partially offsetting the impact of the higher prices on net sales. In addition, in accordance with fair value standards under GAAP, there was a $3.8 million gain associated with the quarterly fair value measurement of the credit risk associated with our natural gas derivative assets and liabilities.

Natural gas adjusted gross margin increased $8.5 million, or 311%, compared to the same period last year. The increase in adjusted unit gross margins reflect the higher price and more volatile market environment in the cash and forward markets leading to supply, inventory, and forward position optimization opportunities.

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Materials Handling

Materials handling net sales and adjusted gross margin were $0.1 million, or 1% higher than the same period last year. The increase was a result of a gain in the Canadian operations, reflecting a higher level of third-party storage as well as revenue gains due to annual escalation of rates on existing tank lease contracts. Margins in the U.S. operations were $0.3 million lower, with reductions in petcoke and furnace slag handling more than offsetting increases in windmill handling, china clay, lease revenue, and heating charges paid by tank leaseholders.

Other Operations

Net sales from other operations increased $1.3 million, or 29%, driven by a combination of a gain in the Canadian trucking operations and higher coal prices. Adjusted gross margin increased $0.9 million, or 55% driven by a transition in our Canadian trucking operations from utilizing third-party haulers to company drivers at the beginning of March 2022, which resulted in the costs of the company drivers recognized as an operating expense. The increased coal prices reflected a higher price environment for this commodity that began in the latter part of 2021 as well as a further spike in prices following the Russian invasion of the Ukraine in late February. Adjusted gross margin was $0.9 million or 55% higher than last year, due to a combination of increased coal margins, along with the impact of reclassifying the drivers costs at the Canadian trucking operations.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021



	Six Months Ended June 30,				Increase/(Decrease)
	2022		2021		$		%
	(in thousands, except adjusted unit gross margin)
Volumes:
Refined products (gallons)	859,478		805,303		54,175		7	%
Natural gas (MMBtus)	28,556		30,527		(1,971)		(6)	%
Materials handling (short tons)	1,038		924		114		12	%
Materials handling (gallons)	184,851		182,303		2,548		1	%
Net Sales:
Refined products	$	2,856,043	$	1,505,342	$	1,350,701	90	%
Natural gas	196,354		153,935		42,419		28	%
Materials handling	25,964		24,771		1,193		5	%
Other operations	13,264		9,757		3,507		36	%
Total net sales	$	3,091,625	$	1,693,805	$	1,397,820	176	%
Adjusted Gross Margin:
Refined products	$	83,994	$	78,198	$	5,796	7	%
Natural gas	77,106		38,364		38,742		101	%
Materials handling	25,929		24,770		1,159		5	%
Other operations	5,550		3,709		1,841		50	%
Total adjusted gross margin	$	192,579	$	145,041	$	47,538	33	%
Adjusted Unit Gross Margin:
Refined products	$	0.098	$	0.097	$	0.001	1	%
Natural gas	$	2.700	$	1.257	$	1.443	115	%

Refined Products

Refined products net sales increased $1,350.7 million, or 90%, due primarily to the substantially higher oil price environment compared to the same period last year. In addition, the 7% increase in volumes was a contributor to the higher net sales. The higher volumes were primarily due to gasoline, though distillates also contributed to the volume gain. The increase in gasoline volumes was due to significantly higher activity with a major customer. The distillate volume gain was a combination of marine fuel and on-road diesel.

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Refined products adjusted gross margin increased $5.8 million, or 7%, compared to the same period last year driven by the 7% increase in volumes. The average unit margin was down slightly, primarily as a result of substantially less attractive market conditions to purchase, store and hedge oil inventory. The Canadian operations was a significant contributor to the weaker unit margins, again due to the weaker market conditions to purchase, store and hedge oil inventory compared to the same period last year.

Natural Gas

Natural gas net sales increased $42.4 million, or 28%, compared to the same period last year, due to a 36% higher average sales price, partially offset by a 6% decrease in volumes. Natural gas adjusted gross margin increased by $38.7 million, or 101%, compared to the same period last year, as a result of a 115% gain in the average adjusted unit gross margin. The increase in adjusted unit gross margins was primarily due to enhanced supply and inventory optimization opportunities for both the cash and forward markets. In addition, in accordance with fair value standards under GAAP, there was a $12.3 million gain associated with the quarterly fair value measurement of the credit risk associated with our natural gas derivative assets and liabilities.

Materials Handling

Materials handling net sales and adjusted gross margin both increased $1.2 million, or by 5%, compared to the same period last year. This increase was a result of a $1.3 million gain in our Canadian operations due to increased storage revenue from further tank leases, annual escalation of rates on existing tank leasing contracts, and revenues from further railcar activities. Gross margin in the U.S. was $0.2 million lower, with a $0.8 million reduction in asphalt the primary factor. The decline in asphalt margin was due to a combination of the completion of the Everett, MA terminal lease at the end of 2021 and the sale of the Oswego, NY terminal in late April 2021. An increase in road salt gross margin of $0.7 million due to higher handling requirements largely offset the reduction in asphalt.

Other Operations

Net sales from other operations increased by $3.5 million, or 36%, due to higher coal prices and volumes as well as a gain in the Canadian trucking operations. The increased coal prices reflect the higher price environment for this commodity that began in the latter part of 2021 as well as a further spike in prices following the Russian invasion of the Ukraine in late February. Coal volumes also increased as demand was strong during the winter period. The increase in sales from the Canadian trucking operations was due to the transition from utilizing third-party haulers to company drivers at the beginning of March 2022, with the costs of the company drivers recognized as an operating expense. Adjusted gross margin was $1.8 million, or 50% higher than last year, again due to a combination of coal and the Canadian trucking operations. The higher coal margin was the primary factor leading to the increase, with the Canadian trucking operations increase a result of reclassifying the drivers costs to an operating expense.

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Operating Costs and Expenses

Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021


	Three Months Ended June 30,				Increase/(Decrease)
	2022		2021		$		%
	(in thousands)
Operating expenses	$	22,092	$	19,148	$	2,944	15%
Selling, general and administrative	$	21,941	$	16,719	$	5,222	31%
Depreciation and amortization	$	8,049	$	8,258	$	(209)	(3)%
Interest expense, net	$	9,127	$	8,510	$	617	7%

Operating Expenses. Operating expenses increased $2.9 million, or 15%, compared to the same period last year, primarily reflecting an increase of $1.1 million of employee related costs, $0.7 million of insurance related costs, $0.4 million of stockpile and boiler fuel expenses, $0.4 million of vehicle fuel expenses, and $0.3 million of utilities.

Selling, General and Administrative Expenses. SG&A expenses increased $5.2 million, or 31%, compared to the same period last year largely driven by an increase of $2.3 million in legal expenses, $2.1 million in incentive compensation expense, $0.4 million in employee related costs, and $0.1 million in insurance related costs.

Depreciation and Amortization. Depreciation and amortization was approximately flat as increased depreciation expense was offset by decreased amortization expense.

Interest Expense, net. Interest expense, net increased $0.6 million, or 7%, compared to the same period last year primarily due to increased net borrowing rates.

Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021




	Six Months Ended June 30,			Increase/(Decrease)
	2022		2021	$		%
	(in thousands)
Operating expenses	$	45,327	38,379	$	6,948	18%
Selling, general and administrative	$	50,661	41,958	$	8,703	21%
Depreciation and amortization	$	16,175	16,741	$	(566)	(3)%
Interest expense, net	$	19,671	17,259	$	2,412	14%

Operating Expenses. Operating expenses increased $6.9 million or 18%, compared to the same period last year, reflecting an increase of $1.8 million in insurance related expenses, $1.8 million of employee related costs, $1.2 million for stockpile and boiler fuel expenses, $1.2 million for utilities, and $0.6 million of vehicle fuel expenses.

Selling, General and Administrative Expenses. SG&A expenses increased $8.7 million or 21%, compared to the same period last year largely driven by an increase of $3.8 million in legal expenses, $3.3 million in incentive compensation expense, $0.6 million in employee related costs, $0.3 million in insurance related costs, $0.2 million in marketing costs, and $0.2 million in IT software related costs.

Depreciation and Amortization. Depreciation and amortization was approximately flat as increased depreciation expense was offset by decreased amortization expense.

Interest Expense, net. Interest expense, net increased $2.4 million, or 14%, compared to the same period last year primarily due to increased net borrowing rates.

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Liquidity and Capital Resources

Liquidity

Our primary liquidity needs are to fund our working capital requirements, operating expenses, capital expenditures and quarterly distributions. Cash generated from operations, our borrowing capacity under our Credit Agreement (as defined below) and potential future issuances of additional partnership interests or debt securities are our primary sources of liquidity. At June 30, 2022, we had a working capital deficit of $519.7 million.

As of June 30, 2022, the undrawn borrowing capacity under the working capital facilities of our Credit Agreement was $223.9 million and the undrawn borrowing capacity under the acquisition facility was $73.0 million. We enter our seasonal peak period during the fourth quarter of each year, during which inventory, accounts receivable and debt levels increase. As we move out of the winter season at the end of the first quarter of the following year, typically inventory is reduced, accounts receivable are collected and converted into cash and debt is paid down. During the six months ended June 30, 2022, the amount drawn under the working capital facilities of our Credit Agreement fluctuated from a low of $187.3 million to a high of $564.9 million.

We believe that we have sufficient liquid assets, cash flow from operations and borrowing capacity under our Credit Agreement to meet our financial commitments, debt service obligations, contingencies and anticipated capital expenditures. However, we are subject to business and operational risks that could adversely affect our cash flow. A material decrease in our cash flow would likely have an adverse effect on our ability to meet our financial commitments and debt service obligations.

Going Concern Assessment

The Credit Agreement matures on May 19, 2023, and has not been renewed as of the date of the issuance of these condensed consolidated financial statements. While the Partnership intends to renew or extend the terms of its Credit Agreement, until such time as we have executed an agreement to refinance or extend the maturity of the Credit Agreement, we cannot conclude that it is probable we will do so, and accordingly, this raises substantial doubt about our ability to continue as a going concern. See "Going Concern Assessment and Management's Plans" above for more information.

Credit Agreement

On April 13, 2022, Sprague Operating Resources LLC (the "U.S. Borrower") and Kildair Service ULC (the "Canadian Borrower" and, together with the U.S. Borrower, the "Borrowers"), wholly owned subsidiaries of the Partnership, entered into a second amendment (the "Second Amendment") to the second amended and restated credit agreement, dated as of May 19, 2020 (the "Original Credit Agreement," the Original Credit Agreement as amended by the first amendment dated May 11, 2021 ("First Amendment") and the Second Amendment, the "Credit Agreement"). Upon the effective date, the Second Amendment increased the committed U.S. dollar revolving working capital facility from $465.0 million to $535.9 million, the uncommitted U.S. dollar revolving working capital facility from $200.0 million to $255.0 million, and the multicurrency revolving working capital facility from $85.0 million to $96.6 million. In addition, the Second Amendment included transition changes from LIBOR to the Secured Overnight Financing Rate ("SOFR") plus a SOFR spread adjustment ("Term SOFR") and extended the permitted expiration of letters of credit from six months to one year after the applicable facility termination date. The Second Amendment was accounted for as a modification of a syndicated loan arrangement with partial extinguishment to the extent there was a decrease in the borrowing capacity on a creditor by creditor basis. The Credit Agreement matures on May 19, 2023. The Partnership and certain of its subsidiaries (the "Subsidiary Guarantors") are guarantors of the obligations under the Credit Agreement. Obligations under the Credit Agreement are secured by substantially all of the assets of the Partnership, the Borrowers and the Subsidiary Guarantors (collectively, the "Loan Parties").

At June 30, 2022, the revolving credit facilities under the Credit Agreement contained, among other items, the following:

•A committed U.S. dollar revolving working capital facility of up to $535.9 million, subject to borrowing base limits, to be used for working capital loans and letters of credit;

•A multicurrency revolving working capital facility of up to $96.6 million, subject to borrowing base limits, to be used for working capital loans and letters of credit;

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At June 30, 2022, indebtedness under the Credit Agreement bears interest, at the Borrowers’ option, at a rate per annum equal to either (i) the Eurocurrency Rate (which is the Term SOFR for loans denominated in U.S. dollars and Term SOFR for loans denominated in Canadian dollars, in each case adjusted for certain regulatory costs, and in each case with a floor of 0.25%) for interest periods of one, two (solely with respect to Eurocurrency Rate loans denominated in Canadian dollars), three or six (solely with respect to Eurocurrency Rate loans denominated in U.S. dollars) months plus a specified margin or (ii) an alternate rate plus a specified margin.

At June 30, 2022, for loans denominated in U.S. dollars, the alternate rate is the Base Rate which is the highest of (a) the U.S. Prime Rate as in effect from time to time, (b) the greater of the Federal Funds Effective Rate and the Overnight Bank Funding Rate as in effect from time to time plus 0.50% and (c) the one-month Eurocurrency Rate for U.S. dollars as in effect from time to time plus 1.00%.

At June 30, 2022, for loans denominated in Canadian dollars, the alternate rate is the Prime Rate which is the higher of (a) the Canadian Prime Rate as in effect from time to time and (b) the one-month Eurocurrency Rate for U.S. dollars as in effect from time to time plus 1.00%.

At June 30, 2022, the specified margins for the working capital revolving facilities vary based on the utilization of the working capital facilities as a whole, measured on a quarterly basis. The specified margin for (x) the committed U.S. dollar revolving working capital facility range from 1.00% to 1.50% for loans bearing interest at the Base Rate and from 2.00% to 2.50% for loans bearing interest at the Eurocurrency Rate, (y) the uncommitted U.S. dollar revolving working capital facility range from 0.75% to 1.25% for loans bearing interest at the Base Rate and 1.75% to 2.25% for loans bearing interest at the Eurocurrency Rate and (z) the multicurrency revolving working capital facility range from 1.00% to 1.50% for loans bearing interest at the Base Rate and 2.00% to 2.50% for loans bearing interest at the Eurocurrency Rate.

In addition, the Borrowers will incur a commitment fee on the unused portion of (x) the committed U.S. dollar revolving working capital facility and multicurrency revolving working capital facility ranging from 0.375% to 0.500% per annum and (y) the revolving acquisition facility at a rate ranging from 0.35% to 0.50% per annum. Overdue amounts bear interest at the applicable rates described above plus an additional margin of 2%.

The Credit Agreement contains various covenants and restrictive provisions that, among other things, prohibit the Partnership from making distributions to unitholders if any event of default occurs or would result from the distribution or if the Loan Parties would not be in pro forma compliance with the financial covenants after giving effect to the distribution. In addition, the Credit Agreement contains various covenants that are usual and customary for a financing of this type, size and purpose, including, but not limited to, covenants that require the Loan Parties to maintain: a minimum consolidated EBITDA-to-fixed charge ratio, a minimum consolidated net working capital amount and a maximum consolidated total leverage-to-EBITDA ratio. The Credit Agreement also limits the Loan Parties ability to incur debt, grant liens, make certain investments or acquisitions, enter into affiliate transactions and dispose of assets. The Partnership was in compliance with the covenants under the Credit Agreement at June 30, 2022.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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Capital Expenditures

Our terminals require investments to maintain, expand, upgrade or enhance existing assets and to comply with environmental and operational regulations. Our capital requirements primarily consist of maintenance capital expenditures and expansion capital expenditures. We define maintenance capital expenditures as capital expenditures made to replace assets, or to maintain the long-term operating capacity of our assets or operating income. Examples of maintenance capital expenditures are expenditures required to maintain equipment reliability, terminal integrity and safety and to address environmental laws and regulations. Costs for repairs and minor renewals to maintain facilities in operating condition and that do not extend the useful life of existing assets will be treated as maintenance expenses as we incur them. We define expansion capital expenditures as capital expenditures made to increase the long-term operating capacity of our assets or our operating income whether through construction or acquisition of additional assets. Examples of expansion capital expenditures include the acquisition of equipment and the development or acquisition of additional storage capacity, to the extent such capital expenditures are expected to expand our operating capacity or our operating income.

The following table summarizes expansion and maintenance capital expenditures for the periods indicated:


	Capital Expenditures
	Expansion		Maintenance		Total
	(in thousands)
Six Months Ended June 30,
2022	$	1,402	$	5,180	$	6,582
2021	$	1,691	$	4,108	$	5,799

We anticipate that future maintenance capital expenditures will be funded with cash generated by operations and that future expansion capital requirements will be provided through long-term borrowings or other debt financings and/or equity offerings.

Cash Flows


	Six Months Ended June 30,
	2022		2021
	(in thousands)
Net cash provided by operating activities	$	266,205	$	159,152
Net cash (used in) provided by investing activities	$	(6,364)	$	5,326
Net cash (used in) financing activities	$	(254,058)	$	(161,495)

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2022 was $266.2 million. Cash inflows for the period were the result of a decrease of $200.7 million in inventories primarily due to less attractive market conditions to purchase, store and hedge oil, $68.6 million representing the net impact in our derivative instruments as a result of contract activity and changes in commodity prices during the period, and a decrease of $2.6 million in other assets driven by changes in collateral. These inflows were partially offset by cash outflows as a result of a decrease of $4.1 million in accounts payable and accrued liabilities primarily relating to the timing of invoice payments for product purchases, and a net loss of $27.3 million.

Net cash provided by operating activities for the six months ended June 30, 2021 was $159.2 million. Cash inflows for the period were the result of a decrease of $52.9 million in inventories largely due to a reduction in seasonal inventory requirements, net income of $3.2 million, and a decrease of $54.3 million in other assets driven by changes in collateral, decrease of $34.7 million in accounts receivable and $29.9 million representing the net impact in our derivative instruments as a result of contract activity and changes in commodity prices during the period. These inflows were offset by cash outflows as a result of a reduction of $19.1 million in accounts payable and accrued liabilities primarily relating to the timing of invoice payments for product purchases.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2022 was $6.4 million and primarily resulted from $1.4 million related to expansion capital expenditures and $5.2 million related to maintenance capital expenditure projects across our terminal system.

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Net cash provided by investing activities for the six months ended June 30, 2021 was $5.3 million, and primarily resulted from the sale of Oswego terminal generating $11.1 million in proceeds partially offset by $1.7 million related to expansion capital expenditures and $4.1 million related to maintenance capital expenditure projects across our terminal system.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2022 was $254.1 million, and primarily resulted from $226.9 million of payments under our Credit Agreement due to financing requirements and distributions of $22.8 million.

Net cash used in financing activities for the six months ended June 30, 2021 was $161.5 million, and primarily resulted from 117.4 million of payments under our Credit Agreement due to reduced financing requirements from accounts receivable levels, the reduction of inventory levels and distributions of $34.9 million.

Impact of Inflation

While inflation in the United States and Canada has been relatively low in recent years, it has accelerated in the last 12 months. Although we do not believe that inflation had a material impact on our results of operations or financial position for the six months ended June 30, 2022 and 2021, a high rate of inflation in the future may have an adverse effect on our operating results depending upon how inflationary pressure impacts the sales price of our products versus the product costs and operating expenses necessary to generate and support the selling of these products. In addition, inflation could materially increase the interest rates on our borrowings under our Credit Agreement or any future debt.

Critical Accounting Policies and Estimates

Part I, Item, 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions.

These estimates are based on our knowledge and understanding of current conditions and actions that we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of operations and are recorded in the period in which they become known. We have identified the following estimates that, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis: the fair value of derivative assets and liabilities, goodwill impairment assessment, and revenue recognition and cost of products sold.

The significant accounting policies and estimates that have been adopted and followed in the preparation of our Condensed Consolidated Financial Statements are detailed in Note 1 - Description of Business and Summary of Significant Accounting Policies included in our 2021 Annual Report. There have been no changes in these policies and estimates that had a significant impact on the financial condition and results of operations for the periods covered in this Quarterly Report.

Recent Accounting Pronouncements

For information on recent accounting pronouncements impacting our business, see "Recent Accounting Pronouncements" included under Note 1 - Description of Business and Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements.

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Item 3.			Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to which we are exposed are commodity price risk, interest rate risk and market/credit risk. We utilize various derivative instruments to manage exposure to commodity risk and swaps to manage exposure to interest rate risk.

Commodity Price Risk

We use various financial instruments as we seek to hedge our commodity price risk. We sell our refined products and natural gas primarily in the Northeast. We hedge our refined products positions primarily with a combination of futures contracts that trade on the New York Mercantile Exchange, or NYMEX, and fixed-for-floating price swaps in the form of bilateral contracts that are traded “over-the-counter” or "OTC". Although there are some notable differences between futures and the fixed-for-floating price swaps, both can provide a fixed price while the counterparty receives a price that fluctuates as market prices change.

As indicated in the table below, we primarily use futures contracts to hedge light oil transactions and swaps contracts for hedging residual fuel oils. There are no residual fuel oil futures contracts that actively trade in the United States. Each of the financial instruments trade by month for many months forward, allowing us the ability to hedge future contractual commitments.


Product Group						Primary Financial Hedging Instrument
Gasolines						NYMEX RBOB futures contract
Distillates						NYMEX Ultra Low Sulfur Diesel futures contract
Residual Fuel Oils						New York Harbor 1% Sulfur Residual Fuel Oil swaps contract

In addition to the financial instruments listed above, we may periodically use the ethanol futures contract that trades on the Chicago Board of Trade, or CBOT, to hedge ethanol that is used for blending into our gasoline. This ethanol contract is based on Chicago delivery. There are also swaps alternatives available in the market to hedge ethanol. In addition, we also use Rotterdam Barge 0.1% Sulfur Gasoil swaps as the primary means to hedge Kildair's marine gas oil positions.

For natural gas, there are no quality differences that need to be considered when hedging. Our primary hedging requirements relate to fixed price and basis (location) exposure. We largely hedge our natural gas fixed price exposure using fixed-for-floating price swaps that trade on the Intercontinental Exchange ("ICE") with the prices based on the Henry Hub location near Erath, Louisiana. The Henry Hub is the most active natural gas trading location in the United States. Although we typically use swaps, there is also an actively traded NYMEX Henry Hub natural gas futures contract that we can use. We primarily use ICE basis swaps as the key financial instrument type to hedge our natural gas basis risk. Similar to the natural gas futures and ICE Henry Hub swaps, basis swaps for major locations trade actively for many months. These swaps are financially settled, typically using prices quoted by Platts. We also directly hedge our price exposure in oil and natural gas by using forward purchases or sales that require physical delivery of the product.

The following table presents total realized and unrealized gains (losses) on derivative instruments utilized for commodity risk management purposes. Such amounts are included in cost of products sold (exclusive of depreciation and amortization) for the periods presented.


	Three Months Ended June 30,				Six Months Ended June 30,
	(in thousands)
	2022		2021		2022		2021
Refined products contracts	$	(37,995)	$	(19,503)	$	(171,054)	$	(39,277)
Natural gas contracts	4,112		(34,447)		172,873		(33,138)
Total	$	(33,883)	$	(53,950)	$	1,819	$	(72,415)

Substantially all of our commodity derivative contracts outstanding as of June 30, 2022 will settle prior to December 31, 2023.

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Interest Rate Risk

We enter into interest rate swaps to manage exposures in changing interest rates. We swap the variable SOFR interest rate payable under our Credit Agreement for fixed LIBOR or equivalent SOFR interest rates. These interest rate swaps meet the criteria to receive cash flow hedge accounting treatment. Counterparties to our interest rate swaps are large multi-national banks and we do not believe there is a material risk of counterparty nonperformance. Additionally, we may enter into seasonal swaps which are intended to manage our increase in borrowings during the winter, as a result of higher inventory and accounts receivable levels.

Our interest rate swap agreements outstanding as of June 30, 2022 were as follows (in thousands):

Beginning

Ending

Notional Amount

January 2022

December 2022

425,000

January 2023

March 2023

475,000

April 2023

December 2023

450,000

January 2024

December 2024

500,000

January 2025

December 2026

450,000

January 2027

300,000


* During the months of May through October, one interest rate swap agreement decreases by $100 million. This decrease is not reflected in the notional amount in the table above.
** During the months of May through October, two interest rate swap agreements decrease by $100 million each. These decreases are not reflected in the notional amount in the table above.

We expect to continue to hedge our floating rate debt with fixed-for-floating interest rate swaps to manage our exposure to LIBOR or SOFR interest rates. Based on a sensitivity analysis for the twelve months ended June 30, 2022, we estimate that if short-term interest rates increase 100 basis points or decrease to zero, our interest expense would have increased approximately $3.0 million and decreased approximately $0.1 million, respectively. These amounts were estimated by considering the effect of the hypothetical short-term interest rates on variable-rate debt outstanding, adjusted for interest rate hedges.

Derivative Instruments

The following tables present our derivative assets and derivative liabilities measured at fair value on a recurring basis as of June 30, 2022:


	As of June 30, 2022
	Fair Value Measurement		Active Markets Level 1		Observable Inputs Level 2		Unobservable Inputs Level 3
	(in thousands)
Derivative assets:

Commodity fixed forwards	$	21,203	$	—	$	21,203	$	—
Futures, swaps and options	261,852		261,852		—		—
Commodity derivatives	283,055		261,852		21,203		—
Interest rate swaps	15,818		—		15,818		—

Total derivative assets	$	298,873	$	261,852	$	37,021	$	—
Derivative liabilities:

Commodity fixed forwards	274,141		—		274,141		—
Futures, swaps and options	158,325		158,260		65		—
Commodity derivatives	432,466		158,260		274,206		—
Interest rate swaps	—		—		—		—

Total derivative liabilities	$	432,466	$	158,260	$	274,206	$	—

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Market and Credit Risk

The risk management activities for our refined products and natural gas segments involve managing exposures to the impact of market fluctuations in the price and transportation costs for commodities through the use of derivative instruments. The prices for energy commodities can be significantly influenced by market liquidity and changes in seasonal demand, weather conditions, transportation availability, and federal and state regulations. We monitor and manage our exposure to market risk on a daily basis in accordance with approved policies.

We maintain a control environment under the direction of our Chief Risk Officer through our risk management policy, processes and procedures, which our senior management has approved. Control measures include volumetric, value at risk, and stop loss limits, as well as contract term limits. Our Chief Risk Officer and Risk Management Committee must approve the use of new instruments or new commodities. Risk limits are monitored and reported daily to senior management. Our risk management department also performs independent verifications of sources of fair values. These controls apply to all of our commodity risk management activities.

We use a value at risk model to monitor commodity price risk within our risk management activities. The value at risk model uses both linear and simulation methodologies based on historical information, with the results representing the potential loss in fair value over one day at a 95% confidence level. Results may vary from time to time as hedging coverage, market pricing levels and volatility change.

We have a number of financial instruments that are potentially at risk including cash and cash equivalents, receivables and derivative contracts. Our primary exposure is credit risk related to our receivables and counterparty performance risk related to the fair value of derivative assets, which is the loss that may result from a customer’s or counterparty’s non-performance. We use credit policies to control credit risk, including utilizing an established credit approval process, monitoring customer and counterparty limits, employing credit mitigation measures such as analyzing customer financial statements, credit insurance with a third party provider and accepting personal guarantees and forms of collateral. We believe that our counterparties will be able to satisfy their contractual obligations. Credit risk is limited by the large number of customers and counterparties comprising our business and their dispersion across different industries.

Cash is held in demand deposit and other short-term investment accounts placed with federally insured financial institutions. Such deposit accounts at times may exceed federally insured limits. We have not experienced any losses on such accounts.

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Item 4.			Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the Partnership's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Partnership's reports under the Exchange Act is accumulated and communicated to the Partnership's management, including the President and Chief Executive Officer and the Chief Financial Officer of our General Partner, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of June 30, 2022, the Partnership carried out an evaluation, under the supervision and with the participation of management (including the President and Chief Executive Officer and Chief Financial Officer of the General Partner) of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based on this evaluation, the General Partner's President and Chief Executive Officer and Chief Financial Officer concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2022.

Changes in Internal Control Over Financial Reporting

There have been no changes in our system of internal control over financial reporting during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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PART II—OTHER INFORMATION


Item 1.			Legal Proceedings

From time to time, we are a party to various legal proceedings or claims arising in the ordinary course of business. For information related to legal proceedings, see the discussion under the caption Legal, Environmental and Other Proceedings in Note 10 - Commitments and Contingencies to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report, which information is incorporated by reference into this Part II, Item 1.


Item 1A.			Risk Factors

Other than the risk factors set forth in this report and below, there have been no material changes from the risk factors discussed in Part I, Item 1A “Risk Factors” included in our 2021 Annual Report. Additional risks not currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations, financial condition, and the price of our common units.

The Partnership operates in a competitive environment in which operating and market risk exposure may be impacted by global events.

In February 2022, Russia invaded Ukraine resulting in the United States, Canada, the European Union and other countries imposing economic sanctions on Russia. These actions have not had and are not expected to have a material impact on the Partnership’s financial condition or results of operations. However, the fluidity and continuation of the conflict may result in additional economic sanctions and other impacts which could have a negative impact on the Partnership’s financial condition, results of operations and cash flows. These include inflationary pressures on raw materials and energy; supply chain and logistics disruptions; volatility in interest rates; and, heightened cybersecurity threats.

We may have difficulty attracting, motivating and retaining employees in light of the proposed Merger.

Uncertainty about the effect of the proposed Merger on our employees may have an adverse effect on the combined organization, particularly given we will no longer be part of a publicly traded entity. This uncertainty may impair our ability to attract, retain and motivate personnel until the Merger is completed. Employee retention may be particularly challenging during the pendency of the Merger, as employees may feel uncertain about their future roles with the combined organization. In addition, we may have to provide additional compensation in order to retain employees, which will increase our administrative expenses even if the Merger does not close. If our employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to become employees of the combined organization, we could experience adverse disruption in our business.

We are subject to business uncertainties and contractual restrictions relating to the Pending Merger, which could adversely affect our business and operations.

In connection with the Merger, it is possible that some customers, suppliers and other persons with whom we have business relationships may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationship with us, which could negatively affect our revenues, earnings and cash available for distribution, as well as the market price of our common units, regardless of whether the Merger is completed.

Under the terms of the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which may adversely affect our ability to execute certain of our business strategies. Such limitations could negatively affect our business and operations prior to the completion of the Merger.

The Merger is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all. Failure to complete the Merger, or significant delays in completing the Merger, could negatively affect the trading price of our common units and our future business and financial results.

The completion of the Merger is subject to a number of conditions. Accordingly, completion of the Merger is not assured and is subject to risks. If the Merger is not completed, or if there are significant delays in completing the Merger, the trading price of our common units and our future business and financial results could be negatively affected, and we will be subject to several risks, including the following:

•we may be liable for damages to Sprague Holdings under the terms and conditions of the Merger Agreement;

•negative reactions from the financial markets, including declines in the price of our common units due to the fact that current prices may reflect a market assumption that the Merger will be completed; and

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•the attention of our management will have been diverted to the Merger rather than our own operations and pursuit of other opportunities that could have been beneficial to us.

We will incur substantial transaction-related costs in connection with the Merger.

We expect to incur a number of non-recurring transaction-related costs associated with evaluating and completing the Merger. These fees and costs will be substantial regardless of whether the Merger is completed. Non-recurring transaction costs include, but are not limited to, fees paid to financial, legal and accounting advisors, filing fees and printing costs. We will not recover these costs if the conditions to closing the Merger are not satisfied, which would have an adverse impact on our financial condition as a stand-alone business.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.			Defaults Upon Senior Securities

None.


Item 4.			Mine Safety Disclosures

Not applicable.


Item 5.			Other Information

None.

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Item 6. Exhibits

The exhibits listed in the accompanying Exhibits Index are filed or incorporated by reference as part of this Form 10-Q.

EXHIBIT INDEX


Exhibit No.						Description
2.1†						Purchase and Sale Agreement, dated September 18, 2017, by and among Sprague Operating Resources LLC, Coen Oil Company, LLC, Coen Markets, Inc., and The Thomaston Land Company, LLC (incorporated by reference to Exhibit 2.1 of Sprague Resources LP's Current Report on Form 8-K filed September 19, 2017 (File No. 001-36137)).

2.2*†						Agreement and Plan of Merger, dated June 2, 2022, by and among Sprague Resources LP, Sprague Resources GP LLC, Sprague HP Holdings, LLC, and Sparrow HP Merger Sub, LLC (incorporated by reference to Exhibit 2.1 of Sprague Resources LP’s Current Report on Form 8-K filed June 2, 2022 (File No. 001-36137).

3.1						Certificate of Limited Partnership of Sprague Energy Partners LP (incorporated by reference to Exhibit 3.1 of Sprague Resources LP’s Registration Statement on Form S-1 filed July 27, 2011 (File No. 333-175826)).

3.2						Amendment to the Certificate of Limited Partnership of Sprague Energy Partners LP (Changing Name to Sprague Resources LP) (incorporated by reference to Exhibit 3.2 of Sprague Resources LP’s Registration Statement on Form S-1 filed July 27, 2011 (File No. 333-175826)).

3.3						Amendment No. 3 to the First Amended and Restated Agreement of Limited Partnership of Sprague Resources LP dated as of October 30, 2013, effective March 1, 2021 (incorporated by reference to Exhibit 3.3 of Sprague Resources LP’s Annual Report on Form 10-K filed March 4, 2021 (File No. 001-36137)).

3.4						Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Sprague Resources LP dated as of October 30, 2013 effective October 25, 2019 (incorporated by reference to Exhibit 3.1 of Sprague Resources LP's Current Report on Form 8-K filed October 25, 2019 (File No. 001-36137)).

3.5						Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Sprague Resources LP dated as of October 30, 2013 effective December 20, 2017 (incorporated by reference to Exhibit 3.1 of Sprague Resources LP's Current Report on Form 8-K filed December 20, 2017 (File No. 001-36137)).

3.6						First Amended and Restated Agreement of Limited Partnership of Sprague Resources LP (incorporated by reference to Exhibit 3.1 of Sprague Resources LP’s Current Report on Form 8-K filed November 5, 2013 (File No. 001-36137)).

3.7						Second Amended and Restated Limited Liability Company Agreement of Sprague Resources GP LLC (incorporated by reference to Exhibit 3.1 of Sprague Resources LP’s Current Report on Form 8-K filed May 28, 2021 (File No. 001-36137)).

3.8						Composite copy of the First Amended and Restated Agreement of Limited Partnership of Sprague Resources LP, dated as of October 30, 2013, as amended by Amendment No. 1, effective December 20, 2017, Amendment No. 2, effective October 25, 2019, and Amendment No. 3, effective March 1, 2021 (incorporated by reference to Exhibit 3.8 of Sprague Resources LP’s Annual Report on Form 10-K filed March 4, 2021 (File No. 001-36137)).

10.1						Second Amendment dated April 13, 2022, to Second Amended and Restated Credit Agreement, dated May 19, 2020, among Sprague Operating Resources LLC, as U.S. Borrower, Kildair Service ULC, as Canadian Borrower, the several lenders parties thereto, MUFG Bank Ltd., as administrative agent, the co-syndication agents, the co-collateral agents and the co-documentation agents party thereto (incorporated by reference to Exhibit 10.1 of Sprague Resources LP's Current Report on Form 8-K filed April 13, 2022 (File No. 001-36167)).

31.1*						Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a) /15d-14(a), by Chief Executive Officer.

31.2*						Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a) /15d-14(a), by Chief Financial Officer.

32.1**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.

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32.2**						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.

101.INS*						Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH*						Inline XBRL Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation

101.DEF*						Inline XBRL Taxonomy Extension Definition

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE*						Inline XBRL Taxonomy Extension Presentation

104*						Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)

*						Filed herewith.
**						Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K.
†						Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules have been omitted. The registrant hereby agrees to furnish supplementally to the SEC, upon its request, any or all omitted schedules.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SPRAGUE RESOURCES LP

	By:	Sprague Resources GP LLC,
		Its General Partner

Date: August 4, 2022		/s/ David C. Long
		David C. Long Chief Financial Officer (on behalf of the registrant, and in his capacity as Principal Financial Officer)

Document

Exhibit 2.2

AGREEMENT AND PLAN OF MERGER

DATED AS OF JUNE 2, 2022

BY AND AMONG

SPRAGUE HP HOLDINGS, LLC,

SPARROW HP MERGER SUB, LLC,

SPRAGUE RESOURCES LP,

AND

SPRAGUE RESOURCES GP LLC

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ARTICLE I Defined Terms; Construction			2
Section 1.1 Definitions			2
Section 1.2 Interpretation			11
ARTICLE II The Merger			13
Section 2.1 The Merger and Surviving Entity			13
Section 2.2 Closing			13
Section 2.3 Effective Time			13
Section 2.4 Effects of the Merger			13
Section 2.5 Organizational Documents of the Surviving Entity			13
Section 2.6 Admission as Partner			14
ARTICLE III Merger Consideration; Payment Procedures			14
Section 3.1 Merger Consideration			14
Section 3.2 Surrender of Common Units			15
Section 3.3 Adjustments			17
Section 3.4 No Dissenters’ or Appraisal Rights			18
ARTICLE IV Representations and Warranties of the Partnership Parties			18
Section 4.1 Organization			18
Section 4.2 Validity of Agreement; Authorization			18
Section 4.3 Capitalization; Subsidiaries			19
Section 4.4 No Conflicts; Consents			21
Section 4.5 Financial Statements; SEC Reports			21
Section 4.6 Opinion of Financial Advisor			22
Section 4.7 Disclosure Controls; Sarbanes-Oxley			22
Section 4.8 Information Supplied			22
Section 4.9 Absence of Undisclosed Liabilities			23
Section 4.10 Brokers and Other Advisors			23
Section 4.11 Absence of Certain Changes or Events			23
Section 4.12 Compliance with Law; Permits			24
Section 4.13 Tax Matters			24
Section 4.14 Employees and Benefit Matters			26
Section 4.15 Insurance			29
Section 4.16 Regulatory Matters			29
Section 4.17 Environmental Matters			29
Section 4.18 Material Contracts			30
Section 4.19 Litigation			30
Section 4.20 Title to Property and Assets			31
Section 4.21 Listing			31
Section 4.22 Anti-Corruption			31
Section 4.23 No Other Representations or Warranties			31
ARTICLE V Representations and Warranties of the Parent Parties			32
Section 5.1 Organization			32
Section 5.2 Operations and Ownership of Merger Sub			33
Section 5.3 Ownership of Common Units, Incentive Distribution Rights and Partnership GP			33


Section 5.4 Validity of Agreement; Authorization			33
Section 5.5 No Conflict or Violation			33
Section 5.6 Consents and Approvals			34
Section 5.7 Legal Proceedings			34
Section 5.8 Access to Information			34
Section 5.9 Information Supplied			34
Section 5.10 Brokers and Other Advisors			35
Section 5.11 Bankruptcy			35
Section 5.12 Sufficiency of Funds			35
Section 5.13 Compliance with Laws			35
Section 5.14 No Other Representations or Warranties			35
ARTICLE VI Additional Covenants and Agreements			36
Section 6.1 Preparation of the Partnership Information Statement and Schedule 13E-3			36
Section 6.2 Conduct of Business			37
Section 6.3 Regulatory Approvals; Other Efforts Related to the Consummation of the Merger			39
Section 6.4 Financing Cooperation			40
Section 6.5 Public Announcements			40
Section 6.6 Access to Information			41
Section 6.7 Indemnification and Insurance			41
Section 6.8 Fees and Expenses			43
Section 6.9 Section 16 Matters			43
Section 6.10 Termination of Trading and Deregistration			43
Section 6.11 Conflicts Committee			43
Section 6.12 Tax Matters			44
Section 6.13 Takeover Statutes			44
Section 6.14 No Rights Triggered			44
Section 6.15 Notification of Certain Matters			44
Section 6.16 Transaction Litigation			44
Section 6.17 Performance by the Partnership GP			45
Section 6.18 Delivery of Written Consent			45
ARTICLE VII Conditions Precedent			45
Section 7.1 Conditions to Each Party’s Obligation to Effect the Merger			45
Section 7.2 Conditions to Obligations of the Parent Parties to Effect the Merger			45
Section 7.3 Conditions to Obligation of the Partnership Parties to Effect the Merger			46
Section 7.4 Frustration of Closing Conditions			47
ARTICLE VIII Termination			47
Section 8.1 Termination			47
Section 8.2 Effect of Termination			48
ARTICLE IX Miscellaneous			50
Section 9.1 No Survival, Etc			50
Section 9.2 Amendment or Supplement			50
Section 9.3 Extension of Time, Waiver, Etc			50
Section 9.4 Assignment			50


Section 9.5 Counterparts			51
Section 9.6 Entire Understanding; No Third-Party Beneficiaries			51
Section 9.7 Governing Law; Jurisdiction; Waiver of Jury Trial			51
Section 9.8 Specific Performance; Parent Party Liability Cap			52
Section 9.9 Notices			53
Section 9.10 Severability			54
Section 9.11 Non-Recourse			54

EXHIBITS

Exhibit A Form of Written Consent

iii

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of June 2, 2022 (this “Agreement”), is by and among Sprague HP Holdings, LLC, a Delaware limited liability company and sole member of Merger Sub (“Parent”), Sparrow HP Merger Sub, LLC, a Delaware limited liability company (“Merger Sub” and, together with Parent, the “Parent Parties”), Sprague Resources LP, a Delaware limited partnership (the “Partnership”), and Sprague Resources GP LLC, a Delaware limited liability company (the “Partnership GP” and, together with the Partnership, the “Partnership Parties”). Each of Parent, Merger Sub, the Partnership and the Partnership GP are referred to herein as a “Party” and together as “Parties.” Certain capitalized terms used in this Agreement are defined in Article I.

WITNESSETH:

WHEREAS, the Conflicts Committee (the “Conflicts Committee”) of the Board of Directors of the Partnership GP (the “Board”) has (i) determined that this Agreement and the consummation of the transactions contemplated hereby, including the Merger, are in the best interests of the Partnership and the Partnership Unaffiliated Unitholders, (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, which action constituted “Special Approval” as defined in Section 7.9(b) of the Partnership Agreement and (iii) resolved to recommend the submission of this Agreement to a vote of the Limited Partners by written consent pursuant to Section 13.11 of the Partnership Agreement;

WHEREAS, Parent, in its capacity as sole member of the Partnership GP, has irrevocably approved this Agreement and the consummation of the transactions contemplated hereby;

WHEREAS, the general partner of the sole member of Parent has (i) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and (ii) authorized the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated hereby, including the Merger, on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, Parent directly owns 100% of the issued and outstanding limited liability company interests in Merger Sub, and Parent, in its capacity as the sole member of Merger Sub, has (i) determined that the Merger is in the best interests of Merger Sub, and declared it advisable, to enter into this Agreement and (ii) approved this Agreement, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger; and

WHEREAS, Parent will, immediately following execution of this Agreement, in its capacity as the record and beneficial owner of Common Units constituting a “Unit Majority” (as defined in the Partnership Agreement), deliver to the Partnership the irrevocable Written Consent approving this Agreement and the transactions contemplated by this Agreement, including the Merger, pursuant to Section 13.11 of the Partnership Agreement.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound, the Parties agree as follows:

ARTICLE I
Defined Terms; Construction

Section 1.1 Definitions.

(a) As used in this Agreement, the following terms have the meanings ascribed thereto below:

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by Contract or otherwise; provided, however, that, except where otherwise expressly provided, for the purposes of this Agreement, none of the Partnership Entities shall be considered Affiliates of any of the Parent Parties, and none of the Parent Parties shall be considered Affiliates of any of the Partnership Entities.

“Agreement” has the meaning set forth in the Preamble.

“Applicable Anti-Corruption Laws” has the meaning set forth in Section 4.22.

“Axel Johnson Purchase Agreement” has the meaning set forth in Section 6.7(c).

“Axel Johnson Retirement Plan” has the meaning set forth in Section 4.14(f).

“Board” has the meaning set forth in the Recitals.

“Book-Entry Units” has the meaning set forth in Section 3.1(a).

“Business Day” means a day except a Saturday, a Sunday or other day on which the SEC or banks in the city of New York are authorized or required by applicable Law to be closed.

“Certificate of Merger” has the meaning set forth in Section 2.3.

“Certificated Units” has the meaning set forth in Section 3.1(a).

“Closing” has the meaning set forth in Section 2.2.

“Closing Date” has the meaning set forth in Section 2.2.

“Closing Failure Notice” has the meaning set forth in Section 8.1(e).

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Unit” has the meaning set forth in the Partnership Agreement.

“Conflicts Committee” has the meaning set forth in the Recitals.

“Conflicts Committee Financial Advisor” has the meaning set forth in Section 4.6.

“Continuing Employees” means those individuals who are employees of a Partnership Entity immediately prior to the Closing Date and who remain employed by the Surviving Entity or any of its Affiliates immediately following the Closing.

“Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, evidence of indebtedness, security agreement, lease, easement, right of way agreement, sublease, license, commitment, subcontract or any other arrangement, understanding, undertaking, obligation, commitment or legally enforceable agreement, whether written or oral.

“Covered Person” has the meaning set forth in Section 6.7(a).

“COVID-19” means the COVID-19 pandemic, including any evolutions or mutations of the COVID-19 disease, and any further epidemics or pandemics arising therefrom.

“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive or guidelines promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19.

“DGCL” means the General Corporation Law of the State of Delaware.

“Divestiture Action” has the meaning set forth in Section 6.3(b).

“DLLCA” means the Delaware Limited Liability Company Act.

“DRULPA” means the Delaware Revised Uniform Limited Partnership Act.

“DTC” has the meaning set forth in Section 3.2(a).

“Effective Time” has the meaning set forth in Section 2.3.

“Encumbrances” means any mortgage, deed of trust, encumbrance, charge, claim, equitable or other interest, easement, right of way, building or use restriction, lease, license, lien, option, pledge, security interest, purchase rights, preemptive right, right of first refusal or similar right or adverse claim or restriction of any kind.

“Enforceability Exceptions” has the meaning set forth in Section 4.2(a).

“Environmental Laws” means all applicable federal, state and local Laws relating to the protection, preservation or restoration of the environment (including natural resources), occupational health or workplace safety, pipeline safety, or otherwise imposing Liability or standards of conduct concerning the generation, use, storage, management, treatment, transportation, disposal or arrangement for disposal of any Hazardous Material.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Fund” has the meaning set forth in Section 3.2(b).

“Financing Indemnified Parties” has the meaning set forth in Section 6.4.

“GAAP” means generally accepted accounting principles in the United States.

“General Partner Interest” has the meaning set forth in the Partnership Agreement.

“Governmental Authority” means any (a) federal, state, local, foreign or municipal government, or any subsidiary body thereof or (b) governmental or quasi-governmental authority of any nature, including, (i) any governmental agency, branch, department, official, committee (including interagency committee), or entity, (ii) any court, judicial authority or other tribunal, and (iii) any arbitration body or tribunal.

“Hazardous Material” shall mean (a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, (c) any petroleum hydrocarbons, petroleum or petroleum product, petroleum substances, natural gas, crude oil, or any components, fractions or derivatives thereof, (d) any polychlorinated biphenyl, (e) any per- or polyfluoroalkyl substance, and (f) any chemical, product, material, substance or waste regulated under, or defined as or included in the definition of “hazardous substance,” “hazardous material,” “hazardous waste,” “restricted hazardous waste,” “extremely hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance” or “toxic pollutant” pursuant to, any Environmental Law.

“Incentive Distribution Right” has the meaning set forth in the Partnership Agreement.

“Inside Date” has the meaning set forth in Section 2.2.

“Intellectual Property” means any and all proprietary and intellectual property rights, under the Law of any jurisdiction or rights under international treaties, both statutory and common law rights, including: (a) utility models, supplementary protection certificates, patents and applications for same, and extensions, divisions, continuations, continuations-in-part, reexaminations, and reissues of the foregoing; (b) trademarks, service marks, trade names, slogans, domain names, logos, trade dress, other source identifiers (including all goodwill associated with the foregoing), and registrations and applications for registrations of the foregoing; (c) copyrights, moral rights, database rights, other rights in works of authorship and registrations and applications for registration of the foregoing; and (d) Trade Secrets.

“IRS” means the U.S. Internal Revenue Service.

“Law” means any applicable domestic or foreign federal, state, local, municipal or other administrative order, constitution, law (including common law), Order, ordinance, rule, code, case, decision, regulation, statute, tariff or treaty, or other requirements with similar effect of any Governmental Authority or any binding provisions or interpretations of the foregoing.

“Liability” means, collectively, any direct or indirect indebtedness, commitment, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation, contingency, responsibility or other liability, in each case, whether fixed or unfixed, asserted or unasserted, known or unknown, liquidated or unliquidated, due or to become due, accrued or unaccrued, absolute, contingent or otherwise.

“Limited Partner” has the meaning set forth in the Partnership Agreement.

“Limited Partner Interest” has the meaning set forth in the Partnership Agreement.

“Loss” means as to any specified Person, any losses, costs, damages, claims, obligations, deficiencies, demands, judgments, assessments, awards, Taxes, amounts paid in settlement, interests, expenses (including litigation costs, costs of investigation and defense and reasonable fees of and actual disbursements by attorneys, consultants, experts or other representatives), fines of, penalties on, or liabilities of any other nature of that Person.

“Material Contract” means each Contract filed or required to be filed as an exhibit to any SEC Report to which any of the Partnership Entities is a party.

“Merger” has the meaning set forth in Section 2.1.

“Merger Consideration” has the meaning set forth in Section 3.1(a).

“Merger Sub” has the meaning set forth in the Preamble.

“NYSE” means the New York Stock Exchange.

“Order” means any award, decision, injunction, judgment, order, ruling, subpoena, demand, request, writ, decree or verdict entered, issued, made or rendered by any Governmental Authority.

“Organizational Documents” means (a) with respect to a corporation, the articles or certificate of incorporation and bylaws thereof together with any other governing agreements or instruments of such corporation or the shareholders thereof, each as amended, (b) with respect to a limited liability company, the certificate of formation and the operating or limited liability company agreement or regulations thereof, or any comparable governing instruments, each, as amended, (c) with respect to a partnership, the certificate of formation and the partnership agreement of the partnership and, if applicable, the Organizational Documents of such partnership’s general partner, or any comparable governing instruments, each as amended and (d) with respect to any other Person, the organizational, constituent or governing documents or instruments of such Person, each as amended.

“Outside Date” has the meaning set forth in Section 8.1(b)(ii).

“Parent” has the meaning set forth in the Preamble.

“Parent Credit Agreement” means that certain Credit Agreement, dated June 16, 2021, among Parent, as borrower, Coöperatieve Rabobank U.A., New York Branch, as administrative agent, and the lenders from time to time party thereto, as may be amended, modified or supplemented from time to time.

“Parent Material Adverse Effect” means any event, change, fact, development, circumstance, condition or occurrence that would materially impair the ability of Parent or Merger Sub or their Affiliates to perform their respective obligations or to consummate the transactions under this Agreement, including the Merger, or materially impede Parent’s or Merger Sub’s or any of their Affiliates’ consummation or performance of the transactions or obligations under this Agreement, including the Merger.

“Parent Non-Recourse Party” has the meaning set forth in Section 9.11(a).

“Parent Parties” has the meaning set forth in the Preamble.

“Parent Parties’ Knowledge” means, in the case of the Parent Parties, the actual knowledge of the individuals listed in Section 1.1 of Parent Party Disclosure Schedule.

“Parent Party Disclosure Schedule” has the meaning set forth in Article V.

“Parent Termination Fee” has the meaning set forth in Section 8.2(b).

“Parent Units” means each Common Unit that is, as of immediately prior to the Effective Time, held by Parent or its permitted transferees.

“Partnership” has the meaning set forth in the Preamble.

“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of October 30, 2013, as amended, modified or supplemented from time to time.

“Partnership Benefit Plan” has the meaning set forth in Section 4.14(a).

“Partnership Disclosure Schedule” has the meaning set forth in Article IV.

“Partnership Entities” means the Partnership, the Partnership GP and each of their respective Subsidiaries.

“Partnership GP” has the meaning set forth in the Preamble.

“Partnership GP LLC Agreement” means the Second Amended and Restated Limited Liability Company Agreement of the Partnership GP, dated as of May 28, 2021, as amended, modified or supplemented from time to time.

“Partnership Information Statement” means the information statement of the type contemplated by Rule 14c-2 promulgated under the Exchange Act to be filed by the Partnership in connection with the Merger.

“Partnership LTIP” means the Sprague Resources LP 2013 Long-Term Incentive Plan and any and all award agreements granted thereunder.

“Partnership Material Adverse Effect” means any event, change, fact, development, circumstance, condition or occurrence that is materially adverse to, or has had a material adverse effect on or change in, on or to the business, condition (financial or otherwise) or operations of the Partnership Entities, taken as a whole; provided, however, that none of the following events, changes, facts, developments, circumstances, conditions or occurrences (either alone or in combination) shall be taken into account for purposes of determining whether or not a Partnership Material Adverse Effect has occurred: (a) changes in general local, domestic, foreign or international economic conditions; (b) changes affecting generally the industries or markets in which such Person operates (including changes in commodity prices or interest rates); (c) acts of war, sabotage or terrorism, military actions or the escalation thereof, weather conditions, or other force majeure events or acts of God, including any material worsening of any of the foregoing conditions threatened or existing as of the date of this Agreement; (d) the announcement (in accordance with the terms of this Agreement) or performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including any disruption of customer or supplier relationships or loss of any employees or independent contractors of any Partnership Entity; provided, that the exception set forth in this clause (d) with respect to the performance of this Agreement shall not apply in connection with any representation or warranty set forth in Section 4.4, or any condition insofar as it relates to any such representation or warranty; (e) any changes in the applicable Laws or accounting rules or principles, including changes required by GAAP or interpretations thereof; (f) any failure of any Partnership Entity to meet any internal or published projections, estimates or expectations of such Partnership Entity’s revenue, earnings or other financial performance or results of operations for any period, or any failure by any Partnership Entity to meet its internal budgets, plans or forecasts of its revenue, earnings or other financial performance of results of operations (it being understood, in each case, that the facts or occurrences giving rise or contributing to such failure that are not otherwise excluded from the definition of a Partnership Material Adverse Effect may be taken into account); (g) any changes in (i) the market price or trading volume of the equity securities of any Partnership Entity (and the associated costs of capital) or (ii) the credit rating of any Partnership Entity (it being understood, in each case of (i) and (ii), that the facts or occurrences giving rise or contributing to such change that are not otherwise excluded from the definition of a Partnership Material Adverse Effect may be taken into account); and (h) any Proceedings commenced by or involving any current or former member, partner or stockholder of any Partnership Entity arising out of or related to this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby; except, in the case of clauses (a) through (c) and (e), to the extent disproportionately affecting the Partnership Entities as compared with other Persons of similar size operating in the same industry in the United States and then only such disproportionate impact shall be considered.

“Partnership Non-Recourse Party” has the meaning set forth in Section 9.11(b).

“Partnership Parties” has the meaning set forth in the preamble.

“Partnership Parties’ Knowledge” means, in the case of the Partnership Parties, the actual knowledge of the individuals listed in Section 1.1 of Partnership Disclosure Schedule.

“Partnership Unaffiliated Unitholders” means Unitholders other than Parent, Merger Sub, Partnership GP and their respective Affiliates.

“Partnership Unitholder Approval” has the meaning set forth in Section 7.1(b).

“Party” and “Parties” has the meaning set forth in the Preamble.

“Paying Agent” has the meaning set forth in Section 3.2(a).

“Permits” has the meaning set forth in Section 4.12(b).

“Permitted Encumbrances” means, with respect to any Person, (a) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s or other like Encumbrances or purchase money security interests, in each case, arising in the ordinary course of business which are not yet delinquent or which are being contested in good faith by appropriate Proceedings; (b) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (c) Encumbrances for Taxes not yet delinquent or that are being contested in good faith by appropriate Proceedings and for which adequate reserves have been established in accordance with GAAP; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations and surety and appeal bonds; (e) encumbrances created pursuant to construction, operating and maintenance agreements, space lease agreements and other similar agreements, in each case having ordinary and customary terms and entered into in the ordinary course of business by such Person and its Subsidiaries, which do not materially impair the value or materially and adversely affect the continued ownership, use or operation of the property for the purpose for which the property is currently being used by such Person or its Subsidiaries; (f) with respect to any item of real property, title exceptions, defects in title, Encumbrances, liens, charges, easements, rights-of-way, covenants, declarations, restrictions, restrictive covenants, revocable interests and other matters of record, or that would be shown by an accurate survey, which do not, in any such case, materially impair the value or materially and adversely affect the continued ownership, use or operation of the property for the purposes for which the property is currently being used by such Person or its Subsidiaries, but excluding, in any case, any monetary lien; (g) with respect to the Partnership Entities, Encumbrances disclosed in any SEC Report or otherwise securing liabilities reflected therein; (h) with respect to any equity interests or other securities, Encumbrances imposed by any applicable securities Laws or contained in the Organizational Documents of such applicable entity; (i) non-exclusive licenses or software granted by such Person in the ordinary course of business; and (j) Encumbrances imposed by the terms and conditions of any Permit held by such Person.

“Person” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity, including a Governmental Authority.

“Proceeding” means any actual claim or claim threatened in writing (including a claim of a violation of Law), action, audit, demand, suit, proceeding, charge, grievance, investigation or other proceeding at law or in equity or order or ruling, in each case whether civil, criminal, administrative, investigative or otherwise and whether or not such claim, action, audit, demand, suit, proceeding, charge, grievance, investigation or other proceeding or order or ruling results in a formal civil or criminal litigation or regulatory action.

“Q2 Distribution” has the meaning set forth in Section 3.1(d).

“Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dispersion, migration, dumping or disposing.

“Representatives” means, with respect to any Person, such Person’s directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives.

“Restraints” has the meaning set forth in Section 7.1(c).

“Rights” means, with respect to any Person, (a) options, warrants, preemptive rights, subscriptions, calls or other rights, convertible securities, exchangeable securities, agreements or commitments of any character obligating such Person (or the general partner of such Person) to issue, transfer or sell any partnership interest or other equity interest of such Person or any of its Subsidiaries or any securities convertible into or exchangeable for such partnership interests or equity interests, or (b) contractual obligations of such Person (or the general partner of such Person) to repurchase, redeem or otherwise acquire any partnership interest or other equity interest in such Person or any of its Subsidiaries or any such securities or agreements listed in clause (a) of this definition.

“Schedule 13E-3” means the filing of a Rule 13E-3 transaction statement on Schedule 13E-3 relating to the Written Consent and the transactions contemplated by this Agreement.

“SEC” means the United States Securities and Exchange Commission.

“SEC Reports” means all periodic reports, current reports and registration statements, including exhibits and other information incorporated therein, required to be filed or actually filed or furnished by the Partnership with the SEC under the Exchange Act or the Securities Act, since January 1, 2020.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Special Approval” has the meaning set forth in the Recitals.

“Sprague Credit Agreement” means that certain Second Amended and Restated Credit Agreement, dated as of May 19, 2020, as amended by that certain First Amendment to the Second Amended and Restated Credit Agreement, dated May 11, 2021, and by that certain Second Amendment to the Second Amended and Restated Credit Agreement, dated April 13, 2022, among

Sprague Operating Resources LLC, as U.S. borrower, Kildair Service ULC, as Canadian borrower, the several lenders parties thereto, MUFG Bank Ltd., as administrative agent, the co-syndication agents, the co-collateral agents and the co-documentation agents party thereto.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity, whether incorporated or unincorporated, of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, (b) if a partnership (whether general or limited), a general partner interest is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof or (c) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof or, in the case of a limited liability company, a managing member interest is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses; provided, however, that, except where otherwise expressly provided, for the purposes of this Agreement, the Partnership, the Partnership GP and their respective Subsidiaries shall not be considered Subsidiaries of Parent.

“Surviving Entity” has the meaning set forth in Section 2.1.

“Takeover Statutes” means any “fair price,” “moratorium,” “control share acquisition,” “business combination” or any other anti-takeover statute or similar statute enacted under state or federal Law and any similar provision incorporated into an Organizational Document.

“Taxes” means all taxes, charges, fees, levies, customs duties or other assessments, in each case, in the nature of a tax that are imposed by a Governmental Authority, including all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, social security, unemployment, excise, estimated, severance, stamp, occupation, property or other taxes, and including all interest, penalties and additions thereto.

“Tax Authority” means a Governmental Authority or political subdivision thereof responsible for the imposition, administration, assessment or collection of any Tax (domestic or foreign) and the agency (if any) charged with the collection or administration of such Tax.

“Tax Returns” means any return, declaration, report, claim for refund, estimate, rendition, statement or other document pertaining to any Taxes or the administration of Tax-related matters that is filed or required to be filed with a Governmental Authority, and including any attachments or supplements or amendments thereto.

“Trade Secrets” means common law and statutory rights associated with trade secrets, confidential and proprietary information and know-how.

“Transaction Documents” means this Agreement, the Certificate of Merger, and each other contract, agreement, certificate or other instrument entered into or delivered by any Party pursuant to this Agreement in connection with the transactions contemplated by this Agreement, including the Merger.

“Treasury Regulations” means the final or temporary regulations promulgated by the U.S. Department of the Treasury under the Code.

“Unit” has the meaning set forth in the Partnership Agreement.

“Unit Majority” has the meaning set forth in the Partnership Agreement.

“Unitholder” has the meaning set forth in the Partnership Agreement.

“Written Consent” means the approval of this Agreement and the transactions contemplated hereby, including the Merger, by the irrevocable written consent of Parent, as the holder of a number of Common Units constituting a Unit Majority, without a meeting in accordance with Sections 13.11 and 14.3 of the Partnership Agreement, the form of which is attached hereto as Exhibit A.

Section 1.2 Interpretation. Unless expressly provided for elsewhere in this Agreement, this Agreement shall be interpreted in accordance with the following provisions:

(a) the words “this Agreement,” “herein,” “hereby,” “hereunder,” “hereof,” and other equivalent words refer to this Agreement as an entirety and not solely to the particular portion, article, section, subsection or other subdivision of this Agreement in which any such word is used;

(b) the word “including” and its derivatives mean “including without limitation” and are terms of illustration and not of limitation;

(c) all definitions set forth herein shall be deemed applicable whether the words defined are used herein in the singular or in the plural and correlative forms of defined terms have corresponding meanings;

(d) the word “or” is not exclusive and has the inclusive meaning represented by the phrase “and/or”;

(e) a defined term has its defined meaning throughout this Agreement and each exhibit and schedule to this Agreement, regardless of whether it appears before or after the place where it is defined;

(f) the phrase “made available,” when used herein, means that the information or materials referred to have been physically or electronically delivered, directly or indirectly, to the applicable Party or its Representatives (including information or materials that have been

posted to an on-line “virtual data room” established by or on behalf of one of the Parties or their respective Affiliates, and information and materials that have been publicly made available through filings with the SEC since January 1, 2020), in each case, (i) with respect to any information or materials that have been publicly made available through filings with the SEC, prior to the execution of this Agreement and (ii) with respect to any other information or materials, on or before 9:00 a.m. on June 1, 2022;

(g) all references to prices, values or monetary amounts refer to United States dollars;

(h) wherever used herein, any pronoun or pronouns shall be deemed to include both the singular and plural and to cover all genders;

(i) this Agreement has been jointly prepared by the Parties, and this Agreement will not be construed against any Person as the principal draftsperson and no consideration may be given to any fact or presumption that any applicable Party had a greater or lesser hand in drafting this Agreement;

(j) the captions of the articles, sections or subsections appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or extent of such section, or in any way affect this Agreement;

(k) any references herein to a particular Section, Article or Schedule means a Section or Article of, or a Schedule to, this Agreement unless otherwise expressly stated herein;

(l) the Schedules attached hereto are incorporated herein by reference and shall be considered part of this Agreement;

(m) unless otherwise specified herein, all accounting terms used herein shall be interpreted, and all determinations with respect to accounting matters hereunder shall be made, in accordance with GAAP, applied on a consistent basis;

(n) all references to days shall mean calendar days unless otherwise provided;

(o) all references to time shall mean New York, New York time;

(p) references to any Person shall include such Person’s successors and permitted assigns; and

(q) all references to any Law or Contract shall mean such Law or Contract, including any amendments thereto, as in effect on the date of this Agreement, provided that all references to any Law or Contract not contained in Article IV or Article V shall also include any amendments to any such Law after the date hereof and any amendments to any such Contract that are permitted or otherwise contemplated by the terms of this Agreement.

ARTICLE II
The Merger

Section 2.1 The Merger and Surviving Entity. Upon the terms and subject to the conditions of this Agreement, and in accordance with the DRULPA and the DLLCA, at the Effective Time, Merger Sub shall merge with and into the Partnership (the “Merger”), the separate existence of Merger Sub shall cease and the Partnership shall survive and continue to exist as a Delaware limited partnership and direct wholly owned Subsidiary of Partnership GP and Parent (the Partnership as the surviving entity in the Merger, sometimes being referred to herein as the “Surviving Entity”).

Section 2.2 Closing. Subject to the provisions of Article VII, the closing of the Merger (the “Closing”) shall take place at the offices of Vinson & Elkins L.L.P., 845 Texas Avenue, Suite 4700, Houston, Texas 77002, at 9:00 A.M., Houston, Texas time, on the third (3rd) Business Day after the satisfaction or waiver of the conditions set forth in Article VII (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or at such other place, date and time as the Partnership and Parent shall agree; provided, however, that in no event shall the Closing occur prior to July 31, 2022 (the “Inside Date”) unless otherwise mutually agreed by the Parties. The date on which the Closing actually occurs is referred to as the “Closing Date.”

Section 2.3 Effective Time. Subject to the provisions of this Agreement, at the Closing, the Partnership and Parent will cause a certificate of merger, executed in accordance with the relevant provisions of the Partnership Agreement, the DRULPA and the DLLCA (the “Certificate of Merger”), to be duly filed with the Secretary of State of the State of Delaware. The Merger will become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Partnership and Parent in writing and specified in the Certificate of Merger (the effective time of the Merger being hereinafter referred to as the “Effective Time”).

Section 2.4 Effects of the Merger. The Merger shall have the effects set forth in this Agreement, the Partnership Agreement and the applicable provisions of the DRULPA and the DLLCA. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises and all and every other interest of the Partnership shall continue in the Partnership as the Surviving Entity, all the property, rights, privileges, powers and franchises and all and every other interest of Merger Sub shall vest in the Partnership as the Surviving Entity, all claims, obligations, debts, liabilities and duties of the Partnership shall continue in the Partnership as the Surviving Entity and all claims, obligations, debts, liabilities and duties of Merger Sub shall become the claims, obligations, debts, liabilities and duties of the Partnership as the Surviving Entity.

Section 2.5 Organizational Documents of the Surviving Entity. At the Effective Time, (a) the certificate of limited partnership of the Partnership as in effect immediately prior to the Effective Time shall remain unchanged and shall be the certificate of limited partnership of the Surviving Entity from and after the Effective Time, until duly amended in accordance with applicable Law and (b) the Partnership Agreement as in effect immediately prior to the Effective Time shall remain unchanged and shall be the agreement of limited partnership of the Surviving

Entity from and after the Effective Time, until duly amended in accordance with the terms thereof and applicable Law.

Section 2.6 Admission as Partner. At the Effective Time, (a) by virtue of the Merger, Parent will hold all Limited Partner Interests in the Partnership, (b) the Partnership GP shall continue as the sole general partner of the Partnership holding a non-economic general partner interest in the Partnership and (c) the Partnership shall continue without dissolution.

ARTICLE III
Merger Consideration; Payment Procedures

Section 3.1 Merger Consideration. Subject to the provisions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of the Parties or any holder of equity or voting securities of the Parties:

(a) Conversion of Common Units (other than Parent Units). Subject to Section 3.1(d) and Section 3.3, each Common Unit (other than Parent Units) issued and outstanding as of immediately prior to the Effective Time shall be converted into the right to receive $19.00 per Common Unit in cash without any interest thereon (the “Merger Consideration”). As of the Effective Time, all Common Units converted into the right to receive the Merger Consideration pursuant to this Section 3.1(a) shall no longer be outstanding and shall automatically be cancelled and cease to exist. As of the Effective Time, each holder of a certificate that immediately prior to the Effective Time represented any such Common Units (“Certificated Units”) or non-certificated Common Units represented in book-entry form (other than Parent Units) immediately prior to the Effective Time (“Book-Entry Units”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration to be paid in consideration therefor upon surrender of such Certificated Unit or Book-Entry Unit in accordance with Section 3.2(c) without interest and distributions, if any, in accordance with Section 3.1(d).

(b) Parent Units, Incentive Distribution Rights and General Partner Interest Unaffected. Each Parent Unit and each Incentive Distribution Right issued and outstanding as of immediately prior to the Effective Time and the General Partner Interest will be unaffected by the Merger and shall be unchanged and remain outstanding, and no consideration shall be delivered in respect thereof pursuant to this Agreement or the transactions contemplated hereby.

(c) Equity of Merger Sub. The limited liability company interests in Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted automatically into a number of Common Units equal to the Common Units converted into the right to receive the Merger Consideration pursuant to Section 3.1(a).

(d) Distributions. To the extent applicable, Unitholders immediately prior to the Effective Time shall have continued rights to receive any distribution, without interest, with respect to such Units with a record date occurring prior to the Effective Time that may have been declared by the Partnership GP or made by the Partnership with respect to such Units in accordance with the terms of this Agreement and that remain unpaid as of the Effective Time. The Partnership GP shall declare, and cause the Partnership to pay, a cash distribution to Unitholders (including

the Partnership Unaffiliated Unitholders) for the calendar quarter ending June 30, 2022, in an amount not less than $0.4338 per Common Unit (the “Q2 Distribution”). If the record date for the Q2 Distribution has not occurred prior to the Effective Time, the record date for such quarter shall be established or reestablished, as applicable, as the day that includes the Effective Time (and the distribution shall be payable to the Unitholders of record as of immediately prior to the Effective Time). Any distributions by the Partnership are not part of the Merger Consideration and shall be paid in accordance with the terms of this Agreement to such Unitholders or former-Unitholders, as applicable.

(e) Books and Records of the Partnership. At the Effective Time, the books and records of the Partnership shall be revised to reflect that all Limited Partners of the Partnership immediately prior to the Effective Time (other than Parent) cease to be Limited Partners of the Partnership pursuant to this Agreement and that Parent is the only Limited Partner of the Partnership that will hold all of the Common Units of the Surviving Entity.

Section 3.2 Surrender of Common Units.

(a) Paying Agent. Prior to the Closing Date, Parent shall appoint a paying agent reasonably acceptable to the Partnership (the “Paying Agent”) for the purpose of exchanging Certificated Units and Book-Entry Units for the Merger Consideration. As promptly as practicable after the Effective Time, Parent or its designee will send, or will cause the Paying Agent to send, to each holder of record of Common Units other than The Depository Trust Company (“DTC”) as of the Effective Time whose Common Units were converted into the right to receive the Merger Consideration, a letter of transmittal (which shall specify that, with respect to Certificated Units, the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificated Unit or affidavits of loss in lieu thereof pursuant to Section 3.2(g) to the Paying Agent) in such customary forms as the Partnership and Parent or its designee may reasonably agree, including, as applicable, instructions for use in effecting the surrender of Certificated Units (or effective affidavits of loss in lieu thereof pursuant to Section 3.2(g)) and Book-Entry Units to the Paying Agent in exchange for the Merger Consideration.

(b) Deposit. On or prior to the Closing Date, Parent shall deposit, or cause another designee to deposit, with the Paying Agent, in trust for the benefit of the holders of Common Units as of the Effective Time whose Common Units are converting into the right to receive the Merger Consideration at the Effective Time, an amount of cash in U.S. dollars equal to the amount of the aggregate Merger Consideration payable pursuant to Section 3.1(a) and upon the due surrender of the Certificated Units (or affidavits of loss in lieu thereof pursuant to Section 3.2(g) with respect to Certificated Units) or Book-Entry Units pursuant to the provisions of this Article III. Parent agrees to make available, or cause to be made available, to the Paying Agent, from time to time as needed, cash sufficient to pay distributions pursuant to Section 3.1(d), if any, all such cash deposited with the Paying Agent shall be referred to in this Agreement as the “Exchange Fund.” The Paying Agent shall, pursuant to irrevocable instructions delivered by Parent or its designee at or prior to the Effective Time, deliver the Merger Consideration contemplated to be paid pursuant to this Article III and distributions pursuant to Section 3.1(d), if any, out of the Exchange Fund. Subject to Sections 3.2(h) and 3.2(i), the Exchange Fund shall not be used for any purpose other than to pay such Merger Consideration and distributions pursuant to Section 3.1(d), if any.

(c) Exchange. Each holder of Common Units, other than DTC, that have been converted into the right to receive the Merger Consideration, upon delivery to the Paying Agent of a properly completed letter of transmittal, duly executed and completed in accordance with the instructions thereto, and surrender of Certificated Units (or affidavit of loss in lieu thereof pursuant to Section 3.2(g) with respect to Certificated Units) or Book-Entry Units and such other documents as may reasonably be required by the Paying Agent (including with respect to Book-Entry Units), will be entitled to receive in exchange therefor a check in an amount equal to the aggregate amount of cash that such holder has a right to receive pursuant to Sections 3.1(a) and 3.1(d). DTC, upon surrender of its Book-Entry Units to the Paying Agent in accordance with the customary surrender procedures of DTC and the Paying Agent, will be entitled to receive in exchange for each surrendered Book-Entry Unit a cash amount equal to the Merger Consideration. The Merger Consideration and distributions pursuant to Section 3.1(d), if any, shall be paid as promptly as practicable by mail after receipt by the Paying Agent of the Certificated Units (or affidavit of loss in lieu thereof pursuant to Section 3.2(g) with respect to Certificated Units) or any applicable documentation with respect to the surrender of Book-Entry Units, and letter of transmittal in accordance with the foregoing, provided that (i) no Person beneficially owning Common Units through DTC will be required to deliver a letter of transmittal to receive the Merger Consideration and distributions pursuant to Section 3.1(d), if any, that such holder is entitled to receive through DTC and (ii) any such Person will receive its Merger Consideration and distributions pursuant to Section 3.1(d), if any, in accordance with the customary payment procedures of DTC and its participants following the Effective Time. No interest shall be paid or accrued on any Merger Consideration. Until so surrendered, each such Certificated Unit and Book-Entry Unit shall, after the Effective Time, represent for all purposes only the right to receive such Merger Consideration.

(d) Other Payees. If any payment of the Merger Consideration is to be made to a Person other than the Person in whose name the applicable surrendered Certificated Unit or Book-Entry Unit is registered (other than DTC), it shall be a condition of such payment that the Person requesting such payment shall pay any transfer or other similar Taxes required by reason of the making of such cash payment to a Person other than the registered holder of the surrendered Certificated Unit or Book-Entry Unit or shall establish to the satisfaction of the Paying Agent that such Tax has been paid or is not payable.

(e) No Further Transfers. From and after the Effective Time, there shall be no further registration on the books of the Partnership of transfers of Common Units converted into the right to receive the Merger Consideration. From and after the Effective Time, the holders of Certificated Units or Book-Entry Units representing Common Units converted into the right to receive the Merger Consideration and that were outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Common Units, except as otherwise provided in this Agreement or by applicable Law, and the Merger Consideration paid upon such conversion and distributions pursuant to Section 3.1(d), if any, shall be deemed to have been paid in full satisfaction of all rights pertaining to such Common Unit. If, after the Effective Time, Certificated Units or Book-Entry Units are presented to the Paying Agent or Parent, they shall be cancelled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article III.

(f) Termination of Exchange Fund. Any portion of the Exchange Fund that remains unclaimed by the holders of Common Units converted into the right to receive the Merger

Consideration twelve (12) months after the Effective Time shall be returned to Parent or its designee, upon demand, and any such holder who has not exchanged his, her or its Common Units for the Merger Consideration in accordance with this Section 3.2 prior to that time shall thereafter look only to Parent or the Surviving Entity for delivery of the Merger Consideration. Notwithstanding the foregoing, no Party shall be liable to any holder of Common Units for any Merger Consideration duly delivered to a public official pursuant to applicable abandoned property escheat or similar Laws. Any Merger Consideration remaining unclaimed by holders of Common Units immediately prior to such time as such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of any claims or interest of any Person previously entitled thereto.

(g) Lost, Stolen or Destroyed Certificated Units. If any Certificated Unit shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificated Unit to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificated Unit, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificated Unit the Merger Consideration to be paid in respect of the Common Units represented by such Certificated Unit as contemplated by this Article III and pay distributions pursuant to Section 3.1(d), if any.

(h) Withholding Taxes. Each of Parent, Merger Sub, the Surviving Entity, the Paying Agent and their respective Affiliates shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Agreement such amounts, if any, as are required to be deducted and withheld with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or under any provision of applicable state, local or foreign Tax Law. To the extent amounts are so withheld and paid over to the appropriate Tax Authority, such withheld amounts shall be treated for the purposes of this Agreement as having been paid to the Person in respect of whom such withholding was made.

(i) Investment of the Exchange Fund. Parent may cause the Paying Agent to invest any cash included in the Exchange Fund solely in cash or cash equivalent investments, as directed by Parent, on a daily basis, in Parent’s sole discretion; provided, however, that no such investment or loss thereon shall affect the amounts payable or the timing of the amounts payable to the Partnership Unaffiliated Unitholders pursuant to this Article III. Any interest and other income resulting from such investments shall be paid promptly to Parent.

Section 3.3 Adjustments. Notwithstanding any provision of this Article III to the contrary, if between the date of this Agreement and the Effective Time the number of outstanding Common Units shall have been changed into a different number of Units or a different class or series by reason of the occurrence or record date of any Unit dividend, subdivision, reclassification, recapitalization, split, split-up, Unit distribution, combination, exchange of Units or similar transaction, the Merger Consideration and any other similar dependent item, as the case may be, shall be appropriately adjusted to reflect fully the effect of such Unit dividend, subdivision, reclassification, recapitalization, split, split-up, Unit distribution, combination, exchange of Units or similar transaction and to provide the holders of Common Units the same economic effect as contemplated hereby prior to such event.

Section 3.4 No Dissenters’ or Appraisal Rights. No dissenters’ or appraisal rights shall be available with respect to the Merger or the other transactions contemplated hereby.

ARTICLE IV
Representations and Warranties of the Partnership Parties

Except (a) as disclosed in any SEC Report publicly available at least 24 hours prior to the date hereof (other than any disclosures contained therein under the headings “Risk Factors” or “Cautionary Statement Regarding Forward-Looking Statements” (other than any factual information contained therein) or any general statements regarding risks and uncertainties that are similarly cautionary, predictive or forward-looking in nature) or (b) as set forth on the corresponding section or subsection of the disclosure letter delivered by the Partnership Parties to the Parent Parties (the “Partnership Disclosure Schedule”) prior to the execution of this Agreement; provided that (i) disclosure in any section of such Partnership Disclosure Schedule will be deemed to be disclosed with respect to any other section of this Agreement to the extent that it is reasonably apparent on the face of such disclosure that it is applicable to such other section and (ii) the mere inclusion of an item in such Partnership Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had, would have or would reasonably be expected to have a Partnership Material Adverse Effect, each Partnership Party represents and warrants, jointly and severally, to Parent as follows:

Section 4.1 Organization.

(a) Each of the Partnership Entities (i) is duly incorporated, organized or formed, as the case may be, validly existing and in good standing under the Laws of its jurisdiction of incorporation, organization or formation, as applicable, and (ii) has all requisite legal and entity power and authority to own, lease and operate its assets and properties and to conduct its business as currently owned and conducted, except in the case of this clause (ii), as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(b) Each of the Partnership Entities is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the ownership, operation or leasing of its assets and properties requires it to so qualify, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(c) The Partnership Parties have made available to Parent or its Affiliates true and complete copies of the Organizational Documents of each of the Partnership Parties and their material Subsidiaries, in each case as in effect on the date of this Agreement.

Section 4.2 Validity of Agreement; Authorization.

(a) Each of the Partnership Parties has all necessary partnership or limited liability company power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, subject to obtaining Partnership Unitholder Approval in the case of the Partnership. The execution, delivery and performance by each of the Partnership Parties of this Agreement, and the consummation by the Partnership Parties of the transactions

contemplated hereby, have been duly authorized and approved by the Conflicts Committee and the Board and, except for obtaining Partnership Unitholder Approval, no other entity action on the part of any of the Partnership Entities is necessary to authorize the execution, delivery and performance by the Partnership Parties of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Partnership Parties and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes a legal, valid and binding obligation of the Partnership Parties, enforceable against each of the Partnership Parties in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles (whether applied in a Proceeding at law or in equity) (collectively, “Enforceability Exceptions”).

(b) The Conflicts Committee, at a meeting duly called and held, has(i) determined that this Agreement and the consummation of the transactions contemplated hereby, including the Merger, are in the best interests of the Partnership and Partnership Unaffiliated Unitholders, (ii) approved this Agreement and the transactions contemplated hereby, including the Merger and (iii) resolved to recommend the submission of this Agreement to a vote of the Limited Partners by written consent pursuant to Section 13.11 of the Partnership Agreement. Such action by the Conflicts Committee described in clause (ii) above constituted Special Approval of this Agreement and the transactions contemplated hereby, including the Merger, under the Partnership Agreement.

Section 4.3 Capitalization; Subsidiaries.

(a) As of close of business on June 1, 2022, there are outstanding (i) 26,238,232 Common Units, (ii) the General Partner Interest and (iii) the Incentive Distribution Rights. As of close of business on June 1, 2022, there are (i) no outstanding equity or equity-based awards granted under the Partnership LTIP and (ii) 1,171,920 Common Units remaining available for grant under the Partnership LTIP. Except as described in this Section 4.3(a), there are no voting securities or other outstanding equity interests (or interests convertible into equity interests) in the Partnership or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of any voting securities or other equity or equity-based interests of the Partnership, including any representing the right to purchase or otherwise receive any of the foregoing. All of the outstanding equity interests of the Partnership have been, or upon issuance will be, duly authorized, validly issued, fully paid (to the extent required under the Partnership Agreement) and non-assessable (except as set forth in the Partnership Agreement or as such non-assessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the DRULPA) and not subject to any Encumbrances (other than as set forth in the Partnership Agreement).

(b) The Partnership GP is the record and beneficial owner of the General Partner Interest, which constitutes 100% of the outstanding general partner interests in the Partnership, free and clear of any Encumbrances, except for (A) restrictions on transfer arising under applicable securities Laws and (B) the applicable terms and conditions of this Agreement and the Organizational Documents of the Partnership Parties. The Partnership GP is not a party to any agreements, arrangements or commitments obligating it to grant, deliver or sell, or cause to be

granted, delivered or sold, the General Partner Interest by sale, lease, license or otherwise. The Partnership GP has all necessary limited liability company power and authority to act as general partner of the Partnership.

(c) Except as described in the Organizational Documents of the Partnership Entities, there are no (i) outstanding options, warrants, subscriptions, puts, calls or other rights, agreements, arrangements or commitments (preemptive, contingent or otherwise) obligating any of such Partnership Entities to offer, issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or encumber any equity interest in any of such Partnership Entities; (ii) outstanding securities or obligations of any kind of any of such Partnership Entities that are convertible into or exercisable or exchangeable for any equity interest in any of such Partnership Entities or any other Person, and none of such Partnership Entities has any obligation of any kind to issue any additional securities or to pay for or repurchase any securities; (iii) outstanding equity appreciation rights, phantom equity or similar rights, agreements, arrangements or commitments based on the book value, income or any other attribute of any of such Partnership Entities; (iv) outstanding bonds, debentures or other evidence of indebtedness or obligations of any of such Partnership Entities having the right to vote (or that are exchangeable for or convertible or exercisable into securities having the right to vote) with the holders of equity interests of such Partnership Entity; and (v) shareholder or unitholder agreements, proxies, voting trusts, rights to require registration under securities Laws or other similar arrangements or commitments to which any of such Partnership Entities is a party.

(d) Section 4.3(d) of the Partnership Disclosure Schedule sets forth each Subsidiary of the Partnership as of the date hereof. As of the date hereof, the Partnership does not, directly or indirectly, own any equity securities in any Person that is not a Subsidiary of the Partnership.

(e) Except as set forth on Section 4.3(e) of the Partnership Disclosure Schedule, no Person other than the Partnership or its Subsidiaries owns any interests in any Subsidiary of the Partnership as of the date hereof.

(f) All of the outstanding equity interests in the Partnership Entities held, directly or indirectly, by the Partnership (i) have been duly authorized and validly issued and are fully paid (in the case of an interest in a corporation, limited partnership or limited liability company, to the extent required under the Organizational Documents of such Person) and non-assessable except to the extent specified in the DGCL, DLLCA or the DRULPA, as applicable (or any other applicable Law with respect to any other applicable jurisdiction of incorporation, organization or formation of any Partnership Entity), or in the Organizational Documents of such applicable Partnership Entity and (ii) are owned, directly or indirectly, by the Partnership, free and clear of all Encumbrances other than (x) restrictions on transfer arising under applicable securities Law, the DGCL, the DLLCA and the DRULPA, and (y) the applicable terms and conditions of this Agreement, the Sprague Credit Agreement and the Organizational Documents of such Partnership Entity.

Section 4.4 No Conflicts; Consents.

(a) The execution, delivery and performance by the Partnership Parties of this Agreement, and the consummation of the transactions contemplated hereby, do not (assuming Partnership Unitholder Approval is obtained): (i) violate or conflict with any provision of the Organizational Documents of any of the Partnership Entities; (ii) violate any applicable Law binding on any of the Partnership Entities; (iii) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default under, give rise to any right of termination, cancellation, amendment or acceleration (with or without the giving of notice or the passage of time or both) under, or require any consent under any of the terms, conditions or provisions of any Material Contract to which a Partnership Entity is a party or by which any Partnership Entity is bound or to which any Partnership Entity’s properties or assets are subject; or (iv) result in the creation or imposition of any Encumbrance (other than any Permitted Encumbrance or Encumbrances arising under or in connection with the Sprague Credit Agreement) upon any of the properties or assets of any of the Partnership Entities; except, in the case of clauses (ii), (iii), and (iv) for any such matter that would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(b) Except (i) as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect, or (ii) (a) (x) the filing with the SEC of such registrations, reports or other actions under the Exchange Act and Securities Act as may be required in connection with this Agreement, the Merger and the other transactions contemplated hereby and (y) any filing in respect of the Merger applicable under state “blue sky” or similar securities Laws, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of the other jurisdictions in which the Partnership is qualified to do business, (c) such filings as may be required under the rules and regulations of the NYSE for any filings required for compliance with any applicable requirements of the federal securities Laws, any applicable state or local securities Laws and any applicable requirements of a national securities exchange, and (d) any consent, approval, waiver, authorization, declaration, filing, registration or qualification as has been waived, made or obtained or with respect to which the time for asserting such right has expired, neither the execution and delivery by the Partnership Parties of this Agreement nor either Partnership Party’s performance of its obligations hereunder, requires the consent, approval, waiver or authorization of, or declaration, filing, registration or qualification with, any Governmental Authority by either Partnership Party.

Section 4.5 Financial Statements; SEC Reports. Since January 1, 2020, the Partnership has filed all SEC Reports required to be filed or furnished with the SEC. All such SEC Reports, at the time filed with the SEC or, if amended, as of the date of the last such amendment (in the case of documents filed pursuant to the Exchange Act), or when declared effective by the SEC (in the case of registration statements filed under the Securities Act), complied as to form in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, as in effect on the date so filed. No SEC Report at the time described above contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All financial statements (including any related notes thereto) contained or incorporated by reference in such SEC Reports complied as to form, when

filed, in all material respects with the rules and regulations of the SEC with respect thereto, and were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the financial position of the Partnership and its consolidated Subsidiaries as of the respective dates thereof and the results of operations and cash flows of the Partnership and its consolidated Subsidiaries for the periods indicated (subject, in the case of unaudited financial statements, to normal year-end audit adjustments that are not individually or in the aggregate material). As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC with respect to any SEC Reports. No Subsidiary of the Partnership is required to file periodic reports with the SEC, either pursuant to the requirements of the Exchange Act or by Contract.

Section 4.6 Opinion of Financial Advisor. The Conflicts Committee has received the opinion of Jefferies LLC (the “Conflicts Committee Financial Advisor”), dated as of June 2, 2022, to the effect that, as of such date, and based upon the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review undertaken in rendering its opinion as set forth therein, the Merger Consideration described in Section 3.1(a) to be received by Partnership Unaffiliated Unitholders pursuant to this Agreement is fair, from a financial point of view, to the Partnership and the Partnership Unaffiliated Unitholders.

Section 4.7 Disclosure Controls; Sarbanes-Oxley.

(a) The Partnership has established and maintains “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to provide reasonable assurance that the information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is accumulated and communicated to management of the Partnership GP, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure to be made. From the date of the filing of the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 to the date of this Agreement, the Board has not been advised of (i) any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the Partnership’s ability to record, process, summarize and report financial information or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership’s internal control over financial reporting.

(b) The Partnership, and to the Partnership Parties’ Knowledge, the directors and officers of the Partnership GP, in their capacities as such, are in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder, and any applicable requirements of a national securities exchange, in each case, that are effective and applicable to the Partnership.

(c) The representations and warranties contained in this Section 4.7 do not address Tax matters, employee and Partnership Benefit Plan matters or environmental matters, which are addressed only in Section 4.13, Section 4.14 and Section 4.17, respectively.

Section 4.8 Information Supplied. None of the information supplied (or to be supplied) in writing by or on behalf of the Partnership Parties specifically for inclusion or

incorporation by reference in (a) the Partnership Information Statement will, on the date it is first mailed to the Unitholders, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading or (b) the Schedule 13E-3 will, at the time the Schedule 13E-3, or any amendment or supplement thereto, is filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, the Partnership Parties make no representation or warranty with respect to information supplied by or on behalf of the Parent Parties for inclusion or incorporation by reference in any of the foregoing documents.

Section 4.9 Absence of Undisclosed Liabilities. None of the Partnership Entities has any indebtedness or liability, absolute or contingent, that is not shown or provided for (a) in the consolidated financial statements included in the SEC Reports or (b) in the “contractual obligations” subsection of the “management’s discussion and analysis of financial condition and results of operations” section of the SEC Reports, in each case, other than (x) liabilities that have arisen in the ordinary course of business consistent with past practice, including liens for current Taxes and assessments not in default, since December 31, 2020, (y) liabilities incidental to the existence and status of the Partnership Entities as entities under the Laws of their respective jurisdictions of incorporation, organization or formation, such as annual fees owed to such jurisdictions and fees owed to a registered agent in such jurisdictions, or (z) other liabilities of the Partnership Entities that would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

Section 4.10 Brokers and Other Advisors. Except for the Conflicts Committee Financial Advisor, the fees and expenses of which will be paid by the Partnership, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, in connection with the Merger or the transactions contemplated hereby based on arrangements made by or on behalf of any Partnership Entity. The Partnership has heretofore made available to Parent or its Affiliates a correct and complete copy of the Conflicts Committee’s engagement letter with the Conflicts Committee Financial Advisor, which letter describes all fees payable to the Conflicts Committee Financial Advisor in connection with the transactions contemplated hereby and all agreements under which any such fees or any expenses are payable and all indemnification and other agreements with the Conflicts Committee Financial Advisor entered into in connection with the transactions contemplated hereby.

Section 4.11 Absence of Certain Changes or Events.

(a) Since December 31, 2020, there has not been or occurred any event, change, fact, development, circumstance, condition or occurrence with respect to the Partnership Entities that has had or would, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(b) From December 31, 2020 through the date of this Agreement, (i) the business of each of the Partnership Entities has been conducted in the ordinary course of business in all material respects consistent with past practice (except as contemplated by this Agreement)

and (ii) there has not been any material physical damage, destruction or other casualty loss (whether or not covered by insurance) to any of the Partnership Entities’ respective properties or assets that are material to the business of the Partnership Entities, as applicable, taken as a whole, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect. Without limiting the foregoing, from December 31, 2020 through the date of this Agreement, (i) the Partnership has not declared or paid, or agreed or committed to declare or pay, any distribution payable in cash, stock or property, other than the declaration and payment of regular quarterly distributions to holders of Common Units and, to the extent applicable, Incentive Distribution Rights in accordance with the Partnership Organizational Documents and as approved by the Board, in its capacity as the general partner of the Partnership and (ii) Section 4.11(b) of Partnership Disclosure Schedule sets forth the outstanding borrowings under the Sprague Credit Agreement as of 5:00 p.m. New York, New York time on June 1, 2022.

(c) The representations and warranties contained in this Section 4.11 do not address Tax matters, employee and Partnership Benefit Plan matters or environmental matters, which are addressed only in Section 4.13, Section 4.14 and Section 4.17, respectively.

Section 4.12 Compliance with Law; Permits.

(a) The operations of each Partnership Entity are currently being conducted in compliance with all applicable Laws, including those relating to the use, ownership and operation of their respective assets and properties, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect. None of the Partnership Entities nor any of their respective Affiliates has received written notice of any violation of any applicable Law related to any of the Partnership Entities, except any such violation as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect. To the Partnership Parties’ Knowledge, none of the Partnership Entities is under investigation by any Governmental Authority for potential, material non-compliance with any Law, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(b) Each of the Partnership Entities is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders (the “Permits”) necessary to own, lease and operate its assets and properties and to lawfully carry on its business as it is now being conducted, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect. None of the Partnership Entities is in conflict with, or in default or violation of, any of such Permits, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(c) The representations and warranties contained in this Section 4.12 do not address Tax matters, employee and Partnership Benefit Plan matters or environmental matters, which are addressed only in Section 4.13, Section 4.14 and Section 4.17, respectively.

Section 4.13 Tax Matters.

(a) Except as has not had and would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect:

(i) Each of the Partnership Entities has:

(A) timely filed (or has obtained extensions with respect to) all income Tax Returns and other Tax Returns required to be filed, which Tax Returns are complete and correct; and

(B) timely paid in full all Taxes owed by such entity that have become due, other than those that are being contested in good faith and for which adequate reserves have been established in accordance with GAAP.

(ii) Within the past four (4) years, no written claim or inquiry has been made by a Tax Authority in a jurisdiction where a Partnership Entity does not file Tax Returns that such Person is or may be subject to taxation by that jurisdiction.

(iii) There is no action, suit, proceeding, investigation, audit, dispute or claim concerning any Tax Return or any Taxes of any of the Partnership Entities either claimed or raised by any Tax Authority in writing.

(iv) There are no Encumbrances for Taxes on any of the assets of the Partnership Entities other than Permitted Encumbrances.

(v) There are no outstanding agreements or waivers extending the applicable statutory periods of limitation for any Taxes associated with the Partnership Entities.

(b) Each Partnership Entity that is treated as a partnership for U.S. federal income tax purposes and each joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income Tax purposes of which a Partnership Entity is a party has in effect a valid election under Section 754 of the Code (and any comparable elections for any applicable state income Tax purposes) for the taxable period that includes the Closing Date.

(c) No Partnership Entity has been a party to a transaction that is a “listed transaction,” as such term is defined in Treasury Regulations Section 1.6011-4(b)(2).

(d) Each Subsidiary of the Partnership (other than Sprague Energy Solutions Inc., Sprague Resources Finance Corp. and Sprague Resources Canada ULC) is currently (and has been since its respective formation) either (i) properly classified as a partnership for U.S. federal income Tax purposes or (ii) properly disregarded as an entity separate from its respective owner for U.S. federal income Tax purposes in accordance with Treasury Regulations Section 301.7701-3. No Subsidiary of the Partnership that is a partnership or a limited liability company has elected to be treated as a corporation for U.S. federal income Tax purposes.

(e) The Partnership is, and at all times since its formation has been, properly classified as an entity disregarded as separate from its owner or a partnership for U.S. federal income Tax purposes and is not, and has never been, treated as a corporation, including under

Section 7704 of the Code, or classified as an association taxable as a corporation, including under Treasury Regulations Section 301.7701-3.

(f) For each taxable year of the Partnership ending after its initial public offering and for the current portion of the Partnership’s current taxable year, at least 90% of the gross income of the Partnership has been from sources that are treated as “qualifying income” within the meaning of Section 7704(d) of the Code.

(g) Notwithstanding anything to the contrary contained elsewhere in this Agreement, this Section 4.13 and Section 4.14 contain the sole and exclusive representations and warranties with respect to Tax matters regarding the Partnership Entities.

Section 4.14 Employees and Benefit Matters.

(a) Section 4.14(a) of the of the Partnership Disclosure Schedule contains a list of each (i) “employee benefit plan” as defined in Section 3(3) of ERISA (regardless of whether such plan is subject to ERISA) and (ii) personnel policy, equity option plan, equity appreciation rights plan, restricted equity plan, phantom equity plan, equity-based compensation arrangement, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy or agreement, deferred compensation agreement or arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement, retention agreement, change of control agreement post-termination or retiree health or welfare, pension, savings, profit sharing, retirement, hospitalization or other health, medical, dental, accident, disability, life or other insurance and each other employee benefit or compensation plan, program, policy, agreement or arrangement which is not described in clause (i) above in which any Continuing Employee participates (whether written or unwritten), in each case, that is sponsored, maintained or contributed to, or required to be contributed to, by a Partnership Entity or with respect to which Partnership Entity has or could have any Liability or obligation (each, a “Partnership Benefit Plan”).

(b) Each Partnership Benefit Plan has been maintained in compliance with all applicable Laws, including ERISA and the Code, and all contributions required to be made under the terms of any of the Partnership Benefit Plans as of the date this representation is made have been timely made or, if not yet due, have been properly accrued in accordance with GAAP, except where a failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(c) With respect to each Partnership Benefit Plan, the Partnership Parties have made available to Parent or its Affiliates complete copies of (i) each Partnership Benefit Plan, including all plan documents, trust agreements, insurance contracts or other funding vehicles and all amendments thereto, (ii) the current summaries and summary plan descriptions, including any summary of material modifications, (iii) the most recent annual reports (Form 5500 series) filed with the IRS, (iv) the most recent actuarial report or other financial statement, (v) the most recent determination or opinion letter, if any, issued by the IRS, (vi) the most recent nondiscrimination tests performed under the Code (including 401(k) and 401(m) tests) and (vii) all non-routine filings made with, or material correspondence to or from, any Governmental Authorities, in each case, as of the date hereof.

(d) Each Partnership Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code (i) satisfies the requirements of Section 401(a) of the Code, (ii) is maintained pursuant to a prototype document approved by the IRS and is entitled to rely on a favorable opinion letter issued by the IRS with respect to such prototype document, or has received a favorable determination from the IRS as to its qualification, (iii) to the Partnership Parties’ Knowledge, nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause the loss of such qualification and (iv) has not been terminated or partially terminated within the meaning of Section 411(d)(3) of the Code. No event has occurred and no condition exists that would subject the Partnership Entities, either directly or indirectly, to any Tax, fine, lien, penalty or other liability imposed by ERISA or the Code, and no nonexempt “prohibited transaction” (as such term is defined in Section 406 of ERISA and Section 4975 of the Code or Section 502 of ERISA) has occurred with respect to any Partnership Benefit Plan, except where such event or nonexempt prohibited transaction would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(e) No Partnership Benefit Plan provides, and no Partnership Entity has incurred any current or projected liability in respect of, post-employment or post-retirement health, medical or life insurance coverage for current, former or retired employees or any other Person, except as required under Section 4980B of the Code or otherwise except as may be required pursuant to any other applicable Law. Each Partnership Benefit Plan can be amended, terminated or otherwise discontinued after the Closing Date in accordance with its terms, without material cost or Liability to any Partnership Entity.

(f) No Partnership Benefit Plan is: (i) a multiemployer pension plan (as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code, or (ii) a multiple employer welfare arrangement (as defined in Section 3(40) of ERISA) or a “multiple employer plan” (as defined in Section 413(c) of the Code). No Partnership Entity contributes to or has any obligation to contribute to, or has at any time within the previous six years contributed to or had an obligation to contribute to: (i) a multiemployer pension plan (as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code except for the Axel Johnson Inc. Retirement Plan (the “Axel Johnson Retirement Plan”), or (ii) a multiple employer welfare arrangement (as defined in Section 3(40) of ERISA) or a “multiple employer plan” (as defined in Section 413(c) of the Code).

(g) No Partnership Entity has incurred any withdrawal liability under Title IV of ERISA which remains unsatisfied or has engaged in any transaction described in Section 4069 or Section 4212(c) of ERISA.

(h) With respect to any Partnership Benefit Plan, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Partnership Parties’ Knowledge, threatened, (ii) to the Partnership Parties’ Knowledge, no facts or circumstances exist that could reasonably be expected to give rise to any such actions, suits or claims and (iii) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation, the IRS

or other Governmental Authorities are pending, or, to the Partnership Parties’ Knowledge, threatened (including any routine requests for information from the Pension Benefit Guaranty Corporation).

(i) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement (whether alone or in conjunction with a subsequent event) will result in the acceleration or creation of any rights of any employee or other service provider to vested rights, payments or benefits or increases in or funding of any payments or benefits or any loan forgiveness, in each case, under or in connection with any Partnership Benefit Plan.

(j) No amount or benefit that could be, or has been, received (whether in cash or property or the vesting of property or the cancellation of indebtedness) by any current or former employee, officer or director of any Partnership Entity who is a “disqualified individual” within the meaning of Section 280G of the Code could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code) as a result of the consummation of the transactions contemplated by this Agreement. No Partnership Benefit Plan provides for the gross-up of any Taxes imposed by Section 4999 or Section 457A of the Code.

(k) Each Partnership Benefit Plan that could be a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code and any award thereunder that could be nonqualified deferred compensation subject to Section 409A of the Code, has been operated, documented and maintained in material compliance with Section 409A of the Code. No service provider is entitled to a Tax gross-up or similar payment for any Tax or interest that may be due under Section 409A of the Code.

(l) Except as set forth on Section 4.14(l) of the Partnership Disclosure Schedule, no Partnership Benefit Plan provides compensation or benefits to any employee or service provider who resides or performs services primarily outside of the United States.

(m) Notwithstanding anything to the contrary contained elsewhere in this Agreement, this Section 4.14 contains the sole and exclusive representations and warranties with respect to employees and the Partnership Benefit Plans.

(n) Other than as set forth on Section 4.14(n) of the Partnership Disclosure Schedule, no Partnership Entity is a party to or bound by any collective bargaining agreement, collective agreement, or other Contract with a labor union, works council, trade union, or other representative of employees. No material labor disruption by any of the employees of any of the Partnership Entities exists or, to the Partnership Parties’ Knowledge, is threatened or imminent. There are no, and since December 31, 2020, there have been no, strikes, lockouts, work stoppages or other material labor disruptions existing or, to the Partnership Parties’ Knowledge, threatened, with respect to any employees of a Partnership Entity or representatives thereof or any other individuals who have provided services with respect to an Partnership Entity.

(o) Since December 31, 2020, the Partnership Entities have complied in all respects with all Laws with respect to labor and employment and the employment or engagement of each individual who has provided services with respect to the Partnership Entities (including the Fair Labor Standards Act and all national, state, provincial, and local Laws regarding the

payment of wages and hours of work, and all such Laws regarding collective bargaining, labor relations, classification of employees and contractors, anti-discrimination, anti-retaliation, recordkeeping, employee leave, Tax withholding and reporting, immigration and safety), except where a failure to so comply would not, individually or in the aggregate, reasonably be expected to have an Partnership Material Adverse Effect.

Section 4.15 Insurance. Except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect, the insurance policies covering the Partnership Entities and their respective businesses and properties are with reputable insurance carriers and in character and amount customary for Persons engaged in similar business in similar industries and subject to the same or substantially similar perils or hazards, and are in all material respects in force in accordance with their terms. None of the Partnership Entities has received written notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance.

Section 4.16 Regulatory Matters. Except as set forth on Section 4.16 of the Partnership Disclosure Schedule:

(a) None of the Partnership Entities is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(b) None of the Partnership Entities is subject to regulation pursuant to (1) the Federal Power Act, 12 U.S.C. § 791a et seq., (2) the Public Utility Holding Company Act of 2005 or (3) the Natural Gas Act of 1938, as amended.

(c) None of the Partnership Entities is subject to (1) regulation of rates charged for services or commodities provided or supplied by the Partnership Entity or (2) other regulation by a state public utility commission or other Governmental Authority as a “public utility,” “electric utility,” “gas utility,” or other utility or similar designation under applicable state law and the Merger, and the consummation of the other transactions contemplated by this Agreement and the other documents or instruments contemplated hereby will not cause the Parties to become subject to, or not exempt from, any such regulation.

Section 4.17 Environmental Matters.

(a) Except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect:

(i) Each of the Partnership Entities is, and, for the past five years has been, in compliance with any and all applicable Environmental Laws, and there are currently no capital expenditures required to maintain compliance with such Environmental Laws.

(ii) Each of the Partnership Entities has received all Permits required of it under applicable Environmental Laws to conduct its respective business, and all such Permits are in full force and effect or have been timely applied for renewal. To the Partnership Parties’ Knowledge, no such Permits are subject to challenge by a third party or adverse modification by a Governmental Authority.

(iii) There are no Proceedings or Orders pending or, to the Partnership Parties’ Knowledge, threatened against or involving the Partnership Entities pursuant to any Environmental Law or related to any Release of or exposure of any Person to Hazardous Materials.

(iv) There has been no Release of any Hazardous Materials by any of the Partnership Entities at any currently owned or leased real property used in connection with the business and, to the Partnership Parties’ Knowledge, none of the Partnership Entities has any liability in connection with any Release of any Hazardous Materials at any location formerly owned or operated by any of the Partnership Entities or third-party location under any applicable Environmental Law.

(v) The Partnership has furnished to Parent complete and accurate copies of all material environmental audits, assessments, reports, studies, analyses and correspondence on alleged environmental matters (including any alleged non-compliance with any Environmental Law, any alleged exposure to Hazardous Materials, or any Release or threatened Release of Hazardous Materials) that are in any Partnership Entity’s possession or control and relating to the Partnership Entities.

(b) Notwithstanding anything to the contrary contained elsewhere in this Agreement, this Section 4.17 contains the sole and exclusive representations and warranties with respect to environmental matters and Environmental Laws.

Section 4.18 Material Contracts.

(a) Except for this Agreement or as filed or publicly furnished with the SEC prior to the date of this Agreement, neither the Partnership nor any of its Subsidiaries is a party to or bound by, as of the date of this Agreement, any Material Contract.

(b) Each of the Material Contracts to which any Partnership Entity is a party (i) constitutes the legal, valid and binding obligation of each such Partnership Entity party thereto, and, to the Partnership Parties’ Knowledge, constitutes the legal, valid and binding obligation of the other parties thereto, and (ii) is in full force and effect, except insofar as such enforceability may be limited by Enforceability Exceptions, in each case, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect. A true and complete copy of each Material Contract and all amendments thereto have been made available to Parent.

(c) No Partnership Entity or, to the Partnership Parties’ Knowledge, any other party to any Material Contract is in default or breach under the terms of such Material Contract and, to the Partnership Parties’ Knowledge, no event has occurred that with the giving of notice or the passage of time or both would constitute a breach or default by a Partnership Entity or any other party to such Material Contract, in each case, except as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

Section 4.19 Litigation.

(a) There are no Proceedings or Orders pending or, to the Partnership Parties’ Knowledge, threatened in writing against or involving the Partnership Entities, that, individually or in the aggregate, have had or would reasonably be expected to have a Partnership Material Adverse Effect. There is no Order of any Governmental Authority outstanding against any Partnership Entity or any of their respective assets and properties that would, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect. To the Partnership Parties’ Knowledge, there are (i) no outstanding Orders that adversely affect the ability of any of the Partnership Entities to own, use or operate the assets or businesses of the Partnership Entities as they are currently owned, used, operated and conducted by the Partnership Entities and (ii) no unsatisfied judgments, penalties or awards against or affecting any of the Partnership Entities or any of their respective properties or assets, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect.

(b) The representations and warranties contained in this Section 4.19 do not address Tax matters, employee and Partnership Benefit Plan matters or environmental matters, which are addressed only in Section 4.13, Section 4.14 and Section 4.17, respectively.

Section 4.20 Title to Property and Assets. Each of the Partnership Entities has good (and with respect to real property, indefeasible) title to, or valid leasehold or other interests in, as applicable, all real and personal property described in the SEC Reports, as owned, leased or used and occupied by such Partnership Entity, free and clear of all Encumbrances, except (a) as would not, individually or in the aggregate, reasonably be expected to have a Partnership Material Adverse Effect, (b) Permitted Encumbrances, or (c) Encumbrances created under the Organizational Documents of any Partnership Entity or created under or permitted by the Sprague Credit Agreement.

Section 4.21 Listing. The Common Units are listed on the New York Stock Exchange.

Section 4.22 Anti-Corruption. None of the Partnership Entities, or any of their respective directors, officers, employees, or to the Partnership Parties’ Knowledge, any of its representatives, consultants, or any other Person acting for or on behalf of the foregoing (individually and collectively) has for the past five years, directly or knowingly indirectly, offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, including cash, checks, wire transfers, tangible and intangible gifts, favors, services, entertainment and travel expenses or other illicit payments to any officer, employee, or agent of any Governmental Authority, to any political party, political party official, or candidate for political office, or to any other Persons, where such action would violate the U.S. Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010, any applicable Law prohibiting commercial bribery, or any other applicable Law prohibiting bribery or corruption (“Applicable Anti-Corruption Laws”). The Partnership Entities have implemented and maintain policies and procedures reasonably designed to detect and prevent violations of Applicable Anti-Corruption Laws.

Section 4.23 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV, the Parent Parties acknowledge that neither Partnership Party nor any other Person on behalf of the Partnership Parties, including any Affiliate of either

Partnership Party, makes or has made any other express or implied representation or warranty with respect to the Partnership Entities or with respect to any other information provided to the Parent Parties or their Affiliates or Representatives in connection with the Merger, this Agreement or the other transactions contemplated hereby. Without limiting the generality of the foregoing, except to the extent required otherwise by applicable Law, neither Partnership Party nor any other Person will have or be subject to, and each Partnership Party expressly disclaims, any Liability or other obligation to a Parent Party or any other Person resulting from the distribution or communication to a Parent Party (including their respective Affiliates or Representatives) of, or a Parent Party’s (or such Affiliates’ or Representatives’) use of, any such information, including any information, documents, projections, forecasts or other materials made available, distributed or communicated (orally or in writing) to a Parent Party or its Affiliates or Representatives in expectation of the Merger, unless any such information is the subject of an express representation or warranty set forth in this Article IV. The Partnership Parties acknowledge and agree that, except for the representations and warranties contained in Article V, the Partnership Parties have not relied on, and none of the Parent Parties or any of their respective Affiliates or Representatives has made, any representation, warranty or statement, including as to the accuracy or completeness thereof, either express or implied, whether written or oral, concerning the Parent Parties or any of their respective Affiliates or any of their respective businesses, operations, assets, liabilities, results of operations, condition (financial or otherwise) or prospects, the transactions contemplated by this Agreement or otherwise with respect to information provided by or on behalf of the Parent Parties or any of their respective Affiliates or Representatives.

ARTICLE V
Representations and Warranties of the Parent Parties

Except as set forth on the corresponding section or subsection of the disclosure letter delivered by the Parent Parties to the Partnership Parties (the “Parent Party Disclosure Schedule”) prior to the execution of this Agreement; provided that (i) disclosure in any section of such Parent Party Disclosure Schedule will be deemed to be disclosed with respect to any other section of this Agreement to the extent that it is reasonably apparent on the face of such disclosure that it is applicable to such other section and (ii) the mere inclusion of an item in such Parent Party Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception of material fact, event or circumstance or that such item has had, would have or would reasonably be expected to have a Parent Material Adverse Effect, each Parent Party hereby represents and warrants, jointly and severally, to the Partnership Parties as follows:

Section 5.1 Organization.

(a) Each Parent Party (i) is duly incorporated, organized or formed, as the case may be, validly existing and in good standing under the Laws of its jurisdiction of incorporation, organization or formation, as applicable, and (ii) has all requisite legal and entity power and authority to own, lease and operate its assets and properties and to conduct its business as currently owned and conducted, in each case, except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

(b) Each Parent Party is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its assets and properties requires it to so qualify, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

Section 5.2 Operations and Ownership of Merger Sub. All of the issued and outstanding limited liability company interests of Merger Sub are owned beneficially and of record by Parent, free and clear of any Encumbrances (other than Permitted Encumbrances and Encumbrances under the Parent Credit Agreement). Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby. Except for obligations and liabilities incurred in connection with its formation and the transactions contemplated hereby, Merger Sub has not and will not have incurred, directly or indirectly, any obligations or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person or acquired any material assets or liabilities other than those incidental to its existence.

Section 5.3 Ownership of Common Units, Incentive Distribution Rights and Partnership GP. As of the date of this Agreement, Parent is the beneficial owner of 19,548,849 Common Units, and owns such Common Units free and clear of any Encumbrances (other than Permitted Encumbrances and Encumbrances under the Parent Credit Agreement). As of the date of this Agreement, the Common Units beneficially owned by Parent and its Subsidiaries constitute a Unit Majority. As of the date of this Agreement, Parent is the record and beneficial owner of 100% of (i) the Incentive Distribution Rights, and owns such Incentive Distribution Rights free and clear of any Encumbrances (other than Permitted Encumbrances and Encumbrances under the Parent Credit Agreement) and (ii) the issued and outstanding equity interests of the Partnership GP, and owns such equity interests free and clear of any Encumbrances (other than Permitted Encumbrances and Encumbrances under the Parent Credit Agreement).

Section 5.4 Validity of Agreement; Authorization. Each Parent Party has all necessary legal and entity power and authority to enter into and deliver this Agreement and to perform its obligations hereunder, to comply with the terms and conditions hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the performance by such Parent Party of its respective obligations hereunder have been duly authorized by such Parent Party’s governing body and, to the extent required, its equityholder(s), and no other proceedings on the part of such Parent Party are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed and delivered by such Parent Party and, assuming due execution and delivery by the other parties hereto, constitutes such Parent Party’s valid and binding obligation, enforceable against such Parent Party in accordance with their respective terms, except insofar as such enforceability may be limited by Enforceability Exceptions.

Section 5.5 No Conflict or Violation. The execution, delivery and performance by the Parent Parties of this Agreement and the consummation of the transactions contemplated hereby, do not and will not: (a) violate or conflict with any provision of either Parent Party’s Organizational Documents; (b) violate any applicable Law binding on either Parent Party; (c) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default under, give rise to any right of termination, cancellation, amendment or acceleration (with or without the giving or notice

or the passage of time or both), or cause any obligation, penalty or premium to arise or accrue under any material Contract to which a Parent Party is a party or by which a Parent Party is bound or to which any of its properties or assets are subject; (d) result in the creation or imposition of any Encumbrance (other than any Permitted Encumbrance) upon either Parent Party’s properties or assets; or (e) result in the cancellation, modification, revocation or suspension of any consent, license, permit, certificate, franchise, authorization, registration or filing with any Governmental Authority of a Parent Party except, in the case of clauses (b) through (e), as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

Section 5.6 Consents and Approvals. Except as set forth on Section 5.6 of the Parent Party Disclosure Schedule, no consent, approval, waiver or authorization of, or declaration, filing, registration or qualification with, any Governmental Authority or any similar Person (on the part of either Parent Party) is required for such Parent Party to execute and deliver this Agreement or to perform its respective obligations hereunder.

Section 5.7 Legal Proceedings(a) . There are no Proceedings or Orders pending or, to the Parent Parties’ Knowledge, threatened in writing against or involving either Parent Party, that, individually or in the aggregate, have had or would reasonably be expected to have a Parent Material Adverse Effect. There are no Orders of any Governmental Authority outstanding against either Parent Party or any of their respective assets and properties that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

Section 5.8 Access to Information. Parent acknowledges that it has conducted its own independent investigation and analysis of the business, operations, assets, liabilities, results of operations, condition and prospects of the Partnership and its Subsidiaries and that it and its Representatives have received access to such books, records and facilities, equipment, Contracts and other assets of the Partnership and its Subsidiaries that it and its Representatives have requested for such purposes and that it and its Representatives have had the opportunity to meet with management of the Partnership to discuss the foregoing, and that it and its Representatives have not relied on any representation, warranty or other statement by any Person on behalf of the Partnership Parties or any of their Subsidiaries, other than the representations and warranties expressly set forth in Article IV.

Section 5.9 Information Supplied. None of the information supplied (or to be supplied) in writing by or on behalf of the Parent Parties specifically for inclusion or incorporation by reference in (a) the Partnership Information Statement will, on the date it is first mailed to the Unitholders, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading or (b) the Schedule 13E-3 will, at the time the Schedule 13E-3, or any amendment or supplement thereto, is filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, no Parent Party makes any representation or warranty with respect to information supplied by or on behalf of the Partnership Parties for inclusion or incorporation by reference in any of the foregoing documents.

Section 5.10 Brokers and Other Advisors. Except for the fees and expenses payable to Evercore Group LLC, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, in connection with the Merger or the transactions contemplated hereby based on arrangements made by or on behalf of the Parent Parties or any of their respective Affiliates.

Section 5.11 Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to the Parent Parties’ Knowledge, threatened against either Parent Party, and no Parent Party is insolvent.

Section 5.12 Sufficiency of Funds. At the Closing, Parent will have sufficient cash, available lines of credit or other sources of immediately available funds to enable Parent and Merger Sub to consummate the transactions contemplated by this Agreement and the other Transaction Documents, including the payment of the Merger Consideration and any fees and expenses of or payable by Parent or Merger Sub under this Agreement that are due and payable on the Closing Date.

Section 5.13 Compliance with Laws. Each of the Parent Parties is, and since the later of January 1, 2020 and its date of formation has been, in compliance with and is not in default under or in violation of any applicable Law, except where such non-compliance, default or violation has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

Section 5.14 No Other Representations or Warranties. Except for the representations and warranties contained in this Article V, the Partnership acknowledges that none of the Parent Parties or any other Person on behalf of the Parent Parties, including any Affiliate of either Parent Party, makes or has made any other express or implied representation or warranty with respect to the Parent Parties or with respect to any other information provided to the Partnership Parties, the Board, the Conflicts Committee or their respective Affiliates or Representatives. Without limiting the generality of the foregoing, except to the extent required otherwise by applicable Law, neither the Parent Parties nor any other Person will have or be subject to, and each Parent Party expressly disclaims, any Liability or other obligation to the Partnership Parties or any other Person resulting from the distribution or communication to the Partnership Parties, the Board or the Conflicts Committee (including their respective Affiliates or Representatives) of, or the Partnership’s or the Partnership GP’s (or such Affiliates’ or Representatives’) use of, any such information, including any information, documents, projections, forecasts or other materials made available, distributed or communicated (orally or in writing) to the Partnership Parties, the Board, the Conflicts Committee or their respective Affiliates or Representatives in expectation of the Merger, unless any such information is the subject of an express representation or warranty set forth in this Article V. The Parent Parties acknowledge and agree that, except for the representations and warranties contained in Article IV, the Parent Parties have not relied on, and none of the Partnership Parties or any of their respective Affiliates or Representatives has made, any representation, warranty or statement, including as to the accuracy or completeness thereof, either express or implied, whether written or oral, concerning the Partnership Parties or any of their respective Affiliates or any of their respective businesses, operations, assets, liabilities, results of operations, condition (financial or otherwise) or prospects, the transactions contemplated by this

Agreement or otherwise with respect to information provided by or on behalf of the Partnership Parties or any of their respective Affiliates or Representatives.

ARTICLE VI
Additional Covenants and Agreements

Section 6.1 Preparation of the Partnership Information Statement and Schedule 13E-3. As promptly as practicable following the date of this Agreement, the Partnership Parties and the Parent Parties shall jointly prepare and file with the SEC the Schedule 13E-3 and any amendments thereto as required by Rule 13E-3 under the Exchange Act, and the Partnership and Parent shall prepare and the Partnership shall file with the SEC the Partnership Information Statement. Each of the Partnership and Parent shall use its commercially reasonable efforts to cause the Partnership Information Statement to be mailed to the Limited Partners as promptly as reasonably practicable after the date of this Agreement. Each of the Parties shall cooperate and consult with each other in connection with the preparation and filing of the Partnership Information Statement and the Schedule 13E-3, as applicable, including promptly furnishing to each other in writing upon reasonable request any and all information relating to a Party or its Affiliates as may be required to be set forth in the Partnership Information Statement or the Schedule 13E-3, as applicable, under applicable Law. If at any time prior to the Effective Time any information relating to a Party or any of their respective Affiliates, directors or officers, is discovered by another Party that should be set forth in an amendment or supplement to, the Partnership Information Statement or the Schedule 13E-3, so that any such document would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Party that discovers such information shall promptly notify the other Parties and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by applicable Law, disseminated to the Limited Partners. The Parties shall notify each other promptly of the receipt of any comments, written or oral, from the SEC or the staff of the SEC and of any request by the SEC or the staff of the SEC for amendments or supplements to the Partnership Information Statement or the Schedule 13E-3 or for additional information, and each Party shall supply each other with copies of all correspondence between it or any of its Representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to the Partnership Information Statement, the Schedule 13E-3 or the transactions contemplated hereby. The Partnership Parties, with the Parent Parties’ cooperation, shall use commercially reasonable efforts to respond as promptly as reasonably practicable to and use commercially reasonable efforts to resolve all comments received from the SEC or the staff of the SEC concerning the Partnership Information Statement as promptly as reasonably practicable and shall respond (with the cooperation of, and after consultation with, each other as provided by this Section 6.1) as promptly as reasonably practicable to and use commercially reasonable efforts to resolve all comments received from the SEC or the staff of the SEC concerning the Schedule 13E-3 as promptly as reasonably practicable. No filing of, or amendment or supplement to, including by incorporation by reference, or correspondence with the SEC with respect to the Partnership Information Statement or the Schedule 13E-3 will be made by the Partnership without providing

the Parent Parties a reasonable opportunity to review and comment thereon, which comments the Partnership shall consider in good faith.

Section 6.2 Conduct of Business. Except (1) as provided in this Agreement, (2) as described on Section 6.2 of the Partnership Disclosure Schedule, (3) as required by applicable Law, or (4) as consented to in writing by Parent (such consent not to be unreasonably withheld, delayed or conditioned), during the period from the date of this Agreement to the Effective Time, (i) the Partnership GP shall, and shall cause the other Partnership Entities to, operate in the ordinary course of business consistent with past practices and (ii) the Partnership GP shall not, and shall cause the other Partnership Entities not to, as applicable:

(a) amend the Organizational Documents of (i) the Partnership GP or the Partnership or (ii) any other Partnership Entity if, in the case of this clause (ii), such amendment is adverse to the Parent Parties or would reasonably be expected to materially impair the ability of the Parties to perform their respective obligations or to consummate the transactions under the Transaction Documents or materially impede their respective consummation or performance of the transactions or obligations under the Transaction Documents;

(b) declare or pay any distribution payable in cash, stock or property, other than the Q2 Distribution;

(c) make or enter into any transaction or series of related transactions for the acquisition or disposition of assets or property or the expansion of, or other capital projects relating to, existing assets or properties that involves a total purchase price or cost exceeding $1,500,000 individually or in the aggregate;

(d) split, combine, divide, subdivide, reverse split, reclassify, recapitalize or effect any other similar transaction with respect to any Partnership Entity’s capital stock or other equity interests;

(e) enter into or adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, conversion, restructuring, recapitalization or other reorganization, in each case, to the extent such transaction would reasonably be expected to materially impair the ability of the Parties to perform their respective obligations or to consummate the transactions under the Transaction Documents or materially impede their respective consummation or performance of the transactions or obligations under the Transaction Documents;

(f) issue, deliver or sell any equity securities in any Partnership Entity other than issuances of Common Units upon vesting or settlement of awards granted under the Partnership LTIP that are outstanding on the date of this Agreement or are otherwise granted in compliance with this Agreement;

(g) repurchase, redeem or otherwise acquire any securities of any Partnership Entity;

(h) grant any awards consisting of Common Units or other equity securities in any Partnership Entity under the Partnership LTIP or any other equity incentive plan;

(i) enter into any collective bargaining agreements, collective agreements, or other Contracts with any labor unions or other representatives of employees of any Partnership Entity;

(j) except as required by the terms of any Partnership Benefit Plan existing and in effect on the date of this Agreement or as contemplated by this Agreement, (i) grant or provide any increase in the compensation (including incentive, severance, redundancy, bonus, change-in-control or retention compensation) or benefits paid, payable, provided or to become payable or provided to, or grant any cash-based awards to, any current or former directors, officers, employees or other individual service providers of any Partnership Entity except for increases in compensation to employees who are not officers of a Partnership Entity in connection with promotions in the ordinary course of business consistent with past practice, (ii) establish, adopt, enter into, amend or terminate any Partnership Benefit Plan or any other plan, policy, program, agreement or arrangement that would be a Partnership Benefit Plan if in effect on the date hereof, or (iii) take any action to accelerate the vesting or payment of compensation or benefits under any Partnership Benefit Plan;

(k) waive, release, assign, settle or compromise any Proceedings to which a Partnership Entity is party seeking damages or an injunction or other equitable relief, which waiver, release, settlement or compromise would reasonably be expected to result in a Partnership Material Adverse Effect;

(l) create, assume, incur, modify, guarantee or otherwise become liable for, either directly or indirectly, any indebtedness (or increase the maximum amount that may be borrowed under any Sprague Credit Agreement) except for indebtedness that does not exceed $5,000,000 individually or in the aggregate and does not violate the terms of any other then-existing indebtedness of any Partnership Entity; provided, however, that the borrowing of funds under the Sprague Credit Agreement to fund (i) any activity, transaction or project that is not otherwise prohibited by this Section 6.2 or (ii) expenditures authorized in the annual budget made available to the Parent Parties shall not count toward the dollar limitation referenced in this Section 6.2(l); provided, further that the Partnership GP shall not create, assume, incur or modify, either directly or indirectly, any indebtedness;

(m) (i) make or change any material Tax election (which shall be deemed to include any entity classification election), change any annual Tax accounting period, adopt or change any material method of Tax accounting, amend any material Tax Return, enter into any closing agreement, settle any material Tax claim, audit or assessment or surrender any right to claim a Tax refund, or (ii) engage in any activity or conduct its business in a manner that would cause less than 90% of the gross income of the Partnership for any calendar quarter ending prior to or that includes the Closing Date to be treated as “qualifying income” within the meaning of Section 7704(d) of the Code;

(n) sell, transfer, assign, exclusively license, abandon, permit to lapse or otherwise dispose of any Intellectual Property of the Partnership Entities; or

(o) (i) agree, in writing or otherwise, to take any of the foregoing actions, or (ii) take any action or agree, in writing or otherwise, to take any action that would reasonably be

expected to materially impair the ability of the Parties to perform their respective obligations or to consummate the transactions under the Transaction Documents or materially impede their respective consummation or performance of the transactions or obligations under the Transaction Documents;

provided, that this Section 6.2 shall not prohibit the Partnership Entities from taking commercially reasonable actions outside of the ordinary course of business or not consistent with past practice in response to (x) changes or developments resulting or arising from COVID-19 or any COVID-19 Measures or (y) other changes or developments that would reasonably be expected to cause a reasonably prudent company similar to the Partnership to take commercially reasonable actions outside of the ordinary course of business or not consistent with past practice; provided, further, however, that prior to taking any such action outside of the ordinary course of business or not consistent with past practice, the Partnership Parties shall consult with the Parent Parties and consider in good faith the views of the Parent Parties regarding any such proposed action.

Section 6.3 Regulatory Approvals; Other Efforts Related to the Consummation of the Merger.

(a) Each Party shall (i) make or cause to be made any filings to the extent required or requested of such Party or any of its Subsidiaries under any applicable Laws or by any Governmental Authority with competent jurisdiction with respect to this Agreement as promptly as is reasonably practicable; (ii) reasonably cooperate with the other Parties and furnish all information in such Party’s possession that is necessary in connection with any other Party’s filings; (iii) use commercially reasonable efforts to secure the expiration or termination of any applicable waiting period and clearance or approval by any relevant Governmental Authority with respect to this Agreement as promptly as is reasonably practicable (including, with respect to the Parent Parties refraining from acquiring or seeking to acquire any entity or assets (other than pursuant to the transactions contemplated by this Agreement) that would present a material risk of delaying or making it more difficult to secure such waiting period expiration or termination, clearance or approval); (iv) promptly inform the other Parties of (and, at any other Party’s reasonable request, supply to such other Party) any communication (or other correspondence, submission or memoranda) from or to, and any proposed understanding or agreement with, any Governmental Authority in respect of any applicable filings; (v) use commercially reasonable efforts to comply, as promptly as is reasonably practicable and with due regard to maintaining the confidentiality of information that would be commercially harmful if publicly disclosed, with any requests received by such Party or any of its Affiliates under any Laws for additional information, documents, submissions or other materials; (vi) use commercially reasonable efforts to respond to and resolve any objections as may be asserted by any Governmental Authority with respect to this Agreement; and (vii) use commercially reasonable efforts to contest and resist any Proceeding instituted (or threatened in writing to be instituted) by any Governmental Authority challenging this Agreement as violative of any Law. Notwithstanding anything to the contrary in this Section 6.3, materials and information provided to another Party or its outside counsel may be redacted, or to the extent reasonably necessary withheld entirely, (x) as necessary to comply with contractual arrangements (other than any contractual arrangements specifically entered into in order to avoid disclosure under this Section 6.3) and (y) as necessary to address reasonable attorney-client or other privilege or confidentiality concerns.

(b) Notwithstanding anything herein to the contrary, in no event shall any of the Parent Parties or any of their respective Affiliates be required to take or agree to take any of the following actions on behalf of themselves, the Partnership Parties or any of their respective Subsidiaries in order to ensure that no Governmental Authority enters any order, decision, judgment, decree, ruling, injunction (preliminary or permanent), or establishes any Law or other action preliminarily or permanently restraining, enjoining or prohibiting the consummation of the Merger, or to ensure that no Governmental Authority with the authority to grant a clearance or approval or otherwise clear, authorize or approve the consummation of the Merger, fails to do so by the Outside Date: (i) selling or otherwise disposing of, or holding separate and agreeing to sell or otherwise dispose of, assets, categories of assets or businesses; (ii) terminating existing relationships, contractual rights or obligations; (iii) terminating any venture or other arrangement; (iv) creating any relationship, contractual rights or obligations or (v) effectuating any other change or restructuring of the Partnership Parties, the Parent Parties or any of their Affiliates (each a “Divestiture Action”). The Partnership Parties shall and shall cause their respective Subsidiaries to agree to take any Divestiture Action requested by Parent if such actions are only effective after the Effective Time and conditioned upon the consummation of the Merger.

Section 6.4 Financing Cooperation. Prior to the Closing, the Partnership Parties shall use commercially reasonable efforts to provide, and shall use commercially reasonable efforts to cause their respective Representatives and the Partnership Entities and their respective Representatives to provide, assistance with any financing of Parent or its Affiliates as is reasonably requested by Parent or its Affiliates. For the avoidance of doubt, obtaining any such financing shall not be a condition to the Closing. Parent shall, upon request by the Partnership Parties, their current and future Affiliates, and each of their respective current and future direct and indirect equityholders, members, partners and Representatives (collectively, the “Financing Indemnified Parties”), or any Partnership Entity, reimburse such Financing Indemnified Parties or Partnership Entities, as applicable, for all reasonable and documented out-of-pocket costs and expenses incurred by such Financing Indemnified Parties or Partnership Entities, as applicable, including reasonable attorney’s fees and accountants’ fees, in connection with cooperation required under or with respect to requests made under this Section 6.4.

Section 6.5 Public Announcements. The initial press release with respect to the execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent and the Partnership. Thereafter, the Parties shall consult with each other prior to issuing any public announcement, statement or other disclosure with respect this Agreement or the transactions contemplated hereby and none of the Parent Parties and their Affiliates, on the one hand, nor the Partnership Parties and their Affiliates, on the other hand, shall issue any such public announcement, statement or other disclosure without having first notified the Parent Parties, on the one hand, or the Partnership Parties, on the other hand, and provided such Parties with, if legally permitted and practically possible, a reasonable time period to review and comment thereon and give due consideration to any reasonable comments thereto; provided that “a reasonable time period” shall in all cases require a Party to inform the other Party with sufficient time to allow such other Party to timely announce publicly or file any reports with the SEC as required under the Exchange Act or the Securities Act or any applicable requirements of a national securities exchange. Notwithstanding the foregoing, any Party may make, without consulting or notifying any other Party, public announcements, statements or other disclosures with respect to this Agreement or the transactions contemplated hereby that are not materially inconsistent with, and

do not contain any material information not disclosed in, previous public announcements, statements or other disclosures made by a Party in compliance with this Section 6.5.

Section 6.6 Access to Information. From the date hereof until the Closing Date, the Partnership Parties shall provide the Parent Parties and their Affiliates and Representatives with reasonable access during normal business hours and upon reasonable notice to the offices, properties, books and records of the Partnership Entities; provided that such access does not unreasonably interfere with the normal operations of any of the Partnership Entities. The Parent Parties shall, at their sole cost and expense and without any cost and expense to the Partnership Entities, restore the properties and assets of the Partnership Entities to at least the same condition they were in prior to the commencement of any access provided to the Parent Parties and their Affiliates and Representatives, including repair of any damage done or resulting from such access. Notwithstanding the foregoing, no Party shall have an obligation to provide access to any information the disclosure of which the other party has concluded may jeopardize any privilege available to such party or any of its Affiliates relating to such information or would be in violation of a confidentiality obligation binding on such party or any of its Affiliates.

Section 6.7 Indemnification and Insurance.

(a) Parent Parties agree that all rights to indemnification, exculpation and advancement of expenses, elimination of liability and exculpation from liabilities existing in favor of (x) any natural Person (together with such Person’s heirs, executors and administrators) who is or was, or at any time prior to the Closing Date becomes, an officer, director or manager of any Partnership Entity or (y) any natural Person (together with such Person’s heirs, executors and administrators) who is or was serving, or at any time prior to the Closing Date serves, at the request of any Partnership Entity as an officer, director, member, general partner, fiduciary or trustee of another Person (other than Persons solely providing, on a fee-for-services basis, trustee, fiduciary or custodial services) (each, a “Covered Person”), as provided in the respective Organizational Documents of such Partnership Entities in effect as of the date of this Agreement, or pursuant to any other agreements in effect on the date hereof and disclosed in Section 6.7(a) of the Partnership Disclosure Schedule, shall survive the Closing and shall continue in full force and effect for a period of not less than six years following the Closing Date, and the Parent Parties shall cause each Partnership Entity to honor and maintain in effect all such rights to indemnification, exculpation and advancement of expenses, elimination of Liability and exculpation from liabilities during such period. For a period of not less than six years, the Parent Parties shall not, and shall not cause or permit any Partnership Entity to, amend, restate, waive or terminate any Organizational Document of the Partnership Entities in any manner that would adversely affect the indemnification or exculpation rights of any such Covered Person.

(b) The Parent Parties covenant and agree that, during the period that commences on the Closing Date and ends on the sixth anniversary of the Closing Date, the Parent Parties shall indemnify and hold harmless each Covered Person, including, for the avoidance of doubt, any such director, manager or officer that resigned or was removed effective as of the Closing pursuant to this Agreement, against any reasonable costs or expenses (including reasonable attorneys’ fees and all other reasonable costs, expenses and obligations (including experts’ fees, travel expenses, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in

connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Proceeding, including any Proceeding relating to a claim for indemnification or advancement brought by a Covered Person), judgments, fines, losses, claims, damages or liabilities, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any thereof) in connection with any actual or threatened Proceeding, and, upon receipt by Parent of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined in a final and non-appealable judgment entered by a court of competent jurisdiction that the Covered Person is not entitled to be indemnified, provide advancement of expenses with respect to each of the foregoing to, all Covered Persons. Any right of a Covered Person pursuant to this Section 6.7(b) shall be enforceable by such Covered Person and their respective heirs and Representatives against Parent Parties and their respective successors and assigns.

(c) The Parent Parties covenant and agree that, during the period that commences on the Closing Date and ends on the sixth anniversary of the Closing Date, with respect to each Covered Person, including, for the avoidance of doubt, any such director, manager or officer that resigned or was removed effective as of the Closing pursuant to this Agreement, the Parent Parties shall (i) maintain in effect the current directors and officers liability and fiduciary liability insurance policy or policies that such Partnership Entity has as of the date of this Agreement, or (ii) upon the termination or cancellation of any such policy or policies, (A) to provide fiduciary liability or similar insurance in substitution for, or in replacement of, such cancelled or terminated policy or policies, or (B) to provide a “tail” or runoff policy (covering all claims, whether choate or inchoate, made during such six year period), in each case, providing coverage thereunder for acts, events, occurrences or omissions occurring or arising at or prior to the Closing that is no less advantageous to each such Covered Person (including policy limits, exclusions and scope) as such Covered Person as in existence as of the date of this Agreement covering such acts, events, occurrences or omissions under the directors and officers liability and fiduciary liability insurance or similar policy maintained by the Partnership Entities as of the date of this Agreement; provided that Parent Parties and the Partnership Entities shall not be required to pay premiums for such insurance policy in excess of 300% of the current premium for such coverage, but shall purchase as much of such coverage as possible for such applicable amount. Notwithstanding anything to the contrary herein, the Parent Parties shall maintain all “tail” or runoff directors and officers liability insurance policies obtained in connection with the transactions contemplated by that certain Purchase Agreement dated April 20, 2021 by and among Sprague Resources Holdings LLC, as Seller, Sprague HP Holdings, LLC, as Acquiror, and Solely for Purposes of Section 11.14 thereof, Hartree Partners, LP, as Guarantor (the “Axel Johnson Purchase Agreement”) in accordance with the requirements of Section 6.8(b) of the Axel Johnson Purchase Agreement, and, for the avoidance of doubt, it is agreed that the Parent Parties shall have no obligations with respect to such “tail” or runoff policies other than the obligations set forth in Section 6.8(b) of the Axel Johnson Purchase Agreement.

(d) In the event that either Parent Party or any Partnership Entity (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) in one or more series of transactions, directly or indirectly, transfers all or substantially all of its properties and assets to any Person (whether by consolidation, merger or otherwise), then, and in each such case, proper provision

shall be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, assumes the obligations set forth in this Section 6.7.

(e) The provisions of this Section 6.7 shall survive the consummation of the transactions contemplated hereby for a period of six years; provided, however, that in the event that any claim or claims for indemnification or advancement of expenses set forth in this Section 6.7 are asserted or made within such six-year period, all rights to indemnification and advancement of expenses in respect of any such claim or claims shall continue until the disposition of such claims. The provisions of this Section 6.7 (i) are expressly intended to benefit each Covered Person, (ii) shall be enforceable by any Covered Person and its heirs and representatives against the Partnership Entities and the Parent Parties, and (iii) shall be in addition to any other rights such Covered Person or its heirs and representatives have under the Organizational Documents of any Partnership Entity, any indemnification agreements or applicable Law.

(f) This Section 6.7 shall not be amended, repealed, terminated or otherwise modified at any time in a manner that would adversely affect the rights of a Covered Person as provided herein except with the prior written consent of such Covered Person.

Section 6.8 Fees and Expenses. Except as otherwise provided in Section 8.2, all fees and expenses incurred in connection with the transactions contemplated hereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties incurred by a Party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, shall be the obligation of the respective Party incurring such fees and expenses, except Parent and the Partnership shall each bear and pay one half of the expenses incurred in connection with the filing, printing and mailing of the Partnership Information Statement.

Section 6.9 Section 16 Matters. Prior to the Effective Time, the Partnership Parties shall, with the Parent Parties’ cooperation, take all such steps as may be required (to the extent permitted under applicable Law) to cause any dispositions of Common Units (including derivative securities with respect to Common Units) resulting from the transactions contemplated hereby by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Partnership to be exempt under Rule 16b-3 promulgated under the Exchange Act.

Section 6.10 Termination of Trading and Deregistration. The Partnership will cooperate with Parent and use reasonable best efforts to take, or cause to be taken, all actions and all things, reasonably necessary, proper or advisable on its part under applicable Laws and rules and policies of the NYSE to enable (a) the delisting of the Common Units from the NYSE and the termination of trading of the Common Units on the Closing Date and (b) the deregistration of the Common Units under the Exchange Act as promptly as practicable after the Effective Time.

Section 6.11 Conflicts Committee. Prior to the earlier of the Effective Time and the termination of this Agreement, Parent shall not, and it shall not permit any of its Subsidiaries to, take any action intended to cause the Partnership GP (or the sole member of the Partnership GP) to, without the consent of a majority of the then-existing members of the Conflicts Committee, eliminate the Conflicts Committee, remove or cause the removal of any member of the Board who

is a member of the Conflicts Committee either as a member of such board or such committee or revoke or diminish the authority of the Conflicts Committee with respect to this Agreement. For the avoidance of doubt, this Section 6.11 shall not apply to the filling, in accordance with the provisions of the Partnership GP LLC Agreement, of any vacancies caused by the resignation, death or incapacity of any such director.

Section 6.12 Tax Matters. For U.S. federal income Tax purposes (and for purposes of any applicable state, local or foreign Tax that follows the U.S. federal income Tax treatment), the Parties intend that the Merger be treated, from the perspective of Parent, consistent with McCauslen v. Commissioner, 45 T.C. 588 (1966), and, from the perspective of the recipients of the Merger Consideration, as a sale of partnership interests.

Section 6.13 Takeover Statutes. The Partnership Parties and Parent shall each use reasonable best efforts to (a) take actions to ensure that no Takeover Statute is or becomes applicable to any of the transactions contemplated hereby and (b) if any Takeover Statute becomes applicable to any of the transactions contemplated hereby, take actions to ensure that such transactions may be consummated as promptly as practicable on the terms contemplated hereby and otherwise minimize the effect of such Takeover Statute or Law on the transaction.

Section 6.14 No Rights Triggered. The Partnership Parties shall take all steps necessary to ensure that the entering into of this Agreement, the Merger and the other transactions contemplated hereby or related thereto and any other action or combination of actions do not and will not result in the grant of any Rights to any Person under the Partnership Agreement or under any material agreement to which the Partnership or any of its Subsidiaries is a party.

Section 6.15 Notification of Certain Matters. Each of the Partnership Parties and Parent shall give prompt notice to the other of (a) any fact, event or circumstance known to it that (i) could reasonably be expected to, individually or taken together with all other facts, events and circumstances known to it, result in any Partnership Material Adverse Effect or prevent, materially delay or impair the ability of such Party to consummate the Merger or comply with its respective obligations under this Agreement or (ii) could cause or constitute a material breach of any of its representations, warranties, covenants or agreements contained herein, (b) any change in the Partnership’s financial condition or business that results in, or could reasonably be expected to result in, a Partnership Material Adverse Effect, (c) any Proceedings, to the extent such Proceedings relate to this Agreement or the Merger or result in a Partnership Material Adverse Effect or (d) any notice or other communication received from any Governmental Authority or other Person related to this Agreement or the transactions contemplated hereby alleging that the consent of such Person is or may be required in connection with this Agreement or the transactions contemplated hereby, if the subject matter of such communication or the failure of such Party to obtain such consent would reasonably be expected to cause any of the conditions to the Closing set forth in Article VII not to be satisfied or to cause the satisfaction thereof to be materially delayed.

Section 6.16 Transaction Litigation. The Partnership shall give Parent prompt notice and the opportunity to participate in the defense or settlement of any security holder litigation against the Partnership Parties or their respective directors relating to the Merger and the other transactions contemplated hereby, and no such settlement shall be agreed to without the prior

written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that the Partnership and the Partnership GP shall in any event control such defense and/or settlement and shall not be required to provide information if doing so would be reasonably expected to violate the confidentiality obligations of such party or threaten the loss of any attorney-client privilege or other applicable legal privilege.

Section 6.17 Performance by the Partnership GP. The Partnership GP shall cause the Partnership and its Subsidiaries to comply with the provisions of this Agreement. Notwithstanding the foregoing, it is understood and agreed that actions or inactions by the Partnership Parties and their respective Subsidiaries shall not be deemed to be breaches or violations or failures to perform by the Partnership Parties of any of the provisions of this Agreement if such action or inaction was or was not taken at the direction of or on the recommendation of Parent.

Section 6.18 Delivery of Written Consent. Parent shall deliver to the Partnership, on the date hereof and substantially concurrent with the execution of this Agreement, the Written Consent, substantially similar to the Form of Written Consent attached hereto as Exhibit A.

ARTICLE VII
Conditions Precedent

Section 7.1 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each Party hereto to effect the Merger shall be subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:

(a) Written Consent. The Written Consent shall not have been amended, modified, withdrawn, terminated or revoked; provided, however, that this Section 7.1(a) shall not imply that the Written Consent is permitted by the Partnership Agreement or applicable Law to be amended, modified or revoked following its execution by holders of the Common Units constituting a Unit Majority.

(b) Partnership Unitholder Approval. The affirmative vote or written consent in favor of the approval of this Agreement and the Merger by holders of the majority of the issued and outstanding Common Units shall have been obtained (which shall be satisfied upon the delivery of the Written Consent substantially concurrently with the execution hereof) (the “Partnership Unitholder Approval”).

(c) No Injunctions or Restraints. No Law, injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority (collectively, “Restraints”) shall be in effect enjoining, restraining, preventing or prohibiting consummation of the transactions contemplated hereby or making the consummation of the transactions contemplated hereby illegal.

Section 7.2 Conditions to Obligations of the Parent Parties to Effect the Merger. The obligations of the Parent Parties to effect the Merger are further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:

(a) Representations and Warranties. (i) The representations and warranties of the Partnership Parties contained in Sections 4.1, 4.2, 4.3(a), 4.3(b) and 4.3(d) are true and correct, except for any de minimis inaccuracies, and (ii) the other representations and warranties of the Partnership Parties contained in Article IV of this Agreement are true and correct, in each of clauses (i) and (ii), as of the date of this Agreement and as of the Closing Date, as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of clause (ii), where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Partnership Material Adverse Effect” set forth in any individual such representation or warranty) would not reasonably be expected to have, individually or in the aggregate, a Partnership Material Adverse Effect.

(b) Performance of Obligations of the Partnership Parties. Each Partnership Party shall have performed or complied with in all material respects all covenants and obligations required to be performed by it under this Agreement at or prior to the Closing Date.

(c) No Partnership Material Adverse Effect. Since the date of this Agreement, there shall not have been a Partnership Material Adverse Effect.

(d) Certificate. Parent shall have received a certificate of an authorized executive officer of the Partnership GP, dated as of the Closing Date, certifying that the conditions specified in Section 7.2(a), Section 7.2(b) and Section 7.2(c) have been fulfilled.

Section 7.3 Conditions to Obligation of the Partnership Parties to Effect the Merger. The obligation of the Partnership Parties to effect the Merger is further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:

(a) Representations and Warranties. (i) The representations and warranties of the Parent Parties contained in Sections 5.1 and 5.4 are true and correct, except for any de minimis inaccuracies, and (ii) the other representations and warranties of the Parent Parties contained in Article V of this Agreement are true and correct, in each of clauses (i) and (ii), as of the date of this Agreement and as of the Closing Date, as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of clause (ii), where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in any individual such representation or warranty) would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(b) Performance of Obligations of the Parent Parties. Each Parent Party shall have performed or complied with in all material respects all covenants and obligations required to be performed by it under this Agreement at or prior to the Closing Date.

(c) Certificate. The Partnership shall have received a certificate of an authorized executive officer of Parent, dated as of the Closing Date, certifying that the conditions specified in Section 7.3(a) and Section 7.3(b) have been fulfilled.

Section 7.4 Frustration of Closing Conditions.

(a) Neither Partnership Party may rely on the failure of any condition set forth in Section 7.1 or Section 7.3, as the case may be, to be satisfied if such failure was due to the failure of such Party to perform and comply in all material respects with the covenants and agreements to be performed or complied with by it prior to the Closing.

(b) No Parent Party may rely on the failure of any condition set forth in Section 7.1 or Section 7.2, as the case may be, to be satisfied if such failure was due to the failure of such Party to perform and comply in all material respects with the covenants and agreements to be performed or complied with by it prior to the Closing.

ARTICLE VIII
Termination

Section 8.1 Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Effective Time:

(a) by the mutual written consent of the Partnership (acting in accordance with the last sentence of Section 9.2) and Parent;

(b) by either of the Partnership (acting in accordance with the last sentence of Section 9.2) or Parent:

(i) if any Restraint having the effect set forth in Section 7.1(c) shall be in effect and shall have become final and nonappealable; provided, however, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to the Partnership or Parent, as applicable, if such Restraint was primarily due to the failure of, in the case of the Partnership, either Partnership Party, or in the case of Parent, either Parent Party, to perform any of its obligations under this Agreement; or

(ii) if the Closing shall not have been consummated on or before December 2, 2022 (the “Outside Date”); provided, however, that the right to terminate this Agreement under this Section 8.1(b)(ii) shall not be available to (A) the Partnership or Parent, as applicable, if the failure of the Closing to occur by the Outside Date was primarily due to the failure of, in the case of the Partnership, either Partnership Party, or in the case of Parent, either Parent Party, to perform and comply in all material respects with the covenants and agreements to be performed or complied with by it prior to the Closing or (B) the Partnership or Parent if, in the case of the Partnership, either Parent Party, or in the case of the Parent, either Partnership Party, has filed (and is then pursuing) an action seeking specific performance as permitted by Section 9.8;

(c) by Parent if either Partnership Party shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement (or if any of the representations or warranties of the Partnership Parties set forth in this Agreement shall fail to be true), which breach or failure (A) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of a condition set forth in Section 7.2(a) or Section 7.2(b) and (B) is incapable of being cured, or is not cured, by the Partnership Parties within the earlier of (x) thirty

(30) days following receipt of written notice from Parent of such breach or failure and (y) the Outside Date; provided, however, that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.1(c) if either Parent Party is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement;

(d) by the Partnership (acting in accordance with the last sentence of Section 9.2) if either Parent Party shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement (or if any such representations or warranties of the Parent Parties set forth in this Agreement shall fail to be true), which breach or failure (A) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of a condition set forth in Section 7.3(a) or Section 7.3(b) and (B) is incapable of being cured, or is not cured, by the Parent Parties within the earlier of (x) thirty (30) days following receipt of written notice from the Partnership of such breach or failure and (y) the Outside Date; provided, however, that the Partnership shall not have the right to terminate this Agreement pursuant to this Section 8.1(d) if either Partnership Party is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement; or

(e) by the Partnership (acting in accordance with the last sentence of Section 9.2), if (A) at least two Business Days have elapsed since the Inside Date and all of the closing conditions set forth in Section 7.1 and Section 7.2 were and continue to be satisfied (other than such conditions that by their nature are only capable of being satisfied by the delivery of documents or the taking of any other action at the Closing, provided such conditions are capable of being satisfied if the Closing Date were the date of delivery of the Closing Failure Notice but subject to the satisfaction (or waiver) of such conditions at the Closing) and the Closing has not occurred by the time required under Section 2.2, (B) the Partnership GP has confirmed by irrevocable written notice delivered to Parent that (x) all conditions set forth in Section 7.3 have been and remain satisfied (other than such conditions as, by their nature, are only capable of being satisfied by the delivery of documents or the taking of any other action at the Closing, but subject to the satisfaction (or waiver) of such conditions at the Closing) or that the Partnership has irrevocably waived any unsatisfied conditions in Section 7.3 and (y) each Partnership Party stands ready, willing and able to consummate the transactions contemplated hereby (including the Closing) on the date of such notice and at all times during the five Business Day period immediately thereafter (such notice, a “Closing Failure Notice”) and (C) Parent fails to consummate the transactions contemplated hereby (including the Closing) within such five Business Day period after the date of the delivery of a Closing Failure Notice.

Section 8.2 Effect of Termination.

(a) In the event that this Agreement is terminated as provided in Section 8.1, then this Agreement shall forthwith become null and void and of no further force and effect (except for the provisions of Article I, Section 6.7(a), Section 6.8, this Section 8.2, Section 9.7, Section 9.8, Section 9.9), and each of the Parties shall be relieved of its duties and obligations arising under this Agreement after the date of such termination and the Parties shall have no further Liability hereunder (except pursuant to Section 6.7(a), this Section 8.2 and Section 9.8); provided, subject to Section 8.2(d), that nothing in this Section 8.2 shall relieve the Partnership Parties of any Liability for fraud or a willful breach of this Agreement.

(b) In the event that this Agreement is terminated by the Partnership pursuant to Section 8.1(d) or Section 8.1(e), or is terminated by the Partnership or Parent pursuant to Section 8.1(b)(ii) at a time when the Partnership could have terminated the Agreement pursuant to Section 8.1(d) or Section 8.1(e), then, in any such case, Parent or its designee shall promptly, but in no event later than 10 Business Days after the date of such termination, pay or cause to be paid to the Partnership or its designee an amount in cash equal to $5,000,000 (the “Parent Termination Fee”) by wire transfer of immediately available funds to one or more accounts designated by the Partnership in writing.

(c) It is agreed that the agreements contained in this Section 8.2 are an integral part of this Agreement and without these agreements, the Parties would not have entered into this Agreement. Each of the parties hereto acknowledges and agrees that the Parent Termination Fee is not intended to be a penalty, but rather liquidated damages in a reasonable amount that will compensate the Partnership Parties, in the circumstances in which such amount is due and payable, for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision. Accordingly, if Parent fails to pay or cause to be paid the Parent Termination Fee pursuant to this Section 8.2 on or prior to the date such amounts are due hereunder, and, in order to obtain such payment, the Partnership commences a Proceeding that results in a final, nonappealable judgment against Parent for any payment of the Parent Termination Fee pursuant to this Section 8.2, Parent shall pay, or cause to be paid, to the Partnership, interest on such amount at an annual rate equal to the prime rate as published in the Wall Street Journal, Eastern Edition, in effect on the date such amounts were originally due hereunder, which shall accrue from such date through the date such payment is actually delivered to the Partnership, or its designee, and the costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Partnership in connection with such Proceeding.

(d) The Parties agree that the monetary remedies set forth in this Section 8.2 (when and if available under the express terms hereof) and the specific performance remedies set forth in Section 9.8 shall be the sole and exclusive remedies (whether at law, in equity, in contract, in tort or otherwise, whether by or through piercing of the corporate or partnership veil, by or through a claim by or on behalf of any Person) of the Parent Parties and the Partnership Parties and any of their respective former, current and future Affiliates, each of their former, current and future partners, members, equityholders and Representatives, and each of their respective heirs, executors, administrators, successors and assigns, for any Losses or Liabilities suffered or incurred by any such Person with respect to this Agreement and the transactions contemplated hereby as a result of the failure of the Closing to occur or the transactions contemplated by this Agreement to be consummated for any or no reason or, in the event of a failure of the Closing to occur or the transactions contemplated by this Agreement to be consummated for any reason or for no reason, for any breach by any Party of this Agreement. Upon the payment of the Parent Termination Fee following a failure of the Closing to occur or the transactions contemplated hereby, no Parent Party or Parent Non-Recourse Party shall have any Liability or obligation in connection with, relating to or arising out of this Agreement or the transactions contemplated hereby. Under no circumstance shall any Person be permitted or entitled both to obtain specific performance pursuant to Section 9.8 and to receive all or any portion of the Parent Termination Fee.

ARTICLE IX
Miscellaneous

Section 9.1 No Survival, Etc. The representations, warranties and agreements in this Agreement (including, for the avoidance of doubt, any schedule, instrument or other document delivered pursuant to this Agreement) shall terminate at the Effective Time or, except as otherwise provided in Section 8.2 upon the termination of this Agreement pursuant to Section 8.1, as the case may be, except that the agreements set forth in Article I, Article II, Article III, Section 6.7, Section 6.8, Section 6.16 and Article IX and any other agreement in this Agreement that contemplates performance after the Effective Time shall survive the Effective Time.

Section 9.2 Amendment or Supplement. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the Partnership Unitholder Approval, by written agreement of the Parties hereto, by action taken or authorized by the Parent and the Conflicts Committee; provided, however, that following receipt of the Partnership Unitholder Approval, there shall be no amendment or change to the provisions of this Agreement that by applicable Law or stock exchange rule would require further approval by the Limited Partners, as applicable, without such approval. Unless otherwise expressly set forth in this Agreement, whenever a determination, decision, approval, consent, waiver or agreement of either Partnership Party is required pursuant to this Agreement (including any determination to exercise or refrain from exercising any rights under Article VIII or to enforce the terms of this Agreement (including Section 9.8)), such determination, decision, approval, consent or agreement must be authorized by the Conflicts Committee and, unless otherwise required by the Partnership Agreement or applicable Law, such action shall not require approval of the holders of Common Units.

Section 9.3 Extension of Time, Waiver, Etc. At any time prior to the Effective Time, any Party may, subject to applicable Law, (a) waive any inaccuracies in the representations and warranties of any other Party hereto, (b) extend the time for the performance of any of the obligations or acts of any other Party hereto, (c) waive compliance by the other Party with any of the agreements contained herein or, except as otherwise provided herein, waive any of such Party’s conditions or (d) make or grant any consent under this Agreement; provided, however, that neither Partnership Party shall take or authorize any such action without the prior written approval of the Conflicts Committee. Notwithstanding the foregoing, no failure or delay by any Party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a Party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party.

Section 9.4 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by any of the Parties without the prior written consent of the other parties, except that each of Parent and Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any Subsidiary or Affiliate of Parent, but no such assignment shall relieve either Parent Party of any of its obligations hereunder and the Partnership may assign, in its sole discretion, any of or all of its rights, interests and obligations under this Agreement to any Subsidiary or Affiliate of the Partnership, but no such assignment shall relieve the Partnership of

any of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 9.4 shall be null and void.

Section 9.5 Counterparts. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

Section 9.6 Entire Understanding; No Third-Party Beneficiaries. This Agreement, the Parent Party Disclosure Schedule, the Partnership Disclosure Schedule, and any certificates delivered by any Party pursuant to this Agreement (a) constitute the entire agreement and understanding, and supersede all other prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter of this Agreement and thereof and (b) shall not confer upon any Person other than the Parties hereto any rights (including third-party beneficiary rights or otherwise) or remedies hereunder, except for, in the case of clause (b), (i) the provisions of Section 6.7 and Section 9.11 and (ii) the right of a holder of Common Units to receive the Merger Consideration after the Closing (a claim by a holder of Common Units with respect to which may not be made unless and until the Closing shall have occurred) and to receive amounts to which it is entitled to receive pursuant to Section 3.1(d), if any. Any inaccuracies in the representations and warranties set forth in this Agreement are subject to waiver by the Parties hereto in accordance with Section 9.3 without notice or Liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the Parties hereto of risks associated with particular matters regardless of the knowledge of any of the Parties hereto. Consequently, Persons other than the Parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

Section 9.7 Governing Law; Jurisdiction; Waiver of Jury Trial.

(a) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware applicable to Contracts executed in and to be performed entirely within that State, regardless of the Law that might otherwise govern under applicable principles of conflicts of Law thereof. Each of the Parties hereto irrevocably agrees that any legal action or Proceeding with respect to this Agreement and the rights and obligations arising hereunder, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the Parties hereto consents to service of process being made upon it through the notice procedures set forth in Section 9.9, irrevocably submits with regard to any such action or Proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this

Agreement or any of the transactions contemplated hereby in any court other than the aforesaid courts. Each of the Parties hereto irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or Proceeding with respect to this Agreement, (i) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in accordance with this Section 9.7(a), (ii) any claim that it or its property is exempt or immune from the jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) to the fullest extent permitted by the applicable Law, any claim that (A) the suit, action or Proceeding in such court is brought in an inconvenient forum, (B) the venue of such suit, action or Proceeding is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Each Party hereto expressly acknowledges that the foregoing waiver is intended to be irrevocable under the Law of the State of Delaware and of the United States of America; provided, however, that each such Party’s consent to jurisdiction and service contained in this Section 9.7(a) is solely for the purposes referred to in this Section 9.7(a) and shall not be deemed to be a general submission to such courts or in the State of Delaware other than for such purpose.

(b) EACH PARTY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 9.8 Specific Performance; Parent Party Liability Cap.

(a) The Parties each agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed (including failing to take such actions as are required of it hereunder in order to consummate the Merger) in accordance with their specific terms or were otherwise breached and it is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in each case, in accordance with this Section 9.8 in the Delaware Court of Chancery (or, if the Delaware Court of Chancery declines to accept personal jurisdiction, any federal court sitting in the State of Delaware), this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief as provided herein on the basis that (a) either Party has an adequate remedy at law or (b) an award of specific performance is not an appropriate remedy for any reason at law or equity (it being understood that nothing in this sentence shall prohibit the Parties hereto from raising other defenses to a claim for specific performance or other equitable relief under this Agreement). Each Party further agrees that no Party shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 9.8, and each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

(b) Notwithstanding anything to the contrary in this Agreement, the maximum Liability of the Parent Parties for Liabilities or Losses incurred by the Partnership Parties and any of their respective former, current and future Affiliates (which, for the purposes of this Section 9.8(b), shall be deemed to include the Partnership Entities), each of their former, current and future partners, members, equityholders and Representatives, and each of their respective heirs, executors, administrators, successors and assigns, in each case, relating to the failure of the Closing to occur or the transactions contemplated by this Agreement to be consummated, breach of this Agreement by any Parent Party and the transactions contemplated by this Agreement shall be limited to an amount equal to the Parent Termination Fee, and in no event shall the Partnership Parties or any of their Affiliates seek any amount in excess of the Parent Termination Fee in connection with this Agreement and the transactions contemplated by this Agreement or in respect of any other document or theory of law or equity or in respect of any oral representations made or alleged to be made in connection herewith or therewith, whether at law or in equity, in contract, tort or otherwise.

Section 9.9 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by email transmission, or mailed by a nationally recognized overnight courier requiring acknowledgement of receipt of delivery or mailed by U.S. registered or certified mail, postage prepaid, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof):

If to the Parent Parties, to:

Hartree Partners, LP

1185 Avenue of the Americas

New York, New York 10036

Attention: Scott Levy; Ali Taqi

Email: slevy@hartreecapital.com; ATAQI@Hartreecapital.com

with copies (which shall not constitute notice) to:

Hartree Partners, LP

1185 Avenue of the Americas

New York, New York 10036

Attention: Hartree Legal

Email: legal@hartreepartners.com

and

Vinson & Elkins L.L.P.
845 Texas Avenue
Suite 4700
Houston, Texas 77002
Attention: David Oelman; Lande Spottswood

Emails: doelman@velaw.com; lspottswood@velaw.com

If to the Partnership or the Partnership GP, to:

Sprague Resources LP

185 International Drive

Portsmouth, NH 03801

Attention: Paul Scoff

Email: pscoff@spragueenergy.com

with copies (which shall not constitute notice) to:

Latham & Watkins LLP
811 Main Street
Suite 3700
Houston, TX 77002
Attn: Bill Finnegan; Ryan J. Maierson; Ryan J. Lynch
E-mails: bill.finnegan@lw.com; ryan.maierson@lw.com; ryan.lynch@lw.com

Notices will be deemed to have been received on the date of receipt (a) if delivered by hand or nationally recognized overnight courier service or (b) upon receipt of an appropriate confirmation by the recipient when so delivered by email (to such email specified or another email or emails as such person may subsequently designated by notice given hereunder only if followed by overnight or hand delivery).

Section 9.10 Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

Section 9.11 Non-Recourse.

(a) Each of the following is herein referred to as a “Parent Non-Recourse Party”: each of the Affiliates of each Parent Party, each of their respective present, former and future partners, members, equityholders and Representatives, and each of the Affiliates and present, former and future partners, members, equityholders and Representatives of any of the foregoing, and each of their respective heirs, executors, administrators, successors and assigns (“Affiliates” for purposes of the definition of “Parent Non-Recourse Party” to include the portfolio companies of investment funds advised or managed by a Parent Party or any of their respective Affiliates), provided, however, that the term Parent Non-Recourse Party expressly excludes the Parent Parties and any Person that is assigned any interest in any of this Agreement by a Parent Party to the extent of such assignment. No Parent Non-Recourse Party shall have any Liability or obligation to the Partnership Parties or their Affiliates of any nature whatsoever in connection with

or under this Agreement, or the transactions contemplated hereby, and the Partnership Parties hereby waive and release all claims of any such Liability and obligation. Subject to the Partnership Parties’ right to specific performance under Section 9.8, this Agreement may only be enforced against, and any dispute, controversy, matter or claim based on, related to or arising out of this Agreement, or the negotiation, performance or consummation of this Agreement, may only be brought against, the entities that are expressly named as Parties, and then only with respect to the specific obligations set forth herein with respect to such Party. Subject to Section 9.6, each Parent Non-Recourse Party is expressly intended as a third-party beneficiary of this Section 9.11(a).

(b) Each of the following is herein referred to as a “Partnership Non-Recourse Party”: each of the Affiliates of each the Partnership Parties, each of the Partnership Parties’ respective present, former and future partners, members, equityholders and Representatives, and each of the Affiliates and present, former and future partners, members, equityholders and Representatives of any of the foregoing, and each of their respective heirs, executors, administrators, successors and assigns, provided, however, that the term Partnership Non-Recourse Party expressly excludes the Partnership Entities or any Person that is assigned any interest in this Agreement to the extent of such assignment. Except as expressly agreed elsewhere, no Partnership Non-Recourse Party shall have any Liability or obligation to the Parent Parties or their Affiliates (including for these purposes the Partnership Entities) of any nature whatsoever in connection with or under this Agreement, or the transactions contemplated hereby, and the Parent Parties hereby waive and release all claims of any such Liability and obligation. Subject to the Parent Parties’ right to specific performance under Section 9.8, this Agreement may only be enforced against, and any dispute, controversy, matter or claim based on, related to or arising out of this Agreement, or the negotiation, performance or consummation of this Agreement, may only be brought against, the entities that are expressly named as Parties, and then only with respect to the specific obligations set forth herein with respect to such Party. Subject to Section 9.6, each Partnership Non-Recourse Party is expressly intended as a third-party beneficiary of this Section 9.11(b).

(Remainder of Page Intentionally Left Blank)

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

PARENT

SPRAGUE HP HOLDINGS, LLC

By: Hartree Partners, LP, its sole member

By: Hartree Partners GP, LLC, its general partner

By: /s/ Stephen M. Hendel

Name: Stephen M. Hendel

Title: Authorized Signatory

MERGER SUB

SPARROW HP MERGER SUB, LLC

By: Sprague HP Holdings, LLC, its sole member

By: Hartree Partners, LP, its sole member

By: Hartree Partners GP, LLC, its general partner

By: /s/ Stephen M. Hendel

Name: Stephen M. Hendel

Title: Authorized Signatory

[Signature Page to Agreement and Plan of Merger]

PARTNERSHIP

SPRAGUE RESOURCES LP

By: Sprague Resources GP LLC,

its general partner

By: /s/ David Glendon

Name: David Glendon

Title: President & CEO

PARTNERSHIP GP

SPRAGUE RESOURCES GP LLC

By: /s/ David Glendon

Name: David Glendon

Title: President & CEO

[Signature Page to Agreement and Plan of Merger]

Exhibit A

Form of Written Consent

[See attached.]

[Exhibit A – Form of Written Consent]

Document

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, David C. Glendon, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Sprague Resources LP;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 4, 2022

/s/ DAVID C. GLENDON
David C. Glendon
President and Chief Executive Officer

Document

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, David C. Long, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Sprague Resources LP;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 4, 2022

/s/ DAVID C. LONG
David C. Long
Chief Financial Officer

Document

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of Sprague Resources LP (the “Partnership”) on Form 10-Q for the three months ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David C. Glendon, President and Chief Executive Officer of the general partner of the Partnership, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


1			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
2.			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.


Date: August 4, 2022

/s/ DAVID C. GLENDON
David C. Glendon
President and Chief Executive Officer
(Principal Executive Officer)

Document

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of Sprague Resources LP (the “Partnership”) on Form 10-Q for the three months ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David C. Long, Chief Financial Officer of the general partner of the Partnership, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


1			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
2.			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.


Date: August 4, 2022

/s/ DAVID C. LONG
David C. Long
Chief Financial Officer (Principal Financial Officer)