United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
or
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: 02-72177
SEI II L.P.
Exact Name of Registrant as Specified in its Charter
New York 13-3064636
State or Other Jurisdiction I.R.S. Employer
of Incorporation or Organization Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 X No ____
Balance Sheets At June 30, At December 31,
1997 1996
Assets
Equipment $ --- $ 8,306,724
Less accumulated depreciation --- (5,011,716)
Net equipment --- 3,295,008
Equipment held for sale 3,211,941 ---
Cash and cash equivalents 443,071 5,703,859
Due from equipment manager 213,629 425,549
Due from affiliate 12,233 ---
Other assets, net of accumulated amortization
of $15,192 in 1997 15,192 8,184
Total Assets $ 3,896,066 $ 9,432,600
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 36,495 $ 34,173
Accrued interest expense due to affiliate 9,923,711 9,824,043
Due to General Partner 706,453 696,999
Note payable to affiliate 2,200,496 7,839,000
Total Liabilities 12,867,155 18,394,215
Partners' Deficit:
General Partner (251,901) (251,806)
Limited Partners (3,614 units outstanding) (8,719,188) (8,709,809)
Total Partners' Deficit (8,971,089) (8,961,615)
Total Liabilities and Partners' Deficit $ 3,896,066 $ 9,432,600
Statement of Partners' Deficit
For the six months ended June 30, 1997 General Limited
Partner Partners Total
Balance at December 31, 1996 $(251,806) $(8,709,809) $(8,961,615)
Net loss (95) (9,379) (9,474)
Balance at June 30, 1997 $(251,901) $(8,719,188) $(8,971,089)
Statements of Operations Three months Six months
ended June 30, ended June 30,
1997 1996 1997 1996
Revenues
Operating revenues $ 450,281 $ 668,072 $ 945,351 $1,295,812
Operating Expenses
Operating costs 338,908 374,059 634,514 699,749
Depreciation and amortization 7,596 83,067 98,259 166,134
Professional and other expenses 33,846 17,077 63,729 30,261
Equipment management fee -
Operators 26,317 31,483 53,319 61,972
General Partner 4,502 6,681 9,453 12,958
Insurance 4,211 4,211 8,422 8,422
Total operating expenses 415,380 516,578 867,696 979,496
Income from operations 34,901 151,494 77,655 316,316
Other Income (Expense)
Interest and miscellaneous income 6,608 64,875 12,539 126,659
Interest expense (48,261) (161,237) (99,668) (327,359)
Total Other Expense (41,653) (96,362) (87,129) (200,700)
Net Income (Loss) $ (6,752) $ 55,132 $ (9,474) $ 115,616
Net Income (Loss) Allocated:
To the General Partner $ (68) $ 551 $ (95) $ 1,156
To the Limited Partners (6,684) 54,581 (9,379) 114,460
$ (6,752) $ 55,132 $ (9,474) $ 115,616
Per limited partnership unit
(3,614 outstanding) $(1.85) $15.10 $(2.60) $31.67
Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities
Net income (loss) $ (9,474) $ 115,616
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 83,067 166,134
Amortization 15,192 ---
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Due from equipment manager 211,920 233,048
Due from affiliate (12,233) ---
Accounts payable and accrued expenses 2,322 (7,232)
Accrued interest expense due to affiliate 99,668 327,358
Due to General Partner 9,454 12,958
Net cash provided by operating activities 399,916 847,882
Cash Flows From Financing Activities
Payment of principal on note payable to affiliate (5,638,504) ---
Loan closing costs (22,200) ---
Net cash used for financing activities (5,660,704) ---
Net increase (decrease) in cash and cash equivalents (5,260,788) 847,882
Cash and cash equivalents, beginning of period 5,703,859 4,238,441
Cash and cash equivalents, end of period $ 443,071 $5,086,323
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of June 30, 1997 and the results of
operations for the three and six months ended June 30, 1997 and 1996 and cash
flows for the six months ended June 30, 1997 and 1996 and the statement of
partners' deficit for the six months ended June 30, 1997. Results of operations
for the period are not necessarily indicative of the results to be expected for
the full year.
Reclassification. Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
The following significant event has occurred subsequent to fiscal year 1996
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Legal Proceedings
In March 1996, a purported class action suit on behalf of all Limited Partners
was brought against the Partnership, Lehman Brothers Inc., Smith Barney
Holdings Inc., and a number of other limited partnerships in New York State
Supreme Court. The complaint alleges claims of common law fraud and deceit,
negligent misrepresentation, breach of fiduciary duty and breach of the implied
covenant of good faith and fair dealing. The defendants intend to defend the
action vigorously.
Barge Sale
On July 28, 1997, the Partnership executed a formal contract to sell its barge
fleet for $4.3 million in cash, representing the highest bid, to Midwest Marine
Management Company, the current operator of the barges, on an "as is, where as"
basis (the "Sale"). It is currently anticipated that the Sale will close on
August 28, 1997, following the satisfaction of certain conditions to closing.
Based upon its analysis, the General Partner believes that the anticipated net
proceeds to the Partnership of the proposed sale, after payment of all fees and
expenses, including the proposed disposition fee (see below), will exceed the
carrying value of the equipment.
Prior to commencing the sale process, the General Partner recognized that it
would be extremely unlikely for 16-year old barges, which would ordinarily be
expected to depreciate further in value over time, to appreciate approximately
200% over a short period of time from their 1996 appraised value of $4.1
million to an amount that would exceed the Partnership's debt obligation of in
excess of $12 million. Furthermore, the Partnership's lender, Buttonwood
Leasing Corporation ("Buttonwood"), an affiliate of the General Partner, had
previously informed the Partnership that no further extensions of the loan
would be provided upon its maturity in early January 1998. To avoid a
foreclosure at maturity, the Partnership initiated negotiations with
Buttonwood. The negotiations resulted in an agreement whereby the Partnership,
as an inducement for it to proceed with marketing the Barges for sale, would
receive a disposition fee equal to 5% of the gross sales proceeds.
In addition to receiving a disposition fee, the Partnership will be reimbursed
for all closing costs incurred in connection with the Sale. The balance of the
proceeds from the Sale will be applied to the Partnership's outstanding debt
obligation, which totaled $12,124,207 as of June 30, 1997. After receipt of
such partial repayment, Buttonwood has indicated that it will forgive the
Partnership's then remaining debt balance (in excess of $8.0 million) which
will allow the Partnership to retain all of its existing cash reserves. If the
sale is completed and the balance of the Partnership's debt is forgiven by
Buttonwood, the General Partner will waive equipment management fees due from
the Partnership in excess of $700,000 in order to allow a final distribution to
be made to the Limited Partners.
After consummating the Sale, satisfying the Partnership's debt obligations as
set forth above and providing for the Partnership's remaining liabilities, a
final liquidating distribution will be made to the Limited Partners and the
Partnership will be dissolved.
Part I, Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On January 3, 1997, the Partnership entered into a First Amended and Restated
Credit Note ("Amended Note") with Buttonwood Leasing Corporation. At that
time, a principal payment of $5,500,000 was made by the Partnership reducing
the outstanding principal balance from $7,839,000 to $2,339,000, and the
maturity date of the Amended Note was extended until the earlier of January 2,
1998, or the date on which the Partnership sells the barges. The outstanding
principal balance of the Amended Note as of June 30, 1997 totaled $2,200,496.
In accordance with the Amended Note, the Partnership is required to pay
quarterly installments of principal only on April 1, 1997, July 1, 1997, and
October 1, 1997 (each a "Payment Date") in an amount equal to the amount of
interest accrued on the unpaid principal balance from the later of January 3,
1997 or the immediately preceding Payment Date. In addition, the Partnership
is required to pay interest on the unpaid principal balance on the Amended Note
at maturity. Interest on the outstanding principal balance of the Amended Note
is computed using simple interest at a rate equal to the Prime Rate as charged
by Bank America Illinois. At June 30, 1997, the interest rate was 8.50%
compared to 8.25% at December 31, 1996 and 8.25% at March 31, 1997.
In addition to the quarterly principal installments, the Partnership is
required to make quarterly cash sweep payments, which are applied to principal,
on or before the 60th day after the end of each calendar quarter commencing
March 31, 1997. The amount of each cash sweep payment will be equal to 90% of
Net Operating Income (as defined in the Amended Note) minus the scheduled
principal installments paid on any debt for the immediately preceding calendar
quarter of the Partnership.
On July 28, 1997, the Partnership executed a formal contract to sell its barge
fleet for $4.3 million in cash, representing the highest bid, to Midwest Marine
Management Company, the current operator of the barges, on an "as is, where as"
basis (the "Sale"). It is currently anticipated that the Sale will close on
August 28, 1997, following the satisfaction of certain conditions to closing.
Based upon its analysis, the General Partner believes that the anticipated net
proceeds to the Partnership of the proposed sale, after payment of all fees and
expenses, including the proposed disposition fee (see below), will exceed the
carrying value of the equipment.
Prior to commencing the sale process, the General Partner recognized that it
would be extremely unlikely for 16-year old barges, which would ordinarily be
expected to depreciate further in value over time, to appreciate approximately
200% over a short period of time from their 1996 appraised value of $4.1
million to an amount that would exceed the Partnership's debt obligation of in
excess of $12 million. Furthermore, the Partnership's lender, Buttonwood
Leasing Corporation ("Buttonwood"), an affiliate of the General Partner, had
previously informed the Partnership that no further extensions of the loan
would be provided upon its maturity in early January 1998. To avoid a
foreclosure at maturity, the Partnership initiated negotiations with
Buttonwood. The negotiations resulted in an agreement whereby the Partnership,
as an inducement for it to proceed with marketing the Barges for sale, would
receive a disposition fee equal to 5% of the gross sales proceeds.
In addition to receiving a disposition fee, the Partnership will be reimbursed
for all closing costs incurred in connection with the Sale. The balance of the
proceeds from the Sale will be applied to the Partnership's outstanding debt
obligation, which totaled $12,124,207 as of June 30, 1997. After receipt of
such partial repayment, Buttonwood has indicated that it will forgive the
Partnership's then remaining debt balance (in excess of $8.0 million) which
will allow the Partnership to retain all of its existing cash reserves. If the
sale is completed and the balance of the Partnership's debt is forgiven by
Buttonwood, the General Partner will waive equipment management fees due from
the Partnership in excess of $700,000 in order to allow a final distribution to
be made to the Limited Partners.
After consummating the Sale, satisfying the Partnership's debt obligations as
set forth above and providing for the Partnership's remaining liabilities, a
final liquidating distribution will be made to the Limited Partners and the
Partnership will be dissolved. The Partnership's cash and cash equivalents
balance totaled $443,071 at June 30, 1997, compared to $5,703,859 at December
31, 1996. The decrease is due to the $5.5 million principal payment on the
Partnership's note payable obligation paid on January 3, 1997.
Due from affiliate increased from $0 at December 31, 1996 to $12,233 at June
30, 1997. The balance at June 30, 1997 represents legal expenses incurred by
the Partnership in connection with the sale of the barges which are to be
reimbursed to the Partnership by Buttonwood.
At June 30, 1997, other assets were $15,192, compared to $8,184 at December 31,
1996. The increase is mainly due to legal costs related to the January 3, 1997
restructuring of the Partnership's note payable obligation which is being
amortized over one year.
The Partnership's fleet of 25 covered hopper river barges continue to operate
primarily on the Mississippi and Illinois Rivers. The barges haul various
types of agricultural products, primarily corn and soybean, in a southbound
direction, and steel, fertilizers and animal feed in a northbound direction.
Operating revenues declined for the first six months of 1997 as compared with
the corresponding period last year since there were less crops available for
shipment. The decreased demand for barges resulted in lower barge rental rates
during the first half of 1997. Although the 1996 harvest was relatively
strong, it is anticipated that it will not likely be transported until the
latter portion of 1997, after farmers have replenished their depleted crop
inventories.
Results of Operations
For the three and six months ended June 30, 1997, the Partnership generated a
net loss of $6,752 and $9,474, respectively, compared to net income of $55,132
and $115,616 for the corresponding periods in 1996. The change from net income
to net loss is primarily attributable to lower operating revenues and lower
interest and miscellaneous income, which were partially offset by lower total
operating expenses and interest expense.
Operating revenues were $450,281 and $945,351 for the three and six months
ended June 30, 1997, respectively, compared to $668,072 and $1,295,812 for the
corresponding periods in 1996. The decrease in operating revenues is primarily
attributable to a lower average barge revenue rate during the first six months
of 1997 due to the decreased demand for barge shipping.
For the three and six months ended June 30, 1997, operating costs were $338,908
and $634,514, respectively, compared to $374,059 and $699,749 for the
comparable 1996 periods. The decreases for both periods are primarily
attributable to a reduction in towing costs incurred by the Partnership during
the 1997 periods.
For the three and six months ended June 30, 1997, depreciation and amortization
totaled $7,596 and $98,259, respectively, compared to $83,067 and $166,134 for
the corresponding periods in 1996. Effective March 31, 1997, the Partnership
stopped recording depreciation expense as a result of the reclassification of
the barges as equipment held for sale pursuant to Financial Accounting
Standards No. 121.
Professional and other expenses for the three and six months ended June 30,
1997 were $33,846 and $63,729, respectively, compared to $17,077 and $30,261
for the corresponding periods in 1996. During the 1997 periods, certain
expenses incurred by an unaffiliated third party service provider in servicing
the Partnership, which were voluntarily absorbed by affiliates of the General
Partner in prior periods, were reimbursed to the General Partner and its
affiliates. Equipment management fee was $30,819 and $62,772 for the three and
six-month periods ended June 30, 1997, respectively, compared to $38,164 and
$74,930 for the same periods in 1996. Management fees are a function of net
revenue. The decreases are the result of lower net revenues in the 1997 period.
Interest and miscellaneous income totaled $6,608 and $12,539 for the three and
six months ended June 30, 1997, respectively, compared to $64,875 and $126,659
for the corresponding periods in 1996. The decreases are primarily
attributable to lower interest income as a result of a lower cash balance in
1997.
Interest expense declined from $161,237 and $327,359 for the three and six
months ended June 30, 1996, respectively, to $48,261 and $99,668 for the same
periods in 1997 due to a lower outstanding principal balance on the Amended
Note as a result of the $5,500,000 principal payment made on January 3, 1997.
Part II Other Information
Item 1 Legal Proceedings
In March 1996, a purported class action suit on behalf
of all Limited Partners was brought against the
Partnership, Lehman Brothers Inc., Smith Barney
Holdings Inc., and a number of other limited
partnerships in the New York State Supreme Court. The
complaint alleges claims of common law fraud and
deceit, negligent misrepresentation, breach of
fiduciary duty and breach of the implied covenant of
good faith and fair dealing. The defendants intend to
defend the action vigorously.
Items 2-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(10) Vessel Sale & Purchase Agreement between the Partnership
and Midwest Marine Management Company.
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the three-month period covered by this report.
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.
SEI II L.P.
BY: SEI II EQUIPMENT INC.
General Partner
Date: August 14, 1997 BY:/s/ Rocco F. Andriola
President, Director &
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 443,071
<SECURITIES> 00
<RECEIVABLES> 225,862
<ALLOWANCES> 00
<INVENTORY> 00
<CURRENT-ASSETS> 668,933
<PP&E> 3,211,941
<DEPRECIATION> 00
<TOTAL-ASSETS> 3,896,066
<CURRENT-LIABILITIES> 12,867,155
<BONDS> 00
<COMMON> 00
00
00
<OTHER-SE> (8,971,089)
<TOTAL-LIABILITY-AND-EQUITY>3,896,066
<SALES> 00
<TOTAL-REVENUES> 957,890
<CGS> 00
<TOTAL-COSTS> 634,514
<OTHER-EXPENSES> 233,182
<LOSS-PROVISION> 00
<INTEREST-EXPENSE> 99,668
<INCOME-PRETAX> (9,474)
<INCOME-TAX> 00
<INCOME-CONTINUING> (9,474)
<DISCONTINUED> 00
<EXTRAORDINARY> 00
<CHANGES> 00
<NET-INCOME> (9,474)
<EPS-PRIMARY> (2.60)
<EPS-DILUTED> (2.60)
</TABLE>
VESSEL SALE AND PURCHASE AGREEMENT
THIS VESSEL SALE AND PURCHASE AGREEMENT (this "Agreement") is
entered into as of the 28th day of July, 1997, by and between MIDWEST
MARINE MANAGEMENT COMPANY, a Missouri corporation, with its principal
offices located at 13545 Barrett Parkway Drive, Suite 120, St. Louis,
Missouri 63021 (hereinafter referred to as "Buyer"), and SEI II L.P.,
a New York limited partnership, with an address of 3 World Financial
Center, 29th Floor, New York, New York 10285 (hereinafter referred to
as "Seller").
WITNESSETH:
WHEREAS, Buyer and Seller are entering into this Agreement with
the intent and for the purpose of Buyer purchasing from Seller the
twenty-five (25) barges described below, and said Buyer and Seller
intend to provide for the sale, purchase and transfer of title from
Seller to Buyer of the Vessels (as defined below), upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. NAMED VESSELS:
SEI 2001 BF Official No. 641143 SEI 2014 BF Official No. 641156
SEI 2002 BF Official No. 641144 SEI 2015 BF Official No. 641157
SEI 2003 BF Official No. 641145 SEI 2016 BF Official No. 641158
SEI 2004 BF Official No. 641146 SEI 2017 BF Official No. 641159
SEI 2005 BF Official No. 641147 SEI 2018 BF Official No. 641160
SEI 2006 BF Official No. 641148 SEI 2019 BF Official No. 641161
SEI 2007 BF Official No. 641149 SEI 2020 BF Official No. 641162
SEI 2008 BF Official No. 641150 SEI 2021 BF Official No. 641163
SEI 2009 BF Official No. 641151 SEI 2022 BF Official No. 641164
SEI 2010 BF Official No. 641152 SEI 2023 BF Official No. 641165
SEI 2011 BF Official No. 641153 SEI 2024 BF Official No. 641166
SEI 2012 BF Official No. 641154 SEI 2025 BF Official No. 641167
SEI 2013 BF Official No. 641155
Any of the above-named barges is sometimes hereinafter referred
to as a "Vessel", and all of the barges are sometimes hereinafter
referred to collectively as the "Vessels".
2. PURCHASE AND SALE OF VESSELS:
Buyer hereby agrees to purchase all, and not less than all, of
the Vessels from Seller, and Seller hereby agrees to sell the Vessels
to Buyer.
3. PURCHASE PRICE:
The Purchase Price shall be U.S. $4,300,000.00, based on the
price of one Vessel being U.S. $172,000.00.
4. PAYMENT:
Buyer shall pay to Seller (a) 10% of the Purchase Price for
the Vessels (the "Earnest Deposit"), in full and in cash on or before
August 15, 1997, by electronic payment of immediately available
Federal funds at a Federal Reserve Bank of the United States of
America available for withdrawal and all other uses without exception
or restriction, and (b) the remainder of the Purchase Price for the
Vessels, in full and in cash upon simultaneous transfer of title to
the Vessels at the Closing, by electronic payment of immediately
available Federal funds at a Federal Reserve Bank of the United
States of America available for withdrawal and all other uses without
exception or restriction. The Purchase Price shall be wired to
Thompson Coburn Client Account at Mercantile Bank N.A., ABA No.
081000210, Account Name: Thompson Coburn Client Account, Account No.
100-14-23332, Reference: SEI II L.P.
5. RIGHTS AND OBLIGATIONS UPON CLOSING TO SURVIVE:
The rights and obligations of Buyer and Seller under this
Agreement shall not terminate or be otherwise reduced, impaired,
altered or affected and shall continue and survive, in full force and
effect without change, the delivery of the Vessels, any payment
therefor, transfer of title thereto, and Closing of the sale and
purchase thereof. All representations, warranties, disclaimers of
warranties, disclaimers of representations, agreements, terms,
conditions and covenants herein shall survive the delivery of the
Vessels, any payment therefor, transfer of title thereto, and Closing
of the sale and purchase thereof.
6. TRANSFER OF TITLE:
Transfer of title to the Vessels shall occur on an "AS IS,
WHERE IS" BASIS, subject to those warranties of title and disclaimers
of other warranties and disclaimers of representations set forth in
paragraph 7 hereof.
7. WARRANTY OF TITLE; INSPECTIONS AND ACKNOWLEDGMENTS OF
BUYER; DISCLAIMER OF WARRANTIES AND DISCLAIMER OF
REPRESENTATIONS:
(a) Warranty of Title. Seller represents and warrants to
Buyer that the Vessels are free and clear of all mortgages
(including, without limitation, that certain First Preferred Mortgage
of Documented Vessels dated as of January 3, 1997, executed by Seller
in favor of Buttonwood Leasing Corporation in the amount of U.S.
$2,339,000 (the "Mortgage"), which Mortgage was filed with the
Officer in Charge, U.S. Coast Guard, National Vessel Documentation
Center on January 3, 1997 and recorded in Book 97-09, Page 352),
libels, maritime liens or other liens, encumbrances, debts,
obligations or other charges whatsoever.
(b) Inspections and Acknowledgments of Buyer. Buyer
acknowledges that Buyer has become thoroughly knowledgeable of the
condition, merchantability, seaworthiness and suitability of the
Vessels by reason of Buyer's inspections and knowledge of the
Vessels, the inland rivers and waterways, and marine equipment and
the marine industry. Buyer further acknowledges that prior to the
Closing, Buyer made all inspections of the Vessels, both afloat and
on drydock, as Buyer deemed necessary, appropriate, or desirable.
With respect to the condition, merchantability, seaworthiness and
suitability of the Vessels for the service and use intended by Buyer,
Buyer agrees to rely solely and entirely on Buyer's own knowledge and
inspections of the Vessels and Buyer's knowledge of the inland rivers
and waterways, marine industry and marine equipment generally, and
not upon any representation or warranty of Seller as to the
condition, merchantability, seaworthiness or suitability of the
Vessels, no such representation or warranty having been made by
Seller. The acceptance of title to the Vessels by Buyer at the
Closing shall constitute an admission of Buyer's complete
satisfaction with the condition, merchantability, seaworthiness and
suitability of the Vessels and Buyer shall not be entitled to make or
assert any claim, lawsuit, right or remedy against Seller with
respect to the condition, merchantability, seaworthiness or
suitability of any of the said Vessels including without limitation
any claim arising out of or relating to latent or patent defects.
(c) Full Disclaimer of All Warranties and Representations.
ACCORDINGLY, EXCEPTING ONLY THE WARRANTY OF TITLE CONTAINED IN
SUBPARAGRAPH 7(a) ABOVE, IT IS THE EXPRESS INTENTION OF SELLER AND
BUYER, IN THE CLEAREST AND MOST UNEQUIVOCAL TERMS, TO NEGATE ANY
WARRANTIES AND REPRESENTATIONS BY SELLER CONCERNING THE VESSELS
SPECIFICALLY INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF
SEAWORTHINESS, MERCHANTABILITY, SUITABILITY AND CONDITION AND ANY
WARRANTY WITH RESPECT TO ANY PATENT AND LATENT DEFECTS IN THE
VESSELS, HOWEVER ARISING. SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, DIRECTLY OR INDIRECTLY, WITH
RESPECT TO THE VESSELS OR THEIR CONSTRUCTION, DESIGN, CONDITION,
WORKMANSHIP, SUITABILITY, FITNESS FOR ANY PURPOSE, SEAWORTHINESS,
MERCHANTABILITY, REPAIR, MAINTENANCE, LATENT, OR PATENT DEFECTS,
QUALITY, QUANTITY OR ANY OTHER MATTER WITH RESPECT OR RELATED TO THE
VESSELS, EXCEPTING ONLY THE WARRANTY OF TITLE CONTAINED IN
SUBPARAGRAPH 7(a) ABOVE. ANY WARRANTY, OBLIGATION, LIABILITY,
LAWSUIT, RIGHT OR REMEDY AGAINST SELLER BY BUYER WITH RESPECT OR
RELATED, DIRECTLY OR INDIRECTLY, TO THE VESSELS OR THEIR
CONSTRUCTION, DESIGN, CONDITION, WORKMANSHIP, SUITABILITY, FITNESS
FOR PURPOSE, SEAWORTHINESS, MERCHANTABILITY, REPAIR, MAINTENANCE,
LATENT OR PATENT DEFECTS, QUALITY OR ANY OTHER CONDITION OF THE
VESSELS ARE HEREBY, EFFECTIVELY, FINALLY AND FULLY DISCLAIMED,
DISCHARGED, RELEASED AND WAIVED BY BUYER IN FAVOR OF SELLER,
EXCEPTING ONLY THE WARRANTY OF TITLE CONTAINED IN SUBPARAGRAPH 7(a)
ABOVE. BUYER SHALL NOT BE ENTITLED TO MAKE OR ASSERT, AND DOES
HEREBY WAIVE, ANY CLAIM, LAWSUIT, RIGHTS OR REMEDIES AGAINST SELLER.
EXPRESS OR IMPLIED, DIRECTLY OR INDIRECTLY, RELATED TO THE VESSELS OR
THEIR CONSTRUCTION, DESIGN, CONDITION, WORKMANSHIP, SUITABILITY,
FITNESS FOR PURPOSE, SEAWORTHINESS, MERCHANTABILITY, REPAIR,
MAINTENANCE, LATENT OR PATENT DEFECTS, QUALITY OR ANY OTHER CONDITION
OF THE VESSELS UNDER ANY CIRCUMSTANCES INCLUDING BUT NOT LIMITED TO
THOSE ARISING OUT OF OR FROM CONTRACTUAL RESPONSIBILITIES, TORTIOUS
OR NEGLIGENT CONDUCT OF OMISSION OR COMMISSION AND WHETHER
INTENTIONAL, UNINTENTIONAL OR BY REASON OF STRICT LIABILITY,
EXCEPTING ONLY ANY SUCH CLAIM, LAWSUIT, RIGHTS OR REMEDIES BASED UPON
THE WARRANTY OF TITLE SET FORTH IN SUBPARAGRAPH 7(a) ABOVE. IN
FURTHERANCE OF THIS INTENTION, BUYER FULLY AND COMPLETELY UNDERSTANDS
AND AGREES THAT THE VESSELS ARE SOLD, PURCHASED, TRANSFERRED,
DELIVERED AND ACCEPTED ON AN "AS IS, WHERE IS" CONDITION BASIS, IN
WHATEVER CONDITION THAT MAY BE AND AT THE SOLE COST, EXPENSE,
LIABILITY AND RISK OF BUYER, EXCEPT FOR THE WARRANTY OF TITLE SET
FORTH IN SUBPARAGRAPH 7(a) ABOVE.
8. EVENT OF LOSS PRIOR TO CLOSING:
Prior to the Closing (defined below), the entire risk of loss
shall be borne by Seller. At Closing, the risk of loss shall pass to
Buyer. If prior to the Closing one or more of the Vessels are
damaged and any such casualty is deemed a total loss, Seller shall
have the right to collect the insurance proceeds for the damaged
Vessel(s) and the Purchase Price shall be reduced to reflect the
number of Vessel(s) deemed a total loss. If prior to Closing one or
more of the Vessels are damaged but such casualty is deemed a partial
loss, Seller shall, at the Closing, assign and turn over, and Buyer
shall be entitled to receive and keep, all insurance proceeds payable
to Seller with respect to such casualty. Buyer shall receive a
credit against the Purchase Price in the amount of any applicable
insurance deductible, and the parties shall proceed to Closing
pursuant to the terms hereof without further modification of the
terms of this Agreement.
9. CLOSING:
At the Closing (the "Closing") which shall occur at the
offices of Thompson Coburn in St Louis, Missouri at 10:00 a.m. on
August 28, 1997 or at such other place and time as Buyer and Seller
mutually agree:
Each party's obligation to consummate this Agreement is
expressly conditioned on the absence of any vote of the limited
partners of Seller (which vote shall have taken place in accordance
with Seller's partnership agreement) to disapprove the transaction
contemplated by this Agreement (such a vote to disapprove any of the
transactions contemplated herein being referred to herein as a
"Limited Partner Disapproval"). This Agreement shall automatically
terminate upon any Limited Partner Disapproval. In addition, if
prior to the Closing the limited partners of Seller have caused a
meeting of Seller to be called in accordance with Seller's
partnership agreement, to vote to disapprove the transaction
contemplated herein (a "Partnership Vote Meeting"), then (x) Seller
shall promptly thereafter provide written notice of the requirement
for such meeting (the "Notice of required Partnership Vote") to
Buyer, together with the date set therefor: (y) the closing date
shall automatically be extended to the seventh (7th) calendar day
following such Partnership Vote Meeting; and (z) Seller shall provide
Buyer with written notice of the result of the Partnership Vote
Meeting promptly after such result becomes available. Seller shall
be responsible for all costs associated with conducting any
Partnership Vote Meeting
(a) Buyer shall deliver to Seller the following:
(1) Payment of the Purchase Price in full in cash, by
electronic payment to Mercantile Bank National Association, ABA No.
081000210, Account Name: Thompson Coburn Client Account, Account No.
100-14-23332, Reference: SEI II L.P., as provided in paragraph 4 of
this Agreement, less the amount of the Earnest Deposit paid upon
execution of this Agreement;
(2) Receipt for Bills of Sale, Satisfaction of Vessels
from Preferred Mortgage and U.S. Coast Guard Certificates of
Documentation for each Vessel; and
(3) A duly executed agreement to terminate the Vessel
Management Agreement dated January I, 1993, between Buyer and Seller,
as amended.
(b) Seller shall deliver to Buyer the following:
(1) In duplicate, a duly executed Bill of Sale (Form
CG-1340) for all of the Vessels containing those warranties of title
and disclaimers of other warranties and disclaimers of
representations set forth in paragraph 7 hereof;
(2) In duplicate, a Satisfaction of Vessels from
Preferred Mortgage duly executed by Buttonwood Leasing Corporation;
(3) The original of the United States Coast Guard
Certificate of Documentation for each of the Vessels;
(4) Possession of each of the Vessels; and
(5) A duly executed agreement to terminate the Vessel
Management Agreement dated January 1, 1993, between Buyer and Seller,
as amended.
10. CITIZENSHIP:
(a) Buyer represents and warrants that it is a citizen of
the United States within the provisions of the Shipping Act of 1916,
as amended, and that at time of delivery and Closing, Buyer and any
assignee of Buyer will be a citizen of the United States, as
aforesaid and fully capable of owning a U.S. vessel and these Vessels
for their intended use in the coastwise trade.
(b) Seller represents and warrants that at all times during its
ownership of the Vessels, it has been and, at the time of delivery
and Closing it will be a citizen of the United States within the
provisions of the Shipping Act of 1916, as amended, and fully capable
of owning a U.S. vessel and these Vessels for their intended use in
the coastwise trade.
11 TAXES:
It is the intent of Seller and Buyer that the purchase
hereunder shall be consummated at such place and in such manner that,
to the extent reasonably possible, neither the Seller, Buyer nor the
Vessels shall be subject to any sales, use, gross receipts, excise,
transfer, value added, watercraft, or other tax, and Seller and Buyer
agree to cooperate with each other in the manner of closing, to the
extent reasonably possible, so as to carry out such intent. However,
if any such tax shall be incurred, as between Seller and Buyer, it
shall constitute the sole liability of the Buyer, and Buyer agrees to
pay, defend, indemnify and hold Seller harmless from and against any
such sales, use, gross receipts, excise, transfer, value added,
watercraft, or other tax of whatever nature, imposed as a result of
the sale or transfer of the Vessels or use thereof by Buyer
thereafter, excluding only any federal, state or local income tax
imposed on the income of Seller or any of its partners by the United
States of America or any taxing authority located within the
geographic boundaries of the United States of America.
12. EXPENSES; BROKERS:
Each party shall be responsible for its own expenses
incident to the Closing and the sale and purchase of the Vessels.
Buyer and Seller each represent and warrant to the other party that
it has had no dealings with any broker or agent in connection with
the sale and purchase of the Vessels.
13. MISCELLANEOUS:
(a) This Agreement is the complete agreement of Buyer and
Seller concerning the subject matter contained herein and terminates
and supersedes any and all prior agreements, arrangements, and
understandings, oral or written, between Buyer and Seller concerning
the subject matter of this Agreement. Waivers or amendments by
Seller with respect to any provision hereof may be made by an
instrument in writing signed by its General Partner, by its President
or any Vice President; waivers or amendments by Buyer with respect to
any provision hereof may be made by an instrument in writing signed
by its President, any Vice President, or any other officer or
authorized representative. No waiver, forbearance or failure by
either Buyer or Seller of its respective right to enforce any
provision of this Agreement shall constitute a waiver or estoppel of
either Buyer's or Seller's right to enforce said provision in the
future or of Buyer's or Seller's right to enforce any other provision
of this Agreement. No waiver or amendment shall be effective unless
and until made in writing and executed as herein set forth.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(c) Unless changed by notice by the party to be notified
specifying a different address or addressee any notice required or
permitted by the terms hereof shall be effectively delivered for all
purposes by delivering same in person or by mailing same by U.S.
Certified or Registered Mail, return receipt requested, or by U.S.
Express Mail, with receipt of delivery to the United States Post
Office for mailing acknowledged, postage prepaid, in each case
properly addressed to the party to be notified at such party's Notice
Address set forth below.
(i) Seller's Notice Address is:
SEI II L.P.
3 World Financial Center, 29th Floor
New York, NY 10285
Attention: Jeffrey C. Carter
Copy to:
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Attention: Jan Robey Alonzo, Esq.
(ii) Buyer's Notice Address is:
Midwest Marine Management Company
13545 Barrett Parkway Drive
Suite 120
St. Louis, Missouri 63021
Attention: Ronald E. Moore
Any notice given by U.S. Mail as specified above shall be
deemed delivered when received by the party to be notified or when
delivery is refused by such party.
(d) The parties covenant that any and all litigation which
either party instigates arising out of this Agreement, whether
sounding in admiralty, equity, contract, tort, or other theories, and
whether in rem or in personam, shall be brought in the U.S. District
Court of the Southern District of New York if federal subject matter
jurisdiction exists. Both parties waive all objections to personal
jurisdiction and venue in such court and any right to trial by jury
in such litigation, and agree that delivery of a copy of the Summons
and Compliant pursuant to the procedure set forth in paragraph 13(c)
hereof, shall constitute valid and effective service of process. If
federal subject matter jurisdiction over the litigation does not
exist, such litigation shall be brought in the Supreme Court of the
State of New York in the Borough of Manhattan, New York.
(e) In the event a dispute arises out of or relating to this
Agreement which is not within the general admiralty and maritime law,
then the law of the State of New York shall govern.
(f) No party hereto may sell, assign, delegate or otherwise
transfer or alienate any of its rights or obligations hereunder
without the prior written consent of the other party hereto, which
consent shall not be unreasonably withheld, and any such attempted
sale, assignment, delegation, transfer or alienation shall not
relieve such party of any obligations hereunder, unless otherwise
specified. Seller agrees that Buyer may assign its rights to
purchase up to ten (10) of the Vessels to Midwest River Investors,
L.L.C. and up to five (5) of the Vessels to Kathryn Rae Towing, Inc.,
and will execute and deliver such documents as required in Section
9(b) to such assignees, as Buyer may reasonably request, provided
that any such assignee of Buyer will execute an agreement to assume
all of Buyer's obligations under this Agreement as it relates to the
Vessels to be purchased by the Assignee, which agreement shall be in
form and substance acceptable to Seller and its counsel.
Notwithstanding anything herein to the contrary, Buyer shall not be
relieved of its obligations under this Agreement and shall remain
obligated to perform its duties hereunder.
(g) This Agreement, and all documents and instruments
delivered pursuant hereto, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
(h) The descriptive headings in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
(i) If any provision of this Agreement is held to be
invalid, the remainder of this Agreement shall not be affected
thereby and shall remain in full effect.
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed on their behalf by their duly authorized
officers and/or representatives as of the day and year first above-
written.
"BUYER"
MIDWEST MARINE MANAGEMENT COMPANY
By: /s/ Ronald E. Moore
Name: Ronald E. Moore
Title: President
"SELLER"
SEI II L.P.
By: SEI II Equipment, Inc.,
its General Partner
By: /s/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: President
