SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 3, 1995
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
Delaware 1-9164 72-1067072
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code:
(504) 582-4000<PAGE>
Freeport-McMoRan Resource Partners, Limited Partnership
Item 2. Acquisition or Disposition of Assets.
On January 3, 1995, Freeport-McMoRan Resource Partners, Limited
Partnership (FRP), a Delaware limited partnership and a 51.4 percent owned
affiliate of Freeport-McMoRan Inc. (FTX), acquired essentially all of the
domestic assets of Pennzoil Sulphur Company, a division of Pennzoil Company,
effective January 1, 1995.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired. It is
impracticable to provide the audited financial statements of
the business acquired required with respect to the
transaction described in Item 2 with this Report. Such
audited financial statements will be filed in an amendment
to this Report as soon as practicable and in no event later
than 60 days after the date upon which a Report relating to
the transaction described in Item 2 is required to be filed.
(b) Pro forma financial information. It is impracticable to
provide pro forma financial information with respect to the
transaction described in Item 2 with the Report. Such pro
forma financial information will be filed in an amendment to
this Report as soon as practicable and in no event later
than 60 days after the date upon which a Report relating to
the transaction described in Item 2 is required to be filed.
(c) Exhibits. The exhibits to this report are listed in the
Exhibit Index appearing on page E-1 hereof.
SIGNATURE
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.
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
By: /s/ Nancy D. Bonner
Nancy D. Bonner
Vice President and Controller
Date: January 18, 1995
Exhibit Index
Sequentially
Numbered
Number Exhibit Page
2.1 Asset Purchase Agreement dated as of October 22,
1994 between Freeport-McMoRan Resource Partners,
Limited Partnership (FRP) and Pennzoil Company
(the Asset Purchase Agreement).
2.2 Amendment No. 1 to the Asset Purchase Agreement.
99.1 News Release of FRP dated January 4, 1995.
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of
October 22, 1994
between
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
and
PENNZOIL COMPANY<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . 11
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . 14
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . 15
2.4 Excluded Liabilities . . . . . . . . . . . . . . . . . 16
2.5 Assignment of Contracts and Rights . . . . . . . . . . 17
2.6 Other Sulphur Properties . . . . . . . . . . . . . . . 17
2.7 Purchase Price . . . . . . . . . . . . . . . . . . . . 18
2.8 Closing . . . . . . . . . . . . . . . . . . . . . . . . 19
2.9 Allocation of Purchase Price for Tax Purposes . . . . . 20
2.10 Liquid Sulphur Inventory Adjustment. . . . . . . . . . 21
2.11 Tampa Average Sulphur Price . . . . . . . . . . . . . . 23
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PENNZOIL
3.1 Corporate Existence and Power . . . . . . . . . . . . . 24
3.2 Corporate Authorization . . . . . . . . . . . . . . . . 25
3.3 Governmental Authorization . . . . . . . . . . . . . . 25
3.4 Non-Contravention . . . . . . . . . . . . . . . . . . . 25
3.5 Required Consents . . . . . . . . . . . . . . . . . . . 26
3.6 Financial Statements . . . . . . . . . . . . . . . . . 26
3.7 Absence of Certain Changes . . . . . . . . . . . . . . 26
3.8 Properties . . . . . . . . . . . . . . . . . . . . . . 27
3.9 Sufficiency of the Purchased Assets . . . . . . . . . . 30
3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . 30
3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . 31
3.12 Material Contracts . . . . . . . . . . . . . . . . . . 31
3.13 Licenses and Permits . . . . . . . . . . . . . . . . . 32
3.14 Insurance Coverage . . . . . . . . . . . . . . . . . . 32
3.15 Compliance with Laws and Court Orders . . . . . . . . . 33
3.16 Inventories . . . . . . . . . . . . . . . . . . . . . . 33
3.17 Intellectual Property . . . . . . . . . . . . . . . . . 33
3.18 Employees . . . . . . . . . . . . . . . . . . . . . . . 34
3.19 Finders' Fees . . . . . . . . . . . . . . . . . . . . . 34
3.20 Environmental Matters . . . . . . . . . . . . . . . . . 34
3.21 Customers and Suppliers. . . . . . . . . . . . . . . . 35
3.22 Books and Records . . . . . . . . . . . . . . . . . . . 36
3.23 Representations Cumulative . . . . . . . . . . . . . . 36
3.24 Scope of Representations of Pennzoil . . . . . . . . . 36<PAGE>
Page
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF FRP
4.1 Organization and Existence . . . . . . . . . . . . . . 36
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . 36
4.3 Governmental Authorization . . . . . . . . . . . . . . 37
4.4 Non-Contravention . . . . . . . . . . . . . . . . . . . 37
4.5 Required Consents . . . . . . . . . . . . . . . . . . . 37
4.6 Financial Statements . . . . . . . . . . . . . . . . . 37
4.7 Absence of Certain Changes . . . . . . . . . . . . . . 37
4.8 Litigation . . . . . . . . . . . . . . . . . . . . . . 38
4.9 Compliance with Laws and Court Orders . . . . . . . . . 38
4.10 Main Pass Production Cost . . . . . . . . . . . . . . . 38
4.11 Representations Cumulative . . . . . . . . . . . . . . 38
4.12 Scope of Representations of FRP . . . . . . . . . . . 38
ARTICLE 5
COVENANTS OF PENNZOIL
5.1 Conduct of the Business . . . . . . . . . . . . . . . . 39
5.2 Confidentiality . . . . . . . . . . . . . . . . . . . . 41
5.3 Access to Information . . . . . . . . . . . . . . . . . 41
5.4 Notices of Certain Events . . . . . . . . . . . . . . . 42
5.5 Noncompetition . . . . . . . . . . . . . . . . . . . . 43
5.6 Trademarks; Trade Names . . . . . . . . . . . . . . . . 44
5.7 Environmental Obligations . . . . . . . . . . . . . . . 44
5.8 Damage, Destruction or Condemnation . . . . . . . . . . 48
5.9 Gas Supply . . . . . . . . . . . . . . . . . . . . . . 49
5.10 Transition Services Agreement . . . . . . . . . . . . . 49
ARTICLE 6
COVENANTS OF FRP
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . 49
6.2 Marketing Solid Sulphur . . . . . . . . . . . . . . . . 50
6.3 Prepaid Expenses . . . . . . . . . . . . . . . . . . . 51
ARTICLE 7
COVENANTS OF BOTH PARTIES
7.1 Best Efforts; Further Assurances . . . . . . . . . . . 52
7.2 Certain Filings . . . . . . . . . . . . . . . . . . . . 52
7.3 Public Announcements . . . . . . . . . . . . . . . . . 53<PAGE>
Page
7.4 Proration . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 8
TAX MATTERS
8.1 Tax Definitions . . . . . . . . . . . . . . . . . . . . 54
8.2 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 54
8.3 Tax Cooperation: Allocation of Taxes . . . . . . . . . 55
ARTICLE 9
EMPLOYEE BENEFITS
9.1 Employee Benefits Definitions . . . . . . . . . . . . . 55
9.2 ERISA Representations . . . . . . . . . . . . . . . . . 56
9.3 Employees and Offers of Employment . . . . . . . . . . 57
9.4 Pennzoil's Employee Benefit Plans . . . . . . . . . . . 58
9.5 Continuation of Certain Administrative Services
and Insurance Coverage . . . . . . . . . . . . . . 60
9.6 WARN Act . . . . . . . . . . . . . . . . . . . . . . . 60
9.7 No Third Party Beneficiaries . . . . . . . . . . . . . 60
ARTICLE 10
CONDITIONS TO CLOSING
10.1 Conditions to the Obligations of Each Party . . . . . 61
10.2 Conditions to Obligation of FRP . . . . . . . . . . . 61
10.3 Conditions to Obligation of Pennzoil . . . . . . . . . 62
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.1 Survival . . . . . . . . . . . . . . . . . . . . . . . 63
11.2 Indemnification . . . . . . . . . . . . . . . . . . . 64
11.3 Procedures . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 12
TERMINATION
12.1 Grounds for Termination . . . . . . . . . . . . . . . 65
12.2 Effect of Termination . . . . . . . . . . . . . . . . 66
ARTICLE 13
MISCELLANEOUS<PAGE>
Page
13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . 66
13.2 Amendments and Waivers . . . . . . . . . . . . . . . . 67
13.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . 68
13.4 Successors and Assigns . . . . . . . . . . . . . . . . 68
13.5 Governing Law . . . . . . . . . . . . . . . . . . . . 68
13.6 Counterparts; Effectiveness . . . . . . . . . . . . . 68
13.7 Entire Agreement; Third Party Beneficiaries . . . . . 68
13.8 Bulk Sales Laws . . . . . . . . . . . . . . . . . . . 69
13.9 Captions . . . . . . . . . . . . . . . . . . . . . . . 69<PAGE>
Page
SCHEDULES
Schedule 1.1 Installment Payments to Pennzoil S-1
Schedule 2.2(f) Excluded Exploration Projects S-2
Schedule 2.6 Other Sulphur Properties S-3
Schedule 3.5 Required Filings, Consents, Etc. S-4
Schedule 3.8(a) Real Property S-5
Schedule 3.8(b) The Mineral Interests S-43
Schedule 3.8(c) Pennzoil Sulphur Company Assets
with $100K Book Basis or More
(Excluding Real Estate, Houston, Antwerp) S-57
Schedule 3.8(e) Condition of Plants, Buildings and
Structures S-62
Schedule 3.10 Material Liabilities S-63
Schedule 3.11 Litigation and Proceedings S-64
Schedule 3.12(a) Contracts S-65
Schedule 3.13 Licenses, Permits and Other
Authorizations S-69
Schedule 3.14 Insurance Coverage S-73
Schedule 3.17(a) Patents, Trademarks, Etc. S-74
Schedule 3.20(a) Environmental Matters S-75
Schedule 3.21 Disputes With Customers or Suppliers S-77
Schedule 4.5 FRP Required Consents S-78
Schedule 9.2(a) Employee Benefit Plans S-79
Schedule 9.2(b) Benefit Arrangements S-80
EXHIBITS
Exhibit A A-1
Exhibit B B-1
Exhibit C C-1<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT dated as of October 22, 1994 between Freeport-McMoRan
Resource Partners, Limited Partnership, a Delaware limited partnership
("FRP"), and Pennzoil Company, a Delaware corporation ("Pennzoil"),
W I T N E S S E T H :
WHEREAS, Pennzoil conducts a sulphur mining and marketing business
through Pennzoil Sulphur Company, a division of Pennzoil (the "Business");
WHEREAS, FRP desires to purchase substantially all of the assets of
the Business (other than the Excluded Assets) from Pennzoil, and Pennzoil
desires to sell substantially all of such assets of the Business to FRP, upon
the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such other Person, with the concept of control in such context meaning
the possession of the power to direct or cause the direction of the management
and policies of another, whether through the ownership of voting securities,
by contract or otherwise.
"Balance Sheet" means the unaudited balance sheet of the Business as
of June 30, 1994 that is referred to in Section 3.6.
"Balance Sheet Date" means June 30, 1994.
"Base Cost" means $13,233,000 which is the product of (i) $44.11 (the
current per ton cash cost of Main Pass sulphur production FOB Tampa Terminal
through August 31, 1994) and (ii) 300,000.
"Base Pad Sulphur" means (i) all solid sulphur in the sulphur vats at
the Galveston Facility that is below the surface defined by a grid of
elevations which originate at the outer edge of the stored blocks and proceed
along the line separating the bottom of the stored blocks and the top of the
sulphur foundation and (ii) all formed berms and aprons located outside the
perimeter of the sulphur blocks in the sulphur vats at the Galveston Facility.<PAGE>
"Base Sulphur Inventory" means 90,000 long tons of sulphur, net of
any sulphur owned by parties other than Pennzoil and any sulphur that is sold
on Pennzoil's books as of the Closing Date, consisting of 30,000 long tons at
the Tampa Facility, 39,000 long tons at the Galveston Facility, 16,000 long
tons at the Culberson Facility and 5,000 long tons of Pennzoil at Savannah, in
each case net of any sulphur owned by parties other than Pennzoil and any
sulphur that is sold on Pennzoil's books as of the Closing Date (the "Tampa
Base Sulphur Inventory", the "Galveston Base Sulphur Inventory", the
"Culberson Base Sulphur Inventory" and the "Savannah Base Sulphur Inventory",
respectively).
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in New York City are authorized by law to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time and any rules or
regulations promulgated thereunder.
"Closing Date" means the date of the Closing.
"Conveyance, Assignment, Bill of Sale and Assumption Agreement" means
the Conveyance, Assignment, Bill of Sale and Assumption Agreement between FRP
and Pennzoil to be dated the Closing Date in substantially the form attached
hereto as Exhibit A. Pennzoil and FRP agree that this Conveyance is a master
form of conveyance and that for purposes of recordation, counterpart forms of
the Conveyance may be prepared that refer to properties outside the county,
parish or state where that Conveyance is to be recorded and contain such other
variations from the master Conveyance as the parties agree upon.
"Culberson Unit" means the pooled unit created by the Culberson Unit
Agreement.
"Culberson Unit Agreement" means the Sulphur Unitization Agreement
dated as of January 7, 1969, by and among Duval Corporation and certain
royalty owners, filed for recordation on May 12, 1970, with the Clerk, County
Court, Culberson County, Texas, in volume 7 at page 389 of the Mineral Records
of Culberson County, Texas.
"Culberson Facility" means (i) Pennzoil's facilities on the Culberson
Unit for producing, processing, storing and loading sulphur and (ii) all
related wells, buildings, fixtures and equipment.
"Cumulative Inflation Adjustment" means, for any Option Date, the sum
of the Inflation Adjustments for each Quarterly Period ending on or before
such Option Date.
"Debt" means, with respect to any Person, (i) indebtedness of such
Person for borrowed money, (ii) indebtedness for the deferred purchase price
of services or property, (iii) obligations of such Person under leases which
have been, or, in accordance with generally accepted accounting principles,
should be, recorded as capitalized leases, (iv) indebtedness of such Person
consisting of unpaid reimbursement obligations in respect of all outstanding
drawings under letters of credit issued for its account and (v) Debt of others
guaranteed by such Person. <PAGE>
"Deed of Trust" means the Deed of Trust, Mortgage, Security Agreement
and Financing Statement between FRP and Pennzoil to be dated the Closing Date
in substantially the form attached hereto as Exhibit B.
"Environmental Investigation or Audit" means, without limitation, any
final audits, studies, reports and monitoring data relating to any Regulated
Environmental Activity, conducted internally (for purposes other than day-to-
day routine monitoring and data analysis) or by outside consultants or
engineers, but shall not include publicly available studies or reports
submitted to regulatory agencies.
"Environmental Laws" means any and all Laws relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, hazardous substances or
wastes into the environment including without limitation ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous substances or wastes or the
clean-up or other remediation thereof.
"Environmental Liabilities" means any and all liabilities arising in
connection with the Business, the Purchased Assets or activities or operations
occurring or conducted at the Real Property (including without limitation
offsite disposal and failure to have any required Environmental Permits),
whether accrued, contingent, absolute, determined, determinable or otherwise,
actual or potential, known or unknown, which (iii) arise under or relate to
Environmental Laws (including without limitation any matter disclosed or
required to be disclosed in Schedule 3.20(a)) and (iv) relate to actions
occurring or conditions existing on or prior to the Closing Date.
"Environmental Permits" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws and necessary or proper for the Business as currently
conducted.
"Galveston Facility" means (i) Pennzoil's facility in Galveston
County, Texas, located on the Galveston County Real Property described in
Schedule 3.8(a), for receiving, storing, and loading sulphur and (ii) all
related buildings, fixtures and equipment.
"Good Title" means (i) with respect to all Purchased Assets other
than Mineral Interests, good and marketable title to the Purchased Assets,
free and clear of all Liens, except Permitted Liens, or in the case of leased
Real Property, valid leasehold interests in the Purchased Assets, and (ii)
with respect to the Mineral Interests in the Culberson Unit, such title that
(A) entitles Pennzoil to receive all of the Net Revenue Interest set forth on
Schedule 3.8(b) with respect to the Minerals produced from or allocated to the
Mineral Interests in the Culberson Unit, or of the full proceeds from the sale
or other disposition of such Minerals; (B) obligates Pennzoil to bear a
proportion of the costs and expenses relating to operations on, and the
maintenance and development of, the Mineral Interests in the Culberson Unit,
not greater than the Working Interest set forth on Schedule 3.8(b); and (C) is
free and clear of Mineral Title Defects and Liens, except the Permitted Liens.<PAGE>
"Governmental Authority" means the United States of America, any
state thereof, and any political subdivision of the foregoing, including but
not limited to any court, federal, state or local governmental or regulatory
body, agency, official or authority.
"Hazardous Substances" means any toxic, radioactive, corrosive or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics, regulated as such
under Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Inflation Adjustment" means, for any Quarterly Period, the product
of (i) the Base Cost, (ii) an amount obtained by subtracting one from the PPI
Factor for such Quarterly Period and (iii) the Inflation Sharing Ratio for
such Quarterly Period.
"Inflation Sharing Ratio" means, for any Quarterly Period, the ratio
shown under the column "Inflation Sharing Ratio" on Schedule 1.1 next to the
applicable Tampa Average Sulphur Price for that Quarterly Period; provided
that if the Tampa Average Sulphur Price for a Quarterly Period falls between
any two prices shown on Schedule 1.1, the Inflation Sharing Ratio for that
Quarterly Period will be determined by interpolation between the "Inflation
Sharing Ratio" amounts shown on Schedule 1.1 for those two prices.
"knowledge" of any party means actual knowledge of its officers and
senior managers, including, in the case of Pennzoil, the officers and senior
managers of the Business (grade 5 or higher) responsible for the principal
operating and administrative functions of the Business.
"Law" means any law, statute, judicial decision, ordinance, decree,
requirement, order, judgment, injunction, rule or regulation of, including the
terms of any license or permit issued by, any Governmental Authority.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance, limitation, preferential
right to purchase, consent to assignment, irregularity, burden, defect or
other adverse claim of any kind in respect of such property or asset. For the
purposes of this Agreement, a Person shall be deemed to own subject to a Lien,
not only a property or asset owned directly by that Person but also any
property or asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on the
business, assets, condition (financial or otherwise), result of operations of
the Business (other than the Excluded Assets) taken as a whole.
"Mineral Title Defect" means a Lien, fact, circumstance or occurrence
that renders incorrect or untrue any of the representations or warranties of
Pennzoil in Section 3.8(i) of this Agreement.<PAGE>
"Net Revenue Interest" means the interest of Pennzoil, expressed as a
percentage, in the Minerals produced from or allocated to a Mineral Interest,
or in and to the full proceeds from the sale or other disposition of such
Minerals, after deducting applicable Production Burdens.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Option Date" means the fourth anniversary of the Closing Date (the
"First Option Date") and each subsequent third anniversary of the First Option
Date.
"Option Price" means, for any Option Date, an amount equal to (i)
$65,000,000 less (ii) the Cumulative Inflation Adjustment on that Option Date;
provided that in no event will the Option Price be less than $10,000,000.
"Permitted Liens" means
(i) lessors' royalties and the terms and conditions of the Mineral
Interests;
(ii) Liens for taxes not yet due and payable;
(iii) operators' liens or mechanics' or materialmen's liens for
amounts not yet due and payable, arising in the ordinary course of business
and incidental to the incurrence of reasonable expenses with respect to the
Mineral Interests;
(iv) easements, rights of way, servitudes, permits or surface leases
on, over or in respect of the Mineral Interests, including those described
in Schedule 3.8(a), Exhibit C, or elsewhere in this Agreement or its
schedules that singly or in the aggregate do not affect the operation or
value of the Mineral Interests in any material respect;
(v) such sales contracts, operating agreements, unitization and
pooling agreements and other similar agreements as are customarily found in
connection with properties comparable to the Mineral Interests, none of
which, singly or in the aggregate, affects the operation or value of the
Mineral Interests in any material respect;
(vi) all consents by, notices to, filings with or other actions by
Governmental Authorities in connection with the transfer of state or
federal leases or interests therein if the same are customarily obtained
subsequent to such transfer; and
(vii) minor irregularities of title affecting any Mineral Interest that
a reasonable, prudent operator would consider immaterial or waive as a
title defect.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a Governmental Authority.
"PPI Factor" means, for any Quarterly Period, the amount obtained by
dividing (i) the producer price index for finished goods (the "PPI"), as<PAGE>
reported in Producer Price Indexes (or any successor publication) published by
the U.S. Bureau of Labor Statistics, for the last month in such Quarterly
Period by (ii) the PPI for October 1994; provided that if the PPI Factor as so
calculated for any Quarterly Period would be less than one, the PPI Factor for
that Quarterly Period shall be deemed to be one.
"Production Burden" means a royalty interest, overriding royalty
interest, production payment interest, net profit interest or other similar
interest that constitutes a burden on, or is measured by or is payable out of
the production of, Minerals or the proceeds realized from the sale or other
disposition of Minerals.
"Quarterly Installment Payment" means, for any Quarterly Period, the
amount shown on Schedule 1.1 under the column "Quarterly Installment Payment"
next to the Tampa Average Sulphur Price for that Quarterly Period; provided
that:
(i) if the Tampa Average Sulphur Price for a Quarterly Period
falls between any two prices shown on Schedule 1.1, the Quarterly
Installment Payment for that Quarterly Period will be determined by
interpolation between the "Quarterly Installment Payment" amounts shown on
Schedule 1.1 next to those two prices;
(ii) if the first and/or last Quarterly Period covers only a
portion of a full calendar quarter, the Quarterly Installment Payment for
that Quarterly Period will be determined by multiplying the Quarterly
Installment Payment that would be payable if that Quarterly Period covered
a full calendar quarter by a fraction of which (A) the numerator is the
number of days in that Quarterly Period and (B) the denominator is the
number of days in the full calendar quarter of which that Quarterly Period
is a part; and
(iii) if at the end of any Quarterly Period ending on or prior to
the twentieth anniversary of the Closing Date,
(A) FRP calculates the Quarterly Installment Payment that
would be due for such Quarterly Period but for the adjustment
required by this Section (iii) (such amount being referred to as the
"Pre-Adjustment Amount") and
(B) the number of tons of sulphur with respect to which
the calculation of the Pre-Adjustment Amount would be deemed to be
made (the "Pro Forma Tonnage"), when added to the aggregate number of
tons of sulphur with respect to which calculations of Quarterly
Installment Payments are deemed to have been made in all previous
Quarterly Periods, would exceed 18.6 million tons (such excess being
referred to as the "Excess Tonnage"), then the Quarterly Installment
Payment for that Quarterly Period will be calculated by multiplying
the Pre-Adjustment Amount by a fraction of which (I) the numerator is
obtained by subtracting the Excess Tonnage from the Pro Forma Tonnage
and (II) the denominator is the Pro Forma Tonnage.
For purposes of this calculation, the number of tons of sulphur with
respect to which a calculation of the Quarterly Installment Payment due in any<PAGE>
Quarterly Period will be deemed to have been made is the amount shown on
Schedule 1.1 under the column "Deemed Quarterly Volumes" next to the Tampa
Average Sulphur Price for that Quarterly Period, provided that (i) if the
Tampa Average Sulphur Price for that Quarterly Period is between any two
prices shown on Schedule 1.1, the number of such tons shall be determined by
interpolating between the Deemed Quarterly Volumes shown on Schedule 1.1 next
to those two prices, (ii) if the first Quarterly Period covers only a portion
of a full calendar quarter, the number of tons of sulphur with respect to
which a calculation of the Quarterly Installment Payment due in that Quarterly
Period will be deemed to have been made will be determined by multiplying the
number of such tons as to which a calculation would have been made if that
Quarterly Period had covered a full calendar quarter by a fraction of which
(A) the numerator is the number of days in that Quarterly Period and (B) the
denominator is the number of days in the full calendar quarter of which that
Quarterly Period is a part.
"Quarterly Period" means a calendar quarter during the period
commencing on the day after the Closing Date and ending on the earlier of (iv)
the twentieth anniversary of the Closing Date and (v) the last day of the
calendar quarter in which calculations of Quarterly Installment Payments are
deemed to have been made with respect to an aggregate of at least 18.6 million
tons of sulphur, as contemplated by Section (iii) of the definition of
"Quarterly Installment Payment"; provided that if the Closing Date does not
occur on the last day of a calendar quarter:
(A) the first Quarterly Period will commence on the day after the
Closing Date and end on the last day of the calendar quarter during which
the Closing Date occurs; and
(B) unless the last Quarterly Period is the period contemplated by
Section (v) of this definition, the last Quarterly Period will commence on
the first day of the calendar quarter in which the twentieth anniversary of
the Closing Date falls and end on such twentieth anniversary.<PAGE>
"Regulated Environmental Activity" means any generation, treatment,
storage, recycling, transportation or Release of any Hazardous Substance, as
such activities are regulated under Environmental Laws.
"Release" means any "release" as such term as defined in CERCLA at 42
U.S.C. Section 9601(22). The term "Released" has a corresponding meaning.
"Tampa Average Sulphur Price" means for any Quarterly Period the
average market price per ton for sulphur FOB Tampa Terminal during that
Quarterly Period calculated by (i) first, taking the arithmetic average of the
high and low Tampa Contract prices, as published in "Green Markets", for each
week that is partially or wholly within that Quarterly Period (each such
average being referred to as a "Weekly Average") and (ii) second, calculating
the arithmetic average of the Weekly Averages for all weeks that are partially
or wholly within that Quarterly Period; provided that if any Weekly Average
relates to a week of which only part is within that Quarterly Period, the
weight given to that Weekly Average in calculating this arithmetic average
will be proportionately reduced to reflect the portion of such week that is
within the Quarterly Period. If "Green Markets" ceases publication or the
required prices are no longer published or if the prices published in "Green
Markets" are no longer representative of prevailing contract sulphur prices in
Tampa, FRP and Pennzoil shall agree on an alternative basis for determining
the Tampa Average Sulphur Price in accordance with the procedures set forth in
Section 2.11 of this Agreement.
"Tampa Facility" means (i) Pennzoil's facility in Hillsborough
County, Florida, located on the Hillsborough County Real Property described in
Schedule 3.8(a), for receiving, storing and loading sulphur and (ii) all
related buildings, fixtures and equipment.
"Transition Services Agreement" means the Transition Services
Agreement between FRP and Pennzoil to be dated the Closing Date in
substantially the form attached hereto as Exhibit C.
"WARN Act" means the Worker Adjustment and Retraining Notification
Act.
"Working Interest" means (i) the interest of Pennzoil, expressed as a
percentage, in a Mineral Interest before giving effect to applicable
Production Burdens and (ii) the percentage of all costs and expenses
associated with the ownership, exploration, development and operation of the
Mineral Interest required to be borne by Pennzoil.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
Accounting Referee 2.9
active employee 9.3
Allocation Statement 2.9
Applicable Price 6.2
Assumed Liabilities 2.3
Benefit Arrangements 9.2
Books and Records 2.1
Business Recitals
Call Option 2.7
Call Option Notice 2.7
Closing 2.8
Closing Sulphur Inventory 2.10
Code 8.1
Conveyance Documents 2.8
Contracts 2.1
Culberson Adjustment 2.10
DTPA 3.8
employee benefit plan 9.2
Employee Plans 9.2
ERISA 9.1
ERISA Affiliate 9.1
Excluded Assets 2.2
Excluded Liabilities 2.4
Financial Statements 3.6
FRP Preamble
FRP Balance Sheet 4.6
FRP Retention 11.2
Galveston Adjustment 2.10
Galveston Environmental Operations 5.7
Generated Materials 5.7
Indemnified Party 11.3
Indemnifying Party 11.3
Intellectual Property Rights 2.1
Known Remedial Conditions 5.7
Loss 11.2
Mineral Interests 2.1
Minerals 2.1
Other Sulphur Properties 2.6
Panel 2.11
Pennzoil Preamble
Pennzoil Trade Names 5.6
Permit 3.13
Personal Property 2.1
Personnel Costs 9.4
Petty Cash 2.1
Post-Closing Tax Period 8.1
Pre-Closing Tax Period 8.1
Purchase Amount 6.2
Purchased Assets 2.1
Purchase Price 2.7
Put Option 2.7
Put Option Notice 2.7
RCRA 5.7
Real Property 3.8
Remedial Activities 5.7
Required Consent 3.5
Savannah Adjustment 2.10
Solid Sulphur Amount 6.2
Solid Sulphur Option Date 6.2
Storage Area 5.7
Tampa Adjustment 2.10
Tax 8.1
Transferred Employee 9.3
Transfer Date 9.3
Written Notice 2.11
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale. Except as otherwise provided below, upon
the terms and subject to the conditions of this Agreement, FRP agrees to
purchase from Pennzoil and Pennzoil agrees to sell, convey, transfer, assign
and deliver, or cause to be sold, conveyed, transferred, assigned and
delivered, to FRP at Closing all of the assets, properties and business, of
every kind and description, wherever located, real, personal or mixed,
tangible or intangible, owned, held or used in the conduct of the Business, as
the same shall exist on the Closing Date (collectively, the "Purchased
Assets"), and including without limitation:
(a) all real property and leases of, and other rights, options
and other interests in, real property used or previously used or held
for use in the conduct of the Business, other than the Mineral Interests
(as defined below), in each case together with all buildings, fixtures
and improvements erected thereon, and all easements, rights of way and
other rights of whatever nature relating thereto, including without
limitation the items listed on Schedule 3.8(a) (collectively referred to
as the "Real Property");
(b) insofar as they relate to the Business, all of Pennzoil's
right, title and interest in and to sulphur and other minerals
("Minerals") in, on and under, and that may be produced from, lands
subject to or included in:
(i) sulphur leases, mineral leases, sulphur patents,
mineral patents, patented and unpatented mining claims and awards,
deeds and other instruments and agreements, including without
limitation fee mineral interests, leasehold mineral interests,
royalty interests, overriding royalty interests, interests in
production payments, net profits interests and other rights to
own, explore for, produce and market Minerals (or to receive a
share of the Minerals produced or the proceeds from the sale or
other disposition of the Minerals), including without limitation
contract rights and reversionary interests in, to and under such
instruments and agreements;<PAGE>
(ii) unitization, unit operating, pooling, communitization
and other similar agreements and orders covering the Real Property
or the other Mineral Interests, and the units, pools and
communitized areas formed thereunder (including without limitation
units formed under orders, regulations, rules, approvals,
decisions or other official acts of any Governmental Authority
having jurisdiction), including without limitation the Culberson
Unit; and
(iii) the Real Property;
including without limitation the properties listed on Schedule 3.8(b),
together with all other rights, titles and interests of Pennzoil in and
to the lands they cover, and all easements, rights-of-way, surface
rights and other rights of whatever nature relating thereto but
excluding the Other Sulphur Properties listed on Schedule 2.6
(collectively, the "Mineral Interests," which term also refers, as the
context requires, to the instruments and agreements that create and
govern the Mineral Interests);
(c) all of Pennzoil's right, title and interest in and to all
personal property, equipment, fixtures and improvements on the Real
Property or the Mineral Interests, or used or held for use in the
Business (excluding the Excluded Assets), including goods, equipment,
fixtures, inventory, facilities, supplies, motor vehicles and other
property of every kind and nature that are used or held for use for the
production, gathering, treatment, processing, storage or transportation
of sulphur, other minerals, water or other substances produced
therewith, together with all accessions, additions and attachments
thereto, including wells, wellhead equipment, casing, tubing, tubular
goods, motors, engines, pumping units, flowlines, tanks, injection
facilities, chemicals, solutions, machinery, pipelines, pipes, tools,
surface and subsurface equipment, storage yards and the goods stored in
them, water systems (for injection, treating and disposal), power
plants, power lines, buildings, furniture, office and communications
equipment, computing and all computer related hardware except as
provided in Section 2.2(g), transportation equipment, including all
assets associated with the loading, receiving and transportation of
sulphur (including rail cars, barges, tankers and marine vessels and
including loading and receiving docks, equipment and facilities),
storage tanks, spare and replacement parts, fuel and all trade fixtures,
fixed assets and tangible property relating to or used or held for use
in the Business, including without limitation the items listed on
Schedule 3.8(c) (collectively, the "Personal Property");
(d) all raw materials, work-in-process, finished goods,
supplies, Closing Sulphur Inventory and the Base Pad Sulphur relating to
or used in the Business;
(e) all rights under all contracts, agreements (including
marketing agreements), personal property leases, licenses, commitments,
sales and purchase orders and other instruments, relating to or used in
the Business, including without limitation the items listed on Schedule
3.12(a) (collectively, the "Contracts");<PAGE>
(f) all prepaid expenses attributable to the Business, including
but not limited to ad valorem taxes, leases, rentals and industry
association dues and fees;
(g) all petty cash located at operating facilities of the
Business ("Petty Cash");
(h) all of Pennzoil's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Purchased
Assets with respect to any period on or after the Closing Date,
including without limitation unliquidated rights under manufacturers'
and vendors' warranties;
(i) all patents, copyrights, trademarks, trade names, service
marks, service names, inventions, trade secrets, know-how, processes,
technologies, formulae, research, proprietary data, market and
development data and libraries and computer software (including any
registrations or applications for registration of any of the foregoing)
and other similar types of proprietary intellectual property rights, in
each case which is owned or licensed by Pennzoil or any Affiliate of
Pennzoil and used or held for use in the Business (excluding the
"Pennzoil" and "Duval" names and any derivative thereof, but including
the right to use the "alchemist" symbol in the Pennzoil Sulphur Company
logo (so long as it is not used together with the Pennzoil yellow oval
or the word "Pennzoil")), including without limitation the items listed
on Schedule 3.17(a) (collectively, the "Intellectual Property Rights");
(j) all transferable licenses, permits or other governmental
authorizations affecting or relating to the Business, including without
limitation the items listed on Schedule 3.13;
(k) all books, records, files and papers, whether in hard copy
or computer format, relating to or used in connection with the Purchased
Assets or the Assumed Liabilities, including without limitation
engineering information, seismic records and surveys, maps and logs,
geological or geophysical data, sales and promotional literature,
manuals and data, sales and purchase correspondence, lists of present
and former suppliers, lists of present and former customers, copies of
current and former contracts and other arrangements with all such
customers, personnel and employment records, and any information
relating to Tax imposed on the Purchased Assets ("Books and Records");
and
(l) all goodwill associated with the Business or the Purchased
Assets.
2.2 Excluded Assets. FRP expressly understands and agrees that
the following assets and properties of Pennzoil (the "Excluded Assets") shall
be excluded from the Purchased Assets:
(a) Pennzoil's facilities at Antwerp, the stock of Duval Sales
International and all assets and contracts that relate primarily to
Pennzoil's Antwerp operations;<PAGE>
(b) the Solid Sulphur Amount;
(c) all of Pennzoil's cash and cash equivalents on hand and in
banks except for Petty Cash and all accounts, notes and other
receivables attributable to the operation of the Business prior to the
Closing Date;
(d) insurance policies and any reserves or funds related to any
employee benefit plans, programs or practices;
(e) the water rights owned by Pennzoil in Jefferson Davis
County;
(f) the Other Sulphur Properties and those properties and
contracts listed on Schedule 2.2(f);
(g) all personal property of Pennzoil that is located in Houston
other than those items included in the Intellectual Property Rights and
the Books and Records; and
(h) Pennzoil's gas supply contract with Texaco Inc.
2.3 Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, FRP agrees, effective at the time of Closing, to
assume the following liabilities (the "Assumed Liabilities"):
(a) all obligations of Pennzoil to perform the Contracts after
the Closing Date;
(b) all liabilities arising from the ownership or operation of
the Purchased Assets after the Closing Date other than the Excluded
Liabilities;
(c) the obligation to reimburse Pennzoil for its payments of
royalties (based on Pennzoil's calculation) for all Closing Sulphur
Inventory that has been produced by Pennzoil and that is conveyed to FRP
on the Closing Date; provided, that Pennzoil will retain all
responsibility for actually paying such royalty obligations, which
responsibility shall be an Excluded Liability;
(d) the obligation to reimburse Pennzoil for 50 percent of any
royalties that may be payable as a result of the transfer of the Base
Pad Sulphur to FRP at the Closing; provided that (i) the parties will
cooperate and will use all reasonable efforts to seek to confirm that no
such royalties are payable (or to minimize the amount of any such
royalties) as a result of such transfer to FRP and (ii) FRP will be
responsible for any royalties payable on the subsequent sale of the Base
Pad Sulphur;
(e) any liabilities assumed by FRP pursuant to Section 5.7; and
(f) all liabilities for (i) the plugging and abandonment of
sulphur wells, (ii) the shutdown or abandonment of any Purchased Assets
including without limitation the removal and disposal of the sulphur<PAGE>
vats (including the Base Pad Sulphur) at the Galveston Facility and
(iii) the abatement of asbestos-insulated pipe (up to 14,000 linear feet
of asbestos-insulated pipe) located in the plant area at the Culberson
Facility as well as any asbestos containing material located elsewhere
at the Culberson Facility. Pennzoil shall retain responsibility for
such abatement for asbestos-insulated pipe in excess of 14,000 linear
feet located in the plant area at the Culberson Facility.
2.4 Excluded Liabilities. Notwithstanding any provision in this
Agreement or any other writing to the contrary, FRP is assuming only the
Assumed Liabilities and is not assuming any other liability or obligation of
Pennzoil (or any predecessor owner of all or part of the Business and the
Purchased Assets) of whatever nature, whether presently in existence or
arising hereafter and whether accrued, contingent, absolute, determined,
determinable or otherwise, actual or potential, known or unknown. All such
other liabilities and obligations shall be retained by and remain obligations
and liabilities of Pennzoil (all such liabilities and obligations not being
assumed being herein referred to as the "Excluded Liabilities"), and, without
in any way limiting this Section 2.4, none of the following shall be Assumed
Liabilities for purposes of this Agreement: (a) all accounts payable
attributable to the operation of the Business prior to the Closing Date and
all obligations with respect to any Debt; (b) any obligation or liability for
Tax arising from or with respect to the Purchased Assets or the operations of
the Business which is incurred in or attributable to the Pre-Closing Tax
Period; (c) any liabilities or obligations relating to employee benefits or
compensation arrangements with respect to any Pennzoil employee who is not a
Transferred Employee or with respect to any Transferred Employee for any
period on or prior to the Transfer Date for such Transferred Employee; (d)
except as provided in Sections 2.3(e) and 2.3(f), any Environmental Liability;
(e) any liability or obligation relating to an Excluded Asset; and (f) subject
to Section 11.2, any other obligation or liability associated with the
Business or the operation of the Purchased Assets on or prior to the Closing
Date.
2.5 Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Purchased Asset or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a
breach or other contravention thereof or in any way adversely affect the
rights of FRP or Pennzoil thereunder. Pennzoil and FRP will use all
commercially reasonable efforts (but without any obligation on the part of
Pennzoil or FRP to pay money) to obtain the consent of the other parties to
any such Purchased Asset or any claim or right or any benefit arising
thereunder for the assignment thereof to FRP. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of Pennzoil thereunder so that FRP would not in
fact receive all such rights, Pennzoil and FRP will cooperate in a mutually
agreeable arrangement under which FRP will obtain the benefits and assume the
obligations thereunder in accordance with this Agreement, including sub-
contracting, sub-licensing or sub-leasing to FRP, or under which Pennzoil will
enforce for the benefit of FRP, with FRP assuming Pennzoil's obligations, any
and all rights of Pennzoil against a third party thereto; provided, however,
that Pennzoil does not guarantee performance by any other party to a Purchased<PAGE>
Asset. Pennzoil will promptly pay to FRP when received all monies received by
Pennzoil under any Purchased Asset or any claim or right or any benefit
arising thereunder, except to the extent the same represents an Excluded
Asset.
2.6 Other Sulphur Properties. (a) Pennzoil hereby grants FRP an
exclusive option, effective from and after the date of this Agreement and
through the date six months after the Closing Date, to acquire some or all of
the properties listed on Schedule 2.6, including the lands they cover, all
interests in the surface and minerals and all appurtenant rights, interests
and properties (collectively, the "Other Sulphur Properties"), on the terms
provided in this Section 2.6. Pennzoil represents that the Other Sulphur
Properties constitute all of the properties owned by Pennzoil, other than the
Real Property and the Mineral Interests described in Schedules 3.8(a) or
3.8(b), that are now predominantly sulphur prospects or properties.
(b) To exercise the option, FRP must give written notice,
identifying the Other Sulphur Property or Properties FRP wishes to acquire, to
Pennzoil at any time from the date of this Agreement to the date six months
after the Closing Date. On the date six months after the Closing Date the
option shall expire, except for Pennzoil's obligation to convey the Other
Sulphur Properties selected by FRP during the six-month option period.
(c) Within ten days after FRP gives each such written notice to
Pennzoil, Pennzoil shall convey to FRP the Other Sulphur Property or
Properties selected by FRP by form of conveyance substantially in the form of
the Conveyance, Assignment, Bill of Sale and Assumption Agreement, but without
warranty of title. FRP shall be responsible for all Environmental Liabilities
that relate to the Other Sulphur Property or Properties selected by and
conveyed to FRP.
(d) Each such conveyance shall be made without additional
consideration.
2.7 Purchase Price. (a) In consideration for Pennzoil's sale of
the Purchased Assets to FRP, FRP agrees to pay to Pennzoil the Quarterly
Installment Payment for each Quarterly Period, subject, however, to Section
5.6 of the Deed of Trust. The Quarterly Installment Payment payable for each
Quarterly Period will be due on the date 45 days after the last day of that
Quarterly Period (or, if such date is not a Business Day, the next succeeding
Business Day) and will be accompanied by a schedule prepared by FRP showing,
in reasonable detail, its calculation of such Quarterly Installment Payment.
The obligation of FRP to make Quarterly Installment Payments as provided above
is referred to herein as the "Purchase Price" for the Purchased Assets.
(b) On each Option Date, FRP will have the right, by notice
given to Pennzoil (a "Call Option Notice") on or before the thirtieth day (or,
if such date is not a Business Day, the next succeeding Business Day) after
such Option Date, to acquire all rights to all Quarterly Installment Payments
occurring after that Option Date for an amount equal to the Option Price for
that Option Date (such right being referred to as the "Call Option"). A Call
Option Notice shall be accompanied by a schedule prepared by FRP showing, in
reasonable detail, its calculation of the Option Price. If FRP delivers a
Call Option Notice in respect of any Option Date, the Option Price shall be<PAGE>
due on the date 45 days after that Option Date. Payment of the Option Price
shall satisfy in full all of FRP's obligations to pay any Quarterly
Installment Payments occurring after the applicable Option Date, and all
rights of Pennzoil to receive any such Quarterly Installment Payments shall be
extinguished.
(c) If FRP does not exercise the Call Option with respect to any
Option Date by delivering a Call Option Notice on or before the thirtieth day
(or, if such date is not a Business Day, the next succeeding Business Day)
after such Option Date, Pennzoil will have the right, by notice given to FRP
(a "Put Option Notice") on or before the sixtieth day (or, if such date is not
a Business Day, the next succeeding Business Day) after such Option Date, to
require FRP to purchase all rights to all future Quarterly Installment
Payments for an amount equal to $10,000,000 (such right being referred to as
the "Put Option"); provided that Pennzoil will not have any Put Option with
respect to any Option Date occurring after the earliest to occur of (i) the
sixteenth anniversary of the Closing Date and (ii) the date on which FRP has
completed all Quarterly Installment Payments. If Pennzoil delivers a Put
Option Notice in respect of any Option Date, such amount shall be due on the
date 75 days after that Option Date (or, if such date is not a Business Day,
on the next succeeding Business Day). Payment of the Option Price shall
satisfy in full all of FRP's obligations to pay any Quarterly Installment
Payments occurring after the applicable Option Date, and all rights of
Pennzoil to receive any such Quarterly Installment Payments shall be
extinguished.
(d) Each payment under this Section 2.7 shall be made by
delivery by FRP of a certified or official bank check payable in immediately
available funds to Pennzoil or by causing such payment to be credited to such
account of Pennzoil as Pennzoil may designate in writing from time to time.
Any payment under this Section 2.7 that is not paid on the date when due shall
bear interest from and including the due date to but excluding the date of
payment at a rate per annum equal to the rate publicly announced from time to
time by Chase Manhattan Bank, N.A. in New York City (i) as its prime rate in
the case of payments as to which there exists a genuine dispute between the
parties regarding the amount of the payment or (ii) as its prime rate plus 2%
in the case of payments as to which no such genuine dispute exists, in each
case during the period from the due date to the date of payment. Such
interest shall be payable at the same time as the payment to which it relates
and shall be calculated daily on the basis of a year of 365 days and the
actual number of days elapsed.
(e) Upon the payment of the last installment of the Purchase
Price or upon payment pursuant to the exercise of the Call Option or the Put
Option, all Liens under the Deed of Trust and all other Liens held by Pennzoil
or its assignee in the Purchased Assets shall be released and discharged
automatically. At any time and from time to time prior to such termination,
the parties may agree to a total or partial release of any such Lien in the
Purchased Assets. Upon such total or partial release of any such Lien,
Pennzoil will execute and deliver to FRP such releases and other documents as
FRP shall reasonably request to evidence or effect such release.
2.8 Closing. The closing (the "Closing") of the purchase and
sale of the Purchased Assets and the assumption of the Assumed Liabilities<PAGE>
hereunder shall take place at the offices of Pennzoil in Houston as soon as
possible, but in no event later than 10 Business Days, after satisfaction of
the conditions set forth in Article 10, or at such other time or place as FRP
and Pennzoil may agree. At the Closing (or from time to time thereafter),
Pennzoil and FRP shall enter into the Conveyance, Assignment, Bill of Sale and
Assumption Agreement, and Pennzoil shall execute, acknowledge and deliver to
FRP such deeds, bills of sale, endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment (the "Conveyance
Documents") as the parties and their respective counsel shall deem reasonably
necessary or appropriate to vest in FRP Good Title in and to the Purchased
Assets. The parties will also execute and deliver (i) the Deed of Trust, (ii)
a Transition Services Agreement and (iii) each other deed, certificate,
agreement or other document contemplated by this Agreement. Any payment
required under this Section 2.8 and not made at the Closing shall bear
interest at the rate per annum equal to the rate publicly announced from time
to time by Chase Manhattan Bank, N.A. in New York City (i) as its prime rate
in the case of payments as to which there exists a genuine dispute between the
parties regarding the amount of the payment and (ii) as its prime rate plus 2%
in the case of payments as to which no such genuine dispute exists.
2.9 Allocation of Purchase Price for Tax Purposes. (a) The
parties agree that for tax purposes, the Purchase Price will be deemed to be
$22,500,000. As soon as practicable after the Closing Date, FRP shall deliver
to Pennzoil a statement (the "Allocation Statement"), setting forth the value
of the Purchased Assets for tax purposes which shall be used for the
allocation of the Purchase Price (together with the Assumed Liabilities) among
the Purchased Assets.
(b) Pennzoil shall have a period of 30 days after the delivery of
the Allocation Statement to present in writing to FRP notice of any objections
Pennzoil may have to the allocation set forth in the Allocation Statement.
Unless Pennzoil timely objects, the Allocation Statement shall be binding on
the parties without further adjustment.
(c) If Pennzoil shall raise any objections within the 30 day
period, FRP and Pennzoil shall negotiate in good faith and use their best
efforts to resolve such dispute. If the parties fail to agree within 5 days
after the delivery of the notice, then the disputed items shall be resolved by
Arthur Andersen, or if such firm declines to act in such capacity, by such
other firm of independent nationally recognized accountants chosen and
mutually accepted by both parties (the "Accounting Referee"). The Accounting
Referee shall resolve the dispute within 30 days of having the item referred
to it. The costs, fees and expenses of the Accounting Referee shall be borne
equally by Pennzoil and FRP.
(d) Pennzoil and FRP agree to report an allocation of the
Purchase Price among the Purchased Assets in a manner entirely consistent with
the Allocation Statement and agree to act in accordance with such Allocation
Statement in the preparation and filing of all tax returns (including without
limitation filing Form 8594 with its Federal income tax return for the taxable
year that includes the date of the Closing) and in the course of any tax
audit, tax review or tax litigation relating thereto.
(e) Not later than 10 days prior to the filing of their<PAGE>
respective Form 8594 relating to this transaction, each party shall deliver to
the other party a copy of its Form 8594.
2.10 Liquid Sulphur Inventory Adjustment. (a) On the Closing Date
(or on such other date or dates as close as possible to the Closing Date as
may be mutually agreed by the parties, one or more representatives designated
by each of Pennzoil and FRP (who may be employees or officers of Pennzoil or
FRP, as the case may be) shall jointly conduct on behalf of each party
respectively a measurement by tank strapping of the level of Pennzoil's liquid
sulphur inventory (net of any sulphur owned by parties other than Pennzoil and
any sulphur that is sold on Pennzoil's books as of the Closing Date) included
in the Purchased Assets at Closing (the "Closing Sulphur Inventory").
Inventory in transit, including in tank cars and barges, will be measured by
tank strapping at destination and will be deemed to be at its destination as
of the Closing Date. If the parties' respective measurements of Pennzoil's
liquid sulphur inventory at the Tampa Facility, the Galveston Facility, the
Culberson Facility and/or Pennzoil's Savannah facility differ, the level of
inventory at that facility shall be the average of the parties' respective
measurements for that facility.
(b)(i) Subject to Section 2.10(b)(v) below, if the Closing
Sulphur Inventory at the Tampa Facility is greater than the Tampa Base Sulphur
Inventory, then FRP shall pay to Pennzoil a cash amount equal to the
difference multiplied by the Tampa Average Sulphur Price as of the Closing
Date minus $3.75; if the Closing Sulphur Inventory at the Tampa Facility is
less than the Tampa Base Sulphur Inventory then Pennzoil shall pay to FRP a
cash amount equal to the difference multiplied times the Tampa Average Sulphur
Price as of the Closing Date minus $3.75 (the payment under this Section
2.10(b)(i) being the "Tampa Adjustment").
(ii) Subject to Section 2.10(b)(v) below, if the Closing
Sulphur Inventory at the Galveston Facility is greater than the Galveston Base
Sulphur Inventory, then FRP shall pay to Pennzoil a cash amount equal to the
difference multiplied by the Tampa Average Sulphur Price as of the Closing
Date minus $17.75; if the Closing Sulphur Inventory at the Galveston Facility
is less than the Galveston Base Sulphur Inventory, then Pennzoil shall pay to
FRP a cash amount equal to the difference multiplied times the Tampa Average
Sulphur Price as of the Closing Date minus $17.75 (the payment under this
Section 2.10(b)(ii) being the "Galveston Adjustment").
(iii) Subject to Section 2.10(b)(v) below, if the Closing
Sulphur Inventory at the Culberson Facility is greater than the Culberson Base
Sulphur Inventory, then FRP shall pay to Pennzoil a cash amount equal to the
difference multiplied by the Tampa Average Sulphur Price as of the Closing
Date minus $39.50; if the Closing Sulphur Inventory at the Culberson Facility
is less than the Culberson Base Sulphur Inventory, then Pennzoil shall pay to
FRP a cash amount equal to the difference multiplied times the Tampa Average
Sulphur Price as of the Closing Date minus $39.50 (the payment under this
Section 2.10(b)(iii) being the "Culberson Adjustment").
(iv) Subject to Section 2.10(b)(v) below, if the Closing
Sulphur Inventory at Savannah is greater than the Savannah Base Sulphur
Inventory, then FRP shall pay to Pennzoil a cash amount equal to the
difference multiplied by the Tampa Average Sulphur Price as of the Closing<PAGE>
Date plus $2.75; if the Closing Sulphur Inventory at Pennzoil's Savannah
facility is less than the Savannah Base Sulphur Inventory, then Pennzoil shall
pay to FRP a cash amount equal to the difference multiplied times the Tampa
Average Sulphur Price as of the Closing Date plus $2.75 (the payment under
this Section 2.10(b)(iv) being the "Savannah Adjustment").
(v) The dollar amount of the Tampa Adjustment, the Galveston
Adjustment, the Culberson Adjustment and the Savannah Adjustment shall be
netted, and, if the Closing Sulphur Inventory is greater than the Base Sulphur
Inventory, the net amount shall be adjusted in FRP's favor by 50 percent of
the royalties payable on such excess inventory. Pennzoil shall pay to FRP, or
FRP shall pay to Pennzoil, as the case may be, the net adjusted amount in the
manner and with interest as provided in Section 2.10(c). Any such payment of
the net adjusted amount pursuant to this Section 2.10(b) shall be made at a
mutually convenient time and place within 20 days after the Closing Date.
(c) Any payments pursuant to this Section 2.10 shall be made by
delivery by FRP, or Pennzoil, as the case may be, of a certified or official
bank check payable in immediately available funds to the other party or by
causing such payments to be credited to such account of such other party as
may be designated by such other party. The amount of any payment to be made
pursuant to this Section 2.10 shall bear interest from and including the due
date to but excluding the date of payment at a rate per annum equal to the
rate publicly announced from time to time by Chase Manhattan Bank, N.A. in New
York City (i) as its prime rate in the case of payments as to which there
exists a genuine dispute between the parties regarding the amount of the
payment and (ii) as its prime rate plus 2% in the case of payments as to which
no such genuine dispute exists, in each case during the period from the
Closing Date to the date of payment. Such interest shall be payable at the
same time as the payment to which it relates and shall be calculated daily on
the basis of a year of 365 days and the actual number of days elapsed.
(d) If Pennzoil advises FRP that the relative amounts of
inventory at Tampa, Galveston and Culberson have been materially changed due
to FRP's use of the "Marine Duval", Pennzoil will propose an appropriate
adjustment to reflect the amounts that would have been paid under this Section
2.10 if FRP had not used the "Marine Duval". The amount of such adjustment
will be negotiated in good faith by the parties. If the parties are unable to
agree upon the amount of such adjustment within 60 days of Pennzoil's initial
proposal, then the arbitration procedure outlined in Section 2.11(b) shall be
used by the parties to establish the amount of the adjustment. Each party
will be entitled to make one proposal, the Panel will be required to choose
one of those two proposals and its decision will be binding on the parties.
Costs of arbitration will also be allocated in accordance with Section
2.11(b).
2.11 Tampa Average Sulphur Price. (a) If, for purposes of
calculating the Tampa Average Sulphur Price, "Green Markets" ceases
publication or no longer publishes the required prices or if the prices
published in "Green Markets" are no longer representative of prevailing
contract sulphur prices in Tampa, FRP and Pennzoil shall agree upon an
alternative basis for determining the Tampa Average Sulphur Price that will be
representative of prevailing contract (rather than spot) sulphur prices in
Tampa from time to time. Such agreement shall be made following good faith<PAGE>
negotiations which shall commence promptly upon the provision of written
notice by either party to the other party ("Written Notice") that an
alternative basis is necessary.
(b) If the parties are unable to agree on such an alternative
basis within 60 days of the provision of Written Notice, the new basis shall
be finally and conclusively determined by a panel of arbitrators (the "Panel")
consisting of three members unaffiliated with either party and selected as
hereinafter provided. Each of Pennzoil and FRP shall select one member of the
Panel within five Business Days after the 60 day period referred to above and
the third member shall be selected by mutual agreement of the two members so
selected within an additional ten Business Days. If either party does not
appoint its member of the Panel as provided above, then the alternative basis
proposed by the other party Section shall prevail. Panel members shall be
chosen on the basis of their knowledge of the agricultural minerals industry
in general and the sulphur industry in particular. The Panel shall meet in
New York, New York or such other place as a majority of the members of the
Panel determines more appropriate. Each party shall provide the Panel within
30 Business Days of its formation with one or more proposals as to the
appropriate alternative basis for determining the prevailing contract market
price for sulphur FOB Tampa Terminal. The parties shall be given the
opportunity to submit in writing supporting information or data for their
proposals and to each make an oral presentation to the Panel. The Panel shall
then decide (by a majority) within 45 Business Days of its formation which one
of the proposed bases will most accurately reflect the prevailing contract
sulphur price in Tampa. It is understood and agreed that the Panel will not
have discretion to select any basis for the Tampa Average Sulphur Price other
than one of the bases proposed by the parties, and will not have authority to
modify or amend such proposal. The basis adopted by the Panel shall be
binding on the parties for future determinations of the Tampa Average Sulphur
Price. The costs associated with the arbitration procedure described in this
Section 2.11(b), including the fees and expenses of the arbitrators and the
costs reasonably incurred by the parties themselves in preparing their
proposals, shall be borne by the party whose proposals are not selected by the
Panel.
(c) Until such time as such an alternative basis has been
mutually agreed as described in Section 2.11(a), or determined by the Panel as
described in Section 2.11(b), the Tampa Average Sulphur Price shall be
determined utilizing prices published in "Green Markets" as described in the
definition of "Tampa Average Sulphur Price"; provided that once an alternative
basis has been agreed upon that new basis shall be applied retroactively to
any payments made with respect to periods after receipt by a party of Written
Notice.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PENNZOIL
Pennzoil represents and warrants to FRP as of the date hereof and
as of the Closing Date that:
3.1 Corporate Existence and Power. Pennzoil is a corporation<PAGE>
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. Pennzoil is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary in connection with the
conduct of the Business, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect. Pennzoil has heretofore delivered to FRP true and complete copies of
its certificate of incorporation and bylaws as currently in effect.
3.2 Corporate Authorization. The execution, delivery and
performance by Pennzoil of this Agreement are within Pennzoil's corporate
powers and have been duly authorized by all necessary corporate action on the
part of Pennzoil. This Agreement constitutes a valid and binding agreement of
Pennzoil, enforceable against Pennzoil in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting enforcement of creditors' rights generally and
except as enforcement hereof is subject to general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
3.3 Governmental Authorization. The execution, delivery and
performance by Pennzoil of this Agreement require no action by or in respect
of, or filing with, any Governmental Authority other than (i) compliance with
any applicable requirements of the HSR Act; and (ii) compliance with any
applicable requirements of the 1934 Act.
3.4 Non-Contravention. The execution, delivery and performance
by Pennzoil of this Agreement do not and will not (i) violate the certificate
of incorporation or bylaws of Pennzoil, (ii) assuming compliance with the
matters referred to in Section 3.3, violate any applicable Law, (iii) assuming
the obtaining of all Required Consents, constitute a default under or give
rise to any right of termination, cancellation or acceleration of any right or
obligation relating to the Business or to a loss of any benefit relating to
the Business to which Pennzoil is entitled under (a) any provision of any
agreement, contract or other instrument binding upon Pennzoil or by which any
of the Purchased Assets is or may be bound or (b) any Permit or (iv) result in
the creation or imposition of any Lien on any Purchased Asset, other than
Permitted Liens. From August 22, 1994 through the date of this Agreement,
Pennzoil has not taken any action that would have resulted in a breach of any
covenant or agreement contained in this Agreement if this Agreement had been
executed on August 22, 1994.
3.5 Required Consents. Schedule 3.5 sets forth each agreement,
contract or other instrument binding upon Pennzoil or any Permit requiring a
consent or other form of approval as a result of or a waiver of rights to
permit the execution, delivery and performance of this Agreement (each such
consent, a "Required Consent" and together the "Required Consents").
3.6 Financial Statements. The unaudited balance sheet for the
Business as of December 31, 1993 and the related unaudited statements of
operations and cash flows for the Business for the year ended December 31,
1993 and the Balance Sheet and the related unaudited interim statement of<PAGE>
operations and cash flows for the six months ended June 30, 1994
(collectively, the "Financial Statements") fairly present, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the financial position as of the
dates thereof and its results of operations and cash flows for the periods
then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
3.7 Absence of Certain Changes. Except as reported in monthly
financial and operating reports that are delivered to FRP before the date of
this Agreement, since the Balance Sheet Date, the Business has been conducted
in the ordinary course consistent with past practices, and there has not been:
(a) any event, occurrence, development or state of circumstances
or facts which has had or could reasonably be expected to have a
Material Adverse Effect other than those that may be deemed to have
occurred by virtue of general changes in economic conditions or
conditions generally affecting the sulphur mining and marketing
business;
(b) any creation or other incurrence of any Lien (other than
Permitted Liens) on any Purchased Asset;
(c) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or any Purchased Asset
which, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect;
(d) any transaction or commitment made, or any contract or
agreement entered into, by Pennzoil relating to the Business or any
Purchased Asset (including the acquisition or disposition of any assets)
or any relinquishment by Pennzoil of any contract or other right, in
either case, material to the Business taken as a whole, other than
transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement;
(e) any change in any method of accounting or accounting
practice by Pennzoil with respect to the Business except for any such
change after the date hereof required by reason of a concurrent change
in generally accepted accounting principles;
(f) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any employee of
the Business (or any amendment to any such existing agreement), (ii)
grant of any severance or termination pay to any such employee or (iii)
change in compensation or other benefits payable to any such employee
pursuant to any severance or retirement plans or policies;
(g) any labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof
to organize any employees of the Business, which employees were not
subject to a collective bargaining agreement at the Balance Sheet Date,
or any lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to such employees; or<PAGE>
(h) any capital expenditure, or commitment for a capital
expenditure, for additions or improvements to property, plant and
equipment.
3.8 Properties. (a) Schedule 3.8(a) contains a correct summary
description of all Real Property.
(b) Schedule 3.8(b) correctly describes the Mineral Interests.
(c) To the knowledge of Pennzoil, Schedule 3.8(c) correctly
describes all Personal Property with a book value in excess of $100,000 and
any Liens thereon, specifying in the case of leases or subleases, the name of
the lessor or sublessor, the lease term and basic annual rent.
(d) Pennzoil has, and at Closing will have and will convey to
FRP, and upon consummation of the transactions contemplated hereby, FRP will
acquire, Good Title to each of the Purchased Assets.
(e)(i) The real property summarized on Schedule 3.8(a) includes
all Real Property (other than Excluded Assets), and only such real property,
as is used or held for use in connection with the conduct and operations of
the Business as heretofore conducted. Except for the Other Sulphur Properties
and other Excluded Assets, the mineral interests described on Schedule 3.8(b)
include all Mineral Interests, and only such mineral interests, as are used or
held for use in connection with the conduct and operations of the Business as
heretofore conducted.
(ii) All leases of and other instruments and agreements
relating to Real Property, Mineral Interests described on Schedule 3.8(b) or
Personal Property are in good standing and are valid, binding and enforceable
in accordance with their respective terms, and there does not exist under any
such lease, instrument or agreement any material default or any event which
with notice or lapse of time or both would constitute a material default.
(iii) Except as provided in Schedule 3.8(e), the plants,
buildings, structures and equipment included in the Purchased Assets and
currently used in the Business are in satisfactory operating condition and
repair and have been reasonably maintained consistent with standards generally
followed in the industry (giving due account to the age and length of use of
same, ordinary wear and tear excepted), are suitable for their present uses
and, in the case of plants, buildings and other structures currently used in
the Business (including without limitation the roofs thereof), are, to the
knowledge of Pennzoil, structurally sound. Except as expressly provided in
this Section 3.8(e)(iii), the Personal Property is sold "AS, IS, WHERE IS,"
and Pennzoil MAKES NO, AND DISCLAIMS ANY, REPRESENTATION OR WARRANTY, WHETHER
EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, AS TO
(i) MERCHANTABILITY, (ii) FITNESS FOR ANY PARTICULAR PURPOSE, (iii) CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS AND (iv) CONDITION. FRP EXPRESSLY WAIVES
THE PROVISIONS OF CHAPTER XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63,
INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS
CODE ANN., BUSINESS AND COMMERCE CODE (THE "DTPA"). Pennzoil and FRP agree
that the preceding disclaimers of warranty are "conspicuous" disclaimers for
purposes of any applicable law, rule or order. FRP expressly recognizes that
the consideration for which Pennzoil has agreed to sell the Purchased Assets<PAGE>
and perform its obligations under this Agreement has been predicated upon the
inapplicability of the DTPA and this waiver of the DTPA. FRP further
recognizes that Pennzoil, in determining to proceed with the entering in to of
this Agreement, has expressly relied on this waiver and the inapplicability of
the DTPA.
(iv) The plants, buildings and structures included in the
Purchased Assets currently have access to (A) public roads or valid easements
over private streets or private property for such ingress to and egress from
all such plants, buildings and structures and (B) water supply, telephone, gas
and electrical connections, drainage and other utilities, as are necessary for
the conduct of the Business as it is presently conducted.
(v) None of the material structures on the Real Property
encroaches upon real property of another person, and no structure of any other
person substantially encroaches upon any Real Property.
(f) No Purchased Asset is subject to any Lien, except Permitted
Liens.
(g) There are no developments affecting any of the Purchased
Assets pending or, to the knowledge of Pennzoil threatened, which might
materially detract from the value of such Purchased Assets, materially
interfere with any present use of any such Purchased Assets or materially
adversely affect the marketability of such Purchased Assets (other than those
developments as may be deemed to have occurred by virtue of business and
economic conditions in general and those relating generally to the sulphur
mining and marketing business).
(h) Pennzoil has delivered or made available to FRP, true and
complete copies of all records, title policies and reports, leases, contracts
and other materials relating to the Real Property and Mineral Interests.
(i) (i) In this Subsection 3.8(i), "Mineral Interest" refers
only to the Culberson Unit Agreement and each Mineral Interest described in
items 1-18 (Culberson County, Texas) of Schedule 3.8(b).
(ii) Each Mineral Interest has been maintained in full
force and effect according to its terms. Pennzoil has made or caused to be
made all payments, including royalties, delay rentals and shut-in royalties,
due under each Mineral Interest.
(iii) To the knowledge of Pennzoil, no other party to a
Mineral Interest is in breach or default of any obligation under the Mineral
Interest.
(iv) Except for matters asserted by the General Land Office
in audits of royalty payments to the State of Texas, there has not occurred an
event, fact or circumstance that with the lapse of time or the giving of
notice, or both, would constitute a breach or default of any obligation under
a Mineral Interest by Pennzoil or, to the knowledge of Pennzoil, by any other
party to the Mineral Interest.
(v) Neither Pennzoil nor any other party to a Mineral<PAGE>
Interest described on has given or threatened to give notice of any action to
terminate, cancel, rescind or procure a judicial reformation of the Mineral
Interest or any provision of the Mineral Interest.
(vi) There are no obligations under a Mineral Interest to
engage in continuous development operations to maintain the Mineral Interest
in full force and effect.
(vii) There are no provisions in a Mineral Interest or other
applicable instrument or agreement that increases the royalty share of the
lessor under that Mineral Interest.
(viii) Except for matters asserted by the General Land Office in
audits of royalty payments to the State of Texas, no provision in any Mineral
Interest (other than a provision allowing a lessor to take Minerals in kind)
requires the payment of a royalty or other Production Burden on any basis
other than the basis of the proceeds actually received by Pennzoil from the
sale or other disposition of the Minerals.
(ix) Pennzoil is not obligated by (A) any prepayment
arrangement, (B) a "take-or-pay" provision or other similar provision, (C) a
production payment, (D) a minerals "balancing" agreement, or (E) any other
arrangements to deliver Minerals produced from the Mineral Interests described
on at some future time without then or thereafter receiving full payment for
the Minerals.
(x) Payments for Minerals sold under each Material Contract
are current (subject to adjustment in accordance with the Material Contracts)
and in accordance with the prices set forth in the Material Contracts.
(xi) All wells drilled and completed on the Culberson Unit
have been drilled and completed within the boundaries of the applicable
Mineral Interests or within the limits otherwise permitted by contract, by
pooling or unit agreement or by law.
3.9 Sufficiency of the Purchased Assets. The Purchased Assets
constitute, and on the Closing Date will constitute, all of the assets or
property (other than Excluded Assets) used or held for use in the Business.
3.10 No Undisclosed Liabilities. Other than liabilities disclosed
on Schedule 3.10, there are no liabilities of the Business (other than
Excluded Liabilities) of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, actual or potential, known or
unknown, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, and which,
in any such case, could be asserted against FRP or the Purchased Assets other
than liabilities provided for in the Balance Sheet or disclosed in the notes
thereto.
3.11 Litigation. Except as set forth on Schedule 3.11 there is no
action, suit, investigation or proceeding pending against, or to the knowledge
of Pennzoil, threatened against or affecting, the Business or any Purchased
Asset before any arbitrator or Governmental Authority which, if determined or
resolved adversely in accordance with the plaintiff's demands, would<PAGE>
reasonably be expected to have a Material Adverse Effect or which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated hereby.
3.12 Material Contracts. (a) Except for the Contracts disclosed
in Schedule 3.12(a) with respect to the Business (other than the Excluded
Assets), Pennzoil is not a party to or bound by:
(i) any lease of personal property providing for annual rentals
of $100,000 or more;
(ii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets providing for either (A)
annual payments by Pennzoil of $100,000 or more or (B) aggregate
payments by Pennzoil of $500,000 or more;
(iii) any agreement with reference to all or a substantial portion
of the output of a plant, a mine or other production facility or all or
a substantial portion of all requirements of a customer of Pennzoil or
of Pennzoil or to any other Person providing for annual payments that
exceed $1,000,000 or more or extending beyond two years;
(iv) any sales, distribution or other similar agreement providing
for the sale by Pennzoil of materials, supplies, goods, services,
equipment or other assets that provides for either (A) annual payments
to Pennzoil of $100,000 or more or (B) aggregate payments to Pennzoil of
$500,000 or more;
(v) any partnership, tax partnership, joint venture or other
similar agreement or arrangement;
(vi) any option agreement, license agreement, franchise, or
agreement in respect of similar rights granted or held by Pennzoil;
(vii) any agency, dealer, sales representative, marketing or other
similar agreement providing for annual payments of $100,000 or more;
(viii) any agreement that limits the freedom of Pennzoil to compete
in any aspect of the sulphur business or with any Person or in any area
or to own, operate, sell, transfer, pledge or otherwise dispose of or
encumber any Purchased Asset or which would so limit the freedom of FRP
after the Closing Date;
(ix) any agreement (other than an Excluded Asset) with or for the
benefit of any Affiliate of Pennzoil;
(x) any labor union contract;
(xi) any agreement (other than an Excluded Asset) with respect to
property, casualty or other forms of insurance; or
(xii) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business which is material to the
Business (other than the Excluded Assets) taken as a whole.<PAGE>
(b) Each Contract disclosed in any schedule to this Agreement or
required to be disclosed pursuant to this Section 3.12 is a valid and binding
agreement of Pennzoil and is in full force and effect, and neither Pennzoil
nor, to the knowledge of Pennzoil, any other party thereto is in default or
breach in any material respect under the terms of any such Contract, nor, to
the knowledge of Pennzoil, has any event or circumstance occurred that, with
notice or lapse of time or both, would constitute any event of default
thereunder. True and complete copies of each such contract have been
delivered to FRP.
(c) Pennzoil's net per ton cost of transportation for sulphur
(excluding rail car costs) from the Culberson Facility under its agreement
with the Santa Fe Railway Company currently does not exceed $20.00 per ton.
This freight cost is subject to annual escalation and is subject to adjustment
when the Tampa price exceeds $92.00 per ton.
3.13 Licenses and Permits. Schedule 3.13 correctly describes each
license, franchise, permit or other similar authorization affecting, or
relating in any way to, the Business insofar as it relates to the Purchased
Assets (including Environmental Permits), together with the name of the
Governmental Authority issuing such license or permit (the "Permits"). Except
as set forth on Schedule 3.13, such Permits are valid and in full force and
effect.
3.14 Insurance Coverage. There is no claim by Pennzoil relating
to the Business pending under any of its insurance policies or fidelity bonds
as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights. All premiums payable under all such
policies and bonds have been timely paid and Pennzoil has otherwise complied
fully with the terms and conditions of all such policies and bonds. Such
policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since October
1989 and remain in full force and effect. Such policies and bonds are of the
type and in amounts customarily carried by Persons conducting businesses
similar to the Business. Except as disclosed in Schedule 3.14, after the
Closing Pennzoil shall continue to have coverage under such policies and bonds
with respect to events occurring prior to Closing.
3.15 Compliance with Laws and Court Orders. Pennzoil is not in
violation of, has not since January 1, 1991 violated, and to Pennzoil's
knowledge is not under investigation with respect to or has not been
threatened to be charged with or given notice of any violation of, any Law
(including without limitation any Law relating to zoning, city planning or
similar matters) applicable to the Purchased Assets or the conduct of the
Business, except for violations that have not had and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
and except for environmental matters, which are addressed in Section 3.20.
3.16 Inventories. The inventories set forth in the Balance Sheet
were properly stated therein in accordance with accounting principles
consistently maintained and applied by Pennzoil. Since the Balance Sheet
Date, the inventories of the Business have been maintained in the ordinary
course of business. All such inventories are owned free and clear of all<PAGE>
Liens. All of the inventory recorded on the Balance Sheet consists of, and
all inventory related to the Business on the Closing Date will consist of,
items of a quality usable or saleable in the normal course of the Business
consistent with past practices and are and will be in quantities sufficient
for the normal operation of the Business in accordance with past practice.
3.17 Intellectual Property. (a) Schedule 3.17(a) sets forth a
list of all patents, patent applications, and registered marks specifying as
to each, as applicable: (i) the nature of such Intellectual Property Right;
(ii) the owner of such Intellectual Property Right; (iii) the jurisdictions by
or in which such Intellectual Property Right is recognized without regard to
registration or has been issued or registered or in which an application for
such issuance or registration has been filed, including the respective
registration or application numbers; and (iv) material licenses, sublicenses
and other agreements as to which Pennzoil or any of its Affiliates is a party
and pursuant to which any Person is authorized to use such Intellectual
Property Right, including the identity of all parties thereto, a description
of the nature and subject matter thereof, the applicable royalty and the term
thereof. Schedule 3.17(a) is an accurate and complete list of all patents,
patent applications, and registered marks used by Pennzoil in the operation or
conduct of the Business as currently or heretofore conducted.
(b)(i) Except as set forth in Section 3.17, Pennzoil has not,
during the three years preceding the date of this Agreement, been sued or
charged in writing with or been a defendant in any claim, suit, action or
proceeding relating to the Business that has not been finally terminated prior
to the date hereof and that involves a claim of infringement of any patents,
trademarks, service marks or copyrights, and (ii) Pennzoil has no knowledge of
any other and no knowledge of any continuing infringement by any other Person
of any Intellectual Property Rights. No Intellectual Property Right is
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by Pennzoil with respect to the Business or
restricting the licensing thereof by Pennzoil to any Person. Pennzoil has not
entered into any agreement to indemnify any other Person against any charge of
infringement of any patent, trademark, service mark or copyright.
3.18 Employees. Pennzoil has previously provided to FRP a true
and complete list of the names, titles, annual salaries or wage rates of all
employees of the Business.
3.19 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Pennzoil who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
3.20 Environmental Matters. (a) Except as disclosed on Schedule
3.20(a):
(i) in connection with or relating to the Purchased Assets or
the Business within the preceding five years, no written notice,
notification, demand, request for information, citation, summons,
complaint or order has been issued, no written complaint has been filed,
no penalty has been assessed and no investigation or review is pending
or, to the best knowledge of Pennzoil, threatened by any Governmental<PAGE>
Authority or other Person with respect to any (A) alleged violation of
any Environmental Law or liability thereunder, (B) alleged failure to
have any Environmental Permit, (C) Regulated Environmental Activity or
(D) Release of Hazardous Substances;
(ii) the Purchased Assets are in compliance with all
Environmental Laws and all Environmental Permits required for operations
have been obtained;
(iii) other than in compliance with Environmental Laws or
Environmental Permits, no polychlorinated biphenyls, radioactive
materials (including naturally occurring radioactive materials and
sealed radioactive sources), urea formaldehyde, lead, asbestos,
asbestos-containing material or underground storage tank (active or
abandoned) is or has been present within the past five years on, at or
under any Purchased Asset;
(iv) there has been no material Release of any Hazardous
Substance within the past five years (and no notification of such
Release has been filed or made within the past five years) at, on or
under any Purchased Asset;
(v) none of the Purchased Assets is listed or proposed for
listing, on the National Priorities List promulgated pursuant to CERCLA,
on CERCLIS (as defined in CERCLA) or on any similar federal or state
list of sites requiring investigation or clean-up;
(vi) Neither Pennzoil nor its former subsidiary Pennzoil Sulphur
Company has placed any Hazardous Substance, other than Hazardous
Substances ordinarily associated with water treatment processes, in (A)
the sludge lagoon, (B) the sanitary lagoons or (C) the salt mixing pit,
in each case at the Culberson Facility; and
(vii) there are no liens under Environmental Laws on any of the
Purchased Assets, no government actions have been taken or, to the
knowledge of Pennzoil, are in process, which could subject any of such
Purchased Assets to such liens, and Pennzoil would not be required to
place any notice or restriction relating to Hazardous Substances at any
Real Property owned by it in any deed to such property.
(b) With respect to the Business, there has been no
Environmental Investigation or Audit which Pennzoil has in its possession in
relation to any Purchased Asset which has not been delivered to FRP at least
two days prior to the date hereof other than an environmental audit of the
Tampa Facility which is in the process of being finalized.
3.21 Customers and Suppliers. Except as set forth on Schedule
3.21, Pennzoil is not engaged in any material disputes with any customers or
suppliers of the Business, and to the best of its knowledge, no customer or
supplier representing revenues or expenses in excess of $250,000 per year has
indicated that it intends to terminate, not renew or adversely modify its
arrangements with Pennzoil in relation to the Business.
3.22 Books and Records. The Books and Records (true and complete<PAGE>
copies of which have been made available to FRP) are accurate and complete in
all material respects.
3.23 Representations Cumulative. The representations and
warranties of Pennzoil in this Agreement are cumulative and independent of,
and not limited by, any covenants, representations and warranties in any
agreement or document (including any conveyance document) contemplated hereby
and the covenants, representations and warranties contained herein shall not
be deemed to be merged into any such agreement or document.
3.24 Scope of Representations of Pennzoil. Except as and to the
extent set forth in this Article 3, Pennzoil makes no representations or
warranties whatsoever, and disclaims all liability and responsibility for any
representation, warranty, statement or information made or communicated
(orally or in writing) to FRP (including, but not limited to, any opinion,
information or advice that may have been provided to FRP by any officer,
stockholder, director, employee, agent, consultant or representative of
Pennzoil, Pennzoil's counsel or any other agent, consultant or
representative). Without limiting the generality of the foregoing, except as
and to the extent expressly set forth in this Article 3, Pennzoil makes no
representations or warranties as to (a) the title to any of the properties of
the Business, (b) the amounts of sulphur reserves attributable to such
properties or (c) any geological or other interpretations or economic
evaluations.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF FRP
FRP represents and warrants to Pennzoil as of the date hereof and
as of the Closing Date that:
4.1 Organization and Existence. FRP is a limited partnership
duly organized, validly existing and in good standing under the laws of
Delaware, which has all powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
4.2 Authorization. The execution, delivery and performance by
FRP of this Agreement are within FRP's powers and have been duly authorized by
all necessary action on the part of FRP. This Agreement constitutes a valid
and binding agreement of FRP, enforceable against FRP in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting enforcement of creditors'
rights generally and except as enforcement hereof is subject to general
principles of equity (regardless of whether such enforcement is considered in
a proceeding in equity or at law).
4.3 Governmental Authorization. The execution, delivery and
performance by FRP of this Agreement require no action by or in respect of, or
filing with, any Governmental Authority other than (i) compliance with any
applicable requirements of the HSR Act; and (ii) compliance with any
applicable requirements of the 1934 Act.<PAGE>
4.4 Non-Contravention. The execution, delivery and performance
by FRP of this Agreement, do not and will not (i) contravene or conflict with
the partnership agreement of FRP, (ii) assuming compliance with the matters
referred to in Section 4.3, violate any applicable Law or (iii) assuming the
obtaining of all Required Consents, constitute a default under or give rise to
any right of termination, cancellation or acceleration of a Debt of FRP.
4.5 Required Consents. Schedule 4.5 sets forth each agreement,
contract or other instrument binding upon FRP or any Permit requiring a
consent as a result of the execution, delivery and performance of this
Agreement.
4.6 Financial Statements. The balance sheet (the "FRP Balance
Sheet") and the related audited statements of operations for FRP for the years
ended December 31, 1993, 1992 and 1991, the unaudited interim balance sheet
June 30, 1994 and the related unaudited interim statement of operations and
cash flow for the six months ended June 30, 1994, fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
financial position of FRP taken as a whole as of the dates thereof and its
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements).
4.7 Absence of Certain Changes. Since the date of the FRP
Balance Sheet, FRP's business has been conducted in the ordinary course
consistent with past practices, and there has not been any event, occurrence,
development or state of circumstances or facts which has had or could
reasonably be expected to have a material adverse effect on the ability of FRP
to fulfill its obligations under this Agreement.
4.8 Litigation. There is no action, suit, investigation or
proceeding pending against, or, to the knowledge of FRP, threatened against or
affecting FRP before any court or arbitrator or any Governmental Authority
which, if determined or resolved adversely in accordance with the plaintiff's
demands, would reasonably be expected to have a material adverse effect on the
ability of FRP to fulfill its obligations under this Agreement or which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated hereby.
4.9 Compliance with Laws and Court Orders. FRP is not in
violation of, has not since January 1, 1991 violated, and to FRP's knowledge
is not under investigation with respect to or has not been threatened to be
charged with or given notice of any violation of, any Law, except for
violations that have not had and could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the ability of
FRP to fulfill its obligations under this Agreement.
4.10 Main Pass Production Cost. The average per ton cash cost of
Main Pass Sulphur Production FOB Tampa Terminal from January 1, 1994 through
August 31, 1994, determined in accordance with FRP's normal accounting
practices and policies which are consistent with generally accepted accounting
principles, is not less than $44.11.<PAGE>
4.11 Representations Cumulative. The representations and
warranties of FRP in this Agreement are cumulative and independent of, and not
limited by, any covenants, representations and warranties in any agreement or
document (including any conveyance document) contemplated hereby and the
covenants, representations and warranties contained herein shall not be deemed
to be merged into any such agreement or document.
4.12 Scope of Representations of FRP. Except as and to the
extent set forth in this Article 4, FRP makes no representations or warranties
whatsoever, and disclaims all liability and responsibility for any
representation, warranty, statement or information made or communicated
(orally or in writing) to Pennzoil (including, but not limited to, any
opinion, information or advice that may have been provided to Pennzoil by any
officer, stockholder, director, employee, agent, consultant or representative
of FRP or its managing general partner, Freeport-McMoRan Inc., FRP's counsel
or any other agent, consultant or representative).
ARTICLE 5
COVENANTS OF PENNZOIL
Pennzoil agrees that:
5.1 Conduct of the Business. (a) From the date hereof until the
Closing Date or the earlier termination of this Agreement, Pennzoil shall
(except as otherwise provided in this Agreement or as FRP may consent in
writing) conduct the Business in the ordinary course of business consistent
with past practice and shall use its commercially reasonable efforts to, in
connection with the Business:
(i) preserve intact its business organization and relationships
with third parties, provided that FRP shall be consulted in the closing
of contracts for fourth quarter business;
(ii) keep available the services of the present employees of the
Business;
(iii) continue making marketing, advertising, promotional, and
other similar expenditures in the ordinary course of business consistent
with past practice;
(iv) duly comply in all material respects with all Laws,
including without limitation all Environmental Laws, applicable to the
Business;
(v) maintain all of the Books and Records in the ordinary course
of business consistent with past practice;
(vi) continue the maintenance and repair of the Purchased Assets
and the Business (including the making of scheduled capital expenditures
and the plugging and abandonment of sulphur wells but excluding any
budgeted tank repairs) in the ordinary course of business consistent
with past practice;<PAGE>
(vii) maintain in effect insurance with respect to the Purchased
Assets related to the Business in the ordinary course of business and
against risks, with carriers and in amounts (including deductibles)
consistent with past practice;
(viii) maintain material and supply inventory and equipment
primarily related to the Business at levels consistent with recent past
practice;
(ix) comply in all material respects with all material Contracts
to which it is a party; and
(x) maintain the Culberson Unit Agreement and the Mineral
Interests described in items 1-18 (Culberson County, Texas) on Schedule
3.8(b) in full force and effect and pay all Production Burdens and
perform all obligations on and under the Culberson Unit Agreement and
such Mineral Interests.
(b) Without limiting the generality of the foregoing, without
the prior written consent of FRP, from the date hereof until the Closing Date
or the earlier termination of this Agreement, Pennzoil will not:
(i) merge or consolidate with any other Person;
(ii) acquire from any other Person, other than in the ordinary
course of business, assets relating to the Business having a fair market
value in excess of an aggregate of $500,000;
(iii) sell, lease, license, pledge or otherwise dispose of any
Purchased Assets except (A) pursuant to existing contracts or
commitments and (B) in the ordinary course of business consistent with
past practice;
(iv) create or suffer to exist any new Lien or encumbrance on any
of the Purchased Assets, other than Permitted Liens;
(v) enter into any material contract or agreement that would be
an Assumed Liability except in the ordinary course of business
consistent with past practice;
(vi) except in the ordinary course of business consistent with
past practice, accept, receive or allow any customer to make any
prepayment related to the Business or the Purchased Assets;
(vii) except in the ordinary course of business consistent with
past practice, waive or release any right of value relating to the
Purchased Assets or the Business;
(viii) permit the Culberson Unit Agreement or any Mineral Interest
described in items 1-18 (Culberson County, Texas) on Schedule 3.8(b) to
expire or terminate;
(ix) settle any court proceedings or other dispute with the State
of Texas for royalties owed where the terms of such settlement would<PAGE>
increase the future royalty obligations of Pennzoil unless Pennzoil has
received the prior approval of FRP;
(x) take any action that would make any representation and
warranty of Pennzoil hereunder inaccurate in any respect at, or as of
any time prior to, Closing Date or omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any
respect at any such time; or
(xi) agree or commit to do any of the foregoing.
5.2 Confidentiality. Pennzoil and its Affiliates will hold, and
will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Business or FRP furnished to Pennzoil or its Affiliates in
connection with the transactions contemplated by this Agreement, except to the
extent that such information can be shown to have been (i) previously known on
a nonconfidential basis by Pennzoil, (ii) in the public domain through no
fault of Pennzoil or (iii) later lawfully acquired by Pennzoil from sources
other than FRP; provided that Pennzoil may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors
and agents in connection with the transactions contemplated by this Agreement
so long as such Persons are informed by Pennzoil of the confidential nature of
such information and are directed by Pennzoil to treat such information
confidentially. Without limiting the foregoing, Pennzoil will enter into
confidentiality agreements with its officers, directors and employees pursuant
to which such officers, directors and employees will agree to comply with the
foregoing confidentiality obligations. The obligations in this Section 5.2
shall continue upon any termination of this Agreement. If this Agreement is
terminated, Pennzoil and its Affiliates will, and will use their best efforts
to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to FRP, upon
request, all documents and other materials, and all copies thereof, obtained
by Pennzoil or its Affiliates or on their behalf from FRP in connection with
this Agreement that are subject to such confidence.
5.3 Access to Information. (a) From the date hereof until the
Closing Date (or, in the case of information relating to Other Sulphur
Properties, until the date six months after the Closing Date), Pennzoil (i)
will give FRP, its counsel, financial advisors, auditors and other authorized
representatives full access during normal business hours to the offices,
properties, books and records of Pennzoil relating to the Business, (ii) will
furnish to FRP, its counsel, financial advisors, auditors and other authorized
representatives such financial, exploration and operating data and other
information relating to the Business as such Persons may reasonably request
and (iii) will instruct the employees, counsel and financial advisors of
Pennzoil to cooperate with FRP in its investigation of the Business; provided
that no investigation by FRP or other information received by FRP shall
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by Pennzoil hereunder. Any investigation pursuant to
this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Pennzoil. <PAGE>
(b) From the date hereof until the Closing Date, Pennzoil will
furnish to FRP, (i) within 30 days after the end of each fiscal quarter, the
unaudited interim balance sheet for the Business and the related unaudited
interim statements of income and cash flows for the Business for that quarter
and (ii) within 45 days after the end of a fiscal year, the audited balance
sheet for the Business and the related audited statements of income and cash
flow for that fiscal year.
(c) No later than 45 days after the date of this Agreement,
Pennzoil will cause the balance sheet for the Purchased Assets and Assumed
Liabilities as of December 31, 1993 and the related statement of operations
and cash flows for the twelve months then ended to be audited by its
independent public accountants and will cause such audited statements to be
delivered to FRP. FRP will bear the reasonable expense of the independent
public accountants.
5.4 Notices of Certain Events. Pennzoil shall promptly notify
FRP of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or
involving or otherwise affecting Pennzoil or the Business that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.11 or that relate to the
consummation of the transactions contemplated by this Agreement; and
(iv) the damage or destruction by fire or other casualty of any
Purchased Asset or part thereof or in the event that any Purchased Asset
or part thereof becomes the subject of any proceeding or, to the
knowledge of Pennzoil, threatened proceeding for the taking thereof or
any part thereof or any right relating thereto by condemnation, eminent
domain or other similar governmental action.
5.5 Noncompetition. (a) Pennzoil agrees that for a period of
five full years from the Closing Date, neither it nor any of its Affiliates
shall engage, either directly or indirectly, as a principal or for its own
account or solely or jointly with others, or as stockholders in any
corporation or joint stock association, in any business that competes with the
Business anywhere in the Western Hemisphere; provided that nothing herein
shall prohibit (i) the acquisition by Pennzoil or any of its Affiliates of a
business (including any interest in an oil or natural gas field) which is
predominantly engaged in a business other than the production or marketing of
sulphur, (ii) Pennzoil's conduct of operations at its facilities in Antwerp so
long as sales from such operations are not made in the North American market,
(iii) the sale of sulphur recovered by Pennzoil from the refining of oil and
natural gas at facilities owned by it or any Affiliate and (iv) the conduct of<PAGE>
the Business at any time on or after the date that Pennzoil takes title to the
Purchased Assets pursuant to the exercise of remedies under the Deed of Trust;
provided that, in the case of Section 5.5(a)(i) or Section 5.5(a)(iii) if more
than 20% of the sales of any business which Pennzoil or its Affiliates owns or
proposes to acquire are attributable to sulphur sales, Pennzoil provides FRP
with the opportunity to negotiate on a good faith basis and on reasonable
commercial terms for FRP to act as Pennzoil's exclusive marketing agent for
the sale of any sulphur produced by the operations of such business.
(b) If any provision contained in this Section shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section, but this Section shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
It is the intention of the parties that if any of the restrictions or
covenants contained herein is held to cover a geographic area or to be for a
length of time which is not permitted by applicable law, or in any way
construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such
provision would be valid or enforceable under applicable law, a court of
competent jurisdiction shall construe and interpret or reform this Section to
provide for a covenant having the maximum enforceable geographic area, time
period and other provisions (not greater than those contained herein) as shall
be valid and enforceable under such applicable law. Pennzoil acknowledges
that FRP would be irreparably harmed by any breach of this Section and that
there would be no adequate remedy at law or in damages to compensate FRP for
any such breach. Pennzoil agrees that FRP shall be entitled to injunctive
relief requiring specific performance by Pennzoil of this Section, and
Pennzoil consents to the entry thereof.
5.6 Trademarks; Trade Names. (a) Except as set forth in the
other subsections of this Section 5.6, after the Closing, FRP and its
affiliates shall not use the name "Pennzoil" or "Duval" or any tradename
incorporating the name "Pennzoil" or "Duval"; provided that FRP will have full
and unrestricted rights with respect to the "alchemist" symbol used in
connection with the Pennzoil Sulphur Company logo. The name "Pennzoil" and
"Duval" and any tradename incorporating the name "Pennzoil" or "Duval" shall
be referred to, collectively or individually as the context requires, as the
"Pennzoil Trade Names".
(b) After the Closing, FRP shall have the right to sell existing
inventory and to use existing packaging, labelling, containers, supplies,
advertising materials, brochures, technical data sheets and any similar
materials bearing any Pennzoil Trade Name until the earlier of (i) six months
after the Closing Date and (ii) the date existing stocks are exhausted.
(c) FRP agrees to discontinue the use of the Pennzoil Trade Name
on buildings, cars, trucks and other fixed assets as soon as practicable after
the Closing and in no event later than six months after the Closing.
5.7 Environmental Obligations. In addition to Pennzoil's
obligations under this Agreement as to Environmental Liabilities generally,
with respect to those environmental conditions specifically set forth in this
Section 5.7, it is understood and agreed that:<PAGE>
(a) Pennzoil shall be responsible for any and all costs and
expenses incurred in connection with any investigation, assessment,
testing, clean-up, remediation, removal, containment, disposal,
treatment or monitoring, including any costs for capital expenditures
associated therewith (the "Remedial Activities"), in connection with the
following:
(i) the scrap sulphur located at the Michigan Vent area at
the Culberson Facility, provided however that Pennzoil shall have
no environmental obligations if FRP disposes of sulphur materials
at such area after the Closing Date;
(ii) the solid waste landfill located on property owned by
the State of Texas adjacent to the Culberson Facility;
(iii) compliance with any future National Pollutant Discharge
Elimination System permit limitations on copper in stormwater at
the Galveston Facility resulting from elevated concentrations of
copper in existence as of the Closing Date; and
(iv) any barium, radium or gross alpha contamination at the
Tampa Facility.
(Sections 5.7(a)(i) to 5.7(a)(iv), the "Known Remedial Conditions").
(b) Pennzoil shall be responsible for any and all liabilities
associated with:
(x) any stormwater runoff and wastewater within or adjacent to
the vat sulphur storage area at the Galveston Facility and any sludge
that is generated through the treatment of such waters (the "Generated
Materials"); and
(y) the operation of the vat sulphur storage area and the
adjacent vat drainage collection and treatment system (the "Storage
Area"; collectively with the Generated Materials, the "Galveston
Environmental Operations");
arising under the Resource Conservation and Recovery Act as in effect on the
Closing Date (including any rules and regulations promulgated thereunder as of
such date) ("RCRA"), provided that the parties agree as follows:
(i) If the Generated Materials and the Galveston Environmental
Operations are in compliance with RCRA, as of the Closing Date, and a
change in the operation of the Storage Area by FRP after the Closing
Date as compared with the operation of such area by Pennzoil prior to
the Closing Date results in noncompliance with RCRA, FRP will be
responsible for any liabilities associated with such noncompliance.
(ii) FRP shall be responsible for payment of operating costs
after the Closing Date in connection with the Galveston Environmental
Operations as part of the Assumed Liabilities, provided that to the
extent such costs are greater than the historical operating costs of
Pennzoil in connection with the Galveston Environmental Operations for<PAGE>
the two years prior to the date hereof, Pennzoil shall be responsible
for any such increased amounts.
(iii) If, as of the Closing Date, the Galveston Environmental
Operations are not in compliance with RCRA and Pennzoil's obligations
pursuant to this Section 5.7(b) are increased as a result of the
operation of the Storage Area by FRP after the Closing Date in a manner
that is not substantially similar to the operation of the Storage Area
by Pennzoil prior to the Closing Date, FRP shall be responsible for the
amount by which such obligations have been increased.
(iv) FRP shall, within a reasonable time period after the
Closing Date, conduct a compliance review of the Galveston Environmental
Operations. If, after conducting such review, FRP determines that the
Generated Materials or the Galveston Environmental Operations are not in
compliance with RCRA, then FRP will consult and cooperate with Pennzoil
(in coordination with governmental agencies and personnel) in good faith
to resolve the problem in a mutually satisfactory and cost effective
manner consistent with prudent business practices. If, after such
consultations, FRP reasonably determines that expenditures are necessary
in order for the Galveston Environmental Operations to be in compliance
with RCRA, FRP shall, after consultation with Pennzoil and taking into
account the cost effectiveness of any proposed solution, perform any
appropriate measures (including without limitation any Remedial
Activities and any necessary construction or installation of control
equipment) to put the Generated Materials and the Galveston
Environmental Operations into compliance with RCRA, and Pennzoil shall
reimburse FRP for such expenditures up to a maximum of $2,000,000
promptly upon submission of invoices and any other supporting
documentation that Pennzoil may reasonably request. If the measures
performed by FRP require expenditures in excess of $2,000,000, the
parties shall split such costs equally and Pennzoil shall reimburse FRP
for Pennzoil's share promptly upon the submission of the documentation
identified in the preceding sentence.
(v) If the Generated Materials and the Galveston Environmental
Operations remain in compliance with RCRA three years after completion
of all appropriate measures, if any are required, in accordance with the
provisions of Section 5.7(b)(iv), Pennzoil shall have no further
liability in connection with noncompliance with RCRA at the Galveston
Environmental Operations.
(vi) To the extent any fines or penalties are imposed on FRP or
its Affiliates after the Closing Date in connection with any
noncompliance with RCRA of the Galveston Environmental Operations at the
time of Closing, notwithstanding anything herein to the contrary,
Pennzoil shall be responsible for all such fines or penalties and no
such fines or penalties shall be included in the cost allocation
described in Section 5.7(b)(iv).
(vii) As used herein, the term "in compliance with RCRA" means
that (A) the Generated Materials are not a "hazardous waste" pursuant to
RCRA, (B) the Galveston Environmental Operations are exempt from RCRA
permitting requirements, regardless of whether the Generated Materials<PAGE>
are a "hazardous waste" pursuant to RCRA or (C) the Galveston
Environmental Operations and the Generated Materials are otherwise in
compliance with RCRA (including RCRA permitting requirements).
(c) With respect to Known Remedial Conditions and any other
environmental condition forming the basis for a claim for indemnification
pursuant to Section 11.2(a)(iv), FRP shall notify Pennzoil of the assertion of
any such claim. Other than in connection with conditions identified in
Section 5.7(b), Pennzoil shall have the right to conduct Remedial Activities
itself or reimburse FRP for performing such Remedial Activities and Pennzoil
shall provide FRP with prompt notification of any such decision.
(d) If Pennzoil elects to perform any such Remedial Activities,
Pennzoil shall implement such Remedial Activities in a timely fashion and in
accordance with applicable Environmental Laws. FRP agrees to provide Pennzoil
with access to the facility at which such Remedial Activities are to be
conducted, and shall cooperate with Pennzoil and Pennzoil's agents in the
performance of any such Remedial Activities, provided that Pennzoil shall not
unreasonably interfere with the operation of FRP's business at such facility
and shall use its best efforts to minimize impairment to the value of FRP's
property. Pennzoil agrees to (i) prepare any necessary or appropriate
remedial plans and afford FRP a reasonable opportunity to review such plans
prior to their completion and, prior to the finalization of any such plan,
consider FRP's comments and suggestions in good faith, (ii) furnish FRP with
copies of any test results, environmental reports and investigations and
correspondence between Pennzoil and the applicable Governmental Authorities
and (iii) indemnify FRP and its Affiliates against (A) any and all fines or
penalties; (B) any damage to property; and (C) any claims, actions, suits and
other proceedings, damages, liabilities, costs and expenses sought by any
third party (whether or not an agent or employee of Pennzoil), in each case as
a result of the activities of Pennzoil, its agents or its contractors in
managing, controlling or implementing any Remedial Activities.
(e) If Pennzoil elects not to perform any such Remedial
Activities, FRP shall perform or cause to be performed such Remedial
Activities in a timely fashion and in accordance with applicable Environmental
Laws. FRP agrees to (i) prepare any necessary or appropriate remedial plans
(taking into account the cost effectiveness of any proposed remedy or remedial
activity) and afford Pennzoil a reasonable opportunity to review such plans
prior to their completion, and, prior to the finalization of any such plan,
consider FRP's comments and suggestions in good faith and (ii) furnish
Pennzoil with copies of any test results, environmental reports and
investigations and correspondence between FRP and the applicable Governmental
Authorities. Pennzoil shall reimburse FRP for all reasonable costs and
expenses actually incurred by FRP or its Affiliates in connection with the
performance of such Remedial Activities promptly upon the submission of
invoices and any other supporting documentation that Pennzoil may reasonably
request.
(f) Notwithstanding anything in this Agreement to the contrary,
Pennzoil shall not be responsible for performing any Remedial Activities or
reimbursing or indemnifying FRP or its Affiliates for any Remedial Activities
unless Pennzoil or FRP or its Affiliates is required to perform such Remedial
Activities (i) pursuant to any Environmental Law or (ii) by any Governmental<PAGE>
Authority (other than Remedial Activities in connection with Section 5.7(b),
as to which this Section 5.7(f) shall not apply).
5.8 Damage, Destruction or Condemnation. If prior to the Closing
there occurs any damage to or destruction of any Purchased Asset or part
thereof by fire or other casualty or any taking of any Purchased Asset or part
thereof or right relating thereto by condemnation, eminent domain or other
similar governmental action, Pennzoil and FRP agree, in addition to any other
rights that either party may have under this Agreement, that:
(a) all condemnation awards or similar payments relating to any
such taking and any and all rights thereto shall constitute part of the
Purchased Assets and shall be transferred to FRP pursuant to this
Agreement; and
(b) subject to the provisions in Section 12.1(d), in the event
of any such fire or other casualty, Pennzoil shall be obligated at its
sole cost and expense, (i) and as promptly as reasonably practicable, to
repair or replace the damaged or destroyed Purchased Assets to restore
them to the condition they were in prior to the damage or destruction or
(ii) if the parties agree, which agreement shall not be unreasonably
withheld, to provide at Closing in immediately available funds an amount
sufficient to enable FRP to carry out the repair or replacement, in
either case whether or not any insurance proceeds relating to such
damage or destruction are received by Pennzoil, and whether or not any
such insurance proceeds received by Pennzoil are sufficient for such
purpose. Pennzoil shall be entitled to retain any insurance proceeds
relating to any such damage or destruction to pay for the cost of such
restoration. Pennzoil shall cause such restoration to be completed
promptly, but in no event later than 90 days after the applicable
casualty event, shall pay the entire cost of such restoration, and shall
cause any and all mechanics', materialmen's and other liens relating
thereto to be paid and discharged the record promptly, but in no event
less than 20 days after the completion of such restoration. Pennzoil
agrees that its obligation under this Section 5.8 to repair or replace
any Purchased Asset shall continue after the Closing (and Pennzoil shall
be responsible for obtaining and maintaining insurance in amounts and
covering risks that Pennzoil customarily obtains) for all Purchased
Assets (including inventory and transportation equipment such as rail
cars, barges, tankers, marine vessels, trucks and other vehicles) that
are in transit or in the process of being transported on the Closing
Date, in each case until such Purchased Assets reach their appointed
destinations.
5.9 Gas Supply. Pennzoil agrees to supply to FRP upon FRP's
request for use at the Culberson Facility all or any portion of the natural
gas that is the subject of a gas purchase contract with Texaco Inc., dated
July 11, 1984 (relating to the D.C. Ponder Gas Unit and the Williams Gas Unit
located in Ward County, Texas). Pennzoil agrees to charge FRP the same rate
for the provision of natural gas as is charged by Texaco Inc. under the above
mentioned contract.
5.10 Transition Services Agreement. Pennzoil agrees to continue
to operate the Purchased Assets in accordance with and pursuant to the
Transition Services Agreement.<PAGE>
ARTICLE 6
COVENANTS OF FRP
FRP agrees that:
6.1 Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, FRP and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Business or Pennzoil furnished to FRP or its Affiliates in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a
nonconfidential basis by FRP, (ii) in the public domain through no fault of
FRP or (iii) later lawfully acquired by FRP from sources other than Pennzoil;
provided that FRP may disclose such information to its officers, directors,
employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement so long as
such Persons are informed by FRP of the confidential nature of such
information and are directed by FRP to treat such information confidentially.
If this Agreement is terminated, FRP and its Affiliates will, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver
to Pennzoil, upon request, all documents and other materials, and all copies
thereof, obtained by FRP or its Affiliates or on their behalf from Pennzoil in
connection with this Agreement that are subject to such confidence.
6.2 Marketing Solid Sulphur. (a) Prior to the Closing, the
parties will retain Saybolt (or, if Saybolt is not available, another
independent surveyor selected by the parties) to conduct a survey of the
amount of solid sulphur inventory above the Base Pad Sulphur at the Galveston
Facility using procedures approved by the parties. The surveyed volume
components will be multiplied by the densities of solid sulphur for each
volume component, as are proposed by the independent surveyor and approved by
the parties, to derive the weight of the solid sulphur. The sum of the
weights of all the component volumes shall be referred to as the "Solid
Sulphur Amount".
(b) The parties agree that an amount of solid sulphur equal to
the Solid Sulphur Amount will be marketed on the following terms:
(i) On or before the date 90 days after the Closing (the "Solid
Sulphur Option Date"), Pennzoil will have the right to sell any amount
of solid sulphur up to the Solid Sulphur Amount outside the United
States. On or before the Solid Sulphur Option Date, Pennzoil will
notify FRP in writing as to the proportion of the Solid Sulphur Amount
with respect to which it has exercised such right, together with the
loading schedule for such solid sulphur. Pennzoil will pay FRP $3.50
per ton for loading the solid sulphur sold by Pennzoil pursuant to this
Section 6.2(b)(i). <PAGE>
(ii) During each of the ten Quarterly Periods beginning with the
first Quarterly Period to commence 90 days after the Solid Sulphur
Option Date, FRP shall purchase solid sulphur equal to one-tenth of the
Solid Sulphur Amount that has not been nominated for sale by Pennzoil as
provided in Section 6.2(a) (the "Purchase Amount"), provided that FRP
will have the right to increase the amount purchased in any Quarterly
Period (A) up to an amount equal to two-tenths of the Solid Sulphur
Amount under the payment conditions set out in Section 6.2(b)(iii) or
(B) above an amount equal to two-tenths of the Solid Sulphur Amount so
long as the parties have agreed upon a price for the amount of sulphur
which is greater than two-tenths of the Solid Sulphur Amount, in either
case with the amount of the increase above the Purchase Amount for such
Quarterly Period being applied to reduce equally the Purchase Amount in
each of the remaining Quarterly Periods.
(iii) On the date 45 days after the end of each of the ten
Quarterly Periods, FRP will pay to Pennzoil an amount equal to the
product of:
(A) the greater of (x) the Purchase Amount for such
Quarterly Period and (y) the amount of solid sulphur that FRP has
elected to purchase pursuant to Section 6.2(b)(ii) and
(B) the Tampa Average Sulphur Price for such Quarterly
Period less $25.00 (or, in the case of sulphur sold as
contemplated by Section 6.2(b)(iii)(B), such other price as the
parties have agreed). Each payment pursuant to this Section 6.2
shall be made in accordance with the requirements of Section 2.7,
and subject to payment of interest on any late payment calculated
as provided therein.
6.3 Prepaid Expenses. No later than 10 days prior to the Closing
Date, Pennzoil will deliver to FRP a schedule of all prepaid expenses
attributable to the Business. Prior to the Closing Date, Pennzoil will
provide FRP with such information as it may reasonably request with respect to
the items listed on that schedule, FRP and Pennzoil will consult in good faith
to resolve any issues raised by FRP as to whether the items listed on that
schedule will be available to FRP after the Closing Date and as to the amount
of such items. On the Closing Date, FRP will pay to Pennzoil, in accordance
with Section 2.7, the amount of all such prepaid expenses that the parties
have agreed will be available to FRP after the Closing.
ARTICLE 7
COVENANTS OF BOTH PARTIES
FRP and Pennzoil agree that:
7.1 Best Efforts; Further Assurances. (a) Subject to the terms
and conditions of this Agreement, FRP and Pennzoil will each use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable Laws to consummate
the transactions contemplated by this Agreement. FRP and Pennzoil each agree<PAGE>
to execute and deliver such other documents, certificates, agreements and
other writings and to take such other actions as may be necessary or desirable
(including without limitation communicating and negotiating with any
appropriate Governmental Authority) in order to consummate or implement
expeditiously the transactions contemplated by this Agreement and to vest in
FRP Good Title to the Purchased Assets. In addition, the parties will fully
cooperate with each other and will use all reasonable efforts to investigate
the transferability of all Permits and to ensure the transfer to FRP of all
transferable Permits. For non-transferable Permits, FRP will use all
reasonable efforts to seek to obtain new Permits.
(b) Pennzoil agrees that, effective as of the Closing Date, FRP
and its successors and assigns shall have the right (i) to collect for the
account of FRP any items of Purchased Assets and (ii) to institute and
prosecute all proceedings which FRP may in its sole discretion deem proper in
order to assert or enforce any right, title or interest in, to or under the
Purchased Assets, and to defend or compromise any and all actions, suits or
proceedings in respect of the Purchased Assets. Pennzoil agrees to cooperate
fully in such efforts. FRP shall be entitled to retain for its own account
any amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
(c) Pennzoil and FRP undertake to make such filings as are
required pursuant to the HSR Act as soon as practicable after the date of this
Agreement.
7.2 Certain Filings. Pennzoil and FRP shall cooperate with one
another (a) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (b) in taking such actions or making any
such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
7.3 Public Announcements. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
as may be required by applicable Law or any listing agreement with any
national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation.
7.4 Proration. (a) All sewer, water, electricity and other
utility charges, rentals (including those under equipment leases), other
contractual payments and like items (including without limitation security
deposits and prepayments, but excluding Taxes, which are addressed in Section
8.3(b) and excluding the royalty obligations which are addressed in Section
7.4(b)) with respect to the Purchased Assets shall be apportioned between
Pennzoil and FRP based on the number of days of the applicable billing period
on or prior to the Closing Date and the number of days of such period after
the Closing Date. Pennzoil shall be liable for the proportionate amount of
such payments and charges that is attributable to the period on or prior to
the Closing Date, and FRP shall be liable for the proportionate amount of such
payments and charges that is attributable to the period after the Closing<PAGE>
Date. Notwithstanding the previous sentence, Pennzoil shall be liable for all
costs associated with inventory in transit at the time of the Closing.
(b) Except as otherwise provided in this Agreement, royalty
obligations with respect to the Purchased Assets shall be apportioned between
Pennzoil and FRP as of the Closing Date. Subject to the provisions of Section
2.3(c), royalty obligations in respect of sulphur production that occurs prior
to the time of Closing shall be Pennzoil's responsibility; any royalty
obligations in respect of sulphur production that occurs after the time of
Closing shall be FRP's responsibility.
(c) With respect to the amounts to be prorated as provided in
Section 7.4(a), Pennzoil shall pay all such amounts as they become due and
shall provide FRP with a statement in reasonable detail showing the amounts
paid and its proration calculation, together with such supporting evidence as
is reasonably necessary to calculate such amounts. FRP shall reimburse
Pennzoil for such amounts in accordance with the terms of the Transition
Services Agreement.
ARTICLE 8
TAX MATTERS
8.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) ending after the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, franchise, capital,
paid-up capital, profits, greenmail, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge or any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by
any governmental authority (domestic or foreign) responsible for the
imposition of any such tax.
8.2 Tax Matters. Pennzoil hereby represents and warrants to FRP
that:
(a) Pennzoil has timely paid all Taxes, and all interest and
penalties due thereon and payable by it for the Pre-Closing Tax Period
which will have been required to be paid on or prior to the Closing
Date, the non-payment of which would result in a Lien on any Purchased
Asset, would otherwise adversely affect the Business or would result in
FRP becoming liable or responsible therefor.<PAGE>
(b) Pennzoil has established, in accordance with generally
accepted accounting principles applied on a basis consistent with that
of preceding periods, adequate reserves for the payment of, and will
timely pay all Tax liabilities, assessments, interest and penalties
which arise from or with respect to the Purchased Assets or the
operation of the Business and are incurred in or attributable to the
Pre-Closing Tax Period, the non-payment of which would result in a Lien
on any Purchased Asset, would otherwise adversely affect the Business or
would result in FRP becoming liable therefor.
8.3 Tax Cooperation: Allocation of Taxes. (a) FRP and Pennzoil
agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information and assistance relating to the
Purchased Assets and the Business as is reasonably necessary for the filing of
all Tax returns, the making of any election related to Taxes, the preparation
for any audit by any taxing authority, and the prosecution or defense of any
claim, suit or proceeding relating to any Tax return. Pennzoil and FRP shall
cooperate with each other in the conduct of any audit or other proceeding
related to Taxes involving the Business and each shall execute and deliver
such powers of attorney and other documents as are necessary to carry out the
intent of this Section 8.3(a).
(b) All real property taxes, personal property taxes and similar
ad valorem obligations levied with respect to the Purchased Assets for a
taxable period which includes (but does not end on) the Closing Date shall be
apportioned between Pennzoil and FRP based on the number of days of such
taxable period included in the Pre-Closing Tax Period and the number of days
of such taxable period included in the Post-Closing Period. Pennzoil shall be
liable for the proportionate amount of such taxes that is attributable to the
Pre-Closing Tax Period, and FRP shall be liable for the proportionate amount
of such taxes that is attributable to the Post-Closing Tax Period.
(c) With respect to the amounts of taxes to be prorated as
provided in Section 8.3(b), Pennzoil shall pay all such amounts as they become
due and shall provide FRP with a statement in reasonable detail showing the
amounts paid and its proration calculation, together with such supporting
evidence as is reasonably necessary to calculate such amounts. FRP shall
reimburse Pennzoil for such amounts in accordance with the terms of the
Transition Services Agreement.
(d) Any transfer, documentary, sales, use or other Taxes
assessed upon or with respect to the transfer of the Purchased Assets to FRP
and any recording or filing fees with respect thereto shall be the
responsibility of Pennzoil.
ARTICLE 9
EMPLOYEE BENEFITS
9.1 Employee Benefits Definitions. The following terms, as used
herein, having the following meanings:
"ERISA" means the Employee Retirement Income Security Act of 1974,<PAGE>
as amended.
"ERISA Affiliate" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.
9.2 ERISA Representations. Pennzoil hereby represents and
warrants to FRP that:
(a) Schedule 9.2(a) lists each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, which (i) is subject to any
provision of ERISA, (ii) is maintained, administered, contributed or has
been contributed to by Pennzoil or any of its Affiliates (as defined
below) and (iii) covers any employee of the Business (hereinafter
referred to collectively as the "Employee Plans"). With respect to each
Employee Plan, Pennzoil has provided a true and complete copy of such
plan document, the most recently filed Form 5500 and an accurate summary
description of such plan. Pennzoil has provided FRP with, or has caused
to be provided to FRP, complete actuarial data (including age, salary,
service and related data) as of the most recent practicable date for
employees of the Business.
(b) Schedule 9.2(b) includes a list of each employment,
severance or other similar contract, arrangement, practice or policy
(written or oral) and each plan or arrangement (written or oral)
providing for group health or other insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an
Employee Plan, (ii) is entered into, maintained or contributed to, as
the case may be, by Pennzoil or any of its Affiliates and (iii) covers
any employee of the Business. Such contracts, plans and arrangements as
are described above, copies or descriptions of all of which have been
made available or furnished previously to FRP are hereinafter referred
to collectively as the "Benefit Arrangements."
(c) Except as disclosed in writing to FRP prior to the date
hereof, there has been no amendment to, written interpretation of or
announcement (whether written or not written) by Pennzoil or any of its
Affiliates relating to, or change in employee participation, benefits or
coverage under, any Employee Plan or Benefit Arrangement which, on a
monthly per employee basis, would increase the expense of maintaining
such Employee Plan or Benefit Arrangement above the level of the expense
incurred, on a monthly per employee basis, in respect thereof for the
most recent prior fiscal year.
(d) The Purchased Assets are not now nor will they after the
passage of time be subject to any Lien imposed under Code Section 412(n)
by reason of the failure of Pennzoil or its Affiliates to make timely
installments or other payments required by Code Section 412.
(e) No Transferred Employee will become entitled to any<PAGE>
retirement, severance or similar benefit or enhanced benefit for which
FRP could be responsible pursuant to Section 9.4(a)(ii) solely as a
result of the transactions contemplated hereby.
9.3 Employees and Offers of Employment. (a) At any time on or
after the Closing Date, FRP shall have the right at its sole discretion to
offer employment to any or all active employees of the Business; provided,
that FRP may terminate at any time after the Closing Date the employment of
any employee who accepts such offer. FRP agrees to notify Pennzoil as soon as
is reasonably practicable for FRP in light of its business objectives, and in
any event within six months of the Closing Date, of the names of active
employees of the Business to whom FRP intends to offer employment and FRP will
offer employment to such employees within the six-month period. For purposes
of this Article 9, the term "active employee" shall mean any Person who, on
the Closing Date, is actively employed by Pennzoil or who is on short-term
disability leave, authorized leave of absence, military service or lay-off
with recall rights as of the Closing Date (FRP will have the right at its sole
discretion to offer such inactive employees employment at any time on or after
the date they return to active employment with Pennzoil), but shall exclude
any other inactive or former employee including any Person who has been on
long-term disability leave or unauthorized leave of absence or who has
terminated his or her employment, retired or died on or before the Closing
Date. Any such offers shall be at such salary or wage and benefit levels and
on such other terms and conditions as FRP shall in its sole discretion deem
appropriate. Each active employee of the Business who commences employment
with FRP on or prior to the termination of the Transition Services Agreement
is hereinafter referred to as the "Transferred Employee" and the date on which
a Transferred Employee commences employment with FRP shall be referred to as
the "Transfer Date" with respect to such Transferred Employee. Pennzoil will
not take, and will cause each of its subsidiaries not to take, any action
which would impede, hinder, interfere or otherwise compete with FRP's effort
to hire any active employee of the Business; provided, however, that if during
that six-month period Pennzoil desires to solicit any active employee of the
Business to continue as a Pennzoil employee, Pennzoil will notify FRP, and FRP
will not unreasonably withhold its consent to Pennzoil's request. FRP shall
not assume responsibility for any Transferred Employee until such employee
commences employment with FRP. FRP shall have no obligation to offer
employment to any Pennzoil employee. Subject to any contrary provision in the
Transition Services Agreement, until such time as a Transferred Employee is
hired by FRP and commences employment with FRP, he or she shall remain and
shall be considered as a Pennzoil employee, and FRP will have no obligation to
such employee for statutory or other purposes.
9.4 Pennzoil's Employee Benefit Plans. (a)(i) Subject to Section
9.4(a)(ii), Pennzoil shall retain all obligations and liabilities under the
Employee Plans and Benefit Arrangements in respect of each employee or former
employee (including any beneficiary thereof) who is not a Transferred
Employee. Except as expressly set forth herein, Pennzoil shall retain all
liabilities and obligations under the Employee Plans and Benefit Arrangements
for each Transferred Employee in respect of benefits accrued as of the
Transfer Date for the Transferred Employee, and neither FRP nor any of its
Affiliates shall have any liability with respect thereto. Accrued benefits or
account balances of each Transferred Employee under the Employee Plans and
Benefit Arrangements qualified under Section 401(a) of the Code shall be fully<PAGE>
vested as of that Transferred Employee's Transfer Date.
(ii) FRP shall be responsible to Pennzoil for up to a maximum
aggregate amount of $8 million in severance pay (as provided for under
Pennzoil's existing severance plans), pension and benefit liabilities incurred
in connection with existing severance plans and incentive pay under the 1994
IBITDA plan, associated with Pennzoil's active employees of the Business and
for which liability is incurred by Pennzoil at any time from the Closing Date
until the later of the date nine months after the Closing Date or the
expiration of the Transition Services Agreement ("Personnel Costs"). The
parties agree that if FRP terminates any Transferred Employee on or prior to
the date nine months after the Closing, such Transferred Employee will be
entitled to the same severance payment that he would have received from
Pennzoil (as provided for under Pennzoil's existing severance plans) if he had
not accepted employment with FRP, and the amount of such payments shall
constitute Personnel Costs for all purposes of this Agreement. On the day
nine months after the Closing Date, FRP shall calculate the cumulative amount
of such Personnel Costs. If the Personnel Costs amount to less than $8
million, FRP shall pay Pennzoil the Personnel Costs, and in addition, 50
percent of the amount calculated by subtracting the Personnel Costs from $8
million. Pennzoil shall be responsible for any portion of the Personnel Costs
that exceeds $8 million, provided that Pennzoil will not be responsible for
any portion of such excess that results from stay bonuses (other than those
paid at Pennzoil's direction) or other increases in benefits implemented by
FRP after the Closing Date. Likewise, FRP shall not be responsible for any
increase in benefits implemented by Pennzoil after the Closing Date.
(b) With respect to each Transferred Employee (including any
beneficiary or dependent thereof), Pennzoil shall retain (i) all liabilities
and obligations arising under any group life, accident, medical, dental or
disability plan or similar arrangement (whether or not insured) to the extent
that such liability or obligation relates to contributions or premiums accrued
(whether or not payable), or to claims incurred (whether or not reported), on
or prior to that Transferred Employee's Transfer Date, (ii) all liabilities
and obligations arising under any worker's compensation arrangement to the
extent such liability or obligation relates to the period prior to that
Transferred Employee's Transfer Date, including liability for any retroactive
workman's compensation premiums attributable to such period and (iii) all
other liabilities and obligations arising under the Employee Plans and the
Benefit Arrangements to the extent any such liability or obligation relates to
the period prior to that Transferred Employee's Transfer Date, including
proportional accruals through that Transfer Date and including without
limitation liabilities and obligations in respect of accruals through that
Transfer Date under any bonus plan or arrangement, any vacation plans,
arrangements and policies.
(c) FRP will recognize Pennzoil service for Transferred
Employees for the purposes of (i) vesting in FRP's 401(k) and pension plans,
(ii) vacation eligibility, (iii) service award eligibility, (iv) wage and
salary continuation and (v) severance benefits. FRP will not recognize
Pennzoil service for Transferred Employees for purposes of pension accruals
and for determining eligibility for retiree medical, dental or other retiree
coverage.<PAGE>
(d) Subject to the provisions of Section 9.4(e), after the
Transfer Date, Transferred Employees and their dependents shall be covered
under FRP's medical insurance policies without any exclusions for pre-existing
medical conditions or other retiree coverage. Co-payments and deductibles of
Transferred Employees under Pennzoil's medical insurance policies shall be
credited against co-payment and deductible requirements under FRP's medical
insurance policies.
(e) With respect to any Transferred Employee (including any
beneficiary or dependent thereof) who enters a hospital or is on short-term
disability under any Benefit Arrangement on or prior to that Transferred
Employee's Transfer Date and continues in a hospital or on short-term
disability after that Transfer Date, Pennzoil shall be responsible for claims
and expenses incurred both before and after that Transfer Date in connection
with such Person, to the extent that such claims and expenses are covered by a
Benefit Arrangement, until such time, (if any) that, in the case of a
Transferred Employee, such Person resumes full-time employment with FRP or one
of its Affiliates and, in the case of any beneficiary or dependent of a
Transferred Employee, such Person's hospitalization has terminated. With
respect to any Benefit Arrangements covering medical expenses and other costs
relating to pregnancies and maternity leave, Pennzoil shall be responsible for
all claims (whether or not reported) and expenses incurred during the period
prior to and ending on that Transfer Date, and FRP or one of its Affiliates
shall be responsible for such benefit arrangements covering such pregnancies
and maternity leave for the period subsequent to that Transfer Date.
9.5 Continuation of Certain Administrative Services and Insurance
Coverage. The parties agree that Pennzoil will continue certain
administrative services and continue to provide insurance coverage after the
Closing Date to the extent provided in and in accordance with the provisions
of the Transition Services Agreement.
9.6 WARN Act. The parties agree to cooperate in good faith to
determine whether any notification may be required under the WARN Act as a
result of the transactions contemplated by this Agreement. FRP will be
responsible for providing any notification that may be required under the WARN
Act with respect to any Transferred Employees. Pennzoil will be responsible
for providing any notification that may be required under the WARN Act with
respect to any employees of the Business that are not Transferred Employees,
provided that FRP has given sufficient notice to enable Pennzoil to provide
such timely notification. If FRP fails to provide sufficient notice, FRP
shall be liable for any additional expenditure resulting from the failure to
provide notification required under the WARN Act with respect to any employees
of the Business.
9.7 No Third Party Beneficiaries. No provision of this Article
shall create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of Pennzoil
or of any of its subsidiaries in respect of continued employment (or resumed
employment) with either FRP or the Businesses or any of their Affiliates and
no provision of this Article 9 shall create any such rights in any such
Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or Benefit Arrangement or any plan or
arrangement which may be established by FRP or any of its Affiliates. No<PAGE>
provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any such plans or arrangements of
FRP or any of its Affiliates.
ARTICLE 10
CONDITIONS TO CLOSING
10.1 Conditions to the Obligations of Each Party. The
obligations of FRP and Pennzoil to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to
the transactions contemplated hereby shall have expired or been
terminated.
(b) No provision of any applicable Law shall (i) prohibit the
consummation of the Closing or (ii) restrain, prohibit or otherwise
interfere with the effective operation or enjoyment by FRP of all or any
material portion of the Purchased Assets.
(c) No proceeding challenging this Agreement or the transactions
contemplated hereby, seeking to prohibit, alter, prevent or materially
delay the Closing or otherwise relating to the Purchased Assets or to
the conduct of the Business after the Closing Date shall have been
instituted by any Person before any arbitrator or Governmental Authority
and be pending.
(d) Each of FRP and Pennzoil shall have executed and delivered
to the other party (i) the Deed of Trust, (ii) the Transition Services
Agreement and (iii) each other deed, certificate, agreement or other
document contemplated by this Agreement.
10.2 Conditions to Obligation of FRP. The obligation of FRP to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) Pennzoil shall have performed in all material respects all
of its obligations hereunder required to be performed by it on or prior
to the Closing Date, (ii) the representations and warranties of Pennzoil
contained in this Agreement and in any certificate or other writing
delivered by Pennzoil pursuant hereto shall be true in all material
respects at and as of the Closing Date, as if made at and as of such
date and (iii) FRP shall have received a certificate signed by the
President, the Group Vice President Sulphur or the Group Vice
President Accounting and Controller of Pennzoil to the foregoing
effect.
(b) Pennzoil shall have received all Required Consents and all
consents, authorizations or approvals from the Governmental Authorities
referred to in Section 3.3, in each case in form and substance
reasonably satisfactory to FRP, and no such consent, authorization or
approval shall have been revoked.<PAGE>
(c) Any title reports that FRP shall have elected to receive
with respect to the Real Property and Mineral Interests shall disclose
no Liens or defects in title that would prevent FRP from acquiring Good
Title to the Real Property and Mineral Interests.
(d) FRP shall have received all documents it may reasonably
request relating to the existence of Pennzoil and the authority of
Pennzoil for this Agreement, all in form and substance reasonably
satisfactory to FRP.
(e) FRP shall have received the consent of its credit facility
banks to incur the obligations contemplated hereby and to establish the
Liens created in the Deed of Trust.
(f) All Permits reasonably necessary for the operation of the
Business (other than the Excluded Assets) shall have been transferred to
FRP prior to the Closing Date (with the only change being the identity
of the holder thereof) or FRP shall be satisfied, in its reasonable
judgment, that (i) such Permits can be transferred within six months
subsequent to the Closing Date (with the only change being the identity
of the holder thereof) or (ii) FRP shall be able to obtain new Permits
reasonably necessary for the operation of the Business (other than the
Excluded Assets) within such period with substantially similar terms
(and requiring FRP to expend similar amounts) to those of the Permits in
effect prior to the Closing Date, and provided that in the case of
Permits to be transferred or obtained in accordance with the provisions
of clauses (i) and (ii), FRP shall be satisfied, in its reasonable
judgment, that no fines or penalties shall be imposed on FRP as a result
of operating without such a Permit that will not be reimbursed by
Pennzoil and FRP shall be able to operate the Business (other than the
Excluded Assets) during such six-month period without any delay or
interruption attributable to operating without any such Permit.
10.3 Conditions to Obligation of Pennzoil. The obligation of
Pennzoil to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a)(i) FRP shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to
the Closing Date, (ii) the representations and warranties of FRP
contained in this Agreement and in any certificate or other writing
delivered by FRP pursuant hereto shall be true in all material respects
at and as of the Closing Date, as if made at and as of such date and
(iii) Pennzoil shall have received a certificate signed by the President
or Chief Financial Officer of FRP to the foregoing effect.
(b) FRP shall have received all consents, authorizations or
approvals from the Governmental Authorities referred to in Section 4.3,
in each case in form and substance reasonably satisfactory to Pennzoil,
and no such consent, authorization or approval shall have been revoked.
(c) Pennzoil shall have received all documents it may reasonably
request relating to the existence of FRP and the authority of FRP for
this Agreement, all in form and substance reasonably satisfactory to<PAGE>
Pennzoil.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.1 Survival. (a) The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall not be
limited or affected by any investigation undertaken by either party hereto,
and shall survive the Closing until the second anniversary of the Closing Date
or (i) in the case of Sections 3.1, 3.2, 4.1 and 4.2, indefinitely, (ii) in
the case of Section 3.20(a), until the fifth anniversary of the Closing and
(iii) in the case of the representations and warranties relating to Taxes or
contained in Article 9, until expiration of the applicable statutory period of
limitations (giving effect to any waiver, mitigation or extension thereof), if
later, and shall thereafter terminate, together with any associated right of
indemnification pursuant to Section 11.2(a)(i). Notwithstanding the preceding
sentence any representation or warranty in respect of which indemnity may be
sought under Section 11.2(a)(i) and the associated right of indemnification
under Section 11.2(a)(i), shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, with respect to any matter
identified in a notice (which notice shall identify the representation or
warranty claimed to have been breached or to have been inaccurate, and shall
state with reasonable particularity the nature of the asserted breach or
inaccuracy) given prior to such time to the party against whom such indemnity
may be sought.
(b) Except as expressly provided in this Agreement, the
covenants and agreements of the parties hereto contained in this Agreement
(including without limitation the obligation to make Quarterly Installment
Payments) or in any certificate or other writing delivered pursuant hereto or
in connection herewith shall not be limited or affected by any investigation
undertaken by either party hereto, and shall survive indefinitely together
with any associated right of indemnification. Without limiting the generality
of the preceding sentence, the indemnification obligation of Pennzoil pursuant
to Section 11.2 with respect to Excluded Liabilities (other than Environmental
Liabilities) shall survive indefinitely whether or not the Excluded Liability
involves any misrepresentation or breach of warranty by Pennzoil under Article
3.
(c) Except as provided in Section 5.7(b), the indemnification
obligation of Pennzoil for Environmental Liabilities shall survive for five
years after the Closing Date (other than in connection with Known Remedial
Conditions, as to which the indemnification obligation of Pennzoil shall
survive indefinitely and shall include all future changes in Environmental
Laws), provided that if within such five-year period FRP notifies Pennzoil of
the existence of any Environmental Liability that requires remediation
(whether at the time of notification or at some future date) under
Environmental Laws in effect at the time of such notification, Pennzoil shall
indemnify FRP and its Affiliates for all Losses incurred or suffered by FRP or
its Affiliates in connection with such Environmental Liability and, in
accordance with the provisions of Section 5.7 relating to remediation,<PAGE>
Pennzoil shall be responsible for all Remedial Activities relating to any such
Environmental Liability (including Remedial Activities that might be required
due to changes in Environmental Laws after such five-year period) and such
obligations shall survive indefinitely.
11.2 Indemnification. (a) Pennzoil hereby indemnifies FRP and
its Affiliates against and agrees to hold each of them harmless from any and
all damage, loss, liability and expense (including without limitation
reasonable expenses of investigation (including the cost of environmental
consultants, engineers or technical personnel) and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) (collectively,
"Loss") incurred or suffered by FRP or any of its Affiliates arising out of or
in connection with:
(i) any misrepresentation or breach of warranty by Pennzoil
under this Agreement, provided, however, that Pennzoil shall be liable
only if the aggregate amount of any such Losses exceeds $500,000 and
provided further that for purposes of making such calculation the
representation set forth in Section 3.20(a)(iv) shall be read without
any materiality qualification (the "FRP Retention") and then only to the
extent of such excess;
(ii) any breach of any covenant or agreement made or to be
performed by Pennzoil pursuant to this Agreement;
(iii) the failure of Pennzoil to discharge or perform any
Excluded Liability;
(iv) subject to and consistent with the provisions of Section
5.7, any Environmental Liabilities; or
(v) any liability to the State of Texas for royalties owed as a
result of sulphur production carried out prior to the Closing.
The FRP Retention shall not apply to Losses covered by Subsections 11.2(a)(ii)
through 11.2(a)(v) above whether or not such Losses are also covered by
Section 11.2(a)(i).
(b) FRP hereby indemnifies Pennzoil and its Affiliates against
and agrees to hold each of them harmless from any and all Loss incurred or
suffered by Pennzoil or any of its Affiliates arising out of or in connection
with any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by FRP pursuant to this Agreement.
11.3 Procedures. The party seeking indemnification under Section
11.2 (the "Indemnified Party") agrees to give prompt notice to the party
against whom indemnity is sought (the "Indemnifying Party") of the assertion
of any claim, or the commencement of any suit, action or proceeding in respect
of which indemnity may be sought under such Section. The Indemnifying Party
may, and at the request of the Indemnified Party shall, participate in and
control the defense of any such suit, action or proceeding at its own expense.
The Indemnifying Party shall not be liable under Section 11.2 for any
settlement effected without its consent of any claim, litigation or proceeding
in respect of which indemnity may be sought hereunder. In addition, if a<PAGE>
claim for indemnification for Environmental Liabilities involves Remedial
Activities, such claim shall be processed in accordance with the applicable
provisions of Section 5.7.
ARTICLE 12
TERMINATION
12.1 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of Pennzoil and FRP;
(b) by either Pennzoil or FRP if the Closing shall not have been
consummated on or before December 31, 1995;
(c) by either Pennzoil or FRP if there shall be any Law that
makes the consummation of the transactions contemplated hereby illegal
or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree
or judgment of any Governmental Authority having competent jurisdiction;
or
(d) by either Pennzoil or FRP if there shall occur any damage to
or destruction of any Purchased Asset or part thereof by fire or other
casualty if, in any such case, the cost of repair or replacement of the
damaged or destroyed Purchased Assets (net, in the case of Pennzoil, of
the estimated insurance proceeds related thereto) exceeds $2,000,000;
provided, however, that Pennzoil may not terminate this Agreement
pursuant to this Section 12.1(d) if FRP waives Pennzoil's obligations
pursuant to Section 5.8(b) in connection with the event of destruction
of or damage to any Purchased Assets.
The party desiring to terminate this Agreement pursuant to
Sections 12.1(b), 12.1(c) or 12.1(d) shall give notice of such termination to
the other party.
12.2 Effect of Termination. If this Agreement is terminated as
permitted by Section 12.1, such termination shall be without liability of
either party (or any stockholder, director, officer, employee, agent,
consultant or representative of such party) to the other party to this
Agreement; provided that if such termination shall result from the willful
failure of either party to fulfill a condition to the performance of the
obligations of the other party, failure to perform a covenant of this
Agreement or breach by either party to this Agreement of any representation or
warranty or agreement contained herein, such party shall be fully liable for
any and all Losses incurred or suffered by the other party as a result of such
failure or breach. The provisions of Sections 5.2, 6.1 and 13.3 shall survive
any termination hereof pursuant to Section 12.1.<PAGE>
ARTICLE 13
MISCELLANEOUS
13.1 Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to FRP to:
Roger T. Baker, Esq.
Vice President - Law
Freeport-McMoRan Resource Partners,
Limited Partnership
1615 Poydras Street
New Orleans, LA 70112
Telecopy: 504-582-4416
with a copy to:
David W. Ferguson, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy: (212) 450-4800
if to Pennzoil, to:
James W. Shaddix, Esq.
General Counsel
Pennzoil Company
Pennzoil Place
700 Milam Street
Houston, TX 77002
Telecopy:
with a copy to:
Frank W.R. Hubert, Jr., Esq.
Baker & Botts, L.L.P.
One Shell Plaza
Houston, TX 77002
Telecopy: (713) 229-1522
All such notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5 p.m. in
the place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding Business Day in the place of
receipt.
13.2 Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Closing Date if, but only if,<PAGE>
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege 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, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
13.3 Expenses. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
13.4 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto except that (i) FRP may
transfer or assign, in whole or from time to time in part, to one or more of
its Affiliates, the right to purchase all or a portion of the Purchased
Assets, but no such transfer or assignment will relieve FRP of its obligations
hereunder and (ii) Pennzoil may assign its rights to receive one or more
Quarterly Installment Payments to another Person or Persons, it being
understood that FRP shall not be required to make any such payment to any
Person other than Pennzoil and that Pennzoil may not transfer or delegate to
any other Person any right or obligation to resolve any dispute, amend any
provision hereof or exercise or waive any right hereunder, all of which rights
or obligations shall be retained solely by Pennzoil.
13.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCEPT TO THE
EXTENT THAT THE LAWS OF THE STATE WHERE A PURCHASED ASSET IS LOCATED
NECESSARILY MUST BE CONSULTED ON ISSUES RELATED TO THE OWNERSHIP OR TRANSFER
OF THAT PURCHASED ASSET.
13.6 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto
shall have received a counterpart hereof signed by the other party hereto.
13.7 Entire Agreement; Third Party Beneficiaries. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
of this Agreement. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by
either party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
13.8 Bulk Sales Laws. FRP hereby waives compliance by Pennzoil<PAGE>
with the provisions of the "bulk sales", "bulk transfer" or similar laws of
any state. Pennzoil agrees to indemnify and hold FRP harmless against any and
all claims, losses, damages, liabilities, costs and expenses incurred by FRP
or any of its affiliates as a result of any failure to comply with any such
"bulk sales", "bulk transfer" or similar laws.
13.9 Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
FREEPORT-McMoRan RESOURCE
PARTNERS, Limited Partnership
By: FREEPORT-McMoRan INC.
Managing General Partner
By__________________________________
Title: Senior Vice President
PENNZOIL COMPANY
By__________________________________
Title: Group Vice President--
Accounting and Controller<PAGE>
Schedule 1.1
INSTALLMENT PAYMENTS TO PENNZOIL
Tampa Deemed
Average Quarterly Quarterly
Sulphur Volumes Installment Inflation
Price (thousands Payment Sharing
($/ton) of tons) (M$'s) Ratio
$56 or 150 0 0.000
less
$61 165 131 0.094
$66 181 524 0.188
$71 196 978 0.234
$76 212 1,494 0.268
$81 227 2,072 0.297
$86 243 2,712 0.324
$91 258 3,414 0.350
$96 274 4,178 0.375
$101 289 5,003 0.399
$106 304 5,890 0.423
$111 320 6,839 0.446
$116 335 7,849 0.469
$121 351 8,922 0.493
$126 366 10,056 0.515
$131 382 11,252 0.538
$136 397 12,510 0.561
$141 413 13,830 0.584
$145 or 425 14,930 0.595
more<PAGE>
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
AMENDMENT NO. 1 dated as of January 3, 1995
to the Asset Purchase Agreement (the Agreement ) dated
as of October 22, 1994 between Freeport-McMoRan
Resource Partners Limited Partnership, a Delaware
limited partnership ("FRP") and Pennzoil Company, a
Delaware corporation ("Pennzoil").
W I T N E S S E T H :
WHEREAS, FRP and Pennzoil desire to amend the
Agreement as set forth in this Amendment No. 1;
NOW, THEREFORE, the parties hereto agree as
follows:
1. Definitions. Unless otherwise
specifically defined herein, each term used herein
which is defined in the Agreement shall have the
meaning assigned to such term in the Agreement. Each
reference to "hereof", "hereunder", "herein" and
"hereby" and each reference to "this Agreement" and
each other similar reference contained in the Agreement
shall refer to the Agreement as amended by this
Amendment No. 1.
2. Accounting Adjustment. The parties have
agreed, as an accounting convenience, to establish a
financial accounting cut-off time (the "Accounting Cut-
Off") for the transaction of 12:01 a.m. on January 1,
1995. Accordingly, upon the occurrence of the Closing,
the parties will make all appropriate financial and
accounting adjustments (including appropriate payments
to each other and to third parties) as if the Closing
had occurred at the Accounting Cut-Off. In particular,
FRP will be entitled to record and receive (and receive
the benefit of) all operating revenues, inventories,
receivables and prepaid expenses generated from or with
respect to the Purchased Assets (and all obligations of
FRP to reimburse Pennzoil for royalties as provided in
the Agreement shall commence) from and after the
Accounting Cut-Off and shall record and pay all
payables and contract obligations incurred in
connection with the Purchased Assets from and after the
Accounting Cut-Off. Pennzoil's cash and cash
equivalents on hand and in banks as of the Accounting
Cut-Off (except for Petty Cash as of that time) and all
accounts, notes and other receivables attributable to
the operation of the Business prior to the Accounting
Cut-Off shall continue to be Excluded Assets, but all
such items generated on or after the Accounting Cut-Off
shall be Purchased Assets. Similarly, all accounts
payable attributable to the operation of the Business
prior to the Accounting Cut-Off shall continue to be
Excluded Liabilities, but all accounts payable
attributable to the operation of the Business on or
after the Accounting Cut-Off shall be Assumed
Liabilities. The liquid sulphur inventory adjustment
contemplated by Section 2.10 of the Agreement shall be
conducted as of the Accounting Cut-Off, and sales of
liquid sulphur inventory (or other inventory
constituting Purchased Assets) on or after the
Accounting Cut-Off shall be for the account and benefit
of FRP. The prepaid expense adjustment contemplated by
Section 6.3 of the Agreement shall be made in respect
of prepaid expenses as they exist at the Accounting
Cut-Off. The proration provisions set forth in
Sections 7.4 and 8.3 of the Agreement shall be made as
of the Accounting Cut-Off rather than as of the Closing
Date. The first Quarterly Period shall commence on
January 1, 1995, and the last Quarterly Period shall
end on the earlier of December 31, 2014 and the date
specified in clause (v) of the definition of Quarterly
Period. The term "Option Date" shall mean January 1,
1999 and each subsequent third anniversary of the First
Option Date. For all other purposes of the Agreement,
including without limitation, determining the Purchased
and Excluded Assets and the Assumed and Excluded
Liabilities, compliance with the representations and
covenants set forth in the Agreement, responsibility
for damage, destruction or condemnation of the assets
and satisfaction of the conditions to Closing, the
references in the Agreement to the Closing Date shall
mean the actual date of the Closing.
3. Valuation of Purchased Assets in Florida.
The parties agree that for tax purposes, the portion of
the Purchase Price attributable to all Purchased Assets
located in the State of Florida shall be deemed to be
$966,500.
4. Gas Supply. Section 2.2(h) of the
Agreement is hereby deleted in its entirety, and it is
understood that Pennzoil's gas contract with Texaco
Inc. shall be deemed to be added to Schedule 3.12(a) of
the Agreement and shall be a "Contract" to be assigned
by Pennzoil to FRP at the Closing. Section 5.9 of the
Agreement is hereby deleted in its entirety.
5. Environmental Liabilities. [Review need
for provision addressing any supplemental environmental
matters such as post-Closing activities of Pennzoil at
Galveston and any post-Closing permit transfers.]
6. Solid Sulphur Amount. Section 6.2(a) of
the Agreement is hereby amended and restated to read in
its entirety:
"6.2 Marketing Solid Sulphur. (a) The
parties will retain an independent surveyor
acceptable to all of the parties to conduct a
survey of the amount of solid sulphur
inventory above the Base Pad Sulphur at the
Galveston Facility using procedures approved
by the parties, such survey to be completed
within 90 days of the Closing. The surveyed
volume components will be multiplied by the
densities of solid sulphur for each volume
component, as are proposed by the independent
surveyor and approved by the parties, to
derive the weight of the solid sulphur. The
sum of the weights of all of the component
volumes shall be referred to as the "Solid
Sulphur Amount".
7. Governing Law. THIS AMENDMENT NO. 1
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF DELAWARE, EXCEPT TO THE EXTENT
THAT THE LAWS OF THE STATE WHERE A PURCHASED ASSET IS
LOCATED NECESSARILY MUST BE CONSULTED ON ISSUES RELATED
TO THE OWNERSHIP OR TRANSFER OF THAT PURCHASED ASSET.
8. Counterparts; Effectiveness. This
Amendment No. 1 may be signed in any number of
counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto
were upon the same instrument. This Amendment No. 1
shall become effective when each party hereto shall
have received a counterpart hereof signed by the other
party hereto. Except as expressly amended by this
Amendment No. 1, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment No. 1 to be duly executed by
their respective authorized officers as of the day and
year first above written.
FREEPORT-McMoRan RESOURCE
PARTNERS, Limited Partnership
By: FREEPORT-McMoRan INC.
Managing General Partner
By__________________________________
Title: Senior Vice President
PENNZOIL COMPANY
By__________________________________
Title: Group Vice President--
Accounting and Controller
NEWS RELEASE
FREEPORT-McMoRan RESOURCE PARTNERS COMPLETES ACQUISITION
OF PENNZOIL'S DOMESTIC SULPHUR BUSINESS
NEW ORLEANS, LA., JANUARY 4, 1995 -- Freeport-McMoRan Resource Partners
(NYSE:FRP), a 51 percent owned affiliate of Freeport-McMoRan Inc. (NYSE:FTX)
and Pennzoil Co. (NYSE:PZL), announced today that FRP had completed the
acquisition of essentially all of the domestic assets of Pennzoil Sulphur Co.,
a division of Pennzoil Sulphur Co., Included in this acquisition are the
Culberson Mine in Texas, the sulphur terminals and
loading facilities in Galveston, Texas and Tampa, Florida, the charter of a
marine sulphur tanker, 2 sulphur barges, 503 leased and owned railcars and
associated commercial contracts and obligations. Pennzoil will continue to
own and operate its Antwerp, Belgium terminal operation and related business.
James L. Pate, chairman and chief executive officer of PZL, said: "the
sale of the sulphur unit provides several positive benefits for Pennzoil.
First, removes a drail on Pennzoil's earnings. Once highly profitable, the
sulphur segment was losing money as a result of a downward spiral of sulphur
prices that began in 1991. The arrangement with FRP allows Pennzoil to
participate in the upside in future sulphur prices. Second, the sale
simplifies Pennzoil's business for investment valuation. Third, it supports
Pennzoil's strategic plan to focus on its core businesses, namely, oil and
natural gas exploration and productin and motor oil manufacturing and
marketing."
Rene L. Latiolais, president and chief executive officer of FRP, said:
"While these sulphur assets were no longer strategic to Pennzoil, indicative of
the structural changes in the world sulphur markets, this acquisition provides
FRP with additional excellent sulphur assets whereby maximum values can be
generated via the cost savings resulting from the combination of sulphur
businesses and adds to FRP's competitive position with regards to the vital raw
material requirements of its phosphate fertilizer operations. Furthermore, this
combination allows us to continue the trend established with the IMC-Agrico
joint venture in 1993 to reduce operating costs and improve FRP's global
competitive position."
Under the provisions of the acquisition agreement, Pennzoil will receive
installment payments from FRP over 20 years which are based on the prevailing
price of sulphur from time to time. The installment payments may be terminated
earlier by FRP, through the exercise of a Call Option for $65 million, or by
Pennzoil, through a Put Option providing for a $10 million payment to Pennzoil.
Neither the Call Option nor the Put Option may be exercised within the first
four years of the agreement.
Pennzoil Co. explores for an produces oil and natural gas, manufacturers
and markets premium lubricants, including the top selling motor oil in the
U.S.A., and is the parent company of Jiffy Lube International, the world's
largest operator of fast oil change centers.
FRP is engaged in the production of phosphate fertilizers and the mining
of phosphate rock through IMC-Agrico Company; the mining, transportation and
terminalling of sulphur, and the development and production of related oil
reserves.
