<PAGE>
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): FEBRUARY 24, 1995
KANEB PIPE LINE PARTNERS, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-10311 75-2287571
(Commission File Number) (IRS Employer Identification No.)
2435 N. Central Expressway, Seventh Floor, Richardson, Texas 75080
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 699-4000
----------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 24, 1995, Registrant, through its operating partnership,
acquired the refined petroleum product pipeline assets of Wyco Pipe Line Company
("Wyco") for $27.1 million in cash. Wyco was owned 60% by a subsidiary of GATX
Terminals Corporation and 40% by a subsidiary of Amoco Pipe Line Company. There
is no material relationship between these companies and the Registrant or any of
its affiliates, directors or officers or associates of any such directors or
officers.
The assets consist of approximately 550 miles of 8" and 6" pipeline
originating in Casper, Wyoming, running south to a truck loading terminal at
Cheyenne, Wyoming, another truck loading terminal at Dupont, Colorado and
terminating at a truck loading terminal at Fountain, Colorado. A branch line
runs from Douglas Junction, Wyoming to a truck loading terminal at Rapid City,
South Dakota. Included are approximately 1,700,000 barrels of tankage at the
terminals, 11 pump stations and all of the other equipment associated with a
working product pipeline system.
The system supplies various grades of motor gasoline, heating oil, and
diesel oil at the terminal truck racks from origin points at Casper/Strouds
station, Mule Creek, and Cheyenne, Wyoming and Commerce City, Colorado.
Registrant intends to continue the business of Wyco.
The transaction was financed by the sale of first mortgage notes to three
insurance companies. The notes are due February 24, 2002 and bear interest at
the rate of 8.37%.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
Report of Independent Accountants.
Statement of Income and Retained Earnings - Years Ended December 31,
1994 and 1993;
Statement of Financial Position - December 31, 1994 and 1993;
Statement of Cash Flows - Years Ended December 31, 1994 and 1993.
(b) Pro forma financial information.
(c) Exhibits.
10.1. Agreement for Sale and Purchase of Assets by and between Wyco
Pipe Line Company and Kaneb Pipe Line Operating Partnership, L.P.
dated February 19, 1995.
10.2. Note Purchase Agreement dated as of December 22, 1994.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KANEB PIPE LINE PARTNERS, L.P.
------------------------------
(Registrant)
Date: March 13, 1995 /s/ Edward D. Doherty
---------------------------
Edward D. Doherty
Chairman
<PAGE>
WYCO PIPE LINE COMPANY
----------------------
FINANCIAL STATEMENTS
--------------------
DECEMBER 31, 1994 AND 1993
--------------------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
January 27, 1995, except as to Note 8,
which is as of February 17, 1995
To the Board of Directors of
Wyco Pipe Line Company
In our opinion, the accompanying statement of financial position and the
related statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Wyco
Pipe Line Company at December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of Wyco Pipe Line Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
<PAGE>
WYCO PIPE LINE COMPANY
----------------------
STATEMENT OF INCOME AND RETAINED EARNINGS
-----------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Revenues
Transportation revenue, including
amounts billed to affiliated
companies of $1,068,465 and
$1,475,862, respectively $12,806,828 $11,585,336
Rent revenue, including $458,333 in 1994
from affiliated company 511,283 10,823
Interest and other income, net 376,240 171,681
Gain on the sale of assets - 5,005,781
---------- ----------
13,694,351 16,773,651
---------- ----------
Costs and expenses
Operating expense 2,357,214 2,119,276
Maintenance expense 2,770,777 2,395,215
General expense 780,555 663,791
Depreciation 1,042,054 840,792
Taxes, other than income taxes 365,432 321,123
Interest expense - 13,091
Casualty and other losses 1,642,218 1,003,714
---------- ----------
8,958,250 7,357,002
---------- ----------
Income before provision for income taxes 4,736,101 9,416,649
---------- ----------
Provision for income taxes
Federal
Current 2,487,349 1,847,870
Deferred (802,338) 1,373,274
State 164,618 113,366
---------- ----------
1,849,629 3,334,510
---------- ----------
Net income 2,886,472 6,082,139
Retained earnings at beginning of year 10,312,551 8,535,412
Dividends declared - $124.10
and $123.00 per share, respectively (4,343,500) (4,305,000)
---------- ----------
Retained earnings at end of year $ 8,855,523 $10,312,551
========== ==========
Earnings per share of common stock: $88.04 $173.78
</TABLE>
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE>
WYCO PIPE LINE COMPANY
----------------------
STATEMENT OF FINANCIAL POSITION
-------------------------------
<TABLE>
<CAPTION>
December 31,
------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash (Unrestricted) $ 28,078 $ 723,201
Marketable equity securities - at cost, which
approximates market 400,000 0
Accounts receivable - affiliated companies 570,152 120,314
Accounts receivable - trade 1,805,969 1,131,626
Materials and supplies 50,141 50,141
Prepaid expenses and other current assets 221,004 531,853
Deferred tax assets 785,000 272,000
----------- -----------
Total current assets 3,860,344 2,829,135
----------- -----------
Cash (Restricted) - 6,622,662
Deferred charges and miscellaneous assets 6,817 11,459
Property and equipment - at cost,
less accumulated depreciation of
$19,916,471 and $18,864,550, respectively 15,571,385 10,269,874
----------- -----------
Total Assets $19,438,546 $19,773,130
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable - trade $ 715,645 $ 960,571
Accounts payable - affiliated companies 451,481 210,552
Income taxes payable 217,503 418,090
Other taxes payable 363,885 317,571
Accrued liabilities 2,960,681 1,396,100
---------- -----------
Total current liabilities 4,709,195 3,302,884
---------- -----------
Deferred rental income 296,970 300,000
Deferred income taxes 3,476,858 3,717,695
----------- -----------
Total deferred liabilities 3,773,828 4,017,695
----------- -----------
Commitments and Contingencies (See Note 8)
Shareholders' Equity
Common stock, no par value -
Authorized - 50,000 shares
Issued and outstanding - 35,000 shares
at $60.00 per share 2,100,000 2,100,000
Retained earnings 8,855,523 10,312,551
----------- -----------
Total shareholders' equity 10,955,523 12,412,551
----------- -----------
Total Liabilities and Shareholders' Equity $19,438,546 $19,733,130
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE>
WYCO PIPE LINE COMPANY
----------------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $2,886,472 $6,082,139
Adjustments to reconcile net income
to cash provided by operating activities:
Gain on sale of assets - (5,005,781)
Depreciation 1,042,054 840,792
Increase in payables and accrued
liabilities 1,406,311 1,387,782
(Increase) Decrease in receivables (1,124,181) 172,518
Decrease (Increase) in prepaid
expenses and other current assets 310,849 (472,437)
Net change in deferred taxes and
other items (752,218) 1,945,282
--------- ---------
Net cash provided by operating
activities 3,769,287 4,950,295
--------- ---------
Cash flows from investing activities:
Proceeds from sale of assets 212,000 6,600,000
Cash restricted as to use 6,622,662 (6,622,662)
Capital expenditures (6,555,572) (13,204)
--------- ---------
Net cash used in investing
activities 279,090 (35,866)
--------- ----------
Cash flows from financing activities:
Repayment of line of credit - (300,000)
Cash dividends paid (4,343,500) (4,305,000)
--------- ---------
Net cash used in financiing
activities (4,343,500) (4,605,000)
--------- ---------
Decrease in cash and marketable securities (295,123) 309,429
Cash and cash equivalents
- - beginning of year 723,201 413,772
---------- ---------
Cash and cash equivalents
- - end of year $ 428,078 $ 723,201
========== =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-4-
<PAGE>
WYCO PIPE LINE COMPANY
----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1994 AND 1993
--------------------------
NOTE 1- OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Wyco Pipe Line Company (the Company) owns and operates a 552-mile pipeline from
Wyoming and South Dakota to Colorado and owns and leases a 30-mile pipeline in
North Dakota. The Company is an interstate common carrier pipeline under the
Interstate Commerce Act of 1887. The Federal Energy Regulatory Commission (FERC)
has regulatory authority over the rates, shipping regulations and other
practices of common carrier pipelines and are empowered to regulate the
accounting for operations.
Cash and cash equivalents, for purposes of reporting cash flows, consist of
short-term highly liquid securities held to maturity and are stated at cost,
which approximates fair value.
Acquisitions of properties and significant betterments to existing properties
are capitalized. Expenditures for repairs and maintenance are charged to
expense as incurred.
The Company computes depreciation for financial reporting purposes on a
straight-line basis over lives prescribed by the Federal Energy Regulatory
Commission (FERC). Depreciation taken for income tax purposes is based on
accelerated methods and lives authorized by the Internal Revenue Code.
During 1993 the Company adopted Financial Accounting Standard No. 109,
"Accounting for Income Taxes". Adoption of the Standard did not affect the
Company's 1993 financial statements. The principal temporary differences giving
rise to deferred taxes at December 31, 1994 and 1993 were depreciation and
provisions for environmental and litigation-related costs.
Earnings per share of common stock is based on the number of shares of common
stock outstanding during the year, which amounted to 35,000 shares in each year.
-5-
<PAGE>
NOTE 2- CASH FLOW INFORMATION:
For purposes of the statement of cash flows, cash and cash equivalents include
cash and marketable securities, all of which have a maturity of three months or
less when acquried.
Net cash provided by operating activities reflects cash payments for interest
and income taxes as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Interest paid $ - $ 13,091
Income taxes paid $2,832,000 $1,607,584
</TABLE>
NOTE 3- RESTRICTED CASH AND SALE OF PIPELINE:
On August 30, 1993, the Company sold an idle ten-inch diameter pipeline segment
in Wyoming, with a net book value of $1,594,000, for $6,600,000. The Company
realized an after-tax gain of $3,254,000 on this sale. The proceeds were
recorded as restricted cash at December 31, 1993 as the Company intended to use
the proceeds to effect a like-kind exchange. See Note 4.
NOTE 4- PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------
1994 1993
---- ----
Gross Net Net
----- --- ---
(in thousands)
<S> <C> <C> <C>
Pipelines $15,860 $ 6,454 $ 2,532
Buildings 1,509 658 610
Land 190 190 190
Machinery, equipment and other 17,417 7,757 6,670
Construction work in progress 512 512 268
------ ------ ------
$35,488 $15,571 $10,270
====== ====== ======
</TABLE>
Property and equipment at December 31, 1994 includes assets with an original
cost of $5,834,000 and accumulated depreciation of $194,500 relating to a
pipeline purchased from Amoco Pipeline Company (Amoco), a shareholder, in 1994.
This pipeline was leased back to Amoco under an agreement which expires on
February 24, 1996. Rental income in 1994 under this lease totaled $458,333 and
future rentals total $541,667.
See also Note 9.
-6-
<PAGE>
NOTE 5- RELATED PARTIES:
The Company is operated and managed by Amoco in accordance with an operating
agreement dated May 31, 1977.
Effective January 1, 1989, the Company entered into two separate agreements with
Amoco to provide Control Center operations which monitor and control pipeline
flow and allow satellite communications from the locations on the Pipeline
System to the Control Center. Charges to the Company in 1994 and 1993 under
these agreements were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Management and operating fee $ 488,448 $ 502,296
Control center 246,024 242,840
Satellite communication fee 68,000 68,000
Other Operating costs 1,869,096 1,493,585
--------- ---------
$2,671,568 $2,306,721
========= =========
</TABLE>
Other operating costs consist primarily of employee wages and related payroll
costs and include charges relating to employee benefit plans, which are
calculated as a percentage of total salaries. As specified in the operating
agreement, this percentage represents the average ratio of benefit plan costs to
total salaries of Amoco employees.
Accounts receivable - affiliated companies includes $466,000 receivable from
Amoco Pipeline. This amount was paid to Amoco Pipeline in anticipation of the
receipt of assets as part of the like-kind exchange executed in 1994 (see Note
3) which were not received.
See Note 4 concerning other transactions with Amoco during 1994.
NOTE 6- CREDIT AGREEMENTS:
On April 15, 1994, the Company entered into a credit agreement with its
shareholders, GATX Pipeline Company and Amoco Pipeline Company, which provides
for borrowings of up to $1,000,000 at a prime rate of interest through April 15,
1995. Also, on December 30, 1994, the Company entered into a credit agreement
with one of its shareholders, Amoco Pipeline Company, which provides for
borrowings of up to $5,000,000 at a prime rate of interest over renewable
one-year terms. There were no borrowings outstanding under these agreements at
December 31, 1994.
-7-
<PAGE>
NOTE 7 - ENVIRONMENTAL ACCRUAL:
In 1994, the Company recorded a charge of $1,200,000 for environmental
remediation. This amount is net of expected insurance recoveries of $200,000.
The accrual for remediation totaled $1,400,000 at December 31, 1994 and
represents management's best estimate of such costs. Additional accruals, if
any, are not expected to have a material adverse effect on the Company's
financial position.
NOTE 8 - LITIGATION:
In December 1991, the Company was named in a lawsuit (Joseph Kramer et al. v.
Wyco Pipe Line Company), which alleged that the Company's activities resulted in
the hydrocarbon contamination of the groundwater and soil on the plaintiffs'
property and asserts losses of at least $5,570,000. The plaintiffs also seek
punitive and emotional distress damages and statutory interest. The Company is
currently undertaking remediation efforts. The Company provided $300,000 and
$800,000 related to this lawsuit and the remediation efforts in 1994 and 1993,
respectively. The Company does not believe that the ultimate resolution of this
matter will have a material adverse impact on its financial position.
NOTE 9 - SALE OF PIPELINE:
The Company anticipates that it will sell its 552-mile pipeline in 1995. The net
book value of property and equipment relating to this pipeline approximated
$9,931,500 at December 31, 1994. The Company expects to realize a significant
gain on the sale and to reinvest the proceeds in other pipeline-related
property.
-8-
<PAGE>
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
In February 1995, Kaneb Pipe Line Partners, L.P. ("Kaneb") acquired, through its
operating partnership, the refined petroleum product pipeline assets of Wyco
Pipe Line Company ("Wyco") for $27.1 million. Wyco was owned 60% by a subsidiary
of GATX Terminals Corporation and 40% by a subsidiary of Amoco Pipe Line
Company. The acquisition was financed by the sale of $27 million of first
mortgage notes to three insurance companies.
The following unaudited pro forma financial statements for Kaneb have been
derived from the audited historical financial statements of Kaneb and Wyco for
the year ended December 31, 1993 and the unaudited financial statements for the
nine month period ended September 30, 1994. The following unaudited pro forma
financial statements have been compiled as if Kaneb acquired the pipeline assets
of Wyco on the date of the balance sheet or as of the beginning of the period
for income statement purposes. The unaudited pro forma financial statements
should be read in conjunction with the notes accompanying such unaudited pro
forma financial statements and with the audited historical financial statements
and related notes of Kaneb and Wyco.
The unaudited pro forma financial statements may not be indicative of the
results that would have occurred if Kaneb had acquired the pipeline assets of
Wyco on the dates indicated or which will be obtained in the future.
<PAGE>
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(In Thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Partnership Wyaco Acquisition Pro
Historical Historical Adjustments Forma
-------------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues $ 69,235 $ 16,602 $ (5,006) (a) $ 80,831
----------- ----------- ----------- ------------
Costs and expenses:
Operating Costs 29,012 5,839 34,851
Depreciation and Amortization 6,135 841 (137) (b) 6,839
General and administrative 4,673 664 - 5,337
----------- ----------- ----------- ------------
Total costs and expenses 39,820 7,344 (137) 47,027
----------- ----------- ----------- ------------
Operating income 29,415 9,258 (4,869) 33,804
Interest and other income 1,331 172 - 1,503
Interest expense (3,376) (13) (2,247) (c) (5,636)
Minority interest in net income (266) - (23) (d) (289)
Income taxes (450) (3,335) 3,335 (e) (450)
----------- ----------- ----------- ------------
Net income $ 26,654 $ 6,082 $ (3,804) $ 28,932
=========== =========== =========== ============
Allocation of net income per Senior Preference Unit $ 2.20 $ 2.20
=========== ============
</TABLE>
<PAGE>
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1994
(In Thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Partnership Wyco Acquisition Pro
Historical Historical Adjustments Forma
-------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Revenues $ 57,925 $ 9,461 $ - $ 67,386
-------------- ------------ ------------- -----------
Costs and expenses:
Operating costs 24,504 3,438 - 27,942
Depreciation 5,366 629 (101) (b) 5,894
General and administrative 3,631 909 - 4,540
-------------- ------------ ------------- -----------
Total costs and expenses 33,501 4,976 (101) 38,376
-------------- ------------ ------------- -----------
Operating income 24,424 4,485 101 29,010
Interest and other income 926 583 - 1,509
Interest expense (2,654) - (1,695) (c) (4,349)
Minority interest in net income (217) - (35) (d) (252)
Income taxes (744) (1,965) 1,965 (e) (744)
-------------- ------------ ------------- -----------
Net income $ 21,735 $ 3,103 $ 336 $ 25,174
============== ============ ============= ===========
Allocation of net income per Senior Preference Unit $ 1.65 $ 1.65
============== ===========
</TABLE>
<PAGE>
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA BALANCE SHEETS
SEPTEMBER 30, 1994
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Partnership Acquisition Pro
Historical Adjustments Forma
----------------- -------------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 7,142 $ 2,047 (f) $ 9,189
Current portion of receivable from
general partner 4,974 - 4,974
Accounts receivable 2,166 - 2,166
Prepaid expenses 2,331 - 2,331
-------------- ------------- ----------
Total current assets 16,613 2,047 18,660
-------------- ------------- ----------
Receivable from general partner 4,133 - 4,133
-------------- ------------- ----------
Property and equiptment, net 144,289 28,161 (a) 172,450
-------------- ------------- ----------
$ 165,035 $ 30,208 $ 195,243
============== ============= ==========
LIABILITIES AND CAPITAL
Current Liabilities:
Current portion of long-term debt $ 1,496 $ - $ 1,496
Accounts payable, accrued expenses
and distributions payable 14,042 1,296 (g) 15,338
Deferred terminating fees 1,658 - 1,658
Payable to general partner 1,035 - 1,035
-------------- ------------- ----------
Total current liabilities 18,231 1,296 19,527
-------------- ------------- ----------
Long-term debt, less current portion 44,022 27,000 (h) 71,022
-------------- ------------- ----------
Other liabilities 1,631 1,912 (i) 3,543
-------------- ------------- ----------
Minority interest 996 - 996
-------------- ------------- ----------
Capital 100,155 - 100,155
-------------- ------------- ----------
$ 165,035 $ 30,208 $ 195,243
============== ============= ==========
</TABLE>
<PAGE>
Kaneb Pipe Line Partners, L. P.
Notes to Pro Forma Financial Statements
(a) Represents the preliminary allocation of the estimated fair market value of
the acquired assets and elimination of the historical gain on an asset sale
in 1993, however, the internal valuation of the assets is not complete as
of the date of this filing.
(b) Adjusts the amortization of the acquired assets.
(c) Reflects interest expense on $27 million of acquisition debt.
(d) Reflects the General Partner's 1% general partner interest in Kaneb
Operating Partnership, L.P.
(e) Reflects elimination of income taxes as the operations will be taxed as a
partnership.
(f) Represents cash received from seller to settle liabilities acquired.
(g) Represents liabilities assumed and accrued acquisition costs.
(h) Reflects the issuance of $27 million of long-term debt, incurred in
connection with the Wyco acquisition.
(i) Represents liabilities assumed in connection with the acquisition.
<PAGE>
Exhibit 10.1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
-----------------------------------------
This Agreement for Sale and Purchase of Assets ("Agreement") is made and
entered into as of this 19th day of February, 1995 by and between WYCO PIPE
LINE COMPANY, a Delaware corporation having its principal office at One Mid
America Plaza, Suite 300, Oakbrook Terrace, Illinois 60181-7423 (referred to
herein as "Seller") and KANEB PIPE LINE OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership having its principal office at 2435 North Central
Expressway, Suite 700, Richardson, Texas 75080 (referred to herein as "Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the owner of a petroleum liquids pipeline running from
Casper, Wyoming to near Fountain, Colorado and from Douglas, Wyoming to Rapid
City, South Dakota, as shown on the map attached hereto and made a part hereof
as Schedule 1.1(a), together with the Related Property (as such term is defined
in Section 1.1(c) hereof), certain associated valves, pump stations, tanks,
metering facilities, and equipment located on the Related Property or used in
connection with the pipeline, and certain other assets related to or used in
connection with the pipeline;
<PAGE>
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller, the pipeline and certain other assets related to the pipeline, upon the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, conditions and agreements set forth herein, the parties hereby
agree as follows:
ARTICLE I - PURCHASE AND SALE OF ASSETS
---------------------------------------
1.1 Assets To Be Transferred. Subject to, and upon the terms and
------------------------
conditions of this Agreement, Seller shall sell, transfer, convey, assign, set
over, and deliver to Buyer, and Buyer shall purchase, acquire and receive from
Seller, at the Closing (as such term is defined in Section 11.1 hereof), the
assets listed and described in subsections (a) through (g) below (collectively
referred to herein as the "Assets"):
(a) Pipeline. The pipeline as shown on Schedule 1.1(a) hereof (the
--------
"Pipeline").
(b) Pipeline Equipment. Subject to Section 1.2 hereof and subject to
------------------
rights or interests of third parties reflected in the Contracts (as such
term is defined in Section 1.1(e) hereof), all facilities, equipment and
other personal property listed in Schedule 1.1(b) attached hereto and made
a part hereof (the "Pipeline Equipment"), except for items that
2
<PAGE>
are listed in Schedule 1.1(b) as "Excluded Items". The Pipeline Equipment
together with the Pipeline is collectively referred to herein as the
"Pipeline System".
(c) Related Property. Subject to Sections 1.3 and 1.5 hereof, the real
----------------
property and buildings and improvements located thereon, and the
leaseholds, easements, rights-of-way, permits, licenses, grants and other
real property rights, related to or used in the operation of the Pipeline
System in the six (6) months preceding the date hereof, all as more fully
described in Schedule 1.1(c) attached hereto and made a part hereof (the
"Related Property").
(d) Licenses and Permits. Subject to Sections 1.2 and 1.6 hereof, all of
--------------------
Seller's rights under all governmental permits, licenses and approvals
(other than such which are Related Property, which are covered in Section
1.1(c)) listed in Schedule 1.1(d) attached hereto and made a part hereof
(the "Permits"), except for items that are listed in Schedule 1.1(d) as
"Excluded Items".
(e) Contracts. Subject to Sections 1.2 and 1.6 hereof, and to the
---------
contract assignment and assumption agreement to be executed by the parties
pursuant to Section 1.4(d) and Article XI hereof, all of Seller's rights in
all of the executory contracts, agreements, leases and commitments listed
in Schedule 1.1(e) attached hereto and made a part hereof (the
"Contracts"), except for items that are listed in Schedule 1.1(e) as
"Excluded Items".
3
<PAGE>
(f) Records. Except as otherwise provided in Section 1.2 hereof, all
-------
records, documents, contracts, correspondence, legal documents, lease, land
and title records, health, safety and environmental records, drawings,
specifications, designs, plans, technical data, and maintenance and repair
records relating to the assets described in the foregoing subsections
1.1(a) through (e) and necessary to or useable in the operation of the
Pipeline System after the Closing (the "Records"), except for items that
are identified on Schedule 1.1(f) as "Excluded Items"; it being understood
that Seller has the right to retain copies of any such Records.
(g) Trade Name. All of the right and interest in the name "Wyco" that
----------
Seller possesses and has the right to transfer (the "Trade Name").
1.2 Excluded Assets. The following rights, properties and assets (the
---------------
"Excluded Assets") are not included in the Assets and their exclusion from sale
hereunder shall not affect the Purchase Price (as defined in Section 2.1 hereof)
and shall not prevent or delay the Closing:
(a) Unassignable Assets. Subject to the provisions of Section 1.6 hereof,
-------------------
those leases, contracts, licenses, permits, approvals, consents, agreements
and commitments included as an Asset but which by their express or implied
terms or by operation of law are not freely assignable by Seller to Buyer,
and any other assets, properties, rights or information that Seller and
Buyer may prior to the Closing agree in writing to exclude from the sale,
provided, however, that no Related Property shall be an Excluded Asset.
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(b) Records. All (i) records prepared specifically for use in connection
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with the sale of the Assets, including bids received from third
parties and information related to such bids, (ii) records identified
on Schedule 1.1(f) attached hereto as Excluded Items, and (iii)
records which relate solely to any liabilities which Buyer does not
assume pursuant to Article III of this Agreement.
(c) Third Party Product. Except as provided in Section 8.1(c) hereof, all
-------------------
line fill, tank and other inventories of petroleum liquids related to the
Pipeline System.
(d) Mandan Line. The 8" pipeline extending from Lignite, North Dakota to
-----------
Black Slough, North Dakota and the 6" pipeline extending from Battleview,
North Dakota to Ramberg Junction, North Dakota, together with associated
licenses, permits, valves, fittings, meters, pumps, engines, electrical
equipment, other equipment, pump stations, tanks, metering facilities,
easements, rights-of-way, leases, other real property interests, contracts,
accounts receivables and records (the "Mandan Line").
(e) Accounts Receivable. All accounts receivable and notes receivable
-------------------
related to the Pipeline System, the Related Property, the Permits or the
Contracts ("Accounts Receivable") insofar as the event, matter or
performance giving rise to the receivable occurred prior to the Closing.
(f) Cash. All of Seller's cash on hand or on deposit.
----
5
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(g) Other. The items identified on Schedules 1.1(b), 1.1(d) and 1.1(e) as
-----
Excluded Items.
1.3 Unassignable and Missing Related Property. To the extent that Buyer
-----------------------------------------
identifies in writing (i) any Related Property which by its express or implied
terms or by operation of law is not capable of being validly assigned or
transferred by Seller to Buyer without the consent or waiver of the owner or
issuer thereof or the other party thereto, or any third person (including a
government or governmental unit), or (ii) any portion of the Pipeline System for
which Seller does not own valid rights-of-way, easements, permits, licenses,
grants, leaseholds or other real property rights necessary for the operation
thereof as conducted during the six (6) months preceding the date hereof, Seller
at its sole cost shall (1) with respect to those matters identified by Buyer
pursuant to clause (i) above, use its best efforts to obtain prior to the
Closing such consents and waivers in principle subject to verification of the
Closing having occurred, by means of letters substantially in the form of
Schedule 1.3 attached hereto and made a part hereof (with no material changes
thereto), and (2) with respect to those matters identified by Buyer pursuant to
clause (ii) above, use its best efforts to obtain such rights-of-way, easements,
permits, licenses, grants, leaseholds or other real property rights, prior to
the Closing. Seller shall not be obligated to pay any presently existing
periodic costs or fees associated with such Related Property which accrue for
periods after the Closing in order to obtain such consents and waivers in
principle; Seller shall, however, pay all other administrative and processing
costs required, whether before or after the Closing, in order for Buyer to
obtain after the Closing the formal consents and waivers described in the
consents and waivers in principle.
6
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1.4 Instruments of Conveyance, Transfer and Assignment. In order to
--------------------------------------------------
accomplish the sale, assignment, transfer and conveyance contemplated herein,
Seller shall execute and deliver at the Closing deeds, bills of sale and other
documents or instruments of assignment, transfer and conveyance (the "Transfer
Documents") appropriate to transfer to Buyer the Assets, subject to Section 1.2,
as follows:
(a) Fee owned Related Property, by special warranty deed, in the form of
Exhibit A attached hereto and made a part hereof;
(b) Leasehold, easement, right-of-way and other interests in Related
Property (that are not customarily transferred by deed) by an assignment
and conveyance in the form of Exhibit B attached hereto and made a part
hereof;
(c) Pipeline, Pipeline Equipment, Records and Trade Name, by a bill of
sale in the form of Exhibit C attached hereto and made a part hereof;
(d) Contracts, by a contract assignment and assumption agreement in the
form of Exhibit D attached hereto and made a part hereof; and
(e) Permits, by an assignment in the form of Exhibit E attached hereto and
made a part hereof and such documents of transfer or assignment as the
appropriate authorities or parties may require.
7
<PAGE>
1.5 Title to Related Property.
-------------------------
(a) Subject to the provisions of this Section 1.5, Seller shall convey to
Buyer, and Buyer shall accept from Seller, the Related Property subject to,
and only subject to: (i) all easements, covenants, conditions,
restrictions, exceptions, reservations and encumbrances (other than liens,
except for liens for real estate taxes not yet due and payable) of record;
(ii) all building, zoning, and other applicable ordinances and regulations
of any municipal, county, state or federal authority having jurisdiction
over the Related Property; (iii) ad valorem real and personal property
taxes and general and special assessments for the then current period as
are not due and payable prior to the Closing; (iv) all encroachments,
overlaps, and other matters which would be disclosed by an accurate current
survey; (v) title defects consisting of survey exceptions and other
recorded easements, licenses, rights-of-way or other restrictions as to the
use of the Related Property; (vi) rights or interests of third parties in
or to the Related Property which are reflected in the Contracts (not
including items listed in Schedule 1.1(e) as Excluded Items); and (vii)
such facts as would be revealed by an inspection of the Related Property
(the items described in clauses (i) through (vii) above collectively
referred to herein as "Title Exceptions").
(b) Buyer shall be entitled to obtain prior to the Closing, at Buyer's
option and sole cost, metes and bounds surveys made by a registered
surveyor setting forth the location of all
8
<PAGE>
buildings and permanent structures and the location of all recorded and
ascertainable easements and rights-of-way. Seller agrees to cooperate with
Buyer's efforts to obtain the surveys, including furnishing Buyer promptly
upon request copies of all surveys which Seller may have in its possession.
(c) Buyer shall be entitled to obtain prior to the date of the Closing, at
its option, a title insurance commitment agreeing to issue to Buyer, upon
recording of the deed and assignment to Buyer, owner's policies of title
insurance in an amount to be determined by Buyer, insuring the title of
Buyer to the Related Property subject only to the ALTA standard printed
exceptions in a policy issued by a title insurance company reasonably
acceptable to Buyer and to Title Exceptions which do not prevent the
current use of the Related Property. To the extent that such title
insurance commitment covers fee owned Related Property, the costs of same
shall be shared equally by Buyer and Seller; all other costs of any such
title insurance, including endorsements and title insurance policies, shall
be borne by Buyer. After the date hereof and until the Closing, Seller
shall not permit to be filed of record any instrument affecting title to
the Related Property without the consent of Buyer, such consent not to be
unreasonably withheld.
(d) After the Closing, Buyer shall be responsible for recording, at its
sole cost, the conveyance of the Related Property hereunder.
9
<PAGE>
(e) Nothing in this Section 1.5 shall limit the representations of Seller
set forth in Article VII below.
1.6 Restrictions on Transfer of Permits, Licenses, Leases and Contracts.
-------------------------------------------------------------------
(a) To the extent that any lease, contract, license, permit, approval,
consent, or other agreement or commitment (but not including such which are
Related Property) included as an Asset to be transferred to Buyer is by its
express or implied terms or by operation of law not capable of being
validly assigned or transferred without the consent or waiver of the issuer
thereof or the other party thereto, or any third person (including a
government or governmental unit), or if such assignment, transfer or
attempted assignment or transfer would constitute a termination or breach
thereof or a violation of any law, decree, order, regulation or other
governmental edict or is otherwise not practicable, this Agreement shall
not constitute an assignment or transfer thereof, or an attempted
assignment or transfer thereof. Any such lease, contract, license, permit,
approval, consent, agreement or commitment (but not including such which
are Related Property) identified by Buyer in writing prior to the Closing
is referred to herein as a "Restricted Asset".
(b) Seller shall be under no obligation to transfer, or attempt to obtain
necessary consents and waivers, with respect to any Restricted Asset which
is a Permit that is not capable of being assigned. Seller is not obligated
to transfer to Buyer any other
10
<PAGE>
Restricted Asset (an "Other Restricted Asset") without Seller and Buyer
first having obtained all necessary consents and waivers. Seller shall use
reasonable efforts for a twelve (12) month period, commencing on the date
hereof, and Buyer shall cooperate with Seller, to obtain the consents and
waivers necessary for Seller to convey to Buyer any such Other Restricted
Asset as soon as practicable; provided, however, that neither party shall
be obligated to pay any consideration therefor to the party from whom the
consent or waiver is requested.
(c) To the extent that the consents and waivers for Other Restricted
Assets referred to in Section 1.6(b) hereof are not obtained by Seller, or
until the impracticalities of transfer referred to therein are resolved,
Seller shall, during the twelve (12) month period commencing on the date
hereof or such longer period as Seller may desire (but, as to any
particular Other Restricted Asset, not longer than the term thereof,
including renewal options), use its reasonable efforts to (i) provide to
Buyer at Buyer's request the benefits of any Other Restricted Asset, but
only to the extent necessary to permit Buyer's ownership or use of the
Assets to the same or similar extent as owned or used by Seller in the six
(6) months immediately prior to the Closing, and (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to
Buyer. After Seller has fulfilled Seller's obligations set forth in
Section 1.6(b) hereof, Seller shall have no further obligations hereunder
with respect to assignment of such Other Restricted Asset, and the failure
to obtain any necessary consent or waiver with respect thereto shall not be
a breach of this Agreement. In no event shall Seller's obligations under
this
11
<PAGE>
Section 1.6 include any obligation to commence or prosecute litigation
against any third party. Buyer agrees to reimburse promptly Seller for its
reasonable costs incurred in connection with this Section 1.6(c).
(d) To the extent that Buyer is provided the benefits pursuant to Section
1.6(c) hereof of any Other Restricted Asset, Buyer shall perform, for the
benefit of the issuer thereof or the other party or parties thereto, the
obligations of Seller thereunder or in connection therewith, but only to
the extent that (i) such action by Buyer would not result in any default
thereunder or in connection therewith, and (ii) such obligation would have
been assumed by Buyer pursuant to Article III hereof or pursuant to the
contract assignment and assumption agreement to be executed by the parties
pursuant to Section 1.4(d) and Article XI hereof, but for the
nonassignability or nontransferability thereof. If Buyer shall fail to
perform to the extent required herein, Seller shall cease to be obligated
under this Section 1.6 in respect of the instrument which is the subject of
such failure to perform unless and until such situation is remedied, and
Buyer shall indemnify, defend and hold Seller harmless from the
consequences of Buyer's failure to perform in accordance with the
provisions of Section 12.2 of this Agreement.
1.7 Destruction of the Assets.
-------------------------
(a) In the event any of the Assets material to the operation of the
Pipeline System are damaged or destroyed by fire or other casualty, or are
condemned or threatened to be
12
<PAGE>
condemned, after the date hereof and prior to the Closing, Seller shall
promptly notify Buyer in writing of such, including reasonable detail
regarding the facts related thereto known to Seller.
(b) If in Seller's good faith judgment repair or replacement of such
Assets can be made at a cost not to exceed $1,355,000, then Seller, at
Seller's sole cost, shall promptly commence and diligently pursue the
repair or replacement of such Assets to Buyer's reasonable satisfaction and
return of the Pipeline System to its normal operating condition as operated
in the six (6) months preceding the date hereof. If in Seller's good faith
judgment the cost of such replacement or repair of such Assets may exceed
$1,355,000, then Seller shall elect to: (i) terminate this Agreement, or
(ii) subject to any rights of Buyer in Section 1.7(c), become obligated to
Buyer, at Seller's sole cost, promptly to commence and diligently pursue
the repair or replacement of such Assets to Buyer's reasonable satisfaction
and return of the Pipeline System to its normal operating condition as
operated in the six (6) months preceding the date hereof. Seller shall
notify Buyer of Seller's repair and replacement cost estimate and, if
applicable, its election under the preceding sentence within ten (10) days
of such loss, destruction, condemnation or threat of condemnation, which
notice shall include reasonable detail supporting such cost estimate.
(c) In the event any of the Assets material to the operation of the
Pipeline System are damaged or destroyed by fire or other casualty, or are
condemned or threatened to be
13
<PAGE>
condemned, after the date hereof and prior to the Closing and in Buyer's
good faith judgment the repair or replacement of such Assets and return of
the Pipeline System to its normal operating condition as operated in the
six (6) months preceding the date hereof may (i) exceed $4,065,000 in cost,
or (ii) take longer than ninety (90) days, then Buyer may elect to
terminate this Agreement by sending written notice of such election to
Seller within ten (10) days of Seller's notice under Section 1.7(b).
(d) If such loss, destruction, condemnation or threat of condemnation
occurs within the ten (10) day period prior to the Closing, the Closing
shall be delayed to the date ten (10) days after the giving of Seller's
notice under Section 1.7(b), to enable the applicable elections to be made,
or if such tenth (10th) day is a Saturday, Sunday or legal holiday in which
banks in Chicago, Illinois are not open for business, the Closing shall be
delayed to the first business day after such tenth (10th) day. If (i) any
damage, destruction, condemnation or threat of condemnation of any of the
Assets occurs after the date hereof and prior to the Closing, (ii) Seller
is obligated or elects to repair or replace such Assets pursuant to this
Section 1.7, (iii) Buyer does not exercise any right of termination of this
Agreement pursuant to this Section 1.7, and (iv) the repair or replacement
has not been completed prior to the scheduled time and date for the
Closing, then Buyer may, at its option, elect to either (1) delay the
Closing until the fifth (5th) business day after all the repairs and
replacements have been completed to Buyer's reasonable satisfaction and the
Pipeline System has been returned to its normal operating condition as
operated in the six (6) months preceding the date hereof, or (2) close the
14
<PAGE>
transactions contemplated by this Agreement on the scheduled date for the
Closing and require Seller to complete the repairs and replacements
contemplated by this Section 1.7 after the Closing.
ARTICLE II - PURCHASE PRICE
---------------------------
2.1 Purchase Price. In consideration of the transfer of the Assets at the
--------------
Closing and the other undertakings of Seller hereunder, Buyer shall pay to
Seller at the Closing twenty seven million, one hundred thousand dollars
($27,100,000.00) (the "Purchase Price").
2.2 Payment. At the Closing, Buyer shall deposit the Purchase Price in
-------
immediately available funds by bank wire transfer in an account or accounts (but
not more than two (2) accounts) at a national bank or banks located in the
United States designated by Seller. Seller shall give notice to Buyer of the
account or accounts and any other wire transfer instructions at least three (3)
days before the day of the Closing.
2.3 Prorations.
----------
(a) The following items relating to the Assets shall be prorated at the
Closing between Buyer and Seller and final payment made to the party to
whom it is due based on the respective period in which the parties own the
Assets during the calendar year which includes the Closing (the
"Prorations"):
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<PAGE>
(i) all real estate, personal property and other ad valorem taxes and
assessments (excluding penalties and interest) assessed or levied against the
Related Property;
(ii) charges, if any, for utilities servicing the Pipeline System and
the Related Property;
(iii) payments, if any, under service and similar Contracts that are
assumed by Buyer;
(iv) prepaid rent, prepaid property taxes, prepaid supplies, advances
and other prepaid costs and deposits related to the Pipeline System, the Related
Property, the Permits or the Contracts; and
(v) all other charges and fees related to the Assets customarily
prorated and adjusted in similar transactions.
For purposes of making such prorations, Seller shall be deemed to have conveyed
the Assets as of 11:59 p.m. the day before the Closing. In the event that
accurate prorations and other adjustments cannot be made because current bills
are not obtainable at the Closing, the parties shall prorate on the best
available information, subject to the Post-Closing Adjustment set forth in
Section 2.4 below.
16
<PAGE>
(b) At the Closing, Seller shall pay Buyer four hundred eighty thousand,
six hundred eighty five dollars and twenty cents ($480,685.20) as a good
faith estimate by the parties of the amount to be reimbursed to Buyer for
the Prorations, subject to the Post-Closing Adjustment set forth in Section
2.4 below. At the Closing, Seller shall deposit the aforementioned amount
in immediately available funds by bank wire transfer in an account at a
national bank located in the United States designated by Buyer. Buyer
shall give notice to Seller of the account and any other wire transfer
instructions at least three (3) days before the day of the Closing.
2.4 Post-Closing Adjustment.
-----------------------
(a) Buyer will provide to Seller copies of any invoices paid by Buyer
after the Closing that relate to Prorations. Within one hundred and twenty
(120) days after the Closing, Seller shall provide Buyer with a statement
of prorations based on final invoices or other final amounts setting forth
the prorations required by Section 2.3, certified by an officer of Seller
("Statement of Prorations"). Seller shall also provide any supporting
documentation reasonably requested by Buyer. If the Statement of
Prorations indicates that Buyer paid an excess amount at the Closing with
respect to the Prorations required by Section 2.3, the Statement of
Prorations shall be accompanied by a check in payment of the excess to
Buyer, plus interest from the later of (i) the date of the Closing or (ii)
the date of payment of the expense that is subject to proration, through
the date of payment of such excess to Buyer, calculated at an interest rate
equal to the most recently
17
<PAGE>
quoted (at the time of payment of such excess to Buyer) one month LIBOR
rate, compounded annually until paid.
(b) Within thirty (30) days of receipt of the Statement of Prorations and
any supporting documentation reasonably requested by Buyer, final payment
shall be made to the party to whom it is due for the difference between (i)
the good faith estimate of the Prorations paid at the Closing pursuant to
Section 2.1 herein, and (ii) the corresponding amounts reflected in the
Statement of Prorations, plus interest from the later of (i) the date of
the Closing or (ii) the date of payment of the expense that is subject to
proration, through the date of payment of such difference, calculated at an
interest rate equal to the most recently quoted (at the time of payment of
such difference) one month LIBOR rate, compounded annually until paid.
(c) Buyer shall have the right to conduct an audit of the relevant books
and records of Seller for the purpose of determining the accuracy of the
Statement of Prorations, provided that any audit must be completed and
written notice of contest of the Statement of Prorations must be given
within three (3) months after receipt of the Statement of Prorations by
Buyer or the Statement of Prorations as delivered by Seller shall be deemed
to be conclusive and binding on the parties. If as the result of any such
audit Buyer contests any portion of the Statement of Prorations within such
three (3) month period, Buyer and Seller shall cooperate in good faith to
reach agreement on a final Statement of Prorations. If Buyer and Seller
cannot agree within thirty (30) days of the date of the
18
<PAGE>
written notice of contest, the parties will submit the issue to binding
arbitration by a single arbitrator under the then-existing commercial
arbitration rules of the American Arbitration Association.
2.5 Like-Kind Exchange.
------------------
(a) It is Seller's intention to exchange the Assets that are the subject
of this Agreement for other property of like-kind in a non-simultaneous
exchange ("Non-Simultaneous Exchange") under such terms and conditions as
qualify for nonrecognition of gain pursuant to Section 1031 of the Internal
Revenue Code of 1986, as amended. At Seller's election, made to Buyer
prior to the transfer of the Assets to Buyer at the Closing and pursuant to
an assignment in the form of Exhibit F attached hereto and made a part
hereof (the "Assignment"), Buyer's obligation to pay to Seller at the
Closing the Purchase Price shall be fulfilled by Buyer's deposit of such
amount at the Closing in immediately available funds by bank wire transfer
in a trust established with Chicago Title and Trust Company as trustee,
pursuant to an exchange trust agreement between Seller and Chicago Deferred
Exchange Corporation.
(b) Buyer agrees to execute a copy of the Assignment and return such copy
to Seller solely for the purpose of acknowledging receipt of the notice
from Seller that Seller intends to effectuate the Non-Simultaneous
Exchange.
19
<PAGE>
2.6 Payments Between Parties. In the event either party ("Recipient")
------------------------
receives payments or refunds to which the other party ("Beneficiary") is
entitled in whole or in part under this Agreement, the Recipient shall within
fifteen (15) days from the date of such receipt pay such amount to the
Beneficiary. All payments to be made under this Section 2.6 or under other
provisions of this Agreement (including Exhibits to be executed and delivered
pursuant to the Agreement) requiring a payment to be made at a time other than
the Closing, shall be made by check or wire transfer in immediately available
funds.
ARTICLE III - ALLOCATION OF LIABILITIES
---------------------------------------
3.1 Known Pre-Closing Liabilities. Seller has knowledge of certain
-----------------------------
liabilities and obligations relating to or arising from the ownership,
operation, maintenance or use of the Assets by Seller prior to the Closing.
Such known liabilities and obligations shall be allocated as follows:
(a) Seller shall retain, without limit as to time or amount, all liability
and obligation relating to or arising from Kramer et al. v. Wyco Pipe Line
-------------------------------
Company, Civil Action No. 91CV2019, District Court, County of Adams, State
-------
of Colorado (the "Kramer Case").
(b) Seller shall retain, without limit as to time or amount, all liability
and obligation relating to or arising from the "Off-Site Dupont Plume", as
such term is defined in Schedule 3.1(b) attached hereto and made a part
hereof, and all liability and obligation
20
<PAGE>
relating to or arising from the "Rocky Mountain Arsenal Leak Site", as such
term is defined in Schedule 3.1(b) attached hereto and made a part hereof,
provided, however, that Seller shall not be liable or obligated for any
incremental liability or obligation relating to the Off-Site Dupont Plume
or the Rocky Mountain Arsenal Leak Site to the extent attributable to (i)
any failure by Buyer to implement the Agreed Remediation Plan (as such term
is defined in Section 3.1(c) hereof) in accordance with the time schedules
set forth in such plan, or negligence in the performance of the Agreed
Remediation Plan, or (ii) any release, spill, leak, discharge or other
emission affecting the soil or groundwater attributable to Buyer's
operations after the Closing. Such incremental liability or obligation
shall be Buyer's sole liability.
(c) The matters set forth on Schedule 3.1(c)1 attached hereto and made a
part hereof (the matters so set forth referred to herein as the "Known Pre-
Closing Contamination") are instances of contamination on the surface or in
the subsurface or groundwater of the Related Property, in existence on or
prior to the Closing and attributable to the ownership, operation,
maintenance or use of the Assets by Seller prior to the Closing, of which
Seller has sufficient knowledge to develop a plan of remediation. Seller
has shared such knowledge with Buyer, and Seller and Buyer have agreed to a
plan of remediation to be followed for the Known Pre-Closing Contamination,
which is set forth in Schedule 3.1(c)2 attached hereto and made a part
hereof (the "Agreed Remediation Plan"), and to the estimated costs
associated with such Agreed Remediation Plan, which are set forth in
Schedule 3.1(c)3 attached hereto and made a part hereof. At the Closing,
21
<PAGE>
Seller and Buyer shall each execute and deliver to the other a remediation
agreement covering remediation of the Known Pre-Closing Contamination,
substantially in the form attached hereto and made a part hereof as Exhibit
G (the "Remediation Agreement").
(d) The matters set forth on Schedule 3.1(d)1 attached hereto and made a
part hereof are instances of contamination on the surface or in the
subsurface or groundwater of the Related Property, in existence on or prior
to the Closing and attributable to the ownership, operation, maintenance or
use of the Assets by Seller prior to the Closing, of which Seller has some
knowledge, but insufficient knowledge to fully develop a plan of
remediation (the "Schedule 3.1(d) Contamination"). Seller has shared such
knowledge with Buyer, and Seller and Buyer have preliminarily devised a
provisional plan of remediation for the Schedule 3.1(d) Contamination,
which is set forth in Schedule 3.1(d)2 attached hereto and made a part
hereof, and have preliminarily estimated the costs associated with such
provisional remediation plan as set forth in Schedule 3.1(d)3 attached
hereto and made a part hereof. The present value of such estimated costs
(using a discount rate of 10%) is seven hundred sixty six thousand and two
hundred dollars ($766,200). At such time as, in the case of the Cheyenne
Terminal contamination reflected on Schedule 3.1(d)1, the relevant State of
Wyoming Environmental Agency approves a plan of remediation, but in no
event later than eighteen (18) months after the date of the Closing, and in
the case of the Rapid City contamination reflected on Schedule 3.1(d)1, the
relevant State of South Dakota Environmental Agency approves a plan of
remediation, but in no event later than eighteen (18) months after the date
of the
22
<PAGE>
Closing, Seller and Buyer shall agree as to the plan of remediation to be
followed for the Schedule 3.1(d) Contamination and as to the estimated
costs associated with such plan of remediation (including amounts spent
since the Closing). If Seller and Buyer are unable to so agree within
eighteen (18) months of the date of the Closing, the parties will submit
the unresolved issues to binding arbitration by a single arbitrator under
the then-existing commercial arbitration rules of the American Arbitration
Association. The plan of remediation with respect to the Schedule 3.1(d)
Contamination and the estimated costs associated with such plan (including
amounts spent since the Closing), as agreed or determined by arbitration,
shall be reduced to writing and signed by representatives of Seller and
Buyer (the "3.1(d) Remediation Plan"), and such writing when so signed
shall be deemed a part of this Agreement. At the Closing, Seller and Buyer
shall each execute and deliver to the other a remediation agreement
covering remediation of the Schedule 3.1(d) Contamination, substantially in
the form attached hereto and made a part hereof as Exhibit G (the
"Remediation Agreement").
3.2 Unknown Pre-Closing and Other Liabilities. For purposes of this
-----------------------------------------
Agreement, the term "Unknown Liability" shall refer collectively to the items
described in clauses (i), (ii) and (iii) below, specifically, (i) liability or
obligation relating to or arising from or as a result of a violation of or a
remedial or regulatory obligation imposed under Environmental Law (as such term
is defined in the Remediation Agreement) relating to or arising from or as a
result of an act, event or contamination that occurred or existed at or prior to
the Closing and was attributable or related to the ownership or use of the
Assets prior to the Closing ("Unknown
23
<PAGE>
Environmental Liability"); (ii) liability or obligation relating to or arising
from the breach of any representation, warranty, covenant or other obligation of
Seller contained in this Agreement, including but not limited to the Remediation
Agreement; and (iii) all other liabilities or obligations of Seller relating to
or arising from the Assets, including, but not limited to, liability or
obligation for third party claims for personal injury or property damage, which
personal injury or property damage was caused by the ownership or use of the
Assets by Seller prior to the Closing, but excluding liabilities and obligations
assumed under the Contracts assigned to Buyer pursuant to the contract
assignment and assumption agreement to be executed by the parties pursuant to
Section 1.4(d) and Article XI hereof, and excluding obligations to be performed
by Buyer pursuant to Section 1.6(d) hereof (the liabilities and obligations
included in this clause (iii) being referred to herein as "Other Liability");
provided that Unknown Liability, Unknown Environmental Liability and Other
Liability shall not include any of the liabilities or obligations retained by
Seller pursuant to Sections 3.1(a) or (b) hereof or any of the costs for
remediation or fines or penalties assumed by or allocated to Buyer under the
Remediation Agreement that are not designated as an Unknown Environmental
Liability under the Remediation Agreement. This Section 3.2 sets forth the
extent to which and the conditions under which Seller shall retain liability for
Unknown Liability.
(a) With respect to Unknown Environmental Liability, if within four and
one-half (4 1/2) years after the Closing, (i) an Environmental Order (as
such term is defined in the Remediation Agreement) is issued, the effect of
which, if not contested, would be to impose a legal obligation to perform
remediation or to impose other legal liability or
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<PAGE>
obligation pursuant to Environmental Law with respect to any Unknown
Environmental Liability (or with respect to Known Pre-Closing Contamination
as set forth in Section 1 of the Remediation Agreement or with respect to
Schedule 3.1(d) Contamination as set forth in Section 2 of the Remediation
Agreement) (collectively, an "Order"), or (ii) a third party delivers a
written statement of claim, the clear purport of which is to assert
liability or damages against Seller or Buyer relating to any Unknown
Environmental Liability (a "Claim"), Seller shall retain liability under
Environmental Law in effect as of the date of the Closing, directly
relating to or arising from any such Order or to the third party making
such Claim (except in the case of an Order under the Remediation Agreement,
Seller shall retain liability only for the incremental cost necessary to
comply fully with such Order), subject to the following and also to
subsections (e), (f) and (g) of Section 3.2 hereof and to Section 3.3
hereof:
(i) Promptly upon becoming aware of any facts which have not yet but
may give rise to such an Order or Claim, Buyer shall provide Seller with
written notice thereof and the opportunity to participate in discussions
with the relevant Environmental Agencies (as such term is defined in the
Remediation Agreement) or third parties relating to such facts, and in
Seller's sole discretion and at its sole cost to appeal any preliminary
determination or finding of such Environmental Agencies, provided that,
subject to clause (ii) below, any delay or failure to provide such notice
promptly will not limit Seller's liability hereunder except to the extent
Seller is damaged or prejudiced by such delay or failure; and
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<PAGE>
(ii) For Seller to have any liability or obligation for any such
Unknown Environmental Liability, Buyer must give written notice of any such
Order or Claim, including copies thereof, in no event later than four and
one-half (4 1/2) years after the Closing (unless Seller otherwise has
received written notice of such Order or Claim, including a copy thereof,
prior to the end of such four and one-half (4 1/2) year period, in which
event Seller shall retain liability and obligation directly relating to or
arising from such Order or to the third party making such Claim as set
forth above, subject to subsections (e), (f) and (g) of Section 3.2 and to
Section 3.3 hereof, and shall promptly give notice of such Order or Claim
to Buyer). If such written notice is given after the expiration of such
four and one-half (4 1/2) year period, Seller shall have no liability or
obligation for such Unknown Environmental Liability, regardless of whether
Buyer could reasonably have known of such Unknown Environmental Liability
within such four and one-half (4 1/2) year period (unless Seller otherwise
has received written notice of such Order or Claim, including a copy
thereof, prior to the end of such four and one-half (4 1/2) year period, in
which event Seller shall retain liability and obligation directly relating
to or arising from such Order or to the third party making such Claim as
set forth above, subject to subsections (e), (f) and (g) of Section 3.2 and
to Section 3.3 hereof, and shall promptly give notice of such Order or
Claim to Buyer); and
(iii) If Buyer, subsequent to the Closing, sells, transfers, conveys,
assigns, sets over, leases or otherwise disposes of any of the Assets or
any part thereof to any person other than an Affiliate of Buyer (as such
term is defined in Section 15.14(ii) hereof)
26
<PAGE>
("Resold Assets"), notwithstanding the foregoing, Seller shall have no
liability or obligation relating to or arising from Unknown Environmental
Liability associated with such Resold Assets, even if such sale, transfer,
or other disposition occurs within four and one-half (4 1/2) years after
the Closing; and
(iv) With respect to any particular such Unknown Environmental
Liability of which (1) Buyer has given written notice to Seller or Seller
has otherwise received written notice in accordance with clauses (i) and
(ii) above, and (2) Seller has agreed in writing that such Unknown
Environmental Liability is an Unknown Environmental Liability for which
Seller has retained liability in accordance with and subject to the
provisions of this Agreement, to the extent Seller is fully liable for such
Unknown Environmental Liability under this Section 3.2, Seller shall have
the right to perform or have performed at its cost (subject to Section
3.2(f) below) any required remediation, including dealing with any
Environmental Agency or Agencies with regard to the corrective action
required, clean-up standards and appropriate work plans. With respect to
any required remediation that Seller elects to perform, Seller may select,
subject to approval by Buyer (such approval not to be unreasonably
withheld), one or more environmental consultants to investigate and
characterize all environmental contamination potentially subject to
remediation, and to design and perform any required remediation. Buyer
shall have the right, at its cost, to participate in the planning and
design of any required remediation, and Buyer shall be provided, for review
and comment, a draft of any study, workplan, report or similar document to
be submitted to an Environmental
27
<PAGE>
Agency at least ten (10) working days before Seller intends to submit it.
Seller will consider in good faith any comments made by Buyer with respect
to any such study, workplan, report or similar document and, to the extent
practicable, will incorporate such comments into the document submitted to
the Environmental Agency. Any required remediation will be designed and
performed by Seller in a manner that complies with all Environmental Laws,
minimizes any potential future liability of the site owner/operator, is
commercially reasonable and cost effective and does not unreasonably
interfere with Buyer's operations. Seller shall provide Buyer a copy of all
reports, plans and correspondence submitted to an Environmental Agency with
respect to an Unknown Environmental Liability or any required remediation
thereof. In addition, Buyer shall have the right, at its cost, to attend
and participate in any meetings, conferences or other sessions with the
Environmental Agency concerning the required remediation and will be
provided at least ten (10) days' notice of any such meetings (or the
maximum number of days as is practicable if the meeting date is not set at
least ten (10) days prior to the meeting). With respect to any remediation
performed by or on behalf of Seller pursuant to this clause (iv), Seller
shall be the generator of any wastes generated in connection with such
remediation and shall prepare all documents associated with such
remediation in a manner that clearly identifies Seller as the generator of
the waste, including, but not limited to, the use of identification numbers
issued to Seller. Upon completion of the required remediation, Seller shall
provide Buyer written confirmation that the remediation plan designed as
set forth above has been completed. To the extent that, pursuant to this
clause (iv), Seller or its representatives or consultants are provided
access to Buyer's
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<PAGE>
properties or the Pipeline System, Seller shall reimburse Buyer for, and
defend, indemnify and hold harmless Buyer from and against, any and all
loss, damage, costs (including reimbursement of all reasonable attorney
fees and other costs of defense), liability, claim or suit, whether for
bodily injury or death of any person (including Seller's employees, agents
and representatives), damage to or destruction or loss of property
(including damage to Buyer's property), or otherwise, arising in any manner
whatsoever out of Seller or its representatives or consultants being given
access to Buyer's properties or the Pipeline System, whether or not based
upon strict liability or caused by the sole or concurrent negligence
(ordinary or gross) of Buyer or any other person or entity, unless such
loss, damage, cost, liability, claim or suit was occasioned solely by the
negligence or intentional tort of Buyer or any officer, director or agent
thereof.
With respect to remediation that Seller has a right to perform
pursuant to this clause (iv), within ninety (90) days of notice to Seller
under clause (ii) above, Seller shall notify Buyer whether Seller will
perform the remediation itself. If Seller decides to perform the
remediation itself, Buyer shall cooperate with Seller to effectuate such
remediation in accordance with this clause (iv), including granting
reasonable access to the area requiring remediation. If Seller decides not
to perform the remediation itself, Buyer shall perform or have performed
the remediation and invoice Seller for reasonable and necessary costs
incurred for such remediation (such invoices to include supporting
documentation). With respect to any remediation performed by or on behalf
of Buyer
29
<PAGE>
in respect of any Unknown Environmental Liability. Buyer shall be the
generator of any wastes generated in connection with such remediation and
shall prepare all documents associated with such remediation in a manner
that clearly identifies Buyer as the generator of the waste, including, but
not limited to, the use of identification numbers issued to Buyer. Subject
to Section 3.2(f) below, Seller shall pay properly submitted invoices
within thirty (30) days of receipt, and any such invoice not paid within
thirty (30) days shall bear interest calculated at a rate equal to the most
recently quoted (at the time such thirty (30) days expires) one month LIBOR
rate, compounded annually from the thirtieth (30th) day after receipt of
the invoice until paid; and
(v) Notwithstanding the foregoing, any incremental liability or
obligation relating to Unknown Environmental Liability to the extent
attributable to any release, spill, leak, discharge or other emission into
the environment attributable to Buyer's operations after the Closing, shall
not be an Unknown Environmental Liability but shall be Buyer's sole
liability.
(b) With respect to liability or obligation relating to or arising from
the breach of any representation, warranty, covenant or other obligation of
Seller contained in this Agreement, including but not limited to the
Remediation Agreement, Seller shall retain such liability and obligation,
subject to the following and also to subsections (e), (f) and (g) of
Section 3.2 hereof and to Section 3.3 hereof, except that any breach of any
30
<PAGE>
covenant or other obligation of Seller contained in this Agreement and to
be performed by Seller after the Closing shall not be subject to subsection
(f) of this Section 3.2:
For Seller to have any liability or obligation for any such breach of
any representation, warranty, covenant or other obligation of Seller
contained in this Agreement, (i) there must be a Buyer Loss (as such term
is defined in Section 12.1 hereof) attributable to the breach, (ii) Buyer
must give written notice of any such breach, setting forth the basis of
such breach known to Buyer at such time in reasonable detail, promptly
after Buyer has knowledge of such breach, provided that, subject to clause
(iii) below, any delay or failure to provide such notice promptly will not
limit Seller's liability hereunder except to the extent Seller is damaged
or prejudiced by such delay or failure, and (iii) Buyer must give written
notice of any such breach (other than a breach of any covenant or other
obligation of Seller contained in this Agreement and to be performed by
Seller after the Closing) in no event later than four and one-half (4 1/2)
years after the Closing; if such written notice is given after the
expiration of such four and one-half (4 1/2) year period, Seller shall have
no liability or obligation for such breach (other than a breach of any
covenant or other obligation of Seller contained in this Agreement and to
be performed by Seller after the Closing), regardless of whether Buyer
could reasonably have known of such breach within such four and one-half (4
1/2) year period.
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<PAGE>
(c) With respect to Other Liability, if within four and one-half (4 1/2)
years after the Closing, a third party delivers a written statement of
claim, the clear purport of which is to assert liability or damages against
Seller or Buyer relating to any Other Liability (a "Demand"), Seller shall
retain liability and obligation to the third party making such Demand,
subject to the following and also to subsections (e), (f) and (g) of
Section 3.2 hereof and to Section 3.3 hereof:
For Seller to have any liability for any such Other Liability, (i)
promptly upon becoming aware of any facts which have not yet but may give
rise to such a Demand, Buyer shall provide Seller with written notice
thereof and the opportunity to participate in discussions with the relevant
third parties relating to such facts, provided that, subject to clause (ii)
below, any delay or failure to provide such notice promptly will not limit
Seller's liability hereunder except to the extent Seller is damaged or
prejudiced by such delay or failure, and (ii) Buyer must give written
notice of any such Demand, including a copy thereof, in no event later than
four and one-half (4 1/2) years after the Closing (unless Seller otherwise
has received written notice of such Demand, including a copy thereof, prior
to the end of such four and one-half (4 1/2) year period, in which event
Seller shall retain liability and obligation to the third party making such
Demand as set forth above, subject to subsections (e), (f) and (g) of
Section 3.2 and to Section 3.3 hereof, and shall promptly give notice of
such Demand to Buyer); if such written notice is given after the expiration
of such four and one-half (4 1/2) year period, Seller shall have no
liability or obligation for such Other Liability, regardless of whether
Buyer could
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<PAGE>
reasonably have known of such Other Liability within such four and one-half
(4 1/2) year period (unless Seller otherwise has received written notice of
such Demand, including a copy thereof, prior to the end of such four and
one-half (4 1/2) year period, in which event Seller shall retain liability
and obligation to the third party making such Demand as set forth above,
subject to subsections (e), (f) and (g) of Section 3.2 and to Section 3.3
hereof, and shall promptly give notice of such Demand to Buyer).
(d) Notwithstanding the foregoing, except to the extent, if any, that any
breach by Seller of its representations set forth in Sections 7.1(n) and
(o) hereof relates to the physical condition or configuration of the
Assets, Seller shall retain no liability or obligation (i) for the physical
condition or configuration of the Pipeline System as of the Closing, or
(ii) with respect to any liability or obligation that accrues after the
Closing and that relates to the physical condition or configuration of the
Pipeline System as of the date of the Closing, including but not limited to
any liability or obligation to repair, replace, correct, upgrade,
refurbish, add to, move, supplement or change any part of the Pipeline
System.
(e) Any and all liabilities and obligations retained by Seller in
accordance with Sections 3.2(a) through (d) above, before taking into
account subsections (f) and (g) below, shall be referred to herein as
"Assigned Liabilities".
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<PAGE>
(f) Notwithstanding subsections (a) through (d) above, Seller shall have
no liability or obligation with respect to any Assigned Liabilities until
the aggregate cost thereof exceeds one hundred and fifty thousand dollars
($150,000); the first one hundred and fifty thousand dollars ($150,000) of
cost of Assigned Liabilities shall be paid by Buyer. After the aggregate
cost of all Assigned Liabilities exceeds one hundred and fifty thousand
dollars ($150,000), as supported with appropriate documentation provided to
Seller by Buyer, Seller shall be liable and obligated for such Assigned
Liabilities to the extent, but only to the extent, that the aggregate cost
of such Assigned Liabilities exceeds $150,000, provided that Seller and
Buyer shall share equally each dollar of the next nine hundred thousand
dollars ($900,000.00) of cost of Assigned Liabilities that are Unknown
Environmental Liability, and provided further that Seller shall not be
liable or obligated for Assigned Liabilities (including without limitation
Assigned Liabilities that are Unknown Environmental Liability) to the
extent the aggregate cost therefor exceeds two million, nine hundred and
fifty thousand dollars ($2,950,000) plus one-half of the first (after the
above-mentioned $150,000 is exceeded) $900,000 of Assigned Liabilities that
are Unknown Environmental Liability (the "Ceiling"). Seller shall not be
liable or obligated, and Buyer shall be liable and obligated (except for
those matters for which Seller has retained liability pursuant to Section
3.3 (a)(i)-(vi) below), for the first $150,000 of Assigned Liabilities and
for all Assigned Liabilities in excess of the Ceiling, except only if
Buyer's aggregate cost for Assigned Liabilities, as supported with
appropriate documentation provided to Seller by Buyer, reaches an amount
equal to the Purchase Price.
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<PAGE>
The maximum liability and obligation of Seller for Assigned Liabilities
shall be the Ceiling, except only if Buyer's aggregate liability and
obligation for Assigned Liabilities reaches an amount equal to the Purchase
Price, as supported with appropriate documentation provided to Seller by
Buyer, at which point liability and obligation for further Assigned
Liabilities to the extent above an amount equal to the Purchase Price shall
revert to and be retained by Seller. The maximum liability and obligation
of Buyer for Assigned Liabilities shall be an amount equal to the Purchase
Price. Liabilities and obligations assumed or incurred by Buyer related to
the Assets that are not Assigned Liabilities shall not count towards either
the $150,000 deductible provided for in this subsection (f) or towards the
Purchase Price cap on Buyer's liability and obligation for Assigned
Liabilities. At such time, if any, as Buyer reasonably determines that its
aggregate liability and obligation for Assigned Liabilities will reach an
amount equal to the Purchase Price, it shall provide Seller with written
notice thereof and shall make available to Seller supporting documentation
reasonably satisfactory to Seller.
Notwithstanding the foregoing, the Ceiling shall not apply to any
Assigned Liabilities relating to or arising from the breach of Section
7.1(d). Notwithstanding the foregoing, the Ceiling and the one hundred and
fifty thousand dollar ($150,000) deductible provided for in this subsection
(f) shall not apply to any Assigned Liabilities relating to or arising from
any breach by Seller of any covenant or other obligation of Seller
contained in this Agreement and to be performed by Seller after the
Closing. Notwithstanding any required notice provisions in Section 3.2(a),
(b) or (c), any
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<PAGE>
individual Assigned Liability that is paid by Buyer within four and one-
half (4 1/2) years after the Closing, in an amount less than ten thousand
dollars ($10,000), and for which notice was not given in accordance with
Section 3.2(a), (b) or (c), whichever applies, but for which Buyer could
have given the required notice to Seller within four and one-half (4 1/2)
years after the Closing, will be counted toward the one hundred and fifty
thousand dollar ($150,000) deductible provided for in this subsection (f)
if proper notice thereof is given to Seller at the time Buyer requests
payment by Seller hereunder of Assigned Liabilities.
For purposes of this Agreement, time expended by personnel of Seller
or Buyer, or affiliates of either, in connection with Assigned Liabilities
shall not be considered a cost of Assigned Liabilities. Reasonable
attorneys' and consultants' fees incurred in connection with an Assigned
Liability by the party that, pursuant to the provisions of this Agreement,
is responsible for dealing with the Assigned Liability, shall be considered
a cost of Assigned Liabilities for purposes of this Agreement; otherwise
attorneys' fees and consultants' fees shall not be considered a cost of
Assigned Liabilities.
(g) Other than liability and obligation for Assigned Liabilities within
the limitations set forth in subsections (a) through (f) above, and for
liability and obligation retained by Seller under either Section 3.1,
Section 3.3 or the Remediation Agreement, Seller shall have no liability or
obligation relating to or arising from the Assets, or the ownership,
36
<PAGE>
operation or use thereof, including without limitation Unknown
Environmental Liability and Unknown Liability.
3.3 Liabilities Assumed by Buyer; Liabilities of Buyer.
--------------------------------------------------
(a) Buyer hereby assumes all liabilities and obligations of Seller
relating to or arising from the Assets, whether such liabilities and
obligations are to a governmental body or any other person, firm or entity,
whether based in whole or in part on strict liability, willful or
intentional misconduct, or ordinary or gross negligence, and whether known
or unknown, current or future, absolute or contingent, liquidated or
unliquidated, or due or to become due, and whether relating to the period
prior to or after the Closing, except those liabilities and obligations
expressly retained by Seller under this Agreement; provided that
notwithstanding any other provision of this Agreement, Buyer shall not
assume or be deemed to have assumed, and Seller shall retain liability for
and indemnify Buyer against, all liabilities, damages, costs (including
reasonable attorneys' fees) arising from or related to the following,
without limit as to time or amount:
(i) liabilities or obligations of Seller that are not Unknown
Liability as hereinabove defined;
(ii) liabilities or obligations of Seller for taxes based on income
or related penalties, interest, assessments or liabilities;
37
<PAGE>
(iii) liabilities or obligations of Seller under contracts,
agreements, leases, commitments, and governmental permits, licenses and
approvals, or portions thereof, that have not been disclosed and delivered
to Buyer as provided for in this Agreement;
(iv) liabilities or obligations of Seller or Amoco Pipeline Company
under any employee welfare or benefit plans or under the Employee
Retirement Income Security Act of 1974 or for other employee related
liabilities except as set forth in Article V hereof;
(v) except as set forth in the Services Agreement (as such term is
defined in Article VI hereof), liabilities or obligations of Seller
relating to or arising from acts or omissions of Seller or its affiliates,
employees, representatives or agents after the Closing, provided that the
indemnity of Seller with respect to such acts or omissions that constitute
a breach of any representation or warranty of Seller contained in this
Agreement shall be limited as set forth in subsections (e), (f) and (g) of
Section 3.2 hereof; and
(vi) liabilities or obligations of Seller relating to or arising
from wilful or intentional violation of laws, rules, regulations or
governmental directives or pronouncements by Seller or its affiliates,
employees, representatives or agents.
(b) All liabilities and obligations directly or indirectly relating to or
arising from Buyer's ownership, operation, maintenance or use of the Assets
after the Closing, including without limitation all liabilities and
obligations under Environmental Law relating to or
38
<PAGE>
arising from Buyer's acts, events or omissions, or contamination, occurring
after the Closing, shall be liabilities and obligations of Buyer.
3.4 Notice by Seller. If Seller, or either of its shareholders, Amoco
----------------
Pipeline Holding Company and GATX Pipeline Company, receives a Claim or a Demand
from a third party, Seller shall promptly send a copy of such to Buyer and shall
provide to Buyer such reasonable detail of information relating to the matters
set forth in such Claim or Demand as is available to Seller.
ARTICLE IV - TAXES
------------------
4.1 Cooperation. Buyer and Seller agree to furnish or cause to be
-----------
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Assets as is reasonably necessary for
the filing of all tax returns, the preparation for any audit by any taxing
authority, and the prosection or defense of any claim, suit or proceeding
relating to any tax return. Seller and Buyer shall cooperate with each other in
the conduct of any audit or other proceeding related to taxes involving the
Assets.
4.2 Transfer Taxes. If and to the extent that any transfer, sales,
--------------
excise, use and other non-income taxes are or become due and payable upon
transfer of the Assets pursuant to this Agreement, such taxes shall be paid by
Buyer. In no event, however, shall Buyer be liable for any income, franchise or
similar tax on the income of the Seller or its shareholders resulting
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<PAGE>
from the transactions contemplated by this Agreement. Buyer shall also pay all
fees for any recording of instruments of conveyance relating to transfer of the
Assets pursuant to this Agreement.
4.3 Other Taxes. All ad valorem, real and personal property taxes and
-----------
general and special assessments (excluding penalties and interest) levied or
assessed against the Assets shall be prorated as of the Closing pursuant to
Section 2.3 hereof.
ARTICLE V - EMPLOYEES
---------------------
5.1 Offers of Employment. Certain employees of Amoco Pipeline Company
--------------------
("APL"), the operator of the Pipeline System, are currently engaged full-time or
part-time in the operation of the Pipeline System (herein referred to as the
"Employees"). Schedule 5.1 attached hereto and made a part hereof sets forth a
list of the Employees. Buyer may make offers of full-time regular employment to
such Employees. If any of the Employees are not offered employment by Buyer, or
are offered employment but do not accept, and such Employees are terminated by
APL, Buyer shall have no liability for any severance costs or other costs
relating to termination of such Employees, except that if, within one hundred
and twenty (120) days of the Closing, Buyer hires any Employee who received
severance payments from APL, Buyer shall reimburse APL for any severance
payments made by APL to any such hired Employees if the Employee does not return
such severance payments to APL as required by the APL severance plan (which is
set forth in Schedule 5.2 attached hereto and made a part hereof).
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5.2 Severance Benefits. Buyer shall provide severance benefits at least
------------------
as generous as those provided in Schedule 5.2 attached hereto and made a part
hereof to any Employee hired by Buyer whose employment with Buyer is terminated
within twelve (12) months after the Closing as a result of the following
circumstances only: (i) any reduction in force effected by Buyer; (ii) any
plant or office location closing effected by Buyer; (iii) any relocation of the
Employee outside the Pipeline System without such Employee's consent; or (iv)
any reduction of personnel; but excluding any termination for "cause". For
purposes hereof, "cause" shall mean: (A) the failure of the Employee to perform
his or her duties at a level reasonably acceptable to Buyer; or (B) the
commission by the Employee of an act of fraud, embezzlement, violence or other
misconduct against Buyer or any of its employees or the Employee having been
convicted of a felony involving moral turpitude. For purposes of determining
"Credited Service" in Schedule 5.2, a severed Employee shall be credited with
service with APL and its affiliates in addition to such Employee's service with
Buyer and its affiliates in the amounts set forth in Schedule 5.2 for such
Employee.
ARTICLE VI - ANCILLARY TRANSACTIONS
-----------------------------------
At the Closing, APL and Buyer shall each execute and deliver to the other
an agreement, substantially in the form attached hereto as Exhibit H (the
"Services Agreement"), pursuant to which APL will provide to Buyer at Buyer's
cost certain post-Closing services relating to the operation of the Pipeline
System for a period not to exceed nine (9) months.
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ARTICLE VII - REPRESENTATIONS AND WARRANTIES
--------------------------------------------
7.1 Seller's Representations and Warranties. Seller represents and
---------------------------------------
warrants to Buyer as follows:
(a) Corporate Organization. Seller is as of the date of this Agreement,
----------------------
and will be at the Closing, a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is
qualified as a foreign corporation in each jurisdiction in which the
character of its business or the location of its assets makes such
qualification necessary (except for those jurisdictions in which the
failure to be so qualified would not, taken in the aggregate, have a
material adverse effect on the Seller's ability to consummate the
transactions herein or in the Transfer Documents, or perform its
obligations hereunder or thereunder).
(b) Authorization. Seller has requisite corporate power and authority to
-------------
execute and deliver this Agreement and the Transfer Documents and to
consummate the transactions and perform its obligations hereunder and under
the Transfer Documents. The execution and delivery by the Seller of this
Agreement and the Transfer Documents and the consummation of the
transactions and the performance by the Seller of the obligations
contemplated hereby and thereby have been duly authorized by all requisite
corporate
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<PAGE>
action on the part of Seller. This Agreement has been, and the Transfer
Documents will be, duly executed and delivered by Seller, and this
Agreement constitutes, and each of the Transfer documents when fully
executed and delivered will constitute, legal, valid and binding
obligations of Seller, enforceable in accordance with their respective
terms, except (i) as limited by bankruptcy, insolvency, rearrangement,
reorganization, or similar debtor relief legislation affecting the rights
of creditors generally from time to time in effect, and (ii) that the
remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(c) No Violation. Subject to (i) compliance with the requirements of the
------------
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder (the "HSR Act"), (ii) the Wyoming PSC
and Colorado PUC consents referred to in Section 8.1(d) hereof, and (iii)
any approvals required for the transfer of any Restricted Asset, neither
the execution and delivery by Seller of this Agreement or the Transfer
Documents, nor the performance by Seller of its obligations under this
Agreement or the Transfer Documents, nor the consummation of the
transactions contemplated by this Agreement and the Transfer Documents
shall:
(A) conflict with any provision of the Articles of Incorporation or
By-Laws of Seller;
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(B) result in a breach or default of, or result in the creation or
imposition of any lien or encumbrance upon the Assets under, any agreement
or commitment to which Seller is a party or by which Seller or any of the
Assets is bound; or
(C) to the knowledge of Seller, violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which Seller or any of the Assets is subject;
which violation, conflict, breach or default would (i) affect Seller's
ability to consummate the transactions contemplated by this Agreement and
the Transfer Documents or (ii) have an adverse effect on the Assets or the
operation of the Pipeline System.
(d) Title to Certain Assets. Seller has good and marketable title to the
-----------------------
Pipeline, Pipeline Equipment and Records free and clear of any security
interests, liens or encumbrances, except for materialmen's liens,
mechanic's liens and other liens arising in the ordinary course of
business, all of which liens are listed on Schedule 7.1(d) and all of which
liens will be discharged and released at or prior to the Closing, and for
any consents necessary to transfer Restricted Assets.
(e) Litigation/Condemnation. Except as otherwise indicated in Section
-----------------------
3.1(a) or set forth in Schedule 7.1(e) attached hereto and made a part
hereof, (i) Seller is not a party to any pending suit or proceeding before
any court, governmental agency or arbitrator,
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(ii) Seller has no knowledge of any threatened suit or proceeding before
any court, governmental agency or arbitrator, (iii) there is no outstanding
order, judgment or decree by any court, governmental authority or
arbitrator against Seller, (iv) Seller has no knowledge of any acts,
events, omissions or circumstances not otherwise disclosed in the Schedules
attached hereto and made a part hereof that Seller, as of the date of this
representation, reasonably anticipates will give rise to a suit or
proceeding before any court, governmental agency or arbitrator, and (v)
there is no pending, or to Seller's knowledge threatened, condemnation or
similar proceedings with respect to any of the Assets.
(f) Inclusion of all Assets. Except for Excluded Assets and Restricted
-----------------------
Assets, the Assets include all assets and properties used in the operation
of the Pipeline System in the six (6) months preceding the date hereof,
except for items consumed or disposed of in the ordinary course of business
of the Pipeline System. Seller has made available to Buyer all material
records that either (i) were created by Seller or the Employees, or (ii)
are in Seller's possession, which would ordinarily be expected to bear
directly on the physical condition of the Pipeline System and Related
Property, including, but not limited to, hydrostatic test and corrosion
records and environmental reports, and such records are true, accurate and
complete.
45
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(g) Third Party Product. None of the products being transported in the
-------------------
Pipeline System or stored in connection with the Assets are owned by
Seller, and all of such items are owned by customers of the Pipeline
System.
(h) Financial Statements. Seller has delivered to Buyer copies of the
--------------------
following financial statements for Seller, all of which financial
statements are included in Schedule 7.1(h) attached hereto and made a part
hereof:
(i) unaudited transportation revenue and volumes by origin to
destination as of December 31, 1994, unaudited comparative income statement
as of December 31, 1994, and detailed income statement for the twelve month
period ending on December 31, 1994; and
(ii) audited balance sheets, income statements and statements of
changes in financial position for each of Seller's three (3) fiscal years
ending December 31, 1991, 1992 and 1993.
The financial statements referred to in (i) above present fairly, in
all material respects, the financial position of Seller at December 31,
1994, and the results of its operations and its cash flows for the time
period indicated in conformity with generally accepted accounting
principles, with the following qualifications: (1) such financial
statements assume a going concern principle; (2) such financial statements
do not contain footnotes and related disclosures, and year-end adjustments,
normally required under generally accepted accounting principles; (3) such
financial statements do not reflect
46
<PAGE>
future remediation costs for identified environmental contamination, that
are reasonably estimable; and (4) such financial statements include income
related to the Mandan Line, which is an Excluded Asset (Section 1.2(d)).
The financial statements referred to in (ii) above present fairly, in
all material respects, the financial position of Seller at the dates
indicated, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles, with the following qualifications: (1) such financial
statements assume a going concern principle; and (2) such financial
statements are subject to certain notes and related disclosures contained
therein.
(i) Governmental Returns. To Seller's knowledge, there is no pending or
--------------------
threatened suit, action, proceeding, investigation or claim with respect to
any tax return or other return or filing, required to be filed by Seller by
any governmental agency prior to the date of this Agreement.
(j) Employee Matters. Except for personnel based in Tulsa, Oklahoma,
----------------
Oakbrook Terrace, Illinois and Chicago, Illinois, the Employees (listed in
Schedule 5.1) are all full-time and part-time personnel engaged as of the
date hereof in the operation of the Pipeline System. Buyer will have no
liability with respect to any employee welfare or benefit plans of APL or
Seller, as a result of the transactions contemplated by this Agreement.
The Employees are not now nor have they ever been covered by, and Seller
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does not now nor has it ever contributed to, a "multiemployer plan" as
defined in section 4001(a)(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") with regard to any Employee which would
result in any liability to Buyer. Neither Seller nor such employer nor any
trustee, administrator, fiduciary, agent or employee thereof has at anytime
been involved in a transaction that would constitute a "prohibited
transaction" within the meaning of Section 406 of ERISA which would subject
the Buyer or any of its affiliates or any of its or their officers,
directors or employees to any taxes, penalties or other liabilities under
section 4975 of ERISA or under Sections 409 or 502(i) of ERISA. To the
best knowledge of Seller, no union-initiated work stoppages are pending or
threatened as of the date of this Agreement.
(k) Contracts and Agreements. Except for items listed in Schedule 1.1(e)
------------------------
as Excluded Items, the Contracts include all of the binding written
contracts and agreements (except for such which are Related Property) that
have been used in or relate to the operation of the Pipeline System in the
six (6) months preceding the date hereof, except for contracts and
agreements that have expired or been terminated in the ordinary course of
business of the Pipeline System. Except as set forth on Schedule 7.1(k)
attached hereto and made a part hereof, (i) all the Contracts are valid,
binding and in full force and effect as against Seller in accordance with
their terms, and to Seller's knowledge all the Contracts are valid, binding
and in full force and effect as against the other parties to the Contracts
("Third Parties") in accordance with their terms; (ii) there is no existing
default by Seller and Seller has no knowledge of any default by any Third
Party with respect to any of the
48
<PAGE>
Contracts, which default would have an adverse effect on Seller's business
or the Assets; and (iii) copies of all the Contracts have been delivered to
Buyer, and such copies are true, complete and accurate.
(l) Intangible Property. The operation of the Assets as conducted as of
-------------------
the date hereof by Seller does not violate or infringe upon any patents,
inventions, trademarks, trade names, brand names, service marks or
copyrights owned by third parties.
(m) Licenses and Permits. Except for items listed on Schedule 1.1(d) as
--------------------
Excluded Items, the Permits are all of the governmental licenses and
permits (other than such which are Related Property) that have been part of
or relate to the operation of the Pipeline System in the six (6) months
preceding the date hereof, except for licenses or permits that have expired
or been terminated in the ordinary course of business of the Pipeline
System. All the Permits are validly issued to Seller, are in its name, and
as of the date of this Agreement are in full force and effect. True,
correct and complete copies of all the Permits have been delivered to
Buyer. There is no present violation in respect of the Permits, to
Seller's knowledge no proceeding is pending or threatened seeking the
revocation or limitation of any of the Permits or alleging a violation of
any of the Permits, and to Seller's knowledge no acts, events, omissions or
circumstances exist or have occurred that Seller, as of the date of this
representation, reasonably anticipates will constitute a violation of any
of the Permits or will give rise to revocation or limitation of any of the
Permits.
49
<PAGE>
(n) Compliance with Governmental Requirements. To Seller's knowledge, and
-----------------------------------------
except as set forth in Schedule 7.1(n) attached hereto and made a part
hereof, as of the date of this representation Seller is not in violation of
any applicable local, state or federal laws, rules or regulations
("Governmental Requirements") (except for matters related to Environmental
Law, which are covered by Section 7.1(o)).
(o) Environmental Law. Except for those matters set forth on Schedules
-----------------
3.1(b), 3.1(c)1, 3.1(d)1 and 7.1 (o) attached hereto and made a part
hereof, to Seller's knowledge (i) there does not exist, as of the date of
this representation, any violation of any Environmental Law with respect to
the Assets, and (ii) no acts, events or contaminations have occurred on or
prior to the date of this representation that Seller, as of the date of
this representation, reasonably anticipates will give rise to any
violations of or remedial obligations under Environmental Law with respect
to the Assets.
(p) Easements. Except as set forth in Schedule 7.1(p) attached hereto and
---------
made a part hereof, Seller is not in receipt of any written notice from any
third party contesting the validity of any easement, right-of-way,
leasehold or other permit, license, grant or other right constituting a
right to use or operate a pipeline across any real property used in the
operation of the Pipeline System during the six (6) months preceding the
date hereof (collectively, the "Easements"). Except as set forth in
Schedule 7.1(p) attached hereto and made a part hereof, Seller has no
knowledge of any matter or circumstance that Seller, as of the date of this
representation, reasonably anticipates will adversely affect,
50
<PAGE>
impair, limit or encumber any Easement. Seller has made available to Buyer
all material records relating to the Easements and such records are true,
accurate and complete.
7.2 Buyer's Representations and Warranties. Buyer represents and warrants
--------------------------------------
to Seller as follows:
(a) Organization. Buyer is as of the date of this Agreement, and will be
------------
at the Closing, a limited partnership duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is qualified
as a foreign entity in each jurisdiction in which the character of its
business or the location of its assets makes such qualification necessary
(except for those jurisdictions in which the failure to be so qualified
would not, taken in the aggregate, have a material adverse effect on the
Buyer's ability to consummate the transactions herein or in the Transfer
Documents or perform its obligations hereunder or thereunder).
(b) Authorization. Buyer has requisite power and authority to execute and
-------------
deliver this Agreement and the Transfer Documents to which Buyer is a
party, and to consummate the transactions and perform its obligations
hereunder and under the Transfer Documents to which Buyer is a party. The
execution and delivery by the Buyer of this Agreement and the Transfer
Documents to which Buyer is a party and the consummation of the
transactions and the performance of the obligations contemplated hereby and
by the Transfer Documents to which Buyer is a party have been authorized by
all requisite
51
<PAGE>
action on the part of the Buyer. This Agreement has been, and the Transfer
Documents to which Buyer is a party will be, duly executed and delivered by
Buyer, and this Agreement constitutes, and each of the Transfer Documents
to which Buyer is a party when fully executed and delivered will
constitute, legal, valid and binding obligations of Buyer, enforceable in
accordance with their respective terms, except (i) as limited by
bankruptcy, insolvency, rearrangement, reorganization, or similar debtor
relief legislation affecting the rights of creditors generally from time to
time in effect, and (ii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(c) No Violation. Subject to (i) compliance with the requirements of the
------------
HSR Act, (ii) the Wyoming PSC and Colorado PUC consents referred to in
Section 8.1(d) hereof, and (iii) any approvals required for the transfer of
any Restricted Asset, neither the execution and delivery by the Buyer of
this Agreement or the Transfer Documents to which Buyer is a party, nor the
performance by Buyer of its obligations under this Agreement or the
Transfer Documents to which Buyer is a party, nor the consummation of the
transactions contemplated by this Agreement and the Transfer Documents to
which Buyer is a party shall: (A) conflict with any provision of the
limited partnership agreement of Buyer; or (B) to the knowledge of Buyer,
violate any statute or law or any judgment, decree, order, regulation or
rule of any court of governmental authority to which Buyer is subject;
52
<PAGE>
which violation or conflict would affect Buyer's ability to consummate the
transactions contemplated by this Agreement and the Transfer Documents.
7.3 Disclaimer of Warranties. Buyer acknowledges and affirms that prior
------------------------
to the Closing, Buyer has had a full opportunity to conduct whatever due
diligence Buyer has deemed appropriate to apprise itself of the Assets,
including without limitation, inspection, investigation, analysis and evaluation
of Seller's operations, maintenance and other business records, the
environmental condition of the Pipeline System and the Related Property and the
other rights and properties and liabilities to be transferred to or assumed by
Buyer hereunder. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES
CONTAINED IN SECTION 7.1 HEREOF, THE ASSETS TRANSFERRED HEREUNDER ARE SOLD AS
IS, WHERE IS, WITH ALL FAULTS, LIMITATIONS AND DEFECTS (HIDDEN AND APPARENT) AND
SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED AND SPECIFICALLY MAKES NO WARRANTY
(1) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR (2) WITH REGARD
TO THE ACCURACY, COMPLETENESS, SUITABILITY OR COMPLIANCE WITH APPLICABLE LAW OF
ANY MANUALS (AS SUCH TERM IS DEFINED IN SCHEDULE 1.1(f) HERETO), AND NONE SHALL
BE IMPLIED. ALL REPRESENTATIONS AND WARRANTIES OTHER THAN THOSE SET FORTH IN
SECTION 7.1 HEREOF, EXPRESS OR IMPLIED, ARE EXCLUDED. SELLER DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY OTHER REPRESENTATION, WARRANTY, STATEMENT
OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER.
53
<PAGE>
7.4 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties contained in this Article VII shall survive the Closing only to the
extent indemnification for breach thereof is provided in Article XII (directly
or as a result of the allocation of liabilities set forth in Article III).
ARTICLE VIII - COVENANTS
------------------------
8.1 Seller's Covenants. Seller covenants and agrees as follows:
------------------
(a) Operation of the Pipeline System -- Negative Covenants. Except to the
------------------------------------------------------
extent expressly permitted by this Agreement, or as otherwise consented to
by an instrument in writing signed by Buyer (which consent shall not be
unreasonably withheld), Seller shall not, from the date hereof until the
Closing:
(i) operate the Pipeline System or use the Assets other than in the
ordinary course of business;
(ii) subject the Assets, or any part thereof, to any lien, claim,
encumbrance, right or other interest or suffer such to be imposed other
than as may arise in the ordinary course of business;
(iii) enter into any transaction other than in the ordinary course of
business;
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<PAGE>
(iv) dispose of any of the Assets other than in the ordinary course
of business;
or
(v) increase or decrease, or apply for approval for any increase or
decrease, of any tariffs, fees or other charges to customers related to the
Pipeline System.
(b) Operation of the Pipeline System -- Affirmative Covenants. Except as
---------------------------------------------------------
otherwise expressly provided by this Agreement, or as otherwise consented
to by an instrument in writing signed by Buyer, Seller shall, from the date
hereof until the Closing:
(i) afford to Buyer and Buyer's authorized representatives, subject
to the Confidentiality Agreement (as defined in Section 15.7 hereof)
previously executed and delivered by Buyer, reasonable access during normal
business hours to the Pipeline System and the Related Property (including,
but not limited to, access for environmental inspection and audits), and to
the officers, management, properties, books and records related to the
operation of the Pipeline System and will furnish and make available to
Buyer such additional financial and operating data and other information
related to the operation of the Pipeline System as Buyer may reasonably
request; provided, however, Seller shall have no obligation to disclose any
of the items identified on Schedule 1.1(f) as Excluded Items or any of the
items covered under Section 1.2(b), and provided further that Buyer shall
reimburse Seller for, and defend, indemnify and hold harmless Seller
55
<PAGE>
from and against, any and all loss, damage, costs (including reimbursement
of all reasonable attorney fees and other costs of defense), liability,
claim or suit, whether for bodily injury or death of any person (including
Buyer's employees, agents and representatives), damage to or destruction or
loss of property (including damage to Seller's property), or otherwise,
arising in any manner whatsoever out of Buyer or its representatives being
given access to the Pipeline System and the Related Property, whether or
not based upon strict liability or caused by the sole or concurrent
negligence (ordinary or gross) of Seller or any other person or entity,
unless such loss, damage, cost, liability, claim or suit was occasioned
solely by the negligence or intentional tort of Seller or any officer,
director or agent thereof;
(ii) if any of the representations or warranties of Seller hereunder
are determined by Seller to have been incorrect when made, or are
determined by Seller to be incorrect as of any date subsequent to the date
hereof until the Closing, or if any of the covenants of Seller contained in
this Agreement have not been complied with timely, promptly notify Buyer to
such effect (provided that such notice shall not limit Buyer's rights under
this Agreement); and
(iii) use commercially reasonable efforts to maintain and preserve
the business of Seller conducted with the Assets and retain its present
customers and suppliers.
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<PAGE>
(c) Third Party Product. At the Closing, the custody of all line fill,
-------------------
tank and other petroleum liquids inventories will be transferred to Buyer
and Buyer shall become responsible as of the Closing to applicable shippers
for such inventories, in accordance with the procedures set forth on
Schedule 8.1(c) attached hereto and made a part hereof.
(d) Wyoming Public Service Commission/Colorado Public Utilities
-----------------------------------------------------------
Commission. In connection with consummating the transactions contemplated
----------
by this Agreement, Seller shall file with the Public Service Commission of
Wyoming (referred to herein as "Wyoming PSC") an application seeking the
Wyoming PSC's authority for the sale of those facilities encompassed by
this Agreement which are subject to the Wyoming PSC's jurisdiction, shall
file with the Public Utilities Commission of Colorado (referred to herein
as the "Colorado PUC") an application seeking the Colorado PUC's authority
for the sale of those facilities encompassed by this Agreement which are
subject to the Colorado PUC's jurisdiction, and will diligently pursue
approval of such applications. Seller shall comply with Colorado PUC
Decision No. C95-44 adopted on January 11, 1995 in Docket No. 94A-610.
(e) Buyer's Access to Records Post-Closing. For a period of five (5)
--------------------------------------
years after the Closing, subject to the execution by Buyer of reasonable
confidentiality undertakings, Seller will furnish to Buyer and its
authorized representatives, upon the reasonable request of Buyer and at
Buyer's sole cost, copies of written financial and operating information
relating to the Assets, contained in Seller's books and records not
transferred
57
<PAGE>
to Buyer, to the extent that such information has not been destroyed and is
required by Buyer or its authorized representatives for financial
reporting, tax or similar purposes, or for purposes of investigating
matters which may be the subject of litigation or administrative
proceedings with third parties or governmental agencies, so long as such
disclosure would not violate the terms of any agreement to which Seller is
bound or any applicable law or regulation or result in the loss of any
attorney-client or attorney work-product privilege. Seller will use
reasonable efforts in accordance with Seller's normal record maintenance
procedures to keep and maintain such written financial and operating
information relating to the Assets for a period of five (5) years from the
Closing or longer as required by statute. At the end of such five (5) year
period or such longer period as may be required by statute, if Seller
wishes to destroy any of such records, it shall first give sixty (60) days
prior written notice to Buyer. Buyer shall then have the right, at its
option, prior to the expiration of such sixty (60) day period, to notify
Seller in writing of Buyer's election to take possession, at Buyer's cost,
of said records or portions thereof, except for records or portions thereof
with respect to which disclosure would violate the terms of any agreement
to which Seller is bound or any applicable law or regulation or result in
the loss of any attorney-client or attorney work product privilege. In the
event Buyer does not notify Seller that Buyer is exercising its option to
acquire documents hereunder, Seller may destroy such records without
further obligation hereunder.
58
<PAGE>
(f) Antitrust Notification. As soon as practicable, Seller shall file or
----------------------
cause to be filed with the United States Federal Trade Commission and the
United States Department of Justice the notification and report form
required for the transactions contemplated hereby and any supplemental or
additional information which may reasonably be requested in connection
therewith pursuant to the HSR Act and shall comply in all material respects
with the requirements of the HSR Act.
(g) Use of "Wyco" Name. Within a reasonable time after the Closing,
------------------
Seller shall amend its Articles of Incorporation to remove "Wyco" and all
derivatives thereof from its name, and shall also file all necessary
documents to amend its authorizations to do business in all jurisdictions
where it is so authorized, to remove "Wyco" from its name, and shall also
cease using the name "Wyco" and all derivatives thereof except as necessary
to complete required governmental filings.
(h) Medical Review Officer Records. Within a reasonable time after the
------------------------------
Closing, and in cooperation with Buyer, Seller shall cause its Medical
Review Officer to deliver to Buyer's Medical Review Officer possession of
the Medical Review Officer records for Employees that have accepted offers
of full-time or temporary employment from Buyer.
(i) Records. Within a reasonable time after the Closing, Seller shall
-------
deliver to Buyer possession of those Records sold to Buyer hereunder that
are not located on the Related Property.
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8.2 Buyer's Covenants. Buyer covenants and agrees as follows:
-----------------
(a) Consents. Buyer shall take all appropriate steps in support of
--------
Seller's efforts pursuant to Sections 1.6(b) and 8.1(d) hereof.
(b) Third Party Product. At the Closing, Buyer shall accept and shall
-------------------
become responsible as of the Closing to applicable shippers for inventories
transferred to Buyer's custody by Seller pursuant to Section 8.1(c) hereof.
(c) Seller's Access to Properties and Records Post-Closing. For a period
------------------------------------------------------
of five (5) years after the Closing, subject to reasonable advance notice
of time and purpose and to the execution by Seller of reasonable
confidentiality undertakings, Buyer will afford to Seller and its
authorized representatives, upon the reasonable request of Seller and at
Seller's sole cost, reasonable access during normal business hours to the
properties transferred to Buyer, and to books and records relating to the
Assets transferred to Buyer (to the extent that such information has not
been destroyed), and Buyer will furnish to Seller such additional
information, and will cooperate with Seller in such other respects, as
Seller may reasonably request, to the extent that such access and
cooperation are required by Seller or its authorized representatives for
financial reporting, tax or similar purposes, or for purposes of removing
books and records not transferred to Buyer pursuant to this Agreement or
for purposes of investigating matters which may be the
60
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subject of litigation or administrative proceedings with third parties or
governmental agencies so long as such disclosure would not violate the
terms of any agreement to which Buyer is bound or any applicable law or
regulation or result in the loss of any attorney-client or attorney work
product privilege. Buyer will use reasonable efforts in accordance with
Buyer's normal record maintenance procedures to keep and maintain all books
and records transferred to Buyer hereunder for a period of five (5) years
from the Closing or longer as may be required by statute. At the end of
such five (5) year period or such longer period as may be required by
statute, if Buyer wishes to destroy any of such records, it shall first
give sixty (60) days prior written notice to Seller. Seller shall then
have the right at its option, prior to the expiration of such sixty (60)
day period, to notify Buyer in writing of Seller's election to take
possession, at Seller's cost, of said records or portions thereof, except
for records or portions thereof with respect to which disclosure would
violate the terms of any agreement to which Buyer is bound or any
applicable law or regulation or result in the loss of any attorney-client
or attorney work product privilege. In the event Seller does not notify
Buyer that Seller is exercising its option to reacquire documents
hereunder, Buyer may destroy such records without further obligation
hereunder.
(d) Antitrust Notification. As soon as practicable, Buyer shall file or
----------------------
cause to be filed with the United States Federal Trade Commission and the
United States Department of Justice the notification and report form
required for the transactions contemplated hereby and any supplemental or
additional information which may reasonably be requested in
61
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connection therewith pursuant to the HSR Act and shall comply in all
material respects with the requirements of the HSR Act.
(e) Reporting. If at any time within four and one-half (4 1/2) years
---------
after the Closing, Buyer becomes obligated to report, or in fact reports,
to any federal, state or local governmental agency any release, outage,
spill, leak, discharge, disposal, treatment, emission of or exposure to,
hazardous waste, hazardous substances, pollutants, contaminants, materials,
products or by-products relating to the Pipeline System or the Related
Property, Buyer shall send a copy of such report to Seller at the same time
it sends the report to the governmental agency. Buyer shall, upon request
by Seller, provide Seller with copies of all correspondence with any
Environmental Agency relating to any such release, outage, spill, leak,
discharge, disposal, treatment, emission or exposure. In addition, for an
additional two and one-half (2 1/2) years beyond the four and one-half (4
1/2) years specified above, with respect to the Dupont Terminal, if Buyer
becomes obligated to report any hydrocarbon release on the Dupont Terminal
property to any State of Colorado or Adams County, Colorado governmental
agency, and such report is available to the public under State of Colorado
law, Buyer shall send a copy of such report to Seller at the same time it
sends the report to the governmental agency. Further, Seller shall be
permitted to furnish copies of any reports it receives pursuant to the
previous two sentences to the plaintiffs in the Kramer Case, if but only if
such reports (i) were given to any State of Colorado or Adams County,
Colorado
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governmental agency, (ii) relate to the Dupont Terminal, and (iii) are
available to the public under State of Colorado law.
(f) Licenses and Permits. Buyer shall use reasonable efforts to obtain by
--------------------
the Closing all governmental licenses and permits necessary for its
operation of the Pipeline System after the Closing (as distinct from
licenses and permits which are Related Property), and if Buyer is unable to
obtain any such licenses or permits, it shall give notice to that effect to
Seller within a reasonable period of time after Buyer has knowledge of such
inability and prior to the Closing.
(g) Pipeline Bridge. As of the date of this Agreement, a portion of the
---------------
six inch (6") segment of the Pipeline System is located on a pipeline
bridge over the North Platte River north of the Amoco Oil Company Casper
Refinery site (the "Pipeline Bridge"). The Pipeline Bridge also supports a
portion of the eight inch (8") pipeline segment of Sinclair Oil Corporation
("Sinclair"), previously sold by Seller to Sinclair, and a water pipeline
owned by Amoco Oil Company. In selling the 8" segment to Sinclair, Seller
gave certain rights to Sinclair with respect to the Pipeline Bridge. All
of those rights are set forth in Section 7.04 of the Agreement for Sale and
Purchase and Lease of Pipeline System by and between Seller and Wal-Mart
Stores, Inc., entered into as of the 30th day of August, 1993 (all of Wal-
Mart's rights, interests and obligations under such were assigned by Wal-
Mart to Sinclair), which Section 7.04 is attached hereto and made a part
hereof as Schedule 8.2(g) (it being understood that "Seller" in such
Section 7.04 is
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"Seller" herein and "Buyer" in such Section 7.04 is Sinclair). Buyer
herein agrees that it purchases, acquires and receives the Pipeline Bridge
subject to the rights of Sinclair contained in such Section 7.04, and
subject to the rights of Amoco Oil Company contained in that Contract which
is item no. 18 on Schedule 1.1(e) hereto (the "Amoco Oil Contract"), and
further agrees that it assumes all rights, duties, liabilities and
obligations of Seller in, under or pursuant to such Section 7.04 and in,
under or pursuant to such Amoco Oil Contract, and agrees to perform,
discharge and comply with all terms and conditions of or under such Section
7.04 and of or under such Amoco Oil Contract, including without limitation
performance of all obligations to be performed thereunder, and Seller shall
have no further duty or obligation thereunder.
(h) Environmental Notification to Sinclair. In recognition of the fact
--------------------------------------
that the Pipeline and a pipeline segment previously sold by Seller to
Sinclair to a certain extent both run in the same Related Property (as more
particularly described in the Lease Agreement between Seller and Sinclair
which is item no. 14 on Schedule 1.1(e)), Buyer agrees to cooperate with
Sinclair in regard to environmental matters affecting said Related Property
and to inform Sinclair within twenty-four (24) hours of any release, spill,
leak, or discharge of any kind which might affect the environment. In the
event that Buyer decides to change the direction or type of material
through the Pipeline, or alter in any material way the Pipeline or its
operations, Buyer agrees that it will inform Sinclair in writing of any
such plans as far in advance as is practicable. The obligations of Buyer
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contained in this subsection (h) shall terminate at such time as Buyer
enters into its own agreement with Sinclair covering the subject matter of
this subsection.
8.3 Mutual Covenants. Seller and Buyer covenant and agree as follows:
----------------
(a) Testing and Gauging. Seller and/or Buyer shall conduct sampling and
-------------------
testing of batches of liquids entering the Pipeline System, and gauging of
tanks, in accordance with the procedures set forth on Schedule 8.3(a)
attached hereto and made a part hereof.
(b) FERC Tariffs. It is Buyer's intent to file an adoption of Seller's
------------
Federal Energy Regulatory Commission ("FERC") tariffs governing the
transportation of materials in the Pipeline System. Seller and Buyer will
cooperate to coordinate such filings or publishings with the FERC necessary
to accomplish such, provided that in no event shall the Closing be
affected.
(c) State Tariffs. It is Buyer's intent to file adoptions of Seller's
-------------
state tariffs governing the transportation of materials in the Pipeline
System. Seller and Buyer will cooperate to coordinate such filings or
publishings with appropriate state agencies necessary to accomplish such,
provided that in no event shall the Closing be affected.
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ARTICLE IX - CONDITIONS TO BUYER'S OBLIGATIONS
----------------------------------------------
The obligations of Buyer under this Agreement to close the transactions
contemplated hereunder shall be subject to the satisfaction, on or prior to the
Closing, of each of the following conditions, any one or more of which may be
waived in writing, in whole or in part, by Buyer:
9.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller contained in this Agreement shall be in all material
respects true and accurate as of the date hereof and at and as of the date of
the Closing as though such representations and warranties were made at and as of
such date, and Seller shall have delivered to Buyer a certificate to such effect
executed by a duly authorized officer of Seller.
9.2 Performance. Seller shall have performed and complied with, in
-----------
all material respects, all of its covenants, agreements and conditions contained
in this Agreement which Seller must perform or comply with at or prior to the
Closing, and Seller shall have delivered to Buyer a certificate to such effect
executed by a duly authorized officer of Seller.
9.3 Litigation. No injunction or any similar legal order prohibiting
----------
or restraining consummation of the transactions herein contemplated shall be in
effect.
9.4 Wyoming PSC/Colorado PUC. The consent of the Wyoming PSC for
------------------------
Seller to sell to Buyer those facilities encompassed by this Agreement which are
subject to the Wyoming
66
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PSC's jurisdiction, and of the Colorado PUC for Seller to sell to Buyer those
facilities encompassed by this Agreement which are subject to the Colorado PUC's
jurisdiction, shall have been obtained.
9.5 HSR Act. All necessary filings and notifications under the HSR
-------
Act shall have been made, and the waiting period referred to in such Act
applicable to the transactions contemplated hereby shall have expired or been
terminated.
9.6 Due Execution and Delivery of Closing Documents. The documents
-----------------------------------------------
to be executed and delivered by Seller at the Closing shall have been properly
executed and delivered.
9.7 Legal Matters. All actions, proceedings, instruments and
-------------
documents required of Seller to carry out this Agreement and to consummate the
transactions contemplated hereby shall have been taken in a manner reasonably
satisfactory in form and substance to counsel for Buyer.
9.8 Unassignable Related Property. With respect to all Related
-----------------------------
Property identified by Buyer in writing pursuant to Section 1.3(i), consents and
waivers in principle contemplated by Section 1.3 shall have been obtained. With
respect to all portions of the Pipeline System identified by Buyer in writing
pursuant to Section 1.3(ii), all rights-of-way, easements, permits, licenses,
grants and leaseholds contemplated by Section 1.3 hereof shall have been
obtained.
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9.9 No Material Adverse Change. No material adverse change in the
--------------------------
Assets or the operations thereof or the business of the Pipeline System shall
have occurred since the date hereof until the Closing.
9.10 Licenses and Permits. Buyer shall have obtained all
--------------------
governmental licenses and permits necessary for its operation of the Pipeline
System (as distinct from licenses and permits which are Related Property),
provided that Buyer shall have used reasonable efforts to obtain by the Closing
all such licenses and permits.
9.11 Guarantee. Both of the shareholders of Seller shall have
---------
executed and delivered to Buyer a guarantee substantially in the form of Exhibit
I attached hereto and made a part hereof (the "Guarantee").
9.12 Mortgages. Seller and Buyer shall have executed and delivered a
---------
letter agreement relating to the two mortgages on the Mule Creek Station Related
Property, satisfactory to Buyer.
ARTICLE X - CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------------------
The obligations of Seller under this Agreement to close the
transactions contemplated hereunder shall be subject to the satisfaction, on or
prior to the Closing, of each of the following conditions, any one or more of
which may be waived in writing, in whole or in part, by the Seller:
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10.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Buyer contained in this Agreement shall be in all material
respects true and accurate as of the date hereof and at and as of the date of
the Closing as though such representations and warranties were made at and as of
such date, and Buyer shall have delivered to Seller a certificate to such effect
executed by a duly authorized officer of Buyer.
10.2 Performance. Buyer shall have performed and complied with, in
-----------
all material respects, all of its covenants, agreements, and conditions
contained in this Agreement which Buyer must perform or comply with at or prior
to the Closing, and Buyer shall have delivered to Seller a certificate to such
effect executed by a duly authorized officer of Buyer.
10.3 Litigation. No injunction or any similar legal order prohibiting or
----------
restraining consummation of the transactions herein contemplated shall be in
effect.
10.4 Wyoming PSC/Colorado PUC. The consent of the Wyoming PSC for Seller
------------------------
to sell to Buyer those facilities encompassed by this Agreement which are
subject to the Wyoming PSC's jurisdiction, and of the Colorado PUC for Seller to
sell to Buyer those facilities encompassed by this Agreement which are subject
to the Colorado PUC's jurisdiction, shall have been obtained.
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10.5 HSR Act. All necessary filings and notifications under the HSR
-------
Act shall have been made, and the waiting period referred to in such Act
applicable to the transactions contemplated hereby shall have expired or been
terminated.
10.6 Due Execution and Delivery of Closing Documents. The documents
-----------------------------------------------
to be executed and delivered by Buyer at the Closing shall have been properly
executed and delivered.
10.7 Legal Matters. All actions, proceedings, instruments and
-------------
documents required of Buyer to carry out this Agreement and to consummate the
transactions contemplated hereby shall have been taken in a manner reasonably
satisfactory in form and substance to counsel for Seller.
ARTICLE XI - CLOSING
--------------------
11.1 Closing. The closing of the transactions contemplated hereby
-------
("Closing") shall take place on February 24, 1995, at the offices of Seller in
Oakbrook Terrace, Illinois at 10:00 a.m. local time (or at such other place,
time or date as the parties may mutually agree in writing). Subject to Section
1.6 hereof, and unless otherwise agreed in writing between the parties, the
transfer of title to the Assets from Seller to Buyer shall be effective as of
the Closing.
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11.2 Seller's Obligations. At the Closing, Seller shall deliver to
--------------------
Buyer the following:
(a) Conveyancing Documents. Executed Transfer Documents with respect to
----------------------
the Assets.
(b) Services Agreement. An executed Services Agreement.
------------------
(c) Remediation Agreement. An executed Remediation Agreement and payment
---------------------
of the amounts specified in the Remediation Agreement for payment at the
Closing in accordance with the Remediation Agreement.
(d) Opinion of Counsel. An opinion of an attorney for Amoco Pipeline
------------------
Company as counsel to Seller in connection with this transaction, dated as
of the Closing, addressed to Buyer, substantially in the form of Exhibit J
attached hereto and made a part hereof, an opinion of an attorney for Amoco
Pipeline Holding Company related to the Guarantee, dated as of the Closing,
addressed to Buyer, substantially in the form of Exhibit J1 attached hereto
and made a part hereof, and an opinion of an attorney for GATX Pipeline
Company related to the Guarantee, dated as of the Closing, addressed to
Buyer, substantially in the form of Exhibit J2 attached hereto and made a
part hereof.
(e) Board Resolutions. A certified copy of the resolutions of Seller's
-----------------
Board of Directors authorizing the transactions contemplated hereunder and
under the Transfer Documents.
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(f) Receipts. Appropriate receipts for the Purchase Price to be paid by
--------
Buyer at the Closing.
(g) Certificates. The certificates referred to in Sections 9.1 and 9.2.
------------
(h) Acceptance of Transfer. An executed acceptance of transfer in the
----------------------
form required by the Colorado PUC, and an executed explanation of change in
account and transfer of experience rate in the form required by the Wyoming
Department of Employment.
(i) Drug Testing Records. Possession of all DOT drug testing records for
--------------------
Employees that have accepted offers of full-time or temporary employment
from Buyer.
(j) Guarantee. The Guarantee executed by both of Seller's shareholders.
---------
(k) Computer Contract Payment. Payment in immediately available funds by
-------------------------
bank wire transfer in an account at a national bank located in the United
States designated by Buyer, of the actual balance due as of the Closing
(supported by reasonable documentation) under that Contract which is item
no. 23 on Schedule 1.1(e) hereto, which is presently estimated to be three
hundred fifty six thousand, four hundred and seventy three dollars
($356,473) for Buyer's assumption of that Contract which is item no. 23 on
Schedule 1.1(e) hereto pursuant to the contract assignment and assumption
agreement to be executed by the parties pursuant to Section 1.4(d) and
Article XI hereof.
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Buyer shall give notice to Seller of the account and any other wire
transfer instructions at least three (3) days before the day of the
Closing.
(l) Prorations. Payment of the amount specified in Section 2.3(b) hereof
----------
in accordance with Section 2.3(b).
11.3 Buyer's Obligations. At the Closing, Buyer shall deliver to Seller:
-------------------
(a) Purchase Price. The Purchase Price in accordance with Article II.
--------------
(b) Services Agreement. An executed Services Agreement.
------------------
(c) Remediation Agreement. An executed Remediation Agreement.
---------------------
(d) Instruments of Assumption. Executed Transfer Documents to which Buyer
-------------------------
is a party.
(e) Non-Simultaneous Exchange. An executed assignment in the form of
-------------------------
Exhibit F attached hereto and made a part hereof.
73
<PAGE>
(f) Opinion of Counsel. An opinion of Stephen M. Hoffner, counsel to
------------------
Buyer, dated as of the Closing, addressed to Seller, substantially in the
form of Exhibit K attached hereto and made a part hereof.
(g) Board Resolutions. A certified copy of the resolutions of the Board
-----------------
of Directors of Buyer's general partner authorizing the transactions
contemplated hereunder and under the Transfer Documents.
(h) Certificates. The certificates referred to in Sections 10.1 and 10.2.
------------
(i) Acceptance of Transfer. An executed acceptance of transfer in the
----------------------
form required by the Colorado PUC, and an executed explanation of change in
account and transfer of experience rate in the form required by the Wyoming
Department of Employment.
ARTICLE XII - INDEMNIFICATION
-----------------------------
12.1 Indemnification by Seller.
-------------------------
(a) From and after the Closing, but subject to the conditions and
limitations set forth in this Agreement, Seller shall indemnify Buyer,
together with Buyer's parent companies, shareholders, partners,
subsidiaries, affiliates, officers, directors, employees and agents, and
defend and hold each of them harmless from and against, any and all costs,
claims,
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damages (including punitive damages), suits, losses, fines, penalties,
causes of action, proceedings, judgments (including pre- and post-judgment
interest), obligations and liabilities (including reasonable attorneys'
fees and consultants' fees incurred in connection with any of the
foregoing) asserted against, incurred or required to be paid by Buyer, its
parent companies, shareholders, partners, subsidiaries, affiliates,
officers, directors, employees or agents (all of the foregoing collectively
referred to herein as a "Buyer Loss"), regardless of whether based in whole
or in part on strict liability, willful or intentional misconduct, or
ordinary or gross negligence of any indemnitee, which arise out of, relate
to or are caused by any liability or obligation retained by Seller under
this Agreement.
Seller's obligation of indemnification in this Section 12(a) is subject to
the allocation of liability set forth in Article III hereof.
(b) From and after the Closing, but subject to Section 12.3 hereof, Seller
shall indemnify Buyer, together with Buyer's parent companies,
shareholders, partners, subsidiaries, affiliates, officers, directors,
employees and agents, and defend and hold each of them harmless from and
against, any and all costs, claims, damages (including punitive damages),
suits, losses, fines, penalties, causes of action, proceedings, judgments
(including pre- and post-judgment interest), obligations and liabilities
(including reasonable attorneys' fees and consultants' fees incurred in
connection with any of the foregoing) asserted against, incurred or
required to be paid by Buyer, its
75
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parent companies, shareholders, partners, subsidiaries, affiliates,
officers, directors, employees or agents, as a result of any claim of
adverse possession landowner Richard Cross may make with respect to Related
Property at Douglas Station, subject to the following:
(i) there must be a Buyer Loss attributable to such claim of adverse
possession;
(ii) Buyer must give written notice of such Buyer Loss promptly after
Buyer has knowledge of such Buyer Loss, provided that any delay or failure
to provide such notice promptly will not limit Seller's liability hereunder
except to the extent Seller is damaged or prejudiced by such delay or
failure; and
(iii) Seller's maximum liability under this Section 12(b) shall be
twenty five thousand dollars ($25,000).
12.2 Indemnification by Buyer. From and after the Closing, but subject to
------------------------
the conditions and limitations set forth in this Agreement, Buyer shall
indemnify Seller, together with Seller's parent companies, shareholders,
subsidiaries, affiliates, officers, directors, employees and agents, and defend
and hold each of them harmless from and against, any and all costs, claims,
damages (including punitive damages), suits, losses, fines, penalties, causes of
action, proceedings, judgments (including pre- and post-judgment interest),
obligations and liabilities (including reasonable attorneys' fees and
consultants' fees incurred in connection with
76
<PAGE>
any of the foregoing) asserted against, incurred or required to be paid by
Seller, its parent companies, shareholders, subsidiaries, affiliates, officers,
directors, employees or agents, regardless of whether based in whole or in part
on strict liability, willful or intentional misconduct, or ordinary or gross
negligence of any indemnitee, which arise out of, relate to or are caused by:
(a) the breach of any representation, warranty, covenant or other obligation of
Buyer contained in this Agreement, including but not limited to the Remediation
Agreement and the contract assignment and assumption agreement to be executed by
the parties pursuant to Section 1.4(d) and Article XI hereof; (b) any duty,
liability or obligation assumed or had by Buyer pursuant to Section 3.1, Section
3.2, Section 3.3 or Section 8.2(g) hereof, or pursuant to the Remediation
Agreement or pursuant to the contract assignment and assumption agreement to be
executed by the parties pursuant to Section 1.4(d) and Article XI hereof; (c)
the ownership, use, maintenance, condition or operation of the Assets by Buyer
from and after the Closing (except to the extent relating to or arising from the
breach by Seller of any representation, warranty, covenant or other obligation
of Seller contained in this Agreement); or (d) liabilities or obligations to the
extent attributable to (i) actions of Buyer or its agents, consultants or
representatives in the implementation or performance of the Agreed Remediation
Plan or the 3.1(d) Remediation Plan, as they may be modified with the consent of
Buyer and Seller, or (ii) any failure by Buyer to implement the Agreed
Remediation Plan or the 3.1(d) Remediation Plan, as they may be modified with
the consent of Buyer and Seller, in accordance with the time schedules set forth
in such plans, or negligence in the performance of the Agreed Remediation Plan
or the 3.1(d) Remediation Plan, as they may be modified with the consent of
Buyer and Seller.
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<PAGE>
It is understood and agreed that Buyer's obligation to indemnify Seller,
its parent companies, shareholders, subsidiaries, affiliates, officers,
directors, employees and agents as set forth above in this Section 12.2 shall
survive the Closing without limit as to time or amount, except as limited by
Sections 3.2(f) and 3.3 hereof. Buyer's obligation of indemnification in this
Article XII is subject to the allocation of liability set forth in Article III
hereof.
12.3 Procedure for Third Party Claims.
--------------------------------
(a) If any third party shall notify Seller or Buyer (the "Indemnified
Party") with respect to any matter which may give rise to a claim for
indemnification against the other party under this Agreement (the
"Indemnifying Party") then the Indemnified Party shall notify the
Indemnifying Party thereof promptly in writing; provided, however, that,
-------- -------
subject to Article III, no delay in giving notice of such matter shall
relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party is thereby damaged or the
defense of any matter for which indemnification is claimed is prejudiced.
The Indemnifying Party shall notify the Indemnified Party in writing within
fifteen (15) days of receiving such notice whether the Indemnifying Party
accepts responsibility for such matter. If (i) the Indemnified Party does
not receive timely written notice that the Indemnifying Party accepts
responsibility for such matter, or (ii) if the Indemnifying Party accepts
responsibility but fails to diligently defend the Indemnified Party in such
matter, or (iii) if in the reasonable opinion of the Indemnified Party the
Indemnifying Party may lack the financial resources necessary to comply
with
78
<PAGE>
its indemnity obligations in connection with such matter, then the
Indemnified Party may defend against or enter into any settlement with
respect to, such matter as it deems appropriate without relieving the
Indemnifying Party of any of its indemnification obligations with respect
to such matter. If the Indemnifying Party assumes responsibility for the
matter, then (A) the Indemnifying Party will defend the Indemnified Party
against the matter with counsel and consultants of its choice reasonably
satisfactory to the Indemnified Party, (B) the Indemnifying Party shall
have, subject to this Section 12.3, exclusive control of the defense and
settlement of the matter, (C) the Indemnified Party may retain separate co-
counsel and consultants at its sole cost, and (D) the Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement
with respect to the matter which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto at no cost to, and with no actions required
by and no future obligations imposed on, the Indemnified Party except for
such as may be agreed to in writing by the Indemnified Party.
(b) The Indemnified Party and the Indemnifying Party shall use their
reasonable efforts to cooperate, without prejudice to any rights they may
have against each other, in the compromise or defense of any third party
claim which is not entirely subject to indemnification by a single
Indemnifying Party.
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<PAGE>
12.4 Exclusive Remedy. The provisions of this Article XII, the provisions
----------------
of Article III, and the corresponding provisions in the Transfer Documents, if
any, are intended to be the exclusive remedy between the parties for the matters
covered by such provisions, and no party shall seek recovery from the other
party with respect to such matters under theories of strict liability,
negligence or other theory of recovery, whether under contract (other than under
this Article XII, Article III or the corresponding provisions of any Transfer
Document) or tort or at law or in equity.
ARTICLE XIII - BULK SALES LAW
-----------------------------
Buyer hereby waives compliance by Seller with any bulk sales law which may
be applicable.
ARTICLE XIV - TERMINATION
-------------------------
14.1 Grounds for Termination. This Agreement may be terminated at any
-----------------------
time prior to the Closing:
(a) By the mutual written agreement of Seller and the Buyer;
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<PAGE>
(b) By Seller or by Buyer if the purchase and sale contemplated hereby
shall not have closed by March 15, 1995, if the failure to close on or
before such date is not caused by any fault of the party electing to
terminate pursuant to this Section 14.1(b);
(c) By Seller or by Buyer if the purchase and sale of the Assets would
violate any nonappealable final order, decree or judgment of any United
States court or governmental body having competent jurisdiction;
(d) By notice from Seller to Buyer or Buyer to Seller pursuant to Section
1.7 hereof, electing to terminate this Agreement; or
(e) By notice from either party to the other if the conditions to such
party's obligations to close as set forth in Article IX and X,
respectively, are not satisfied or waived on or prior to the scheduled date
for the Closing.
14.2 Effect of Termination. If this Agreement is terminated by Seller or
---------------------
by Buyer as permitted under Section 14.1 hereof, such termination shall not
terminate (i) the rights or remedies of either party with respect to the breach
of any provision of this Agreement prior to termination, including breach of the
obligation to close, or (ii) the obligations of the parties under the
Confidentiality Agreement.
81
<PAGE>
ARTICLE XV - MISCELLANEOUS
--------------------------
15.1 Further Assurance.
-----------------
(a) After the Closing, Seller shall from time to time, at Buyer's request
and without further cost to Buyer, prepare, execute and deliver to Buyer
such other instruments of conveyance and transfer (including without
limitation, additional assignments suitable for recording) and take such
other action (including but not limited to delivery of possession of Assets
for which title has passed hereunder) as Buyer may reasonably request so as
more effectively to sell, transfer, assign, deliver and vest in Buyer title
to and possession of the Assets as provided in this Agreement, and to
implement the covenants hereunder that are to be performed by Seller after
the Closing.
(b) After the Closing, Buyer shall from time to time, at Seller's request
and without further cost to Seller, prepare, execute and deliver to Seller
such other instruments of assumption and take such other action as Seller
may reasonably request so as to more effectively assume the contracts,
agreements, leases and commitments assumed by Buyer hereunder and to
implement the covenants hereunder that are to be performed by Buyer after
the Closing.
15.2 Brokers. Each of the parties hereto represents and warrants to the
-------
other that no broker or finder has acted on its behalf in connection with the
transactions contemplated by this
82
<PAGE>
Agreement. Each of the parties agrees to indemnify, defend and hold the other
party harmless, in accordance with the provisions of Article XII hereof, from
any claim or demand for any commission, compensation or other payment by any
broker, finder or similar agent claiming to have been or that was in fact
employed by or on behalf of the first party.
15.3 Costs. Whether or not the transactions contemplated hereby are
-----
consummated, each party shall pay its own respective costs (including, without
limitation, the fees, disbursements and costs of its attorneys, accountants and
consultants if any) in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated hereby, except as
otherwise provided in this Agreement.
15.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original instrument, but all such
counterparts together shall constitute but one agreement.
15.5 Schedules. All Schedules and Exhibits attached hereto, with the
---------
exception of Exhibit H (the Services Agreement), are incorporated herein and
expressly made a part of this Agreement as fully as though completely set forth
herein.
15.6 Waiver. The failure of any party at any time or times to enforce or
------
require performance of any provision hereof shall in no way operate as a waiver
or affect the right of such party at a later time to enforce the same. No
waiver by any party of any condition or the
83
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breach of any term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach, or a waiver of any other condition or of any breach of any
other term, covenant, representation or warranty contained in this Agreement.
Any waiver of an obligation, agreement or condition contained herein shall be
valid and effective only if in writing and signed by the party to whom such
compliance is owed.
15.7 Confidentiality Agreement. The letter agreement entered into between
-------------------------
Seller and Buyer, dated April 6, 1992 relating to disclosure of Seller
information pertaining to the Assets (the "Confidentiality Agreement"), shall
terminate as of the Closing or according to its terms, whichever shall last
occur. From and after the Closing, Seller shall, and shall cause its
shareholders and the employees, agents and representatives of Seller and its
shareholders to not disclose to any third party not affiliated with Seller any
information regarding the Assets or the operation thereof in such party's
possession, except to the extent required by applicable law or court order.
15.8 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed effective and given only upon receipt, when
delivered personally, by facsimile transmission, by overnight courier, by telex
or by registered or certified mail (return receipt requested), postage prepaid,
to the parties at the following addresses (or at such other addresses
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<PAGE>
for a party as shall be specified by like notice; provided that notices of a
change of address shall be effective only upon receipt thereof):
If to Seller to: Wyco Pipe Line Company
Attn.: Manager, Business Development
One Mid America Plaza, Suite 300
Oakbrook Terrace, IL 60181-4723
Facsimile No.: (708) 990-4985
with a copy to: GATX Terminals Corporation
Attn.: President
500 West Monroe Street
Chicago, IL 60661-3676
Facsimile No.: (312) 621-6647
If to Buyer to: Kaneb Pipe Line Operating Partnership, L.P.
Attn: Edward D. Doherty
2435 North Central Expressway
Suite 700
Richardson, Texas 75080
Facsimile No.: (214) 699-1894
with copies to: Kaneb Pipe Line Operating Partnership, L.P.
Attn: Leon B. Hutchens
100 N. Broadway, Suite 550
Wichita, Kansas 67202
Facsimile No.: (316) 262-0726
and
Kenneth L. Stewart, Esq.
Fulbright & Jaworski
2200 Ross Avenue
28th Floor
Dallas, Texas 75201
Facsimile No.: (214) 855-8200
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<PAGE>
15.9 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits hereto, the Transfer Documents, the Confidentiality Agreement and the
letter agreement relating to the two mortgages on the Mule Creek Station Related
Property constitute the entire agreement between the parties hereto pertaining
to the subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties relating
to the subject matter hereof. There are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein or in the Schedules and Exhibits hereto
or in the Transfer Documents or the Confidentiality Agreement. No supplement,
modification, waiver or termination of this Agreement or any Schedule or Exhibit
shall be binding unless executed in writing by the party to be bound thereby.
15.10 Severability. If any provision of this Agreement shall hereafter be
------------
held to be invalid or unenforceable for any reason, that provision shall be
reformed to the maximum extent permitted to come as close as possible in its
effects to the invalid or unenforceable provision, failing which, it shall be
ineffective to the extent of such invalidity or unenforceability only, with the
balance of the provision and of the Agreement continuing in full force and
effect. Such occurrence shall not have the effect of rendering the provision in
question invalid in any other jurisdiction or in any other case or
circumstances, or of rendering invalid any other provisions contained herein to
the extent that such other provisions are not themselves actually in conflict
with any applicable law.
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<PAGE>
15.11 Knowledge. Except as otherwise specifically provided for herein,
---------
whenever a matter is expressed "to the knowledge of" a party or to a party's
"knowledge", or whenever it is said that a party has or does not have
"knowledge" of a matter, such knowledge shall mean to the knowledge as of the
date of this Agreement (and as of the Closing with respect to the truth and
accuracy of the representations and warranties set forth in this Agreement to be
certified pursuant to Sections 9.1 and 10.1), of the directors, officers and
employees of the party serving in such capacities as of the date of this
Agreement (and as of the Closing with respect to the truth and accuracy of the
representations and warranties set forth in this Agreement to be certified
pursuant to Sections 9.1 and 10.1) and, with repect to Seller, those persons
listed on Schedule 5.1.
15.12 Transfer. Seller and Buyer shall cooperate and take such action as
--------
may be reasonably requested by the other to effect an orderly transfer of the
Assets with a minimum of disruption to the operations of the parties and their
employees.
15.13 Publicity. Any public announcements with respect hereto or the
---------
transactions contemplated hereby shall be made at such time and in such manner
as Seller and Buyer shall mutually agree; provided, however, that nothing herein
shall prevent any party from making such public announcements as such party may
consider necessary to satisfy such party's legal or contractual obligations but
in such event the party intending to make such disclosure shall advise the other
party in advance of such disclosure and provide such other party with a copy of
the text of the information to be disclosed; and further provided that nothing
in this Section
87
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15.13 shall in any way limit or restrict Seller's or Buyer's communications with
its employees, customers, or suppliers.
15.14 Assignment. Except for
----------
(i) an assignment by Seller in connection with a Non-Simultaneous
Exchange, as referred to in Section 2.5 hereof, which Seller may make at
its election, and
(ii) an assignment by Buyer of this Agreement in its entirety only
(prior to the Closing) or in whole or in part (after the Closing), to any
entity that controls, is controlled by or is under common control with
Buyer (an "Affiliate"), which Buyer may make at its election, provided that
Buyer shall not be relieved thereby of its obligations hereunder,
neither party to this Agreement shall assign this Agreement, directly or
indirectly, or any part thereof without the prior written consent of the other
party, and any attempt to do so will be of no force or effect. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. For purposes of the foregoing,
"control" shall mean ownership of more than fifty percent (50%) of the issued
voting rights or interests of the entity or entities in question.
15.15 Captions. The captions in this Agreement are for convenience only
--------
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
88
<PAGE>
15.16 Gender. Whenever appropriate herein, the singular number shall
------
include the plural, the plural shall include the singular, and the use of any
gender shall include all genders.
15.17 No Third Party Beneficiaries. Nothing in this Agreement shall
----------------------------
entitle any person other than Seller or Buyer and their respective successors
and assigns permitted hereby to any claim, cause of action, remedy or right of
any kind.
15.18 Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the law of the
State of Delaware, excluding any choice of law rules which may direct the
application of the laws of any other jurisdiction.
15.19 Force Majeure. Neither party shall be liable to the other for
-------------
failure to carry out the terms and provisions of this Agreement to the extent
such failure arises out of, relates to or is caused by strikes, fire, acts of
God, or other causes, whether similar or dissimilar to the foregoing, beyond the
reasonable control of such party.
15.20 Telecopy Execution and Delivery. A facsimile, telecopy or other
-------------------------------
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all
89
<PAGE>
purposes. At the request of either party hereto, all parties hereto agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed.
WYCO PIPE LINE COMPANY
By: /s/ TM Brogan
--------------------------------
Title: Director
--------------------------
KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By Kaneb Pipe Line Company,
General Partner
By: /s/ Edward D. Doherty
----------------------------------
Title: Chairman
---------------------------
90
<PAGE>
Exhibit 10.2
- --------------------------------------------------------------------------------
KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
Series A Issuer
STANTRANS, INC.
Series B Issuer
KANEB PIPE LINE PARTNERS, L.P.
and
SUPPORT TERMINAL SERVICES, INC.
and
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
as Guarantors
____________________________
NOTE PURCHASE AGREEMENT
dated as of December 22, 1994
____________________________
FIRST MORTGAGE NOTES OF KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P. (Series A)
8.05% FIRST MORTGAGE NOTES OF STANTRANS, INC.
DUE December 22, 2001 (Series B)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
NOTE PURCHASE AGREEMENT............................................ 1
SECTION 1. THE NOTES AND NOTE AGREEMENTS..................... 1
-----------------------------
1.1 Series A Notes...................................... 1
1.2 Series B Notes...................................... 2
1.3 Acquisition for Investment; ERISA................... 4
SECTION 2. REPRESENTATIONS AND WARRANTIES.................... 4
------------------------------
2.1 Financial Statements................................ 4
2.2 Private Placement Memorandum........................ 4
2.3 No Material Adverse Change.......................... 5
2.4 Subsidiaries; Organization, Authority and
Good Standing....................................... 5
2.5 Title to Properties; Liens and Leases;
Existing Debt and Investments....................... 6
2.6 Licenses............................................ 6
2.7 Binding Obligations................................. 7
2.8 Litigation; Compliance with Laws.................... 7
2.9 No Burdensome Provisions............................ 7
2.10 Compliance with Other Instruments, etc............. 8
2.11 Use of Proceeds; Federal Reserve Board
Regulations......................................... 8
2.12 ERISA.............................................. 9
2.13 Tax Liability...................................... 9
2.14 Governmental Action................................ 10
2.15 Offering of Notes.................................. 10
2.16 Environmental Matters.............................. 11
2.17 Disclosure......................................... 11
2.18 Solvency........................................... 12
2.19 Status Under Certain Statutes...................... 12
SECTION 3. CONDITIONS OF CLOSING............................. 12
--------------------
3.1 Conditions to Purchase and Sale of Series B
Notes............................................... 12
3.2 Conditions to Purchase and Sale of Series A
Notes............................................... 15
SECTION 4. PREPAYMENTS AND PAYMENTS OF THE NOTES............. 17
-------------------------------------
4.1 Optional Prepayments................................ 17
4.2 Allocation of Prepayments........................... 18
4.3 Acquisition of Notes; No Reissuance................. 18
SECTION 5. FINANCIAL STATEMENTS, ETC......................... 18
--------------------------
SECTION 6. INSPECTION; CONFIDENTIALITY....................... 22
---------------------------
SECTION 7. AFFIRMATIVE COVENANTS............................. 23
---------------------
7.1 Maintenance of Office or Agency..................... 23
7.2 To Keep Books....................................... 23
7.3 Payment of Taxes; Corporate Existence;
Maintenance of Properties........................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
7.4 To Insure........................................... 24
7.5 Compliance with Laws................................ 25
SECTION 8. NEGATIVE COVENANTS................................ 25
-----------------
8.1 Funded Debt......................................... 25
8.2 Liens............................................... 26
8.3 Restricted Payments................................. 28
8.4 Merger or Consolidation............................. 29
8.5 Disposition of Assets............................... 30
8.6 Investments......................................... 30
8.7 Sale and Leaseback.................................. 30
8.8 Transactions with Affiliates........................ 31
8.9 Fiscal Year......................................... 31
8.10 Subsidiaries....................................... 31
8.11 Restricted Subsidiaries............................ 31
SECTION 9. DEFINITIONS AND ACCOUNTING........................ 32
--------------------------
SECTION 10. SECURITY......................................... 45
10.1 The Security....................................... 45
10.2 Agreement to Deliver Security Documents............ 45
10.3 Perfection and Protection of Security
Interests and Liens................................. 45
10.4 Additional Secured Debt............................ 45
SECTION 11. DEFAULTS AND REMEDIES............................ 47
---------------------
11.1 Events of Default.................................. 47
11.2 Suits for Enforcement.............................. 51
11.3 Remedies Cumulative................................ 51
11.4 Remedies Not Waived................................ 51
11.5 Indemnity.......................................... 51
SECTION 12. CONSENTS, WAIVERS AND AMENDMENTS................. 53
--------------------------------
SECTION 13. SPECIAL RIGHTS OF PURCHASER...................... 54
13.1 Method of Payment; Indemnity....................... 55
13.2 Expenses........................................... 55
SECTION 14. REGISTRATION, TRANSFER OR EXCHANGE OF
------------------------------------
NOTES.................................................... 56
------
14.1 Note Register...................................... 56
14.2 Surrender for Transfer............................. 56
14.3 Loss, Theft, Destruction or Mutilation of
Notes............................................... 57
14.4 Holders............................................ 57
SECTION 15. SURVIVAL OF REPRESENTATIONS AND
-------------------------------
WARRANTIES; SUCCESSORS AND ASSIGNS....................... 57
----------------------------------
SECTION 16. NOTICES AND OTHER COMMUNICATIONS................. 57
--------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 17. SEVERABILITY..................................... 58
------------
SECTION 18. REFERENCES AND TITLES............................ 58
---------------------
SECTION 19. COUNTERPARTS..................................... 58
------------
SECTION 20. GOVERNING LAW.................................... 59
-------------
SECTION 21. LIMITATION ON INTEREST........................... 59
----------------------
</TABLE>
EXHIBIT A - FORM OF SERIES A NOTE
EXHIBIT B - FORM OF SERIES B NOTE
EXHIBIT C - FORM OF SOLVENCY CERTIFICATE
EXHIBIT D - FORM OF INSTRUMENT OF TRANSFER
EXHIBIT E - FORM OF OPINION OF NEW YORK COUNSEL
EXHIBIT F - FORM OF OPINION OF COUNSEL OF THE KPP COMPANIES
SCHEDULE 1 - LIST OF SERIES A NOTES AND HOLDERS
SCHEDULE 2 - LIST OF SERIES B NOTES AND HOLDERS
SCHEDULE 3 - SECURITY SCHEDULE
SCHEDULE 4 - LIST AND DESIGNATION OF SUBSIDIARIES
SCHEDULE 5 - LIST OF DEBT AND LIENS
SCHEDULE 6 - LIST OF INVESTMENTS
SCHEDULE 7 - LIST OF LITIGATION AND JUDGMENTS
SCHEDULE 8 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 9 - LIST OF CHIEF EXECUTIVE OFFICES
SCHEDULE 10 - LIST OF FACILITIES TO BE CLOSED
SCHEDULE 11 - INSURANCE
SCHEDULE 12 - DEFINITION OF AVAILABLE CASH
SCHEDULE 13 - UNRESTRICTED SUBSIDIARIES
iii
<PAGE>
KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
STANTRANS, INC.
2400 Lakeside Boulevard
Richardson, Texas 75082
NOTE PURCHASE AGREEMENT
Richardson, Texas
As of December 22, 1994
To the Holder Identified on
the Signature Page at the
End of this Agreement
Ladies and Gentlemen:
The undersigned, Kaneb Pipe Line Operating Partnership, L.P., a Delaware
limited partnership ("KPOP"), StanTrans, Inc., a Delaware corporation ("STI"),
Kaneb Pipe Line Partners, L.P., a Delaware limited partnership (the
"Partnership"), Support Terminal Services, Inc., a Delaware corporation ("STS"),
and Support Terminals Operating Partnership, L.P., a Delaware limited
partnership ("STOP") hereby agree with you as follows:
SECTION 1. THE NOTES AND NOTE AGREEMENTS.
-----------------------------
1.1 Series A Notes. (a) KPOP has duly authorized the issue to the
--------------
institutional purchasers named on Schedule 1 hereto of KPOP's First Mortgage
Notes due seven years from the date of issuance (the "Series A Final Maturity
Date") in the aggregate principal amount of $27,000,000 to be dated the date of
issuance, to mature on the Series A Final Maturity Date and to be substantially
in the form set forth in Exhibit A hereto, with only such revisions, deletions
and amendments as shall be acceptable to you and the other purchasers of Series
A Notes under the Note Agreements. The term "Note Agreements" as used herein
refers collectively to this Note Purchase Agreement (this "Agreement") and to
the other Note Purchase Agreements of even date herewith with the various
institutional purchasers named on Schedules 1 and 2 hereto. The term "Series A
Notes" as used herein refers collectively to the Series A Notes delivered
pursuant to the provisions of this Agreement and the other Note Agreements, and
also to each Series A Note delivered in substitution or exchange for or in lieu
of any such Series A Note. KPOP hereby represents and warrants that
concurrently herewith it is entering into each of the other Note Agreements in a
form identical hereto except for the signature of the purchaser thereunder at
the end thereof.
(b) The unpaid principal amount of the Series A Notes shall bear interest
at the Series A Contract Rate from the date of
1
<PAGE>
issuance thereof until such unpaid principal amount shall have become due and
payable. Any principal amount of the Series A Notes and any Applicable Premium
Amount, as the case may be, not paid when due, and (to the extent permitted by
law) any due and unpaid interest accrued thereon, shall bear interest at the
Series A Overdue Rate for the period that the same is overdue. The Series A
Overdue Rate (herein so called) is equal to the greater of (i) two percent per
annum (2.0%) plus the Series A Contract Rate, and (ii) two percent per annum
(2.0%) plus the Prime Rate; provided that the Series A Overdue Rate shall in no
event exceed the maximum rate permitted by applicable law. Interest at the
Series A Contract Rate and the Series A Overdue Rate shall be computed on the
basis of a 360-day year of twelve 30-day months. Interest at the Series A
Overdue Rate shall, to the extent permitted by law, be compounded monthly.
Interest at the Series A Contract Rate shall be payable semi-annually as it
accrues on the sixth month and annual anniversary date of the Series A Closing
Date of each year (or if any such date shall not be a Business Day, the
immediately following Business Day), beginning on the sixth month anniversary
date of the Series A Closing Date and continuing regularly thereafter until the
Series A Notes are paid in full. Interest at the Series A Overdue Rate shall be
payable upon demand and, whether or not demand is made, on the last day of each
calendar month. All interest on the Series A Notes, if not already due and
payable, shall be due and payable on the Series A Final Maturity Date.
(c) Subject to the terms and conditions of this Agreement, KPOP will sell
to you, and you will purchase from KPOP, on or before January 30, 1995, or such
other date agreed to by you and KPOP (the "Series A Closing Date"), a duly
executed Series A Note dated the Series A Closing Date in the principal amount
set forth opposite your name on Schedule 1, registered in your name, at the
purchase price of 100% of the principal amount thereof. Delivery of the Series
A Note so to be purchased by you shall be made on the Series A Closing Date at
the offices of Thompson & Knight, P.C., your special counsel, at 1700 Pacific
Avenue, Suite 3300, Dallas, Texas 75201. Such delivery shall be made against
payment to KPOP of the purchase price for such Series A Note by wire transfer of
immediately available funds in such amount to the account of KPOP at Texas
Commerce Bank, ABA No. 111001150, Account No. 0880-5043997.
1.2 Series B Notes. (a) STI has duly authorized the issue to the
--------------
institutional purchasers named on Schedule 2 hereto of STI's 8.05% First
Mortgage Notes due December 22, 2001 (the "Series B Final Maturity Date") in the
aggregate principal amount of $33,000,000 to be dated the date of issuance, to
mature on the Series B Final Maturity Date and to be substantially in the form
set forth in Exhibit B hereto, with only such revisions, deletions and
amendments as shall be acceptable to you and the other purchasers of Series B
Notes under the Note Agreements. The term "Series B Notes" as used herein
refers collectively to the Series B Notes delivered pursuant to the provisions
of this
2
<PAGE>
Agreement and the other Note Agreements, and also to each Series B Note
delivered in substitution or exchange for or in lieu of any such Series B Note.
The term "Notes" as used herein refers collectively to the Series A Notes and
the Series B Notes delivered pursuant to the provisions of this Agreement and
the other Note Agreements, and also to each such Note delivered in substitution
or exchange for or in lieu of any such Note. STI hereby represents and warrants
that concurrently herewith it is entering into each of the other Note Agreements
in a form identical hereto except for the signature of the purchaser thereunder
at the end thereof.
(b) The unpaid principal amount of the Series B Notes shall bear interest
at the rate of 8.05% per annum (the "Series B Contract Rate") from the date of
issuance thereof until such unpaid principal amount shall have become due and
payable. Any principal amount of the Series B Notes and any Applicable Premium
Amount, as the case may be, not paid when due, and (to the extent permitted by
law) any due and unpaid interest accrued thereon, shall bear interest at the
Series B Overdue Rate for the period that the same is overdue. The Series B
Overdue Rate (herein so called) is equal to the greater of (i) 10.05% per annum
and (ii) two percent (2.0%) per annum plus the Prime Rate; provided that the
Series B Overdue Rate shall in no event exceed the maximum rate permitted by
applicable law. Interest at the Series B Contract Rate and the Series B Overdue
Rate shall be computed on the basis of a 360-day year of twelve 30-day months.
Interest at the Series B Overdue Rate shall, to the extent permitted by law, be
compounded monthly. Interest at the Series B Contract Rate shall be payable
semi-annually as it accrues on the 22nd dayof June and December of each year
(or if any such date shall not be a Business Day, the immediately following
Business Day), beginning June 22, 1995 and continuing regularly thereafter until
the Series B Notes are paid in full. Interest at the Series B Overdue Rate
shall be payable upon demand and, whether or not demand is made, on the last day
of each calendar month. All interest on the Series B Notes, if not already due
and payable, shall be due and payable on the Series B Final Maturity Date.
(c) Subject to the terms and conditions of this Agreement, STI will sell
to you, and you will purchase from STI, on December 22, 1994, or such other date
agreed to by you and STI (the "Series B Closing Date"), a duly executed Series B
Note dated the Series B Closing Date in the principal amount set forth opposite
your name on Schedule 2, registered in your name, at the purchase price of 100%
of the principal amount thereof. Delivery of the Series B Note so to be
purchased by you shall be made on the Series B Closing Date at the offices of
Thompson & Knight, P.C., your special counsel, at 1700 Pacific Avenue, Suite
3300, Dallas, Texas 75201. Such delivery shall be made against payment by wire
transfer of immediately available funds to Trustee, for the benefit of STI, to
(i) pay Existing Term Lenders in the amount of $22,566,796.88 to pay the
Existing Term Debt in full, which Existing Term Debt will be modified, renewed
and extended by, and
3
<PAGE>
thereafter evidenced by, the Series B Notes, and (ii) pay STI in the amount of
$10,000,000.
1.3 Acquisition for Investment; ERISA. This Agreement is made with you in
---------------------------------
reliance upon your representation to each of KPOP and STI (which, by your
acceptance hereof you confirm) that (a) you are an "accredited investor" within
the meaning of Rule 501 under the Securities Act of 1933, as amended (in this
section, the "Act"); (b) each Note which you are acquiring is being acquired
for your own account for investment, and not with a view to the sale or
distribution thereof, nor with any present intention of selling or distributing
such Note, but subject, nevertheless, to your right to have the disposal of all
or any part of your property (including such Note) at all times be within your
control; and (c) no employee benefit plan accounts for 10% or more of the assets
allocated to any separate account (as defined in ERISA) maintained by you which
is a source of funds being used by you for the acquisition of such Note. By
your acceptance hereof you further acknowledge that such Note has not been
registered under the Act or the securities laws of any state on the ground that
the original sale contemplated hereby is exempt from registration under the Act
and such state securities laws, and you agree that in the absence of such
registration such Note will be sold or disposed of only pursuant to an exemption
from registration under the Act and such state securities laws.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of the KPP Companies
------------------------------
hereby represent and warrant that:
2.1 Financial Statements. The Partnership has delivered to you a copy of
--------------------
(i) its audited Consolidated financial statements for the years ended December
31, 1989, 1990, 1991, 1992 and 1993 which contain balance sheets as of the end
of each year and statements of income, of cash flows and of changes in partners'
capital for each such year, (ii) its unaudited Consolidated interim financial
statements for the nine-month period ending September 30, 1994, which contain a
balance sheet as of the end of such period and a statement of income and of cash
flows for such period and (iii) its unaudited Consolidated statements of income
for the three-month period ending September 30, 1994. Such financial statements
fairly present the Consolidated financial condition of the Partnership as of the
respective dates of the balance sheets and the results of its operations and
cash flows for the periods ending on such dates and in the case of statements of
income, the three month period ending on such dates, except as otherwise stated
therein or in the notes thereto, such financial statements have been prepared in
accordance with GAAP consistently applied, subject, in the case of such interim
financial statements, to normal year end adjustments.
2.2 Private Placement Memorandum. The KPP Companies have delivered to
----------------------------
you a copy of the Private Placement Memorandum dated September 1994 (the
"Private Placement Memorandum"). The
4
<PAGE>
information contained in the Private Placement Memorandum was, as of the date
thereof, true and correct in all material respects and fairly describes
generally the business, operations and principal properties of the KPP Companies
and their Subsidiaries as of the date thereof and hereof, except as supplemented
by the most recent form 10Q and projections provided to you in writing prior to
the date hereof. Any estimated amounts included in projections or assumptions
in projections provided in the Private Placement Memorandum are based upon the
best information available in light of all conditions existing as of the date
thereof and hereof, except as supplemented by projections provided to you in
writing prior to the date hereof.
2.3 No Material Adverse Change. There has been no material adverse change
--------------------------
in the business, operations, properties, assets or condition, financial or
otherwise, of KPOP or STI individually or the KPP Companies and their
Subsidiaries taken as a whole, since December 31, 1993, and none of the KPP
Companies nor any of their Subsidiaries have any material liabilities
(contingent or otherwise) which are not disclosed either in the Private
Placement Memorandum, or in one of the balance sheets referred to in Section
2.1.
2.4 Subsidiaries; Organization, Authority and Good Standing. (a)
-------------------------------------------------------
Schedule 4 hereto sets forth a complete and correct list of all Subsidiaries of
the Partnership, together with the name of each Subsidiary, its jurisdiction of
incorporation, the percentage of its shares or partnership units owned by a KPP
Company or another of their Subsidiaries. Except as set forth on Schedule 4:
(i) all outstanding shares or partnership units issued by any KPP Companies or
any of their Subsidiaries have been validly issued, are fully paid and non-
assessable, and are owned beneficially by the record owner thereof, and (ii)
there are no outstanding options, warrants or other rights to acquire shares in
any KPP Company or in any of their Subsidiaries.
(b) Each KPP Company and each of their Subsidiaries is a partnership or
corporation duly formed or organized and validly existing in good standing under
the laws of its jurisdiction of organization or incorporation (which is a state
of the United States of America) and has full partnership or corporate power and
authority to own or lease the properties and assets it purports to own or hold
under lease, and to conduct the business which it now conducts.
(c) Each of STI, KPOP and STOP is duly qualified and in good standing as a
foreign corporation or partnership in each jurisdiction within the United States
wherein the character of the properties owned or held by it or the nature of the
business transacted by it makes such qualification necessary. Each KPP Company
(other than STI, KPOP and STOP) and each of their Subsidiaries is duly qualified
and in good standing as a foreign corporation or partnership in each
jurisdiction in which the
5
<PAGE>
failure to be qualified would materially and adversely affect the business,
operations, properties, assets or condition, financial or otherwise of such KPP
Company, such Subsidiary or the KPP Companies and their Subsidiaries taken as a
whole.
(d) Each of the KPP Companies has duly authorized the execution and
delivery of the Note Agreements, the Notes and the other Note Purchase Documents
to which it is a party and the performance of its obligations hereunder and
thereunder. The issuance and sale of the Notes are within the partnership and
corporate power and authority of each of KPOP and STI.
2.5 Title to Properties; Liens and Leases; Existing Debt and Investments.
--------------------------------------------------------------------
(a) The KPP Companies and their Subsidiaries each (i) have good and marketable
title to all properties it purports to own, free and clear of all Liens, other
than those permitted under Section 8.2, and (ii) enjoys peaceful and undisturbed
possession under all leases necessary for the conduct of its business, and all
such leases are valid and subsisting and in full force and effect.
(b) Schedule 5 hereto sets forth a list, complete and correct in all
respects, of all outstanding Debt of the KPP Companies and their Subsidiaries,
together with the outstanding principal amount of each such item of Debt, the
name of its obligor (including any guarantor), the names of the holders thereof,
its interest rate and maturity date and a brief description of the properties
(if any) securing such Debt and the priority of the Lien on such properties.
(c) None of the KPP Companies, nor any of their Subsidiaries, hold any
Restricted Investments. Schedule 6 hereto sets forth a list, complete and
correct in all respects, of all outstanding Permitted Investments of the KPP
Companies and their Subsidiaries (other than Permitted Investments described in
subparagraphs (a), (b), (d), (e), (f) and (g) of the definition of Permitted
Investments contained herein), together with the outstanding amount of each such
Permitted Investment, the name of the Person in which such investment is made
and a brief description of the terms of such investment.
2.6 Licenses. Each KPP Company and its Subsidiaries owns or has the right
--------
to use all trademarks, trade names, service marks, copyrights, patents, computer
software and other technology rights and licenses, governmental licenses,
franchises, certificates, consents, permits and approvals necessary to enable it
to own the properties and assets and to conduct the business which it now owns
and conducts, without known conflict with the rights of others (except where
such conflicts are not material) and has made all of the filings with respect
thereto with the appropriate state and federal governmental agencies and
authorities to protect its rights therein. To the best knowledge of each of the
KPP Companies and their Subsidiaries, all such trademarks, trade names, service
6
<PAGE>
marks, copyrights, patents, computer software and other technology rights and
licenses, governmental licenses, franchises, certificates, consents, permits and
approvals are valid and subsisting.
2.7 Binding Obligations. The Note Agreements constitute, and the Notes
-------------------
and the other Note Purchase Documents, when issued, executed and delivered, will
constitute, the legal, valid and binding obligations of each KPP Company which
is a party thereto enforceable in accordance with their respective terms, except
as enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally or by the availability
of equitable remedies.
2.8 Litigation; Compliance with Laws. (a) Schedule 7 hereto sets forth a
--------------------------------
list, complete and correct in all material respects, of all actions, suits or
proceedings (whether or not purportedly on behalf of any KPP Company, any of
their Subsidiaries or any of their Affiliates) pending (or, to the knowledge of
any Responsible Officer, threatened) against or affecting any KPP Company or any
of their Subsidiaries at law or in equity or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind: (i) which involves any of the
transactions herein contemplated, or (ii) which would materially and adversely
affect the business, operations, properties, assets or condition, financial or
otherwise, of KPOP or STI individually, the KPP Companies and their Subsidiaries
taken as a whole, or any KPP Company's ability to perform under the Note
Agreements or under the Notes or the other Note Purchase Documents.
(b) Except as disclosed in Schedule 7, none of the KPP Companies nor any
of their Subsidiaries is in default, event of default or violation of any law,
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which default, event of default or
violation would materially and adversely affect (i) the business, operations,
properties, assets or condition, financial or otherwise, of KPOP or STI
individually, or the KPP Companies and their Subsidiaries taken as a whole, or
(ii) any KPP Company's ability to perform under this Note Agreement or under the
Notes or the other Note Purchase Documents or to perform any of the transactions
contemplated herein or therein.
2.9 No Burdensome Provisions. None of the KPP Companies nor any of their
------------------------
Subsidiaries is a party to any agreement or instrument or subject to any charter
or other corporate restriction which materially and adversely affects the
business, operations, properties, assets or condition, financial or otherwise,
of KPOP or STI individually, the KPP Companies and their Subsidiaries taken as a
whole or any KPP Company's ability
7
<PAGE>
to perform under the Note Agreements or under the Notes or the other Note
Purchase Documents.
2.10 Compliance with Other Instruments, etc. None of the KPP Companies
---------------------------------------
nor any of their Subsidiaries is in default or event of default in, and no
temporary waiver of default or event of default is in effect with respect to,
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in (a) any bond, debenture, note or other evidence of
Debt of any KPP Company or any of their Subsidiaries, (b) any agreement or
instrument under or pursuant to which any such bond, debenture, note or other
evidence of Debt has been issued or made and delivered, or (c) any agreement or
instrument pursuant to which any properties of any KPP Company or any of their
Subsidiaries are subject, which default or event of default would materially and
adversely affect the business, operations, properties, assets or condition,
financial or otherwise, of KPOP or STI individually, the KPP Companies and their
Subsidiaries taken as a whole or any KPP Company's ability to perform under the
Note Agreements or under the Notes or the other Note Purchase Documents.
Neither the execution and delivery of the Note Agreements, the Notes or the
other Note Purchase Documents by the KPP Companies to which each is a party, nor
the consummation of the transactions herein and therein contemplated, nor
compliance with the terms, conditions and provisions hereof and thereof by the
KPP Companies, will conflict with or result in a breach of any of the terms,
conditions or provisions of the partnership agreement, charter or by-laws of any
KPP Company or any of their Subsidiaries or of any material agreement or
instrument to which any of them is now a party or by which any of them or any of
their properties is or may be bound, or constitute a default or event of default
thereunder, or result in the creation or imposition of any Lien upon any of
their material properties or assets. None of the KPP Companies nor any of their
Subsidiaries is in default or event of default in the performance of any of the
covenants and agreements contained herein. No event has occurred and is
continuing which constitutes, or which with the lapse of time would constitute,
a Default or Event of Default.
2.11 Use of Proceeds; Federal Reserve Board Regulations. The proceeds
--------------------------------------------------
from the sale of the Series A Notes will be used by KPOP first, to the extent
thereof, to finance the acquisition of the assets of WYCO and second, for
general corporate purposes. The proceeds from the sale of the Series B Notes
will be used by STI first, to the extent thereof, to repay approximately
$33,000,000 of the outstanding indebtedness owing by STI and KPOP to Texas
Commerce Bank National Association and second, for general corporate purposes.
None of the proceeds received by either KPOP or STI from the sale of the Notes
will be used for the purpose of purchasing or carrying any "margin stock" as
defined in Regulation G of the Board of Governors of the Federal Reserve System
("Margin Stock") or for the purpose of reducing or retiring any indebtedness
which was originally incurred to
8
<PAGE>
purchase or carry any Margin Stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of said
Regulation G. None of the transactions contemplated herein or in the Notes will
(i) violate or result in a violation of Section 7 of the Securities Exchange Act
of 1934, as amended, or any regulations issued pursuant thereto, including
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II or (ii) require any Holder to complete a Federal Reserve
System form G-3. Margin Stock does not, and no KPP Company intends or foresees
that Margin Stock will at any time, constitute a substantial part of such KPP
Company's assets.
2.12 ERISA. (a) The issuance and delivery by KPOP or STI of each Note
-----
purchased by you will not involve any prohibited transaction within the meaning
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). The
representation by the KPP Companies in this Section 2.12(a) is made in reliance
upon and subject to the accuracy of your representation in Section 1.3 as to the
source of the funds to be used by you to acquire such Note.
(b) Based upon ERISA and the regulations and published interpretations
thereunder, each of the KPP Companies and its ERISA Affiliates is in compliance
in all material respects with the applicable provisions of ERISA. No Reportable
Event has occurred with respect to any Plan (other than a Reportable Event for
which the 30 days' notice requirement with respect to such Reportable Event has
been waived by the PBGC). None of the KPP Companies and their ERISA Affiliates
has incurred any liability to the PBGC under Section 4062 of ERISA or to any
Plan. None of the KPP Companies nor any of their Subsidiaries is currently
obligated to contribute to a multi-employer plan, as defined in Section
4001(a)(3) of ERISA.
(c) The term "Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA. The term "Plan" shall mean any plan defined in
Section 4021(a) of ERISA in respect of which the KPP Companies or any of their
ERISA Affiliates is an "employer" or a "substantial employer" as such terms are
defined in Sections 3(5) and 4001(a)(2), respectively, of ERISA. The term
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any governmental
agency or agencies substituted therefor, and the term "ERISA Affiliate" shall
mean any Person which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as the KPP Companies or is
under common control (within the meaning of Section 414(c) of the Code) with the
KPP Companies.
2.13 Tax Liability. (a) All federal income tax returns which are
-------------
required to be filed by each of the KPP Companies or any of their Subsidiaries
have been filed. The federal income tax liabilities of the KPP Companies and
their Subsidiaries have
9
<PAGE>
not been subject to a notice of audit by the Internal Revenue Service and
accordingly has been finally determined and paid for all fiscal years up to and
including the fiscal year ended December 31, 1989.
(b) All state and local income and franchise tax returns which are
required to be filed by any KPP Company or any of their Subsidiaries have been
filed by it or on its behalf, to the extent, if any, that it files combined or
consolidated returns.
(c) All taxes shown on such returns have been paid to the extent that such
taxes have become due, except those taxes, assessments, charges, levies or
claims the amount, applicability or validity of which is currently being
contested in good faith by it and which in respect thereof, such KPP Company or
any such Subsidiary shall have set aside on its books reserves deemed adequate
in the reasonable opinion of such KPP Company or such Subsidiary. In the
opinion of the KPP Companies, all tax liabilities of the KPP Companies and their
Subsidiaries were adequately provided for as of December 31, 1993, and are now
so provided for on the books of the KPP Companies and their Subsidiaries.
2.14 Governmental Action. No action of any governmental or public body or
-------------------
authority (i.e., no consent, transfer license, etc.) is required to authorize,
or is otherwise required in connection with, the execution, delivery and
performance of the Note Agreements, the Notes or the other Note Purchase
Documents.
2.15 Offering of Notes. None of the KPP Companies nor any agents acting
-----------------
on their behalf have, either directly or indirectly, sold or offered for sale or
disposed of, or attempted or offered to dispose of, the Notes or any part
thereof, or any similar obligation of the KPP Companies, to, or has solicited
any offers to buy any of the Notes or any part thereof, or any similar
obligation of the KPP Companies from, or has otherwise approached or negotiated
in respect of the Notes or any part thereof, or any similar obligation of the
KPP Companies, with any Person or Persons other than you and not more than
twenty-one other accredited institutional investors, each of whom had a pre-
existing business relationship with one or more of the KPP Companies or their
directors, officers, employees or agents (including, without limitation, the KPP
Companies' investment banker placing the Notes), was known to be regularly
engaged in the business of evaluating and making investments in instruments
similar to the Notes and was provided with a Private Placement Memorandum and
was given access to all other material financial and other pertinent information
about the KPP Companies; during the twelve month period preceding the date
hereof, none of the KPP Companies nor any agents acting on their behalf have,
either directly or indirectly, issued or sold any securities of the KPP
Companies that are of the same or similar class to the Notes in a transaction
exempt from the provisions of Section 5 of the Securities Act of 1933, as
amended; and the KPP Companies agree
10
<PAGE>
that neither they nor any agent acting on their behalf will sell or offer for
sale or dispose of, or attempt or offer to dispose of, any of the Notes or any
part thereof to, or any similar obligation of the KPP Companies, or solicit any
offers to buy any of the Notes or any part thereof from, or otherwise approach
or negotiate in respect of the Notes or any part thereof, or any similar
obligation of the KPP Companies with, any Person or Persons so as thereby to
bring the issuance or sale of the Notes within the provisions of Section 5 of
the Securities Act of 1933, as amended.
2.16 Environmental Matters. Except as disclosed in Schedule 8:
---------------------
(a) each of the KPP Companies and each of their Subsidiaries is in
compliance with all applicable federal, state and local laws and regulations
relating to pollution control and environmental contamination, including all
laws and regulations governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of Hazardous
Materials and all laws and regulations with regard to record keeping,
notification and reporting requirements respecting Hazardous Materials;
(b) none of the KPP Companies nor any of their Subsidiaries has been
alleged to be in violation of, or to have any obligation for remediation under,
or has been subject to any administrative or judicial proceeding pursuant to,
such laws or regulations, nor has any Claim under CERCLA, RCRA or any other
federal, state or local environmental statute or regulation been asserted
against any KPP Company or any Subsidiary, except in each case as to matters
that have been finally and fully resolved (with any judgment, fine or other
payment owing by any KPP Company or any of their Subsidiaries in connection
therewith having been paid in full); and
(c) there are no facts or circumstances that the KPP Companies reasonably
believe form the basis, or could form the basis, for the assertion of any Claim
against any KPP Company or any of their Subsidiaries relating to any
environmental matter that would materially and adversely affect the business,
operations, properties, assets or condition, financial or otherwise, of KPOP or
STI individually or the KPP Companies and their Subsidiaries taken as a whole,
including any Claim arising from past or present environmental practices
asserted under CERCLA, RCRA or any other federal, state or local environmental
statute or regulation.
2.17 Disclosure. None of the Note Agreements, the Notes, the other Note
----------
Purchase Documents, the Private Placement Memorandum nor any of the instruments,
certificates or statements furnished to you by any KPP Company or any of their
Subsidiaries in connection with the transactions contemplated hereby or thereby,
contains any untrue statement of a material fact or
11
<PAGE>
omits to state any material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. There is no fact peculiar to any KPP Company or their
respective Subsidiaries which has not been disclosed to you in writing which
materially adversely affects or, as far the KPP Companies can reasonably
foresee, will materially adversely affect the properties, business, profits or
condition (financial or otherwise) of KPOP or STI individually or the KPP
Companies and their Subsidiaries taken as a whole.
2.18 Solvency. No KPP Company is, and upon giving effect to the issuance
--------
of the Notes no KPP Company will be, "insolvent", as such term is used in
Section 24.003 of the Texas Business and Commerce Code or 11 U.S.C. 101 (32)(a).
2.19 Status Under Certain Statutes. No KPP Company is an "investment
-----------------------------
company" or a Person directly or indirectly "controlled" by or "acting on behalf
of" an investment company within the meaning of the Investment Company Act of
1940, as amended. No KPP Company nor any of their Subsidiaries is a "national"
of any foreign country designated in the Foreign Assets Control Regulations, the
Transaction Control Regulations, the Foreign Funds Control Regulations, the
Iranian Assets Control Regulations, the Cuban Assets Control Regulations, the
Nicaraguan Trade Control Regulations, the Iraqi Sanctions Regulations, the
Haitian Transactions Regulations or the Libyan Sanctions Regulations of the
United States Treasury Department (31 CFR Subtitle B, Chapter V, as amended).
None of the proceeds of the sale of the Notes will be used, directly or
indirectly, for the purpose of engaging in any transaction which violates any of
such Regulations or which violates the Foreign Funds Control Regulations or the
Transaction Control Regulations of the United States Treasury Department (31 CFR
Subtitle B, Chapter V, as amended), or any regulation or ruling issued
thereunder.
SECTION 3. CONDITIONS OF CLOSING.
---------------------
3.1 Conditions to Purchase and Sale of Series B Notes. Your obligation to
-------------------------------------------------
purchase and pay for the Series B Notes to be purchased by you on the Series B
Closing Date, as provided in Section 1.2(c), shall be subject to the performance
by each of the KPP Companies of all its agreements theretofore or simultaneously
to be performed hereunder and under the Series B Notes, to the accuracy of its
representations and warranties contained herein and in the Series B Notes, and
to the satisfaction, on or prior to such purchase, of the following further
conditions:
(a) Opinion of Counsel. You shall have received from Hutton, Ingram,
------------------
Yuzek, Gaines, Carroll & Bertolotti, New York counsel for the KPP Companies, and
from Stephen Hoffner, general counsel for the KPP Companies favorable opinions
in form and substance acceptable to you as to the matters set forth on
12
<PAGE>
Exhibits E and F, and from your own special counsel, Thompson & Knight, P.C., a
favorable opinion in form and substance acceptable to you.
(b) Schedules. All Schedules hereto shall be true and correct as of the
---------
Series B Closing Date.
(c) Proceedings and Documents. All proceedings to be taken in connection
-------------------------
with the transactions contemplated by this Agreement and the other Note Purchase
Documents, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to you; and you shall have received copies of the
following documents in form and substance satisfactory to you:
(i) your Series B Note;
(ii) copies of the other Note Agreements;
(iii) the Security Documents;
(iv) the Intercreditor Agreement;
(v) a Solvency Certificate of the chief financial officer of STI and KPL
as general partner of KPOP in the form of Exhibit C hereto;
(vi) certificates of due formation and good standing in each of the KPP
Companies' and their Subsidiaries' states of organization;
(vii) certificates of due qualification and good standing in each state in
which any KPP Company (other than STOP) or any of their Subsidiaries
owns property;
(viii) an "Officers' Certificate" of the Secretary and of the Chairman of the
Board or President of each KPP Company or its general partner, which
shall contain the names and signatures of the officers of such KPP
Company or its general partner authorized to execute Note Purchase
Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy
of resolutions duly adopted by the Board of Directors of such KPP
Company or its general partner and in full force and effect at the
time this Agreement is entered into, authorizing the execution of this
Agreement and the other Note Purchase Documents delivered or to be
delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (ii) a copy of the
charter documents or partnership agreement of such KPP Company and all
amendments, thereto, certified by the appropriate official of such KPP
13
<PAGE>
Company's state of organization, and (iii) a copy of any bylaws of
such KPP Company;
(ix) confirmation from the KPP Companies' investment bankers as to matters
discussed in Section 2.15;
(x) environmental site assessment reports prepared by Pilko & Associates
as of a date not earlier than sixty (60) days prior to the Series B
Closing Date, which update the environmental site assessment reports
prepared by Pilko & Associates as of March, 1993, and cover both the
real property pledged pursuant to the Mortgage and the real property
owned by STI;
(xi) a true and correct copy of each Bank Debt Document;
(xii) evidence of insurance required pursuant to Section 7.4; and
all other documents and other evidence which you may reasonably request in
connection with such transactions, including without limitation all records of
corporate proceedings in connection therewith.
(d) Legality of Notes. The Series B Note being acquired by you on the
-----------------
Series B Closing Date, shall then qualify as a legal investment for insurance
companies under the laws of any jurisdiction to which you may be subject
(without resort to any "basket" or "leeway" provision of any such law,
permitting limited investments by you without restriction as to the character of
the particular investment) and such purchase shall not subject you to any
penalty or other onerous condition under or pursuant to any applicable law or
government regulation; and you shall have received such certificates or other
evidence as you may reasonably request to establish compliance with this
condition.
(e) Private Placement Number. The Series B Notes shall have been assigned
------------------------
a private placement number by Standard and Poor's CUSIP Service Bureau.
(f) Fees Payable at Closing. You and your special counsel shall have
-----------------------
received the fees and expenses required to be paid or reimbursed by the KPP
Companies, as provided in Section 13.2, in connection with the preparation and
review of the Note Agreements, the Series B Notes, the other Note Purchase
Documents and the other documents and instruments relating thereto, the
negotiations thereof and other matters in connection therewith. The KPP
Companies shall have paid all fees and expenses of Pilko & Associates with
respect to the site assessment described in Section 3.1(c)(x). The KPP
Companies shall have paid you a fee in the amount of $8,595.07.
14
<PAGE>
(g) Representations and Warranties. All representations and warranties
------------------------------
made by any KPP Company or its Subsidiaries in any Note Purchase Document shall
be true on and as of the Series B Closing Date as if such representations and
warranties had been made as of the Series B Closing Date (or where a
representation or warranty is given as of a specified date, the date so
specified).
3.2 Conditions to Purchase and Sale of Series A Notes. Your obligation to
-------------------------------------------------
purchase and pay for the Series A Notes to be purchased by you on the Series A
Closing Date, as provided in Section 1.1(c), shall be subject to the performance
by each of the KPP Companies of all its agreements theretofore or simultaneously
to be performed hereunder and under the Series A Notes, to the accuracy of its
representations and warranties contained herein and in the Series A Notes, and
to the satisfaction, on or prior to such purchase, of the following further
conditions:
(a) Opinion of Counsel. You shall have received from Hutton, Ingram,
------------------
Yuzek, Gaines, Carroll & Bertolotti, New York counsel for the KPP Companies, and
from Stephen Hoffner, general counsel for the KPP Companies as to the matters
set forth on Exhibits E and F, and from your own special counsel, Thompson &
Knight, P.C., a favorable opinion in form and substance acceptable to you.
(b) Schedules. All Schedules hereto shall be true and correct as of the
---------
Series A Closing Date.
(c) Proceedings and Documents. All proceedings to be taken in connection
-------------------------
with the transactions contemplated by this Agreement and the other Note Purchase
Documents, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to you; and you shall have received copies of the
following documents in form and substance satisfactory to you:
(i) your Series A Note;
(ii) a Solvency Certificate of the chief financial officer of STI and KPL
as general partner of KPOP in the form of Exhibit C hereto;
(iii) certificates of due formation and good standing in each of the KPP
Companies' and their Subsidiaries' states of organization;
(iv) certificates of due qualification and good standing in each state in
which the any KPP Company (other than STOP) or any of their
Subsidiaries owns property;
(v) an "Officers' Certificate" of the Secretary and of the Chairman of the
Board or President of each KPP Company
15
<PAGE>
or its general partner, which shall contain the names and signatures
of the officers of such KPP Company or its general partner authorized
to execute Note Purchase Documents and which shall certify to the
truth, correctness and completeness of the following exhibits attached
thereto: (i) a copy of resolutions duly adopted by the Board of
Directors of such KPP Company or its general partner and in full force
and effect at the time this Agreement is entered into, authorizing the
execution of this Agreement and the other Note Purchase Documents
delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (ii)
a copy of the charter documents or partnership agreement of such KPP
Company and all amendments, thereto, certified by the appropriate
official of such KPP Company's state of organization, and (iii) a copy
of any bylaws of such KPP Company;
(vi) confirmation from the KPP Companies' investment bankers as to matters
discussed in Section 2.15;
(vii) evidence of insurance required pursuant to Section 7.4;
(viii) copies of all documents, which shall be in form and substance
acceptable to you, executed in connection with the acquisition by KPOP
of the assets of WYCO; and
all other documents and other evidence which you may reasonably request in
connection with such transactions, including without limitation all records of
corporate proceedings in connection therewith.
(d) Legality of Notes. The Series A Note being acquired by you on the
-----------------
Series A Closing Date, shall then qualify as a legal investment for insurance
companies under the laws of any jurisdiction to which you may be subject
(without resort to any "basket" or "leeway" provision of any such law,
permitting limited investments by you without restriction as to the character of
the particular investment) and such purchase shall not subject you to any
penalty or other onerous condition under or pursuant to any applicable law or
government regulation; and you shall have received such certificates or other
evidence as you may reasonably request to establish compliance with this
condition.
(e) Private Placement Number. The Series A Notes shall have been assigned
------------------------
a private placement number by Standard and Poor's CUSIP Service Bureau.
(f) Fees Payable at Closing. You and your special counsel shall have
-----------------------
received the fees and expenses required to be paid or reimbursed by the KPP
Companies, as provided in Section 13.2, in connection with the preparation and
review of the Note
16
<PAGE>
Agreements, the Series A Notes, the other Note Purchase Documents and the other
documents and instruments relating thereto, the negotiations thereof and other
matters in connection therewith.
(g) WYCO Acquisition. The acquisition by KPOP of the assets of WYCO, upon
----------------
terms acceptable to you, shall have been completed prior to, or
contemporaneously with, the closing of the Series A Notes.
(h) Series B Closing. The closing for the Series B Notes shall have been
----------------
completed prior to, or contemporaneously with, the closing of the Series A Notes
and all documents described in Section 3.1(c) shall have been delivered to you
on the Series B Closing Date.
(i) Representations and Warranties. All representations and warranties
------------------------------
made by any KPP Company or its Subsidiaries in any Note Purchase Document shall
be true on and as of the Series A Closing Date, both before and after giving
effect to the Wyco Acquisition, as if such representations and warranties had
been made as of the Series A Closing Date (or where a representation or warranty
is given as of a specified date, the date so specified).
SECTION 4. PREPAYMENTS AND PAYMENTS OF THE NOTES.
-------------------------------------
4.1 Optional Prepayments. (a) From time to time each of KPOP and STI may
--------------------
at its option prepay its Notes then outstanding, in whole or in part, so long as
the aggregate amount of all partial prepayments of principal concurrently paid
on such Notes equals $500,000 or any higher integral multiple of $100,000, by
giving each Holder written notice thereof not less than 30 days nor more than 60
days prior to the date fixed for such prepayment (the "Prepayment Date", which
date shall be a Business Day), which notice shall also specify the principal
amount of the Notes held by such Holder so to be prepaid and an estimate of the
Applicable Premium Amount of the Notes to be so prepaid and accrued interest due
thereon, along with the computation thereof set forth in reasonable detail.
(b) The KPP Companies shall deliver to all Holders, by facsimile
transmission, with copies delivered by overnight delivery service with proof of
delivery, on the second Business Day preceding the Prepayment Date a certificate
signed by a principal financial officer of the Partnership setting forth the
Applicable Premium Amount of the Notes held by all Holders to be so prepaid,
which certificate shall set forth in reasonable detail the computation thereof.
If the KPP Companies do not timely deliver such certificate to all Holders or if
less than the Requisite Holders agree with the Partnership's calculation of the
Applicable Premium Amount contained in such certificate, the Requisite Holders
may calculate or recalculate, as the case may be, the Applicable Premium Amount
of the Notes held by all
17
<PAGE>
Holders to be so prepaid, which calculation shall be binding upon the KPP
Companies and the other Holders absent manifest error.
(c) On the Prepayment Date, either KPOP or STI, as applicable, shall
prepay to each Holder the principal amount of the Notes held by such Holder to
be so prepaid, the interest accrued on such principal amount to the Prepayment
Date, and the Applicable Premium Amount, if any.
4.2 Allocation of Prepayments. In the event of any prepayment of less
-------------------------
than all of the outstanding Notes of a series pursuant to Section 4.1, the KPP
Companies will allocate the principal amount to be so prepaid, together with
interest thereon and the Applicable Premium Amount related thereto, if any,
among the Holders of Notes of such series in proportion, as nearly as may be, to
the respective unpaid principal amounts of the Notes of such series held by
them.
4.3 Acquisition of Notes; No Reissuance. No KPP Company will, nor will it
-----------------------------------
permit any Subsidiary or Affiliate to, directly or indirectly prepay, redeem,
retire, purchase or otherwise acquire any Note of a series, except pursuant to
(a) Section 4.1, or (b) an offer to all Holders of Notes of such series to
prepay, redeem, retire, purchase or otherwise acquire the Notes held by them on
the same terms and conditions and in proportion, as nearly as may be, to the
respective unpaid principal amounts of the Notes of such series held by them.
Any Note prepaid in full pursuant to Section 4.1 or otherwise acquired by any
KPP Company or any of their Subsidiaries shall be surrendered to the KPP
Companies for cancellation, shall not be reissued and shall not be deemed
outstanding, and no Note shall be issued in lieu of any principal amount of any
Note so prepaid.
SECTION 5. FINANCIAL STATEMENTS, ETC. Each KPP Company covenants and
--------------------------
agrees that the KPP Companies will furnish to each Holder:
(a) as soon as practicable, and in any event within 65 days after the end
of each quarterly period in each fiscal year of KPL and the KPP Companies, the
unaudited Consolidated statements of income, of cash flows and of partners'
capital of KPL and the Partnership, the unaudited consolidating statement of
income of each of the KPP Companies and their Subsidiaries (indicating which
Subsidiaries are Unrestricted Subsidiaries) and the unaudited Consolidated
statements of income, of cash flows and of partners' capital of the KPP
Companies and their Restricted Subsidiaries in each case for such period and for
that part of the fiscal year ended with such quarterly period, and the
Consolidated and consolidating balance sheet of KPL and of the KPP Companies and
their Subsidiaries as at the end of each such fiscal period (indicating which
Subsidiaries are Unrestricted Subsidiaries) and the unaudited Consolidated
balance sheet of the KPP Companies and their Restricted Subsidiaries as at the
end of each such fiscal period, in each case setting forth in
18
<PAGE>
comparative form the corresponding figures for the corresponding period or part
of the preceding fiscal year, all in reasonable detail, prepared in conformity
with GAAP applied on a basis consistent with that of the previous year (except
as otherwise stated therein or in the notes thereto) and certified by the chief
financial officers of KPL, KPOP and STI as (x) having been prepared in
conformity with GAAP applied on a basis consistent with that of the previous
year (except as otherwise stated therein or in the notes thereto) and (y)
presenting fairly the financial condition and results of operations of KPL and
of the KPP Companies and their Subsidiaries, as at the end of and for the fiscal
periods to which they relate, subject to normal year-end adjustments;
(b) as soon as practicable, and in any event within 95 days after the end
of each fiscal year of KPL and the KPP Companies, the audited Consolidated
statements of income, of cash flows and of changes in partners' capital of KPL
and of the Partnership, the unaudited consolidating statement of income of each
of the KPP Companies and their Subsidiaries (indicating which Subsidiaries are
Unrestricted Subsidiaries) and the unaudited Consolidated statements of income,
of cash flows and of partners' capital of the KPP Companies and their Restricted
Subsidiaries as at the end of and for such year, and the audited Consolidated
and unaudited consolidating balance sheet of KPL and of the KPP Companies and
their Subsidiaries as at the end of such year (indicating which Subsidiaries are
Unrestricted Subsidiaries) and the unaudited Consolidated balance sheet of the
KPP Companies and their Restricted Subsidiaries as at the end of each such year,
in each case setting forth in comparative form the corresponding figures of the
previous fiscal year, all in reasonable detail, prepared in conformity with GAAP
applied on a basis consistent with that of the previous year (except as
otherwise stated therein or in the notes thereto) and certified by the chief
financial officer of the Partnership as (x) having been prepared in conformity
with GAAP applied on a basis consistent with that of the previous year (except
as otherwise stated therein or in the notes thereto) and (y) presenting fairly
the financial condition and results of operations of KPL and the KPP Companies
and their Subsidiaries as at the end of such fiscal year, and accompanied by a
report or opinion of Price Waterhouse (or other independent certified public
accountants which have a recognized national standing) stating that such
financial statements present fairly the consolidated financial condition and
results of operations of KPL and the KPP Companies and their Subsidiaries, in
accordance with GAAP consistently applied (except for changes in application
with which such accountants concur) and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards;
(c) concurrently with the financial statements delivered pursuant to
Section 5(b), a letter that conforms to professional pronouncements promulgated
by the American Institute of Certified
19
<PAGE>
Public Accountants from the firm of independent certified accountants that
reported on such financial statements to the effect that in the course of, and
based solely upon, their audit of such financial statements, nothing has come to
their attention to cause them to believe that there existed on the date of such
statements any Default or Event of Default, provided that, if in the opinion of
such accountants any such Default or Event of Default exists, such accountants
shall describe its nature and the length of time it has existed;
(d) concurrently with the financial statements delivered pursuant to
Sections 5(a) and (b), a certificate of the chief financial officers of KPOP and
STI (i) setting forth, as of the end of the respective fiscal period, the extent
to which the KPP Companies have complied, and have caused their Subsidiaries to
comply, with the requirements of Section 8, including, in the case any Debt,
merger or consolidation, Permitted Investment, Lien securing Debt, Restricted
Payment, sale and leaseback, Transfer or sale incurred or made during such
fiscal period, all necessary computations reflecting the manner in which such
compliance was determined and a reference to the source of each number included
in such computations, (ii) stating that the activities of the KPP Companies and
their Subsidiaries during such fiscal period have been monitored under such
officer's supervision to determine whether the KPP Companies have fulfilled all
of their obligations under the Note Agreements, the Notes and the other Note
Purchase Documents, and (iii) stating that no Default or Event of Default
existed as of the end of such fiscal period, on the date of such certificate or
at any time during the period covered by such financial statements, or, if any
Default or Event of Default exists or existed, specifying such Default,
Defaults, Event of Default or Events of Default, the nature and status thereof,
and what action the KPP Companies have or are taking or propose to take with
respect thereto;
(e) concurrently with the sending or filing thereof (or promptly
thereafter), copies of all such financial statements, proxy statements and
reports as Kaneb Services, Inc., KPL or any KPP Company shall send to its
stockholders or partnership unitholders pursuant to SEC requirements, including
all registration statements, annual reports on form 10-K, quarterly reports on
form 10-Q, current reports on form 8-K and other regular periodic reports which
Kaneb Services, Inc., KPL or any KPP Company or any of their Subsidiaries may
file with the SEC;
(f) promptly but in any event not later than 3 Business Days after a
Responsible Officer of any KPP Company becomes aware of the existence of a
Default or an Event of Default or a default or an event of default or a claimed
default, whether or not waived, under any other Debt of any KPP Company or any
of their Subsidiaries which Debt is in an aggregate principal amount of
$1,000,000 or more, a written notice to each Holder, the Trustee and each other
creditor under the Intercreditor Agreement, specifying the nature and period of
existence thereof and what
20
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action such KPP Company or such Subsidiary, as the case may be, is taking or
proposes to take with respect thereto;
(g) promptly but in any event not later than 3 Business Days after receipt
thereof by any KPP Company or any of their Subsidiaries, any notice from any
governmental agency asserting (i) any violation by, or possible remedial
obligation owed by, any KPP Company or any of their Subsidiaries under CERCLA,
RCRA or any other federal, state or local environmental statute or regulation,
or (ii) any Claim against any KPP Company or any of its Subsidiaries relating to
any environmental matter (including any Claim arising from past or present
environmental practices asserted under CERCLA, RCRA or any other federal, state
or local environmental statute or regulation) if such violation or Claim could
reasonably result in any KPP Company or any of their Subsidiaries incurring
liability, including but not limited to fines and remediation costs, of
$1,000,000 or more, and promptly (but in any event not later than 30 days after
receipt thereof by such KPP Company or Subsidiary) to be followed by the KPP
Companies' statement of what action the KPP Companies or such Subsidiary, as the
case may be, is taking or proposes to take with respect thereto;
(h) promptly but in any event not later than 3 Business Days after a
Responsible Officer of any KPP Company becomes aware thereof, a written notice
of the existence of any condition or occurrence of any event which, in the
opinion of such officer, would have a material and adverse effect on (i) the
business, operations, properties, assets or condition, financial or otherwise,
of KPOP or STI individually or the KPP Companies and their Subsidiaries taken as
a whole or (ii) on the ability of any KPP Company or any of its Subsidiaries to
perform under this Note Agreement, the Notes or any other Note Purchase Document
or to perform any of the transactions contemplated herein or therein;
(i) immediately upon becoming aware of the occurrence of any (i)
"reportable event", as such term is defined in Section 4043(b) of ERISA, (ii)
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA, or (iii) "prohibited transaction", as such term is defined in Section
4975 of the Code, in connection with any pension plan or trust created
thereunder, a written notice specifying the nature thereof, what action the KPP
Companies are taking or propose to take with respect thereto, and, when known,
any action by the Internal Revenue Service with respect thereto; and
(j) promptly upon reasonable request by you or any subsequent Holder,
copies of all other information relating in any way to any KPP Company or any of
its Subsidiaries, including any information required in connection with a
proposed sale of any of the Notes under Rule 144A.
SECTION 6. INSPECTION; CONFIDENTIALITY. (a) Upon reasonable notice to the
---------------------------
KPP Companies, any Holder of any portion
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of the Notes at the time outstanding shall have the right to visit and inspect
(at the expense of such Holder) during normal business hours, any of the offices
or properties of any KPP Company or any of its Subsidiaries, to examine any of
their books of account, make copies therefrom and photocopies and photographs
thereof, and to write down and record any information obtained therefrom, and to
discuss their affairs, finances and accounts with their officers and independent
public accountants, as often as such Holder may reasonably request.
Notwithstanding the foregoing, any visit or inspection by or on behalf of any
Holder during the continuance of any Default or Event of Default shall be at the
expense of the KPP Companies.
(b) Each Holder will keep in confidence, in accordance with its normal,
customary practices, any information, including financial information, which is
marked by the KPP Companies as being non-public and confidential or proprietary
in nature that is disclosed to such Holder by any of the KPP Companies (as a
result of any examination of the books and records of the KPP Companies and
their Subsidiaries or otherwise); provided, however, that you or such other
-------- -------
Holder may disclose any such information: (i) to your employees and
representatives, including without limitation, your attorneys and accountants
who would ordinarily have access to such information in the normal course of
performance of their duties, in confidence in accordance with your normal,
customary practices; (ii) to another Holder, (iii) to actual or prospective
purchasers of the Notes or any participations therein or any successor, assignee
or Affiliate of yours with respect to the Notes; (iv) such third parties as you
may, in your discretion, deem reasonably necessary or desirable in connection
with or in response to: (A) compliance with any law, ordinance or governmental
order, regulation, rule, policy, investigation or regulatory authority
(including, without limitation, The National Association of Insurance
Commissioners, its successors, or any other insurance industry regulatory
authority) requirement or request, (B) any order, decree, judgment, subpoena,
notice of discovery or similar request or testimony, or pleading issued, filed,
served or purported on its face to be issued, filed or served (x) by or under
authority of any court, tribunal, arbitration board, any governmental or
industry agency, commission, authority, board or similar entity or (y) in
connection with any proceeding, case or matter pending (or on its face purported
to be pending) in any court, tribunal, arbitration board, or any governmental
agency, commission, authority, board or similar entity, (C) the enforcement of
your rights hereunder and under the Notes during the continuance of a Default or
Event of Default or (D) the filing of any documents which are necessary or
appropriate, in your opinion, for the protection of any security interest or
collateral relative to the Note Purchase Documents and the transactions
contemplated herein; (v) any Person holding your debt or securities who shall
have requested to inspect such information in its capacity as a holder of such
debt or securities; and (vi) any rating agency or service who rates your debt or
claims paying ability or any entity which
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you regularly report to as a member of any industry of which you are a part.
SECTION 7. AFFIRMATIVE COVENANTS. Each KPP Company covenants and agrees
---------------------
that so long as any Note shall be outstanding:
7.1 Maintenance of Office or Agency. Each KPP Company will maintain its
-------------------------------
chief executive office and principal place of business at the respective
addresses set forth on Schedule 9 hereto (or such other place in the United
States of America as such KPP Company may designate in writing to the Holders at
least twenty Business Days prior to the date it moves such chief executive
office and principal place of business) and will keep its books and records
regarding the Collateral at the respective addresses set forth on Schedule 9
hereto (or such other place in the United States of America as such KPP Company
may designate in writing to the Holders at least twenty Business Days prior to
the date it moves such books and records). No KPP Company will, nor will it
permit any of its Subsidiaries to, change its name (except to such name as such
KPP Company may designate in writing to the Holders at least twenty Business
Days prior to the date it changes its name). Each notice given under this
Section 7.1 must specifically state that such notice is given pursuant to this
Agreement.
7.2 To Keep Books. Each KPP Company will, and will cause its Subsidiaries
-------------
to, keep proper books of record and account in accordance with GAAP.
7.3 Payment of Taxes; Corporate Existence; Maintenance of Properties.
----------------------------------------------------------------
Each KPP Company will, and will cause its Subsidiaries to,
(a) pay and discharge promptly all taxes, assessments and governmental
charges or levies imposed upon it, its income or profits or its property before
the same shall become in default, as well as all lawful claims and liabilities
of any kind (including claims and liabilities for labor, materials and supplies)
which, if unpaid, might by law become a Lien upon its property; provided that
none of the KPP Companies and their Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim if (i) the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate and
lawful proceedings diligently conducted, (ii) such KPP Company or Subsidiary
shall have set aside on its books reserves in respect thereof deemed adequate in
the reasonable opinion of such KPP Company or such Subsidiary and (iii) any Lien
placed upon any property of any KPP Company or any of its Subsidiaries as a
result thereof will not impair the operation of such property by the KPP
Companies;
(b) subject to Sections 8.4 and 8.5, do all things necessary to preserve
and keep in full force and effect the
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corporate or partnership existence, rights (charter and statutory) and
franchises of each KPP Company and of each of their Subsidiaries;
(c) maintain the general nature of its operations and businesses in the
refined petroleum products storage, terminaling and transportation industry; and
(d) maintain and keep all the properties, except for those facilities
which are listed on Schedule 10 hereto, of the KPP Companies and their
Subsidiaries which are used or useful in the conduct of their respective
businesses in good condition, repair and working order and supplied with all
necessary equipment and make all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as may be reasonably necessary so that
the business carried on in connection therewith may be conducted at all times.
7.4 To Insure. Each KPP Company will, and will cause its Subsidiaries to,
---------
(a) keep all of its insurable properties owned by it insured against all
risks usually insured against by Persons operating like properties in the
localities where the properties are located, all in amounts sufficient to
prevent such KPP Company or Subsidiary, as the case may be, from becoming a
coinsurer within the terms of the policies in question, but in any event in
amounts not less than the amounts set forth on Schedule 11 hereto or if greater,
the amounts which would be maintained by a prudent company in the same industry
and location;
(b) maintain public liability insurance against claims for personal
injury, death or property damage suffered by others upon or in or about any
premises occupied by it or occurring as a result of its maintenance or operation
of any airplanes, automobiles, trucks or other vehicles or other facilities
(including any machinery used therein or thereon) or as the result of the use of
products sold by it or services rendered by it;
(c) maintain such other types of insurance with respect to its business as
are usually carried by Persons of comparable size engaged in the same or a
similar business and similarly situated, including business interruption
insurance; and
(d) maintain all such workmen's compensation or similar insurance as may
be required under the laws of any State or jurisdiction in which it may be
engaged in business. All such insurance shall be maintained in amounts
consistent with the practices of prudent Persons of comparable size and
established reputation engaged in the same or a similar business and similarly
situated and in compliance with any applicable laws; provided, however, such
insurance shall at a minimum be in such
24
<PAGE>
amounts, against such risks and with such deductible limits as set forth on
Schedule 11. All insurance herein provided for shall be effected under a valid
and enforceable policy or policies issued by reputable and financially sound
insurers. Any insurance policies covering Collateral shall be (i) endorsed to
provide for payment of losses to Trustee as its interests may appear, pursuant
to a mortgage clause (without contribution) of standard form made part of the
applicable policy, (ii) provide that such policies may not be cancelled, reduced
or affected in any manner for any reason without fifteen days prior notice to
Trustee and (iii) provide for any other matters specified in any applicable
Security Document or which Trustee may reasonably require.
In the event that any KPP Company or any of its Subsidiaries shall fail to
maintain all insurance in accordance with this Section 7.4, any Holder and/or
the Trustee shall have the right (but shall be under no obligation) to procure
such insurance and the KPP Companies agree to reimburse such Holder or the
Trustee, as the case may be, for all costs and expenses of procuring such
insurance.
7.5 Compliance with Laws. Each KPP Company and its Subsidiaries will
--------------------
conduct their respective operations, and will obtain all environmental, health
and safety permits, licenses and other authorizations necessary for their
respective operations and will maintain such authorizations in full force and
effect, in compliance in all material respects with applicable federal, state
and local laws and regulations, including without limitation the Occupational
Safety and Health Act of 1970, as amended, ERISA and all laws and regulations
relating to pollution control and environmental contamination, those governing
the generation, use, collection, treatment, storage, transportation, recovery,
removal, discharge or disposal of Hazardous Materials, and all laws and
regulations relating to record keeping, notification and reporting requirements
respecting Hazardous Materials. Each KPP Company will, and will cause its
Subsidiaries to, keep their respective properties free and clear of any Liens
imposed pursuant to CERCLA, RCRA or any other federal, state or local
environmental statute or regulation.
SECTION 8. NEGATIVE COVENANTS. Each KPP Company covenants and agrees that
------------------
so long as any Note shall be outstanding:
8.1 Funded Debt. No KPP Company shall, nor shall permit any of its
-----------
Restricted Subsidiaries to, create, assume, incur, guarantee or otherwise become
or be liable in respect of, or maintain or otherwise allow to exist, any Funded
Debt, except for the following:
(a) Funded Debt represented by the Notes and the Guaranties;
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(b) Funded Debt of the KPP Companies outstanding on the Series B Closing
Date, as set forth in Schedule 5 hereto and amendments or modifications thereof
(but excluding any extension in the maturity of or any increase in the principal
amount of such Funded Debt and any refunding, refinancing or renewal of such
Funded Debt which extends the maturity of or increases the principal amount of
such Funded Debt); and
(c) other Funded Debt of any of the KPP Companies, provided that at the
time of, and immediately after giving effect to, the incurrence (including the
incurrence of any extension in the maturity of or any increase in the principal
amount of such Funded Debt and any refunding, refinancing or renewal of such
Funded Debt which extends the maturity of or increases the principal amount of
such Funded Debt) thereof and giving effect to the contemporaneous application
of any proceeds thereof to retire other Funded Debt, (i) no Default or Event of
Default has occurred and is continuing and (ii) Consolidated Funded Debt shall
not equal or exceed 3.15 times Consolidated Cash Flow for a 12 calendar month
period ending not more than 3 months prior to the date on which such KPP Company
incurs such additional Funded Debt.
8.2 Liens. No KPP Company shall, nor shall permit its Restricted
-----
Subsidiaries to: (i) create, assume or otherwise incur or suffer to exist any
Lien upon (or, whether by Transfer to any KPP Company or any of its Restricted
Subsidiaries or otherwise, subject, or permit any KPP Company or any of its
Restricted Subsidiaries to subject, to the prior payment of any obligations,
indebtedness or claim other than KPOP's and STI's obligation under the Notes)
any property or assets (real or personal, tangible or intangible, including any
stock or other securities) of any KPP Company or any of its Restricted
Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, (ii) own or acquire or agree to acquire any property or assets (real
or personal, tangible or intangible, including any stock or other securities)
subject to or encumbered by any Lien, or (iii) suffer to exist any obligations,
indebtedness or claim of any KPP Company or any of its Restricted Subsidiaries
or claims or demands against any KPP Company or any of its Restricted
Subsidiaries, which obligations, indebtedness, claims or demands, if unpaid,
would (in the hands of the holder thereof or anyone who shall have guaranteed
the same or who has any right or obligation to purchase the same), by law or
upon bankruptcy or insolvency or otherwise, be given any priority whatsoever
over its general creditors; provided that the foregoing restrictions (I) shall
not apply to Liens under the Security Documents or Liens arising by rights of
offset securing the Bank Debt which are subject to the Intercreditor Agreement
and (II) shall not prevent:
(a) the KPP Companies or any of their Restricted Subsidiaries from
suffering to exist any Liens existing on the Series B Closing Date, as set forth
in Schedule 5 hereto, which
26
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secure Funded Debt permitted under Section 8.1(b) and renewals, extensions and
refundings (but not increases in principal amount) thereof which are permitted
under Section 8.1(c), provided that such Liens are not extended to cover
additional property; or
(b) the KPP Companies or any of their Restricted Subsidiaries from
creating, assuming, incurring or suffering to exist any Liens which are
incidental to its normal conduct of business or ownership of its properties or
assets, provided that such Liens do not secure Debt and do not materially impair
the use of such properties or assets in the operation of the KPP Companies' and
their Restricted Subsidiaries' businesses; or
(c) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming or incurring or suffering to exist: (i) Liens for taxes not yet due and
payable or the nonpayment of which is permitted by Section 7.3(a), (ii) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties, and rights of eminent domain, which Liens, exceptions, encumbrances,
easements, reservations, rights and restrictions do not in the aggregate have a
material adverse effect on such KPP Company or Restricted Subsidiary or
materially impair their use in the operation of their businesses, or (iii)
mechanics Liens and materialman's Liens for services or materials for which
payment is not yet due and payable and which do not materially impair the use by
such KPP Company or Restricted Subsidiary in the operation of its businesses; or
(d) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming, incurring or suffering to exist Liens in respect of property acquired
by such KPP Company or Restricted Subsidiary after the date hereof to secure
Debt assumed or incurred to finance all or any part of the purchase price,
provided that:
(i) each such Lien shall at all times apply solely to the property
so acquired and the improvements thereon which are to become fixtures or
accessions thereto,
(ii) the principal amount of Debt secured by any such Lien in respect
of any such property shall at no time exceed the fair market value of such
property at the time of acquisition thereof by such KPP Company or
Restricted Subsidiary or, if less, the cost of such acquisition,
(iii) each such Lien shall be either existing at the time of
acquisition or created within 120 days thereafter, and
(iv) the Debt secured by such Lien is permitted by Sections 8.1 at the
time such Debt is incurred; or
27
<PAGE>
(e) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming or incurring or suffering to exist the following Liens if (i) the
validity, applicability or amount thereof is being contested in good faith and
by appropriate and lawful proceedings diligently conducted, (ii) the KPP Company
or its Restricted Subsidiary in question shall have set aside on its books,
reserves in respect thereof which are deemed adequate in the reasonable opinion
of such KPP Company or such Restricted Subsidiary, (iii) levy and execution
thereof continue to be stayed, (iv) any of which Liens covering any Collateral
are subordinate to the Liens in favor of the Holders, and (v) such Liens do not
in the aggregate materially detract from the value of the property of the KPP
Company or its Restricted Subsidiary in question, or materially impair the use
of that property in the operation of its business: (A) claims and Liens of
mechanics, materialmen, warehousemen (other than those claims and Liens
described in Section 8.2(c)(iii)), and (B) adverse judgments or orders on appeal
for the payment of money not in excess of the aggregate amount of $25,000,000;
or
(f) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming, incurring or suffering to exist Liens permitted by Section 10.4; or
(g) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming, incurring or suffering to exist other Liens, on property which is not
Collateral, securing Debt permitted by Section 8.1, provided that the aggregate
amount of Debt so secured shall at no time exceed ten percent (10%) of Partners'
Capital.
8.3 Restricted Payments. No KPP Company shall, nor shall it permit any of
-------------------
its Restricted Subsidiaries to, make any Restricted Payment (or incur any
liability to make any Restricted Payment), except (i) KPOP may make Restricted
Payments in cash where on the date such Restricted Payment is made and
immediately after giving effect thereto no Default or Event of Default has
occurred and is continuing, or will occur with the passage of time, and such
Restricted Payment does not exceed "KPOP Available Cash" for the fiscal quarter
immediately preceding the quarter in which such Restricted Payment is paid, (ii)
the Partnership may make Restricted Payments in cash where on the date such
Restricted Payment is made and immediately after giving effect thereto no
Default or Event of Default has occurred and is continuing, or will occur with
the passage of time, and such Restricted Payment does not exceed "Partnership
Available Cash" for the fiscal quarter immediately preceding the quarter in
which such Restricted Payment is paid, and (iii) payments in an aggregate amount
not to exceed $5,000,000 made by KPOP under the Repurchase Agreement prior to
June 30, 1995. For purposes of this Section 8.3, the terms "KPOP Available
Cash" and "Partnership Available Cash" shall have the meaning set forth on
Schedule 12.
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8.4 Merger or Consolidation. No KPP Company shall, nor shall permit any
-----------------------
of its Restricted Subsidiaries to, consolidate with or merge into any Person, or
permit any Person to merge into it, except that any KPP Company or any of its
Restricted Subsidiaries may take any of the following actions:
(a) any Restricted Subsidiary may be merged into or consolidated with any
KPP Company or any other Wholly Owned Restricted Subsidiary so long as a KPP
Company or a Wholly Owned Restricted Subsidiary is the surviving Person; and
(b) any KPP Company or any Restricted Subsidiary may merge or consolidate
with another corporation, partnership or limited liability company if:
(i) both prior to and after taking the effects of the merger or
consolidation into account, no Default, or Default with the passage of time
that will become an Event of Default, Event of Default has occurred and is
continuing;
(ii) following the merger or consolidation the successor formed
thereby is a corporation, partnership or limited liability company which
(A) is duly organized and existing under the laws of the United States of
America or any State thereof, (B) is not "insolvent" (as defined in 11
U.S.C. 101(32)(A) or Section 24.003 of the Texas Business and Commerce
Code) and (C) maintains substantially all of its assets in the United
States of America;
(iii) the due and punctual performance and observance of all the
obligations, terms, covenants, agreements and conditions of the Note
Agreements, the Notes and the other Note Purchase Documents to be performed
or observed by such KPP Company shall, by written instrument in form and
substance satisfactory to the Requisite Holders and furnished to each
Holder, be expressly assumed by such successor (if other than such KPP
Company), and such successor (if other than the KPP Company) shall
expressly confirm, by written instrument in form and substance satisfactory
to the Requisite Holders and furnished to each Holder, that the Notes
constitute a senior secured obligation of such successor;
(iv) following the merger or consolidation an additional $1 of Funded
Debt could be incurred in compliance with Section 8.1(c); and
(v) immediately prior to such merger or consolidation, you receive a
certificate of Responsible Officers of the KPP Companies certifying that
such merger or consolidation complies with all requirements set forth in
this Section 8.4, and an opinion of outside counsel in form and substance
satisfactory to the Holders, stating that the successor is a corporation,
partnership or limited liability company which
29
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is duly organized and existing under the laws of the United States of
America or any State thereof and will upon consummation of the merger or
consolidation succeed to the assets and liabilities of the KPP Company or
Restricted Subsidiary that is a party thereto.
8.5 Disposition of Assets. No KPP Company shall, nor shall it permit any
---------------------
of its Subsidiaries to, Transfer any Collateral. No KPP Company shall, nor
shall permit any of its Restricted Subsidiaries to, Transfer any of its other
properties and assets (including securities of its Restricted Subsidiaries) at
any time except:
(a) a Transfer in the ordinary course of business (including any Transfer
of obsolete or worn-out assets); or
(b) a Transfer pursuant to a transaction in compliance with Section 8.4 or
Section 8.7; or
(c) a Permitted Transfer.
No KPP Company will, nor will permit any of its Restricted Subsidiaries to,
issue or sell shares of its capital stock to any Person other than a KPP Company
or another Wholly-Owned Restricted Subsidiary of the KPP Companies, other than
new issuances of limited partnership units of the Partnership in exchange for
cash or property representing fair consideration in the determination of the
Board of Directors of KPL. No KPP Company will, nor will permit any of its
Subsidiaries to, Transfer any capital stock of a Restricted Subsidiary other
than (i) a merger or consolidation which complies with the provisions of Section
8.4, (ii) a contribution of capital stock of a Restricted Subsidiary to a joint
venture, provided that following the contribution of such capital stock an
additional $1 of Funded Debt could be incurred by the KPP Companies in
compliance with Section 8.1(c), or (iii) a Permitted Transfer.
8.6 Investments. No KPP Company shall, nor shall permit any of its
-----------
Restricted Subsidiaries to, make or acquire any Restricted Investment.
8.7 Sale and Leaseback. No KPP Company shall, nor shall permit any of its
------------------
Restricted Subsidiaries to, sell and lease-back any of its properties or assets;
provided, however, that within 180 days following the acquisition of any
property or asset, the KPP companies may sell to and lease-back from another
Person such property or asset so long as no Default or Event of Default exists
at the time of and after giving effect to such transaction.
8.8 Transactions with Affiliates. No KPP Company shall, nor shall permit
----------------------------
any of its Restricted Subsidiaries to, engage in any transaction with an
Affiliate on terms less favorable to such KPP Company or Restricted Subsidiary
than would have been
30
<PAGE>
obtainable in arm's length dealing in the ordinary course of business with a
Person not an Affiliate.
8.9 Fiscal Year. No KPP Company shall, nor shall permit any of its
-----------
Subsidiaries to, change its fiscal year to anything other than the calendar
year.
8.10 Subsidiaries. No KPP Company shall have or own any Subsidiary unless
------------
such Subsidiary shall either (i) not be a Restricted Subsidiary or (ii) be a
Guarantor of the Notes and be a Restricted Subsidiary. No KPP Company may
become an Unrestricted Subsidiary. No KPP Company will, or will permit any
Restricted Subsidiary to, directly or indirectly, enter into, create, or
otherwise allow to exist any contract or other consensual restriction (other
than as may exist pursuant to the partnership agreements of the Partnership and
KPOP) on the ability of any Restricted Subsidiary of any KPP Company to pay
distributions to any KPP Company or any of its Restricted Subsidiaries, to
redeem equity interests in it held by any KPP Company or any of its Restricted
Subsidiaries, to repay loans owing by it to any KPP Company or any of their
Restricted Subsidiaries or to transfer any of its assets to any KPP Company or
any of its Restricted Subsidiaries. Each KPP Company shall, and shall cause its
Restricted Subsidiaries to, provide notice of the Guaranties to any holder of
Debt of such KPP Company or such Restricted Subsidiary.
8.11 Restricted Subsidiaries. (a) As used herein the term "Restricted
-----------------------
Subsidiary" means any Subsidiary of any KPP Company other than an Unrestricted
Subsidiary. The term "Unrestricted Subsidiary" means any Subsidiary of any KPP
Company which the KPP Companies have designated as such, provided that the KPP
Companies will not designate any Subsidiary as an Unrestricted Subsidiary unless
at the time of such designation and immediately after giving effect thereto (i)
no Default or Event of Default shall have occurred and be continuing and (ii) an
additional $1 of Funded Debt could be incurred in compliance with Section
8.1(c).
(b) The KPP Companies may redesignate any Unrestricted Subsidiary as a
Restricted Subsidiary so long as at the time of such redesignation and
immediately after giving effect thereto (i) no Default or Event of Default shall
have occurred and be continuing and (ii) an additional $1 of Funded Debt could
be incurred in compliance with Section 8.1(c). To the extent that any
Unrestricted Subsidiary becomes a Restricted Subsidiary hereunder, such
Subsidiary shall always remain a Restricted Subsidiary.
(c) On Schedule 13, the KPP Companies shall designate which Subsidiaries
they designate as Unrestricted Subsidiaries as of the Series B Closing Date in
accordance with the provisions of this Section. Thereafter, promptly upon any
Subsidiary being designated by the KPP Companies as a Restricted Subsidiary or
an
31
<PAGE>
Unrestricted Subsidiary, the KPP Companies shall deliver to each Holder a
certificate of the chief financial officer of the Partnership setting forth the
name of the Subsidiary, its jurisdiction of incorporation or formation and a
brief description of its business and properties, certifying the status of such
Subsidiary as an Unrestricted Subsidiary or a Restricted Subsidiary pursuant to
the provisions of this Section.
SECTION 9. DEFINITIONS AND ACCOUNTING. For all purposes of this Note
--------------------------
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
"Affiliate" means any Person (other than the KPP Companies or any of their
---------
Restricted Subsidiaries) which, directly or indirectly, controls or is
controlled by or is under common control with the KPP Companies or their
Subsidiaries or which beneficially owns or holds or has the power to direct the
voting of 10% or more of any class of Voting Stock (or in the case of a Person
which is not a corporation, 10% or more of its equity interest) of any KPP
Company or any of its Subsidiaries or which has 10% or more of its Voting Stock
(or in the case of a Person which is not a corporation, 10% or more of its
equity interest) beneficially owned or held, directly or indirectly, by any KPP
Company or any of its Subsidiaries. For purposes of this definition, "control"
means the power to direct the management and policies of a Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" has the meaning specified in Section 1.1(a).
---------
"Applicable Premium Amount" shall mean, with respect to any prepayment of
-------------------------
principal owing under the Notes pursuant to Section 4.1 or any acceleration of
principal owing under the Notes pursuant to Section 11.1 (such prepaid or
accelerated principal amount being herein called the "Called Principal"), an
----------------
amount equal to the greater of (i) zero, and (ii) the excess of the Discounted
Value of such Called Principal over the amount of such Called Principal. As
used in this definition:
"Discounted Value" of any Called Principal means the sum of:
----------------
(a) the amount obtained by discounting such Called Principal from the
scheduled maturity date of such Called Principal to (i) in the case of
Called Principal which is prepaid pursuant to Section 4.1, the related
Prepayment Date, or (ii) in the case of Called Principal which is
accelerated pursuant to Section 11.1, the date of acceleration (either such
date being herein called the "Settlement Date" for such Called Principal),
---------------
plus
(b) the amounts obtained by discounting each remaining payment of
interest that would be due on such Called
32
<PAGE>
Principal from the date on which such payment would be made to the
Settlement Date for such Called Principal,
with all such discounting being made in accordance with accepted financial
practice and at a discount factor (applied on a semi-annual basis) equal to
the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to any Called Principal, one-half
------------------
of one percent (0.5%) per annum plus the yield to maturity for the actively
traded marketable United States Treasury fixed interest rate security with a
maturity equal to the scheduled maturity of the Called Principal of the Notes as
of the Settlement Date, as set forth on the display designated as "Page 678" on
the Telerate Access Service (or such other display as may replace Page 678 on
Telerate Access Service or if Telerate Access Service is not available, then any
other nationally recognized trading screen reporting on-line intraday trading in
United States Treasury fixed interest rate securities) at 11:00 A.M. (New York
City time) as of the second Business Day preceding the date such Applicable
Premium Amount becomes due and payable. In the event that no such nationally
recognized trading screen reporting on-line trading in the United States
Treasury fixed interest rate securities is available, "Treasury Rate" shall mean
the yield to maturity implied by the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so reported
as of the second Business Day preceding such Settlement Date, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded United States treasury securities having a constant maturity
equal to the period from such Settlement Date to the scheduled maturity date of
such Called Principal. Such implied yield shall be determined, if necessary, by
(a) converting United States treasury bill quotations to bond-equivalent yields
in accordance with accepted financial practice and (b) interpolating linearly
between reported yields.
"Bankruptcy Default" has the meaning specified in Section 11.1.
------------------
"Bank Debt" means indebtedness, which has an original principal amount not
---------
in excess of $15,000,000, of KPOP owing to Texas Commerce Bank National
Association and Bank of Montreal and their respective successors or assigns,
under or pursuant to the Bank Debt Documents.
"Bank Debt Documents" means that certain Restated Credit Agreement of even
-------------------
date herewith by and among KPOP, Texas Commerce Bank National Association, as
Agent and Lenders which are a party thereto, as such agreement may be amended,
restated, supplemented or refinanced from time to time.
33
<PAGE>
"Business Day" means any day on which banks are required to be open to
------------
carry on their normal business in the States of Iowa, New York and Texas.
"Capitalized Lease" means and includes at any time any lease of property
-----------------
(real, personal or mixed) which in accordance with GAAP would at such time be
required to be capitalized on a balance sheet of the lessee. "Capitalized Lease
-----------------
Obligation" means at any time the capitalized amount of the rental commitment
- ----------
under a Capitalized Lease which in accordance with GAAP would at such time be
required to be shown on a balance sheet of the lessee.
"CERCLA" has the meaning specified below in the definition of "Hazardous
------
Materials".
"Claim" means any and all claims, demands, causes of action, suits,
-----
proceedings, administrative proceedings, losses, judgments, decrees, debts,
damages, liabilities, court costs and attorneys' fees and other expenses
incurred, assessed or sustained by or against any KPP Company or any of its
Subsidiaries.
"Code" has the meaning specified in Section 2.12(a).
----
"Collateral" means all property of any kind which is subject to a Lien in
----------
favor of Holders or which, under the terms of any Security Document, is
purported to be subject to such a Lien.
"Consolidated" refers to the consolidation of any Person, in accordance
------------
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Cash Flow" means for the period in question, the sum of (i)
----------------------
Consolidated Net Income for such period, plus (ii) depreciation and
amortization, deferred taxes, other non-cash charges and interest expense
(including without duplication, interest expense related to Capitalized Leases),
for such period that was taken into account in determining such Consolidated Net
Income but which did not involve a current expenditure of funds; provided that:
--------
(a) The determination of Consolidated Cash Flow for a particular 12 month
period shall exclude earnings taken into account in determining Consolidated
Cash Flow which are attributable to any of the following which have occurred or
will have occurred after giving effect to the transaction which necessitates the
determination of whether additional Consolidated Funded Debt may be incurred:
(i) discontinued operations; (ii) operations represented by properties or assets
Transferred or to
34
<PAGE>
be Transferred; (iii) a Subsidiary which ceases to be a Consolidated Subsidiary;
(iv) minority interests created in a Subsidiary; or (v) the interest in a
Subsidiary attributable to capital stock Transferred or to be Transferred.
(b) Solely for the purpose of determining whether (i) Funded Debt may be
assumed or incurred, pursuant to Section 8.1, to finance all or any part of the
purchase price of property or (ii) a KPP Company may merge or consolidate
pursuant to Section 8.4, or may assume or incur Funded Debt, pursuant to Section
8.1, in connection with such merger or consolidation, the determination of
Consolidated Cash Flow for a particular 12 month period shall include the
Consolidated Cash Flow which is attributable solely to the property to be so
purchased or the Person with whom the KPP Company is to merge or consolidate for
such 12 month period, after elimination of the portions of earnings included in
such Consolidated Cash Flow that are or may be attributable to (A) operations to
be discontinued, (B) sources of revenues that will not or may not be available
to the KPP Companies after the purchase, merger or consolidation, (C) the gain
(net of any tax effect) resulting from the sale of any capital assets other than
in the ordinary course of business, (D) the aggregate amount of unusual or
nonrecurring gains (net of any tax effect) and (E) other adjustments (such as
additional or increased expenses) appropriate to reflect the earnings that would
have been realized by the KPP Companies had the purchase of property or the
merger or consolidation occurred at the inception of such 12 month period;
provided that Holders shall have received a certificate of the chief financial
- --------
officer of the Partnership, or its general partner, in form and scope
satisfactory to each Holder, reflecting the determination of the earnings so
attributable to such property or Person, which certificate must specifically be
based upon, reference and attach either (x) audited financial statements that
reflect the earnings figures used in such determination and any other source of
information used in such certificate or (y) unaudited financial statements that
reflect the earnings figures used in such determination which must be prepared
in accordance with GAAP (and be accompanied by a certificate of such chief
financial officer certifying that they were so prepared), be in form and detail
acceptable to Requisite Holders and be otherwise acceptable to Required Holders
in their reasonable discretion.
"Consolidated Funded Debt" means the aggregate, after eliminating all
------------------------
intercompany items, of all Funded Debt of the Partnership and its Consolidated
Subsidiaries, consolidated in accordance with GAAP. Without limiting the
foregoing, an obligations that may be Funded Debt of more than one of the KPP
Companies and their Subsidiaries shall not be counted more than once in
determining Consolidated Funded Debt.
"Consolidated Net Income" means, for the period in question, the
-----------------------
Consolidated net income of the Partnership and its Consolidated Subsidiaries
(after eliminating all intercompany
35
<PAGE>
items and portions of earnings properly attributable to minority interests, but
without eliminating the portion of earnings attributable to KPL's 1% general
partnership interest in KPOP), all as determined in accordance with GAAP
excluding (A) any net loss or undistributed net income, as determined in
- ---------
accordance with GAAP, of any Person in which any KPP Company or any of their
Consolidated Subsidiaries has an ownership interest, but which is not a
Consolidated Subsidiary, (B) the net income or loss of any Consolidated
Subsidiary for any time period included in the computation of such net income
prior to the date it became a Consolidated Subsidiary (except in the limited
circumstances set forth in paragraph (b) of the definition of Consolidated Cash
Flow), (C) the gain or loss (net of any tax effect) resulting from the sale of
any capital assets other than in the ordinary course of business, and (D) the
aggregate amount of unusual or nonrecurring gains or losses (net of any tax
effect).
"Debt" of any Person on any date means, without duplication, (a) any
----
obligation of such Person for borrowed money or which was incurred for the
purchase price of assets or services, (b) any indebtedness or obligation secured
by or constituting a Lien existing on property owned by such Person, whether or
not such Person is directly liable for such indebtedness or obligation, (c) the
face amount of all letters of credit, bankers acceptances or other similar
facilities, whether drawn or undrawn, for which such Person is the account
party, (d) all Capitalized Lease Obligations of such Person, (e) the net amount
payable for settlement of interest rate swaps of such Person as determined in
respect thereof as of the end of the most recently ended fiscal quarter of such
Person, based on the assumption that such swaps had terminated at the end of
such fiscal quarter, and (f) all Guaranty Liabilities by such Person.
"Default" means any event which, with notice or lapse of time or both,
-------
would constitute an Event of Default.
"ERISA" has the meaning specified in Section 2.12(a).
-----
"ERISA Affiliate" has the meaning specified in Section 2.12(c).
---------------
"Event of Default" has the meaning specified in Section 11.1.
----------------
"Existing Term Debt" means the Debt of STI under the "Tranche A Term
------------------
Facility", pursuant to the Credit Agreement dated as of March 1, 1993, as
heretofore modified and amended, among KPOP, STI, Texas Commerce Bank National
Association (successor by merger with Texas Commerce Bank, National Association)
as Primary Agent and Funding Agent and the lenders (including the Existing Term
Lenders) parties thereto.
"Existing Term Lenders" means, collectively, Texas Commerce Bank National
---------------------
Association (successor by merger with Texas
36
<PAGE>
Commerce Bank, National Association), Bank of Montreal, The Bank of Nova Scotia,
The First National Bank of Boston, Bank One, Texas, N.A., and First Interstate
Bank of Texas, N.A.
"Funded Debt" of any Person on any date means, without duplication, (a) any
-----------
obligation of such Person for borrowed money or which was incurred for the
purchase price of assets or services, in each case having a final maturity of
one or more than one year from the date such obligation was incurred (or which
is renewable or extendable at the option of such Person to a maturity beyond one
year from the date of incurrence thereof), including all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not the obligation to make such
payments shall constitute a current liability of such Person under GAAP, (b) any
indebtedness or obligation secured by or constituting a Lien existing on
property owned by such Person, whether or not such Person is directly liable for
such indebtedness or obligation, (c) the face amount of all letters of credit,
bankers acceptances or other similar facilities, whether drawn or undrawn, for
which such Person is the account party and which have a final maturity of one or
more than one year from the date such letter of credit was issued, (d) all
Capitalized Lease Obligations of such Person, (e) the net amount payable for
settlement of interest rate swaps of such Person as determined in respect
thereof as of the end of the most recently ended fiscal quarter of such Person,
based on the assumption that such swaps had terminated at the end of such fiscal
quarter, and (f) all Guaranty Liabilities by such Person in respect of Funded
Debt of another Person.
"GAAP" means those generally accepted accounting principles and practices
----
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor).
"Guaranties" means, collectively, the guaranties of even date herewith
----------
given by each of KPOP, STI, the Partnership, STS and STOP for the benefit of the
Holders, as from time to time amended, modified or restated, and all other
guaranties hereafter delivered to Holders in connection with the transactions
contemplated herein.
"Guaranty Liabilities" of any Person on any date means, without
--------------------
duplication, (a) any guarantee or endorsement by such Person of obligations of
another (other than endorsements for purposes of collection in the ordinary
course of business), (b) any obligation of such Person to purchase goods,
services, notes or securities for the purpose of supplying funds for the
purchase, payment or satisfaction of, or measured by, obligations of another,
(c) any other contingent obligation of such Person in respect of, or to purchase
or otherwise acquire or service, obligations of another, (d) any obligation of
such Person, whether or not contingent, in respect of the obligations of a
general or limited partnership of which such Person is a general
37
<PAGE>
partner, unless the holder of such obligation has agreed to waive all recourse
to such Person for such obligation, and (e) every obligation of such Person for
obligations of another which such Person has in effect guaranteed by an
agreement, contingent or otherwise, to make a loan, advance or capital
contribution to or other investment in such debtor for the purpose of assuring
or maintaining a minimum equity, asset base, working capital or other balance
sheet condition for such debtor on any date, or to provide funds for the payment
of any liability, dividend or stock liquidation payment of or by such debtor, or
otherwise to supply funds to or in any manner invest in such debtor for such
purpose.
"Hazardous Materials" means materials defined as "hazardous substances",
-------------------
"hazardous wastes", "hazardous constituents" or "solid wastes" in (a) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. (S)(S) 9601 et seq. and any amendments thereto and regulations thereunder
("CERCLA"), (b) the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)
6901 et seq. and any amendments thereto and regulations thereunder ("RCRA") and
(c) any other federal, state or local environmental statute or regulation.
"Holder" means a Person to whom any Note is originally issued and any
------
subsequent holder of a Note shown in the register of either KPOP or STI to hold
such Note.
"Intercreditor Agreement" means that certain Collateral Trust and
-----------------------
Intercreditor Agreement dated of even date herewith by and among Texas Commerce
Bank National Association, Bank of Montreal, each Holder listed on Schedule 1
and Schedule 2 and Texas Commerce Bank National Association, as Trustee as such
agreement may be amended, restated or supplemented from time to time.
"KPL" means Kaneb Pipe Line Company, a Delaware corporation.
---
"KPOP" means Kaneb Pipe Line Operating Partnership, L.P., a Delaware
----
limited partnership.
"KPP Companies" means, collectively, KPOP, STI, the Partnership, STS, STOP,
-------------
and, subject to Section 8.4, their successors and assigns.
"Lien" means, with respect to any property or assets, any right or interest
----
therein of a creditor to secure obligations, indebtedness or claims owed to him
or any other arrangement with such creditor which provides for the payment of
such obligation, indebtedness or claim out of such property or assets or which
allows him to have such obligation, indebtedness or claim satisfied out of such
property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's
38
<PAGE>
or materialman's lien, any other charge or encumbrance for security purposes,
whether arising by law or agreement or otherwise. "Lien" also means any filed
financing statement, any registration of a pledge (such as with an issuer of
unregistered securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Margin Stock" has the meaning specified in Section 2.11.
------------
"Mortgage" means that certain Mortgage and Security Agreement dated of
--------
event date herewith, executed by KPOP and KPL.
"Note Agreements" has the meaning specified in Section 1.1(a).
---------------
"Note Purchase Documents" means this Agreement, the other Note Agreements,
-----------------------
the Notes, the Security Documents, the Intercreditor Agreement, and all other
agreements, certificates, documents, instruments and writings at any time
delivered in connection herewith or therewith.
"Notes" has the meaning specified in Section 1.2(a).
-----
"Partners' Capital" means, at the time in question, the partners' capital
-----------------
of the Partnership, as consolidated with its Subsidiaries, as determined in
accordance with GAAP, including without limitation, the elimination of minority
interests.
"Partnership" means Kaneb Pipe Line Partners, L.P., a Delaware limited
-----------
partnership.
"PBGC" has the meaning specified in Section 2.12(c).
----
"Permitted Investment" means any investment by any KPP Company or any of
--------------------
their Restricted Subsidiaries in any other Person, whether by acquisition of
stock or Debt, by loan, advance, guarantee, or transfer of property out of the
ordinary course of business, by capital contribution, by extension of credit or
otherwise by any KPP Company or any of their Restricted Subsidiaries in any of
the following:
(a) any marketable obligation maturing not later than one year after
the date of acquisition thereof, issued or guaranteed by the United States
of America or by any agency of the United States of America which has the
full faith and credit of the United States of America;
(b) commercial paper which is rated "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investor Service, Inc., and maturing not
later than one year after the date of acquisition thereof, issued by any
corporation organized
39
<PAGE>
under the laws of the United States or any state thereof and which has
capital, surplus and undivided profits of at least $100,000,000;
(c) any demand deposit or time deposit (including certificates of
deposit and money market or sweep accounts) with a commercial bank or trust
company organized under the laws of the United States or any state thereof
and having capital, surplus and undivided profits of at least $100,000,000
whose senior debt securities are rated "A" or higher by Standard & Poor's
Corporation or "A-2" or higher by Moody's Investor Service, Inc., provided
that such deposit must either be payable on demand or mature not later than
twelve months from the date of investment therein;
(d) any demand deposit with a commercial bank or trust company
organized under the laws of the United States of America or any state
thereof maintained for use in the ordinary course of business;
(e) any tax-exempt security which is rated "A" or higher by Standard
& Poor's Corporation or "A-2" or higher by Moody's Investor Services, Inc.,
maturing not later than one year from the date of acquisition thereof and
which is issued by any institution having capital, surplus and undivided
profits of at least $100,000,000;
(f) any advance to directors, officers or employees of any KPP
Company in the ordinary course of business which has been approved by such
KPP Company, provided that the aggregate amount of all such advances
outstanding at any one time may not exceed $1,000,000;
(g) all accounts receivables on normal trade terms which arise from
the sale of goods or services in the ordinary course of business;
(h) intercompany advances, loans or extensions of credit by any KPP
Company or any of their Wholly Owned Restricted Subsidiaries to any other
KPP Company or any of their Wholly Owned Restricted Subsidiaries provided
that such intercompany advances, loans or extensions of credit shall be
subordinated to the Notes and the Guaranties upon terms satisfactory to the
Holders;
(i) investments, other than pursuant to the preceding clause (h) (by
transfer of property, capital contribution or otherwise) in the
Partnership, KPOP, STS, STI or STOP or any other Person provided that such
Person is or shall immediately therewith become a Guarantor and a Wholly
Owned Restricted Subsidiary of the KPP Companies; and
(j) any other investment so long as the aggregate book value of such
investments does not at any time exceed ten
40
<PAGE>
percent (10%) of the Partners' Capital as of the end of the fiscal year
immediately preceding the date in question.
"Permitted Transfer" means a Transfer of property or assets or a Transfer
------------------
of capital stock or partnership units of a Subsidiary of any KPP Company (other
than a Subsidiary that is one of the KPP Companies other than STOP) if:
(a) at the time of such Transfer, and immediately after giving effect
thereto:
(i) such Transfer is for fair market value and in the best
interests of the Person making such Transfer,
(ii) no Default or Event of Default has occurred and is
continuing or would exist after giving effect thereto, or
(iii) all such Transfers which are to be treated as "Permitted
Transfers" under this subsection (a) in any fiscal year shall consist
of properties or assets or of capital stock of a Subsidiary which do
not in the aggregate have a book value (determined with regard to each
such property or asset or such capital stock at the time the same is
Transferred) of more than ten percent (10%) of the Partners' Capital
as of the end of the immediately preceding fiscal year; or
(b) any other Transfer for cash provided that within one year from
the date of such Transfer, the KPP Companies or their Subsidiaries use the
full amount of the proceeds received therefrom, net of all expenses of the
KPP Companies or their Subsidiaries incurred in connection with such
Transfer, either (or in combination):
(i) to acquire property or assets used in the storage,
terminaling, pipeline and transportation business, or
(ii) to pay Funded Debt of the KPP Companies.
(c) the Transfer is to any other KPP Company or any of their Wholly
Owned Restricted Subsidiaries.
"Person" means an individual, a corporation, a partnership, a trust, a
------
joint venture, an unincorporated organization or a government or any agency or
political subdivision thereof.
"Plan" has the meaning specified in Section 2.12(c).
----
"Prepayment Date" has the meaning specified in Section 4.1.
---------------
"Prime Rate" means, on any day, the rate quoted by J. P. Morgan Company as
----------
its prime rate, base rate or similar reference
41
<PAGE>
for such day; or, if such rate is no longer quoted by J. P. Morgan Company, such
other similar reference rate for such day readily available as selected by the
Requisite Holders to be the Prime Rate.
"Private Placement Memorandum" has the meaning specified in Section 2.2.
----------------------------
"RCRA" has the meaning specified in the above definition of "Hazardous
----
Materials".
"Reportable Event" has the meaning specified in Section 2.12(c).
----------------
"Repurchase Agreement" means the Put Agreement dated as of October 11,
--------------------
1993, between the Partnership and Texas Commerce Bank National Association
pursuant to which the Partnership agreed to repurchase upon demand by Texas
Commerce Bank National Association certain of its partnership units issued to
KPL.
"Requisite Holders" means the Holder or Holders of not less than 51% in
-----------------
aggregate principal amount of all Notes at the time outstanding, exclusive of
any Notes held by the KPP Companies, any of their Subsidiaries or any Affiliate
of such Persons.
"Responsible Officer" means any of the following officers, agents or
-------------------
employees of any KPP Company, or in the case of a partnership, of the Managing
General Partner of such KPP Company: the Chairman, the President, the Chief
Executive Officer, the Chief Operating Officer and, and the Chief Financial
Officer (and any Person who performs one of the same functions under a different
title).
"Restricted Investment" means any investment by any KPP Company or any of
---------------------
their Restricted Subsidiaries in any other Person, whether by acquisition of
stock or Debt, by loan, advance, guarantee, or transfer of property out of the
ordinary course of business, by capital contribution, by extension of credit or
otherwise; provided that the term "Restricted Investment" shall not include any
Permitted Investment.
"Restricted Payment" means (a) any dividend on, or other distribution in
------------------
respect of, shares of class of capital stock of, or partnership or other
interest in any KPP Company or any of their Subsidiaries (other than a dividend
or other distribution payable solely in capital stock of such company or a
dividend or other distribution payable solely to KPOP or to one of its Wholly-
Owned Restricted Subsidiaries), (b) any payment on account of the purchase,
redemption or other retirement of any such shares of capital stock or
partnership interest, or of any warrant, option or other right to acquire shares
of capital stock or partnership interest in, KPL, Kaneb Services, Inc., any KPP
Company or any of their Subsidiaries, or (c) any other distribution made to a
holder of any such shares of capital stock
42
<PAGE>
or partnership interest, either directly or indirectly (other than a
distribution payable solely in capital stock of any KPP Company), including any
forgiveness of debt owed by such shareholder or partner to KPL, any KPP Company
or any of their Subsidiaries.
"Restricted Subsidiary" has the meaning given it in Section 8.11.
---------------------
"Rule 144A" means Rule 144A promulgated by the SEC, as amended from time to
---------
time.
"SEC" means the Securities and Exchange Commission, or any governmental
---
agency or agencies substituted therefor.
"Security Documents" means the Guaranties, all other instruments listed in
------------------
the Security Schedule and all other security agreements, deeds of trust,
mortgages, chattel mortgages, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now, heretofore, or hereafter delivered by any Person to Holders or
the Trustee in connection with this Note Agreement or any transaction
contemplated hereby to secure or guarantee the payment of any part of the Note
or the performance of the KPP Companies' or any other Person's other duties and
obligations under the Note Purchase Documents.
"Security Schedule" means Schedule 3 hereto.
-----------------
"Series A Closing Date" has the meaning specified in Section 1.1(c).
---------------------
"Series A Contract Rate" means the per annum rate of interest equal to one
----------------------
percent (1.0%) per annum plus the interpolated yield to maturity of an
obligation with a seven year maturity and average life, interpolating based upon
the yield to maturity of the five-year United States Treasury Notes due November
1999 or such later issue of on-the-run five-year United States Treasury Notes
issued prior to such date of determination and are reflected on the display
designated as "Page 500" on the Telerate Access Service (or such other display
as may replace Page 500 on Telerate Access Service or if Telerate Access Service
is not available, any other nationally recognized trading screen reporting on-
line intraday trading in United States Treasury fixed interest rate securities)
and the yield to maturity of the ten-year United States Treasury Notes due
November 2004 or such later issue of on-the-run ten-year United States Treasury
Notes issued prior to such date of determination and are reflected on such
display, at 11:00 A.M. (New York City time) as of the fifth Business Day
preceding the Series A Closing Date, as determined by the Requisite Holders on
or prior to the Series A Closing Date.
43
<PAGE>
"Series A Final Maturity Date" has the meaning specified in Section 1.1(a).
----------------------------
"Series A Overdue Rate" has the meaning specified in Section 1.1(b).
---------------------
"Series B Closing Date" has the meaning specified in Section 1.2(c).
---------------------
"Series B Contract Rate" has the meaning specified in Section 1.2(b).
----------------------
"Series B Final Maturity Date" has the meaning specified in Section 1.2(a).
----------------------------
"Series B Overdue Rate" has the meaning specified in Section 1.2(b).
---------------------
"STI" means StanTrans, Inc., a Delaware corporation.
---
"STOP" means Support Terminals Operating Partnership, L.P., a Delaware
----
limited partnership.
"STS" means Support Terminal Services, Inc., a Delaware corporation.
---
"Subsidiary" means, with respect to any KPP Company, any corporation,
----------
association or other business entity in which such KPP Company or one or more of
its Subsidiaries owns sufficient equity or voting interests to enable it or them
(as a group) ordinarily, in the absence of contingencies, to elect a majority of
the directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such KPP Company or one or more of its Subsidiaries
or such KPP Company and one or more of its Subsidiaries (unless such partnership
can and does ordinarily take major business actions without the prior approval
of such KPP Company or one or more of its Subsidiaries).
"Transfer" means to sell, lease, transfer or otherwise dispose.
--------
"Trustee" means the Trustee appointed and acting pursuant to the
-------
Intercreditor Agreement.
"Unrestricted Subsidiary" has the meaning given it in Section 8.11.
-----------------------
"Voting Stock" of a Person means the issued and outstanding capital stock
------------
of such Person with the power to elect, appoint or cause the election or
appointment of the members of its board of directors.
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"Wholly Owned Restricted Subsidiary" means, at any time, any Restricted
----------------------------------
Subsidiary one hundred percent (100%) of all the equity interests, voting
interests and Debt of which are owned by any one or more of the KPP Companies
and their other Wholly Owned Restricted Subsidiaries at such time.
"WYCO" means WYCO Pipe Line Company, a Delaware corporation.
----
SECTION 10. SECURITY.
--------
10.1 The Security. The Notes will be secured by the Security Documents
------------
listed in the Security Schedule and any additional Security Documents hereafter
delivered by any Person and accepted by Requisite Holders.
10.2 Agreement to Deliver Security Documents. Each KPP Company agrees to
---------------------------------------
deliver and to cause its Subsidiaries to deliver, to further secure the Notes
whenever requested by Requisite Holders in their sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance satisfactory to
Requisite Holders for the purpose of granting, confirming, and perfecting first
and prior liens in the Collateral. Each KPP Company also agrees to deliver and
to cause its Subsidiaries to deliver, whenever Requisite Holders determine in
their sole and absolute discretion, reasonably exercised, that any of the
matters described below is in question, favorable opinions from legal counsel
acceptable to the Requisite Holders as to such matter (a) confirming that such
properties and interests are subject to Security Documents securing the Notes
that constitute and create legal, valid and duly perfected first deed of trust
liens, or mortgage liens or security interests in such properties and interests
and the proceeds thereof, (b) stating that such properties and interests are
free and clear of all Liens except those in favor of Trustee and that such
Person has good and defensible title thereto, and (c) covering such other
matters as Requisite Holders may request.
10.3 Perfection and Protection of Security Interests and Liens. The KPP
---------------------------------------------------------
Companies will from time to time deliver to the Trustee financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by the KPP Companies or
any of their Subsidiaries in form and substance satisfactory to the Requisite
Holders.
10.4 Additional Secured Debt. (a) Funded Debt for money borrowed by KPOP
-----------------------
with respect to which all of the following are true is herein called "Qualifying
----------
Debt": (i) such Debt is permitted to be incurred by Section 8.1(c) at the time
- ----
such Debt is incurred, (ii) such Debt is permitted to be incurred pursuant to
the terms of each document or instrument governing other Debt of any of the KPP
Companies or any of their Subsidiaries (or a written consent given thereunder),
(iii) such Debt is permitted
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to be secured on a pari passu basis with all other Debt which is secured by the
Collateral pursuant to the terms of each document or instrument governing such
Debt that is secured by the Collateral (or a written consent given thereunder),
(iv) the initial holders of such Debt are Financial Institutions, (v) such Debt
is not guarantied in any manner by any Person and is not secured by any Lien
unless any such guaranty or Lien shall concurrently benefit and secure all Notes
on a pari passu basis, (vi) any consent or approval of any governmental or
public body or authority which is required for the incurrence of such Debt has
been obtained, and (vii) KPOP has given an officer's certificate addressed to
each Holder of KPOP's intent to secure such Debt with the Collateral, which
certificate shall have been given not less than 30 days prior to the incurrence
of such Debt and shall contain representations, warranties and covenants (in
form and substance approved by the Trustee) that such Debt complies with each of
the provisions of this Section 10.4. To the extent that the principal amount of
the Notes exceeds $60,000,000 or the amount of loans, letters of credit or
commitments to make loans or issue letters of credit under the Bank Debt
Documents exceeds $15,000,000 (exclusive of the amount of premium, interest,
expenses, fees, indemnifications and similar amounts that may be incurred in
respect of such amount), such excess principal amount or excess loans, letters
of credit or commitments shall not be treated as Funded Obligations under the
Intercreditor Agreement unless the same shall be Qualifying Debt. As used in
this Section 10.4, "Financial Institution" shall mean a commercial bank
---------------------
chartered under, or duly authorized to operated a branch in the United States
under, the law of the United States or any state thereof, or an insurance
company or commercial finance company organized under the laws of any State of
the United States, in each case with capital and surplus in excess of
$100,000,000 at the time it shall become a creditor hereunder, or a separate
account administered by such an insurance company.
(b) The Trustee shall be authorized to execute amendments or supplements
to the Security Documents reasonably acceptable to the Trustee and the KPP
Companies to provide for the securing of Qualifying Debt on a pari passu basis
with the Notes, subject to and on the conditions that (i) the KPP Companies and
the holder of the Qualifying Debt shall have complied with such conditions as
the Trustee may reasonable require to assure that such Debt is Qualifying Debt
on the date so secured and (ii) the holders of such Qualifying Debt shall have
executed a written agreement agreeing to be bound by all of the terms and
conditions of the Intercreditor Agreement in the form attached thereto as
Exhibit B. Notwithstanding anything to the contrary contained in this Agreement,
any Note Purchase Document or Bank Debt Document, the Intercreditor Agreement
shall at all times provide that, to the extent (i) the Liens upon the Collateral
securing any such Qualifying Debt are or become subject or subordinate to any
claims or Liens of any other Person to which the Notes are not similarly subject
or subordinate or (ii) the Qualifying Debt, or
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the Liens upon the Collateral securing the Qualifying Debt, shall become subject
or subordinate to claims of any other Person or defenses of any of the KPP
Companies or any other Person (including without limitation avoidability by a
trustee in any bankruptcy or insolvency proceeding) to which any of the Notes
are not subject (each an "Intervening Claim"), any amount which must be applied
against such Intervening Claim shall be deducted from the amount allocable to
such Qualifying Debt by the Trustee or any Holder pursuant to the provisions of
the Intercreditor Agreement.
SECTION 11. DEFAULTS AND REMEDIES.
---------------------
11.1 Events of Default. If one or more of the following events (each an
-----------------
"Event of Default") shall occur for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of principal of any Note when and as the same
shall become due and payable, or default in the payment of the Applicable
Premium Amount of any Note when and as the same shall become due and payable; or
(b) default in the payment of any interest upon any Note when such
interest becomes due and payable and continuance of such default for a period of
5 Business Days; or
(c) default in the performance or observance of any covenant, agreement or
condition contained in Section 8 hereof which shall not have been remedied,
waived or cured by the 30th day after the occurrence of such default; or
(d) default in the performance or observance of any covenant, agreement or
condition contained in the Notes, in the Note Agreements or in any other Note
Purchase Document (other than specified in subsections (a), (b) or (c) above)
which shall not have been remedied, waived or cured by the 30th day after the
earlier of the date on which (i) any KPP Company receives notice of such default
from a Holder or (ii) a Responsible Officer otherwise obtains knowledge of such
default; or
(e) (i) any default occurs in the payment when due of any principal,
premium or interest on the Bank Debt or any "Qualifying Debt" secured by Liens
on the Collateral and any applicable grace period thereof has expired, or (ii)
any other default or event of default occurs in respect of the Bank Debt or any
such Qualifying Debt or under any agreement relating to such obligation or
indebtedness, and any such default or event of default has not been cured or
permanently waived prior to the expiration of any applicable grace period, or
(iii) any default occurs in the payment when due of any principal, premium or
interest on any Debt of any KPP Company or any of their
47
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Subsidiaries (other than the Notes and the Bank Debt or such Qualifying Debt)
which Debt exceeds $5,000,000 in the aggregate and any applicable grace period
thereof has expired, or (iv) any other default or event of default occurs in
respect of such Debt described in (e)(iii) or under any agreement relating to
such obligation or indebtedness, and any such default or event of default has
not been cured or permanently waived prior to the expiration of any applicable
grace period; or
(f) any KPP Company or any of their Subsidiaries shall file a petition
seeking relief for itself under Title 11 of the United States Code, as now
constituted or hereafter amended, or an answer consenting to, admitting the
material allegations of or otherwise not controverting, or shall fail to timely
controvert, a petition filed against such Company or Subsidiary seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended; or any KPP Company or any of their Subsidiaries shall file such a
petition or answer with respect to relief under the provisions of any other now
existing or future bankruptcy, insolvency or other similar law of the United
States of America or any State thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations or
an arrangement, composition, extension or adjustment with creditors; or
(g) a court of competent jurisdiction shall enter an order for relief
which is not stayed within 90 days from the date of entry thereof against any
KPP Company or any of their Subsidiaries under Title 11 of the United States
Code, as now constituted or hereafter amended; or there shall be entered an
order, judgment or decree by operation of law or by a court having jurisdiction
in the premises which is not stayed within 90 days from the date of entry
thereof adjudging any KPP Company or any of their Subsidiaries as bankrupt or
insolvent, or ordering relief against any KPP Company or any of their
Subsidiaries, or approving as properly filed a petition seeking relief against
any KPP Company or any of their Subsidiaries, under the provisions of any other
now existing or future bankruptcy, insolvency or other similar law of the United
States of America or any State thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations or
an arrangement, composition, extension or adjustment with creditors, or
appointing a receiver, liquidator, assignee, sequestrator, trustee, custodian or
similar official of any KPP Company or any of their Subsidiaries or of any part
of the Collateral or a substantial part of any of its other property, or
ordering the reorganization, winding-up or liquidation of its affairs; or any
involuntary petition against any KPP Company or any of their Subsidiaries
seeking any of the relief specified in this clause shall not be dismissed within
90 days of its filing; or
(h) any KPP Company or any of their Subsidiaries shall make a general
assignment for the benefit of its creditors; or any KPP Company or any of their
Subsidiaries shall consent to the
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appointment of or taking possession by a receiver, liquidator, assignee,
sequestrator, trustee, custodian or similar official of such KPP Company or
Subsidiary or of any part of the Collateral or any substantial part of its other
property; or any KPP Company or any of their Subsidiaries shall have admitted to
its insolvency or inability to pay, or shall have failed to pay, its debts
generally as such debts become due; or any KPP Company or any of their
Subsidiaries or their directors or majority stockholders shall take any action
looking to the dissolution or liquidation of such KPP Company or Subsidiary
(other than as contemplated by Section 8.4 or Section 8.5); or
(i) there shall remain in force, undischarged, unsatisfied, unbonded and
unstayed, for more than 30 consecutive days final judgments, decrees or orders
for the payment of money in excess of an aggregate amount of $25,000,000 against
any KPP Company or any of their Subsidiaries; or
(j) (i) any KPP Company or any ERISA Affiliate shall incur any liability
in excess of $5,000,000 to a Plan or to the Internal Revenue Service or the
Pension Guaranty Benefit Corporation with respect to a Plan or (ii) a statutory
Lien shall be placed on the property of any KPP Company or any ERISA Affiliate
pursuant to ERISA which secures obligations in excess of $5,000,000; or
(k) any representation or warranty by or on behalf of the KPP Companies in
the Note Agreements, the Notes, any other Loan Document or in any certificate or
instrument furnished in connection therewith proves to have been false or
misleading in any material respect as of the date given or made;
then (i) upon the occurrence of any Event of Default described in subsections
(f), (g) or (h) of this section with respect to either KPP or STI (each a
"Bankruptcy Default"), all of the Notes shall automatically become immediately
due and payable; (ii) upon the occurrence with respect to any Note of any Event
of Default described in subsection (a) or (b), the Holder of any Note may at any
time during its continuance, by written notice to the KPP Companies, declare its
Note to be due and payable, whereupon such Note shall forthwith mature and
become due and payable; or (iii) upon the occurrence of any other Event of
Default, the Requisite Holders may at any time during its continuance, by
written notice to the KPP Companies, declare all of the Notes to be due and
payable, whereupon in each case all of the Notes shall forthwith mature and
become due and payable.
The amount payable upon the occurrence of a Bankruptcy Default shall be, to
the extent permitted by law, the entire unpaid principal amount of the Notes,
together with interest accrued thereon, and such amount shall be payable without
presentment, demand, protest or other requirement of any kind, all of which are
expressly waived by the KPP Companies and their Subsidiaries. The amount
payable upon an acceleration based on
49
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any other Event of Default shall be, to the extent permitted by law, the entire
unpaid principal amount of the Notes so accelerated, the interest accrued
thereon to the date of acceleration, and the Applicable Premium Amount, and such
amount shall be payable without presentment, demand, protest or further notice,
all of which are expressly waived by the KPP Companies.
On any date on which the Requisite Holders give written notice to the KPP
Companies declaring all of the Notes to be due and payable pursuant to Section
11.1(iii), the Requisite Holders shall give written notice to the KPP Companies
and to all the other Holders of the amount of the Applicable Premium Amount of
the Notes so accelerated, which notice shall set forth in reasonable detail the
computation thereof. Within five Business Days after Requisite Holders receive
notice that any other Holder has given written notice to the KPP Companies
declaring its Note to be due and payable pursuant to Section 11.1(ii), the
Holder of such Note shall give written notice to the KPP Companies of the amount
of the Applicable Premium Amount of the Note so accelerated, which notice shall
set forth in reasonable detail the computation thereof, and the KPP Companies
shall provide written notice of such Applicable Premium Amount to the other
Holders. The Applicable Premium Amount set forth in any such notice shall be
binding on the KPP Companies and the Holders absent manifest error.
If, at any time after any or all of the Notes shall have been declared due
and payable pursuant to this Section 11.1 and before any judgment or decree for
the payment of monies due shall have been obtained or entered, the KPP Companies
shall pay in full the principal, interest and Applicable Premium Amount which
shall have become due and payable in respect of the Notes otherwise than by such
declaration, with interest upon all such overdue principal and the Applicable
Premium Amount and (to the extent that payment of such interest is enforceable
under applicable law) upon overdue interest at the Series A Overdue Rate and the
Series B Overdue Rate, as applicable, to the date of such payment, and an
additional amount sufficient to reimburse the Holders for their costs and
expenses incurred in connection with any such declaration, and the KPP Companies
shall remedy every other Event of Default, then the Requisite Holders, by
written notice to the KPP Companies, may (but shall have no obligation to)
rescind and annul such declaration and its consequences; but no such rescission
or annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.
11.2 Suits for Enforcement. Subject to the exercise by Trustee of its
---------------------
powers under the Security Documents, in case any one or more of the Events of
Default specified in Section 11.1 shall occur and be continuing, the Holder of
each Note may proceed to protect and enforce its rights by suit in equity,
action at law or by other appropriate proceeding, whether for the specific
performance (to the extent permitted by law) of any
50
<PAGE>
covenant or agreement contained in such Note or the Note Agreements or any other
Loan Document or in aid of the exercise of any power granted therein, or may
proceed to enforce the payment of such Note or to enforce any other legal or
equitable right of such Holder. If any Holder of a Note shall demand payment
thereof or take any action in respect of a Default or an Event of Default, the
KPP Companies will forthwith give written notice to the other Holders of Notes,
specifying such action and the nature of the Default or Event of Default. The
notice to each Holder shall also set forth the respective names and addresses
of, and principal amounts of the Notes held by, the other Holders.
In case of a Default or Event of Default, the KPP Companies will pay to
each Holder such further amount as shall be sufficient to cover such Holder's
costs and expenses of collection and enforcement, including attorneys' fees, to
the extent provided in Section 13.2.
11.3 Remedies Cumulative. No remedy herein conferred upon any Holder is
-------------------
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11.4 Remedies Not Waived. No course of dealing or unwritten agreement or
-------------------
practice between the KPP Companies and any Holder shall operate as a waiver of
any right of any Holder and no delay on the part of any Holder in exercising any
right shall so operate.
11.5 Indemnity. Each KPP Company and their Subsidiaries, jointly and
---------
severally, agrees to indemnify and reimburse each Holder, upon demand, against
and for any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this section collectively called "liabilities
and costs") which to any extent (in whole or in part) may be imposed on,
incurred by, or asserted against such Holder growing out of, resulting from, or
in any other way associated with the Note Agreements, the Notes, the other Note
Purchase Documents or the transactions and events (including the enforcement or
defense thereof) at any time associated herewith or therewith or contemplated
herein or therein. THE FOREGOING INDEMNIFICATION AND REIMBURSEMENT OBLIGATIONS
OF THE KPP COMPANIES SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE
IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY SUCH HOLDER, PROVIDED THAT:
(a) Except as provided in the following subsection (b), no Holder
shall be entitled under this section to
51
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receive indemnification for (i) that portion of any final judgment for
liabilities and costs which portion, determined in accordance with
principles of comparative fault, is based upon a finding that such Holder
has been grossly negligent or has engaged in willful misconduct, or (ii)
the liabilities and costs representing that portion of any out-of-court
settlement by a Holder which has been allocated by the parties to such
settlement to a claim that such Holder has been grossly negligent or has
engaged in willful misconduct.
(b) Each Holder shall be entitled under this section to receive
indemnification and reimbursement for any liabilities and costs arising
from a final judgment in favor of an Outside Party to the effect that such
Holder is somehow legally responsible (due to a theory of imputed
negligence or otherwise) for the negligence or other acts or omissions of
any KPP Company or any of their Affiliates.
(c) Each KPP Company shall (upon demand as the same are incurred)
indemnify and reimburse each Holder for all costs, expenses, and
disbursements of any kind or nature whatsoever (including reasonable fees
of attorneys, accountants, experts and advisors) which are incurred by such
Holder in defending against any claim or allegation that such Holder has
been grossly negligent or has engaged in willful misconduct. Each Holder
agrees to reimburse the KPP Companies for amounts paid to such Holder under
this Section 11.5(c) upon the determination in a final judgment that such
Holder has been grossly negligent or has engaged in willful misconduct.
(d) No Holder shall, without the consent of the KPP Companies, which
consent shall not be unreasonably withheld, enter into any out-of-court
settlement of any claim for liabilities and costs if the KPP Companies
would be obligated under this section to indemnify such Holder for amounts
paid by such Holder under such settlement. The KPP Companies will,
however, consent to any settlement proposed by such Holder which is
reasonable in light of the then existing circumstances.
As used in this section: the term "Holder" shall refer not only to each Person
who is the Holder of any Note at the time in question but also to any former
Holder of such Note (or of any predecessor Note) and to each director, officer,
agent, attorney, employee, representative and affiliate of such present or
former Holder, and the term "Outside Party" shall refer, with respect to any
Holder, to any Person other than such Holder, its owners, and the insurance or
other regulatory authorities which exercise jurisdiction over its ability to
purchase promissory notes and engage in transactions of the kind contemplated
herein.
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SECTION 12. CONSENTS, WAIVERS AND AMENDMENTS. Any term, covenant,
--------------------------------
agreement or condition of the Notes or the Note Agreements or any other Loan
Document may, with the consent of the KPP Companies, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), but any such amendment or waiver must be made
in writing by one or more instruments signed by the Requisite Holders; provided
that:
(a) no such amendment or waiver shall, without the consent of all Holders,
(1) change the maturity of the principal of, or any installment of
interest on, any of the Notes, or reduce the principal amount thereof or
the interest thereon, or subordinate or otherwise modify the terms of
payment of the principal thereof or interest or premium thereon including
any extension of the time for, or change in the application or priority of,
any such payment, or
(2) give to any Note any preference over any other Note, or
(3) reduce the percentage of the principal amount of Notes the
Holders of which are required to approve any such amendment or effectuate
any such waiver, or
(4) except as provided in Section 10.4, amend any Guaranty or amend
any other Security Document where the effect of such amendment releases any
Collateral or adversely affects the perfection or priority of any Lien on
the Collateral, or
(5) amend or waive any of the provisions of this Section 12,
(6) amend any of the provisions of the Intercreditor Agreement, and
(b) no such waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon.
The KPP Companies will not, directly or indirectly, solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement, the Notes or other Note Purchase Documents unless
each Holder (irrespective of the amount of Notes then owned by it) shall
concurrently be informed thereof by the KPP Companies and shall be afforded the
opportunity of considering the same and shall be supplied by the KPP Companies
with sufficient information, including but not limited to the making of updated
representations and warranties comparable in scope to those set forth in Section
2, to enable it to make an informed decision with respect thereto. The KPP
Companies will not, directly or
53
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indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any Holder as
consideration for or as an inducement to the entering into by any Holder of any
waiver or amendment of any of the terms and provisions of this Agreement or
other Loan Document unless such remuneration is concurrently paid, on the same
terms, ratably to each Holder of then outstanding Notes. The KPP Companies will
not in connection with any solicitation, request or negotiation of any waiver or
amendment, directly or indirectly, prepay or offer to prepay (and shall
represent that they do not contemplate prepaying within the next twelve months)
any series that would not be prepaid ratably with the Notes of the other series,
and any prepayment made by the KPP Companies during the twelve months
immediately following such waiver or amendment, must be pro rata between the
Series A Notes and the Series B Notes, except for such difference in the offer
price between Series A Notes and Series B Notes which reflects only the
differences in the interest rates thereon and payment dates or maturity date
thereof and is reasonably determined.
Subject to the last sentence of this paragraph, any amendment or waiver
pursuant to this Section 12 shall apply equally to all Holders and shall be
binding upon them, upon each further Holder of any Note and upon the KPP
Companies whether or not such Note shall have been marked to indicate such
amendment or waiver. No such amendment or waiver shall extend to or affect any
obligation not expressly amended or waived or impair any right related thereto.
For purposes of determining whether the Holders of the requisite aggregate
principal amount of Notes at any time have agreed or consented to any amendment
or waiver pursuant to the provisions of this Section 12, any Notes held by any
KPP Company, any of their Subsidiaries or any Affiliate shall not be deemed
outstanding. Any consent made by a Holder that has transferred or has agreed to
transfer its Notes to a KPP Company, any of their Subsidiaries or any Affiliate
thereof and has provided or has agreed to provide such written consent as a
condition to such transfer shall be void and of no force and effect except
solely as to such Holder, and any amendments effected or waivers granted or to
be effected or granted that would not have been or would not be so effected or
granted but for such consent (and the consent of all other Holders that were
acquired under the same or similar conditions) shall be void and of no force and
effect retroactive to the date such amendment or waiver initially took or takes
effect, except solely as to such Holder.
SECTION 13. SPECIAL RIGHTS OF PURCHASER.
---------------------------
13.1 Method of Payment; Indemnity. Anything contained in the Notes to the
----------------------------
contrary notwithstanding, in the case of each Note held by you, KPOP and STI
will make all payments in respect of its Notes (including the final payment) of
principal thereof and the Applicable Premium Amount (if any) and interest
thereon by wire transfer in immediately available funds not later than
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11:00 a.m. (local time at your address for payment specified on Schedule 1 or
Schedule 2, as appropriate), on the date each such payment is due pursuant to
the terms hereof and the terms of the Notes, to the account specified under your
name on Schedule 1 or Schedule 2, as appropriate (or in such other manner or at
such other address or account in the United States as you may from time to time
designate to the KPP Companies in writing), each such payment being accompanied
by the reference number specified on Schedule 1 or Schedule 2, as appropriate,
and by such other information as is necessary to identify the source and
application thereof, and all without any presentment or surrender of such Note
and without any notation of such payment being made thereon. You agree that in
the event you shall sell or transfer such Note you will notify the KPP Companies
of that fact and will prior to the delivery of such Note make, or cause to be
made, a notation thereon of all principal, if any, theretofore paid on such Note
and of the date to which interest has been paid on such Note. The KPP Companies
agree that, in the event that any Note held by you is lost, stolen or destroyed
and application is made, pursuant to the provisions of Section 14.3, for the
execution and delivery of a new Note in lieu thereof, an unsecured indemnity
agreement signed by you shall constitute indemnity satisfactory to the KPP
Companies.
13.2 Expenses. Whether or not the transactions contemplated herein shall
--------
be consummated, the KPP Companies shall pay all of your and the Trustee's
expenses, including out-of-pocket expenses, arising in connection therewith,
including the fees and disbursements of your special counsel and Trustee's
special counsel for all services incident to the preparation and negotiation of
the Note Agreements, the Notes, the other Note Purchase Documents and all other
documents and instruments delivered in connection therewith. The KPP Companies
shall also pay all compensation to the Trustee and any and all costs, expenses
or disbursements (including reasonable fees of attorneys, accountants, experts
and advisers) of any kind or nature whatsoever which is incurred by the Trustee
resulting from or in any other way associated with any of the Collateral, the
Note Purchase Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein. The KPP Companies shall also pay, and save you harmless from, any and
all liabilities with respect to the assignment of a private placement number
from Standard and Poor's CUSIP Service Bureau, trustee's fees and expenses,
environmental assessment charges, title charges, survey costs, filing,
registration and recording fees, mortgage recording taxes, stamp and other
taxes, duties, imposts, assessments and other charges which may be payable or
deemed to be payable in connection with the execution and delivery of this Note
Agreement, the Notes and the other Note Purchase Documents. The KPP Companies
agree, to the extent permitted by applicable law, to pay and indemnify you
against any costs and expenses, including reasonable attorneys' and accountants'
fees, incurred by you, any subsequent Holder or the Trustee in evaluating (in
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connection with any controversy or potential controversy) and enforcing,
exercising or defending any rights or remedies under this Agreement, the Notes
and the other Note Purchase Documents or in responding to any subpoena or other
legal process issued in connection with this Agreement or the transactions
contemplated hereby or by reason of your or any subsequent Holder's having
acquired any Note, including without limitation, costs and expenses incurred in
any bankruptcy case. Without limiting the foregoing, to the extent permitted by
applicable law, the KPP Companies also will pay the reasonable fees, expenses
and disbursements of an investment bank or other firm acting as adviser (which
fees, expenses and disbursements may include, without limitation, reasonable
legal and accounting fees) to the Holders of the Notes following the occurrence
and during the continuance of a Default or an Event of Default or in connection
with any such amendment or waiver proposed in connection with any potential
Default or Event of Default or any workout, restructuring or similar
negotiations relating to this Agreement, the Notes and the other Note Purchase
Documents or any other Holder. The obligations of the KPP Companies under this
Section 13.2 shall survive the transfer of any Note or portion thereof or
interest therein by you or any subsequent Holder and the payment of any Note.
SECTION 14. REGISTRATION, TRANSFER OR EXCHANGE OF NOTES.
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14.1 Note Register. The KPP Companies shall keep at their office or
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agency maintained as provided in Section 7.1 a register in which the KPP
Companies shall provide for the registration of Notes and for the registration
of transfer and exchange of Notes.
14.2 Surrender for Transfer. The Holder of each Note at its option may
----------------------
either in person or by duly authorized attorney surrender the same for
registration of transfer or exchange at such office or agency of the KPP
Companies and, without expense to such Holder (other than for transfer taxes, if
any), receive in exchange therefor a Note or Notes, each in the face amount of
at least $900,000 (or if the outstanding principal amount of a Note being so
transferred or exchanged is less than $900,000 at such time, then in the face
amount of amount then outstanding), dated as of the date to which interest has
been paid on the surrendered Note, and registered in the name of such Person or
Persons as may be designated by such Holder, for the same aggregate principal
amount as the then unpaid principal amount of such surrendered Note. Every Note
presented or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in the form of Exhibit D to this
Agreement, duly executed by the Holder of such Note or his attorney duly
authorized in writing. Every Note so made and delivered in exchange for any
surrendered Note shall in all other respects be in the same form and have the
same terms as such surrendered Note. No transfer or exchange of any Note shall
be valid unless made in the foregoing manner at such office or agency.
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14.3 Loss, Theft, Destruction or Mutilation of Notes. Upon receipt of
-----------------------------------------------
evidence reasonably satisfactory to the KPP Companies of the loss, theft,
destruction or mutilation of any Note, and, in the case of any such loss, theft
or destruction, upon receipt of indemnity or instrument reasonably satisfactory
to the KPP Companies which may include unsecured corporate obligations in the
case of any institutional investor, or in the case of any such mutilation, upon
surrender and cancellation of the mutilated Note, the KPP Companies will make
and deliver, in lieu of such lost, stolen, destroyed or mutilated Note, a new
Note of like tenor and unpaid principal amount, dated as of the date to which
interest has been paid on such earlier Note.
14.4 Holders. Provided that the KPP Companies have complied with their
-------
obligation to register any transfer or exchange of a Note under Section 14.2,
the KPP Companies may deem and treat the Holder of each Note as the owner and
holder of such Note for the purpose of receiving payment of principal and
interest on such Note and for all other purposes whatsoever, whether or not such
Note shall be overdue.
SECTION 15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SUCCESSORS AND
----------------------------------------------------------
ASSIGNS. All covenants, agreements, representations and warranties made herein,
- -------
in the Notes, and in any documents and certificates delivered pursuant hereto
shall be deemed to have been relied upon by you, notwithstanding any
investigation heretofore or hereafter made by you or on your behalf, and shall
survive the issuance and delivery of the Notes and your purchase thereof and
payment therefor and shall continue in full force and effect so long as any Note
is outstanding and unpaid. In addition, the KPP Companies' obligations under
Sections 11.5 and 13.2 hereof shall survive the payment of the Notes. Whenever
in this Agreement either of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party, and all
covenants, agreements, representations and warranties in this Agreement
contained by or on behalf of the KPP Companies, or by or on behalf of you, shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto; provided that the KPP Companies may not assign any of their
rights under this Agreement or any other Loan Document without your written
consent.
SECTION 16. NOTICES AND OTHER COMMUNICATIONS. All notices and other
--------------------------------
communications provided for under the Note Agreements or under the Notes or the
other Note Purchase Documents shall be in writing and either delivered by
overnight delivery service with proof of delivery, or sent by facsimile
transmission, with copies delivered by overnight delivery service with proof of
delivery:
(a) if to any Holder, at its address (or addresses) specified on Schedule
1 or Schedule 2, as appropriate; and
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(b) if to the KPP Companies, at:
2400 Lakeside Boulevard
Richardson, Texas 75082
Telecopier No.: (214) 699-1894
Attention: Edward D. Doherty
or at such other address as each party referred to in this section may hereafter
designate by like notice to the other parties. Any such notice or communication
shall be deemed to have been given (i) in the case of overnight delivery
service, as of the date of first attempted delivery at the address provided
herein, and (ii) in the case of facsimile transmission, when actually received.
SECTION 17. SEVERABILITY. If any term or provision hereof or of the Notes
------------
shall be determined to be illegal or unenforceable all other terms and
provisions hereof and of the Notes shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
SECTION 18. REFERENCES AND TITLES. All references in this Agreement to
---------------------
Exhibits, Schedules, sections, subsections and other subdivisions refer to the
Exhibits, Schedules, sections, subsections and other subdivisions of this
Agreement and the other Note Agreements unless expressly provided otherwise.
Titles appearing at the beginning of any subdivisions are for convenience only
and do not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
SECTION 19. COUNTERPARTS. This Agreement may be separately executed in
------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
SECTION 20. GOVERNING LAW. THIS AGREEMENT, THE NOTES, THE OTHER NOTE
-------------
PURCHASE DOCUMENTS, AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED IN
CONNECTION HEREWITH OR THEREWITH SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
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NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 21. LIMITATION ON INTEREST. The Holders and the KPP Companies
----------------------
intend to contract in strict compliance with applicable usury law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained herein or in the Notes shall ever be
construed to provide for interest in excess of the maximum amount of interest
permitted to be charged by applicable law from time to time in effect. No KPP
Company nor any of their Subsidiaries nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
obligations hereunder or under the Notes shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions herein or in the Notes which may be in conflict or apparent
conflict herewith.
THIS WRITTEN NOTE AGREEMENT, THE NOTES AND THE OTHER NOTE PURCHASE
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
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Upon your signing the form of acceptance on the enclosed counterpart of
this Agreement and returning such counterpart to the KPP Companies, this
Agreement shall become a binding agreement between you and the KPP Companies.
Very truly yours,
KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By: Kaneb Pipe Line Company, its
General Partner
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
STANTRANS, INC.
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
KANEB PIPE LINE PARTNERS, L.P
By: Kaneb Pipe Line Company, its
General Partner
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
SUPPORT TERMINAL SERVICES, INC.
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
<PAGE>
The foregoing agreement is
agreed to and accepted by:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ JAMES C. FIFIELD
--------------------------------
Name: JAMES C. FIFIELD
Title: Counsel
By: /s/ STEPHEN G. SKRIVANEK
--------------------------------
Name: STEPHEN G. SKRIVANEK
Title: Counsel
<PAGE>
SUPPORT TERMINAL OPERATING
PARTNERSHIP, L.P.
By: Support Terminal Services,
Inc., its General Partner
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
