<PAGE> 1
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): AUGUST 27, 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> 2
ITEM 5. ACQUISITION OR DISPOSITION OF ASSETS.
On August 27, 1995, the Partnership, through its operating
partnership, signed definitive purchase agreements to acquire from Steuart
Petroleum Company and certain of its affiliates (collectively, "Steuart") the
liquids terminaling assets of Steuart. It is anticipated that the acquisition
price of approximately $82 million will be financed by bank borrowings. The
Steuart terminaling assets consist of seven petroleum products terminals
located in the District of Columbia, Florida, Georgia, Maryland and Virginia
and the pipeline and terminaling services to Andrews Air Force Base in
Maryland. The terminals have in the aggregate approximately 9 million barrels
of storage capacity in 87 tanks. Steuart's two largest facilities are located
near Washington, D.C. and Jacksonville, Florida. The Piney Point, Maryland
terminal is the closest deep water petroleum storage facility to Washington
D.C. The Piney Point Maryland terminal has 30 tanks with approximately 5.5
million barrels of aggregate storage capacity, which is currently used to store
petroleum products,consisting primarily of fuel oil. The Jacksonville terminal
has 28 tanks with approximately 2.1 million barrels of aggregate storage
capacity, which is currently used to store petroleum products including
gasoline, No. 2 oil, No. 6 oil, diesel, jet fuel, kerosene and bunker fuel.
The closing of the Steuart acquisition is conditioned upon
satisfactory completion of a due diligence investigation, receipt of all
necessary consents and approvals, the execution of certain throughput
agreements and certain other conditions. If all conditions to closing are
satisfied, it is anticipated that the Partnership would acquire the Steuart
terminals prior to October 31, 1995. There can be no assurance, however, that
the acquisition will be consummated or, if consummated, that the terms of the
acquisition will not vary materially from those described herein.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business to be acquired.
Report of Independent Accountants.
Statements of Revenues and Direct Operating Expenses - Years
Ended December 31, 1994 and 1992, Period from January 1, 1993
to June 8, 1993 and the Period from June 9, 1993 to December
31, 1993; Statements of Net Assets To Be Acquired - December
31, 1994 and 1993.
(b) Pro forma financial information.
(c) Exhibits.
10.1 Asset Purchase Agreement by and among Steuart
Petroleum Company, SPC Terminals, Inc., Support Terminals
Operating Partnership, L.P. and Kaneb Pipe Line Operating
Partnership, L.P.
10.2 Piney Point Pipeline Asset Purchase Agreement by and
among Piney Point Industries, Inc., Support Terminals
Operating Partnership, L.P. and Kaneb Pipe Line Operating
Partnership, L.P.
10.3 Purchase Agreement by and among Steuart Investment
Company, Support Terminals Operating Partnership, L.P. and
Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KANEB PIPE LINE PARTNERS, L.P.
------------------------------
(Registrant)
Date: August 29, 1995 /s/ Edward D. Doherty
-------------------------------
Edward D. Doherty
Chairman
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors of
Steuart Petroleum Company and
Steuart Investment Company
We have audited the accompanying statements of revenues and direct operating
expenses of SPC/SIC - Terminal Operations Division for the year ended December
31, 1992 and the period from January 1, 1993 to June 8, 1993. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
these statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of these statements. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1, the accompanying statements were prepared to present
the revenues and direct operating expenses attributable to SPC/SIC - Terminal
Operations Division, and are not intended to be a complete presentation of the
revenues and expenses of SPC/SIC - Terminal Operations Division.
In our opinion, such statements of revenues and direct operating expenses
present fairly, in all material respects, the revenues and direct operating
expenses of SPC/SIC - Terminal Operations Division for the year ended December
31, 1992 and the period from January 1, 1993 to June 8, 1993 in conformity with
the basis of presentation described in Note 1 and generally accepted accounting
principles.
PRICE WATERHOUSE LLP
Washington, D.C.
August 18, 1995
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors of
Steuart Petroleum Company and
Steuart Investment Company
We have audited the accompanying statements of net assets to be acquired as of
December 31, 1993 and 1994 and the related statements of revenues and direct
operating expenses of SPC/SIC - Terminal Operations Division for the period
from June 9, 1993 to December 31, 1993 and the year ended December 31, 1994.
These financial statements are the responsibility of the Division's management.
Our responsibility is to express an opinion on these statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets to be
acquired and the statements of revenues and direct operating expenses are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in these statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
these statements. We believe that our audits provide a reasonable basis for
our opinion.
As described in Note 1, the accompanying statements were prepared to present
the net assets to be acquired and the revenues and direct operating expenses
attributable to SPC/SIC - Terminal Operations Division, and are not intended to
be a complete presentation of the net assets or revenues and expenses of
SPC/SIC - Terminal Operations Division.
In our opinion, such statements of net assets to be acquired and statements of
revenues and direct operating expenses present fairly, in all material
respects, the net assets to be acquired as of December 31, 1993 and 1994 and
the revenues and direct operating expenses for the period from June 9, 1993 to
December 31, 1993 and the year ended December 31, 1994 of SPC/SIC - Terminal
Operations Division, in conformity with the basis of presentation described in
Note 1 and generally accepted accounting principles.
PRICE WATERHOUSE LLP
Washington, D.C.
August 18, 1995
<PAGE> 7
SPC/SIC-
TERMINAL OPERATIONS DIVISION
STATEMENTS OF NET ASSETS TO BE ACQUIRED
(In thousands)
<TABLE>
<CAPTION>
December 31
----------- June 30, 1995
1993 1994 (unaudited)
---- ---- ---------------
<S> <C> <C> <C>
Assets
------
Current assets - other receivables - environmental
reimbursements $ 330 $ - $ -
Property, plant and equipment, less accumulated
depreciation and amortization 42,171 44,571 44,335
Other assets
Investment in joint venture - 25 -
Other receivables - environmental reimbursements 418 300 300
-------- --------- ---------
Total assets 42,919 44,896 44,635
-------- --------- ---------
Liabilities
-----------
Current liabilities - environmental costs 525 200 200
Noncurrent liabilities - environmental costs 715 650 650
Accumulated losses of joint venture in excess of investment - - 42
-------- --------- ---------
Total liabilities 1,240 850 892
-------- --------- ---------
Net assets to be acquired $ 41,679 $ 44,046 $ 43,743
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
SPC/SIC-
TERMINAL OPERATIONS DIVISION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(In thousands)
<TABLE>
<CAPTION>
For the
six months
For the period from For the period from ended
For the year ended January 1, 1993 to June 9, 1993 to For the year ended June 30,
December 31, 1992 June 8, 1993 December 31, 1993 December 31, 1994 1994 1995
------------------ ------------------- ------------------- ------------------ ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Third party $17,124 $7,373 $ 9,759 $19,777 $10,865 $7,753
SPC-Marketing Division
and other (Note 8) 2,340 1,063 1,388 2,895 1,481 1,360
------- ------ ------- ------- ------- ------
19,464 8,436 11,147 22,672 12,346 9,113
Direct operating expenses
Sales and operations 8,512 4,184 5,084 9,283 4,666 3,790
Selling, general and administrative 1,090 638 888 1,679 816 800
Depreciation and amortization 1,418 687 2,218 4,267 2,104 2,196
------- ------ ------- ------- ------- ------
11,020 5,509 8,190 15,229 7,586 6,786
Losses of joint venture - - - 75 11 67
------- ------ ------- ------- ------- ------
Excess of revenues over
direct operating expenses and
losses of joint venture $ 8,444 $2,927 $ 2,957 $ 7,368 $ 4,749 $2,260
======= ====== ======= ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 9
SPC/SIC-
TERMINAL OPERATIONS DIVISION
NOTES TO STATEMENTS OF NET ASSETS TO BE ACQUIRED AND STATEMENTS
OF REVENUES AND DIRECT OPERATING EXPENSES
(In thousands)
NOTE 1 - BASIS OF PRESENTATION
Kaneb Pipe Line Partners, L.P. ("KPP") expects to enter into agreements with
Steuart Petroleum Company ("SPC" or the "Company," a wholly-owned subsidiary of
Steuart Investment Company) and Steuart Investment Company ("SIC"), the
sellers, to acquire certain of the assets and assume certain of the liabilities
relating to the business of the terminal operations division of SPC, the
terminal operations and pipeline business of SIC and the partnership interest
of SPC Terminals Inc. (a wholly-owned subsidiary of Steuart Petroleum Company -
see Note 7). Such purchased net assets to be acquired are collectively
referred to herein as SPC/SIC - Terminal Operations Division or "Division."
The Division is engaged principally in the terminal storage and throughput
services business.
The assets to be acquired include five terminals (located in Piney Point,
Maryland; Washington, D.C. (2); Cockpit Point, Virginia and Jacksonville,
Florida) and a pipeline in Maryland. The businesses also include two leased
terminals (located in Brunswick, Georgia and Savannah, Georgia - see Note 7).
The accompanying special-purpose financial statements include the net assets to
be acquired and related revenues and direct operating expenses of the Division
and are not intended to be a complete presentation of the assets, liabilities
or the results of operations of the sellers or the Division on a stand-alone
basis. These financial statements do not reflect the revaluation of assets and
liabilities to be acquired by KPP to their fair market value at the date of
acquisition. The statements have been prepared in accordance with generally
accepted accounting principles and were derived from the historical accounting
records of SPC and SIC.
The statements of net assets to be acquired include the net assets of SPC and
SIC which are directly related to the businesses to be acquired. As a result,
the statements do not include cash, accounts and notes receivable, prepaid
expenses, accounts payable and accrued expenses and borrowings.
The statements of revenues and direct operating expenses include the revenue
and expenses directly attributable to the businesses, and also include an
allocation of certain expenses directly attributable to the businesses which
have been historically segregated by SPC and SIC in their accounting records.
Full historical financial statements, including certain general and
administrative expenses and other indirect expenses, interest expense and
income taxes, have not been presented due to the fact that management believes
it is not practicable to determine that portion which is attributable to the
Division. Management of the sellers believes the basis of allocating all other
expenses to be reasonable; however, the amounts could differ from amounts that
would be determined if the Division were operated on a stand-alone basis. In
addition, centralized cash accounts for the majority of
<PAGE> 10
-2-
disbursements exist at the sellers. As a result, statements of cash flows have
been excluded from the financial statements.
The statement of net assets to be acquired as of June 30, 1995 and the
statements of revenues and direct operating expenses for the six months ended
June 30, 1995 and 1994 are unaudited; however, in the opinion of management
these statements reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of these statements.
See Note 3 for a summary of the new basis of accounting.
NOTE 2- SIGNIFICANT ACCOUNTING POLICIES
Revenues
Revenues are recognized based upon contractual agreements relating to product
storage and transfer.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation charges are
computed by straight-line methods over the following useful lives:
Buildings and improvements 5-33 years
Machinery and equipment 3-20 years
Leasehold improvements 4-32 years
Maintenance and repairs are expensed as incurred; significant renewals and
betterments are capitalized. Maintenance and repair expense included in sales
and operations expenses for the year ended December 31, 1992, the period from
January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31,
1993 and for the year ended December 31, 1994 was $1,697, $693, $1,581 and
$2,256, respectively.
Environmental matters
Environmental expenditures that relate to current operations are primarily
expensed as incurred. The Division has recorded a liability ($1,240, $850 and
$850 (unaudited) at December 31, 1993 and 1994 and June 30, 1995,
respectively), and a receivable for reimbursements ($748, $300 and $300
(unaudited) at December 31, 1993 and 1994 and June 30, 1995, respectively), for
future environmental costs. The Division's policy is to record a liability
when costs of remediation and/or cleanup of known environmental problems are
probable and the costs can be reasonably estimated. The Division's policy is
to record available reimbursements when qualification for reimbursement from
state funds is probable under various state laws and regulations. The portion
of the costs and reimbursements expected to be incurred and received beyond one
year are classified as noncurrent liabilities and other assets.
<PAGE> 11
- 3 -
NOTE 3 - NEW BASIS OF ACCOUNTING
Prior to June 9, 1993, SPC was fifty percent owned by SIC and fifty percent
owned by American AGIP Co., Inc. ("AGIP"), a wholly-owned subsidiary of AGIP
Petroli International, B.V., a Netherlands corporation whose ultimate sole
parent is Ente Nazionale Idrocarburi, an industrial conglomerate organized
under the laws of the Republic of Italy. Following the close of business on
June 8, 1993, SPC retired all of its existing common stock and redeemed the
shares previously held by AGIP.
The redemption of the common stock of the Company previously held by AGIP
resulted in the Company becoming wholly-owned by SIC, and therefore a new basis
of accounting was established. Consequently, the accompanying statements of
revenues and direct operating expenses include the year ended December 31, 1992
and the period from January 1, 1993 to June 8, 1993 (old basis) and the period
from June 9, 1993 to December 31, 1993, the year ended December 31, 1994 and
the six months ended June 30, 1995 and 1994 (new basis).
The consequences of establishing a new basis of accounting at June 9, 1993
included an increased adjustment to the carrying value of buildings and
improvements of $22,507. Differences in estimates made in establishing the
original new basis allocation resulted in an additional $2,270 increase in the
carrying value of buildings and improvements in 1994.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (primarily petroleum terminaling and storage
facilities) are carried at cost and consist of the following:
<TABLE>
<CAPTION>
December 31,
----------- June 30, 1995
1993 1994 (unaudited)
---- ---- -----------
<S> <C> <C> <C>
Land $ 4,253 $ 4,253 $ 4,253
Buildings and improvements 41,873 48,124 50,068
Machinery and equipment 537 1,163 1,394
Leasehold improvements 96 96 96
Construction-in-progress 1,469 1,219 965
-------- -------- --------
48,228 54,855 56,776
Less accumulated depreciation ( 6,057) (10,284) (12,441)
-------- -------- --------
$ 42,171 $ 44,571 $ 44,335
======== ======== ========
</TABLE>
Certain credit facilities of SPC are cross-collateralized by a first priority
interest in the property, plant and equipment of the Division.
<PAGE> 12
- 4 -
NOTE 5 - SALES TO MAJOR CUSTOMERS
The Division's revenues from major customers for the following periods amounted
to:
<TABLE>
<CAPTION>
For the
six months
For the period from For the period from ended
For the year ended January 1, 1993 to June 9, 1993 to For the year ended June 30,
December 31, 1992 June 8, 1993 December 31, 1993 December 31, 1994 1994 1995
------------------ ------------------- ------------------- ------------------ ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Electric utility $3,156 $1,188 $1,664 $5,267 $3,918 $1,412
Defense Fuel
Supply Center $1,893 $907 $1,350 $2,447 $1,241 $717
Aectra
(see Note 7) $2,478 $853 $1,265 $2,745 $1,140 $1,392
</TABLE>
Effective February 1995, Defense Fuel Supply Center terminated one of its two
contracts with the Division prior to its scheduled expiration in June 1996.
The terminated contract provided for minimum annual revenues of approximately
$1,400.
NOTE 6 - EMPLOYEE BENEFIT PLANS
The sellers maintain profit-sharing plans that covers substantially all
employees. Contributions, which are made to the plans solely at the discretion
of the sellers' Boards of Directors, amounted to $113, $63, $83 and $208 for
the year ended December 31, 1992, the period from January 1, 1993 to June 8,
1993, the period from June 9, 1993 to December 31, 1993 and for the year ended
December 31, 1994, respectively. Benefits are payable to employees upon
retirement, disability or termination based upon their accumulated credits in
accordance with the provision of the plans. The plans may be terminated at the
option of the sellers. The sellers also maintain a 401(k) retirement plan
whereby they match a portion of the employees' contributions. The Division's
contributions to the plan amounted to $15, $6, $9 and $72 for the year ended
December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period
from June 9, 1993 to December 31, 1993 and for the year ended December 31,
1994, respectively.
NOTE 7 - JOINT VENTURE
On May 27, 1994, SPC formed SPC Terminals Inc. (STI) as a wholly-owned
subsidiary. On this date, STI entered into a general partnership agreement
with Aectra Terminals Inc. (ATI) and formed Steuart-Aectra Terminals
Partnership No. 1 (SAT #1), which purchased a petroleum bulk terminal located
in Savannah, Georgia. Each partner has a 50% interest in the partnership.
STI's investment in SAT #1 is accounted for under the equity method. In 1994,
STI recorded a loss of $75 representing its approximate share of SAT #1 losses.
The Division has a five year lease on this terminal from SAT #1 expiring May
31, 1999 for the cost of the property insurance. During 1994, the Division
incurred approximately $17 in rent expense in connection with the lease. The
Division also has a five year throughput agreement with Aectra Refining
<PAGE> 13
- 5 -
and Marketing (Aectra) expiring May 31, 1999, whereby Aectra has agreed to
throughput a minimum amount of gasoline, gasoline components and distillates
each year at this terminal.
At December 31, 1994, SAT #1 had total assets of $1,816 (principally property,
plant and equipment), liabilities of $1,766 and partnership equity of $50. SAT
#1 incurred a net loss of $150 for the period from May 27, 1994 to December 31,
1994.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Division provides terminal storage and throughput services to the marketing
division of SPC. Revenue from such services amounted to $2,141, $989, $1,353
and $2,800 for the year ended December 31, 1992, the period from January 1,
1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for
the year ended December 31, 1994, respectively.
The Division also provides office space to other divisions of SPC. Rental
revenues amounted to $199, $74, $35 and $95 for the year ended December 31,
1992, the period from January 1, 1993 to June 8, 1993, the period from June 9,
1993 to December 31, 1993 and for the year ended December 31, 1994,
respectively.
<PAGE> 14
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In February 1995, Kaneb Pipe Line Partners, L.P. (the "Partnership")
acquired, through its operating partnership, the refined petroleum product
pipeline assets (the "West Pipeline") of Wyco Pipe Line Company for $27.1
million. The West Pipeline 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 assets acquired from Wyco Pipe Line Company did
not include certain assets that were leased to Amoco Pipe Line Company, and the
purchase agreement did not provide for either (i) the continuation of an
arrangement with Amoco Pipe Line Company for the monitoring and control of
pipeline flows or (ii) the extension or assumption of certain credit agreements
that Wyco Pipe Line Company had with its shareholders.
On August 27, 1995, the Partnership agreed to purchase the liquids
terminaling assets from Steuart Petroleum Company and certain of its affiliates
(collectively, "Steuart"). The acquisition price of $82 million will be
financed by bank borrowings. The asset purchase agreement includes a provision
for an earn-out payment based upon revenues of one of the terminals exceeding a
specified amount for a seven year period beginning in 1996. The contracts also
include a provision for the continuation of all terminaling contracts in place
at the time of the acquisition, including those contracts with Steuart. The
closing of the acquisition is conditional upon satisfactory completion of a due
diligence investigation, receipt of all necessary consents and approvals, the
execution of certain throughput agreements and certain other conditions. If
all conditions to the closing are satisfied, it is anticipated that the
Partnership would acquire the liquids terminaling assets from Steuart prior to
October 31, 1995. There can be no assurance that the acquisition will be
consummated or, if consummated, that the terms of the acquisition will not vary
materially from those described herein. The acquisition, if consummated, will
be accounted for using the purchase method of accounting. The total purchase
price will be allocated to the assets and liabilities based on their respective
fair values based on valuations and other studies which are not yet completed.
The allocation of the purchase price presented in the unaudited pro forma
consolidated financial statements is preliminary and subject to adjustment.
The following unaudited pro forma financial statements of the Partnership
have been derived from (i) the historical financial statements of the
Partnership as of June 30, 1995 and for the year ended December 31, 1994 and
the six-month period ended June 30, 1995, (ii) the historical financial
statements of Wyco Pipe Line Company for the year ended December 31, 1994 and
the period ended February 24, 1995, and (iii) the statements of revenues and
direct operating expenses for the year ended December 31, 1994 and the
six-month period ended June 30, 1995 and the statements of net assets to be
acquired as of June 30, 1995 of SPC/SIC -- Terminal Operations Division. The
following unaudited pro forma financial statements have been compiled as if the
Partnership acquired the pipeline assets of the West Pipeline and the liquids
terminaling assets of Steuart as of the beginning of the period for income
statement purposes and as of June 30, 1995 for balance sheet 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
historical financial statements and related notes of the Partnership the
historical financial statements and related notes of Wyco Pipe Line Company and
the historical statements of revenues and direct operating expenses and
statements of net assets to be acquired and related notes of SPC/SIC --
Terminal Operations Division.
The unaudited pro forma financial statements may not be indicative of the
results that would have occurred if the Partnership had acquired the pipeline
assets of the West Pipeline and the liquids terminaling assets of Steuart on
the dates indicated or which will be obtained in the future.
<PAGE> 15
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS - EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PARTNERSHIP STEUART
HISTORICAL WEST HISTORICAL PRO
SIX PIPELINE ACQUISITION SIX FORMA-
MONTHS HISTORICAL AD- PRO MONTHS ACQUISITION WEST
ENDED ENDED FEB- JUSTMENTS- FORMA ENDED AD- PIPELINE
JUNE 30, RUARY 24, WEST WEST JUNE 30, JUSTMENTS- AND
1995 1995 PIPELINE PIPELINE 1995 STEUART STEUART
----------- ---------- ---------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . $ 43,724 $ 1,715 $ -- $ 45,439 $ 9,113 $ 1,478(f) $ 56,030
Costs and expenses:
Operating costs . . . 18,269 1,158 -- 19,427 3,857 (29)(g) 23,255
Depreciation and
amortization . . . 4,161 128 (22)(a) 4,267 2,196 637 (h) 7,100
General and
administrative . . 2,571 283 -- 2,854 800 (454)(i) 3,200
--------- --------- --------- --------- --------- ---------- ---------
Total costs and
expenses . . . . 25,001 1,569 (22) 26,548 6,853 154 33,555
--------- --------- --------- --------- --------- ---------- ---------
Operating income . . . 18,723 146 22 18,891 2,260 1,324 22,475
Interest and other
income . . . . . . . 447 17,111 (16,926)(b) 632 -- - 632
Interest expense . . . (3,037) - (350)(c) (3,387) -- (3,075)(j) (6,462)
Minority interest in
net income . . . . . (157) - - (157) -- (6)(k) (163)
Income taxes . . . . . (219) (6,026) 6,026 (e) (219) -- - (219)
--------- --------- --------- --------- --------- ---------- ---------
Net income . . . . . . $ 15,757 $ 11,231 $ (11,228) $ 15,760 $ 2,260 $ (1,757) 16,263
========= ========= ========= ========= ========= ========== =========
Allocation of net
income per Senior
Preference Unit . . . $ 1.10 $ 1.10 $ 1.10
========= ========= =========
Allocation of net
income per
Preference Unit . . . $ 1.10 $ 1.10 $ 1.10
========= ========= =========
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE> 16
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS - EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO
ACQUISITION FORMA-
AD- PRO ACQUISITION WEST
WEST JUSTMENTS- FORMA AD- PIPELINE
PARTNERSHIP PIPELINE WEST WEST STEUART JUSTMENTS- AND
HISTORICAL HISTORICAL PIPELINE PIPELINE HISTORICAL STEUART STEUART
---------- ---------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . $ 78,745 $ 13,694 $ -- $ 92,439 $ 22,672 $ 2,956 (f) $ 118,067
--------- --------- --------- --------- --------- ---------- ---------
Costs and expenses:
Operating costs . . . 33,586 7,135 -- 40,721 9,358 (102)(g) 49,977
Depreciation and
amortization . . . 7,257 1,042 (338)(a) 7,961 4,267 1,398 (h) 13,626
General and
administrative . . 4,924 781 -- 5,705 1,679 (929)(i) 6,455
--------- --------- --------- --------- --------- ---------- ---------
Total costs
and expenses . . 45,767 8,958 (338) 54,387 15,304 367 70,058
--------- --------- --------- -------- --------- ---------- ---------
Operating income . . . 32,978 4,736 338 38,052 7,368 2,589 48,009
Interest and other
income . . . . . . . 1,299 - -- 1,299 - - 1,299
Interest expense . . . (3,706) - (2,260)(c) (5,966) - (6,150)(j) (12,116)
Minority interest in
net income . . . . . (295) - (27)(d) (322) - (38)(k) (360)
Income taxes . . . . . (818) (1,850) 1,850 (e) (818) - - (818)
--------- --------- --------- --------- --------- ---------- ---------
Net income . . . . . . $ 29,458 $ 2,886 $ (99) $ 32,245 $ 7,368 $ (3,599) $ 36,014
========= ========= ========= ========= ========= ========== =========
Allocation of net
income per Senior
Preference Unit . . . $ 2.20 $ 2.20 $ 2.20
========= ========= =========
Allocation of net
income per
Preference Unit . . . $ 2.20 $ 2.20 $ 2.20
========= ========= =========
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE> 17
KANEB PIPE LINE PARTNERS, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITION
PARTNERSHIP ADJUSTMENTS PRO
HISTORICAL STEUART FORMA
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 3,087 $ - $ 3,087
Accounts receivable . . . . . . . . . . . . . . . . . . . . 8,181 - 8,181
Current portion of receivable from general partner . . . . 2,398 - 2,398
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 2,157 - 2,157
----------- ------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . 15,823 - 15,823
----------- ------------ -----------
Receivable from general partner . . . . . . . . . . . . . . . 2,305 - 2,305
----------- ------------ -----------
Property and equipment, net . . . . . . . . . . . . . . . . . 173,306 82,850 (l) 256,156
----------- ------------ -----------
$ 191,434 $ 82,850 $ 274,284
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . $ 1,658 $ - $ 1,658
Accounts payable, accrued expenses and
distributions payable . . . . . . . . . . . . . . . . . . 15,761 200(m) 15,961
Deferred terminaling fees . . . . . . . . . . . . . . . . . 1,763 - 1,763
Payable to general partner . . . . . . . . . . . . . . . . 701 - 701
----------- ------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . 19,883 200 20,083
----------- ------------ -----------
Long-term debt, less current portion . . . . . . . . . . . . 69,408 82,000(n) 151,408
----------- ------------ -----------
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 1,899 650(m) 2,549
----------- ------------ -----------
Minority interest . . . . . . . . . . . . . . . . . . . . . . 985 - 985
----------- ------------ -----------
Partners' Capital . . . . . . . . . . . . . . . . . . . . . . 99,259 - 99,259
----------- ------------ -----------
$ 191,434 $ 82,850 $ 274,284
=========== ============ ===========
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE> 18
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
WEST PIPELINE
(a) Represents adjustments to the depreciation and amortization of the
acquired assets.
(b) Represents the gain on the sale of the pipeline assets that was
recorded by Wyco Pipe Line Company in February 1995 related to the
sale of the West Pipeline to the Partnership.
(c) Represents interest expense on $27 million of acquisition debt at
8.37% per annum.
(d) Represents the General Partner's 1% general partner interest in Kaneb
Pipe Line Operating Partnership, L.P.
(e) Represents elimination of corporate income taxes as the acquired
operations will be held by the Partnership and will not be subject to
federal and state income taxes.
STEUART
(f) Represents the revenues resulting from a throughput agreement entered
into by Steuart in conjunction with the acquisition. The agreement
provides for a fixed volume of storage over a five year period.
(g) Represents adjustments to insurance expense to reflect the
Partnership's insurance rates.
(h) Represents adjustments to the depreciation and amortization of the
acquired assets.
(i) Represents adjustments to remove duplicate general and administrative
expenses, primarily related to management and clerical positions.
(j) Represents interest expense on the $82 million of acquisition debt at
an assumed rate of 7.5% per annum.
(k) Represents the General partner's 1% general partner interest in Kaneb
Pipe Line Operating Partnership, L.P.
(l) Represents the preliminary allocation of the estimated fair value of
the acquired assets as of June 30, 1995 as the Partnership's internal
valuation of the assets is not complete as of the date of this filing.
(m) Represents the assumption of environmental liabilities in connection
with the acquisition of the Steuart assets.
(n) Represents the issuance of $82 million of long-term debt incurred in
connection with the acquisition of the Steuart assets.
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 Asset Purchase Agreement by and among Steuart Petroleum
Company, SPC Terminals, Inc., Support Terminals Operating
Partnership, L.P. and Kaneb Pipe Line Operating Partnership,
L.P.
10.2 Piney Point Pipeline Asset Purchase Agreement by and among
Piney Point Industries, Inc., Support Terminals Operating
Partnership, L.P. and Kaneb Pipe Line Operating Partnership,
L.P.
10.3 Purchase Agreement by and among Steuart Investment Company,
Support Terminals Operating Partnership, L.P. and Kaneb Pipe
Line Operating Partnership, L.P. for Cockpit Point
<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT BY AND AMONG
STEUART PETROLEUM COMPANY, SPC TERMINALS, INCORPORATED,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
AUGUST 27, 1995
<PAGE> 2
TABLE CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3.1 At Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3.2 Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.4 Allocation of Purchase Price Amongst Acquired Assets . . . . . . . . . . . . . . . . . . . 19
Section 2.5 Allocation of Purchase Price Amongst Terminals . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.6 Payment of Taxes and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 3 MATTERS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.1 Examination of Records and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.2 Environmental Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.2.1 Audits and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work . . . . . . . . . . . . . . . 23
3.1.2.3 Purchase Price Adjustment for Other Remedial Work . . . . . . . . . . . . . . . . 27
3.1.2.4 Other Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.2 Real Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.4 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.5 Purchaser's Licenses, Permits and Approvals. . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.10 Audited Division Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.11 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.12 Cockpit Real Estate Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.13 Florida Submerged Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 4 OPERATION OF THE BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.2 Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.2 Certificate Regarding Environmental Representations
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.4 Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.7 Throughput Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.9 Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.10 Subsidiary Partnership Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11 Subsidiary Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.12. Right-of-Way Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.2 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.3 Sale Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARY CORPORATION . . . . . . . . . . . . 42
Section 7.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.2 Corporate Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.3 Governmental Authorization: Third Party Consents . . . . . . . . . . . . . . . . . . . . . 43
Section 7.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.7 Title to Real Estate, and Real Estate Leases . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.8 Condition of and Title to Tangible Personal Property . . . . . . . . . . . . . . . . . . . 45
Section 7.9 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.10 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.11 No Material Adverse Change; Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.12 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.13 Patents, Trademarks. Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.17 Tax Returns and Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.18 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.19 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.20 List of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.21 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.22 All Assets Included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
Section 7.23 Special Representations Regarding Subsidiary Entities. . . . . . . . . . . . . . . . . . . 55
7.23.1 Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.23.2 Issuance or Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . 56
7.23.3 Ownership of Subsidiary Partnership; Title to
Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.23.4 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.23.5 Subsidiary Partnership Business and Assets . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.24 Right-of-way Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR . . . . . . . . . . . . . . . . . 58
Section 8.1 Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.3 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.4 Governmental Authorization; Third Party Consent . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters . . . . . . . . . . . . . . . . . . . . . 59
Section 8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.1.A Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.1.B Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.2.A Documents and Instruments to be Delivered by SPC . . . . . . . . . . . . . . . . . . . . . 61
Section 9.2.B Documents and Instruments to be Delivered by SPCT . . . . . . . . . . . . . . . . . . . . . 62
Section 9.3.A Documents and Instruments to be Delivered by Purchaser . . . . . . . . . . . . . . . . . . 62
Section 9.3.B Documents and Instruments to be Delivered by Guarantor . . . . . . . . . . . . . . . . . . 63
Section 9.4 Inventories and Tank Bottoms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.4.1 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.4.2 Wastes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.4.3 Tank Bottoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.1 Grounds for Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.1 Indemnification by SPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.4 Establishment of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 11.5 Limits on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.6 Minimum Claim Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.7 Special Environmental Indemnification and Post-Closing
Covenants by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
Section 11.8 Notification; Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 11.9 Net Worth Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 12.5 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.11.A Post-Closing Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.11.B Post-Closing Access to Books and Records by SPC . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.12 Treatment of Purchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 12.13 SPCT's Sale of the Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 12.14 Accounts Receivable Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.16 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
(iv)
<PAGE> 6
ASSET PURCHASE AGREEMENT BY AND AMONG
STEUART PETROLEUM COMPANY, SPC TERMINALS, INCORPORATED,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
This Asset Purchase Agreement is made this 27th day of August, 1995,
by and among Steuart Petroleum Company, a Delaware corporation with its
principal place of business at 4646 Fortieth Street, N.W., Washington D.C.
20016 ("SPC" or the "Company"), SPC Terminals, Incorporated, a Delaware
corporation with its principal place of business at 4646 Fortieth Street, N.W.,
Washington D.C. 20016 ("SPCT" or "Subsidiary Corporation"), Support Terminals
Operating Partnership, L.P., a Delaware limited partnership with its principal
place of business at 17304 Preston Road, Suite 1000, Dallas, Texas 75252-5623
("Purchaser") and Kaneb Pipe Line Operating Partnership, L.P., a Delaware
limited partnership with its principal place of business at 2435 N. Central
Expressway, Suite 700, Richardson, Texas 75080 ("Guarantor").
RECITALS
A. SPC owns or leases and operates terminal operations that offer
petroleum product throughput and storage capabilities at seven terminals in
Maryland, the District of Columbia, Georgia, Florida, and Virginia, as more
fully described on Schedule 2.1(a). SPC also owns northern and southern
marketing divisions that provide various petroleum products to customers in the
Washington, D.C. metropolitan region, and in Northern Florida and Southern
Georgia.
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B. The Subsidiary Partnership owns the Real Estate on which the
Terminal in Savannah, Georgia is located. The Savannah Real Estate is leased
to SPC, the owner and operator of the Business at Savannah. SPCT owns the
Partnership Interest.
C. Purchaser wants to buy and SPC and SPCT want to sell,
respectively, the terminal operations and the Partnership Interest, but not the
northern or southern marketing divisions, on the terms and subject to the
conditions set forth in this Agreement.
Now, therefore, the parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Acquired Assets" has the meaning set forth in Section 2.1.
"Adjusted Purchase Price" means the Purchase Price less any reductions
thereto made in accordance with this Agreement.
"Adjustment Statement" means a statement showing adjustments to the
Unaudited Terminal Operating Statement in the form of Exhibit A.
"Aectra" means Aectra Terminals, Inc.
"Aectra's Partnership Interest" means the fifty percent (50%) interest
in the Subsidiary Partnership owned by Aectra that is subject to the terms set
forth in the Partnership Agreement.
"Affiliate" means as to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person.
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"Agreement" means this Agreement and the Schedules and Exhibits
attached hereto, as amended, supplemented or modified.
"Aggregate Purchase Price" means the sum of the Purchase Price set
forth in this Agreement, the Purchase Price set forth in the Cockpit Agreement
and the Purchase Price set forth in the PPI Agreement.
"Aggregate Adjusted Purchase Price" means the sum of the Adjusted
Purchase Price set forth in this Agreement, the Adjusted Purchase Price set
forth in the Cockpit Agreement and the Adjusted Purchase Price set forth in the
PPI Agreement.
"Aggregate Net Remedial Cost" means the sum of (i) the Net Remedial
Cost as determined under this Agreement for Remedial Work with respect to the
Acquired Assets or the Business, (ii) the Net Remedial Cost as determined under
the Cockpit Agreement for Remedial Work with respect to the assets acquired
under the Cockpit Agreement and (iii) the Net Remedial Cost as determined under
the PPI Agreement for Remedial Work with respect to the assets and business
acquired under the PPI Agreement.
"Applicable Law" means as to any Person, any Federal, state,
municipal, foreign or other law, treaty, order, ordinance, code, rule,
regulation, right, privilege, qualification, license or franchise or
determination of or promulgated by a Governmental Authority, applicable or
binding on such Person or any of its property or to which such Person or any of
its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Audit(s)" means such environmental due diligence as Purchaser chooses
to conduct, including without limitation a Phase I and/or Phase II
environmental audit.
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"Audited Division Statements" means collectively (i) the Statements
of Net Assets Acquired for the Business together with PPI as of December 31,
1993 and 1994, and (ii) the Statements of Revenues and Direct Operating
Expenses for the Business together with the business of PPI and the real
property at Cockpit Point being acquired by Purchaser under the Cockpit
Agreement for the year ended December 31, 1992, the period from January 1, 1993
to June 8, 1993, the period from June 9, 1993 to December 31, 1993, and the
year ended December 31, 1994.
"Audited Financial Statements" means the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 1992, December
31, 1993 and December 31, 1994 and the related consolidated statements of
operations and cash flows, together with the notes thereto, of the Company and
its Subsidiaries for the year ended December 31, 1992, the period from January
1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and
the year ended December 31, 1994.
"Average Monthly Revenue" shall be calculated by dividing the total
revenues generated from the Business at each affected Terminal for the twelve
calendar months immediately preceding the date of this Agreement by twelve.
"Benning Pipeline" means the pipeline extending from the M Street
Terminal, 133 M Street, S.E., Washington, D.C. to the Pepco Power Plant on
Benning Road, N.E., Washington, D.C.
"Business" means SPC's terminal operations, as described in the first
sentence of Recital A, and related pipeline operations, and does not for
purposes of this Agreement include the northern or southern marketing divisions
described in such Recital.
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<PAGE> 10
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas, the City of New York or
Washington, D.C. are authorized or required by Applicable Law or executive
order to close.
"Capital Account" has the meaning set forth in Section 7.23.4
"Claim" has the meaning set forth in Section 11.4.
"Closing" has the meaning set forth in Section 9.1.A
"Closing Date" means the date specified in Section 9.1.A
"Cockpit Agreement" means that certain Purchase Agreement By and Among
Steuart Investment Company, Support Terminals Operating Partnership, L.P. and
Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point, of even date
with this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Confidentiality Agreement" means that certain Confidentiality
Agreement by and between the Company and the Guarantor, dated March 3, 1995.
"Contracts" means all contracts and agreements between SPC and
suppliers, vendors, customers and other third parties relating to the Business
or the Acquired Assets, including without limitation Material Contracts, but
not including Real Estate Leases and Right-of-way Agreements.
"Current Title Information" has the meaning set forth in Section 3.2.
"Customary Course of Business" means a course of business consistent
with the Subsidiary Partnership's past customs and practices with respect to
its business.
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<PAGE> 11
"Due Diligence Period" means the 60-day period commencing with the date
of this Agreement.
"Earn-out" has the meaning set forth in Section 2.3.2.
"Environmental Adjustment Request" means a request for a reduction in
the Aggregate Purchase Price submitted by Purchaser pursuant to Section
3.1.2.2.
"Environmental Law" means any Federal, state or local law, statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions concerning the Acquired Assets or any portion thereof,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C.
Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401 et
seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA")
and similar laws of any Governmental Authority having jurisdiction over any
portion of the Acquired Assets as such laws may be amended or supplemented from
time to time, and all regulations promulgated or orders issued pursuant to such
laws, but not including the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq. ("OSHA") or other laws relating primarily to the
protection of workers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that is treated as a single
employer with the Company or any of its Subsidiaries under Section 414(b), (c),
(m) or (o) of the Code.
"Escrow Fund" has the meaning set forth in Section 11.4.
"Excluded Assets" has the meaning set forth in Section 2.1.
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<PAGE> 12
"GAAP" means generally accepted United States accounting principles in
effect from time to time.
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision of any thereof, any federal,
state, local or other court or arbitral tribunal, and any entity (corporate or
otherwise) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" includes without limitation:
(i) any substance included within the definition of
"hazardous waste" pursuant to Section 1004 of the RCRA and implementing
regulations;
(ii) any substance included within the definition of
"hazardous substance" pursuant to Section 101 of CERCLA and implementing
regulations;
(iii) any pollutant listed under the CAA, the CWA or
implementing regulations pursuant to the CAA or the CWA; and
(iv) petroleum and petroleum products.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indemnified Party" means each SPC Indemnified Party or each Purchaser
Indemnified Party as determined by the context of the reference to "Indemnified
Party" herein.
"Inventory" means the inventories of petroleum products used by and
associated with the Business, consisting primarily of tank bottoms and pipe
line fills, but not the inventories of SPC's northern and southern marketing
divisions, or inventories owned by customers of the Company and stored in the
Terminals.
"June 30, 1995 Statement" means the June 30, 1995 column on Exhibit B.
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<PAGE> 13
"Knowledge" when used with respect to the Company or its Subsidiaries,
means the actual knowledge of the officers of the Company and its Subsidiaries,
and when used with respect to the Purchaser, means the actual knowledge of the
officers of the general partner of the Purchaser and the officers of ST
Services, Inc.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences)
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease obligation, or any financing lease having
substantially the same economic effect as any of the foregoing, except that
"Lien" shall not include liens for taxes not due and payable at Closing.
"Major Loss" means any loss, damage, breakdown, or casualty to the
Acquired Assets, whether from fire, flood, hurricane, or any other cause, (i)
in an amount reasonably estimated to exceed Ten Million Dollars ($10,000,000),
whether or not covered by insurance, or (ii) which is reasonably estimated to
cause the Terminal operations at either Piney Point or Jacksonville to be
Materially Impaired for a period in excess of ninety (90) days.
"Material Contracts" means the Partnership Agreement (if the
Partnership Interest is purchased by Purchaser) and Contracts that either (i)
require an annual payment by any party thereto in excess of $50,000, (ii) are
not cancelable by SPC (at no penalty to SPC) within twelve months, or (iii)
have a material effect on the operation or conduct of the Business.
"Materially Impaired" means, with respect to any Terminal, the loss of
thirty percent (30%) of the Average Monthly Revenue from such Terminal in any
particular month.
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<PAGE> 14
"Net Remedial Cost" means the cost, estimated if necessary, to perform
any Remedial Work net of estimated insurance coverage and reimbursements from
trust funds maintained by any Governmental Authority.
"Notice" has the meaning set forth in Section 3.1.2.4.
"Ordinary Course of Business" means a course of business consistent
with the Company's past customs and practices with respect to the Business.
"Partnership Agreement" means that certain General Partnership
Agreement By and Between SPC Terminals Incorporated and Aectra Terminals Inc.,
dated as of May 27, 1994, as amended through the date of this Agreement.
"Partnership Interest" means the fifty percent (50%) interest in the
Subsidiary Partnership owned by SPCT that is subject to the terms set forth in
the Partnership Agreement.
"Permitted Encumbrances" shall mean:
(a) with respect to any property other than ROW Real
Estate (provided that item (iii) below shall only apply to Real Estate) (i)
those matters described on Schedules 2.1(a) and 2.1(b) under the heading
"Permitted Encumbrances", (ii) liens for taxes not due and payable at Closing,
(iii) except for matters listed as Title Objections on Schedule 3.2,
imperfections of title, easements or restrictions that do not substantially
affect marketability, insurability, or use (but specifically excluding any Lien
or any claim of Lien related to an obligation to pay money with respect to a
debt, but including those Liens listed on Schedule 2.1(a)), (iv) any Liens or
other restrictions or title defects that are waived or consented to by
Purchaser, and (v) Liens or restrictions that are Permitted Encumbrances
pursuant to the last sentence of Section 3.2(d); and
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<PAGE> 15
(b) with respect to ROW Real Estate (i) those matters
described on Schedules 2.1(a) and 2.1(b) under the heading "Permitted
Encumbrances", (ii) Liens for taxes that SPC is obligated to pay under any
Right-of-Way Agreement not due and payable at Closing, (iii) Liens on the ROW
Real Estate arising due to the acts or omissions of the owner or lessor of the
ROW Real Estate, (iv) any Lien on the ROW Real Estate that is not attributable
to an act or omission of SPC or its Affiliates, and (v) any Liens or other
restrictions that are waived or consented to by Purchaser.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"PPI" means Piney Point Industries, Inc., a Maryland corporation.
"PPI Agreement" means that certain Piney Point Pipeline Asset Purchase
Agreement By and Among Piney Point Industries, Inc., Support Terminals
Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. of
even date with this Agreement.
"Purchase Agreements" means collectively this Agreement, the Cockpit
Agreement and the PPI Agreement.
"Purchase Price" has the meaning set forth in Section 2.3.1.
"Purchaser Indemnified Party" has the meaning set forth in Section
11.1.
"Purchaser's Consultant" means Think Tank, Inc., or any other
recognized environmental consulting firm selected by Purchaser and approved by
SPC, such approval not to be unreasonably withheld.
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"Real Estate" means, individually or in the aggregate, the parcels of
owned or leased real estate on which the Terminals are located, which have the
following addresses: Piney Point, Maryland; 401 Farragut Street, N.E.,
Washington, D.C.; Cockpit Point, Cockpit Point Road, Dumfries, Virginia; 133 M
Street, S.E., Washington, D.C.; 1 Woodcock Road, Savannah, Georgia; 211 New
Castle Street, Brunswick, Georgia; 5401 Evergreen Avenue, Jacksonville,
Florida; 6531 Evergreen Avenue, Jacksonville, Florida; and 5725 Buffalo Avenue,
Jacksonville, Florida; and, in each case, all buildings and other improvements
located thereon, as described in greater detail in Schedule 2.1(a), but not
including SPC's offices at 4646 Fortieth Street, N.W., Washington, D.C., and
also not including the ROW Real Estate.
"Real Estate Leases" means the leases for the leased Real Estate, as
described in Schedule 2.1(a), under which SPC is a lessee.
"Real Property Matter" means, with respect to any parcel of Real
Estate, (i) a Title Objection with respect to such parcel; (ii) an existing or
pending condemnation, expropriation, or public taking of all or any portion of
such parcel, which, (A) individually or in the aggregate, has, or is reasonably
expected to have, a material adverse effect on the operations of the relevant
Terminal, (B) has, or is reasonably expected to have, a material adverse effect
on the internal expansion of the relevant Terminal or (C) affects greater than
ten percent (10%) of the acreage on which the relevant Terminal is situated; or
(iii) the Company's inability to secure a waiver or otherwise have released or
terminated rights of first refusal, if any, that may exist with respect to
Farragut Street or Annex 1 or Annex 2 at Jacksonville.
"Remaining Threshold" means one million dollars ($1,000,000) minus the
Aggregate Net Remedial Cost determined in accordance with Section 3.1.2.2.
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"Remedial Work" means any investigation, site monitoring, containment,
cleanup, removal, restoration, or other corrective action that is reasonably
necessary to remedy any non-compliance with Environmental Law, that is
reasonably necessary under Environmental Law, or that has been required by a
Governmental Authority.
"Right-of-way Agreement(s)" means the agreement(s) (whether in the
form of a license, easement, lease or other form of agreement) pursuant to
which SPC is granted the right to use real estate owned by third parties for
the Benning Pipeline and the Business. The Right-of-way agreements are more
particularly described in Schedule 2.1(i).
"ROW Real Estate" means individually or in the aggregate, the real
estate on which the Benning Pipeline is located that is described in, and
subject to the terms and conditions, set forth in a Right-of-way Agreement.
"SIC" means Steuart Investment Company, a Delaware corporation.
"SPC Indemnified Party" has the meaning set forth in Section 11.3.
"SPC's Consultant" means Versar, Inc., or any other recognized
environmental firm selected by SPC and approved by Purchaser, such approval not
to be unreasonably withheld.
"Steuart License Agreement" means the license agreement between the
parties granting the Purchaser the right to use the Steuart name to the extent
set forth therein.
"Subsidiary" and "Subsidiaries" means the Subsidiary Corporation and
the Subsidiary Partnership, separately and collectively as the text requires.
"Subsidiary Corporation" or "SPCT" means SPC Terminals Incorporated, a
Delaware corporation wholly-owned by SPC that is a general partner of the
Subsidiary Partnership.
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"Subsidiary Partnership" means Steuart-Aectra Terminals Partnership
No. 1, a general partnership organized under the laws of the State of
Delaware.
"Tangible Personal Property" means all tangible personal property
used in the Business including, but not limited to, the Vehicles and the
Inventory.
"Terminal(s)" means the terminals referred to in Recital A and located
on the Real Estate.
"Title Objection" means (a) any Lien, restriction or title defect
that substantially impairs the marketability, insurability or use of any parcel
of Real Estate, other than Permitted Encumbrances, (b) any matter on Schedule
3.2(b) that is raised as a Title Objection by notice from Purchaser to the
Company within thirty (30) days after the date of this Agreement and (c) those
matters listed as of the date of this Agreement on Schedule 3.2(a).
"Unaudited Financial Statements" means the unaudited consolidated
balance sheets of the Company and its Subsidiaries as of the end of January,
February, March, April, May, and June 1995, and the related income statements
and statements of cash flow (on a first in, first out basis) in each case by
month and year to date. The Unaudited Financial Statements are titled on the
document as the "Steuart Petroleum Company Financial Operating Results."
"Unaudited Partnership Financial Statements" means collectively (i)
the unaudited balance sheet of the Subsidiary Partnership as of December 31,
1994 and the related income statement for the period June 1, 1994 to December
31, 1994 and (ii) the unaudited balance sheets of the Subsidiary Partnership as
of the end of January, February, March, April, May and June 1995, and the
related income statements in each case by month and year to date 1995.
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"Unaudited Terminal Operating Statements" means an unaudited statement
showing the operating results by Terminal for the Business taken from the
Company's unaudited financial statements for each month after June 30, 1995
through Closing in the form of Exhibit C.
"Vehicles" means all boats, automobiles, trailers, trucks, vans, and
other motor vehicles used in the Business, including, but not limited to, those
listed on Schedule 2.1(b).
ARTICLE 2
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Purchase. At the Closing, SPC shall sell,
transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from SPC, all right, title and interest in and to the
assets, properties, and rights comprising the Business, whether tangible or
intangible, real, personal or mixed, and wherever located, and SPCT shall sell,
transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from SPCT all right, title and interest in and to the
Partnership Interest (the Partnership Interest and the assets, properties, and
rights purchased from SPC being collectively referred to as, the "Acquired
Assets"), in each case free and clear of all Liens and other restrictions,
except for Permitted Encumbrances, provided, that the Acquired Assets shall not
include and Purchaser shall not acquire (i) cash, bank accounts, accounts
receivable, certificates of deposit or other cash equivalents, (ii) any tax
refunds attributable to taxes paid by SPC, (iii) those assets listed on
Schedule 2.1 under the heading "Excluded Assets", (iv) the right to the Steuart
name, except as licensed hereunder, (v) any insurance retrospective rating
adjustment applicable to periods prior to the Closing Date, and (vi) any
reimbursements from trust funds or insurance maintained
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by any Governmental Authority for Remedial Work performed prior to the Closing
Date and paid for by SPC (the items listed in clauses (i) through (vi) being
referred to herein as the "Excluded Assets"). The Acquired Assets include
without limitation:
(a) the Real Estate and the Real Estate Leases, as listed
on Schedule 2.1(a);
(b) the Tangible Personal Property as listed on Schedule
2.1(b);
(c) SPC's rights under the Contracts, to the extent
transferable, including SPC's rights under the
Material Contracts listed on Schedule 2.1(c);
(d) all business records in the possession or under the
control of SPC relating to the Acquired Assets and to
the Business, including without limitation the books
and records of accounts and customer and prospect
lists, but excluding financial records presently
maintained at SPC's location at 4646 Fortieth Street,
N.W., Washington, D.C. (which SPC shall maintain and
transfer to Purchaser in accordance with the terms of
Section 12.11.A);
(e) to the extent transferable, all of SPC's right and
interest in any license, permits, consents, and
authorities relating to the Business, issued by any
Governmental Authority and any applications for such
items;
(f) the Partnership Interest which may or may not be sold
and transferred by SPCT to Purchaser as described in
more detail in Section 12.13;
(g) the Benning Pipeline; and
(h) SPC's rights under the Right-of-way Agreements,
including, but not limited to, those listed on
Schedule 2.1(i).
Section 2.2 Assumption of Liabilities. (a) Purchaser shall
assume at Closing:
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(i) obligations of SPC under the Contracts,
Right-of-way Agreements, and Real Estate Leases attributable to periods of time
commencing with the Closing, provided, however, that (A) with respect to
Material Contracts, Right-of-way Agreements, and Real Estate Leases, Purchaser
assumes such obligations only for Material Contracts listed on Schedule 2.1(c),
Right-of-way Agreements listed on Schedule 2.1(i) and Real Estate Leases listed
on Schedule 2.1(a) and in each case only to the extent true and correct copies
thereof and all amendments thereto have either been delivered to Purchaser as
of the date hereof, or are delivered to and consented to by Purchaser after the
date hereof, provided, however, that to the extent that a copy of an immaterial
amendment to such Material Contract, Right-of-way Agreement or Real Estate
Lease has not been provided to Purchaser as of the date hereof, Purchaser shall
assume such obligations for such Material Contract, Right-of-way Agreement or
Real Estate Lease without regard to the amendment not delivered to Purchaser
and, in such event, SPC shall be responsible for all Liabilities of Purchaser
with respect to the amendment not delivered to Purchaser without regard to the
limits set forth in Section 11.5; and (B) Purchaser specifically does not
assume, and shall not be treated as having assumed, any liability or obligation
under any Contract, Right-of-way Agreement or Real Estate Lease to the extent
such liability or obligation relates to, or arises out of, a breach of such
Contract, Right-of-way Agreement or Real Estate Lease that occurs prior to the
Closing (provided that liability and obligation for Purchaser's continuing
breaches of such Contracts, Right-of-way Agreements or Real Estate Leases after
Closing and liability and obligation for breaches of such Contracts,
Right-of-way Agreements or Real Estate Leases commenced by Purchaser after
Closing shall be the responsibility of Purchaser). Notwithstanding the
foregoing, if Purchaser does not purchase
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the Cockpit Point Real Property from SIC under the Cockpit Agreement at the
Closing, Purchaser shall only be obligated to assume the Cockpit Point Real
Estate Lease if it is modified in the manner set forth in Section 3.12;
(ii) if the Partnership Interest is purchased
hereunder, SPCT's obligations and liabilities under the Partnership Agreement
attributable to periods of time commencing with the Closing, provided however,
that Purchaser specifically does not assume, and shall not be treated as having
assumed, any liability or obligation that relates to or arises out of a breach
of the Partnership Agreement that occurs prior to Closing (provided that
liability and obligation for Purchaser's continuing breaches of the Partnership
Agreement after Closing and liability and obligation for breaches of the
Partnership Agreement commenced by Purchaser after Closing shall be the
responsibility of Purchaser); and
(iii) except as expressly provided for otherwise
herein and in accordance with the provisions of Section 11.7, any amounts
payable to perform Remedial Work with respect to the Acquired Assets or the
Business, regardless of when the events giving rise to the obligation to
perform such Remedial Work are alleged to have occurred.
The obligations assumed by Purchaser pursuant to subsection (a) of
this Section 2.2 are referred to herein collectively as the "Assumed
Liabilities".
(b) Purchaser shall not assume (i) any liabilities or
obligations of SPC or the Subsidiaries not specifically assumed under
subsection (a) of this Section 2.2, except to the extent that Purchaser's
covenants in Section 11.7 constitute an assumption of such liabilities or
obligations, or (ii) any liabilities or obligations associated with the
northern or southern marketing divisions. Nothing herein shall be deemed to
contravene the Purchaser's
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indemnification of SPC in Sections 11.3 and 11.7, which shall remain in full
force and effect. Without in any way limiting the foregoing, the parties agree
that the Purchaser does not and will not assume the sponsorship of, or the
responsibility for contributions to, or any liability in connection with, any
employee pension benefit plan, any employee welfare benefit plan, or other
employee benefit agreement or arrangement maintained by SPC for its employees,
former employees, retirees, their beneficiaries or any other Person. In
addition and not as a limitation of the foregoing covenant, the parties agree
that SPC shall be liable for any continuation coverage (including any
penalties, excise taxes or interest resulting from the failure to provide
continuation coverage) required by Section 4980B of the Code due to qualifying
events which occur on or before the Closing Date. Notwithstanding the
foregoing, Purchaser shall provide health and medical benefits under its then
existing plans, effective as of the date of hire, for each SPC employee that is
hired by Purchaser.
Section 2.3 Payment of Purchase Price. The consideration for the
sale of the Acquired Assets shall be the Purchase Price, the Earn-Out described
in Section 2.3.2, and the assumption by the Purchaser of the Assumed
Liabilities.
2.3.1 At Closing. At the Closing, Purchaser shall pay for
the Acquired Assets the sum of Seventy Five Million Nine Hundred Nineteen
Thousand Dollars ($75,919,000) (the "Purchase Price") , or the Adjusted
Purchase Price, as the case may be, which amount shall include the sum of Five
Million Dollars ($5,000,000) paid to the Escrow Agent pursuant to the Escrow
Agreement described in Section 11.4. Notwithstanding any provision contained
herein that may be construed to the contrary, any adjustment to the Purchase
Price pursuant to the terms of the PPI Agreement (other than Section 12.14) and
the Cockpit Agreement shall be
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calculated as part of the Aggregate Adjusted Purchase Price for purposes of
determining SPC's right to terminate this Agreement pursuant to Section 10.1(c)
hereto.
2.3.2 Earn-Out. With respect to the Terminal at Piney
Point, Purchaser shall pay SPC an earn-out for each of the seven calendar years
commencing January 1, 1996, equal to forty percent (40%) of the net revenues in
such year in excess of $10,250,000 (the "Earn-Out"), as set forth more fully in
Exhibit 2.3.2.
Section 2.4 Allocation of Purchase Price Amongst Acquired Assets.
The Purchase Price shall be allocated amongst the Acquired Assets in accordance
with the fair market values set forth on Schedule 2.4. Neither party shall
take any position inconsistent with Schedule 2.4 in any filing with the
Internal Revenue Service or for any other purpose.
Section 2.5 Allocation of Purchase Price Amongst Terminals. The
Purchase Price shall be allocated amongst the individual Terminals, which
allocation shall include all of the Acquired Assets located at each Terminal,
in accordance with the fair market values set forth on Schedule 2.5.
Section 2.6 Payment of Taxes and Closing Costs. Purchaser shall
be responsible for and shall pay any and all state sales taxes (except with
respect to any sales tax in Virginia, which shall be shared equally by SPC and
Purchaser) arising in connection with the sale of the Acquired Assets. All
closing costs in connection with the sale of the Real Estate or transfer of the
rights under the Right-of-way Agreements, including transfer taxes and
recording fees, shall be paid equally by SPC and Purchaser, except that title
insurance premiums shall be paid by Purchaser.
Section 2.7 Risk of Loss.
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(a) The risk of loss of the Acquired Assets shall pass to
Purchaser at Closing. If there is any loss, damage, breakdown, or casualty to
any of the Acquired Assets prior to Closing that does not constitute either
(i) a loss, damage, breakdown, or casualty that has been repaired or replaced
to the reasonable satisfaction of Purchaser, or (ii) a loss, damage, breakdown,
or casualty fully covered by insurance proceeds which have been assigned to
Purchaser and insurance retentions paid by SPC to Purchaser, the Purchase Price
shall be reduced by the cost to repair or replace such assets, estimated if
necessary. If there is reasonable doubt whether a loss, damage, breakdown, or
casualty is fully covered by insurance and the payment of insurance retentions
by SPC, Purchaser may reduce the Purchase Price by the cost of repairing or
replacing such assets, in which case SPC shall not assign the insurance
proceeds or pay any insurance retentions to Purchaser. The cost of repairing
or replacing such assets shall be such cost or estimated cost as is agreed upon
between the parties.
(b) Notwithstanding the above provisions of this Section
2.7, if any repair or replacement is reasonably expected to cause the Average
Monthly Revenue at an affected Terminal to decrease by five percent (5%) or
more during the month immediately following Closing, Purchaser may, in lieu of
accepting insurance proceeds and any insurance retentions or a reduction in the
Purchase Price, delay the Closing on the portion of the Acquired Assets
constituting such Terminal until SPC has completed such repair or replacement
to the reasonable satisfaction of Purchaser, provided, however, that if
Purchaser elects to delay the Closing for a particular Terminal or Terminals,
SPC may elect to delay the Closing with respect to all of the Acquired Assets
until such repair or replacement has been completed. If the Purchaser elects
to delay the Closing pursuant to the preceding sentence, then (unless SPC is
entitled to and elects
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to terminate this Agreement pursuant to Article 10), SPC shall promptly and
diligently cause such repair or replacement to be completed to the reasonable
satisfaction of Purchaser.
ARTICLE 3
MATTERS PRIOR TO CLOSING
Section 3.1 Due Diligence.
3.1.1 Examination of Records and Assets. During the Due
Diligence Period, (i) Purchaser and its agents may examine the Business, the
Acquired Assets, and such books, records, files, and documents of the Company
or the Subsidiaries as relate to the Business or the Acquired Assets, (ii) the
Company shall make available to Purchaser and its agents for review all
information concerning the Acquired Assets or the Business which they may
request, and (iii) the Company will make available to Purchaser the officers
and any key employees of the Company to answer questions and to discuss the
Company and its Business, all in a manner that does not unduly disrupt the
Business. If the Closing does not occur, Purchaser shall promptly return to
the Company or the Subsidiaries, as appropriate, at Purchaser's expense, (i)
all documents (including any copies thereof) received from the Company or the
Subsidiaries before, during or after the Due Diligence Period, and (ii) any
documents or materials that Purchaser or its advisers have generated that
contain or disclose information from the documents received from the Company or
the Subsidiaries. Prior to Closing, except as required in connection with
Kaneb Pipe Line Partners, L.P.'s registration statement filed under the
Securities Act of 1933 and the related offering of partnership units, Purchaser
shall maintain in confidence any information or data received from SPC or the
Subsidiaries in the course of conducting its due diligence, including without
limitation the environmental due diligence
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provided for in Section 3.1.2, and shall not use the same for any purpose
except in connection with the transaction contemplated by this Agreement,
provided, that the foregoing confidentiality requirement shall remain in effect
after the Closing with respect to the financial statements of the Company and
its Affiliates. Prior to Closing, and thereafter with respect to the financial
statements of the Company and its Affiliates, except as required in connection
with Kaneb Pipe Line Partners, L.P.'s registration statement filed under the
Securities Act of 1933 and the related offering of partnership units, Purchaser
shall not disclose any such information or data to any third person except to
the extent that (i) such information or data is already in the public domain,
or (ii) such disclosure is compelled or required by subpoena or similar legal
process.
3.1.2 Environmental Due Diligence.
3.1.2.1 Audits and Surveys. During the Due Diligence Period,
Purchaser may cause Audits to be conducted by the Purchaser's Consultant, at
its expense, of any of the Real Estate or ROW Real Estate (to the extent such
Audits are permitted under the applicable Right-of-way Agreement). The scope,
methodology, timing, and conduct of all such Audits shall be subject to the
prior approval of SPC or, with respect to the Savannah, Georgia Real Estate,
SPCT, which approval shall not be unreasonably withheld, except that it shall
not be unreasonable for SPC to withhold its approval based on SPC's reasonable
opinion that such Audit is not permitted under the relevant Right-of-way
Agreement. All Audits shall be conducted so as to avoid unduly disrupting the
Business. All such Audits shall be completed within the Due Diligence Period
if, and to the extent that, Purchaser wishes to rely on the results of such
Audits in proposing any adjustment to the Purchase Price under Section 3.1.2.2.
The Purchaser shall cause the Purchaser's Consultant to deliver simultaneously
to SPC copies of all
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data, reports, surveys, or audits, or drafts thereof that it delivers to
Purchaser with respect to the Acquired Assets or the Business and deliver to
SPC promptly after signing this Agreement copies of all data, reports, surveys,
audits, or drafts thereof delivered to Purchaser with respect to the Acquired
Assets or the Business prior to the signing of this Agreement.
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work.
(a) If the Audits prepared by Purchaser's
Consultant under any of the Purchase Agreements disclose that Remedial Work
with respect to the Acquired Assets or the Business or the assets or business
acquired under the PPI Agreement or the Cockpit Agreement is required,
Purchaser may deliver to SPC a written notice describing all such proposed
Remedial Work, and the calculation of the Aggregate Net Remedial Cost with
respect thereto with particularity with respect to the Acquired Assets or the
Business under this Agreement and the assets or business being acquired by
Purchaser under the PPI Agreement and the Cockpit Agreement. If the Aggregate
Net Remedial Cost for such Remedial Work is in excess of one million dollars
($1,000,000), Purchaser may deliver to SPC an Environmental Adjustment Request
requesting an adjustment in the Aggregate Purchase Price equal to the amount by
which such Aggregate Net Remedial Cost exceeds one million dollars
($1,000,000).
(b) The Net Remedial Cost for Remedial Work with
respect to the Acquired Assets or the Business disclosed pursuant to this
Section 3.1.2.2 shall be aggregated with the Net Remedial Cost for Remedial
Work under Section 3.1.2.2 of the PPI Agreement and Section 3.1.2.2 of the
Cockpit Agreement for purposes of (i) calculating the one million dollar
($1,000,000) threshold described in Section 3.1.2.2 of this Agreement and the
Remaining Threshold, (ii) delivering an Environmental Adjustment Request to SPC
under this Agreement,
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to PPI under the PPI Agreement or to SIC under the Cockpit Agreement, (iii)
calculating the Aggregate Net Remedial Cost to determine Purchaser's right to
terminate pursuant to Section 10.1(h) of this Agreement, and (iv) calculating
the Aggregate Adjusted Purchase Price to determine SPC's right to terminate
under Section 10.1(c) of this Agreement.
(c) No Environmental Adjustment Request under
this Section 3.1.2.2 may be delivered to SPC more than seventy-five (75) days
from the date of this Agreement. If SPC agrees with the Environmental
Adjustment Request, it shall so notify the Purchaser, and the Aggregate
Purchase Price shall be reduced by the amount by which the Aggregate Net
Remedial Cost exceeds one million dollars ($1,000,000).
(d) If SPC disagrees with the Environmental
Adjustment Request, SPC may at its expense engage SPC's Consultant, who shall
be given copies of all reports and work product of Purchaser's Consultant, and
who shall be free to conduct such additional testing and analysis as it thinks
necessary. SPC shall cause SPC's Consultant to deliver simultaneously to the
Purchaser copies of all data, reports, surveys or audits, or drafts thereof
that it delivers to SPC with respect to the Acquired Assets or the Business, or
the assets or business being acquired by Purchaser under the PPI Agreement or
the Cockpit Agreement. As promptly as possible, SPC shall cause SPC's
Consultant to prepare a report, which shall be distributed simultaneously to
SPC, Purchaser, and Purchaser's Consultant, stating (i) whether it agrees that
Remedial Work with respect to the Acquired Assets or the Business or the assets
or business being acquired by Purchaser under the PPI Agreement or the Cockpit
Agreement is required with an Aggregate Net Remedial Cost in excess of one
million dollars ($1,000,000), and (ii) its estimate of the Aggregate Net
Remedial Cost with particularity with respect to the Acquired
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Assets or the Business under this Agreement and the assets or business being
acquired by Purchaser under the PPI Agreement or the Cockpit Agreement. If the
lower of the two Aggregate Net Remedial Costs is equal to at least 90% of the
higher of the two, the Aggregate Net Remedial Cost shall be the average of the
two, and the Aggregate Purchase Price shall be reduced by the amount, if any,
by which such average exceeds one million dollars ($1,000,000). If the lower of
the two Aggregate Net Remedial Costs is less than 90% of the higher of the two,
the two Consultants shall jointly engage Groundwater Technologies, Inc. as the
Joint Consultant, at the joint expense of the Company and the Purchaser, who
shall be given copies of all reports and work product of the Purchaser's and
SPC's Consultants, who may conduct such additional testing and analysis as it
considers necessary, and who shall render a report to both parties and their
Consultants stating what the Aggregate Net Remedial Cost, if any, should be,
and that report shall be final and binding on the parties. To the extent, if
any, that the Aggregate Net Remedial Cost as stated by the Joint Consultant
exceeds one million dollars ($1,000,000), the Aggregate Purchase Price shall be
reduced by the amount of such excess.
(e) To the extent that the Aggregate Net Remedial
Cost is finally determined to exceed one million dollars ($1,000,000) and
therefore result in a reduction of the Aggregate Purchase Price by the amount
of such excess, the reduction of the Aggregate Purchase Price shall be
allocated among SPC under this Agreement, PPI under the PPI Agreement and SIC
under the Cockpit Agreement by subtracting from the Purchase Price in each
respective agreement an amount equal to the Aggregate Purchase Price adjustment
multiplied by a fraction, the numerator of which is the Net Remedial Cost less
one million dollars ($1,000,000) but not less than zero (0) with respect to
this Agreement and the Net Remedial Cost with respect to the
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PPI Agreement and the Cockpit Agreement and the denominator of which is the
Aggregate Net Remedial Cost. The foregoing shall be illustrated as follows:
<TABLE>
<CAPTION>
Example 1 Example 2
--------- ---------
<S> <C>
Net Remedial Cost under this Agreement $ 900,000 $1,200,000
Plus Net Remedial Cost under the PPI Agreement 200,000 200,000
Plus Net Remedial Cost under the Cockpit Agreement 100,000 100,000
---------- ----------
Equals Aggregate Net Remedial Cost 1,200,000 1,500,000
Less one million dollars 1,000,000 1,000,000
---------- ----------
Equals Aggregate Purchase Price Adjustment $ 200,000 $ 500,000
0/300 x 200 = 0 = Purchase Price adjustment
under this Agreement = 200/500 x 500 = 200,000
200/300 x 200 = 133,333 = Purchase Price adjustment
under the PPI Agreement = 200/500 x 500 = 200,000
100/300 x 200 = 66,667 = Purchase Price adjustment
------- under the Cockpit Agreement = 100/500 x 500 = 100,000
-------
200,000 = Aggregate Purchase = 500,000
Price adjustment
</TABLE>
(f) Notwithstanding the foregoing, if the
Aggregate Net Remedial Cost is not in excess of one million dollars
($1,000,000), the foregoing procedures set forth in this Section 3.1.2.2 shall
still be followed even though Purchaser shall not be entitled to an adjustment
in the Aggregate Purchase Price but instead the amount of the Aggregate Net
Remedial Cost under this Section 3.1.2.2 shall be determined and used in
calculating the Remaining Threshold.
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3.1.2.3 Purchase Price Adjustment for Other Remedial Work.
Notwithstanding any terms contained in Sections 3.1.2.1 and 3.1.2.2, (i) if
there is a violation of Environmental Law that occurs after the date of this
Agreement and prior to Closing that requires Remedial Work with respect to the
Acquired Assets or the Business that is not completed prior to Closing either
to the reasonable satisfaction of Purchaser or to the satisfaction of the
applicable Governmental Authority, (ii) if after the Due Diligence Period and
prior to Closing a violation of Environmental Law that requires Remedial Work
with respect to the Acquired Assets or the Business is discovered that could
not reasonably have been discovered during the Due Diligence Period by the
Phase I and Phase II environmental audit performed by Versar, Inc. and Handex,
Inc. in 1993, (copies of which have been provided to Purchaser) and such
Remedial Work is not completed prior to Closing either to the reasonable
satisfaction of Purchaser or to the satisfaction of the applicable Governmental
Authority or (iii) if there exists Net Remedial Costs for matters described in
Section 3.1.2.3 of the PPI Agreement or the Cockpit Agreement, then in each
such case Purchaser shall be entitled to an adjustment to the Aggregate
Purchase Price for the Aggregate Net Remedial Cost with respect to matters
described in Section 3.1.2.3 of each of the Purchase Agreements in excess of
the Remaining Threshold with respect to all such Remedial Work remaining to be
completed after Closing, determined in accordance with the procedures set forth
in Section 3.1.2.2 without regard to the 75 day time period for proposing such
adjustment.
3.1.2.4 Other Environmental Liabilities. If, prior to
Closing, Purchaser, SPC or SPCT receives notice of a claim from, or discovers
or receives notice of any facts or circumstances reasonably expected by ICF
Kaiser to give rise to a claim by, any Person or
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Governmental Authority for liability or obligation (other than for Remedial
Work) related to an alleged violation of Environmental Law with respect to the
Acquired Assets or the Business, it shall promptly notify the other parties
hereto (the "Notice"). Thereafter, SPC and Purchaser shall attempt to agree on
whether a Purchase Price adjustment or other agreeable mechanism is warranted
with respect to such claim. If the parties are unable to agree, SPC may in its
discretion assume responsibility for such claim and provide Purchaser with an
indemnification against such claim reasonably satisfactory to Purchaser. If
within thirty (30) days after delivery of the Notice (i) the parties are unable
to agree on an adjustment to the Purchase Price or other agreeable mechanism,
and (ii) SPC fails to assume responsibility for such claim and provide an
indemnification reasonably satisfactory to Purchaser, then Purchaser shall have
the right to terminate this Agreement.
Section 3.2 Real Property Matters.
(a) Purchaser shall at its expense from the date of this
Agreement through Closing review the status of SPC's (or the applicable
owner's) title to the Real Estate. As of the date of this Agreement, Purchaser
has received (i) the surveys listed on the attached Schedule 3.2(a) and (ii)
the current title binders listed on the attached Schedule 3.2(a) obtained from
Commonwealth Land Title Insurance Company and Lawyers Title Insurance
Corporation with respect to the Real Estate indicating therein Purchaser as the
proposed insured (with the cost of any update work necessary to cause the
issuance of current title binders to be paid equally by Purchaser and SPC).
The information set forth on such surveys listed on Schedule 3.2(a) and in such
title binders listed on Schedule 3.2(a) (but only to the extent copies of the
documents referenced in such surveys listed on Schedule 3.2(a) and in such
title binders listed on Schedule
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3.2(a) have been provided to Purchaser), and specifically excluding the matters
described on Schedule 3.2(b), is referred to herein as the "Current Title
Information". Purchaser shall have the right, at its expense, to cause to be
prepared to its satisfaction current surveys of any or all of the parcels of
Real Estate.
(b) All Real Property Matters disclosed in the Current
Title Information are listed on Schedule 3.2(a) and Purchaser shall not have
the right or the opportunity to raise any other Real Property Matters based on
the Current Title Information. Purchaser shall have the right for a period of
thirty (30) days after the date of this Agreement to continue to raise as Title
Objections (by written notice to SPC) any or all of the matters described on
Schedule 3.2(b), without regard to the standard set forth in clause (a) of the
definition of Title Objections unless otherwise stated on Schedule 3.2(b).
(c) If Purchaser's review prior to Closing discloses a
Real Property Matter not disclosed in the Current Title Information or in
Schedule 3.2(b), Purchaser shall notify SPC thereof within four (4) Business
Days of discovery.
(d) With respect to the Real Property Matters listed on
Schedule 3.2(a) and any Real Property Matters for which notice is sent to SPC
under clause (c) above, SPC shall at its expense attempt to remedy or cure such
Real Property Matter, provided that, except for payments necessary to release
existing mortgages and any Lien related to said mortgages on Real Estate owned
by SPC or the Subsidiary Partnership, SPC shall have no obligation to spend any
amount in excess of five percent (5%) of the Purchase Price allocated pursuant
to Section 2.5 to the Terminal on the affected Real Estate to remedy or cure a
Real Property Matter. With respect to any Title Objection raised by Purchaser
based on the matters described in Schedule
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3.2(b), SPC shall have no obligation to cure the Title Objection, but if SPC
does not cure the Title Objection within thirty (30) days from Purchaser's
notification thereof, the Title Objection shall be an uncured Real Property
Matter for purposes of this Section 3.2. If SPC is unable to remedy or cure
one or more Real Property Matters within 30 days from Purchaser's notification
thereof, the parties shall attempt in good faith to negotiate an adjustment in
the Purchase Price that will compensate Purchaser for the cost of curing or
remedying the Real Property Matter or for otherwise accepting the Real Estate
as is. If the parties are unable to agree on an adjustment to the Purchase
Price, and the Real Property Matter is with respect to the Real Estate at Piney
Point, or Jacksonville, this Agreement shall terminate. If the parties are
unable to agree on an adjustment to the Purchase Price and the Real Property
Matter is with respect to any other parcel of Real Estate, this Agreement shall
terminate with respect to the Terminal located on such parcel or parcels and
all related Acquired Assets and the Purchase Price shall be reduced by the
amount allocated to such Terminal on Schedule 2.5. Notwithstanding any
provision contained herein that may be construed to the contrary, if (i) any
Lien or restriction with respect to the Real Estate on which the Brunswick
Terminal is located or, if the Partnership Interest is not purchased by
Purchaser, the Real Estate on which the Savannah Terminal is located is not the
result of an act or omission of SPC, and (ii) Purchaser can continue to lease
such Real Estate after the Closing as it is currently being leased by SPC, then
SPC shall have no obligation to remove such Lien or restriction and such Lien
or restriction shall be a Permitted Encumbrance.
Section 3.3 Consents. SPC or the Subsidiary Corporation, as
appropriate, shall use reasonable commercial efforts promptly to obtain the
consent, waiver or approval (including without limitation the waiver, release
or termination of rights of first refusal with respect to the
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Terminals in Annex 1 and Annex 2 in Jacksonville and Farragut Street, if any)
of each Person whose consent, waiver, or approval is required to effect an
assignment of any of the Material Contracts, Right-of-way Agreements or Real
Estate Leases, or to transfer any of the Acquired Assets to Purchaser, or
otherwise in connection with this transaction, and, where appropriate, to
effect a novation of such Material Contracts, Right-of-way Agreements or Real
Estate Leases. Purchaser shall cooperate with SPC and the Subsidiary
Corporation in obtaining such items as reasonably requested to do so by SPC or
the Subsidiary Corporation.
Section 3.4 Hart-Scott-Rodino. Purchaser, SPC and SPCT shall
each comply with the notification, waiting period and other requirements of the
HSR Act. Each party shall take reasonable steps to provide information to and
otherwise cooperate with the other parties for the purposes of making required
filings under the HSR Act.
Section 3.5 Purchaser's Licenses, Permits and Approvals.
Purchaser shall exercise reasonable commercial efforts promptly to obtain all
licenses and permits required by Purchaser to purchase the Acquired Assets.
Section 3.6 Employees. SPC shall provide Purchaser with a list
of the names, addresses and base salaries of its salaried and hourly employees
of the Business, and provide Purchaser with the opportunity to conduct
pre-employment interviews with them. Purchaser may but shall not be obligated
to offer employment to any of SPC's employees, on such terms and conditions as
Purchaser may determine, contingent upon and effective at Closing. SPC shall
terminate all of its salaried and hourly employees of the Business effective at
Closing. SPC shall be responsible for paying any and all liabilities resulting
from such terminations of such
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employees (including, but not limited to, any liabilities under the Workers
Adjustment and Retraining Notification Act) and will indemnify and hold
harmless Purchaser therefrom.
Section 3.7 Notification. Each party shall promptly notify the
other parties if it has Knowledge of (i) any information indicating that any
representation or warranty of any other party is or may be untrue in any
material respect, (ii) any covenant to be performed by such other party that is
not being performed, or (iii) any circumstance that would impede or interfere
with the Closing, except that no party shall be liable for a breach of this
covenant unless and except to the extent that the affected party is materially
prejudiced or damaged thereby.
Section 3.8 Deferred Like-Kind Exchange. Upon the request of
SPC, made at least two Business Days prior to the Closing Date, Purchaser shall
execute such documents as may reasonably be required to acknowledge (i) notice
of SPC's intention to accomplish a deferred like-kind exchange of part or all
of the Acquired Assets pursuant to Section 1031 of the Code and Treasury
Regulation 1.1031(k)-1 and (ii) the assignment of part or all of SPC's right,
title and interest in and to (but not SPC's obligations under) this Agreement
to a qualified intermediary (within the meaning of Treasury Regulation Section
1.1031(k)-1(g)(4)).
Section 3.9 Actions Necessary to Consummate. From and after the
date of this Agreement, each of the parties shall in good faith take such
action as may be commercially reasonable to consummate the transactions
contemplated by this Agreement.
Section 3.10 Audited Division Statements. Prior to the execution
of this Agreement, SPC prepared and delivered to Purchaser, and, at Purchaser's
expense, Purchaser caused Price Waterhouse, LLP to audit and deliver to
Purchaser an opinion on, the Audited Division
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<PAGE> 38
Statements. All out-of-pocket third party expenses incurred by SPC in
connection with this Section 3.10 and all of Purchaser's expenses shall be
borne by Purchaser.
Section 3.11 Capital Expenditures. SPC has made or will make
during 1995 and up to the month in which the Closing occurs capital
expenditures with respect to the Business or the Acquired Assets in the
aggregate amount, but not necessarily in the manner, set forth on Schedule
3.11. The parties agree that the only capital expenditures that shall apply
against this requirement are capital expenditures in 1995 for the projects
listed on Schedule 7.9(g) and any other projects approved in writing by
Purchaser, provided that such approval shall be deemed to have been given
unless it is denied within five (5) Business Days of having been requested.
Section 3.12 Cockpit Real Estate Lease. If the Real Property, as
defined in the Cockpit Agreement, is not purchased by Purchaser, then Purchaser
is still required to purchase the portion of the Business conducted at the
Cockpit Terminal and the Purchaser shall be required to lease the Real Property
from SIC in accordance with the terms to be negotiated and concluded at the
appropriate time; provided, however, that if such lease terms cannot be agreed
upon, then Purchaser shall not be required to lease the Real Property and
Purchaser shall not be required to purchase the portion of the Business
conducted at the Cockpit Terminal and the Purchase Price under this Agreement
shall be reduced by $119,000.
Section 3.13 Florida Submerged Land. Prior to Closing the Company
shall in good faith continue to pursue the State of Florida submerged property
issues described on Schedule 7.5. At the Closing, the Company shall execute
and deliver to Purchaser a quit claim deed covering all submerged land
contiguous to the Real Estate at Jacksonville, Florida.
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ARTICLE 4
OPERATION OF THE BUSINESS PRIOR TO CLOSING
Section 4.1 Ordinary Course. (a) Between the date of this
Agreement and the Closing, SPC shall (i) carry on the Business diligently in
the Ordinary Course of Business and shall not institute any new methods of
accounting or pricing, or engage in any transaction or activity, or enter into
any agreement or make any commitment with respect to the Business or Acquired
Assets except in the Ordinary Course of Business; (ii) maintain the Acquired
Assets in good operating condition consistent with past practice and comply
timely with all provisions of leases, agreements, contracts and commitments
relating to the Acquired Assets or the Business; (iii) exercise reasonable
efforts to preserve the Business and its relationships with its customers,
employees, and suppliers, to timely file all reports required by any
Governmental Authority and to pay all taxes, and to comply with all Applicable
Law. In addition, SPC shall deliver to Purchaser copies of (i) the Unaudited
Terminal Operating Statements and a related Adjustment Statement for periods
subsequent to June 30, 1995 and prior to the Closing as soon as they become
available to SPC, but in no event later than twenty-one (21) days after the end
of the month covered by such statements together with a representation that
such statements are true and correct in all material respects and fairly
present the results of operations of the Business together with PPI as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied, subject to normal year end
adjustments, the adjustments described in Schedule 7.9 and the absence of
footnotes required by GAAP; (ii) monthly and year to date unaudited financial
statements for SPC for periods subsequent to June 30, 1995 and prior to the
Closing as soon as they become available to SPC, but in no event later
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than thirty (30) days after the end of the month covered by such statements
together with a representation that such statements are true and correct in all
material respects and fairly present the consolidated financial position of the
Company and its subsidiaries as of the respective dates thereof and the results
of operations and cash flows of the Company and its subsidiaries as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied, subject to normal year end
adjustments, the adjustments described in Schedule 7.9 and the absence of
footnotes required by GAAP; and (iii) monthly statements setting forth the
capital expenditures of the Business for periods subsequent to June 30, 1995,
and prior to Closing as soon as they become available to SPC, but in no event
later than twenty-one (21) days after the end of the month covered by such
statements.
(b) Between the date of this Agreement and the Closing,
SPCT covenants that it shall exercise commercially reasonable efforts to
preserve the business of the Subsidiary Partnership as it is now being
conducted. In addition SPCT shall deliver to Purchaser copies of monthly and
year to date unaudited financial statements for the Subsidiary Partnership for
periods subsequent to June 30, 1995 and prior to the Closing as soon as they
become available to SPCT, but in no event later than twenty-one (21) days after
the end of the month covered by such statements together with a representation
that such statements are true and correct in all material respects and fairly
present the financial position of the Subsidiary Partnership as of the
respective dates thereof and the results of operations and cash flows of the
Subsidiary Partnership as of the respective dates or for the respective periods
set forth therein, all in conformity with GAAP consistently applied, subject to
normal year end adjustments, the adjustments described in Schedule 7.9 and the
absence of footnotes required by GAAP.
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Section 4.2 Certain Changes. Without the prior consent of
Purchaser, such consent not to be unreasonably withheld, provided that such
consent shall be deemed to have been given unless it is denied within five (5)
Business Days of having been requested, neither SPC nor SPCT shall: (i) permit
or allow any of the Acquired Assets to be subjected to any Lien; (ii) cancel or
waive any material claim or right relating to the Acquired Assets or the
Business; (iii) sell, transfer, assign, distribute or otherwise dispose of any
Acquired Assets, except in the Ordinary Course of Business; (iv) enter into any
contract or commitment with respect to the Business or the Acquired Assets, the
performance of which may extend beyond the Closing Date, except in the Ordinary
Course of Business; (v) cause or permit any of its current insurance or
reinsurance policies with respect to the Acquired Assets or the Business to be
canceled or terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation, or lapse, the Company
obtains replacement policies from the same or comparable insurers providing
coverage which is the same or comparable to that provided under the cancelled,
terminated, or lapsed policies; (vi) acquire by purchase or license any
trademark, patent, or other intellectual property rights with respect to the
Business; (vii) make any payment or provision with respect to any employee
benefit plan or program with respect to the Business, except in the Ordinary
Course of Business, or adopt any new employee benefit plan or program with
respect to the Business or amend any existing employee benefit plan or program
with respect to the Business, or enter into any new employment agreements with
respect to the Business, or increase the compensation payable to any employee
with respect to the Business or pay any bonuses to any employee of the Business
except in the Ordinary Course of Business. Without the consent of Purchaser,
such consent not to be unreasonably withheld, SPC shall not
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enter into, amend or modify any Material Contracts or any Right-of-way
Agreements or any Real Estate Leases (other than the Cockpit Real Estate Lease
as contemplated by Section 3.12) and SPCT shall not agree to amend or modify
the Partnership Agreement, provided that such consent shall be deemed to have
been given unless it is denied within five (5) Business Days of having been
requested. In addition, SPCT shall use commercially reasonable efforts to
prevent the Subsidiary Partnership from entering into, amending or modifying
any material contract of the Subsidiary Partnership without the prior consent
of Purchaser, such consent not to be unreasonably withheld, provided that such
consent shall be deemed to have been given unless it is denied within five (5)
Business Days of having been requested
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Acquired Assets at
Closing shall be subject to the satisfaction of the following conditions on or
before the Closing Date, except as and to the extent that such satisfaction is
waived by Purchaser.
Section 5.1 Representations and Warranties. The representations
and warranties of the Company and SPCT (if the Partnership Interest is acquired
by the Purchaser hereunder) contained in Article 7 (other than Section 7.16)
shall be true and correct in all material respects at and as of the Closing
Date and the Purchaser shall have received a certificate to that effect signed
by an officer of the Company and an officer of the Subsidiary Corporation.
Section 5.2 Certificate Regarding Environmental Representations
and Warranties. The Company shall have delivered to Purchaser a certificate
signed by an officer of the Company
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stating either (i) the representations and warranties of the Company and SPCT
(if the Partnership Interest is acquired by the Purchaser hereunder) contained
in Section 7.16 are true and correct at and as of the Closing Date or (ii) the
representations and warranties of the Company and SPCT (if the Partnership
Interest is acquired by the Purchaser hereunder) contained in Section 7.16 are
true and correct at and as of the Closing Date except for matters disclosed in
the certificate, which certificate shall divide any such matters stated therein
into matters for which a Purchase Price adjustment is available under Sections
3.1.2.2, 3.1.2.3 or 3.1.2.4, and matters for which a Purchase Price adjustment
is not available under Section 3.1.2.3(ii).
Section 5.3 Compliance with this Agreement. The Company and SPCT
(if the Partnership Interest is acquired by the Purchaser hereunder) shall have
performed and complied in all material respects with all of their agreements
and covenants set forth or contemplated herein that are required to be
performed or complied with on or before the Closing Date and the Purchaser
shall have received a certificate to that effect signed by an officer of the
Company and SPCT.
Section 5.4 Purchase Permitted by Applicable Laws. The purchase
of the Acquired Assets shall not be prohibited by any Applicable Law or by any
order or ruling of any Governmental Authority, nor shall any condition have
been imposed on the Closing by any Governmental Authority which would subject
either party to penalties or other sanctions as a result of the Closing.
Section 5.5 Opinion of Counsel. The Purchaser shall have
received an opinion of counsel to the Company, dated the Closing Date, opining
in substance on the matters set forth in Exhibit 5.5.
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Section 5.6 Consents and Approvals. All material consents,
exemptions, authorizations, or other actions by, or notices to, or filings
with, any Person necessary or required in connection with the purchase of the
Acquired Assets or the operation of the Business by Purchaser shall have been
obtained and be in full force and effect (including any required consent of a
ROW Real Estate owner for the transfer or assignment of a Right-of-way
Agreement), and any waiting periods under any Applicable Law shall have
expired, except that those rights of first refusal affecting Farragut Street
or, Annex I and Annex 2 at Jacksonville, if any, are to be treated as Real
Property Matters pursuant to Section 3.2.
Section 5.7 Throughput Agreements. There shall be included in
the Material Contracts with respect to each of the Jacksonville, Piney Point,
Farragut Street, and Brunswick Terminals throughput agreements for petroleum
products with SPC or some other financially sound Person reasonably acceptable
to Purchaser in the form attached as Exhibit 5.7, which shall be executed and
become effective by Closing.
Section 5.8 No Material Adverse Change. Except as set forth on
Schedule 7.11 or as disclosed in the monthly Unaudited Terminal Operating
Statements, dated after December 31, 1994 and provided to Purchaser prior to
the signing of this Agreement or the Unaudited Partnership Financial
Statements, dated after December 31, 1994 and provided to Purchaser prior to
the signing of this Agreement, there shall have been no material adverse change
in the Acquired Assets or the operations or financial condition of the Business
or the Subsidiary Partnership since December 31, 1994.
Section 5.9 Title Policy. Purchaser shall have obtained from
Commonwealth Land Title Insurance Company or Lawyers Title Insurance
Corporation commitments to issue owner's
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or leasehold policies of title insurance providing that (i) upon due
recordation of an appropriate deed or memorandum of lease such title company
shall insure that the title or leasehold interest to each parcel of the Real
Estate owned or leased by SPC prior to Closing shall be vested in Purchaser
free and clear of any Real Property Matter and (ii) title to the Real Estate on
which the Savannah Terminal is located shall be vested in the Subsidiary
Partnership free and clear of any Real Property Matter.
Section 5.10 Subsidiary Partnership Debt. As a condition to
Purchaser's obligation to purchase the Partnership Interest, the Subsidiary
Partnership, as of the Closing, shall have no liabilities in excess of its cash
on hand other than liabilities of the Subsidiary Partnership in accordance with
the Real Estate Lease for the Savannah, Georgia Terminal, and SPCT shall have
delivered to Purchaser a certificate to such effect.
Section 5.11 Subsidiary Partnership. SPCT shall exercise
commercially reasonable efforts to prevent the Subsidiary Partnership from
entering into, amending or modifying any material contract, without the prior
consent of Purchaser, such consent not to be unreasonably withheld, provided
that such consent shall be deemed to have been given unless it is denied within
five (5) Business Days of having been requested. If SPCT fails to prevent the
Subsidiary Partnership from entering into, amending or modifying any material
contract, then Purchaser shall have the right to terminate this Agreement with
respect to the Partnership Interest (but shall still be required to purchase
that portion of the Business conducted at the Terminal located in Savannah,
Georgia), and the provisions of clauses (i), (ii) and (iii) of the last
sentence of Section 12.13(a) shall apply.
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Section 5.12. Right-of-Way Agreement. The Company shall have
granted to Purchaser rights-of-way for the Pepco Pipeline as defined in the
Cockpit Agreement across the seven (7) parcels of land described in Exhibit
5.12 on terms substantially identical to the terms of the right of way
agreement attached to Exhibit 5.12.
ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligations of the Company to sell the Acquired Assets hereunder
shall be subject to the satisfaction of the following conditions on or before
the Closing Date, except as and to the extent that such satisfaction is waived
by the Company.
Section 6.1 Representations and Warranties. The representations
and warranties of the Purchaser and Guarantor contained in Article 8 hereof
shall be true and correct in all material respects at and as of the Closing
Date, and the Company shall have received a certificate to that effect signed
by an officer of the general partner of the Purchaser and an officer of the
general partner of the Guarantor.
Section 6.2 Compliance with this Agreement. The Purchaser and
Guarantor shall have performed and complied in all material respects with all
of their agreements and covenants set forth or contemplated herein that are
required to be performed or complied with by the Purchaser and Guarantor on or
before the Closing Date and SPC and SPCT shall have received a certificate to
that effect signed by an officer of the general partner of the Purchaser and an
officer of the general partner of the Guarantor.
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Section 6.3 Sale Permitted by Applicable Laws. The sale of the
Acquired Assets by the Company hereunder shall not be prohibited by any
Applicable Law or Governmental Authority nor shall any condition have been
imposed on the Closing by any Governmental Authority which would subject either
party to penalties or other sanctions as a result of the Closing.
Section 6.4 Opinion of Counsel. The Company shall have received
an opinion of counsel to the Purchaser, dated the Closing Date, opining in
substance on the matters set forth in Exhibit 6.4.
Section 6.5 Consents and Approvals. All consents, exemptions,
authorizations, waivers or other actions by, or notices to, or filings with,
any Person necessary or required in connection with the execution, delivery or
performance by the Purchaser of this Agreement shall have been obtained and be
in full force and effect.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SUBSIDIARY CORPORATION
The Company and the Subsidiary Corporation hereby, jointly and
severally, represent and warrant to the Purchaser, as of the date of this
Agreement and as of the Closing Date, as follows:
Section 7.1 Existence and Power. Each of the Company and the
Subsidiary Corporation is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. The
Subsidiary Partnership is a general partnership duly
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organized, validly existing and in good standing under the laws of the State of
Delaware. The Company and each Subsidiary: (a) has all requisite corporate or
partnership power and authority, as applicable, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged; (b)
is duly qualified as a foreign corporation or partnership, as applicable, and
is in good standing, under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business require such
qualification, except to the extent that the failure to do so would not have an
adverse effect on the Acquired Assets or the Business; and (c) with respect to
the Company and the Subsidiary Corporation, has the corporate power and
authority to execute, deliver and perform their respective obligations under
the Purchase Agreements.
Section 7.2 Corporate Authorization: No Contravention. The
execution, delivery and performance by the Company and the Subsidiary
Corporation of the Purchase Agreements: (a) has been duly authorized by all
necessary corporate, and, if required, stockholder action; (b) does not
contravene the terms of the Company's or the Subsidiary Corporations's
Certificate of Incorporation or By-Laws, or any amendment of either thereof,
and (c) will not violate Applicable Law, or conflict with or result in any
breach of or default under, or cause the creation of any Lien under, any
contractual obligation of the Company or any of its Subsidiaries.
Section 7.3 Governmental Authorization: Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under an Applicable Law, is necessary or required
in connection with the execution, delivery or performance by the Company of the
Purchase Agreements or the Subsidiary Corporation of this
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Agreement, or enforcement against the Company of the Purchase Agreements or the
Subsidiary Corporation of this Agreement, other than (i)compliance with the HSR
Act, and (ii) in connection with the rights of first refusal described in
Section 3.3.
Section 7.4 Binding Effect. The Purchase Agreements have been
duly executed and delivered by the Company and, in the case of this Agreement,
the Subsidiary Corporation and constitute the legal, valid and binding
obligation of each of the Company and the Subsidiary Corporation enforceable
against the Company and the Subsidiary Corporation in accordance with their
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability.
Section 7.5 Litigation. Except as listed on Schedule 7.5, there
are no legal actions, suits, proceedings, or claims pending, or to the
Knowledge of the Company or its Subsidiaries, threatened, before any
Governmental Authority against or affecting the Company or any of its
Subsidiaries (a) with respect to the Purchase Agreements, or any of the
transactions contemplated thereby, or (b) which would be reasonably likely to
have (i) an adverse effect on the Acquired Assets, the Business, the Subsidiary
Partnership or the business of the Subsidiary Partnership or (ii) an adverse
effect on the ability of the Company or the Subsidiary Corporation to perform
its obligations hereunder. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any Governmental Authority
purporting to enjoin SPC or SPCT or restrain SPC's or SPCT's execution,
delivery or performance of the Purchase Agreements.
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Section 7.6 Compliance with Laws. The Company and each of its
Subsidiaries are in compliance with all Applicable Law, except for any failure
to comply which would not have an adverse effect on the Acquired Assets or the
Business.
Section 7.7 Title to Real Estate, and Real Estate Leases.
Schedule 2.1(a) sets forth a list of all parcels of real property, excluding
ROW Real Estate, upon which any of the Terminals or their operations are
located (including a metes and bounds description thereof, to the extent
available, or a plat of subdivision designation) and also provides a true and
correct indication of whether each such parcel is owned or leased by the
Company or any Subsidiary. The Company and each of its Subsidiaries has good
and marketable title in fee simple to, or holds interests as lessee under Real
Estate Leases in full force and effect in, the Real Estate, free of Liens
(other than Liens that will be released in full at Closing) and subject to
Permitted Encumbrances. The Company has delivered to the Purchaser true and
correct copies of all Real Estate Leases, and any amendments thereto, and each
such Real Estate Lease is binding upon and enforceable against the Company and
with respect to the Terminal located in Savannah, Georgia, the Subsidiary
Partnership, and to the Company's Knowledge all parties thereto, in each case,
in accordance with its terms, and there is no default thereunder and SPC's
rights thereunder are included in the Acquired Assets. As of the Closing Date,
the improvements located on the Real Estate are in as good a condition as they
were on the date of Purchaser's physical inspection of the Terminals as
specified on Schedule 7.7, ordinary wear and tear excepted.
Section 7.8 Condition of and Title to Tangible Personal Property.
The Tangible Personal Property taken as a whole is sufficient (including its
state of operating condition and
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repair taken as a whole, but not on an item by item basis) for the conduct of
the Business as presently conducted. Except as set forth on Schedule 7.8, the
Company owns free of Liens (other than Liens that will be released in full at
Closing) or has the right to use as a lessee under a valid lease included in
the Contracts, all of the Tangible Personal Property.
Section 7.9 Financial Condition.
(a) The Company has furnished Purchaser with true and
complete copies of (i) the Audited Financial Statements, (ii) the Unaudited
Financial Statements, (iii) the June 30, 1995 Statement, (iv) the Unaudited
Partnership Financial Statements, (v) the Capital Expenditure Statement, and
(vi) the Audited Division Statements.
(b) The Audited Financial Statements are true and correct
in all material respects and fairly present the consolidated financial position
of the Company and its Subsidiaries as of the respective dates thereof, and the
results of operations and cash flows for the Company and its Subsidiaries as of
the respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved.
(c) The Unaudited Financial Statements are true and
correct in all material respects and fairly present the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
thereof, and the results of operations and cash flows for the Company and its
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with GAAP consistently applied during the periods
involved, subject to normal year-end adjustments, the adjustments described in
Schedule 7.9, and the absence of footnotes required by GAAP.
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(d) The June 30, 1995 Statement is true and correct in
all material respects and fairly presents the results of operations of the
Business together with PPI as of the date and for the period set forth therein
in conformity with GAAP consistently applied during the period involved,
subject to normal year-end adjustments, the adjustments described in Schedule
7.9, and the absence of footnotes required by GAAP.
(e) The Unaudited Partnership Financial Statements are
true and correct in all material respects and fairly present the results of
operations of the Subsidiary Partnership as of the respective dates or for the
periods set forth therein in conformity with GAAP consistently applied during
the periods involved, subject to normal year-end adjustments, the adjustments
described in Schedule 7.9, and the absence of footnotes required by GAAP.
(f) The Audited Division Statements are true and correct
in all material respects and fairly present the results of operations of the
Business together with PPI as of the respective dates or for the respective
periods set forth therein in conformity with GAAP consistently applied during
the periods involved.
(g) Neither the Company nor any of its Subsidiaries has
any material liabilities, absolute or contingent, not reflected in the Audited
Division Statements, the Unaudited Terminal Operating Statements, or the
Unaudited Partnership Financial Statements, except (i) liabilities not required
under GAAP to be reflected on such financial statements or the notes thereto
(as applicable), (ii) liabilities incurred in the Ordinary Course of Business
since the date of the most recent Unaudited Terminal Operating Statement or in
the Subsidiary Partnership's ordinary course of business since the date of the
most recent Unaudited Partnership
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Financial Statement in each case consistent with past operations and not
relating to the borrowing of money and (iii) as disclosed on Schedule 7.9.
Section 7.10 Employee Plans.
(a) Types of Employee Plans. Except as set forth in
Schedule 7.10 the Company does not maintain or contribute to any "employee
pension benefit plan" or any "employee welfare benefit plan" as such terms are
defined in Section 3(2) and Section 3(1), respectively, of ERISA nor, since
April 28, 1980, has the Company participated in or contributed to a
"multi-employer plan" as such term is defined in Section 3(37) of ERISA.
(b) Prohibited Transactions. To the Company's Knowledge,
and except as disclosed in Schedule 7.10, neither the Company nor any of their
respective directors, officers, employees or agents, nor any "party in
interest" or "disqualified person", as such terms are defined in Section 3 of
ERISA and Section 4975 of the Code, has, with respect to any employee plan
identified in Section 7.10(a) hereof ("Employee Plan") engaged in or been a
party to any "prohibited transaction", as such term is defined in Section 4975
of the Code or Section 406 of ERISA.
(c) ERISA. To the Company's Knowledge, and except as
disclosed in Schedule 7.10, the Company is in substantial compliance with the
requirements prescribed by any and all statutes, orders, or governmental rules
or regulations currently in effect with respect to all Employee Plans,
including, but not limited to, ERISA and the Code, applicable to such Employee
Plans. To the Company's Knowledge, and except as disclosed in Schedule 7.10,
the Company has in all material respects performed all material obligations
required to be performed
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by it under, is not in violation in any material respect of, and has no
knowledge of any material default or violation by any other party to, any of
the Employee Plans.
(d) Qualifications. To the Company's Knowledge, each
Employee Plan intended to qualify under Section 401(a) of the Code has
heretofore been determined by the Internal Revenue Service to so qualify, and
the trusts created thereunder have heretofore been determined to be exempt from
tax under the provisions of Section 501(a) of the Code, and nothing has since
occurred which may reasonably be expected to cause the loss of such
qualification or exemption.
(e) No Carryover Liability. The consummation of this
Agreement (and the employment by the Purchaser of former employees of SPC) will
not result in any carryover liability to the Purchaser for taxes, penalties,
interest or any other claims resulting from any Employee Plan, or other
employee benefit agreement or arrangement. In addition, SPC makes the
following representations (a) as to employee pension benefit plans of the
Company: (1) no Company has become liable to the PBGC under Sections 4062,
4063, or 4064 of ERISA under which a lien could attach to the Acquired Assets
under Section 4068 of ERISA; (2) the Company has not ceased operations at a
facility so as to become subject to the provisions of Section 4062(a) of ERISA;
and (3) the Company has not made a complete or partial withdrawal from a
multi-employer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA, and (b) all group
health plans maintained by the Company have been operated in compliance with
Section 4980B(f) of the Code.
Section 7.11 No Material Adverse Change; Ordinary Course. Since
December 31, 1994, (i) there has not been any material adverse change in the
Acquired Assets, the Business,
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the Subsidiary Partnership or the business of the Subsidiary Partnership and
(ii) the Company has operated the Business in the Ordinary Course of Business
and the Subsidiary Partnership has operated its business in the Customary
Course of Business, except as set forth on Schedule 7.11 or disclosed in any
Unaudited Terminal Operating Statement or Unaudited Partnership Financial
Statement dated after December 31, 1994 that was provided to Purchaser prior to
the signing of this Agreement.
Section 7.12 Broker's, Finder's or Similar Fees. Except as set
forth on Schedule 7.12, no brokerage commissions, finder's fees or similar fees
are payable in connection with the transactions contemplated hereby. Purchaser
has no liability for any items set forth on Schedule 7.12.
Section 7.13 Patents, Trademarks. Etc. Neither the Company nor
its Subsidiaries owns or has the right to use any patents, trademarks, service
marks, trade names, copyrights, or similar rights with respect to the Acquired
Assets or the Business. To the Company's Knowledge, no right or product,
process, method, substance or other material presently sold by or employed by
the Company or any of its Subsidiaries, or which the Company or any of its
Subsidiaries contemplates selling or employing infringes upon the patents,
trademarks, service marks, copyrights or licenses that are owned by others. No
litigation is pending and no claim has been made against the Company or any of
its Subsidiaries or, to the Knowledge of the Company and its Subsidiaries, is
threatened, contesting the right of the Company or any of its Subsidiaries to
sell or use any right or product, process, method, substance or other material
presently sold by or employed by the Company or any of its Subsidiaries.
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Section 7.14 Material Contracts. The Company and the Subsidiary
Corporation have delivered to Purchaser true and correct copies of all Material
Contracts, including all amendments thereto. Schedule 2.1(c) lists all
Material Contracts, and will be updated at Closing to include any Material
Contracts entered into or amended between the date of this Agreement and the
Closing Date. Except as disclosed on Schedule 2.1(c) each Material Contract is
in effect and has not been amended or otherwise modified and is binding upon
and enforceable against the Company or the applicable Subsidiary and, to the
Company's and the Subsidiary Corporation's Knowledge, all parties thereto, in
accordance with its terms, and there is no default thereunder and to the
Knowledge of the Company and the Subsidiary Corporation no other party thereto
has issued or threatened to issue a notice of termination or cancellation.
Except as set forth on Schedule 2.1(c), no consent to the transfer or
assignment of the Material Contracts to Purchaser is required.
Section 7.15 Permits. Except as set forth on Schedule 7.15, the
Company and each Subsidiary holds all licenses, permits, franchises, approvals,
consents, waivers, exemptions, authorizations, certificates of occupancy and
similar rights and privileges which are necessary for the operation of its
Business.
Section 7.16 Environmental Matters.
(a) Except as set forth on Schedule 7.16, neither the
operation of the Business, any of the Acquired Assets nor the operation of the
business of the Subsidiary Partnership (i) violates any Environmental Law in
effect on the date hereof, and without regard for future modifications or
amendments, (ii) is subject to any pending or threatened action, suit,
investigation, or other proceeding by any Governmental Authority with respect
to an alleged
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violation of Environmental Law, (iii) uses, and there is not located on the
Real Estate, any Hazardous Substances other than (x) those forming a part of
the Inventory and supplies of the Company and (y) petroleum products owned by
customers or by SPC, which in each case are maintained in accordance with
Environmental Law in effect on the date hereof, and without regard for future
modifications or amendments or (iv) uses, and there is not located on the ROW
Real Estate, any Hazardous Substances other than (x) those forming a part of
the Inventory and supplies of the Company and (y) petroleum products owned by
customers or by SPC, which in each case are maintained in accordance with
Environmental Law in effect on the date hereof, and without regard for future
modifications or amendments.
(b) Except as set forth on Schedule 7.16, (i) there
exists no condition arising from the presence, release, threat of release,
placement on or under the Real Estate or the ROW Real Estate, use, storage,
handling, generation, or disposal of any Hazardous Substance such as would
require Remedial Work or give rise to other liability or obligation, (ii) each
of the Company and the Subsidiaries has been issued all material licenses,
permits, and certificates required under Environmental Law in effect on the
date hereof for the conduct of its business and (iii) there exists no past or
present violation of Environmental Law in effect on the date hereof with
respect to the Business or the Acquired Assets that gives rise to liability or
obligation now or in the future. Schedule 7.16 describes all conditions as to
which, to the Knowledge of the Company and the Subsidiary Corporation, Remedial
Work with respect to the Business or the Acquired Assets or the business of the
Subsidiary Partnership is required, and the scope and methodology of such
Remedial Work as currently in process or contemplated by the Company or the
Subsidiary Corporation. Neither the Company nor the Subsidiary
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Corporation has any liability or obligation, accrued, contingent or otherwise,
with respect to the matters described on Schedule 7.16, except for the
obligation to complete Remedial Work. The representation and warranty
contained in this Section 7.16 is the only representation and warranty made by
SPC or the Subsidiary Corporation with respect to environmental matters or
Environmental Law, and no other representation or warranty made herein shall be
applicable to such matters or Environmental Law. Notwithstanding the
disclosure to Purchaser on Schedule 7.16 or pursuant to Section 5.2 of any
Remedial Work for which a Purchase Price adjustment is not available pursuant
to Section 3.1.2.3(ii), such Remedial Work shall be regarded as a breach of
this Section 7.16 for purposes of Section 11.7.1.
Section 7.17 Tax Returns and Liabilities.
(a) Returns. The Company has delivered to Purchaser true
and complete copies of all Florida, Maryland and District of Columbia income
tax returns relating to the operations of the Company and all federal, state,
local and foreign income tax returns relating to the operations of the
Subsidiary Partnership for the fiscal years 1992, 1993, and 1994, as
applicable.
(b) All Returns Filed. Except as set forth on Schedule
7.17:
(i) all tax returns and reports of every kind
(including, without limitation, information and withholding returns and reports
of or relating to any income taxes, franchise taxes, real and personal
property taxes, withholding taxes, employee compensation taxes, sales and use
taxes and all other taxes of any kind applicable to the Company or any of the
Subsidiaries) that are required to be filed on or before the Closing Date in
accordance with Applicable Law by or with respect to the Company, any
Subsidiary, or any other corporation
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that is or was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which the Company was a member for any
period ending on or prior to the Closing Date have been or will be duly and
timely filed, and are or will be accurate and complete in all material
respects;
(ii) all taxes due have been or will be paid in
full, the amounts so paid have been adequate to pay all income, franchise, real
and personal property, withholding and employment compensation taxes, sales and
use taxes and all other taxes of any kind whatsoever, including interest and
penalties, due and payable by the Company or any Subsidiary for all periods
ending on or before the date hereof;
(iii) all assessed deficiencies, if any, have been
fully paid and satisfied and no deficiencies for any of such taxes have been
asserted or threatened;
(iv) there are no outstanding agreements by the
Company or any Subsidiary for the extension of time for the assessment of any
tax;
(v) neither the Company nor any Subsidiary is
currently being audited by the Internal Revenue Service or by the District of
Columbia or by any other taxing authorities and no such audit has been
threatened; and
(vi) the total amounts set up as liabilities for
current and deferred taxes have been prepared in accordance with GAAP in the
Audited Financial Statements and the Unaudited Financial Statements and are
sufficient to cover the payment of all material taxes that are or are hereafter
finally determined to be, or to have been, due with respect to the operations
of the Company and the Subsidiaries through the periods covered thereby.
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Section 7.18 Employee Relations. The Company believes that its
relationship with its employees is generally good. There is no pending or, to
the Knowledge of the Company, threatened labor dispute or union organization
campaign. None of the Company's employees is represented by any labor union or
is subject to a collective bargaining agreement.
Section 7.19 Restrictive Agreements. Except as set forth on
Schedule 7.19, the Company is not a party to any agreements restricting or
limiting the activities of the Business.
Section 7.20 List of Assets. The Acquired Assets include, but are
not limited to, and there shall be transferred to Purchaser at Closing, all of
the assets listed on Schedules 2.1(a), 2.1(b), 2.1(c), and 2.1(i).
Section 7.21 Information Furnished. Neither this Agreement nor
any instrument or document furnished to Purchaser hereunder, when considered as
a whole, contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
Section 7.22 All Assets Included. Except for the Excluded Assets,
the Acquired Assets include all assets of any nature, real or personal,
tangible or intangible, necessary for or used in the operation of the Business
as operated by the Company.
Section 7.23 Special Representations Regarding Subsidiary Entities.
7.23.1 Partnership Agreement. SPCT has delivered to
Purchaser a true, correct and complete copy of the Partnership Agreement. As
of the date hereof, (i) no action has been taken by the Subsidiary Partnership
nor has any written proposal been made by its partners to amend the
Partnership Agreement, (ii) nor has any action been taken by the Subsidiary
Partnership, the Subsidiary Corporation, or to the Knowledge of the Company and
the
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Subsidiary Corporation, any other partner, pursuant to the terms of the
Partnership Agreement or otherwise, in contemplation of the liquidation or
dissolution of the Subsidiary Partnership, (iii) nor are there any proceedings
pending or, to the Knowledge of the Company or the Subsidiary Corporation,
threatened contemplating the liquidation or dissolution of the Subsidiary
Partnership or threatening its existence, (iv) nor has any event or action
occurred, nor do any facts exist, that would cause a dissolution or liquidation
of the Subsidiary Partnership. The Partnership Agreement (i) has been duly
authorized, executed and delivered by the Subsidiary Corporation, and, to the
Company and Subsidiary Corporation's Knowledge, the other party named therein
and (ii) constitutes the valid and binding obligation of the Subsidiary
Corporation and to the Knowledge of the Company and Subsidiary Corporation, the
other party named therein.
7.23.2 Issuance or Transfer of Partnership Interests. Except
as set forth in the Partnership Agreement, there are no commitments,
agreements, or arrangements of any kind relating to the transfer, delivery or
sale of any additional interests in the Subsidiary Partnership, the Partnership
Interest or, to the Knowledge of the Company and the Subsidiary Corporation,
any other interest in the Partnership.
7.23.3 Ownership of Subsidiary Partnership; Title to
Partnership Interest. Aectra and the Subsidiary Corporation are the only
partners of the Subsidiary Partnership. The Subsidiary Corporation is the sole
owner of good and marketable title to the Partnership Interest. The Subsidiary
Corporation owns such Partnership Interest free and clear of all Liens or other
restrictions (except as set forth in the Partnership Agreement and for those
Liens which will be released at Closing). Upon Closing, Purchaser will acquire
good and marketable title to the
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Partnership Interest free and clear of all Liens or other restrictions, other
than restrictions set forth in the Partnership Agreement and Liens, if any,
created by Purchaser.
7.23.4 Capital Accounts. Pursuant to the Partnership
Agreement, the Subsidiary Partnership maintains a separate capital account
("Capital Account") for each of its partners which reflects, among other
things, each partner's capital contributions, and allocable share of net
income, losses and deductions. As of June 30, 1995, the amount in the
Subsidiary Corporation's Capital Account is $(41,690.36), and the amount of
Aectra's Capital Account is $(41,690.36). As of the Closing, the Subsidiary
Corporation's Capital Account will not be less than Aectra's Capital Account
and will not be less than zero (0).
7.23.5 Subsidiary Partnership Business and Assets. The
exclusive business of the Subsidiary Partnership consists of owning certain
real and personal property comprising a petroleum bulk terminal located at 1
Woodcock Road, Savannah, Georgia and leasing such property to the Company.
Other than the Agreement of Lease dated May 31, 1994 by and between the
Subsidiary Partnership and the Company, the Subsidiary Partnership has no
material contracts.
Section 7.24 Right-of-way Agreements.
(a) Schedule 2.1(i) sets forth a list of all the
Right-of-way Agreements. The Company has delivered to Purchaser true and
correct copies of the Right-of-way Agreements, and any amendments thereto.
Except as disclosed on Schedule 2.1(i), each such Right-of-way Agreement is (i)
in effect and has not been amended or otherwise modified, and (ii) is binding
upon and enforceable against the Company and, to the Company's Knowledge, all
parties thereto in accordance with its terms, and there is no default
thereunder and, to the Knowledge of the
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Company, no other party thereto has issued or threatened to issue a notice of
termination or cancellation.
(b) Except as set forth on Schedule 2.1(i), no consent is
required for the transfer or assignment of SPC's rights and obligations under
the Right-of-way Agreements to Purchaser. The ROW Real Estate is free and
clear of Liens (other than Liens, if any, that will be released in full at
Closing) and subject to Permitted Encumbrances.
(c) The Right-of-way Agreements for the Benning Pipeline
grant SPC the right to operate the Benning Pipeline and conduct a portion of
the Business thereon as it has been operated by SPC during the last twelve
months.
(d) The Pipeline is in good operating condition and
repair, ordinary wear and tear excepted, and has been maintained in accordance
with industry standards and in compliance with all governmental requirements.
ARTICLE 8.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER AND THE GUARANTOR
The Purchaser and the Guarantor, jointly and severally, represent and
warrant to SPC and SPCT as follows as of the date of this Agreement and as of
the Closing Date:
Section 8.1 Authorization; No Contravention. The execution,
delivery and performance by Purchaser and Guarantor of this Agreement: (a) are
within Purchaser's and Guarantor's partnership power and authority and has been
duly authorized by all necessary action; (b) does not contravene the terms of
Purchaser's or Guarantor's respective limited
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partnership agreements; and (c) will not violate, conflict with or result in
any breach or default under any contractual obligation of Purchaser or
Guarantor, or violate any Applicable Law.
Section 8.2 Binding Effect. This Agreement has been duly
executed and delivered by Purchaser and Guarantor, and constitutes the legal,
valid and binding obligation of Purchaser and Guarantor enforceable against
each of them in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors rights generally or by equitable principles relating
to enforceability.
Section 8.3 Broker's, Finder's or Similar Fees. No brokerage
commissions, finders fees or similar fees are payable in connection with the
transactions contemplated hereby under any agreements made by or with
Purchaser.
Section 8.4 Governmental Authorization; Third Party Consent. No
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Applicable Law, and no lapse of a waiting period under
Applicable Law, is necessary or required in connection with the execution,
delivery or performance by Purchaser or Guarantor (other than compliance with
the HSR Act) or enforcement against Purchaser or Guarantor of this Agreement.
Section 8.5 Sufficient Funds. As of the date hereof, Purchaser
has sufficient funds or has approved financing commitments which will enable it
to close the transactions contemplated under this Agreement. As of the Closing
Date, Purchaser will have funds available to it sufficient to close and to
fulfill its obligations hereunder.
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters.
After giving effect to the financing to be incurred by Purchaser in connection
with its consummation of the
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transactions contemplated hereby, Purchaser will not be as of the Closing Date
(i) "insolvent" nor will it become "insolvent" as the result of such
transactions, (ii) engaged in a business or transaction for which any property
or assets remaining with Purchaser would be "unreasonably little" or
"unreasonably small in relation to its business" or the transaction, or (iii)
in a position where it "intends to incur, or believes that it would incur,
debts that would be beyond its ability to pay as such debts mature," in each
case as such quoted terms are used in Section 548 of the United States
Bankruptcy Code of 1978, as amended, the Uniform Fraudulent Conveyances Act and
the Uniform Fraudulent Transfer Act.
Section 8.7 Litigation. There are no legal actions, suits,
proceedings, or claims pending, or to the Knowledge of Purchaser or Guarantor,
threatened, before any Governmental Authority against or affecting Purchaser or
Guarantor (a) with respect to this Agreement, or any transactions contemplated
hereby, or (b) which would be reasonably likely to have an adverse effect on
the ability of the Purchaser or Guarantor to perform their respective
obligations hereunder. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any Governmental Authority
purporting to enjoin Purchaser or Guarantor with respect to, or restrain
Purchaser's or Guarantor's execution, delivery or performance of, this
Agreement.
ARTICLE 9
CLOSING
Section 9.1.A Time and Place. The consummation of the purchase and
sale of the Acquired Assets (the "Closing") shall take place at the offices of
Ginsburg, Feldman & Bress
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at 1250 Connecticut Avenue, Washington, D.C. at 10:00 a.m. Washington time on
October 31, 1995 (the "Closing Date"), or such other date, time, and place as
the parties shall agree. At Closing, Purchaser shall be entitled to physical
possession of the Real Estate and Acquired Assets, and SPC shall surrender the
same to Purchaser.
Section 9.1.B Effective Date. The transactions contemplated by this
Agreement shall be effective at 12:01 A.M. on the Closing Date, without regard
to the date of recordation of deeds or other transfer documents.
Section 9.2.A Documents and Instruments to be Delivered by SPC. At
Closing, SPC shall deliver to Purchaser (or, with respect to transfer documents
for the Real Estate, deliver to the Presidential Title, Inc. sufficiently prior
to Closing to permit recording at the time of Closing):
(a) bills of sale, assignments, limited warranty deeds,
the Steuart License Agreement, signed vehicle registrations, and such other
instruments as shall be required to transfer title to the Acquired Assets to
Purchaser, free of Liens (except Permitted Encumbrances), all in form customary
in the jurisdiction which the Acquired Assets are located and all to be in form
reasonably satisfactory to both parties;
(b) A certificate of an officer of SPC stating that (i)
SPC has complied with all of the covenants imposed on it by this Agreement to
the extent they are required to be complied with prior to the Closing, and (ii)
that the representations and warranties made by SPC are in all material
respects true and correct at Closing, all as required by Sections 5.1, 5.2 and
5.3;
(c) the legal opinion required by Section 5.5;
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(d) copies of all consents, waivers and approvals
referred to in Section 5.6;
(e) copies of the resolutions of SPC's board of directors
and of any action required by SPC's stockholders authorizing the execution and
delivery of this Agreement, certified by SPC's secretary or assistant
secretary; and
(f) a good standing certificate from the State of
Delaware dated as of a date not more than 20 days prior to the Closing Date.
Section 9.2.B Documents and Instruments to be Delivered by SPCT.
At Closing, SPCT shall deliver to Purchaser:
(a) an assignment transferring the Partnership Interest
to Purchaser free of Liens (except Permitted Encumbrances), in a form
reasonably satisfactory to both parties;
(b) the certificates required by Sections 5.1, 5.2, 5.3
and 5.10;
(c) copies of all consents, waivers and approvals,
referred to in Section 5.6;
(d) copies of the resolutions of SPCT's board of
directors and of any action required by SPCT's stockholder authorizing the
execution and delivery of this Agreement, certified by SPCT's secretary or
assistant secretary; and
(e) a good standing certificate from the State of
Delaware dated as of a date not more than 20 days prior to the Closing Date.
Section 9.3.A Documents and Instruments to be Delivered by
Purchaser. At Closing, Purchaser shall deliver to SPC:
(a) the Purchase Price or Adjusted Purchase Price, as the
case may be, by bank check or wire transfer of immediately available funds, at
SPC's election, and, if by wire transfer, to such account as SPC may notify to
Purchaser not less than two Business Days prior
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to the Closing Date, and SPCT agrees that such delivery of the Purchase Price
to SPC shall constitute delivery to SPCT of all Purchase Price owed to it
hereunder;
(b) the legal opinion required by Section 6.4;
(c) a certificate of an officer of the general partner of
the Purchaser stating that (i) Purchaser has complied with all of the covenants
imposed on it by this Agreement to the extent they are required to be complied
with prior to the Closing, and (ii) that the representations and warranties
made by Purchaser are in all material respects true and correct at Closing, all
as required by Sections 6.1 and 6.2; and
(d) copies of the resolutions of the board of directors
of Purchaser's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Purchaser's
general partner.
Section 9.3.B Documents and Instruments to be Delivered by Guarantor.
At Closing, Guarantor shall deliver to SPC:
(a) the legal opinion required by Section 6.4;
(b) a certificate of an officer of the general partner of
the Guarantor stating that (i) Guarantor has complied with all of the covenants
imposed on it by this Agreement to the extent they are required to be complied
with prior to the Closing, and (ii) that the representations and warranties
made by Guarantor are in all material respects true and correct at Closing, all
as required by Sections 6.1 and 6.2; and
(c) copies of the resolutions of the board of directors
of Guarantor's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Guarantor's
general partner.
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Section 9.4 Inventories and Tank Bottoms.
9.4.1 Inventories. On the Closing Date all of the petroleum
products and other liquids in bulk storage tanks at the Terminals shall be
inventoried, gauged and sampled by representatives of Purchaser and SPC, and
the petroleum products samples shall be promptly tested by an independent
testing laboratory mutually chosen by the parties (at their joint expense) to
verify the specifications of such petroleum products that are owned by SPC's
northern and southern marketing divisions, and by SPC's customers, in
accordance with the procedures set forth in Exhibit 9.4.1. SPC will be
responsible for (i) any shortages in the inventories (and will be credited with
any overages of inventories other than tank bottoms), and (ii) any petroleum
products that do not meet the owner's specifications for such product, and
shall indemnify and hold Purchaser harmless from liabilities or obligations
resulting therefrom. Shortages and overages in the inventories (other than
tank bottoms) shall be determined as soon as practicable after Closing. SPC
shall have the right to resolve any specification matter with the customer,
including disputing customer claims, prior to Purchaser reaching any settlement
therefor.
9.4.2. Wastes. Representatives of Purchaser and SPC shall
jointly inventory all wastes (including waste water) stored in holding tanks
and separators. SPC shall reimburse Purchaser for the costs, if any, incurred
in the disposal of such volumes of waste which cannot legally be disposed of
through the existing systems at the terminal locations to the extent the total
aggregate cost for all locations (including the cost for waste disposal from
the Pipeline, as defined under the PPI Agreement) exceeds one hundred thousand
dollars ($100,000) after consideration of amounts, if any, paid by SPC's
customers. Purchaser shall dispose of said wastes within thirty (30) days of
Closing Date and shall submit copies of invoices and manifests
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to SPC within sixty (60) days of the Closing Date. SPC shall pay Purchaser
within forty-five (45) days of receipt of invoices. Liquid waste as used in
this Section 9.4.2 does not include the tank bottoms portion of the Inventory
covered by Section 9.4.3.
9.4.3 Tank Bottoms. On the Closing Date all tank bottoms
shall be inventoried, gauged and sampled by representatives of the parties, and
shall be tested promptly by an independent testing laboratory mutually chosen
by the parties (at their joint expense), to determine the number of barrels of
merchantable petroleum product contained therein, in accordance with the
procedures set forth in Exhibit 9.4.3. "Merchantable petroleum product" for
this purpose means petroleum product that is free from non-petroleum substances
such as water or rust. The Purchase Price shall be reduced, dollar-for-dollar,
by the fair market value of the shortfall, if any, between 60,750 barrels of
merchantable petroleum product and the number of barrels of merchantable
petroleum product in the tank bottoms included in the Inventory on the Closing
Date. "Fair market value" for these purposes shall be determined by Platts
price on the Closing Date for 2% No. 6 oil, New York Harbor Posting. To the
extent any monies are due to Purchaser by virtue of this Section 9.4.3, it
shall be paid by SPC within two Business Days of receipt of the report from the
independent testing laboratory referred to above.
ARTICLE 10
TERMINATION
Section 10.1 Grounds for Termination. This Agreement may be
terminated as follows:
(a) by mutual agreement of the parties, at any time;
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(b) by either party if the Closing does not occur on or
before January 1, 1996;
(c) by SPC, if the Aggregate Purchase Price or the
Aggregate Adjusted Purchase Price, as applicable, determined pursuant to the
terms of this Agreement, the Cockpit Agreement and the PPI Agreement, without
regard to Section 12.14, the accounts receivable collection section, of this
Agreement and the PPI Agreement, and without regard to Section 9.4.3 of this
Agreement, totals less than Eighty Million Dollars ($80,000,000), unless
Purchaser is willing in that event to pay the aggregate sum of Eighty Million
Dollars ($80,000,000) for the assets sold under this Agreement, the Cockpit
Agreement and the PPI Agreement.
(d) by SPC at any time after November 30, 1995, if the
conditions to Closing set forth in Article 6 have not been met by that date,
unless the failure to meet such condition is attributable to any fault or
neglect of SPC;
(e) by Purchaser at any time after November 30, 1995, if
the conditions to Closing set forth in Article 5 have not been met by that
date, unless the failure to meet such condition is attributable to any fault or
neglect of Purchaser;
(f) by Purchaser if a Major Loss occurs, provided that
Purchaser gives notice of its intent to terminate within ten (10) Business Days
after it has received notice of such Major Loss;
(g) by Purchaser if it discovers a material breach of any
representation or warranty made by SPC which SPC is unable to cure within
thirty (30) days after having received notice of such breach;
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(h) by Purchaser if the Aggregate Net Remedial Cost
(whether or not resulting in a Purchase Price adjustment) determined pursuant
to Sections 3.1.2.2 and 3.1.2.3 of this Agreement, the PPI Agreement and the
Cockpit Agreement exceeds six million dollars ($6,000,000);
(i) by SPC if it discovers a material breach of any
representation or warranty made by Purchaser that Purchaser is unable to cure
within thirty (30) days after having received notice of such breach; and
(j) by Purchaser pursuant to Section 3.1.2.4.
Section 10.2 Effect of Termination. If this Agreement terminates:
(a) neither party shall have any obligation to the other
party, except that such termination shall be without prejudice to the rights of
any party resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of the other party under
this Agreement, provided that a failure by a party to close when all of the
conditions to such party's obligation to close have been met shall be deemed to
be an intentional breach of such party's covenants and agreements hereunder.
(b) promptly upon termination for any reason, Purchaser
shall return to SPC or SPCT at Purchaser's expense all documents (including
copies thereof) received from SPC or SPCT prior to, during or after the Due
Diligence Period;
(c) Purchaser shall not offer employment to any of SPC's
employees, without the prior consent of SPC, for two years following the date
of this Agreement; and
(d) the provisions of Section 3.1.1, Section 10.2, and
Sections 12.1, 12.2, 12.3,
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12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 shall survive the termination of this
Agreement and continue in full force and effect.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by SPC. Subject to the provisions of
this Article 11, the Company agrees to indemnify, defend, and hold harmless the
Purchaser and its Affiliates, officers, directors, agents, shareholders,
partners, and employees, (each, a "Purchaser Indemnified Party") from and
against any and all liabilities, losses, claims (whether or not successful),
damages, and expenses (including reasonable fees, and disbursements of counsel)
(collectively, "Liabilities") resulting from or arising out of (i) any breach
of any representation or warranty, covenant or agreement of the Company or the
Subsidiary Corporation set forth in this Agreement, (ii) non-compliance with
any applicable transfer or bulk sales law, (iii) obligations or liabilities of
the Company, the Subsidiary Corporation or the Subsidiary Partnership related
to or arising out of acts, events or omissions occurring prior to the Closing
and not expressly assumed by Purchaser hereunder or indemnified against by
Purchaser pursuant to Section 11.7.3, (iv) liabilities or obligations related
to any amendment to a Material Contract or Right-of-Way Agreement or Real
Estate Lease not delivered to Purchaser prior to the date of this Agreement,
unless such amendment is subsequently delivered to and accepted by Purchaser,
or (v) all taxes, assessments or levies relating to the seven (7) parcels of
land described in Exhibit 5.12, provided, however, that the Company shall not
be liable under this
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Section 11.1 to any Purchaser Indemnified Party for any amount paid in
settlement of claims without the Company's consent, unless such consent was
requested and unreasonably withheld.
Section 11.2 Survival of Representations and Warranties. The
representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7
and 7.12 shall survive the Closing without limitation of time. The
representations and warranties set forth in Section 7.16 (Environmental
Matters) shall survive the Closing and shall expire three years after the
Closing Date. The representations and warranties set forth in Section 7.17
(Taxes) shall survive the Closing and shall expire on a date that is ninety
(90) days following the expiration of the applicable statute of limitations.
All other representations and warranties shall survive the Closing and shall
expire two years after the Closing Date. Any right of Purchaser to make a
claim against the Company for a breach of any covenant or agreement of the
Company or the Subsidiary Corporation herein shall survive the Closing and
shall expire one hundred eighty (180) days after the date on which the Company
or Subsidiary Corporation was obligated to comply with such covenant or
agreement. Any claim for breach of a representation and warranty, or covenant
or agreement, must be made by Purchaser by a demand for arbitration to the
Company prior to the expiration of such representation and warranty, or the
right to make a claim for a breach of such covenant or agreement, and any such
claims covered by such demands made by Purchaser to the Company within such
time periods shall survive until resolved.
Section 11.3 Indemnification by Purchaser. Purchaser, its
successors and assigns, jointly and severally, agree to indemnify, defend, and
hold harmless the Company, the Subsidiary Corporation and their Affiliates,
officers, directors, shareholders, partners, warrant holders, agents, and
employees, (each, an "SPC Indemnified Party") from and against any and
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all Liabilities resulting from or arising out of (i) any breach of any
representation, warranty, covenant or agreement of Purchaser or Guarantor set
forth in this Agreement or (ii) obligations or liabilities of the Purchaser
with respect to the Business or the Acquired Assets, including those which may
be imposed upon any SPC Indemnified Party, related to or arising out of acts,
events or omissions occurring after the Closing and not expressly assumed by
any SPC Indemnified Party hereunder and specifically including (but not limited
to) liabilities or obligations arising from the failure of Purchaser to assume
any post-Closing liabilities as required by Section 2.2, provided, however,
that Purchaser shall not be liable under this Section 11.3 to any SPC
Indemnified Party for any amount paid in settlement of claims without
Purchaser's consent unless such consent was requested and unreasonably
withheld, and provided further that the right of the SPC Indemnified Parties to
make a claim for breach of any covenants or agreements of Purchaser herein
shall expire one hundred eighty (180) days after the date on which the
Purchaser was obligated to comply with the covenant or agreement.
Section 11.4 Establishment of Escrow Fund. (a) At Closing, the
Company shall deposit from the proceeds of the Purchase Price the sum of Five
Million Dollars ($5,000,000) (together with interest earned thereon, the
"Escrow Fund") with the Escrow Agent named in the Escrow Agreement attached as
Exhibit 11.4 to this Agreement, to be held in accordance with the terms of the
Escrow Agreement as a fund against which the Purchaser Indemnified Parties can
make indemnification claims under the Purchase Agreements (a "Claim"). Any
Claim shall be addressed first to the Escrow Agent, until the Escrow Fund has
been fully paid out, and then to the Company, PPI or SIC, as applicable,
provided, however, Claims shall only be made to the Company, PPI or SIC, as
applicable, for Claims for which there is no limitation of amount
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under Section 11.5 of the Purchase Agreements because all other Claims can only
be paid out of the Escrow Fund. The Escrow Agreement shall provide that (i)
two (2) years after the Closing Date, the Escrow Fund shall be reduced to an
amount equal to the sum of (x) Two Million Dollars ($2,000,000) plus (y) the
aggregate amount of all unresolved Claims against the Escrow Fund, and all
amounts in excess of such amount shall be paid to SPC, provided, however, that
the amount in excess of Two Million Dollars ($2,000,000) retained in the Escrow
Fund for each unresolved Claim shall be released from the Escrow Fund upon
resolution of such Claim, with the agreed amount, if any, of the Claim being
paid to Purchaser and the remainder, if any, of the amount originally retained
in the Escrow Fund for such Claim being paid to SPC (ii) three (3) years after
the Closing Date, the Escrow Fund shall be reduced to an amount equal to the
aggregate amount of all unresolved Claims against the Escrow Fund and amounts
in excess of such amount shall be paid to SPC, (iii) thereafter, any balance
remaining in the Escrow Fund for each unresolved Claim shall be released from
the Escrow Fund upon resolution of such Claim, with the agreed amount, if any,
of the Claim being paid to Purchaser and the remainder, if any, of the amount
originally retained in the Escrow Fund for such Claim being paid to SPC and
(iv) the Escrow Agreement shall terminate on the later to occur of three (3)
years after the Closing Date and the settlement and satisfaction of all Claims
against the Escrow Fund.
(b) With respect to each Claim made against the Escrow
Fund, SPC and Purchaser shall attempt to reach agreement on the amount, if any,
that should be paid to Purchaser with respect to the Claim, and if an agreement
is reached, SPC and Purchaser shall deliver joint written instructions to the
Escrow Agent regarding the disposition of the Claim and
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the amount, if any, that should be paid to Purchaser out of the Escrow Fund
with respect to the Claim. If SPC and Purchaser are unable to reach agreement
regarding the disposition or amount of a Claim, the Claim shall be settled by
arbitration in accordance with the provisions of this Agreement, and the
arbitrator shall, as part of the arbitration award, instruct SPC and Purchaser
to deliver to the Escrow Agent joint written instructions stating the
disposition of the Claim pursuant to the arbitration and the amount, if any,
that should be paid to Purchaser out of the Escrow Fund with respect to the
Claim pursuant to the arbitration award.
(c) To the extent Purchaser is entitled to receive
payment from the Escrow Fund of an amount with respect to any Claim that is not
subject to limitation in amount under Section 11.5 of the Purchase Agreements,
Purchaser may request that the Escrow Agent delay payment from the Escrow Fund
of part or all of such amount until payment of such amount from the Escrow Fund
is requested by Purchaser. To the extent the amount payable to Purchaser with
respect to any Claim or Claims that are not subject to limitation under Section
11.5 of the Purchase Agreements is in excess of the undisbursed amount of the
Escrow Fund at the time Purchaser requests payment, Purchaser may require
payment directly from SPC, SPCT, SIC or PPI, as applicable, of the amounts not
paid from the Escrow Fund.
Section 11.5 Limits on Liability. With the exception of (i)
claims arising under Sections 7.1, 7.2, 7.3, 7.4, 7.7 (but only to the extent
that any claim is based on the specific wording in each of the limited warranty
deeds by which the Real Estate is conveyed) and 7.12 (ii) claims for fines or
penalties imposed by Governmental Authorities, (iii) claims for Liens that are
not Permitted Encumbrances, (iv) claims related to breaches of the agreements
of the Company in Section 9.4, (v) claims for a breach by the Company of the
covenant contained in Section 3.11,
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(vi) claims under Section 11.1(iv), and (vii) claims under Section 11.1(v), for
which there shall be no limitation of amount, the Company's maximum liability
for Liabilities under the Company's indemnifications under this Agreement,
including without limitation Section 11.7.1.1, shall be the Escrow Fund, and
neither the Company, the Subsidiary Corporation nor any of their Affiliates,
shareholders, warrant holders, partners, officers, directors, agents and
employees shall have any liability for such Liabilities in excess of the
Escrow Fund.
Section 11.6 Minimum Claim Amount. With the exception of (i)
claims arising under Section 11.7.1.1, (ii) claims for fines or penalties
imposed by Governmental Authorities, (iii) claims for Liens that are not
Permitted Encumbrances, (iv) claims related to breaches of the agreements of
the Company in Section 9.4, (v) claims for a breach by the Company of the
covenant contained in Section 3.11, (vi) claims under Section 11.1(iv), and
(vii) claims under Section 11.1(v), for which there shall be no minimum claim,
Purchaser shall not be entitled to assert any claim for indemnification
hereunder until the aggregate of all claims for indemnification under this
Agreement, the PPI Agreement and the Cockpit Agreement collectively exceeds
Seven Hundred and Fifty Thousand Dollars ($750,000) and then only for amounts
in excess of such Seven Hundred and Fifty Thousand Dollars ($750,000). In each
case in which Purchaser determines that it has a claim for indemnification,
while the aggregate of all claims under this Agreement, the PPI Agreement and
the Cockpit Agreement collectively is less than Seven Hundred and Fifty
Thousand Dollars ($750,000), it shall promptly notify SPC of all such claims in
an amount over $1,000.00, which notice shall describe the claim with
particularity and state the amount of such claim. If SPC does not challenge
the validity of the claim within thirty (30) days of receiving notice thereof,
it shall be deemed to have been
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accepted. If SPC disputes the claim, it shall so notify Purchaser, in which
case the parties shall take such steps as are necessary to preserve their
respective positions with respect to such claim and any evidence relating
thereto, so that the claim may be challenged by SPC if the aggregate of all
claims under this Agreement, the PPI Agreement and the Cockpit Agreement
collectively exceeds Seven Hundred and Fifty Thousand Dollars ($750,000).
Notice of all claims in an amount of $1,000.00 or less shall be provided to SPC
promptly after the aggregate of all claims under this Agreement, the PPI
Agreement and the Cockpit Agreement collectively exceed Seven Hundred and Fifty
Thousand Dollars ($750,000).
Section 11.7 Special Environmental Indemnification and
Post-Closing Covenants by Purchaser.
11.7.1.1 To the extent that, prior to the date three years
after the Closing Date, Purchaser discovers and notifies SPC of facts or
circumstances that give rise to Remedial Work (including Remedial Work related
to matters discovered prior to the Closing or disclosed on Schedule 7.16 under
this Agreement or Schedules 7.16 of the PPI Agreement or the Cockpit Agreement)
with respect to the Acquired Assets or the Business or the assets or business
acquired by Purchaser under the PPI Agreement or the Cockpit Agreement (except
for Remedial Work attributable to (i) changes in Environmental Law occurring
after the Closing Date, or (ii) events occurring or actions of Persons other
than SPC, SPCT, SIC or PPI taken after the Closing Date), the Aggregate Net
Remedial Cost for Remedial Work with respect to the Acquired Assets or the
Business being acquired by the Purchaser under this Agreement, the assets or
business being acquired by the Purchaser under the PPI Agreement, or the assets
being acquired by the Purchaser under the Cockpit Agreement shall be paid as
follows:
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(i) an amount equal to the sum of (X) One Million
Dollars ($1,000,000) and (Y) any reduction in the Aggregate Purchase Price
pursuant to Section 3.1.2.2 or 3.1.2.3 shall be paid by Purchaser;
(ii) the next Two Million Five Hundred Thousand
Dollars ($2,500,000) of such Aggregate Net Remedial Costs shall be paid, as
incurred pari passu, eighty percent (80%) by SPC (and Purchaser shall make a
claim on the Escrow Fund therefor) and twenty percent (20%) by Purchaser; and
(iii) thereafter Purchaser shall pay all additional
amounts of such Aggregate Net Remedial Costs related to the Acquired Assets or
the Business being acquired by the Purchaser under this Agreement, the assets
or business being acquired by the Purchaser under the PPI Agreement, or the
assets being acquired by the Purchaser under the Cockpit Agreement.
Notwithstanding the preceding portions of this Section 11.7.1.1,
Purchaser shall not be liable for or be required to pay any Aggregate Net
Remedial Costs resulting from or arising out of any action or omission after
Closing of any SPC Indemnified Party, any SIC Indemnified Party (as defined in
the Cockpit Agreement) or any PPI Indemnified Party (as defined in the PPI
Agreement) that constitutes or causes a violation of Environmental Law with
respect to the Business or the Acquired Assets being acquired by the Purchaser
under this Agreement, the assets or business being acquired by the Purchaser
under the PPI Agreement, or the assets being acquired by the Purchaser under
the Cockpit Agreement or gives rise to the need to perform Remedial Work with
respect thereto, unless otherwise agreed to in writing by Purchaser.
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11.7.1.2 Purchaser shall not alter or change the scope or
methodology of Remedial Work described on Schedule 7.16 except as required by
Applicable Law or as approved by the Company, which approval shall not be
unreasonably withheld, provided, however, that an objection shall not be deemed
unreasonable solely because it is based on an increase in the cost for
performing such Remedial Work. For so long as SPC has any liability to
Purchaser under Section 11.7.1.1, Purchaser shall use commercially reasonable
efforts to perform and complete all such required Remedial Work and shall keep
SPC informed of the progress of such Remedial Work. In addition, before
undertaking any such Remedial Work Purchaser shall notify SPC of the scope and
methodology of such Remedial Work, sufficiently in advance (except as emergency
conditions may require otherwise) to permit SPC to comment on such scope and
methodology. Recognizing that the final decision on scope and methodology
rests with Purchaser, Purchaser shall nonetheless make a good faith effort to
reach agreement with SPC regarding such scope and methodology, recognizing
SPC's financial interest therein. Purchaser shall provide SPC with copies of
all plans, reports, and correspondence submitted to any Governmental Authority
with respect to such Remedial Work. Purchaser will not agree to any such
Remedial Work or other actions that commit or bind SPC (beyond the payment of
money hereunder) without the prior consent of SPC. Purchaser will provide SPC
with copies of all invoices rendered by Persons actually performing such
Remedial Work, and SPC shall be deemed to have accepted the validity and
reasonableness of such invoices if it does not notify Purchaser to the contrary
within ten (10) Business Days of receiving the same.
11.7.2 (a) Purchaser and Guarantor acknowledge that (i)
Purchaser has reviewed copies of all documents and other materials related to
environmental matters with respect to the
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Acquired Assets and the Business that were provided by the Company or SPCT,
(ii) the Company and SPCT have specifically bargained for relief, as more
particularly described herein, from post-Closing liability resulting from
violations of Environmental Law or the performance of Remedial Work with
respect to the Acquired Assets or the Business, and (iii) the Purchase Price
and Adjusted Purchase Price, as the case may be, reflect Purchaser's
willingness to accept liability ( and Guarantor's willingness to guarantee
Purchaser's obligation to accept such liability) with respect to such matters
as more fully described below.
(b) Purchaser has agreed to assume, and Guarantor
has agreed to guarantee the obligation of Purchaser to assume, as of the
Closing all obligations and liabilities resulting from or arising out of any
actual or alleged violation of Environmental Law related to the Acquired Assets
or the Business, regardless of when such violation was supposed to have
occurred, or the performance of Remedial Work with respect to the Acquired
Assets or the Business, except for (i) fines and penalties imposed by any
Governmental Authority relating to violations of Environmental Law that
occurred prior to Closing with respect to the Acquired Assets or the Business,
(ii) payments to be made by SPC pursuant to Section 11.7.1.1, (iii) obligations
or liabilities that result from or arise out of any act or omission after the
Closing of any SPC Indemnified Party that constitutes or causes a violation of
Environmental Law with respect to the Business or the Acquired Assets or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11.
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(c) For the avoidance of any doubt, Purchaser,
Guarantor, SPC and SPCT confirm their agreement that neither SPC nor SPCT shall
have any obligation or liability post-Closing resulting from or arising out of
any actual or alleged violation of Environmental Law related to the Acquired
Assets or the Business, regardless of when such violation was supposed to have
occurred, or the performance of Remedial Work with respect to the Acquired
Assets or the Business, except (i) fines and penalties imposed by any
Governmental Authority relating to violations of Environmental Law that
occurred prior to Closing with respect to the Acquired Assets or the Business,
(ii) payments to be made by SPC pursuant to Section 11.7.1.1, (iii) obligations
or liabilities that result from or arise out of any act or omission after
Closing of any SPC Indemnified Party that constitutes or causes a violation of
Environmental Law with respect to the Business or the Acquired Assets or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11.
11.7.3 Purchaser, its successors and assigns, jointly and
severally, agree to indemnify, defend, and hold harmless each SPC Indemnified
Party from and against any and all Liabilities resulting from or arising out
of any actual or alleged violation of Environmental Law related to the Acquired
Assets or the Business, regardless of when such violation was supposed to have
occurred, or the performance of Remedial Work with respect to the Acquired
Assets or the Business, except for (i) fines and penalties imposed by any
Governmental Authority relating to violations of Environmental Law that
occurred prior to Closing with respect to the Acquired Assets or the Business,
(ii) payments to be made by SPC pursuant to Section
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11.7.1.1, (iii) obligations or liabilities that result from or arise out of any
act or omission after Closing of any SPC Indemnified Party that constitutes or
causes a violation of Environmental Law with respect to the Business or the
Acquired Assets or gives rise to the need to perform Remedial Work with respect
thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims
for a breach of the representations and warranties set forth in Section 7.16 to
the extent Purchaser is entitled to indemnity under this Article 11.
Notwithstanding the preceding provisions of this Section 11.7.3, Purchaser
shall not be liable under this Section 11.7.3 to any SPC Indemnified Party for
any amount paid in settlement without Purchaser's consent unless such consent
was requested and unreasonably withheld.
11.7.4 Purchaser shall, for a period of five (5) years after
Closing, notify the Company promptly of any claim made by any Governmental
Authority or by any Person that there has been a violation of Environmental Law
in connection with the Business or the Acquired Assets, or occurring on or from
the Real Estate or the ROW Real Estate, and shall thereafter keep the Company
informed of actions being taken or the conduct of proceedings with respect to
such claim, provided that once it has been reasonably determined to the
satisfaction of SPC that the amount required to resolve such claim (whether by
performing Remedial Work or otherwise) is less than $250,000, Purchaser shall
no longer be obligated to provide SPC with information about such claim.
Section 11.8 Notification; Counsel. Each Indemnified Party under
this Article 11 will, promptly after the receipt of notice of the commencement
of any action, investigation, claim or other proceeding against such
Indemnified Party in respect of which indemnity may be sought under this
Article 11, notify the Company and SPCT or the Purchaser, as the case may be,
in
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writing of the commencement thereof. The failure of any Indemnified Party to
give such notice shall not relieve the indemnifying party from any liability
which it may have to such Indemnified Party unless, and only to the extent
that, such omission materially adversely affects the indemnifying party's
ability to defend in such action, claim or other proceeding. In case any such
action, claim or other proceeding shall be brought against any Indemnified
Party and it shall notify the indemnifying party of the commencement thereof,
and, except as otherwise stated herein, the indemnifying party shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party. Notwithstanding the foregoing, in any
action, claim or proceeding in which both an indemnifying party, on the one
hand, and an Indemnified Party, on the other hand, is, or is reasonably likely
to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the indemnifying party's expense and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the indemnifying party, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable. In any
event, the Indemnified Party will reasonably cooperate with the indemnifying
party in any defense undertaken by an indemnifying party.
Section 11.9 Net Worth Covenant. (a) SPC agrees that for a period
of five (5) years after Closing it will maintain a net worth (assets minus
liabilities on a GAAP basis balance sheet adding back those liabilities
attributable to the above market portion of payment obligations under the
throughput agreements described in Section 5.7 and also the deferred income
taxes, if any, attributable to the proposed like kind exchange completed in
accordance with Section 3.8) in excess of $20,000,000. During the five (5)
year period, SPC shall provide to Purchaser, as
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soon as they are available, but in no event more than sixty (60) days after
year end, annual calendar year GAAP basis financial statements (and more
frequent financial statements if requested by Purchaser) and such other
information as is reasonably necessary for Purchaser to confirm compliance with
the net worth covenant described in this Section 11.9;
(b) SPC may (so long as SIC meets the net worth requirement set forth
in the next sentence), at any time during the five (5) year period, provide
Purchaser with a guaranty, in the form attached hereto as Exhibit 11.9, from
SIC in the amount of $20,000,000 and upon the delivery of such guaranty to
Purchaser the covenant contained in Section 11.9(a) shall be null and void.
Purchaser shall accept the SIC guaranty so long as SIC has, and agrees to
maintain for the remainder of the five (5) year period, a net worth equal to or
greater than $20,000,000. If SIC provides the guaranty described above, SPC
shall not thereafter be required to comply with the requirements of Section
11.9(a), and the guaranty shall state that SIC shall thereafter provide
Purchaser, at the times the SPC financial statements would have been
required under the preceding subsection (a), of this Section 11.9, a letter
from SIC's independent auditors stating that SIC's net worth (on a GAAP balance
sheet basis adding back the deferred income taxes, if any, attributable to the
proposed like-kind exchange completed in accordance with Section 3.8 and those
liabilities attributable to the above market portion of payment obligations
under the throughput agreements described in Section 5.7) is at least
$20,000,000.
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ARTICLE 12
MISCELLANEOUS
Section 12.1 Notices. All notices, requests, demands, consents,
approvals and other communications provided for or permitted hereunder shall be
made in writing and shall be delivered by hand or sent by telecopier or courier
service:
(a) if to Purchaser or Guarantor:
Kaneb Pipe Line Partners, L.P.
2435 N. Central Expressway, Suite 700
Richardson, TX 75080
Attn: Edward D. Doherty
Telecopier No.: (214) 699-1894
with a copy to:
Support Terminal Services, Inc.
17304 Preston Road, Suite 1000
Dallas, TX 75252-5623
Attn: Fred Johnson
Telecopier No.: (214) 931-6526
with a copy to:
Fulbright & Jaworski, L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
Attn: Kenneth L. Stewart
Telecopier No.: (214) 855-8200
(b) if to SPC or SPCT:
Steuart Petroleum Company
4646 40th Street, N.W.
Washington, D.C. 20016
Telecopier No.: (202) 244-5425
Attention: President, and
General Counsel
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with a copy to:
Ginsburg, Feldman and Bress, Chartered
1250 Connecticut Avenue, N.W. Suite 800
Washington, D.C. 20036
Telecopier No.: (202) 637-9195
Attention: Lee R. Marks, Esq.
with a copy to:
Steuart Investment Company
4646 40th Street, N.W.
Washington, D.C. 20016
Telecopier No.: (202) 244-1221
Attention: Guy T. Steuart II, and
John R. Clark III, Esq.
Section 12.2 Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
the parties hereto. No party hereto may assign its rights under this Agreement
without the consent of the other party, except that (i) SPC may liquidate and
dissolve without Purchaser's consent if SIC provides the guaranty as permitted
by Section 11.9, and (ii) Purchaser may assign its rights under this Agreement
to any Affiliate, but such assignment shall not relieve Purchaser or Guarantor
of any of their obligations hereunder to the extent such obligations are not
performed by Purchaser's assignee.
Section 12.3 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are
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cumulative and are not exclusive of any remedies that may be available to any
party hereto at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by any party hereto from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by all parties hereto, or, in the case of a waiver, by
the party waiving compliance, and (ii) only in the specific instance and for
the specific purpose for which made or given.
Section 12.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of New York, without regard to the
principles of conflicts of law of New York.
Section 12.5 Jurisdiction. Any controversy or claim arising out
of or relating to this Agreement or any agreements or transactions contemplated
hereby shall be settled by arbitration in accordance with the Commercial Rules
of Arbitration of the American Arbitration Association in effect on the date
hereof, and any award rendered in such arbitration shall be final and binding
on the Parties. Judgment on any award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. Any arbitration hereunder
shall be decided by a single arbitrator, who shall be a lawyer experienced in
commercial matters. The parties shall attempt to agree on an arbitrator but
either party may at any time request that an arbitrator be selected in
accordance with the Commercial Arbitration Rules. Any arbitration hereunder
shall be held in New York City, New York. The prevailing party shall be
entitled in any arbitration hereunder to recover its reasonable attorney's fees
and all costs and expenses of the arbitration.
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Section 12.6 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
Section 12.7 Entire Agreement. The Purchase Agreements and, with
respect to the applicable parties, the Confidentiality Agreement, together are
a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. The Purchase
Agreements supersede all prior agreements and understandings between the
parties with respect to the subject matter contained herein, except for the
Confidentiality Agreement. Notwithstanding anything herein to the contrary,
the terms and conditions of the Confidentiality Agreement shall terminate upon
Closing.
Section 12.8 Expenses. Each party will bear its own expenses
incurred in connection with the negotiation and execution of this Agreement,
and Purchaser shall pay its expenses incurred in carrying out due diligence,
including Audits.
Section 12.9 Publicity. Except as may be required by Applicable
Law, or as required in connection with Kaneb Pipe Line Partners L.P.'s
registration statement filed under the Securities Act of 1933 and the related
offering of partnership units, none of the parties shall issue a publicity
release or announcement or otherwise make any public disclosure concerning this
Agreement without the prior approval of the other party. If any announcement is
required by law to be made by either party , prior to making such announcement
such party will deliver
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a draft of such announcement to the other party and shall give the other party
an opportunity to comment thereon.
Section 12.10 Further Assurances. Each party shall execute such
documents and perform such further reasonable acts (including without
limitation reasonable action to obtain any consents, exemptions,
authorizations, or other actions by, or giving any notices to, or making any
filings with, any Governmental Authority or any other Person) as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
Section 12.11.A Post-Closing Access to Books and Records by
Purchaser. For a period of five (5) years after the Closing Date, subject to
reasonable advance notice of time and purpose and to the execution by Purchaser
of reasonable confidentiality undertakings, Purchaser and its authorized
representatives may at Purchaser's expense have reasonable access during normal
business hours to the books and records related to the Business or Acquired
Assets that are not included in the Acquired Assets and SPC will furnish to
Purchaser such additional information and will cooperate with Purchaser in such
other respects as Purchaser may reasonably request, to the extent that such
access and disclosure of such information and cooperation are required by
Purchaser 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 Authorities, so long as such
disclosure, access, and cooperation do not violate the terms of any agreement
to which SPC is bound or any Applicable Law or result in the loss of any
attorney-client or work product privilege. SPC will use reasonable efforts in
accordance with SPC's normal record maintenance procedures to keep and maintain
all such books and records for a period of five (5) years from the Closing or
longer as may be required by statute,
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except that notwithstanding any requirements of SPC's normal record maintenance
procedures, SPC shall not destroy books and records related to the Business or
Acquired Assets during such five (5) year period. From and after such five (5)
year period, SPC shall give Purchaser sixty (60) days prior notice before
destroying any of such books and records, and Purchaser may at any time during
such sixty (60) days take possession, at Purchaser's cost, of such books and
records, provided that if Purchaser does not take possession of any of such
books and records during such sixty (60) days, SPC shall be free thereafter to
dispose of such books and records.
Section 12.11.B Post-Closing Access to Books and Records by SPC. For
a period of five (5) years after the Closing Date, subject to reasonable
advance notice of time and purpose and to the execution by SPC of reasonable
confidentiality undertakings, SPC and its authorized representatives may at
SPC's expense have reasonable access during normal business hours to the books
and records related to the Business or Acquired Assets that are included in the
Acquired Assets and Purchaser will furnish to SPC such additional information
and will cooperate with SPC in such other respects as SPC may reasonably
request, to the extent that such access and disclosure of such information and
cooperation are required by SPC 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
Authorities, so long as such disclosure, access, and cooperation do not violate
the terms of any agreement to which Purchaser is bound or any Applicable Law or
result in the loss of any attorney-client or work product privilege. Purchaser
will use reasonable efforts in accordance with Purchaser's normal record
maintenance procedures to keep and maintain all such books and records for a
period of five (5) years from the Closing or longer as may be required by
statute, except that
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notwithstanding any requirements of Purchaser's normal record maintenance
procedures, Purchaser shall not destroy books and records transferred to
Purchaser hereunder during such five (5) year period. From and after such five
(5) year period, Purchaser shall give SPC sixty (60) days prior notice before
destroying any of such books and records, and SPC may at any time during such
sixty days take possession, at SPC's cost, of such books and records, provided
that if SPC does not take possession of any of such books and records during
such sixty days, Purchaser shall be free thereafter to dispose of such books
and records.
Section 12.12 Treatment of Purchase Agreements. Notwithstanding
any provision contained in any of the Purchase Agreements that may be construed
to the contrary, (i) the aggregate Liabilities of SPC, SPCT, PPI and SIC under
the Purchase Agreements that are subject to maximum liability limits pursuant
to the provisions of Section 11.5 of the Purchase Agreements shall be the
Escrow Fund, (ii) the maximum aggregate amount that will be paid to Purchaser
for the type of Remedial Work described in Section 11.7.1.1 pursuant to the
Purchase Agreements shall be the amount set forth in Section 11.7.1.1, and
(iii) the $1,000,000 threshold set forth in Section 3.1.2.2, the Remaining
Threshold and the $750,000 threshold set forth in Section 11.6 represent the
aggregate threshold amounts for applicable claims under the Purchase
Agreements.
Section 12.13 SPCT's Sale of the Partnership Interest. (a) This
Agreement includes provisions for the sale of the Partnership Interest and
contains certain representations, warranties, agreements and covenants with
respect to the Partnership Interest, SPCT and the Subsidiary Partnership. If
Aectra exercises its right of first refusal to purchase the Partnership
Interest (as provided for in Section 12.3 of the Partnership Agreement), (i)
Purchaser shall
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purchase that portion of the Business conducted at the Savannah Terminal and
assume the Real Estate Lease associated therewith, (ii) the references herein
to the sale and purchase of the Partnership Interest and the representations
and warranties, covenants and agreements related to the Partnership Interest
(including the Purchase Price related thereto), the Subsidiary Partnership and
SPCT as they relate to the sale of the Partnership Interest shall be null and
void, and (iii) the Purchase Price shall be reduced by $1,300,000.
(b) If Aectra, pursuant to Section 12.3 of the
Partnership Agreement, declines to purchase the Partnership Interest and Aectra
agrees to sell Aectra's Partnership Interest pursuant to the terms and
conditions set forth in section 12.3 of the Partnership Agreement, then
Purchaser shall purchase the Partnership Interest on the terms and conditions
set forth herein and Aectra's Partnership Interest in accordance with the
provisions of Section 12.3 of the Partnership Agreement.
Section 12.14 Accounts Receivable Collections. [Except as
otherwise provided in Exhibit 12.14, the parties agree that all accounts
receivable and payments under the Contracts shall be pro rated as of the
Closing Date. SPC shall be credited with such amounts attributable to periods
prior to Closing and Purchaser shall be credited with such amounts attributable
to periods after Closing and the Purchase Price shall be adjusted accordingly.
All payments under the Contracts described on Exhibit 12.14 shall be prorated
at Closing pursuant to the procedures described in Exhibit 12.14.
Section 12.15 Prorations. Real Estate property taxes and
assessments for which SPC is liable, water, sewer and utility charges, normal
operating expenses, annual permit or inspection fees (calculated on the basis
of the period covered), and all other charges and fees customarily
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prorated and adjusted in similar transactions shall be prorated at Closing on
the basis of a 365-day year. If any item subject to proration cannot be
calculated accurately on the Closing Date, then such item shall be calculated
within thirty (30) days after the Closing Date and any party owing another
party a sum of money based on such subsequent proration(s) shall promptly pay
the sum owed, together with interest thereon at the rate of seven percent (7%)
per annum from the Closing Date to the date of payment if payment is not made
within ten (10) days after delivery of an invoice therefor.
Section 12.16 Guaranty. Guarantor acknowledges and agrees that it
will derive substantial direct and indirect benefits from providing the
guaranty set forth in this Section 12.16 and Guarantor has determined that it
is in its best interest to provide this guaranty. Guarantor absolutely and
unconditionally guarantees to SPC and each SPC Indemnified Party the due and
punctual payment of all liabilities and obligations of Purchaser to SPC or each
SPC Indemnified Party, as appropriate, in accordance with the terms of this
Agreement (and specifically including the indemnification obligations set forth
in Article 11). Guarantor guarantees to SPC and each SPC Indemnified Party the
performance of all obligations, liabilities, covenants and agreements (and
specifically the indemnification obligations set forth in Article 11) of
Purchaser to SPC or each SPC Indemnified Party, as appropriate. Guarantor
agrees to indemnify and hold SPC and each SPC Indemnified Party harmless from
and against all liability and expense, including reasonable attorneys' fees,
sustained by SPC or any SPC Indemnified Party by reason of the failure of
Purchaser to fully perform and comply with the terms and obligations of this
Agreement. Guarantor expressly waives any right to require SPC or any SPC
Indemnified Party to bring any action, or exhaust its rights, against Purchaser
or any other person, or to require
90
<PAGE> 96
that resort be had to any assets of Purchaser before pursuing the Guarantor
under this Section 12.16.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their authorized officers as of the date first above
written.
STEUART PETROLEUM COMPANY
By: /s/ JOHN C. JOHNSON
---------------------------------------
Name: John C. Johnson
Title: President and C.E.O
SPC TERMINALS, INCORPORATED.
By: /s/ JOHN C. JOHNSON
---------------------------------------
Name: John C. Johnson
Title: President
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
91
<PAGE> 97
SUPPORT TERMINALS OPERATING
PARTNERSHIP, L.P.
By: Support Terminal Services, Inc.,
its general partner
By: /s/ EDWARD D. DOHERTY
-------------------------------------------
Name: Edward D. Doherty
Title: Chairman
92
<PAGE> 1
EXHBIT 10.2
PINEY POINT PIPELINE ASSET PURCHASE AGREEMENT
BY AND AMONG PINEY POINT INDUSTRIES, INC,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
AUGUST 27, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.2 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Allocation of Purchase Price Amongst Pipeline Assets . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.6 Payment of Taxes and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 MATTERS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.1 Examination of Records and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.2 Environmental Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.2.1 Audits and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work . . . . . . . . . . . . . . . . . . . . 17
3.1.2.3 Purchase Price Adjustment for Other Remedial Work . . . . . . . . . . . . . . . . . . . . . 18
3.1.2.4 Other Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.2 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.4 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.5 Purchaser's Licenses, Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4 OPERATION OF THE BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.2 Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.2 Certificate Regarding Environmental Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Section 5.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.4 Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.9 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.10 Satisfaction of Conditions to Closing Under
The Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.2 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.3 Sale Permitted by Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.6 Satisfaction of Conditions to Closing Under
The Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.2 Corporate Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.3 Governmental Authorization: Third Party Consents . . . . . . . . . . . . . . . . . . . . . 29
Section 7.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.8 Condition of and Title to Tangible Personal Property . . . . . . . . . . . . . . . . . . . 30
Section 7.9 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.10 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.11 No Material Adverse Change: Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.12 Broker's Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.13 Patents, Trademarks. Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.17 Tax Returns and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.18 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.19 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.20 List of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.21 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.22 All Assets Included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.23 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 7.24 Right-of-Way Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 8 REPRESENTATIONS AND WARRANTITHEOPURCHASER AND THE GUARANTOR . . . . . . . . . . . . . . . . . . . . 39
Section 8.1 Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.3 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.4 Governmental Authorization; Third Party Consent . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters . . . . . . . . . . . . . . . . . . . . . 40
Section 8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.1.A Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.1.B Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.2 Documents and Instruments to be Delivered by PPI . . . . . . . . . . . . . . . . . . . . . 42
Section 9.3.A Documents and Instruments to be Delivered by Purchaser. . . . . . . . . . . . . . . . . . . 43
Section 9.3.B Documents and Instruments to be Delivered by Guarantor. . . . . . . . . . . . . . . . . . . 43
Section 9.4 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4.1 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4.2. Wastes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.1 Grounds for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.2 Termination of the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.1 Indemnification by PPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.4 Indemnification Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.5 Limits on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.6 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.7 Special Environmental Indemnification and Post-Closing
Covenants by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.8 Notification; Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.9 Net Worth Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.5 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.11.A Post-Closing Access to Books and Records by Purchaser . . . . . . . . . . . . . . . . . . . 61
Section 12.11.B Post-Closing Access to Books and Records by PPI . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.12 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.13 Capitalized Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.14 Accounts Receivable Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.16 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
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PINEY POINT PIPELINE ASSET PURCHASE AGREEMENT
BY AND AMONG PINEY POINT INDUSTRIES, INC,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
This Piney Point Pipeline Asset Purchase Agreement is made this 27th
day of August, 1995, by and among Piney Point Industries, Inc., a Maryland
corporation and a wholly-owned subsidiary of SIC with its principal place of
business at 4646 Fortieth Street, N.W., Washington D.C. 20016 ("PPI" or the
"Company"), Support Terminals Operating Partnership, L.P., a Delaware limited
partnership with its principal place of business at 17304 Preston Road, Suite
1000, Dallas, Texas 75252-5623 ("Purchaser") and Kaneb Pipe Line Operating
Partnership, L.P., a Delaware limited partnership with its principal place of
business at 2435 N. Central Expressway, Suite 700, Richardson, Texas 75080
("Guarantor").
RECITALS
A. PPI owns and operates the Pipeline.
B. SPC and Purchaser have entered into the Asset Purchase
Agreement, pursuant to which, SPC has agreed to sell to Purchaser and Purchaser
has agreed to buy from Seller those SPC assets more particularly described in
the Asset Purchase Agreement.
C. As part of the transactions contemplated by the Asset Purchase
Agreement, PPI has agreed to sell to Purchaser and Purchaser has agreed to buy
the Pipeline Assets and the Business, on the terms and subject to the
conditions set forth in this Agreement.
Now, therefore, the parties agree as follows:
<PAGE> 7
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Adjusted Purchase Price" means the Purchase Price less any reductions
thereto made in accordance with this Agreement.
"Affiliate" means as to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person.
"Agreement" means this Agreement and the Schedules and Exhibits
attached hereto, as amended, supplemented or modified.
"Andrews AFB" means Andrews Air Force Base in Prince George's County,
Maryland.
"Applicable Law" means as to any Person, any Federal, state,
municipal, foreign or other law, treaty, order, ordinance, code, rule,
regulation, right, privilege, qualification, license or franchise or
determination of or promulgated by a Governmental Authority, applicable or
binding on such Person or any of its property or to which such Person or any of
its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
By and Among Steuart Petroleum Company, SPC Terminals, Incorporated, Support
Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating
Partnership, L.P., of even date with this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
2
<PAGE> 8
"Audit(s)" means such environmental due diligence as Purchaser chooses
to conduct, including, without limitation, a Phase I and/or Phase II
environmental audit.
"Average Monthly Revenue" shall be calculated by dividing the total
revenues generated from the Business for the twelve calendar months immediately
preceding the date of this Agreement by twelve.
"Business" means PPI's Pipeline operations.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas, the City of New York or
Washington, D.C. are authorized or required by Applicable Law or executive
order to close.
"Closing" has the meaning set forth in Section 9.1.A.
"Closing Date" means the date specified in Section 9.1.A.
"Cockpit Agreement" means that certain Purchase Agreement By and Among
Steuart Investment Company, Support Terminals Operating Partnership, L.P. and
Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point, of even date
with this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Consulting Agreement" means that certain Consulting Agreement by and
between Steuart Petroleum Company and Piney Point Industries, Inc., dated June
30, 1991, pursuant to which SPC provides management services to PPI on the
operation of the Pipeline.
"Contracts" means all contracts and agreements between PPI and third
parties relating to the Pipeline Assets or the Business, including without
limitation Material Contracts, but not
3
<PAGE> 9
including the Consulting Agreement, the Dockman Services Agreement, the Tariff,
the Right-of-way Agreements, or the Emergency Spill Response Agreement.
"Dockman Services Agreement" means that certain Agreement by and
between Steuart Petroleum Company and Piney Point Industries, Inc., dated June
30, 1991, pursuant to which SPC provides dockman services to assist in the
unloading of river barges.
"DOD" means the Department of Defense.
"Due Diligence Period" means the 60-day period commencing with the
date of this Agreement.
"Emergency Spill Response Agreement" means that certain agreement by
and between SPC and PPI, dated August 13, 1992, pursuant to which SPC provides
PPI with certain spill response personnel, equipment and materials.
"Environmental Adjustment Request" means a request for a reduction in
the Purchase Price submitted by Purchaser pursuant to Section 3.1.2.2.
"Environmental Law" means any Federal, state or local law, statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions concerning the Pipeline Assets or any portion thereof,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C.
Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401 et
seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA")
and similar laws of any Governmental Authority having jurisdiction over any
portion of the Pipeline Assets as such laws may be amended or supplemented from
time to time, and all regulations promulgated or orders issued pursuant to
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such laws, but not including the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq. ("OSHA") or other laws relating primarily to the
protection of workers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that is treated as a single
employer with the Company or any of its Subsidiaries under Section 414(b), (c),
(m) or (o) of the Code.
"Excluded Assets" has the meaning set forth in Section 2.1.
"GAAP" means generally accepted United States accounting principles in
effect from time to time.
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision of any thereof, any federal,
state, local or other court or arbitral tribunal, and any entity (corporate or
otherwise) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" includes without limitation:
(i) any substance included within the definition of
"hazardous waste" pursuant to Section 1004 of the RCRA and implementing
regulations;
(ii) any substance included within the definition of
"hazardous substance" pursuant to Section 101 of CERCLA and implementing
regulations;
(iii) any pollutant listed under the CAA, the CWA or
implementing regulations pursuant to the CAA or the CWA; and
(iv) petroleum and petroleum products.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
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"Indemnified Party" means each PPI Indemnified Party or each Purchaser
Indemnified Party as determined by the context of the reference to "Indemnified
Party" herein.
"Knowledge" when used with respect to the Company, means the actual
knowledge of the officers of the Company, and when used with respect to the
Purchaser, means the actual knowledge of the officers of the general partner of
the Purchaser, and the officers of ST Services, Inc.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences)
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease obligation, or any financing lease having
substantially the same economic effect as any of the foregoing, except that
"Lien" shall not include liens for taxes that PPI is obligated to pay under any
Right-of-way Agreement not due and payable at Closing.
"Major Loss" means any loss, damage, breakdown, or casualty to the
Pipeline Assets whether from fire, flood, hurricane, or any other cause, in an
amount reasonably estimated to exceed five hundred thousand dollars ($500,000),
whether or not covered by insurance.
"Material Contracts" means Contracts that either (i) require an annual
payment by any party thereto in excess of $50,000, (ii) are not cancelable by
PPI (at no penalty to PPI) within twelve months, or (iii) have a material
effect on the operation or conduct of the Business.
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"Net Remedial Cost" means the cost, estimated if necessary, to perform
any Remedial Work net of estimated insurance coverage and reimbursements from
trust funds maintained by any Governmental Authority.
"Notice" has the meaning set forth in Section 3.1.2.4.
"Ordinary Course of Business" means a course of business consistent
with the Company's past customs and practices with respect to the Business.
"Permitted Encumbrances" shall mean (i) those matters described on
Schedules 2.1(a), 2.1(b) or 2.1(c) under the heading of "Permitted
Encumbrances", (ii) Liens for taxes that PPI is obligated to pay under any
Right-of-Way Agreement not due and payable at Closing, (iii) Liens on the ROW
Real Estate arising due to the acts or omissions of the owner or lessor of the
ROW Real Estate, (iv) any Lien on the ROW Real Estate that is not attributable
to an act or omission of PPI or its Affiliates, and (v) any Liens or other
restrictions or title defects that are waived or consented to by Purchaser.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Pipeline" means the 11.6 miles (approximately) of pipeline extending
from the Anacostia River at the Anacostia Naval Facility in Washington, D.C.
onto Andrews AFB in Prince George's County, Maryland, operated by PPI, together
with the PPI Tanks and any other improvements or fixtures utilized by PPI in
connection therewith.
"Pipeline Assets" has the meaning set forth in Section 2.1.
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"PPI's Consultant" means Versar, Inc., or any other recognized
environmental firm selected by PPI and approved by Purchaser, such approval not
to be unreasonably withheld.
"PPI Indemnified Party" has the meaning set forth in Section 11.3.
"PPI Tanks" means those petroleum product storage tanks used in the
operation of Business and located at Andrews AFB.
"Purchase Price" has the meaning set forth in Section 2.3.1.
"Purchaser Indemnified Party" has the meaning set forth in Section
11.1.
"Purchaser's Consultant" means Think Tank, Inc., or any other
recognized environmental consulting firm selected by Purchaser and approved by
PPI, such approval not to be unreasonably withheld.
"Remedial Work" means any investigation, site monitoring, containment,
cleanup, removal, restoration, or other corrective action that is reasonably
necessary to remedy any non-compliance with Environmental Law, that is
reasonably necessary under Environmental Law, or that has been required by a
Governmental Authority.
"Right-of-way Agreement(s)" means the agreement(s) (whether in the
form of a license, easement, lease or other form of agreement) pursuant to
which PPI is granted the right to use the real estate owned by third parties
for the Pipeline and the Business. The Right-of-way agreements are more
particularly described in Schedule 2.1(b).
"ROW Real Estate" means, individually or in the aggregate, the real
estate on which the Pipeline is located that is described, in and subject to
the terms and conditions set forth in, a Right-of-way Agreement.
"SIC" means Steuart Investment Company, a Delaware corporation.
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"SPC' means Steuart Petroleum Company, a Delaware Corporation.
"Tangible Personal Property" means all tangible personal property used
in the Business including, but not limited to, the Vehicles.
"Tariff" means that certain tariff and the related operating agreement
pursuant to which PPI transports petroleum products to, and stores petroleum
products at, Andrews AFB.
"Unaudited Annual PPI Financial Statements" means the unaudited
balance sheets and related statements of income and cash flows of PPI as of and
for the years ending December 31, 1992, 1993 and 1994.
"Unaudited Monthly PPI Financial Statements" means the unaudited
balance sheets and related statements of income and cash flows of PPI as of and
for each month and year-to-date for the six months ending June 30, 1995.
"Vehicles" means all boats, automobiles, trailers, trucks, vans, and
other motor vehicles used in the Business, including, but not limited to, those
listed on Schedule 2.1(c).
ARTICLE 2
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Purchase. At the Closing, PPI shall sell,
transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from PPI, all right, title and interest in and to the
assets, properties, and rights comprising the Business and the Pipeline,
whether tangible or intangible, real, personal or mixed, and wherever located
(collectively, the "Pipeline Assets"), free and clear of all Liens, and other
restrictions, except for Permitted Encumbrances, provided, that the Pipeline
Assets shall not include and Purchaser
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shall not acquire (i) cash, bank accounts, accounts receivable, certificates of
deposit or other cash equivalents, (ii) any tax refunds attributable to taxes
paid by PPI, (iii) those assets listed on Schedule 2.1 under the heading
"Excluded Assets", (iv) the right to the Piney Point Industries name, (v) any
insurance retrospective rating adjustment applicable to periods prior to the
Closing Date, (vi) any reimbursements from trust funds or insurance maintained
by any Governmental Authority for Remedial Work performed prior to the Closing
Date and paid for by PPI, and (vii) any and all contractual rights attributable
to the Tariff (except as contemplated by Section 5.6), the Dockman Services
Agreement, the Emergency Spill Response Agreement and the Consulting Agreement
(the items listed in clauses (i) through (vii) being referred to herein as the
"Excluded Assets"). The Pipeline Assets include without limitation:
(a) the Pipeline as described on Schedule 2.1(a);
(b) the Company's rights under the Right-of-way
Agreements, including, but not limited to, those
listed on Schedule 2.1(b);
(c) the Tangible Personal Property as listed on Schedule
2.1(c);
(d) PPI's rights under the Contracts, to the extent
transferable, including PPI's rights under the
Material Contracts listed on Schedule 2.1(d);
(e) all business records in the possession or under the
control of PPI relating to the Pipeline Assets or the
Business, including without limitation the books and
records of accounts and customer and prospect lists,
but excluding financial records presently maintained
at PPI's location at 4646 Fortieth Street, N.W.,
Washington, D.C. (which PPI shall maintain and
transfer to Purchaser in accordance with the terms of
Section 12.11); and
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(f) to the extent transferable, all of PPI's right and
interest in any license, permits, consents, and
authorities relating to the Business, issued by any
Governmental Authority and any applications for such
items.
Section 2.2 Assumption of Liabilities. (a) Purchaser shall
assume at Closing:
(i) obligations of PPI under the Contracts and Right-of-way
Agreements attributable to periods of time commencing with the Closing,
provided, however, that (A) with respect to Material Contracts and Right-of-way
Agreements, Purchaser assumes such obligations only for Material Contracts
listed on Schedule 2.1(d) and Right-of-way Agreements listed on Schedule 2.1(b)
and in each case only to the extent true and correct copies thereof and all
amendments thereto have either been delivered to Purchaser as of the date
hereof, or are delivered to and consented to by Purchaser after the date
hereof, provided, however, that to the extent that a copy of an immaterial
amendment to such Material Contract or such Right-of-way Agreement has not been
provided to Purchaser as of the date hereof, Purchaser shall assume such
obligations for such Material Contract or such Right-of-way Agreement without
regard to the amendment not delivered to Purchaser and, in such event, PPI
shall be responsible for all Liabilities of Purchaser with respect to the
amendment not delivered to Purchaser without regard to the limits set forth in
Section 11.5 and (B) Purchaser specifically does not assume, and shall not be
treated as having assumed, any liability or obligation under any Material
Contract or Right-of-way Agreement to the extent such liability or obligation
relates to or arises out of a breach of such Contract or Right-of-way Agreement
that occurs prior to the Closing (provided that liability and obligation for
Purchaser's continuing breaches of such Contracts or such Right-of-way
Agreements after Closing and liability and obligation for breaches of such
Contracts or
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Right-of-way Agreements commenced by Purchaser after Closing shall be the
responsibility of Purchaser); and
(ii) except as expressly provided for otherwise herein and in
accordance with the provisions of Section 11.7, any amounts payable to perform
Remedial Work with respect to the Pipeline Assets or the Business, regardless
of when the events giving rise to the obligation to perform such Remedial Work
are alleged to have occurred.
The obligations assumed by Purchaser pursuant to subsection
(a) of this Section 2.2 are referred to herein collectively as the "Assumed
Liabilities".
(b) Purchaser shall not assume any liabilities or obligations of PPI
not specifically assumed under subsection (a) of this Section 2.2, except to
the extent that Purchaser's covenants in Section 11.7 constitute an assumption
of such liabilities or obligations. Nothing herein shall be deemed to
contravene the Purchaser's indemnification of PPI in Sections 11.3 and 11.7,
which shall remain in full force and effect. Without in any way limiting the
foregoing, the parties agree that the Purchaser does not and will not assume
the sponsorship of, or the responsibility for contributions to, or any
liability in connection with, any employee pension benefit plan, any employee
welfare benefit plan, or other employee benefit agreement or arrangement
maintained or adopted by PPI for its employee, former employees, retirees,
their beneficiaries or any other Person. In addition and not as a limitation
of the foregoing covenant, the parties agree that PPI shall be liable for any
continuation coverage (including any penalties, excise taxes or interest
resulting from the failure to provide continuation coverage) required by
Section 4980B of the Code due to qualifying events which occur on or before the
Closing Date.
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Notwithstanding the foregoing, Purchaser shall provide health and medical
benefits under its then existing plans, effective as of the date of hire, if
the PPI employee is hired by Purchaser.
Section 2.3 Payment of Purchase Price. The consideration for the
sale of the Pipeline Assets shall be the Purchase Price and the assumption by
the Purchaser of the Assumed Liabilities.
2.3.1 Purchase Price. At the Closing, Purchaser shall pay
for the Pipeline Assets the sum of Four Million Two Hundred Thousand
($4,200,000) (the "Purchase Price"), or the Adjusted Purchase Price, as the
case may be. Notwithstanding any provision contained herein that may be
construed to the contrary, any adjustment to the Purchase Price pursuant to the
terms of this Agreement (other than Section 12.14) shall be calculated as part
of the Aggregate Adjusted Purchase Price for purposes of determining SPC's
right to terminate the Asset Purchase Agreement pursuant to Section 10.1(c)
therein.
2.3.2 Intentionally Omitted.
Section 2.4 Allocation of Purchase Price Amongst Pipeline Assets.
The Purchase Price shall be allocated amongst the Pipeline Assets in accordance
with the fair market values set forth on Schedule 2.4. Neither party shall take
any position inconsistent with Schedule 2.4 in any filing with the Internal
Revenue Service or for any other purpose.
Section 2.5 Intentionally Omitted.
Section 2.6 Payment of Taxes and Closing Costs. Purchaser shall
be responsible for and shall pay any and all state sales taxes arising in
connection with the sale of the Pipeline Assets. All closing costs in
connection with the transfer of the rights under the Right-of-way
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Agreements, including transfer taxes, if any, and recording fees, shall be paid
equally by PPI and Purchaser.
Section 2.7 Risk of Loss.
(a) The risk of loss of the Pipeline Assets shall pass to
Purchaser at Closing. If there is any loss, damage, breakdown, or casualty to
any of the Pipeline Assets prior to Closing that does not constitute either (i)
a loss, damage, breakdown, or casualty that has been repaired or replaced to
the reasonable satisfaction of Purchaser, or (ii) a loss, damage, breakdown, or
casualty fully covered by insurance proceeds which have been assigned to
Purchaser and insurance retentions paid by PPI to Purchaser, the Purchase Price
shall be reduced by the cost to repair or replace such assets, estimated if
necessary. If there is reasonable doubt whether a loss, damage, breakdown, or
casualty is fully covered by insurance and the payment of insurance retentions
by PPI, Purchaser may reduce the Purchase Price by the cost of repairing or
replacing such assets, in which case PPI shall not assign the insurance
proceeds or pay any insurance retentions to Purchaser. The cost of repairing
or replacing such assets shall be such cost or estimated cost as is agreed upon
between the parties.
(b) Notwithstanding the above provisions of this Section
2.7, if any repair or replacement is reasonably expected to cause the Average
Monthly Revenue to decrease by five percent (5%) or more during the month
immediately following Closing, Purchaser may, in lieu of accepting insurance
proceeds and any insurance retentions or a reduction in the Purchase Price,
delay the Closing until PPI has completed such repair or replacement to the
reasonable satisfaction of Purchaser, provided, however, that if Purchaser
elects to delay the Closing, SPC and SIC, both, but not separately, may elect
to delay the Closing contemplated under the Asset
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Purchase Agreement and the Closing contemplated under the Cockpit Agreement
until such time as the closings under the Purchase Agreements can occur
simultaneously. If the Purchaser elects to delay the Closing pursuant to the
preceding sentence, then (unless PPI is entitled to and elects to terminate
this Agreement pursuant to Article 10), PPI shall promptly and diligently cause
such repair or replacement to be completed to the reasonable satisfaction of
Purchaser.
ARTICLE 3
MATTERS PRIOR TO CLOSING
Section 3.1 Due Diligence.
3.1.1 Examination of Records and Assets. During the Due
Diligence Period, (i) Purchaser and its agents may examine the Pipeline Assets
and the Business, and such books, records, files, and documents of the Company
that relate to the Business or the Pipeline Assets, (ii) the Company shall make
available to Purchaser and its agents for review all information concerning the
Pipeline Assets or the Business which they may request, and (iii) the Company
will make available to Purchaser the officers and the employee of the Company
to answer questions and to discuss the Company and its Business, all in a
manner that does not unduly disrupt the Business. If the Closing does not
occur, Purchaser shall promptly return to the Company, at Purchaser's expense,
(i) all documents (including any copies thereof) received from the Company
before, during or after the Due Diligence Period, and (ii) any documents or
materials that Purchaser or its advisers have generated that contain or
disclose information from the documents received from the Company. Prior to
Closing, except as required in connection with Kaneb Pipe Line Partners, L.P.'s
registration statement filed under the Securities Act of
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1933 and the related offering of partnership units, Purchaser shall maintain in
confidence any information or data received from PPI in the course of
conducting its due diligence, including without limitation the environmental
due diligence provided for in Section 3.1.2, and shall not use the same for any
purpose except in connection with the transaction contemplated by this
Agreement, provided, that the foregoing confidentiality requirement shall
remain in effect after the Closing with respect to the financial statements of
the Company and its Affiliates. Prior to Closing, and thereafter with respect
to the financial statements of the Company and its Affiliates, except as
required in connection with Kaneb Pipe Line Partners, L.P.'s registration
statement filed under the Securities Act of 1933 and the related offering of
partnership units, Purchaser shall not disclose any such information or data to
any third person except to the extent that (i) such information or data is
already in the public domain, or (ii) such disclosure is compelled or required
by subpoena or similar legal process.
3.1.2 Environmental Due Diligence.
3.1.2.1 Audits and Surveys. During the Due Diligence Period,
Purchaser may cause Audits to be conducted by the Purchaser's Consultant, at
its expense, of any of the Pipeline Assets and ROW Real Estate (to the extent
such Audits are permitted under the applicable Right-of-way Agreement). The
scope, methodology, timing, and conduct of all such Audits shall be subject to
the prior approval of PPI which approval shall not be unreasonably withheld,
except that it shall not be unreasonable for PPI to withhold its approval based
on PPI's reasonable opinion that such Audit is not permitted under the relevant
Right-of-way Agreement. All Audits shall be conducted so as to avoid unduly
disrupting the Business. All such Audits shall be completed within the Due
Diligence Period if, and to the extent that, Purchaser wishes
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to rely on the results of such Audits in proposing any adjustment to the
Purchase Price pursuant to Section 3.1.2.2. The Purchaser shall cause the
Purchaser's Consultant to deliver simultaneously to PPI copies of all data,
reports, surveys, or audits, or drafts thereof that it delivers to Purchaser
with respect to the Business or the Pipeline Assets and deliver to PPI promptly
after signing this Agreement copies of all data, reports, surveys, audits, or
drafts thereof delivered to Purchaser with respect to the Business or the
Pipeline Assets prior to the signing of this Agreement.
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work.
(a) If the Audits prepared by Purchaser's
Consultant disclose that Remedial Work is required with respect to the Pipeline
Assets or the Business, then Purchaser shall record and track such Remedial
Work with any Remedial Work disclosed pursuant to Section 3.1.2.2 of the Asset
Purchase Agreement and Section 3.1.2.2 of the Cockpit Agreement and Purchaser
may deliver to PPI and SPC an Environmental Adjustment Request to request an
adjustment to the Purchase Price subject to this subsection (a) and subsections
(b), (c) and (d) below. The Net Remedial Cost for Remedial Work with respect
to the Pipeline Assets or the Business disclosed pursuant to this Section
3.1.2.2 shall be aggregated with the Net Remedial Cost for Remedial Work under
Section 3.1.2.2 of the Asset Purchase Agreement and Section 3.1.2.2 of the
Cockpit Agreement for purposes of (i) calculating the one million dollar
($1,000,000) threshold described in Section 3.1.2.2 of the Asset Purchase
Agreement and the Remaining Threshold, (ii) delivering an Environmental
Adjustment Request to SPC and PPI, (iii) calculating the Net Remedial Cost to
determine Purchaser's right to terminate pursuant to Section 10.1(h) of the
Asset Purchase Agreement, and (iv) calculating the Aggregate Adjusted Purchase
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Price to determine SPC's right to terminate under Section 10.1(c) of the Asset
Purchase Agreement.
(b) The time limitations and procedures for (i)
delivering an Environmental Adjustment Request, and (ii) determining the Net
Remedial Cost for Remedial Work required with respect to the Pipeline Assets or
the Business set forth in Section 3.1.2.2 of the Asset Purchase Agreement shall
apply hereunder.
(c) Any Environmental Adjustment Request that
includes a description of Remedial Work required with respect to the Pipeline
Assets or the Business shall be delivered to PPI and SPC.
(d) To the extent, if any, that the Aggregate Net
Remedial Cost under the Purchase Agreements exceeds one million dollars
($1,000,000) and any of the excess amount of such Aggregate Net Remedial Cost
is attributable to the Pipeline Assets or the Business as determined in
accordance with the procedures set forth in Section 3.1.2.2(e) of the Asset
Purchase Agreement, then the Purchase Price shall be reduced by the amount of
such excess in accordance with Section 3.1.2.2 of the Asset Purchase Agreement.
3.1.2.3 Purchase Price Adjustment for Other Remedial Work.
Notwithstanding any terms contained in Sections 3.1.2.1 and 3.1.2.2, (i) if
there is a violation of Environmental Law that occurs after the date of this
Agreement and prior to Closing that requires Remedial Work with respect to the
Pipeline Assets or the Business that is not completed prior to Closing either
to the reasonable satisfaction of Purchaser or to the satisfaction of the
applicable Governmental Authority, or (ii) if after the Due Diligence Period
and prior to Closing a violation of Environmental Law that requires Remedial
Work with respect to the Pipeline
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Assets or the Business is discovered that could not reasonably have been
discovered during the Due Diligence Period by a Phase I and Phase II
environmental audit and such Remedial Work is not completed prior to Closing
either to the reasonable satisfaction of Purchaser or to the satisfaction of
the applicable Governmental Authority, then in each such case Purchaser shall
be entitled to an adjustment to the Aggregate Purchase Price determined in
accordance with the procedures set forth in Sections 3.1.2.2 and 3.1.2.3 of the
Asset Purchase Agreement without regard to the 75 day time period for proposing
such adjustment.
3.1.2.4 Other Environmental Liabilities. If, prior to
Closing, Purchaser or PPI receives notice of a claim from, or discovers, or
receives notice of any facts or circumstances reasonably expected by ICF Kaiser
to give rise to a claim by, any Person or Governmental Authority for liability
or obligation (other than for Remedial Work) related to an alleged violation of
Environmental Law with respect to the Pipeline Assets or the Business, it shall
promptly notify the other parties hereto (the "Notice"). Thereafter, PPI and
Purchaser shall attempt to agree on whether a Purchase Price adjustment or
other agreeable mechanism is warranted with respect to such claim. If the
parties are unable to agree, PPI may in its discretion assume responsibility
for such claim and provide Purchaser with an indemnification against such claim
reasonably satisfactory to Purchaser. If within thirty (30) days after the
Notice (i) the parties are unable to agree on an adjustment to the Purchase
Price or other agreeable mechanism, and (ii) PPI fails to assume responsibility
for such claim and provide an indemnification reasonably satisfactory to
Purchaser, then Purchaser shall have the right to terminate this Agreement.
Section 3.2 Intentionally Omitted.
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Section 3.3 Consents.
(a) PPI shall use reasonable commercial efforts promptly
to obtain the consent, waiver or approval of each Person whose consent, waiver,
or approval is required to effect an assignment of any of the Material
Contracts or Right-of-way Agreements, or to transfer any of the Pipeline Assets
to Purchaser, or otherwise in connection with this transaction, and, where
appropriate, to effect a novation of such Material Contracts or Right-of-way
Agreements. Purchaser shall cooperate with PPI in obtaining such items as
reasonably requested to do so by PPI.
(b) Purchaser acknowledges that (i) the Tariff will not
be transferred to Purchaser and (ii) Purchaser must apply for its own tariff
and operating agreement to transport petroleum products to, and store petroleum
products at, Andrews AFB after Closing.
Section 3.4 Hart-Scott-Rodino. Purchaser and PPI shall each
comply with the notification, waiting period and other requirements of the HSR
Act. Each party shall take reasonable steps to provide information to and
otherwise cooperate with the other parties for the purposes of making required
filings under the HSR Act.
Section 3.5 Purchaser's Licenses, Permits. Purchaser shall (i)
exercise reasonable commercial efforts promptly to obtain all licenses and
permits required by Purchaser to purchase the Pipeline Assets, and (ii) use
best efforts to promptly tender and obtain approval for a tariff and related
operating agreement to transport petroleum products to, and store petroleum
products at, Andrews AFB with a tariff rate of at least $.95 per Bbl. and
containing substantially similar terms as the most recently effective Tariff.
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Section 3.6 Employees.
(a) PPI shall provide Purchaser with the name, address
and base salary of its employee, and provide Purchaser with the opportunity to
conduct a pre-employment interview with the employee. Purchaser may but shall
not be obligated to offer employment to the PPI employee, on such terms and
conditions as Purchaser may determine, contingent upon and effective at
Closing. PPI shall terminate the employee effective at Closing. PPI shall be
responsible for paying any and all liabilities resulting from such termination
(including, but not limited to, any liabilities under the Workers Adjustment
and Retraining Notification Act, if applicable) and will indemnify and hold
harmless Purchaser therefrom.
(b) PPI and SPC will terminate the Dockman Services
Agreement, the Consulting Agreement and the Emergency Spill Response Agreement
effective on the Closing Date.
Section 3.7 Notification. Each party shall promptly notify the
other parties if it has Knowledge of (i) any information indicating that any
representation or warranty of any other party is or may be untrue in any
material respect, (ii) any covenant to be performed by such other party that is
not being performed, or (iii) any circumstance that would impede or interfere
with the Closing, except that no party shall be liable for a breach of this
covenant unless and except to the extent that the affected party is materially
prejudiced or damaged thereby.
Section 3.8 Deferred Like-Kind Exchange. Upon the request of
PPI, made at least two Business Days prior to the Closing Date, Purchaser shall
execute such documents as may reasonably be required to acknowledge (x) notice
of PPI's intention to accomplish a deferred like-kind exchange of part or all
of the Pipeline Assets pursuant to Section 1031 of the Code and
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Treasury Regulation 1.1031(k)-1 and (y) the assignment of PPI's right, title
and interest in and to (but not PPI's obligations under) this Agreement to a
qualified intermediary (within the meaning of Treasury Regulation Section
1.1031(k)-1(g)(4)).
Section 3.9 Actions Necessary to Consummate. From and after the
date of this Agreement, each of the parties shall in good faith take such
action as may be commercially reasonable to consummate the transactions
contemplated by this Agreement.
ARTICLE 4
OPERATION OF THE BUSINESS PRIOR TO CLOSING
Section 4.1 Ordinary Course. (a) Between the date of this
Agreement and the Closing, PPI shall (i) carry on the Business diligently in
the Ordinary Course of Business and shall not institute any new methods of
accounting or pricing, or engage in any transaction or activity, or enter into
any agreement or make any commitment with respect to the Pipeline Assets or the
Business, except in the Ordinary Course of Business; (ii) maintain the Pipeline
Assets in good operating condition consistent with past practice and comply
timely with all provisions of leases, agreements, contracts and commitments
relating to the Pipeline Assets or the Business; (iii) exercise reasonable
efforts to preserve the Business and its relationships with its customers, its
employee, and suppliers, to timely file all reports required by any
Governmental Authority and to pay all taxes, and to comply with all Applicable
Law. In addition, PPI shall deliver to Purchaser copies of monthly and
year-to-date financial statements prepared on a basis consistent with the
Unaudited Monthly PPI Financial Statements for periods subsequent to June 30,
1995 and prior to the Closing as soon as they become available to PPI, but in
no event later than
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twenty-one (21) days after the end of the month covered by such statements
together with a representation that such statements are true and correct in all
material respects and fairly present the financial position of the Business as
of respective dates thereof and results of operations and cash flow of the
Business as of the respective dates or for the respective periods set forth
therein, all in conformity with GAAP consistently applied, subject to normal
year end adjustments, the adjustments described in Schedule 7.9 and absence of
footnotes required by GAAP.
Section 4.2 Certain Changes. Without the prior consent of
Purchaser such consent not to be unreasonably withheld, provided that such
consent shall be deemed to have been given unless it is denied within five (5)
Business Days of having been requested, PPI shall not: (i) permit or allow any
of the Pipeline Assets to be subjected to any Lien; (ii) cancel or waive any
material claim or right relating to the Pipeline Assets or the Business; (iii)
sell, transfer, assign, distribute or otherwise dispose of any Pipeline Assets,
except in the Ordinary Course of Business; (iv) enter into any contract or
commitment with respect to the Pipeline Assets or the Business, the performance
of which may extend beyond the Closing Date, except in the Ordinary Course of
Business; (v) cause or permit any of its current insurance or reinsurance
policies with respect to the Pipeline Assets or the Business to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation, or lapse, PPI obtains replacement policies
from the same or comparable insurers providing coverage which is the same or
comparable to that provided under the cancelled, terminated, or lapsed
policies; (vi) acquire by purchase or license any trademark, patent, or other
intellectual property rights with respect to the Business; (vii) make any
payment or provision with respect to any
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employee benefit plan or program with respect to the Business, except in the
Ordinary Course of Business, or adopt any new employee benefit plan or program
with respect to the Business or amend any existing employee benefit plan or
program with respect to the Business, or enter into any new employment
agreements with respect to the Business, or increase the compensation payable
to the employee or pay any bonuses to the employee, except in the Ordinary
Course of Business. Without the consent of Purchaser, such consent not to be
unreasonably withheld, PPI shall not enter into, amend or modify any Material
Contracts or Right-of-way Agreements, provided that such consent shall be
deemed to have been given unless it is denied within five (5) Business Days of
having been requested.
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Pipeline Assets at
Closing shall be subject to the satisfaction of the following conditions on or
before the Closing Date, except as and to the extent that such satisfaction is
waived by Purchaser.
Section 5.1 Representations and Warranties. The representations
and warranties of the Company contained in Article 7 (other than Section 7.16)
shall be true and correct in all material respects at and as of the Closing
Date and the Purchaser shall have received a certificate to that effect signed
by an officer of the Company.
Section 5.2 Certificate Regarding Environmental Representations
and Warranties. The Company shall have delivered to Purchaser a certificate
signed by an officer of the Company stating either (i) the representations and
warranties of the Company contained in Section 7.16
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are true and correct at and as of the Closing Date or (ii) the representations
and warranties of the Company contained in Section 7.16 are true and correct at
and as of the Closing Date except for matters disclosed in the certificate,
which certificate shall divide any such matters stated therein into matters for
which a Purchase Price adjustment is available under Sections 3.1.2.2, 3.1.2.3
or 3.1.2.4, and matters for which a Purchase Price adjustment is not available
under Section 3.1.2.3(ii).
Section 5.3 Compliance with this Agreement. The Company shall
have performed and complied in all material respects with all of its agreements
and covenants set forth or contemplated herein that are required to be
performed or complied with on or before the Closing Date and the Purchaser
shall have received a certificate to that effect signed by an officer of the
Company.
Section 5.4 Purchase Permitted by Applicable Laws. The purchase
of the Pipeline Assets shall not be prohibited by any Applicable Law or by any
order or ruling of any Governmental Authority, nor shall any condition have
been imposed on the Closing by any Governmental Authority which would subject
either party to penalties or other sanctions as a result of the Closing.
Section 5.5 Opinion of Counsel. The Purchaser shall have
received an opinion of counsel to the Company, dated the Closing Date, opining
in substance on the matters set forth in Exhibit 5.5.
Section 5.6 Consents and Approvals. All material consents,
exemptions, authorizations, or other actions by, or notices to, or filings
with, any Person necessary or required in connection with the purchase of the
Pipeline Assets or the operation of the Business
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by Purchaser shall have been obtained and be in full force and effect
(including any required consent of a ROW Real Estate owner for the transfer or
assignment of a Right-of-way Agreement and an extension of the expired license
described in Schedule 2.1(b)), and any waiting periods under any Applicable Law
shall have expired. Purchaser shall have either (i) obtained a tariff and
related operating agreement with a tariff rate of at least $.95 per Bbl. and
containing substantially similar terms as the most recently effective Tariff or
(ii) reached an acceptable agreement with PPI pursuant to which Purchaser is
allowed to operate the Pipeline under, and obtain the benefit of, the Tariff
until such time as Purchaser is able to obtain an acceptable tariff and related
operating agreement for operating the Pipeline.
Section 5.7 Intentionally Omitted.
Section 5.8 No Material Adverse Change. Except as set forth on
Schedule 7.11 or as disclosed in the Unaudited Monthly PPI Financial Statements
dated after December 31, 1994 provided to Purchaser prior to the signing of
this Agreement, there shall have been no material adverse change in the
Pipeline Assets or the operations or financial condition of the Business since
December 31, 1994.
Section 5.9 Intentionally Omitted.
Section 5.10 Satisfaction of Conditions to Closing Under The Asset
Purchase Agreement. All the conditions to Close set forth in Article 5 of the
Asset Purchase Agreement shall have been satisfied, except to the extent that
such satisfaction is waived by Purchaser.
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ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligations of the Company to sell the Pipeline Assets hereunder
shall be subject to the satisfaction of the following conditions on or before
the Closing Date, except as and to the extent that such satisfaction is waived
by the Company.
Section 6.1 Representations and Warranties. The representations
and warranties of the Purchaser and the Guarantor contained in Article 8 hereof
shall be true and correct in all material respects at and as of the Closing
Date, and the Company shall have received a certificate to that effect signed
by an officer of the general partner of the Purchaser and an officer of the
general partner of the Guarantor.
Section 6.2 Compliance with this Agreement. The Purchaser and
Guarantor shall have performed and complied in all material respects with all
of their agreements and covenants set forth or contemplated herein that are
required to be performed or complied with by the Purchaser and Guarantor on or
before the Closing Date, and PPI shall have received a certificate to that
effect signed by an officer of the general partner of the Purchaser and an
officer of the general partner of the Guarantor.
Section 6.3 Sale Permitted by Applicable Laws. The sale of the
Pipeline Assets by the Company hereunder shall not be prohibited by any
Applicable Law, or Governmental Authority nor shall any condition have been
imposed on the Closing by any Governmental Authority which would subject either
party to penalties or other sanctions as a result of the Closing.
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Section 6.4 Opinion of Counsel. The Company shall have received
an opinion of counsel to the Purchaser, dated the Closing Date, opining in
substance on the matters set forth in Exhibit 6.4.
Section 6.5 Consents and Approvals. All consents, exemptions,
authorizations, waivers or other actions by, or notices to, or filings with,
any Person necessary or required in connection with the execution, delivery or
performance by the Purchaser of this Agreement shall have been obtained and be
in full force and effect.
Section 6.6 Satisfaction of Conditions to Closing Under The Asset
Purchase Agreement. All the conditions to Close set forth in Article 6 of the
Asset Purchase Agreement shall have been satisfied by Purchaser, except to the
extent that such satisfaction is waived by PPI.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby, represents and warrants to the Purchaser, as of
the date of this Agreement and as of the Closing Date, as follows:
Section 7.1 Existence and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company: (a) has all requisite
corporate power and authority, as applicable, to own and operate its property,
and to conduct the business in which it is currently, or is currently proposed
to be, engaged; (b) is duly qualified as a foreign corporation, and is in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its
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business require such qualification, except to the extent that the failure to
do so would not have an adverse effect on the Pipeline Assets or the Business;
and (c) has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
Section 7.2 Corporate Authorization: No Contravention. The
execution, delivery and performance by the Company of this Agreement: (a) has
been duly authorized by all necessary corporate, and, if required, stockholder
action; (b) does not contravene the terms of the Company's Certificate of
Incorporation or By-Laws, or any amendment of either thereof, and (c) will not
violate Applicable Law, or conflict with or result in any breach of or default
under, or cause the creation of any Lien under, any contractual obligation of
the Company.
Section 7.3 Governmental Authorization: Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under an Applicable Law, is necessary or required
in connection with the execution, delivery or performance by the Company, or
enforcement against the Company, of this Agreement, other than compliance with
the HSR Act.
Section 7.4 Binding Effect. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability.
Section 7.5 Litigation. Except as listed on Schedule 7.5, there
are no legal actions, suits, proceedings, or claims pending, or to the
Knowledge of the Company, threatened, before
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any Governmental Authority against or affecting the Company (a) with respect to
this Agreement, or any of the transactions contemplated hereby, or (b) which
would be reasonably likely to have, (i) an adverse effect on the Pipeline
Assets or the Business, or (ii) an adverse effect on the ability of the Company
to perform its obligations hereunder. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
Governmental Authority purporting to enjoin PPI or restrain PPI's execution,
delivery or performance of this Agreement.
Section 7.6 Compliance with Laws. The Company is in compliance
with all Applicable Law, except for any failure to comply which would not have
an adverse effect on the Pipeline Assets or the Business.
Section 7.7 Intentionally Omitted.
Section 7.8 Condition of and Title to Tangible Personal Property.
The Tangible Personal Property taken as a whole is sufficient (including its
state of operating condition and repair taken as a whole, but not on an item by
item basis) for the conduct of the Business as presently conducted. Except as
set forth on Schedule 7.8, the Company owns free of Liens (other than Liens
that will be released in full at Closing) or has the right to use as a lessee
under a valid lease included in the Contracts, all of the Tangible Personal
Property.
Section 7.9 Financial Condition. (a) The Company has furnished
Purchaser with true and complete copies of (i) the Unaudited Annual PPI
Financial Statements and (ii) the Unaudited Monthly PPI Financial Statements.
(b) The Unaudited Annual PPI Financial Statements and the
Unaudited Monthly PPI Financial Statements are true and correct in all material
respects and fairly present
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the results of operations of the Business as of the respective dates or for the
periods set forth therein in conformity with GAAP consistently applied, subject
to normal year-end adjustments, the adjustments described in Schedule 7.9, and
the absence of footnotes required by GAAP.
(c) The Company has no material liabilities, absolute or
contingent, that are not reflected in the Unaudited Annual PPI Financial
Statements, or the Unaudited Monthly PPI Financial Statements, except (i)
liabilities not required under GAAP to be reflected on such financial
statements or the notes thereto (as applicable), (ii) liabilities incurred in
the Ordinary Course of Business since the date of the most recent Unaudited
Monthly PPI Financial Statements consistent with past operations and not
relating to the borrowing of money and (iii) as disclosed on Schedule 7.9.
Section 7.10 Employee Plans.
(a) Types of Employee Plans. Except as set forth in
Schedule 7.10, the Company does not maintain or contribute to any "employee
pension benefit plan" or any "employee welfare benefit plan" as such terms are
defined in Section 3(2) and Section 3(1), respectively, of the ERISA nor, since
April 28, 1980, has the Company participated in or contributed to a
"multi-employer plan" as such term is defined in Section 3(37) of ERISA.
(b) Prohibited Transactions. To the Company's Knowledge,
and except as disclosed in Schedule 7.10, neither the Company nor any of its
respective directors, officers, employees or agents, nor any "party in
interest" or "disqualified person", as such terms are defined in Section 3 of
ERISA and Section 4975 of the Code, has, with respect to any employee plan
identified in Section 7.10(a) hereof ("Employee Plan") engaged in or been a
party to any
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"prohibited transaction", as such term is defined in Section 4975 of the Code
or Section 406 of ERISA.
(c) ERISA. To the Company's Knowledge, and except as
disclosed in Schedule 7.10, the Company is in substantial compliance with the
requirements prescribed by any and all statutes, orders, or governmental rules
or regulations currently in effect with respect to all Employee Plans,
including, but not limited to, ERISA and the Code, applicable to such Employee
Plans. To the Company's Knowledge, and except as disclosed in Schedule 7.10,
the Company has in all material respects performed all material obligations
required to be performed by it under, is not in violation in any material
respect of, and has no knowledge of any material default or violation by any
other party to, any of the Employee Plans.
(d) Qualifications. To the Company's Knowledge, each
Employee Plan intended to qualify under Section 401(a) of the Code has
heretofore been determined by the Internal Revenue Service to so qualify, and
the trusts created thereunder have heretofore been determined to be exempt from
tax under the provisions of Section 501(a) of the Code, and nothing has since
occurred which may reasonably be expected to cause the loss of such
qualification or exemption.
(e) No Carryover Liability. The consummation of this
Agreement (and the employment by the Purchaser of PPI's former employee) will
not result in any carryover liability to the Purchaser for taxes, penalties,
interest or any other claims resulting from any Employee Plan, or other
employee benefit agreement or arrangement. In addition, PPI makes the
following representations (a) as to employee pension benefit plans of the
Company: (1) no Company has become liable to the PBGC under Sections 4062,
4063, or 4064 of ERISA under
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which a lien could attach to the Pipeline Assets under Section 4068 of ERISA;
(2) the Company has not ceased operations so as to become subject to the
provisions of Section 4062(a) of ERISA; and (3) the Company has not made a
complete or partial withdrawal from a multi-employer plan (as defined in
Section 3(37) of ERISA) so as to incur withdrawal liability as defined in
Section 4201 of ERISA, and (b) all group health plans maintained or adopted by
the Company have been operated in compliance with Section 4980B(f) of the Code.
Section 7.11 No Material Adverse Change: Ordinary Course. Since
December 31, 1994, (i) there has not been any material adverse change in the
Pipeline Assets or the Business and (ii) the Company has operated the Business
in the Ordinary Course of Business, except as set forth on Schedule 7.11 or
disclosed in any Unaudited Monthly PPI Financial Statements dated after
December 31, 1994 that was provided to Purchaser prior to the signing of this
Agreement.
Section 7.12 Broker's Finder's or Similar Fees. Except as set
forth on Schedule 7.12, no brokerage commissions, finder's fees or similar fees
are payable in connection with the transactions contemplated hereby. Purchaser
has no liability for any items set forth on Schedule 7.12.
Section 7.13 Patents, Trademarks. Etc. PPI does not own or have
the right to use any patents, trademarks, service marks, trade names,
copyrights, or similar rights with respect to the Pipeline Assets or the
Business. To the Company's Knowledge, no right or product, process, method,
substance or other material presently sold by or employed by the Company, or
which the Company contemplates selling or employing infringes upon the patents,
trademarks, service marks, copyrights or licenses that are owned by others. No
litigation is pending and no
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claim has been made against the Company or, to the Knowledge of the Company, is
threatened, contesting the right of the Company to sell or use any right or
product, process, method, substance or other material presently sold by or
employed by the Company.
Section 7.14 Material Contracts. The Company has delivered to
Purchaser true and correct copies of all Material Contracts, including all
amendments thereto. Schedule 2.1(d) lists all Material Contracts, and will be
updated at Closing to include any Material Contracts entered into or amended
between the date of this Agreement and the Closing Date. Except as disclosed on
Schedule 2.1(d), each Material Contract is in effect and has not been amended
or otherwise modified, and is binding upon and enforceable against the Company
and, to the Company's Knowledge, all parties thereto, in accordance with its
terms, and there is no default thereunder and to the Knowledge of the Company
no other party thereto has issued or threatened to issue a notice of
termination or cancellation. Except as set forth on Schedule 2.1(d), no
consent to the transfer or assignment of the Material Contracts to Purchaser is
required.
Section 7.15 Permits. Except as set forth on Schedule 7.15, the
Company holds all licenses, permits, franchises, approvals, consents, waivers,
exemptions, authorizations, certificates of occupancy and similar rights and
privileges which are necessary for the operation of its Business.
Section 7.16 Environmental Matters.
(a) Except as set forth on Schedule 7.16, neither the
operation of the Business nor any of the Pipeline Assets (i) violates any
Environmental Law in effect on the date hereof, and without regard for future
modifications or amendments, (ii) is subject to any pending or threatened
action, suit, investigation, or other proceeding by any Governmental Authority
with
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respect to an alleged violation of Environmental Law, or (iii) uses, and there
is not located on the ROW Real Estate, any Hazardous Substances other than
those forming a part of the petroleum products owned by Andrews AFB which are
maintained in accordance with Environmental Law in effect on the date hereof,
and without regard for future modifications or amendments.
(b) Except as set forth on Schedule 7.16, (i) there
exists no condition arising from the presence, release, threat of release,
placement on or under the ROW Real Estate, use, storage, handling, generation,
or disposal of any Hazardous Substance such as would require Remedial Work or
give rise to other liability or obligation, (ii) the Company has been issued
all material licenses, permits, and certificates required under Environmental
Law in effect on the date hereof for the conduct of the Business and (iii)
there exists no past or present violation of Environmental Law in effect on the
date hereof with respect to the Pipeline Assets or the Business that gives rise
to liability or obligation now or in the future.
(c) Schedule 7.16 describes all conditions as to which,
to the Knowledge of the Company, Remedial Work with respect to the Business or
the Pipeline Assets is required, and the scope and methodology of such Remedial
Work as currently in process or contemplated by the Company. The Company has no
liability or obligation, accrued, contingent or otherwise, with respect to the
matters described on Schedule 7.16, except for the obligation to complete
Remedial Work.
(d) The representation and warranty contained in this
Section 7.16 is the only representation and warranty made by PPI with respect
to environmental matters or Environmental Law, and no other representation or
warranty made herein shall be applicable to
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such matters or Environmental Law. Notwithstanding the disclosure to Purchaser
on Schedule 7.16 or pursuant to Section 5.2 of any Remedial Work for which a
Purchase Price adjustment is not available pursuant to Section 3.1.2.3(ii),
such Remedial Work shall be regarded as a breach of this Section 7.16 for
purposes of Section 11.7.1.
Section 7.17 Tax Returns and Liabilities.
(a) Returns. The Company has delivered to Purchaser true
and complete copies of all Maryland and the District of Columbia income tax
returns relating to the operations of the Company for fiscal years 1992, 1993,
and 1994. The Company is included in the consolidated federal income tax
return filed by SIC.
(b) All Returns Filed. Except as set forth on Schedule
7.17:
(i) all tax returns and reports of every kind
(including, without limitation, information and withholding returns and reports
of or relating to any income taxes, franchise taxes, real and personal
property taxes, withholding taxes, employee compensation taxes, sales and use
taxes and all other taxes of any kind applicable to the Company) that are
required to be filed on or before the Closing Date in accordance with
Applicable Law by or with respect to the Company, or any other corporation that
is or was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which the Company was a member for any
period ending on or prior to the Closing Date have been or will be duly and
timely filed, and are or will be accurate and complete in all material
respects;
(ii) all taxes due have been or will be paid in
full, and the amounts so paid have been adequate to pay all income, franchise,
real and personal property, withholding and employment compensation taxes,
sales and use taxes and all other taxes of any kind
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whatsoever, including interest and penalties, due and payable by the Company
for all periods ending on or before the date hereof;
(iii) all assessed deficiencies, if any, have been
fully paid and satisfied and no deficiencies for any of such taxes have been
asserted or threatened;
(iv) there are no outstanding agreements by the
Company for the extension of time for the assessment of any tax;
(v) the Company is not currently being audited by
the Internal Revenue Service, the District of Columbia, or the State of
Maryland or by any other taxing authorities and no such audit has been
threatened; and
(vi) the total amounts set up as liabilities for
current and deferred taxes have been prepared in accordance with GAAP in the
Unaudited Annual PPI Financial Statements and the Unaudited Monthly PPI
Financial Statements and are sufficient to cover the payment of all material
taxes that are or are hereafter finally determined to be, or to have been, due
with respect to the operations of the Company through the periods covered
thereby.
Section 7.18 Employee Relations. The Company has only one
employee. The Company believes that its relationship with its employee is
generally good. There is no pending or, to the Knowledge of the Company,
threatened labor dispute or union organization campaign. The Company's
employee is not represented by any labor union or is subject to a collective
bargaining agreement.
Section 7.19 Restrictive Agreements. Except as set forth on
Schedule 7.19, the Company is not a party to any agreements restricting or
limiting the activities of the Business.
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Section 7.20 List of Assets. The Pipeline Assets include, but are
not limited to, and there shall be transferred to Purchaser at Closing, all of
the assets listed on Schedules 2.1(a), 2.1(b), 2.1(c), and 2.1(d).
Section 7.21 Information Furnished. Neither this Agreement nor
any instrument or document furnished to Purchaser hereunder, when considered as
a whole, contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
Section 7.22 All Assets Included. Except for the Excluded Assets,
the Pipeline Assets include all assets of any nature, real or personal,
tangible or intangible, necessary for or used in the operation of the Business
as operated by the Company.
Section 7.23 Intentionally Omitted.
Section 7.24 Right-of-Way Agreements. (a) Schedule 2.1(b) sets
forth a list of all Right-of-way Agreements. The Company has delivered to
Purchaser true and correct copies of the Right-of-way Agreements, and any
amendments thereto. Except as disclosed on Schedule 2.1(b), each such
Right-of-way Agreement is (i) in effect and has not been amended or otherwise
modified, and (ii) is binding upon and enforceable against the Company and, to
the Company's Knowledge, all parties thereto in accordance with its terms and
there is no default thereunder and, to the Knowledge of the Company, no other
party thereto has issued or threatened to issue a notice of termination or
cancellation.
(b) Except as set forth on Schedule 2.1(b), no consent is
required for the transfer or assignment of PPI's rights and obligations under
the Right-of-way Agreements to
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Purchaser. The ROW Real Estate is free and clear of Liens (other than Liens,
if any, that will be released in full at Closing) and subject to Permitted
Encumbrances.
(c) The Right-of-way Agreements included in the Pipeline
Assets create a contiguous right-of-way from the barge receipt manifold at the
Anacostia Naval Facility in Washington, D.C. to the PPI Tanks located at
Andrews AFB and grant to PPI the right to operate the Pipeline and conduct the
Business thereon as it has been operated and conducted by PPI during the last
twelve months.
(d) The Pipeline is in good operating condition and
repair, ordinary wear and tear excepted, and has been maintained in accordance
with industry standards and in compliance with all governmental requirements.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND THE GUARANTOR
The Purchaser and the Guarantor, jointly and severally, represent and
warrant to PPI as follows as of the date of this Agreement and as of the
Closing Date:
Section 8.1 Authorization: No Contravention. The execution,
delivery and performance by Purchaser and Guarantor of this Agreement: (a) are
within Purchaser's and Guarantor's partnership power and authority and has been
duly authorized by all necessary action; (b) does not contravene the terms of
Purchaser's or Guarantor's respective limited partnership agreements; and (c)
will not violate, conflict with or result in any breach or default under any
contractual obligation of Purchaser or Guarantor, or violate any Applicable
Law.
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Section 8.2 Binding Effect. This Agreement has been duly
executed and delivered by Purchaser and Guarantor, and constitutes the legal,
valid and binding obligation of Purchaser and Guarantor enforceable against
each of them in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors rights generally or by equitable principles relating
to enforceability.
Section 8.3 Broker's, Finder's or Similar Fees. No brokerage
commissions, finders fees or similar fees are payable in connection with the
transactions contemplated hereby under any agreements made by or with
Purchaser.
Section 8.4 Governmental Authorization; Third Party Consent. No
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Applicable Law, and no lapse of a waiting period under
Applicable Law, is necessary or required in connection with the execution,
delivery or performance by Purchaser or Guarantor (other than compliance with
the HSR Act) or enforcement against Purchaser or Guarantor of this Agreement.
Section 8.5 Sufficient Funds. As of the date hereof, Purchaser
has sufficient funds or has approved financing commitments which will enable it
to close the transactions contemplated under this Agreement. As of the Closing
Date, Purchaser will have funds available to it sufficient to close and to
fulfill its obligations hereunder.
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters.
After giving effect to the financing to be incurred by Purchaser in
connection with its consummation of the transactions contemplated hereby,
Purchaser will not be as of the Closing Date (i) "insolvent" nor will it become
"insolvent" as the result of such transactions, (ii) engaged
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in a business or transaction for which any property or assets remaining with
Purchaser would be "unreasonably little" or "unreasonably small in relation to
its business" or the transaction, or (iii) in a position where it "intends to
incur, or believes that it would incur, debts that would be beyond its ability
to pay as such debts mature," in each case as such quoted terms are used in
Section 548 of the United States Bankruptcy Code of 1978, as amended, the
Uniform Fraudulent Conveyances Act and the Uniform Fraudulent Transfer Act.
Section 8.7 Litigation. There are no legal actions, suits,
proceedings, or claims pending, or to the Knowledge of Purchaser or Guarantor,
threatened, before any Governmental Authority against or affecting Purchaser or
Guarantor (a) with respect to this Agreement, or any transactions contemplated
hereby, or (b) which would be reasonably likely to have an adverse effect on
the ability of the Purchaser or Guarantor to perform their respective
obligations hereunder. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any Governmental Authority
purporting to enjoin Purchaser or Guarantor with respect to, or restrain
Purchaser's or Guarantor's execution, delivery or performance of, this
Agreement.
ARTICLE 9
CLOSING
Section 9.1.A Time and Place. The consummation of the purchase and
sale of the Pipeline Assets (the "Closing") shall take place at the offices of
Ginsburg, Feldman & Bress at 1250 Connecticut Avenue, Washington, D.C. at 10:00
a.m. Washington time on October 31, 1995 (the "Closing Date"), or such other
date, time, and place as the parties shall agree. At
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Closing, Purchaser shall be entitled to physical possession of the Pipeline
Assets, and PPI shall surrender the same to Purchaser.
Section 9.1.B Effective Date. The transactions contemplated by this
Agreement shall be effective at 12:01 A.M. on the Closing Date, without regard
to the date of recordation of deeds or other transfer documents.
Section 9.2 Documents and Instruments to be Delivered by PPI. At
Closing, PPI shall deliver to Purchaser (or, with respect to transfer documents
for the Right-of-way that require recordation, deliver to Presidential Title,
Inc. sufficiently prior to Closing to permit recording at the time of Closing):
(a) bills of sale, assignments, signed vehicle
registrations, and such other instruments as shall be required to transfer
title to the Pipeline Assets to Purchaser, free of Liens (except Permitted
Encumbrances), all in a form customary in the State of Maryland or the District
of Columbia, as applicable, and all to be in form reasonably satisfactory to
both parties;
(b) A certificate of an officer of PPI stating that (i)
PPI has complied with all of the covenants imposed on it by this Agreement to
the extent they are required to be complied with prior to the Closing, and (ii)
that the representations and warranties made by PPI are in all material
respects true and correct at Closing, all as required by Sections 5.1, 5.2 and
5.3;
(c) the legal opinion required by Section 5.5;
(d) copies of all consents, waivers and approvals
referred to in Section 5.6;
(e) copies of the resolutions of PPI's board of directors
and of any action required by PPI's stockholders authorizing the execution and
delivery of this Agreement, certified by PPI's secretary or assistant
secretary; and
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(f) a good standing certificate from the State of
Maryland, dated as of a date not more than 20 days prior to the Closing Date.
Section 9.3.A Documents and Instruments to be Delivered by Purchaser.
At Closing, Purchaser shall deliver to PPI:
(a) the Purchase Price or Adjusted Purchase Price, as the
case may be, by bank check or wire transfer of immediately available funds, at
PPI's election, and, if by wire transfer, to such account as PPI may notify to
Purchaser not less than two Business Days prior to the Closing Date.
(b) the legal opinion required by Section 6.4;
(c) a certificate of an officer of the general partner of
the Purchaser stating that (i) Purchaser has complied with all of the covenants
imposed on it by this Agreement to the extent they are required to be complied
with prior to the Closing, and (ii) that the representations and warranties
made by Purchaser are in all material respects true and correct at Closing, all
as required by Sections 6.1 and 6.2; and
(d) copies of the resolutions of the board of directors
of Purchaser's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Purchaser's
general partner.
Section 9.3.B Documents and Instruments to be Delivered by Guarantor.
At Closing, Guarantor shall deliver to PPI:
(a) the legal opinion required by Section 6.4;
(b) a certificate of an officer of the general partner of
the Guarantor stating that (i) Guarantor has complied with all of the covenants
imposed on it by this Agreement to the
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extent they are required to be complied with prior to Closing, and (ii) that
the representations and warranties made by Guarantor are in all material
respects true and correct at Closing, all as required by Sections 6.1 and 6.2;
and
(c) copies of the resolutions of the board of directors
of Guarantor's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Guarantor's
general partner.
Section 9.4 Inventories.
9.4.1 Inventories. On the Closing Date, PPI and a DOD
quality assurance representative shall inventory the petroleum products and all
other liquids in the PPI tanks and the Pipeline related pipe fill to verify the
specifications of such petroleum products owned by DOD. The inventory shall be
performed at the joint expense of PPI and Purchaser and a Purchaser
representative may observe the inventory. PPI will be responsible for (i) any
shortages in the inventories (and DOD will be credited with any overages of
inventories), and (ii) any petroleum products that do not meet the DOD
specifications for such product, and PPI shall indemnify and hold Purchaser
harmless from liabilities or obligations resulting therefrom. Shortages and
overages in the inventories shall be determined as soon as practicable after
Closing. PPI shall have the right to resolve any specification matter with the
DOD, including disputing DOD's claims prior to Purchaser reaching any
settlement therefor.
9.4.2. Wastes. Representatives of Purchaser and PPI shall
jointly inventory all wastes (including waste water) stored in holding tanks
and separators. Purchaser's costs, if any, incurred in the disposal of such
volumes of waste which cannot legally be disposed of through the existing
systems at the Pipeline shall be reimbursed to Purchaser in accordance with
Section
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9.4.2 of the Asset Purchase Agreement after consideration of amounts, if any,
paid by DOD. Purchaser shall dispose of said wastes within thirty (30) days of
Closing Date and shall submit copies of invoices and manifests to PPI within
sixty (60) days of the Closing Date. Purchaser shall be paid in accordance
with Section 9.4.2 of the Asset Purchase Agreement.
ARTICLE 10
TERMINATION
Section 10.1 Grounds for Termination. This Agreement may be
terminated as follows:
(a) by mutual agreement of the parties, at any time;
(b) by Purchaser if a Major Loss occurs, provided that
Purchaser gives notice of its intent to terminate within ten (10) Business Days
after it has received notice of such Major Loss;
(c) by Purchaser if it discovers a material breach of any
representation or warranty made by PPI which PPI is unable to cure within
thirty (30) days after having received notice of such breach; and
(d) by PPI if it discovers a material breach of any
representation or warranty made by Purchaser which Purchaser is unable to cure
within thirty (30) days after having received notice of such breach.
(e) by PPI at any time after November 30, 1995, if the
conditions to Closing set forth in Article 6 have not been met by that date,
unless the failure to meet such condition is attributable to any fault or
neglect of PPI; and
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(f) by Purchaser at any time after November 30, 1995, if
the conditions to Closing set forth in Article 5 have not been met by that
date, unless the failure to meet such condition is attributable to any fault or
neglect of Purchaser; and
(g) by Purchaser pursuant to Section 3.1.2.4.
If this Agreement terminates pursuant to this Section 10.1, the Asset
Purchase Agreement and the Cockpit Agreement shall remain in full force and
effect, unless such agreements terminate by their own terms.
Section 10.2 Termination of the Asset Purchase Agreement. This
Agreement shall automatically terminate if the Asset Purchase Agreement
terminates for any reason, unless PPI and Purchaser agree that this Agreement
shall remain in full force and effect. If this Agreement does not terminate,
then PPI and Purchaser shall negotiate mutually agreeable terms to adjust the
indemnification limits and the Escrow Fund amount referred to in Article 11 of
the Asset Purchase Agreement consistent with the amount of the Purchase Price
and the terms and conditions of this Agreement.
Section 10.3 Effect of Termination. If this Agreement terminates:
(a) neither party shall have any obligation to the other
party, except that such termination shall be without prejudice to the rights of
any party resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of the other party under
this Agreement, provided that a failure by a party to close when all of the
conditions to such party's obligation to close have been met shall be deemed to
be an intentional breach of such party's covenants and agreements hereunder.
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(b) promptly upon termination for any reason, Purchaser
shall return to PPI at Purchaser's expense all documents (including copies
thereof) received from PPI prior to, during and after the Due Diligence Period;
(c) the provisions of Section 3.1.1, Section 10.3, and
Sections 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 shall survive
the termination of this Agreement and continue in full force and effect.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by PPI. Subject to the provisions of
this Article 11, the Company agrees to indemnify, defend, and hold harmless the
Purchaser and its Affiliates, officers, directors, agents, shareholders,
partners, and employees, (each, a "Purchaser Indemnified Party") from and
against any and all liabilities, losses, claims (whether or not successful),
damages, and expenses (including reasonable fees, and disbursements of counsel)
(collectively, "Liabilities") resulting from or arising out of (i) any breach
of any representation or warranty, covenant or agreement of the Company set
forth in this Agreement, (ii) non-compliance with any applicable transfer or
bulk sales law, or (iii) obligations or liabilities of the Company related to
or arising out of acts, events or omissions occurring prior to the Closing and
not expressly assumed by Purchaser hereunder or indemnified against by
Purchaser pursuant to Section 11.7.3, or (iv) liabilities or obligations
related to any amendment to a Material Contract or Right-of-way Agreement not
delivered to Purchaser prior to the date of this Agreement, unless such
amendment is subsequently delivered to and accepted by Purchaser, provided,
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however, that the Company shall not be liable under this Section 11.1 to any
Purchaser Indemnified Party for any amount paid in settlement of claims without
the Company's consent, unless such consent was requested and unreasonably
withheld.
Section 11.2 Survival of Representations and Warranties. The
representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, and
7.12 shall survive the Closing without limitation of time. The representations
and warranties set forth in Section 7.16 (Environmental Matters) shall survive
the Closing and shall expire three years after the Closing Date. The
representations and warranties set forth in Section 7.17 (Taxes) shall survive
the Closing and shall expire on a date that is ninety (90) days following the
expiration of the applicable statute of limitations. All other representations
and warranties shall survive the Closing and shall expire two years after the
Closing Date. Any right of Purchaser to make a claim against the Company for a
breach of any covenant or agreement of the Company herein shall survive the
Closing and shall expire one hundred eighty (180) days after the date on which
the Company was obligated to comply with the covenant or agreement. Any claim
for breach of a representation and warranty, or covenant or agreement, must be
made by Purchaser by a demand for arbitration to the Company prior to the
expiration of such representation and warranty, or the right to make a claim
for a breach of such covenant or agreement, and any such claims covered by such
demands made by Purchaser to the Company within such time periods shall survive
until resolved.
Section 11.3 Indemnification by Purchaser. Purchaser, its
successor and assigns, jointly and severally, agree to indemnify, defend, and
hold harmless the Company and its Affiliates, officers, directors,
shareholders, partners, warrant holders, agents, and employees, (each, an
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"PPI Indemnified Party") from and against any and all Liabilities resulting
from or arising out of (i) any breach of any representation, warranty, covenant
or agreement of Purchaser or Guarantor set forth in this Agreement or (ii)
obligations or liabilities of the Purchaser with respect to the Business or the
Pipeline Assets, including those which may be imposed upon any PPI Indemnified
Party, related to or arising out of acts, events or omissions occurring after
the Closing and not expressly assumed by any PPI Indemnified Party hereunder
and specifically including (but not limited to) liabilities or obligations
arising from the failure of Purchaser to assume any post-Closing liabilities as
required by Section 2.2, provided, however, that Purchaser shall not be liable
under this Section 11.3 to any PPI Indemnified Party for any amount paid in
settlement of claims without Purchaser's consent unless such consent was
requested and unreasonably withheld, and provided further that the right of the
PPI Indemnified Parties to make a claim for breach of any covenants or
agreements of Purchaser herein shall expire one hundred eighty (180) days after
the date on which the Purchaser was obligated to comply with the covenant or
agreement.
Section 11.4 Indemnification Claims.
(a) PPI, SPC and Purchaser acknowledge and agree that the
Escrow Fund, established by SPC at Closing, will be used to satisfy claims for
indemnification under the Purchase Agreements, including all indemnification
claims under this Agreement, for which no limit on liability has been
established in accordance with the terms of Section 11.4 of the Asset Purchase
Agreement.
(b) With the exception of (i) claims arising under
Section 11.7.1.1 (ii) claims for fines or penalties imposed by Governmental
Authorities, (iii) claims for Liens that are not
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Permitted Encumbrances, (iv) claims related to breaches of the agreements of
the Company in Section 9.4, and (v) claims under Section 11.1 (iv), for which
there shall be no minimum claim, Purchaser shall not be entitled to assert any
claim for indemnification hereunder until the aggregate of all indemnifications
claims that may be made pursuant to the Purchase Agreements exceeds the minimum
amount described in Section 11.6 of the Asset Purchase Agreement. Purchaser
shall follow the notice procedures set forth in Section 11.6 of the Asset
Purchase Agreement for making claims for indemnification hereunder.
Section 11.5 Limits on Liability. With the exception of (i)
claims arising under Sections 7.1, 7.2, 7.3, 7.4, and 7.12 (ii) claims for
fines or penalties imposed by Governmental Authorities, (iii) claims for Liens
that are not Permitted Encumbrances, (iv) claims related to breaches of the
agreements of the Company in Section 9.4, and (v) claims under Section
11.1(iv), for which there shall be no limitation of amount, the Company's
maximum liability for Liabilities under the Company's indemnifications under
this Agreement, including without limitation Section 11.7.1.1, shall be the
Escrow Fund, and neither the Company nor any of its Affiliates, shareholders,
officers, directors, agents and employees shall have any liability for such
Liabilities in excess of the Escrow Fund.
Section 11.6 Intentionally Omitted.
Section 11.7 Special Environmental Indemnification and
Post-Closing Covenants by Purchaser.
11.7.1.1 To the extent that, prior to the date three years
after the Closing Date, Purchaser discovers and notifies PPI and SPC of facts
or circumstances that give rise to Remedial Work (including Remedial Work
related to matters discovered prior to the Closing or
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disclosed on Schedule 7.16) with respect to the Pipeline Assets or the Business
(except for Remedial Work attributable to (i) changes in Environmental Law
occurring after the Closing Date, or (ii) events occurring or actions of
Persons other than PPI, SPC, SPCT or SIC taken after the Closing Date), the Net
Remedial Cost for such Remedial Work with respect to the Pipeline Assets or the
Business shall be calculated as part of the Aggregate Net Remedial Cost
determined pursuant to the terms of Section 11.7.1.1 of the Asset Purchase
Agreement and shall be paid in accordance with those terms, subject to the
limits set forth in Section 11.7.1.1 of the Asset Purchase Agreement.
Notwithstanding the preceding portions of this Section 11.7.1.1,
Purchaser shall not be liable for or be required to pay any Net Remedial Costs
resulting from or arising out of any action or omission after Closing of any
PPI Indemnified Party that constitutes or causes a violation of Environmental
Law with respect to the Pipeline Assets or the Business or gives rise to the
need to perform Remedial Work with respect thereto, unless otherwise agreed to
in writing by Purchaser.
11.7.1.2 Purchaser shall not alter or change the scope or
methodology of Remedial Work described on Schedule 7.16 except as required by
Applicable Law or as approved by the Company, which approval shall not be
unreasonably withheld, provided, however, that an objection shall not be deemed
unreasonable solely because it is based on an increase in the cost for
performing such Remedial Work. For so long as PPI has any liability to
Purchaser under Section 11.7.1.1, Purchaser shall use commercially reasonable
efforts to perform and complete all such required Remedial Work and shall keep
PPI and SPC informed of the progress of such Remedial Work. In addition,
before undertaking any such Remedial
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Work Purchaser shall notify PPI of the scope and methodology of such Remedial
Work, sufficiently in advance (except as emergency conditions may require
otherwise) to permit PPI to comment on such scope and methodology. Recognizing
that the final decision on scope and methodology rests with Purchaser,
Purchaser shall nonetheless make a good faith effort to reach agreement with
PPI regarding such scope and methodology, recognizing PPI's financial interest
therein. Purchaser shall provide PPI and SPC with copies of all plans,
reports, and correspondence submitted to any Governmental Authority with
respect to such Remedial Work. Purchaser will not agree to any such Remedial
Work or other actions that commit or bind PPI or SPC (beyond the payment of
money hereunder) without the prior consent of PPI and SPC. Purchaser will
provide PPI and SPC with copies of all invoices rendered by Persons actually
performing such Remedial Work, and PPI and SPC shall be deemed to have accepted
the validity and reasonableness of such invoices if it does not notify
Purchaser to the contrary within ten (10) Business Days of receiving the same.
11.7.2 (a) Purchaser and Guarantor acknowledge that (i)
Purchaser has reviewed copies of all documents and other materials related to
environmental matters with respect to the Pipeline Assets and the Business that
were provided by the Company, (ii) the Company has specifically bargained for
relief, as more particularly described herein, from post-Closing liability
resulting from violations of Environmental Law or the performance of Remedial
Work with respect to the Pipeline Assets or the Business, and (iii) the
Purchase Price and Adjusted Purchase Price, as the case may be, reflect
Purchaser's willingness to accept liability (and Guarantor's willingness to
guarantee Purchaser's obligation to accept such liability) with respect to such
matters as more fully described below.
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(b) Purchaser has agreed to assume, and Guarantor has
agreed to guarantee the obligation of Purchaser to assume, as of the Closing
all obligations and liabilities resulting from or arising out of any actual or
alleged violation of Environmental Law related to the Pipeline Assets or the
Business, regardless of when such violation was supposed to have occurred, or
the performance of Remedial Work with respect to the Pipeline Assets or the
Business, except for (i) fines and penalties imposed by any Governmental
Authority relating to violations of Environmental Law that occurred prior to
Closing with respect to the Pipeline Assets or the Business, (ii) payments to
be made to Purchaser pursuant to Section 11.7.1.1, (iii) obligations or
liabilities that result from or arise out of any act or omission after the
Closing of any PPI Indemnified Party that constitutes or causes a violation of
Environmental Law with respect to the Business or the Pipeline Assets or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11.
(c) For the avoidance of any doubt, Purchaser, Guarantor
and PPI confirm their agreement that PPI shall have no obligation or liability
post-Closing resulting from or arising out of any actual or alleged violation
of Environmental Law related to the Pipeline Assets or the Business, regardless
of when such violation was supposed to have occurred, or the performance of
Remedial Work with respect to the Pipeline Assets or the Business, except (i)
fines and penalties imposed by any Governmental Authority relating to
violations of Environmental Law that occurred prior to Closing with respect to
the Pipeline Assets or the Business, (ii) payments to be made to Purchaser
pursuant to Section 11.7.1.1, (iii) obligations
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or liabilities that result from or arise out of any act or omission after the
Closing of any PPI Indemnified Party that constitutes or causes a violation of
Environmental Law with respect to the Business or the Pipeline Assets or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11.
11.7.3 Purchaser, its successors and assigns, jointly and
severally, agree to indemnify, defend, and hold harmless each PPI Indemnified
Party from and against any and all Liabilities resulting from or arising out
of any actual or alleged violation of Environmental Law related to the Pipeline
Assets or the Business, regardless of when such violation was supposed to have
occurred, or the performance of Remedial Work with respect to the Pipeline
Assets or the Business, except for (i) fines and penalties imposed by any
Governmental Authority relating to violations of Environmental Law that
occurred prior to Closing with respect to the Pipeline Assets or the Business,
(ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii)
obligations or liabilities that result from or arise out of any act or omission
after the Closing of any PPI Indemnified Party that constitutes or causes a
violation of Environmental Law with respect to the Business or the Pipeline
Assets or gives rise to the need to perform Remedial Work with respect thereto,
unless otherwise agreed to in writing by Purchaser, and (iv) claims for a
breach of the representations and warranties set forth in Section 7.16 to the
extent Purchaser is entitled to indemnity under this Article 11.
Notwithstanding the preceding provisions of this Section 11.7.3, Purchaser
shall not be liable under this Section 11.7.3 to any
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PPI Indemnified Party for any amount paid in settlement without Purchaser's
consent unless such consent was requested and unreasonably withheld.
11.7.4 Purchaser shall, for a period of five (5) years after
Closing, notify the Company and SPC promptly of any claim made by any
Governmental Authority or by any Person that there has been a violation of
Environmental Law in connection with the Pipeline Assets or the Business, or
occurring on or from the Pipeline or the ROW Real Estate, and shall thereafter
keep the Company and SPC informed of actions being taken or the conduct of
proceedings with respect to such claim, provided that once it has been
reasonably determined to the satisfaction of PPI and SPC that the amount
required to resolve such claim (whether by performing Remedial Work or
otherwise) is less than $250,000, Purchaser shall no longer be obligated to
provide PPI and SPC with information about such claim.
Section 11.8 Notification; Counsel. Each Indemnified Party under
this Article 11 will, promptly after the receipt of notice of the commencement
of any action, investigation, claim or other proceeding against such
Indemnified Party in respect of which indemnity may be sought under this
Article 11, notify the Company and SPC or the Purchaser, as the case may be, in
writing of the commencement thereof. The failure of any Indemnified Party to
give such notice shall not relieve the indemnifying party from any liability
which it may have to such Indemnified Party unless, and only to the extent
that, such omission materially adversely affects the indemnifying party's
ability to defend in such action, claim or other proceeding. In case any such
action, claim or other proceeding shall be brought against any Indemnified
Party and it shall notify the indemnifying party of the commencement thereof,
and, except as otherwise stated herein, the indemnifying party shall be
entitled to assume the defense thereof at its own expense,
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with counsel satisfactory to such Indemnified Party. Notwithstanding the
foregoing, in any action, claim or proceeding in which both an indemnifying
party, on the one hand, and an Indemnified Party, on the other hand, is, or is
reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the indemnifying party's expense and to
control its own defense of such action, claim or proceeding if, in the
reasonable opinion of counsel to such Indemnified Party, a conflict or
potential conflict exists between the indemnifying party, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable. In any event, the Indemnified Party will reasonably
cooperate with the indemnifying party in any defense undertaken by an
indemnifying party.
Section 11.9 Net Worth Covenant.
(a) PPI agrees that for a period of five (5) years after
Closing it will maintain a net worth (assets minus liabilities on a GAAP basis
balance sheet adding back the deferred income taxes, if any, attributable to
any like-kind exchange completed in accordance with Section 3.8) in excess of
$250,000.00. During the five (5) year period, PPI shall provide to Purchaser,
as soon as they are available, but in no event more than sixty (60) days after
year end, annual calendar year GAAP basis financial statements (and more
frequent financial statements if requested by Purchaser) and such other
information as is reasonably necessary for Purchaser to confirm compliance with
the net worth covenants described in this Section 11.9.
(b) PPI may (so long as SIC meets the net worth
requirements set forth in the next sentence), at any time during the five (5)
year period, provide Purchaser with a guaranty, in the form attached hereto as
Exhibit 11.9, from SIC in the amount of $250,000 and upon the delivery of such
guaranty to Purchaser the covenant contained in subsection (a) of this Section
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11.9 shall be null and void. Purchaser shall accept the SIC guaranty so long
as SIC has, and agrees to maintain for the remainder of the five (5) year
period, a net worth equal to or greater than $250,000. If SIC provides the
guaranty described above, PPI shall not thereafter be required to comply with
the requirements of Section 11.9(a), and the guaranty shall state that SIC
shall thereafter provide to Purchaser, at the times the PPI financial
statements would have been required under the preceding subsection (a) of this
Section 11.9, a letter from SIC's independent auditors stating that SIC's net
worth (on a GAAP balance sheet basis adding back the deferred income taxes, if
any, attributable to the proposed like-kind exchange completed in accordance
with Section 3.8 of the Purchase Agreements and those liabilities attributable
to the above market portion of payment obligations under the throughput
agreements described in Section 5.7 of the Asset Purchase Agreement) is at
least equal to $250,000.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Notices. All notices, requests, demands, consents,
approvals and other communications provided for or permitted hereunder shall be
made in writing and shall be delivered by hand or sent by telecopier or courier
service:
(a) if to Purchaser or Guarantor:
Kaneb Pipe Line Partners, L.P.
2435 N. Central Expressway, Suite 700
Richardson, TX 75080
Attn: Edward D. Doherty
Telecopier No.: (214) 699-1894
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with a copy to:
Support Terminal Services, Inc.
17304 Preston Road, Suite 1000
Dallas, TX 75252-5623
Attn: Fred Johnson
Telecopier No.: (214) 931-6526
with a copy to:
Fulbright & Jaworski, L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
Attn: Kenneth L. Stewart
Telecopier No.: (214) 855-8200
(b) if to the Company or SPC:
Piney Point Industries, Inc.
4646 Fortieth Street, N.W.
Washington, D.C. 20016
Telecopier No.: (202) 244-4518
Attention: Leonard P. Steuart II, and
General Counsel
with a copy to:
Ginsburg, Feldman and Bress, Chartered
1250 Connecticut Avenue, N.W. Suite 800
Washington, D.C. 20036
Telecopier No.: (202) 637-9195
Attention: Lee R. Marks, Esq.
with a copy to SPC:
Steuart Petroleum Company
4646 Fortieth Street, N.W.
Washington, D.C. 20016
Telecopier No.: (202) 244-5425
Attention: President, and
General Counsel
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Section 12.2 Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of the
parties hereto. No party hereto may assign its rights under this Agreement
without the consent of the other party, except that (i) PPI may liquidate and
dissolve without Purchaser's consent if SIC provides the guaranty as permitted
by Section 11.9, and (ii) Purchaser may assign its rights under this Agreement
to any Affiliate, but such assignment shall not relieve Purchaser or Guarantor
of any of their obligations hereunder to the extent such obligations are not
performed by Purchaser's assignee.
Section 12.3 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to any party hereto
at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by any party hereto from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by all parties hereto, or, in the case of a waiver, by
the party waiving compliance and (ii) only in the specific instance and for the
specific purpose for which made or given.
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Section 12.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of New York, without regard to the
principles of conflicts of law of New York.
Section 12.5 Jurisdiction. Any controversy or claim arising out
of or relating to this Agreement or any agreements or transactions
contemplated hereby shall be settled by arbitration in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association in
effect on the date hereof, and any award rendered in such arbitration shall be
final and binding on the Parties. Judgment on any award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be decided by a single arbitrator, who shall be a
lawyer experienced in commercial matters. The parties shall attempt to agree on
an arbitrator but either party may at any time request that an arbitrator be
selected in accordance with the Commercial Arbitration Rules. Any arbitration
hereunder shall be held in New York City, New York. The prevailing party shall
be entitled in any arbitration hereunder to recover its reasonable attorney's
fees and all costs and expenses of the arbitration.
Section 12.6 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
Section 12.7 Entire Agreement. The Purchase Agreements are a
complete and exclusive statement of the agreement and understanding of the
parties hereto with respect to the subject
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matter contained herein. The Purchase Agreements supersede all prior
agreements and understandings between the parties with respect to the subject
matter contained herein.
Section 12.8 Expenses. Each party will bear its own expenses
incurred in connection with the negotiation and execution of this Agreement,
and Purchaser shall pay its expenses incurred in carrying out due diligence,
including Audits.
Section 12.9 Publicity. Except as may be required by Applicable
Law, or as required in connection with Kaneb Pipe Line Partners L.P.'s
registration statement filed under the Securities Act of 1933 and the related
offering of partnership units, none of the parties shall issue a publicity
release or announcement or otherwise make any public disclosure concerning this
Agreement without the prior approval of the other party. If any announcement is
required by law to be made by either party , prior to making such announcement
such party will deliver a draft of such announcement to the other party and
shall give the other party an opportunity to comment thereon.
Section 12.10 Further Assurances. Each party shall execute such
documents and perform such further reasonable acts (including without
limitation reasonable action to obtain any consents, exemptions,
authorizations, or other actions by, or giving any notices to, or making any
filings with, any Governmental Authority or any other Person) as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
Section 12.11.A Post-Closing Access to Books and Records by
Purchaser. For a period of five (5) years after the Closing Date, subject to
reasonable advance notice of time and purpose and to the execution by Purchaser
of reasonable confidentiality undertakings, Purchaser and its authorized
representatives may at Purchaser's expense have reasonable access during normal
61
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business hours to the books and records related to the Business or the Pipeline
Assets that are not included in the Pipeline Assets and PPI will furnish to
Purchaser such additional information and will cooperate with Purchaser in such
other respects as Purchaser may reasonably request, to the extent that such
access and disclosure of such information and cooperation are required by
Purchaser 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 Authorities, so long as such
disclosure, access, and cooperation do not violate the terms of any agreement
to which PPI is bound or any Applicable Law or result in the loss of any
attorney-client or work product privilege. PPI will use reasonable efforts in
accordance with PPI's normal record maintenance procedures to keep and maintain
all such books and records for a period of five (5) years from the Closing or
longer as may be required by statute, except that notwithstanding any
requirements of PPI's normal record maintenance procedures, PPI shall not
destroy such books and records related to the Business or the Pipeline Assets
during such five (5) year period. From and after such five (5) year period,
PPI shall give Purchaser sixty (60) days prior notice before destroying any of
such books and records, and Purchaser may at any time during such sixty (60)
days take possession, at Purchaser's cost, of such books and records, provided
that if Purchaser does not take possession of any of such books and records
during such sixty (60) days, PPI shall be free thereafter to dispose of such
books and records.
Section 12.11.B Post-Closing Access to Books and Records by PPI. For
a period of five (5) years after the Closing Date, subject to reasonable
advance notice of time and purpose and to the execution by PPI of reasonable
confidentiality undertakings, PPI and its authorized
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representatives may at PPI's expense have reasonable access during normal
business hours to the books and records related to the Business or Acquired
Assets that are included in the Acquired Assets and Purchaser will furnish to
PPI such additional information and will cooperate with PPI in such other
respects as PPI may reasonably request, to the extent that such access and
disclosure of such information and cooperation are required by PPI 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 Authorities, so long as such disclosure,
access, and cooperation do not violate the terms of any agreement to which
Purchaser is bound or any Applicable Law or result in the loss of any
attorney-client or work product privilege. Purchaser will use reasonable
efforts in accordance with Purchaser's normal record maintenance procedures to
keep and maintain all such books and records transferred to Purchaser hereunder
for a period of five (5) years from the Closing or longer as may be required by
statute, except that notwithstanding any requirements of Purchaser's normal
record maintenance procedures, Purchaser shall not destroy books and records
transferred to Purchaser hereunder during such five (5) year period. From and
after such five (5) year period, Purchaser shall give PPI sixty (60) days prior
notice before destroying any of such books and records, and PPI may at any time
during such sixty days take possession, at PPI's cost, of such books and
records, provided that if PPI does not take possession of any of such books and
records during such sixty (60) days, Purchaser shall be free thereafter to
dispose of such books and records.
Section 12.12 Intentionally Omitted.
Section 12.13 Capitalized Terms. Terms having initial capitalized
letters not otherwise defined herein shall have the meaning given those terms
in the Asset Purchase Agreement.
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Section 12.14 Accounts Receivable Collections. The parties agree
that all accounts receivable payments under the Contracts shall be pro rated as
of the Closing Date. SPC shall be credited with such amounts attributable to
periods prior to Closing and Purchaser shall be credited with such amounts
attributable to periods after Closing and the Purchase Price shall be adjusted
accordingly.
Section 12.15 Prorations. Real Estate property taxes and assessments
for which PPI is liable, water, sewer and utility charges, normal operating
expenses, annual permit or inspection fees (calculated on the basis of the
period covered), and all other charges and fees customarily prorated and
adjusted in similar transactions shall be prorated at Closing on the basis of a
365-day year. If any item subject to proration cannot be calculated accurately
on the Closing Date, then such item shall be calculated within thirty (30) days
after the Closing Date and any party owing another party a sum of money based
on such subsequent proration(s) shall promptly pay the sum owed, together with
interest thereon at the rate of seven percent (7%) per annum from the Closing
Date to the date of payment if payment is not made within ten (10) days after
delivery of an invoice therefor.
Section 12.16 Guaranty. Guarantor acknowledges and agrees that it
will derive substantial direct and indirect benefits from providing the
guaranty set forth in this Section 12.16 and Guarantor has determined that it
is in its best interest to provide this guaranty. Guarantor absolutely and
unconditionally guarantees to PPI and each PPI Indemnified Party the due and
punctual payment of all liabilities and obligations of Purchaser to PPI or each
PPI Indemnified Party, as appropriate, in accordance with the terms of this
Agreement (and specifically including the indemnification obligations set forth
in Article 11). Guarantor guarantees to PPI and each
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PPI Indemnified Party the performance of all of Purchaser's obligations,
liabilities, covenants and agreements (and specifically the indemnification
obligations set forth in Article 11) of Purchaser to PPI or each PPI
Indemnified Party, as appropriate. Guarantor agrees to indemnify and hold PPI
and each PPI Indemnified Party harmless from and against all liability and
expense, including reasonable attorneys' fees, sustained by PPI or any PPI
Indemnified Party by reason of the failure of Purchaser to fully perform and
comply with the terms and obligations of this Agreement. Guarantor expressly
waives any right to require PPI or any PPI Indemnified Party to bring any
action, or exhaust its rights, against Purchaser or any other person, or to
require that resort be had to any assets of Purchaser before pursuing the
Guarantor under this Section 12.16.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their authorized officers as of the date first above
written.
PINEY POINT INDUSTRIES, INC.
By: /s/ LEONARD P. STEUART II
Name: Leonard P. Steuart II
Title: President
SUPPORT TERMINALS OPERATING
PARTNERSHIP, L.P.
By: Support Terminal Services, Inc., its
general partner
By:/s/ E. D. DOHERTY
Name: E. D. Doherty
Title: Chairman
65
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KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By: Kaneb Pipe Line Company, its
general partner
By:/s/ E. D. DOHERTY
Name: E. D. Doherty
Title: Chairman
By executing and delivering this Agreement to Purchaser, Steuart
Petroleum Company hereby acknowledges and assumes the obligations delegated to
or imposed upon Steuart Petroleum Company under this Agreement, including but
not limited to those payment obligations for indemnification claims that shall
be made from the Escrow Fund.
STEUART PETROLEUM COMPANY
By:/s/ JOHN C. JOHNSON
Name: John C. Johnson
Title: President and C.E.O.
66
<PAGE> 1
EXHIBIT 10.3
PURCHASE AGREEMENT BY AND AMONG
STEUART INVESTMENT COMPANY,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
FOR COCKPIT POINT
AUGUST 27, 1995
<PAGE> 2
TABLE CONTENTS
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.1 At Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.2 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Allocation of Purchase Price Amongst Acquired Assets . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.6 Payment of Taxes and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 MATTERS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.1 Examination of Records and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.2 Environmental Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.2 Real Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.4 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.5 Purchaser's Licenses, Permits and Approvals. . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.6 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 OPERATION OF THE PROPERTY PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.2 Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.2 Certificate Regarding Environmental Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.4 Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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Section 5.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.9 Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.10 Satisfaction of Conditions to Closing Under the
Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.2 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.3 Sale Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.6 Satisfaction of Conditions to Closing Under
the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.2 Corporate Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.3 Governmental Authorization: Third Party Consents . . . . . . . . . . . . . . . . . . . . . 29
Section 7.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.7 Title to Real Property and Real Property Leases . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.8 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.9 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.10 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.11 No Material Adverse Change: Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.12 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.13 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.17 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.18 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.19 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.20 List of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.21 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.22 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.23 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.24 Right-of-way Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR . . . . . . . . . . . . . . . . . 35
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Section 8.1 Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.3 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.4 Governmental Authorization; Third Party Consent . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters . . . . . . . . . . . . . . . . . . . . . 36
Section 8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.1.A Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.1.B Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.2 Documents and Instruments to be Delivered by SPC . . . . . . . . . . . . . . . . . . . . . 38
Section 9.3.A Documents and Instruments to be Delivered by Purchaser . . . . . . . . . . . . . . . . . . 39
Section 9.3.B Documents and Instruments to be Delivered by Guarantor . . . . . . . . . . . . . . . . . . 39
Section 9.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 10.1 Grounds for Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 10.2 Termination of the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.1 Indemnification by SIC and SPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.4 Establishment of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 11.5 Limits on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 11.6 Minimum Claim Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.7 Special Environmental Indemnification and Post-Closing
Covenants by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.8 Notification; Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.9 Net Worth Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.3 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.5 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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<S> <C>
Section 12.11.A Post-Closing Access to Books and Records by Purchaser . . . . . . . . . . . . . . . . . . . 56
Section 12.11.B Post-Closing Access to Books and Records by SIC . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.12 Treatment of Purchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.13 Capitalized Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.14 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.16 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
(iv)
<PAGE> 6
PURCHASE AGREEMENT BY AND AMONG
STEUART INVESTMENT COMPANY, SUPPORT
TERMINALS OPERATING PARTNERSHIP, L.P. AND
KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
FOR COCKPIT POINT
This Purchase Agreement is made this 27th day of August, 1995, by and
among Steuart Investment Company, a Delaware corporation with its principal
place of business at 4646 Fortieth Street, N.W., Washington D.C. 20016 ("SIC" or
the "Company"), Support Terminals Operating Partnership, L.P., a Delaware
limited partnership with its principal place of business at 17304 Preston Road,
Suite 1000, Dallas, Texas 75252-5623 ("Purchaser") and Kaneb Pipe Line Operating
Partnership, L.P., a Delaware limited partnership with its principal place of
business at 2435 N. Central Expressway, Suite 700, Richardson, Texas 75080
("Guarantor").
RECITALS
A. SIC owns the Property. The Business conducted on the Real
Property is owned and operated by SPC. SIC leases the Property to SPC pursuant
to the Real Property Lease.
B. SPC and Purchaser have entered into the Asset Purchase
Agreement, pursuant to which, SPC has agreed to sell to Purchaser and
Purchaser has agreed to buy from Seller, among other things, the Business
conducted on the Real Property, including SPC's rights under the Real Property
Lease.
C. As part of the transactions contemplated by the Asset Purchase
Agreement, SIC has agreed to sell to Purchaser and Purchaser has agreed to buy
the Property, on the terms and subject to the conditions set forth in this
Agreement.
<PAGE> 7
Now, therefore, the parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Adjusted Purchase Price" means the Purchase Price less any reductions
thereto made in accordance with this Agreement.
"Affiliate" means as to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person.
"Agreement" means this Agreement and the Schedules and Exhibits
attached hereto, as amended, supplemented or modified.
"Aggregate Purchase Price" means the sum of the Purchase Price set
forth in this Agreement, the Purchase Price set forth in the PPI Agreement and
the Purchase Price set forth in the Asset Purchase Agreement.
"Aggregate Adjusted Purchase Price" means the sum of the Adjusted
Purchase Price set forth in this Agreement, the Adjusted Purchase Price set
forth in the PPI Agreement and the Adjusted Purchase Price set forth in the
Asset Purchase Agreement.
"Applicable Law" means as to any Person, any Federal, state,
municipal, foreign or other law, treaty, order, ordinance, code, rule,
regulation, right, privilege, qualification, license or franchise or
determination of or promulgated by a Governmental Authority, applicable or
2
<PAGE> 8
binding on such Person or any of its property or to which such Person or any of
its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
By and Among Steuart Petroleum Company, SPC Terminals, Incorporated, Support
Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating
Partnership, L.P. of even date with this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Audit(s)" means such environmental due diligence as Purchaser chooses
to conduct, including without limitation a Phase I and/or Phase II
environmental audit.
"Average Monthly Revenue" shall be calculated by dividing the total
revenues generated from the Business for the twelve calendar months immediately
preceding the date of this Agreement by twelve.
"Business" means SPC's terminal operations at Cockpit Point.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas, the City of New York or
Washington, D.C. are authorized or required by Applicable Law or executive
order to close.
"Closing" has the meaning set forth in Section 9.1.A.
"Closing Date" means the date specified in Section 9.1.A.
"Cockpit Point" means the Real Property.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
3
<PAGE> 9
"Contracts" means all contracts and agreements between SIC and
suppliers, vendors, customers and other third parties relating to the Property,
including without limitation Material Contracts, but not including the
Right-of-way Agreements.
"Current Title Information" has the meaning set forth in Section 3.2.
"Due Diligence Period" means the 60-day period commencing with the
date of this Agreement.
"Environmental Adjustment Request" means a request for a reduction in
the Purchase Price submitted by Purchaser pursuant to Section 3.1.2.2.
"Environmental Law" means any Federal, state or local law, statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions concerning the Property or any portion thereof,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C.
Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401
et seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA")
and similar laws of any Governmental Authority having jurisdiction over any
portion of the Property as such laws may be amended or supplemented from time
to time, and all regulations promulgated or orders issued pursuant to such
laws, but not including the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq. ("OSHA") or other laws relating primarily to the
protection of workers.
"Excluded Assets" has the meaning set forth in Section 2.1.
"GAAP" means generally accepted United States accounting principles in
effect from time to time.
4
<PAGE> 10
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision of any thereof, any federal,
state, local or other court or arbitral tribunal, and any entity (corporate or
otherwise) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" includes without limitation:
(i) any substance included within the definition of
"hazardous waste" pursuant to Section 1004 of the RCRA and implementing
regulations;
(ii) any substance included within the definition of
"hazardous substance" pursuant to Section 101 of CERCLA and implementing
regulations;
(iii) any pollutant listed under the CAA, the CWA or
implementing regulations pursuant to the CAA or the CWA; and
(iv) petroleum and petroleum products.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indemnified Party" means each SIC Indemnified Party or each Purchaser
Indemnified Party as determined by the context of the reference to "Indemnified
Party" herein.
"Knowledge" when used with respect to the Company, means the actual
knowledge of the officers of the Company, and when used with respect to the
Purchaser, means the actual knowledge of the officers of the general partner of
the Purchaser and the officers of ST Services, Inc.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity
5
<PAGE> 11
related preferences) including, without limitation, those created by, arising
under or evidenced by any conditional sale or other title retention agreement,
the interest of a lessor under a capital lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing,
except that "Lien" shall not include liens for taxes not due and payable at
Closing.
"Major Loss" means any loss, damage, breakdown, or casualty to the
whether from fire, flood, hurricane, or any other cause, in an amount
reasonably estimated to exceed Five Hundred Thousand Dollars ($500,000),
whether or not covered by insurance.
"Material Contracts" means Contracts that either (i) require an annual
payment by any party thereto in excess of $50,000, (ii) are not cancelable by
SIC (at no penalty to SIC) within twelve months, or (iii) have a material
effect on the operation or conduct of the Property, including without
limitation the Real Property Lease.
"Net Remedial Cost" means the cost, estimated if necessary, to perform
any Remedial Work net of estimated insurance coverage and reimbursements from
trust funds maintained by any Governmental Authority.
"Notice" has the meaning set forth in Section 3.1.2.4.
"Ordinary Course of Business" means a course of business consistent
with the Company's past customs and practices with respect to the Property.
"Pepco" means Potomac Electric Power Company.
"Pepco Pipeline" means the 30 miles (approximately) of 16 inch
pipeline owned by Pepco extending from the Piney Point Terminal, in St. Mary's
County, Maryland to the Ryceville Pumping Station in Charles County, Maryland.
6
<PAGE> 12
"Permitted Encumbrances" shall mean:
(a) with respect to any property other than ROW Real
Estate (provided that item (iii) below shall only apply to Real Property) (i)
those matters described on Schedules 2.1(a) and 2.1(b) under the heading
"Permitted Encumbrances", (ii) liens for taxes not due and payable at Closing,
(iii) except for matters listed as Title Objections on Schedule 3.2,
imperfections of title, easements or restrictions that do not substantially
affect marketability, insurability, or use (but specifically excluding any Lien
or any claim of Lien related to an obligation to pay money with respect to a
debt, but including those Liens listed on Schedule 2.1(a)) and, (iv) any Liens
or other restrictions or title defects that are waived or consented to by
Purchaser; and
(b) with respect to ROW Real Estate (i) those matters
described on Schedules 2.1(a) and 2.1(b) under the heading "Permitted
Encumbrances", (ii) Liens for taxes that SIC is obligated to pay under any
Right-of-Way Agreement not due and payable at Closing, (iii) Liens on the ROW
Real Estate arising due to the acts or omissions of the owner or lessor of the
ROW Real Estate, (iv) any Lien on the ROW Real Estate that is not attributable
to an act or omission of SIC or its Affiliates, and (v) any Liens or other
restrictions that are waived or consented to by Purchaser.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"PPI" means Piney Point Industries, Inc., a Maryland corporation.
7
<PAGE> 13
"PPI Agreement" means that certain Piney Point Pipeline Asset Purchase
Agreement By and Among Piney Point Industries, Inc., Support Terminals
Operating Partnership, L.P. and Kaneb Pipeline Operating Partnership, L.P. of
even date with this Agreement.
"Property" shall have the meaning set forth in Section 2.1.
"Purchase Agreements" means collectively this Agreement, the PPI
Agreement and the Asset Purchase Agreement.
"Purchase Price" has the meaning set forth in Section 2.3.1.
"Purchaser Indemnified Party" has the meaning set forth in Section
11.1.
"Purchaser's Consultant" means Think Tank, Inc., or any other
recognized environmental consulting firm selected by Purchaser and approved by
SIC, such approval not to be unreasonably withheld.
"Real Property" means that certain real property located at Cockpit
Point Road, Dumfries, Virginia and including the Tanks and all buildings,
structures, fixtures and other improvements located thereon, as described in
greater detail in Schedule 2.1(a), but not including any other real property
owned or leased by SIC and also not including the ROW Real Estate.
"Real Property Lease" means that certain Lease Agreement with respect
to the Real Property by and between SPC as lessee and SIC as lessor, dated
August 1, 1981, as amended by the First Amendment dated January 1, 1994, and
listed on Schedule 2.1(b).
"Real Property Matter" means, with respect to any parcel of Real
Property, (i) a Title Objection with respect to such parcel; (ii) an existing
or pending condemnation, expropriation, or public taking of all or any portion
of such parcel, which, (A) individually or in the aggregate,
8
<PAGE> 14
has, or is reasonably expected to have, a material adverse effect on the
operations of the Property, (B) has, or is reasonably expected to have, a
material adverse effect on the internal expansion of the Property or (C)
affects greater than ten percent (10%) of the acreage of the Property.
"Remedial Work" means any investigation, site monitoring, containment,
cleanup, removal, restoration, or other corrective action that is reasonably
necessary to remedy any non-compliance with Environmental Law, that is
reasonably necessary under Environmental Law, or that has been required by a
Governmental Authority.
"Right-of-way Agreement(s)" means the agreement(s) (whether in the
form of a license, easement, lease or other form of agreement) pursuant to
which SIC is granted the right to use real estate owned by third parties for
the Pepco Pipeline and the Business and the right-of-way agreements described
in Section 5.12 of the Asset Purchase Agreement. The Right-of-way Agreements
are more particularly described in Schedule 2.1(c).
"ROW Real Estate" means individually or in the aggregate, the real
estate on which the Pepco Pipeline is located that is described in, and subject
to the terms and conditions set forth in a Right-of-way Agreement.
"SIC Indemnified Party" has the meaning set forth in Section 11.3.
"SIC's Consultant" means Versar, Inc., or any other recognized
environmental firm selected by SIC and approved by Purchaser, such approval not
to be unreasonably withheld.
"SPC" means Steuart Petroleum Company, a Delaware corporation.
"Tank" means the four (4) storage tanks having a total shell capacity
of approximately 465,000 bbls and three (3) ancillary tanks located on and
comprising part of the Real Property.
9
<PAGE> 15
"Terminal(s)" means the various terminal operations owned or leased
and operated by SPC that offer petroleum product throughput and storage
capabilities as more fully described in the Asset Purchase Agreement.
"Title Objection" means (a) any Lien, restriction or title defect
that substantially impairs the marketability, insurability or use of any parcel
of Real Property, other than Permitted Encumbrances and (b) those matters
listed on Schedule 3.2.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Purchase. At the Closing, SIC shall sell,
transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from SIC, all right, title and interest in and to the
following assets, properties, and rights, whether tangible or intangible, real,
personal or mixed, and wherever located (the "Property"), in each case free and
clear of all Liens and other restrictions, except for Permitted Encumbrances:
(a) the Real Property as listed on Schedule 2.1(a);
(b) SIC's rights under the Contracts, to the extent
transferable, including SIC's rights under the
Material Contracts listed on Schedule 2.1(b);
(c) SIC's rights under the Right-of-way Agreements,
including, but not limited to, those listed on
Schedule 2.1(c).
(d) all business records in the possession or under the
control of SIC relating to the Property including
without limitation the books and records of account
and customer and prospect lists, but excluding
financial records
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<PAGE> 16
presently maintained at SIC's location at 4646
Fortieth Street, N.W., Washington, D.C. (which SIC
shall maintain and transfer to Purchaser in
accordance with the terms of Section 12.11); and
(e) to the extent transferable, all of SIC's right and
interest in any license, permits, consents, and
authorities relating to the Property, issued by any
Governmental Authority and any applications for such
items.
Notwithstanding anything herein to the contrary, the Property shall
not include and Purchaser shall not acquire (i) cash, bank accounts, accounts
receivable, certificates of deposit or other cash equivalents, (ii) any tax
refunds attributable to taxes paid by SIC, (iii) those assets listed on
Schedule 2.1 under the heading "Excluded Assets", (iv) the right to the Steuart
name, except as licensed under the Asset Purchase Agreement, (v) any insurance
retrospective rating adjustment applicable to periods prior to the Closing
Date, and (vi) any reimbursements from trust funds or insurance maintained by
any Governmental Authority for Remedial Work performed prior to the Closing
Date and paid for by SIC (the items listed in clauses (i) through (vi) being
referred to herein as the "Excluded Assets").
Section 2.2 Assumption of Liabilities.
(a) Purchaser shall assume at Closing:
(i) obligations of SIC under the Contracts and
Right-of-way Agreements attributable to periods of time commencing with the
Closing, provided, however, that (A) with respect to Material Contracts and
Right-of-way Agreements, Purchaser assumes such obligations only for Material
Contracts listed on Schedule 2.1(b) and Right-of-way Agreements listed on
Schedule 2.1(c) and only to the extent true and correct copies thereof and
11
<PAGE> 17
all amendments thereto have either been delivered to Purchaser as of the date
hereof, or are delivered to and consented to by Purchaser after the date
hereof, provided, however, that to the extent that a copy of an immaterial
amendment to such Material Contract or Right-of-way Agreement has not been
provided to Purchaser as of the date hereof, Purchaser shall assume such
obligations for such Material Contract or such Right-of way Agreement without
regard to the amendment not delivered to Purchaser and, in such event, SIC
shall be responsible for all liabilities of Purchaser with respect to the
amendment not delivered to Purchaser without regard to the limits set forth in
Section 11.5; and (B) Purchaser specifically does not assume, and shall not be
treated as having assumed, any liability or obligation under any Contract or
Right-of-way Agreement to the extent such liability or obligation relates to or
arises out of a breach of such Contract or Right-of way Agreement that occurs
prior to the Closing (provided that liability and obligation for Purchaser's
continuing breaches of such Contracts or such Right-of-way Agreements after
Closing and liability and obligation for breaches of such Contracts or
Right-of-way Agreements commenced by Purchaser after Closing shall be the
responsibility of Purchaser); and
(ii) except as expressly provided for otherwise
herein and in accordance with the provisions of Section 11.7, any amounts
payable to perform Remedial Work with respect to the Real Property, regardless
of when the events giving rise to the obligation to perform such Remedial Work
are alleged to have occurred.
The obligations assumed by Purchaser pursuant to subsection (a) of
this Section 2.2 are referred to herein collectively as the "Assumed
Liabilities".
12
<PAGE> 18
(b) Purchaser shall not assume any liabilities or
obligations of SIC not specifically assumed under subsection (a) of this
Section 2.2, except to the extent that Purchaser's covenants in Section 11.7
constitute an assumption of such liabilities or obligations. Nothing herein
shall be deemed to contravene the Purchaser's indemnification of SPC in
Sections 11.3 and 11.7, which shall remain in full force and effect.
Section 2.3 Payment of Purchase Price. The consideration for the
sale of the Property shall be the Purchase Price and the assumption by the
Purchaser of the Assumed Liabilities.
2.3.1 At Closing. At the Closing, Purchaser shall pay for
the Acquired Assets the sum of One Million Eight Hundred Eighty One Thousand
Dollars ($1,881,000) (the "Purchase Price") , or the Adjusted Purchase Price,
as the case may be. Notwithstanding any provision contained herein that may be
construed to the contrary, any adjustment to the Purchase Price pursuant to the
terms of this Agreement shall be calculated as part of the Aggregate Adjusted
Purchase Price for purposes of determining SPC's right to terminate the Asset
Purchase Agreement pursuant to Section 10.1(c) therein.
2.3.2 Intentionally Omitted.
Section 2.4 Allocation of Purchase Price Amongst Acquired Assets.
The Purchase Price shall be allocated amongst the Property in accordance with
the fair market values set forth on Schedule 2.4. Neither party shall take any
position inconsistent with Schedule 2.4 in any filing with the Internal Revenue
Service or for any other purpose.
Section 2.5 Intentionally Omitted.
Section 2.6 Payment of Taxes and Closing Costs. Purchaser shall
be responsible for and shall pay any and all state sales taxes (except with
respect to any sales tax in Virginia, which
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<PAGE> 19
shall be shared equally by SIC and Purchaser) arising in connection with the
sale of the Property; provided, however, that all closing costs in connection
with the sale of the Real Property or transfer of the rights under the
Right-of-way Agreements including transfer taxes and recording fees, shall be
paid equally by SIC and Purchaser, except that title insurance premiums shall
be paid by Purchaser.
Section 2.7 Risk of Loss.
(a) The risk of loss of the Property shall pass to
Purchaser at Closing. If there is any loss, damage, breakdown, or casualty to
any of the Property prior to Closing that does not constitute either (i) a
loss, damage, breakdown, or casualty that has been repaired or replaced to the
reasonable satisfaction of Purchaser, or (ii) a loss, damage, breakdown, or
casualty fully covered by insurance proceeds which have been assigned to
Purchaser and insurance retentions paid by SIC to Purchaser, the Purchase Price
shall be reduced by the cost to repair or replace such assets, estimated if
necessary. If there is reasonable doubt whether a loss, damage, breakdown, or
casualty is fully covered by insurance and the payment of insurance retentions
by SIC, Purchaser may reduce the Purchase Price by the cost of repairing or
replacing such assets, in which case SIC shall not assign the insurance
proceeds or pay any insurance retentions to Purchaser. The cost of repairing
or replacing such assets shall be such cost or estimated cost as is agreed upon
between the parties.
(b) Notwithstanding the above provisions of this Section
2.7, if any repair or replacement is reasonably expected to cause the Average
Monthly Revenue to decrease by five percent (5%) or more during the month
immediately following Closing, Purchaser may, in lieu of accepting insurance
proceeds and any insurance retentions or a reduction in the Purchase
14
<PAGE> 20
Price, delay the Closing hereunder on the portion of the Property constituting
and relating to the Real Property and under the Asset Purchase Agreement on the
portion of the Acquired Assets thereunder constituting the Cockpit Terminal
until SPC has completed such repair or replacement to the reasonable
satisfaction of Purchaser, provided, however, that if Purchaser elects to delay
the Closing for the Cockpit Terminal, SIC, SPC and PPI, all, but not
separately, may elect to delay the Closing hereunder, the Closing with respect
to all of the Acquired Assets under the Asset Purchase Agreement and the
Closing contemplated under the PPI Agreement until such time as the Closing
under the Purchase Agreements can take place simultaneously.
ARTICLE 3
MATTERS PRIOR TO CLOSING
Section 3.1 Due Diligence.
3.1.1 Examination of Records and Assets. During the Due
Diligence Period, (i) Purchaser and its agents may examine the Property, and
such books, records, files, and documents of the Company as relate to the
Property, (ii) the Company shall make available to Purchaser and its agents for
review all information concerning the Property which they may request, and
(iii) the Company will make available to Purchaser the officers and any key
employees of the Company to answer questions and to discuss the Company and the
Property all in a manner that does not unduly disrupt the Property and the
operation of the Company's business. If the Closing does not occur, Purchaser
shall promptly return to the Company, at Purchaser's expense, (i) all documents
(including any copies thereof) received from the Company before, during or
after the Due Diligence Period, and (ii) any documents or materials
15
<PAGE> 21
that Purchaser or its advisers have generated that contain or disclose
information from the documents received from the Company. Prior to Closing,
except as required in connection with Kaneb Pipe Line Partners, L.P.'s
registration statement filed under the Securities Act of 1933 and the related
offering of partnership units, Purchaser shall maintain in confidence any
information or data received from the Company in the course of conducting its
due diligence, including without limitation the environmental due diligence
provided for in Section 3.1.2, and shall not use the same for any purpose
except in connection with the transaction contemplated by this Agreement,
provided, that the foregoing confidentiality requirement shall remain in effect
after the Closing with respect to the financial statements of the Company and
its Affiliates. Prior to Closing, and thereafter with respect to the financial
statements of the Company and its Affiliates, except as required in connection
with Kaneb Pipe Line Partners, L.P.'s registration statement filed under the
Securities Act of 1933 and the related offering of partnership units, Purchaser
shall not disclose any such information or data to any third person except to
the extent that (i) such information or data is already in the public domain,
or (ii) such disclosure is compelled or required by subpoena or similar legal
process.
3.1.2 Environmental Due Diligence.
3.1.2.1 Audits and Surveys. During the Due Diligence Period,
Purchaser may cause Audits to be conducted by the Purchaser's Consultant, at
its expense, of any of the Real Property, the Pepco Pipeline (to the extent
such Audits are permitted by Pepco) or ROW Real Estate (to the extent such
Audits are permitted under the applicable Right-of-way Agreement). The scope,
methodology, timing, and conduct of all such Audits shall be subject to the
prior approval of SIC, which approval shall not be unreasonably withheld,
except that it shall not be
16
<PAGE> 22
unreasonable for SIC to withhold its approval based on SIC's reasonable opinion
that such Audit is not permitted under the relevant Right-of-way Agreement.
All Audits shall be conducted so as to avoid unduly disrupting the Property or
the business of Pepco, SIC and/or SPC. All such Audits shall be completed
within the Due Diligence Period if, and to the extent that, Purchaser wishes to
rely on the results of such Audits in proposing any adjustment to the Purchase
Price under Section 3.1.2.2. The Purchaser shall cause the Purchaser's
Consultant to deliver simultaneously to SIC copies of all data, reports,
surveys, or audits, or drafts thereof that it delivers to Purchaser with
respect to the Property and deliver to SIC promptly after signing this
Agreement copies of all data, reports, surveys, audits, or drafts thereof
delivered to Purchaser with respect to the Property prior to the signing of
this Agreement.
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work.
(a) If the Audits prepared by Purchaser's
Consultant disclose that Remedial Work is required with respect to the
Property, then Purchaser shall record and track such Remedial Work with any
Remedial Work disclosed pursuant to Section 3.1.2.2 of the Asset Purchase
Agreement and Section 3.1.2.2 of the PPI Agreement and Purchaser may deliver to
SIC and SPC an Environmental Adjustment Request to request an adjustment to the
Purchase Price subject to this subsection (a) and subsections (b), (c) and (d)
below. The Net Remedial Cost for Remedial Work with respect to the Property
disclosed pursuant to this Section 3.1.2.2 shall be aggregated with the Net
Remedial Cost for Remedial Work under Section 3.1.2.2 of the Asset Purchase
Agreement and Section 3.1.2.2 of the PPI Agreement for purposes of (i)
calculating the one million dollar ($1,000,000) threshold described in Section
3.1.2.2 of the Asset Purchase Agreement and the Remaining Threshold, (ii)
delivering an Environmental
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<PAGE> 23
Adjustment Request to SPC under the Asset Purchase Agreement, to PPI under the
PPI Agreement and/or SIC under this Agreement, (iii) calculating the Net
Remedial Cost to determine Purchaser's right to terminate pursuant to Section
10.1(h) of the Asset Purchase Agreement, and (iv) calculating the Aggregate
Adjusted Purchase Price to determine SPC's right to terminate under Section
10.1(c) of the Asset Purchase Agreement.
(b) The time limitations and procedures for (i)
delivering an Environmental Adjustment Request, and (ii) determining the Net
Remedial Cost for Remedial Work required with respect to the Property set forth
in Section 3.1.2.2 of the Asset Purchase Agreement shall apply hereunder.
(c) Any Environmental Adjustment Request that
includes a description of Remedial Work required with respect to the Property
shall be delivered to SIC and SPC.
(d) To the extent, if any, that the Aggregate Net
Remedial Cost under the Purchase Agreements exceeds one million dollars
($1,000,000) and any of the excess amount of such Aggregate Net Remedial Cost
is attributable to the Property as determined in accordance with the procedures
set forth in Section 3.1.2.2(e) of the Asset Purchase Agreement, then the
Purchase Price shall be reduced by the amount of such excess in accordance with
Section 3.1.2.2 of the Asset Purchase Agreement.
3.1.2.3 Purchase Price Adjustment for Other Remedial Work.
Notwithstanding any terms contained in Sections 3.1.2.1 and 3.1.2.2, (i) if
there is a violation of Environmental Law that occurs after the date of this
Agreement and prior to Closing that requires Remedial Work with respect to the
Property that is not completed prior to Closing either to the reasonable
satisfaction of Purchaser or to the satisfaction of the applicable Governmental
Authority, or (ii)
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if after the Due Diligence Period and prior to Closing a violation of
Environmental Law that requires Remedial Work with respect to the Property is
discovered that could not reasonably have been discovered during the Due
Diligence Period by a Phase I and Phase II environmental audit and such
Remedial Work is not completed prior to Closing either to the reasonable
satisfaction of Purchaser or to the satisfaction of the applicable Governmental
Authority, then in each such case Purchaser shall be entitled to an adjustment
to the Aggregate Purchase Price determined in accordance with the procedures
set forth in Sections 3.1.2.2 and 3.1.2.3 of the Asset Purchase Agreement
without regard to the 75 day time period for proposing such adjustment.
3.1.2.4 Other Environmental Liabilities. If, prior to
Closing, Purchaser or SIC receives notice of a claim from, or discovers or
receives notice of any facts or circumstances reasonably expected by ICF Kaiser
to give rise to a claim by, any Person or Governmental Authority for liability
or obligation (other than for Remedial Work) related to an alleged violation of
Environmental Law with respect to the Property, it shall promptly notify the
other parties hereto (the "Notice"). Thereafter, SIC and Purchaser shall
attempt to agree on whether a Purchase Price adjustment or other agreeable
mechanism is warranted with respect to such claim. If the parties are unable
to agree, SIC may in its discretion assume responsibility for such claim and
provide Purchaser with an indemnification against such claim reasonably
satisfactory to Purchaser. If within thirty (30) days after delivery of the
Notice (i) the parties are unable to agree on an adjustment to the Purchase
Price or other agreeable mechanism, and (ii) SIC fails to assume responsibility
for such claim and provide an indemnification reasonably satisfactory to
Purchaser, then Purchaser shall have the right to terminate this Agreement.
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Section 3.2 Real Property Matters.
(a) Purchaser shall at its expense from the date of this
Agreement through Closing review the status of SIC's title to the Real
Property. As of the date of this Agreement, Purchaser has received (i) the
survey listed on the attached Schedule 3.2 and (ii) the current title binder
for the Real Property listed on the attached Schedule 3.2 obtained from
Commonwealth Land Title Insurance Company with respect to the Real Property
indicating therein Purchaser as the proposed insured (with the cost of any
update work necessary to cause the issuance of the current title binder to be
paid equally by Purchaser and SIC). The information set forth on such survey
and in such title binder (but only to the extent copies of the documents
referenced therein have been provided to Purchaser) is referred to herein as
the "Current Title Information". Purchaser shall have the right, at its
expense, to cause to be prepared to its satisfaction current surveys of any or
all of the parcels of Real Property.
(b) All Real Property Matters disclosed in the Current
Title Information are listed on Schedule 3.2 and Purchaser shall not have the
right or the opportunity to raise any other Real Property Matters based on the
Current Title Information.
(c) If Purchaser's review prior to Closing discloses a
Real Property Matter not disclosed in the Current Title Information, Purchaser
shall notify SIC thereof within four (4) Business Days of discovery.
(d) With respect to Real Property Matters listed on
Schedule 3.2 and any Real Property Matters for which notice is sent to SIC
under clause (c) above, SIC shall at its expense attempt to remedy or cure such
Real Property Matter, provided that, except for payments
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necessary to release existing mortgages and any Lien related to said mortgages
on Real Property owned by SIC, SIC shall have no obligation to spend any amount
in excess of five percent (5%) of the Purchase Price to remedy or cure a Real
Property Matter. If SIC is unable to remedy or cure one or more Real Property
Matters within 30 days from Purchaser's notification thereof, the parties shall
attempt in good faith to negotiate an adjustment in the Purchase Price that
will compensate Purchaser for the cost of curing or remedying the Real Property
Matter or for otherwise accepting the Real Property as is. If the parties are
unable to agree on an adjustment to the Purchase Price as a result of a Real
Property Matter this Agreement shall terminate with respect to all Property
other than the Right-of-way Agreements and the Purchase Price shall be reduced
to one dollar ($1.00) plus Purchaser's assumption with respect to the
Right-of-way Agreements under Section 2.2, in which event the Purchaser shall
still be obligated to acquire the Cockpit Terminal pursuant to the Asset
Purchase Agreement and the Purchaser shall be required to lease the Real
Property from SIC in accordance with the terms of a lease to be negotiated and
concluded at the appropriate time; provided, however, that the Purchaser shall
not be required to acquire the Cockpit Terminal pursuant to the Asset Purchase
Agreement or to lease the Real Property from SIC if SIC and the Purchaser
cannot agree on the terms of such lease.
Section 3.3 Consents. SIC shall use reasonable commercial
efforts promptly to obtain the consent, waiver or approval of each Person whose
consent, waiver, or approval is required to effect an assignment of any of the
Material Contracts or Right-of-way Agreements, or to transfer any of the
Property to Purchaser or otherwise in connection with this transaction, and,
where appropriate, to effect a novation of such Material Contracts or
Right-of-way Agreements.
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Purchaser shall cooperate with SIC in obtaining such items as reasonably
requested to do so by SIC.
Section 3.4 Hart-Scott-Rodino. SIC and Purchaser shall each
comply with the notification, waiting period and other requirements of the HSR
Act. Each party shall take reasonable steps to provide information to and
otherwise cooperate with the other party for the purposes of making required
filings under the HSR Act.
Section 3.5 Purchaser's Licenses, Permits and Approvals.
Purchaser shall exercise reasonable commercial efforts promptly to obtain all
licenses and permits required by Purchaser to purchase the Property.
Section 3.6 Intentionally Omitted.
Section 3.7 Notification. Each party shall promptly notify the
other parties if it has Knowledge of (i) any information indicating that any
representation or warranty of any other party is or may be untrue in any
material respect, (ii) any covenant to be performed by such other party that is
not being performed, or (iii) any circumstance that would impede or interfere
with the Closing, except that no party shall be liable for a breach of this
covenant unless and except to the extent that the affected party is materially
prejudiced or damaged thereby.
Section 3.8 Deferred Like-Kind Exchange. Upon the request of
SIC, made at least two Business Days prior to the Closing Date, Purchaser shall
execute such documents as may reasonably be required to acknowledge (i) notice
of SIC's intention to accomplish a deferred like-kind exchange of part or all
of the Property pursuant to Section 1031 of the Code and Treasury Regulation
1.1031(k)-1 and (ii) the assignment of part or all of SIC's right, title and
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interest in and to (but not SIC's obligations under) this Agreement to a
qualified intermediary (within the meaning of Treasury Regulation Section
1.1031(k)-1(g)(4)).
Section 3.9 Actions Necessary to Consummate. From and after the
date of this Agreement, each of the parties shall in good faith take such
action as may be commercially reasonable to consummate the transactions
contemplated by this Agreement.
ARTICLE 4
OPERATION OF THE PROPERTY PRIOR TO CLOSING
Section 4.1 Ordinary Course. Between the date of this Agreement
and the Closing, SIC shall (i) operate and maintain the Property diligently in
the Ordinary Course of Business and shall not institute any new methods of
accounting or pricing, or engage in any transaction or activity, or enter into
any agreement or make any commitment with respect to the Property except in the
Ordinary Course of Business; (ii) maintain the Property in good operating
condition consistent with past practice and comply timely with all provisions
of leases, agreements, contracts and commitments relating to the Property;
(iii) exercise reasonable efforts to preserve the Property and its
relationships with its customers, employees, and suppliers, to timely file all
reports required by any Governmental Authority and to pay all taxes, and to
comply with all Applicable Law. In addition, SIC shall have delivered to
Purchaser copies of appropriate financial information regarding the Property.
Section 4.2 Certain Changes. Without the prior consent of
Purchaser, such consent not to be unreasonably withheld, provided that such
consent shall be deemed to have been given unless it is denied within five (5)
Business Days of having been requested, SIC shall not: (i)
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permit or allow any of the Property to be subjected to any Lien; (ii) cancel or
waive any material claim or right relating to the Property; (iii) sell,
transfer, assign, distribute or otherwise dispose of any Property, except in
the Ordinary Course of Business; (iv) enter into any contract or commitment
with respect to the Property, the performance of which may extend beyond the
Closing Date, except in the Ordinary Course of Business; or (v) cause or permit
any of its current insurance or reinsurance policies with respect to the
Property to be canceled or terminated or any of the coverage thereunder to
lapse, unless simultaneously with such termination, cancellation, or lapse, the
Company obtains replacement policies from the same or comparable insurers
providing coverage which is the same or comparable to that provided under the
cancelled, terminated, or lapsed policies. Without the consent of Purchaser,
such consent not to be unreasonably withheld, SIC shall not enter into, amend
or modify any Material Contracts or any Right-of-way Agreements, provided that
such consent shall be deemed to have been given unless it is denied within five
(5) Business Days of having been requested.
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Property at Closing
shall be subject to the satisfaction of the following conditions on or before
the Closing Date, except as and to the extent that such satisfaction is waived
by Purchaser.
Section 5.1 Representations and Warranties. The representations
and warranties of the Company contained in Article 7 (other than Section 7.16)
shall be true and correct in all material
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respects at and as of the Closing Date and the Purchaser shall have received a
certificate to that effect signed by an officer of the Company.
Section 5.2 Certificate Regarding Environmental Representations
and Warranties. The Company shall have delivered to Purchaser a certificate
signed by an officer of the Company stating either (i) the representations and
warranties of the Company contained in Section 7.16 are true and correct at and
as of the Closing Date or (ii) the representations and warranties of the
Company contained in Section 7.16 are true and correct at and as of the Closing
Date except for matters disclosed in the certificate, which certificate shall
divide any such matters stated therein into matters for which a Purchase Price
adjustment is available under Sections 3.1.2.2, 3.1.2.3 or 3.1.2.4, and matters
for which a Purchase Price adjustment is not available under Section
3.1.2.3(ii).
Section 5.3 Compliance with this Agreement. The Company shall
have performed and complied in all material respects with all of their
agreements and covenants set forth or contemplated herein that are required to
be performed or complied with on or before the Closing Date and the Purchaser
shall have received a certificate to that effect signed by an officer of the
Company.
Section 5.4 Purchase Permitted by Applicable Laws. The purchase
of the Property shall not be prohibited by any Applicable Law or by any order
or ruling of any Governmental Authority, nor shall any condition have been
imposed on the Closing by any Governmental Authority which would subject either
party to penalties or other sanctions as a result of the Closing.
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Section 5.5 Opinion of Counsel. The Purchaser shall have
received an opinion of counsel to the Company, dated the Closing Date, opining
in substance on the matters set forth in Exhibit 5.5.
Section 5.6 Consents and Approvals. All material consents,
exemptions, authorizations, or other actions by, or notices to, or filings
with, any Person necessary or required in connection with the purchase of the
Property by Purchaser shall have been obtained and be in full force and effect
(including any required consent of a ROW Real Estate owner for the transfer or
assignment of a Right-of-way Agreement), and any waiting periods under any
Applicable Law shall have expired.
Section 5.7 Intentionally Omitted.
Section 5.8 No Material Adverse Change. Except as set forth on
Schedule 7.11 there shall have been no material adverse change in the Property
since December 31, 1994.
Section 5.9 Title Policy. Purchaser shall have obtained from
Commonwealth Land Title Insurance Company commitments to issue owner's policies
of title insurance providing that upon due recordation of an appropriate deed
such title company shall insure that the title to each parcel of the Real
Property shall be vested in Purchaser free and clear of any Real Property
Matter.
Section 5.10 Satisfaction of Conditions to Closing Under the Asset
Purchase Agreement. All the conditions to close set forth in Article 5 of the
Asset Purchase Agreement shall have been satisfied, except to the extent that
such satisfaction is waived by Purchaser.
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ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligations of the Company to sell the Property hereunder shall be
subject to the satisfaction of the following conditions on or before the
Closing Date, except as and to the extent that such satisfaction is waived by
the Company.
Section 6.1 Representations and Warranties. The representations
and warranties of the Purchaser and the Guarantor contained in Article 8 hereof
shall be true and correct in all material respects at and as of the Closing
Date, and the Company shall have received a certificate to that effect signed
by an officer of the general partner of the Purchaser and an officer of the
general partner of the Guarantor.
Section 6.2 Compliance with this Agreement. The Purchaser and
the Guarantor shall have performed and complied in all material respects with
all of their agreements and conditions set forth or contemplated herein that
are required to be performed or complied with by the Purchaser and the
Guarantor on or before the Closing Date, and the Company shall have received a
certificate to that effect signed by and officer of the general partner of the
Purchaser and an officer of the general partner of the Guarantor.
Section 6.3 Sale Permitted by Applicable Laws. The sale of the
Property by the Company hereunder shall not be prohibited by any Applicable Law
or Governmental Authority nor shall any condition have been imposed on the
Closing by any Governmental Authority which would subject either party to
penalties or other sanctions as a result of the Closing.
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Section 6.4 Opinion of Counsel. The Company shall have received
an opinion of counsel to the Purchaser, dated the Closing Date, opining in
substance on the matters set forth in Exhibit 6.4.
Section 6.5 Consents and Approvals. All consents, exemptions,
authorizations, waivers or other actions by, or notices to, or filings with,
any Person necessary or required in connection with the execution, delivery or
performance by the Purchaser of this Agreement shall have been obtained and be
in full force and effect.
Section 6.6 Satisfaction of Conditions to Closing Under the Asset
Purchase Agreement. All the conditions to close set forth in Article 6 of the
Asset Purchase Agreement shall have been satisfied by Purchaser, except to the
extent that such satisfaction is waived by SIC.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser, as of the
date of this Agreement and as of the Closing Date, as follows:
Section 7.1 Existence and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company: (a) has all requisite
corporate power and authority, as applicable, to own and operate its property,
and to conduct the business in which it is currently, or is currently proposed
to be, engaged; (b) is duly qualified as a foreign corporation and is in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business require such
qualification, except to the extent that the failure to do so would not have
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an adverse effect on the Property; and (c) has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
Section 7.2 Corporate Authorization: No Contravention. The
execution, delivery and performance by the Company of this Agreement: (a) has
been duly authorized by all necessary corporate, and, if required, stockholder
action; (b) does not contravene the terms of the Company's Certificate of
Incorporation or By-Laws, or any amendment of either thereof, and (c) will not
violate Applicable Law, or conflict with or result in any breach of or default
under, or cause the creation of any Lien under, any contractual obligation of
the Company.
Section 7.3 Governmental Authorization: Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under an Applicable Law, is necessary or required
in connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement, other than compliance with
the HSR Act.
Section 7.4 Binding Effect. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability.
Section 7.5 Litigation. Except as listed on Schedule 7.5, there
are no legal actions, suits, proceedings, or claims pending, or to the
Knowledge of the Company threatened, before any Governmental Authority against
or affecting the Company (a) with respect to this
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Agreement, or any of the transactions contemplated thereby, or (b) which would
be reasonably likely to have (i) an adverse effect on the Property or (ii) an
adverse effect on the ability of the Company to perform its obligations
hereunder. No injunction, writ, temporary restraining order, decree or any
order of any nature has been issued by any Governmental Authority purporting to
enjoin SIC or restrain SIC's execution, delivery or performance of this
Agreement.
Section 7.6 Compliance with Laws. The Company is in compliance
with all Applicable Law, except for any failure to comply which would not have
an adverse effect on the Property.
Section 7.7 Title to Real Property and Real Property Leases.
Schedule 2.1(a) sets forth a list of all parcels of real property, excluding
ROW Real Estate, upon which the Cockpit Terminal or its operations are located
(including a metes and bounds description thereof, to the extent available, or
a plat of subdivision designation) and also provides a true and correct
indication of whether each such parcel is owned or leased by the Company. The
Company has good and marketable title in fee simple to the Real Property, free
of Liens (other than Liens that will be released in full at Closing) and
subject to Permitted Encumbrances. The Company has delivered to the Purchaser
true and correct copies of the Real Property Lease, and any amendments thereto,
and such Real Property Lease is binding upon and enforceable against the
Company and SPC in accordance with its terms, and SIC's rights thereunder are
included in the Property. As of the Closing Date, the improvements located on
the Real Property are in as good a condition as they were on the date of
Purchaser's physical inspection of the Terminals as specified on Schedule 7.7,
ordinary wear and tear excepted.
Section 7.8 Intentionally Omitted.
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Section 7.9 Intentionally Omitted.
Section 7.10 Intentionally Omitted.
Section 7.11 No Material Adverse Change: Ordinary Course. Since
December 31, 1994, (i) there has not been any material adverse change in the
Property and (ii) the Company has operated the Property in the Ordinary Course
of Business, except as set forth on Schedule 7.11.
Section 7.12 Broker's, Finder's or Similar Fees. Except as set
forth on Schedule 7.12, no brokerage commissions, finder's fees or similar fees
are payable in connection with the transactions contemplated hereby. Purchaser
has no liability for any items set forth on Schedule 7.12.
Section 7.13 Intentionally Omitted.
Section 7.14 Material Contracts. The Company has delivered to
Purchaser true and correct copies of all Material Contracts, including all
amendments thereto. Schedule 2.1(b) lists all Material Contracts, and will be
updated at Closing to include any Material Contracts entered into or amended
between the date of this Agreement and the Closing Date. Except as disclosed
on Schedule 2.1(b), each Material Contract is in effect and has not been
amended or otherwise modified, and is binding upon and enforceable against the
Company and, to the Company's Knowledge, all parties thereto, in accordance
with its terms, and there is no default thereunder and to the Knowledge of the
Company no other party thereto has issued or threatened to issue a notice of
termination or cancellation. Except as set forth on Schedule 2.1(b), no
consent to the transfer or assignment of the Material Contracts to Purchaser is
required.
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Section 7.15 Permits. Except as set forth on Schedule 7.15, the
Company holds all licenses, permits, franchises, approvals, consents, waivers,
exemptions, authorizations, certificates of occupancy and similar rights and
privileges which are necessary for the operation of the Property.
Section 7.16 Environmental Matters.
(a) Except as set forth on Schedule 7.16, the Property
(i) does not violate any Environmental Law in effect on the date hereof, and
without regard for future modifications or amendments, (ii) is not subject to
any pending or threatened action, suit, investigation, or other proceeding by
any Governmental Authority with respect to an alleged violation of
Environmental Law, (iii) does not use, and there is not located on the Real
Property, any Hazardous Substances other than (x) those forming a part of the
supplies of the Company and (y) petroleum products owned by customers or by
SIC, which in each case are maintained in accordance with Environmental Law in
effect on the date hereof, and without regard for future modifications or
amendments and (iv) does not use, and there is not located on the ROW Real
Estate, any Hazardous Substances other than (x) those forming a part of the
supplies of the Company and (y) petroleum products owned by customers or by
SIC, which in case are maintained in accordance with Environmental Law in
affect on the date hereof, and without regard for future modifications or
amendments.
(b) Except as set forth on Schedule 7.16, (i) there
exists no condition arising from the presence, release, threat of release,
placement on or under the Real Property or the ROW Real Estate, use, storage,
handling, generation, or disposal of any Hazardous Substance such as would
require Remedial Work or give rise to other liability or obligation, (ii) the
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Company has been issued all material licenses, permits, and certificates
required under Environmental Law in effect on the date hereof for the conduct
of its business and (iii) there exists no past or present violation of
Environmental Law in effect on the date hereof with respect to the Property
that gives rise to liability or obligation now or in the future. Schedule 7.16
describes all conditions as to which, to the Knowledge of the Company Remedial
Work with respect to the Property is required, and the scope and methodology of
such Remedial Work as currently in process or contemplated by the Company. The
Company does not have any liability or obligation, accrued, contingent or
otherwise, with respect to the matters described on Schedule 7.16, except for
the obligation to complete Remedial Work. The representation and warranty
contained in this Section 7.16 is the only representation and warranty made by
SIC with respect to environmental matters or Environmental Law, and no other
representation or warranty made herein shall be applicable to such matters or
Environmental Law. Notwithstanding the disclosure to Purchaser on Schedule
7.16 or pursuant to Section 5.2 of any Remedial Work for which a Purchase Price
adjustment is not available pursuant to Section 3.1.2.3(ii), such Remedial Work
shall be regarded as a breach of this Section 7.16 for purposes of Section
11.7.1.
Section 7.17 Intentionally Omitted.
Section 7.18 Intentionally Omitted.
Section 7.19 Restrictive Agreements. Except as set forth on
Schedule 7.19, the Company is not a party to any agreements restricting or
limiting the use of the Property.
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Section 7.20 List of Assets. The Property includes, but is not
limited to, and there shall be transferred to Purchaser at Closing, all of the
assets listed on Schedules 2.1(a), 2.1(b) and 2.1(c).
Section 7.21 Information Furnished. Neither this Agreement nor
the Schedules or Exhibits hereto, nor any instrument or document furnished to
Purchaser hereunder, when considered as a whole, contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements herein or therein, as the case may be, not misleading.
Section 7.22 Intentionally Omitted.
Section 7.23 Intentionally Omitted.
Section 7.24 Right-of-way Agreements.
(a) Schedule 2.1(c) sets forth a list of all the
Right-of-way Agreements. The Company has delivered to Purchaser true and
correct copies of the Right-of-way Agreements, and any amendments thereto.
Except as disclosed on Schedule 2.1(c), each such Right-of-way Agreement is (i)
in effect and has not been amended or otherwise modified, and (ii) is binding
upon and enforceable against the Company and, to the Company's Knowledge, all
parties thereto in accordance with its terms and there is no default thereunder
and, to the Knowledge of the Company, no other party thereto has issued or
threatened to issue a notice of termination or cancellation.
(b) Except as set forth on Schedule 2.1(c), no consent is
required for the transfer or assignment of SIC's rights and obligations under
the Right-of-way Agreements to
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Purchaser. The ROW Real Estate is free and clear of Liens (other than Liens,
if any, that will be released in full at Closing) and subject to Permitted
Encumbrances.
(c) The Right-of-way Agreements included in the Property
together with the easement agreement described in Exhibit 5.12 of the Asset
Purchase Agreement grant SIC a contiguous right-of-way from SPC's Piney Point
Terminal to the Ryceville Pumping Station and grant to SIC the right to operate
the Pepco Pipeline as it has been operated by SPC during the last twelve
months.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND THE GUARANTOR
The Purchaser and the Guarantor, jointly and severally, represent and
warrant to SIC as follows as of the date of this Agreement and as of the
Closing Date:
Section 8.1 Authorization: No Contravention. The execution,
delivery and performance by Purchaser and Guarantor of this Agreement: (a) is
within Purchaser's and Guarantor's partnership power and authority and has been
duly authorized by all necessary action; (b) does not contravene the terms of
Purchaser's or Guarantor's respective limited partnership agreements; and (c)
will not violate, conflict with or result in any breach or default under any
contractual obligation of Purchaser or Guarantor, or violate any Applicable
Law.
Section 8.2 Binding Effect. This Agreement has been duly
executed and delivered by Purchaser and Guarantor, and constitutes the legal,
valid and binding obligation of Purchaser and Guarantor enforceable against
each of them in accordance with its terms, except as enforceability
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may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors rights generally or by equitable principles
relating to enforceability.
Section 8.3 Broker's, Finder's or Similar Fees. No brokerage
commissions, finders fees or similar fees are payable in connection with the
transactions contemplated hereby under any agreements made by or with
Purchaser.
Section 8.4 Governmental Authorization; Third Party Consent. No
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Applicable Law, and no lapse of a waiting period under
Applicable Law, is necessary or required in connection with the execution,
delivery or performance by Purchaser or Guarantor (other than compliance with
the HSR Act) or enforcement against such Purchaser or Guarantor of this
Agreement.
Section 8.5 Sufficient Funds. As of the date hereof, Purchaser
has sufficient funds or has approved financing commitments which will enable it
to close the transactions contemplated under this Agreement. As of the Closing
Date, Purchaser will have funds available to it sufficient to close and to
fulfill its obligations hereunder.
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters.
After giving effect to the financing to be incurred by Purchaser in connection
with its consummation of the transactions contemplated hereby, Purchaser will
not be as of the Closing Date (i) "insolvent" nor will it become "insolvent" as
the result of such transactions, (ii) engaged in a business or transaction for
which any property or assets remaining with Purchaser would be "unreasonably
little" or "unreasonably small in relation to its business" or the transaction,
or (iii) in a position where it "intends to incur, or believes that it would
incur, debts that would be beyond its ability
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to pay as such debts mature," in each case as such quoted terms are used in
Section 548 of the United States Bankruptcy Code of 1978, as amended, the
Uniform Fraudulent Conveyances Act and the Uniform Fraudulent Transfer Act.
Section 8.7 Litigation. There are no legal actions, suits,
proceedings, or claims pending, or to the Knowledge of Purchaser or Guarantor,
threatened, before any Governmental Authority against or affecting Purchaser or
Guarantor (a) with respect to this Agreement, or any transactions contemplated
hereby, or (b) which would be reasonably likely to have an adverse effect on
the ability of the Purchaser or Guarantor to perform their respective
obligations hereunder. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any Governmental Authority
purporting to enjoin Purchaser or Guarantor with respect to, or restrain
Purchaser's or Guarantor's execution, delivery or performance of, this
Agreement.
ARTICLE 9
CLOSING
Section 9.1.A Time and Place. The consummation of the purchase and
sale of the Property (the "Closing") shall take place at the offices of
Ginsburg, Feldman & Bress at 1250 Connecticut Avenue, Washington, D.C. at 10:00
a.m. Washington time on October 31, 1995 (the "Closing Date"), or such other
date, time, and place as the parties shall agree. At Closing, Purchaser shall
be entitled to physical possession of the Property and SIC shall surrender the
same to Purchaser.
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Section 9.1.B Effective Date. The transactions contemplated by
this Agreement shall be effective at 12:01 A.M. on the Closing Date, without
regard to the date of recordation of deeds or other transfer documents.
Section 9.2 Documents and Instruments to be Delivered by SPC. At
Closing, SIC shall deliver to Purchaser (or, with respect to transfer documents
for the Real Property, deliver to the Presidential Title, Inc. sufficiently
prior to Closing to permit recording at the time of Closing):
(a) bills of sale, assignments, limited warranty deeds
and such other instruments as shall be required to transfer title to the
Property, free of Liens (except Permitted Encumbrances), all in form customary
in the jurisdiction which the Property is located and all to be in form
reasonably satisfactory to both parties;
(b) A certificate of an officer of SIC stating that (i)
SIC has complied with all of the covenants imposed on it by this Agreement to
the extent they are required to be complied with prior to the Closing, and (ii)
that the representations and warranties made by SIC are in all material
respects true and correct at Closing, all as required by Sections 5.1, 5.2 and
5.3;
(c) the legal opinion required by Section 5.5;
(d) copies of all consents, waivers and approvals
referred to in Section 5.6;
(e) copies of the resolutions of SIC's board of directors
and of any action required by SIC's stockholders authorizing the execution and
delivery of this Agreement, certified by SIC's secretary or assistant
secretary; and
(f) a good standing certificate from the State of
Delaware dated as of a date not more than 20 days prior to the Closing Date.
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Section 9.3.A Documents and Instruments to be Delivered by
Purchaser. At Closing, Purchaser shall deliver to SIC:
(a) the Purchase Price or Adjusted Purchase Price, as the
case may be, by bank check or wire transfer of immediately available funds, at
SIC's election, and, if by wire transfer, to such account as SIC may notify to
Purchaser not less than two Business Days prior to the Closing Date;
(b) the legal opinion required by Section 6.4;
(c) a certificate of an officer of the general partner of
the Purchaser stating that (i) Purchaser has complied with all of the covenants
imposed on it by this Agreement to the extent they are required to be complied
with prior to the Closing, and (ii) that the representations and warranties
made by Purchaser are in all material respects true and correct at Closing, all
as required by Sections 6.1 and 6.2; and
(d) copies of the resolutions of the board of directors
of Purchaser's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Purchaser's
general partner.
Section 9.3.B Documents and Instruments to be Delivered by Guarantor.
At Closing, Guarantor shall deliver to SIC:
(a) the legal opinion required by Section 6.4;
(b) a certificate of an officer of the general partner of
the Guarantor stating that (i) Guarantor has complied with all of the covenants
imposed on it by this Agreement to the extent they are required to be complied
with prior to the Closing, and (ii) that the representations
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and warranties made by Guarantor are in all material respects true and correct
at Closing, all as required by Sections 6.1 and 6.2; and
(c) copies of the resolutions of the board of directors
of Guarantor's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Guarantor's
general partner.
Section 9.4 Intentionally Omitted.
ARTICLE 10
TERMINATION
Section 10.1 Grounds for Termination. This Agreement may be
terminated as follows:
(a) by mutual agreement of the parties, at any time;
(b) by SIC at any time after November 30, 1995, if the
conditions to Closing set forth in Article 6 have not been met by that date,
unless the failure to meet such condition is attributable to any fault or
neglect of SIC;
(c) by Purchaser at any time after November 30, 1995, if
the conditions to Closing set forth in Article 5 have not been met by that
date, unless the failure to meet such condition is attributable to any fault or
neglect of Purchaser;
(d) by Purchaser if a Major Loss occurs, provided that
Purchaser gives notice of its intent to terminate within ten (10) Business Days
after it has received notice of such Major Loss;
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(e) by Purchaser if it discovers a material breach of any
representation or warranty made by SIC which SIC is unable to cure within
thirty (30) days after having received notice of such breach;
(f) by SIC if it discovers a material breach of any
representation or warranty made by Purchaser which Purchaser is unable to cure
within thirty (30) days after having received notice of such breach; and
(g) by Purchaser pursuant to Section 3.1.2.4.
If this Agreement terminates pursuant to the provisions of this
Section 10.1, the Asset Purchase Agreement and the PPI Agreement shall remain
in full force and effect, unless such agreements terminate by their own terms,
provided that the portions of the last sentence of Section 3.2 that deal with
the lease of the Real Property shall still apply.
Section 10.2 Termination of the Asset Purchase Agreement. This
Agreement shall automatically terminate if the Asset Purchase Agreement
terminates for any reason, unless SIC and Purchaser agree otherwise. If this
Agreement does not terminate, then SIC and Purchaser shall negotiate mutually
agreeable terms to adjust the indemnification limits and the Escrow Fund amount
referred to in Article 11 of the Asset Purchase Agreement consistent with the
amount of the Purchase Price and the terms and conditions of this Agreement.
Section 10.3 Effect of Termination. If this Agreement terminates:
(a) neither party shall have any obligation to the other
party, except that such termination shall be without prejudice to the rights of
any party resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of the
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other party under this Agreement, provided that a failure by a party to close
when all of the conditions to such party's obligation to close have been met
shall be deemed to be an intentional breach of such party's covenants and
agreements hereunder.
(b) promptly upon termination for any reason, Purchaser
shall return to SIC at Purchaser's expense all documents (including copies
thereof) received from SIC prior to, during or after the Due Diligence Period;
(c) Purchaser shall not offer employment to any of SIC's
employees, without the prior consent of SIC, for two years following the date
of this Agreement; and
(d) the provisions of Section 3.1.1, Section 10.3, and
Sections 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 and the
portion of the last sentence of Section 3.2 dealing with the lease of the Real
Property shall survive the termination of this Agreement and continue in full
force and effect.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by SIC and SPC.
(a) SIC, SPC and the Purchaser acknowledge and agree that
SPC's indemnification obligation under Section 11.1 of the Asset Purchase
Agreement is intended to and shall cover and include Liabilities of each
Purchaser Indemnified Party resulting from or arising out of (i) any breach of
any representation or warranty, covenant or agreement of SIC set forth in this
Agreement, except for a breach of a representation and warranty contained in
Sections 7.1, 7.2, 7.3, 7.4, 7.7, and 7.12, (ii) a breach of SPC's
representation and warranty
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contained in Section 7.16 of Asset Purchase Agreement as it applies to the Real
Property, (iii) non-compliance with any applicable transfer or bulk sales law,
and (iv) obligations or liabilities of the Company related to or arising out of
acts, events or omissions occurring prior to the Closing that are related to
the Property and not expressly assumed by Purchaser or indemnified against by
Purchaser hereunder or in the Asset Purchase Agreement, provided, however, that
SPC shall not be liable under this Section 11.1 to any Purchaser Indemnified
Party for any amount paid in settlement of claims without SPC's and SIC's
consent, unless such consent was requested and unreasonably withheld.
Therefore, SIC shall have no liability to Purchaser for any breach of any
representation or warranty, covenant or agreement of the Company set forth
herein, except a breach of those representations and warranties set forth in
Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.12. The indemnification obligations
assumed by SPC under this Section 11.1 shall be subject to and treated in
accordance with Sections 11.2, 11.5, 11.6, 11.7 and 11.8 of the Asset Purchase
Agreement, as if such indemnification obligations were made under the Asset
Purchase Agreement.
(b) Subject to the provisions of this Article 11, the
Company agrees to indemnify, defend, and hold harmless the Purchaser and its
Affiliates, officers, directors, agents, shareholders, partners, and employees,
(each, a "Purchaser Indemnified Party") from and against any and all
liabilities, losses, claims (whether or not successful), damages, and expenses
(including reasonable fees, and disbursements of counsel) (collectively,
"Liabilities") resulting from or arising out of (i) any breach of any
representation or warranty, of the Company set forth in Sections 7.1, 7.2, 7.3,
7.4, 7.7 and 7.12 of this Agreement or (ii) liabilities or obligations related
to any amendment to a Material Contract or Right-of-way Agreement not delivered
to
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Purchaser prior to the date of this Agreement, unless such amendment is
subsequently delivered to and accepted by Purchaser, provided, however, that
the Company shall not be liable under this Section 11.1 to any Purchaser
Indemnified Party for any amount paid in settlement of claims without the
Company's consent, unless such consent was requested and unreasonably withheld.
Section 11.2 Survival of Representations and Warranties. The
representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7
and 7.12 shall survive the Closing without limitation of time. The
representations and warranties set forth in Section 7.16 (Environmental
Matters) shall survive the Closing and shall expire three years after the
Closing Date. All other representations and warranties shall survive the
Closing and shall expire two years after the Closing Date. Any right of
Purchaser to make a claim against the Company for a breach of any covenant or
agreement of the Company herein shall survive the Closing and shall expire one
hundred eighty (180) days after the date on which the Company was obligated to
comply with such covenant or agreement. Any claim for breach of a
representation and warranty, or covenant or agreement, must be made by
Purchaser by a demand for arbitration to the Company prior to the expiration of
such representation and warranty, or the right to make a claim for a breach of
such covenant or agreement, and any such claims covered by such demands made by
Purchaser to the Company within such time periods shall survive until resolved.
Section 11.3 Indemnification by Purchaser. Purchaser, it
successors and assigns, jointly and severally, agree to indemnify, defend, and
hold harmless the Company and their Affiliates, officers, directors,
shareholders, partners, warrant holders, agents, and employees, (each, an "SIC
Indemnified Party") from and against any and all Liabilities resulting from or
arising out
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of (i) any breach of any representation, warranty, covenant or agreement of
Purchaser or Guarantor set forth in this Agreement or (ii) obligations or
liabilities of the Purchaser with respect to the Property, including those
which may be imposed upon any SIC Indemnified Party, related to or arising out
of acts, events or omissions occurring after the Closing and not expressly
assumed by any SIC Indemnified Party hereunder and specifically including (but
not limited to) liabilities or obligations arising from the failure of
Purchaser to assume any post-Closing liabilities as required by Section 2.2,
provided, however, that Purchaser shall not be liable under this Section 11.3
to any SIC Indemnified Party for any amount paid in settlement of claims
without Purchaser's consent unless such consent was requested and unreasonably
withheld, and provided further that the right of the SIC Indemnified Parties to
make a claim for breach of any covenants or agreements of Purchaser herein
shall expire one hundred eighty (180) days after the date on which the
Purchaser was obligated to comply with the covenant or agreement.
Section 11.4 Establishment of Escrow Fund. SIC, SPC and Purchaser
acknowledge and agree that the Escrow Fund, established by SPC at Closing, will
be used to satisfy claims for indemnification under the Purchase Agreements,
including all indemnification claims under this Agreement, for which no limit
on liability has been established in accordance with the terms of Section 11.4
of the Asset Purchase Agreement. Purchaser shall follow the procedures set
forth in Section 11.4 of the Asset Purchase Agreement for making claims for
indemnification under this Agreement.
Section 11.5 Limits on Liability. With the exception of (i)
claims arising under Sections 7.1, 7.2, 7.3, 7.4, 7.7 (but only to the extent
that any claim is based on the specific wording
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in each of the limited warranty deeds by which the Real Property is conveyed)
and 7.12 (ii) claims for fines or penalties imposed by Governmental
Authorities, (iii) claims for Liens that are not Permitted Encumbrances, and
(iv) claims under Section 11.1(b)(ii), for which there shall be no limitation
of amount, the Company's maximum liability for Liabilities under the Company's
indemnifications under this Agreement, including without limitation Section
11.7.1.1, shall be the Escrow Fund, and neither the Company, nor any of their
Affiliates, shareholders, warrant holders, partners, officers, directors,
agents and employees shall have any liability for such Liabilities in excess
of the Escrow Fund.
Section 11.6 Minimum Claim Amount. With the exception of (i)
claims arising under Section 11.7.1.1, (ii) claims for fines or penalties
imposed by Governmental Authorities, (iii) claims for Liens that are not
Permitted Encumbrances, (iv) claims under Section 11.1(b)(ii), and (v) fifty
percent (50%) of any claim for indemnification with respect to a breach of the
representations and warranties set forth in Sections 7.24(a), (b) and (c) with
respect to the Pepco Pipeline, for which there shall be no minimum claim,
Purchaser shall not be entitled to assert any claim for indemnification
hereunder until the aggregate of all claims for indemnification under this
Agreement, the PPI Agreement and the Asset Purchase Agreement collectively
exceeds Seven Hundred and Fifty Thousand Dollars ($750,000) and then only for
amounts in excess of such Seven Hundred and Fifty Thousand Dollars ($750,000).
Purchaser shall follow the notice procedures set forth in Section 11.6 of the
Asset Purchase Agreement for making claims for indemnification hereunder.
Section 11.7 Special Environmental Indemnification and
Post-Closing Covenants by Purchaser.
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11.7.1.1 To the extent that, prior to the date three years
after the Closing Date, Purchaser discovers and notifies SIC and SPC of facts
or circumstances that give rise to Remedial Work (including Remedial Work
related to matters discovered prior to the Closing or disclosed on Schedule
7.16) with respect to the Property (except for Remedial Work attributable to
(i) changes in Environmental Law occurring after the Closing Date, or (ii)
events occurring or actions of Persons other than SIC, SPC, SPCT or PPI taken
after the Closing Date), the Net Remedial Cost for Remedial Work with respect
to the Property shall be calculated as part of the Aggregate Net Remedial Cost
determined pursuant to the terms of Section 11.7.1.1 of the Asset Purchase
Agreement and shall be paid in accordance with those terms, subject to the
limits set forth in Section 11.7.1.1 of the Asset Purchase Agreement.
Notwithstanding the preceding portions of this Section 11.7.1.1,
Purchaser shall not be liable for or be required to pay any Net Remedial Costs
resulting from or arising out of any action or omission after Closing of any
SIC Indemnified Party that constitutes or causes a violation of Environmental
Law with respect to the Property or gives rise to the need to perform Remedial
Work with respect thereto, unless otherwise agreed to in writing by Purchaser.
11.7.1.2 Purchaser shall not alter or change the scope or
methodology of Remedial Work described on Schedule 7.16 except as required by
Applicable Law or as approved by the Company, which approval shall not be
unreasonably withheld, provided, however, that an objection shall not be deemed
unreasonable solely because it is based on an increase in the cost for
performing such Remedial Work. For so long as SPC has any liability to
Purchaser under Section 11.7.1.1, Purchaser shall use commercially reasonable
efforts to perform and complete all such required Remedial Work and shall keep
SIC informed of the
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progress of such Remedial Work. In addition, before undertaking any such
Remedial Work Purchaser shall notify SIC of the scope and methodology of such
Remedial Work, sufficiently in advance (except as emergency conditions may
require otherwise) to permit SIC to comment on such scope and methodology.
Recognizing that the final decision on scope and methodology rests with
Purchaser, Purchaser shall nonetheless make a good faith effort to reach
agreement with SIC regarding such scope and methodology, recognizing SIC's
financial interest therein. Purchaser shall provide SIC with copies of all
plans, reports, and correspondence submitted to any Governmental Authority with
respect to such Remedial Work. Purchaser will not agree to any such Remedial
Work or other actions that commit or bind SIC or SPC (beyond the payment of
money hereunder) without the prior consent of SIC and SPC. Purchaser will
provide SIC with copies of all invoices rendered by Persons actually performing
such Remedial Work, and SIC shall be deemed to have accepted the validity and
reasonableness of such invoices if it does not notify Purchaser to the contrary
within ten (10) Business Days of receiving the same.
11.7.2 (a) Purchaser and Guarantor acknowledge that (i)
Purchaser has reviewed copies of all documents and other materials related to
environmental matters with respect to the Property that were provided by the
Company, (ii) the Company has specifically bargained for relief, as more
particularly described herein, from post-Closing liability resulting from
violations of Environmental Law or the performance of Remedial Work with
respect to the Property and (iii) the Purchase Price and Adjusted Purchase
Price, as the case may be, reflect Purchaser's willingness to accept liability
( and Guarantor's willingness to guarantee Purchaser's obligation to accept
such liability) with respect to such matters as more fully described below.
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(b) Purchaser has agreed to assume, and Guarantor
has agreed to guarantee the obligation of Purchaser to assume, as of the
Closing all obligations and liabilities resulting from or arising out of any
actual or alleged violation of Environmental Law related to the Property,
regardless of when such violation was supposed to have occurred, or the
performance of Remedial Work with respect to the Property, except for (i) fines
and penalties imposed by any Governmental Authority relating to violations of
Environmental Law that occurred prior to Closing with respect to the Property,
(ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii)
obligations or liabilities that result from or arise out of any act or omission
after the Closing of any SIC Indemnified Party that constitutes or causes a
violation of Environmental Law with respect to the Property or gives rise to
the need to perform Remedial Work with respect thereto, unless otherwise agreed
to in writing by Purchaser, and (iv) claims for a breach of the representations
and warranties set forth in Section 7.16 to the extent Purchaser is entitled to
indemnity under this Article 11.
(c) For the avoidance of any doubt, Purchaser,
Guarantor, and SIC confirm their agreement that SIC shall not have any
obligation or liability post-Closing resulting from or arising out of any
actual or alleged violation of Environmental Law related to the Property,
regardless of when such violation was supposed to have occurred, or the
performance of Remedial Work with respect to the Property except (i) fines and
penalties imposed by any Governmental Authority relating to violations of
Environmental Law that occurred prior to Closing with respect to the Property,
(ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii)
obligations or liabilities that result from or arise out of any act or omission
after Closing of any SIC Indemnified Party that constitutes or causes a
violation of Environmental
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Law with respect to the Property or gives rise to the need to perform Remedial
Work with respect thereto, unless otherwise agreed to in writing by Purchaser,
and (iv) claims for a breach of the representations and warranties set forth in
Section 7.16 to the extent Purchaser is entitled to indemnity under this
Article 11.
11.7.3 Purchaser, its successors and assigns, jointly and
severally, agree to indemnify, defend, and hold harmless each SIC Indemnified
Party from and against any and all Liabilities resulting from or arising out
of any actual or alleged violation of Environmental Law related to the
Property, regardless of when such violation was supposed to have occurred, or
the performance of Remedial Work with respect to the Property, except for (i)
fines and penalties imposed by any Governmental Authority relating to
violations of Environmental Law that occurred prior to Closing with respect to
the Property, (ii) payments to be made to Purchaser pursuant to Section
11.7.1.1, (iii) obligations or liabilities that result from or arise out of any
act or omission after Closing of any SIC Indemnified Party that constitutes or
causes a violation of Environmental Law with respect to the Property or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11. Notwithstanding the
preceding provisions of this Section 11.7.3, Purchaser shall not be liable
under this Section 11.7.3 to any SIC Indemnified Party for any amount paid in
settlement without Purchaser's consent unless such consent was requested and
unreasonably withheld.
11.7.4 Purchaser shall, for a period of five (5) years after
Closing, notify the Company and SPC promptly of any claim made by any
Governmental Authority or by any
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Person that there has been a violation of Environmental Law in connection with
the Property, or occurring on or from the Real Property or the ROW Real Estate,
and shall thereafter keep the Company and SPC informed of actions being taken
and/or the conduct of proceedings with respect to such claim, provided that
once it has been reasonably determined to the satisfaction of SIC that the
amount required to resolve such claim (whether by performing Remedial Work or
otherwise) is less than $250,000, Purchaser shall no longer be obligated to
provide SIC and SPC with information about such claim.
Section 11.8 Notification; Counsel. Each Indemnified Party under
this Article 11 will, promptly after the receipt of notice of the commencement
of any action, investigation, claim or other proceeding against such
Indemnified Party in respect of which indemnity may be sought under this
Article 11, notify the Company and SPC or the Purchaser, as the case may be, in
writing of the commencement thereof. The failure of any Indemnified Party to
give such notice shall not relieve the indemnifying party from any liability
which it may have to such Indemnified Party unless, and only to the extent
that, such omission materially adversely affects the indemnifying party's
ability to defend in such action, claim or other proceeding. In case any such
action, claim or other proceeding shall be brought against any Indemnified
Party and it shall notify the indemnifying party of the commencement thereof,
and, except as otherwise stated herein, the indemnifying party shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party. Notwithstanding the foregoing, in any
action, claim or proceeding in which both an indemnifying party, on the one
hand, and an Indemnified Party, on the other hand, is, or is reasonably likely
to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the indemnifying party's
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expense and to control its own defense of such action, claim or proceeding if,
in the reasonable opinion of counsel to such Indemnified Party, a conflict or
potential conflict exists between the indemnifying party, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable. In any event, the Indemnified Party will reasonably
cooperate with the indemnifying party in any defense undertaken by an
indemnifying party.
Section 11.9 Net Worth Statement. SIC hereby represents and
warrants to Purchaser that as of the Closing Date it will have a net worth
(assets minus liabilities on a GAAP basis balance sheet adding back those
liabilities attributable to the above market portion of payment obligations
under the throughput agreements described in Section 5.7 of the Asset Purchase
Agreement and also deferred income taxes, if any, attributable to any like kind
exchange completed in accordance with Section 3.8 of any of the Purchase
Agreements) of not less than $30,000,000.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Notices. All notices, requests, demands, consents,
approvals and other communications provided for or permitted hereunder shall be
made in writing and shall be delivered by hand or sent by telecopier or courier
service:
(a) if to Purchaser or Guarantor:
Kaneb Pipe Line Partners, L.P.
2435 N. Central Expressway, Suite 700
Richardson, TX 75080
Attn: Edward D. Doherty
Telecopier No.: (214) 699-1894
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with a copy to:
Support Terminal Services, Inc.
17304 Preston Road, Suite 1000
Dallas, TX 75252-5623
Attn: Fred Johnson
Telecopier No.: (214) 931-6526
with a copy to:
Fulbright & Jaworski, L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
Attn: Kenneth L. Stewart
Telecopier No.: (214) 855-8200
(b) if to SPC or SIC:
Steuart Petroleum Company
4646 40th Street, N.W.
Washington, D.C. 20016
Telecopier No.: (202) 244-5425
Attention: President, and
General Counsel
with a copy to:
Ginsburg, Feldman and Bress, Chartered
1250 Connecticut Avenue, N.W. Suite 800
Washington, D.C. 20036
Telecopier No.: (202) 637-9195
Attention: Lee R. Marks, Esq.
with a copy to:
Steuart Investment Company
4646 40th Street, N.W.
Washington, D.C. 20016
Telecopier No.: (202) 244-1221
Attention: Guy T. Steuart II, and
John R. Clark III, Esq.
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Section 12.2 Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
the parties hereto. No party hereto may assign its rights under this Agreement
without the consent of the other party, except that Purchaser may assign its
rights under this Agreement to any Affiliate, but such assignment shall not
relieve Purchaser or Guarantor of any of their obligations hereunder to the
extent such obligations are not performed by Purchaser's assignee.
Section 12.3 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to any party hereto
at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by any party hereto from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by all parties hereto, or, in the case of a waiver, by
the party waiving compliance, and (ii) only in the specific instance and for
the specific purpose for which made or given.
Section 12.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of New York, without regard to the
principles of conflicts of law of New York.
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Section 12.5 Jurisdiction. Any controversy or claim arising out
of or relating to this Agreement or any agreements or transactions
contemplated hereby shall be settled by arbitration in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association in
effect on the date hereof, and any award rendered in such arbitration shall be
final and binding on the Parties. Judgment on any award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be decided by a single arbitrator, who shall be a
lawyer experienced in commercial matters. The parties shall attempt to agree on
an arbitrator but either party may at any time request that an arbitrator be
selected in accordance with the Commercial Arbitration Rules. Any arbitration
hereunder shall be held in New York City, New York. The prevailing party shall
be entitled in any arbitration hereunder to recover its reasonable attorney's
fees and all costs and expenses of the arbitration.
Section 12.6 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
Section 12.7 Entire Agreement. The Purchase Agreements are a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. The Purchase
Agreements supersede all prior agreements and understandings between the
parties with respect to the subject matter contained herein.
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Section 12.8 Expenses. Each party will bear its own expenses
incurred in connection with the negotiation and execution of this Agreement,
and Purchaser shall pay its expenses incurred in carrying out due diligence,
including Audits.
Section 12.9 Publicity. Except as may be required by Applicable
Law, or as required in connection with Kaneb Pipe Line Partners L.P.'s
registration statement filed under the Securities Act of 1933 and the related
offering of partnership units, none of the parties shall issue a publicity
release or announcement or otherwise make any public disclosure concerning this
Agreement without the prior approval of the other party. If any announcement is
required by law to be made by either party , prior to making such announcement
such party will deliver a draft of such announcement to the other party and
shall give the other party an opportunity to comment thereon.
Section 12.10 Further Assurances. Each party shall execute such
documents and perform such further reasonable acts (including without
limitation reasonable action to obtain any consents, exemptions,
authorizations, or other actions by, or giving any notices to, or making any
filings with, any Governmental Authority or any other Person) as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
Section 12.11.A Post-Closing Access to Books and Records by
Purchaser. For a period of five (5) years after the Closing Date, subject to
reasonable advance notice of time and purpose and to the execution by Purchaser
of reasonable confidentiality undertakings, Purchaser and its authorized
representatives may at Purchaser's expense have reasonable access during normal
business hours to the books and records related to the Property that are not
included in the Property and SIC will furnish to Purchaser such additional
information and will cooperate with
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Purchaser in such other respects as Purchaser may reasonably request, to the
extent that such access and disclosure of such information and cooperation are
required by Purchaser 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 Authorities, so
long as such disclosure, access, and cooperation do not violate the terms of
any agreement to which SIC is bound or any Applicable Law or result in the loss
of any attorney-client or work product privilege. SIC will use reasonable
efforts in accordance with SIC's normal record maintenance procedures to keep
and maintain all such books and records for a period of five (5) years from the
Closing or longer as may be required by statute, except that notwithstanding
any requirements of SIC's normal record maintenance procedures, SIC shall not
destroy such books and records during such five (5) year period. From and
after such five (5) year period, SIC shall give Purchaser sixty (60) days prior
notice before destroying any of such books and records, and Purchaser may at
any time during such sixty days take possession, at Purchaser's cost, of such
books and records, provided that if Purchaser does not take possession of any
of such books and records during such sixty days, SIC shall be free thereafter
to dispose of such books and records.
Section 12.11.B Post-Closing Access to Books and Records by SIC. For
a period of five (5) years after the Closing Date, subject to reasonable
advance notice of time and purpose and to the execution by SIC of reasonable
confidentiality undertakings, SIC and its authorized representatives may at
SIC's expense have reasonable access during normal business hours to the books
and records related to the Property that are included in the Property and
Purchaser will furnish to SIC such additional information and will cooperate
with SIC in such other
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respects as SIC may reasonably request, to the extent that such access and
disclosure of such information and cooperation are required by SIC 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 Authorities, so long as such disclosure,
access, and cooperation do not violate the terms of any agreement to which
Purchaser is bound or any Applicable Law or result in the loss of any
attorney-client or work product privilege. Purchaser will use reasonable
efforts in accordance with Purchaser's normal record maintenance procedures to
keep and maintain all books and records transferred to Purchaser hereunder for
a period of five (5) years from the Closing or longer as may be required by
statute, except that notwithstanding any requirements of Purchaser's normal
record maintenance procedures, Purchaser shall not destroy such books and
records during such five (5) year period. From and after such five (5) year
period, Purchaser shall give SIC sixty (60) days prior notice before destroying
any of such books and records, and SIC may at any time during such sixty days
take possession, at SIC's cost, of such books and records, provided that if SIC
does not take possession of any of such books and records during such sixty
days, Purchaser shall be free thereafter to dispose of such books and records.
Section 12.12 Treatment of Purchase Agreements. Notwithstanding
any provision contained in any of the Purchase Agreements that may be construed
to the contrary, (i) the aggregate Liabilities of SPC, SPCT, PPI and SIC under
the Purchase Agreements that are subject to maximum liability limits pursuant
to the provisions of Section 11.5 of the Purchase Agreements shall be the
Escrow Fund, (ii) the maximum aggregate amount that will be paid to Purchaser
for the type of Remedial Work described in Section 11.7.1.1 pursuant to the
Purchase
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Agreements shall be the amount set forth in Section 11.7.1.1, and (iii) the
$1,000,000 threshold set forth in Section 3.1.2.2, the Remaining Threshold and
the $750,000 threshold set forth in Section 11.6 represent the aggregate
threshold amounts for applicable claims under the Purchase Agreements.
Section 12.13 Capitalized Terms. Terms having initial capitalized
letters not otherwise defined herein shall have the meaning given those terms
in the Asset Purchase Agreement.
Section 12.14 Intentionally Omitted.
Section 12.15 Prorations. Real Property property taxes and
assessments for which SIC is liable, water, sewer and utility charges, normal
operating expenses, annual permit or inspection fees (calculated on the basis
of the period covered), and all other charges and fees customarily prorated and
adjusted in similar transactions shall be prorated at Closing on the basis of a
365-day year. If any item subject to proration cannot be calculated accurately
on the Closing Date, then such item shall be calculated within thirty (30) days
after the Closing Date and any party owing another party a sum of money based
on such subsequent proration(s) shall promptly pay the sum owed, together with
interest thereon at the rate of seven percent (7%) per annum from the Closing
Date to the date of payment if payment is not made within ten (10) days after
delivery of an invoice therefor.
Section 12.16 Guaranty. Guarantor acknowledges and agrees that it
will derive substantial direct and indirect benefits from providing the
guaranty set forth in this Section 12.16 and Guarantor has determined that it
is in its best interest to provide this guaranty. Guarantor absolutely and
unconditionally guarantees to SIC and each SIC Indemnified Party the due and
punctual payment of all liabilities and obligations of Purchaser to SIC or each
SIC Indemnified
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Party, as appropriate, in accordance with the terms of this Agreement (and
specifically including the indemnification obligations set forth in Article
11). Guarantor guarantees to SIC and each SIC Indemnified Party the
performance of all of Purchaser's obligations, liabilities, covenants and
agreements (and specifically the indemnification obligations set forth in
Article 11) to SIC or each SIC Indemnified Party, as appropriate. Guarantor
agrees to indemnify and hold SIC and each SIC Indemnified Party harmless from
and against all liability and expense, including reasonable attorneys' fees,
sustained by SIC or any SIC Indemnified Party by reason of the failure of the
Purchaser to fully perform and comply with the terms and obligations of this
Agreement. Guarantor expressly waives any right to require SIC or any SIC
Indemnified Party to bring any action, or exhaust its rights, against Purchaser
or any other person, or to require that resort be had to any assets of
Purchaser before pursuing the Guarantor under this Section 12.16.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their authorized officers as of the date first above
written.
STEUART INVESTMENT COMPANY
By:/s/ GUY T. STEUART II
Name: Guy T. Steuart II
Title: President
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KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By: Kaneb Pipe Line Company, its
general partner
By:/s/ E. D. DOHERTY
Name: E. D. Doherty
Title: Chairman
SUPPORT TERMINALS OPERATING
PARTNERSHIP, L.P.
By: Support Terminal Services, Inc.,
its general partner
By:/s/ E. D. DOHERTY
Name: E. D. Doherty
Title: Chairman
By executing and delivering this Agreement, Steuart Petroleum Company
hereby acknowledges and assumes the obligations delegated to or imposed upon
Steuart Petroleum Company under this Agreement, including but not limited to
those payment obligations for indemnification claims that shall be made from
the Escrow Fund.
STEUART PETROLEUM COMPANY
By:/s/ JOHN C. JOHNSON
Name: John C. Johnson
Title: President and C.E.O.
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