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: October 15, 1999
PRIDE COMPANIES, L.P.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of Incorporation or Organization)
1-10473 75-2313597
(Commission file number) (I.R.S. Employer Identification No.)
1209 North Fourth
Abilene, Texas 79601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 674-8000
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PRIDE COMPANIES, L.P.
TABLE OF CONTENTS
Item 2. Acquisition or Disposition of Assets....................... 3
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Introductory Statement................................. 4
Unaudited Pro Forma Condensed Financial Statements:
Unaudited Pro Forma Balance Sheet
as of June 30, 1999............................ 6
Unaudited Pro Forma Statement of
Operations for the six months ended
June 30, 1999.................................. 8
Unaudited Pro Forma Statement of
Operations for the year ended
December 31, 1998.............................. 10
(c) Exhibits............................................... 13
Signatures.......................................................... 13
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PRIDE COMPANIES, L. P.
The information in this document includes forward-looking
statements that are based on assumptions that in the future may prove
not to have been accurate. Those statements and the business and
properties of Pride Companies, L.P. (the "Partnership") are subject to a
number of risks including (i) the margins between the revenue realized
by the Partnership on the sale of refined products and the cost of those
products purchased from Equilon (a refining and marketing joint venture
between Royal Dutch/Shell Group and Texaco, Inc.) and the availability
of such products, (ii) the volume of throughput at the products
terminals, (iii) the impact of current and future laws and governmental
regulations affecting the petroleum industry in general and the
Partnership's operations in particular, (iv) the ability of the
Partnership to sustain cash flow from operations sufficient to realize
its investment in operating assets of the Partnership and meet its debt
obligations, and (v) fluctuations in refined product prices and their
impact on working capital and the borrowing base under the Partnership's
credit agreement. Prior to the sale of the operating assets of the
crude gathering segment (the "Crude Gathering System"), the Partnership
was subject to the following additional risks (i) the volume of
throughput on and margins from the transportation and resale of crude
oil from the Partnership's Crude Gathering System, (ii) the amount of
crude oil produced in the areas the Partnership gathered, and (iii)
fluctuations in crude oil prices and their impact on working capital and
the borrowing base under the Partnership's credit agreement.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
DISPOSITION OF THE CRUDE GATHERING SYSTEM
On October 1, 1999, the Partnership completed the sale of the
Crude Gathering System operating assets to Sun Pipe Line Services Co.,
Inc. ("Sun"), a subsidiary of Sunoco, Inc. The Partnership received
$29.8 million in cash proceeds from the sale and Sun assumed certain
indebtedness in the amount of $5.3 million. The sales price was
determined based on a purchase price of $24.9 million plus the value of
the inventory which was $10.2 million on October 1, 1999. The net
proceeds were applied as follows: $15.0 million principal payment on the
A term loan ("A Term Loan"), $2.0 million was paid to Pride SGP, Inc.
("Pride SGP" or "Special General Partner") as part of the exchange (see
below), and $11.3 million net of transaction costs was retained for
working capital.
The assets sold included an 800-mile pipeline system, 800,000
barrels of tankage, 430,000 barrels of crude oil, 40 truck injection
stations, and other related equipment.
The sale is expected to result in a loss of less than $100,000 for
financial purposes. Further, the Partnership expects to report a
taxable gain, which will be allocable to the public unitholders. There
will be no cash available from the transaction to make distributions to
the public unitholders.
In connection with the transaction, Pride SGP, Inc. exchanged (a)
certain trunklines and related pumping facilities owned by Pride SGP,
(b) interest payable to Pride SGP of $548,000, (c) rentals payable to
Pride SGP of $2,046,000, (d) the Series E Cumulative Convertible
Preferred Units ("Series E Preferred Units") in the face amount of
$2,000,000 held by Pride SGP, and (e) the Series F Cumulative Preferred
Units ("Series F Preferred Units") in the face amount of $450,000 held
by Pride SGP for (y) $2,000,000 in cash and (z) a newly issued
subordinated preferred security ("Subordinated Preferred Security") in
the face amount of $3,044,000. The Subordinated Preferred Security will
not accrue any distributions for the first five years after its date of
issuance, and thereafter, distributions will accrue at a rate equal to
the lesser of (i) the Partnership's net income less any distributions
accrued or paid on any preferred securities issued to Varde Partners,
Inc. ("Varde") or (ii) 10% per annum.
The Partnership will continue to operate its refined products
marketing business through the Abilene, Aledo and San Angelo terminals.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
INTRODUCTORY STATEMENT
The unaudited pro forma condensed financial statements of the
Partnership have been prepared to give effect to (i) the sale of the
Crude Gathering System operating assets on October 1, 1999; (ii) the
exchange with Pride SGP, Inc. ("Special General Partner" or "Pride SGP")
of (a) certain trunklines and related pumping facilities owned by Pride
SGP, (b) interest payable to Pride SGP of $548,000, (c) rentals payable
to Pride SGP of $2,046,000, (d) the Series E Cumulative Convertible
Preferred Units ("Series E Preferred Units") in the face amount of
$2,000,000 held by Pride SGP, and (e) the Series F Cumulative Preferred
Units ("Series F Preferred Units") in the face amount of $450,000 held
by Pride SGP for (y) $2,000,000 in cash and (z) a newly issued
subordinated preferred security ("Subordinated Preferred Security") in
the face amount of $3,044,000 (items (i) and (ii) are collectively
referred to herein as the "1999 Disposition and Exchange"); and (iii)
the use of the proceeds.
The unaudited pro forma balance sheet and statements of operations
have been prepared to give effect to the 1999 Disposition and Exchange
as described below:
The unaudited pro forma condensed balance sheet of the Partnership
as of June 30, 1999 has been prepared to give effect to the 1999
Disposition and Exchange as if they were completed on June 30,
1999.
The unaudited pro forma condensed statements of operations of the
Partnership for the six months ended June 30, 1999 and for the
year ended December 31, 1998 have been prepared to give effect to
the 1999 Disposition and Exchange as if they had occurred on
January 1, 1998.
The unaudited pro forma condensed financial statements included
herein are not necessarily indicative of the results that might have
occurred had the transactions taken place on the dates that are assumed
for the pro forma presentations and are not intended to be a projection
of future results. Future results may vary significantly from the
results reflected in the accompanying unaudited pro forma financial
statements because of fluctuations in product margins and product sales
volumes, competition, future laws and regulations and other factors.
The following unaudited pro forma condensed financial statements
should be read in conjunction with the Financial Statement (and the
related notes) of the Partnership included in the Annual Report on Form
10-K for the year ended December 31, 1998 and the Quarterly Report on
Form 10-Q for the six months ended June 30, 1999.
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PRIDE COMPANIES, L.P.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)
<CAPTION>
The Pro Forma Pro Forma
Partnership Adjustments Partnership
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 7,705 $ 8,728 (a) $ 16,433
Accounts receivable, less allowance
for doubtful accounts 16,650 16,650
Inventories 7,932 (6,631)(a) 1,301
Prepaid expenses 536 (148)(a) 388
------- -------- -------
Total current assets 32,823 1,949 34,772
------- -------- -------
Property, plant and equipment 68,930 (38,597)(a) 30,333
Accumulated depreciation 24,503 (11,222)(a) 13,281
------- -------- -------
Property, plant and equipment - net 44,427 (27,375) 17,052
Assets no longer used in the business 4,235 4,235
Deferred financing costs 4,535 4,535
Other assets 386 386
------- -------- -------
$86,406 $(25,426) $60,980
======= ======== =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY):
Current liabilities:
Accounts payable $29,023 $ $29,023
Accrued payroll and related benefits 1,102 1,102
Accrued taxes 3,186 3,186
Other accrued liabilities 1,057 (77)(a) 980
Current portion of long-term debt 3,219 (185)(a) 3,034
------ ------- ------
Total current liabilities 37,587 (262) 37,325
Long-term debt, excluding current portion 41,755 (20,209)(a) 21,546
Deferred income taxes 2,230 (2,230)(a) -
Other long-term liabilities 12,482 (3,141)(a) 9,341
Redeemable preferred equity 19,529 594 (a) 20,123
Partners' capital (deficiency):
Common units (5,275,000 units
authorized, 4,950,000 units
outstanding) (26,165) (174)(a) (26,339)
General partners' interest (1,012) (4)(a) (1,016)
------- ------- ------
$ 86,406 $(25,426) $60,980
======= ======= ======
See accompanying notes to unaudited pro forma condensed financial statements.
</TABLE>
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<TABLE>
(Use .75" margins)
PRIDE COMPANIES, L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<CAPTION>
1999
Disposition
The and Pro Forma Pro Forma
Partnership Exchange Adjustments Partnership
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 190,172 $(141,461) $ $ 48,711
Cost of sales and operating
expenses, excluding
depreciation 183,517 (137,075) 46,442
Marketing, general and
administrative expenses 3,785 (1,977) -(d) 1,808
Depreciation 1,743 (1,020) 723
-------- -------- ------- -------
Operating income (loss) 1,127 (1,389) - (262)
Other income (expense):
Interest income 100 100
Interest expense (including
interest paid in kind of
$1,318 and increasing rate
accrued interest of $249) (3,060) 218 1,077 (b) (1,765)
Credit and loan fees (including
amortization of $722 and
credit and loan fees paid
in kind of $100) (1,552) 536 (1,016)
Other - net 80 (30) 50
-------- -------- ------- -------
Loss before income taxes (3,305) (665) 1,077 (2,893)
Income tax benefit 118 (118) -
-------- -------- ------- -------
Net loss $ (3,187) $ (783) $ 1,077 $ (2,893)
======== ======== ======= =======
Basic and diluted net loss
per Common Unit $ (0.82) $ (0.15) $ 0.23 $ (0.74)
======== ======== ======= =======
Numerator:
Net loss $ (3,187) $ (783) $ 1,077 $ (2,893)
Preferred distributions in
arrears (932) 98 (c) (834)
-------- -------- ------- -------
Net loss less preferred
distributions (4,119) (783) 1,175 (3,727)
Net loss allocable to 2% general
partner interest (82) (16) 24 (74)
-------- --------- ------ ------
Numerator for basic and diluted
earnings per unit $ (4,037) $ (767) $ 1,151 $ (3,653)
======== ======== ======= =======
Denominator:
Denominator for basic and diluted
earnings per unit 4,950 4,950 4,950 4,950
======== ======== ======= =======
See accompanying notes to unaudited pro forma condensed financial statements.
</TABLE>
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<TABLE>
PRIDE COMPANIES, L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<CAPTION>
1999
Disposition
The and Pro Forma Pro Forma
Partnership Exchange Adjustments Partnership
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 380,627 $(259,438) $ $121,189
Cost of sales and operating
expenses, excluding
depreciation 369,280 (253,826) 115,454
Marketing, general and
administrative expenses 8,001 (4,240) -(d) 3,761
Depreciation 3,438 (2,016) 1,422
-------- -------- ------- -------
Operating income (loss) (92) 644 - 552
Other income (expense):
Interest income -
Interest expense (including
interest paid in kind of
$1,344 and increasing rate
accrued interest of $1,030) (6,144) 497 2,136 (b) (3,511)
Credit and loan fees (including
amortization of $1,323 and
credit and loan fees paid
in kind of $150) (2,753) 1,107 (1,646)
Other - net 346 (25) 321
-------- -------- ------- -------
Loss before income taxes (8,643) 2,223 2,136 (4,284)
Income tax benefit 86 (86) -
-------- -------- ------- -------
Net loss $ (8,557) $ 2,137 $ 2,136 $ (4,284)
======== ======== ======= =======
Basic and diluted net loss
per Common Unit $ (2.04) $ 0.42 $ 0.46 $ (1.16)
======== ======== ======= =======
Numerator:
Net loss $ (8,557) $ 2,137 $ 2,136 $ (4,284)
Preferred distributions in
arrears (1,763) 195 (c) (1,568)
-------- -------- ------- -------
Net loss less preferred
distributions (10,320) 2,137 2,331 (5,852)
Net loss allocable to 2% general
partner interest (206) 43 47 (116)
-------- --------- ------ ------
Numerator for basic and diluted
earnings per unit $ (10,114) $ 2,094 $ 2,284 $ (5,736)
======== ======== ======= =======
Denominator:
Denominator for basic and diluted
earnings per unit 4,950 4,950 4,950 4,950
======== ======== ======= =======
See accompanying notes to unaudited pro forma condensed financial statements.
</TABLE>
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NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed financial information of Pride
Companies, L. P. (the "Partnership") has been prepared to give effect to (i)
the sale of the Crude Gathering System operating assets on October 1, 1999;
(ii) the exchange with Pride SGP, Inc. ("Special General Partner" or "Pride
SGP") of (a) certain trunklines and related pumping facilities owned by Pride
SGP, (b) interest payable to Pride SGP of $548,000, (c) rentals payable to
Pride SGP of $2,046,000, (d) the Series E Cumulative Convertible Preferred
Units ("Series E Preferred Units") in the face amount of $2,000,000 held by
Pride SGP, and (e) the Series F Cumulative Preferred Units ("Series F
Preferred Units") in the face amount of $450,000 held by Pride SGP for (y)
$2,000,000 in cash and (z) a newly issued subordinated preferred security
("Subordinated Preferred Security") in the face amount of $3,044,000 (items
(i) and (ii) are collectively referred to herein as the "1999 Disposition and
Exchange"); and (iii) the use of the proceeds.
The unaudited pro forma condensed balance sheet is presented as if the
1999 Disposition and Exchange occurred on June 30, 1999 and the unaudited pro
forma condensed statements of operation are presented as if the 1999
Disposition and Exchange occurred on January 1, 1999.
The following is a description of the individual columns included in
these unaudited pro forma condensed financial statements:
The Partnership Represents the condensed balance sheet of Pride
Companies, L. P. as of June 30, 1999 and the condensed statements of
operations of Pride Companies, L. P. for the six months ended June 30,
1999 and for the year ended December 31, 1998.
1999 Disposition and Exchange Reflects the results of operations for
the six months ended June 30, 1999 and the year ended December 31, 1998
of the Crude Gathering System.
NOTE 2. PRO FORMA ADJUSTMENTS
Following are descriptions of the pro forma adjustments used in the
preparation of the accompanying unaudited pro forma condensed financials:
(a) Pro forma adjustments to recognize the 1999 Disposition and Exchange and
the use of cash proceeds as if the transaction had occurred on June 30,
1999. The actual sales price on October 1, 1999 was $29.8 million of
cash which included an amount for the fair value of inventory of $10.2
million and the assumption of $5.3 million of debt for a total purchase
price of $35.1 million. However, under the terms of the contract, if
the transaction had closed on June 30, 1999, the sales price would have
been $27.1 million of cash which includes inventory of only $7.6 million
and the assumption of $5.4 million of debt for a total purchase price of
$32.5 million. The difference in actual sales proceeds on October 1,
1999 and pro forma sales proceeds on June 30, 1999 is primarily due to
the increase in inventory prices between the two dates and slightly
higher inventory volumes. Because the disposition was an asset sale of
the operating assets of the Crude Gathering System, the pro forma
adjustments do not reflect the reduction in such working capital items
as accounts receivable and accounts payable related to the Crude
Gathering System.
(b) Respective pro forma adjustments to reduce interest expense for the six
months ended June 30, 1999 and for the year ended December 31, 1998 to
reflect the use of $15,000,000 of cash proceeds to reduce the A Term
Loan. The adjustments for the six months ended June 30, 1999 and the
year ended December 31, 1998 are based on the effective interest rate of
the A Term Loan.
(c) Respective pro forma adjustments to reduce distributions in arrears on
the Series E Preferred Units and Series F Preferred Units for the six
months ended June 30, 1999 and for the year ended December 31, 1998 to
reflect the redemption of these preferred Securities.
(d) While the Partnership expects marketing, general and administrative
expenses associated with the products marketing business to decline as a
result of the disposition of the Crude Gathering System, a pro forma
adjustment has not been made for such expected decrease.
EXHIBITS
10.1 Purchase and Sale Agreement by and among Pride Companies, L.P. and Pride
SGP, Inc., as Sellers, and Sun Pipe Line Services Co., as Buyer, dated
August 4, 1999 (Schedules have been deleted).
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.
PRIDE COMPANIES, L.P.
By: /GEORGE PERCIVAL/
George Percival
Principal Financial Officer
Date: October 15, 1999
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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
BY AND AMONG
PRIDE COMPANIES, L.P.
AND
PRIDE SGP, INC.,
AS SELLERS
AND
SUN PIPE LINE SERVICES CO.,
AS BUYER
AUGUST 4, 1999
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TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 1PURCHASE AND SALE OF ASSETS . . . . . . . . . . . .1
1.1 Agreement to Purchase and Sell Assets. . . . . . . .1
1.2 Assets . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Excluded Assets. . . . . . . . . . . . . . . . . . .4
ARTICLE 2PURCHASE PRICE; OTHER TRANSACTIONS. . . . . . . . .5
2.1 Purchase Price . . . . . . . . . . . . . . . . . . .5
2.2 Post-Closing Adjustments to the Purchase Price . . .5
2.3 Allocated Values . . . . . . . . . . . . . . . . . .5
2.4 Assumption Agreement . . . . . . . . . . . . . . . .6
2.5 Employment Matters . . . . . . . . . . . . . . . . .6
ARTICLE 3REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . .8
3.1 Organization and Good Standing . . . . . . . . . . .8
3.2 Conduct of Business. . . . . . . . . . . . . . . . .9
3.3 Authorization of Agreement; No Violation; No Consents9
3.4 Governmental Consents. . . . . . . . . . . . . . . 10
3.5 Enforceability . . . . . . . . . . . . . . . . . . 10
3.6 Brokers. . . . . . . . . . . . . . . . . . . . . . 10
3.7 Suits. . . . . . . . . . . . . . . . . . . . . . . 10
3.8 Permits. . . . . . . . . . . . . . . . . . . . . . 10
3.9 Environmental Matters. . . . . . . . . . . . . . . 11
3.10 Government Notices . . . . . . . . . . . . . . . . 12
3.11 Payment of Taxes . . . . . . . . . . . . . . . . . 12
3.12 Compliance with Contracts. . . . . . . . . . . . . 13
3.13 Adverse Title Claims . . . . . . . . . . . . . 13
3.14 Capital Expenditures . . . . . . . . . . . . . . . 13
3.15 Supplemental Disclosure. . . . . . . . . . . . . . 13
3.16 Compliance with Applicable Laws. . . . . . . . . . 14
3.17 Employee Relations and Benefit Plans . . . . . . . 14
3.18 Financial Statements . . . . . . . . . . . . . 14
3.19 Capital Stock. . . . . . . . . . . . . . . . . . . 15
3.20 Year 2000 Compliance . . . . . . . . . . . . . . . 16
3.21 Material Compliance. . . . . . . . . . . . . . . . 16
3.22 Volume of Certain Business . . . . . . . . . . . . 16
3.23 Pride Borger . . . . . . . . . . . . . . . . . . . 16
3.24 Diamond Shamrock Promissory Note . . . . . . . 16
3.25 Survival of Representations and Warranties of Sellers16
ARTICLE 4REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . 16
4.1 Organization and Good Standing . . . . . . . . . . 17
4.2 Authorization of Agreement; No Violation; No Consents17
4.3 Governmental Consents. . . . . . . . . . . . . . . 17
4.4 Enforceability . . . . . . . . . . . . . . . . . . 17
4.5 Brokers. . . . . . . . . . . . . . . . . . . . . . 17
4.6 Suits. . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Financing. . . . . . . . . . . . . . . . . . . . . 18
4.8 Supplemental Disclosure. . . . . . . . . . . . . . 18
4.9 Survival of Representations and Warranties of Buyer18
ARTICLE 5COVENANTS OF SELLERS. . . . . . . . . . . . . . . 18
5.1 General. . . . . . . . . . . . . . . . . . . . . . 18
5.2 HSR Act. . . . . . . . . . . . . . . . . . . . . . 18
5.3 Operations . . . . . . . . . . . . . . . . . . . . 19
5.4 Restricted Activities. . . . . . . . . . . . . . . 20
5.5 Noncompetition . . . . . . . . . . . . . . . . . . 20
5.6 Injunctive Relief. . . . . . . . . . . . . . . . . 21
5.7 Severability of Covenants. . . . . . . . . . . . . 21
5.8 Independent Covenants. . . . . . . . . . . . . . . 22
5.9 Materiality. . . . . . . . . . . . . . . . . . . . 22
5.10 Access . . . . . . . . . . . . . . . . . . . . . . 22
5.11 Payment of Pre-Closing Operating Expenses. . . . . 22
5.12 Public Announcements . . . . . . . . . . . . . . . 22
5.13 Exclusivity. . . . . . . . . . . . . . . . . . . . 23
5.14 Cooperation and Obligation to Supplement Information23
5.15 Review of Title and Consents . . . . . . . . . . . 23
5.16 Assessment . . . . . . . . . . . . . . . . . . . . 24
5.17 Tax. . . . . . . . . . . . . . . . . . . . . . . . 26
5.18 Nonforeign Affidavit . . . . . . . . . . . . . . . 27
ARTICLE 6COVENANTS OF BUYER. . . . . . . . . . . . . . . . 27
6.1 General. . . . . . . . . . . . . . . . . . . . . . 27
6.2 Confidentiality. . . . . . . . . . . . . . . . . . 27
6.3 HSR Act. . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7CONDITIONS TO OBLIGATIONS OF SELLERS. . . . . . . 27
7.1 Representations. . . . . . . . . . . . . . . . . . 27
7.2 HSR Act. . . . . . . . . . . . . . . . . . . . . . 27
7.3 Performance. . . . . . . . . . . . . . . . . . . . 28
7.4 Pending Matters. . . . . . . . . . . . . . . . . . 28
7.5 Delivery . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 8CONDITIONS TO OBLIGATIONS OF BUYER. . . . . . . . 28
8.1 Representations. . . . . . . . . . . . . . . . . . 28
8.2 HSR Act. . . . . . . . . . . . . . . . . . . . . . 29
8.3 Performance. . . . . . . . . . . . . . . . . . . . 29
8.4 Pending Matters. . . . . . . . . . . . . . . . . . 29
8.5 Delivery . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9CLOSING; ADJUSTMENTS TO PURCHASE PRICE. . . . . . 30
9.1 Time and Place of Closing. . . . . . . . . . . . . 30
9.2 Prorations . . . . . . . . . . . . . . . . . . . . 30
9.3 Adjustments to the Purchase Price. . . . . . . . . 31
9.4 Statement. . . . . . . . . . . . . . . . . . . . . 32
9.5 Post-Closing Adjustments to the Purchase Price . . 32
9.6 Allocation of Carrier Obligations and Proceeds . . 33
9.7 Crude Oil Inventory. . . . . . . . . . . . . . . . 33
ARTICLE 10INDEMNITY. . . . . . . . . . . . . . . . . . . . 34
10.1 General Indemnity. . . . . . . . . . . . . . . . . 34
10.2 Release. . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 11TAXES. . . . . . . . . . . . . . . . . . . . . . 37
11.1 Allocation of Taxes. . . . . . . . . . . . . . . . 37
11.2 Cooperation. . . . . . . . . . . . . . . . . . . . 39
11.3 Certain Tax Sharing Agreements . . . . . . . . . . 40
11.4 Relationship of Article 11 to Article 10 . . . . . 40
ARTICLE 12TERMINATION. . . . . . . . . . . . . . . . . . . 40
12.1 Termination At or Prior to Closing . . . . . . . . 40
12.2 Effect of Termination. . . . . . . . . . . . . . . 41
ARTICLE 13OTHER AGREEMENTS OF THE PARTIES. . . . . . . . . 41
13.1 Pre-Closing Adjustments. . . . . . . . . . . . . . 41
13.2 Risk of Loss . . . . . . . . . . . . . . . . . . . 41
13.3 Records: Access and Retention. . . . . . . . . . . 42
13.4 Names. . . . . . . . . . . . . . . . . . . . . . . 43
13.5 Expenses . . . . . . . . . . . . . . . . . . . . . 43
13.6 Independent Investigation. . . . . . . . . . . . . 43
13.7 Disclaimer Regarding Assets. . . . . . . . . . . . 43
13.8 Disclaimer Regarding Information . . . . . . . . . 44
13.9 Waiver of Deceptive Trade Practices Acts . . . . . 44
13.10 Transition Services . . . . . . . . . . . . . 44
ARTICLE 14OTHER PROVISIONS . . . . . . . . . . . . . . . . 45
14.1 Applicable Law; Alternative Dispute Resolution . . 45
14.2 No Third Party Beneficiaries . . . . . . . . . 46
14.3 Waiver . . . . . . . . . . . . . . . . . . . . . . 46
14.4 Entire Agreement; Amendment. . . . . . . . . . . . 46
14.5 Notices . . . . . . . . . . . . . . . . . . . 47
14.6 No Assignment. . . . . . . . . . . . . . . . . . . 47
14.7 Severability . . . . . . . . . . . . . . . . . . . 48
14.8 Construction . . . . . . . . . . . . . . . . . . . 48
14.9 Counterparts . . . . . . . . . . . . . . . . . . . 48
14.10 Third-Party Consents to Assignment . . . . . . 48
14.11 Further Assurances. . . . . . . . . . . . . . 49
14.12 Telecopy Execution and Delivery . . . . . . . 49
<PAGE>
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), dated August 4,
1999, is by and between Pride Companies, L.P., a Delaware limited
partnership ("Pride"), whose address is 1209 North 4th Street, Abilene,
Texas 79601, and Pride SGP, Inc., a Texas corporation ("Pride SGP"), whose
address is 1209 North 4th Street, Abilene, Texas 79601 (collectively,
"Sellers") and Sun Pipe Line Services Co., a Delaware corporation
("Buyer"), whose address is 1801 Market Street, Philadelphia, Pennsylvania
19103. (References to "Buyer" herein may include Buyer's parent,
Affiliates, or subsidiaries.) Sellers collectively and Buyer individually
are sometimes referred to herein as a "Party" and Sellers and Buyer
collectively are sometimes referred to as the "Parties." All capitalized
terms used in this Agreement and the exhibits hereto (the "Exhibits"),
including both the singular and plural forms thereof, are defined in
Schedule 1.
RECITALS:
WHEREAS, Sellers are engaged in the purchasing, gathering,
transportation, storage and marketing of crude oil; and
WHEREAS, Sellers desire to sell, grant, transfer, convey, assign and
deliver to Buyer and Buyer desires to purchase and acquire from Sellers,
certain crude oil purchasing, gathering, marketing, storage and
transportation business, including all of the business and operations of
Pride Borger, Inc., a Delaware corporation ("Pride Borger"), whose address
is 1209 North 4th Street, Abilene, Texas 79601 (collectively, the
"Business") and related assets on the terms and subject to the conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations, warranties, covenants, conditions and
agreements contained herein, the Parties intending to be legally bound by
the terms hereof, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Agreement to Purchase and Sell Assets. On and subject to the
terms and conditions of this Agreement, Buyer agrees to buy from Sellers;
and Pride, and to the extent applicable, Pride SGP, agree to sell, grant,
deliver, transfer, assign and convey to Buyer, the Assets (as defined
below), effective as of October 1, 1999 (the "Closing Date").
1.2 Assets. Subject to Section 1.3, the term "Assets" shall mean
all of Sellers' right, title and interest (real, prescriptive or
otherwise) in and to:
(a) Pipeline Properties. The crude oil pipeline systems
which are commonly referred to as the Comyn System (including the
major trunk line segments and related pumping facilities now or
previously owned by Pride SGP, Inc. and which were acquired from
SOCO Pipeline Company and Scurlock Oil Company (the "SGP Assets"));
the Tye to Refinery line and the Refinery to Hawley line, all of
which are described on Schedule 1.2(a); the Texas Plains System
(including the major trunk line segments and related pumping
facilities acquired from Scurlock Permian and Diamond Shamrock),
which are described on Schedule 1.2(a)(i); and an additional
approximately 300 miles of gathering lines, including, without
limitation, East Broadview, Carlsbad, and Keystone which are
described on Schedule 1.2(a)(ii); along with all main, trunk,
gathering, lateral, and feeder lines, together with all tanks,
pumps, valves, meters, regulators, and other associated structures,
pipelines, equipment, facilities and properties, whether real,
personal or mixed, together with all fixtures, accessions,
additions, and attachments thereto, which are used with the
properties described on Schedules 1.2(a), 1.2(a)(i), and 1.2(a)(ii)
for use in the gathering, storage and transportation of crude oil
(collectively, the "Pipeline Properties"), said Pipeline Properties
being depicted on a map described on Schedule 1.2(a)(iii);
(b) Equipment. The equipment, machinery, goods, vehicles,
trucks, truck spare parts, truck unloading stations, LACT/TACT
units, SCADA system, materials, and other personal property
(including inventories of tubular goods, supplies and tools,
computer equipment and spare parts, fixtures and improvements on the
Pipeline Properties, appurtenant thereto or used or obtained in
connection with them, or with the ownership, operation, use,
possession, maintenance or occupancy of the Pipeline Properties and
the Business of Sellers (collectively, the "Gathering Operations")),
(collectively, the "Equipment"), which Equipment is described on
Schedule 1.2(b);
(c) Surface Contracts. All surface and subsurface
contracts, leases, easements, privileges, servitudes, permits or
licenses (including any railroad permits or licenses), rights of
way, licenses, whether written or unwritten, or other real property
instruments or agreements relating to the use or ownership of
surface and subsurface properties and structures thereon that are
used or held for use in connection with the Gathering Operations
(collectively, the "Surface Contracts"), which interests are
described on Schedule 1.2(c);
(d) Real Property. The owned real property as listed on
Schedule 1.2(d), and all rights, easements, privileges, improvements
and appurtenances belonging, pertaining or relating to such real
property (collectively, the "Real Property");
(e) Contracts. To the extent assignable and subject to
Section 1.3(g), all contracts, commitments, agreements, and
arrangements of Sellers (other than insurance contracts held by or
insuring Sellers) that in any way relate to the Gathering
Operations, together with (i) all rights, privileges and benefits of
Sellers thereunder arising on or after the Closing Date; (ii) all
rights of Sellers thereunder to audit the records of any party
thereto and to receive refunds of any nature thereunder relating to
periods on or after the Closing Date; (iii) all claims of Sellers
for take-or-pay or other similar payments arising on or after the
Closing Date not specifically excluded in Section 1.3(b) below; (iv)
all purchasing, gathering, storage, marketing and transportation
contracts and all other agreements relating to any of the Gathering
Operations, including, without limitation, all crude oil purchase,
sale, exchange, buy/sell and division order contracts; and (v) to
the extent assignable, all indemnity and other rights that Sellers
have received from the previous owners of the Assets, which
contracts, commitments, interests, agreements and arrangements are
described on Schedule 1.2(e) (collectively, the "Contracts").
Sellers further agree to use commercially reasonable efforts to
provide Buyer with such rights under the Contracts. To the extent
that such rights are not assignable, Sellers agree to retain and
administer such Contracts pursuant to Section 14.10 hereof, except
with respect to the Contracts relating to Ultramar Diamond Shamrock
Corporation (formerly Diamond Shamrock Refinery Company) ("UDS") and
Gary-Williams Energy Corporation ("Gary-Williams") which require
consent to assignment as a condition to close;
(f) Liability Insurance. Notwithstanding Section 1.2(e)
above, Buyer shall be entitled to become an additional insured
under any of Sellers' liability insurance policies in place on the
Closing Date to the extent those policies apply to incidents
occurring prior to the Closing Date and Sellers shall provide
certificates to such effect at Closing. Effective as of the Closing
Date, Sellers shall assign all claims and causes of action they have
against insurance carriers providing coverage for any Assumed
Liabilities assumed by Buyer to the extent such liabilities are
assumed. Sellers shall provide Buyer access to said insurance
policies and endorsements on or before Closing, and Buyer may make
photocopies thereof as desired;
(g) Permits. To the extent assignable, all licenses,
permits, approvals, consents, privileges, certificates, and other
authorizations and other rights of Sellers granted by environmental
authorities, Governmental Authorities and private authorities and
all certificates of convenience or necessity, immunities,
privileges, grants, and other rights that relate to the Business
(the "Permits"), which Permits are described on Schedule 1.2(g);
(h) Records. Except as set forth in Section 1.3(g),
originals or photocopies of general corporate, financial and Tax
records of Pride Borger and Sellers' books, records, files, reports
and similar data, documents and materials that relate to the
Pipeline Properties or Gathering Operations, including without
limitation, all drawings, title records, operational records,
technical records, processing records, division orders (if
applicable), measurement, tank strapping records, network lease
settlement reference and contract reference information, plant
property and right-of-way files, regulatory compliance files,
contract files, accounting files, and copies of computer
spreadsheets used for accounting and allocations;
(i) Pride Borger Stock. Notwithstanding Section 1.3, all
of the capital stock and all of the assets of Pride Borger;
(j) Crude Inventories. All of Sellers' inventory of crude
oil (including line fill) as of the Closing Date physically located
in the Assets (except line fill associated with the inactive
gathering systems) or relating to the Gathering Operations, which
inventory shall be determined in accordance with the Inventory and
Close-Out Procedures in Schedule 1.2(j); and
(k) Names. All of Sellers' rights in and to the names
"Comyn System" and "Texas Plains System" or any reasonable
derivative thereof and any logo, trade name, or trademark associated
therewith.
1.3 Excluded Assets. Notwithstanding Sections 1.2(a)-(h) and
1.2(j)-(k), the Assets shall not include, and there are excepted, reserved
and excluded from the purchase and sale contemplated hereby, all assets,
rights and properties of Sellers and their Affiliates which are not listed
as Assets, including, without limitation, the following (collectively, the
"Excluded Assets"):
(a) subject to Section 9.2, all accounts receivable, notes
receivable, cash, and cash equivalents of Sellers with respect to
the Assets or Gathering Operations existing prior to the Closing
Date, provided, however, that Sellers agree to abide by all
Applicable Laws in their efforts to collect such accounts receivable
and notes receivable, and that such efforts will be consistent with
Sellers' past practice and usual manner;
(b) all claims and causes of action of Sellers arising prior
to the Closing Date, provided, however, that Sellers agree to notify
and consult with Buyer regarding their intentions to seek recovery
on any such claim or cause of action prior to actually seeking or
taking action to effect such recovery;
(c) all general corporate, financial and tax (income and
franchise) records of Sellers (but not Pride Borger's), subject
however to Buyer's right of access under Section 5.10;
(d) all interest of Sellers in and to the names "Pride
Companies, Pride Borger, Pride Refining and Pride Pipeline" or any
reasonable derivative thereof and any logo, trade name, or trademark
associated therewith;
(e) all losses, carryovers, and rights or claims to receive
refunds with respect to any and all Taxes of Sellers (except Pride
Borger) of every nature and description, including interest payable
with respect thereto;
(f) Sellers' books, records, files, drawings, diagrams and
similar documents and materials, including those specifically
identified on Schedule 1.3(f), which (i) Sellers cannot legally
provide to Buyer without breaching confidentiality agreements with
third parties or (ii) which relate to the trade payables, royalty
payables and other liabilities retained by Seller;
(g) all of Sellers' royalty suspense accounts and all
original books and records (including lease files) relating thereto;
(h) all of Sellers' or Sellers' Affiliates' interest in
their Abilene Refinery and products storage and transportation
business; and
(i) all assets, rights and properties deleted from the
Assets pursuant to this Agreement.
ARTICLE 2
PURCHASE PRICE; OTHER TRANSACTIONS
2.1 Purchase Price. Buyer agrees to pay Sellers a total amount of
Twenty-Six Million Dollars ($26,000,000) to be reduced by the outstanding
balance on the note (the "Diamond Shamrock Promissory Note") as of the
Closing Date in the approximate amount of $5,330,000 (the "Purchase
Price"). Buyer agrees to pay Sellers at Closing the Purchase Price, as
adjusted at Closing pursuant to Article 9, by means of a completed
wire-transfer of immediately available funds to an account designated by
Sellers.
2.2 Post-Closing Adjustments to the Purchase Price. The Purchase
Price shall be subject to a post-Closing adjustment in accordance with the
provisions of Article 9.
2.3 Allocated Values. Buyer and Sellers have agreed to allocate
the Purchase Price together with any assumed liabilities among the Assets
for federal income tax purposes pursuant to Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code"), in accordance with the
allocation Schedule attached hereto as Schedule 2.3. Schedule 2.3 will be
adjusted by Buyer and Sellers to the extent necessary to reflect any
subsequent final determination of the Purchase Price pursuant to Article
9. Sellers and Buyer agree to execute any forms or other documentation to
be filed with the Internal Revenue Service which are consistent with the
allocated Purchase Price as set forth on Schedule 2.3, as adjusted.
Sellers and Buyer each agree that they and their Affiliates will not
prepare any Tax Return or report inconsistent with such agreed allocation,
as adjusted.
2.4 Assumption Agreement. At the Closing, Buyer will enter into
an Assumption Agreement in the form of Exhibit A hereto pursuant to which
Buyer agrees to assume and be responsible for the Assumed Liabilities
occurring prior to the Closing.
2.5 Employment Matters.
(a) Employment. As soon as reasonably practicable after the
date hereof, and in any event within ten (10) days after the date
hereof, Sellers shall provide Buyer with a list of employees of
Sellers that Sellers desire to retain after the Closing Date
("Retained Employees"). Simultaneously, Sellers shall provide Buyer
with a list of employees of Sellers that Sellers do not intend to
retain after the Closing Date (the "Non-Retained Employees"). The
list of Non-Retained Employees shall include all employees of
Sellers that are not on the list of Retained Employees. During the
period beginning ten (10) days after the date hereof, and ending
five (5) days prior to Closing, Sellers shall provide Buyer the
opportunity to review the employment records of the Business and
meet with all of the employees on the list of Non-Retained
Employees, as requested by Buyer, to obtain information needed to
address transitional issues, including the hiring of the Non-Retained
Employees selected by Buyer. Buyer shall have access to
the Non-Retained Employees and their employment records during
normal business hours, and shall not unreasonably interfere with the
operation of Sellers' business. No more than thirty (30) days, but
in any event at least five (5) days prior to the Closing Date, Buyer
shall provide Sellers with a list of those employees from the list
of Non-Retained Employees that Buyer intends to employ after the
Closing Date (the "Intended Hired Employees"). Sellers' employees
on the list of Non-Retained Employees that are not included on the
list of Intended Hired Employees, and employees on the list of
Intended Hired Employees who do not become employees of Buyer in
connection with the consummation of the transactions contemplated
herein, shall be referred to herein as "Excluded Employees". During
the period from the date hereof to the Closing Date, Sellers shall
use their best efforts to retain the services of their present
officers and employees except, with notice to Buyer, in instances in
which Sellers reasonably believe that the termination of any officer
or employee is in the best interest of Sellers or a termination for
cause, and Sellers will maintain good employee relationships
consistent with past practices and comply with the terms of
applicable contracts in existence on the date hereof. On the
Closing Date, Sellers shall terminate all of the Non-Retained
Employees and Buyer shall hire all of the Intended Hired Employees
who accept Buyer's offer of employment (the "Hired Employees").
Sellers shall retain all liability for any liability, claim or
obligation relating to or arising out of the employment by Sellers,
or terminating of employment by Sellers, of Sellers' employees,
including, without limiting the foregoing, all claims for workers'
compensation, breach of express or implied employment contracts,
wrongful discharge, benefits under employee benefit or disability
plans, or violations of any federal, state or local laws prohibiting
employment discrimination. Sellers shall be responsible for any
continuation group health coverage required under Section 4980B of
the Code or Sections 601 through 608 of ERISA with respect to all
such employees.
(b) WARN ACT. Sellers shall be responsible for complying
with all requirements of the WARN Act, and any similar state or
local statute, applicable to Sellers and their business prior to the
Closing Date.
(c) Severance. Buyer shall be under no obligation to provide
severance pay or any other termination benefit with respect to the
termination by Sellers of any Non-Retained Employees. Subject to
Section 2.5(d)(ii), Sellers shall be responsible for severance
benefits as specified in Sellers' Employees Handbook related to the
termination of the Excluded Employees; provided, however, that Buyer
shall reimburse Sellers for the cost of any severance payment
provided to any Excluded Employee if Buyer or any of its Affiliates
hires such Excluded Employee within six (6) months of the Closing
Date. If Buyer terminates any of the Hired Employees within six (6)
months after the Closing Date (the "Transition Period"), other than
for just cause, Buyer shall provide, or cause to be provided, if
they have not already received severance benefits from Sellers,
severance benefits to such terminated employees equal to those that
would have been provided pursuant to Sellers' Employee Handbook (as
in effect on June 1, 1999), to the Excluded Employees by Sellers;
provided however, that Sellers shall reimburse Buyer for the costs
of such severance benefits if Sellers or any of their Affiliates
hire any such Hired Employee within six (6) months of the end of the
Transition Period.
(d) Benefits Following Closing.
(i) Sellers shall retain liability for all claims,
costs, expenses, liabilities and other obligations related to
Hired Employees in which damages or other remedies are sought
based on incidents or events occurring or arising prior to the
Closing Date.
(ii) If any accruals for employee benefits or
compensation are included as current liabilities in the
Financial Statements (such as for Sellers' 401(k) and profit
sharing plans and for bonuses under FAS 106), Sellers shall,
on and after the Closing Date, provide its employees and
former employees with such benefits or compensation to the
full extent of, on a basis consistent with, and for the same
time period represented by such accrual. In any event,
Sellers shall pay to former employees of Sellers (including
Excluded Employees and Hired Employees) all benefits to which
they are entitled under Sellers' existing benefit plans to the
extent such benefits are funded under such benefit plans as of
the Closing Date or otherwise covered by insurance
arrangements. Notwithstanding the foregoing, Sellers shall be
responsible for any claims incurred by a Non-Retained Employee
or his or her covered dependents under Sellers' medical
insurance, life insurance and all other welfare plans prior to
the date of hire by Buyer in accordance with the terms of
Sellers' plans, and for all disability benefits and worker's
compensation payable to any Non-Retained Employee as a result
of events occurring prior to the Closing Date.
(iii) This Section 2.5 shall not require any
acceleration of benefits not otherwise required by the terms
of any applicable benefit plans.
(e) Vacation. Sellers shall retain all liabilities for
unpaid, accrued vacation of Non-Retained Employees as of the Closing
Date. At the time of termination of employment of the Non-Retained
Employees, Sellers shall pay to each Non-Retained Employee the
unpaid, accrued vacation to which such Non-Retained Employee is
entitled as of the Closing Date. Except as may be provided in
Buyer's collective bargaining or Employee Association Agreements
with respect to Hourly Employees, service with both Sellers and
Buyer shall be taken into account in determining Hired Employees'
vacation under Buyer's Mid-Career Hires Vacation Guidelines. Buyer
shall not take into account service with Sellers of the Hired
Employees for any other purpose.
(f) Cooperation; Employment Records. The Parties agree to
furnish each other with such information concerning employees, and
to take such other action as is necessary and appropriate to effect
the transactions contemplated by this Section 2.5. At Closing, or
as soon as possible thereafter, Sellers will provide Buyer a list of
Hired Employees who have taken leave under the Family and Medical
Leave Act within 12 months prior to the Closing Date, including the
type and length of such leave.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Pride, and to the extent applicable, Pride SGP, represent and
warrant to Buyer as of the date of this Agreement and, subject to the
provisions of Sections 3.15 and 3.25, as of the Closing, that:
3.1 Organization and Good Standing. Pride is a limited
partnership validly existing and in good standing under the Applicable
Laws of the State of Delaware, and in each state in which it conducts
business, with full partnership power, right and authority to own and
lease the properties and assets it currently owns and leases and to carry
on its business as such business is currently being conducted. Pride's
federal tax identification number is 75-2313597. Pride SGP is a
corporation duly organized, validly existing, and in good standing under
the Applicable Laws of the State of Texas and in each state in which it
conducts business with full corporate power, right, and authority to own
and lease the properties and assets it currently owns and leases and to
carry on its business, as such business is currently being conducted.
Pride SGP's federal tax identification number is 75-1768862. Pride Borger
is a corporation duly organized, validly existing, and in good standing
under the Applicable Laws of the State of Delaware, and in each state in
which it conducts business, with full corporate power, right, and
authority to own and lease the properties and assets it currently owns and
leases and to carry on its business as such business is currently being
conducted. Pride Borger's federal tax identification number is 75-1468070.
3.2 Conduct of Business. The Assets identified in Section 1.2
constitute all of the assets owned by Sellers and required for the
operation of the Business as currently conducted by Sellers, other than
the Excluded Assets.
3.3 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by Sellers. Pride has the
full partnership power and authority to enter into this Agreement, to make
the representations, warranties, covenants, and agreements made herein and
to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement, and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all requisite partnership action on the part of Sellers. Neither the
execution and delivery of this Agreement by Sellers nor the consummation
by Sellers of the transactions contemplated hereby (a) will conflict with,
result in a breach, default or violation of, or require consent of any
third party under (i) the terms, provisions or conditions of the
Partnership Agreement of Pride or any contract, agreement, instrument or
restriction of any kind to which Sellers are a party or by which Sellers
are bound or to which any of the Assets are subject or (ii) to the
knowledge of Sellers, any judgment, decree, or order or any governmental
permit, certificate, license, Applicable Law, statute, rule or regulation
or any judgment, decree, or order to which Sellers are a party or is
subject, or to which any of the Assets are subject, except for (A)
consents and approvals from Governmental Authorities that are customarily
obtained after closing in connection with a sale of properties, and for
those permits or licenses for street, road, canal, river, drainage, or
other public or governmental right-of-way for any pipeline crossing or
passageway, (B) any conflict, breach, default, violation, or consent that
would not have, individually or in the aggregate, a Material Adverse
Effect, and (C) any applicable requirement under the HSR Act, or (b) will
result in the creation of any lien, charge, or other encumbrance on any of
the Assets.
For purposes of this Agreement, unless specifically set forth herein
to the contrary, the terms "knowledge," "known," or any similar term, as
applied to Sellers, Pride Borger or Buyer, shall mean the actual knowledge
of Sellers', Pride Borger's or Buyer's executive officers, respectively;
provided, however, that prior to the Closing, Sellers shall make inquiry
of and seek to obtain certificates from the employees identified on such
Schedule 3.3 with respect to the accuracy of Sellers' representations and
warranties herein.
3.4 Governmental Consents. To the knowledge of Sellers, no
consent, action, approval or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to
authorize, or is otherwise required in connection with, the execution and
delivery of this Agreement by Sellers, or Sellers' performance of the
terms of this Agreement, or the validity or enforceability hereof against
Sellers, except for consents referenced in Sections 3.3 and 14.10, and
except where the failure to give notice to file or to obtain any
authorization, consent or approval would not have a Material Adverse
Effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
3.5 Enforceability. This Agreement constitutes the legal, valid,
and binding obligation of Sellers enforceable against Sellers in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar Applicable Laws affecting
creditors' rights generally and general principles of equity.
3.6 Brokers. Simmons & Company International has acted as broker
or finder for or on behalf of Sellers and their Affiliates in connection
with this Agreement or the transactions contemplated by this Agreement,
and no other broker or finder has acted in such capacity. No broker or
finder is entitled to any brokerage or finder's fee, or to any commission,
based in any way on agreements, arrangements or understandings made on
behalf of Sellers or any Affiliate of Sellers for which Buyer has or will
have any liability or obligation (contingent or otherwise).
3.7 Suits. Except as set forth on Schedule 3.7, there are no Suits
pending or, to the knowledge of Sellers, threatened involving the Assets,
the Business, or the employees of the Business which could have a Material
Adverse Effect on Buyer's ownership of, use of or title to the Assets,
either known by, or upon which service has been effected on, Seller.
3.8 Permits. To the knowledge of Sellers, Sellers possess all
governmental licenses, permits, and certificates necessary for the
operation of the Business and the Assets, except to the extent that the
failure to possess such governmental licenses, permits, and certificates
would not have a Material Adverse Effect. Nothing in this Section 3.8
shall be deemed or construed to constitute a representation or warranty
with respect to Environmental Laws which are covered exclusively by
Section 3.9 and Article 10, respectively.
3.9 Environmental Matters. (a) Except as set forth on Schedule
3.9(a), and to the knowledge of Sellers, no Violation of Environmental
Laws exists with respect to the Business or any of the Assets, which
Violation of Environmental Laws would have a Material Adverse Effect.
(b) To the knowledge of Sellers and except as set forth on
Schedule 3.9(b), or as would not result in a Material Adverse
Effect:
(i) There has been no spill, release, threatened
release, discharge or disposal of Hazardous Substances that
has occurred or which is presently occurring on, from, under
or onto any Assets or from any adjacent properties.
(ii) There has been no undisclosed spill, release,
threatened release, discharge or disposal of Hazardous
Substances that has occurred or which is presently occurring
(i) on tracts neighboring and/or occupied by any Assets or
(ii) from any real property owned by Sellers as a result of
any construction on or operation or use of any Assets.
(iii) Except as set forth on Schedule 3.9(c), there are
no presently existing or threatened environmental claims.
(iv) Except as set forth on Schedule 3.9(d), in
connection with the construction on, or operation, maintenance
and use of, any Assets, as of the date of this Agreement,
there has been no failure by Sellers to comply with all
applicable requirements of Environmental Laws relating to
Sellers, the operations of any Assets, or Sellers'
manufacture, processing, distribution, use, treatment,
generation, recycling, reuse, sale, storage, handling,
transportation or disposal of any Hazardous Substance and
Sellers are not aware of any facts or circumstances which
could materially impair such compliance with all applicable
Environmental Laws after the date of this Agreement.
(v) Except as set forth on Schedule 3.9(e), Sellers
are not currently required to obtain any environmental permit
to construct, demolish, renovate, occupy, operate or use any
buildings, improvements, fixtures or equipment forming a part
of any Assets that have not been obtained and fully disclosed
to Buyer.
(vi) Except as set forth on Schedule 3.9(f), there is
no ACM or Underground Storage Tank located on, in (including,
with respect to ACM, within building materials) or about any
Assets nor has any ACM or Underground Storage Tank at any time
been removed from any Assets.
(vii) Except as set forth on Schedule 3.9(g), there are
no liens affecting any Assets arising out of or in connection
with an environmental claim and Sellers have not received any
summons, directive, citation, notice, investigation letter or
other communication, whether written or oral, from any
Governmental Authority or any other Person concerning any
intentional or unintentional action or omission by Sellers or
any other Person which may result in an environmental claim or
a breach of any requirement of Environmental Law with regard
to Sellers or any Assets.
3.10 Government Notices. Except as set forth on Schedule 3.10,
there are no known notifications pending or, to the knowledge of Sellers,
threatened by any Governmental Entity relating to Sellers and the Assets
or relating to the discharge or release of materials into the environment
or otherwise relating to the protection of the public health or the
environment.
3.11 Payment of Taxes.
(a) No Taxes, including ad valorem, real or personal
property taxes, assessed against the Assets are delinquent. Sellers
have properly completed and filed or caused to be filed in a timely
manner all material reports or returns required to be filed with
respect to such Taxes relating to the Assets with any applicable
taxing authority or, if not so timely filed, all appropriate
penalties with respect to same have been assessed and paid or duly
contested in good faith.
(b) Pride Borger has filed or caused to be filed all Tax
Returns with the exception of the federal return for the short
period ending on the Closing Date required to have been filed by or
for it, and all material information set forth in such Tax Returns
is accurate and complete. Pride Borger has paid or made adequate
provision for all Taxes payable by it or with respect to its assets.
Pride Borger has not granted (and is not subject to) any waiver of
the period of limitations for the assessment of Tax for any
currently open taxable period, and no unpaid Tax has been asserted
against or with respect to Pride Borger by any taxing authority.
Pride Borger has collected or withheld all amounts required to be
collected or withheld by it for any Taxes, and all such amounts have
been paid to the appropriate governmental agencies or set aside in
appropriate accounts for future payment when due. Pride Borger is
in compliance with, and its records contain all information and
documents necessary to comply with, all applicable information
reporting and Tax withholding requirements. Pride Borger has not
made or entered into, and does not hold any asset subject to, a
"safe harbor lease" subject to former Section 168(f)(8) of the
Internal Revenue Code and the regulations thereunder. There are no
liens for Taxes upon assets of Pride Borger other than for current
Taxes not yet due and payable. Pride Borger is not and has not been
a party to any joint venture, partnership, or other arrangement
which could be treated as a partnership for federal income tax
purposes. Sellers have delivered to Buyer correct and complete
copies of all federal income Tax Returns and state franchise Tax
Returns, examination reports, proposed audit findings in any cycle
in which an examination report has not yet been issued and
statements of deficiencies assessed against or agreed to by Pride
Borger since December 1, 1994, as well as copies of any
correspondence with Diamond Shamrock regarding Tax liabilities or
potential Tax liabilities of Pride Borger. For purposes of this
Section 3.11, Pride Borger shall mean Pride Borger and Pride Texas
Plains, L.P.
3.12 Compliance with Contracts. To Sellers' knowledge, neither
Sellers, Pride Borger, nor any other party to the Contracts, Surface
Contracts or Permits are in default or breach of any of the Contracts,
Surface Contracts or Permits that would have a Material Adverse Effect,
nor do Sellers or Pride Borger have knowledge of events that could result
in a default or breach of any Contract, Surface Contract or Permit.
3.13 Adverse Title Claims. At Closing, Sellers will have good and
indefeasible title to the Assets, free and clear of all liens,
encumbrances, security interests, equities or restrictions whatsoever,
other than Permitted Liens. Except as set forth on Schedule 3.13, to the
knowledge of Sellers,
(a) there are no liens or encumbrances with respect to any
of the Assets for delinquent Taxes and delinquent assessments;
(b) there are no liens, deeds of trust, mortgages, adverse
title claims, or similar encumbrances with respect to the Assets;
and
(c) there are no materialmen's, mechanics', repairmen's,
employees', contractors', operators', and other similar liens or
charges arising in the ordinary course of business incidental to
construction, maintenance, or operation of any of the Assets prior
to the Closing.
3.14 Capital Expenditures. Neither Sellers nor Pride Borger have
made or agreed to make any capital expenditures for additions to property,
plant, or equipment, other than in the ordinary course of business and
consistent with past practices, except as provided in Section 5.3.
3.15 Supplemental Disclosure. Sellers shall have the right and
option to amend the representations and warranties made by them herein, on
the Schedules and in all other certificates delivered by it to Buyer
pursuant hereto to ensure that such representations and warranties,
Schedules, and other certificates remain true and correct between the date
of this Agreement and the Closing. Sellers will provide Buyer with
reasonable notice of any amendments to the Schedules, and Buyer and
Sellers shall negotiate a pre-closing adjustment to the purchase price
("Pre-Closing Adjustment") to reflect such amendment, if requested by
either party. If the Parties cannot agree on such Pre-Closing Adjustment,
the issue shall be resolved pursuant to Section 13.1.
3.16 Compliance with Applicable Laws. To the knowledge of Sellers,
neither Sellers nor Pride Borger are in default under any Applicable Laws,
which default would have a Material Adverse Effect upon the Assets or the
Business or the employees of the Business. Sellers and Pride Borger have
been granted all Permits from federal, state, and local government
regulatory bodies necessary or desirable to carry on the Business, all of
which are currently in full force and effect except where any failure to
obtain Permits would not have a Material Adverse Effect upon the Assets or
the Business.
3.17 Employee Relations and Benefit Plans. Set forth on Schedule
3.17 is an accurate and complete list of all agreements of any kind
between Sellers and their employees or group of employees, including,
without limitation, written or oral employment and benefit plans. Except
as provided in Section 2.5 hereof, Buyer shall not, by the execution and
delivery of this Agreement or otherwise, become obligated to employ any
employee of Sellers or Pride Borger or assume any liabilities or
contractual obligations with respect to such employees or otherwise become
liable for or obligated in any manner (contractual or otherwise) to any
employee of Sellers or Pride Borger, including, without limiting the
generality of the foregoing, any liability or obligation pursuant to any
collective bargaining agreement, employment agreement, or pension, profit
sharing or other employee benefit plan (within the meaning of Section 3(3)
of the Employment Retirement Income Security Act of 1974, as amended) or
any other fringe benefit program maintained by Sellers or to which Sellers
contribute or any liability for the withdrawal or partial withdrawal from
or termination of any such plan or program by Sellers or Pride Borger.
Pride Borger has never had any employees during the period in which
Sellers have owned Pride Borger. Sellers warrant that no labor union or
employee organization has been certified or recognized as the collective
bargaining representative of any employees of Sellers, nor are there any
union organizations, campaigns, representation proceedings, labor strikes,
work stoppages, or slow downs underway or, to Sellers' knowledge after
reasonable inquiry, threatened with respect to any of the employees of
Sellers.
3.18 Financial Statements. Sellers have delivered to Buyer copies
of the Crude Oil Gathering Division consolidating balance sheets which
include Pride Pipeline Company, Pride Borger, and PHS Pipeline as of
December 31st, for the years 1995 through 1998 and for the three months
ending March 31, 1999 (the "Balance Sheet Dates"), Crude Oil Gathering
Division consolidating statements of income or earnings, cash flow and
retained earnings which include Pride Pipeline Company, Pride Borger, and
PHS Pipeline for the twelve months then ended and the three months then
ended, respectively (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"), applied on a consistent basis
throughout the periods indicated. The Financial Statements are true,
complete and correct with the exception that such Financial Statements do
not contain footnotes. Such Financial Statements present fairly the
financial condition and the results of the operations of the Crude Oil
Gathering Division for the periods indicated thereon. In addition,
Sellers have provided Buyer with copies of the Form 10K for the years
ended December 31, 1995 through 1998 and the Form 10Q for the quarter
ending March 31, 1999 which Form 10Ks include audited financial statements
for Pride (the "Publicly Filed Financial Statements"). Such Publicly
Filed Financial Statements have the Crude Oil Gathering Division
consolidated in them. The Publicly Filed Financial Statements include all
material footnotes required by GAAP, each such footnote is complete and
accurate, and contains all information required by GAAP to be contained
therein. All reserves for contingent risks have been estimated in
accordance with GAAP and are appropriate and sufficient to cover all costs
reasonably expected to be incurred from such risks. The Publicly Filed
Financial Statements and the Financial Statements are consistent with the
books and records of Sellers (including without limitation those related
to the Crude Oil Gathering Division).
3.19 Capital Stock.
(a) The authorized capital stock of Pride Borger consists of
1,000 shares of common stock, of which 1,000 shares are issued and
outstanding. Schedule 3.19(a) accurately describes the ownership of
Pride Borger's capital stock as of the date hereof. Pride is and
will be on the Closing Date the record and beneficial owner and
holder of, and has, and on the Closing Date will have, good, valid
and indefeasible record and beneficial title to, Pride Borger's
capital stock indicated on Schedule 3.19(a) to be owned by Pride,
free and clear of any adverse claim of any other Person, including
without limitation, any encumbrance. All of the outstanding shares
of Pride Borger's capital stock have been duly authorized and are
validly issued, fully paid and nonassessable. All dividends and
other distributions declared with respect to the issued and
outstanding shares of Pride Borger's capital stock have been paid or
distributed. There are no existing subscriptions, rights, warrants,
calls, options, commitments or agreements of any character relating
to Pride Borger's capital stock which is authorized but unissued or
held in the treasury or relating to the purchase or redemption of
Pride Borger's issued and outstanding capital stock, and there are
no outstanding securities or other instruments convertible into or
exchangeable for shares of such capital stock and no commitments to
issue such securities or instruments.
(b) The certificates representing Pride Borger's capital
stock to be delivered to Buyer at the Closing, and the signatures on
the endorsements thereof or stock powers delivered therewith, will
be valid and genuine. The stock certificates, endorsements, stock
powers and other documents to be delivered to Buyer on the Closing
Date will transfer to and vest in Buyer good, valid and indefeasible
title to Pride Borger's capital stock, free and clear of any adverse
claims of any other Person.
3.20 Year 2000 Compliance. Except as set forth on Schedule 3.20,
Sellers are not aware of any areas in which the Assets will not be Year
2000 compliant upon completion of Sellers' Year 2000 Compliance plan.
"Year 2000 Compliant" means as to any Person or entity that all software,
firmware, microprocessing chips and other data processing devices and
services (both as a recipient and as a provider), capabilities and
facilities utilized by, and material to the business operations or
financial condition of, that Person or entity will be able to record and
process all calendar dates (whether before, in and after the year 2000)
correctly with four-digit year processing and will be able to communicate
with other applicable systems to accept any two-digit year date data in a
manner that resolves any ambiguities as to century in a properly defined
manner.
3.21 Material Compliance. To the knowledge of Sellers, Sellers
have maintained the Assets in material compliance with Applicable Laws and
in accordance with good industry practice, except where any failure to do
so would not have a Material Adverse Effect on the Assets or the Business.
3.22 Volume of Certain Business. The lease acquisition and
pipeline transportation volumes shall not have changed materially since
the levels disclosed to Buyer in data as of December, 1998.
3.23 Pride Borger. Pride Borger was originally incorporated under
the name D-S Pipe Line Corporation ("D-S Pipe Line"), which was the
subject of the stock purchase agreement between Pride Refining, Inc.
("Pride Refining") as Buyer, and Diamond Shamrock Refining and Marketing
Company ("Diamond Shamrock") as Seller dated September 1, 1994. The
corporate name of D-S Pipe Line was changed to Pride Borger on March 8,
1995.
3.24 Diamond Shamrock Promissory Note. Sellers are current on all
principal and interest payments and the Diamond Shamrock Promissory Note
is not in default.
3.25 Survival of Representations and Warranties of Sellers. The
representations and warranties of Sellers set forth in this Agreement
shall not continue to be made after Closing, except that Sellers shall be
and remain liable for any damages, losses or claims arising from Sellers'
breach of or inaccuracy in any such representation or warranty in
accordance with Article 10.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as of the date of this
Agreement and, subject to the provisions of Sections 4.8 and 4.9, as of
the Closing, that:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the Applicable
Laws of the State of Delaware and in each state in which it conducts
business with full corporate power, right, and authority to own and lease
the properties and assets it currently owns and leases and to carry on its
business as such business is currently being conducted. Buyer's federal
tax identification number is 23-2052191.
4.2 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by Buyer. Buyer has the
full corporate power and authority to enter into this Agreement, to make
the representations, warranties, covenants, and agreements made herein and
to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement, and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all requisite corporate action on the part of Buyer. To the knowledge of
Buyer, neither the execution and delivery of this Agreement by Buyer nor
the consummation by Buyer of the transactions contemplated hereby (a) will
conflict with, result in a breach, default or violation of, or require the
consent of a third party under (i) the terms, provisions, or conditions of
Buyer's articles of incorporation, bylaws, or any other corporate document
(and any amendments thereto) or (ii) any judgment, decree, or order or any
governmental permit, certificate, material agreement, license, Applicable
Laws, statute, rule, or regulation or any judgment, decree, or order to
which Buyer is a Party or is subject, or to which the business, assets or
operations of Buyer are subject, except for (A) post-closing consents, (B)
any conflict, breach, default, or violation that would not have,
individually or in the aggregate, a material adverse effect on Buyer, and
(C) any applicable requirements under the HSR Act, or (b) will result in
the creation of any lien, charge, or other encumbrance on any property or
assets of Buyer.
4.3 Governmental Consents. To the knowledge of Buyer, no consent,
action, approval or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to authorize, or is
otherwise required in connection with the execution and delivery of this
Agreement by Buyer, or Buyer's performance of the terms of this Agreement,
or the validity or enforceability hereof against Buyer, except for
post-closing consents set forth on Schedule 14.10 and any applicable
requirements under the HSR Act, and except where the failure to give
notice to file or to obtain any authorization, consent or approval would
not have a material adverse effect on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
4.4 Enforceability. This Agreement constitutes a legal, valid, and
binding obligation of Buyer enforceable against Buyer in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and other similar Applicable Laws affecting creditors' rights
generally and general principles of equity.
4.5 Brokers. No broker or finder has acted for or on behalf of
Buyer or any Affiliate of Buyer in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is
entitled to any brokerage or finder's fee, or to any commission, based in
any way on agreements, arrangements or understandings made by or on behalf
of Buyer or any Affiliate of Buyer for which Sellers have or will have any
liability or obligation (contingent or otherwise).
4.6 Suits. There are no Suits pending, or to Buyer's knowledge
threatened, which could prohibit Buyer's acquisition or ownership of the
Assets or which could have a material adverse effect on the Buyer's
consummation of the transactions contemplated hereby.
4.7 Financing. Buyer has currently available all funds necessary
to pay the Purchase Price and any other amounts contemplated by this
Agreement. Buyer's ability to consummate the transactions contemplated
hereby is not contingent on its ability to complete any financing prior to
or upon the Closing.
4.8 Supplemental Disclosure. Buyer shall have the right and option
to amend the representations and warranties made by it herein, on the
Schedules and in all other certificates delivered by it to Sellers
pursuant hereto to ensure that such representations and warranties,
Schedules, and other certificates remain true and correct between the date
of this Agreement and the Closing. Buyer will provide Sellers with
reasonable notice of any amendments to the Schedules.
4.9 Survival of Representations and Warranties of Buyer. The
representations and warranties of Buyer set forth in this Agreement shall
not continue to be made after Closing, except that Buyer shall be and
remains liable for any breach of or inaccuracy in any such representation
or warranty in accordance with Article 10.
ARTICLE 5
COVENANTS OF SELLERS
Pride, and to the extent applicable, Pride SGP, covenant and agree,
except as otherwise contemplated by this Agreement or as otherwise
approved by Buyer in writing, that from the date hereof through the
Closing Date (or after the Closing Date, as required by Section 5.3(i)):
5.1 General. Sellers will use their best efforts to take all
actions and to do all things necessary or advisable in order to consummate
and make effective the transactions contemplated by this Agreement,
including satisfaction of the closing conditions.
5.2 HSR Act. Upon the execution of this Agreement, Sellers will,
if required, file a notification under the HSR Act relating to the
purchase and sale contemplated hereby with the Justice Department and the
FTC. Sellers will (a) promptly file any other required notification under
the HSR Act relating to the purchase and sale contemplated hereby with the
Justice Department and the FTC, (b) respond to inquiries from the Justice
Department and the FTC in connection with such notification, (c) request
early termination or waiver of any applicable waiting period under the HSR
Act and (d) provide to Buyer copies of all filings and correspondence
between Sellers and the Justice Department and the FTC regarding the
purchase and sale contemplated hereby.
5.3 Operations. Sellers and Pride Borger shall:
(a) use their best efforts to conduct the Business
consistent with past practice in their usual manner and maintain
their books of account in a manner that fairly and accurately
reflects their income, expenses and liabilities;
(b) use their best efforts to duly and punctually perform
all of their material contractual obligations in the ordinary course
of business;
(c) give prompt written notice to Buyer of any notice
received by either of them of any material default or breach or
alleged material default or breach under any instrument or agreement
to which either of them is a party or by which either of them is
bound and take all reasonable steps to cure any such default or
breach;
(d) give prompt written notice to Buyer pertaining to
releases or discharges of Hazardous Substances from the Assets or
material violations of Applicable Laws and provide copies of any
written correspondence relating thereto received by Sellers from any
Governmental Authority;
(e) use their best efforts to preserve the goodwill of, and
their good relationships with, their suppliers, customers, landlords
and others having business relations with them;
(f) use their best efforts to preserve the Business intact
and retain the services of their present officers, employees and
agents except, with notice to Buyer, in instances in which Sellers
reasonably believe that the termination of any officer, employee or
agent is in the best interests of Sellers or a termination for
cause;
(g) use their best efforts to cause all conditions to the
consummation of the transactions contemplated hereby to be
satisfied;
(h) use their best efforts to cooperate and coordinate the
scheduling of Crude Oil movements with Buyer between the date hereof
and the Closing Date and act as Buyer's agent as directed by Buyer
where necessary; and
(i) use their best efforts to clean and make gas free all
inactive storage tanks associated with the Merton and Alan Reed
locations, which tanks are described on Schedule 5.3(i), within 60
days after Closing.
5.4 Restricted Activities. Without the prior written consent of
Buyer, which shall not be unreasonably withheld, neither Sellers nor Pride
Borger shall:
(a) enter into any employment agreement or increase the rate
of compensation payable or to become payable by Sellers or Pride
Borger to any of their directors, officers, employees or agents
(other than in connection with merit or longevity-related raises
consistent with past practices of Sellers);
(b) incur or agree to incur, or otherwise guarantee or
become liable for, any indebtedness for money borrowed or any
commitment, obligation or liability, absolute or contingent, other
than in the ordinary course of business;
(c) fail to maintain the Assets and tangible properties in
the ordinary course of business;
(d) except in the ordinary course of business, make or
permit any material change in the Assets, liabilities or financial
condition;
(e) enter into or assume any mortgage, pledge, conditional
sale or other title retention agreement, or cause or permit any
lien, security interest, mortgage, encumbrance or charge of any kind
to attach upon any of the Assets, whether now owned or hereafter
acquired, except for capital leases and liens for taxes, assessments
or governmental charges or levies which are not delinquent;
(f) enter into any new crude oil purchase or sale agreements
for volumes greater than 500 barrels per day which exceed a three
(3) month term or renew any existing purchase or sale agreement
except on substantially similar terms; or
(g) agree to do any of the things described in clauses (a)
through (f) of this Section 5.4.
5.5 Noncompetition. Sellers agree that for a period of three (3)
years following the Closing Date, they shall not, directly or indirectly,
through a subsidiary or Affiliate, without the prior express written
consent of Buyer:
(a) engage, as shareholder, owner, partner, joint venturer,
investor, lender, agent, sales representative, in a managerial
capacity, or otherwise, in the business of purchasing, gathering,
transportation or marketing of crude oil, in each case, within the
following states: Texas and New Mexico (the "Territory");
(b) call upon (in person, telephonically, by mail, or by
electronic transmission) any person who is, at that time, within the
Territory, an employee of Buyer in a managerial capacity for the
purpose or with the intent of enticing such employee away from or
out of the employ of Buyer;
(c) call upon (in person, telephonically, by mail, or by
electronic transmission) any person or entity which is, at that
time, or which has been, within one year prior to the Closing Date,
a customer of Sellers or Buyer, as the case may be, within the
Territory for the purpose of purchasing, gathering, transportation
or marketing of crude oil, in each case, within the Territory;
(d) disclose the identity of Buyer's or Sellers' customers,
whether in existence or proposed, to any Person, firm, partnership,
corporation or business for any reason or purpose whatsoever; or
(e) promote or assist, financially or otherwise (including,
without limitation, lending, guaranteeing loans or otherwise
providing financial assurance in any way), any Person, firm,
partnership, corporation or other entity whatsoever to do any of the
above.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Sellers or any of its partners from (i) acquiring as
an investment not more than one percent of the capital stock of a
competing business, whose stock is traded on a national securities
exchange or over-the-counter or (ii) conducting any of the businesses
(other than the Business) currently conducted by Sellers or their
Subsidiaries.
5.6 Injunctive Relief. Because of the difficulty of measuring
economic losses to Buyer as a result of the breach of the covenant in
Section 5.5, and because of the immediate and irreparable damage that
would be caused to Buyer for which it would have no other adequate remedy,
Sellers agree that, in the event of breach by Sellers of the foregoing
covenant, the covenant may be enforced by Buyer by, without limitation,
injunctions and restraining orders.
5.7 Severability of Covenants. The covenants in Sections 5.5
through 5.9 are severable and separate, and the unenforceability of any
specific covenant shall not affect the provisions of any other covenant.
Moreover, in the event any court of competent jurisdiction shall determine
that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the Parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
5.8 Independent Covenants. All of the covenants in Sections 5.5
through 5.9 shall be construed as an agreement independent of any other
provision of this Agreement, and the existence of any claim or cause of
action of Sellers against Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer of
such covenants. It is specifically agreed that the duration of the
noncompetition covenants stated above shall be computed by excluding from
such computation any time during which Sellers are in violation of any
provision of Sections 5.5 through 5.9 and any time during which there is
pending in any court of competent jurisdiction any action (including any
appeal from any judgment) brought by any Person, whether or not a party to
this Agreement, in which action Buyer seeks to enforce the agreements and
covenants of Sellers or in which any Person contests the validity of such
agreements and covenants or their enforceability or seeks to avoid their
performance or enforcement.
5.9 Materiality. Sellers hereby agree that the covenants in
Section 5.5 through 5.9 are a material and substantial part of this
transaction.
5.10 Access. Sellers will permit Buyer's officers, employees,
agents, and advisors to have reasonable access to Seller's employees, the
Assets (including, without limitation, the Contracts) and Sellers' records
as described in Sections 1.2(h) and 1.3(c), and Buyer will be permitted to
make copies thereof. With respect to Buyer's access to Sellers' customers,
Sellers acknowledge the importance of the successful transfer of Sellers'
customers' business to Buyer. Accordingly, Sellers and Buyer agree to
jointly prepare an announcement to Sellers' customers following the
execution of this Agreement. Sellers and Buyer agree to cooperate
regarding any contact of Sellers' customers by Buyer prior to Closing.
Buyer shall not, however, contact any of Sellers' customers (other than
UDS and Gary-Williams) to discuss the Contracts or the Business of Sellers
prior to Closing without the prior written consent of Sellers, which
consent shall not be unreasonably delayed or withheld.
5.11 Payment of Pre-Closing Operating Expenses. The Parties agree
that any customary operating expenses and all taxes (including severance
taxes) actually incurred by Sellers in the operation of the Assets and
attributable solely to periods of time prior to the Closing Date shall be
for the account of, and paid by, Sellers in accordance with Sellers'
customary practice and Applicable Law, and Buyer shall not be responsible
for the payment thereof.
5.12 Public Announcements. No press release, public announcement,
confirmation or other information regarding this Agreement or the contents
hereof shall be made by Buyer or Sellers without prior consent of the
other Party, except as may be necessary in the opinion of counsel to any
party to meet the requirements of any Applicable Law or regulations, the
determination of any court, or the requirements of any stock exchange on
which the securities of such Party may be listed. If the transactions
contemplated herein are not consummated, neither Buyer nor Sellers shall
disclose to any third party or publicly discuss the proposed transaction
contemplated hereby, except as otherwise permitted hereinabove and except
as agreed in advance, in writing, by the Parties or otherwise required by
Applicable Law, in which case the Party so compelled will give reasonable
written notice in advance to the other Parties.
5.13 Exclusivity. After the signing of this Agreement until the
Closing Date or the termination of this Agreement, neither Sellers nor any
of its Affiliates as representatives shall (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person or
entity relating to the acquisition of any capital stock or other voting
securities of, or any substantial portion of the Assets of, Sellers
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any negotiations or discussions
regarding, furnish any information with respect to, assist or participate
in, or facilitate in any other manner any effort or attempt by any Person
or entity in favor of such acquisition (including any acquisition
structured as a merger, consolidation, or share exchange). Sellers will
notify Buyer if any Person or entity makes any written unsolicited
proposal or offer with respect to any of the foregoing.
5.14 Cooperation and Obligation to Supplement Information. Sellers
(and each of Pride's general partners) shall at all times prior to the
Closing Date cooperate fully with Buyer for the purpose of consummating
the transactions contemplated hereby. Sellers shall, from time to time
through the Closing Date, supplement the Schedules, lists and other
documents referred to herein and delivered pursuant hereto to reflect
changes in the subject matter thereof occurring through the Closing Date.
Sellers shall deliver to Buyer supplements to the disclosure Schedules
promptly after the occurrence of any event which materially changes any
representation or warranty made by Sellers in this Agreement or any
statement made in the disclosure Schedules or in any supplement. Sellers
shall use their best efforts prior to and after the Closing Date, to
cooperate with Buyer in transferring all electronic and other data related
to the Business, including, without limitation, to the extent available,
the data set forth on Schedule 5.14 in a format reasonably acceptable to
Buyer.
5.15 Review of Title and Consents. Buyer acknowledges that its
remedies for defects in title shall be limited to the representation in
Section 3.13 and this Section 5.15 and that except as provided in these
sections, the Assets are being transferred without warranty of title on an
"AS IS" "WHERE IS" basis. During the due diligence review, Buyer shall be
entitled to review the Surface Contracts, Real Property and Permits to
determine whether Sellers have good title and whether any consents or
approvals are required for their assignment or conveyance. Sellers will
provide Buyer with access to Sellers' right of way files covering the
Surface Contracts, Real Property and Permits. At Buyer's request, Sellers
will further provide Buyer with access to copying privileges at Buyer's
sole cost. If Buyer discovers a "Material Title Defect" (as defined
below) during its due diligence review, Buyer shall immediately notify
Sellers in writing of the defect. Sellers shall have the right to cure
such defect by giving Buyer written notice of such election prior to
Closing. If Sellers elect not to cure such defect, Buyer and Sellers may
agree to delete the affected Asset or portions thereof from the Assets.
If Seller elects not to cure, and Buyer and Sellers cannot agree to the
deletion, the amounts at issue in excess of the aggregate amount of
$200,000 referenced below shall be treated as a Pre-Closing Adjustment in
accordance with Section 13.1. For the purposes of this paragraph, a
"Material Title Defect" shall mean a lapse, gap or title defect (other
than a Material Consent, as defined below) to any individual title or
tract relating to property which is currently actively used or operated by
Sellers or Pride Borger, for which (a) the cost of curing title or
obtaining rights to use, occupancy and possession or (b) if (a) is not
applicable, the damages from loss of use by deletion of the property would
exceed TEN THOUSAND AND NO/100 DOLLARS ($10,000.00) and in the aggregate
(a) the cost of curing title or obtaining rights to use, occupancy and
possession or (b) if (a) is not applicable, the damages from loss of use
by deletion of the property would exceed TWO HUNDRED THOUSAND DOLLARS
($200,000.00). Buyer agrees that any circumstance in which Sellers have
reasonable claims to prescriptive rights shall not be considered a
Material Title Defect.
During the due diligence review, Buyer will identify in writing to
Sellers all Material Consents required for assignment of any of the
Contracts, Surface Contracts and Permits. Prior to Closing, Sellers will
use reasonable efforts to obtain all Material Consents so identified, and
after Closing, Sellers will cooperate and assist Buyer in obtaining any
remaining Material Consents and approvals required for the assignment of
Contracts, Surface Contracts and Permits. For purposes of this paragraph,
a "Material Consent" shall mean a consent which is required on the face of
the Contracts, Surface Contracts and Permits and which is required to be
obtained from an individual or entity other than a public or quasi-public
entity or a business entity which grants consents in the normal course of
business and the cost of obtaining such consent would exceed FIVE THOUSAND
AND NO/100 DOLLARS ($5,000.00) and in the aggregate, the cost of obtaining
all required Material Consents would exceed SEVENTY-FIVE THOUSAND AND
NO/100 DOLLARS ($75,000.00). If Sellers elect not to expend amounts in
excess of these amounts to obtain the consents, or if Sellers cannot
provide the Buyer the benefit of the Contracts, Surface Contracts and
Permits in accordance with Section 14.10, the amounts at issue in excess
of the aggregate amount of $75,000 referenced above shall be treated as a
Pre-Closing Adjustment in accordance with Section 13.1. If consents or
approvals (other than any consents or approvals which constitute Material
Consents) are required, Sellers shall endeavor to obtain such consents
and/or approvals, and Buyer and/or Sellers shall execute any reasonable
documentation requested by the parties whose consent or approval may be
required.
5.16 Assessment.
(a) Buyer, at its own risk and expense, may conduct a due
diligence review of the Assets as Buyer considers necessary or
advisable. The due diligence review must be completed without
delaying the Closing and must be coordinated and scheduled between
designated representatives of Buyer and Sellers. The Parties agree
that environmental due diligence will be conducted pursuant to the
initial work plan set forth in Schedule 5.16, and that with the
prior written consent of Sellers, which consent shall not be
unreasonably withheld or delayed, environmental due diligence by
Buyer may be expanded from such initial work plan based on the
results of such initial work plan.
(b) If, as a result of Buyer's due diligence review, either
a "Material Physical Defect" or a "Material Environmental Condition"
(each defined below) is discovered, Buyer shall immediately notify
Sellers in writing, describing such Material Physical Defect or
Material Environmental Condition and the reasonable estimate of the
cost to repair, correct or remediate. Sellers and Buyer may agree
that Sellers shall repair the Material Physical Defect or remediate
or correct the Material Environmental Condition or delete the
affected asset or portions thereof from the Assets being sold. If
Sellers elect not to repair the Material Physical Defect or
remediate or correct the Material Environmental Condition or delete
the affected Assets or portion thereof, or Buyer does not agree to
the repair, remediation, correction or deletion, amounts in excess
of the aggregate amount of $750,000 referenced below for Material
Physical Defects and the aggregate amount of $250,000 referenced
below for Material Environmental Conditions will be treated as
Pre-Closing Adjustments in accordance with Section 13.1. For purposes
of this paragraph only, a "Material Physical Defect" shall mean
physical defects in the Assets for which (a) the cost of repair or
(b) if (a) is not applicable, the damages from loss of use by
deletion of the Asset would exceed a cumulative total of SEVEN
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00). To be
included in the calculation of the cumulative amount, (a) the cost
of repair or (b) if (a) is not applicable, the damages from loss of
use by deletion of the Asset due to a defect in any individual
component of the Assets must exceed THIRTY-FIVE THOUSAND AND NO/100
DOLLARS ($35,000.00). Equipment or Pipeline Properties not being
actively used by Sellers as of the Closing Date shall not be subject
to review for Material Physical Defects. For purposes of this
paragraph only, a "Material Environmental Condition" shall mean a
condition of any soils, surface water, groundwater or air caused by
Sellers or their predecessors in their operation of the Assets where
a Governmental Authority would mandate correction or remediation of
such conditions under applicable Environmental Laws, for which (a)
the cost of correction or remediation or (b) if (a) is not
applicable, damages from loss of use by deletion of the property
would exceed a cumulative total of TWO HUNDRED AND FIFTY THOUSAND
AND NO/100 DOLLARS ($250,000.00). To be included in the calculation
of the cumulative amount of Material Environmental Condition, (a)
the correction or remediation of an applicable individual condition
or (b) if (a) is not applicable, the damages from loss of use by
deletion of the property must exceed TWENTY THOUSAND DOLLARS
($20,000.00).
(c) Right of Entry. Sellers will provide Buyer (or its
contractor) with reasonable access to the Assets to conduct the due
diligence review. If Sellers do not have legal right to allow Buyer
such access, then Sellers and Buyer shall work together to obtain
the access. Buyer shall submit schedules to Sellers which show when
Buyer plans to access the Assets. Said schedules shall be provided
to Sellers sufficiently in advance of the date or dates of access to
enable Sellers to arrange to have an inspector(s) present. Buyer
agrees to exercise precautions and conduct all actions at or on the
Assets in a way that will, in so far as reasonably possible, assure
the safety of persons and property. IN ADDITION TO ARTICLE 10,
BUYER SHALL RELEASE, INDEMNIFY AND HOLD HARMLESS SELLERS, THEIR
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, SUCCESSORS, AND
ASSIGNS (HEREINAFTER INDIVIDUALLY AND COLLECTIVELY, THE
"INDEMNITEE") AGAINST ANY CLAIMS ASSERTED AGAINST INDEMNITEE BY ANY
PERSON FOR INJURY TO PERSONS OR DAMAGE TO PROPERTY ARISING OUT OF
THE DUE DILIGENCE REVIEW, EXCEPT TO THE EXTENT THAT ANY SUCH INJURY
OR DAMAGE ARISES OUT OF THE NEGLIGENCE OR WILLFUL MISCONDUCT OF
SELLERS. IF SUCH INJURY TO PERSONS OR DAMAGE TO PROPERTY IS THE
RESULT OF JOINT NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLERS AND
BUYER (WHICH TERMS, FOR PURPOSES OF THIS PARAGRAPH SHALL INCLUDE
SELLERS' AND BUYER'S RESPECTIVE EMPLOYEES, CONTRACTORS AND AGENTS),
BUYER'S DUTY OF INDEMNIFICATION SHALL BE REDUCED TO THE EXTENT OF
SELLERS' PROPORTIONATE SHARE OF SUCH JOINT NEGLIGENCE OR WILLFUL
MISCONDUCT.
(d) Buyer may, at its sole discretion, delete inactive
gathering lines from the Assets, without adjusting the Purchase
Price. Portions of the Jacksboro facility not necessary to its
operations will be deleted from the Assets and retained by Sellers.
5.17 Tax. Between the date hereof and the Closing Date, to the
extent Sellers have knowledge with respect to Pride Borger of the
commencement or scheduling of any Tax audit, the assessment of any Tax,
the issuance of any notice of Tax due or any bill for collection of any
Tax due, or the commencement or scheduling of any other administrative or
judicial proceeding with respect to the determination, assessment or
collection of any Tax of Pride Borger (including as a former partner of
Pride Texas Plains, L.P.), Sellers shall provide prompt notice to Buyer of
such matter setting forth information (to the extent known) describing any
asserted Tax liability in reasonable detail and including copies of any
notice or other documentation received from the applicable Tax authority
with respect to such matter. Sellers shall cause Pride Borger not to take
any of the following actions: (i) make, revoke or amend any Tax election;
(ii) execute any waiver of restrictions on assessment or collection of any
Tax; or (iii) enter into or amend any agreement or settlement with any Tax
authority.
5.18 Nonforeign Affidavit. Sellers shall furnish Buyer an
affidavit, stating, under penalty of perjury, the Sellers' United States
taxpayer identification number and that the Sellers are not a foreign
person, pursuant to Section 1445(b)(2) of the Internal Revenue Code.
ARTICLE 6
COVENANTS OF BUYER
Buyer covenants and agrees, except as otherwise contemplated by this
Agreement or as otherwise approved by Sellers in writing, that from the
date hereof through the Closing Date:
6.1 General. Buyer will use all reasonable efforts to take all
actions and to do all things necessary or advisable in order to consummate
and make effective the transactions contemplated by this Agreement,
including satisfaction of the closing conditions.
6.2 Confidentiality. Buyer agrees to maintain the confidentiality
of all confidential information disclosed hereunder pursuant to the terms
of the Parties' Confidentiality Agreement.
6.3 HSR Act. Upon the execution of this Agreement, Buyer will, if
required, file a notification under the HSR Act relating to the purchase
and sale contemplated hereby with the Justice Department and the FTC.
Buyer will (a) promptly file any other required notifications under the
HSR Act relating to the purchase and sale contemplated hereby with the
Justice Department and the FTC, (b) respond to inquiries from the Justice
Department and the FTC in connection with such notification, (c) request
early termination or waiver of any applicable waiting period under the HSR
Act and (d) provide to Sellers copies of all filings and correspondence
between Buyer and the Justice Department and the FTC (other than Buyer's
internal economic analysis and management presentation) regarding the
purchase and sale contemplated hereby.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to consummate the transactions
contemplated by this Agreement are subject, at the option of Sellers, to
the following conditions:
7.1 Representations. The representations and warranties of Buyer
herein contained shall be true and correct in all material respects on the
Closing Date.
7.2 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall
have lapsed or terminated (by early termination or otherwise).
7.3 Performance. Buyer shall have performed all material
obligations, covenants, and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.
7.4 Pending Matters. No Suits shall be pending or threatened that
seeks to restrain, enjoin, or otherwise prohibit the consummation of the
transactions contemplated by this Agreement.
7.5 Delivery. Buyer shall have delivered to Sellers:
(a) the Purchase Price as contemplated by Sections 2.1;
(b) an executed counterpart of this Agreement;
(c) an executed counterpart of the assignments and
conveyances of Surface Contracts (in the form set forth in Exhibit
B attached hereto), an executed counterpart of the deeds for the fee
tracts constituting part of the Assets (in the form set forth in
Exhibit C attached hereto) and any other agreements, documents,
certificates, or other instruments reasonably necessary to
consummate the transactions contemplated by this Agreement;
(d) an executed counterpart of the Assignment and Bill of
Sale (in the form set forth in Exhibit D attached hereto);
(e) incumbency certificates for all signatory officers of
Buyer;
(f) certified resolutions of Buyer authorizing all aspects
of transactions contemplated herein; and
(g) an executed counterpart of the Assumption Agreement (in
the form set forth in Exhibit A attached hereto).
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated
by this Agreement are subject, at the option of Buyer, to the following
conditions:
8.1 Representations. The representations and warranties of
Sellers herein contained shall be true and correct in all material
respects on the Closing Date.
8.2 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall
have lapsed or terminated (by early termination or otherwise).
8.3 Performance. Sellers shall have performed all material
obligations, covenants, and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.
8.4 Pending Matters. No Suits shall be pending or threatened that
seeks to restrain, enjoin, or otherwise prohibit the consummation of the
transactions contemplated by this Agreement.
8.5 Delivery. Sellers shall have delivered to Buyer:
(a) an executed counterpart of this Agreement;
(b) an executed counterpart of the assignments and
conveyances of Surface Contracts (in the form set forth in Exhibit
B attached hereto for each county where the same are located), an
executed counterpart of the deeds for the fee tracts constituting
part of the Assets (in the form set forth in Exhibit C attached
hereto) and any other agreements, documents, certificates, or other
instruments reasonably necessary to consummate the transactions
contemplated by this Agreement;
(c) an executed counterpart of the Assignment and Bill of
Sale (in the form set forth in Exhibit D attached hereto);
(d) an executed counterpart of the Assumption Agreement (in
the form set forth in Exhibit A attached hereto);
(e) the capital stock of Pride Borger, endorsed in blank by
Pride;
(f) termination or assignment to Buyer of the management
agreement between Pride and Pride Borger;
(g) incumbency certificates for all signatory officers of
Sellers;
(h) certified resolutions of Sellers authorizing all aspects
of transactions contemplated herein; and
(i) an opinion of Pride's counsel in the form set forth in
Exhibit E;
(j) certification by an officer of Sellers that there have
been no changes in the Assets between the date hereof and the
Closing Date that would have a Material Adverse Effect.
(k) An assignment from Pride Refining to Buyer of any and
all rights of Pride Refining under the stock purchase agreement
between Pride Refining and Diamond Shamrock dated September 1, 1994.
(l) An assignment of all rights, to the extent assignable,
held by Sellers pursuant to each of the respective agreements
pertaining to Sellers' acquisition of the SGP Assets and the Texas
Plains System.
(m) An assignment of all claims and causes of action Sellers
have against insurance carriers providing coverage for any Assumed
Liability to the extent assumed by Buyer.
(n) Consents to the assignment of all existing Contracts
with UDS and Gary-Williams.
ARTICLE 9
CLOSING; ADJUSTMENTS TO PURCHASE PRICE
9.1 Time and Place of Closing. If the conditions referred to in
Articles 7 and 8 have been satisfied or waived in writing, the
transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Andrews & Kurth L.L.P., on October 1, 1999, to be
effective as of the Closing Date, or at such place or on such earlier date
as may be mutually agreed upon by Buyer and Sellers. Buyer and Sellers
shall also use their reasonable efforts to close before November 30, 1999.
9.2 Prorations.
(a) All proceeds, accounts receivable and other amounts
attributable to periods of time prior to the Closing Date (excluding
those belonging to Pride Borger), less reasonable out-of-pocket
expenses paid to third parties (not including overhead expenses),
shall belong to and be paid over to Sellers, and all other proceeds,
accounts receivable and other amounts attributable to the Assets
shall belong to Buyer. Buyer and Sellers agree that after the
Closing Date, they will hold and promptly transfer and deliver to
the other, from time to time, as and when received, any cash, checks
or other property that they may receive on or after the Closing
Date, which properly belongs to the other party, including, without
limitation, any payments on account, and will account to the other
for such cash, checks or other property with receipts. Neither Party
shall have the right of offset to proceeds that properly belong to
the other Party or any obligation to collect amounts for the other
Party as described in this Section 9.2.
(b) Pride warrants that the Closing Balance Sheet for Pride
Borger shall reflect a 1-to-1 ratio of current assets to adjusted
current liabilities (the "Current Ratio"). Adjusted current assets
and liabilities shall include current assets and liabilities other
than the current portion of the Diamond Shamrock Promissory Note and
the Taxes covered under Section 9.3(b)(ii). Therefore, to the
extent that current assets exceed adjusted current liabilities,
Pride shall be entitled to additional cash from Buyer until the
Current Ratio is 1-to-1 and, to the extent adjusted current
liabilities exceed current assets, Pride shall pay additional cash
to Buyer until the Current Ratio is 1-to-1.
9.3 Adjustments to the Purchase Price.
(a) The Purchase Price shall be increased by the following
amounts:
(i) an amount equal to all prepaid expenses
attributable to the Assets after the Closing Date that are
paid by or on behalf of Sellers; and
(ii) the market value of Sellers' inventory of crude
oil owned by Sellers which shall be determined as provided in
Schedule 1.2(j).
(b) The Purchase Price shall be decreased by the following
amounts:
(i) proceeds received by Sellers prior to the Closing
Date attributable to the Assets that are, in accordance with
GAAP, attributable to the period of time on or after the
Closing Date;
(ii) an amount properly accruable under GAAP on the
Closing Date for Pre-Closing Period Taxes of Pride Borger due
after the Closing Date, and Pre-Closing Period Taxes based
upon or measured by the ownership of the Assets due after the
Closing Date reduced by the accrued tax benefit arising from
the anticipated carryback of a federal income tax net
operating loss, if any, for the short taxable period of Pride
Borger beginning on January 1, 1999; and
(iii) any amount which may be due from Sellers as agreed
upon by Buyer and Sellers in writing.
(c) The Purchase Price, as adjusted by the adjustments
described in Sections 9.3(a) and (b) above (which adjustments are
hereinafter referred to as the "Purchase Price Adjustments") and
Sections 13.1, 13.2, 3.15, 5.15 and 5.16 shall be the "Purchase
Price" due at the Closing pursuant to Article 2 hereof.
9.4 Statement. Not later than three (3) business days prior to
the Closing Date, Sellers shall prepare and deliver to Buyer a statement
of the reasonably estimated Purchase Price Adjustments (the "Statement"),
which Statement shall be prepared by Sellers reasonably, in good faith and
in accordance with GAAP. At Closing, Buyer shall pay the Purchase Price,
as adjusted by the estimated amounts reflected on the Statement.
9.5 Post-Closing Adjustments to the Purchase Price.
(a) On or before ninety (90) days after the Closing Date,
Sellers shall prepare and deliver to Buyer a revised Statement
(except for Taxes that are addressed in Article 11 hereof) setting
forth the actual Purchase Price Adjustments. To the extent
reasonably required by Sellers, Buyer shall assist in the
preparation of the revised Statement. Sellers shall provide Buyer
such data and information as Buyer may reasonably request supporting
the amounts reflected on the revised Statement in order to permit
Buyer to perform or cause to be performed an audit. The revised
Statement shall become final and binding upon the Parties on the
60th day following receipt thereof by Buyer (the "Final Settlement
Date") unless Buyer gives written notice of its disagreement (a
"Notice of Disagreement") to Sellers prior to such date. Time is of
the essence with respect to the Notice of Disagreement. Any Notice
of Disagreement shall specify an estimate of the dollar amount,
nature, and a general description or statement of the basis of any
disagreement so asserted. If a Notice of Disagreement is not
received by Sellers in a timely manner, then the Statement shall
become final and binding on the Parties in accordance with clause
(i) or (ii) below (the "Final Statement"), and the Final Settlement
Date shall be the earlier of (i) the date Sellers and Buyer agree in
writing with respect to all matters specified in the Notice of
Disagreement or (ii) the date on which the arbitrators issue a final
ruling as provided in Section 14.1 below.
(b) If the amount of the Purchase Price as set forth on the
Final Statement exceeds the amount of the estimated Purchase Price
paid at Closing, then Buyer shall pay to Sellers the amount by which
the Purchase Price as set forth on the Final Statement exceeds the
amount of the estimated Purchase Price paid at Closing within five
(5) business days after the Final Settlement Date. If the amount of
the Purchase Price as set forth on the Final Statement is less than
the amount of the estimated Purchase Price paid at Closing, then
Sellers shall pay to Buyer the amount by which the Purchase Price as
set forth on the Final Statement is less than the amount of the
estimated Purchase Price paid at Closing within five (5) business
days after the Final Settlement Date. Any post-Closing payment made
pursuant to this Section 9.5(b) shall be made by means of a wire
transfer of immediately available funds.
9.6 Allocation of Carrier Obligations and Proceeds.
(a) To the extent that crude oil, condensates, natural
gasoline, or basic sediment and water (collectively, the "Crude
Oil") has been offered for shipment in the Assets under a published
tariff or pursuant to rights under a private transportation
agreement, but not yet delivered to Sellers, Buyer shall receive
Crude Oil for transportation in the normal course of business.
Tariff revenues with respect to Crude Oil delivered from the Assets
prior to the Closing Date shall be credited to Sellers, and tariff
revenues with respect to Crude Oil delivered from the Assets on or
after the Closing Date shall be credited to Buyer. Deficiency
obligations or rentals due to Sellers under private transportation
agreements or pipeline leases to third parties with respect to the
Assets shall be allocated between Sellers and Buyer as of the
Closing Date. Buyer shall exert reasonable efforts to continue to
provide substantially equivalent transportation service between
current origin and destination points on the Assets for shippers for
ninety (90) days following the Closing Date.
(b) Sellers shall provide a notice to existing shippers on
the Assets (as set forth in Schedule 9.6(b)) in mutually agreeable
form not later than ten days after the Closing Date concerning the
proposed sale of Assets. Immediately after Closing, Sellers and
Buyer shall coordinate the delivery of notices to all shippers on
the Assets of the (i) conveyance of the Assets, and (ii) intention
to honor existing Texas Railroad Commission ("TRC") tariffs, where
appropriate, until existing TRC tariffs are canceled by Sellers and
new TRC tariffs are posted by Buyer. Sellers and Buyer shall
coordinate the filing by Sellers of appropriate TRC tariff
cancellations and the filing by Buyer of new TRC tariffs, as
appropriate, with respect to those portions of the Assets where TRC
tariffs are in place, as soon as practicable after Closing, but not
later than the next tender of shipment date after the Closing.
(c) Sellers shall provide confirmation to Buyer as soon as
reasonably possible after Closing from exchange contract customers
as to the amount of any imbalances as of one (1) month prior to the
Closing Date and as of the Closing Date. Sellers shall zero balance
or reconcile any exchange contract imbalance, other than the
exchange imbalance related to line fill associated with the UDS
contract described in Section 1.2(e).
9.7 Crude Oil Inventory. The Assets may contain crude oil which
is held for the account of shipper(s). It is understood that title to the
contents of the Assets will remain with the shipper(s) and that Buyer
assumes the obligation to deliver such contents in accordance with
Sellers' existing arrangements with the shipper(s), whether under a
published tariff or a private transportation or storage agreement. Tariff
charges for transportation of "Physical Inventory," will be in accordance
with Section 9.6. The system will be gauged on or before 7:00 a.m.
Central Time on the Closing Date, at which time the custody of all Crude
Oil will be transferred to Buyer, and Buyer shall become responsible to
each shipper for Crude Oil in Buyer's custody. Crude Oil inventory will
be handled in the manner designated by Schedule 1.2(j). Line fill in the
inactive tanks and gathering systems shall not be considered crude oil
inventory for purposes of Schedule 1.2(j). Only fifty percent (50%) of
the measurable crude oil in tank bottoms (2% or greater BS&W) shall be
considered crude oil inventory for purposes of Schedule 1.2(j).
ARTICLE 10
INDEMNITY
10.1 General Indemnity.
(a) EXCEPT AS PROVIDED BY ARTICLE 13 AND SUBJECT TO SECTIONS
10.1(d) AND 10.2, PRIDE, AND TO THE EXTENT APPLICABLE, PRIDE SGP, SHALL
INDEMNIFY, REIMBURSE, DEFEND, AND HOLD HARMLESS BUYER, ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, SHAREHOLDERS, AFFILIATES
AND SUBSIDIARIES (COLLECTIVELY, THE "BUYER INDEMNITEES") FROM AND AGAINST
ANY AND ALL CLAIMS, LIABILITIES, LOSSES, CAUSES OF ACTION, COSTS, AND
EXPENSES, INCLUDING COURT COSTS AND REASONABLE ATTORNEYS' FEES ("LOSSES"),
REGARDLESS (IN EACH CASE) WHETHER KNOWN OR UNKNOWN, ASSERTED AGAINST,
RESULTING FROM, IMPOSED UPON, OR INCURRED BY ANY OF BUYER INDEMNITEES FOR:
(i) ANY INACCURACY IN ANY REPRESENTATION OR WARRANTY OF SELLERS UNDER THIS
AGREEMENT, THE DISCLOSURE SCHEDULES, AS UPDATED AND SUPPLEMENTED AS OF THE
CLOSING DATE, OR ANY AGREEMENT, CERTIFICATE OR OTHER DOCUMENT DELIVERED OR
TO BE DELIVERED BY SELLERS PURSUANT HERETO IN ANY RESPECT, OR ANY BREACH
OR NON-FULFILLMENT OF ANY COVENANT, AGREEMENT OR OTHER OBLIGATION OF
SELLERS UNDER THIS AGREEMENT, (ii) THE BUSINESS OF SELLERS OR THE
OCCUPANCY, CONDITION, MANAGEMENT, OWNERSHIP, OPERATION OR USE OF SELLERS'
ASSETS PRIOR TO THE CLOSING DATE EXCEPT TO THE EXTENT ASSUMED BY BUYER
PURSUANT TO THE ASSUMPTION AGREEMENT; (iii) THE RETAINED LIABILITIES AND
(iv) THE TRANSPORTATION OR DISTRIBUTION OF REFINED PRODUCTS WHICH HAS BEEN
CONDUCTED BY SELLERS PRIOR TO AND AFTER THE CLOSING DATE; PROVIDED,
HOWEVER, THAT SELLERS' INDEMNITY AND LIABILITY FOR ANY LOSSES SHALL BE
LIMITED TO OR BY THE FOLLOWING:
(i) ANY SUCH LOSSES WHICH ARE ASSERTED OR CLAIMED WITHIN
TWENTY-FOUR MONTHS AFTER THE CLOSING DATE (OR, IF LONGER, WITHIN THE
APPLICABLE STATUTE OF LIMITATIONS PERIOD, IF ANY, ON CLAIMS ASSERTED
OR MADE RELATING TO SELLERS' REPRESENTATIONS IN SECTIONS 3.11, 3.17
OR 3.18) BY THE INDEMNIFIED PARTY GIVING NOTICE OF SUCH CLAIM OR
ASSERTION TO SELLERS PURSUANT HERETO;
(ii) SELLERS SHALL NOT BE RESPONSIBLE FOR LOSSES (EXCLUDING
POST-CLOSING OBLIGATIONS SET FORTH HEREIN) UNTIL THE INDIVIDUAL LOSS
CONDITION EXCEEDS SEVEN THOUSAND FIVE HUNDRED DOLLARS ($7,500.00);
(iii) SELLERS SHALL NOT, IN ANY CASE, BE REQUIRED TO MAKE
PAYMENTS HEREUNDER IN EXCESS OF THE PURCHASE PRICE; AND
(iv) SELLERS SHALL NOT, IN ANY CASE, BE REQUIRED TO INDEMNIFY
BUYER FOR LOSSES RESULTING FROM BUYER'S OWNERSHIP OR OPERATION OF
THE ASSETS AFTER CLOSING.
(b) EXCEPT AS PROVIDED IN SECTION 10.1(a) ABOVE, AND SUBJECT TO
SECTION 10.1(c), BUYER SHALL INDEMNIFY, RELEASE, DEFEND AND HOLD HARMLESS
SELLERS, THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES,
SHAREHOLDERS, AFFILIATES, SUBSIDIARIES, SUCCESSORS, AND ASSIGNS
(COLLECTIVELY, THE "SELLERS' INDEMNITEES") FROM AND AGAINST ANY AND ALL
LOSSES REGARDLESS OF (IN EACH CASE) WHETHER KNOWN OR UNKNOWN, ASSERTED
AGAINST, RESULTING FROM, IMPOSED UPON OR INCURRED BY ANY OF SELLERS'
INDEMNITEES AS A RESULT OF, OR ARISING OUT OF (i) THE ASSUMED LIABILITIES
OR (ii) THE OWNERSHIP OR OPERATION OF THE ASSETS BY BUYER, ATTRIBUTABLE
ONLY TO PERIODS OF TIME AFTER THE CLOSING DATE, SO LONG AS SUCH LOSSES ARE
NOT ATTRIBUTABLE TO THE SOLE, JOINT, AND/OR CONCURRENT NEGLIGENCE, STRICT
LIABILITY, OR OTHER FAULT OF ANY SELLERS' INDEMNITEE; PROVIDED, HOWEVER,
THAT BUYER'S INDEMNITY AND LIABILITY FOR ANY LOSSES UNDER SUBSECTION (ii)
ABOVE SHALL BE LIMITED TO OR BY THE FOLLOWING:
(i) ANY SUCH LOSSES WHICH ARE ASSERTED OR CLAIMED WITHIN
TWENTY-FOUR MONTHS AFTER THE CLOSING DATE BY THE INDEMNIFIED PARTY
GIVING NOTICE OF SUCH CLAIM OR ASSERTION TO BUYER PURSUANT HERETO;
AND
(ii) BUYER SHALL NOT BE RESPONSIBLE FOR LOSSES UNTIL THE
INDIVIDUAL LOSS CONDITION EXCEEDS SEVEN THOUSAND FIVE HUNDRED
DOLLARS ($7,500.00).
(c) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN
NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY'S INDEMNITEES FOR
ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE, OR
SPECULATIVE DAMAGES, EVEN IF CAUSED BY THE SOLE, JOINT, AND/OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF SUCH PARTY.
(d) All claims for indemnification under Sections 10.1(a) or
10.1(b) shall be asserted and resolved pursuant to this Section 10.1(d).
Any Person claiming indemnification hereunder is hereinafter referred to
as the "Indemnified Party" and any Person against whom such claims are
asserted hereunder is hereinafter referred to as the "Indemnifying Party."
In the event that any Losses are asserted against or sought to be
collected from an Indemnified Party by a third party, said Indemnified
Party shall with reasonable promptness provide to the Indemnifying Party
a written notice of claim specifying in reasonable detail (to the extent
known at the time) the nature of the Losses and the estimated amount of
such Losses ("Claim Notice"). The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to any such
Losses if the Indemnified Party fails to notify the Indemnifying Party
thereof in accordance with the provisions of this Agreement, but only to
the extent that the Indemnifying Party is prejudiced by such failure to
notify. The Indemnifying Party shall have thirty (30) days from the
personal delivery or receipt of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (i) if the Indemnifying Party disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder
with respect to such Losses and/or (ii) if the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such
Losses; provided, however, that any Indemnified Party is hereby authorized
prior to and during the Notice Period to file any motion, answer or other
pleading that it shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party (and of which it shall have
given reasonable notice to the Indemnifying Party). In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such Losses, the
Indemnifying Party shall have the right to defend all appropriate
proceedings, and with counsel of its own choosing, which proceedings shall
be promptly settled or prosecuted by them to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such
defense or settlement, it may do so at its sole cost and expense, unless
the Indemnified Party shall in good faith determine that there exists
actual or potential conflict(s) of interest which make representation by
the same counsel inappropriate, in which case the Indemnified Party may
hire independent counsel, in consultation with the Indemnifying Party, at
the Indemnifying Party's cost and expense. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that the
Indemnifying Party elects to defend or, if appropriate and related to the
claim in question, in making any counterclaim or reconvention demand
against the Person asserting the third party Losses, or any cross Claim
against any Person. In the event the Indemnifying Party is not disputing
its liability to the Indemnified Party with respect to a claim, no such
claim may be settled or otherwise compromised without the prior written
consent of the Indemnifying Party. Anything in this Article to the
contrary notwithstanding, the Indemnifying Party shall not, without the
Indemnified Party's prior written consent, settle or compromise any
proceeding or consent to the entry of any judgment with respect to any
Suit for anything other than money damages paid by the Indemnifying Party.
The Indemnifying Party may, without the Indemnified Party's prior written
consent, settle or compromise any such Suit or consent to entry of any
judgment with respect to any such Suit that requires solely the payment of
money damages by the Indemnifying Party and that includes as an
unconditional term thereof the release by the claimant or the plaintiff of
the Indemnified Party from all liability in respect of such Suit.
10.2 Release. EXCEPT TO THE EXTENT THAT SELLERS HAVE ASSIGNED
CLAIMS TO BUYER PURSUANT TO SECTIONS 8.5(k), 8.5(l) and 8.5(m), AS OF THE
CLOSING DATE, BUYER (ON BEHALF OF ITSELF AND EACH OF THE OTHER BUYER
INDEMNITEES) RELEASES AND DISCHARGES ANY AND ALL CLAIMS AT LAW OR IN
EQUITY, KNOWN OR UNKNOWN, WHETHER NOT EXISTING OR ARISING IN THE FUTURE,
CONTINGENT OR OTHERWISE, AGAINST SELLERS OR ANY OF SELLERS' INDEMNITEES
WITH RESPECT TO ANY MATTER OR CIRCUMSTANCE RELATING TO THE ASSUMED
LIABILITIES.
ARTICLE 11
TAXES
11.1 Allocation of Taxes.
(a) Buyer shall be liable for documentary, recording, stamp,
transfer or similar taxes, assessments or fees arising from the
transactions contemplated by this Agreement regardless upon whom
such taxes, assessments or fees are levied or imposed by Applicable
Law. Should Applicable Law require such taxes, assessments or fees
to be paid by Sellers, Buyer shall remit the amount of such taxes,
assessments or fees to Sellers at the Closing or thereafter when
required to be paid to a county and/or the State of Texas. Sellers
agree to claim the occasional sale exemption from Texas sales tax
and New Mexico gross receipts tax for the transfer of Assets
hereunder. Notwithstanding anything contained herein to the
contrary, Buyer shall not be responsible for any state or federal
income taxes associated with any gain on the disposition of the
Assets that may be assessed on such Assets sale under this Agreement
and Buyer shall be responsible for sales, use or similar taxes that
may be assessed on such Assets sale under this Agreement.
(b) All ad valorem, property (whether real or personal) and
similar taxes (the "Property Taxes") with respect to the Assets for
any tax period in which the Closing Date occurs, shall be prorated
pursuant to Section 9.3(b)(ii) (with Buyer economically responsible
for the Property Taxes for the portion of the tax period on or after
the Closing Date). Buyer shall file or cause to be filed all
required reports and returns coming due after Closing incident to
the Property Taxes and shall pay or cause to be paid to the taxing
authorities all Property Taxes relating to the tax period in which
the Closing Date occurs. Sellers shall reasonably cooperate with
Buyer in the preparation, filing and payment of the Property Taxes.
In addition to Buyer's right of access pursuant to Section 5.10, and
within 30 days of the Closing Date, Sellers shall provide Buyer with
copies of (i) all of Sellers' filings which relate to Property Taxes
and (ii) all bills or notices received by Sellers which relate to
Property Taxes, since January 1, 1998. Buyer shall furnish Sellers
with a statement setting forth the apportionment of any Property
Taxes paid.
(c) Except as set forth in Sections 11.1(a) and (b), Sellers
shall be liable for, and shall indemnify, defend and hold Buyer
harmless from and against, any and all Taxes imposed on or with
respect to Pride Borger or its respective assets, operations or
activities, or with respect to the Assets, for any Pre-Closing
Period. Except as set forth in Sections 11.1(a) and (b), Buyer
shall be liable for, and shall indemnify, defend and hold Sellers
harmless from and against, any and all Taxes imposed on or with
respect to Pride Borger or its respective assets, operations or
activities, or with respect to the Assets, for any Post-Closing
Period. For purposes of this Article, in the case of any Taxes that
are imposed on a periodic basis and are payable for a taxable period
that includes (but does not end on) the Closing Date, the portion of
such Tax which relates to the portion of such taxable period ending
on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire taxable period multiplied by
a fraction, the numerator of which is the number of days in the
portion of the taxable period ending on the Closing Date, and the
denominator of which is the number of days in the entire taxable
period, and (y) in the case of any Tax based upon or related to
income or receipts, be deemed equal to the amount which would be
payable if the books were closed on the Closing Date. Any credits
relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the books were
closed on the Closing Date.
(d) Sellers shall be responsible for the preparation and
filing of any Tax Returns or reports related to the Assets that are
required to be filed on or before the Closing Date or pertain to
Taxes which are required by Applicable Law to be paid by Sellers.
Buyer, with the cooperation of Sellers, shall be responsible for the
preparation and filing of all other Tax Returns or reports related
to the Assets. Notwithstanding the foregoing, Sellers shall be
responsible for the preparation and Buyer shall have the right to
review and be responsible for filing of, any Tax Returns of Pride
Borger for all period ending on or prior to the Closing Date which
are due after the Closing Date, and Buyer shall be responsible for
the preparation and filing of any Tax Return of Pride Borger for any
Straddle Period. Buyer shall furnish Sellers with a statement
setting forth an allocation of any Taxes due on or after the Closing
Date computed in accordance with Section 11.1(c).
(e) If the sum of Sellers' pro rata portion of the Property
Taxes computed in accordance with Section 11.1(b), plus Sellers'
portion of Taxes on any Tax Returns filed by Buyer computed in
accordance with Section 11.1(c) and (d), reduced by the amount of
any refund attributable to the carryback of any federal income tax
net operating loss of Pride Borger arising from the short taxable
year beginning January 1, 1999, exceeds that amount deducted from
the Purchase Price pursuant to Section 9.3(b)(ii), Sellers shall pay
to Buyer such excess within thirty (30) days of the date of the
statements setting forth the foregoing calculations. If the amount
deducted from the Purchase Price pursuant to Section 9.3(b)(ii)
exceeds the sum of Sellers' pro rata portion of the Property Taxes
computed in accordance with Section 11.1(b) plus Sellers' portion of
the Taxes on any Tax Returns filed by Buyer computed in accordance
with Section 11.1(c) and (d), reduced by the amount of any refund
attributable to the carryback of any federal income tax net
operating loss of Pride Borger arising from the short taxable year
beginning January 1, 1999, Buyer shall pay Sellers such excess
within thirty (30) days of the date of the statements setting forth
the foregoing calculations. If the Parties fail to agree as to the
amount of Taxes and the apportionment thereof between the Parties
within forty-five (45) days of the statement dates, then the dispute
will be resolved in accordance with Section 14.1 hereof.
11.2 Cooperation. Buyer and Sellers will cooperate with each other
and with each other's respective agents, including accounting firms and
legal counsel, in connection with the preparation or audit of any Tax
Return or report and any Tax claim or litigation that include whole or
partial taxable periods, activities, operations or events on or prior to
the Closing Date, which cooperation shall include, but not be limited to,
making available employees, if any, or original documents, or either of
them, for the purpose of providing testimony and advice. In the event of
a contest with a taxing authority regarding Taxes relating to the Assets
for which Sellers are wholly responsible hereunder, Sellers shall have the
right to control the contest, provided, however, that Sellers shall keep
Buyer reasonably informed as to the progress of such contest, give the
Buyer the opportunity to review and comment in advance on all written
submissions and filings relevant to issues raised in such contest, and
consider in good faith any suggestions made by Buyer about the conduct of
such contest and shall not settle any Tax claim against Pride Borger
without the prior written consent of Buyer, which consent shall not be
unreasonably delayed or withheld, if settlement would increase the amount
of Taxes payable by Buyer after the Closing Date. In the event that Buyer
refuses to consent to a settlement acceptable to the applicable taxing
authority and Sellers, Buyer shall be obligated to defend at its expense
any action or proceeding thereafter brought against Sellers by the Tax
authority relating to the Tax subject to the approved settlement and shall
reimburse Sellers for any Taxes, penalties, interests and costs incurred
by Sellers in excess of those that would have been incurred by Sellers if
the matter had been settled as Sellers proposed. In the event of a
contest with a taxing authority regarding Taxes related to the Assets for
which Sellers and Buyer are jointly responsible hereunder, Sellers and
Buyer shall jointly control the contest in good faith with each other.
Reasonable out-of-pocket expense with respect to such contests shall be
borne by the Parties pro rata in accordance with their responsibility for
such Taxes as set forth in this Agreement.
11.3 Certain Tax Sharing Agreements. All Tax sharing agreements or
similar agreements with respect to or involving Pride Borger shall be
terminated as of the Closing Date and, after the Closing Date, Pride
Borger shall not be bound hereby or have any liability thereunder.
11.4 Relationship of Article 11 to Article 10. The indemnities
provided in this Article 11 are in addition to, but not in duplication of,
the indemnities provided in Article 10. To the extent of any
inconsistency between Article 11 and other provisions of this Agreement,
Article 11 shall apply. Article 10 shall apply to Tax claims and
liabilities to which Article 11 does not apply.
ARTICLE 12
TERMINATION
12.1 Termination At or Prior to Closing. This Agreement may be
terminated at any time on or prior to the Closing Date:
(a) by mutual written consent of the Parties;
(b) by Sellers on the Closing Date if the conditions set
forth in Article 7 have not been satisfied in all material respects
by Buyer, other than through failure of Sellers to comply fully with
its obligations hereunder, and shall not have been waived by Sellers
on or before the Closing Date;
(c) by Buyer on the Closing Date if the conditions set forth
in Article 8 have not been satisfied in all material respects by
Sellers, other than through failure of Buyer to comply fully with
its obligations hereunder, and shall not have been waived by Buyer
on or before the Closing Date.
(d) by either Buyer or Sellers if the Closing shall not have
occurred on or before November 30, 1999, due to the failure to
obtain the necessary approval or consent under the HSR Act;
provided, however, that no Party can so terminate this Agreement if
such Party is at such time in material breach of any provision of
this Agreement;
(e) by any Party on the Closing Date if any Governmental
Entity shall have issued an order, judgment or decree restraining,
enjoining, prohibiting or invalidating the consummation of any of
the transactions contemplated herein;
(f) by Buyer or Sellers in accordance with Section 13.1; or
(g) by Buyer if it determines, at its sole discretion, that
Sellers have not materially complied with all Applicable Laws
pertaining to their employees, and such non-compliance will have a
Material Adverse Effect.
12.2 Effect of Termination. In the event that Closing does not
occur as a result of any Party exercising its right to terminate pursuant
to Section 12.1, then this Agreement shall be null and void and no Party
shall have any rights or obligations under this Agreement, except that (a)
nothing herein shall relieve any Party from any liability for any breach
hereof and (b) the waiver under Section 13.9 and the confidentiality
obligations under Sections 5.12 and 6.2 shall survive any such
termination.
ARTICLE 13
OTHER AGREEMENTS OF THE PARTIES
Buyer, Pride, and, to the extent applicable, Pride SGP, hereby agree
that:
13.1 Pre-Closing Adjustments. If the Parties cannot agree on the
amount of any Pre-Closing Adjustments hereunder, the Parties shall submit
such Pre-Closing Adjustments to binding arbitration pursuant to Section
14.1(b). If, after such binding arbitration, the cumulative total of
Pre-Closing Adjustments hereunder, whether agreed upon by the Parties or
determined by binding arbitration hereunder, equal or exceed $1,000,000,
either Party may terminate this Agreement on or prior to the Closing Date.
If either Party terminates this Agreement in accordance with this
Section 13.1, both Parties shall be relieved of all liabilities and
obligations hereunder, except for any indemnity provisions, which shall
survive such termination.
13.2 Risk of Loss. If prior to the Closing either (i) "Material
Damage or Destruction" occurs by fire or other casualty to all or any
portion of the Assets, or (ii) a taking of a "Material Portion" of the
Assets occurs by condemnation or eminent domain or by agreement in lieu
thereof, Sellers shall immediately notify Buyer thereof. Sellers shall
have the right to rebuild, repair or replace such lost, damaged, or
governmentally taken portion of the Assets, by giving Buyer written notice
of such election within thirty (30) days after the damage or destruction
or governmental taking or by giving notice at any time prior to Closing,
if the damage or destruction or governmental taking occurs less than
thirty (30) days prior to Closing. If Sellers elect for any reason not to
cure such loss or damage prior to the Closing, Buyer and Sellers may,
before the Closing, negotiate a Pre-Closing Adjustment to fairly reflect
the value represented by the lost or damaged Assets, or the Assets taken
by condemnation, and in each case the damages from loss of use. If the
Parties cannot agree on such Pre-Closing Adjustment, the issue shall be
resolved pursuant to Section 13.1. For purposes of this paragraph only,
a loss by fire or other casualty shall be deemed "Material Damage or
Destruction" if the cost of repairing the damage done to any individual
component of the Assets, and the damages from loss of use exceeds TEN
THOUSAND DOLLARS ($10,000.00). For purposes of this paragraph only, a
taking by condemnation, or as otherwise provided herein, shall be deemed
a taking of a "Material Portion" if the cost of replacement and the
damages from loss of use exceeds TEN THOUSAND DOLLARS ($10,000.00).
13.3 Records: Access and Retention.
(a) After Closing, Buyer and Sellers shall give the other
Parties and their authorized representatives such access, during
normal business hours, to the employees, books, records and files
being conveyed, assigned and transferred to Buyer, or retained by
Sellers, hereunder, as may be reasonably required, including with
respect to post-closing audits, provided that such access does not
unreasonably interfere with the ongoing operations of the other.
Sellers and Buyer shall be entitled to keep or obtain extracts and
copies of such books, records and files. Any information obtained
pursuant to this Section is subject to Sections 5.12 and 6.2
regarding confidentiality.
(b) Buyer shall preserve and retain all books, records and
files being conveyed, assigned and transferred to Buyer hereunder in
accordance with its current document retention policy; provided,
however, that in the event that Buyer transfers all or a portion of
the Assets to any third party during such period, Buyer may transfer
to such third party all or a portion of the books, records and files
related thereto, provided such third party transferee expressly
agrees in writing to preserve and maintain them for a period of
seven (7) years and Buyer first offers to Sellers the opportunity,
at Sellers' expense, to copy the books, records and files to be
transferred.
(c) Subject to (and in addition to the requirements of) the
provisions of Sections 13.3(a) and (b), the Parties shall maintain
a true and correct set of records pertaining to their performance of
this Agreement and all transactions related thereto and shall retain
all such records for a period of not less than three (3) years after
completion of performance under this Agreement. Any representative
or representatives authorized by either Party may audit any and all
such records of the other Party at any time during performance of
this Agreement and during the three (3) year period after completion
of performance.
13.4 Names. (a) As soon as reasonably possible after Closing, but
in no event later than one hundred eighty (180) days after Closing, Buyer
shall remove the names of Sellers and their Affiliates, and all variations
thereof, from all of the Assets and make the requisite filings with, and
provide the requisite notices to, the appropriate federal, state or local
agencies to place the title or other evidence of ownership, including
operation of the Assets, in a name other than any name of Sellers or any
of their Affiliates, or any variations thereof.
(b) As soon as reasonably possible after Closing, but in no
event later than forty-five (45) days after Closing, Buyer shall
change the corporate name of Pride Borger to a new corporate name
which shall not include the word "Pride."
13.5 Expenses. Each Party shall be solely responsible for all
expenses, including due diligence expenses, incurred by it in connection
with this transaction, and neither Party shall be entitled to any
reimbursement for such expenses from the other Party hereto. Without
limiting the generality of the foregoing, Buyer will be solely responsible
for recording fees and taxes relating to the conveyances to be delivered
pursuant to this Agreement.
13.6 Independent Investigation. BUYER REPRESENTS AND ACKNOWLEDGES
THAT IT IS KNOWLEDGEABLE OF THE CRUDE OIL GATHERING BUSINESS AND THE
BUSINESS OF OPERATING PIPELINES AND STORAGE FACILITIES AND THAT IT HAS HAD
ACCESS TO THE ASSETS, THE OFFICERS, AND EMPLOYEES OF SELLERS, AND THE
BOOKS, RECORDS AND FILES OF SELLERS RELATING TO THE ASSETS AND IN MAKING
THE DECISION TO ENTER INTO THIS AGREEMENT AND CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY. BUYER HAS RELIED ON THE BASIS OF ITS OWN INDEPENDENT
DUE DILIGENCE INVESTIGATION OF THE ASSETS AND UPON THE REPRESENTATIONS AND
WARRANTIES MADE IN ARTICLE 3. ACCORDINGLY, BUYER ACKNOWLEDGES THAT SELLERS
HAVE NOT MADE, AND SELLERS HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY (OTHER THAN THOSE EXPRESS REPRESENTATIONS AND
WARRANTIES MADE IN ARTICLE 3), EXPRESS, IMPLIED, BY LAW, BY STATUTE OR
OTHERWISE, RELATING TO THE ASSETS.
13.7 Disclaimer Regarding Assets. Except as otherwise expressly
provided in Article 3, BUYER ACKNOWLEDGES THAT SELLERS HAVE NOT MADE, AND
SELLERS HEREBY EXPRESSLY DISCLAIM AND NEGATE, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CONDITION OF THE ASSETS
INCLUDING, WITHOUT LIMITATION, ANY FACILITY, IMMOVABLE PROPERTY, MOVABLE
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY, FIXTURES AND PERSONAL PROPERTY
CONSTITUTING PART OF THE ASSETS, INCLUDING, WITHOUT LIMITATION, (a) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (c) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (d) ANY RIGHTS
OF BUYER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION
OR RETURN OF THE PURCHASE PRICE, (e) ANY IMPLIED OR EXPRESS WARRANTY OF
FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, (f) ANY AND ALL IMPLIED
WARRANTIES EXISTING UNDER APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, (g)
ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE
OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE ENVIRONMENT OR
HEALTH, AND (h) THE VOLUME OF INVENTORY OF CRUDE OIL LOCATED IN THE
ASSETS, IT BEING THE EXPRESS INTENTION OF BUYER AND SELLERS THAT (EXCEPT
TO THE EXTENT EXPRESSLY PROVIDED IN ARTICLES 3 AND 11), THE ASSETS SHALL
BE CONVEYED TO BUYER AS IS AND IN THEIR PRESENT CONDITION AND STATE OF
REPAIR AND BUYER REPRESENTS TO SELLERS THAT BUYER HAS MADE OR CAUSED TO BE
MADE SUCH INSPECTIONS WITH RESPECT TO THE ASSETS AS BUYER DEEMS
APPROPRIATE AND BUYER WILL ACCEPT THE ASSETS AS IS, IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.
13.8 Disclaimer Regarding Information. Except as set forth in
Article 3 hereof and in the Schedules referred to therein, Sellers hereby
expressly negates and disclaims, and Buyer hereby waives and acknowledges
that Sellers have not made, any representation or warranty, express or
implied, relating to the accuracy, completeness or materiality of any
information, data or other materials (written or oral) now, heretofore, or
hereafter furnished to Buyer by or on behalf of Seller; provided, however,
nothing in this Section 13.8 will limit, reduce, diminish or impair (i)
any of Sellers' representations and warranties in Article 3 hereof or (ii)
the provisions of Article 11.
13.9 Waiver of Deceptive Trade Practices Acts. BUYER WAIVES ITS
RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES ACT SECTION 17.41 et seq. TEXAS
BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS, AND
UNDER SIMILAR STATUTES ADOPTED IN OTHER STATES. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS SELECTION, BUYER CONSENTS TO THIS WAIVER.
13.10 Transition Services. Sellers shall use their best efforts to
provide Buyer, at Buyer's option, the manpower to operate the SCADA System
through December 31, 1999 or earlier. Buyer shall pay Sellers their
direct costs for these services. Sellers will be under no obligation to
replace employees who are terminated or resign.
ARTICLE 14
OTHER PROVISIONS
14.1 Applicable Law; Alternative Dispute Resolution.
(a) This Agreement shall be governed by and construed in
accordance with the Applicable Laws of the State of Texas, excluding
its principles of conflicts of laws that might refer the matter to
the Applicable Laws of another jurisdiction. All assignments and
instruments of conveyance to be executed in accordance with this
Agreement shall be governed by and construed in accordance with the
Applicable Laws of the State of Texas.
(b) Any dispute arising under this Agreement shall be
resolved pursuant to this Section 14.1(b):
(i) Any Party has the right to request the other to
meet to discuss a dispute. The Party requesting the meeting
will give at least ten (10) business days notice in writing of
the subject it wishes to discuss, provide a written statement
of the dispute, and designate an officer of the company with
complete power to resolve the dispute to attend the meeting.
Within three (3) business days after receipt of such request,
the Party receiving the request will provide a responsive
written statement and will designate an officer of the company
who will attend the meeting with complete power to resolve the
dispute.
(ii) If the meeting fails to resolve the dispute by a
signed agreement among the officers, the dispute shall be
submitted for nonappealable, binding determination through
arbitration by either Sellers or Buyer by written notice of
submission to the other Party, which notice also shall name
one (1) arbitrator. The Party receiving such notice, shall, by
written notice to the other Party within ten (10) days
thereafter, name the second arbitrator, or failing to do so,
the Party giving notice of submission shall name the second
arbitrators. The two (2) arbitrators so appointed shall name
a third arbitrator, or, failing to do so within ten (10) days,
the third arbitrator shall be appointed by the Judicial
Arbitration and Mediation Services, Houston, Texas. If such
person fails to make such an appointment within ten (10) days
after being requested to do so by Sellers or Buyer, either
such Party may request that such appointment be made by the
Judicial Arbitration and Mediation Services, Houston, Texas;
the first such appointment to be communicated to Sellers and
Buyer shall be effective hereunder. The Parties agree that an
officer with complete authority to resolve the dispute for
each entity shall attend the arbitration. Unless otherwise
agreed by the Parties, the arbitrators shall be persons with
at least eight years of professional experience in the crude
oil purchasing, gathering, transportation and marketing
industry and who are not, and have not previously been,
employed by either Party (or an Affiliate thereof), and do not
have a direct or indirect interest in either Party (or an
Affiliate thereof) or the subject matter of the arbitration.
(iii) The arbitrators so appointed, after giving the
Parties due notice of the date of a hearing and reasonable
opportunity to be heard, shall promptly hear the controversy
in Houston, Texas and shall thereafter render their decision
determining the controversy no later than ninety (90) days
after such board has been appointed. Any decision requires the
support of a majority of the arbitrators. If the board of
arbitration is unable to reach such decision, new arbitrators
will be named and shall act hereunder, at the request of
either Party, in a like manner as if none had been previously
named.
(iv) The decision of the arbitrators shall be rendered
in writing and supported by written reasons. The decision of
the arbitrators shall be final and binding upon the Parties
and will be complied with by Sellers and Buyer. Each Party
shall bear the expenses of its chosen arbitrator, and the
expenses of the third arbitrator shall be borne equally by
Sellers and Buyer. Each Party shall bear the compensation and
expenses of its legal counsel, witnesses, and employees.
(v) The arbitrators can award only the amounts
proposed by Buyer or the amounts proposed by Sellers.
14.2 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent
of the Parties that this Agreement shall not be construed as a third party
beneficiary contract; provided, however, that the indemnification
provisions in this Agreement shall inure to the benefit of Buyer
Indemnitees and Sellers' Indemnitees as provided herein.
14.3 Waiver. Except as expressly provided in this Agreement,
neither the failure nor any delay on the part of any Party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, or of any other right, power or remedy; nor shall any single or
partial exercise of any right, power or remedy preclude any further or
other exercise thereof, or the exercise of any other right, power or
remedy. Except as expressly provided herein, no waiver of any of the
provisions of this Agreement shall be valid unless it is in writing and
signed by the Party against whom it is sought to be enforced.
14.4 Entire Agreement; Amendment. This Agreement, the Schedules
and Exhibits hereto, and any agreements, instruments or documents executed
and delivered by the Parties pursuant to this Agreement, constitute the
entire agreement and understanding between the Parties, and it is
understood and agreed that all previous undertakings, negotiations and
agreements between the Parties regarding the subject matter hereof are
merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by Buyer and Sellers.
14.5 Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered
in person or sent by United States certified or registered mail, postage
prepaid, return receipt requested, or by overnight express mail, or by
telex, facsimile or telecopy to the address of such Party set forth below.
Any such notice shall be effective upon receipt or three days after placed
in the mail, whichever is earlier.
If to Buyer: Sun Pipe Line Services Co.
1801 Market Street
Philadelphia, Pennsylvania 19103
Attn: Richard G. Taylor, Vice-President
Fax No.: 215-977-3637
Jeffrey W. Wagner, Chief Counsel
Fax No.: 215-977-6878
If to Pride: Pride Companies, L.P.
1209 North 4th Street
Abilene, Texas 79601
Attn: Brad Stephens, Chief Executive Officer
Dave Caddell, General Counsel
Fax No.: 915-676-8792
If to Pride SGP: Pride SGP, Inc.
1209 North 4th Street
Abilene, Texas 79601
Attn: Brad Stephens, Chief Executive Officer
Dave Caddell, General Counsel
Fax No.: 915-676-8792
Any Party may, by notice so delivered, change its address for notice
purposes hereunder.
14.6 No Assignment. Neither this Agreement nor any rights or
obligations hereunder shall be assigned or transferred in any way
whatsoever by either Party hereto except (i) to Affiliates of such Party,
or (ii) to other Persons with prior written consent of the other Party
hereto, which consent such Party shall not unreasonably withhold, and any
assignment or attempted assignment without such consent shall have no
force or effect with respect to the non-assigning Party. In the event of
an assignment to an Affiliate, Buyer and/or Sellers, as the case may be,
shall retain the obligations set forth in this Agreement. Subject to the
preceding sentence, this Agreement shall be binding on and inure to the
benefit of the Parties hereto and their permitted successors and assigns.
14.7 Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in
full force and effect and this Agreement shall be construed in all
respects as if such invalid, illegal or unenforceable provision were
omitted. If any provision is inapplicable to any Person or circumstance,
it shall, nevertheless, remain applicable to all other Persons and
circumstances.
14.8 Construction. Any section headings in this Agreement are for
convenience of reference only, and shall be given no effect in the
construction or interpretation of this Agreement or any provisions
thereof. No provision of this Agreement will be interpreted in favor of,
or against, any Party by reason of the extent to which any such Party or
its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
14.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and which
together shall constitute but one and the same instrument.
14.10 Third-Party Consents to Assignment. Buyer acknowledges that
certain of the Contracts, Surface Contracts and Permits included in the
Assets may not be readily assignable to Buyer. If a consent by a third
party is required to the assignment of any Contract, Surface Contract or
Permit contemplated to be assigned under the terms of this Agreement, at
Buyer's direction Sellers will initiate prior to Closing the notices
and/or requests for consents in a form approved by Buyer and will
cooperate with Buyer to obtain such consents. If any required consent is
not obtained following Sellers' bona fide efforts to obtain the same,
Sellers will continue to make efforts to obtain the consent(s), and, if
the consent(s) is/are not obtained, will retain and administer the
specific Contract, Surface Contract and Permit, provided Buyer does not
assume any additional risk (economic or otherwise) or expense, and Seller
will perform and carry out the obligations pursuant to the terms of such
Contract, Surface Contract and Permit until such Contract, Surface
Contract and Permit expires in accordance with its terms, with all
economic benefits and burdens being with Buyer, except Sellers will not be
entitled to any overhead, profit or fee for its retention and
administration of the Contract, Surface Contract and Permit but will be
entitled to charge Buyer for any reasonable and prudently incurred direct
out-of-pocket expenses. In the event that Sellers' proposed retention and
administration of the Contracts, Surface Contracts or Permits result in
additional risk or expense to Buyer, the consents shall be addressed in
accordance with the provisions of Section 5.15.
14.11 Further Assurances. After the Closing Date, each Party at the
reasonable request of the other and without additional consideration,
shall execute and deliver, or shall cause to be executed and delivered,
from time to time, such further certificates, agreements or instruments of
conveyance and transfer, assumption, release and acquittance and shall
take such other action as the other Party hereto may reasonably request,
to convey and deliver the Assets to Buyer, to assure to Sellers the
assumption of the liabilities and obligations intended to be assumed by
Buyer hereunder, and to otherwise consummate or implement the transactions
contemplated by this Agreement.
14.12 Telecopy Execution and Delivery. A facsimile, telecopy or
other reproduction of this Agreement, or any other documents required for
Closing, may be executed by one or more Parties hereto, and an executed
copy of this Agreement, or such other documents, may be delivered by one
or more Parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of
such Party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the request
of any Party hereto, all Parties hereto agree to execute an original of
this Agreement, or such other documents, as well as any facsimile,
telecopy or other reproduction hereof.
IN WITNESS WHEREOF, the Parties have duly executed and delivered
this Agreement on the date first written above.
SELLERS:
PRIDE COMPANIES, L.P.
By:______________________________
PRIDE SGP, INC.
By:______________________________
BUYER:
SUN PIPE LINE SERVICES CO.
By:______________________________
<PAGE>
LIST OF SCHEDULES
Schedule 1 Definitions
Schedule 1.2(a) Comyn Pipeline System
Schedule 1.2(a)(i) Texas Plains System
Schedule 1.2(a)(ii) Gathering Lines and Systems
Schedule 1.2(a)(iii) Map
Schedule 1.2(b) Equipment
Schedule 1.2(c) Surface Contracts
Schedule 1.2(d) Real Property
Schedule 1.2(e) Contracts
Schedule 1.2(g) Permits
Schedule 1.2(j) Crude Inventories
Schedule 1.3(f) Excluded Records
Schedule 2.3 Allocated Values
Schedule 3.3 Employee Inquiries
Schedule 3.7 Suits
Schedule 3.9(a) Environmental Matters
Schedule 3.9(b) Hazardous Substances
Schedule 3.9(c) Environmental Claims
Schedule 3.9(d) Compliance with Environmental Laws
Schedule 3.9(e) Environmental Permits
Schedule 3.9(f) ACMs, Underground Storage Tanks
Schedule 3.9(g) Liens
Schedule 3.10 Government Notices
Schedule 3.13 Adverse Title Claims
Schedule 3.17 Employee Agreements
Schedule 3.19(a) Ownership of Pride Borger's Capital Stock
Schedule 3.20 Year 2000 Compliance
Schedule 5.3(i) Storage Tanks
Schedule 5.14 Pride Administrative Information Needed
Schedule 5.16 Environmental Work Plan
Schedule 9.6(b) Shippers
<PAGE>
EXHIBITS
Exhibit A Assumption Agreement
Exhibit B Forms of Assignments (leases, easements, rights-of-way,
contracts, permits and licenses)
Exhibit C Forms of Assignments (deeds for fee tracts)
Exhibit D Forms of Assignment and Bill of Sale (personal property)
Exhibit E Form of Opinion of Pride's Counsel
<PAGE>
SCHEDULE 1
DEFINITIONS
"ACM" means asbestos or any material containing more than one
percent (1%) asbestos (as determined under Environmental Laws) that is
friable or which bears a risk of becoming friable if not abated.
"Affiliate" means with respect to any Person, any other Person that
directly, or indirectly through one or-more intermediaries, controls or is
controlled by or is under common control with, such Person; as used in
this definition, "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract, or otherwise.
"Agreement" is defined in the introduction on page 1.
"Applicable Laws" means enforceable federal, state or local laws,
statutes, ordinances, permits, licenses, orders, approvals, variances,
rules or regulations or judicial or administrative decisions.
"Assets" is defined in Section 1.2.
"Assignment and Bill of Sale" means that certain Assignment and Bill
of Sale, in the form as set forth in Exhibit D attached hereto, for
certain of the Assets, including corporeal movable property not conveyed
pursuant to the assignment, conveyances, and deeds in the forms set forth
in Exhibit C attached hereto;
"Assumed Liabilities" means:
(a) all obligations, duties and liabilities relating to or
arising out of the Contracts which arise on or following the Closing
Date and are related to Buyer's ownership or operation of the
Business and/or the Assets on or following the Closing Date;
(b) liability for payment of trade payables, royalty
payables, exchange imbalances, operating expenses, rentals, lease
payments, utility charges and all accounts payable incident to the
Buyer's ownership or operation of the Business and/or the Assets
which arise on or following the Closing Date;
(c) liability for claims arising from the Buyer's conduct of
the Business or the Buyer's occupancy, condition, management or use
of the Assets on or after the Closing Date, other than claims which
are retained by Sellers under Retained Liabilities;
(d) all obligations, duties, losses, liabilities, claims,
expenses or damages, costs (including attorney's fees and expenses)
created by, related to, or arising out of any release, leak or
discharge of crude oil, from, on, or under the Assets (but not
Sellers' refinery location, even if a portion of the Assets may be
located therein), whether accruing prior to or after the Closing
Date, other than governmental required remediation ongoing as of the
Closing Date which shall be retained by Sellers under Retained
Liabilities; and
(e) to the extent arising on or after the Closing Date and
related to the ownership or operation of the Business and/or the
Assets on or after the Closing Date, liability for all Taxes,
assessments and other governmental charges imposed upon the Buyer or
the Assets or upon the income or profits therefrom.
"Assumption Agreement" is defined in Section 2.4.
"Balance Sheet Dates" is defined in Section 3.18.
"Business" is defined in the Recitals on page 1.
"Buyer" is defined in the introduction on page 1.
"Buyer Indemnitees" is defined in Section 10.1(a).
"Claim Notice" is defined in Section 10.1(d).
"Closing" is defined in Section 9.1.
"Closing Date" is defined in Section 1.1.
"Code" is defined in Section 2.3.
"Confidentiality Agreement" means that certain agreement regarding
confidentiality dated January 22, 1999, between Sellers and Buyer, as may
be amended from time to time.
"Contracts" is defined in Section 1.2(e).
"Crude Oil" is defined in Section 9.6(a).
"Current Ratio" is defined in Section 9.2(b).
"D-S Pipeline" is defined in Section 3.23.
"Diamond Shamrock" is defined in Section 3.23.
"Diamond Shamrock Promissory Note" means that certain promissory
note dated November 30, 1994, made by Pride Refining payable to Diamond
Shamrock in the original principal amount of $6,000,000.
"Environmental Laws" means, as to any given Asset, all laws,
statutes, ordinances, rules, and regulations of any Governmental
Authority pertaining to protection of the environment or health or the
release of materials into the environment in effect as of the date hereof
and as interpreted by applicable court decisions or administrative orders
as of the date hereof.
"Equipment" is defined in Section 1.2(b).
"Excluded Assets" is defined in Section 1.3.
"Excluded Employees" is defined in Section 2.5(a).
"Exhibits" is defined in the introduction on page 1.
"Final Settlement Date" is defined in Section 9.5(a).
"Final Statement" is defined in Section 9.5(a).
"Financial Statements" is defined in Section 3.18.
"FTC" means the Federal Trade Commission.
"GAAP" is defined in Section 3.18.
"Gary-Williams" is defined in Section 1.2(e).
"Gathering Operations" is defined in Section 1.2(b).
"Governmental Authority" means, as to any given Asset, the
governments of the United States and the State of Texas and New Mexico and
the county, city, and political subdivisions in which such Asset is
located and that exercises jurisdiction over such Asset, and any agency,
department, board, or other instrumentality thereof that properly
exercises jurisdiction over such Asset.
"Governmental Entity" means any domestic or foreign court,
government, governmental agency, authority, entity or instrumentality.
"Hazardous Substances" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated under any Environmental Laws, including
without limitation, any petroleum or petroleum derived substances, or
wastes, toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous material, hazardous waste, hazardous constituents,
solid waste, special waste, industrial substance, radon, radioactive
material, asbestos, or asbestos containing material, urea formaldehyde,
foam insulation, mercury, lead, or polychlorinated biphenyls. Hazardous
Substance includes any substance to which exposure is presently regulated
by any Governmental Authority or any Environmental Laws.
"Hired Employees" is defined in Section 2.5(a).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indemnified Party" is defined in Section 10.1(d).
"Indemnifying Party" is defined in Section 10.1(d).
"Indemnitee" is defined in Section 5.16(c).
"Intended Hired Employee" is defined in Section 2.5(a).
"Justice Department" means the United States Department of Justice.
"Knowledge" and "known" are defined in Section 3.3.
"Losses" is defined in Section 10.1(a).
"Material Adverse Effect" means an occurrence or condition that
could result, either individually or in the aggregate, in any material
adverse change in Sellers' Business or operations or materially and
adversely impair any of their Assets or their right or ability to carry on
their Business as conducted by them immediately prior to the date hereof
or materially hinders or impedes the consummation of the transactions
contemplated by this Agreement.
"Material Consent" is defined in Section 5.15.
"Material Damage or Destruction" is defined in Section 13.2.
"Material Environmental Condition" is defined in Section 5.16(b).
"Material Physical Defect" is defined in Section 5.16(b).
"Material Portion" is defined in Section 13.2.
"Material Title Defect" is defined in Section 5.15.
"Non-Retained Employees" is defined in Section 2.5(a).
"Notice of Disagreement" is defined in Section 9.5(a).
"Notice Period" is defined in Section 10.1(d).
"Party" is defined in the introduction on page 1.
"Parties" is defined in the introduction on page 1.
"Permits" is defined in Section 1.2(g).
"Permitted Liens" means (i) zoning, building and all other similar
laws applicable to the ownership, use or development of the Assets, (ii)
liens for unpaid taxes, assessments and any other governmental charges,
which are not yet delinquent, (iii) such other matters as do not interfere
in any material respect with the ownership, use, occupancy or operations
of the Business as used in the normal course on the Closing Date, and (iv)
such other matters with respect to which Buyer has agreed to take pursuant
to the terms of this Agreement.
"Person" means any natural person, corporation, joint venture,
partnership, limited partnership, trust, estate, business trust,
association, Governmental Entity, or any other juristic entity.
"Physical Inventory" is defined in Schedule 9.7.
"Pipeline Properties" is defined in Section 1.2(a).
"Post-Closing Period" shall means any tax period commencing after
the Closing Date and the portion of any Straddle Period commencing after
the Closing Date.
"Pre-Closing Adjustment" is defined in Section 3.15.
"Pre-Closing Period" shall mean any tax period ending on or before
the Closing Date and the portion of any Straddle Period ending on the
Closing Date.
"Pride" is defined in the introduction on page 1.
"Pride Borger" is defined in the Recitals on page 1.
"Pride Refining" is defined in Section 3.23.
"Pride SGP" is defined in the introduction on page 1.
"Property Taxes" is defined in Section 11.1 (b).
"Publicly Filed Financial Statements" is defined in Section 3.18.
"Purchase Price" is defined in Section 2.1.
"Purchase Price Adjustments" is defined in Section 9.3(c).
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq.
"Real Property" is defined in Section 1.2(d).
"Retained Employees" is defined in Section 2.5(a).
"Retained Liabilities" means:
(a) All obligations, duties and liabilities relating to or
arising out of the Contracts which arise prior to the Closing Date
and are related to Sellers' ownership or operation of the Business
and/or the Assets prior to the Closing Date;
(b) Liability for payment of trade payables, royalty
payables, exchange imbalances, operating expenses, rentals, lease
payables, utility charges and all accounts payable incident to the
Sellers' ownership or operation of the Business and/or the Assets
which arise prior to the Closing Date;
(c) Liability for any claims including, without limitation,
all third party claims (e.g., claims by governmental agencies,
individuals, partnerships, corporations, etc.) to the extent
relating to the products refining, transportation or distribution
business conducted by Sellers whether prior to or after the Closing
Date;
(d) Liability for claims and litigation arising from the
conduct of the Sellers' Business or the Sellers' occupancy,
condition, management, ownership, operation, maintenance or use of
the Assets prior to the Closing Date, other than claims which are
assumed under Assumed Liabilities;
(e) Liability for fines and penalties attributable to
Sellers' failure to comply with Applicable Laws prior to Closing
Date;
(f) To the extent arising prior to the Closing Date,
liability for all Taxes, assessments and other governmental charges
imposed upon Sellers or the Assets or upon the income or profits
therefrom;
(g) Any materialmen's, mechanic's, repairmen's, employees',
contractors', operators' and other similar liens or charges arising
in the ordinary course of business incidental to construction,
maintenance or operation of any of the Assets or conduct of the
Business prior to the Closing Date;
(h) Any and all Taxes, assessments and other governmental
charges imposed on or with respect to Pride Borger or its respective
assets, operations or activities, or with respect to the Assets, for
any Pre-Closing Period; and
(i) Liability for any governmental required environmental
remediation ongoing as of the Closing Date.
"Sellers" is defined in the introduction on page 1.
"Sellers' Indemnitees" is defined in Section 10.1(b).
"SGP Assets" is defined in Section 1.2(a).
"Statement" is defined in Section 9.4.
"Straddle Period" shall mean any Tax period that begins before and
ends after the Closing Date.
"Surface Contracts" is defined in Section 1.2(c).
"Suits" means any pending or threatened legal, administrative,
judicial or arbitration proceedings, suits, actions, litigation, claims,
or investigations, at law or in equity, before any federal, state or local
court, regulatory agency or other Governmental Authority.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental taxes, customs
duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Territory" is defined in Section 5.5(a).
"TRC" is defined in Section 9.6(b).
"Transition Period" is defined in Section 2.5(c).
"UDS" is defined in Section 1.2(e).
"Underground Storage Tank" shall have the meaning ascribed to it in
the RCRA.
"Violation of Environmental Laws" shall mean, as to any given Asset,
(i) the violation of or failure to meet requirements or standards that are
applicable to such Asset under applicable Environmental Laws where such
requirements or standards are in effect as of the date hereof, and the
term does not include good or desirable operating practices or standards
that may be recommended by a Governmental Authority, or (ii) acts which
could create criminal or civil penalties under Environmental Laws.
"Year 2000 Compliant" is defined in Section 3.20.
