1
EXHBIT 10.2
PINEY POINT PIPELINE ASSET PURCHASE AGREEMENT
BY AND AMONG PINEY POINT INDUSTRIES, INC,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
AUGUST 27, 1995
2
TABLE OF CONTENTS
Page No.
--------
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.2 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Allocation of Purchase Price Amongst Pipeline Assets . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.6 Payment of Taxes and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 MATTERS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.1 Examination of Records and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.2 Environmental Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.2.1 Audits and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work . . . . . . . . . . . . . . . . . . . . 17
3.1.2.3 Purchase Price Adjustment for Other Remedial Work . . . . . . . . . . . . . . . . . . . . . 18
3.1.2.4 Other Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.2 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.4 Xxxx-Xxxxx-Xxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.5 Purchaser's Licenses, Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4 OPERATION OF THE BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.2 Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.2 Certificate Regarding Environmental Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i)
3
Section 5.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.4 Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.9 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.10 Satisfaction of Conditions to Closing Under
The Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.2 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.3 Sale Permitted by Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.6 Satisfaction of Conditions to Closing Under
The Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.2 Corporate Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.3 Governmental Authorization: Third Party Consents . . . . . . . . . . . . . . . . . . . . . 29
Section 7.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.8 Condition of and Title to Tangible Personal Property . . . . . . . . . . . . . . . . . . . 30
Section 7.9 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.10 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.11 No Material Adverse Change: Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.12 Broker's Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.13 Patents, Trademarks. Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.17 Tax Returns and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.18 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.19 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.20 List of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.21 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.22 All Assets Included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.23 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(ii)
4
Section 7.24 Right-of-Way Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 8 REPRESENTATIONS AND WARRANTITHEOPURCHASER AND THE GUARANTOR . . . . . . . . . . . . . . . . . . . . 39
Section 8.1 Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.3 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.4 Governmental Authorization; Third Party Consent . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters . . . . . . . . . . . . . . . . . . . . . 40
Section 8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.1.A Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.1.B Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.2 Documents and Instruments to be Delivered by PPI . . . . . . . . . . . . . . . . . . . . . 42
Section 9.3.A Documents and Instruments to be Delivered by Purchaser. . . . . . . . . . . . . . . . . . . 43
Section 9.3.B Documents and Instruments to be Delivered by Guarantor. . . . . . . . . . . . . . . . . . . 43
Section 9.4 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4.1 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4.2. Wastes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.1 Grounds for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.2 Termination of the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.1 Indemnification by PPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.4 Indemnification Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.5 Limits on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.6 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.7 Special Environmental Indemnification and Post-Closing
Covenants by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.8 Notification; Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.9 Net Worth Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.5 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(iii)
5
Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.11.A Post-Closing Access to Books and Records by Purchaser . . . . . . . . . . . . . . . . . . . 61
Section 12.11.B Post-Closing Access to Books and Records by PPI . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.12 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.13 Capitalized Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.14 Accounts Receivable Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.16 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(iv)
6
PINEY POINT PIPELINE ASSET PURCHASE AGREEMENT
BY AND AMONG PINEY POINT INDUSTRIES, INC,
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
This Piney Point Pipeline Asset Purchase Agreement is made this 27th
day of August, 1995, by and among Piney Point Industries, Inc., a Maryland
corporation and a wholly-owned subsidiary of SIC with its principal place of
business at 0000 Xxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx X.X. 00000 ("PPI" or the
"Company"), Support Terminals Operating Partnership, L.P., a Delaware limited
partnership with its principal place of business at 00000 Xxxxxxx Xxxx, Xxxxx
0000, Xxxxxx, Xxxxx 00000-0000 ("Purchaser") and Kaneb Pipe Line Operating
Partnership, L.P., a Delaware limited partnership with its principal place of
business at 0000 X. Xxxxxxx Xxxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxx 00000
("Guarantor").
RECITALS
A. PPI owns and operates the Pipeline.
B. SPC and Purchaser have entered into the Asset Purchase
Agreement, pursuant to which, SPC has agreed to sell to Purchaser and Purchaser
has agreed to buy from Seller those SPC assets more particularly described in
the Asset Purchase Agreement.
C. As part of the transactions contemplated by the Asset Purchase
Agreement, PPI has agreed to sell to Purchaser and Purchaser has agreed to buy
the Pipeline Assets and the Business, on the terms and subject to the
conditions set forth in this Agreement.
Now, therefore, the parties agree as follows:
7
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Adjusted Purchase Price" means the Purchase Price less any reductions
thereto made in accordance with this Agreement.
"Affiliate" means as to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person.
"Agreement" means this Agreement and the Schedules and Exhibits
attached hereto, as amended, supplemented or modified.
"Xxxxxxx AFB" means Xxxxxxx Air Force Base in Prince George's County,
Maryland.
"Applicable Law" means as to any Person, any Federal, state,
municipal, foreign or other law, treaty, order, ordinance, code, rule,
regulation, right, privilege, qualification, license or franchise or
determination of or promulgated by a Governmental Authority, applicable or
binding on such Person or any of its property or to which such Person or any of
its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
By and Among Xxxxxxx Petroleum Company, SPC Terminals, Incorporated, Support
Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating
Partnership, L.P., of even date with this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
2
8
"Audit(s)" means such environmental due diligence as Purchaser chooses
to conduct, including, without limitation, a Phase I and/or Phase II
environmental audit.
"Average Monthly Revenue" shall be calculated by dividing the total
revenues generated from the Business for the twelve calendar months immediately
preceding the date of this Agreement by twelve.
"Business" means PPI's Pipeline operations.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas, the City of New York or
Washington, D.C. are authorized or required by Applicable Law or executive
order to close.
"Closing" has the meaning set forth in Section 9.1.A.
"Closing Date" means the date specified in Section 9.1.A.
"Cockpit Agreement" means that certain Purchase Agreement By and Among
Xxxxxxx Investment Company, Support Terminals Operating Partnership, L.P. and
Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point, of even date
with this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Consulting Agreement" means that certain Consulting Agreement by and
between Xxxxxxx Petroleum Company and Piney Point Industries, Inc., dated June
30, 1991, pursuant to which SPC provides management services to PPI on the
operation of the Pipeline.
"Contracts" means all contracts and agreements between PPI and third
parties relating to the Pipeline Assets or the Business, including without
limitation Material Contracts, but not
3
9
including the Consulting Agreement, the Xxxxxxx Services Agreement, the Tariff,
the Right-of-way Agreements, or the Emergency Spill Response Agreement.
"Xxxxxxx Services Agreement" means that certain Agreement by and
between Xxxxxxx Petroleum Company and Piney Point Industries, Inc., dated June
30, 1991, pursuant to which SPC provides xxxxxxx services to assist in the
unloading of river barges.
"DOD" means the Department of Defense.
"Due Diligence Period" means the 60-day period commencing with the
date of this Agreement.
"Emergency Spill Response Agreement" means that certain agreement by
and between SPC and PPI, dated August 13, 1992, pursuant to which SPC provides
PPI with certain spill response personnel, equipment and materials.
"Environmental Adjustment Request" means a request for a reduction in
the Purchase Price submitted by Purchaser pursuant to Section 3.1.2.2.
"Environmental Law" means any Federal, state or local law, statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions concerning the Pipeline Assets or any portion thereof,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C.
Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401 et
seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA")
and similar laws of any Governmental Authority having jurisdiction over any
portion of the Pipeline Assets as such laws may be amended or supplemented from
time to time, and all regulations promulgated or orders issued pursuant to
4
10
such laws, but not including the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq. ("OSHA") or other laws relating primarily to the
protection of workers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that is treated as a single
employer with the Company or any of its Subsidiaries under Section 414(b), (c),
(m) or (o) of the Code.
"Excluded Assets" has the meaning set forth in Section 2.1.
"GAAP" means generally accepted United States accounting principles in
effect from time to time.
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision of any thereof, any federal,
state, local or other court or arbitral tribunal, and any entity (corporate or
otherwise) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" includes without limitation:
(i) any substance included within the definition of
"hazardous waste" pursuant to Section 1004 of the RCRA and implementing
regulations;
(ii) any substance included within the definition of
"hazardous substance" pursuant to Section 101 of CERCLA and implementing
regulations;
(iii) any pollutant listed under the CAA, the CWA or
implementing regulations pursuant to the CAA or the CWA; and
(iv) petroleum and petroleum products.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
5
11
"Indemnified Party" means each PPI Indemnified Party or each Purchaser
Indemnified Party as determined by the context of the reference to "Indemnified
Party" herein.
"Knowledge" when used with respect to the Company, means the actual
knowledge of the officers of the Company, and when used with respect to the
Purchaser, means the actual knowledge of the officers of the general partner of
the Purchaser, and the officers of ST Services, Inc.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences)
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease obligation, or any financing lease having
substantially the same economic effect as any of the foregoing, except that
"Lien" shall not include liens for taxes that PPI is obligated to pay under any
Right-of-way Agreement not due and payable at Closing.
"Major Loss" means any loss, damage, breakdown, or casualty to the
Pipeline Assets whether from fire, flood, hurricane, or any other cause, in an
amount reasonably estimated to exceed five hundred thousand dollars ($500,000),
whether or not covered by insurance.
"Material Contracts" means Contracts that either (i) require an annual
payment by any party thereto in excess of $50,000, (ii) are not cancelable by
PPI (at no penalty to PPI) within twelve months, or (iii) have a material
effect on the operation or conduct of the Business.
6
12
"Net Remedial Cost" means the cost, estimated if necessary, to perform
any Remedial Work net of estimated insurance coverage and reimbursements from
trust funds maintained by any Governmental Authority.
"Notice" has the meaning set forth in Section 3.1.2.4.
"Ordinary Course of Business" means a course of business consistent
with the Company's past customs and practices with respect to the Business.
"Permitted Encumbrances" shall mean (i) those matters described on
Schedules 2.1(a), 2.1(b) or 2.1(c) under the heading of "Permitted
Encumbrances", (ii) Liens for taxes that PPI is obligated to pay under any
Right-of-Way Agreement not due and payable at Closing, (iii) Liens on the ROW
Real Estate arising due to the acts or omissions of the owner or lessor of the
ROW Real Estate, (iv) any Lien on the ROW Real Estate that is not attributable
to an act or omission of PPI or its Affiliates, and (v) any Liens or other
restrictions or title defects that are waived or consented to by Purchaser.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Pipeline" means the 11.6 miles (approximately) of pipeline extending
from the Anacostia River at the Anacostia Naval Facility in Washington, D.C.
onto Xxxxxxx AFB in Prince George's County, Maryland, operated by PPI, together
with the PPI Tanks and any other improvements or fixtures utilized by PPI in
connection therewith.
"Pipeline Assets" has the meaning set forth in Section 2.1.
7
13
"PPI's Consultant" means Versar, Inc., or any other recognized
environmental firm selected by PPI and approved by Purchaser, such approval not
to be unreasonably withheld.
"PPI Indemnified Party" has the meaning set forth in Section 11.3.
"PPI Tanks" means those petroleum product storage tanks used in the
operation of Business and located at Xxxxxxx AFB.
"Purchase Price" has the meaning set forth in Section 2.3.1.
"Purchaser Indemnified Party" has the meaning set forth in Section
11.1.
"Purchaser's Consultant" means Think Tank, Inc., or any other
recognized environmental consulting firm selected by Purchaser and approved by
PPI, such approval not to be unreasonably withheld.
"Remedial Work" means any investigation, site monitoring, containment,
cleanup, removal, restoration, or other corrective action that is reasonably
necessary to remedy any non-compliance with Environmental Law, that is
reasonably necessary under Environmental Law, or that has been required by a
Governmental Authority.
"Right-of-way Agreement(s)" means the agreement(s) (whether in the
form of a license, easement, lease or other form of agreement) pursuant to
which PPI is granted the right to use the real estate owned by third parties
for the Pipeline and the Business. The Right-of-way agreements are more
particularly described in Schedule 2.1(b).
"ROW Real Estate" means, individually or in the aggregate, the real
estate on which the Pipeline is located that is described, in and subject to
the terms and conditions set forth in, a Right-of-way Agreement.
"SIC" means Xxxxxxx Investment Company, a Delaware corporation.
8
14
"SPC' means Xxxxxxx Petroleum Company, a Delaware Corporation.
"Tangible Personal Property" means all tangible personal property used
in the Business including, but not limited to, the Vehicles.
"Tariff" means that certain tariff and the related operating agreement
pursuant to which PPI transports petroleum products to, and stores petroleum
products at, Xxxxxxx AFB.
"Unaudited Annual PPI Financial Statements" means the unaudited
balance sheets and related statements of income and cash flows of PPI as of and
for the years ending December 31, 1992, 1993 and 1994.
"Unaudited Monthly PPI Financial Statements" means the unaudited
balance sheets and related statements of income and cash flows of PPI as of and
for each month and year-to-date for the six months ending June 30, 1995.
"Vehicles" means all boats, automobiles, trailers, trucks, vans, and
other motor vehicles used in the Business, including, but not limited to, those
listed on Schedule 2.1(c).
ARTICLE 2
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Purchase. At the Closing, PPI shall sell,
transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from PPI, all right, title and interest in and to the
assets, properties, and rights comprising the Business and the Pipeline,
whether tangible or intangible, real, personal or mixed, and wherever located
(collectively, the "Pipeline Assets"), free and clear of all Liens, and other
restrictions, except for Permitted Encumbrances, provided, that the Pipeline
Assets shall not include and Purchaser
9
15
shall not acquire (i) cash, bank accounts, accounts receivable, certificates of
deposit or other cash equivalents, (ii) any tax refunds attributable to taxes
paid by PPI, (iii) those assets listed on Schedule 2.1 under the heading
"Excluded Assets", (iv) the right to the Piney Point Industries name, (v) any
insurance retrospective rating adjustment applicable to periods prior to the
Closing Date, (vi) any reimbursements from trust funds or insurance maintained
by any Governmental Authority for Remedial Work performed prior to the Closing
Date and paid for by PPI, and (vii) any and all contractual rights attributable
to the Tariff (except as contemplated by Section 5.6), the Xxxxxxx Services
Agreement, the Emergency Spill Response Agreement and the Consulting Agreement
(the items listed in clauses (i) through (vii) being referred to herein as the
"Excluded Assets"). The Pipeline Assets include without limitation:
(a) the Pipeline as described on Schedule 2.1(a);
(b) the Company's rights under the Right-of-way
Agreements, including, but not limited to, those
listed on Schedule 2.1(b);
(c) the Tangible Personal Property as listed on Schedule
2.1(c);
(d) PPI's rights under the Contracts, to the extent
transferable, including PPI's rights under the
Material Contracts listed on Schedule 2.1(d);
(e) all business records in the possession or under the
control of PPI relating to the Pipeline Assets or the
Business, including without limitation the books and
records of accounts and customer and prospect lists,
but excluding financial records presently maintained
at PPI's location at 0000 Xxxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. (which PPI shall maintain and
transfer to Purchaser in accordance with the terms of
Section 12.11); and
10
16
(f) to the extent transferable, all of PPI's right and
interest in any license, permits, consents, and
authorities relating to the Business, issued by any
Governmental Authority and any applications for such
items.
Section 2.2 Assumption of Liabilities. (a) Purchaser shall
assume at Closing:
(i) obligations of PPI under the Contracts and Right-of-way
Agreements attributable to periods of time commencing with the Closing,
provided, however, that (A) with respect to Material Contracts and Right-of-way
Agreements, Purchaser assumes such obligations only for Material Contracts
listed on Schedule 2.1(d) and Right-of-way Agreements listed on Schedule 2.1(b)
and in each case only to the extent true and correct copies thereof and all
amendments thereto have either been delivered to Purchaser as of the date
hereof, or are delivered to and consented to by Purchaser after the date
hereof, provided, however, that to the extent that a copy of an immaterial
amendment to such Material Contract or such Right-of-way Agreement has not been
provided to Purchaser as of the date hereof, Purchaser shall assume such
obligations for such Material Contract or such Right-of-way Agreement without
regard to the amendment not delivered to Purchaser and, in such event, PPI
shall be responsible for all Liabilities of Purchaser with respect to the
amendment not delivered to Purchaser without regard to the limits set forth in
Section 11.5 and (B) Purchaser specifically does not assume, and shall not be
treated as having assumed, any liability or obligation under any Material
Contract or Right-of-way Agreement to the extent such liability or obligation
relates to or arises out of a breach of such Contract or Right-of-way Agreement
that occurs prior to the Closing (provided that liability and obligation for
Purchaser's continuing breaches of such Contracts or such Right-of-way
Agreements after Closing and liability and obligation for breaches of such
Contracts or
11
17
Right-of-way Agreements commenced by Purchaser after Closing shall be the
responsibility of Purchaser); and
(ii) except as expressly provided for otherwise herein and in
accordance with the provisions of Section 11.7, any amounts payable to perform
Remedial Work with respect to the Pipeline Assets or the Business, regardless
of when the events giving rise to the obligation to perform such Remedial Work
are alleged to have occurred.
The obligations assumed by Purchaser pursuant to subsection
(a) of this Section 2.2 are referred to herein collectively as the "Assumed
Liabilities".
(b) Purchaser shall not assume any liabilities or obligations of PPI
not specifically assumed under subsection (a) of this Section 2.2, except to
the extent that Purchaser's covenants in Section 11.7 constitute an assumption
of such liabilities or obligations. Nothing herein shall be deemed to
contravene the Purchaser's indemnification of PPI in Sections 11.3 and 11.7,
which shall remain in full force and effect. Without in any way limiting the
foregoing, the parties agree that the Purchaser does not and will not assume
the sponsorship of, or the responsibility for contributions to, or any
liability in connection with, any employee pension benefit plan, any employee
welfare benefit plan, or other employee benefit agreement or arrangement
maintained or adopted by PPI for its employee, former employees, retirees,
their beneficiaries or any other Person. In addition and not as a limitation
of the foregoing covenant, the parties agree that PPI shall be liable for any
continuation coverage (including any penalties, excise taxes or interest
resulting from the failure to provide continuation coverage) required by
Section 4980B of the Code due to qualifying events which occur on or before the
Closing Date.
12
18
Notwithstanding the foregoing, Purchaser shall provide health and medical
benefits under its then existing plans, effective as of the date of hire, if
the PPI employee is hired by Purchaser.
Section 2.3 Payment of Purchase Price. The consideration for the
sale of the Pipeline Assets shall be the Purchase Price and the assumption by
the Purchaser of the Assumed Liabilities.
2.3.1 Purchase Price. At the Closing, Purchaser shall pay
for the Pipeline Assets the sum of Four Million Two Hundred Thousand
($4,200,000) (the "Purchase Price"), or the Adjusted Purchase Price, as the
case may be. Notwithstanding any provision contained herein that may be
construed to the contrary, any adjustment to the Purchase Price pursuant to the
terms of this Agreement (other than Section 12.14) shall be calculated as part
of the Aggregate Adjusted Purchase Price for purposes of determining SPC's
right to terminate the Asset Purchase Agreement pursuant to Section 10.1(c)
therein.
2.3.2 Intentionally Omitted.
Section 2.4 Allocation of Purchase Price Amongst Pipeline Assets.
The Purchase Price shall be allocated amongst the Pipeline Assets in accordance
with the fair market values set forth on Schedule 2.4. Neither party shall take
any position inconsistent with Schedule 2.4 in any filing with the Internal
Revenue Service or for any other purpose.
Section 2.5 Intentionally Omitted.
Section 2.6 Payment of Taxes and Closing Costs. Purchaser shall
be responsible for and shall pay any and all state sales taxes arising in
connection with the sale of the Pipeline Assets. All closing costs in
connection with the transfer of the rights under the Right-of-way
13
19
Agreements, including transfer taxes, if any, and recording fees, shall be paid
equally by PPI and Purchaser.
Section 2.7 Risk of Loss.
(a) The risk of loss of the Pipeline Assets shall pass to
Purchaser at Closing. If there is any loss, damage, breakdown, or casualty to
any of the Pipeline Assets prior to Closing that does not constitute either (i)
a loss, damage, breakdown, or casualty that has been repaired or replaced to
the reasonable satisfaction of Purchaser, or (ii) a loss, damage, breakdown, or
casualty fully covered by insurance proceeds which have been assigned to
Purchaser and insurance retentions paid by PPI to Purchaser, the Purchase Price
shall be reduced by the cost to repair or replace such assets, estimated if
necessary. If there is reasonable doubt whether a loss, damage, breakdown, or
casualty is fully covered by insurance and the payment of insurance retentions
by PPI, Purchaser may reduce the Purchase Price by the cost of repairing or
replacing such assets, in which case PPI shall not assign the insurance
proceeds or pay any insurance retentions to Purchaser. The cost of repairing
or replacing such assets shall be such cost or estimated cost as is agreed upon
between the parties.
(b) Notwithstanding the above provisions of this Section
2.7, if any repair or replacement is reasonably expected to cause the Average
Monthly Revenue to decrease by five percent (5%) or more during the month
immediately following Closing, Purchaser may, in lieu of accepting insurance
proceeds and any insurance retentions or a reduction in the Purchase Price,
delay the Closing until PPI has completed such repair or replacement to the
reasonable satisfaction of Purchaser, provided, however, that if Purchaser
elects to delay the Closing, SPC and SIC, both, but not separately, may elect
to delay the Closing contemplated under the Xxxxx
00
00
Purchase Agreement and the Closing contemplated under the Cockpit Agreement
until such time as the closings under the Purchase Agreements can occur
simultaneously. If the Purchaser elects to delay the Closing pursuant to the
preceding sentence, then (unless PPI is entitled to and elects to terminate
this Agreement pursuant to Article 10), PPI shall promptly and diligently cause
such repair or replacement to be completed to the reasonable satisfaction of
Purchaser.
ARTICLE 3
MATTERS PRIOR TO CLOSING
Section 3.1 Due Diligence.
3.1.1 Examination of Records and Assets. During the Due
Diligence Period, (i) Purchaser and its agents may examine the Pipeline Assets
and the Business, and such books, records, files, and documents of the Company
that relate to the Business or the Pipeline Assets, (ii) the Company shall make
available to Purchaser and its agents for review all information concerning the
Pipeline Assets or the Business which they may request, and (iii) the Company
will make available to Purchaser the officers and the employee of the Company
to answer questions and to discuss the Company and its Business, all in a
manner that does not unduly disrupt the Business. If the Closing does not
occur, Purchaser shall promptly return to the Company, at Purchaser's expense,
(i) all documents (including any copies thereof) received from the Company
before, during or after the Due Diligence Period, and (ii) any documents or
materials that Purchaser or its advisers have generated that contain or
disclose information from the documents received from the Company. Prior to
Closing, except as required in connection with Kaneb Pipe Line Partners, L.P.'s
registration statement filed under the Securities Act of
15
21
1933 and the related offering of partnership units, Purchaser shall maintain in
confidence any information or data received from PPI in the course of
conducting its due diligence, including without limitation the environmental
due diligence provided for in Section 3.1.2, and shall not use the same for any
purpose except in connection with the transaction contemplated by this
Agreement, provided, that the foregoing confidentiality requirement shall
remain in effect after the Closing with respect to the financial statements of
the Company and its Affiliates. Prior to Closing, and thereafter with respect
to the financial statements of the Company and its Affiliates, except as
required in connection with Kaneb Pipe Line Partners, L.P.'s registration
statement filed under the Securities Act of 1933 and the related offering of
partnership units, Purchaser shall not disclose any such information or data to
any third person except to the extent that (i) such information or data is
already in the public domain, or (ii) such disclosure is compelled or required
by subpoena or similar legal process.
3.1.2 Environmental Due Diligence.
3.1.2.1 Audits and Surveys. During the Due Diligence Period,
Purchaser may cause Audits to be conducted by the Purchaser's Consultant, at
its expense, of any of the Pipeline Assets and ROW Real Estate (to the extent
such Audits are permitted under the applicable Right-of-way Agreement). The
scope, methodology, timing, and conduct of all such Audits shall be subject to
the prior approval of PPI which approval shall not be unreasonably withheld,
except that it shall not be unreasonable for PPI to withhold its approval based
on PPI's reasonable opinion that such Audit is not permitted under the relevant
Right-of-way Agreement. All Audits shall be conducted so as to avoid unduly
disrupting the Business. All such Audits shall be completed within the Due
Diligence Period if, and to the extent that, Purchaser wishes
16
22
to rely on the results of such Audits in proposing any adjustment to the
Purchase Price pursuant to Section 3.1.2.2. The Purchaser shall cause the
Purchaser's Consultant to deliver simultaneously to PPI copies of all data,
reports, surveys, or audits, or drafts thereof that it delivers to Purchaser
with respect to the Business or the Pipeline Assets and deliver to PPI promptly
after signing this Agreement copies of all data, reports, surveys, audits, or
drafts thereof delivered to Purchaser with respect to the Business or the
Pipeline Assets prior to the signing of this Agreement.
3.1.2.2 Purchase Price Adjustment for Certain Remedial Work.
(a) If the Audits prepared by Purchaser's
Consultant disclose that Remedial Work is required with respect to the Pipeline
Assets or the Business, then Purchaser shall record and track such Remedial
Work with any Remedial Work disclosed pursuant to Section 3.1.2.2 of the Asset
Purchase Agreement and Section 3.1.2.2 of the Cockpit Agreement and Purchaser
may deliver to PPI and SPC an Environmental Adjustment Request to request an
adjustment to the Purchase Price subject to this subsection (a) and subsections
(b), (c) and (d) below. The Net Remedial Cost for Remedial Work with respect
to the Pipeline Assets or the Business disclosed pursuant to this Section
3.1.2.2 shall be aggregated with the Net Remedial Cost for Remedial Work under
Section 3.1.2.2 of the Asset Purchase Agreement and Section 3.1.2.2 of the
Cockpit Agreement for purposes of (i) calculating the one million dollar
($1,000,000) threshold described in Section 3.1.2.2 of the Asset Purchase
Agreement and the Remaining Threshold, (ii) delivering an Environmental
Adjustment Request to SPC and PPI, (iii) calculating the Net Remedial Cost to
determine Purchaser's right to terminate pursuant to Section 10.1(h) of the
Asset Purchase Agreement, and (iv) calculating the Aggregate Adjusted Purchase
17
23
Price to determine SPC's right to terminate under Section 10.1(c) of the Asset
Purchase Agreement.
(b) The time limitations and procedures for (i)
delivering an Environmental Adjustment Request, and (ii) determining the Net
Remedial Cost for Remedial Work required with respect to the Pipeline Assets or
the Business set forth in Section 3.1.2.2 of the Asset Purchase Agreement shall
apply hereunder.
(c) Any Environmental Adjustment Request that
includes a description of Remedial Work required with respect to the Pipeline
Assets or the Business shall be delivered to PPI and SPC.
(d) To the extent, if any, that the Aggregate Net
Remedial Cost under the Purchase Agreements exceeds one million dollars
($1,000,000) and any of the excess amount of such Aggregate Net Remedial Cost
is attributable to the Pipeline Assets or the Business as determined in
accordance with the procedures set forth in Section 3.1.2.2(e) of the Asset
Purchase Agreement, then the Purchase Price shall be reduced by the amount of
such excess in accordance with Section 3.1.2.2 of the Asset Purchase Agreement.
3.1.2.3 Purchase Price Adjustment for Other Remedial Work.
Notwithstanding any terms contained in Sections 3.1.2.1 and 3.1.2.2, (i) if
there is a violation of Environmental Law that occurs after the date of this
Agreement and prior to Closing that requires Remedial Work with respect to the
Pipeline Assets or the Business that is not completed prior to Closing either
to the reasonable satisfaction of Purchaser or to the satisfaction of the
applicable Governmental Authority, or (ii) if after the Due Diligence Period
and prior to Closing a violation of Environmental Law that requires Remedial
Work with respect to the Pipeline
18
24
Assets or the Business is discovered that could not reasonably have been
discovered during the Due Diligence Period by a Phase I and Phase II
environmental audit and such Remedial Work is not completed prior to Closing
either to the reasonable satisfaction of Purchaser or to the satisfaction of
the applicable Governmental Authority, then in each such case Purchaser shall
be entitled to an adjustment to the Aggregate Purchase Price determined in
accordance with the procedures set forth in Sections 3.1.2.2 and 3.1.2.3 of the
Asset Purchase Agreement without regard to the 75 day time period for proposing
such adjustment.
3.1.2.4 Other Environmental Liabilities. If, prior to
Closing, Purchaser or PPI receives notice of a claim from, or discovers, or
receives notice of any facts or circumstances reasonably expected by ICF Xxxxxx
to give rise to a claim by, any Person or Governmental Authority for liability
or obligation (other than for Remedial Work) related to an alleged violation of
Environmental Law with respect to the Pipeline Assets or the Business, it shall
promptly notify the other parties hereto (the "Notice"). Thereafter, PPI and
Purchaser shall attempt to agree on whether a Purchase Price adjustment or
other agreeable mechanism is warranted with respect to such claim. If the
parties are unable to agree, PPI may in its discretion assume responsibility
for such claim and provide Purchaser with an indemnification against such claim
reasonably satisfactory to Purchaser. If within thirty (30) days after the
Notice (i) the parties are unable to agree on an adjustment to the Purchase
Price or other agreeable mechanism, and (ii) PPI fails to assume responsibility
for such claim and provide an indemnification reasonably satisfactory to
Purchaser, then Purchaser shall have the right to terminate this Agreement.
Section 3.2 Intentionally Omitted.
19
25
Section 3.3 Consents.
(a) PPI shall use reasonable commercial efforts promptly
to obtain the consent, waiver or approval of each Person whose consent, waiver,
or approval is required to effect an assignment of any of the Material
Contracts or Right-of-way Agreements, or to transfer any of the Pipeline Assets
to Purchaser, or otherwise in connection with this transaction, and, where
appropriate, to effect a novation of such Material Contracts or Right-of-way
Agreements. Purchaser shall cooperate with PPI in obtaining such items as
reasonably requested to do so by PPI.
(b) Purchaser acknowledges that (i) the Tariff will not
be transferred to Purchaser and (ii) Purchaser must apply for its own tariff
and operating agreement to transport petroleum products to, and store petroleum
products at, Xxxxxxx AFB after Closing.
Section 3.4 Xxxx-Xxxxx-Xxxxxx. Purchaser and PPI shall each
comply with the notification, waiting period and other requirements of the HSR
Act. Each party shall take reasonable steps to provide information to and
otherwise cooperate with the other parties for the purposes of making required
filings under the HSR Act.
Section 3.5 Purchaser's Licenses, Permits. Purchaser shall (i)
exercise reasonable commercial efforts promptly to obtain all licenses and
permits required by Purchaser to purchase the Pipeline Assets, and (ii) use
best efforts to promptly tender and obtain approval for a tariff and related
operating agreement to transport petroleum products to, and store petroleum
products at, Xxxxxxx AFB with a tariff rate of at least $.95 per Bbl. and
containing substantially similar terms as the most recently effective Tariff.
20
26
Section 3.6 Employees.
(a) PPI shall provide Purchaser with the name, address
and base salary of its employee, and provide Purchaser with the opportunity to
conduct a pre-employment interview with the employee. Purchaser may but shall
not be obligated to offer employment to the PPI employee, on such terms and
conditions as Purchaser may determine, contingent upon and effective at
Closing. PPI shall terminate the employee effective at Closing. PPI shall be
responsible for paying any and all liabilities resulting from such termination
(including, but not limited to, any liabilities under the Workers Adjustment
and Retraining Notification Act, if applicable) and will indemnify and hold
harmless Purchaser therefrom.
(b) PPI and SPC will terminate the Xxxxxxx Services
Agreement, the Consulting Agreement and the Emergency Spill Response Agreement
effective on the Closing Date.
Section 3.7 Notification. Each party shall promptly notify the
other parties if it has Knowledge of (i) any information indicating that any
representation or warranty of any other party is or may be untrue in any
material respect, (ii) any covenant to be performed by such other party that is
not being performed, or (iii) any circumstance that would impede or interfere
with the Closing, except that no party shall be liable for a breach of this
covenant unless and except to the extent that the affected party is materially
prejudiced or damaged thereby.
Section 3.8 Deferred Like-Kind Exchange. Upon the request of
PPI, made at least two Business Days prior to the Closing Date, Purchaser shall
execute such documents as may reasonably be required to acknowledge (x) notice
of PPI's intention to accomplish a deferred like-kind exchange of part or all
of the Pipeline Assets pursuant to Section 1031 of the Code and
21
27
Treasury Regulation 1.1031(k)-1 and (y) the assignment of PPI's right, title
and interest in and to (but not PPI's obligations under) this Agreement to a
qualified intermediary (within the meaning of Treasury Regulation Section
1.1031(k)-1(g)(4)).
Section 3.9 Actions Necessary to Consummate. From and after the
date of this Agreement, each of the parties shall in good faith take such
action as may be commercially reasonable to consummate the transactions
contemplated by this Agreement.
ARTICLE 4
OPERATION OF THE BUSINESS PRIOR TO CLOSING
Section 4.1 Ordinary Course. (a) Between the date of this
Agreement and the Closing, PPI shall (i) carry on the Business diligently in
the Ordinary Course of Business and shall not institute any new methods of
accounting or pricing, or engage in any transaction or activity, or enter into
any agreement or make any commitment with respect to the Pipeline Assets or the
Business, except in the Ordinary Course of Business; (ii) maintain the Pipeline
Assets in good operating condition consistent with past practice and comply
timely with all provisions of leases, agreements, contracts and commitments
relating to the Pipeline Assets or the Business; (iii) exercise reasonable
efforts to preserve the Business and its relationships with its customers, its
employee, and suppliers, to timely file all reports required by any
Governmental Authority and to pay all taxes, and to comply with all Applicable
Law. In addition, PPI shall deliver to Purchaser copies of monthly and
year-to-date financial statements prepared on a basis consistent with the
Unaudited Monthly PPI Financial Statements for periods subsequent to June 30,
1995 and prior to the Closing as soon as they become available to PPI, but in
no event later than
22
28
twenty-one (21) days after the end of the month covered by such statements
together with a representation that such statements are true and correct in all
material respects and fairly present the financial position of the Business as
of respective dates thereof and results of operations and cash flow of the
Business as of the respective dates or for the respective periods set forth
therein, all in conformity with GAAP consistently applied, subject to normal
year end adjustments, the adjustments described in Schedule 7.9 and absence of
footnotes required by GAAP.
Section 4.2 Certain Changes. Without the prior consent of
Purchaser such consent not to be unreasonably withheld, provided that such
consent shall be deemed to have been given unless it is denied within five (5)
Business Days of having been requested, PPI shall not: (i) permit or allow any
of the Pipeline Assets to be subjected to any Lien; (ii) cancel or waive any
material claim or right relating to the Pipeline Assets or the Business; (iii)
sell, transfer, assign, distribute or otherwise dispose of any Pipeline Assets,
except in the Ordinary Course of Business; (iv) enter into any contract or
commitment with respect to the Pipeline Assets or the Business, the performance
of which may extend beyond the Closing Date, except in the Ordinary Course of
Business; (v) cause or permit any of its current insurance or reinsurance
policies with respect to the Pipeline Assets or the Business to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation, or lapse, PPI obtains replacement policies
from the same or comparable insurers providing coverage which is the same or
comparable to that provided under the cancelled, terminated, or lapsed
policies; (vi) acquire by purchase or license any trademark, patent, or other
intellectual property rights with respect to the Business; (vii) make any
payment or provision with respect to any
23
29
employee benefit plan or program with respect to the Business, except in the
Ordinary Course of Business, or adopt any new employee benefit plan or program
with respect to the Business or amend any existing employee benefit plan or
program with respect to the Business, or enter into any new employment
agreements with respect to the Business, or increase the compensation payable
to the employee or pay any bonuses to the employee, except in the Ordinary
Course of Business. Without the consent of Purchaser, such consent not to be
unreasonably withheld, PPI shall not enter into, amend or modify any Material
Contracts or Right-of-way Agreements, provided that such consent shall be
deemed to have been given unless it is denied within five (5) Business Days of
having been requested.
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Pipeline Assets at
Closing shall be subject to the satisfaction of the following conditions on or
before the Closing Date, except as and to the extent that such satisfaction is
waived by Purchaser.
Section 5.1 Representations and Warranties. The representations
and warranties of the Company contained in Article 7 (other than Section 7.16)
shall be true and correct in all material respects at and as of the Closing
Date and the Purchaser shall have received a certificate to that effect signed
by an officer of the Company.
Section 5.2 Certificate Regarding Environmental Representations
and Warranties. The Company shall have delivered to Purchaser a certificate
signed by an officer of the Company stating either (i) the representations and
warranties of the Company contained in Section 7.16
24
30
are true and correct at and as of the Closing Date or (ii) the representations
and warranties of the Company contained in Section 7.16 are true and correct at
and as of the Closing Date except for matters disclosed in the certificate,
which certificate shall divide any such matters stated therein into matters for
which a Purchase Price adjustment is available under Sections 3.1.2.2, 3.1.2.3
or 3.1.2.4, and matters for which a Purchase Price adjustment is not available
under Section 3.1.2.3(ii).
Section 5.3 Compliance with this Agreement. The Company shall
have performed and complied in all material respects with all of its agreements
and covenants set forth or contemplated herein that are required to be
performed or complied with on or before the Closing Date and the Purchaser
shall have received a certificate to that effect signed by an officer of the
Company.
Section 5.4 Purchase Permitted by Applicable Laws. The purchase
of the Pipeline Assets shall not be prohibited by any Applicable Law or by any
order or ruling of any Governmental Authority, nor shall any condition have
been imposed on the Closing by any Governmental Authority which would subject
either party to penalties or other sanctions as a result of the Closing.
Section 5.5 Opinion of Counsel. The Purchaser shall have
received an opinion of counsel to the Company, dated the Closing Date, opining
in substance on the matters set forth in Exhibit 5.5.
Section 5.6 Consents and Approvals. All material consents,
exemptions, authorizations, or other actions by, or notices to, or filings
with, any Person necessary or required in connection with the purchase of the
Pipeline Assets or the operation of the Business
25
31
by Purchaser shall have been obtained and be in full force and effect
(including any required consent of a ROW Real Estate owner for the transfer or
assignment of a Right-of-way Agreement and an extension of the expired license
described in Schedule 2.1(b)), and any waiting periods under any Applicable Law
shall have expired. Purchaser shall have either (i) obtained a tariff and
related operating agreement with a tariff rate of at least $.95 per Bbl. and
containing substantially similar terms as the most recently effective Tariff or
(ii) reached an acceptable agreement with PPI pursuant to which Purchaser is
allowed to operate the Pipeline under, and obtain the benefit of, the Tariff
until such time as Purchaser is able to obtain an acceptable tariff and related
operating agreement for operating the Pipeline.
Section 5.7 Intentionally Omitted.
Section 5.8 No Material Adverse Change. Except as set forth on
Schedule 7.11 or as disclosed in the Unaudited Monthly PPI Financial Statements
dated after December 31, 1994 provided to Purchaser prior to the signing of
this Agreement, there shall have been no material adverse change in the
Pipeline Assets or the operations or financial condition of the Business since
December 31, 1994.
Section 5.9 Intentionally Omitted.
Section 5.10 Satisfaction of Conditions to Closing Under The Asset
Purchase Agreement. All the conditions to Close set forth in Article 5 of the
Asset Purchase Agreement shall have been satisfied, except to the extent that
such satisfaction is waived by Purchaser.
26
32
ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligations of the Company to sell the Pipeline Assets hereunder
shall be subject to the satisfaction of the following conditions on or before
the Closing Date, except as and to the extent that such satisfaction is waived
by the Company.
Section 6.1 Representations and Warranties. The representations
and warranties of the Purchaser and the Guarantor contained in Article 8 hereof
shall be true and correct in all material respects at and as of the Closing
Date, and the Company shall have received a certificate to that effect signed
by an officer of the general partner of the Purchaser and an officer of the
general partner of the Guarantor.
Section 6.2 Compliance with this Agreement. The Purchaser and
Guarantor shall have performed and complied in all material respects with all
of their agreements and covenants set forth or contemplated herein that are
required to be performed or complied with by the Purchaser and Guarantor on or
before the Closing Date, and PPI shall have received a certificate to that
effect signed by an officer of the general partner of the Purchaser and an
officer of the general partner of the Guarantor.
Section 6.3 Sale Permitted by Applicable Laws. The sale of the
Pipeline Assets by the Company hereunder shall not be prohibited by any
Applicable Law, or Governmental Authority nor shall any condition have been
imposed on the Closing by any Governmental Authority which would subject either
party to penalties or other sanctions as a result of the Closing.
27
33
Section 6.4 Opinion of Counsel. The Company shall have received
an opinion of counsel to the Purchaser, dated the Closing Date, opining in
substance on the matters set forth in Exhibit 6.4.
Section 6.5 Consents and Approvals. All consents, exemptions,
authorizations, waivers or other actions by, or notices to, or filings with,
any Person necessary or required in connection with the execution, delivery or
performance by the Purchaser of this Agreement shall have been obtained and be
in full force and effect.
Section 6.6 Satisfaction of Conditions to Closing Under The Asset
Purchase Agreement. All the conditions to Close set forth in Article 6 of the
Asset Purchase Agreement shall have been satisfied by Purchaser, except to the
extent that such satisfaction is waived by PPI.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby, represents and warrants to the Purchaser, as of
the date of this Agreement and as of the Closing Date, as follows:
Section 7.1 Existence and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company: (a) has all requisite
corporate power and authority, as applicable, to own and operate its property,
and to conduct the business in which it is currently, or is currently proposed
to be, engaged; (b) is duly qualified as a foreign corporation, and is in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its
28
34
business require such qualification, except to the extent that the failure to
do so would not have an adverse effect on the Pipeline Assets or the Business;
and (c) has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
Section 7.2 Corporate Authorization: No Contravention. The
execution, delivery and performance by the Company of this Agreement: (a) has
been duly authorized by all necessary corporate, and, if required, stockholder
action; (b) does not contravene the terms of the Company's Certificate of
Incorporation or By-Laws, or any amendment of either thereof, and (c) will not
violate Applicable Law, or conflict with or result in any breach of or default
under, or cause the creation of any Lien under, any contractual obligation of
the Company.
Section 7.3 Governmental Authorization: Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under an Applicable Law, is necessary or required
in connection with the execution, delivery or performance by the Company, or
enforcement against the Company, of this Agreement, other than compliance with
the HSR Act.
Section 7.4 Binding Effect. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability.
Section 7.5 Litigation. Except as listed on Schedule 7.5, there
are no legal actions, suits, proceedings, or claims pending, or to the
Knowledge of the Company, threatened, before
29
35
any Governmental Authority against or affecting the Company (a) with respect to
this Agreement, or any of the transactions contemplated hereby, or (b) which
would be reasonably likely to have, (i) an adverse effect on the Pipeline
Assets or the Business, or (ii) an adverse effect on the ability of the Company
to perform its obligations hereunder. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
Governmental Authority purporting to enjoin PPI or restrain PPI's execution,
delivery or performance of this Agreement.
Section 7.6 Compliance with Laws. The Company is in compliance
with all Applicable Law, except for any failure to comply which would not have
an adverse effect on the Pipeline Assets or the Business.
Section 7.7 Intentionally Omitted.
Section 7.8 Condition of and Title to Tangible Personal Property.
The Tangible Personal Property taken as a whole is sufficient (including its
state of operating condition and repair taken as a whole, but not on an item by
item basis) for the conduct of the Business as presently conducted. Except as
set forth on Schedule 7.8, the Company owns free of Liens (other than Liens
that will be released in full at Closing) or has the right to use as a lessee
under a valid lease included in the Contracts, all of the Tangible Personal
Property.
Section 7.9 Financial Condition. (a) The Company has furnished
Purchaser with true and complete copies of (i) the Unaudited Annual PPI
Financial Statements and (ii) the Unaudited Monthly PPI Financial Statements.
(b) The Unaudited Annual PPI Financial Statements and the
Unaudited Monthly PPI Financial Statements are true and correct in all material
respects and fairly present
30
36
the results of operations of the Business as of the respective dates or for the
periods set forth therein in conformity with GAAP consistently applied, subject
to normal year-end adjustments, the adjustments described in Schedule 7.9, and
the absence of footnotes required by GAAP.
(c) The Company has no material liabilities, absolute or
contingent, that are not reflected in the Unaudited Annual PPI Financial
Statements, or the Unaudited Monthly PPI Financial Statements, except (i)
liabilities not required under GAAP to be reflected on such financial
statements or the notes thereto (as applicable), (ii) liabilities incurred in
the Ordinary Course of Business since the date of the most recent Unaudited
Monthly PPI Financial Statements consistent with past operations and not
relating to the borrowing of money and (iii) as disclosed on Schedule 7.9.
Section 7.10 Employee Plans.
(a) Types of Employee Plans. Except as set forth in
Schedule 7.10, the Company does not maintain or contribute to any "employee
pension benefit plan" or any "employee welfare benefit plan" as such terms are
defined in Section 3(2) and Section 3(1), respectively, of the ERISA nor, since
April 28, 1980, has the Company participated in or contributed to a
"multi-employer plan" as such term is defined in Section 3(37) of ERISA.
(b) Prohibited Transactions. To the Company's Knowledge,
and except as disclosed in Schedule 7.10, neither the Company nor any of its
respective directors, officers, employees or agents, nor any "party in
interest" or "disqualified person", as such terms are defined in Section 3 of
ERISA and Section 4975 of the Code, has, with respect to any employee plan
identified in Section 7.10(a) hereof ("Employee Plan") engaged in or been a
party to any
31
37
"prohibited transaction", as such term is defined in Section 4975 of the Code
or Section 406 of ERISA.
(c) ERISA. To the Company's Knowledge, and except as
disclosed in Schedule 7.10, the Company is in substantial compliance with the
requirements prescribed by any and all statutes, orders, or governmental rules
or regulations currently in effect with respect to all Employee Plans,
including, but not limited to, ERISA and the Code, applicable to such Employee
Plans. To the Company's Knowledge, and except as disclosed in Schedule 7.10,
the Company has in all material respects performed all material obligations
required to be performed by it under, is not in violation in any material
respect of, and has no knowledge of any material default or violation by any
other party to, any of the Employee Plans.
(d) Qualifications. To the Company's Knowledge, each
Employee Plan intended to qualify under Section 401(a) of the Code has
heretofore been determined by the Internal Revenue Service to so qualify, and
the trusts created thereunder have heretofore been determined to be exempt from
tax under the provisions of Section 501(a) of the Code, and nothing has since
occurred which may reasonably be expected to cause the loss of such
qualification or exemption.
(e) No Carryover Liability. The consummation of this
Agreement (and the employment by the Purchaser of PPI's former employee) will
not result in any carryover liability to the Purchaser for taxes, penalties,
interest or any other claims resulting from any Employee Plan, or other
employee benefit agreement or arrangement. In addition, PPI makes the
following representations (a) as to employee pension benefit plans of the
Company: (1) no Company has become liable to the PBGC under Sections 4062,
4063, or 4064 of ERISA under
32
38
which a lien could attach to the Pipeline Assets under Section 4068 of ERISA;
(2) the Company has not ceased operations so as to become subject to the
provisions of Section 4062(a) of ERISA; and (3) the Company has not made a
complete or partial withdrawal from a multi-employer plan (as defined in
Section 3(37) of ERISA) so as to incur withdrawal liability as defined in
Section 4201 of ERISA, and (b) all group health plans maintained or adopted by
the Company have been operated in compliance with Section 4980B(f) of the Code.
Section 7.11 No Material Adverse Change: Ordinary Course. Since
December 31, 1994, (i) there has not been any material adverse change in the
Pipeline Assets or the Business and (ii) the Company has operated the Business
in the Ordinary Course of Business, except as set forth on Schedule 7.11 or
disclosed in any Unaudited Monthly PPI Financial Statements dated after
December 31, 1994 that was provided to Purchaser prior to the signing of this
Agreement.
Section 7.12 Broker's Finder's or Similar Fees. Except as set
forth on Schedule 7.12, no brokerage commissions, finder's fees or similar fees
are payable in connection with the transactions contemplated hereby. Purchaser
has no liability for any items set forth on Schedule 7.12.
Section 7.13 Patents, Trademarks. Etc. PPI does not own or have
the right to use any patents, trademarks, service marks, trade names,
copyrights, or similar rights with respect to the Pipeline Assets or the
Business. To the Company's Knowledge, no right or product, process, method,
substance or other material presently sold by or employed by the Company, or
which the Company contemplates selling or employing infringes upon the patents,
trademarks, service marks, copyrights or licenses that are owned by others. No
litigation is pending and no
33
39
claim has been made against the Company or, to the Knowledge of the Company, is
threatened, contesting the right of the Company to sell or use any right or
product, process, method, substance or other material presently sold by or
employed by the Company.
Section 7.14 Material Contracts. The Company has delivered to
Purchaser true and correct copies of all Material Contracts, including all
amendments thereto. Schedule 2.1(d) lists all Material Contracts, and will be
updated at Closing to include any Material Contracts entered into or amended
between the date of this Agreement and the Closing Date. Except as disclosed on
Schedule 2.1(d), each Material Contract is in effect and has not been amended
or otherwise modified, and is binding upon and enforceable against the Company
and, to the Company's Knowledge, all parties thereto, in accordance with its
terms, and there is no default thereunder and to the Knowledge of the Company
no other party thereto has issued or threatened to issue a notice of
termination or cancellation. Except as set forth on Schedule 2.1(d), no
consent to the transfer or assignment of the Material Contracts to Purchaser is
required.
Section 7.15 Permits. Except as set forth on Schedule 7.15, the
Company holds all licenses, permits, franchises, approvals, consents, waivers,
exemptions, authorizations, certificates of occupancy and similar rights and
privileges which are necessary for the operation of its Business.
Section 7.16 Environmental Matters.
(a) Except as set forth on Schedule 7.16, neither the
operation of the Business nor any of the Pipeline Assets (i) violates any
Environmental Law in effect on the date hereof, and without regard for future
modifications or amendments, (ii) is subject to any pending or threatened
action, suit, investigation, or other proceeding by any Governmental Authority
with
34
40
respect to an alleged violation of Environmental Law, or (iii) uses, and there
is not located on the ROW Real Estate, any Hazardous Substances other than
those forming a part of the petroleum products owned by Xxxxxxx AFB which are
maintained in accordance with Environmental Law in effect on the date hereof,
and without regard for future modifications or amendments.
(b) Except as set forth on Schedule 7.16, (i) there
exists no condition arising from the presence, release, threat of release,
placement on or under the ROW Real Estate, use, storage, handling, generation,
or disposal of any Hazardous Substance such as would require Remedial Work or
give rise to other liability or obligation, (ii) the Company has been issued
all material licenses, permits, and certificates required under Environmental
Law in effect on the date hereof for the conduct of the Business and (iii)
there exists no past or present violation of Environmental Law in effect on the
date hereof with respect to the Pipeline Assets or the Business that gives rise
to liability or obligation now or in the future.
(c) Schedule 7.16 describes all conditions as to which,
to the Knowledge of the Company, Remedial Work with respect to the Business or
the Pipeline Assets is required, and the scope and methodology of such Remedial
Work as currently in process or contemplated by the Company. The Company has no
liability or obligation, accrued, contingent or otherwise, with respect to the
matters described on Schedule 7.16, except for the obligation to complete
Remedial Work.
(d) The representation and warranty contained in this
Section 7.16 is the only representation and warranty made by PPI with respect
to environmental matters or Environmental Law, and no other representation or
warranty made herein shall be applicable to
35
41
such matters or Environmental Law. Notwithstanding the disclosure to Purchaser
on Schedule 7.16 or pursuant to Section 5.2 of any Remedial Work for which a
Purchase Price adjustment is not available pursuant to Section 3.1.2.3(ii),
such Remedial Work shall be regarded as a breach of this Section 7.16 for
purposes of Section 11.7.1.
Section 7.17 Tax Returns and Liabilities.
(a) Returns. The Company has delivered to Purchaser true
and complete copies of all Maryland and the District of Columbia income tax
returns relating to the operations of the Company for fiscal years 1992, 1993,
and 1994. The Company is included in the consolidated federal income tax
return filed by SIC.
(b) All Returns Filed. Except as set forth on Schedule
7.17:
(i) all tax returns and reports of every kind
(including, without limitation, information and withholding returns and reports
of or relating to any income taxes, franchise taxes, real and personal
property taxes, withholding taxes, employee compensation taxes, sales and use
taxes and all other taxes of any kind applicable to the Company) that are
required to be filed on or before the Closing Date in accordance with
Applicable Law by or with respect to the Company, or any other corporation that
is or was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which the Company was a member for any
period ending on or prior to the Closing Date have been or will be duly and
timely filed, and are or will be accurate and complete in all material
respects;
(ii) all taxes due have been or will be paid in
full, and the amounts so paid have been adequate to pay all income, franchise,
real and personal property, withholding and employment compensation taxes,
sales and use taxes and all other taxes of any kind
36
42
whatsoever, including interest and penalties, due and payable by the Company
for all periods ending on or before the date hereof;
(iii) all assessed deficiencies, if any, have been
fully paid and satisfied and no deficiencies for any of such taxes have been
asserted or threatened;
(iv) there are no outstanding agreements by the
Company for the extension of time for the assessment of any tax;
(v) the Company is not currently being audited by
the Internal Revenue Service, the District of Columbia, or the State of
Maryland or by any other taxing authorities and no such audit has been
threatened; and
(vi) the total amounts set up as liabilities for
current and deferred taxes have been prepared in accordance with GAAP in the
Unaudited Annual PPI Financial Statements and the Unaudited Monthly PPI
Financial Statements and are sufficient to cover the payment of all material
taxes that are or are hereafter finally determined to be, or to have been, due
with respect to the operations of the Company through the periods covered
thereby.
Section 7.18 Employee Relations. The Company has only one
employee. The Company believes that its relationship with its employee is
generally good. There is no pending or, to the Knowledge of the Company,
threatened labor dispute or union organization campaign. The Company's
employee is not represented by any labor union or is subject to a collective
bargaining agreement.
Section 7.19 Restrictive Agreements. Except as set forth on
Schedule 7.19, the Company is not a party to any agreements restricting or
limiting the activities of the Business.
37
43
Section 7.20 List of Assets. The Pipeline Assets include, but are
not limited to, and there shall be transferred to Purchaser at Closing, all of
the assets listed on Schedules 2.1(a), 2.1(b), 2.1(c), and 2.1(d).
Section 7.21 Information Furnished. Neither this Agreement nor
any instrument or document furnished to Purchaser hereunder, when considered as
a whole, contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
Section 7.22 All Assets Included. Except for the Excluded Assets,
the Pipeline Assets include all assets of any nature, real or personal,
tangible or intangible, necessary for or used in the operation of the Business
as operated by the Company.
Section 7.23 Intentionally Omitted.
Section 7.24 Right-of-Way Agreements. (a) Schedule 2.1(b) sets
forth a list of all Right-of-way Agreements. The Company has delivered to
Purchaser true and correct copies of the Right-of-way Agreements, and any
amendments thereto. Except as disclosed on Schedule 2.1(b), each such
Right-of-way Agreement is (i) in effect and has not been amended or otherwise
modified, and (ii) is binding upon and enforceable against the Company and, to
the Company's Knowledge, all parties thereto in accordance with its terms and
there is no default thereunder and, to the Knowledge of the Company, no other
party thereto has issued or threatened to issue a notice of termination or
cancellation.
(b) Except as set forth on Schedule 2.1(b), no consent is
required for the transfer or assignment of PPI's rights and obligations under
the Right-of-way Agreements to
38
44
Purchaser. The ROW Real Estate is free and clear of Liens (other than Liens,
if any, that will be released in full at Closing) and subject to Permitted
Encumbrances.
(c) The Right-of-way Agreements included in the Pipeline
Assets create a contiguous right-of-way from the barge receipt manifold at the
Anacostia Naval Facility in Washington, D.C. to the PPI Tanks located at
Xxxxxxx AFB and grant to PPI the right to operate the Pipeline and conduct the
Business thereon as it has been operated and conducted by PPI during the last
twelve months.
(d) The Pipeline is in good operating condition and
repair, ordinary wear and tear excepted, and has been maintained in accordance
with industry standards and in compliance with all governmental requirements.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND THE GUARANTOR
The Purchaser and the Guarantor, jointly and severally, represent and
warrant to PPI as follows as of the date of this Agreement and as of the
Closing Date:
Section 8.1 Authorization: No Contravention. The execution,
delivery and performance by Purchaser and Guarantor of this Agreement: (a) are
within Purchaser's and Guarantor's partnership power and authority and has been
duly authorized by all necessary action; (b) does not contravene the terms of
Purchaser's or Guarantor's respective limited partnership agreements; and (c)
will not violate, conflict with or result in any breach or default under any
contractual obligation of Purchaser or Guarantor, or violate any Applicable
Law.
39
45
Section 8.2 Binding Effect. This Agreement has been duly
executed and delivered by Purchaser and Guarantor, and constitutes the legal,
valid and binding obligation of Purchaser and Guarantor enforceable against
each of them in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors rights generally or by equitable principles relating
to enforceability.
Section 8.3 Broker's, Finder's or Similar Fees. No brokerage
commissions, finders fees or similar fees are payable in connection with the
transactions contemplated hereby under any agreements made by or with
Purchaser.
Section 8.4 Governmental Authorization; Third Party Consent. No
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Applicable Law, and no lapse of a waiting period under
Applicable Law, is necessary or required in connection with the execution,
delivery or performance by Purchaser or Guarantor (other than compliance with
the HSR Act) or enforcement against Purchaser or Guarantor of this Agreement.
Section 8.5 Sufficient Funds. As of the date hereof, Purchaser
has sufficient funds or has approved financing commitments which will enable it
to close the transactions contemplated under this Agreement. As of the Closing
Date, Purchaser will have funds available to it sufficient to close and to
fulfill its obligations hereunder.
Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters.
After giving effect to the financing to be incurred by Purchaser in
connection with its consummation of the transactions contemplated hereby,
Purchaser will not be as of the Closing Date (i) "insolvent" nor will it become
"insolvent" as the result of such transactions, (ii) engaged
40
46
in a business or transaction for which any property or assets remaining with
Purchaser would be "unreasonably little" or "unreasonably small in relation to
its business" or the transaction, or (iii) in a position where it "intends to
incur, or believes that it would incur, debts that would be beyond its ability
to pay as such debts mature," in each case as such quoted terms are used in
Section 548 of the United States Bankruptcy Code of 1978, as amended, the
Uniform Fraudulent Conveyances Act and the Uniform Fraudulent Transfer Act.
Section 8.7 Litigation. There are no legal actions, suits,
proceedings, or claims pending, or to the Knowledge of Purchaser or Guarantor,
threatened, before any Governmental Authority against or affecting Purchaser or
Guarantor (a) with respect to this Agreement, or any transactions contemplated
hereby, or (b) which would be reasonably likely to have an adverse effect on
the ability of the Purchaser or Guarantor to perform their respective
obligations hereunder. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any Governmental Authority
purporting to enjoin Purchaser or Guarantor with respect to, or restrain
Purchaser's or Guarantor's execution, delivery or performance of, this
Agreement.
ARTICLE 9
CLOSING
Section 9.1.A Time and Place. The consummation of the purchase and
sale of the Pipeline Assets (the "Closing") shall take place at the offices of
Xxxxxxxx, Xxxxxxx & Xxxxx at 0000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx, X.X. at 10:00
a.m. Washington time on October 31, 1995 (the "Closing Date"), or such other
date, time, and place as the parties shall agree. At
41
47
Closing, Purchaser shall be entitled to physical possession of the Pipeline
Assets, and PPI shall surrender the same to Purchaser.
Section 9.1.B Effective Date. The transactions contemplated by this
Agreement shall be effective at 12:01 A.M. on the Closing Date, without regard
to the date of recordation of deeds or other transfer documents.
Section 9.2 Documents and Instruments to be Delivered by PPI. At
Closing, PPI shall deliver to Purchaser (or, with respect to transfer documents
for the Right-of-way that require recordation, deliver to Presidential Title,
Inc. sufficiently prior to Closing to permit recording at the time of Closing):
(a) bills of sale, assignments, signed vehicle
registrations, and such other instruments as shall be required to transfer
title to the Pipeline Assets to Purchaser, free of Liens (except Permitted
Encumbrances), all in a form customary in the State of Maryland or the District
of Columbia, as applicable, and all to be in form reasonably satisfactory to
both parties;
(b) A certificate of an officer of PPI stating that (i)
PPI has complied with all of the covenants imposed on it by this Agreement to
the extent they are required to be complied with prior to the Closing, and (ii)
that the representations and warranties made by PPI are in all material
respects true and correct at Closing, all as required by Sections 5.1, 5.2 and
5.3;
(c) the legal opinion required by Section 5.5;
(d) copies of all consents, waivers and approvals
referred to in Section 5.6;
(e) copies of the resolutions of PPI's board of directors
and of any action required by PPI's stockholders authorizing the execution and
delivery of this Agreement, certified by PPI's secretary or assistant
secretary; and
42
48
(f) a good standing certificate from the State of
Maryland, dated as of a date not more than 20 days prior to the Closing Date.
Section 9.3.A Documents and Instruments to be Delivered by Purchaser.
At Closing, Purchaser shall deliver to PPI:
(a) the Purchase Price or Adjusted Purchase Price, as the
case may be, by bank check or wire transfer of immediately available funds, at
PPI's election, and, if by wire transfer, to such account as PPI may notify to
Purchaser not less than two Business Days prior to the Closing Date.
(b) the legal opinion required by Section 6.4;
(c) a certificate of an officer of the general partner of
the Purchaser stating that (i) Purchaser has complied with all of the covenants
imposed on it by this Agreement to the extent they are required to be complied
with prior to the Closing, and (ii) that the representations and warranties
made by Purchaser are in all material respects true and correct at Closing, all
as required by Sections 6.1 and 6.2; and
(d) copies of the resolutions of the board of directors
of Purchaser's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Purchaser's
general partner.
Section 9.3.B Documents and Instruments to be Delivered by Guarantor.
At Closing, Guarantor shall deliver to PPI:
(a) the legal opinion required by Section 6.4;
(b) a certificate of an officer of the general partner of
the Guarantor stating that (i) Guarantor has complied with all of the covenants
imposed on it by this Agreement to the
43
49
extent they are required to be complied with prior to Closing, and (ii) that
the representations and warranties made by Guarantor are in all material
respects true and correct at Closing, all as required by Sections 6.1 and 6.2;
and
(c) copies of the resolutions of the board of directors
of Guarantor's general partner authorizing the execution and delivery of this
Agreement, certified by the secretary or an assistant secretary of Guarantor's
general partner.
Section 9.4 Inventories.
9.4.1 Inventories. On the Closing Date, PPI and a DOD
quality assurance representative shall inventory the petroleum products and all
other liquids in the PPI tanks and the Pipeline related pipe fill to verify the
specifications of such petroleum products owned by DOD. The inventory shall be
performed at the joint expense of PPI and Purchaser and a Purchaser
representative may observe the inventory. PPI will be responsible for (i) any
shortages in the inventories (and DOD will be credited with any overages of
inventories), and (ii) any petroleum products that do not meet the DOD
specifications for such product, and PPI shall indemnify and hold Purchaser
harmless from liabilities or obligations resulting therefrom. Shortages and
overages in the inventories shall be determined as soon as practicable after
Closing. PPI shall have the right to resolve any specification matter with the
DOD, including disputing DOD's claims prior to Purchaser reaching any
settlement therefor.
9.4.2. Wastes. Representatives of Purchaser and PPI shall
jointly inventory all wastes (including waste water) stored in holding tanks
and separators. Purchaser's costs, if any, incurred in the disposal of such
volumes of waste which cannot legally be disposed of through the existing
systems at the Pipeline shall be reimbursed to Purchaser in accordance with
Section
44
50
9.4.2 of the Asset Purchase Agreement after consideration of amounts, if any,
paid by DOD. Purchaser shall dispose of said wastes within thirty (30) days of
Closing Date and shall submit copies of invoices and manifests to PPI within
sixty (60) days of the Closing Date. Purchaser shall be paid in accordance
with Section 9.4.2 of the Asset Purchase Agreement.
ARTICLE 10
TERMINATION
Section 10.1 Grounds for Termination. This Agreement may be
terminated as follows:
(a) by mutual agreement of the parties, at any time;
(b) by Purchaser if a Major Loss occurs, provided that
Purchaser gives notice of its intent to terminate within ten (10) Business Days
after it has received notice of such Major Loss;
(c) by Purchaser if it discovers a material breach of any
representation or warranty made by PPI which PPI is unable to cure within
thirty (30) days after having received notice of such breach; and
(d) by PPI if it discovers a material breach of any
representation or warranty made by Purchaser which Purchaser is unable to cure
within thirty (30) days after having received notice of such breach.
(e) by PPI at any time after November 30, 1995, if the
conditions to Closing set forth in Article 6 have not been met by that date,
unless the failure to meet such condition is attributable to any fault or
neglect of PPI; and
45
51
(f) by Purchaser at any time after November 30, 1995, if
the conditions to Closing set forth in Article 5 have not been met by that
date, unless the failure to meet such condition is attributable to any fault or
neglect of Purchaser; and
(g) by Purchaser pursuant to Section 3.1.2.4.
If this Agreement terminates pursuant to this Section 10.1, the Asset
Purchase Agreement and the Cockpit Agreement shall remain in full force and
effect, unless such agreements terminate by their own terms.
Section 10.2 Termination of the Asset Purchase Agreement. This
Agreement shall automatically terminate if the Asset Purchase Agreement
terminates for any reason, unless PPI and Purchaser agree that this Agreement
shall remain in full force and effect. If this Agreement does not terminate,
then PPI and Purchaser shall negotiate mutually agreeable terms to adjust the
indemnification limits and the Escrow Fund amount referred to in Article 11 of
the Asset Purchase Agreement consistent with the amount of the Purchase Price
and the terms and conditions of this Agreement.
Section 10.3 Effect of Termination. If this Agreement terminates:
(a) neither party shall have any obligation to the other
party, except that such termination shall be without prejudice to the rights of
any party resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of the other party under
this Agreement, provided that a failure by a party to close when all of the
conditions to such party's obligation to close have been met shall be deemed to
be an intentional breach of such party's covenants and agreements hereunder.
46
52
(b) promptly upon termination for any reason, Purchaser
shall return to PPI at Purchaser's expense all documents (including copies
thereof) received from PPI prior to, during and after the Due Diligence Period;
(c) the provisions of Section 3.1.1, Section 10.3, and
Sections 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 shall survive
the termination of this Agreement and continue in full force and effect.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by PPI. Subject to the provisions of
this Article 11, the Company agrees to indemnify, defend, and hold harmless the
Purchaser and its Affiliates, officers, directors, agents, shareholders,
partners, and employees, (each, a "Purchaser Indemnified Party") from and
against any and all liabilities, losses, claims (whether or not successful),
damages, and expenses (including reasonable fees, and disbursements of counsel)
(collectively, "Liabilities") resulting from or arising out of (i) any breach
of any representation or warranty, covenant or agreement of the Company set
forth in this Agreement, (ii) non-compliance with any applicable transfer or
bulk sales law, or (iii) obligations or liabilities of the Company related to
or arising out of acts, events or omissions occurring prior to the Closing and
not expressly assumed by Purchaser hereunder or indemnified against by
Purchaser pursuant to Section 11.7.3, or (iv) liabilities or obligations
related to any amendment to a Material Contract or Right-of-way Agreement not
delivered to Purchaser prior to the date of this Agreement, unless such
amendment is subsequently delivered to and accepted by Purchaser, provided,
47
53
however, that the Company shall not be liable under this Section 11.1 to any
Purchaser Indemnified Party for any amount paid in settlement of claims without
the Company's consent, unless such consent was requested and unreasonably
withheld.
Section 11.2 Survival of Representations and Warranties. The
representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, and
7.12 shall survive the Closing without limitation of time. The representations
and warranties set forth in Section 7.16 (Environmental Matters) shall survive
the Closing and shall expire three years after the Closing Date. The
representations and warranties set forth in Section 7.17 (Taxes) shall survive
the Closing and shall expire on a date that is ninety (90) days following the
expiration of the applicable statute of limitations. All other representations
and warranties shall survive the Closing and shall expire two years after the
Closing Date. Any right of Purchaser to make a claim against the Company for a
breach of any covenant or agreement of the Company herein shall survive the
Closing and shall expire one hundred eighty (180) days after the date on which
the Company was obligated to comply with the covenant or agreement. Any claim
for breach of a representation and warranty, or covenant or agreement, must be
made by Purchaser by a demand for arbitration to the Company prior to the
expiration of such representation and warranty, or the right to make a claim
for a breach of such covenant or agreement, and any such claims covered by such
demands made by Purchaser to the Company within such time periods shall survive
until resolved.
Section 11.3 Indemnification by Purchaser. Purchaser, its
successor and assigns, jointly and severally, agree to indemnify, defend, and
hold harmless the Company and its Affiliates, officers, directors,
shareholders, partners, warrant holders, agents, and employees, (each, an
48
54
"PPI Indemnified Party") from and against any and all Liabilities resulting
from or arising out of (i) any breach of any representation, warranty, covenant
or agreement of Purchaser or Guarantor set forth in this Agreement or (ii)
obligations or liabilities of the Purchaser with respect to the Business or the
Pipeline Assets, including those which may be imposed upon any PPI Indemnified
Party, related to or arising out of acts, events or omissions occurring after
the Closing and not expressly assumed by any PPI Indemnified Party hereunder
and specifically including (but not limited to) liabilities or obligations
arising from the failure of Purchaser to assume any post-Closing liabilities as
required by Section 2.2, provided, however, that Purchaser shall not be liable
under this Section 11.3 to any PPI Indemnified Party for any amount paid in
settlement of claims without Purchaser's consent unless such consent was
requested and unreasonably withheld, and provided further that the right of the
PPI Indemnified Parties to make a claim for breach of any covenants or
agreements of Purchaser herein shall expire one hundred eighty (180) days after
the date on which the Purchaser was obligated to comply with the covenant or
agreement.
Section 11.4 Indemnification Claims.
(a) PPI, SPC and Purchaser acknowledge and agree that the
Escrow Fund, established by SPC at Closing, will be used to satisfy claims for
indemnification under the Purchase Agreements, including all indemnification
claims under this Agreement, for which no limit on liability has been
established in accordance with the terms of Section 11.4 of the Asset Purchase
Agreement.
(b) With the exception of (i) claims arising under
Section 11.7.1.1 (ii) claims for fines or penalties imposed by Governmental
Authorities, (iii) claims for Liens that are not
49
55
Permitted Encumbrances, (iv) claims related to breaches of the agreements of
the Company in Section 9.4, and (v) claims under Section 11.1 (iv), for which
there shall be no minimum claim, Purchaser shall not be entitled to assert any
claim for indemnification hereunder until the aggregate of all indemnifications
claims that may be made pursuant to the Purchase Agreements exceeds the minimum
amount described in Section 11.6 of the Asset Purchase Agreement. Purchaser
shall follow the notice procedures set forth in Section 11.6 of the Asset
Purchase Agreement for making claims for indemnification hereunder.
Section 11.5 Limits on Liability. With the exception of (i)
claims arising under Sections 7.1, 7.2, 7.3, 7.4, and 7.12 (ii) claims for
fines or penalties imposed by Governmental Authorities, (iii) claims for Liens
that are not Permitted Encumbrances, (iv) claims related to breaches of the
agreements of the Company in Section 9.4, and (v) claims under Section
11.1(iv), for which there shall be no limitation of amount, the Company's
maximum liability for Liabilities under the Company's indemnifications under
this Agreement, including without limitation Section 11.7.1.1, shall be the
Escrow Fund, and neither the Company nor any of its Affiliates, shareholders,
officers, directors, agents and employees shall have any liability for such
Liabilities in excess of the Escrow Fund.
Section 11.6 Intentionally Omitted.
Section 11.7 Special Environmental Indemnification and
Post-Closing Covenants by Purchaser.
11.7.1.1 To the extent that, prior to the date three years
after the Closing Date, Purchaser discovers and notifies PPI and SPC of facts
or circumstances that give rise to Remedial Work (including Remedial Work
related to matters discovered prior to the Closing or
50
56
disclosed on Schedule 7.16) with respect to the Pipeline Assets or the Business
(except for Remedial Work attributable to (i) changes in Environmental Law
occurring after the Closing Date, or (ii) events occurring or actions of
Persons other than PPI, SPC, SPCT or SIC taken after the Closing Date), the Net
Remedial Cost for such Remedial Work with respect to the Pipeline Assets or the
Business shall be calculated as part of the Aggregate Net Remedial Cost
determined pursuant to the terms of Section 11.7.1.1 of the Asset Purchase
Agreement and shall be paid in accordance with those terms, subject to the
limits set forth in Section 11.7.1.1 of the Asset Purchase Agreement.
Notwithstanding the preceding portions of this Section 11.7.1.1,
Purchaser shall not be liable for or be required to pay any Net Remedial Costs
resulting from or arising out of any action or omission after Closing of any
PPI Indemnified Party that constitutes or causes a violation of Environmental
Law with respect to the Pipeline Assets or the Business or gives rise to the
need to perform Remedial Work with respect thereto, unless otherwise agreed to
in writing by Purchaser.
11.7.1.2 Purchaser shall not alter or change the scope or
methodology of Remedial Work described on Schedule 7.16 except as required by
Applicable Law or as approved by the Company, which approval shall not be
unreasonably withheld, provided, however, that an objection shall not be deemed
unreasonable solely because it is based on an increase in the cost for
performing such Remedial Work. For so long as PPI has any liability to
Purchaser under Section 11.7.1.1, Purchaser shall use commercially reasonable
efforts to perform and complete all such required Remedial Work and shall keep
PPI and SPC informed of the progress of such Remedial Work. In addition,
before undertaking any such Remedial
51
57
Work Purchaser shall notify PPI of the scope and methodology of such Remedial
Work, sufficiently in advance (except as emergency conditions may require
otherwise) to permit PPI to comment on such scope and methodology. Recognizing
that the final decision on scope and methodology rests with Purchaser,
Purchaser shall nonetheless make a good faith effort to reach agreement with
PPI regarding such scope and methodology, recognizing PPI's financial interest
therein. Purchaser shall provide PPI and SPC with copies of all plans,
reports, and correspondence submitted to any Governmental Authority with
respect to such Remedial Work. Purchaser will not agree to any such Remedial
Work or other actions that commit or bind PPI or SPC (beyond the payment of
money hereunder) without the prior consent of PPI and SPC. Purchaser will
provide PPI and SPC with copies of all invoices rendered by Persons actually
performing such Remedial Work, and PPI and SPC shall be deemed to have accepted
the validity and reasonableness of such invoices if it does not notify
Purchaser to the contrary within ten (10) Business Days of receiving the same.
11.7.2 (a) Purchaser and Guarantor acknowledge that (i)
Purchaser has reviewed copies of all documents and other materials related to
environmental matters with respect to the Pipeline Assets and the Business that
were provided by the Company, (ii) the Company has specifically bargained for
relief, as more particularly described herein, from post-Closing liability
resulting from violations of Environmental Law or the performance of Remedial
Work with respect to the Pipeline Assets or the Business, and (iii) the
Purchase Price and Adjusted Purchase Price, as the case may be, reflect
Purchaser's willingness to accept liability (and Guarantor's willingness to
guarantee Purchaser's obligation to accept such liability) with respect to such
matters as more fully described below.
52
58
(b) Purchaser has agreed to assume, and Guarantor has
agreed to guarantee the obligation of Purchaser to assume, as of the Closing
all obligations and liabilities resulting from or arising out of any actual or
alleged violation of Environmental Law related to the Pipeline Assets or the
Business, regardless of when such violation was supposed to have occurred, or
the performance of Remedial Work with respect to the Pipeline Assets or the
Business, except for (i) fines and penalties imposed by any Governmental
Authority relating to violations of Environmental Law that occurred prior to
Closing with respect to the Pipeline Assets or the Business, (ii) payments to
be made to Purchaser pursuant to Section 11.7.1.1, (iii) obligations or
liabilities that result from or arise out of any act or omission after the
Closing of any PPI Indemnified Party that constitutes or causes a violation of
Environmental Law with respect to the Business or the Pipeline Assets or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11.
(c) For the avoidance of any doubt, Purchaser, Guarantor
and PPI confirm their agreement that PPI shall have no obligation or liability
post-Closing resulting from or arising out of any actual or alleged violation
of Environmental Law related to the Pipeline Assets or the Business, regardless
of when such violation was supposed to have occurred, or the performance of
Remedial Work with respect to the Pipeline Assets or the Business, except (i)
fines and penalties imposed by any Governmental Authority relating to
violations of Environmental Law that occurred prior to Closing with respect to
the Pipeline Assets or the Business, (ii) payments to be made to Purchaser
pursuant to Section 11.7.1.1, (iii) obligations
53
59
or liabilities that result from or arise out of any act or omission after the
Closing of any PPI Indemnified Party that constitutes or causes a violation of
Environmental Law with respect to the Business or the Pipeline Assets or gives
rise to the need to perform Remedial Work with respect thereto, unless
otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of
the representations and warranties set forth in Section 7.16 to the extent
Purchaser is entitled to indemnity under this Article 11.
11.7.3 Purchaser, its successors and assigns, jointly and
severally, agree to indemnify, defend, and hold harmless each PPI Indemnified
Party from and against any and all Liabilities resulting from or arising out
of any actual or alleged violation of Environmental Law related to the Pipeline
Assets or the Business, regardless of when such violation was supposed to have
occurred, or the performance of Remedial Work with respect to the Pipeline
Assets or the Business, except for (i) fines and penalties imposed by any
Governmental Authority relating to violations of Environmental Law that
occurred prior to Closing with respect to the Pipeline Assets or the Business,
(ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii)
obligations or liabilities that result from or arise out of any act or omission
after the Closing of any PPI Indemnified Party that constitutes or causes a
violation of Environmental Law with respect to the Business or the Pipeline
Assets or gives rise to the need to perform Remedial Work with respect thereto,
unless otherwise agreed to in writing by Purchaser, and (iv) claims for a
breach of the representations and warranties set forth in Section 7.16 to the
extent Purchaser is entitled to indemnity under this Article 11.
Notwithstanding the preceding provisions of this Section 11.7.3, Purchaser
shall not be liable under this Section 11.7.3 to any
54
60
PPI Indemnified Party for any amount paid in settlement without Purchaser's
consent unless such consent was requested and unreasonably withheld.
11.7.4 Purchaser shall, for a period of five (5) years after
Closing, notify the Company and SPC promptly of any claim made by any
Governmental Authority or by any Person that there has been a violation of
Environmental Law in connection with the Pipeline Assets or the Business, or
occurring on or from the Pipeline or the ROW Real Estate, and shall thereafter
keep the Company and SPC informed of actions being taken or the conduct of
proceedings with respect to such claim, provided that once it has been
reasonably determined to the satisfaction of PPI and SPC that the amount
required to resolve such claim (whether by performing Remedial Work or
otherwise) is less than $250,000, Purchaser shall no longer be obligated to
provide PPI and SPC with information about such claim.
Section 11.8 Notification; Counsel. Each Indemnified Party under
this Article 11 will, promptly after the receipt of notice of the commencement
of any action, investigation, claim or other proceeding against such
Indemnified Party in respect of which indemnity may be sought under this
Article 11, notify the Company and SPC or the Purchaser, as the case may be, in
writing of the commencement thereof. The failure of any Indemnified Party to
give such notice shall not relieve the indemnifying party from any liability
which it may have to such Indemnified Party unless, and only to the extent
that, such omission materially adversely affects the indemnifying party's
ability to defend in such action, claim or other proceeding. In case any such
action, claim or other proceeding shall be brought against any Indemnified
Party and it shall notify the indemnifying party of the commencement thereof,
and, except as otherwise stated herein, the indemnifying party shall be
entitled to assume the defense thereof at its own expense,
55
61
with counsel satisfactory to such Indemnified Party. Notwithstanding the
foregoing, in any action, claim or proceeding in which both an indemnifying
party, on the one hand, and an Indemnified Party, on the other hand, is, or is
reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the indemnifying party's expense and to
control its own defense of such action, claim or proceeding if, in the
reasonable opinion of counsel to such Indemnified Party, a conflict or
potential conflict exists between the indemnifying party, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable. In any event, the Indemnified Party will reasonably
cooperate with the indemnifying party in any defense undertaken by an
indemnifying party.
Section 11.9 Net Worth Covenant.
(a) PPI agrees that for a period of five (5) years after
Closing it will maintain a net worth (assets minus liabilities on a GAAP basis
balance sheet adding back the deferred income taxes, if any, attributable to
any like-kind exchange completed in accordance with Section 3.8) in excess of
$250,000.00. During the five (5) year period, PPI shall provide to Purchaser,
as soon as they are available, but in no event more than sixty (60) days after
year end, annual calendar year GAAP basis financial statements (and more
frequent financial statements if requested by Purchaser) and such other
information as is reasonably necessary for Purchaser to confirm compliance with
the net worth covenants described in this Section 11.9.
(b) PPI may (so long as SIC meets the net worth
requirements set forth in the next sentence), at any time during the five (5)
year period, provide Purchaser with a guaranty, in the form attached hereto as
Exhibit 11.9, from SIC in the amount of $250,000 and upon the delivery of such
guaranty to Purchaser the covenant contained in subsection (a) of this Section
56
62
11.9 shall be null and void. Purchaser shall accept the SIC guaranty so long
as SIC has, and agrees to maintain for the remainder of the five (5) year
period, a net worth equal to or greater than $250,000. If SIC provides the
guaranty described above, PPI shall not thereafter be required to comply with
the requirements of Section 11.9(a), and the guaranty shall state that SIC
shall thereafter provide to Purchaser, at the times the PPI financial
statements would have been required under the preceding subsection (a) of this
Section 11.9, a letter from SIC's independent auditors stating that SIC's net
worth (on a GAAP balance sheet basis adding back the deferred income taxes, if
any, attributable to the proposed like-kind exchange completed in accordance
with Section 3.8 of the Purchase Agreements and those liabilities attributable
to the above market portion of payment obligations under the throughput
agreements described in Section 5.7 of the Asset Purchase Agreement) is at
least equal to $250,000.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Notices. All notices, requests, demands, consents,
approvals and other communications provided for or permitted hereunder shall be
made in writing and shall be delivered by hand or sent by telecopier or courier
service:
(a) if to Purchaser or Guarantor:
Kaneb Pipe Line Partners, L.P.
0000 X. Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
57
63
with a copy to:
Support Terminal Services, Inc.
00000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Attn: Xxxx Xxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
(b) if to the Company or SPC:
Piney Point Industries, Inc.
0000 Xxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx XX, and
General Counsel
with a copy to:
Xxxxxxxx, Xxxxxxx and Xxxxx, Chartered
0000 Xxxxxxxxxxx Xxxxxx, X.X. Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telecopier No.: (000) 000-0000
Attention: Xxx X. Xxxxx, Esq.
with a copy to SPC:
Xxxxxxx Petroleum Company
0000 Xxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopier No.: (000) 000-0000
Attention: President, and
General Counsel
58
64
Section 12.2 Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of the
parties hereto. No party hereto may assign its rights under this Agreement
without the consent of the other party, except that (i) PPI may liquidate and
dissolve without Purchaser's consent if SIC provides the guaranty as permitted
by Section 11.9, and (ii) Purchaser may assign its rights under this Agreement
to any Affiliate, but such assignment shall not relieve Purchaser or Guarantor
of any of their obligations hereunder to the extent such obligations are not
performed by Purchaser's assignee.
Section 12.3 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to any party hereto
at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by any party hereto from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by all parties hereto, or, in the case of a waiver, by
the party waiving compliance and (ii) only in the specific instance and for the
specific purpose for which made or given.
59
65
Section 12.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of New York, without regard to the
principles of conflicts of law of New York.
Section 12.5 Jurisdiction. Any controversy or claim arising out
of or relating to this Agreement or any agreements or transactions
contemplated hereby shall be settled by arbitration in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association in
effect on the date hereof, and any award rendered in such arbitration shall be
final and binding on the Parties. Judgment on any award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be decided by a single arbitrator, who shall be a
lawyer experienced in commercial matters. The parties shall attempt to agree on
an arbitrator but either party may at any time request that an arbitrator be
selected in accordance with the Commercial Arbitration Rules. Any arbitration
hereunder shall be held in New York City, New York. The prevailing party shall
be entitled in any arbitration hereunder to recover its reasonable attorney's
fees and all costs and expenses of the arbitration.
Section 12.6 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
Section 12.7 Entire Agreement. The Purchase Agreements are a
complete and exclusive statement of the agreement and understanding of the
parties hereto with respect to the subject
60
66
matter contained herein. The Purchase Agreements supersede all prior
agreements and understandings between the parties with respect to the subject
matter contained herein.
Section 12.8 Expenses. Each party will bear its own expenses
incurred in connection with the negotiation and execution of this Agreement,
and Purchaser shall pay its expenses incurred in carrying out due diligence,
including Audits.
Section 12.9 Publicity. Except as may be required by Applicable
Law, or as required in connection with Kaneb Pipe Line Partners L.P.'s
registration statement filed under the Securities Act of 1933 and the related
offering of partnership units, none of the parties shall issue a publicity
release or announcement or otherwise make any public disclosure concerning this
Agreement without the prior approval of the other party. If any announcement is
required by law to be made by either party , prior to making such announcement
such party will deliver a draft of such announcement to the other party and
shall give the other party an opportunity to comment thereon.
Section 12.10 Further Assurances. Each party shall execute such
documents and perform such further reasonable acts (including without
limitation reasonable action to obtain any consents, exemptions,
authorizations, or other actions by, or giving any notices to, or making any
filings with, any Governmental Authority or any other Person) as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
Section 12.11.A Post-Closing Access to Books and Records by
Purchaser. For a period of five (5) years after the Closing Date, subject to
reasonable advance notice of time and purpose and to the execution by Purchaser
of reasonable confidentiality undertakings, Purchaser and its authorized
representatives may at Purchaser's expense have reasonable access during normal
61
67
business hours to the books and records related to the Business or the Pipeline
Assets that are not included in the Pipeline Assets and PPI will furnish to
Purchaser such additional information and will cooperate with Purchaser in such
other respects as Purchaser may reasonably request, to the extent that such
access and disclosure of such information and cooperation are required by
Purchaser for financial reporting, tax, or similar purposes, or for purposes of
investigating matters which may be the subject of litigation or administrative
proceedings with third parties or Governmental Authorities, so long as such
disclosure, access, and cooperation do not violate the terms of any agreement
to which PPI is bound or any Applicable Law or result in the loss of any
attorney-client or work product privilege. PPI will use reasonable efforts in
accordance with PPI's normal record maintenance procedures to keep and maintain
all such books and records for a period of five (5) years from the Closing or
longer as may be required by statute, except that notwithstanding any
requirements of PPI's normal record maintenance procedures, PPI shall not
destroy such books and records related to the Business or the Pipeline Assets
during such five (5) year period. From and after such five (5) year period,
PPI shall give Purchaser sixty (60) days prior notice before destroying any of
such books and records, and Purchaser may at any time during such sixty (60)
days take possession, at Purchaser's cost, of such books and records, provided
that if Purchaser does not take possession of any of such books and records
during such sixty (60) days, PPI shall be free thereafter to dispose of such
books and records.
Section 12.11.B Post-Closing Access to Books and Records by PPI. For
a period of five (5) years after the Closing Date, subject to reasonable
advance notice of time and purpose and to the execution by PPI of reasonable
confidentiality undertakings, PPI and its authorized
62
68
representatives may at PPI's expense have reasonable access during normal
business hours to the books and records related to the Business or Acquired
Assets that are included in the Acquired Assets and Purchaser will furnish to
PPI such additional information and will cooperate with PPI in such other
respects as PPI may reasonably request, to the extent that such access and
disclosure of such information and cooperation are required by PPI for
financial reporting, tax, or similar purposes, or for purposes of investigating
matters which may be the subject of litigation or administrative proceedings
with third parties or Governmental Authorities, so long as such disclosure,
access, and cooperation do not violate the terms of any agreement to which
Purchaser is bound or any Applicable Law or result in the loss of any
attorney-client or work product privilege. Purchaser will use reasonable
efforts in accordance with Purchaser's normal record maintenance procedures to
keep and maintain all such books and records transferred to Purchaser hereunder
for a period of five (5) years from the Closing or longer as may be required by
statute, except that notwithstanding any requirements of Purchaser's normal
record maintenance procedures, Purchaser shall not destroy books and records
transferred to Purchaser hereunder during such five (5) year period. From and
after such five (5) year period, Purchaser shall give PPI sixty (60) days prior
notice before destroying any of such books and records, and PPI may at any time
during such sixty days take possession, at PPI's cost, of such books and
records, provided that if PPI does not take possession of any of such books and
records during such sixty (60) days, Purchaser shall be free thereafter to
dispose of such books and records.
Section 12.12 Intentionally Omitted.
Section 12.13 Capitalized Terms. Terms having initial capitalized
letters not otherwise defined herein shall have the meaning given those terms
in the Asset Purchase Agreement.
63
69
Section 12.14 Accounts Receivable Collections. The parties agree
that all accounts receivable payments under the Contracts shall be pro rated as
of the Closing Date. SPC shall be credited with such amounts attributable to
periods prior to Closing and Purchaser shall be credited with such amounts
attributable to periods after Closing and the Purchase Price shall be adjusted
accordingly.
Section 12.15 Prorations. Real Estate property taxes and assessments
for which PPI is liable, water, sewer and utility charges, normal operating
expenses, annual permit or inspection fees (calculated on the basis of the
period covered), and all other charges and fees customarily prorated and
adjusted in similar transactions shall be prorated at Closing on the basis of a
365-day year. If any item subject to proration cannot be calculated accurately
on the Closing Date, then such item shall be calculated within thirty (30) days
after the Closing Date and any party owing another party a sum of money based
on such subsequent proration(s) shall promptly pay the sum owed, together with
interest thereon at the rate of seven percent (7%) per annum from the Closing
Date to the date of payment if payment is not made within ten (10) days after
delivery of an invoice therefor.
Section 12.16 Guaranty. Guarantor acknowledges and agrees that it
will derive substantial direct and indirect benefits from providing the
guaranty set forth in this Section 12.16 and Guarantor has determined that it
is in its best interest to provide this guaranty. Guarantor absolutely and
unconditionally guarantees to PPI and each PPI Indemnified Party the due and
punctual payment of all liabilities and obligations of Purchaser to PPI or each
PPI Indemnified Party, as appropriate, in accordance with the terms of this
Agreement (and specifically including the indemnification obligations set forth
in Article 11). Guarantor guarantees to PPI and each
64
70
PPI Indemnified Party the performance of all of Purchaser's obligations,
liabilities, covenants and agreements (and specifically the indemnification
obligations set forth in Article 11) of Purchaser to PPI or each PPI
Indemnified Party, as appropriate. Guarantor agrees to indemnify and hold PPI
and each PPI Indemnified Party harmless from and against all liability and
expense, including reasonable attorneys' fees, sustained by PPI or any PPI
Indemnified Party by reason of the failure of Purchaser to fully perform and
comply with the terms and obligations of this Agreement. Guarantor expressly
waives any right to require PPI or any PPI Indemnified Party to bring any
action, or exhaust its rights, against Purchaser or any other person, or to
require that resort be had to any assets of Purchaser before pursuing the
Guarantor under this Section 12.16.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their authorized officers as of the date first above
written.
PINEY POINT INDUSTRIES, INC.
By: /s/ XXXXXXX X. XXXXXXX XX
Name: Xxxxxxx X. Xxxxxxx XX
Title: President
SUPPORT TERMINALS OPERATING
PARTNERSHIP, L.P.
By: Support Terminal Services, Inc., its
general partner
By:/s/ X. X. XXXXXXX
Name: X. X. Xxxxxxx
Title: Chairman
65
71
KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By: Kaneb Pipe Line Company, its
general partner
By:/s/ X. X. XXXXXXX
Name: X. X. Xxxxxxx
Title: Chairman
By executing and delivering this Agreement to Purchaser, Xxxxxxx
Petroleum Company hereby acknowledges and assumes the obligations delegated to
or imposed upon Xxxxxxx Petroleum Company under this Agreement, including but
not limited to those payment obligations for indemnification claims that shall
be made from the Escrow Fund.
XXXXXXX PETROLEUM COMPANY
By:/s/ XXXX X. XXXXXXX
Name: Xxxx X. Xxxxxxx
Title: President and C.E.O.
66
