-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UoTgh73uzDW//lvzh+g1P0kgzi120hNZvxS0n1OBmOwFQEZe4JDb7bcF21LrFlc7 RSDrBpNIvYLislL6oa3t3A== 0000950134-96-000015.txt : 19960104 0000950134-96-000015.hdr.sgml : 19960104 ACCESSION NUMBER: 0000950134-96-000015 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950827 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960103 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KANEB SERVICES INC CENTRAL INDEX KEY: 0000054441 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 751191271 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-05083 FILM NUMBER: 96500594 BUSINESS ADDRESS: STREET 1: 2400 LAKESIDE BLVD CITY: RICHARDSON STATE: TX ZIP: 75082 BUSINESS PHONE: 2146994000 MAIL ADDRESS: STREET 1: P O BOX 650283 CITY: DALLAS STATE: TX ZIP: 75265-0283 FORMER COMPANY: FORMER CONFORMED NAME: KANEB PIPE LINE CO DATE OF NAME CHANGE: 19710610 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8 - KA CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): AUGUST 27, 1995 KANEB SERVICES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 1-5083 74-1191271 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 2435 N. Central Expressway, Seventh Floor, Richardson, Texas 75080 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 699-4000 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On December 18, 1995, the Registrant, through its wholly-owned subsidiary, Kaneb Pipe Line Company, as general partner for and on behalf of Kaneb Pipe Line Partners, L.P., its operating partnership, Kaneb Pipe Line Operating Partnership, L.P., signed definitive purchase agreements to acquire from Steuart Petroleum Company and certain of its affiliates (collectively, "Steuart") the liquids terminaling assets of Steuart. The acquisition price of $68 million was financed by bank borrowings. The Steuart terminaling assets consist of seven petroleum products terminals located in the District of Columbia, Florida, Georgia, Maryland and Virginia and the pipeline and terminaling services to Andrews Air Force Base in Maryland. The terminals have in the aggregate approximately 9 million barrels of storage capacity in 87 tanks. Steuart's two largest facilities are located near Washington, D.C. and Jacksonville, Florida. The Piney Point, Maryland terminal is the closest deep water petroleum storage facility to Washington D.C. The Piney Point Maryland terminal has 30 tanks with approximately 5.5 million barrels of aggregate storage capacity, which is currently used to store petroleum products,consisting primarily of fuel oil. The Jacksonville terminal has 28 tanks with approximately 2.1 million barrels of aggregate storage capacity, which is currently used to store petroleum products including gasoline, No. 2 oil, No. 6 oil, diesel, jet fuel, kerosene and bunker fuel. 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of business to be acquired. Report of Independent Accountants. Statements of Revenues and Direct Operating Expenses - Years Ended December 31, 1994 and 1992, Period from January 1, 1993 to June 8, 1993 and the Period from June 9, 1993 to December 31, 1993; Statements of Net Assets To Be Acquired - December 31, 1994 and 1993. Notes to Statements of Net Assets to be Acquired and Statements of Revenues and Direct Operating Expenses. (b) Pro forma financial information (unaudited). (c) Exhibits. 10.1 Asset Purchase Agreement by and among Steuart Petroleum Company, SPC Terminals, Inc., Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. 10.2 Piney Point Pipeline Asset Purchase Agreement by and among Piney Point Industries, Inc., Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. 10.3 Purchase Agreement by and among Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point 10.4 Amendment to Asset Purchase Agreements by and among Steuart Petroleum Company, SPC Terminals, Inc., Piney Point Industries, Inc., Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. 23.1 Consent of Independent Accountants. 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KANEB SERVICES, INC. -------------------- (Registrant) Date: January 3, 1996 /s/ Tony M. Regan -------------------- Tony M. Regan Controller 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KANEB SERVICES, INC. -------------------- (Registrant) Date: January 3, 1996 -------------------- Tony M. Regan Controller 6 REPORT OF INDEPENDENT ACCOUNTANTS To the Boards of Directors of Steuart Petroleum Company and Steuart Investment Company We have audited the accompanying statements of revenues and direct operating expenses of SPC/SIC - Terminal Operations Division for the year ended December 31, 1992 and the period from January 1, 1993 to June 8, 1993. These financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on these statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of revenues and direct operating expenses are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in these statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of these statements. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, the accompanying statements were prepared to present the revenues and direct operating expenses attributable to SPC/SIC - Terminal Operations Division, and are not intended to be a complete presentation of the revenues and expenses of SPC/SIC - Terminal Operations Division. In our opinion, such statements of revenues and direct operating expenses present fairly, in all material respects, the revenues and direct operating expenses of SPC/SIC - Terminal Operations Division for the year ended December 31, 1992 and the period from January 1, 1993 to June 8, 1993 in conformity with the basis of presentation described in Note 1 and generally accepted accounting principles. PRICE WATERHOUSE LLP Washington, D.C. August 18, 1995 7 REPORT OF INDEPENDENT ACCOUNTANTS To the Boards of Directors of Steuart Petroleum Company and Steuart Investment Company We have audited the accompanying statements of net assets to be acquired as of December 31, 1993 and 1994 and the related statements of revenues and direct operating expenses of SPC/SIC - Terminal Operations Division for the period from June 9, 1993 to December 31, 1993 and the year ended December 31, 1994. These financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on these statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of net assets to be acquired and the statements of revenues and direct operating expenses are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in these statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of these statements. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, the accompanying statements were prepared to present the net assets to be acquired and the revenues and direct operating expenses attributable to SPC/SIC - Terminal Operations Division, and are not intended to be a complete presentation of the net assets or revenues and expenses of SPC/SIC - Terminal Operations Division. In our opinion, such statements of net assets to be acquired and statements of revenues and direct operating expenses present fairly, in all material respects, the net assets to be acquired as of December 31, 1993 and 1994 and the revenues and direct operating expenses for the period from June 9, 1993 to December 31, 1993 and the year ended December 31, 1994 of SPC/SIC - Terminal Operations Division, in conformity with the basis of presentation described in Note 1 and generally accepted accounting principles. PRICE WATERHOUSE LLP Washington, D.C. August 18, 1995 8 SPC/SIC- TERMINAL OPERATIONS DIVISION STATEMENTS OF NET ASSETS TO BE ACQUIRED (In thousands)
December 31 ----------- June 30, 1995 1993 1994 (unaudited) ---- ---- --------------- Assets ------ Current assets - other receivables - environmental reimbursements $ 330 $ - $ - Property, plant and equipment, less accumulated depreciation and amortization 42,171 44,571 44,335 Other assets Investment in joint venture - 25 - Other receivables - environmental reimbursements 418 300 300 -------- --------- --------- Total assets 42,919 44,896 44,635 -------- --------- --------- Liabilities ----------- Current liabilities - environmental costs 525 200 200 Noncurrent liabilities - environmental costs 715 650 650 Accumulated losses of joint venture in excess of investment - - 42 -------- --------- --------- Total liabilities 1,240 850 892 -------- --------- --------- Net assets to be acquired $ 41,679 $ 44,046 $ 43,743 ======== ========= =========
The accompanying notes are an integral part of these statements. 9 SPC/SIC- TERMINAL OPERATIONS DIVISION STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (In thousands)
For the six months For the period from For the period from ended For the year ended January 1, 1993 to June 9, 1993 to For the year ended June 30, December 31, 1992 June 8, 1993 December 31, 1993 December 31, 1994 1994 1995 ------------------ ------------------- ------------------- ------------------ ---- ---- (unaudited) Revenues Third party $17,124 $7,373 $ 9,759 $19,777 $10,865 $7,753 SPC-Marketing Division and other (Note 8) 2,340 1,063 1,388 2,895 1,481 1,360 ------- ------ ------- ------- ------- ------ 19,464 8,436 11,147 22,672 12,346 9,113 Direct operating expenses Sales and operations 8,512 4,184 5,084 9,283 4,666 3,790 Selling, general and administrative 1,090 638 888 1,679 816 800 Depreciation and amortization 1,418 687 2,218 4,267 2,104 2,196 ------- ------ ------- ------- ------- ------ 11,020 5,509 8,190 15,229 7,586 6,786 Losses of joint venture - - - 75 11 67 ------- ------ ------- ------- ------- ------ Excess of revenues over direct operating expenses and losses of joint venture $ 8,444 $2,927 $ 2,957 $ 7,368 $ 4,749 $2,260 ======= ====== ======= ======= ======= ======
The accompanying notes are an integral part of these statements. 10 SPC/SIC- TERMINAL OPERATIONS DIVISION NOTES TO STATEMENTS OF NET ASSETS TO BE ACQUIRED AND STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (In thousands) NOTE 1 - BASIS OF PRESENTATION Kaneb Pipe Line Partners, L.P. ("KPP") expects to enter into agreements with Steuart Petroleum Company ("SPC" or the "Company," a wholly-owned subsidiary of Steuart Investment Company) and Steuart Investment Company ("SIC"), the sellers, to acquire certain of the assets and assume certain of the liabilities relating to the business of the terminal operations division of SPC, the terminal operations and pipeline business of SIC and the partnership interest of SPC Terminals Inc. (a wholly-owned subsidiary of Steuart Petroleum Company - see Note 7). Such purchased net assets to be acquired are collectively referred to herein as SPC/SIC - Terminal Operations Division or "Division." The Division is engaged principally in the terminal storage and throughput services business. The assets to be acquired include five terminals (located in Piney Point, Maryland; Washington, D.C. (2); Cockpit Point, Virginia and Jacksonville, Florida) and a pipeline in Maryland. The businesses also include two leased terminals (located in Brunswick, Georgia and Savannah, Georgia - see Note 7). The accompanying special-purpose financial statements include the net assets to be acquired and related revenues and direct operating expenses of the Division and are not intended to be a complete presentation of the assets, liabilities or the results of operations of the sellers or the Division on a stand-alone basis. These financial statements do not reflect the revaluation of assets and liabilities to be acquired by KPP to their fair market value at the date of acquisition. The statements have been prepared in accordance with generally accepted accounting principles and were derived from the historical accounting records of SPC and SIC. The statements of net assets to be acquired include the net assets of SPC and SIC which are directly related to the businesses to be acquired. As a result, the statements do not include cash, accounts and notes receivable, prepaid expenses, accounts payable and accrued expenses and borrowings. The statements of revenues and direct operating expenses include the revenue and expenses directly attributable to the businesses, and also include an allocation of certain expenses directly attributable to the businesses which have been historically segregated by SPC and SIC in their accounting records. Full historical financial statements, including certain general and administrative expenses and other indirect expenses, interest expense and income taxes, have not been presented due to the fact that management believes it is not practicable to determine that portion which is attributable to the Division. Management of the sellers believes the basis of allocating all other expenses to be reasonable; however, the amounts could differ from amounts that would be determined if the Division were operated on a stand-alone basis. In addition, centralized cash accounts for the majority of 11 -2- disbursements exist at the sellers. As a result, statements of cash flows have been excluded from the financial statements. The statement of net assets to be acquired as of June 30, 1995 and the statements of revenues and direct operating expenses for the six months ended June 30, 1995 and 1994 are unaudited; however, in the opinion of management these statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of these statements. See Note 3 for a summary of the new basis of accounting. NOTE 2- SIGNIFICANT ACCOUNTING POLICIES Revenues Revenues are recognized based upon contractual agreements relating to product storage and transfer. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation charges are computed by straight-line methods over the following useful lives: Buildings and improvements 5-33 years Machinery and equipment 3-20 years Leasehold improvements 4-32 years Maintenance and repairs are expensed as incurred; significant renewals and betterments are capitalized. Maintenance and repair expense included in sales and operations expenses for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for the year ended December 31, 1994 was $1,697, $693, $1,581 and $2,256, respectively. Environmental matters Environmental expenditures that relate to current operations are primarily expensed as incurred. The Division has recorded a liability ($1,240, $850 and $850 (unaudited) at December 31, 1993 and 1994 and June 30, 1995, respectively), and a receivable for reimbursements ($748, $300 and $300 (unaudited) at December 31, 1993 and 1994 and June 30, 1995, respectively), for future environmental costs. The Division's policy is to record a liability when costs of remediation and/or cleanup of known environmental problems are probable and the costs can be reasonably estimated. The Division's policy is to record available reimbursements when qualification for reimbursement from state funds is probable under various state laws and regulations. The portion of the costs and reimbursements expected to be incurred and received beyond one year are classified as noncurrent liabilities and other assets. 12 - 3 - NOTE 3 - NEW BASIS OF ACCOUNTING Prior to June 9, 1993, SPC was fifty percent owned by SIC and fifty percent owned by American AGIP Co., Inc. ("AGIP"), a wholly-owned subsidiary of AGIP Petroli International, B.V., a Netherlands corporation whose ultimate sole parent is Ente Nazionale Idrocarburi, an industrial conglomerate organized under the laws of the Republic of Italy. Following the close of business on June 8, 1993, SPC retired all of its existing common stock and redeemed the shares previously held by AGIP. The redemption of the common stock of the Company previously held by AGIP resulted in the Company becoming wholly-owned by SIC, and therefore a new basis of accounting was established. Consequently, the accompanying statements of revenues and direct operating expenses include the year ended December 31, 1992 and the period from January 1, 1993 to June 8, 1993 (old basis) and the period from June 9, 1993 to December 31, 1993, the year ended December 31, 1994 and the six months ended June 30, 1995 and 1994 (new basis). The consequences of establishing a new basis of accounting at June 9, 1993 included an increased adjustment to the carrying value of buildings and improvements of $22,507. Differences in estimates made in establishing the original new basis allocation resulted in an additional $2,270 increase in the carrying value of buildings and improvements in 1994. NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment (primarily petroleum terminaling and storage facilities) are carried at cost and consist of the following:
December 31, ----------- June 30, 1995 1993 1994 (unaudited) ---- ---- ----------- Land $ 4,253 $ 4,253 $ 4,253 Buildings and improvements 41,873 48,124 50,068 Machinery and equipment 537 1,163 1,394 Leasehold improvements 96 96 96 Construction-in-progress 1,469 1,219 965 -------- -------- -------- 48,228 54,855 56,776 Less accumulated depreciation ( 6,057) (10,284) (12,441) -------- -------- -------- $ 42,171 $ 44,571 $ 44,335 ======== ======== ========
Certain credit facilities of SPC are cross-collateralized by a first priority interest in the property, plant and equipment of the Division. 13 - 4 - NOTE 5 - SALES TO MAJOR CUSTOMERS The Division's revenues from major customers for the following periods amounted to:
For the six months For the period from For the period from ended For the year ended January 1, 1993 to June 9, 1993 to For the year ended June 30, December 31, 1992 June 8, 1993 December 31, 1993 December 31, 1994 1994 1995 ------------------ ------------------- ------------------- ------------------ ---- ---- (unaudited) Electric utility $3,156 $1,188 $1,664 $5,267 $3,918 $1,412 Defense Fuel Supply Center $1,893 $907 $1,350 $2,447 $1,241 $717 Aectra (see Note 7) $2,478 $853 $1,265 $2,745 $1,140 $1,392
Effective February 1995, Defense Fuel Supply Center terminated one of its two contracts with the Division prior to its scheduled expiration in June 1996. The terminated contract provided for minimum annual revenues of approximately $1,400. NOTE 6 - EMPLOYEE BENEFIT PLANS The sellers maintain profit-sharing plans that covers substantially all employees. Contributions, which are made to the plans solely at the discretion of the sellers' Boards of Directors, amounted to $113, $63, $83 and $208 for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for the year ended December 31, 1994, respectively. Benefits are payable to employees upon retirement, disability or termination based upon their accumulated credits in accordance with the provision of the plans. The plans may be terminated at the option of the sellers. The sellers also maintain a 401(k) retirement plan whereby they match a portion of the employees' contributions. The Division's contributions to the plan amounted to $15, $6, $9 and $72 for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for the year ended December 31, 1994, respectively. NOTE 7 - JOINT VENTURE On May 27, 1994, SPC formed SPC Terminals Inc. (STI) as a wholly-owned subsidiary. On this date, STI entered into a general partnership agreement with Aectra Terminals Inc. (ATI) and formed Steuart-Aectra Terminals Partnership No. 1 (SAT #1), which purchased a petroleum bulk terminal located in Savannah, Georgia. Each partner has a 50% interest in the partnership. STI's investment in SAT #1 is accounted for under the equity method. In 1994, STI recorded a loss of $75 representing its approximate share of SAT #1 losses. The Division has a five year lease on this terminal from SAT #1 expiring May 31, 1999 for the cost of the property insurance. During 1994, the Division incurred approximately $17 in rent expense in connection with the lease. The Division also has a five year throughput agreement with Aectra Refining 14 - 5 - and Marketing (Aectra) expiring May 31, 1999, whereby Aectra has agreed to throughput a minimum amount of gasoline, gasoline components and distillates each year at this terminal. At December 31, 1994, SAT #1 had total assets of $1,816 (principally property, plant and equipment), liabilities of $1,766 and partnership equity of $50. SAT #1 incurred a net loss of $150 for the period from May 27, 1994 to December 31, 1994. NOTE 8 - RELATED PARTY TRANSACTIONS The Division provides terminal storage and throughput services to the marketing division of SPC. Revenue from such services amounted to $2,141, $989, $1,353 and $2,800 for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for the year ended December 31, 1994, respectively. The Division also provides office space to other divisions of SPC. Rental revenues amounted to $199, $74, $35 and $95 for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for the year ended December 31, 1994, respectively. 15 KANEB SERVICES, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In February 1995, Kaneb Services, Inc. ("Kaneb") acquired, through its interest in Kaneb Pipe Line Partners, L.P. (the"Partnership") the refined petroleum product pipeline assets (the "West Pipeline") of Wyco Pipe Line Company for $27.1 million. The West Pipeline was owned 60% by a subsidiary of GATX Terminals Corporation and 40% by a subsidiary of Amoco Pipe Line Company. The acquisition was financed by the sale of $27 million of first mortgage notes to three insurance companies. The assets acquired from Wyco Pipe Line Company did not include certain assets that were leased to Amoco Pipe Line Company, and the purchase agreement did not provide for either (i) the continuation of an arrangement with Amoco Pipe Line Company for the monitoring and control of pipeline flows or (ii) the extension or assumption of certain credit agreements that Wyco Pipe Line Company had with its shareholders. On December 18, 1995, the Partnership purchased the liquids terminaling assets from Steuart Petroleum Company and certain of its affiliates (collectively, "Steuart"). The acquisition price of $68 million was financed by bank borrowings. The asset purchase agreement includes a provision for an earn-out payment based upon revenues of one of the terminals exceeding a specified amount for a seven year period beginning in 1996. The contracts also include a provision for the continuation of all terminaling contracts in place at the time of the acquisition, including those contracts with Steuart. The acquisition will be accounted for using the purchase method of accounting. The total purchase price will be allocated to the assets and liabilities based on their respective fair values based on valuations and other studies which are not yet completed. The allocation of the purchase price presented in the unaudited pro forma consolidated financial statements is preliminary and subject to adjustment. The following unaudited pro forma financial statements of Kaneb have been derived from (i) the historical financial statements of Kaneb as of September 30, 1995 and for the year ended December 31, 1994 and the nine-month period ended September 30, 1995, (ii) the historical financial statements of Wyco Pipe Line Company for the year ended December 31, 1994 and the period ended February 24, 1995, and (iii) the statements of revenues and direct operating expenses for the year ended December 31, 1994 and the nine-month period ended September 30, 1995 and the statements of net assets to be acquired as of September 30, 1995 of SPC/SIC -- Terminal Operations Division. The following unaudited pro forma financial statements have been compiled as if Kaneb acquired the pipeline assets of the West Pipeline and the liquids terminaling assets of Steuart as of the beginning of the period for income statement purposes and as of September 30, 1995 for balance sheet purposes. The unaudited pro forma financial statements should be read in conjunction with the notes accompanying such unaudited pro forma financial statements and with the historical financial statements and related notes of Kaneb, the historical financial statements and related notes of Wyco Pipe Line Company and the historical statements of revenues and direct operating expenses and statements of net assets to be acquired and related notes of SPC/SIC -- Terminal Operations Division. The unaudited pro forma financial statements may not be indicative of the results that would have occurred if Kaneb had acquired the pipeline assets of the West Pipeline and the liquids terminaling assets of Steuart on the dates indicated or which will be obtained in the future. 16 KANEB SERVICES, INC. PRO FORMA STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 1995 (In Thousands, except per share amounts) (Unaudited)
Kaneb West Pipeline Acquisition Pro Historical Nine Historical Adjustments- Forma Months Ended Period Ended West West September 30, 1995 February 24, 1995 Pipeline Pipeline ------------------ ----------------- --------------- --------------- Revenues $ 156,613 $ 1,715 $ - $ 158,328 ------------------ ----------------- --------------- --------------- Costs and expenses: Operating costs 112,388 1,441 - 113,829 Depreciation and amortization 9,821 128 (22) (a) 9,927 General and administrative 3,444 - - 3,444 ------------------ ----------------- --------------- --------------- Total costs and expenses 125,653 1,569 (22) 127,200 ------------------ ----------------- --------------- --------------- Operating income 30,960 146 22 31,128 Gain on sale of partnership interests 54,157 - - 54,157 Interest and other income (expense) (433) 17,111 (16,926) (b) (248) Interest expense (12,893) - (350) (c) (13,243) Amortization of excess of cost over fair value of net assets of acquired business (1,387) - - (1,387) Non-controlling interest in net income (10,573) - - (10,573) Income taxes (1,880) (6,026) 6,026 (e) (1,880) ------------------ ----------------- --------------- --------------- Net income 57,951 11,231 (11,228) 57,954 Dividends applicable to preferred stock 1,158 - - 1,158 ------------------ ----------------- --------------- --------------- Net income applicable to common stock $ 56,793 $ 11,231 $ (11,228) $ 56,796 ================== ================= =============== =============== Earnings per common share $ 1.70 $ 1.70 ================== =============== Pro Steuart Forma- Historical Acquisition West Nine Months Ended Adjustments- Pipeline and SepteMber 30, 1995 Steuart Steuart ------------------ ------------- --------------- Revenues $ 12,589 $ 2,217 (f) $ 173,134 ------------------ ------------- --------------- Costs and expenses: Operating costs 6,916 (584) (g) 120,161 Depreciation and amortization 3,313 792 (h) 14,032 General and administrative - - 3,444 ------------------ ------------- --------------- Total costs and expenses 10,229 208 137,637 ------------------ ------------- --------------- Operating income 2,360 2,009 35,497 Gain on sale of partnership interests - - 54,157 Interest and other income (expense) - - (248) Interest expense - (3,825) (i) (17,068) Amortization of excess of cost over fair value of net assets of acquired business - - (1,387) Non-controlling interest in net income - (253) (j) (10,826) Income taxes - (26) (k) (1,906) ------------------ ------------- --------------- Net income 2,360 (2,095) 58,219 Dividends applicable to preferred stock - - 1,158 ------------------ ------------- --------------- Net income applicable to common stock $ 2,360 $ (2,095) $ 57,061 ================== ============= =============== Earnings per common share $ 1.71 ===============
See notes to unaudited pro forma financial statements. 17 KANEB SERVICES, INC. PRO FORMA STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1994 (In Thousands, except per share amounts) (Unaudited)
Acquisition Pro Adjustments - Forma Kaneb West Pipeline West West Historical Historical Pipeline Pipeline ------------ ------------- ------------- ------------ Revenues $ 208,722 $ 13,694 $ - $ 222,416 ------------ ------------- ------------- ------------ Costs and expenses: Operating costs 159,913 7,916 - 167,829 Depreciation and Amortization 12,807 1,042 (338) (a) 13,511 General and administrative 4,038 - - 4,038 ------------ ------------- ------------- ------------ Total costs and expenses 176,758 8,958 (338) 185,378 ------------ ------------- ------------- ------------ Operating income 31,964 4,736 338 37,038 Interest and other income 195 - - 195 Interest expense (13,752) - (2,260) (c) (16,012) Amortization of excess of cost over fair value of net assets of acquired business (1,846) - - (1,846) Non-controlling interest in net income (12,567) - (1,242) (d) (13,809) Income taxes (1,959) (1,850) 1,709 (e) (2,100) ------------ ------------- ------------- ------------ Net income 2,035 2,886 (1,455) 3,466 Dividends applicable to preferred stock 1,489 - - 1,489 ------------ ------------- ------------- ------------ Net income applicable to common stock $ 546 $ 2,886 $ (1,455) $ 1,977 ============ ================ ============= ============ Earnings per common share $ 0.02 $ 0.06 ============ ============ Pro Forma - Acquisition West Steuart Adjustments - Pipeline and Historical Steuart Steuart ------------ --------------- ------------- Revenues $ 22,672 $ 2,956 (f) $ 248,044 ------------ -------------- ------------- Costs and expenses: Operating costs 11,037 (1,031)(g) 177,835 Depreciation and Amortization 4,267 1,207 (h) 18,985 General and administrative - - 4,038 ------------ -------------- ------------- Total costs and expenses 15,304 176 200,858 ------------ -------------- ------------- Operating income 7,368 2,780 47,186 Interest and other income - - 195 Interest expense - (5,100) (i) (21,112) Amortization of excess of cost over fair value of net assets of acquired business - - (1,846) Non-controlling interest in net income - (2,346) (j) (16,155) Income taxes - (243) (k) (2,343) ------------ -------------- ------------- Net income 7,368 (4,909) 5,925 Dividends applicable to preferred stock 1,489 ------------ -------------- ------------- Net income applicable to common stock $ 7,368 $ (4,909) $ 4,436 ============ ============== ============= Earnings per common share $ 0.14 ==============
See notes to unaudited pro forma financial statements. 18 KANEB SERVICES, INC. PRO FORMA CONSOLIDATED BALANCE SHEETS September 30, 1995 (In Thousands) (Unaudited)
Acquisition Kaneb Adjustments Pro Historical Steuart Forma ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 28,217 $ - $ 28,217 Accounts receivable, trade 33,903 - 33,903 Inventories 6,229 - 6,229 Prepaid expenses 5,496 - 5,496 ------------ ------------ ------------ Total current assets 73,845 - 73,845 ------------ ------------ ------------ Property and equipment, net 191,051 68,850 (l) 259,901 ------------ ------------ ------------ Excess of cost over fair value of net assets of acquired business 65,490 - 65,490 ------------ ------------ ------------ Other assets 3,311 - 3,311 ------------ ------------ ------------ $ 333,697 $ 68,850 $ 402,547 ============ ============ ============ LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $ 3,997 $ - $ 3,997 Accounts payable 10,657 200 (m) 10,857 Accrued expenses 27,603 - 27,603 Accrued distribution payable 4,067 - 4,067 ------------ ------------ ------------ Total current liabilities 46,324 200 46,524 ------------ ------------ ------------ Long-term debt, less current portion 125,719 68,000 (n) 193,719 ------------ ------------ ------------ Net liabilities of discontinued operations 3,051 - 3,051 ------------ ------------ ------------ Deferred income taxes and other liabilities 6,742 650 (m) 7,392 ------------ ------------ ------------ Non-controlling interest in Partnership 74,636 - 74,636 ------------ ------------ ------------ Stockholders' equity 77,225 - 77,225 ------------ ------------ ------------ $ 333,697 $ 68,850 $ 402,547 ============ ============ ============
See notes to unaudited pro forma financial statements. 19 Kaneb Services, Inc. Notes to Unaudited Pro Forma Consolidated Financial Statements WEST PIPELINE (a) Represents adjustments to the depreciation and amortization of the acquired assets. (b) Represents the gain on the sale of the pipeline assets that was recorded by Wyco Pipe Line Company in February 1995 related to the sale of the West Pipeline to the Partnership. (c) Represents interest expense on $27 million of acquisition debt at 8.37% per annum. (d) Represents the allocation of the net income of the Partnership to the non-controlling interest. (e) Represents elimination of federal income taxes. STEUART (f) Represents the revenues resulting from a throughput agreement entered into by Steuart in conjunction with the acquisition. The agreement provides for a fixed volume of storage over a two year period. (g) Represents adjustments to insurance expense to reflect the Partnership's insurance rates and to remove duplicate operating expenses, primarily related to management and clerical positions. (h) Represents adjustments to the depreciation and amortization of the acquired assets. (i) Represents interest expense on $68 million of acquisition debt at an assumed rate of 7.5% per annum. (j) Represents the allocation of the net income of the Partnership to the non-controlling interest. (k) Represents state income taxes on the operations of the Steuart assets. (l) Represents the preliminary allocation of the estimated fair value of the acquired assets as the internal valuation of the assets is not complete as of the date of this filing. (m) Represents the assumption of environmental liabilites in connection with the acquisition of the Steuart assets. (n) Represents the issuance of $68 million of long-term debt, incurred in connection with the acquisition of the Steuart assets. 20 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.1 Asset Purchase Agreement by and among Steuart Petroleum Company, SPC Terminals, Inc., Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. 10.2 Piney Point Pipeline Asset Purchase Agreement by and among Piney Point Industries, Inc., Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. 10.3 Purchase Agreement by and among Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point 10.4 Amendment to Asset Purchase Agreements by and among Steuart Petroleum Company, SPC Terminals, Inc., Piney Point Industries, Inc., Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. 23.1 Consent of Independent Accountants EX-10.1 2 ASSET PURCHASE AGREEMENT WITH STEWART PETROLEUM CO 1 EXHIBIT 10.1 ASSET PURCHASE AGREEMENT BY AND AMONG STEUART PETROLEUM COMPANY, SPC TERMINALS, INCORPORATED, SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. AUGUST 27, 1995 2 TABLE CONTENTS ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.3.1 At Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.3.2 Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.4 Allocation of Purchase Price Amongst Acquired Assets . . . . . . . . . . . . . . . . . . . 19 Section 2.5 Allocation of Purchase Price Amongst Terminals . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.6 Payment of Taxes and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE 3 MATTERS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.1.1 Examination of Records and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.1.2 Environmental Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.1.2.1 Audits and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.1.2.2 Purchase Price Adjustment for Certain Remedial Work . . . . . . . . . . . . . . . 23 3.1.2.3 Purchase Price Adjustment for Other Remedial Work . . . . . . . . . . . . . . . . 27 3.1.2.4 Other Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 3.2 Real Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.4 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 3.5 Purchaser's Licenses, Permits and Approvals. . . . . . . . . . . . . . . . . . . . . . . . 31 Section 3.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.10 Audited Division Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.11 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 3.12 Cockpit Real Estate Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 3.13 Florida Submerged Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE 4 OPERATION OF THE BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.2 Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 5.2 Certificate Regarding Environmental Representations
3 and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 5.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 5.4 Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 5.7 Throughput Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 5.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 5.9 Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 5.10 Subsidiary Partnership Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 5.11 Subsidiary Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 5.12. Right-of-Way Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.2 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.3 Sale Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARY CORPORATION . . . . . . . . . . . . 42 Section 7.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 7.2 Corporate Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.3 Governmental Authorization: Third Party Consents . . . . . . . . . . . . . . . . . . . . . 43 Section 7.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 7.7 Title to Real Estate, and Real Estate Leases . . . . . . . . . . . . . . . . . . . . . . . 45 Section 7.8 Condition of and Title to Tangible Personal Property . . . . . . . . . . . . . . . . . . . 45 Section 7.9 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.10 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 7.11 No Material Adverse Change; Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.12 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13 Patents, Trademarks. Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.17 Tax Returns and Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.19 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.20 List of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.21 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.22 All Assets Included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(ii) 4 Section 7.23 Special Representations Regarding Subsidiary Entities. . . . . . . . . . . . . . . . . . . 55 7.23.1 Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 7.23.2 Issuance or Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . 56 7.23.3 Ownership of Subsidiary Partnership; Title to Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.23.4 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 7.23.5 Subsidiary Partnership Business and Assets . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.24 Right-of-way Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR . . . . . . . . . . . . . . . . . 58 Section 8.1 Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 8.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 8.3 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 8.4 Governmental Authorization; Third Party Consent . . . . . . . . . . . . . . . . . . . . . . 59 Section 8.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters . . . . . . . . . . . . . . . . . . . . . 59 Section 8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 9.1.A Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 9.1.B Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 9.2.A Documents and Instruments to be Delivered by SPC . . . . . . . . . . . . . . . . . . . . . 61 Section 9.2.B Documents and Instruments to be Delivered by SPCT . . . . . . . . . . . . . . . . . . . . . 62 Section 9.3.A Documents and Instruments to be Delivered by Purchaser . . . . . . . . . . . . . . . . . . 62 Section 9.3.B Documents and Instruments to be Delivered by Guarantor . . . . . . . . . . . . . . . . . . 63 Section 9.4 Inventories and Tank Bottoms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.4.1 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.4.2 Wastes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.4.3 Tank Bottoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 10.1 Grounds for Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 ARTICLE 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 11.1 Indemnification by SPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 11.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 11.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 11.4 Establishment of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 11.5 Limits on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 11.6 Minimum Claim Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 11.7 Special Environmental Indemnification and Post-Closing Covenants by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(iii) 5 Section 11.8 Notification; Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 11.9 Net Worth Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section 12.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 12.5 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 12.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 12.11.A Post-Closing Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 12.11.B Post-Closing Access to Books and Records by SPC . . . . . . . . . . . . . . . . . . . . . . 87 Section 12.12 Treatment of Purchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Section 12.13 SPCT's Sale of the Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Section 12.14 Accounts Receivable Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Section 12.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Section 12.16 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
(iv) 6 ASSET PURCHASE AGREEMENT BY AND AMONG STEUART PETROLEUM COMPANY, SPC TERMINALS, INCORPORATED, SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. This Asset Purchase Agreement is made this 27th day of August, 1995, by and among Steuart Petroleum Company, a Delaware corporation with its principal place of business at 4646 Fortieth Street, N.W., Washington D.C. 20016 ("SPC" or the "Company"), SPC Terminals, Incorporated, a Delaware corporation with its principal place of business at 4646 Fortieth Street, N.W., Washington D.C. 20016 ("SPCT" or "Subsidiary Corporation"), Support Terminals Operating Partnership, L.P., a Delaware limited partnership with its principal place of business at 17304 Preston Road, Suite 1000, Dallas, Texas 75252-5623 ("Purchaser") and Kaneb Pipe Line Operating Partnership, L.P., a Delaware limited partnership with its principal place of business at 2435 N. Central Expressway, Suite 700, Richardson, Texas 75080 ("Guarantor"). RECITALS A. SPC owns or leases and operates terminal operations that offer petroleum product throughput and storage capabilities at seven terminals in Maryland, the District of Columbia, Georgia, Florida, and Virginia, as more fully described on Schedule 2.1(a). SPC also owns northern and southern marketing divisions that provide various petroleum products to customers in the Washington, D.C. metropolitan region, and in Northern Florida and Southern Georgia. 7 B. The Subsidiary Partnership owns the Real Estate on which the Terminal in Savannah, Georgia is located. The Savannah Real Estate is leased to SPC, the owner and operator of the Business at Savannah. SPCT owns the Partnership Interest. C. Purchaser wants to buy and SPC and SPCT want to sell, respectively, the terminal operations and the Partnership Interest, but not the northern or southern marketing divisions, on the terms and subject to the conditions set forth in this Agreement. Now, therefore, the parties agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Acquired Assets" has the meaning set forth in Section 2.1. "Adjusted Purchase Price" means the Purchase Price less any reductions thereto made in accordance with this Agreement. "Adjustment Statement" means a statement showing adjustments to the Unaudited Terminal Operating Statement in the form of Exhibit A. "Aectra" means Aectra Terminals, Inc. "Aectra's Partnership Interest" means the fifty percent (50%) interest in the Subsidiary Partnership owned by Aectra that is subject to the terms set forth in the Partnership Agreement. "Affiliate" means as to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. 2 8 "Agreement" means this Agreement and the Schedules and Exhibits attached hereto, as amended, supplemented or modified. "Aggregate Purchase Price" means the sum of the Purchase Price set forth in this Agreement, the Purchase Price set forth in the Cockpit Agreement and the Purchase Price set forth in the PPI Agreement. "Aggregate Adjusted Purchase Price" means the sum of the Adjusted Purchase Price set forth in this Agreement, the Adjusted Purchase Price set forth in the Cockpit Agreement and the Adjusted Purchase Price set forth in the PPI Agreement. "Aggregate Net Remedial Cost" means the sum of (i) the Net Remedial Cost as determined under this Agreement for Remedial Work with respect to the Acquired Assets or the Business, (ii) the Net Remedial Cost as determined under the Cockpit Agreement for Remedial Work with respect to the assets acquired under the Cockpit Agreement and (iii) the Net Remedial Cost as determined under the PPI Agreement for Remedial Work with respect to the assets and business acquired under the PPI Agreement. "Applicable Law" means as to any Person, any Federal, state, municipal, foreign or other law, treaty, order, ordinance, code, rule, regulation, right, privilege, qualification, license or franchise or determination of or promulgated by a Governmental Authority, applicable or binding on such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "Assumed Liabilities" has the meaning set forth in Section 2.2. "Audit(s)" means such environmental due diligence as Purchaser chooses to conduct, including without limitation a Phase I and/or Phase II environmental audit. 3 9 "Audited Division Statements" means collectively (i) the Statements of Net Assets Acquired for the Business together with PPI as of December 31, 1993 and 1994, and (ii) the Statements of Revenues and Direct Operating Expenses for the Business together with the business of PPI and the real property at Cockpit Point being acquired by Purchaser under the Cockpit Agreement for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993, and the year ended December 31, 1994. "Audited Financial Statements" means the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1992, December 31, 1993 and December 31, 1994 and the related consolidated statements of operations and cash flows, together with the notes thereto, of the Company and its Subsidiaries for the year ended December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and the year ended December 31, 1994. "Average Monthly Revenue" shall be calculated by dividing the total revenues generated from the Business at each affected Terminal for the twelve calendar months immediately preceding the date of this Agreement by twelve. "Benning Pipeline" means the pipeline extending from the M Street Terminal, 133 M Street, S.E., Washington, D.C. to the Pepco Power Plant on Benning Road, N.E., Washington, D.C. "Business" means SPC's terminal operations, as described in the first sentence of Recital A, and related pipeline operations, and does not for purposes of this Agreement include the northern or southern marketing divisions described in such Recital. 4 10 "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Dallas, Texas, the City of New York or Washington, D.C. are authorized or required by Applicable Law or executive order to close. "Capital Account" has the meaning set forth in Section 7.23.4 "Claim" has the meaning set forth in Section 11.4. "Closing" has the meaning set forth in Section 9.1.A "Closing Date" means the date specified in Section 9.1.A "Cockpit Agreement" means that certain Purchase Agreement By and Among Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point, of even date with this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto. "Confidentiality Agreement" means that certain Confidentiality Agreement by and between the Company and the Guarantor, dated March 3, 1995. "Contracts" means all contracts and agreements between SPC and suppliers, vendors, customers and other third parties relating to the Business or the Acquired Assets, including without limitation Material Contracts, but not including Real Estate Leases and Right-of-way Agreements. "Current Title Information" has the meaning set forth in Section 3.2. "Customary Course of Business" means a course of business consistent with the Subsidiary Partnership's past customs and practices with respect to its business. 5 11 "Due Diligence Period" means the 60-day period commencing with the date of this Agreement. "Earn-out" has the meaning set forth in Section 2.3.2. "Environmental Adjustment Request" means a request for a reduction in the Aggregate Purchase Price submitted by Purchaser pursuant to Section 3.1.2.2. "Environmental Law" means any Federal, state or local law, statute, ordinance, or regulation pertaining to health, industrial hygiene, or the environmental conditions concerning the Acquired Assets or any portion thereof, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401 et seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA") and similar laws of any Governmental Authority having jurisdiction over any portion of the Acquired Assets as such laws may be amended or supplemented from time to time, and all regulations promulgated or orders issued pursuant to such laws, but not including the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. ("OSHA") or other laws relating primarily to the protection of workers. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any Person that is treated as a single employer with the Company or any of its Subsidiaries under Section 414(b), (c), (m) or (o) of the Code. "Escrow Fund" has the meaning set forth in Section 11.4. "Excluded Assets" has the meaning set forth in Section 2.1. 6 12 "GAAP" means generally accepted United States accounting principles in effect from time to time. "Governmental Authority" means the government of any nation, state, city, locality or other political subdivision of any thereof, any federal, state, local or other court or arbitral tribunal, and any entity (corporate or otherwise) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Hazardous Substance" includes without limitation: (i) any substance included within the definition of "hazardous waste" pursuant to Section 1004 of the RCRA and implementing regulations; (ii) any substance included within the definition of "hazardous substance" pursuant to Section 101 of CERCLA and implementing regulations; (iii) any pollutant listed under the CAA, the CWA or implementing regulations pursuant to the CAA or the CWA; and (iv) petroleum and petroleum products. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "Indemnified Party" means each SPC Indemnified Party or each Purchaser Indemnified Party as determined by the context of the reference to "Indemnified Party" herein. "Inventory" means the inventories of petroleum products used by and associated with the Business, consisting primarily of tank bottoms and pipe line fills, but not the inventories of SPC's northern and southern marketing divisions, or inventories owned by customers of the Company and stored in the Terminals. "June 30, 1995 Statement" means the June 30, 1995 column on Exhibit B. 7 13 "Knowledge" when used with respect to the Company or its Subsidiaries, means the actual knowledge of the officers of the Company and its Subsidiaries, and when used with respect to the Purchaser, means the actual knowledge of the officers of the general partner of the Purchaser and the officers of ST Services, Inc. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences) including, without limitation, those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease obligation, or any financing lease having substantially the same economic effect as any of the foregoing, except that "Lien" shall not include liens for taxes not due and payable at Closing. "Major Loss" means any loss, damage, breakdown, or casualty to the Acquired Assets, whether from fire, flood, hurricane, or any other cause, (i) in an amount reasonably estimated to exceed Ten Million Dollars ($10,000,000), whether or not covered by insurance, or (ii) which is reasonably estimated to cause the Terminal operations at either Piney Point or Jacksonville to be Materially Impaired for a period in excess of ninety (90) days. "Material Contracts" means the Partnership Agreement (if the Partnership Interest is purchased by Purchaser) and Contracts that either (i) require an annual payment by any party thereto in excess of $50,000, (ii) are not cancelable by SPC (at no penalty to SPC) within twelve months, or (iii) have a material effect on the operation or conduct of the Business. "Materially Impaired" means, with respect to any Terminal, the loss of thirty percent (30%) of the Average Monthly Revenue from such Terminal in any particular month. 8 14 "Net Remedial Cost" means the cost, estimated if necessary, to perform any Remedial Work net of estimated insurance coverage and reimbursements from trust funds maintained by any Governmental Authority. "Notice" has the meaning set forth in Section 3.1.2.4. "Ordinary Course of Business" means a course of business consistent with the Company's past customs and practices with respect to the Business. "Partnership Agreement" means that certain General Partnership Agreement By and Between SPC Terminals Incorporated and Aectra Terminals Inc., dated as of May 27, 1994, as amended through the date of this Agreement. "Partnership Interest" means the fifty percent (50%) interest in the Subsidiary Partnership owned by SPCT that is subject to the terms set forth in the Partnership Agreement. "Permitted Encumbrances" shall mean: (a) with respect to any property other than ROW Real Estate (provided that item (iii) below shall only apply to Real Estate) (i) those matters described on Schedules 2.1(a) and 2.1(b) under the heading "Permitted Encumbrances", (ii) liens for taxes not due and payable at Closing, (iii) except for matters listed as Title Objections on Schedule 3.2, imperfections of title, easements or restrictions that do not substantially affect marketability, insurability, or use (but specifically excluding any Lien or any claim of Lien related to an obligation to pay money with respect to a debt, but including those Liens listed on Schedule 2.1(a)), (iv) any Liens or other restrictions or title defects that are waived or consented to by Purchaser, and (v) Liens or restrictions that are Permitted Encumbrances pursuant to the last sentence of Section 3.2(d); and 9 15 (b) with respect to ROW Real Estate (i) those matters described on Schedules 2.1(a) and 2.1(b) under the heading "Permitted Encumbrances", (ii) Liens for taxes that SPC is obligated to pay under any Right-of-Way Agreement not due and payable at Closing, (iii) Liens on the ROW Real Estate arising due to the acts or omissions of the owner or lessor of the ROW Real Estate, (iv) any Lien on the ROW Real Estate that is not attributable to an act or omission of SPC or its Affiliates, and (v) any Liens or other restrictions that are waived or consented to by Purchaser. "Person" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "PPI" means Piney Point Industries, Inc., a Maryland corporation. "PPI Agreement" means that certain Piney Point Pipeline Asset Purchase Agreement By and Among Piney Point Industries, Inc., Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. of even date with this Agreement. "Purchase Agreements" means collectively this Agreement, the Cockpit Agreement and the PPI Agreement. "Purchase Price" has the meaning set forth in Section 2.3.1. "Purchaser Indemnified Party" has the meaning set forth in Section 11.1. "Purchaser's Consultant" means Think Tank, Inc., or any other recognized environmental consulting firm selected by Purchaser and approved by SPC, such approval not to be unreasonably withheld. 10 16 "Real Estate" means, individually or in the aggregate, the parcels of owned or leased real estate on which the Terminals are located, which have the following addresses: Piney Point, Maryland; 401 Farragut Street, N.E., Washington, D.C.; Cockpit Point, Cockpit Point Road, Dumfries, Virginia; 133 M Street, S.E., Washington, D.C.; 1 Woodcock Road, Savannah, Georgia; 211 New Castle Street, Brunswick, Georgia; 5401 Evergreen Avenue, Jacksonville, Florida; 6531 Evergreen Avenue, Jacksonville, Florida; and 5725 Buffalo Avenue, Jacksonville, Florida; and, in each case, all buildings and other improvements located thereon, as described in greater detail in Schedule 2.1(a), but not including SPC's offices at 4646 Fortieth Street, N.W., Washington, D.C., and also not including the ROW Real Estate. "Real Estate Leases" means the leases for the leased Real Estate, as described in Schedule 2.1(a), under which SPC is a lessee. "Real Property Matter" means, with respect to any parcel of Real Estate, (i) a Title Objection with respect to such parcel; (ii) an existing or pending condemnation, expropriation, or public taking of all or any portion of such parcel, which, (A) individually or in the aggregate, has, or is reasonably expected to have, a material adverse effect on the operations of the relevant Terminal, (B) has, or is reasonably expected to have, a material adverse effect on the internal expansion of the relevant Terminal or (C) affects greater than ten percent (10%) of the acreage on which the relevant Terminal is situated; or (iii) the Company's inability to secure a waiver or otherwise have released or terminated rights of first refusal, if any, that may exist with respect to Farragut Street or Annex 1 or Annex 2 at Jacksonville. "Remaining Threshold" means one million dollars ($1,000,000) minus the Aggregate Net Remedial Cost determined in accordance with Section 3.1.2.2. 11 17 "Remedial Work" means any investigation, site monitoring, containment, cleanup, removal, restoration, or other corrective action that is reasonably necessary to remedy any non-compliance with Environmental Law, that is reasonably necessary under Environmental Law, or that has been required by a Governmental Authority. "Right-of-way Agreement(s)" means the agreement(s) (whether in the form of a license, easement, lease or other form of agreement) pursuant to which SPC is granted the right to use real estate owned by third parties for the Benning Pipeline and the Business. The Right-of-way agreements are more particularly described in Schedule 2.1(i). "ROW Real Estate" means individually or in the aggregate, the real estate on which the Benning Pipeline is located that is described in, and subject to the terms and conditions, set forth in a Right-of-way Agreement. "SIC" means Steuart Investment Company, a Delaware corporation. "SPC Indemnified Party" has the meaning set forth in Section 11.3. "SPC's Consultant" means Versar, Inc., or any other recognized environmental firm selected by SPC and approved by Purchaser, such approval not to be unreasonably withheld. "Steuart License Agreement" means the license agreement between the parties granting the Purchaser the right to use the Steuart name to the extent set forth therein. "Subsidiary" and "Subsidiaries" means the Subsidiary Corporation and the Subsidiary Partnership, separately and collectively as the text requires. "Subsidiary Corporation" or "SPCT" means SPC Terminals Incorporated, a Delaware corporation wholly-owned by SPC that is a general partner of the Subsidiary Partnership. 12 18 "Subsidiary Partnership" means Steuart-Aectra Terminals Partnership No. 1, a general partnership organized under the laws of the State of Delaware. "Tangible Personal Property" means all tangible personal property used in the Business including, but not limited to, the Vehicles and the Inventory. "Terminal(s)" means the terminals referred to in Recital A and located on the Real Estate. "Title Objection" means (a) any Lien, restriction or title defect that substantially impairs the marketability, insurability or use of any parcel of Real Estate, other than Permitted Encumbrances, (b) any matter on Schedule 3.2(b) that is raised as a Title Objection by notice from Purchaser to the Company within thirty (30) days after the date of this Agreement and (c) those matters listed as of the date of this Agreement on Schedule 3.2(a). "Unaudited Financial Statements" means the unaudited consolidated balance sheets of the Company and its Subsidiaries as of the end of January, February, March, April, May, and June 1995, and the related income statements and statements of cash flow (on a first in, first out basis) in each case by month and year to date. The Unaudited Financial Statements are titled on the document as the "Steuart Petroleum Company Financial Operating Results." "Unaudited Partnership Financial Statements" means collectively (i) the unaudited balance sheet of the Subsidiary Partnership as of December 31, 1994 and the related income statement for the period June 1, 1994 to December 31, 1994 and (ii) the unaudited balance sheets of the Subsidiary Partnership as of the end of January, February, March, April, May and June 1995, and the related income statements in each case by month and year to date 1995. 13 19 "Unaudited Terminal Operating Statements" means an unaudited statement showing the operating results by Terminal for the Business taken from the Company's unaudited financial statements for each month after June 30, 1995 through Closing in the form of Exhibit C. "Vehicles" means all boats, automobiles, trailers, trucks, vans, and other motor vehicles used in the Business, including, but not limited to, those listed on Schedule 2.1(b). ARTICLE 2 PURCHASE AND SALE OF ASSETS Section 2.1 Sale and Purchase. At the Closing, SPC shall sell, transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall purchase and accept from SPC, all right, title and interest in and to the assets, properties, and rights comprising the Business, whether tangible or intangible, real, personal or mixed, and wherever located, and SPCT shall sell, transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall purchase and accept from SPCT all right, title and interest in and to the Partnership Interest (the Partnership Interest and the assets, properties, and rights purchased from SPC being collectively referred to as, the "Acquired Assets"), in each case free and clear of all Liens and other restrictions, except for Permitted Encumbrances, provided, that the Acquired Assets shall not include and Purchaser shall not acquire (i) cash, bank accounts, accounts receivable, certificates of deposit or other cash equivalents, (ii) any tax refunds attributable to taxes paid by SPC, (iii) those assets listed on Schedule 2.1 under the heading "Excluded Assets", (iv) the right to the Steuart name, except as licensed hereunder, (v) any insurance retrospective rating adjustment applicable to periods prior to the Closing Date, and (vi) any reimbursements from trust funds or insurance maintained 14 20 by any Governmental Authority for Remedial Work performed prior to the Closing Date and paid for by SPC (the items listed in clauses (i) through (vi) being referred to herein as the "Excluded Assets"). The Acquired Assets include without limitation: (a) the Real Estate and the Real Estate Leases, as listed on Schedule 2.1(a); (b) the Tangible Personal Property as listed on Schedule 2.1(b); (c) SPC's rights under the Contracts, to the extent transferable, including SPC's rights under the Material Contracts listed on Schedule 2.1(c); (d) all business records in the possession or under the control of SPC relating to the Acquired Assets and to the Business, including without limitation the books and records of accounts and customer and prospect lists, but excluding financial records presently maintained at SPC's location at 4646 Fortieth Street, N.W., Washington, D.C. (which SPC shall maintain and transfer to Purchaser in accordance with the terms of Section 12.11.A); (e) to the extent transferable, all of SPC's right and interest in any license, permits, consents, and authorities relating to the Business, issued by any Governmental Authority and any applications for such items; (f) the Partnership Interest which may or may not be sold and transferred by SPCT to Purchaser as described in more detail in Section 12.13; (g) the Benning Pipeline; and (h) SPC's rights under the Right-of-way Agreements, including, but not limited to, those listed on Schedule 2.1(i). Section 2.2 Assumption of Liabilities. (a) Purchaser shall assume at Closing: 15 21 (i) obligations of SPC under the Contracts, Right-of-way Agreements, and Real Estate Leases attributable to periods of time commencing with the Closing, provided, however, that (A) with respect to Material Contracts, Right-of-way Agreements, and Real Estate Leases, Purchaser assumes such obligations only for Material Contracts listed on Schedule 2.1(c), Right-of-way Agreements listed on Schedule 2.1(i) and Real Estate Leases listed on Schedule 2.1(a) and in each case only to the extent true and correct copies thereof and all amendments thereto have either been delivered to Purchaser as of the date hereof, or are delivered to and consented to by Purchaser after the date hereof, provided, however, that to the extent that a copy of an immaterial amendment to such Material Contract, Right-of-way Agreement or Real Estate Lease has not been provided to Purchaser as of the date hereof, Purchaser shall assume such obligations for such Material Contract, Right-of-way Agreement or Real Estate Lease without regard to the amendment not delivered to Purchaser and, in such event, SPC shall be responsible for all Liabilities of Purchaser with respect to the amendment not delivered to Purchaser without regard to the limits set forth in Section 11.5; and (B) Purchaser specifically does not assume, and shall not be treated as having assumed, any liability or obligation under any Contract, Right-of-way Agreement or Real Estate Lease to the extent such liability or obligation relates to, or arises out of, a breach of such Contract, Right-of-way Agreement or Real Estate Lease that occurs prior to the Closing (provided that liability and obligation for Purchaser's continuing breaches of such Contracts, Right-of-way Agreements or Real Estate Leases after Closing and liability and obligation for breaches of such Contracts, Right-of-way Agreements or Real Estate Leases commenced by Purchaser after Closing shall be the responsibility of Purchaser). Notwithstanding the foregoing, if Purchaser does not purchase 16 22 the Cockpit Point Real Property from SIC under the Cockpit Agreement at the Closing, Purchaser shall only be obligated to assume the Cockpit Point Real Estate Lease if it is modified in the manner set forth in Section 3.12; (ii) if the Partnership Interest is purchased hereunder, SPCT's obligations and liabilities under the Partnership Agreement attributable to periods of time commencing with the Closing, provided however, that Purchaser specifically does not assume, and shall not be treated as having assumed, any liability or obligation that relates to or arises out of a breach of the Partnership Agreement that occurs prior to Closing (provided that liability and obligation for Purchaser's continuing breaches of the Partnership Agreement after Closing and liability and obligation for breaches of the Partnership Agreement commenced by Purchaser after Closing shall be the responsibility of Purchaser); and (iii) except as expressly provided for otherwise herein and in accordance with the provisions of Section 11.7, any amounts payable to perform Remedial Work with respect to the Acquired Assets or the Business, regardless of when the events giving rise to the obligation to perform such Remedial Work are alleged to have occurred. The obligations assumed by Purchaser pursuant to subsection (a) of this Section 2.2 are referred to herein collectively as the "Assumed Liabilities". (b) Purchaser shall not assume (i) any liabilities or obligations of SPC or the Subsidiaries not specifically assumed under subsection (a) of this Section 2.2, except to the extent that Purchaser's covenants in Section 11.7 constitute an assumption of such liabilities or obligations, or (ii) any liabilities or obligations associated with the northern or southern marketing divisions. Nothing herein shall be deemed to contravene the Purchaser's 17 23 indemnification of SPC in Sections 11.3 and 11.7, which shall remain in full force and effect. Without in any way limiting the foregoing, the parties agree that the Purchaser does not and will not assume the sponsorship of, or the responsibility for contributions to, or any liability in connection with, any employee pension benefit plan, any employee welfare benefit plan, or other employee benefit agreement or arrangement maintained by SPC for its employees, former employees, retirees, their beneficiaries or any other Person. In addition and not as a limitation of the foregoing covenant, the parties agree that SPC shall be liable for any continuation coverage (including any penalties, excise taxes or interest resulting from the failure to provide continuation coverage) required by Section 4980B of the Code due to qualifying events which occur on or before the Closing Date. Notwithstanding the foregoing, Purchaser shall provide health and medical benefits under its then existing plans, effective as of the date of hire, for each SPC employee that is hired by Purchaser. Section 2.3 Payment of Purchase Price. The consideration for the sale of the Acquired Assets shall be the Purchase Price, the Earn-Out described in Section 2.3.2, and the assumption by the Purchaser of the Assumed Liabilities. 2.3.1 At Closing. At the Closing, Purchaser shall pay for the Acquired Assets the sum of Seventy Five Million Nine Hundred Nineteen Thousand Dollars ($75,919,000) (the "Purchase Price") , or the Adjusted Purchase Price, as the case may be, which amount shall include the sum of Five Million Dollars ($5,000,000) paid to the Escrow Agent pursuant to the Escrow Agreement described in Section 11.4. Notwithstanding any provision contained herein that may be construed to the contrary, any adjustment to the Purchase Price pursuant to the terms of the PPI Agreement (other than Section 12.14) and the Cockpit Agreement shall be 18 24 calculated as part of the Aggregate Adjusted Purchase Price for purposes of determining SPC's right to terminate this Agreement pursuant to Section 10.1(c) hereto. 2.3.2 Earn-Out. With respect to the Terminal at Piney Point, Purchaser shall pay SPC an earn-out for each of the seven calendar years commencing January 1, 1996, equal to forty percent (40%) of the net revenues in such year in excess of $10,250,000 (the "Earn-Out"), as set forth more fully in Exhibit 2.3.2. Section 2.4 Allocation of Purchase Price Amongst Acquired Assets. The Purchase Price shall be allocated amongst the Acquired Assets in accordance with the fair market values set forth on Schedule 2.4. Neither party shall take any position inconsistent with Schedule 2.4 in any filing with the Internal Revenue Service or for any other purpose. Section 2.5 Allocation of Purchase Price Amongst Terminals. The Purchase Price shall be allocated amongst the individual Terminals, which allocation shall include all of the Acquired Assets located at each Terminal, in accordance with the fair market values set forth on Schedule 2.5. Section 2.6 Payment of Taxes and Closing Costs. Purchaser shall be responsible for and shall pay any and all state sales taxes (except with respect to any sales tax in Virginia, which shall be shared equally by SPC and Purchaser) arising in connection with the sale of the Acquired Assets. All closing costs in connection with the sale of the Real Estate or transfer of the rights under the Right-of-way Agreements, including transfer taxes and recording fees, shall be paid equally by SPC and Purchaser, except that title insurance premiums shall be paid by Purchaser. Section 2.7 Risk of Loss. 19 25 (a) The risk of loss of the Acquired Assets shall pass to Purchaser at Closing. If there is any loss, damage, breakdown, or casualty to any of the Acquired Assets prior to Closing that does not constitute either (i) a loss, damage, breakdown, or casualty that has been repaired or replaced to the reasonable satisfaction of Purchaser, or (ii) a loss, damage, breakdown, or casualty fully covered by insurance proceeds which have been assigned to Purchaser and insurance retentions paid by SPC to Purchaser, the Purchase Price shall be reduced by the cost to repair or replace such assets, estimated if necessary. If there is reasonable doubt whether a loss, damage, breakdown, or casualty is fully covered by insurance and the payment of insurance retentions by SPC, Purchaser may reduce the Purchase Price by the cost of repairing or replacing such assets, in which case SPC shall not assign the insurance proceeds or pay any insurance retentions to Purchaser. The cost of repairing or replacing such assets shall be such cost or estimated cost as is agreed upon between the parties. (b) Notwithstanding the above provisions of this Section 2.7, if any repair or replacement is reasonably expected to cause the Average Monthly Revenue at an affected Terminal to decrease by five percent (5%) or more during the month immediately following Closing, Purchaser may, in lieu of accepting insurance proceeds and any insurance retentions or a reduction in the Purchase Price, delay the Closing on the portion of the Acquired Assets constituting such Terminal until SPC has completed such repair or replacement to the reasonable satisfaction of Purchaser, provided, however, that if Purchaser elects to delay the Closing for a particular Terminal or Terminals, SPC may elect to delay the Closing with respect to all of the Acquired Assets until such repair or replacement has been completed. If the Purchaser elects to delay the Closing pursuant to the preceding sentence, then (unless SPC is entitled to and elects 20 26 to terminate this Agreement pursuant to Article 10), SPC shall promptly and diligently cause such repair or replacement to be completed to the reasonable satisfaction of Purchaser. ARTICLE 3 MATTERS PRIOR TO CLOSING Section 3.1 Due Diligence. 3.1.1 Examination of Records and Assets. During the Due Diligence Period, (i) Purchaser and its agents may examine the Business, the Acquired Assets, and such books, records, files, and documents of the Company or the Subsidiaries as relate to the Business or the Acquired Assets, (ii) the Company shall make available to Purchaser and its agents for review all information concerning the Acquired Assets or the Business which they may request, and (iii) the Company will make available to Purchaser the officers and any key employees of the Company to answer questions and to discuss the Company and its Business, all in a manner that does not unduly disrupt the Business. If the Closing does not occur, Purchaser shall promptly return to the Company or the Subsidiaries, as appropriate, at Purchaser's expense, (i) all documents (including any copies thereof) received from the Company or the Subsidiaries before, during or after the Due Diligence Period, and (ii) any documents or materials that Purchaser or its advisers have generated that contain or disclose information from the documents received from the Company or the Subsidiaries. Prior to Closing, except as required in connection with Kaneb Pipe Line Partners, L.P.'s registration statement filed under the Securities Act of 1933 and the related offering of partnership units, Purchaser shall maintain in confidence any information or data received from SPC or the Subsidiaries in the course of conducting its due diligence, including without limitation the environmental due diligence 21 27 provided for in Section 3.1.2, and shall not use the same for any purpose except in connection with the transaction contemplated by this Agreement, provided, that the foregoing confidentiality requirement shall remain in effect after the Closing with respect to the financial statements of the Company and its Affiliates. Prior to Closing, and thereafter with respect to the financial statements of the Company and its Affiliates, except as required in connection with Kaneb Pipe Line Partners, L.P.'s registration statement filed under the Securities Act of 1933 and the related offering of partnership units, Purchaser shall not disclose any such information or data to any third person except to the extent that (i) such information or data is already in the public domain, or (ii) such disclosure is compelled or required by subpoena or similar legal process. 3.1.2 Environmental Due Diligence. 3.1.2.1 Audits and Surveys. During the Due Diligence Period, Purchaser may cause Audits to be conducted by the Purchaser's Consultant, at its expense, of any of the Real Estate or ROW Real Estate (to the extent such Audits are permitted under the applicable Right-of-way Agreement). The scope, methodology, timing, and conduct of all such Audits shall be subject to the prior approval of SPC or, with respect to the Savannah, Georgia Real Estate, SPCT, which approval shall not be unreasonably withheld, except that it shall not be unreasonable for SPC to withhold its approval based on SPC's reasonable opinion that such Audit is not permitted under the relevant Right-of-way Agreement. All Audits shall be conducted so as to avoid unduly disrupting the Business. All such Audits shall be completed within the Due Diligence Period if, and to the extent that, Purchaser wishes to rely on the results of such Audits in proposing any adjustment to the Purchase Price under Section 3.1.2.2. The Purchaser shall cause the Purchaser's Consultant to deliver simultaneously to SPC copies of all 22 28 data, reports, surveys, or audits, or drafts thereof that it delivers to Purchaser with respect to the Acquired Assets or the Business and deliver to SPC promptly after signing this Agreement copies of all data, reports, surveys, audits, or drafts thereof delivered to Purchaser with respect to the Acquired Assets or the Business prior to the signing of this Agreement. 3.1.2.2 Purchase Price Adjustment for Certain Remedial Work. (a) If the Audits prepared by Purchaser's Consultant under any of the Purchase Agreements disclose that Remedial Work with respect to the Acquired Assets or the Business or the assets or business acquired under the PPI Agreement or the Cockpit Agreement is required, Purchaser may deliver to SPC a written notice describing all such proposed Remedial Work, and the calculation of the Aggregate Net Remedial Cost with respect thereto with particularity with respect to the Acquired Assets or the Business under this Agreement and the assets or business being acquired by Purchaser under the PPI Agreement and the Cockpit Agreement. If the Aggregate Net Remedial Cost for such Remedial Work is in excess of one million dollars ($1,000,000), Purchaser may deliver to SPC an Environmental Adjustment Request requesting an adjustment in the Aggregate Purchase Price equal to the amount by which such Aggregate Net Remedial Cost exceeds one million dollars ($1,000,000). (b) The Net Remedial Cost for Remedial Work with respect to the Acquired Assets or the Business disclosed pursuant to this Section 3.1.2.2 shall be aggregated with the Net Remedial Cost for Remedial Work under Section 3.1.2.2 of the PPI Agreement and Section 3.1.2.2 of the Cockpit Agreement for purposes of (i) calculating the one million dollar ($1,000,000) threshold described in Section 3.1.2.2 of this Agreement and the Remaining Threshold, (ii) delivering an Environmental Adjustment Request to SPC under this Agreement, 23 29 to PPI under the PPI Agreement or to SIC under the Cockpit Agreement, (iii) calculating the Aggregate Net Remedial Cost to determine Purchaser's right to terminate pursuant to Section 10.1(h) of this Agreement, and (iv) calculating the Aggregate Adjusted Purchase Price to determine SPC's right to terminate under Section 10.1(c) of this Agreement. (c) No Environmental Adjustment Request under this Section 3.1.2.2 may be delivered to SPC more than seventy-five (75) days from the date of this Agreement. If SPC agrees with the Environmental Adjustment Request, it shall so notify the Purchaser, and the Aggregate Purchase Price shall be reduced by the amount by which the Aggregate Net Remedial Cost exceeds one million dollars ($1,000,000). (d) If SPC disagrees with the Environmental Adjustment Request, SPC may at its expense engage SPC's Consultant, who shall be given copies of all reports and work product of Purchaser's Consultant, and who shall be free to conduct such additional testing and analysis as it thinks necessary. SPC shall cause SPC's Consultant to deliver simultaneously to the Purchaser copies of all data, reports, surveys or audits, or drafts thereof that it delivers to SPC with respect to the Acquired Assets or the Business, or the assets or business being acquired by Purchaser under the PPI Agreement or the Cockpit Agreement. As promptly as possible, SPC shall cause SPC's Consultant to prepare a report, which shall be distributed simultaneously to SPC, Purchaser, and Purchaser's Consultant, stating (i) whether it agrees that Remedial Work with respect to the Acquired Assets or the Business or the assets or business being acquired by Purchaser under the PPI Agreement or the Cockpit Agreement is required with an Aggregate Net Remedial Cost in excess of one million dollars ($1,000,000), and (ii) its estimate of the Aggregate Net Remedial Cost with particularity with respect to the Acquired 24 30 Assets or the Business under this Agreement and the assets or business being acquired by Purchaser under the PPI Agreement or the Cockpit Agreement. If the lower of the two Aggregate Net Remedial Costs is equal to at least 90% of the higher of the two, the Aggregate Net Remedial Cost shall be the average of the two, and the Aggregate Purchase Price shall be reduced by the amount, if any, by which such average exceeds one million dollars ($1,000,000). If the lower of the two Aggregate Net Remedial Costs is less than 90% of the higher of the two, the two Consultants shall jointly engage Groundwater Technologies, Inc. as the Joint Consultant, at the joint expense of the Company and the Purchaser, who shall be given copies of all reports and work product of the Purchaser's and SPC's Consultants, who may conduct such additional testing and analysis as it considers necessary, and who shall render a report to both parties and their Consultants stating what the Aggregate Net Remedial Cost, if any, should be, and that report shall be final and binding on the parties. To the extent, if any, that the Aggregate Net Remedial Cost as stated by the Joint Consultant exceeds one million dollars ($1,000,000), the Aggregate Purchase Price shall be reduced by the amount of such excess. (e) To the extent that the Aggregate Net Remedial Cost is finally determined to exceed one million dollars ($1,000,000) and therefore result in a reduction of the Aggregate Purchase Price by the amount of such excess, the reduction of the Aggregate Purchase Price shall be allocated among SPC under this Agreement, PPI under the PPI Agreement and SIC under the Cockpit Agreement by subtracting from the Purchase Price in each respective agreement an amount equal to the Aggregate Purchase Price adjustment multiplied by a fraction, the numerator of which is the Net Remedial Cost less one million dollars ($1,000,000) but not less than zero (0) with respect to this Agreement and the Net Remedial Cost with respect to the 25 31 PPI Agreement and the Cockpit Agreement and the denominator of which is the Aggregate Net Remedial Cost. The foregoing shall be illustrated as follows:
Example 1 Example 2 --------- --------- Net Remedial Cost under this Agreement $ 900,000 $1,200,000 Plus Net Remedial Cost under the PPI Agreement 200,000 200,000 Plus Net Remedial Cost under the Cockpit Agreement 100,000 100,000 ---------- ---------- Equals Aggregate Net Remedial Cost 1,200,000 1,500,000 Less one million dollars 1,000,000 1,000,000 ---------- ---------- Equals Aggregate Purchase Price Adjustment $ 200,000 $ 500,000 0/300 x 200 = 0 = Purchase Price adjustment under this Agreement = 200/500 x 500 = 200,000 200/300 x 200 = 133,333 = Purchase Price adjustment under the PPI Agreement = 200/500 x 500 = 200,000 100/300 x 200 = 66,667 = Purchase Price adjustment ------- under the Cockpit Agreement = 100/500 x 500 = 100,000 ------- 200,000 = Aggregate Purchase = 500,000 Price adjustment
(f) Notwithstanding the foregoing, if the Aggregate Net Remedial Cost is not in excess of one million dollars ($1,000,000), the foregoing procedures set forth in this Section 3.1.2.2 shall still be followed even though Purchaser shall not be entitled to an adjustment in the Aggregate Purchase Price but instead the amount of the Aggregate Net Remedial Cost under this Section 3.1.2.2 shall be determined and used in calculating the Remaining Threshold. 26 32 3.1.2.3 Purchase Price Adjustment for Other Remedial Work. Notwithstanding any terms contained in Sections 3.1.2.1 and 3.1.2.2, (i) if there is a violation of Environmental Law that occurs after the date of this Agreement and prior to Closing that requires Remedial Work with respect to the Acquired Assets or the Business that is not completed prior to Closing either to the reasonable satisfaction of Purchaser or to the satisfaction of the applicable Governmental Authority, (ii) if after the Due Diligence Period and prior to Closing a violation of Environmental Law that requires Remedial Work with respect to the Acquired Assets or the Business is discovered that could not reasonably have been discovered during the Due Diligence Period by the Phase I and Phase II environmental audit performed by Versar, Inc. and Handex, Inc. in 1993, (copies of which have been provided to Purchaser) and such Remedial Work is not completed prior to Closing either to the reasonable satisfaction of Purchaser or to the satisfaction of the applicable Governmental Authority or (iii) if there exists Net Remedial Costs for matters described in Section 3.1.2.3 of the PPI Agreement or the Cockpit Agreement, then in each such case Purchaser shall be entitled to an adjustment to the Aggregate Purchase Price for the Aggregate Net Remedial Cost with respect to matters described in Section 3.1.2.3 of each of the Purchase Agreements in excess of the Remaining Threshold with respect to all such Remedial Work remaining to be completed after Closing, determined in accordance with the procedures set forth in Section 3.1.2.2 without regard to the 75 day time period for proposing such adjustment. 3.1.2.4 Other Environmental Liabilities. If, prior to Closing, Purchaser, SPC or SPCT receives notice of a claim from, or discovers or receives notice of any facts or circumstances reasonably expected by ICF Kaiser to give rise to a claim by, any Person or 27 33 Governmental Authority for liability or obligation (other than for Remedial Work) related to an alleged violation of Environmental Law with respect to the Acquired Assets or the Business, it shall promptly notify the other parties hereto (the "Notice"). Thereafter, SPC and Purchaser shall attempt to agree on whether a Purchase Price adjustment or other agreeable mechanism is warranted with respect to such claim. If the parties are unable to agree, SPC may in its discretion assume responsibility for such claim and provide Purchaser with an indemnification against such claim reasonably satisfactory to Purchaser. If within thirty (30) days after delivery of the Notice (i) the parties are unable to agree on an adjustment to the Purchase Price or other agreeable mechanism, and (ii) SPC fails to assume responsibility for such claim and provide an indemnification reasonably satisfactory to Purchaser, then Purchaser shall have the right to terminate this Agreement. Section 3.2 Real Property Matters. (a) Purchaser shall at its expense from the date of this Agreement through Closing review the status of SPC's (or the applicable owner's) title to the Real Estate. As of the date of this Agreement, Purchaser has received (i) the surveys listed on the attached Schedule 3.2(a) and (ii) the current title binders listed on the attached Schedule 3.2(a) obtained from Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation with respect to the Real Estate indicating therein Purchaser as the proposed insured (with the cost of any update work necessary to cause the issuance of current title binders to be paid equally by Purchaser and SPC). The information set forth on such surveys listed on Schedule 3.2(a) and in such title binders listed on Schedule 3.2(a) (but only to the extent copies of the documents referenced in such surveys listed on Schedule 3.2(a) and in such title binders listed on Schedule 28 34 3.2(a) have been provided to Purchaser), and specifically excluding the matters described on Schedule 3.2(b), is referred to herein as the "Current Title Information". Purchaser shall have the right, at its expense, to cause to be prepared to its satisfaction current surveys of any or all of the parcels of Real Estate. (b) All Real Property Matters disclosed in the Current Title Information are listed on Schedule 3.2(a) and Purchaser shall not have the right or the opportunity to raise any other Real Property Matters based on the Current Title Information. Purchaser shall have the right for a period of thirty (30) days after the date of this Agreement to continue to raise as Title Objections (by written notice to SPC) any or all of the matters described on Schedule 3.2(b), without regard to the standard set forth in clause (a) of the definition of Title Objections unless otherwise stated on Schedule 3.2(b). (c) If Purchaser's review prior to Closing discloses a Real Property Matter not disclosed in the Current Title Information or in Schedule 3.2(b), Purchaser shall notify SPC thereof within four (4) Business Days of discovery. (d) With respect to the Real Property Matters listed on Schedule 3.2(a) and any Real Property Matters for which notice is sent to SPC under clause (c) above, SPC shall at its expense attempt to remedy or cure such Real Property Matter, provided that, except for payments necessary to release existing mortgages and any Lien related to said mortgages on Real Estate owned by SPC or the Subsidiary Partnership, SPC shall have no obligation to spend any amount in excess of five percent (5%) of the Purchase Price allocated pursuant to Section 2.5 to the Terminal on the affected Real Estate to remedy or cure a Real Property Matter. With respect to any Title Objection raised by Purchaser based on the matters described in Schedule 29 35 3.2(b), SPC shall have no obligation to cure the Title Objection, but if SPC does not cure the Title Objection within thirty (30) days from Purchaser's notification thereof, the Title Objection shall be an uncured Real Property Matter for purposes of this Section 3.2. If SPC is unable to remedy or cure one or more Real Property Matters within 30 days from Purchaser's notification thereof, the parties shall attempt in good faith to negotiate an adjustment in the Purchase Price that will compensate Purchaser for the cost of curing or remedying the Real Property Matter or for otherwise accepting the Real Estate as is. If the parties are unable to agree on an adjustment to the Purchase Price, and the Real Property Matter is with respect to the Real Estate at Piney Point, or Jacksonville, this Agreement shall terminate. If the parties are unable to agree on an adjustment to the Purchase Price and the Real Property Matter is with respect to any other parcel of Real Estate, this Agreement shall terminate with respect to the Terminal located on such parcel or parcels and all related Acquired Assets and the Purchase Price shall be reduced by the amount allocated to such Terminal on Schedule 2.5. Notwithstanding any provision contained herein that may be construed to the contrary, if (i) any Lien or restriction with respect to the Real Estate on which the Brunswick Terminal is located or, if the Partnership Interest is not purchased by Purchaser, the Real Estate on which the Savannah Terminal is located is not the result of an act or omission of SPC, and (ii) Purchaser can continue to lease such Real Estate after the Closing as it is currently being leased by SPC, then SPC shall have no obligation to remove such Lien or restriction and such Lien or restriction shall be a Permitted Encumbrance. Section 3.3 Consents. SPC or the Subsidiary Corporation, as appropriate, shall use reasonable commercial efforts promptly to obtain the consent, waiver or approval (including without limitation the waiver, release or termination of rights of first refusal with respect to the 30 36 Terminals in Annex 1 and Annex 2 in Jacksonville and Farragut Street, if any) of each Person whose consent, waiver, or approval is required to effect an assignment of any of the Material Contracts, Right-of-way Agreements or Real Estate Leases, or to transfer any of the Acquired Assets to Purchaser, or otherwise in connection with this transaction, and, where appropriate, to effect a novation of such Material Contracts, Right-of-way Agreements or Real Estate Leases. Purchaser shall cooperate with SPC and the Subsidiary Corporation in obtaining such items as reasonably requested to do so by SPC or the Subsidiary Corporation. Section 3.4 Hart-Scott-Rodino. Purchaser, SPC and SPCT shall each comply with the notification, waiting period and other requirements of the HSR Act. Each party shall take reasonable steps to provide information to and otherwise cooperate with the other parties for the purposes of making required filings under the HSR Act. Section 3.5 Purchaser's Licenses, Permits and Approvals. Purchaser shall exercise reasonable commercial efforts promptly to obtain all licenses and permits required by Purchaser to purchase the Acquired Assets. Section 3.6 Employees. SPC shall provide Purchaser with a list of the names, addresses and base salaries of its salaried and hourly employees of the Business, and provide Purchaser with the opportunity to conduct pre-employment interviews with them. Purchaser may but shall not be obligated to offer employment to any of SPC's employees, on such terms and conditions as Purchaser may determine, contingent upon and effective at Closing. SPC shall terminate all of its salaried and hourly employees of the Business effective at Closing. SPC shall be responsible for paying any and all liabilities resulting from such terminations of such 31 37 employees (including, but not limited to, any liabilities under the Workers Adjustment and Retraining Notification Act) and will indemnify and hold harmless Purchaser therefrom. Section 3.7 Notification. Each party shall promptly notify the other parties if it has Knowledge of (i) any information indicating that any representation or warranty of any other party is or may be untrue in any material respect, (ii) any covenant to be performed by such other party that is not being performed, or (iii) any circumstance that would impede or interfere with the Closing, except that no party shall be liable for a breach of this covenant unless and except to the extent that the affected party is materially prejudiced or damaged thereby. Section 3.8 Deferred Like-Kind Exchange. Upon the request of SPC, made at least two Business Days prior to the Closing Date, Purchaser shall execute such documents as may reasonably be required to acknowledge (i) notice of SPC's intention to accomplish a deferred like-kind exchange of part or all of the Acquired Assets pursuant to Section 1031 of the Code and Treasury Regulation 1.1031(k)-1 and (ii) the assignment of part or all of SPC's right, title and interest in and to (but not SPC's obligations under) this Agreement to a qualified intermediary (within the meaning of Treasury Regulation Section 1.1031(k)-1(g)(4)). Section 3.9 Actions Necessary to Consummate. From and after the date of this Agreement, each of the parties shall in good faith take such action as may be commercially reasonable to consummate the transactions contemplated by this Agreement. Section 3.10 Audited Division Statements. Prior to the execution of this Agreement, SPC prepared and delivered to Purchaser, and, at Purchaser's expense, Purchaser caused Price Waterhouse, LLP to audit and deliver to Purchaser an opinion on, the Audited Division 32 38 Statements. All out-of-pocket third party expenses incurred by SPC in connection with this Section 3.10 and all of Purchaser's expenses shall be borne by Purchaser. Section 3.11 Capital Expenditures. SPC has made or will make during 1995 and up to the month in which the Closing occurs capital expenditures with respect to the Business or the Acquired Assets in the aggregate amount, but not necessarily in the manner, set forth on Schedule 3.11. The parties agree that the only capital expenditures that shall apply against this requirement are capital expenditures in 1995 for the projects listed on Schedule 7.9(g) and any other projects approved in writing by Purchaser, provided that such approval shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested. Section 3.12 Cockpit Real Estate Lease. If the Real Property, as defined in the Cockpit Agreement, is not purchased by Purchaser, then Purchaser is still required to purchase the portion of the Business conducted at the Cockpit Terminal and the Purchaser shall be required to lease the Real Property from SIC in accordance with the terms to be negotiated and concluded at the appropriate time; provided, however, that if such lease terms cannot be agreed upon, then Purchaser shall not be required to lease the Real Property and Purchaser shall not be required to purchase the portion of the Business conducted at the Cockpit Terminal and the Purchase Price under this Agreement shall be reduced by $119,000. Section 3.13 Florida Submerged Land. Prior to Closing the Company shall in good faith continue to pursue the State of Florida submerged property issues described on Schedule 7.5. At the Closing, the Company shall execute and deliver to Purchaser a quit claim deed covering all submerged land contiguous to the Real Estate at Jacksonville, Florida. 33 39 ARTICLE 4 OPERATION OF THE BUSINESS PRIOR TO CLOSING Section 4.1 Ordinary Course. (a) Between the date of this Agreement and the Closing, SPC shall (i) carry on the Business diligently in the Ordinary Course of Business and shall not institute any new methods of accounting or pricing, or engage in any transaction or activity, or enter into any agreement or make any commitment with respect to the Business or Acquired Assets except in the Ordinary Course of Business; (ii) maintain the Acquired Assets in good operating condition consistent with past practice and comply timely with all provisions of leases, agreements, contracts and commitments relating to the Acquired Assets or the Business; (iii) exercise reasonable efforts to preserve the Business and its relationships with its customers, employees, and suppliers, to timely file all reports required by any Governmental Authority and to pay all taxes, and to comply with all Applicable Law. In addition, SPC shall deliver to Purchaser copies of (i) the Unaudited Terminal Operating Statements and a related Adjustment Statement for periods subsequent to June 30, 1995 and prior to the Closing as soon as they become available to SPC, but in no event later than twenty-one (21) days after the end of the month covered by such statements together with a representation that such statements are true and correct in all material respects and fairly present the results of operations of the Business together with PPI as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied, subject to normal year end adjustments, the adjustments described in Schedule 7.9 and the absence of footnotes required by GAAP; (ii) monthly and year to date unaudited financial statements for SPC for periods subsequent to June 30, 1995 and prior to the Closing as soon as they become available to SPC, but in no event later 34 40 than thirty (30) days after the end of the month covered by such statements together with a representation that such statements are true and correct in all material respects and fairly present the consolidated financial position of the Company and its subsidiaries as of the respective dates thereof and the results of operations and cash flows of the Company and its subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied, subject to normal year end adjustments, the adjustments described in Schedule 7.9 and the absence of footnotes required by GAAP; and (iii) monthly statements setting forth the capital expenditures of the Business for periods subsequent to June 30, 1995, and prior to Closing as soon as they become available to SPC, but in no event later than twenty-one (21) days after the end of the month covered by such statements. (b) Between the date of this Agreement and the Closing, SPCT covenants that it shall exercise commercially reasonable efforts to preserve the business of the Subsidiary Partnership as it is now being conducted. In addition SPCT shall deliver to Purchaser copies of monthly and year to date unaudited financial statements for the Subsidiary Partnership for periods subsequent to June 30, 1995 and prior to the Closing as soon as they become available to SPCT, but in no event later than twenty-one (21) days after the end of the month covered by such statements together with a representation that such statements are true and correct in all material respects and fairly present the financial position of the Subsidiary Partnership as of the respective dates thereof and the results of operations and cash flows of the Subsidiary Partnership as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied, subject to normal year end adjustments, the adjustments described in Schedule 7.9 and the absence of footnotes required by GAAP. 35 41 Section 4.2 Certain Changes. Without the prior consent of Purchaser, such consent not to be unreasonably withheld, provided that such consent shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested, neither SPC nor SPCT shall: (i) permit or allow any of the Acquired Assets to be subjected to any Lien; (ii) cancel or waive any material claim or right relating to the Acquired Assets or the Business; (iii) sell, transfer, assign, distribute or otherwise dispose of any Acquired Assets, except in the Ordinary Course of Business; (iv) enter into any contract or commitment with respect to the Business or the Acquired Assets, the performance of which may extend beyond the Closing Date, except in the Ordinary Course of Business; (v) cause or permit any of its current insurance or reinsurance policies with respect to the Acquired Assets or the Business to be canceled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation, or lapse, the Company obtains replacement policies from the same or comparable insurers providing coverage which is the same or comparable to that provided under the cancelled, terminated, or lapsed policies; (vi) acquire by purchase or license any trademark, patent, or other intellectual property rights with respect to the Business; (vii) make any payment or provision with respect to any employee benefit plan or program with respect to the Business, except in the Ordinary Course of Business, or adopt any new employee benefit plan or program with respect to the Business or amend any existing employee benefit plan or program with respect to the Business, or enter into any new employment agreements with respect to the Business, or increase the compensation payable to any employee with respect to the Business or pay any bonuses to any employee of the Business except in the Ordinary Course of Business. Without the consent of Purchaser, such consent not to be unreasonably withheld, SPC shall not 36 42 enter into, amend or modify any Material Contracts or any Right-of-way Agreements or any Real Estate Leases (other than the Cockpit Real Estate Lease as contemplated by Section 3.12) and SPCT shall not agree to amend or modify the Partnership Agreement, provided that such consent shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested. In addition, SPCT shall use commercially reasonable efforts to prevent the Subsidiary Partnership from entering into, amending or modifying any material contract of the Subsidiary Partnership without the prior consent of Purchaser, such consent not to be unreasonably withheld, provided that such consent shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE The obligation of the Purchaser to purchase the Acquired Assets at Closing shall be subject to the satisfaction of the following conditions on or before the Closing Date, except as and to the extent that such satisfaction is waived by Purchaser. Section 5.1 Representations and Warranties. The representations and warranties of the Company and SPCT (if the Partnership Interest is acquired by the Purchaser hereunder) contained in Article 7 (other than Section 7.16) shall be true and correct in all material respects at and as of the Closing Date and the Purchaser shall have received a certificate to that effect signed by an officer of the Company and an officer of the Subsidiary Corporation. Section 5.2 Certificate Regarding Environmental Representations and Warranties. The Company shall have delivered to Purchaser a certificate signed by an officer of the Company 37 43 stating either (i) the representations and warranties of the Company and SPCT (if the Partnership Interest is acquired by the Purchaser hereunder) contained in Section 7.16 are true and correct at and as of the Closing Date or (ii) the representations and warranties of the Company and SPCT (if the Partnership Interest is acquired by the Purchaser hereunder) contained in Section 7.16 are true and correct at and as of the Closing Date except for matters disclosed in the certificate, which certificate shall divide any such matters stated therein into matters for which a Purchase Price adjustment is available under Sections 3.1.2.2, 3.1.2.3 or 3.1.2.4, and matters for which a Purchase Price adjustment is not available under Section 3.1.2.3(ii). Section 5.3 Compliance with this Agreement. The Company and SPCT (if the Partnership Interest is acquired by the Purchaser hereunder) shall have performed and complied in all material respects with all of their agreements and covenants set forth or contemplated herein that are required to be performed or complied with on or before the Closing Date and the Purchaser shall have received a certificate to that effect signed by an officer of the Company and SPCT. Section 5.4 Purchase Permitted by Applicable Laws. The purchase of the Acquired Assets shall not be prohibited by any Applicable Law or by any order or ruling of any Governmental Authority, nor shall any condition have been imposed on the Closing by any Governmental Authority which would subject either party to penalties or other sanctions as a result of the Closing. Section 5.5 Opinion of Counsel. The Purchaser shall have received an opinion of counsel to the Company, dated the Closing Date, opining in substance on the matters set forth in Exhibit 5.5. 38 44 Section 5.6 Consents and Approvals. All material consents, exemptions, authorizations, or other actions by, or notices to, or filings with, any Person necessary or required in connection with the purchase of the Acquired Assets or the operation of the Business by Purchaser shall have been obtained and be in full force and effect (including any required consent of a ROW Real Estate owner for the transfer or assignment of a Right-of-way Agreement), and any waiting periods under any Applicable Law shall have expired, except that those rights of first refusal affecting Farragut Street or, Annex I and Annex 2 at Jacksonville, if any, are to be treated as Real Property Matters pursuant to Section 3.2. Section 5.7 Throughput Agreements. There shall be included in the Material Contracts with respect to each of the Jacksonville, Piney Point, Farragut Street, and Brunswick Terminals throughput agreements for petroleum products with SPC or some other financially sound Person reasonably acceptable to Purchaser in the form attached as Exhibit 5.7, which shall be executed and become effective by Closing. Section 5.8 No Material Adverse Change. Except as set forth on Schedule 7.11 or as disclosed in the monthly Unaudited Terminal Operating Statements, dated after December 31, 1994 and provided to Purchaser prior to the signing of this Agreement or the Unaudited Partnership Financial Statements, dated after December 31, 1994 and provided to Purchaser prior to the signing of this Agreement, there shall have been no material adverse change in the Acquired Assets or the operations or financial condition of the Business or the Subsidiary Partnership since December 31, 1994. Section 5.9 Title Policy. Purchaser shall have obtained from Commonwealth Land Title Insurance Company or Lawyers Title Insurance Corporation commitments to issue owner's 39 45 or leasehold policies of title insurance providing that (i) upon due recordation of an appropriate deed or memorandum of lease such title company shall insure that the title or leasehold interest to each parcel of the Real Estate owned or leased by SPC prior to Closing shall be vested in Purchaser free and clear of any Real Property Matter and (ii) title to the Real Estate on which the Savannah Terminal is located shall be vested in the Subsidiary Partnership free and clear of any Real Property Matter. Section 5.10 Subsidiary Partnership Debt. As a condition to Purchaser's obligation to purchase the Partnership Interest, the Subsidiary Partnership, as of the Closing, shall have no liabilities in excess of its cash on hand other than liabilities of the Subsidiary Partnership in accordance with the Real Estate Lease for the Savannah, Georgia Terminal, and SPCT shall have delivered to Purchaser a certificate to such effect. Section 5.11 Subsidiary Partnership. SPCT shall exercise commercially reasonable efforts to prevent the Subsidiary Partnership from entering into, amending or modifying any material contract, without the prior consent of Purchaser, such consent not to be unreasonably withheld, provided that such consent shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested. If SPCT fails to prevent the Subsidiary Partnership from entering into, amending or modifying any material contract, then Purchaser shall have the right to terminate this Agreement with respect to the Partnership Interest (but shall still be required to purchase that portion of the Business conducted at the Terminal located in Savannah, Georgia), and the provisions of clauses (i), (ii) and (iii) of the last sentence of Section 12.13(a) shall apply. 40 46 Section 5.12. Right-of-Way Agreement. The Company shall have granted to Purchaser rights-of-way for the Pepco Pipeline as defined in the Cockpit Agreement across the seven (7) parcels of land described in Exhibit 5.12 on terms substantially identical to the terms of the right of way agreement attached to Exhibit 5.12. ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE The obligations of the Company to sell the Acquired Assets hereunder shall be subject to the satisfaction of the following conditions on or before the Closing Date, except as and to the extent that such satisfaction is waived by the Company. Section 6.1 Representations and Warranties. The representations and warranties of the Purchaser and Guarantor contained in Article 8 hereof shall be true and correct in all material respects at and as of the Closing Date, and the Company shall have received a certificate to that effect signed by an officer of the general partner of the Purchaser and an officer of the general partner of the Guarantor. Section 6.2 Compliance with this Agreement. The Purchaser and Guarantor shall have performed and complied in all material respects with all of their agreements and covenants set forth or contemplated herein that are required to be performed or complied with by the Purchaser and Guarantor on or before the Closing Date and SPC and SPCT shall have received a certificate to that effect signed by an officer of the general partner of the Purchaser and an officer of the general partner of the Guarantor. 41 47 Section 6.3 Sale Permitted by Applicable Laws. The sale of the Acquired Assets by the Company hereunder shall not be prohibited by any Applicable Law or Governmental Authority nor shall any condition have been imposed on the Closing by any Governmental Authority which would subject either party to penalties or other sanctions as a result of the Closing. Section 6.4 Opinion of Counsel. The Company shall have received an opinion of counsel to the Purchaser, dated the Closing Date, opining in substance on the matters set forth in Exhibit 6.4. Section 6.5 Consents and Approvals. All consents, exemptions, authorizations, waivers or other actions by, or notices to, or filings with, any Person necessary or required in connection with the execution, delivery or performance by the Purchaser of this Agreement shall have been obtained and be in full force and effect. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARY CORPORATION The Company and the Subsidiary Corporation hereby, jointly and severally, represent and warrant to the Purchaser, as of the date of this Agreement and as of the Closing Date, as follows: Section 7.1 Existence and Power. Each of the Company and the Subsidiary Corporation is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Subsidiary Partnership is a general partnership duly 42 48 organized, validly existing and in good standing under the laws of the State of Delaware. The Company and each Subsidiary: (a) has all requisite corporate or partnership power and authority, as applicable, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (b) is duly qualified as a foreign corporation or partnership, as applicable, and is in good standing, under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business require such qualification, except to the extent that the failure to do so would not have an adverse effect on the Acquired Assets or the Business; and (c) with respect to the Company and the Subsidiary Corporation, has the corporate power and authority to execute, deliver and perform their respective obligations under the Purchase Agreements. Section 7.2 Corporate Authorization: No Contravention. The execution, delivery and performance by the Company and the Subsidiary Corporation of the Purchase Agreements: (a) has been duly authorized by all necessary corporate, and, if required, stockholder action; (b) does not contravene the terms of the Company's or the Subsidiary Corporations's Certificate of Incorporation or By-Laws, or any amendment of either thereof, and (c) will not violate Applicable Law, or conflict with or result in any breach of or default under, or cause the creation of any Lien under, any contractual obligation of the Company or any of its Subsidiaries. Section 7.3 Governmental Authorization: Third Party Consents. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under an Applicable Law, is necessary or required in connection with the execution, delivery or performance by the Company of the Purchase Agreements or the Subsidiary Corporation of this 43 49 Agreement, or enforcement against the Company of the Purchase Agreements or the Subsidiary Corporation of this Agreement, other than (i)compliance with the HSR Act, and (ii) in connection with the rights of first refusal described in Section 3.3. Section 7.4 Binding Effect. The Purchase Agreements have been duly executed and delivered by the Company and, in the case of this Agreement, the Subsidiary Corporation and constitute the legal, valid and binding obligation of each of the Company and the Subsidiary Corporation enforceable against the Company and the Subsidiary Corporation in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability. Section 7.5 Litigation. Except as listed on Schedule 7.5, there are no legal actions, suits, proceedings, or claims pending, or to the Knowledge of the Company or its Subsidiaries, threatened, before any Governmental Authority against or affecting the Company or any of its Subsidiaries (a) with respect to the Purchase Agreements, or any of the transactions contemplated thereby, or (b) which would be reasonably likely to have (i) an adverse effect on the Acquired Assets, the Business, the Subsidiary Partnership or the business of the Subsidiary Partnership or (ii) an adverse effect on the ability of the Company or the Subsidiary Corporation to perform its obligations hereunder. No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any Governmental Authority purporting to enjoin SPC or SPCT or restrain SPC's or SPCT's execution, delivery or performance of the Purchase Agreements. 44 50 Section 7.6 Compliance with Laws. The Company and each of its Subsidiaries are in compliance with all Applicable Law, except for any failure to comply which would not have an adverse effect on the Acquired Assets or the Business. Section 7.7 Title to Real Estate, and Real Estate Leases. Schedule 2.1(a) sets forth a list of all parcels of real property, excluding ROW Real Estate, upon which any of the Terminals or their operations are located (including a metes and bounds description thereof, to the extent available, or a plat of subdivision designation) and also provides a true and correct indication of whether each such parcel is owned or leased by the Company or any Subsidiary. The Company and each of its Subsidiaries has good and marketable title in fee simple to, or holds interests as lessee under Real Estate Leases in full force and effect in, the Real Estate, free of Liens (other than Liens that will be released in full at Closing) and subject to Permitted Encumbrances. The Company has delivered to the Purchaser true and correct copies of all Real Estate Leases, and any amendments thereto, and each such Real Estate Lease is binding upon and enforceable against the Company and with respect to the Terminal located in Savannah, Georgia, the Subsidiary Partnership, and to the Company's Knowledge all parties thereto, in each case, in accordance with its terms, and there is no default thereunder and SPC's rights thereunder are included in the Acquired Assets. As of the Closing Date, the improvements located on the Real Estate are in as good a condition as they were on the date of Purchaser's physical inspection of the Terminals as specified on Schedule 7.7, ordinary wear and tear excepted. Section 7.8 Condition of and Title to Tangible Personal Property. The Tangible Personal Property taken as a whole is sufficient (including its state of operating condition and 45 51 repair taken as a whole, but not on an item by item basis) for the conduct of the Business as presently conducted. Except as set forth on Schedule 7.8, the Company owns free of Liens (other than Liens that will be released in full at Closing) or has the right to use as a lessee under a valid lease included in the Contracts, all of the Tangible Personal Property. Section 7.9 Financial Condition. (a) The Company has furnished Purchaser with true and complete copies of (i) the Audited Financial Statements, (ii) the Unaudited Financial Statements, (iii) the June 30, 1995 Statement, (iv) the Unaudited Partnership Financial Statements, (v) the Capital Expenditure Statement, and (vi) the Audited Division Statements. (b) The Audited Financial Statements are true and correct in all material respects and fairly present the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof, and the results of operations and cash flows for the Company and its Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved. (c) The Unaudited Financial Statements are true and correct in all material respects and fairly present the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof, and the results of operations and cash flows for the Company and its Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved, subject to normal year-end adjustments, the adjustments described in Schedule 7.9, and the absence of footnotes required by GAAP. 46 52 (d) The June 30, 1995 Statement is true and correct in all material respects and fairly presents the results of operations of the Business together with PPI as of the date and for the period set forth therein in conformity with GAAP consistently applied during the period involved, subject to normal year-end adjustments, the adjustments described in Schedule 7.9, and the absence of footnotes required by GAAP. (e) The Unaudited Partnership Financial Statements are true and correct in all material respects and fairly present the results of operations of the Subsidiary Partnership as of the respective dates or for the periods set forth therein in conformity with GAAP consistently applied during the periods involved, subject to normal year-end adjustments, the adjustments described in Schedule 7.9, and the absence of footnotes required by GAAP. (f) The Audited Division Statements are true and correct in all material respects and fairly present the results of operations of the Business together with PPI as of the respective dates or for the respective periods set forth therein in conformity with GAAP consistently applied during the periods involved. (g) Neither the Company nor any of its Subsidiaries has any material liabilities, absolute or contingent, not reflected in the Audited Division Statements, the Unaudited Terminal Operating Statements, or the Unaudited Partnership Financial Statements, except (i) liabilities not required under GAAP to be reflected on such financial statements or the notes thereto (as applicable), (ii) liabilities incurred in the Ordinary Course of Business since the date of the most recent Unaudited Terminal Operating Statement or in the Subsidiary Partnership's ordinary course of business since the date of the most recent Unaudited Partnership 47 53 Financial Statement in each case consistent with past operations and not relating to the borrowing of money and (iii) as disclosed on Schedule 7.9. Section 7.10 Employee Plans. (a) Types of Employee Plans. Except as set forth in Schedule 7.10 the Company does not maintain or contribute to any "employee pension benefit plan" or any "employee welfare benefit plan" as such terms are defined in Section 3(2) and Section 3(1), respectively, of ERISA nor, since April 28, 1980, has the Company participated in or contributed to a "multi-employer plan" as such term is defined in Section 3(37) of ERISA. (b) Prohibited Transactions. To the Company's Knowledge, and except as disclosed in Schedule 7.10, neither the Company nor any of their respective directors, officers, employees or agents, nor any "party in interest" or "disqualified person", as such terms are defined in Section 3 of ERISA and Section 4975 of the Code, has, with respect to any employee plan identified in Section 7.10(a) hereof ("Employee Plan") engaged in or been a party to any "prohibited transaction", as such term is defined in Section 4975 of the Code or Section 406 of ERISA. (c) ERISA. To the Company's Knowledge, and except as disclosed in Schedule 7.10, the Company is in substantial compliance with the requirements prescribed by any and all statutes, orders, or governmental rules or regulations currently in effect with respect to all Employee Plans, including, but not limited to, ERISA and the Code, applicable to such Employee Plans. To the Company's Knowledge, and except as disclosed in Schedule 7.10, the Company has in all material respects performed all material obligations required to be performed 48 54 by it under, is not in violation in any material respect of, and has no knowledge of any material default or violation by any other party to, any of the Employee Plans. (d) Qualifications. To the Company's Knowledge, each Employee Plan intended to qualify under Section 401(a) of the Code has heretofore been determined by the Internal Revenue Service to so qualify, and the trusts created thereunder have heretofore been determined to be exempt from tax under the provisions of Section 501(a) of the Code, and nothing has since occurred which may reasonably be expected to cause the loss of such qualification or exemption. (e) No Carryover Liability. The consummation of this Agreement (and the employment by the Purchaser of former employees of SPC) will not result in any carryover liability to the Purchaser for taxes, penalties, interest or any other claims resulting from any Employee Plan, or other employee benefit agreement or arrangement. In addition, SPC makes the following representations (a) as to employee pension benefit plans of the Company: (1) no Company has become liable to the PBGC under Sections 4062, 4063, or 4064 of ERISA under which a lien could attach to the Acquired Assets under Section 4068 of ERISA; (2) the Company has not ceased operations at a facility so as to become subject to the provisions of Section 4062(a) of ERISA; and (3) the Company has not made a complete or partial withdrawal from a multi-employer plan (as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as defined in Section 4201 of ERISA, and (b) all group health plans maintained by the Company have been operated in compliance with Section 4980B(f) of the Code. Section 7.11 No Material Adverse Change; Ordinary Course. Since December 31, 1994, (i) there has not been any material adverse change in the Acquired Assets, the Business, 49 55 the Subsidiary Partnership or the business of the Subsidiary Partnership and (ii) the Company has operated the Business in the Ordinary Course of Business and the Subsidiary Partnership has operated its business in the Customary Course of Business, except as set forth on Schedule 7.11 or disclosed in any Unaudited Terminal Operating Statement or Unaudited Partnership Financial Statement dated after December 31, 1994 that was provided to Purchaser prior to the signing of this Agreement. Section 7.12 Broker's, Finder's or Similar Fees. Except as set forth on Schedule 7.12, no brokerage commissions, finder's fees or similar fees are payable in connection with the transactions contemplated hereby. Purchaser has no liability for any items set forth on Schedule 7.12. Section 7.13 Patents, Trademarks. Etc. Neither the Company nor its Subsidiaries owns or has the right to use any patents, trademarks, service marks, trade names, copyrights, or similar rights with respect to the Acquired Assets or the Business. To the Company's Knowledge, no right or product, process, method, substance or other material presently sold by or employed by the Company or any of its Subsidiaries, or which the Company or any of its Subsidiaries contemplates selling or employing infringes upon the patents, trademarks, service marks, copyrights or licenses that are owned by others. No litigation is pending and no claim has been made against the Company or any of its Subsidiaries or, to the Knowledge of the Company and its Subsidiaries, is threatened, contesting the right of the Company or any of its Subsidiaries to sell or use any right or product, process, method, substance or other material presently sold by or employed by the Company or any of its Subsidiaries. 50 56 Section 7.14 Material Contracts. The Company and the Subsidiary Corporation have delivered to Purchaser true and correct copies of all Material Contracts, including all amendments thereto. Schedule 2.1(c) lists all Material Contracts, and will be updated at Closing to include any Material Contracts entered into or amended between the date of this Agreement and the Closing Date. Except as disclosed on Schedule 2.1(c) each Material Contract is in effect and has not been amended or otherwise modified and is binding upon and enforceable against the Company or the applicable Subsidiary and, to the Company's and the Subsidiary Corporation's Knowledge, all parties thereto, in accordance with its terms, and there is no default thereunder and to the Knowledge of the Company and the Subsidiary Corporation no other party thereto has issued or threatened to issue a notice of termination or cancellation. Except as set forth on Schedule 2.1(c), no consent to the transfer or assignment of the Material Contracts to Purchaser is required. Section 7.15 Permits. Except as set forth on Schedule 7.15, the Company and each Subsidiary holds all licenses, permits, franchises, approvals, consents, waivers, exemptions, authorizations, certificates of occupancy and similar rights and privileges which are necessary for the operation of its Business. Section 7.16 Environmental Matters. (a) Except as set forth on Schedule 7.16, neither the operation of the Business, any of the Acquired Assets nor the operation of the business of the Subsidiary Partnership (i) violates any Environmental Law in effect on the date hereof, and without regard for future modifications or amendments, (ii) is subject to any pending or threatened action, suit, investigation, or other proceeding by any Governmental Authority with respect to an alleged 51 57 violation of Environmental Law, (iii) uses, and there is not located on the Real Estate, any Hazardous Substances other than (x) those forming a part of the Inventory and supplies of the Company and (y) petroleum products owned by customers or by SPC, which in each case are maintained in accordance with Environmental Law in effect on the date hereof, and without regard for future modifications or amendments or (iv) uses, and there is not located on the ROW Real Estate, any Hazardous Substances other than (x) those forming a part of the Inventory and supplies of the Company and (y) petroleum products owned by customers or by SPC, which in each case are maintained in accordance with Environmental Law in effect on the date hereof, and without regard for future modifications or amendments. (b) Except as set forth on Schedule 7.16, (i) there exists no condition arising from the presence, release, threat of release, placement on or under the Real Estate or the ROW Real Estate, use, storage, handling, generation, or disposal of any Hazardous Substance such as would require Remedial Work or give rise to other liability or obligation, (ii) each of the Company and the Subsidiaries has been issued all material licenses, permits, and certificates required under Environmental Law in effect on the date hereof for the conduct of its business and (iii) there exists no past or present violation of Environmental Law in effect on the date hereof with respect to the Business or the Acquired Assets that gives rise to liability or obligation now or in the future. Schedule 7.16 describes all conditions as to which, to the Knowledge of the Company and the Subsidiary Corporation, Remedial Work with respect to the Business or the Acquired Assets or the business of the Subsidiary Partnership is required, and the scope and methodology of such Remedial Work as currently in process or contemplated by the Company or the Subsidiary Corporation. Neither the Company nor the Subsidiary 52 58 Corporation has any liability or obligation, accrued, contingent or otherwise, with respect to the matters described on Schedule 7.16, except for the obligation to complete Remedial Work. The representation and warranty contained in this Section 7.16 is the only representation and warranty made by SPC or the Subsidiary Corporation with respect to environmental matters or Environmental Law, and no other representation or warranty made herein shall be applicable to such matters or Environmental Law. Notwithstanding the disclosure to Purchaser on Schedule 7.16 or pursuant to Section 5.2 of any Remedial Work for which a Purchase Price adjustment is not available pursuant to Section 3.1.2.3(ii), such Remedial Work shall be regarded as a breach of this Section 7.16 for purposes of Section 11.7.1. Section 7.17 Tax Returns and Liabilities. (a) Returns. The Company has delivered to Purchaser true and complete copies of all Florida, Maryland and District of Columbia income tax returns relating to the operations of the Company and all federal, state, local and foreign income tax returns relating to the operations of the Subsidiary Partnership for the fiscal years 1992, 1993, and 1994, as applicable. (b) All Returns Filed. Except as set forth on Schedule 7.17: (i) all tax returns and reports of every kind (including, without limitation, information and withholding returns and reports of or relating to any income taxes, franchise taxes, real and personal property taxes, withholding taxes, employee compensation taxes, sales and use taxes and all other taxes of any kind applicable to the Company or any of the Subsidiaries) that are required to be filed on or before the Closing Date in accordance with Applicable Law by or with respect to the Company, any Subsidiary, or any other corporation 53 59 that is or was a member of an affiliated group (within the meaning of Section 1504(a) of the Code) of corporations of which the Company was a member for any period ending on or prior to the Closing Date have been or will be duly and timely filed, and are or will be accurate and complete in all material respects; (ii) all taxes due have been or will be paid in full, the amounts so paid have been adequate to pay all income, franchise, real and personal property, withholding and employment compensation taxes, sales and use taxes and all other taxes of any kind whatsoever, including interest and penalties, due and payable by the Company or any Subsidiary for all periods ending on or before the date hereof; (iii) all assessed deficiencies, if any, have been fully paid and satisfied and no deficiencies for any of such taxes have been asserted or threatened; (iv) there are no outstanding agreements by the Company or any Subsidiary for the extension of time for the assessment of any tax; (v) neither the Company nor any Subsidiary is currently being audited by the Internal Revenue Service or by the District of Columbia or by any other taxing authorities and no such audit has been threatened; and (vi) the total amounts set up as liabilities for current and deferred taxes have been prepared in accordance with GAAP in the Audited Financial Statements and the Unaudited Financial Statements and are sufficient to cover the payment of all material taxes that are or are hereafter finally determined to be, or to have been, due with respect to the operations of the Company and the Subsidiaries through the periods covered thereby. 54 60 Section 7.18 Employee Relations. The Company believes that its relationship with its employees is generally good. There is no pending or, to the Knowledge of the Company, threatened labor dispute or union organization campaign. None of the Company's employees is represented by any labor union or is subject to a collective bargaining agreement. Section 7.19 Restrictive Agreements. Except as set forth on Schedule 7.19, the Company is not a party to any agreements restricting or limiting the activities of the Business. Section 7.20 List of Assets. The Acquired Assets include, but are not limited to, and there shall be transferred to Purchaser at Closing, all of the assets listed on Schedules 2.1(a), 2.1(b), 2.1(c), and 2.1(i). Section 7.21 Information Furnished. Neither this Agreement nor any instrument or document furnished to Purchaser hereunder, when considered as a whole, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein, as the case may be, not misleading. Section 7.22 All Assets Included. Except for the Excluded Assets, the Acquired Assets include all assets of any nature, real or personal, tangible or intangible, necessary for or used in the operation of the Business as operated by the Company. Section 7.23 Special Representations Regarding Subsidiary Entities. 7.23.1 Partnership Agreement. SPCT has delivered to Purchaser a true, correct and complete copy of the Partnership Agreement. As of the date hereof, (i) no action has been taken by the Subsidiary Partnership nor has any written proposal been made by its partners to amend the Partnership Agreement, (ii) nor has any action been taken by the Subsidiary Partnership, the Subsidiary Corporation, or to the Knowledge of the Company and the 55 61 Subsidiary Corporation, any other partner, pursuant to the terms of the Partnership Agreement or otherwise, in contemplation of the liquidation or dissolution of the Subsidiary Partnership, (iii) nor are there any proceedings pending or, to the Knowledge of the Company or the Subsidiary Corporation, threatened contemplating the liquidation or dissolution of the Subsidiary Partnership or threatening its existence, (iv) nor has any event or action occurred, nor do any facts exist, that would cause a dissolution or liquidation of the Subsidiary Partnership. The Partnership Agreement (i) has been duly authorized, executed and delivered by the Subsidiary Corporation, and, to the Company and Subsidiary Corporation's Knowledge, the other party named therein and (ii) constitutes the valid and binding obligation of the Subsidiary Corporation and to the Knowledge of the Company and Subsidiary Corporation, the other party named therein. 7.23.2 Issuance or Transfer of Partnership Interests. Except as set forth in the Partnership Agreement, there are no commitments, agreements, or arrangements of any kind relating to the transfer, delivery or sale of any additional interests in the Subsidiary Partnership, the Partnership Interest or, to the Knowledge of the Company and the Subsidiary Corporation, any other interest in the Partnership. 7.23.3 Ownership of Subsidiary Partnership; Title to Partnership Interest. Aectra and the Subsidiary Corporation are the only partners of the Subsidiary Partnership. The Subsidiary Corporation is the sole owner of good and marketable title to the Partnership Interest. The Subsidiary Corporation owns such Partnership Interest free and clear of all Liens or other restrictions (except as set forth in the Partnership Agreement and for those Liens which will be released at Closing). Upon Closing, Purchaser will acquire good and marketable title to the 56 62 Partnership Interest free and clear of all Liens or other restrictions, other than restrictions set forth in the Partnership Agreement and Liens, if any, created by Purchaser. 7.23.4 Capital Accounts. Pursuant to the Partnership Agreement, the Subsidiary Partnership maintains a separate capital account ("Capital Account") for each of its partners which reflects, among other things, each partner's capital contributions, and allocable share of net income, losses and deductions. As of June 30, 1995, the amount in the Subsidiary Corporation's Capital Account is $(41,690.36), and the amount of Aectra's Capital Account is $(41,690.36). As of the Closing, the Subsidiary Corporation's Capital Account will not be less than Aectra's Capital Account and will not be less than zero (0). 7.23.5 Subsidiary Partnership Business and Assets. The exclusive business of the Subsidiary Partnership consists of owning certain real and personal property comprising a petroleum bulk terminal located at 1 Woodcock Road, Savannah, Georgia and leasing such property to the Company. Other than the Agreement of Lease dated May 31, 1994 by and between the Subsidiary Partnership and the Company, the Subsidiary Partnership has no material contracts. Section 7.24 Right-of-way Agreements. (a) Schedule 2.1(i) sets forth a list of all the Right-of-way Agreements. The Company has delivered to Purchaser true and correct copies of the Right-of-way Agreements, and any amendments thereto. Except as disclosed on Schedule 2.1(i), each such Right-of-way Agreement is (i) in effect and has not been amended or otherwise modified, and (ii) is binding upon and enforceable against the Company and, to the Company's Knowledge, all parties thereto in accordance with its terms, and there is no default thereunder and, to the Knowledge of the 57 63 Company, no other party thereto has issued or threatened to issue a notice of termination or cancellation. (b) Except as set forth on Schedule 2.1(i), no consent is required for the transfer or assignment of SPC's rights and obligations under the Right-of-way Agreements to Purchaser. The ROW Real Estate is free and clear of Liens (other than Liens, if any, that will be released in full at Closing) and subject to Permitted Encumbrances. (c) The Right-of-way Agreements for the Benning Pipeline grant SPC the right to operate the Benning Pipeline and conduct a portion of the Business thereon as it has been operated by SPC during the last twelve months. (d) The Pipeline is in good operating condition and repair, ordinary wear and tear excepted, and has been maintained in accordance with industry standards and in compliance with all governmental requirements. ARTICLE 8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR The Purchaser and the Guarantor, jointly and severally, represent and warrant to SPC and SPCT as follows as of the date of this Agreement and as of the Closing Date: Section 8.1 Authorization; No Contravention. The execution, delivery and performance by Purchaser and Guarantor of this Agreement: (a) are within Purchaser's and Guarantor's partnership power and authority and has been duly authorized by all necessary action; (b) does not contravene the terms of Purchaser's or Guarantor's respective limited 58 64 partnership agreements; and (c) will not violate, conflict with or result in any breach or default under any contractual obligation of Purchaser or Guarantor, or violate any Applicable Law. Section 8.2 Binding Effect. This Agreement has been duly executed and delivered by Purchaser and Guarantor, and constitutes the legal, valid and binding obligation of Purchaser and Guarantor enforceable against each of them in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors rights generally or by equitable principles relating to enforceability. Section 8.3 Broker's, Finder's or Similar Fees. No brokerage commissions, finders fees or similar fees are payable in connection with the transactions contemplated hereby under any agreements made by or with Purchaser. Section 8.4 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Applicable Law, and no lapse of a waiting period under Applicable Law, is necessary or required in connection with the execution, delivery or performance by Purchaser or Guarantor (other than compliance with the HSR Act) or enforcement against Purchaser or Guarantor of this Agreement. Section 8.5 Sufficient Funds. As of the date hereof, Purchaser has sufficient funds or has approved financing commitments which will enable it to close the transactions contemplated under this Agreement. As of the Closing Date, Purchaser will have funds available to it sufficient to close and to fulfill its obligations hereunder. Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters. After giving effect to the financing to be incurred by Purchaser in connection with its consummation of the 59 65 transactions contemplated hereby, Purchaser will not be as of the Closing Date (i) "insolvent" nor will it become "insolvent" as the result of such transactions, (ii) engaged in a business or transaction for which any property or assets remaining with Purchaser would be "unreasonably little" or "unreasonably small in relation to its business" or the transaction, or (iii) in a position where it "intends to incur, or believes that it would incur, debts that would be beyond its ability to pay as such debts mature," in each case as such quoted terms are used in Section 548 of the United States Bankruptcy Code of 1978, as amended, the Uniform Fraudulent Conveyances Act and the Uniform Fraudulent Transfer Act. Section 8.7 Litigation. There are no legal actions, suits, proceedings, or claims pending, or to the Knowledge of Purchaser or Guarantor, threatened, before any Governmental Authority against or affecting Purchaser or Guarantor (a) with respect to this Agreement, or any transactions contemplated hereby, or (b) which would be reasonably likely to have an adverse effect on the ability of the Purchaser or Guarantor to perform their respective obligations hereunder. No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any Governmental Authority purporting to enjoin Purchaser or Guarantor with respect to, or restrain Purchaser's or Guarantor's execution, delivery or performance of, this Agreement. ARTICLE 9 CLOSING Section 9.1.A Time and Place. The consummation of the purchase and sale of the Acquired Assets (the "Closing") shall take place at the offices of Ginsburg, Feldman & Bress 60 66 at 1250 Connecticut Avenue, Washington, D.C. at 10:00 a.m. Washington time on October 31, 1995 (the "Closing Date"), or such other date, time, and place as the parties shall agree. At Closing, Purchaser shall be entitled to physical possession of the Real Estate and Acquired Assets, and SPC shall surrender the same to Purchaser. Section 9.1.B Effective Date. The transactions contemplated by this Agreement shall be effective at 12:01 A.M. on the Closing Date, without regard to the date of recordation of deeds or other transfer documents. Section 9.2.A Documents and Instruments to be Delivered by SPC. At Closing, SPC shall deliver to Purchaser (or, with respect to transfer documents for the Real Estate, deliver to the Presidential Title, Inc. sufficiently prior to Closing to permit recording at the time of Closing): (a) bills of sale, assignments, limited warranty deeds, the Steuart License Agreement, signed vehicle registrations, and such other instruments as shall be required to transfer title to the Acquired Assets to Purchaser, free of Liens (except Permitted Encumbrances), all in form customary in the jurisdiction which the Acquired Assets are located and all to be in form reasonably satisfactory to both parties; (b) A certificate of an officer of SPC stating that (i) SPC has complied with all of the covenants imposed on it by this Agreement to the extent they are required to be complied with prior to the Closing, and (ii) that the representations and warranties made by SPC are in all material respects true and correct at Closing, all as required by Sections 5.1, 5.2 and 5.3; (c) the legal opinion required by Section 5.5; 61 67 (d) copies of all consents, waivers and approvals referred to in Section 5.6; (e) copies of the resolutions of SPC's board of directors and of any action required by SPC's stockholders authorizing the execution and delivery of this Agreement, certified by SPC's secretary or assistant secretary; and (f) a good standing certificate from the State of Delaware dated as of a date not more than 20 days prior to the Closing Date. Section 9.2.B Documents and Instruments to be Delivered by SPCT. At Closing, SPCT shall deliver to Purchaser: (a) an assignment transferring the Partnership Interest to Purchaser free of Liens (except Permitted Encumbrances), in a form reasonably satisfactory to both parties; (b) the certificates required by Sections 5.1, 5.2, 5.3 and 5.10; (c) copies of all consents, waivers and approvals, referred to in Section 5.6; (d) copies of the resolutions of SPCT's board of directors and of any action required by SPCT's stockholder authorizing the execution and delivery of this Agreement, certified by SPCT's secretary or assistant secretary; and (e) a good standing certificate from the State of Delaware dated as of a date not more than 20 days prior to the Closing Date. Section 9.3.A Documents and Instruments to be Delivered by Purchaser. At Closing, Purchaser shall deliver to SPC: (a) the Purchase Price or Adjusted Purchase Price, as the case may be, by bank check or wire transfer of immediately available funds, at SPC's election, and, if by wire transfer, to such account as SPC may notify to Purchaser not less than two Business Days prior 62 68 to the Closing Date, and SPCT agrees that such delivery of the Purchase Price to SPC shall constitute delivery to SPCT of all Purchase Price owed to it hereunder; (b) the legal opinion required by Section 6.4; (c) a certificate of an officer of the general partner of the Purchaser stating that (i) Purchaser has complied with all of the covenants imposed on it by this Agreement to the extent they are required to be complied with prior to the Closing, and (ii) that the representations and warranties made by Purchaser are in all material respects true and correct at Closing, all as required by Sections 6.1 and 6.2; and (d) copies of the resolutions of the board of directors of Purchaser's general partner authorizing the execution and delivery of this Agreement, certified by the secretary or an assistant secretary of Purchaser's general partner. Section 9.3.B Documents and Instruments to be Delivered by Guarantor. At Closing, Guarantor shall deliver to SPC: (a) the legal opinion required by Section 6.4; (b) a certificate of an officer of the general partner of the Guarantor stating that (i) Guarantor has complied with all of the covenants imposed on it by this Agreement to the extent they are required to be complied with prior to the Closing, and (ii) that the representations and warranties made by Guarantor are in all material respects true and correct at Closing, all as required by Sections 6.1 and 6.2; and (c) copies of the resolutions of the board of directors of Guarantor's general partner authorizing the execution and delivery of this Agreement, certified by the secretary or an assistant secretary of Guarantor's general partner. 63 69 Section 9.4 Inventories and Tank Bottoms. 9.4.1 Inventories. On the Closing Date all of the petroleum products and other liquids in bulk storage tanks at the Terminals shall be inventoried, gauged and sampled by representatives of Purchaser and SPC, and the petroleum products samples shall be promptly tested by an independent testing laboratory mutually chosen by the parties (at their joint expense) to verify the specifications of such petroleum products that are owned by SPC's northern and southern marketing divisions, and by SPC's customers, in accordance with the procedures set forth in Exhibit 9.4.1. SPC will be responsible for (i) any shortages in the inventories (and will be credited with any overages of inventories other than tank bottoms), and (ii) any petroleum products that do not meet the owner's specifications for such product, and shall indemnify and hold Purchaser harmless from liabilities or obligations resulting therefrom. Shortages and overages in the inventories (other than tank bottoms) shall be determined as soon as practicable after Closing. SPC shall have the right to resolve any specification matter with the customer, including disputing customer claims, prior to Purchaser reaching any settlement therefor. 9.4.2. Wastes. Representatives of Purchaser and SPC shall jointly inventory all wastes (including waste water) stored in holding tanks and separators. SPC shall reimburse Purchaser for the costs, if any, incurred in the disposal of such volumes of waste which cannot legally be disposed of through the existing systems at the terminal locations to the extent the total aggregate cost for all locations (including the cost for waste disposal from the Pipeline, as defined under the PPI Agreement) exceeds one hundred thousand dollars ($100,000) after consideration of amounts, if any, paid by SPC's customers. Purchaser shall dispose of said wastes within thirty (30) days of Closing Date and shall submit copies of invoices and manifests 64 70 to SPC within sixty (60) days of the Closing Date. SPC shall pay Purchaser within forty-five (45) days of receipt of invoices. Liquid waste as used in this Section 9.4.2 does not include the tank bottoms portion of the Inventory covered by Section 9.4.3. 9.4.3 Tank Bottoms. On the Closing Date all tank bottoms shall be inventoried, gauged and sampled by representatives of the parties, and shall be tested promptly by an independent testing laboratory mutually chosen by the parties (at their joint expense), to determine the number of barrels of merchantable petroleum product contained therein, in accordance with the procedures set forth in Exhibit 9.4.3. "Merchantable petroleum product" for this purpose means petroleum product that is free from non-petroleum substances such as water or rust. The Purchase Price shall be reduced, dollar-for-dollar, by the fair market value of the shortfall, if any, between 60,750 barrels of merchantable petroleum product and the number of barrels of merchantable petroleum product in the tank bottoms included in the Inventory on the Closing Date. "Fair market value" for these purposes shall be determined by Platts price on the Closing Date for 2% No. 6 oil, New York Harbor Posting. To the extent any monies are due to Purchaser by virtue of this Section 9.4.3, it shall be paid by SPC within two Business Days of receipt of the report from the independent testing laboratory referred to above. ARTICLE 10 TERMINATION Section 10.1 Grounds for Termination. This Agreement may be terminated as follows: (a) by mutual agreement of the parties, at any time; 65 71 (b) by either party if the Closing does not occur on or before January 1, 1996; (c) by SPC, if the Aggregate Purchase Price or the Aggregate Adjusted Purchase Price, as applicable, determined pursuant to the terms of this Agreement, the Cockpit Agreement and the PPI Agreement, without regard to Section 12.14, the accounts receivable collection section, of this Agreement and the PPI Agreement, and without regard to Section 9.4.3 of this Agreement, totals less than Eighty Million Dollars ($80,000,000), unless Purchaser is willing in that event to pay the aggregate sum of Eighty Million Dollars ($80,000,000) for the assets sold under this Agreement, the Cockpit Agreement and the PPI Agreement. (d) by SPC at any time after November 30, 1995, if the conditions to Closing set forth in Article 6 have not been met by that date, unless the failure to meet such condition is attributable to any fault or neglect of SPC; (e) by Purchaser at any time after November 30, 1995, if the conditions to Closing set forth in Article 5 have not been met by that date, unless the failure to meet such condition is attributable to any fault or neglect of Purchaser; (f) by Purchaser if a Major Loss occurs, provided that Purchaser gives notice of its intent to terminate within ten (10) Business Days after it has received notice of such Major Loss; (g) by Purchaser if it discovers a material breach of any representation or warranty made by SPC which SPC is unable to cure within thirty (30) days after having received notice of such breach; 66 72 (h) by Purchaser if the Aggregate Net Remedial Cost (whether or not resulting in a Purchase Price adjustment) determined pursuant to Sections 3.1.2.2 and 3.1.2.3 of this Agreement, the PPI Agreement and the Cockpit Agreement exceeds six million dollars ($6,000,000); (i) by SPC if it discovers a material breach of any representation or warranty made by Purchaser that Purchaser is unable to cure within thirty (30) days after having received notice of such breach; and (j) by Purchaser pursuant to Section 3.1.2.4. Section 10.2 Effect of Termination. If this Agreement terminates: (a) neither party shall have any obligation to the other party, except that such termination shall be without prejudice to the rights of any party resulting from the intentional or willful breach or violation of the representations, warranties, covenants or agreements of the other party under this Agreement, provided that a failure by a party to close when all of the conditions to such party's obligation to close have been met shall be deemed to be an intentional breach of such party's covenants and agreements hereunder. (b) promptly upon termination for any reason, Purchaser shall return to SPC or SPCT at Purchaser's expense all documents (including copies thereof) received from SPC or SPCT prior to, during or after the Due Diligence Period; (c) Purchaser shall not offer employment to any of SPC's employees, without the prior consent of SPC, for two years following the date of this Agreement; and (d) the provisions of Section 3.1.1, Section 10.2, and Sections 12.1, 12.2, 12.3, 67 73 12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 shall survive the termination of this Agreement and continue in full force and effect. ARTICLE 11 INDEMNIFICATION Section 11.1 Indemnification by SPC. Subject to the provisions of this Article 11, the Company agrees to indemnify, defend, and hold harmless the Purchaser and its Affiliates, officers, directors, agents, shareholders, partners, and employees, (each, a "Purchaser Indemnified Party") from and against any and all liabilities, losses, claims (whether or not successful), damages, and expenses (including reasonable fees, and disbursements of counsel) (collectively, "Liabilities") resulting from or arising out of (i) any breach of any representation or warranty, covenant or agreement of the Company or the Subsidiary Corporation set forth in this Agreement, (ii) non-compliance with any applicable transfer or bulk sales law, (iii) obligations or liabilities of the Company, the Subsidiary Corporation or the Subsidiary Partnership related to or arising out of acts, events or omissions occurring prior to the Closing and not expressly assumed by Purchaser hereunder or indemnified against by Purchaser pursuant to Section 11.7.3, (iv) liabilities or obligations related to any amendment to a Material Contract or Right-of-Way Agreement or Real Estate Lease not delivered to Purchaser prior to the date of this Agreement, unless such amendment is subsequently delivered to and accepted by Purchaser, or (v) all taxes, assessments or levies relating to the seven (7) parcels of land described in Exhibit 5.12, provided, however, that the Company shall not be liable under this 68 74 Section 11.1 to any Purchaser Indemnified Party for any amount paid in settlement of claims without the Company's consent, unless such consent was requested and unreasonably withheld. Section 11.2 Survival of Representations and Warranties. The representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.12 shall survive the Closing without limitation of time. The representations and warranties set forth in Section 7.16 (Environmental Matters) shall survive the Closing and shall expire three years after the Closing Date. The representations and warranties set forth in Section 7.17 (Taxes) shall survive the Closing and shall expire on a date that is ninety (90) days following the expiration of the applicable statute of limitations. All other representations and warranties shall survive the Closing and shall expire two years after the Closing Date. Any right of Purchaser to make a claim against the Company for a breach of any covenant or agreement of the Company or the Subsidiary Corporation herein shall survive the Closing and shall expire one hundred eighty (180) days after the date on which the Company or Subsidiary Corporation was obligated to comply with such covenant or agreement. Any claim for breach of a representation and warranty, or covenant or agreement, must be made by Purchaser by a demand for arbitration to the Company prior to the expiration of such representation and warranty, or the right to make a claim for a breach of such covenant or agreement, and any such claims covered by such demands made by Purchaser to the Company within such time periods shall survive until resolved. Section 11.3 Indemnification by Purchaser. Purchaser, its successors and assigns, jointly and severally, agree to indemnify, defend, and hold harmless the Company, the Subsidiary Corporation and their Affiliates, officers, directors, shareholders, partners, warrant holders, agents, and employees, (each, an "SPC Indemnified Party") from and against any and 69 75 all Liabilities resulting from or arising out of (i) any breach of any representation, warranty, covenant or agreement of Purchaser or Guarantor set forth in this Agreement or (ii) obligations or liabilities of the Purchaser with respect to the Business or the Acquired Assets, including those which may be imposed upon any SPC Indemnified Party, related to or arising out of acts, events or omissions occurring after the Closing and not expressly assumed by any SPC Indemnified Party hereunder and specifically including (but not limited to) liabilities or obligations arising from the failure of Purchaser to assume any post-Closing liabilities as required by Section 2.2, provided, however, that Purchaser shall not be liable under this Section 11.3 to any SPC Indemnified Party for any amount paid in settlement of claims without Purchaser's consent unless such consent was requested and unreasonably withheld, and provided further that the right of the SPC Indemnified Parties to make a claim for breach of any covenants or agreements of Purchaser herein shall expire one hundred eighty (180) days after the date on which the Purchaser was obligated to comply with the covenant or agreement. Section 11.4 Establishment of Escrow Fund. (a) At Closing, the Company shall deposit from the proceeds of the Purchase Price the sum of Five Million Dollars ($5,000,000) (together with interest earned thereon, the "Escrow Fund") with the Escrow Agent named in the Escrow Agreement attached as Exhibit 11.4 to this Agreement, to be held in accordance with the terms of the Escrow Agreement as a fund against which the Purchaser Indemnified Parties can make indemnification claims under the Purchase Agreements (a "Claim"). Any Claim shall be addressed first to the Escrow Agent, until the Escrow Fund has been fully paid out, and then to the Company, PPI or SIC, as applicable, provided, however, Claims shall only be made to the Company, PPI or SIC, as applicable, for Claims for which there is no limitation of amount 70 76 under Section 11.5 of the Purchase Agreements because all other Claims can only be paid out of the Escrow Fund. The Escrow Agreement shall provide that (i) two (2) years after the Closing Date, the Escrow Fund shall be reduced to an amount equal to the sum of (x) Two Million Dollars ($2,000,000) plus (y) the aggregate amount of all unresolved Claims against the Escrow Fund, and all amounts in excess of such amount shall be paid to SPC, provided, however, that the amount in excess of Two Million Dollars ($2,000,000) retained in the Escrow Fund for each unresolved Claim shall be released from the Escrow Fund upon resolution of such Claim, with the agreed amount, if any, of the Claim being paid to Purchaser and the remainder, if any, of the amount originally retained in the Escrow Fund for such Claim being paid to SPC (ii) three (3) years after the Closing Date, the Escrow Fund shall be reduced to an amount equal to the aggregate amount of all unresolved Claims against the Escrow Fund and amounts in excess of such amount shall be paid to SPC, (iii) thereafter, any balance remaining in the Escrow Fund for each unresolved Claim shall be released from the Escrow Fund upon resolution of such Claim, with the agreed amount, if any, of the Claim being paid to Purchaser and the remainder, if any, of the amount originally retained in the Escrow Fund for such Claim being paid to SPC and (iv) the Escrow Agreement shall terminate on the later to occur of three (3) years after the Closing Date and the settlement and satisfaction of all Claims against the Escrow Fund. (b) With respect to each Claim made against the Escrow Fund, SPC and Purchaser shall attempt to reach agreement on the amount, if any, that should be paid to Purchaser with respect to the Claim, and if an agreement is reached, SPC and Purchaser shall deliver joint written instructions to the Escrow Agent regarding the disposition of the Claim and 71 77 the amount, if any, that should be paid to Purchaser out of the Escrow Fund with respect to the Claim. If SPC and Purchaser are unable to reach agreement regarding the disposition or amount of a Claim, the Claim shall be settled by arbitration in accordance with the provisions of this Agreement, and the arbitrator shall, as part of the arbitration award, instruct SPC and Purchaser to deliver to the Escrow Agent joint written instructions stating the disposition of the Claim pursuant to the arbitration and the amount, if any, that should be paid to Purchaser out of the Escrow Fund with respect to the Claim pursuant to the arbitration award. (c) To the extent Purchaser is entitled to receive payment from the Escrow Fund of an amount with respect to any Claim that is not subject to limitation in amount under Section 11.5 of the Purchase Agreements, Purchaser may request that the Escrow Agent delay payment from the Escrow Fund of part or all of such amount until payment of such amount from the Escrow Fund is requested by Purchaser. To the extent the amount payable to Purchaser with respect to any Claim or Claims that are not subject to limitation under Section 11.5 of the Purchase Agreements is in excess of the undisbursed amount of the Escrow Fund at the time Purchaser requests payment, Purchaser may require payment directly from SPC, SPCT, SIC or PPI, as applicable, of the amounts not paid from the Escrow Fund. Section 11.5 Limits on Liability. With the exception of (i) claims arising under Sections 7.1, 7.2, 7.3, 7.4, 7.7 (but only to the extent that any claim is based on the specific wording in each of the limited warranty deeds by which the Real Estate is conveyed) and 7.12 (ii) claims for fines or penalties imposed by Governmental Authorities, (iii) claims for Liens that are not Permitted Encumbrances, (iv) claims related to breaches of the agreements of the Company in Section 9.4, (v) claims for a breach by the Company of the covenant contained in Section 3.11, 72 78 (vi) claims under Section 11.1(iv), and (vii) claims under Section 11.1(v), for which there shall be no limitation of amount, the Company's maximum liability for Liabilities under the Company's indemnifications under this Agreement, including without limitation Section 11.7.1.1, shall be the Escrow Fund, and neither the Company, the Subsidiary Corporation nor any of their Affiliates, shareholders, warrant holders, partners, officers, directors, agents and employees shall have any liability for such Liabilities in excess of the Escrow Fund. Section 11.6 Minimum Claim Amount. With the exception of (i) claims arising under Section 11.7.1.1, (ii) claims for fines or penalties imposed by Governmental Authorities, (iii) claims for Liens that are not Permitted Encumbrances, (iv) claims related to breaches of the agreements of the Company in Section 9.4, (v) claims for a breach by the Company of the covenant contained in Section 3.11, (vi) claims under Section 11.1(iv), and (vii) claims under Section 11.1(v), for which there shall be no minimum claim, Purchaser shall not be entitled to assert any claim for indemnification hereunder until the aggregate of all claims for indemnification under this Agreement, the PPI Agreement and the Cockpit Agreement collectively exceeds Seven Hundred and Fifty Thousand Dollars ($750,000) and then only for amounts in excess of such Seven Hundred and Fifty Thousand Dollars ($750,000). In each case in which Purchaser determines that it has a claim for indemnification, while the aggregate of all claims under this Agreement, the PPI Agreement and the Cockpit Agreement collectively is less than Seven Hundred and Fifty Thousand Dollars ($750,000), it shall promptly notify SPC of all such claims in an amount over $1,000.00, which notice shall describe the claim with particularity and state the amount of such claim. If SPC does not challenge the validity of the claim within thirty (30) days of receiving notice thereof, it shall be deemed to have been 73 79 accepted. If SPC disputes the claim, it shall so notify Purchaser, in which case the parties shall take such steps as are necessary to preserve their respective positions with respect to such claim and any evidence relating thereto, so that the claim may be challenged by SPC if the aggregate of all claims under this Agreement, the PPI Agreement and the Cockpit Agreement collectively exceeds Seven Hundred and Fifty Thousand Dollars ($750,000). Notice of all claims in an amount of $1,000.00 or less shall be provided to SPC promptly after the aggregate of all claims under this Agreement, the PPI Agreement and the Cockpit Agreement collectively exceed Seven Hundred and Fifty Thousand Dollars ($750,000). Section 11.7 Special Environmental Indemnification and Post-Closing Covenants by Purchaser. 11.7.1.1 To the extent that, prior to the date three years after the Closing Date, Purchaser discovers and notifies SPC of facts or circumstances that give rise to Remedial Work (including Remedial Work related to matters discovered prior to the Closing or disclosed on Schedule 7.16 under this Agreement or Schedules 7.16 of the PPI Agreement or the Cockpit Agreement) with respect to the Acquired Assets or the Business or the assets or business acquired by Purchaser under the PPI Agreement or the Cockpit Agreement (except for Remedial Work attributable to (i) changes in Environmental Law occurring after the Closing Date, or (ii) events occurring or actions of Persons other than SPC, SPCT, SIC or PPI taken after the Closing Date), the Aggregate Net Remedial Cost for Remedial Work with respect to the Acquired Assets or the Business being acquired by the Purchaser under this Agreement, the assets or business being acquired by the Purchaser under the PPI Agreement, or the assets being acquired by the Purchaser under the Cockpit Agreement shall be paid as follows: 74 80 (i) an amount equal to the sum of (X) One Million Dollars ($1,000,000) and (Y) any reduction in the Aggregate Purchase Price pursuant to Section 3.1.2.2 or 3.1.2.3 shall be paid by Purchaser; (ii) the next Two Million Five Hundred Thousand Dollars ($2,500,000) of such Aggregate Net Remedial Costs shall be paid, as incurred pari passu, eighty percent (80%) by SPC (and Purchaser shall make a claim on the Escrow Fund therefor) and twenty percent (20%) by Purchaser; and (iii) thereafter Purchaser shall pay all additional amounts of such Aggregate Net Remedial Costs related to the Acquired Assets or the Business being acquired by the Purchaser under this Agreement, the assets or business being acquired by the Purchaser under the PPI Agreement, or the assets being acquired by the Purchaser under the Cockpit Agreement. Notwithstanding the preceding portions of this Section 11.7.1.1, Purchaser shall not be liable for or be required to pay any Aggregate Net Remedial Costs resulting from or arising out of any action or omission after Closing of any SPC Indemnified Party, any SIC Indemnified Party (as defined in the Cockpit Agreement) or any PPI Indemnified Party (as defined in the PPI Agreement) that constitutes or causes a violation of Environmental Law with respect to the Business or the Acquired Assets being acquired by the Purchaser under this Agreement, the assets or business being acquired by the Purchaser under the PPI Agreement, or the assets being acquired by the Purchaser under the Cockpit Agreement or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser. 75 81 11.7.1.2 Purchaser shall not alter or change the scope or methodology of Remedial Work described on Schedule 7.16 except as required by Applicable Law or as approved by the Company, which approval shall not be unreasonably withheld, provided, however, that an objection shall not be deemed unreasonable solely because it is based on an increase in the cost for performing such Remedial Work. For so long as SPC has any liability to Purchaser under Section 11.7.1.1, Purchaser shall use commercially reasonable efforts to perform and complete all such required Remedial Work and shall keep SPC informed of the progress of such Remedial Work. In addition, before undertaking any such Remedial Work Purchaser shall notify SPC of the scope and methodology of such Remedial Work, sufficiently in advance (except as emergency conditions may require otherwise) to permit SPC to comment on such scope and methodology. Recognizing that the final decision on scope and methodology rests with Purchaser, Purchaser shall nonetheless make a good faith effort to reach agreement with SPC regarding such scope and methodology, recognizing SPC's financial interest therein. Purchaser shall provide SPC with copies of all plans, reports, and correspondence submitted to any Governmental Authority with respect to such Remedial Work. Purchaser will not agree to any such Remedial Work or other actions that commit or bind SPC (beyond the payment of money hereunder) without the prior consent of SPC. Purchaser will provide SPC with copies of all invoices rendered by Persons actually performing such Remedial Work, and SPC shall be deemed to have accepted the validity and reasonableness of such invoices if it does not notify Purchaser to the contrary within ten (10) Business Days of receiving the same. 11.7.2 (a) Purchaser and Guarantor acknowledge that (i) Purchaser has reviewed copies of all documents and other materials related to environmental matters with respect to the 76 82 Acquired Assets and the Business that were provided by the Company or SPCT, (ii) the Company and SPCT have specifically bargained for relief, as more particularly described herein, from post-Closing liability resulting from violations of Environmental Law or the performance of Remedial Work with respect to the Acquired Assets or the Business, and (iii) the Purchase Price and Adjusted Purchase Price, as the case may be, reflect Purchaser's willingness to accept liability ( and Guarantor's willingness to guarantee Purchaser's obligation to accept such liability) with respect to such matters as more fully described below. (b) Purchaser has agreed to assume, and Guarantor has agreed to guarantee the obligation of Purchaser to assume, as of the Closing all obligations and liabilities resulting from or arising out of any actual or alleged violation of Environmental Law related to the Acquired Assets or the Business, regardless of when such violation was supposed to have occurred, or the performance of Remedial Work with respect to the Acquired Assets or the Business, except for (i) fines and penalties imposed by any Governmental Authority relating to violations of Environmental Law that occurred prior to Closing with respect to the Acquired Assets or the Business, (ii) payments to be made by SPC pursuant to Section 11.7.1.1, (iii) obligations or liabilities that result from or arise out of any act or omission after the Closing of any SPC Indemnified Party that constitutes or causes a violation of Environmental Law with respect to the Business or the Acquired Assets or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of the representations and warranties set forth in Section 7.16 to the extent Purchaser is entitled to indemnity under this Article 11. 77 83 (c) For the avoidance of any doubt, Purchaser, Guarantor, SPC and SPCT confirm their agreement that neither SPC nor SPCT shall have any obligation or liability post-Closing resulting from or arising out of any actual or alleged violation of Environmental Law related to the Acquired Assets or the Business, regardless of when such violation was supposed to have occurred, or the performance of Remedial Work with respect to the Acquired Assets or the Business, except (i) fines and penalties imposed by any Governmental Authority relating to violations of Environmental Law that occurred prior to Closing with respect to the Acquired Assets or the Business, (ii) payments to be made by SPC pursuant to Section 11.7.1.1, (iii) obligations or liabilities that result from or arise out of any act or omission after Closing of any SPC Indemnified Party that constitutes or causes a violation of Environmental Law with respect to the Business or the Acquired Assets or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of the representations and warranties set forth in Section 7.16 to the extent Purchaser is entitled to indemnity under this Article 11. 11.7.3 Purchaser, its successors and assigns, jointly and severally, agree to indemnify, defend, and hold harmless each SPC Indemnified Party from and against any and all Liabilities resulting from or arising out of any actual or alleged violation of Environmental Law related to the Acquired Assets or the Business, regardless of when such violation was supposed to have occurred, or the performance of Remedial Work with respect to the Acquired Assets or the Business, except for (i) fines and penalties imposed by any Governmental Authority relating to violations of Environmental Law that occurred prior to Closing with respect to the Acquired Assets or the Business, (ii) payments to be made by SPC pursuant to Section 78 84 11.7.1.1, (iii) obligations or liabilities that result from or arise out of any act or omission after Closing of any SPC Indemnified Party that constitutes or causes a violation of Environmental Law with respect to the Business or the Acquired Assets or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of the representations and warranties set forth in Section 7.16 to the extent Purchaser is entitled to indemnity under this Article 11. Notwithstanding the preceding provisions of this Section 11.7.3, Purchaser shall not be liable under this Section 11.7.3 to any SPC Indemnified Party for any amount paid in settlement without Purchaser's consent unless such consent was requested and unreasonably withheld. 11.7.4 Purchaser shall, for a period of five (5) years after Closing, notify the Company promptly of any claim made by any Governmental Authority or by any Person that there has been a violation of Environmental Law in connection with the Business or the Acquired Assets, or occurring on or from the Real Estate or the ROW Real Estate, and shall thereafter keep the Company informed of actions being taken or the conduct of proceedings with respect to such claim, provided that once it has been reasonably determined to the satisfaction of SPC that the amount required to resolve such claim (whether by performing Remedial Work or otherwise) is less than $250,000, Purchaser shall no longer be obligated to provide SPC with information about such claim. Section 11.8 Notification; Counsel. Each Indemnified Party under this Article 11 will, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such Indemnified Party in respect of which indemnity may be sought under this Article 11, notify the Company and SPCT or the Purchaser, as the case may be, in 79 85 writing of the commencement thereof. The failure of any Indemnified Party to give such notice shall not relieve the indemnifying party from any liability which it may have to such Indemnified Party unless, and only to the extent that, such omission materially adversely affects the indemnifying party's ability to defend in such action, claim or other proceeding. In case any such action, claim or other proceeding shall be brought against any Indemnified Party and it shall notify the indemnifying party of the commencement thereof, and, except as otherwise stated herein, the indemnifying party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party. Notwithstanding the foregoing, in any action, claim or proceeding in which both an indemnifying party, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the indemnifying party's expense and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the indemnifying party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable. In any event, the Indemnified Party will reasonably cooperate with the indemnifying party in any defense undertaken by an indemnifying party. Section 11.9 Net Worth Covenant. (a) SPC agrees that for a period of five (5) years after Closing it will maintain a net worth (assets minus liabilities on a GAAP basis balance sheet adding back those liabilities attributable to the above market portion of payment obligations under the throughput agreements described in Section 5.7 and also the deferred income taxes, if any, attributable to the proposed like kind exchange completed in accordance with Section 3.8) in excess of $20,000,000. During the five (5) year period, SPC shall provide to Purchaser, as 80 86 soon as they are available, but in no event more than sixty (60) days after year end, annual calendar year GAAP basis financial statements (and more frequent financial statements if requested by Purchaser) and such other information as is reasonably necessary for Purchaser to confirm compliance with the net worth covenant described in this Section 11.9; (b) SPC may (so long as SIC meets the net worth requirement set forth in the next sentence), at any time during the five (5) year period, provide Purchaser with a guaranty, in the form attached hereto as Exhibit 11.9, from SIC in the amount of $20,000,000 and upon the delivery of such guaranty to Purchaser the covenant contained in Section 11.9(a) shall be null and void. Purchaser shall accept the SIC guaranty so long as SIC has, and agrees to maintain for the remainder of the five (5) year period, a net worth equal to or greater than $20,000,000. If SIC provides the guaranty described above, SPC shall not thereafter be required to comply with the requirements of Section 11.9(a), and the guaranty shall state that SIC shall thereafter provide Purchaser, at the times the SPC financial statements would have been required under the preceding subsection (a), of this Section 11.9, a letter from SIC's independent auditors stating that SIC's net worth (on a GAAP balance sheet basis adding back the deferred income taxes, if any, attributable to the proposed like-kind exchange completed in accordance with Section 3.8 and those liabilities attributable to the above market portion of payment obligations under the throughput agreements described in Section 5.7) is at least $20,000,000. 81 87 ARTICLE 12 MISCELLANEOUS Section 12.1 Notices. All notices, requests, demands, consents, approvals and other communications provided for or permitted hereunder shall be made in writing and shall be delivered by hand or sent by telecopier or courier service: (a) if to Purchaser or Guarantor: Kaneb Pipe Line Partners, L.P. 2435 N. Central Expressway, Suite 700 Richardson, TX 75080 Attn: Edward D. Doherty Telecopier No.: (214) 699-1894 with a copy to: Support Terminal Services, Inc. 17304 Preston Road, Suite 1000 Dallas, TX 75252-5623 Attn: Fred Johnson Telecopier No.: (214) 931-6526 with a copy to: Fulbright & Jaworski, L.L.P. 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Attn: Kenneth L. Stewart Telecopier No.: (214) 855-8200 (b) if to SPC or SPCT: Steuart Petroleum Company 4646 40th Street, N.W. Washington, D.C. 20016 Telecopier No.: (202) 244-5425 Attention: President, and General Counsel 82 88 with a copy to: Ginsburg, Feldman and Bress, Chartered 1250 Connecticut Avenue, N.W. Suite 800 Washington, D.C. 20036 Telecopier No.: (202) 637-9195 Attention: Lee R. Marks, Esq. with a copy to: Steuart Investment Company 4646 40th Street, N.W. Washington, D.C. 20016 Telecopier No.: (202) 244-1221 Attention: Guy T. Steuart II, and John R. Clark III, Esq. Section 12.2 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. No party hereto may assign its rights under this Agreement without the consent of the other party, except that (i) SPC may liquidate and dissolve without Purchaser's consent if SIC provides the guaranty as permitted by Section 11.9, and (ii) Purchaser may assign its rights under this Agreement to any Affiliate, but such assignment shall not relieve Purchaser or Guarantor of any of their obligations hereunder to the extent such obligations are not performed by Purchaser's assignee. Section 12.3 Amendment and Waiver. (a) No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are 83 89 cumulative and are not exclusive of any remedies that may be available to any party hereto at law, in equity or otherwise. (b) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any party hereto from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by all parties hereto, or, in the case of a waiver, by the party waiving compliance, and (ii) only in the specific instance and for the specific purpose for which made or given. Section 12.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to the principles of conflicts of law of New York. Section 12.5 Jurisdiction. Any controversy or claim arising out of or relating to this Agreement or any agreements or transactions contemplated hereby shall be settled by arbitration in accordance with the Commercial Rules of Arbitration of the American Arbitration Association in effect on the date hereof, and any award rendered in such arbitration shall be final and binding on the Parties. Judgment on any award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any arbitration hereunder shall be decided by a single arbitrator, who shall be a lawyer experienced in commercial matters. The parties shall attempt to agree on an arbitrator but either party may at any time request that an arbitrator be selected in accordance with the Commercial Arbitration Rules. Any arbitration hereunder shall be held in New York City, New York. The prevailing party shall be entitled in any arbitration hereunder to recover its reasonable attorney's fees and all costs and expenses of the arbitration. 84 90 Section 12.6 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. Section 12.7 Entire Agreement. The Purchase Agreements and, with respect to the applicable parties, the Confidentiality Agreement, together are a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. The Purchase Agreements supersede all prior agreements and understandings between the parties with respect to the subject matter contained herein, except for the Confidentiality Agreement. Notwithstanding anything herein to the contrary, the terms and conditions of the Confidentiality Agreement shall terminate upon Closing. Section 12.8 Expenses. Each party will bear its own expenses incurred in connection with the negotiation and execution of this Agreement, and Purchaser shall pay its expenses incurred in carrying out due diligence, including Audits. Section 12.9 Publicity. Except as may be required by Applicable Law, or as required in connection with Kaneb Pipe Line Partners L.P.'s registration statement filed under the Securities Act of 1933 and the related offering of partnership units, none of the parties shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement without the prior approval of the other party. If any announcement is required by law to be made by either party , prior to making such announcement such party will deliver 85 91 a draft of such announcement to the other party and shall give the other party an opportunity to comment thereon. Section 12.10 Further Assurances. Each party shall execute such documents and perform such further reasonable acts (including without limitation reasonable action to obtain any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. Section 12.11.A Post-Closing Access to Books and Records by Purchaser. For a period of five (5) years after the Closing Date, subject to reasonable advance notice of time and purpose and to the execution by Purchaser of reasonable confidentiality undertakings, Purchaser and its authorized representatives may at Purchaser's expense have reasonable access during normal business hours to the books and records related to the Business or Acquired Assets that are not included in the Acquired Assets and SPC will furnish to Purchaser such additional information and will cooperate with Purchaser in such other respects as Purchaser may reasonably request, to the extent that such access and disclosure of such information and cooperation are required by Purchaser for financial reporting, tax, or similar purposes, or for purposes of investigating matters which may be the subject of litigation or administrative proceedings with third parties or Governmental Authorities, so long as such disclosure, access, and cooperation do not violate the terms of any agreement to which SPC is bound or any Applicable Law or result in the loss of any attorney-client or work product privilege. SPC will use reasonable efforts in accordance with SPC's normal record maintenance procedures to keep and maintain all such books and records for a period of five (5) years from the Closing or longer as may be required by statute, 86 92 except that notwithstanding any requirements of SPC's normal record maintenance procedures, SPC shall not destroy books and records related to the Business or Acquired Assets during such five (5) year period. From and after such five (5) year period, SPC shall give Purchaser sixty (60) days prior notice before destroying any of such books and records, and Purchaser may at any time during such sixty (60) days take possession, at Purchaser's cost, of such books and records, provided that if Purchaser does not take possession of any of such books and records during such sixty (60) days, SPC shall be free thereafter to dispose of such books and records. Section 12.11.B Post-Closing Access to Books and Records by SPC. For a period of five (5) years after the Closing Date, subject to reasonable advance notice of time and purpose and to the execution by SPC of reasonable confidentiality undertakings, SPC and its authorized representatives may at SPC's expense have reasonable access during normal business hours to the books and records related to the Business or Acquired Assets that are included in the Acquired Assets and Purchaser will furnish to SPC such additional information and will cooperate with SPC in such other respects as SPC may reasonably request, to the extent that such access and disclosure of such information and cooperation are required by SPC for financial reporting, tax, or similar purposes, or for purposes of investigating matters which may be the subject of litigation or administrative proceedings with third parties or Governmental Authorities, so long as such disclosure, access, and cooperation do not violate the terms of any agreement to which Purchaser is bound or any Applicable Law or result in the loss of any attorney-client or work product privilege. Purchaser will use reasonable efforts in accordance with Purchaser's normal record maintenance procedures to keep and maintain all such books and records for a period of five (5) years from the Closing or longer as may be required by statute, except that 87 93 notwithstanding any requirements of Purchaser's normal record maintenance procedures, Purchaser shall not destroy books and records transferred to Purchaser hereunder during such five (5) year period. From and after such five (5) year period, Purchaser shall give SPC sixty (60) days prior notice before destroying any of such books and records, and SPC may at any time during such sixty days take possession, at SPC's cost, of such books and records, provided that if SPC does not take possession of any of such books and records during such sixty days, Purchaser shall be free thereafter to dispose of such books and records. Section 12.12 Treatment of Purchase Agreements. Notwithstanding any provision contained in any of the Purchase Agreements that may be construed to the contrary, (i) the aggregate Liabilities of SPC, SPCT, PPI and SIC under the Purchase Agreements that are subject to maximum liability limits pursuant to the provisions of Section 11.5 of the Purchase Agreements shall be the Escrow Fund, (ii) the maximum aggregate amount that will be paid to Purchaser for the type of Remedial Work described in Section 11.7.1.1 pursuant to the Purchase Agreements shall be the amount set forth in Section 11.7.1.1, and (iii) the $1,000,000 threshold set forth in Section 3.1.2.2, the Remaining Threshold and the $750,000 threshold set forth in Section 11.6 represent the aggregate threshold amounts for applicable claims under the Purchase Agreements. Section 12.13 SPCT's Sale of the Partnership Interest. (a) This Agreement includes provisions for the sale of the Partnership Interest and contains certain representations, warranties, agreements and covenants with respect to the Partnership Interest, SPCT and the Subsidiary Partnership. If Aectra exercises its right of first refusal to purchase the Partnership Interest (as provided for in Section 12.3 of the Partnership Agreement), (i) Purchaser shall 88 94 purchase that portion of the Business conducted at the Savannah Terminal and assume the Real Estate Lease associated therewith, (ii) the references herein to the sale and purchase of the Partnership Interest and the representations and warranties, covenants and agreements related to the Partnership Interest (including the Purchase Price related thereto), the Subsidiary Partnership and SPCT as they relate to the sale of the Partnership Interest shall be null and void, and (iii) the Purchase Price shall be reduced by $1,300,000. (b) If Aectra, pursuant to Section 12.3 of the Partnership Agreement, declines to purchase the Partnership Interest and Aectra agrees to sell Aectra's Partnership Interest pursuant to the terms and conditions set forth in section 12.3 of the Partnership Agreement, then Purchaser shall purchase the Partnership Interest on the terms and conditions set forth herein and Aectra's Partnership Interest in accordance with the provisions of Section 12.3 of the Partnership Agreement. Section 12.14 Accounts Receivable Collections. [Except as otherwise provided in Exhibit 12.14, the parties agree that all accounts receivable and payments under the Contracts shall be pro rated as of the Closing Date. SPC shall be credited with such amounts attributable to periods prior to Closing and Purchaser shall be credited with such amounts attributable to periods after Closing and the Purchase Price shall be adjusted accordingly. All payments under the Contracts described on Exhibit 12.14 shall be prorated at Closing pursuant to the procedures described in Exhibit 12.14. Section 12.15 Prorations. Real Estate property taxes and assessments for which SPC is liable, water, sewer and utility charges, normal operating expenses, annual permit or inspection fees (calculated on the basis of the period covered), and all other charges and fees customarily 89 95 prorated and adjusted in similar transactions shall be prorated at Closing on the basis of a 365-day year. If any item subject to proration cannot be calculated accurately on the Closing Date, then such item shall be calculated within thirty (30) days after the Closing Date and any party owing another party a sum of money based on such subsequent proration(s) shall promptly pay the sum owed, together with interest thereon at the rate of seven percent (7%) per annum from the Closing Date to the date of payment if payment is not made within ten (10) days after delivery of an invoice therefor. Section 12.16 Guaranty. Guarantor acknowledges and agrees that it will derive substantial direct and indirect benefits from providing the guaranty set forth in this Section 12.16 and Guarantor has determined that it is in its best interest to provide this guaranty. Guarantor absolutely and unconditionally guarantees to SPC and each SPC Indemnified Party the due and punctual payment of all liabilities and obligations of Purchaser to SPC or each SPC Indemnified Party, as appropriate, in accordance with the terms of this Agreement (and specifically including the indemnification obligations set forth in Article 11). Guarantor guarantees to SPC and each SPC Indemnified Party the performance of all obligations, liabilities, covenants and agreements (and specifically the indemnification obligations set forth in Article 11) of Purchaser to SPC or each SPC Indemnified Party, as appropriate. Guarantor agrees to indemnify and hold SPC and each SPC Indemnified Party harmless from and against all liability and expense, including reasonable attorneys' fees, sustained by SPC or any SPC Indemnified Party by reason of the failure of Purchaser to fully perform and comply with the terms and obligations of this Agreement. Guarantor expressly waives any right to require SPC or any SPC Indemnified Party to bring any action, or exhaust its rights, against Purchaser or any other person, or to require 90 96 that resort be had to any assets of Purchaser before pursuing the Guarantor under this Section 12.16. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their authorized officers as of the date first above written. STEUART PETROLEUM COMPANY By: /s/ JOHN C. JOHNSON --------------------------------------- Name: John C. Johnson Title: President and C.E.O SPC TERMINALS, INCORPORATED. By: /s/ JOHN C. JOHNSON --------------------------------------- Name: John C. Johnson Title: President KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. By: Kaneb Pipe Line Company, its general partner By: /s/ EDWARD D. DOHERTY --------------------------------------- Name: Edward D. Doherty Title: Chairman 91 97 SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. By: Support Terminal Services, Inc., its general partner By: /s/ EDWARD D. DOHERTY ------------------------------------------- Name: Edward D. Doherty Title: Chairman 92 EX-10.2 3 PINEY POINT PIPELINE ASSET PURCHASE AGREEMENT 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 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 3.5 Purchaser's Licenses, Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 3.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 4 OPERATION OF THE BUSINESS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 4.2 Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 5.2 Certificate Regarding Environmental Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(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 4646 Fortieth Street, N.W., Washington D.C. 20016 ("PPI" or the "Company"), Support Terminals Operating Partnership, L.P., a Delaware limited partnership with its principal place of business at 17304 Preston Road, Suite 1000, Dallas, Texas 75252-5623 ("Purchaser") and Kaneb Pipe Line Operating Partnership, L.P., a Delaware limited partnership with its principal place of business at 2435 N. Central Expressway, Suite 700, Richardson, Texas 75080 ("Guarantor"). RECITALS A. PPI owns and operates the Pipeline. B. SPC and Purchaser have entered into the Asset Purchase Agreement, pursuant to which, SPC has agreed to sell to Purchaser and Purchaser has agreed to buy from Seller those SPC assets more particularly described in the Asset Purchase Agreement. C. As part of the transactions contemplated by the Asset Purchase Agreement, PPI has agreed to sell to Purchaser and Purchaser has agreed to buy the Pipeline Assets and the Business, on the terms and subject to the conditions set forth in this Agreement. Now, therefore, the parties agree as follows: 7 ARTICLE 1 DEFINITIONS 1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Adjusted Purchase Price" means the Purchase Price less any reductions thereto made in accordance with this Agreement. "Affiliate" means as to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "Agreement" means this Agreement and the Schedules and Exhibits attached hereto, as amended, supplemented or modified. "Andrews AFB" means Andrews Air Force Base in Prince George's County, Maryland. "Applicable Law" means as to any Person, any Federal, state, municipal, foreign or other law, treaty, order, ordinance, code, rule, regulation, right, privilege, qualification, license or franchise or determination of or promulgated by a Governmental Authority, applicable or binding on such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "Asset Purchase Agreement" means that certain Asset Purchase Agreement By and Among Steuart Petroleum Company, SPC Terminals, Incorporated, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P., of even date with this Agreement. "Assumed Liabilities" has the meaning set forth in Section 2.2. 2 8 "Audit(s)" means such environmental due diligence as Purchaser chooses to conduct, including, without limitation, a Phase I and/or Phase II environmental audit. "Average Monthly Revenue" shall be calculated by dividing the total revenues generated from the Business for the twelve calendar months immediately preceding the date of this Agreement by twelve. "Business" means PPI's Pipeline operations. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Dallas, Texas, the City of New York or Washington, D.C. are authorized or required by Applicable Law or executive order to close. "Closing" has the meaning set forth in Section 9.1.A. "Closing Date" means the date specified in Section 9.1.A. "Cockpit Agreement" means that certain Purchase Agreement By and Among Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point, of even date with this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto. "Consulting Agreement" means that certain Consulting Agreement by and between Steuart Petroleum Company and Piney Point Industries, Inc., dated June 30, 1991, pursuant to which SPC provides management services to PPI on the operation of the Pipeline. "Contracts" means all contracts and agreements between PPI and third parties relating to the Pipeline Assets or the Business, including without limitation Material Contracts, but not 3 9 including the Consulting Agreement, the Dockman Services Agreement, the Tariff, the Right-of-way Agreements, or the Emergency Spill Response Agreement. "Dockman Services Agreement" means that certain Agreement by and between Steuart Petroleum Company and Piney Point Industries, Inc., dated June 30, 1991, pursuant to which SPC provides dockman services to assist in the unloading of river barges. "DOD" means the Department of Defense. "Due Diligence Period" means the 60-day period commencing with the date of this Agreement. "Emergency Spill Response Agreement" means that certain agreement by and between SPC and PPI, dated August 13, 1992, pursuant to which SPC provides PPI with certain spill response personnel, equipment and materials. "Environmental Adjustment Request" means a request for a reduction in the Purchase Price submitted by Purchaser pursuant to Section 3.1.2.2. "Environmental Law" means any Federal, state or local law, statute, ordinance, or regulation pertaining to health, industrial hygiene, or the environmental conditions concerning the Pipeline Assets or any portion thereof, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401 et seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA") and similar laws of any Governmental Authority having jurisdiction over any portion of the Pipeline Assets as such laws may be amended or supplemented from time to time, and all regulations promulgated or orders issued pursuant to 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 Hart-Scott-Rodino 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 Andrews AFB in Prince George's County, Maryland, operated by PPI, together with the PPI Tanks and any other improvements or fixtures utilized by PPI in connection therewith. "Pipeline Assets" has the meaning set forth in Section 2.1. 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 Andrews AFB. "Purchase Price" has the meaning set forth in Section 2.3.1. "Purchaser Indemnified Party" has the meaning set forth in Section 11.1. "Purchaser's Consultant" means Think Tank, Inc., or any other recognized environmental consulting firm selected by Purchaser and approved by PPI, such approval not to be unreasonably withheld. "Remedial Work" means any investigation, site monitoring, containment, cleanup, removal, restoration, or other corrective action that is reasonably necessary to remedy any non-compliance with Environmental Law, that is reasonably necessary under Environmental Law, or that has been required by a Governmental Authority. "Right-of-way Agreement(s)" means the agreement(s) (whether in the form of a license, easement, lease or other form of agreement) pursuant to which PPI is granted the right to use the real estate owned by third parties for the Pipeline and the Business. The Right-of-way agreements are more particularly described in Schedule 2.1(b). "ROW Real Estate" means, individually or in the aggregate, the real estate on which the Pipeline is located that is described, in and subject to the terms and conditions set forth in, a Right-of-way Agreement. "SIC" means Steuart Investment Company, a Delaware corporation. 8 14 "SPC' means Steuart Petroleum Company, a Delaware Corporation. "Tangible Personal Property" means all tangible personal property used in the Business including, but not limited to, the Vehicles. "Tariff" means that certain tariff and the related operating agreement pursuant to which PPI transports petroleum products to, and stores petroleum products at, Andrews AFB. "Unaudited Annual PPI Financial Statements" means the unaudited balance sheets and related statements of income and cash flows of PPI as of and for the years ending December 31, 1992, 1993 and 1994. "Unaudited Monthly PPI Financial Statements" means the unaudited balance sheets and related statements of income and cash flows of PPI as of and for each month and year-to-date for the six months ending June 30, 1995. "Vehicles" means all boats, automobiles, trailers, trucks, vans, and other motor vehicles used in the Business, including, but not limited to, those listed on Schedule 2.1(c). ARTICLE 2 PURCHASE AND SALE OF ASSETS Section 2.1 Sale and Purchase. At the Closing, PPI shall sell, transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall purchase and accept from PPI, all right, title and interest in and to the assets, properties, and rights comprising the Business and the Pipeline, whether tangible or intangible, real, personal or mixed, and wherever located (collectively, the "Pipeline Assets"), free and clear of all Liens, and other restrictions, except for Permitted Encumbrances, provided, that the Pipeline Assets shall not include and Purchaser 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 Dockman Services Agreement, the Emergency Spill Response Agreement and the Consulting Agreement (the items listed in clauses (i) through (vii) being referred to herein as the "Excluded Assets"). The Pipeline Assets include without limitation: (a) the Pipeline as described on Schedule 2.1(a); (b) the Company's rights under the Right-of-way Agreements, including, but not limited to, those listed on Schedule 2.1(b); (c) the Tangible Personal Property as listed on Schedule 2.1(c); (d) PPI's rights under the Contracts, to the extent transferable, including PPI's rights under the Material Contracts listed on Schedule 2.1(d); (e) all business records in the possession or under the control of PPI relating to the Pipeline Assets or the Business, including without limitation the books and records of accounts and customer and prospect lists, but excluding financial records presently maintained at PPI's location at 4646 Fortieth Street, N.W., Washington, D.C. (which PPI shall maintain and transfer to Purchaser in accordance with the terms of Section 12.11); and 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 Asset 14 20 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 Kaiser to give rise to a claim by, any Person or Governmental Authority for liability or obligation (other than for Remedial Work) related to an alleged violation of Environmental Law with respect to the Pipeline Assets or the Business, it shall promptly notify the other parties hereto (the "Notice"). Thereafter, PPI and Purchaser shall attempt to agree on whether a Purchase Price adjustment or other agreeable mechanism is warranted with respect to such claim. If the parties are unable to agree, PPI may in its discretion assume responsibility for such claim and provide Purchaser with an indemnification against such claim reasonably satisfactory to Purchaser. If within thirty (30) days after the Notice (i) the parties are unable to agree on an adjustment to the Purchase Price or other agreeable mechanism, and (ii) PPI fails to assume responsibility for such claim and provide an indemnification reasonably satisfactory to Purchaser, then Purchaser shall have the right to terminate this Agreement. Section 3.2 Intentionally Omitted. 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, Andrews AFB after Closing. Section 3.4 Hart-Scott-Rodino. Purchaser and PPI shall each comply with the notification, waiting period and other requirements of the HSR Act. Each party shall take reasonable steps to provide information to and otherwise cooperate with the other parties for the purposes of making required filings under the HSR Act. Section 3.5 Purchaser's Licenses, Permits. Purchaser shall (i) exercise reasonable commercial efforts promptly to obtain all licenses and permits required by Purchaser to purchase the Pipeline Assets, and (ii) use best efforts to promptly tender and obtain approval for a tariff and related operating agreement to transport petroleum products to, and store petroleum products at, Andrews AFB with a tariff rate of at least $.95 per Bbl. and containing substantially similar terms as the most recently effective Tariff. 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 Dockman Services Agreement, the Consulting Agreement and the Emergency Spill Response Agreement effective on the Closing Date. Section 3.7 Notification. Each party shall promptly notify the other parties if it has Knowledge of (i) any information indicating that any representation or warranty of any other party is or may be untrue in any material respect, (ii) any covenant to be performed by such other party that is not being performed, or (iii) any circumstance that would impede or interfere with the Closing, except that no party shall be liable for a breach of this covenant unless and except to the extent that the affected party is materially prejudiced or damaged thereby. Section 3.8 Deferred Like-Kind Exchange. Upon the request of PPI, made at least two Business Days prior to the Closing Date, Purchaser shall execute such documents as may reasonably be required to acknowledge (x) notice of PPI's intention to accomplish a deferred like-kind exchange of part or all of the Pipeline Assets pursuant to Section 1031 of the Code and 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 Andrews AFB which are maintained in accordance with Environmental Law in effect on the date hereof, and without regard for future modifications or amendments. (b) Except as set forth on Schedule 7.16, (i) there exists no condition arising from the presence, release, threat of release, placement on or under the ROW Real Estate, use, storage, handling, generation, or disposal of any Hazardous Substance such as would require Remedial Work or give rise to other liability or obligation, (ii) the Company has been issued all material licenses, permits, and certificates required under Environmental Law in effect on the date hereof for the conduct of the Business and (iii) there exists no past or present violation of Environmental Law in effect on the date hereof with respect to the Pipeline Assets or the Business that gives rise to liability or obligation now or in the future. (c) Schedule 7.16 describes all conditions as to which, to the Knowledge of the Company, Remedial Work with respect to the Business or the Pipeline Assets is required, and the scope and methodology of such Remedial Work as currently in process or contemplated by the Company. The Company has no liability or obligation, accrued, contingent or otherwise, with respect to the matters described on Schedule 7.16, except for the obligation to complete Remedial Work. (d) The representation and warranty contained in this Section 7.16 is the only representation and warranty made by PPI with respect to environmental matters or Environmental Law, and no other representation or warranty made herein shall be applicable to 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 Andrews AFB and grant to PPI the right to operate the Pipeline and conduct the Business thereon as it has been operated and conducted by PPI during the last twelve months. (d) The Pipeline is in good operating condition and repair, ordinary wear and tear excepted, and has been maintained in accordance with industry standards and in compliance with all governmental requirements. ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR The Purchaser and the Guarantor, jointly and severally, represent and warrant to PPI as follows as of the date of this Agreement and as of the Closing Date: Section 8.1 Authorization: No Contravention. The execution, delivery and performance by Purchaser and Guarantor of this Agreement: (a) are within Purchaser's and Guarantor's partnership power and authority and has been duly authorized by all necessary action; (b) does not contravene the terms of Purchaser's or Guarantor's respective limited partnership agreements; and (c) will not violate, conflict with or result in any breach or default under any contractual obligation of Purchaser or Guarantor, or violate any Applicable Law. 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 Ginsburg, Feldman & Bress at 1250 Connecticut Avenue, Washington, D.C. at 10:00 a.m. Washington time on October 31, 1995 (the "Closing Date"), or such other date, time, and place as the parties shall agree. At 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. 2435 N. Central Expressway, Suite 700 Richardson, TX 75080 Attn: Edward D. Doherty Telecopier No.: (214) 699-1894 57 63 with a copy to: Support Terminal Services, Inc. 17304 Preston Road, Suite 1000 Dallas, TX 75252-5623 Attn: Fred Johnson Telecopier No.: (214) 931-6526 with a copy to: Fulbright & Jaworski, L.L.P. 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Attn: Kenneth L. Stewart Telecopier No.: (214) 855-8200 (b) if to the Company or SPC: Piney Point Industries, Inc. 4646 Fortieth Street, N.W. Washington, D.C. 20016 Telecopier No.: (202) 244-4518 Attention: Leonard P. Steuart II, and General Counsel with a copy to: Ginsburg, Feldman and Bress, Chartered 1250 Connecticut Avenue, N.W. Suite 800 Washington, D.C. 20036 Telecopier No.: (202) 637-9195 Attention: Lee R. Marks, Esq. with a copy to SPC: Steuart Petroleum Company 4646 Fortieth Street, N.W. Washington, D.C. 20016 Telecopier No.: (202) 244-5425 Attention: President, and General Counsel 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/ LEONARD P. STEUART II Name: Leonard P. Steuart II Title: President SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. By: Support Terminal Services, Inc., its general partner By:/s/ E. D. DOHERTY Name: E. D. Doherty Title: Chairman 65 71 KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. By: Kaneb Pipe Line Company, its general partner By:/s/ E. D. DOHERTY Name: E. D. Doherty Title: Chairman By executing and delivering this Agreement to Purchaser, Steuart Petroleum Company hereby acknowledges and assumes the obligations delegated to or imposed upon Steuart Petroleum Company under this Agreement, including but not limited to those payment obligations for indemnification claims that shall be made from the Escrow Fund. STEUART PETROLEUM COMPANY By:/s/ JOHN C. JOHNSON Name: John C. Johnson Title: President and C.E.O. 66 EX-10.3 4 PURCHASE AGREEMENT WITH STEWART INVESTMENT CO. 1 EXHIBIT 10.3 PURCHASE AGREEMENT BY AND AMONG STEUART INVESTMENT COMPANY, SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. FOR COCKPIT POINT AUGUST 27, 1995 2 TABLE CONTENTS
Page No. -------- ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.1 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3.1 At Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3.2 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.4 Allocation of Purchase Price Amongst Acquired Assets . . . . . . . . . . . . . . . . . . . 13 Section 2.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.6 Payment of Taxes and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 3 MATTERS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.1.1 Examination of Records and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.1.2 Environmental Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.2 Real Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.4 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.5 Purchaser's Licenses, Permits and Approvals. . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.6 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.8 Deferred Like-Kind Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.9 Actions Necessary to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 4 OPERATION OF THE PROPERTY PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 4.2 Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 5.2 Certificate Regarding Environmental Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 5.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 5.4 Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(i) 3 Section 5.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 5.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 5.9 Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 5.10 Satisfaction of Conditions to Closing Under the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.2 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.3 Sale Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 6.6 Satisfaction of Conditions to Closing Under the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.2 Corporate Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.3 Governmental Authorization: Third Party Consents . . . . . . . . . . . . . . . . . . . . . 29 Section 7.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.6 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 7.7 Title to Real Property and Real Property Leases . . . . . . . . . . . . . . . . . . . . . . 30 Section 7.8 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 7.9 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.10 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.11 No Material Adverse Change: Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.12 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.13 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.15 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.17 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.18 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.19 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 7.20 List of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 7.21 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 7.22 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 7.23 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 7.24 Right-of-way Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR . . . . . . . . . . . . . . . . . 35
(ii) 4 Section 8.1 Authorization: No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 8.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 8.3 Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 8.4 Governmental Authorization; Third Party Consent . . . . . . . . . . . . . . . . . . . . . . 36 Section 8.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters . . . . . . . . . . . . . . . . . . . . . 36 Section 8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 9.1.A Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 9.1.B Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 9.2 Documents and Instruments to be Delivered by SPC . . . . . . . . . . . . . . . . . . . . . 38 Section 9.3.A Documents and Instruments to be Delivered by Purchaser . . . . . . . . . . . . . . . . . . 39 Section 9.3.B Documents and Instruments to be Delivered by Guarantor . . . . . . . . . . . . . . . . . . 39 Section 9.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 10.1 Grounds for Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 10.2 Termination of the Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 10.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 11.1 Indemnification by SIC and SPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 11.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 11.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 11.4 Establishment of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 11.5 Limits on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 11.6 Minimum Claim Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 11.7 Special Environmental Indemnification and Post-Closing Covenants by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 11.8 Notification; Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 11.9 Net Worth Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 12.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 12.3 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 12.5 Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 12.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 12.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(iii) 5 Section 12.11.A Post-Closing Access to Books and Records by Purchaser . . . . . . . . . . . . . . . . . . . 56 Section 12.11.B Post-Closing Access to Books and Records by SIC . . . . . . . . . . . . . . . . . . . . . . 57 Section 12.12 Treatment of Purchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.13 Capitalized Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 12.14 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 12.15 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 12.16 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(iv) 6 PURCHASE AGREEMENT BY AND AMONG STEUART INVESTMENT COMPANY, SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. AND KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. FOR COCKPIT POINT This Purchase Agreement is made this 27th day of August, 1995, by and among Steuart Investment Company, a Delaware corporation with its principal place of business at 4646 Fortieth Street, N.W., Washington D.C. 20016 ("SIC" or the "Company"), Support Terminals Operating Partnership, L.P., a Delaware limited partnership with its principal place of business at 17304 Preston Road, Suite 1000, Dallas, Texas 75252-5623 ("Purchaser") and Kaneb Pipe Line Operating Partnership, L.P., a Delaware limited partnership with its principal place of business at 2435 N. Central Expressway, Suite 700, Richardson, Texas 75080 ("Guarantor"). RECITALS A. SIC owns the Property. The Business conducted on the Real Property is owned and operated by SPC. SIC leases the Property to SPC pursuant to the Real Property Lease. B. SPC and Purchaser have entered into the Asset Purchase Agreement, pursuant to which, SPC has agreed to sell to Purchaser and Purchaser has agreed to buy from Seller, among other things, the Business conducted on the Real Property, including SPC's rights under the Real Property Lease. C. As part of the transactions contemplated by the Asset Purchase Agreement, SIC has agreed to sell to Purchaser and Purchaser has agreed to buy the Property, on the terms and subject to the conditions set forth in this Agreement. 7 Now, therefore, the parties agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Adjusted Purchase Price" means the Purchase Price less any reductions thereto made in accordance with this Agreement. "Affiliate" means as to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "Agreement" means this Agreement and the Schedules and Exhibits attached hereto, as amended, supplemented or modified. "Aggregate Purchase Price" means the sum of the Purchase Price set forth in this Agreement, the Purchase Price set forth in the PPI Agreement and the Purchase Price set forth in the Asset Purchase Agreement. "Aggregate Adjusted Purchase Price" means the sum of the Adjusted Purchase Price set forth in this Agreement, the Adjusted Purchase Price set forth in the PPI Agreement and the Adjusted Purchase Price set forth in the Asset Purchase Agreement. "Applicable Law" means as to any Person, any Federal, state, municipal, foreign or other law, treaty, order, ordinance, code, rule, regulation, right, privilege, qualification, license or franchise or determination of or promulgated by a Governmental Authority, applicable or 2 8 binding on such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "Asset Purchase Agreement" means that certain Asset Purchase Agreement By and Among Steuart Petroleum Company, SPC Terminals, Incorporated, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. of even date with this Agreement. "Assumed Liabilities" has the meaning set forth in Section 2.2. "Audit(s)" means such environmental due diligence as Purchaser chooses to conduct, including without limitation a Phase I and/or Phase II environmental audit. "Average Monthly Revenue" shall be calculated by dividing the total revenues generated from the Business for the twelve calendar months immediately preceding the date of this Agreement by twelve. "Business" means SPC's terminal operations at Cockpit Point. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Dallas, Texas, the City of New York or Washington, D.C. are authorized or required by Applicable Law or executive order to close. "Closing" has the meaning set forth in Section 9.1.A. "Closing Date" means the date specified in Section 9.1.A. "Cockpit Point" means the Real Property. "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto. 3 9 "Contracts" means all contracts and agreements between SIC and suppliers, vendors, customers and other third parties relating to the Property, including without limitation Material Contracts, but not including the Right-of-way Agreements. "Current Title Information" has the meaning set forth in Section 3.2. "Due Diligence Period" means the 60-day period commencing with the date of this Agreement. "Environmental Adjustment Request" means a request for a reduction in the Purchase Price submitted by Purchaser pursuant to Section 3.1.2.2. "Environmental Law" means any Federal, state or local law, statute, ordinance, or regulation pertaining to health, industrial hygiene, or the environmental conditions concerning the Property or any portion thereof, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. Sections 6901 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. ("RCRA"); the Clean Air Act, 42 U.S.C. Sections 7401 et seq. ("CAA"); the Clean Water Act, 33 U.S.C. Sections 1251 et seq. ("CWA") and similar laws of any Governmental Authority having jurisdiction over any portion of the Property as such laws may be amended or supplemented from time to time, and all regulations promulgated or orders issued pursuant to such laws, but not including the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. ("OSHA") or other laws relating primarily to the protection of workers. "Excluded Assets" has the meaning set forth in Section 2.1. "GAAP" means generally accepted United States accounting principles in effect from time to time. 4 10 "Governmental Authority" means the government of any nation, state, city, locality or other political subdivision of any thereof, any federal, state, local or other court or arbitral tribunal, and any entity (corporate or otherwise) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Hazardous Substance" includes without limitation: (i) any substance included within the definition of "hazardous waste" pursuant to Section 1004 of the RCRA and implementing regulations; (ii) any substance included within the definition of "hazardous substance" pursuant to Section 101 of CERCLA and implementing regulations; (iii) any pollutant listed under the CAA, the CWA or implementing regulations pursuant to the CAA or the CWA; and (iv) petroleum and petroleum products. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "Indemnified Party" means each SIC Indemnified Party or each Purchaser Indemnified Party as determined by the context of the reference to "Indemnified Party" herein. "Knowledge" when used with respect to the Company, means the actual knowledge of the officers of the Company, and when used with respect to the Purchaser, means the actual knowledge of the officers of the general partner of the Purchaser and the officers of ST Services, Inc. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity 5 11 related preferences) including, without limitation, those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease obligation, or any financing lease having substantially the same economic effect as any of the foregoing, except that "Lien" shall not include liens for taxes not due and payable at Closing. "Major Loss" means any loss, damage, breakdown, or casualty to the whether from fire, flood, hurricane, or any other cause, in an amount reasonably estimated to exceed Five Hundred Thousand Dollars ($500,000), whether or not covered by insurance. "Material Contracts" means Contracts that either (i) require an annual payment by any party thereto in excess of $50,000, (ii) are not cancelable by SIC (at no penalty to SIC) within twelve months, or (iii) have a material effect on the operation or conduct of the Property, including without limitation the Real Property Lease. "Net Remedial Cost" means the cost, estimated if necessary, to perform any Remedial Work net of estimated insurance coverage and reimbursements from trust funds maintained by any Governmental Authority. "Notice" has the meaning set forth in Section 3.1.2.4. "Ordinary Course of Business" means a course of business consistent with the Company's past customs and practices with respect to the Property. "Pepco" means Potomac Electric Power Company. "Pepco Pipeline" means the 30 miles (approximately) of 16 inch pipeline owned by Pepco extending from the Piney Point Terminal, in St. Mary's County, Maryland to the Ryceville Pumping Station in Charles County, Maryland. 6 12 "Permitted Encumbrances" shall mean: (a) with respect to any property other than ROW Real Estate (provided that item (iii) below shall only apply to Real Property) (i) those matters described on Schedules 2.1(a) and 2.1(b) under the heading "Permitted Encumbrances", (ii) liens for taxes not due and payable at Closing, (iii) except for matters listed as Title Objections on Schedule 3.2, imperfections of title, easements or restrictions that do not substantially affect marketability, insurability, or use (but specifically excluding any Lien or any claim of Lien related to an obligation to pay money with respect to a debt, but including those Liens listed on Schedule 2.1(a)) and, (iv) any Liens or other restrictions or title defects that are waived or consented to by Purchaser; and (b) with respect to ROW Real Estate (i) those matters described on Schedules 2.1(a) and 2.1(b) under the heading "Permitted Encumbrances", (ii) Liens for taxes that SIC is obligated to pay under any Right-of-Way Agreement not due and payable at Closing, (iii) Liens on the ROW Real Estate arising due to the acts or omissions of the owner or lessor of the ROW Real Estate, (iv) any Lien on the ROW Real Estate that is not attributable to an act or omission of SIC or its Affiliates, and (v) any Liens or other restrictions that are waived or consented to by Purchaser. "Person" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "PPI" means Piney Point Industries, Inc., a Maryland corporation. 7 13 "PPI Agreement" means that certain Piney Point Pipeline Asset Purchase Agreement By and Among Piney Point Industries, Inc., Support Terminals Operating Partnership, L.P. and Kaneb Pipeline Operating Partnership, L.P. of even date with this Agreement. "Property" shall have the meaning set forth in Section 2.1. "Purchase Agreements" means collectively this Agreement, the PPI Agreement and the Asset Purchase Agreement. "Purchase Price" has the meaning set forth in Section 2.3.1. "Purchaser Indemnified Party" has the meaning set forth in Section 11.1. "Purchaser's Consultant" means Think Tank, Inc., or any other recognized environmental consulting firm selected by Purchaser and approved by SIC, such approval not to be unreasonably withheld. "Real Property" means that certain real property located at Cockpit Point Road, Dumfries, Virginia and including the Tanks and all buildings, structures, fixtures and other improvements located thereon, as described in greater detail in Schedule 2.1(a), but not including any other real property owned or leased by SIC and also not including the ROW Real Estate. "Real Property Lease" means that certain Lease Agreement with respect to the Real Property by and between SPC as lessee and SIC as lessor, dated August 1, 1981, as amended by the First Amendment dated January 1, 1994, and listed on Schedule 2.1(b). "Real Property Matter" means, with respect to any parcel of Real Property, (i) a Title Objection with respect to such parcel; (ii) an existing or pending condemnation, expropriation, or public taking of all or any portion of such parcel, which, (A) individually or in the aggregate, 8 14 has, or is reasonably expected to have, a material adverse effect on the operations of the Property, (B) has, or is reasonably expected to have, a material adverse effect on the internal expansion of the Property or (C) affects greater than ten percent (10%) of the acreage of the Property. "Remedial Work" means any investigation, site monitoring, containment, cleanup, removal, restoration, or other corrective action that is reasonably necessary to remedy any non-compliance with Environmental Law, that is reasonably necessary under Environmental Law, or that has been required by a Governmental Authority. "Right-of-way Agreement(s)" means the agreement(s) (whether in the form of a license, easement, lease or other form of agreement) pursuant to which SIC is granted the right to use real estate owned by third parties for the Pepco Pipeline and the Business and the right-of-way agreements described in Section 5.12 of the Asset Purchase Agreement. The Right-of-way Agreements are more particularly described in Schedule 2.1(c). "ROW Real Estate" means individually or in the aggregate, the real estate on which the Pepco Pipeline is located that is described in, and subject to the terms and conditions set forth in a Right-of-way Agreement. "SIC Indemnified Party" has the meaning set forth in Section 11.3. "SIC's Consultant" means Versar, Inc., or any other recognized environmental firm selected by SIC and approved by Purchaser, such approval not to be unreasonably withheld. "SPC" means Steuart Petroleum Company, a Delaware corporation. "Tank" means the four (4) storage tanks having a total shell capacity of approximately 465,000 bbls and three (3) ancillary tanks located on and comprising part of the Real Property. 9 15 "Terminal(s)" means the various terminal operations owned or leased and operated by SPC that offer petroleum product throughput and storage capabilities as more fully described in the Asset Purchase Agreement. "Title Objection" means (a) any Lien, restriction or title defect that substantially impairs the marketability, insurability or use of any parcel of Real Property, other than Permitted Encumbrances and (b) those matters listed on Schedule 3.2. ARTICLE 2 PURCHASE AND SALE OF ASSETS Section 2.1 Sale and Purchase. At the Closing, SIC shall sell, transfer, grant, assign, convey and deliver to Purchaser, and Purchaser shall purchase and accept from SIC, all right, title and interest in and to the following assets, properties, and rights, whether tangible or intangible, real, personal or mixed, and wherever located (the "Property"), in each case free and clear of all Liens and other restrictions, except for Permitted Encumbrances: (a) the Real Property as listed on Schedule 2.1(a); (b) SIC's rights under the Contracts, to the extent transferable, including SIC's rights under the Material Contracts listed on Schedule 2.1(b); (c) SIC's rights under the Right-of-way Agreements, including, but not limited to, those listed on Schedule 2.1(c). (d) all business records in the possession or under the control of SIC relating to the Property including without limitation the books and records of account and customer and prospect lists, but excluding financial records 10 16 presently maintained at SIC's location at 4646 Fortieth Street, N.W., Washington, D.C. (which SIC shall maintain and transfer to Purchaser in accordance with the terms of Section 12.11); and (e) to the extent transferable, all of SIC's right and interest in any license, permits, consents, and authorities relating to the Property, issued by any Governmental Authority and any applications for such items. Notwithstanding anything herein to the contrary, the Property shall not include and Purchaser shall not acquire (i) cash, bank accounts, accounts receivable, certificates of deposit or other cash equivalents, (ii) any tax refunds attributable to taxes paid by SIC, (iii) those assets listed on Schedule 2.1 under the heading "Excluded Assets", (iv) the right to the Steuart name, except as licensed under the Asset Purchase Agreement, (v) any insurance retrospective rating adjustment applicable to periods prior to the Closing Date, and (vi) any reimbursements from trust funds or insurance maintained by any Governmental Authority for Remedial Work performed prior to the Closing Date and paid for by SIC (the items listed in clauses (i) through (vi) being referred to herein as the "Excluded Assets"). Section 2.2 Assumption of Liabilities. (a) Purchaser shall assume at Closing: (i) obligations of SIC under the Contracts and Right-of-way Agreements attributable to periods of time commencing with the Closing, provided, however, that (A) with respect to Material Contracts and Right-of-way Agreements, Purchaser assumes such obligations only for Material Contracts listed on Schedule 2.1(b) and Right-of-way Agreements listed on Schedule 2.1(c) and only to the extent true and correct copies thereof and 11 17 all amendments thereto have either been delivered to Purchaser as of the date hereof, or are delivered to and consented to by Purchaser after the date hereof, provided, however, that to the extent that a copy of an immaterial amendment to such Material Contract or Right-of-way Agreement has not been provided to Purchaser as of the date hereof, Purchaser shall assume such obligations for such Material Contract or such Right-of way Agreement without regard to the amendment not delivered to Purchaser and, in such event, SIC shall be responsible for all liabilities of Purchaser with respect to the amendment not delivered to Purchaser without regard to the limits set forth in Section 11.5; and (B) Purchaser specifically does not assume, and shall not be treated as having assumed, any liability or obligation under any Contract or Right-of-way Agreement to the extent such liability or obligation relates to or arises out of a breach of such Contract or Right-of way Agreement that occurs prior to the Closing (provided that liability and obligation for Purchaser's continuing breaches of such Contracts or such Right-of-way Agreements after Closing and liability and obligation for breaches of such Contracts or Right-of-way Agreements commenced by Purchaser after Closing shall be the responsibility of Purchaser); and (ii) except as expressly provided for otherwise herein and in accordance with the provisions of Section 11.7, any amounts payable to perform Remedial Work with respect to the Real Property, regardless of when the events giving rise to the obligation to perform such Remedial Work are alleged to have occurred. The obligations assumed by Purchaser pursuant to subsection (a) of this Section 2.2 are referred to herein collectively as the "Assumed Liabilities". 12 18 (b) Purchaser shall not assume any liabilities or obligations of SIC not specifically assumed under subsection (a) of this Section 2.2, except to the extent that Purchaser's covenants in Section 11.7 constitute an assumption of such liabilities or obligations. Nothing herein shall be deemed to contravene the Purchaser's indemnification of SPC in Sections 11.3 and 11.7, which shall remain in full force and effect. Section 2.3 Payment of Purchase Price. The consideration for the sale of the Property shall be the Purchase Price and the assumption by the Purchaser of the Assumed Liabilities. 2.3.1 At Closing. At the Closing, Purchaser shall pay for the Acquired Assets the sum of One Million Eight Hundred Eighty One Thousand Dollars ($1,881,000) (the "Purchase Price") , or the Adjusted Purchase Price, as the case may be. Notwithstanding any provision contained herein that may be construed to the contrary, any adjustment to the Purchase Price pursuant to the terms of this Agreement shall be calculated as part of the Aggregate Adjusted Purchase Price for purposes of determining SPC's right to terminate the Asset Purchase Agreement pursuant to Section 10.1(c) therein. 2.3.2 Intentionally Omitted. Section 2.4 Allocation of Purchase Price Amongst Acquired Assets. The Purchase Price shall be allocated amongst the Property in accordance with the fair market values set forth on Schedule 2.4. Neither party shall take any position inconsistent with Schedule 2.4 in any filing with the Internal Revenue Service or for any other purpose. Section 2.5 Intentionally Omitted. Section 2.6 Payment of Taxes and Closing Costs. Purchaser shall be responsible for and shall pay any and all state sales taxes (except with respect to any sales tax in Virginia, which 13 19 shall be shared equally by SIC and Purchaser) arising in connection with the sale of the Property; provided, however, that all closing costs in connection with the sale of the Real Property or transfer of the rights under the Right-of-way Agreements including transfer taxes and recording fees, shall be paid equally by SIC and Purchaser, except that title insurance premiums shall be paid by Purchaser. Section 2.7 Risk of Loss. (a) The risk of loss of the Property shall pass to Purchaser at Closing. If there is any loss, damage, breakdown, or casualty to any of the Property prior to Closing that does not constitute either (i) a loss, damage, breakdown, or casualty that has been repaired or replaced to the reasonable satisfaction of Purchaser, or (ii) a loss, damage, breakdown, or casualty fully covered by insurance proceeds which have been assigned to Purchaser and insurance retentions paid by SIC to Purchaser, the Purchase Price shall be reduced by the cost to repair or replace such assets, estimated if necessary. If there is reasonable doubt whether a loss, damage, breakdown, or casualty is fully covered by insurance and the payment of insurance retentions by SIC, Purchaser may reduce the Purchase Price by the cost of repairing or replacing such assets, in which case SIC shall not assign the insurance proceeds or pay any insurance retentions to Purchaser. The cost of repairing or replacing such assets shall be such cost or estimated cost as is agreed upon between the parties. (b) Notwithstanding the above provisions of this Section 2.7, if any repair or replacement is reasonably expected to cause the Average Monthly Revenue to decrease by five percent (5%) or more during the month immediately following Closing, Purchaser may, in lieu of accepting insurance proceeds and any insurance retentions or a reduction in the Purchase 14 20 Price, delay the Closing hereunder on the portion of the Property constituting and relating to the Real Property and under the Asset Purchase Agreement on the portion of the Acquired Assets thereunder constituting the Cockpit Terminal until SPC has completed such repair or replacement to the reasonable satisfaction of Purchaser, provided, however, that if Purchaser elects to delay the Closing for the Cockpit Terminal, SIC, SPC and PPI, all, but not separately, may elect to delay the Closing hereunder, the Closing with respect to all of the Acquired Assets under the Asset Purchase Agreement and the Closing contemplated under the PPI Agreement until such time as the Closing under the Purchase Agreements can take place simultaneously. ARTICLE 3 MATTERS PRIOR TO CLOSING Section 3.1 Due Diligence. 3.1.1 Examination of Records and Assets. During the Due Diligence Period, (i) Purchaser and its agents may examine the Property, and such books, records, files, and documents of the Company as relate to the Property, (ii) the Company shall make available to Purchaser and its agents for review all information concerning the Property which they may request, and (iii) the Company will make available to Purchaser the officers and any key employees of the Company to answer questions and to discuss the Company and the Property all in a manner that does not unduly disrupt the Property and the operation of the Company's business. If the Closing does not occur, Purchaser shall promptly return to the Company, at Purchaser's expense, (i) all documents (including any copies thereof) received from the Company before, during or after the Due Diligence Period, and (ii) any documents or materials 15 21 that Purchaser or its advisers have generated that contain or disclose information from the documents received from the Company. Prior to Closing, except as required in connection with Kaneb Pipe Line Partners, L.P.'s registration statement filed under the Securities Act of 1933 and the related offering of partnership units, Purchaser shall maintain in confidence any information or data received from the Company in the course of conducting its due diligence, including without limitation the environmental due diligence provided for in Section 3.1.2, and shall not use the same for any purpose except in connection with the transaction contemplated by this Agreement, provided, that the foregoing confidentiality requirement shall remain in effect after the Closing with respect to the financial statements of the Company and its Affiliates. Prior to Closing, and thereafter with respect to the financial statements of the Company and its Affiliates, except as required in connection with Kaneb Pipe Line Partners, L.P.'s registration statement filed under the Securities Act of 1933 and the related offering of partnership units, Purchaser shall not disclose any such information or data to any third person except to the extent that (i) such information or data is already in the public domain, or (ii) such disclosure is compelled or required by subpoena or similar legal process. 3.1.2 Environmental Due Diligence. 3.1.2.1 Audits and Surveys. During the Due Diligence Period, Purchaser may cause Audits to be conducted by the Purchaser's Consultant, at its expense, of any of the Real Property, the Pepco Pipeline (to the extent such Audits are permitted by Pepco) or ROW Real Estate (to the extent such Audits are permitted under the applicable Right-of-way Agreement). The scope, methodology, timing, and conduct of all such Audits shall be subject to the prior approval of SIC, which approval shall not be unreasonably withheld, except that it shall not be 16 22 unreasonable for SIC to withhold its approval based on SIC's reasonable opinion that such Audit is not permitted under the relevant Right-of-way Agreement. All Audits shall be conducted so as to avoid unduly disrupting the Property or the business of Pepco, SIC and/or SPC. All such Audits shall be completed within the Due Diligence Period if, and to the extent that, Purchaser wishes to rely on the results of such Audits in proposing any adjustment to the Purchase Price under Section 3.1.2.2. The Purchaser shall cause the Purchaser's Consultant to deliver simultaneously to SIC copies of all data, reports, surveys, or audits, or drafts thereof that it delivers to Purchaser with respect to the Property and deliver to SIC promptly after signing this Agreement copies of all data, reports, surveys, audits, or drafts thereof delivered to Purchaser with respect to the Property prior to the signing of this Agreement. 3.1.2.2 Purchase Price Adjustment for Certain Remedial Work. (a) If the Audits prepared by Purchaser's Consultant disclose that Remedial Work is required with respect to the Property, then Purchaser shall record and track such Remedial Work with any Remedial Work disclosed pursuant to Section 3.1.2.2 of the Asset Purchase Agreement and Section 3.1.2.2 of the PPI Agreement and Purchaser may deliver to SIC and SPC an Environmental Adjustment Request to request an adjustment to the Purchase Price subject to this subsection (a) and subsections (b), (c) and (d) below. The Net Remedial Cost for Remedial Work with respect to the Property disclosed pursuant to this Section 3.1.2.2 shall be aggregated with the Net Remedial Cost for Remedial Work under Section 3.1.2.2 of the Asset Purchase Agreement and Section 3.1.2.2 of the PPI Agreement for purposes of (i) calculating the one million dollar ($1,000,000) threshold described in Section 3.1.2.2 of the Asset Purchase Agreement and the Remaining Threshold, (ii) delivering an Environmental 17 23 Adjustment Request to SPC under the Asset Purchase Agreement, to PPI under the PPI Agreement and/or SIC under this Agreement, (iii) calculating the Net Remedial Cost to determine Purchaser's right to terminate pursuant to Section 10.1(h) of the Asset Purchase Agreement, and (iv) calculating the Aggregate Adjusted Purchase Price to determine SPC's right to terminate under Section 10.1(c) of the Asset Purchase Agreement. (b) The time limitations and procedures for (i) delivering an Environmental Adjustment Request, and (ii) determining the Net Remedial Cost for Remedial Work required with respect to the Property set forth in Section 3.1.2.2 of the Asset Purchase Agreement shall apply hereunder. (c) Any Environmental Adjustment Request that includes a description of Remedial Work required with respect to the Property shall be delivered to SIC and SPC. (d) To the extent, if any, that the Aggregate Net Remedial Cost under the Purchase Agreements exceeds one million dollars ($1,000,000) and any of the excess amount of such Aggregate Net Remedial Cost is attributable to the Property as determined in accordance with the procedures set forth in Section 3.1.2.2(e) of the Asset Purchase Agreement, then the Purchase Price shall be reduced by the amount of such excess in accordance with Section 3.1.2.2 of the Asset Purchase Agreement. 3.1.2.3 Purchase Price Adjustment for Other Remedial Work. Notwithstanding any terms contained in Sections 3.1.2.1 and 3.1.2.2, (i) if there is a violation of Environmental Law that occurs after the date of this Agreement and prior to Closing that requires Remedial Work with respect to the Property that is not completed prior to Closing either to the reasonable satisfaction of Purchaser or to the satisfaction of the applicable Governmental Authority, or (ii) 18 24 if after the Due Diligence Period and prior to Closing a violation of Environmental Law that requires Remedial Work with respect to the Property is discovered that could not reasonably have been discovered during the Due Diligence Period by a Phase I and Phase II environmental audit and such Remedial Work is not completed prior to Closing either to the reasonable satisfaction of Purchaser or to the satisfaction of the applicable Governmental Authority, then in each such case Purchaser shall be entitled to an adjustment to the Aggregate Purchase Price determined in accordance with the procedures set forth in Sections 3.1.2.2 and 3.1.2.3 of the Asset Purchase Agreement without regard to the 75 day time period for proposing such adjustment. 3.1.2.4 Other Environmental Liabilities. If, prior to Closing, Purchaser or SIC receives notice of a claim from, or discovers or receives notice of any facts or circumstances reasonably expected by ICF Kaiser to give rise to a claim by, any Person or Governmental Authority for liability or obligation (other than for Remedial Work) related to an alleged violation of Environmental Law with respect to the Property, it shall promptly notify the other parties hereto (the "Notice"). Thereafter, SIC and Purchaser shall attempt to agree on whether a Purchase Price adjustment or other agreeable mechanism is warranted with respect to such claim. If the parties are unable to agree, SIC may in its discretion assume responsibility for such claim and provide Purchaser with an indemnification against such claim reasonably satisfactory to Purchaser. If within thirty (30) days after delivery of the Notice (i) the parties are unable to agree on an adjustment to the Purchase Price or other agreeable mechanism, and (ii) SIC fails to assume responsibility for such claim and provide an indemnification reasonably satisfactory to Purchaser, then Purchaser shall have the right to terminate this Agreement. 19 25 Section 3.2 Real Property Matters. (a) Purchaser shall at its expense from the date of this Agreement through Closing review the status of SIC's title to the Real Property. As of the date of this Agreement, Purchaser has received (i) the survey listed on the attached Schedule 3.2 and (ii) the current title binder for the Real Property listed on the attached Schedule 3.2 obtained from Commonwealth Land Title Insurance Company with respect to the Real Property indicating therein Purchaser as the proposed insured (with the cost of any update work necessary to cause the issuance of the current title binder to be paid equally by Purchaser and SIC). The information set forth on such survey and in such title binder (but only to the extent copies of the documents referenced therein have been provided to Purchaser) is referred to herein as the "Current Title Information". Purchaser shall have the right, at its expense, to cause to be prepared to its satisfaction current surveys of any or all of the parcels of Real Property. (b) All Real Property Matters disclosed in the Current Title Information are listed on Schedule 3.2 and Purchaser shall not have the right or the opportunity to raise any other Real Property Matters based on the Current Title Information. (c) If Purchaser's review prior to Closing discloses a Real Property Matter not disclosed in the Current Title Information, Purchaser shall notify SIC thereof within four (4) Business Days of discovery. (d) With respect to Real Property Matters listed on Schedule 3.2 and any Real Property Matters for which notice is sent to SIC under clause (c) above, SIC shall at its expense attempt to remedy or cure such Real Property Matter, provided that, except for payments 20 26 necessary to release existing mortgages and any Lien related to said mortgages on Real Property owned by SIC, SIC shall have no obligation to spend any amount in excess of five percent (5%) of the Purchase Price to remedy or cure a Real Property Matter. If SIC is unable to remedy or cure one or more Real Property Matters within 30 days from Purchaser's notification thereof, the parties shall attempt in good faith to negotiate an adjustment in the Purchase Price that will compensate Purchaser for the cost of curing or remedying the Real Property Matter or for otherwise accepting the Real Property as is. If the parties are unable to agree on an adjustment to the Purchase Price as a result of a Real Property Matter this Agreement shall terminate with respect to all Property other than the Right-of-way Agreements and the Purchase Price shall be reduced to one dollar ($1.00) plus Purchaser's assumption with respect to the Right-of-way Agreements under Section 2.2, in which event the Purchaser shall still be obligated to acquire the Cockpit Terminal pursuant to the Asset Purchase Agreement and the Purchaser shall be required to lease the Real Property from SIC in accordance with the terms of a lease to be negotiated and concluded at the appropriate time; provided, however, that the Purchaser shall not be required to acquire the Cockpit Terminal pursuant to the Asset Purchase Agreement or to lease the Real Property from SIC if SIC and the Purchaser cannot agree on the terms of such lease. Section 3.3 Consents. SIC shall use reasonable commercial efforts promptly to obtain the consent, waiver or approval of each Person whose consent, waiver, or approval is required to effect an assignment of any of the Material Contracts or Right-of-way Agreements, or to transfer any of the Property to Purchaser or otherwise in connection with this transaction, and, where appropriate, to effect a novation of such Material Contracts or Right-of-way Agreements. 21 27 Purchaser shall cooperate with SIC in obtaining such items as reasonably requested to do so by SIC. Section 3.4 Hart-Scott-Rodino. SIC and Purchaser shall each comply with the notification, waiting period and other requirements of the HSR Act. Each party shall take reasonable steps to provide information to and otherwise cooperate with the other party for the purposes of making required filings under the HSR Act. Section 3.5 Purchaser's Licenses, Permits and Approvals. Purchaser shall exercise reasonable commercial efforts promptly to obtain all licenses and permits required by Purchaser to purchase the Property. Section 3.6 Intentionally Omitted. Section 3.7 Notification. Each party shall promptly notify the other parties if it has Knowledge of (i) any information indicating that any representation or warranty of any other party is or may be untrue in any material respect, (ii) any covenant to be performed by such other party that is not being performed, or (iii) any circumstance that would impede or interfere with the Closing, except that no party shall be liable for a breach of this covenant unless and except to the extent that the affected party is materially prejudiced or damaged thereby. Section 3.8 Deferred Like-Kind Exchange. Upon the request of SIC, made at least two Business Days prior to the Closing Date, Purchaser shall execute such documents as may reasonably be required to acknowledge (i) notice of SIC's intention to accomplish a deferred like-kind exchange of part or all of the Property pursuant to Section 1031 of the Code and Treasury Regulation 1.1031(k)-1 and (ii) the assignment of part or all of SIC's right, title and 22 28 interest in and to (but not SIC's obligations under) this Agreement to a qualified intermediary (within the meaning of Treasury Regulation Section 1.1031(k)-1(g)(4)). Section 3.9 Actions Necessary to Consummate. From and after the date of this Agreement, each of the parties shall in good faith take such action as may be commercially reasonable to consummate the transactions contemplated by this Agreement. ARTICLE 4 OPERATION OF THE PROPERTY PRIOR TO CLOSING Section 4.1 Ordinary Course. Between the date of this Agreement and the Closing, SIC shall (i) operate and maintain the Property diligently in the Ordinary Course of Business and shall not institute any new methods of accounting or pricing, or engage in any transaction or activity, or enter into any agreement or make any commitment with respect to the Property except in the Ordinary Course of Business; (ii) maintain the Property in good operating condition consistent with past practice and comply timely with all provisions of leases, agreements, contracts and commitments relating to the Property; (iii) exercise reasonable efforts to preserve the Property and its relationships with its customers, employees, and suppliers, to timely file all reports required by any Governmental Authority and to pay all taxes, and to comply with all Applicable Law. In addition, SIC shall have delivered to Purchaser copies of appropriate financial information regarding the Property. Section 4.2 Certain Changes. Without the prior consent of Purchaser, such consent not to be unreasonably withheld, provided that such consent shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested, SIC shall not: (i) 23 29 permit or allow any of the Property to be subjected to any Lien; (ii) cancel or waive any material claim or right relating to the Property; (iii) sell, transfer, assign, distribute or otherwise dispose of any Property, except in the Ordinary Course of Business; (iv) enter into any contract or commitment with respect to the Property, the performance of which may extend beyond the Closing Date, except in the Ordinary Course of Business; or (v) cause or permit any of its current insurance or reinsurance policies with respect to the Property to be canceled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation, or lapse, the Company obtains replacement policies from the same or comparable insurers providing coverage which is the same or comparable to that provided under the cancelled, terminated, or lapsed policies. Without the consent of Purchaser, such consent not to be unreasonably withheld, SIC shall not enter into, amend or modify any Material Contracts or any Right-of-way Agreements, provided that such consent shall be deemed to have been given unless it is denied within five (5) Business Days of having been requested. ARTICLE 5 CONDITIONS TO THE OBLIGATION OF PURCHASER TO CLOSE The obligation of the Purchaser to purchase the Property at Closing shall be subject to the satisfaction of the following conditions on or before the Closing Date, except as and to the extent that such satisfaction is waived by Purchaser. Section 5.1 Representations and Warranties. The representations and warranties of the Company contained in Article 7 (other than Section 7.16) shall be true and correct in all material 24 30 respects at and as of the Closing Date and the Purchaser shall have received a certificate to that effect signed by an officer of the Company. Section 5.2 Certificate Regarding Environmental Representations and Warranties. The Company shall have delivered to Purchaser a certificate signed by an officer of the Company stating either (i) the representations and warranties of the Company contained in Section 7.16 are true and correct at and as of the Closing Date or (ii) the representations and warranties of the Company contained in Section 7.16 are true and correct at and as of the Closing Date except for matters disclosed in the certificate, which certificate shall divide any such matters stated therein into matters for which a Purchase Price adjustment is available under Sections 3.1.2.2, 3.1.2.3 or 3.1.2.4, and matters for which a Purchase Price adjustment is not available under Section 3.1.2.3(ii). Section 5.3 Compliance with this Agreement. The Company shall have performed and complied in all material respects with all of their agreements and covenants set forth or contemplated herein that are required to be performed or complied with on or before the Closing Date and the Purchaser shall have received a certificate to that effect signed by an officer of the Company. Section 5.4 Purchase Permitted by Applicable Laws. The purchase of the Property shall not be prohibited by any Applicable Law or by any order or ruling of any Governmental Authority, nor shall any condition have been imposed on the Closing by any Governmental Authority which would subject either party to penalties or other sanctions as a result of the Closing. 25 31 Section 5.5 Opinion of Counsel. The Purchaser shall have received an opinion of counsel to the Company, dated the Closing Date, opining in substance on the matters set forth in Exhibit 5.5. Section 5.6 Consents and Approvals. All material consents, exemptions, authorizations, or other actions by, or notices to, or filings with, any Person necessary or required in connection with the purchase of the Property by Purchaser shall have been obtained and be in full force and effect (including any required consent of a ROW Real Estate owner for the transfer or assignment of a Right-of-way Agreement), and any waiting periods under any Applicable Law shall have expired. Section 5.7 Intentionally Omitted. Section 5.8 No Material Adverse Change. Except as set forth on Schedule 7.11 there shall have been no material adverse change in the Property since December 31, 1994. Section 5.9 Title Policy. Purchaser shall have obtained from Commonwealth Land Title Insurance Company commitments to issue owner's policies of title insurance providing that upon due recordation of an appropriate deed such title company shall insure that the title to each parcel of the Real Property shall be vested in Purchaser free and clear of any Real Property Matter. Section 5.10 Satisfaction of Conditions to Closing Under the Asset Purchase Agreement. All the conditions to close set forth in Article 5 of the Asset Purchase Agreement shall have been satisfied, except to the extent that such satisfaction is waived by Purchaser. 26 32 ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE The obligations of the Company to sell the Property hereunder shall be subject to the satisfaction of the following conditions on or before the Closing Date, except as and to the extent that such satisfaction is waived by the Company. Section 6.1 Representations and Warranties. The representations and warranties of the Purchaser and the Guarantor contained in Article 8 hereof shall be true and correct in all material respects at and as of the Closing Date, and the Company shall have received a certificate to that effect signed by an officer of the general partner of the Purchaser and an officer of the general partner of the Guarantor. Section 6.2 Compliance with this Agreement. The Purchaser and the Guarantor shall have performed and complied in all material respects with all of their agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Purchaser and the Guarantor on or before the Closing Date, and the Company shall have received a certificate to that effect signed by and officer of the general partner of the Purchaser and an officer of the general partner of the Guarantor. Section 6.3 Sale Permitted by Applicable Laws. The sale of the Property by the Company hereunder shall not be prohibited by any Applicable Law or Governmental Authority nor shall any condition have been imposed on the Closing by any Governmental Authority which would subject either party to penalties or other sanctions as a result of the Closing. 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 SIC. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Purchaser, as of the date of this Agreement and as of the Closing Date, as follows: Section 7.1 Existence and Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company: (a) has all requisite corporate power and authority, as applicable, to own and operate its property, and to conduct the business in which it is currently, or is currently proposed to be, engaged; (b) is duly qualified as a foreign corporation and is in good standing, under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business require such qualification, except to the extent that the failure to do so would not have 28 34 an adverse effect on the Property; and (c) has the corporate power and authority to execute, deliver and perform its obligations under this Agreement. Section 7.2 Corporate Authorization: No Contravention. The execution, delivery and performance by the Company of this Agreement: (a) has been duly authorized by all necessary corporate, and, if required, stockholder action; (b) does not contravene the terms of the Company's Certificate of Incorporation or By-Laws, or any amendment of either thereof, and (c) will not violate Applicable Law, or conflict with or result in any breach of or default under, or cause the creation of any Lien under, any contractual obligation of the Company. Section 7.3 Governmental Authorization: Third Party Consents. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person, and no lapse of a waiting period under an Applicable Law, is necessary or required in connection with the execution, delivery or performance by the Company or enforcement against the Company of this Agreement, other than compliance with the HSR Act. Section 7.4 Binding Effect. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability. Section 7.5 Litigation. Except as listed on Schedule 7.5, there are no legal actions, suits, proceedings, or claims pending, or to the Knowledge of the Company threatened, before any Governmental Authority against or affecting the Company (a) with respect to this 29 35 Agreement, or any of the transactions contemplated thereby, or (b) which would be reasonably likely to have (i) an adverse effect on the Property or (ii) an adverse effect on the ability of the Company to perform its obligations hereunder. No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any Governmental Authority purporting to enjoin SIC or restrain SIC's execution, delivery or performance of this Agreement. Section 7.6 Compliance with Laws. The Company is in compliance with all Applicable Law, except for any failure to comply which would not have an adverse effect on the Property. Section 7.7 Title to Real Property and Real Property Leases. Schedule 2.1(a) sets forth a list of all parcels of real property, excluding ROW Real Estate, upon which the Cockpit Terminal or its operations are located (including a metes and bounds description thereof, to the extent available, or a plat of subdivision designation) and also provides a true and correct indication of whether each such parcel is owned or leased by the Company. The Company has good and marketable title in fee simple to the Real Property, free of Liens (other than Liens that will be released in full at Closing) and subject to Permitted Encumbrances. The Company has delivered to the Purchaser true and correct copies of the Real Property Lease, and any amendments thereto, and such Real Property Lease is binding upon and enforceable against the Company and SPC in accordance with its terms, and SIC's rights thereunder are included in the Property. As of the Closing Date, the improvements located on the Real Property are in as good a condition as they were on the date of Purchaser's physical inspection of the Terminals as specified on Schedule 7.7, ordinary wear and tear excepted. Section 7.8 Intentionally Omitted. 30 36 Section 7.9 Intentionally Omitted. Section 7.10 Intentionally Omitted. Section 7.11 No Material Adverse Change: Ordinary Course. Since December 31, 1994, (i) there has not been any material adverse change in the Property and (ii) the Company has operated the Property in the Ordinary Course of Business, except as set forth on Schedule 7.11. Section 7.12 Broker's, Finder's or Similar Fees. Except as set forth on Schedule 7.12, no brokerage commissions, finder's fees or similar fees are payable in connection with the transactions contemplated hereby. Purchaser has no liability for any items set forth on Schedule 7.12. Section 7.13 Intentionally Omitted. Section 7.14 Material Contracts. The Company has delivered to Purchaser true and correct copies of all Material Contracts, including all amendments thereto. Schedule 2.1(b) lists all Material Contracts, and will be updated at Closing to include any Material Contracts entered into or amended between the date of this Agreement and the Closing Date. Except as disclosed on Schedule 2.1(b), each Material Contract is in effect and has not been amended or otherwise modified, and is binding upon and enforceable against the Company and, to the Company's Knowledge, all parties thereto, in accordance with its terms, and there is no default thereunder and to the Knowledge of the Company no other party thereto has issued or threatened to issue a notice of termination or cancellation. Except as set forth on Schedule 2.1(b), no consent to the transfer or assignment of the Material Contracts to Purchaser is required. 31 37 Section 7.15 Permits. Except as set forth on Schedule 7.15, the Company holds all licenses, permits, franchises, approvals, consents, waivers, exemptions, authorizations, certificates of occupancy and similar rights and privileges which are necessary for the operation of the Property. Section 7.16 Environmental Matters. (a) Except as set forth on Schedule 7.16, the Property (i) does not violate any Environmental Law in effect on the date hereof, and without regard for future modifications or amendments, (ii) is not subject to any pending or threatened action, suit, investigation, or other proceeding by any Governmental Authority with respect to an alleged violation of Environmental Law, (iii) does not use, and there is not located on the Real Property, any Hazardous Substances other than (x) those forming a part of the supplies of the Company and (y) petroleum products owned by customers or by SIC, which in each case are maintained in accordance with Environmental Law in effect on the date hereof, and without regard for future modifications or amendments and (iv) does not use, and there is not located on the ROW Real Estate, any Hazardous Substances other than (x) those forming a part of the supplies of the Company and (y) petroleum products owned by customers or by SIC, which in case are maintained in accordance with Environmental Law in affect on the date hereof, and without regard for future modifications or amendments. (b) Except as set forth on Schedule 7.16, (i) there exists no condition arising from the presence, release, threat of release, placement on or under the Real Property or the ROW Real Estate, use, storage, handling, generation, or disposal of any Hazardous Substance such as would require Remedial Work or give rise to other liability or obligation, (ii) the 32 38 Company has been issued all material licenses, permits, and certificates required under Environmental Law in effect on the date hereof for the conduct of its business and (iii) there exists no past or present violation of Environmental Law in effect on the date hereof with respect to the Property that gives rise to liability or obligation now or in the future. Schedule 7.16 describes all conditions as to which, to the Knowledge of the Company Remedial Work with respect to the Property is required, and the scope and methodology of such Remedial Work as currently in process or contemplated by the Company. The Company does not have any liability or obligation, accrued, contingent or otherwise, with respect to the matters described on Schedule 7.16, except for the obligation to complete Remedial Work. The representation and warranty contained in this Section 7.16 is the only representation and warranty made by SIC with respect to environmental matters or Environmental Law, and no other representation or warranty made herein shall be applicable to such matters or Environmental Law. Notwithstanding the disclosure to Purchaser on Schedule 7.16 or pursuant to Section 5.2 of any Remedial Work for which a Purchase Price adjustment is not available pursuant to Section 3.1.2.3(ii), such Remedial Work shall be regarded as a breach of this Section 7.16 for purposes of Section 11.7.1. Section 7.17 Intentionally Omitted. Section 7.18 Intentionally Omitted. Section 7.19 Restrictive Agreements. Except as set forth on Schedule 7.19, the Company is not a party to any agreements restricting or limiting the use of the Property. 33 39 Section 7.20 List of Assets. The Property includes, but is not limited to, and there shall be transferred to Purchaser at Closing, all of the assets listed on Schedules 2.1(a), 2.1(b) and 2.1(c). Section 7.21 Information Furnished. Neither this Agreement nor the Schedules or Exhibits hereto, nor any instrument or document furnished to Purchaser hereunder, when considered as a whole, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein, as the case may be, not misleading. Section 7.22 Intentionally Omitted. Section 7.23 Intentionally Omitted. Section 7.24 Right-of-way Agreements. (a) Schedule 2.1(c) sets forth a list of all the Right-of-way Agreements. The Company has delivered to Purchaser true and correct copies of the Right-of-way Agreements, and any amendments thereto. Except as disclosed on Schedule 2.1(c), each such Right-of-way Agreement is (i) in effect and has not been amended or otherwise modified, and (ii) is binding upon and enforceable against the Company and, to the Company's Knowledge, all parties thereto in accordance with its terms and there is no default thereunder and, to the Knowledge of the Company, no other party thereto has issued or threatened to issue a notice of termination or cancellation. (b) Except as set forth on Schedule 2.1(c), no consent is required for the transfer or assignment of SIC's rights and obligations under the Right-of-way Agreements to 34 40 Purchaser. The ROW Real Estate is free and clear of Liens (other than Liens, if any, that will be released in full at Closing) and subject to Permitted Encumbrances. (c) The Right-of-way Agreements included in the Property together with the easement agreement described in Exhibit 5.12 of the Asset Purchase Agreement grant SIC a contiguous right-of-way from SPC's Piney Point Terminal to the Ryceville Pumping Station and grant to SIC the right to operate the Pepco Pipeline as it has been operated by SPC during the last twelve months. ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE GUARANTOR The Purchaser and the Guarantor, jointly and severally, represent and warrant to SIC as follows as of the date of this Agreement and as of the Closing Date: Section 8.1 Authorization: No Contravention. The execution, delivery and performance by Purchaser and Guarantor of this Agreement: (a) is within Purchaser's and Guarantor's partnership power and authority and has been duly authorized by all necessary action; (b) does not contravene the terms of Purchaser's or Guarantor's respective limited partnership agreements; and (c) will not violate, conflict with or result in any breach or default under any contractual obligation of Purchaser or Guarantor, or violate any Applicable Law. Section 8.2 Binding Effect. This Agreement has been duly executed and delivered by Purchaser and Guarantor, and constitutes the legal, valid and binding obligation of Purchaser and Guarantor enforceable against each of them in accordance with its terms, except as enforceability 35 41 may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors rights generally or by equitable principles relating to enforceability. Section 8.3 Broker's, Finder's or Similar Fees. No brokerage commissions, finders fees or similar fees are payable in connection with the transactions contemplated hereby under any agreements made by or with Purchaser. Section 8.4 Governmental Authorization; Third Party Consent. No approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Applicable Law, and no lapse of a waiting period under Applicable Law, is necessary or required in connection with the execution, delivery or performance by Purchaser or Guarantor (other than compliance with the HSR Act) or enforcement against such Purchaser or Guarantor of this Agreement. Section 8.5 Sufficient Funds. As of the date hereof, Purchaser has sufficient funds or has approved financing commitments which will enable it to close the transactions contemplated under this Agreement. As of the Closing Date, Purchaser will have funds available to it sufficient to close and to fulfill its obligations hereunder. Section 8.6 Fraudulent Conveyance/Fraudulent Transfer Matters. After giving effect to the financing to be incurred by Purchaser in connection with its consummation of the transactions contemplated hereby, Purchaser will not be as of the Closing Date (i) "insolvent" nor will it become "insolvent" as the result of such transactions, (ii) engaged in a business or transaction for which any property or assets remaining with Purchaser would be "unreasonably little" or "unreasonably small in relation to its business" or the transaction, or (iii) in a position where it "intends to incur, or believes that it would incur, debts that would be beyond its ability 36 42 to pay as such debts mature," in each case as such quoted terms are used in Section 548 of the United States Bankruptcy Code of 1978, as amended, the Uniform Fraudulent Conveyances Act and the Uniform Fraudulent Transfer Act. Section 8.7 Litigation. There are no legal actions, suits, proceedings, or claims pending, or to the Knowledge of Purchaser or Guarantor, threatened, before any Governmental Authority against or affecting Purchaser or Guarantor (a) with respect to this Agreement, or any transactions contemplated hereby, or (b) which would be reasonably likely to have an adverse effect on the ability of the Purchaser or Guarantor to perform their respective obligations hereunder. No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any Governmental Authority purporting to enjoin Purchaser or Guarantor with respect to, or restrain Purchaser's or Guarantor's execution, delivery or performance of, this Agreement. ARTICLE 9 CLOSING Section 9.1.A Time and Place. The consummation of the purchase and sale of the Property (the "Closing") shall take place at the offices of Ginsburg, Feldman & Bress at 1250 Connecticut Avenue, Washington, D.C. at 10:00 a.m. Washington time on October 31, 1995 (the "Closing Date"), or such other date, time, and place as the parties shall agree. At Closing, Purchaser shall be entitled to physical possession of the Property and SIC shall surrender the same to Purchaser. 37 43 Section 9.1.B Effective Date. The transactions contemplated by this Agreement shall be effective at 12:01 A.M. on the Closing Date, without regard to the date of recordation of deeds or other transfer documents. Section 9.2 Documents and Instruments to be Delivered by SPC. At Closing, SIC shall deliver to Purchaser (or, with respect to transfer documents for the Real Property, deliver to the Presidential Title, Inc. sufficiently prior to Closing to permit recording at the time of Closing): (a) bills of sale, assignments, limited warranty deeds and such other instruments as shall be required to transfer title to the Property, free of Liens (except Permitted Encumbrances), all in form customary in the jurisdiction which the Property is located and all to be in form reasonably satisfactory to both parties; (b) A certificate of an officer of SIC stating that (i) SIC has complied with all of the covenants imposed on it by this Agreement to the extent they are required to be complied with prior to the Closing, and (ii) that the representations and warranties made by SIC are in all material respects true and correct at Closing, all as required by Sections 5.1, 5.2 and 5.3; (c) the legal opinion required by Section 5.5; (d) copies of all consents, waivers and approvals referred to in Section 5.6; (e) copies of the resolutions of SIC's board of directors and of any action required by SIC's stockholders authorizing the execution and delivery of this Agreement, certified by SIC's secretary or assistant secretary; and (f) a good standing certificate from the State of Delaware dated as of a date not more than 20 days prior to the Closing Date. 38 44 Section 9.3.A Documents and Instruments to be Delivered by Purchaser. At Closing, Purchaser shall deliver to SIC: (a) the Purchase Price or Adjusted Purchase Price, as the case may be, by bank check or wire transfer of immediately available funds, at SIC's election, and, if by wire transfer, to such account as SIC may notify to Purchaser not less than two Business Days prior to the Closing Date; (b) the legal opinion required by Section 6.4; (c) a certificate of an officer of the general partner of the Purchaser stating that (i) Purchaser has complied with all of the covenants imposed on it by this Agreement to the extent they are required to be complied with prior to the Closing, and (ii) that the representations and warranties made by Purchaser are in all material respects true and correct at Closing, all as required by Sections 6.1 and 6.2; and (d) copies of the resolutions of the board of directors of Purchaser's general partner authorizing the execution and delivery of this Agreement, certified by the secretary or an assistant secretary of Purchaser's general partner. Section 9.3.B Documents and Instruments to be Delivered by Guarantor. At Closing, Guarantor shall deliver to SIC: (a) the legal opinion required by Section 6.4; (b) a certificate of an officer of the general partner of the Guarantor stating that (i) Guarantor has complied with all of the covenants imposed on it by this Agreement to the extent they are required to be complied with prior to the Closing, and (ii) that the representations 39 45 and warranties made by Guarantor are in all material respects true and correct at Closing, all as required by Sections 6.1 and 6.2; and (c) copies of the resolutions of the board of directors of Guarantor's general partner authorizing the execution and delivery of this Agreement, certified by the secretary or an assistant secretary of Guarantor's general partner. Section 9.4 Intentionally Omitted. ARTICLE 10 TERMINATION Section 10.1 Grounds for Termination. This Agreement may be terminated as follows: (a) by mutual agreement of the parties, at any time; (b) by SIC at any time after November 30, 1995, if the conditions to Closing set forth in Article 6 have not been met by that date, unless the failure to meet such condition is attributable to any fault or neglect of SIC; (c) by Purchaser at any time after November 30, 1995, if the conditions to Closing set forth in Article 5 have not been met by that date, unless the failure to meet such condition is attributable to any fault or neglect of Purchaser; (d) by Purchaser if a Major Loss occurs, provided that Purchaser gives notice of its intent to terminate within ten (10) Business Days after it has received notice of such Major Loss; 40 46 (e) by Purchaser if it discovers a material breach of any representation or warranty made by SIC which SIC is unable to cure within thirty (30) days after having received notice of such breach; (f) by SIC if it discovers a material breach of any representation or warranty made by Purchaser which Purchaser is unable to cure within thirty (30) days after having received notice of such breach; and (g) by Purchaser pursuant to Section 3.1.2.4. If this Agreement terminates pursuant to the provisions of this Section 10.1, the Asset Purchase Agreement and the PPI Agreement shall remain in full force and effect, unless such agreements terminate by their own terms, provided that the portions of the last sentence of Section 3.2 that deal with the lease of the Real Property shall still apply. Section 10.2 Termination of the Asset Purchase Agreement. This Agreement shall automatically terminate if the Asset Purchase Agreement terminates for any reason, unless SIC and Purchaser agree otherwise. If this Agreement does not terminate, then SIC and Purchaser shall negotiate mutually agreeable terms to adjust the indemnification limits and the Escrow Fund amount referred to in Article 11 of the Asset Purchase Agreement consistent with the amount of the Purchase Price and the terms and conditions of this Agreement. Section 10.3 Effect of Termination. If this Agreement terminates: (a) neither party shall have any obligation to the other party, except that such termination shall be without prejudice to the rights of any party resulting from the intentional or willful breach or violation of the representations, warranties, covenants or agreements of the 41 47 other party under this Agreement, provided that a failure by a party to close when all of the conditions to such party's obligation to close have been met shall be deemed to be an intentional breach of such party's covenants and agreements hereunder. (b) promptly upon termination for any reason, Purchaser shall return to SIC at Purchaser's expense all documents (including copies thereof) received from SIC prior to, during or after the Due Diligence Period; (c) Purchaser shall not offer employment to any of SIC's employees, without the prior consent of SIC, for two years following the date of this Agreement; and (d) the provisions of Section 3.1.1, Section 10.3, and Sections 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8 and 12.9 and the portion of the last sentence of Section 3.2 dealing with the lease of the Real Property shall survive the termination of this Agreement and continue in full force and effect. ARTICLE 11 INDEMNIFICATION Section 11.1 Indemnification by SIC and SPC. (a) SIC, SPC and the Purchaser acknowledge and agree that SPC's indemnification obligation under Section 11.1 of the Asset Purchase Agreement is intended to and shall cover and include Liabilities of each Purchaser Indemnified Party resulting from or arising out of (i) any breach of any representation or warranty, covenant or agreement of SIC set forth in this Agreement, except for a breach of a representation and warranty contained in Sections 7.1, 7.2, 7.3, 7.4, 7.7, and 7.12, (ii) a breach of SPC's representation and warranty 42 48 contained in Section 7.16 of Asset Purchase Agreement as it applies to the Real Property, (iii) non-compliance with any applicable transfer or bulk sales law, and (iv) obligations or liabilities of the Company related to or arising out of acts, events or omissions occurring prior to the Closing that are related to the Property and not expressly assumed by Purchaser or indemnified against by Purchaser hereunder or in the Asset Purchase Agreement, provided, however, that SPC shall not be liable under this Section 11.1 to any Purchaser Indemnified Party for any amount paid in settlement of claims without SPC's and SIC's consent, unless such consent was requested and unreasonably withheld. Therefore, SIC shall have no liability to Purchaser for any breach of any representation or warranty, covenant or agreement of the Company set forth herein, except a breach of those representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.12. The indemnification obligations assumed by SPC under this Section 11.1 shall be subject to and treated in accordance with Sections 11.2, 11.5, 11.6, 11.7 and 11.8 of the Asset Purchase Agreement, as if such indemnification obligations were made under the Asset Purchase Agreement. (b) Subject to the provisions of this Article 11, the Company agrees to indemnify, defend, and hold harmless the Purchaser and its Affiliates, officers, directors, agents, shareholders, partners, and employees, (each, a "Purchaser Indemnified Party") from and against any and all liabilities, losses, claims (whether or not successful), damages, and expenses (including reasonable fees, and disbursements of counsel) (collectively, "Liabilities") resulting from or arising out of (i) any breach of any representation or warranty, of the Company set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.12 of this Agreement or (ii) liabilities or obligations related to any amendment to a Material Contract or Right-of-way Agreement not delivered to 43 49 Purchaser prior to the date of this Agreement, unless such amendment is subsequently delivered to and accepted by Purchaser, provided, however, that the Company shall not be liable under this Section 11.1 to any Purchaser Indemnified Party for any amount paid in settlement of claims without the Company's consent, unless such consent was requested and unreasonably withheld. Section 11.2 Survival of Representations and Warranties. The representations and warranties set forth in Sections 7.1, 7.2, 7.3, 7.4, 7.7 and 7.12 shall survive the Closing without limitation of time. The representations and warranties set forth in Section 7.16 (Environmental Matters) shall survive the Closing and shall expire three years after the Closing Date. All other representations and warranties shall survive the Closing and shall expire two years after the Closing Date. Any right of Purchaser to make a claim against the Company for a breach of any covenant or agreement of the Company herein shall survive the Closing and shall expire one hundred eighty (180) days after the date on which the Company was obligated to comply with such covenant or agreement. Any claim for breach of a representation and warranty, or covenant or agreement, must be made by Purchaser by a demand for arbitration to the Company prior to the expiration of such representation and warranty, or the right to make a claim for a breach of such covenant or agreement, and any such claims covered by such demands made by Purchaser to the Company within such time periods shall survive until resolved. Section 11.3 Indemnification by Purchaser. Purchaser, it successors and assigns, jointly and severally, agree to indemnify, defend, and hold harmless the Company and their Affiliates, officers, directors, shareholders, partners, warrant holders, agents, and employees, (each, an "SIC Indemnified Party") from and against any and all Liabilities resulting from or arising out 44 50 of (i) any breach of any representation, warranty, covenant or agreement of Purchaser or Guarantor set forth in this Agreement or (ii) obligations or liabilities of the Purchaser with respect to the Property, including those which may be imposed upon any SIC Indemnified Party, related to or arising out of acts, events or omissions occurring after the Closing and not expressly assumed by any SIC Indemnified Party hereunder and specifically including (but not limited to) liabilities or obligations arising from the failure of Purchaser to assume any post-Closing liabilities as required by Section 2.2, provided, however, that Purchaser shall not be liable under this Section 11.3 to any SIC Indemnified Party for any amount paid in settlement of claims without Purchaser's consent unless such consent was requested and unreasonably withheld, and provided further that the right of the SIC Indemnified Parties to make a claim for breach of any covenants or agreements of Purchaser herein shall expire one hundred eighty (180) days after the date on which the Purchaser was obligated to comply with the covenant or agreement. Section 11.4 Establishment of Escrow Fund. SIC, SPC and Purchaser acknowledge and agree that the Escrow Fund, established by SPC at Closing, will be used to satisfy claims for indemnification under the Purchase Agreements, including all indemnification claims under this Agreement, for which no limit on liability has been established in accordance with the terms of Section 11.4 of the Asset Purchase Agreement. Purchaser shall follow the procedures set forth in Section 11.4 of the Asset Purchase Agreement for making claims for indemnification under this Agreement. Section 11.5 Limits on Liability. With the exception of (i) claims arising under Sections 7.1, 7.2, 7.3, 7.4, 7.7 (but only to the extent that any claim is based on the specific wording 45 51 in each of the limited warranty deeds by which the Real Property is conveyed) and 7.12 (ii) claims for fines or penalties imposed by Governmental Authorities, (iii) claims for Liens that are not Permitted Encumbrances, and (iv) claims under Section 11.1(b)(ii), for which there shall be no limitation of amount, the Company's maximum liability for Liabilities under the Company's indemnifications under this Agreement, including without limitation Section 11.7.1.1, shall be the Escrow Fund, and neither the Company, nor any of their Affiliates, shareholders, warrant holders, partners, officers, directors, agents and employees shall have any liability for such Liabilities in excess of the Escrow Fund. Section 11.6 Minimum Claim Amount. With the exception of (i) claims arising under Section 11.7.1.1, (ii) claims for fines or penalties imposed by Governmental Authorities, (iii) claims for Liens that are not Permitted Encumbrances, (iv) claims under Section 11.1(b)(ii), and (v) fifty percent (50%) of any claim for indemnification with respect to a breach of the representations and warranties set forth in Sections 7.24(a), (b) and (c) with respect to the Pepco Pipeline, for which there shall be no minimum claim, Purchaser shall not be entitled to assert any claim for indemnification hereunder until the aggregate of all claims for indemnification under this Agreement, the PPI Agreement and the Asset Purchase Agreement collectively exceeds Seven Hundred and Fifty Thousand Dollars ($750,000) and then only for amounts in excess of such Seven Hundred and Fifty Thousand Dollars ($750,000). Purchaser shall follow the notice procedures set forth in Section 11.6 of the Asset Purchase Agreement for making claims for indemnification hereunder. Section 11.7 Special Environmental Indemnification and Post-Closing Covenants by Purchaser. 46 52 11.7.1.1 To the extent that, prior to the date three years after the Closing Date, Purchaser discovers and notifies SIC and SPC of facts or circumstances that give rise to Remedial Work (including Remedial Work related to matters discovered prior to the Closing or disclosed on Schedule 7.16) with respect to the Property (except for Remedial Work attributable to (i) changes in Environmental Law occurring after the Closing Date, or (ii) events occurring or actions of Persons other than SIC, SPC, SPCT or PPI taken after the Closing Date), the Net Remedial Cost for Remedial Work with respect to the Property shall be calculated as part of the Aggregate Net Remedial Cost determined pursuant to the terms of Section 11.7.1.1 of the Asset Purchase Agreement and shall be paid in accordance with those terms, subject to the limits set forth in Section 11.7.1.1 of the Asset Purchase Agreement. Notwithstanding the preceding portions of this Section 11.7.1.1, Purchaser shall not be liable for or be required to pay any Net Remedial Costs resulting from or arising out of any action or omission after Closing of any SIC Indemnified Party that constitutes or causes a violation of Environmental Law with respect to the Property or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser. 11.7.1.2 Purchaser shall not alter or change the scope or methodology of Remedial Work described on Schedule 7.16 except as required by Applicable Law or as approved by the Company, which approval shall not be unreasonably withheld, provided, however, that an objection shall not be deemed unreasonable solely because it is based on an increase in the cost for performing such Remedial Work. For so long as SPC has any liability to Purchaser under Section 11.7.1.1, Purchaser shall use commercially reasonable efforts to perform and complete all such required Remedial Work and shall keep SIC informed of the 47 53 progress of such Remedial Work. In addition, before undertaking any such Remedial Work Purchaser shall notify SIC of the scope and methodology of such Remedial Work, sufficiently in advance (except as emergency conditions may require otherwise) to permit SIC to comment on such scope and methodology. Recognizing that the final decision on scope and methodology rests with Purchaser, Purchaser shall nonetheless make a good faith effort to reach agreement with SIC regarding such scope and methodology, recognizing SIC's financial interest therein. Purchaser shall provide SIC with copies of all plans, reports, and correspondence submitted to any Governmental Authority with respect to such Remedial Work. Purchaser will not agree to any such Remedial Work or other actions that commit or bind SIC or SPC (beyond the payment of money hereunder) without the prior consent of SIC and SPC. Purchaser will provide SIC with copies of all invoices rendered by Persons actually performing such Remedial Work, and SIC shall be deemed to have accepted the validity and reasonableness of such invoices if it does not notify Purchaser to the contrary within ten (10) Business Days of receiving the same. 11.7.2 (a) Purchaser and Guarantor acknowledge that (i) Purchaser has reviewed copies of all documents and other materials related to environmental matters with respect to the Property that were provided by the Company, (ii) the Company has specifically bargained for relief, as more particularly described herein, from post-Closing liability resulting from violations of Environmental Law or the performance of Remedial Work with respect to the Property and (iii) the Purchase Price and Adjusted Purchase Price, as the case may be, reflect Purchaser's willingness to accept liability ( and Guarantor's willingness to guarantee Purchaser's obligation to accept such liability) with respect to such matters as more fully described below. 48 54 (b) Purchaser has agreed to assume, and Guarantor has agreed to guarantee the obligation of Purchaser to assume, as of the Closing all obligations and liabilities resulting from or arising out of any actual or alleged violation of Environmental Law related to the Property, regardless of when such violation was supposed to have occurred, or the performance of Remedial Work with respect to the Property, except for (i) fines and penalties imposed by any Governmental Authority relating to violations of Environmental Law that occurred prior to Closing with respect to the Property, (ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii) obligations or liabilities that result from or arise out of any act or omission after the Closing of any SIC Indemnified Party that constitutes or causes a violation of Environmental Law with respect to the Property or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of the representations and warranties set forth in Section 7.16 to the extent Purchaser is entitled to indemnity under this Article 11. (c) For the avoidance of any doubt, Purchaser, Guarantor, and SIC confirm their agreement that SIC shall not have any obligation or liability post-Closing resulting from or arising out of any actual or alleged violation of Environmental Law related to the Property, regardless of when such violation was supposed to have occurred, or the performance of Remedial Work with respect to the Property except (i) fines and penalties imposed by any Governmental Authority relating to violations of Environmental Law that occurred prior to Closing with respect to the Property, (ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii) obligations or liabilities that result from or arise out of any act or omission after Closing of any SIC Indemnified Party that constitutes or causes a violation of Environmental 49 55 Law with respect to the Property or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of the representations and warranties set forth in Section 7.16 to the extent Purchaser is entitled to indemnity under this Article 11. 11.7.3 Purchaser, its successors and assigns, jointly and severally, agree to indemnify, defend, and hold harmless each SIC Indemnified Party from and against any and all Liabilities resulting from or arising out of any actual or alleged violation of Environmental Law related to the Property, regardless of when such violation was supposed to have occurred, or the performance of Remedial Work with respect to the Property, except for (i) fines and penalties imposed by any Governmental Authority relating to violations of Environmental Law that occurred prior to Closing with respect to the Property, (ii) payments to be made to Purchaser pursuant to Section 11.7.1.1, (iii) obligations or liabilities that result from or arise out of any act or omission after Closing of any SIC Indemnified Party that constitutes or causes a violation of Environmental Law with respect to the Property or gives rise to the need to perform Remedial Work with respect thereto, unless otherwise agreed to in writing by Purchaser, and (iv) claims for a breach of the representations and warranties set forth in Section 7.16 to the extent Purchaser is entitled to indemnity under this Article 11. Notwithstanding the preceding provisions of this Section 11.7.3, Purchaser shall not be liable under this Section 11.7.3 to any SIC Indemnified Party for any amount paid in settlement without Purchaser's consent unless such consent was requested and unreasonably withheld. 11.7.4 Purchaser shall, for a period of five (5) years after Closing, notify the Company and SPC promptly of any claim made by any Governmental Authority or by any 50 56 Person that there has been a violation of Environmental Law in connection with the Property, or occurring on or from the Real Property or the ROW Real Estate, and shall thereafter keep the Company and SPC informed of actions being taken and/or the conduct of proceedings with respect to such claim, provided that once it has been reasonably determined to the satisfaction of SIC that the amount required to resolve such claim (whether by performing Remedial Work or otherwise) is less than $250,000, Purchaser shall no longer be obligated to provide SIC and SPC with information about such claim. Section 11.8 Notification; Counsel. Each Indemnified Party under this Article 11 will, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such Indemnified Party in respect of which indemnity may be sought under this Article 11, notify the Company and SPC or the Purchaser, as the case may be, in writing of the commencement thereof. The failure of any Indemnified Party to give such notice shall not relieve the indemnifying party from any liability which it may have to such Indemnified Party unless, and only to the extent that, such omission materially adversely affects the indemnifying party's ability to defend in such action, claim or other proceeding. In case any such action, claim or other proceeding shall be brought against any Indemnified Party and it shall notify the indemnifying party of the commencement thereof, and, except as otherwise stated herein, the indemnifying party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party. Notwithstanding the foregoing, in any action, claim or proceeding in which both an indemnifying party, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the indemnifying party's 51 57 expense and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the indemnifying party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable. In any event, the Indemnified Party will reasonably cooperate with the indemnifying party in any defense undertaken by an indemnifying party. Section 11.9 Net Worth Statement. SIC hereby represents and warrants to Purchaser that as of the Closing Date it will have a net worth (assets minus liabilities on a GAAP basis balance sheet adding back those liabilities attributable to the above market portion of payment obligations under the throughput agreements described in Section 5.7 of the Asset Purchase Agreement and also deferred income taxes, if any, attributable to any like kind exchange completed in accordance with Section 3.8 of any of the Purchase Agreements) of not less than $30,000,000. ARTICLE 12 MISCELLANEOUS Section 12.1 Notices. All notices, requests, demands, consents, approvals and other communications provided for or permitted hereunder shall be made in writing and shall be delivered by hand or sent by telecopier or courier service: (a) if to Purchaser or Guarantor: Kaneb Pipe Line Partners, L.P. 2435 N. Central Expressway, Suite 700 Richardson, TX 75080 Attn: Edward D. Doherty Telecopier No.: (214) 699-1894 52 58 with a copy to: Support Terminal Services, Inc. 17304 Preston Road, Suite 1000 Dallas, TX 75252-5623 Attn: Fred Johnson Telecopier No.: (214) 931-6526 with a copy to: Fulbright & Jaworski, L.L.P. 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Attn: Kenneth L. Stewart Telecopier No.: (214) 855-8200 (b) if to SPC or SIC: Steuart Petroleum Company 4646 40th Street, N.W. Washington, D.C. 20016 Telecopier No.: (202) 244-5425 Attention: President, and General Counsel with a copy to: Ginsburg, Feldman and Bress, Chartered 1250 Connecticut Avenue, N.W. Suite 800 Washington, D.C. 20036 Telecopier No.: (202) 637-9195 Attention: Lee R. Marks, Esq. with a copy to: Steuart Investment Company 4646 40th Street, N.W. Washington, D.C. 20016 Telecopier No.: (202) 244-1221 Attention: Guy T. Steuart II, and John R. Clark III, Esq. 53 59 Section 12.2 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. No party hereto may assign its rights under this Agreement without the consent of the other party, except that Purchaser may assign its rights under this Agreement to any Affiliate, but such assignment shall not relieve Purchaser or Guarantor of any of their obligations hereunder to the extent such obligations are not performed by Purchaser's assignee. Section 12.3 Amendment and Waiver. (a) No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any party hereto at law, in equity or otherwise. (b) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any party hereto from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by all parties hereto, or, in the case of a waiver, by the party waiving compliance, and (ii) only in the specific instance and for the specific purpose for which made or given. Section 12.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to the principles of conflicts of law of New York. 54 60 Section 12.5 Jurisdiction. Any controversy or claim arising out of or relating to this Agreement or any agreements or transactions contemplated hereby shall be settled by arbitration in accordance with the Commercial Rules of Arbitration of the American Arbitration Association in effect on the date hereof, and any award rendered in such arbitration shall be final and binding on the Parties. Judgment on any award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any arbitration hereunder shall be decided by a single arbitrator, who shall be a lawyer experienced in commercial matters. The parties shall attempt to agree on an arbitrator but either party may at any time request that an arbitrator be selected in accordance with the Commercial Arbitration Rules. Any arbitration hereunder shall be held in New York City, New York. The prevailing party shall be entitled in any arbitration hereunder to recover its reasonable attorney's fees and all costs and expenses of the arbitration. Section 12.6 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. Section 12.7 Entire Agreement. The Purchase Agreements are a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. The Purchase Agreements supersede all prior agreements and understandings between the parties with respect to the subject matter contained herein. 55 61 Section 12.8 Expenses. Each party will bear its own expenses incurred in connection with the negotiation and execution of this Agreement, and Purchaser shall pay its expenses incurred in carrying out due diligence, including Audits. Section 12.9 Publicity. Except as may be required by Applicable Law, or as required in connection with Kaneb Pipe Line Partners L.P.'s registration statement filed under the Securities Act of 1933 and the related offering of partnership units, none of the parties shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement without the prior approval of the other party. If any announcement is required by law to be made by either party , prior to making such announcement such party will deliver a draft of such announcement to the other party and shall give the other party an opportunity to comment thereon. Section 12.10 Further Assurances. Each party shall execute such documents and perform such further reasonable acts (including without limitation reasonable action to obtain any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. Section 12.11.A Post-Closing Access to Books and Records by Purchaser. For a period of five (5) years after the Closing Date, subject to reasonable advance notice of time and purpose and to the execution by Purchaser of reasonable confidentiality undertakings, Purchaser and its authorized representatives may at Purchaser's expense have reasonable access during normal business hours to the books and records related to the Property that are not included in the Property and SIC will furnish to Purchaser such additional information and will cooperate with 56 62 Purchaser in such other respects as Purchaser may reasonably request, to the extent that such access and disclosure of such information and cooperation are required by Purchaser for financial reporting, tax, or similar purposes, or for purposes of investigating matters which may be the subject of litigation or administrative proceedings with third parties or Governmental Authorities, so long as such disclosure, access, and cooperation do not violate the terms of any agreement to which SIC is bound or any Applicable Law or result in the loss of any attorney-client or work product privilege. SIC will use reasonable efforts in accordance with SIC's normal record maintenance procedures to keep and maintain all such books and records for a period of five (5) years from the Closing or longer as may be required by statute, except that notwithstanding any requirements of SIC's normal record maintenance procedures, SIC shall not destroy such books and records during such five (5) year period. From and after such five (5) year period, SIC shall give Purchaser sixty (60) days prior notice before destroying any of such books and records, and Purchaser may at any time during such sixty days take possession, at Purchaser's cost, of such books and records, provided that if Purchaser does not take possession of any of such books and records during such sixty days, SIC shall be free thereafter to dispose of such books and records. Section 12.11.B Post-Closing Access to Books and Records by SIC. For a period of five (5) years after the Closing Date, subject to reasonable advance notice of time and purpose and to the execution by SIC of reasonable confidentiality undertakings, SIC and its authorized representatives may at SIC's expense have reasonable access during normal business hours to the books and records related to the Property that are included in the Property and Purchaser will furnish to SIC such additional information and will cooperate with SIC in such other 57 63 respects as SIC may reasonably request, to the extent that such access and disclosure of such information and cooperation are required by SIC for financial reporting, tax, or similar purposes, or for purposes of investigating matters which may be the subject of litigation or administrative proceedings with third parties or Governmental Authorities, so long as such disclosure, access, and cooperation do not violate the terms of any agreement to which Purchaser is bound or any Applicable Law or result in the loss of any attorney-client or work product privilege. Purchaser will use reasonable efforts in accordance with Purchaser's normal record maintenance procedures to keep and maintain all books and records transferred to Purchaser hereunder for a period of five (5) years from the Closing or longer as may be required by statute, except that notwithstanding any requirements of Purchaser's normal record maintenance procedures, Purchaser shall not destroy such books and records during such five (5) year period. From and after such five (5) year period, Purchaser shall give SIC sixty (60) days prior notice before destroying any of such books and records, and SIC may at any time during such sixty days take possession, at SIC's cost, of such books and records, provided that if SIC does not take possession of any of such books and records during such sixty days, Purchaser shall be free thereafter to dispose of such books and records. Section 12.12 Treatment of Purchase Agreements. Notwithstanding any provision contained in any of the Purchase Agreements that may be construed to the contrary, (i) the aggregate Liabilities of SPC, SPCT, PPI and SIC under the Purchase Agreements that are subject to maximum liability limits pursuant to the provisions of Section 11.5 of the Purchase Agreements shall be the Escrow Fund, (ii) the maximum aggregate amount that will be paid to Purchaser for the type of Remedial Work described in Section 11.7.1.1 pursuant to the Purchase 58 64 Agreements shall be the amount set forth in Section 11.7.1.1, and (iii) the $1,000,000 threshold set forth in Section 3.1.2.2, the Remaining Threshold and the $750,000 threshold set forth in Section 11.6 represent the aggregate threshold amounts for applicable claims under the Purchase Agreements. Section 12.13 Capitalized Terms. Terms having initial capitalized letters not otherwise defined herein shall have the meaning given those terms in the Asset Purchase Agreement. Section 12.14 Intentionally Omitted. Section 12.15 Prorations. Real Property property taxes and assessments for which SIC is liable, water, sewer and utility charges, normal operating expenses, annual permit or inspection fees (calculated on the basis of the period covered), and all other charges and fees customarily prorated and adjusted in similar transactions shall be prorated at Closing on the basis of a 365-day year. If any item subject to proration cannot be calculated accurately on the Closing Date, then such item shall be calculated within thirty (30) days after the Closing Date and any party owing another party a sum of money based on such subsequent proration(s) shall promptly pay the sum owed, together with interest thereon at the rate of seven percent (7%) per annum from the Closing Date to the date of payment if payment is not made within ten (10) days after delivery of an invoice therefor. Section 12.16 Guaranty. Guarantor acknowledges and agrees that it will derive substantial direct and indirect benefits from providing the guaranty set forth in this Section 12.16 and Guarantor has determined that it is in its best interest to provide this guaranty. Guarantor absolutely and unconditionally guarantees to SIC and each SIC Indemnified Party the due and punctual payment of all liabilities and obligations of Purchaser to SIC or each SIC Indemnified 59 65 Party, as appropriate, in accordance with the terms of this Agreement (and specifically including the indemnification obligations set forth in Article 11). Guarantor guarantees to SIC and each SIC Indemnified Party the performance of all of Purchaser's obligations, liabilities, covenants and agreements (and specifically the indemnification obligations set forth in Article 11) to SIC or each SIC Indemnified Party, as appropriate. Guarantor agrees to indemnify and hold SIC and each SIC Indemnified Party harmless from and against all liability and expense, including reasonable attorneys' fees, sustained by SIC or any SIC Indemnified Party by reason of the failure of the Purchaser to fully perform and comply with the terms and obligations of this Agreement. Guarantor expressly waives any right to require SIC or any SIC Indemnified Party to bring any action, or exhaust its rights, against Purchaser or any other person, or to require that resort be had to any assets of Purchaser before pursuing the Guarantor under this Section 12.16. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their authorized officers as of the date first above written. STEUART INVESTMENT COMPANY By:/s/ GUY T. STEUART II Name: Guy T. Steuart II Title: President 60 66 KANEB PIPE LINE OPERATING PARTNERSHIP, L.P. By: Kaneb Pipe Line Company, its general partner By:/s/ E. D. DOHERTY Name: E. D. Doherty Title: Chairman SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P. By: Support Terminal Services, Inc., its general partner By:/s/ E. D. DOHERTY Name: E. D. Doherty Title: Chairman By executing and delivering this Agreement, Steuart Petroleum Company hereby acknowledges and assumes the obligations delegated to or imposed upon Steuart Petroleum Company under this Agreement, including but not limited to those payment obligations for indemnification claims that shall be made from the Escrow Fund. STEUART PETROLEUM COMPANY By:/s/ JOHN C. JOHNSON Name: John C. Johnson Title: President and C.E.O. 61 EX-10.4 5 AMENDMENT TO ASSET PURCHASE AGREEMENTS 1 EXHIBIT 10.4 Amendment to Asset Purchase Agreements by and among Steuart Petroleum Company, SPC Terminals, Inc., Piney Point Industries, Inc., Steuart Investment Company, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership L.P. 2 [STEUART PETROLEUM COMPANY LETTERHEAD] December 18, 1995 Edward D. Doherty Chairman Kaneb Pipe Line Company 2435 N. Central Expressway Richardson, Texas 75080 Re: Amendment Dear Ed: This letter agreement, when countersigned by you as Chairman of Kaneb Pipe Line Company and Support Terminal Services, Inc., the general partners of Kaneb Pipe Line Operating Partnership, L.P. and Support Terminals operating Partnership, L.P. ("Purchaser"), respectively, will amend (i) the Asset Purchase Agreement by and among Steuart Petroleum Company ("SPC" or the "Company"), SPC Terminals Incorporated, Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. (the "SPC Agreement"), (ii) the Purchase Agreement by and among Steuart Investment Company ("SIC"), Support Terminals Operating Partnership, L.P. and Kaneb Pipe Line Operating Partnership, L.P. (the "Cockpit Agreement"), and (iii) the 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. (the "Piney Point Agreement"), each dated August 27, 1995, and referred to collectively as the "Agreements". In consideration of the execution and delivery of this letter agreement by SPC and SIC, Purchaser hereby withdraws its letter dated December 1, 1995, pursuant to which it terminated the Agreements, and the parties hereto agree that the Agreements, as amended hereby, remain in full force and effect. Terms having an initial capitalized letter used below shall have the meanings respectively set forth in the Agreements unless otherwise defined or unless the context otherwise requires. Except as modified by this letter, the terms and conditions of the Agreements shall be as set forth therein. Wherever in any Closing documents, reference is made to any of the Agreements, such references shall include and refer to the Agreements as amended by this Amendment. 1. Purchase Price. The Aggregate Purchase Price shall be Sixty-Eight Million Dollars ($68,000,000), all cash paid at Closing. The Aggregate Purchase Price shall be allocated among 3 Edward D. Doherty, Chairman December 18, 1995 Page 2 the Agreements as follows: $62,300,000 to the SPC Agreement, $1,700,000 to the Cockpit Agreement and $4,000,000 to the Piney Point Agreement. Schedules 2.4 and 2.5 to the SPC Agreement are hereby amended in their entirety as set forth on Schedule 2.4 and 2.5 to this letter agreement. 2. Environmental Matters. (a) Purchaser waives any pre-closing Purchase Price adjustment to which it may have been entitled as a result of the matters described in the October 13, 1995 Think Tank Report and Purchaser's November 1, 1995 letter. (b) The certificate tendered by the Company to Purchaser at Closing pursuant to Section 5.2 shall be deemed to include, as a disclosure by the Company, all of the matters set forth in the October 13, 1995 Think Tank Report and Purchaser's November 1, 1995 letter, and no Purchase Price adjustment shall be available with respect to same. (c) Sections 11.7.1.1(i) and (ii) are amended to read as follows: (i) amounts required to complete Remedial Work relating to matters disclosed on Schedule 7.16 of each Agreement or in the October 13, 1995 Think Tank Report or Purchaser's November 1, 1995 letter shall be paid by Purchaser up to a maximum of $2,290,000; (ii) the first $2,500,000 of such Aggregate Net Remedial Costs that are not covered by clause (i) above shall be paid, as incurred pari passu, eighty percent (80%) by SPC and twenty percent (20%) by Purchaser; 3. Jacksonville Terminal Agreement. Section 4 of the Jacksonville Terminal Agreement, contained in Section 5.7 of the Schedules and Exhibits to the SPC Agreement, is amended by replacing "five (5) years" with "two (2) years". 4. Escrow Fund. Purchaser agrees that an Escrow Fund shall not be required and no portion of the Aggregate Purchase Price shall be paid as described in Section 2.3.1 of the SPC Agreement. To that end, the Agreements are hereby amended to delete any references to an Escrow Agent, Escrow Account, Escrow Fund or Escrow Agreement. Sections 11.4 and 11.5 of the SPC Agreement are hereby deleted in their entirety and replaced by Exhibit A-1 attached to this letter agreement. Sections 11.4 and 11.5 of the Cockpit Agreement are hereby deleted in their entirety and 4 Edward D. Doherty, Chairman December 18, 1995 Page 3 replaced by Exhibit A-2 attached to this letter agreement, and Sections 11.4(a) and 11.5 of the Piney Point agreement are hereby deleted in their entirety and replaced by Exhibit A-3 attached to this letter agreement. 5. Section 3.11. Schedule 3.11 to the SPC Agreement forecasts capital expenditures during 1995 of $3.230 million. SPC has informed Purchaser that the actual expenditures will be less than that amount, and Purchaser has agreed to waive any shortfall up to $250,000. 6. Aectra. Prior to the Closing Date, SPC intends to enter into a Second Amendment and Third Addendum with Aectra Refining and Marketing, Inc. substantially in the form of Exhibit B attached to this letter agreement. Purchaser consents to the execution of such Second Amendment and Third Addendum. 7. Termination. Subsections (d) and (e) of Section 10.1 are deleted, and subsection (b) is modified by substituting "January 31" for "January 1". Neither party, as of the date of this letter agreement, knows of any right that it has to terminate the Agreements other than item (iii) in the definition of "Real Property Matter" in the SPC Agreement. 8. Closing Date. Subject to the satisfaction of the required conditions to Closing as modified by this letter agreement, the closing for the transactions contemplated under the Agreements (the "Closing") shall occur at 10:00 a.m. EST on any day between December 18 or 19, 1995 or on any day between December 26, 1995 and December 29, 1995 (the "Closing Date") at the offices of Ginsburg, Feldman & Bress, 1250 Connecticut Avenue, Washington, D.C., or such other date, time and place as the parties shall agree. The first sentence of Section 9.1.A in each Agreement is hereby deleted. Purchaser accepts that time is of the essence, and that part of the consideration for SPC in accepting a reduced Aggregate Purchase Price is the expectation of a prompt Closing. Each of the parties agrees in good faith to use all reasonable commercial efforts to close within the dates indicated, and the parties will agree on the exact date as soon as practicable. 9. Consents and Approvals. With respect to the conditions precedent to Closing set forth in Section 5.6, Purchaser hereby waives certain matters as follows, and the Company, PPI and Purchaser hereby agree as follows: (a) Farragut Street/Colonial Pipeline, Inc. ("Colonial"): Purchaser accepts the November 14, 1995 letter from Colonial (previously delivered to Purchaser) as Colonial's agreement to keep its spur line to the Farragut Street Terminal in operation. 5 Edward D. Doherty, Chairman December 18, 1995 Page 4 SPC is not required to provide Purchaser with any further assurances with respect to the continuation of the operation of the Colonial spur line at the Farragut Street Terminal. (b) Cockpit Point/Sun Oil ("Sun"): Purchaser waives the requirement to obtain Sun's consent to SPC's assignment of the three (3) agreements with Sun, if such consent was required by the terms of the agreement, and agrees to assume, at Closing, SPC's obligations under said Sun agreements. Purchaser acknowledges that a dispute exists between SPC and Sun concerning SPC's continued use of the dock owned and operated by Sun under the existing arrangements. Among other provisions, Sun is seeking to establish a dock fee of $.10/bb with a $10,000 annual minimum. The Company will cease any further negotiation with Sun on this issue, and Purchaser will undertake same on and after Closing. SPC and its Affiliates shall cooperate with and assist Purchaser in obtaining a reasonably acceptable agreement with Sun regarding continued use of the dock, provided any reasonable out-of-pocket expenses incurred by SPC shall be reimbursed by Purchaser. (c) The National Park Service ("NPS"): Purchaser waives the requirement that SPC or PPI, as the case may be, obtain permits or consents from the NPS to allow SPC, PPI or Purchaser to operate the facilities located on property owned or controlled by the NPS affecting the M Street Terminal (including the Benning Pipeline) or the PPI Pipeline. Purchaser assumes responsibility for obtaining such permits, consents or any other authorizations required from NPS to operate the M Street Terminal and the PPI Pipeline. From and after the Closing Date Purchaser shall assume all liability arising from and after the Closing Date from the failure to have such permits, consents or authorizations. SPC, PPI and their Affiliates shall cooperate with and assist Purchaser in obtaining the NPS permits or consents, provided any reasonable out-of-pocket expenses incurred by SPC or PPI shall be reimbursed by Purchaser. (d) The PPI Tariff: Purchaser waives the requirement that Purchaser obtain a tariff and related operating agreement for the PPI Pipeline with a tariff rate of at least $.95 per Bbl. (e) Florida Power & Light ("FP&L"): Purchaser acknowledges that FP&L has agreed to exercise its one year renewal option on the same terms and conditions set forth in its existing agreement with SPC. A copy of FP&L's letter dated November 27, 1995 exercising its option is attached as Exhibit C. (f) Florida Submerged Land Issues: Purchaser agrees to assume responsibility for the completion of all matters related to the Florida submerged lands disclosed in the letter, 6 Edward D. Doherty, Chairman December 18, 1995 Page 5 previously delivered to you, dated October 12, 1995 from Dan Richardson of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (including the payment of any fees or expenses (including attorneys' fees) incurred on or after the Closing Date by Purchaser for the resolution of such matters). If as a result of Purchaser obtaining leases for a portion of the Phillips Dock and for submerged land where the tankers berth rent is required by the State of Florida for any period before the Closing Date, SPC agrees to pay such retroactive rent, provided that Purchaser has consulted with SPC in negotiating said matter and provided SPC with the opportunity to be present at the negotiations. (g) Other Consents: (i) Purchaser waives the requirement to obtain consents from Mr. and Mrs. James C. Greenwell, Stephen and Cindy Gass and Mary G. Norris, collectively known as the Greenwells, to the assignment of the relevant Right of Way Agreements affecting the PEPCO Pipeline. (ii) Purchaser waives the requirements to obtain the consent to the assignment of the Material Contracts and Right-of-Way Agreements set forth in Exhibit D hereto, and shall assume such Material Contracts and Right-of-Way Agreements as set forth in Section 2.2 of the Agreements. 10. Additional Unaudited Financial Information. Section 5.8 of the SPC Agreement is hereby amended by adding after the words "prior to the signing of this Agreement" the first time they appear therein the following: "or after the signing of this Agreement and prior to December 5, 1995, in accordance with Section 4.1." Section 5.8 of the Piney Point Agreement is hereby amended by adding after the words "prior to the signing of this Agreement" the following: "or disclosed in the financial statements delivered to Purchaser after the signing of this Agreement and prior to December 5, 1995, in accordance with Section 4.1." 7 Edward D. Doherty, Chairman December 18, 1995 Page 6 11. Net Worth Covenant. Section 11.9 of the SPC Agreement is hereby amended by replacing "$20,000,000" with "$12,000,000". 12. Employees. SPC will lease to Purchaser for the period from Closing through December 31, 1995 (the "Interim Period") those of the employees presently utilized in the operation of the Business as are requested by Purchaser. Purchaser will reimburse SPC at cost for the salary, employee benefits (excluding severance related items), and payroll taxes paid by SPC to or on account of such leased employees for the Interim Period at rates and in amounts comparable to those now being paid by SPC for or on account of such items. Purchaser shall be responsible for and shall indemnify and hold SPC harmless from and against all Liabilities related to or arising out of (i) injuries to such leased employees during the Interim Period and (ii) claims by such leased employees related to or arising out of acts or omissions of Purchaser during the Interim Period. Sincerely, STEUART PETROLEUM COMPANY By: /s/ LEONARD P. STEUART II ----------------------------------- Leonard P. Steuart II, Chairman of the Board PINEY POINT INDUSTRIES, INC. By: /s/ LEONARD P. STEUART II ----------------------------------- Leonard P. Steuart II, President STEUART INVESTMENT COMPANY 8 Edward D. Doherty, Chairman December 18, 1995 Page 7 By: /s/ GUY T. STEUART, II ----------------------------------- Guy T. Steuart, II, President SPC TERMINALS INCORPORATED By: /s/ L. P. Steuart ----------------------------------- Acknowledged and Agreed to: Support Terminal Operating Partnership, L.P. By: Support Terminal Services, Inc., its general partner By: /s/ EDWARD D. DOHERTY -------------------------------- Edward D. Doherty, Chairman Kaneb Operation Partnership, L.P. By: Kaneb Pipe Line Company, its general partner By: /s/ EDWARD D. DOHERTY -------------------------------- Edward D. Doherty, Chairman EX-23.1 6 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (No. 2-90929, No. 33-41181, No. 33-41295 and No. 33-54027) of Kaneb Services, Inc. of our reports dated August 18, 1995, relating to the statements of net assets to be acquired and the related statements of revenues and direct operating expenses of SPC/SIC-Terminal Operations Division, which appear in the Current Report on Form 8-K of Kaneb Services, Inc. dated August 29, 1995. PRICE WATERHOUSE LLP Washington, D.C. January 3, 1996 -----END PRIVACY-ENHANCED MESSAGE-----