Exhibit 10.2
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KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
Series A Issuer
STANTRANS, INC.
Series B Issuer
KANEB PIPE LINE PARTNERS, L.P.
and
SUPPORT TERMINAL SERVICES, INC.
and
SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.
as Guarantors
____________________________
NOTE PURCHASE AGREEMENT
dated as of December 22, 1994
____________________________
FIRST MORTGAGE NOTES OF KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P. (Series A)
8.05% FIRST MORTGAGE NOTES OF STANTRANS, INC.
DUE December 22, 2001 (Series B)
TABLE OF CONTENTS
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Page
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NOTE PURCHASE AGREEMENT............................................ 1
SECTION 1. THE NOTES AND NOTE AGREEMENTS..................... 1
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1.1 Series A Notes...................................... 1
1.2 Series B Notes...................................... 2
1.3 Acquisition for Investment; ERISA................... 4
SECTION 2. REPRESENTATIONS AND WARRANTIES.................... 4
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2.1 Financial Statements................................ 4
2.2 Private Placement Memorandum........................ 4
2.3 No Material Adverse Change.......................... 5
2.4 Subsidiaries; Organization, Authority and
Good Standing....................................... 5
2.5 Title to Properties; Liens and Leases;
Existing Debt and Investments....................... 6
2.6 Licenses............................................ 6
2.7 Binding Obligations................................. 7
2.8 Litigation; Compliance with Laws.................... 7
2.9 No Burdensome Provisions............................ 7
2.10 Compliance with Other Instruments, etc............. 8
2.11 Use of Proceeds; Federal Reserve Board
Regulations......................................... 8
2.12 ERISA.............................................. 9
2.13 Tax Liability...................................... 9
2.14 Governmental Action................................ 10
2.15 Offering of Notes.................................. 10
2.16 Environmental Matters.............................. 11
2.17 Disclosure......................................... 11
2.18 Solvency........................................... 12
2.19 Status Under Certain Statutes...................... 12
SECTION 3. CONDITIONS OF CLOSING............................. 12
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3.1 Conditions to Purchase and Sale of Series B
Notes............................................... 12
3.2 Conditions to Purchase and Sale of Series A
Notes............................................... 15
SECTION 4. PREPAYMENTS AND PAYMENTS OF THE NOTES............. 17
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4.1 Optional Prepayments................................ 17
4.2 Allocation of Prepayments........................... 18
4.3 Acquisition of Notes; No Reissuance................. 18
SECTION 5. FINANCIAL STATEMENTS, ETC......................... 18
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SECTION 6. INSPECTION; CONFIDENTIALITY....................... 22
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SECTION 7. AFFIRMATIVE COVENANTS............................. 23
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7.1 Maintenance of Office or Agency..................... 23
7.2 To Keep Books....................................... 23
7.3 Payment of Taxes; Corporate Existence;
Maintenance of Properties........................... 23
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7.4 To Insure........................................... 24
7.5 Compliance with Laws................................ 25
SECTION 8. NEGATIVE COVENANTS................................ 25
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8.1 Funded Debt......................................... 25
8.2 Liens............................................... 26
8.3 Restricted Payments................................. 28
8.4 Merger or Consolidation............................. 29
8.5 Disposition of Assets............................... 30
8.6 Investments......................................... 30
8.7 Sale and Leaseback.................................. 30
8.8 Transactions with Affiliates........................ 31
8.9 Fiscal Year......................................... 31
8.10 Subsidiaries....................................... 31
8.11 Restricted Subsidiaries............................ 31
SECTION 9. DEFINITIONS AND ACCOUNTING........................ 32
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SECTION 10. SECURITY......................................... 45
10.1 The Security....................................... 45
10.2 Agreement to Deliver Security Documents............ 45
10.3 Perfection and Protection of Security
Interests and Liens................................. 45
10.4 Additional Secured Debt............................ 45
SECTION 11. DEFAULTS AND REMEDIES............................ 47
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11.1 Events of Default.................................. 47
11.2 Suits for Enforcement.............................. 51
11.3 Remedies Cumulative................................ 51
11.4 Remedies Not Waived................................ 51
11.5 Indemnity.......................................... 51
SECTION 12. CONSENTS, WAIVERS AND AMENDMENTS................. 53
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SECTION 13. SPECIAL RIGHTS OF PURCHASER...................... 54
13.1 Method of Payment; Indemnity....................... 55
13.2 Expenses........................................... 55
SECTION 14. REGISTRATION, TRANSFER OR EXCHANGE OF
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NOTES.................................................... 56
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14.1 Note Register...................................... 56
14.2 Surrender for Transfer............................. 56
14.3 Loss, Theft, Destruction or Mutilation of
Notes............................................... 57
14.4 Holders............................................ 57
SECTION 15. SURVIVAL OF REPRESENTATIONS AND
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WARRANTIES; SUCCESSORS AND ASSIGNS....................... 57
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SECTION 16. NOTICES AND OTHER COMMUNICATIONS................. 57
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SECTION 17. SEVERABILITY..................................... 58
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SECTION 18. REFERENCES AND TITLES............................ 58
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SECTION 19. COUNTERPARTS..................................... 58
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SECTION 20. GOVERNING LAW.................................... 59
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SECTION 21. LIMITATION ON INTEREST........................... 59
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EXHIBIT A - FORM OF SERIES A NOTE
EXHIBIT B - FORM OF SERIES B NOTE
EXHIBIT C - FORM OF SOLVENCY CERTIFICATE
EXHIBIT D - FORM OF INSTRUMENT OF TRANSFER
EXHIBIT E - FORM OF OPINION OF NEW YORK COUNSEL
EXHIBIT F - FORM OF OPINION OF COUNSEL OF THE KPP COMPANIES
SCHEDULE 1 - LIST OF SERIES A NOTES AND HOLDERS
SCHEDULE 2 - LIST OF SERIES B NOTES AND HOLDERS
SCHEDULE 3 - SECURITY SCHEDULE
SCHEDULE 4 - LIST AND DESIGNATION OF SUBSIDIARIES
SCHEDULE 5 - LIST OF DEBT AND LIENS
SCHEDULE 6 - LIST OF INVESTMENTS
SCHEDULE 7 - LIST OF LITIGATION AND JUDGMENTS
SCHEDULE 8 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 9 - LIST OF CHIEF EXECUTIVE OFFICES
SCHEDULE 10 - LIST OF FACILITIES TO BE CLOSED
SCHEDULE 11 - INSURANCE
SCHEDULE 12 - DEFINITION OF AVAILABLE CASH
SCHEDULE 13 - UNRESTRICTED SUBSIDIARIES
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KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
STANTRANS, INC.
2400 Lakeside Boulevard
Richardson, Texas 75082
NOTE PURCHASE AGREEMENT
Richardson, Texas
As of December 22, 1994
To the Holder Identified on
the Signature Page at the
End of this Agreement
Ladies and Gentlemen:
The undersigned, Kaneb Pipe Line Operating Partnership, L.P., a Delaware
limited partnership ("KPOP"), StanTrans, Inc., a Delaware corporation ("STI"),
Kaneb Pipe Line Partners, L.P., a Delaware limited partnership (the
"Partnership"), Support Terminal Services, Inc., a Delaware corporation ("STS"),
and Support Terminals Operating Partnership, L.P., a Delaware limited
partnership ("STOP") hereby agree with you as follows:
SECTION 1. THE NOTES AND NOTE AGREEMENTS.
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1.1 Series A Notes. (a) KPOP has duly authorized the issue to the
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institutional purchasers named on Schedule 1 hereto of KPOP's First Mortgage
Notes due seven years from the date of issuance (the "Series A Final Maturity
Date") in the aggregate principal amount of $27,000,000 to be dated the date of
issuance, to mature on the Series A Final Maturity Date and to be substantially
in the form set forth in Exhibit A hereto, with only such revisions, deletions
and amendments as shall be acceptable to you and the other purchasers of Series
A Notes under the Note Agreements. The term "Note Agreements" as used herein
refers collectively to this Note Purchase Agreement (this "Agreement") and to
the other Note Purchase Agreements of even date herewith with the various
institutional purchasers named on Schedules 1 and 2 hereto. The term "Series A
Notes" as used herein refers collectively to the Series A Notes delivered
pursuant to the provisions of this Agreement and the other Note Agreements, and
also to each Series A Note delivered in substitution or exchange for or in lieu
of any such Series A Note. KPOP hereby represents and warrants that
concurrently herewith it is entering into each of the other Note Agreements in a
form identical hereto except for the signature of the purchaser thereunder at
the end thereof.
(b) The unpaid principal amount of the Series A Notes shall bear interest
at the Series A Contract Rate from the date of
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issuance thereof until such unpaid principal amount shall have become due and
payable. Any principal amount of the Series A Notes and any Applicable Premium
Amount, as the case may be, not paid when due, and (to the extent permitted by
law) any due and unpaid interest accrued thereon, shall bear interest at the
Series A Overdue Rate for the period that the same is overdue. The Series A
Overdue Rate (herein so called) is equal to the greater of (i) two percent per
annum (2.0%) plus the Series A Contract Rate, and (ii) two percent per annum
(2.0%) plus the Prime Rate; provided that the Series A Overdue Rate shall in no
event exceed the maximum rate permitted by applicable law. Interest at the
Series A Contract Rate and the Series A Overdue Rate shall be computed on the
basis of a 360-day year of twelve 30-day months. Interest at the Series A
Overdue Rate shall, to the extent permitted by law, be compounded monthly.
Interest at the Series A Contract Rate shall be payable semi-annually as it
accrues on the sixth month and annual anniversary date of the Series A Closing
Date of each year (or if any such date shall not be a Business Day, the
immediately following Business Day), beginning on the sixth month anniversary
date of the Series A Closing Date and continuing regularly thereafter until the
Series A Notes are paid in full. Interest at the Series A Overdue Rate shall be
payable upon demand and, whether or not demand is made, on the last day of each
calendar month. All interest on the Series A Notes, if not already due and
payable, shall be due and payable on the Series A Final Maturity Date.
(c) Subject to the terms and conditions of this Agreement, KPOP will sell
to you, and you will purchase from KPOP, on or before January 30, 1995, or such
other date agreed to by you and KPOP (the "Series A Closing Date"), a duly
executed Series A Note dated the Series A Closing Date in the principal amount
set forth opposite your name on Schedule 1, registered in your name, at the
purchase price of 100% of the principal amount thereof. Delivery of the Series
A Note so to be purchased by you shall be made on the Series A Closing Date at
the offices of Thompson & Knight, P.C., your special counsel, at 1700 Pacific
Avenue, Suite 3300, Dallas, Texas 75201. Such delivery shall be made against
payment to KPOP of the purchase price for such Series A Note by wire transfer of
immediately available funds in such amount to the account of KPOP at Texas
Commerce Bank, ABA No. 111001150, Account No. 0880-5043997.
1.2 Series B Notes. (a) STI has duly authorized the issue to the
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institutional purchasers named on Schedule 2 hereto of STI's 8.05% First
Mortgage Notes due December 22, 2001 (the "Series B Final Maturity Date") in the
aggregate principal amount of $33,000,000 to be dated the date of issuance, to
mature on the Series B Final Maturity Date and to be substantially in the form
set forth in Exhibit B hereto, with only such revisions, deletions and
amendments as shall be acceptable to you and the other purchasers of Series B
Notes under the Note Agreements. The term "Series B Notes" as used herein
refers collectively to the Series B Notes delivered pursuant to the provisions
of this
2
Agreement and the other Note Agreements, and also to each Series B Note
delivered in substitution or exchange for or in lieu of any such Series B Note.
The term "Notes" as used herein refers collectively to the Series A Notes and
the Series B Notes delivered pursuant to the provisions of this Agreement and
the other Note Agreements, and also to each such Note delivered in substitution
or exchange for or in lieu of any such Note. STI hereby represents and warrants
that concurrently herewith it is entering into each of the other Note Agreements
in a form identical hereto except for the signature of the purchaser thereunder
at the end thereof.
(b) The unpaid principal amount of the Series B Notes shall bear interest
at the rate of 8.05% per annum (the "Series B Contract Rate") from the date of
issuance thereof until such unpaid principal amount shall have become due and
payable. Any principal amount of the Series B Notes and any Applicable Premium
Amount, as the case may be, not paid when due, and (to the extent permitted by
law) any due and unpaid interest accrued thereon, shall bear interest at the
Series B Overdue Rate for the period that the same is overdue. The Series B
Overdue Rate (herein so called) is equal to the greater of (i) 10.05% per annum
and (ii) two percent (2.0%) per annum plus the Prime Rate; provided that the
Series B Overdue Rate shall in no event exceed the maximum rate permitted by
applicable law. Interest at the Series B Contract Rate and the Series B Overdue
Rate shall be computed on the basis of a 360-day year of twelve 30-day months.
Interest at the Series B Overdue Rate shall, to the extent permitted by law, be
compounded monthly. Interest at the Series B Contract Rate shall be payable
semi-annually as it accrues on the 22nd dayof June and December of each year
(or if any such date shall not be a Business Day, the immediately following
Business Day), beginning June 22, 1995 and continuing regularly thereafter until
the Series B Notes are paid in full. Interest at the Series B Overdue Rate
shall be payable upon demand and, whether or not demand is made, on the last day
of each calendar month. All interest on the Series B Notes, if not already due
and payable, shall be due and payable on the Series B Final Maturity Date.
(c) Subject to the terms and conditions of this Agreement, STI will sell
to you, and you will purchase from STI, on December 22, 1994, or such other date
agreed to by you and STI (the "Series B Closing Date"), a duly executed Series B
Note dated the Series B Closing Date in the principal amount set forth opposite
your name on Schedule 2, registered in your name, at the purchase price of 100%
of the principal amount thereof. Delivery of the Series B Note so to be
purchased by you shall be made on the Series B Closing Date at the offices of
Thompson & Knight, P.C., your special counsel, at 1700 Pacific Avenue, Suite
3300, Dallas, Texas 75201. Such delivery shall be made against payment by wire
transfer of immediately available funds to Trustee, for the benefit of STI, to
(i) pay Existing Term Lenders in the amount of $22,566,796.88 to pay the
Existing Term Debt in full, which Existing Term Debt will be modified, renewed
and extended by, and
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thereafter evidenced by, the Series B Notes, and (ii) pay STI in the amount of
$10,000,000.
1.3 Acquisition for Investment; ERISA. This Agreement is made with you in
---------------------------------
reliance upon your representation to each of KPOP and STI (which, by your
acceptance hereof you confirm) that (a) you are an "accredited investor" within
the meaning of Rule 501 under the Securities Act of 1933, as amended (in this
section, the "Act"); (b) each Note which you are acquiring is being acquired
for your own account for investment, and not with a view to the sale or
distribution thereof, nor with any present intention of selling or distributing
such Note, but subject, nevertheless, to your right to have the disposal of all
or any part of your property (including such Note) at all times be within your
control; and (c) no employee benefit plan accounts for 10% or more of the assets
allocated to any separate account (as defined in ERISA) maintained by you which
is a source of funds being used by you for the acquisition of such Note. By
your acceptance hereof you further acknowledge that such Note has not been
registered under the Act or the securities laws of any state on the ground that
the original sale contemplated hereby is exempt from registration under the Act
and such state securities laws, and you agree that in the absence of such
registration such Note will be sold or disposed of only pursuant to an exemption
from registration under the Act and such state securities laws.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each of the KPP Companies
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hereby represent and warrant that:
2.1 Financial Statements. The Partnership has delivered to you a copy of
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(i) its audited Consolidated financial statements for the years ended December
31, 1989, 1990, 1991, 1992 and 1993 which contain balance sheets as of the end
of each year and statements of income, of cash flows and of changes in partners'
capital for each such year, (ii) its unaudited Consolidated interim financial
statements for the nine-month period ending September 30, 1994, which contain a
balance sheet as of the end of such period and a statement of income and of cash
flows for such period and (iii) its unaudited Consolidated statements of income
for the three-month period ending September 30, 1994. Such financial statements
fairly present the Consolidated financial condition of the Partnership as of the
respective dates of the balance sheets and the results of its operations and
cash flows for the periods ending on such dates and in the case of statements of
income, the three month period ending on such dates, except as otherwise stated
therein or in the notes thereto, such financial statements have been prepared in
accordance with GAAP consistently applied, subject, in the case of such interim
financial statements, to normal year end adjustments.
2.2 Private Placement Memorandum. The KPP Companies have delivered to
----------------------------
you a copy of the Private Placement Memorandum dated September 1994 (the
"Private Placement Memorandum"). The
4
information contained in the Private Placement Memorandum was, as of the date
thereof, true and correct in all material respects and fairly describes
generally the business, operations and principal properties of the KPP Companies
and their Subsidiaries as of the date thereof and hereof, except as supplemented
by the most recent form 10Q and projections provided to you in writing prior to
the date hereof. Any estimated amounts included in projections or assumptions
in projections provided in the Private Placement Memorandum are based upon the
best information available in light of all conditions existing as of the date
thereof and hereof, except as supplemented by projections provided to you in
writing prior to the date hereof.
2.3 No Material Adverse Change. There has been no material adverse change
--------------------------
in the business, operations, properties, assets or condition, financial or
otherwise, of KPOP or STI individually or the KPP Companies and their
Subsidiaries taken as a whole, since December 31, 1993, and none of the KPP
Companies nor any of their Subsidiaries have any material liabilities
(contingent or otherwise) which are not disclosed either in the Private
Placement Memorandum, or in one of the balance sheets referred to in Section
2.1.
2.4 Subsidiaries; Organization, Authority and Good Standing. (a)
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Schedule 4 hereto sets forth a complete and correct list of all Subsidiaries of
the Partnership, together with the name of each Subsidiary, its jurisdiction of
incorporation, the percentage of its shares or partnership units owned by a KPP
Company or another of their Subsidiaries. Except as set forth on Schedule 4:
(i) all outstanding shares or partnership units issued by any KPP Companies or
any of their Subsidiaries have been validly issued, are fully paid and non-
assessable, and are owned beneficially by the record owner thereof, and (ii)
there are no outstanding options, warrants or other rights to acquire shares in
any KPP Company or in any of their Subsidiaries.
(b) Each KPP Company and each of their Subsidiaries is a partnership or
corporation duly formed or organized and validly existing in good standing under
the laws of its jurisdiction of organization or incorporation (which is a state
of the United States of America) and has full partnership or corporate power and
authority to own or lease the properties and assets it purports to own or hold
under lease, and to conduct the business which it now conducts.
(c) Each of STI, KPOP and STOP is duly qualified and in good standing as a
foreign corporation or partnership in each jurisdiction within the United States
wherein the character of the properties owned or held by it or the nature of the
business transacted by it makes such qualification necessary. Each KPP Company
(other than STI, KPOP and STOP) and each of their Subsidiaries is duly qualified
and in good standing as a foreign corporation or partnership in each
jurisdiction in which the
5
failure to be qualified would materially and adversely affect the business,
operations, properties, assets or condition, financial or otherwise of such KPP
Company, such Subsidiary or the KPP Companies and their Subsidiaries taken as a
whole.
(d) Each of the KPP Companies has duly authorized the execution and
delivery of the Note Agreements, the Notes and the other Note Purchase Documents
to which it is a party and the performance of its obligations hereunder and
thereunder. The issuance and sale of the Notes are within the partnership and
corporate power and authority of each of KPOP and STI.
2.5 Title to Properties; Liens and Leases; Existing Debt and Investments.
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(a) The KPP Companies and their Subsidiaries each (i) have good and marketable
title to all properties it purports to own, free and clear of all Liens, other
than those permitted under Section 8.2, and (ii) enjoys peaceful and undisturbed
possession under all leases necessary for the conduct of its business, and all
such leases are valid and subsisting and in full force and effect.
(b) Schedule 5 hereto sets forth a list, complete and correct in all
respects, of all outstanding Debt of the KPP Companies and their Subsidiaries,
together with the outstanding principal amount of each such item of Debt, the
name of its obligor (including any guarantor), the names of the holders thereof,
its interest rate and maturity date and a brief description of the properties
(if any) securing such Debt and the priority of the Lien on such properties.
(c) None of the KPP Companies, nor any of their Subsidiaries, hold any
Restricted Investments. Schedule 6 hereto sets forth a list, complete and
correct in all respects, of all outstanding Permitted Investments of the KPP
Companies and their Subsidiaries (other than Permitted Investments described in
subparagraphs (a), (b), (d), (e), (f) and (g) of the definition of Permitted
Investments contained herein), together with the outstanding amount of each such
Permitted Investment, the name of the Person in which such investment is made
and a brief description of the terms of such investment.
2.6 Licenses. Each KPP Company and its Subsidiaries owns or has the right
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to use all trademarks, trade names, service marks, copyrights, patents, computer
software and other technology rights and licenses, governmental licenses,
franchises, certificates, consents, permits and approvals necessary to enable it
to own the properties and assets and to conduct the business which it now owns
and conducts, without known conflict with the rights of others (except where
such conflicts are not material) and has made all of the filings with respect
thereto with the appropriate state and federal governmental agencies and
authorities to protect its rights therein. To the best knowledge of each of the
KPP Companies and their Subsidiaries, all such trademarks, trade names, service
6
marks, copyrights, patents, computer software and other technology rights and
licenses, governmental licenses, franchises, certificates, consents, permits and
approvals are valid and subsisting.
2.7 Binding Obligations. The Note Agreements constitute, and the Notes
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and the other Note Purchase Documents, when issued, executed and delivered, will
constitute, the legal, valid and binding obligations of each KPP Company which
is a party thereto enforceable in accordance with their respective terms, except
as enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally or by the availability
of equitable remedies.
2.8 Litigation; Compliance with Laws. (a) Schedule 7 hereto sets forth a
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list, complete and correct in all material respects, of all actions, suits or
proceedings (whether or not purportedly on behalf of any KPP Company, any of
their Subsidiaries or any of their Affiliates) pending (or, to the knowledge of
any Responsible Officer, threatened) against or affecting any KPP Company or any
of their Subsidiaries at law or in equity or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind: (i) which involves any of the
transactions herein contemplated, or (ii) which would materially and adversely
affect the business, operations, properties, assets or condition, financial or
otherwise, of KPOP or STI individually, the KPP Companies and their Subsidiaries
taken as a whole, or any KPP Company's ability to perform under the Note
Agreements or under the Notes or the other Note Purchase Documents.
(b) Except as disclosed in Schedule 7, none of the KPP Companies nor any
of their Subsidiaries is in default, event of default or violation of any law,
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which default, event of default or
violation would materially and adversely affect (i) the business, operations,
properties, assets or condition, financial or otherwise, of KPOP or STI
individually, or the KPP Companies and their Subsidiaries taken as a whole, or
(ii) any KPP Company's ability to perform under this Note Agreement or under the
Notes or the other Note Purchase Documents or to perform any of the transactions
contemplated herein or therein.
2.9 No Burdensome Provisions. None of the KPP Companies nor any of their
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Subsidiaries is a party to any agreement or instrument or subject to any charter
or other corporate restriction which materially and adversely affects the
business, operations, properties, assets or condition, financial or otherwise,
of KPOP or STI individually, the KPP Companies and their Subsidiaries taken as a
whole or any KPP Company's ability
7
to perform under the Note Agreements or under the Notes or the other Note
Purchase Documents.
2.10 Compliance with Other Instruments, etc. None of the KPP Companies
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nor any of their Subsidiaries is in default or event of default in, and no
temporary waiver of default or event of default is in effect with respect to,
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in (a) any bond, debenture, note or other evidence of
Debt of any KPP Company or any of their Subsidiaries, (b) any agreement or
instrument under or pursuant to which any such bond, debenture, note or other
evidence of Debt has been issued or made and delivered, or (c) any agreement or
instrument pursuant to which any properties of any KPP Company or any of their
Subsidiaries are subject, which default or event of default would materially and
adversely affect the business, operations, properties, assets or condition,
financial or otherwise, of KPOP or STI individually, the KPP Companies and their
Subsidiaries taken as a whole or any KPP Company's ability to perform under the
Note Agreements or under the Notes or the other Note Purchase Documents.
Neither the execution and delivery of the Note Agreements, the Notes or the
other Note Purchase Documents by the KPP Companies to which each is a party, nor
the consummation of the transactions herein and therein contemplated, nor
compliance with the terms, conditions and provisions hereof and thereof by the
KPP Companies, will conflict with or result in a breach of any of the terms,
conditions or provisions of the partnership agreement, charter or by-laws of any
KPP Company or any of their Subsidiaries or of any material agreement or
instrument to which any of them is now a party or by which any of them or any of
their properties is or may be bound, or constitute a default or event of default
thereunder, or result in the creation or imposition of any Lien upon any of
their material properties or assets. None of the KPP Companies nor any of their
Subsidiaries is in default or event of default in the performance of any of the
covenants and agreements contained herein. No event has occurred and is
continuing which constitutes, or which with the lapse of time would constitute,
a Default or Event of Default.
2.11 Use of Proceeds; Federal Reserve Board Regulations. The proceeds
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from the sale of the Series A Notes will be used by KPOP first, to the extent
thereof, to finance the acquisition of the assets of WYCO and second, for
general corporate purposes. The proceeds from the sale of the Series B Notes
will be used by STI first, to the extent thereof, to repay approximately
$33,000,000 of the outstanding indebtedness owing by STI and KPOP to Texas
Commerce Bank National Association and second, for general corporate purposes.
None of the proceeds received by either KPOP or STI from the sale of the Notes
will be used for the purpose of purchasing or carrying any "margin stock" as
defined in Regulation G of the Board of Governors of the Federal Reserve System
("Margin Stock") or for the purpose of reducing or retiring any indebtedness
which was originally incurred to
8
purchase or carry any Margin Stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of said
Regulation G. None of the transactions contemplated herein or in the Notes will
(i) violate or result in a violation of Section 7 of the Securities Exchange Act
of 1934, as amended, or any regulations issued pursuant thereto, including
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II or (ii) require any Holder to complete a Federal Reserve
System form G-3. Margin Stock does not, and no KPP Company intends or foresees
that Margin Stock will at any time, constitute a substantial part of such KPP
Company's assets.
2.12 ERISA. (a) The issuance and delivery by KPOP or STI of each Note
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purchased by you will not involve any prohibited transaction within the meaning
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). The
representation by the KPP Companies in this Section 2.12(a) is made in reliance
upon and subject to the accuracy of your representation in Section 1.3 as to the
source of the funds to be used by you to acquire such Note.
(b) Based upon ERISA and the regulations and published interpretations
thereunder, each of the KPP Companies and its ERISA Affiliates is in compliance
in all material respects with the applicable provisions of ERISA. No Reportable
Event has occurred with respect to any Plan (other than a Reportable Event for
which the 30 days' notice requirement with respect to such Reportable Event has
been waived by the PBGC). None of the KPP Companies and their ERISA Affiliates
has incurred any liability to the PBGC under Section 4062 of ERISA or to any
Plan. None of the KPP Companies nor any of their Subsidiaries is currently
obligated to contribute to a multi-employer plan, as defined in Section
4001(a)(3) of ERISA.
(c) The term "Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA. The term "Plan" shall mean any plan defined in
Section 4021(a) of ERISA in respect of which the KPP Companies or any of their
ERISA Affiliates is an "employer" or a "substantial employer" as such terms are
defined in Sections 3(5) and 4001(a)(2), respectively, of ERISA. The term
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any governmental
agency or agencies substituted therefor, and the term "ERISA Affiliate" shall
mean any Person which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as the KPP Companies or is
under common control (within the meaning of Section 414(c) of the Code) with the
KPP Companies.
2.13 Tax Liability. (a) All federal income tax returns which are
-------------
required to be filed by each of the KPP Companies or any of their Subsidiaries
have been filed. The federal income tax liabilities of the KPP Companies and
their Subsidiaries have
9
not been subject to a notice of audit by the Internal Revenue Service and
accordingly has been finally determined and paid for all fiscal years up to and
including the fiscal year ended December 31, 1989.
(b) All state and local income and franchise tax returns which are
required to be filed by any KPP Company or any of their Subsidiaries have been
filed by it or on its behalf, to the extent, if any, that it files combined or
consolidated returns.
(c) All taxes shown on such returns have been paid to the extent that such
taxes have become due, except those taxes, assessments, charges, levies or
claims the amount, applicability or validity of which is currently being
contested in good faith by it and which in respect thereof, such KPP Company or
any such Subsidiary shall have set aside on its books reserves deemed adequate
in the reasonable opinion of such KPP Company or such Subsidiary. In the
opinion of the KPP Companies, all tax liabilities of the KPP Companies and their
Subsidiaries were adequately provided for as of December 31, 1993, and are now
so provided for on the books of the KPP Companies and their Subsidiaries.
2.14 Governmental Action. No action of any governmental or public body or
-------------------
authority (i.e., no consent, transfer license, etc.) is required to authorize,
or is otherwise required in connection with, the execution, delivery and
performance of the Note Agreements, the Notes or the other Note Purchase
Documents.
2.15 Offering of Notes. None of the KPP Companies nor any agents acting
-----------------
on their behalf have, either directly or indirectly, sold or offered for sale or
disposed of, or attempted or offered to dispose of, the Notes or any part
thereof, or any similar obligation of the KPP Companies, to, or has solicited
any offers to buy any of the Notes or any part thereof, or any similar
obligation of the KPP Companies from, or has otherwise approached or negotiated
in respect of the Notes or any part thereof, or any similar obligation of the
KPP Companies, with any Person or Persons other than you and not more than
twenty-one other accredited institutional investors, each of whom had a pre-
existing business relationship with one or more of the KPP Companies or their
directors, officers, employees or agents (including, without limitation, the KPP
Companies' investment banker placing the Notes), was known to be regularly
engaged in the business of evaluating and making investments in instruments
similar to the Notes and was provided with a Private Placement Memorandum and
was given access to all other material financial and other pertinent information
about the KPP Companies; during the twelve month period preceding the date
hereof, none of the KPP Companies nor any agents acting on their behalf have,
either directly or indirectly, issued or sold any securities of the KPP
Companies that are of the same or similar class to the Notes in a transaction
exempt from the provisions of Section 5 of the Securities Act of 1933, as
amended; and the KPP Companies agree
10
that neither they nor any agent acting on their behalf will sell or offer for
sale or dispose of, or attempt or offer to dispose of, any of the Notes or any
part thereof to, or any similar obligation of the KPP Companies, or solicit any
offers to buy any of the Notes or any part thereof from, or otherwise approach
or negotiate in respect of the Notes or any part thereof, or any similar
obligation of the KPP Companies with, any Person or Persons so as thereby to
bring the issuance or sale of the Notes within the provisions of Section 5 of
the Securities Act of 1933, as amended.
2.16 Environmental Matters. Except as disclosed in Schedule 8:
---------------------
(a) each of the KPP Companies and each of their Subsidiaries is in
compliance with all applicable federal, state and local laws and regulations
relating to pollution control and environmental contamination, including all
laws and regulations governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of Hazardous
Materials and all laws and regulations with regard to record keeping,
notification and reporting requirements respecting Hazardous Materials;
(b) none of the KPP Companies nor any of their Subsidiaries has been
alleged to be in violation of, or to have any obligation for remediation under,
or has been subject to any administrative or judicial proceeding pursuant to,
such laws or regulations, nor has any Claim under CERCLA, RCRA or any other
federal, state or local environmental statute or regulation been asserted
against any KPP Company or any Subsidiary, except in each case as to matters
that have been finally and fully resolved (with any judgment, fine or other
payment owing by any KPP Company or any of their Subsidiaries in connection
therewith having been paid in full); and
(c) there are no facts or circumstances that the KPP Companies reasonably
believe form the basis, or could form the basis, for the assertion of any Claim
against any KPP Company or any of their Subsidiaries relating to any
environmental matter that would materially and adversely affect the business,
operations, properties, assets or condition, financial or otherwise, of KPOP or
STI individually or the KPP Companies and their Subsidiaries taken as a whole,
including any Claim arising from past or present environmental practices
asserted under CERCLA, RCRA or any other federal, state or local environmental
statute or regulation.
2.17 Disclosure. None of the Note Agreements, the Notes, the other Note
----------
Purchase Documents, the Private Placement Memorandum nor any of the instruments,
certificates or statements furnished to you by any KPP Company or any of their
Subsidiaries in connection with the transactions contemplated hereby or thereby,
contains any untrue statement of a material fact or
11
omits to state any material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. There is no fact peculiar to any KPP Company or their
respective Subsidiaries which has not been disclosed to you in writing which
materially adversely affects or, as far the KPP Companies can reasonably
foresee, will materially adversely affect the properties, business, profits or
condition (financial or otherwise) of KPOP or STI individually or the KPP
Companies and their Subsidiaries taken as a whole.
2.18 Solvency. No KPP Company is, and upon giving effect to the issuance
--------
of the Notes no KPP Company will be, "insolvent", as such term is used in
Section 24.003 of the Texas Business and Commerce Code or 11 U.S.C. 101 (32)(a).
2.19 Status Under Certain Statutes. No KPP Company is an "investment
-----------------------------
company" or a Person directly or indirectly "controlled" by or "acting on behalf
of" an investment company within the meaning of the Investment Company Act of
1940, as amended. No KPP Company nor any of their Subsidiaries is a "national"
of any foreign country designated in the Foreign Assets Control Regulations, the
Transaction Control Regulations, the Foreign Funds Control Regulations, the
Iranian Assets Control Regulations, the Cuban Assets Control Regulations, the
Nicaraguan Trade Control Regulations, the Iraqi Sanctions Regulations, the
Haitian Transactions Regulations or the Libyan Sanctions Regulations of the
United States Treasury Department (31 CFR Subtitle B, Chapter V, as amended).
None of the proceeds of the sale of the Notes will be used, directly or
indirectly, for the purpose of engaging in any transaction which violates any of
such Regulations or which violates the Foreign Funds Control Regulations or the
Transaction Control Regulations of the United States Treasury Department (31 CFR
Subtitle B, Chapter V, as amended), or any regulation or ruling issued
thereunder.
SECTION 3. CONDITIONS OF CLOSING.
---------------------
3.1 Conditions to Purchase and Sale of Series B Notes. Your obligation to
-------------------------------------------------
purchase and pay for the Series B Notes to be purchased by you on the Series B
Closing Date, as provided in Section 1.2(c), shall be subject to the performance
by each of the KPP Companies of all its agreements theretofore or simultaneously
to be performed hereunder and under the Series B Notes, to the accuracy of its
representations and warranties contained herein and in the Series B Notes, and
to the satisfaction, on or prior to such purchase, of the following further
conditions:
(a) Opinion of Counsel. You shall have received from Hutton, Ingram,
------------------
Yuzek, Gaines, Carroll & Bertolotti, New York counsel for the KPP Companies, and
from Stephen Hoffner, general counsel for the KPP Companies favorable opinions
in form and substance acceptable to you as to the matters set forth on
12
Exhibits E and F, and from your own special counsel, Thompson & Knight, P.C., a
favorable opinion in form and substance acceptable to you.
(b) Schedules. All Schedules hereto shall be true and correct as of the
---------
Series B Closing Date.
(c) Proceedings and Documents. All proceedings to be taken in connection
-------------------------
with the transactions contemplated by this Agreement and the other Note Purchase
Documents, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to you; and you shall have received copies of the
following documents in form and substance satisfactory to you:
(i) your Series B Note;
(ii) copies of the other Note Agreements;
(iii) the Security Documents;
(iv) the Intercreditor Agreement;
(v) a Solvency Certificate of the chief financial officer of STI and KPL
as general partner of KPOP in the form of Exhibit C hereto;
(vi) certificates of due formation and good standing in each of the KPP
Companies' and their Subsidiaries' states of organization;
(vii) certificates of due qualification and good standing in each state in
which any KPP Company (other than STOP) or any of their Subsidiaries
owns property;
(viii) an "Officers' Certificate" of the Secretary and of the Chairman of the
Board or President of each KPP Company or its general partner, which
shall contain the names and signatures of the officers of such KPP
Company or its general partner authorized to execute Note Purchase
Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy
of resolutions duly adopted by the Board of Directors of such KPP
Company or its general partner and in full force and effect at the
time this Agreement is entered into, authorizing the execution of this
Agreement and the other Note Purchase Documents delivered or to be
delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (ii) a copy of the
charter documents or partnership agreement of such KPP Company and all
amendments, thereto, certified by the appropriate official of such KPP
13
Company's state of organization, and (iii) a copy of any bylaws of
such KPP Company;
(ix) confirmation from the KPP Companies' investment bankers as to matters
discussed in Section 2.15;
(x) environmental site assessment reports prepared by Pilko & Associates
as of a date not earlier than sixty (60) days prior to the Series B
Closing Date, which update the environmental site assessment reports
prepared by Pilko & Associates as of March, 1993, and cover both the
real property pledged pursuant to the Mortgage and the real property
owned by STI;
(xi) a true and correct copy of each Bank Debt Document;
(xii) evidence of insurance required pursuant to Section 7.4; and
all other documents and other evidence which you may reasonably request in
connection with such transactions, including without limitation all records of
corporate proceedings in connection therewith.
(d) Legality of Notes. The Series B Note being acquired by you on the
-----------------
Series B Closing Date, shall then qualify as a legal investment for insurance
companies under the laws of any jurisdiction to which you may be subject
(without resort to any "basket" or "leeway" provision of any such law,
permitting limited investments by you without restriction as to the character of
the particular investment) and such purchase shall not subject you to any
penalty or other onerous condition under or pursuant to any applicable law or
government regulation; and you shall have received such certificates or other
evidence as you may reasonably request to establish compliance with this
condition.
(e) Private Placement Number. The Series B Notes shall have been assigned
------------------------
a private placement number by Standard and Poor's CUSIP Service Bureau.
(f) Fees Payable at Closing. You and your special counsel shall have
-----------------------
received the fees and expenses required to be paid or reimbursed by the KPP
Companies, as provided in Section 13.2, in connection with the preparation and
review of the Note Agreements, the Series B Notes, the other Note Purchase
Documents and the other documents and instruments relating thereto, the
negotiations thereof and other matters in connection therewith. The KPP
Companies shall have paid all fees and expenses of Pilko & Associates with
respect to the site assessment described in Section 3.1(c)(x). The KPP
Companies shall have paid you a fee in the amount of $8,595.07.
14
(g) Representations and Warranties. All representations and warranties
------------------------------
made by any KPP Company or its Subsidiaries in any Note Purchase Document shall
be true on and as of the Series B Closing Date as if such representations and
warranties had been made as of the Series B Closing Date (or where a
representation or warranty is given as of a specified date, the date so
specified).
3.2 Conditions to Purchase and Sale of Series A Notes. Your obligation to
-------------------------------------------------
purchase and pay for the Series A Notes to be purchased by you on the Series A
Closing Date, as provided in Section 1.1(c), shall be subject to the performance
by each of the KPP Companies of all its agreements theretofore or simultaneously
to be performed hereunder and under the Series A Notes, to the accuracy of its
representations and warranties contained herein and in the Series A Notes, and
to the satisfaction, on or prior to such purchase, of the following further
conditions:
(a) Opinion of Counsel. You shall have received from Hutton, Ingram,
------------------
Yuzek, Gaines, Carroll & Bertolotti, New York counsel for the KPP Companies, and
from Stephen Hoffner, general counsel for the KPP Companies as to the matters
set forth on Exhibits E and F, and from your own special counsel, Thompson &
Knight, P.C., a favorable opinion in form and substance acceptable to you.
(b) Schedules. All Schedules hereto shall be true and correct as of the
---------
Series A Closing Date.
(c) Proceedings and Documents. All proceedings to be taken in connection
-------------------------
with the transactions contemplated by this Agreement and the other Note Purchase
Documents, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to you; and you shall have received copies of the
following documents in form and substance satisfactory to you:
(i) your Series A Note;
(ii) a Solvency Certificate of the chief financial officer of STI and KPL
as general partner of KPOP in the form of Exhibit C hereto;
(iii) certificates of due formation and good standing in each of the KPP
Companies' and their Subsidiaries' states of organization;
(iv) certificates of due qualification and good standing in each state in
which the any KPP Company (other than STOP) or any of their
Subsidiaries owns property;
(v) an "Officers' Certificate" of the Secretary and of the Chairman of the
Board or President of each KPP Company
15
or its general partner, which shall contain the names and signatures
of the officers of such KPP Company or its general partner authorized
to execute Note Purchase Documents and which shall certify to the
truth, correctness and completeness of the following exhibits attached
thereto: (i) a copy of resolutions duly adopted by the Board of
Directors of such KPP Company or its general partner and in full force
and effect at the time this Agreement is entered into, authorizing the
execution of this Agreement and the other Note Purchase Documents
delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (ii)
a copy of the charter documents or partnership agreement of such KPP
Company and all amendments, thereto, certified by the appropriate
official of such KPP Company's state of organization, and (iii) a copy
of any bylaws of such KPP Company;
(vi) confirmation from the KPP Companies' investment bankers as to matters
discussed in Section 2.15;
(vii) evidence of insurance required pursuant to Section 7.4;
(viii) copies of all documents, which shall be in form and substance
acceptable to you, executed in connection with the acquisition by KPOP
of the assets of WYCO; and
all other documents and other evidence which you may reasonably request in
connection with such transactions, including without limitation all records of
corporate proceedings in connection therewith.
(d) Legality of Notes. The Series A Note being acquired by you on the
-----------------
Series A Closing Date, shall then qualify as a legal investment for insurance
companies under the laws of any jurisdiction to which you may be subject
(without resort to any "basket" or "leeway" provision of any such law,
permitting limited investments by you without restriction as to the character of
the particular investment) and such purchase shall not subject you to any
penalty or other onerous condition under or pursuant to any applicable law or
government regulation; and you shall have received such certificates or other
evidence as you may reasonably request to establish compliance with this
condition.
(e) Private Placement Number. The Series A Notes shall have been assigned
------------------------
a private placement number by Standard and Poor's CUSIP Service Bureau.
(f) Fees Payable at Closing. You and your special counsel shall have
-----------------------
received the fees and expenses required to be paid or reimbursed by the KPP
Companies, as provided in Section 13.2, in connection with the preparation and
review of the Note
16
Agreements, the Series A Notes, the other Note Purchase Documents and the other
documents and instruments relating thereto, the negotiations thereof and other
matters in connection therewith.
(g) WYCO Acquisition. The acquisition by KPOP of the assets of WYCO, upon
----------------
terms acceptable to you, shall have been completed prior to, or
contemporaneously with, the closing of the Series A Notes.
(h) Series B Closing. The closing for the Series B Notes shall have been
----------------
completed prior to, or contemporaneously with, the closing of the Series A Notes
and all documents described in Section 3.1(c) shall have been delivered to you
on the Series B Closing Date.
(i) Representations and Warranties. All representations and warranties
------------------------------
made by any KPP Company or its Subsidiaries in any Note Purchase Document shall
be true on and as of the Series A Closing Date, both before and after giving
effect to the Wyco Acquisition, as if such representations and warranties had
been made as of the Series A Closing Date (or where a representation or warranty
is given as of a specified date, the date so specified).
SECTION 4. PREPAYMENTS AND PAYMENTS OF THE NOTES.
-------------------------------------
4.1 Optional Prepayments. (a) From time to time each of KPOP and STI may
--------------------
at its option prepay its Notes then outstanding, in whole or in part, so long as
the aggregate amount of all partial prepayments of principal concurrently paid
on such Notes equals $500,000 or any higher integral multiple of $100,000, by
giving each Holder written notice thereof not less than 30 days nor more than 60
days prior to the date fixed for such prepayment (the "Prepayment Date", which
date shall be a Business Day), which notice shall also specify the principal
amount of the Notes held by such Holder so to be prepaid and an estimate of the
Applicable Premium Amount of the Notes to be so prepaid and accrued interest due
thereon, along with the computation thereof set forth in reasonable detail.
(b) The KPP Companies shall deliver to all Holders, by facsimile
transmission, with copies delivered by overnight delivery service with proof of
delivery, on the second Business Day preceding the Prepayment Date a certificate
signed by a principal financial officer of the Partnership setting forth the
Applicable Premium Amount of the Notes held by all Holders to be so prepaid,
which certificate shall set forth in reasonable detail the computation thereof.
If the KPP Companies do not timely deliver such certificate to all Holders or if
less than the Requisite Holders agree with the Partnership's calculation of the
Applicable Premium Amount contained in such certificate, the Requisite Holders
may calculate or recalculate, as the case may be, the Applicable Premium Amount
of the Notes held by all
17
Holders to be so prepaid, which calculation shall be binding upon the KPP
Companies and the other Holders absent manifest error.
(c) On the Prepayment Date, either KPOP or STI, as applicable, shall
prepay to each Holder the principal amount of the Notes held by such Holder to
be so prepaid, the interest accrued on such principal amount to the Prepayment
Date, and the Applicable Premium Amount, if any.
4.2 Allocation of Prepayments. In the event of any prepayment of less
-------------------------
than all of the outstanding Notes of a series pursuant to Section 4.1, the KPP
Companies will allocate the principal amount to be so prepaid, together with
interest thereon and the Applicable Premium Amount related thereto, if any,
among the Holders of Notes of such series in proportion, as nearly as may be, to
the respective unpaid principal amounts of the Notes of such series held by
them.
4.3 Acquisition of Notes; No Reissuance. No KPP Company will, nor will it
-----------------------------------
permit any Subsidiary or Affiliate to, directly or indirectly prepay, redeem,
retire, purchase or otherwise acquire any Note of a series, except pursuant to
(a) Section 4.1, or (b) an offer to all Holders of Notes of such series to
prepay, redeem, retire, purchase or otherwise acquire the Notes held by them on
the same terms and conditions and in proportion, as nearly as may be, to the
respective unpaid principal amounts of the Notes of such series held by them.
Any Note prepaid in full pursuant to Section 4.1 or otherwise acquired by any
KPP Company or any of their Subsidiaries shall be surrendered to the KPP
Companies for cancellation, shall not be reissued and shall not be deemed
outstanding, and no Note shall be issued in lieu of any principal amount of any
Note so prepaid.
SECTION 5. FINANCIAL STATEMENTS, ETC. Each KPP Company covenants and
--------------------------
agrees that the KPP Companies will furnish to each Holder:
(a) as soon as practicable, and in any event within 65 days after the end
of each quarterly period in each fiscal year of KPL and the KPP Companies, the
unaudited Consolidated statements of income, of cash flows and of partners'
capital of KPL and the Partnership, the unaudited consolidating statement of
income of each of the KPP Companies and their Subsidiaries (indicating which
Subsidiaries are Unrestricted Subsidiaries) and the unaudited Consolidated
statements of income, of cash flows and of partners' capital of the KPP
Companies and their Restricted Subsidiaries in each case for such period and for
that part of the fiscal year ended with such quarterly period, and the
Consolidated and consolidating balance sheet of KPL and of the KPP Companies and
their Subsidiaries as at the end of each such fiscal period (indicating which
Subsidiaries are Unrestricted Subsidiaries) and the unaudited Consolidated
balance sheet of the KPP Companies and their Restricted Subsidiaries as at the
end of each such fiscal period, in each case setting forth in
18
comparative form the corresponding figures for the corresponding period or part
of the preceding fiscal year, all in reasonable detail, prepared in conformity
with GAAP applied on a basis consistent with that of the previous year (except
as otherwise stated therein or in the notes thereto) and certified by the chief
financial officers of KPL, KPOP and STI as (x) having been prepared in
conformity with GAAP applied on a basis consistent with that of the previous
year (except as otherwise stated therein or in the notes thereto) and (y)
presenting fairly the financial condition and results of operations of KPL and
of the KPP Companies and their Subsidiaries, as at the end of and for the fiscal
periods to which they relate, subject to normal year-end adjustments;
(b) as soon as practicable, and in any event within 95 days after the end
of each fiscal year of KPL and the KPP Companies, the audited Consolidated
statements of income, of cash flows and of changes in partners' capital of KPL
and of the Partnership, the unaudited consolidating statement of income of each
of the KPP Companies and their Subsidiaries (indicating which Subsidiaries are
Unrestricted Subsidiaries) and the unaudited Consolidated statements of income,
of cash flows and of partners' capital of the KPP Companies and their Restricted
Subsidiaries as at the end of and for such year, and the audited Consolidated
and unaudited consolidating balance sheet of KPL and of the KPP Companies and
their Subsidiaries as at the end of such year (indicating which Subsidiaries are
Unrestricted Subsidiaries) and the unaudited Consolidated balance sheet of the
KPP Companies and their Restricted Subsidiaries as at the end of each such year,
in each case setting forth in comparative form the corresponding figures of the
previous fiscal year, all in reasonable detail, prepared in conformity with GAAP
applied on a basis consistent with that of the previous year (except as
otherwise stated therein or in the notes thereto) and certified by the chief
financial officer of the Partnership as (x) having been prepared in conformity
with GAAP applied on a basis consistent with that of the previous year (except
as otherwise stated therein or in the notes thereto) and (y) presenting fairly
the financial condition and results of operations of KPL and the KPP Companies
and their Subsidiaries as at the end of such fiscal year, and accompanied by a
report or opinion of Price Waterhouse (or other independent certified public
accountants which have a recognized national standing) stating that such
financial statements present fairly the consolidated financial condition and
results of operations of KPL and the KPP Companies and their Subsidiaries, in
accordance with GAAP consistently applied (except for changes in application
with which such accountants concur) and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards;
(c) concurrently with the financial statements delivered pursuant to
Section 5(b), a letter that conforms to professional pronouncements promulgated
by the American Institute of Certified
19
Public Accountants from the firm of independent certified accountants that
reported on such financial statements to the effect that in the course of, and
based solely upon, their audit of such financial statements, nothing has come to
their attention to cause them to believe that there existed on the date of such
statements any Default or Event of Default, provided that, if in the opinion of
such accountants any such Default or Event of Default exists, such accountants
shall describe its nature and the length of time it has existed;
(d) concurrently with the financial statements delivered pursuant to
Sections 5(a) and (b), a certificate of the chief financial officers of KPOP and
STI (i) setting forth, as of the end of the respective fiscal period, the extent
to which the KPP Companies have complied, and have caused their Subsidiaries to
comply, with the requirements of Section 8, including, in the case any Debt,
merger or consolidation, Permitted Investment, Lien securing Debt, Restricted
Payment, sale and leaseback, Transfer or sale incurred or made during such
fiscal period, all necessary computations reflecting the manner in which such
compliance was determined and a reference to the source of each number included
in such computations, (ii) stating that the activities of the KPP Companies and
their Subsidiaries during such fiscal period have been monitored under such
officer's supervision to determine whether the KPP Companies have fulfilled all
of their obligations under the Note Agreements, the Notes and the other Note
Purchase Documents, and (iii) stating that no Default or Event of Default
existed as of the end of such fiscal period, on the date of such certificate or
at any time during the period covered by such financial statements, or, if any
Default or Event of Default exists or existed, specifying such Default,
Defaults, Event of Default or Events of Default, the nature and status thereof,
and what action the KPP Companies have or are taking or propose to take with
respect thereto;
(e) concurrently with the sending or filing thereof (or promptly
thereafter), copies of all such financial statements, proxy statements and
reports as Kaneb Services, Inc., KPL or any KPP Company shall send to its
stockholders or partnership unitholders pursuant to SEC requirements, including
all registration statements, annual reports on form 10-K, quarterly reports on
form 10-Q, current reports on form 8-K and other regular periodic reports which
Kaneb Services, Inc., KPL or any KPP Company or any of their Subsidiaries may
file with the SEC;
(f) promptly but in any event not later than 3 Business Days after a
Responsible Officer of any KPP Company becomes aware of the existence of a
Default or an Event of Default or a default or an event of default or a claimed
default, whether or not waived, under any other Debt of any KPP Company or any
of their Subsidiaries which Debt is in an aggregate principal amount of
$1,000,000 or more, a written notice to each Holder, the Trustee and each other
creditor under the Intercreditor Agreement, specifying the nature and period of
existence thereof and what
20
action such KPP Company or such Subsidiary, as the case may be, is taking or
proposes to take with respect thereto;
(g) promptly but in any event not later than 3 Business Days after receipt
thereof by any KPP Company or any of their Subsidiaries, any notice from any
governmental agency asserting (i) any violation by, or possible remedial
obligation owed by, any KPP Company or any of their Subsidiaries under CERCLA,
RCRA or any other federal, state or local environmental statute or regulation,
or (ii) any Claim against any KPP Company or any of its Subsidiaries relating to
any environmental matter (including any Claim arising from past or present
environmental practices asserted under CERCLA, RCRA or any other federal, state
or local environmental statute or regulation) if such violation or Claim could
reasonably result in any KPP Company or any of their Subsidiaries incurring
liability, including but not limited to fines and remediation costs, of
$1,000,000 or more, and promptly (but in any event not later than 30 days after
receipt thereof by such KPP Company or Subsidiary) to be followed by the KPP
Companies' statement of what action the KPP Companies or such Subsidiary, as the
case may be, is taking or proposes to take with respect thereto;
(h) promptly but in any event not later than 3 Business Days after a
Responsible Officer of any KPP Company becomes aware thereof, a written notice
of the existence of any condition or occurrence of any event which, in the
opinion of such officer, would have a material and adverse effect on (i) the
business, operations, properties, assets or condition, financial or otherwise,
of KPOP or STI individually or the KPP Companies and their Subsidiaries taken as
a whole or (ii) on the ability of any KPP Company or any of its Subsidiaries to
perform under this Note Agreement, the Notes or any other Note Purchase Document
or to perform any of the transactions contemplated herein or therein;
(i) immediately upon becoming aware of the occurrence of any (i)
"reportable event", as such term is defined in Section 4043(b) of ERISA, (ii)
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA, or (iii) "prohibited transaction", as such term is defined in Section
4975 of the Code, in connection with any pension plan or trust created
thereunder, a written notice specifying the nature thereof, what action the KPP
Companies are taking or propose to take with respect thereto, and, when known,
any action by the Internal Revenue Service with respect thereto; and
(j) promptly upon reasonable request by you or any subsequent Holder,
copies of all other information relating in any way to any KPP Company or any of
its Subsidiaries, including any information required in connection with a
proposed sale of any of the Notes under Rule 144A.
SECTION 6. INSPECTION; CONFIDENTIALITY. (a) Upon reasonable notice to the
---------------------------
KPP Companies, any Holder of any portion
21
of the Notes at the time outstanding shall have the right to visit and inspect
(at the expense of such Holder) during normal business hours, any of the offices
or properties of any KPP Company or any of its Subsidiaries, to examine any of
their books of account, make copies therefrom and photocopies and photographs
thereof, and to write down and record any information obtained therefrom, and to
discuss their affairs, finances and accounts with their officers and independent
public accountants, as often as such Holder may reasonably request.
Notwithstanding the foregoing, any visit or inspection by or on behalf of any
Holder during the continuance of any Default or Event of Default shall be at the
expense of the KPP Companies.
(b) Each Holder will keep in confidence, in accordance with its normal,
customary practices, any information, including financial information, which is
marked by the KPP Companies as being non-public and confidential or proprietary
in nature that is disclosed to such Holder by any of the KPP Companies (as a
result of any examination of the books and records of the KPP Companies and
their Subsidiaries or otherwise); provided, however, that you or such other
-------- -------
Holder may disclose any such information: (i) to your employees and
representatives, including without limitation, your attorneys and accountants
who would ordinarily have access to such information in the normal course of
performance of their duties, in confidence in accordance with your normal,
customary practices; (ii) to another Holder, (iii) to actual or prospective
purchasers of the Notes or any participations therein or any successor, assignee
or Affiliate of yours with respect to the Notes; (iv) such third parties as you
may, in your discretion, deem reasonably necessary or desirable in connection
with or in response to: (A) compliance with any law, ordinance or governmental
order, regulation, rule, policy, investigation or regulatory authority
(including, without limitation, The National Association of Insurance
Commissioners, its successors, or any other insurance industry regulatory
authority) requirement or request, (B) any order, decree, judgment, subpoena,
notice of discovery or similar request or testimony, or pleading issued, filed,
served or purported on its face to be issued, filed or served (x) by or under
authority of any court, tribunal, arbitration board, any governmental or
industry agency, commission, authority, board or similar entity or (y) in
connection with any proceeding, case or matter pending (or on its face purported
to be pending) in any court, tribunal, arbitration board, or any governmental
agency, commission, authority, board or similar entity, (C) the enforcement of
your rights hereunder and under the Notes during the continuance of a Default or
Event of Default or (D) the filing of any documents which are necessary or
appropriate, in your opinion, for the protection of any security interest or
collateral relative to the Note Purchase Documents and the transactions
contemplated herein; (v) any Person holding your debt or securities who shall
have requested to inspect such information in its capacity as a holder of such
debt or securities; and (vi) any rating agency or service who rates your debt or
claims paying ability or any entity which
22
you regularly report to as a member of any industry of which you are a part.
SECTION 7. AFFIRMATIVE COVENANTS. Each KPP Company covenants and agrees
---------------------
that so long as any Note shall be outstanding:
7.1 Maintenance of Office or Agency. Each KPP Company will maintain its
-------------------------------
chief executive office and principal place of business at the respective
addresses set forth on Schedule 9 hereto (or such other place in the United
States of America as such KPP Company may designate in writing to the Holders at
least twenty Business Days prior to the date it moves such chief executive
office and principal place of business) and will keep its books and records
regarding the Collateral at the respective addresses set forth on Schedule 9
hereto (or such other place in the United States of America as such KPP Company
may designate in writing to the Holders at least twenty Business Days prior to
the date it moves such books and records). No KPP Company will, nor will it
permit any of its Subsidiaries to, change its name (except to such name as such
KPP Company may designate in writing to the Holders at least twenty Business
Days prior to the date it changes its name). Each notice given under this
Section 7.1 must specifically state that such notice is given pursuant to this
Agreement.
7.2 To Keep Books. Each KPP Company will, and will cause its Subsidiaries
-------------
to, keep proper books of record and account in accordance with GAAP.
7.3 Payment of Taxes; Corporate Existence; Maintenance of Properties.
----------------------------------------------------------------
Each KPP Company will, and will cause its Subsidiaries to,
(a) pay and discharge promptly all taxes, assessments and governmental
charges or levies imposed upon it, its income or profits or its property before
the same shall become in default, as well as all lawful claims and liabilities
of any kind (including claims and liabilities for labor, materials and supplies)
which, if unpaid, might by law become a Lien upon its property; provided that
none of the KPP Companies and their Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim if (i) the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate and
lawful proceedings diligently conducted, (ii) such KPP Company or Subsidiary
shall have set aside on its books reserves in respect thereof deemed adequate in
the reasonable opinion of such KPP Company or such Subsidiary and (iii) any Lien
placed upon any property of any KPP Company or any of its Subsidiaries as a
result thereof will not impair the operation of such property by the KPP
Companies;
(b) subject to Sections 8.4 and 8.5, do all things necessary to preserve
and keep in full force and effect the
23
corporate or partnership existence, rights (charter and statutory) and
franchises of each KPP Company and of each of their Subsidiaries;
(c) maintain the general nature of its operations and businesses in the
refined petroleum products storage, terminaling and transportation industry; and
(d) maintain and keep all the properties, except for those facilities
which are listed on Schedule 10 hereto, of the KPP Companies and their
Subsidiaries which are used or useful in the conduct of their respective
businesses in good condition, repair and working order and supplied with all
necessary equipment and make all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as may be reasonably necessary so that
the business carried on in connection therewith may be conducted at all times.
7.4 To Insure. Each KPP Company will, and will cause its Subsidiaries to,
---------
(a) keep all of its insurable properties owned by it insured against all
risks usually insured against by Persons operating like properties in the
localities where the properties are located, all in amounts sufficient to
prevent such KPP Company or Subsidiary, as the case may be, from becoming a
coinsurer within the terms of the policies in question, but in any event in
amounts not less than the amounts set forth on Schedule 11 hereto or if greater,
the amounts which would be maintained by a prudent company in the same industry
and location;
(b) maintain public liability insurance against claims for personal
injury, death or property damage suffered by others upon or in or about any
premises occupied by it or occurring as a result of its maintenance or operation
of any airplanes, automobiles, trucks or other vehicles or other facilities
(including any machinery used therein or thereon) or as the result of the use of
products sold by it or services rendered by it;
(c) maintain such other types of insurance with respect to its business as
are usually carried by Persons of comparable size engaged in the same or a
similar business and similarly situated, including business interruption
insurance; and
(d) maintain all such workmen's compensation or similar insurance as may
be required under the laws of any State or jurisdiction in which it may be
engaged in business. All such insurance shall be maintained in amounts
consistent with the practices of prudent Persons of comparable size and
established reputation engaged in the same or a similar business and similarly
situated and in compliance with any applicable laws; provided, however, such
insurance shall at a minimum be in such
24
amounts, against such risks and with such deductible limits as set forth on
Schedule 11. All insurance herein provided for shall be effected under a valid
and enforceable policy or policies issued by reputable and financially sound
insurers. Any insurance policies covering Collateral shall be (i) endorsed to
provide for payment of losses to Trustee as its interests may appear, pursuant
to a mortgage clause (without contribution) of standard form made part of the
applicable policy, (ii) provide that such policies may not be cancelled, reduced
or affected in any manner for any reason without fifteen days prior notice to
Trustee and (iii) provide for any other matters specified in any applicable
Security Document or which Trustee may reasonably require.
In the event that any KPP Company or any of its Subsidiaries shall fail to
maintain all insurance in accordance with this Section 7.4, any Holder and/or
the Trustee shall have the right (but shall be under no obligation) to procure
such insurance and the KPP Companies agree to reimburse such Holder or the
Trustee, as the case may be, for all costs and expenses of procuring such
insurance.
7.5 Compliance with Laws. Each KPP Company and its Subsidiaries will
--------------------
conduct their respective operations, and will obtain all environmental, health
and safety permits, licenses and other authorizations necessary for their
respective operations and will maintain such authorizations in full force and
effect, in compliance in all material respects with applicable federal, state
and local laws and regulations, including without limitation the Occupational
Safety and Health Act of 1970, as amended, ERISA and all laws and regulations
relating to pollution control and environmental contamination, those governing
the generation, use, collection, treatment, storage, transportation, recovery,
removal, discharge or disposal of Hazardous Materials, and all laws and
regulations relating to record keeping, notification and reporting requirements
respecting Hazardous Materials. Each KPP Company will, and will cause its
Subsidiaries to, keep their respective properties free and clear of any Liens
imposed pursuant to CERCLA, RCRA or any other federal, state or local
environmental statute or regulation.
SECTION 8. NEGATIVE COVENANTS. Each KPP Company covenants and agrees that
------------------
so long as any Note shall be outstanding:
8.1 Funded Debt. No KPP Company shall, nor shall permit any of its
-----------
Restricted Subsidiaries to, create, assume, incur, guarantee or otherwise become
or be liable in respect of, or maintain or otherwise allow to exist, any Funded
Debt, except for the following:
(a) Funded Debt represented by the Notes and the Guaranties;
25
(b) Funded Debt of the KPP Companies outstanding on the Series B Closing
Date, as set forth in Schedule 5 hereto and amendments or modifications thereof
(but excluding any extension in the maturity of or any increase in the principal
amount of such Funded Debt and any refunding, refinancing or renewal of such
Funded Debt which extends the maturity of or increases the principal amount of
such Funded Debt); and
(c) other Funded Debt of any of the KPP Companies, provided that at the
time of, and immediately after giving effect to, the incurrence (including the
incurrence of any extension in the maturity of or any increase in the principal
amount of such Funded Debt and any refunding, refinancing or renewal of such
Funded Debt which extends the maturity of or increases the principal amount of
such Funded Debt) thereof and giving effect to the contemporaneous application
of any proceeds thereof to retire other Funded Debt, (i) no Default or Event of
Default has occurred and is continuing and (ii) Consolidated Funded Debt shall
not equal or exceed 3.15 times Consolidated Cash Flow for a 12 calendar month
period ending not more than 3 months prior to the date on which such KPP Company
incurs such additional Funded Debt.
8.2 Liens. No KPP Company shall, nor shall permit its Restricted
-----
Subsidiaries to: (i) create, assume or otherwise incur or suffer to exist any
Lien upon (or, whether by Transfer to any KPP Company or any of its Restricted
Subsidiaries or otherwise, subject, or permit any KPP Company or any of its
Restricted Subsidiaries to subject, to the prior payment of any obligations,
indebtedness or claim other than KPOP's and STI's obligation under the Notes)
any property or assets (real or personal, tangible or intangible, including any
stock or other securities) of any KPP Company or any of its Restricted
Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, (ii) own or acquire or agree to acquire any property or assets (real
or personal, tangible or intangible, including any stock or other securities)
subject to or encumbered by any Lien, or (iii) suffer to exist any obligations,
indebtedness or claim of any KPP Company or any of its Restricted Subsidiaries
or claims or demands against any KPP Company or any of its Restricted
Subsidiaries, which obligations, indebtedness, claims or demands, if unpaid,
would (in the hands of the holder thereof or anyone who shall have guaranteed
the same or who has any right or obligation to purchase the same), by law or
upon bankruptcy or insolvency or otherwise, be given any priority whatsoever
over its general creditors; provided that the foregoing restrictions (I) shall
not apply to Liens under the Security Documents or Liens arising by rights of
offset securing the Bank Debt which are subject to the Intercreditor Agreement
and (II) shall not prevent:
(a) the KPP Companies or any of their Restricted Subsidiaries from
suffering to exist any Liens existing on the Series B Closing Date, as set forth
in Schedule 5 hereto, which
26
secure Funded Debt permitted under Section 8.1(b) and renewals, extensions and
refundings (but not increases in principal amount) thereof which are permitted
under Section 8.1(c), provided that such Liens are not extended to cover
additional property; or
(b) the KPP Companies or any of their Restricted Subsidiaries from
creating, assuming, incurring or suffering to exist any Liens which are
incidental to its normal conduct of business or ownership of its properties or
assets, provided that such Liens do not secure Debt and do not materially impair
the use of such properties or assets in the operation of the KPP Companies' and
their Restricted Subsidiaries' businesses; or
(c) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming or incurring or suffering to exist: (i) Liens for taxes not yet due and
payable or the nonpayment of which is permitted by Section 7.3(a), (ii) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties, and rights of eminent domain, which Liens, exceptions, encumbrances,
easements, reservations, rights and restrictions do not in the aggregate have a
material adverse effect on such KPP Company or Restricted Subsidiary or
materially impair their use in the operation of their businesses, or (iii)
mechanics Liens and materialman's Liens for services or materials for which
payment is not yet due and payable and which do not materially impair the use by
such KPP Company or Restricted Subsidiary in the operation of its businesses; or
(d) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming, incurring or suffering to exist Liens in respect of property acquired
by such KPP Company or Restricted Subsidiary after the date hereof to secure
Debt assumed or incurred to finance all or any part of the purchase price,
provided that:
(i) each such Lien shall at all times apply solely to the property
so acquired and the improvements thereon which are to become fixtures or
accessions thereto,
(ii) the principal amount of Debt secured by any such Lien in respect
of any such property shall at no time exceed the fair market value of such
property at the time of acquisition thereof by such KPP Company or
Restricted Subsidiary or, if less, the cost of such acquisition,
(iii) each such Lien shall be either existing at the time of
acquisition or created within 120 days thereafter, and
(iv) the Debt secured by such Lien is permitted by Sections 8.1 at the
time such Debt is incurred; or
27
(e) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming or incurring or suffering to exist the following Liens if (i) the
validity, applicability or amount thereof is being contested in good faith and
by appropriate and lawful proceedings diligently conducted, (ii) the KPP Company
or its Restricted Subsidiary in question shall have set aside on its books,
reserves in respect thereof which are deemed adequate in the reasonable opinion
of such KPP Company or such Restricted Subsidiary, (iii) levy and execution
thereof continue to be stayed, (iv) any of which Liens covering any Collateral
are subordinate to the Liens in favor of the Holders, and (v) such Liens do not
in the aggregate materially detract from the value of the property of the KPP
Company or its Restricted Subsidiary in question, or materially impair the use
of that property in the operation of its business: (A) claims and Liens of
mechanics, materialmen, warehousemen (other than those claims and Liens
described in Section 8.2(c)(iii)), and (B) adverse judgments or orders on appeal
for the payment of money not in excess of the aggregate amount of $25,000,000;
or
(f) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming, incurring or suffering to exist Liens permitted by Section 10.4; or
(g) any KPP Company or any of its Restricted Subsidiaries from creating,
assuming, incurring or suffering to exist other Liens, on property which is not
Collateral, securing Debt permitted by Section 8.1, provided that the aggregate
amount of Debt so secured shall at no time exceed ten percent (10%) of Partners'
Capital.
8.3 Restricted Payments. No KPP Company shall, nor shall it permit any of
-------------------
its Restricted Subsidiaries to, make any Restricted Payment (or incur any
liability to make any Restricted Payment), except (i) KPOP may make Restricted
Payments in cash where on the date such Restricted Payment is made and
immediately after giving effect thereto no Default or Event of Default has
occurred and is continuing, or will occur with the passage of time, and such
Restricted Payment does not exceed "KPOP Available Cash" for the fiscal quarter
immediately preceding the quarter in which such Restricted Payment is paid, (ii)
the Partnership may make Restricted Payments in cash where on the date such
Restricted Payment is made and immediately after giving effect thereto no
Default or Event of Default has occurred and is continuing, or will occur with
the passage of time, and such Restricted Payment does not exceed "Partnership
Available Cash" for the fiscal quarter immediately preceding the quarter in
which such Restricted Payment is paid, and (iii) payments in an aggregate amount
not to exceed $5,000,000 made by KPOP under the Repurchase Agreement prior to
June 30, 1995. For purposes of this Section 8.3, the terms "KPOP Available
Cash" and "Partnership Available Cash" shall have the meaning set forth on
Schedule 12.
28
8.4 Merger or Consolidation. No KPP Company shall, nor shall permit any
-----------------------
of its Restricted Subsidiaries to, consolidate with or merge into any Person, or
permit any Person to merge into it, except that any KPP Company or any of its
Restricted Subsidiaries may take any of the following actions:
(a) any Restricted Subsidiary may be merged into or consolidated with any
KPP Company or any other Wholly Owned Restricted Subsidiary so long as a KPP
Company or a Wholly Owned Restricted Subsidiary is the surviving Person; and
(b) any KPP Company or any Restricted Subsidiary may merge or consolidate
with another corporation, partnership or limited liability company if:
(i) both prior to and after taking the effects of the merger or
consolidation into account, no Default, or Default with the passage of time
that will become an Event of Default, Event of Default has occurred and is
continuing;
(ii) following the merger or consolidation the successor formed
thereby is a corporation, partnership or limited liability company which
(A) is duly organized and existing under the laws of the United States of
America or any State thereof, (B) is not "insolvent" (as defined in 11
U.S.C. 101(32)(A) or Section 24.003 of the Texas Business and Commerce
Code) and (C) maintains substantially all of its assets in the United
States of America;
(iii) the due and punctual performance and observance of all the
obligations, terms, covenants, agreements and conditions of the Note
Agreements, the Notes and the other Note Purchase Documents to be performed
or observed by such KPP Company shall, by written instrument in form and
substance satisfactory to the Requisite Holders and furnished to each
Holder, be expressly assumed by such successor (if other than such KPP
Company), and such successor (if other than the KPP Company) shall
expressly confirm, by written instrument in form and substance satisfactory
to the Requisite Holders and furnished to each Holder, that the Notes
constitute a senior secured obligation of such successor;
(iv) following the merger or consolidation an additional $1 of Funded
Debt could be incurred in compliance with Section 8.1(c); and
(v) immediately prior to such merger or consolidation, you receive a
certificate of Responsible Officers of the KPP Companies certifying that
such merger or consolidation complies with all requirements set forth in
this Section 8.4, and an opinion of outside counsel in form and substance
satisfactory to the Holders, stating that the successor is a corporation,
partnership or limited liability company which
29
is duly organized and existing under the laws of the United States of
America or any State thereof and will upon consummation of the merger or
consolidation succeed to the assets and liabilities of the KPP Company or
Restricted Subsidiary that is a party thereto.
8.5 Disposition of Assets. No KPP Company shall, nor shall it permit any
---------------------
of its Subsidiaries to, Transfer any Collateral. No KPP Company shall, nor
shall permit any of its Restricted Subsidiaries to, Transfer any of its other
properties and assets (including securities of its Restricted Subsidiaries) at
any time except:
(a) a Transfer in the ordinary course of business (including any Transfer
of obsolete or worn-out assets); or
(b) a Transfer pursuant to a transaction in compliance with Section 8.4 or
Section 8.7; or
(c) a Permitted Transfer.
No KPP Company will, nor will permit any of its Restricted Subsidiaries to,
issue or sell shares of its capital stock to any Person other than a KPP Company
or another Wholly-Owned Restricted Subsidiary of the KPP Companies, other than
new issuances of limited partnership units of the Partnership in exchange for
cash or property representing fair consideration in the determination of the
Board of Directors of KPL. No KPP Company will, nor will permit any of its
Subsidiaries to, Transfer any capital stock of a Restricted Subsidiary other
than (i) a merger or consolidation which complies with the provisions of Section
8.4, (ii) a contribution of capital stock of a Restricted Subsidiary to a joint
venture, provided that following the contribution of such capital stock an
additional $1 of Funded Debt could be incurred by the KPP Companies in
compliance with Section 8.1(c), or (iii) a Permitted Transfer.
8.6 Investments. No KPP Company shall, nor shall permit any of its
-----------
Restricted Subsidiaries to, make or acquire any Restricted Investment.
8.7 Sale and Leaseback. No KPP Company shall, nor shall permit any of its
------------------
Restricted Subsidiaries to, sell and lease-back any of its properties or assets;
provided, however, that within 180 days following the acquisition of any
property or asset, the KPP companies may sell to and lease-back from another
Person such property or asset so long as no Default or Event of Default exists
at the time of and after giving effect to such transaction.
8.8 Transactions with Affiliates. No KPP Company shall, nor shall permit
----------------------------
any of its Restricted Subsidiaries to, engage in any transaction with an
Affiliate on terms less favorable to such KPP Company or Restricted Subsidiary
than would have been
30
obtainable in arm's length dealing in the ordinary course of business with a
Person not an Affiliate.
8.9 Fiscal Year. No KPP Company shall, nor shall permit any of its
-----------
Subsidiaries to, change its fiscal year to anything other than the calendar
year.
8.10 Subsidiaries. No KPP Company shall have or own any Subsidiary unless
------------
such Subsidiary shall either (i) not be a Restricted Subsidiary or (ii) be a
Guarantor of the Notes and be a Restricted Subsidiary. No KPP Company may
become an Unrestricted Subsidiary. No KPP Company will, or will permit any
Restricted Subsidiary to, directly or indirectly, enter into, create, or
otherwise allow to exist any contract or other consensual restriction (other
than as may exist pursuant to the partnership agreements of the Partnership and
KPOP) on the ability of any Restricted Subsidiary of any KPP Company to pay
distributions to any KPP Company or any of its Restricted Subsidiaries, to
redeem equity interests in it held by any KPP Company or any of its Restricted
Subsidiaries, to repay loans owing by it to any KPP Company or any of their
Restricted Subsidiaries or to transfer any of its assets to any KPP Company or
any of its Restricted Subsidiaries. Each KPP Company shall, and shall cause its
Restricted Subsidiaries to, provide notice of the Guaranties to any holder of
Debt of such KPP Company or such Restricted Subsidiary.
8.11 Restricted Subsidiaries. (a) As used herein the term "Restricted
-----------------------
Subsidiary" means any Subsidiary of any KPP Company other than an Unrestricted
Subsidiary. The term "Unrestricted Subsidiary" means any Subsidiary of any KPP
Company which the KPP Companies have designated as such, provided that the KPP
Companies will not designate any Subsidiary as an Unrestricted Subsidiary unless
at the time of such designation and immediately after giving effect thereto (i)
no Default or Event of Default shall have occurred and be continuing and (ii) an
additional $1 of Funded Debt could be incurred in compliance with Section
8.1(c).
(b) The KPP Companies may redesignate any Unrestricted Subsidiary as a
Restricted Subsidiary so long as at the time of such redesignation and
immediately after giving effect thereto (i) no Default or Event of Default shall
have occurred and be continuing and (ii) an additional $1 of Funded Debt could
be incurred in compliance with Section 8.1(c). To the extent that any
Unrestricted Subsidiary becomes a Restricted Subsidiary hereunder, such
Subsidiary shall always remain a Restricted Subsidiary.
(c) On Schedule 13, the KPP Companies shall designate which Subsidiaries
they designate as Unrestricted Subsidiaries as of the Series B Closing Date in
accordance with the provisions of this Section. Thereafter, promptly upon any
Subsidiary being designated by the KPP Companies as a Restricted Subsidiary or
an
31
Unrestricted Subsidiary, the KPP Companies shall deliver to each Holder a
certificate of the chief financial officer of the Partnership setting forth the
name of the Subsidiary, its jurisdiction of incorporation or formation and a
brief description of its business and properties, certifying the status of such
Subsidiary as an Unrestricted Subsidiary or a Restricted Subsidiary pursuant to
the provisions of this Section.
SECTION 9. DEFINITIONS AND ACCOUNTING. For all purposes of this Note
--------------------------
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
"Affiliate" means any Person (other than the KPP Companies or any of their
---------
Restricted Subsidiaries) which, directly or indirectly, controls or is
controlled by or is under common control with the KPP Companies or their
Subsidiaries or which beneficially owns or holds or has the power to direct the
voting of 10% or more of any class of Voting Stock (or in the case of a Person
which is not a corporation, 10% or more of its equity interest) of any KPP
Company or any of its Subsidiaries or which has 10% or more of its Voting Stock
(or in the case of a Person which is not a corporation, 10% or more of its
equity interest) beneficially owned or held, directly or indirectly, by any KPP
Company or any of its Subsidiaries. For purposes of this definition, "control"
means the power to direct the management and policies of a Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" has the meaning specified in Section 1.1(a).
---------
"Applicable Premium Amount" shall mean, with respect to any prepayment of
-------------------------
principal owing under the Notes pursuant to Section 4.1 or any acceleration of
principal owing under the Notes pursuant to Section 11.1 (such prepaid or
accelerated principal amount being herein called the "Called Principal"), an
----------------
amount equal to the greater of (i) zero, and (ii) the excess of the Discounted
Value of such Called Principal over the amount of such Called Principal. As
used in this definition:
"Discounted Value" of any Called Principal means the sum of:
----------------
(a) the amount obtained by discounting such Called Principal from the
scheduled maturity date of such Called Principal to (i) in the case of
Called Principal which is prepaid pursuant to Section 4.1, the related
Prepayment Date, or (ii) in the case of Called Principal which is
accelerated pursuant to Section 11.1, the date of acceleration (either such
date being herein called the "Settlement Date" for such Called Principal),
---------------
plus
(b) the amounts obtained by discounting each remaining payment of
interest that would be due on such Called
32
Principal from the date on which such payment would be made to the
Settlement Date for such Called Principal,
with all such discounting being made in accordance with accepted financial
practice and at a discount factor (applied on a semi-annual basis) equal to
the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to any Called Principal, one-half
------------------
of one percent (0.5%) per annum plus the yield to maturity for the actively
traded marketable United States Treasury fixed interest rate security with a
maturity equal to the scheduled maturity of the Called Principal of the Notes as
of the Settlement Date, as set forth on the display designated as "Page 678" on
the Telerate Access Service (or such other display as may replace Page 678 on
Telerate Access Service or if Telerate Access Service is not available, then any
other nationally recognized trading screen reporting on-line intraday trading in
United States Treasury fixed interest rate securities) at 11:00 A.M. (New York
City time) as of the second Business Day preceding the date such Applicable
Premium Amount becomes due and payable. In the event that no such nationally
recognized trading screen reporting on-line trading in the United States
Treasury fixed interest rate securities is available, "Treasury Rate" shall mean
the yield to maturity implied by the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so reported
as of the second Business Day preceding such Settlement Date, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded United States treasury securities having a constant maturity
equal to the period from such Settlement Date to the scheduled maturity date of
such Called Principal. Such implied yield shall be determined, if necessary, by
(a) converting United States treasury bill quotations to bond-equivalent yields
in accordance with accepted financial practice and (b) interpolating linearly
between reported yields.
"Bankruptcy Default" has the meaning specified in Section 11.1.
------------------
"Bank Debt" means indebtedness, which has an original principal amount not
---------
in excess of $15,000,000, of KPOP owing to Texas Commerce Bank National
Association and Bank of Montreal and their respective successors or assigns,
under or pursuant to the Bank Debt Documents.
"Bank Debt Documents" means that certain Restated Credit Agreement of even
-------------------
date herewith by and among KPOP, Texas Commerce Bank National Association, as
Agent and Lenders which are a party thereto, as such agreement may be amended,
restated, supplemented or refinanced from time to time.
33
"Business Day" means any day on which banks are required to be open to
------------
carry on their normal business in the States of Iowa, New York and Texas.
"Capitalized Lease" means and includes at any time any lease of property
-----------------
(real, personal or mixed) which in accordance with GAAP would at such time be
required to be capitalized on a balance sheet of the lessee. "Capitalized Lease
-----------------
Obligation" means at any time the capitalized amount of the rental commitment
- ----------
under a Capitalized Lease which in accordance with GAAP would at such time be
required to be shown on a balance sheet of the lessee.
"CERCLA" has the meaning specified below in the definition of "Hazardous
------
Materials".
"Claim" means any and all claims, demands, causes of action, suits,
-----
proceedings, administrative proceedings, losses, judgments, decrees, debts,
damages, liabilities, court costs and attorneys' fees and other expenses
incurred, assessed or sustained by or against any KPP Company or any of its
Subsidiaries.
"Code" has the meaning specified in Section 2.12(a).
----
"Collateral" means all property of any kind which is subject to a Lien in
----------
favor of Holders or which, under the terms of any Security Document, is
purported to be subject to such a Lien.
"Consolidated" refers to the consolidation of any Person, in accordance
------------
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Cash Flow" means for the period in question, the sum of (i)
----------------------
Consolidated Net Income for such period, plus (ii) depreciation and
amortization, deferred taxes, other non-cash charges and interest expense
(including without duplication, interest expense related to Capitalized Leases),
for such period that was taken into account in determining such Consolidated Net
Income but which did not involve a current expenditure of funds; provided that:
--------
(a) The determination of Consolidated Cash Flow for a particular 12 month
period shall exclude earnings taken into account in determining Consolidated
Cash Flow which are attributable to any of the following which have occurred or
will have occurred after giving effect to the transaction which necessitates the
determination of whether additional Consolidated Funded Debt may be incurred:
(i) discontinued operations; (ii) operations represented by properties or assets
Transferred or to
34
be Transferred; (iii) a Subsidiary which ceases to be a Consolidated Subsidiary;
(iv) minority interests created in a Subsidiary; or (v) the interest in a
Subsidiary attributable to capital stock Transferred or to be Transferred.
(b) Solely for the purpose of determining whether (i) Funded Debt may be
assumed or incurred, pursuant to Section 8.1, to finance all or any part of the
purchase price of property or (ii) a KPP Company may merge or consolidate
pursuant to Section 8.4, or may assume or incur Funded Debt, pursuant to Section
8.1, in connection with such merger or consolidation, the determination of
Consolidated Cash Flow for a particular 12 month period shall include the
Consolidated Cash Flow which is attributable solely to the property to be so
purchased or the Person with whom the KPP Company is to merge or consolidate for
such 12 month period, after elimination of the portions of earnings included in
such Consolidated Cash Flow that are or may be attributable to (A) operations to
be discontinued, (B) sources of revenues that will not or may not be available
to the KPP Companies after the purchase, merger or consolidation, (C) the gain
(net of any tax effect) resulting from the sale of any capital assets other than
in the ordinary course of business, (D) the aggregate amount of unusual or
nonrecurring gains (net of any tax effect) and (E) other adjustments (such as
additional or increased expenses) appropriate to reflect the earnings that would
have been realized by the KPP Companies had the purchase of property or the
merger or consolidation occurred at the inception of such 12 month period;
provided that Holders shall have received a certificate of the chief financial
- --------
officer of the Partnership, or its general partner, in form and scope
satisfactory to each Holder, reflecting the determination of the earnings so
attributable to such property or Person, which certificate must specifically be
based upon, reference and attach either (x) audited financial statements that
reflect the earnings figures used in such determination and any other source of
information used in such certificate or (y) unaudited financial statements that
reflect the earnings figures used in such determination which must be prepared
in accordance with GAAP (and be accompanied by a certificate of such chief
financial officer certifying that they were so prepared), be in form and detail
acceptable to Requisite Holders and be otherwise acceptable to Required Holders
in their reasonable discretion.
"Consolidated Funded Debt" means the aggregate, after eliminating all
------------------------
intercompany items, of all Funded Debt of the Partnership and its Consolidated
Subsidiaries, consolidated in accordance with GAAP. Without limiting the
foregoing, an obligations that may be Funded Debt of more than one of the KPP
Companies and their Subsidiaries shall not be counted more than once in
determining Consolidated Funded Debt.
"Consolidated Net Income" means, for the period in question, the
-----------------------
Consolidated net income of the Partnership and its Consolidated Subsidiaries
(after eliminating all intercompany
35
items and portions of earnings properly attributable to minority interests, but
without eliminating the portion of earnings attributable to KPL's 1% general
partnership interest in KPOP), all as determined in accordance with GAAP
excluding (A) any net loss or undistributed net income, as determined in
- ---------
accordance with GAAP, of any Person in which any KPP Company or any of their
Consolidated Subsidiaries has an ownership interest, but which is not a
Consolidated Subsidiary, (B) the net income or loss of any Consolidated
Subsidiary for any time period included in the computation of such net income
prior to the date it became a Consolidated Subsidiary (except in the limited
circumstances set forth in paragraph (b) of the definition of Consolidated Cash
Flow), (C) the gain or loss (net of any tax effect) resulting from the sale of
any capital assets other than in the ordinary course of business, and (D) the
aggregate amount of unusual or nonrecurring gains or losses (net of any tax
effect).
"Debt" of any Person on any date means, without duplication, (a) any
----
obligation of such Person for borrowed money or which was incurred for the
purchase price of assets or services, (b) any indebtedness or obligation secured
by or constituting a Lien existing on property owned by such Person, whether or
not such Person is directly liable for such indebtedness or obligation, (c) the
face amount of all letters of credit, bankers acceptances or other similar
facilities, whether drawn or undrawn, for which such Person is the account
party, (d) all Capitalized Lease Obligations of such Person, (e) the net amount
payable for settlement of interest rate swaps of such Person as determined in
respect thereof as of the end of the most recently ended fiscal quarter of such
Person, based on the assumption that such swaps had terminated at the end of
such fiscal quarter, and (f) all Guaranty Liabilities by such Person.
"Default" means any event which, with notice or lapse of time or both,
-------
would constitute an Event of Default.
"ERISA" has the meaning specified in Section 2.12(a).
-----
"ERISA Affiliate" has the meaning specified in Section 2.12(c).
---------------
"Event of Default" has the meaning specified in Section 11.1.
----------------
"Existing Term Debt" means the Debt of STI under the "Tranche A Term
------------------
Facility", pursuant to the Credit Agreement dated as of March 1, 1993, as
heretofore modified and amended, among KPOP, STI, Texas Commerce Bank National
Association (successor by merger with Texas Commerce Bank, National Association)
as Primary Agent and Funding Agent and the lenders (including the Existing Term
Lenders) parties thereto.
"Existing Term Lenders" means, collectively, Texas Commerce Bank National
---------------------
Association (successor by merger with Texas
36
Commerce Bank, National Association), Bank of Montreal, The Bank of Nova Scotia,
The First National Bank of Boston, Bank One, Texas, N.A., and First Interstate
Bank of Texas, N.A.
"Funded Debt" of any Person on any date means, without duplication, (a) any
-----------
obligation of such Person for borrowed money or which was incurred for the
purchase price of assets or services, in each case having a final maturity of
one or more than one year from the date such obligation was incurred (or which
is renewable or extendable at the option of such Person to a maturity beyond one
year from the date of incurrence thereof), including all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not the obligation to make such
payments shall constitute a current liability of such Person under GAAP, (b) any
indebtedness or obligation secured by or constituting a Lien existing on
property owned by such Person, whether or not such Person is directly liable for
such indebtedness or obligation, (c) the face amount of all letters of credit,
bankers acceptances or other similar facilities, whether drawn or undrawn, for
which such Person is the account party and which have a final maturity of one or
more than one year from the date such letter of credit was issued, (d) all
Capitalized Lease Obligations of such Person, (e) the net amount payable for
settlement of interest rate swaps of such Person as determined in respect
thereof as of the end of the most recently ended fiscal quarter of such Person,
based on the assumption that such swaps had terminated at the end of such fiscal
quarter, and (f) all Guaranty Liabilities by such Person in respect of Funded
Debt of another Person.
"GAAP" means those generally accepted accounting principles and practices
----
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor).
"Guaranties" means, collectively, the guaranties of even date herewith
----------
given by each of KPOP, STI, the Partnership, STS and STOP for the benefit of the
Holders, as from time to time amended, modified or restated, and all other
guaranties hereafter delivered to Holders in connection with the transactions
contemplated herein.
"Guaranty Liabilities" of any Person on any date means, without
--------------------
duplication, (a) any guarantee or endorsement by such Person of obligations of
another (other than endorsements for purposes of collection in the ordinary
course of business), (b) any obligation of such Person to purchase goods,
services, notes or securities for the purpose of supplying funds for the
purchase, payment or satisfaction of, or measured by, obligations of another,
(c) any other contingent obligation of such Person in respect of, or to purchase
or otherwise acquire or service, obligations of another, (d) any obligation of
such Person, whether or not contingent, in respect of the obligations of a
general or limited partnership of which such Person is a general
37
partner, unless the holder of such obligation has agreed to waive all recourse
to such Person for such obligation, and (e) every obligation of such Person for
obligations of another which such Person has in effect guaranteed by an
agreement, contingent or otherwise, to make a loan, advance or capital
contribution to or other investment in such debtor for the purpose of assuring
or maintaining a minimum equity, asset base, working capital or other balance
sheet condition for such debtor on any date, or to provide funds for the payment
of any liability, dividend or stock liquidation payment of or by such debtor, or
otherwise to supply funds to or in any manner invest in such debtor for such
purpose.
"Hazardous Materials" means materials defined as "hazardous substances",
-------------------
"hazardous wastes", "hazardous constituents" or "solid wastes" in (a) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. (S)(S) 9601 et seq. and any amendments thereto and regulations thereunder
("CERCLA"), (b) the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)
6901 et seq. and any amendments thereto and regulations thereunder ("RCRA") and
(c) any other federal, state or local environmental statute or regulation.
"Holder" means a Person to whom any Note is originally issued and any
------
subsequent holder of a Note shown in the register of either KPOP or STI to hold
such Note.
"Intercreditor Agreement" means that certain Collateral Trust and
-----------------------
Intercreditor Agreement dated of even date herewith by and among Texas Commerce
Bank National Association, Bank of Montreal, each Holder listed on Schedule 1
and Schedule 2 and Texas Commerce Bank National Association, as Trustee as such
agreement may be amended, restated or supplemented from time to time.
"KPL" means Kaneb Pipe Line Company, a Delaware corporation.
---
"KPOP" means Kaneb Pipe Line Operating Partnership, L.P., a Delaware
----
limited partnership.
"KPP Companies" means, collectively, KPOP, STI, the Partnership, STS, STOP,
-------------
and, subject to Section 8.4, their successors and assigns.
"Lien" means, with respect to any property or assets, any right or interest
----
therein of a creditor to secure obligations, indebtedness or claims owed to him
or any other arrangement with such creditor which provides for the payment of
such obligation, indebtedness or claim out of such property or assets or which
allows him to have such obligation, indebtedness or claim satisfied out of such
property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's
38
or materialman's lien, any other charge or encumbrance for security purposes,
whether arising by law or agreement or otherwise. "Lien" also means any filed
financing statement, any registration of a pledge (such as with an issuer of
unregistered securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Margin Stock" has the meaning specified in Section 2.11.
------------
"Mortgage" means that certain Mortgage and Security Agreement dated of
--------
event date herewith, executed by KPOP and KPL.
"Note Agreements" has the meaning specified in Section 1.1(a).
---------------
"Note Purchase Documents" means this Agreement, the other Note Agreements,
-----------------------
the Notes, the Security Documents, the Intercreditor Agreement, and all other
agreements, certificates, documents, instruments and writings at any time
delivered in connection herewith or therewith.
"Notes" has the meaning specified in Section 1.2(a).
-----
"Partners' Capital" means, at the time in question, the partners' capital
-----------------
of the Partnership, as consolidated with its Subsidiaries, as determined in
accordance with GAAP, including without limitation, the elimination of minority
interests.
"Partnership" means Kaneb Pipe Line Partners, L.P., a Delaware limited
-----------
partnership.
"PBGC" has the meaning specified in Section 2.12(c).
----
"Permitted Investment" means any investment by any KPP Company or any of
--------------------
their Restricted Subsidiaries in any other Person, whether by acquisition of
stock or Debt, by loan, advance, guarantee, or transfer of property out of the
ordinary course of business, by capital contribution, by extension of credit or
otherwise by any KPP Company or any of their Restricted Subsidiaries in any of
the following:
(a) any marketable obligation maturing not later than one year after
the date of acquisition thereof, issued or guaranteed by the United States
of America or by any agency of the United States of America which has the
full faith and credit of the United States of America;
(b) commercial paper which is rated "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investor Service, Inc., and maturing not
later than one year after the date of acquisition thereof, issued by any
corporation organized
39
under the laws of the United States or any state thereof and which has
capital, surplus and undivided profits of at least $100,000,000;
(c) any demand deposit or time deposit (including certificates of
deposit and money market or sweep accounts) with a commercial bank or trust
company organized under the laws of the United States or any state thereof
and having capital, surplus and undivided profits of at least $100,000,000
whose senior debt securities are rated "A" or higher by Standard & Poor's
Corporation or "A-2" or higher by Moody's Investor Service, Inc., provided
that such deposit must either be payable on demand or mature not later than
twelve months from the date of investment therein;
(d) any demand deposit with a commercial bank or trust company
organized under the laws of the United States of America or any state
thereof maintained for use in the ordinary course of business;
(e) any tax-exempt security which is rated "A" or higher by Standard
& Poor's Corporation or "A-2" or higher by Moody's Investor Services, Inc.,
maturing not later than one year from the date of acquisition thereof and
which is issued by any institution having capital, surplus and undivided
profits of at least $100,000,000;
(f) any advance to directors, officers or employees of any KPP
Company in the ordinary course of business which has been approved by such
KPP Company, provided that the aggregate amount of all such advances
outstanding at any one time may not exceed $1,000,000;
(g) all accounts receivables on normal trade terms which arise from
the sale of goods or services in the ordinary course of business;
(h) intercompany advances, loans or extensions of credit by any KPP
Company or any of their Wholly Owned Restricted Subsidiaries to any other
KPP Company or any of their Wholly Owned Restricted Subsidiaries provided
that such intercompany advances, loans or extensions of credit shall be
subordinated to the Notes and the Guaranties upon terms satisfactory to the
Holders;
(i) investments, other than pursuant to the preceding clause (h) (by
transfer of property, capital contribution or otherwise) in the
Partnership, KPOP, STS, STI or STOP or any other Person provided that such
Person is or shall immediately therewith become a Guarantor and a Wholly
Owned Restricted Subsidiary of the KPP Companies; and
(j) any other investment so long as the aggregate book value of such
investments does not at any time exceed ten
40
percent (10%) of the Partners' Capital as of the end of the fiscal year
immediately preceding the date in question.
"Permitted Transfer" means a Transfer of property or assets or a Transfer
------------------
of capital stock or partnership units of a Subsidiary of any KPP Company (other
than a Subsidiary that is one of the KPP Companies other than STOP) if:
(a) at the time of such Transfer, and immediately after giving effect
thereto:
(i) such Transfer is for fair market value and in the best
interests of the Person making such Transfer,
(ii) no Default or Event of Default has occurred and is
continuing or would exist after giving effect thereto, or
(iii) all such Transfers which are to be treated as "Permitted
Transfers" under this subsection (a) in any fiscal year shall consist
of properties or assets or of capital stock of a Subsidiary which do
not in the aggregate have a book value (determined with regard to each
such property or asset or such capital stock at the time the same is
Transferred) of more than ten percent (10%) of the Partners' Capital
as of the end of the immediately preceding fiscal year; or
(b) any other Transfer for cash provided that within one year from
the date of such Transfer, the KPP Companies or their Subsidiaries use the
full amount of the proceeds received therefrom, net of all expenses of the
KPP Companies or their Subsidiaries incurred in connection with such
Transfer, either (or in combination):
(i) to acquire property or assets used in the storage,
terminaling, pipeline and transportation business, or
(ii) to pay Funded Debt of the KPP Companies.
(c) the Transfer is to any other KPP Company or any of their Wholly
Owned Restricted Subsidiaries.
"Person" means an individual, a corporation, a partnership, a trust, a
------
joint venture, an unincorporated organization or a government or any agency or
political subdivision thereof.
"Plan" has the meaning specified in Section 2.12(c).
----
"Prepayment Date" has the meaning specified in Section 4.1.
---------------
"Prime Rate" means, on any day, the rate quoted by J. P. Morgan Company as
----------
its prime rate, base rate or similar reference
41
for such day; or, if such rate is no longer quoted by J. P. Morgan Company, such
other similar reference rate for such day readily available as selected by the
Requisite Holders to be the Prime Rate.
"Private Placement Memorandum" has the meaning specified in Section 2.2.
----------------------------
"RCRA" has the meaning specified in the above definition of "Hazardous
----
Materials".
"Reportable Event" has the meaning specified in Section 2.12(c).
----------------
"Repurchase Agreement" means the Put Agreement dated as of October 11,
--------------------
1993, between the Partnership and Texas Commerce Bank National Association
pursuant to which the Partnership agreed to repurchase upon demand by Texas
Commerce Bank National Association certain of its partnership units issued to
KPL.
"Requisite Holders" means the Holder or Holders of not less than 51% in
-----------------
aggregate principal amount of all Notes at the time outstanding, exclusive of
any Notes held by the KPP Companies, any of their Subsidiaries or any Affiliate
of such Persons.
"Responsible Officer" means any of the following officers, agents or
-------------------
employees of any KPP Company, or in the case of a partnership, of the Managing
General Partner of such KPP Company: the Chairman, the President, the Chief
Executive Officer, the Chief Operating Officer and, and the Chief Financial
Officer (and any Person who performs one of the same functions under a different
title).
"Restricted Investment" means any investment by any KPP Company or any of
---------------------
their Restricted Subsidiaries in any other Person, whether by acquisition of
stock or Debt, by loan, advance, guarantee, or transfer of property out of the
ordinary course of business, by capital contribution, by extension of credit or
otherwise; provided that the term "Restricted Investment" shall not include any
Permitted Investment.
"Restricted Payment" means (a) any dividend on, or other distribution in
------------------
respect of, shares of class of capital stock of, or partnership or other
interest in any KPP Company or any of their Subsidiaries (other than a dividend
or other distribution payable solely in capital stock of such company or a
dividend or other distribution payable solely to KPOP or to one of its Wholly-
Owned Restricted Subsidiaries), (b) any payment on account of the purchase,
redemption or other retirement of any such shares of capital stock or
partnership interest, or of any warrant, option or other right to acquire shares
of capital stock or partnership interest in, KPL, Kaneb Services, Inc., any KPP
Company or any of their Subsidiaries, or (c) any other distribution made to a
holder of any such shares of capital stock
42
or partnership interest, either directly or indirectly (other than a
distribution payable solely in capital stock of any KPP Company), including any
forgiveness of debt owed by such shareholder or partner to KPL, any KPP Company
or any of their Subsidiaries.
"Restricted Subsidiary" has the meaning given it in Section 8.11.
---------------------
"Rule 144A" means Rule 144A promulgated by the SEC, as amended from time to
---------
time.
"SEC" means the Securities and Exchange Commission, or any governmental
---
agency or agencies substituted therefor.
"Security Documents" means the Guaranties, all other instruments listed in
------------------
the Security Schedule and all other security agreements, deeds of trust,
mortgages, chattel mortgages, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now, heretofore, or hereafter delivered by any Person to Holders or
the Trustee in connection with this Note Agreement or any transaction
contemplated hereby to secure or guarantee the payment of any part of the Note
or the performance of the KPP Companies' or any other Person's other duties and
obligations under the Note Purchase Documents.
"Security Schedule" means Schedule 3 hereto.
-----------------
"Series A Closing Date" has the meaning specified in Section 1.1(c).
---------------------
"Series A Contract Rate" means the per annum rate of interest equal to one
----------------------
percent (1.0%) per annum plus the interpolated yield to maturity of an
obligation with a seven year maturity and average life, interpolating based upon
the yield to maturity of the five-year United States Treasury Notes due November
1999 or such later issue of on-the-run five-year United States Treasury Notes
issued prior to such date of determination and are reflected on the display
designated as "Page 500" on the Telerate Access Service (or such other display
as may replace Page 500 on Telerate Access Service or if Telerate Access Service
is not available, any other nationally recognized trading screen reporting on-
line intraday trading in United States Treasury fixed interest rate securities)
and the yield to maturity of the ten-year United States Treasury Notes due
November 2004 or such later issue of on-the-run ten-year United States Treasury
Notes issued prior to such date of determination and are reflected on such
display, at 11:00 A.M. (New York City time) as of the fifth Business Day
preceding the Series A Closing Date, as determined by the Requisite Holders on
or prior to the Series A Closing Date.
43
"Series A Final Maturity Date" has the meaning specified in Section 1.1(a).
----------------------------
"Series A Overdue Rate" has the meaning specified in Section 1.1(b).
---------------------
"Series B Closing Date" has the meaning specified in Section 1.2(c).
---------------------
"Series B Contract Rate" has the meaning specified in Section 1.2(b).
----------------------
"Series B Final Maturity Date" has the meaning specified in Section 1.2(a).
----------------------------
"Series B Overdue Rate" has the meaning specified in Section 1.2(b).
---------------------
"STI" means StanTrans, Inc., a Delaware corporation.
---
"STOP" means Support Terminals Operating Partnership, L.P., a Delaware
----
limited partnership.
"STS" means Support Terminal Services, Inc., a Delaware corporation.
---
"Subsidiary" means, with respect to any KPP Company, any corporation,
----------
association or other business entity in which such KPP Company or one or more of
its Subsidiaries owns sufficient equity or voting interests to enable it or them
(as a group) ordinarily, in the absence of contingencies, to elect a majority of
the directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such KPP Company or one or more of its Subsidiaries
or such KPP Company and one or more of its Subsidiaries (unless such partnership
can and does ordinarily take major business actions without the prior approval
of such KPP Company or one or more of its Subsidiaries).
"Transfer" means to sell, lease, transfer or otherwise dispose.
--------
"Trustee" means the Trustee appointed and acting pursuant to the
-------
Intercreditor Agreement.
"Unrestricted Subsidiary" has the meaning given it in Section 8.11.
-----------------------
"Voting Stock" of a Person means the issued and outstanding capital stock
------------
of such Person with the power to elect, appoint or cause the election or
appointment of the members of its board of directors.
44
"Wholly Owned Restricted Subsidiary" means, at any time, any Restricted
----------------------------------
Subsidiary one hundred percent (100%) of all the equity interests, voting
interests and Debt of which are owned by any one or more of the KPP Companies
and their other Wholly Owned Restricted Subsidiaries at such time.
"WYCO" means WYCO Pipe Line Company, a Delaware corporation.
----
SECTION 10. SECURITY.
--------
10.1 The Security. The Notes will be secured by the Security Documents
------------
listed in the Security Schedule and any additional Security Documents hereafter
delivered by any Person and accepted by Requisite Holders.
10.2 Agreement to Deliver Security Documents. Each KPP Company agrees to
---------------------------------------
deliver and to cause its Subsidiaries to deliver, to further secure the Notes
whenever requested by Requisite Holders in their sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance satisfactory to
Requisite Holders for the purpose of granting, confirming, and perfecting first
and prior liens in the Collateral. Each KPP Company also agrees to deliver and
to cause its Subsidiaries to deliver, whenever Requisite Holders determine in
their sole and absolute discretion, reasonably exercised, that any of the
matters described below is in question, favorable opinions from legal counsel
acceptable to the Requisite Holders as to such matter (a) confirming that such
properties and interests are subject to Security Documents securing the Notes
that constitute and create legal, valid and duly perfected first deed of trust
liens, or mortgage liens or security interests in such properties and interests
and the proceeds thereof, (b) stating that such properties and interests are
free and clear of all Liens except those in favor of Trustee and that such
Person has good and defensible title thereto, and (c) covering such other
matters as Requisite Holders may request.
10.3 Perfection and Protection of Security Interests and Liens. The KPP
---------------------------------------------------------
Companies will from time to time deliver to the Trustee financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by the KPP Companies or
any of their Subsidiaries in form and substance satisfactory to the Requisite
Holders.
10.4 Additional Secured Debt. (a) Funded Debt for money borrowed by KPOP
-----------------------
with respect to which all of the following are true is herein called "Qualifying
----------
Debt": (i) such Debt is permitted to be incurred by Section 8.1(c) at the time
- ----
such Debt is incurred, (ii) such Debt is permitted to be incurred pursuant to
the terms of each document or instrument governing other Debt of any of the KPP
Companies or any of their Subsidiaries (or a written consent given thereunder),
(iii) such Debt is permitted
45
to be secured on a pari passu basis with all other Debt which is secured by the
Collateral pursuant to the terms of each document or instrument governing such
Debt that is secured by the Collateral (or a written consent given thereunder),
(iv) the initial holders of such Debt are Financial Institutions, (v) such Debt
is not guarantied in any manner by any Person and is not secured by any Lien
unless any such guaranty or Lien shall concurrently benefit and secure all Notes
on a pari passu basis, (vi) any consent or approval of any governmental or
public body or authority which is required for the incurrence of such Debt has
been obtained, and (vii) KPOP has given an officer's certificate addressed to
each Holder of KPOP's intent to secure such Debt with the Collateral, which
certificate shall have been given not less than 30 days prior to the incurrence
of such Debt and shall contain representations, warranties and covenants (in
form and substance approved by the Trustee) that such Debt complies with each of
the provisions of this Section 10.4. To the extent that the principal amount of
the Notes exceeds $60,000,000 or the amount of loans, letters of credit or
commitments to make loans or issue letters of credit under the Bank Debt
Documents exceeds $15,000,000 (exclusive of the amount of premium, interest,
expenses, fees, indemnifications and similar amounts that may be incurred in
respect of such amount), such excess principal amount or excess loans, letters
of credit or commitments shall not be treated as Funded Obligations under the
Intercreditor Agreement unless the same shall be Qualifying Debt. As used in
this Section 10.4, "Financial Institution" shall mean a commercial bank
---------------------
chartered under, or duly authorized to operated a branch in the United States
under, the law of the United States or any state thereof, or an insurance
company or commercial finance company organized under the laws of any State of
the United States, in each case with capital and surplus in excess of
$100,000,000 at the time it shall become a creditor hereunder, or a separate
account administered by such an insurance company.
(b) The Trustee shall be authorized to execute amendments or supplements
to the Security Documents reasonably acceptable to the Trustee and the KPP
Companies to provide for the securing of Qualifying Debt on a pari passu basis
with the Notes, subject to and on the conditions that (i) the KPP Companies and
the holder of the Qualifying Debt shall have complied with such conditions as
the Trustee may reasonable require to assure that such Debt is Qualifying Debt
on the date so secured and (ii) the holders of such Qualifying Debt shall have
executed a written agreement agreeing to be bound by all of the terms and
conditions of the Intercreditor Agreement in the form attached thereto as
Exhibit B. Notwithstanding anything to the contrary contained in this Agreement,
any Note Purchase Document or Bank Debt Document, the Intercreditor Agreement
shall at all times provide that, to the extent (i) the Liens upon the Collateral
securing any such Qualifying Debt are or become subject or subordinate to any
claims or Liens of any other Person to which the Notes are not similarly subject
or subordinate or (ii) the Qualifying Debt, or
46
the Liens upon the Collateral securing the Qualifying Debt, shall become subject
or subordinate to claims of any other Person or defenses of any of the KPP
Companies or any other Person (including without limitation avoidability by a
trustee in any bankruptcy or insolvency proceeding) to which any of the Notes
are not subject (each an "Intervening Claim"), any amount which must be applied
against such Intervening Claim shall be deducted from the amount allocable to
such Qualifying Debt by the Trustee or any Holder pursuant to the provisions of
the Intercreditor Agreement.
SECTION 11. DEFAULTS AND REMEDIES.
---------------------
11.1 Events of Default. If one or more of the following events (each an
-----------------
"Event of Default") shall occur for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of principal of any Note when and as the same
shall become due and payable, or default in the payment of the Applicable
Premium Amount of any Note when and as the same shall become due and payable; or
(b) default in the payment of any interest upon any Note when such
interest becomes due and payable and continuance of such default for a period of
5 Business Days; or
(c) default in the performance or observance of any covenant, agreement or
condition contained in Section 8 hereof which shall not have been remedied,
waived or cured by the 30th day after the occurrence of such default; or
(d) default in the performance or observance of any covenant, agreement or
condition contained in the Notes, in the Note Agreements or in any other Note
Purchase Document (other than specified in subsections (a), (b) or (c) above)
which shall not have been remedied, waived or cured by the 30th day after the
earlier of the date on which (i) any KPP Company receives notice of such default
from a Holder or (ii) a Responsible Officer otherwise obtains knowledge of such
default; or
(e) (i) any default occurs in the payment when due of any principal,
premium or interest on the Bank Debt or any "Qualifying Debt" secured by Liens
on the Collateral and any applicable grace period thereof has expired, or (ii)
any other default or event of default occurs in respect of the Bank Debt or any
such Qualifying Debt or under any agreement relating to such obligation or
indebtedness, and any such default or event of default has not been cured or
permanently waived prior to the expiration of any applicable grace period, or
(iii) any default occurs in the payment when due of any principal, premium or
interest on any Debt of any KPP Company or any of their
47
Subsidiaries (other than the Notes and the Bank Debt or such Qualifying Debt)
which Debt exceeds $5,000,000 in the aggregate and any applicable grace period
thereof has expired, or (iv) any other default or event of default occurs in
respect of such Debt described in (e)(iii) or under any agreement relating to
such obligation or indebtedness, and any such default or event of default has
not been cured or permanently waived prior to the expiration of any applicable
grace period; or
(f) any KPP Company or any of their Subsidiaries shall file a petition
seeking relief for itself under Title 11 of the United States Code, as now
constituted or hereafter amended, or an answer consenting to, admitting the
material allegations of or otherwise not controverting, or shall fail to timely
controvert, a petition filed against such Company or Subsidiary seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended; or any KPP Company or any of their Subsidiaries shall file such a
petition or answer with respect to relief under the provisions of any other now
existing or future bankruptcy, insolvency or other similar law of the United
States of America or any State thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations or
an arrangement, composition, extension or adjustment with creditors; or
(g) a court of competent jurisdiction shall enter an order for relief
which is not stayed within 90 days from the date of entry thereof against any
KPP Company or any of their Subsidiaries under Title 11 of the United States
Code, as now constituted or hereafter amended; or there shall be entered an
order, judgment or decree by operation of law or by a court having jurisdiction
in the premises which is not stayed within 90 days from the date of entry
thereof adjudging any KPP Company or any of their Subsidiaries as bankrupt or
insolvent, or ordering relief against any KPP Company or any of their
Subsidiaries, or approving as properly filed a petition seeking relief against
any KPP Company or any of their Subsidiaries, under the provisions of any other
now existing or future bankruptcy, insolvency or other similar law of the United
States of America or any State thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations or
an arrangement, composition, extension or adjustment with creditors, or
appointing a receiver, liquidator, assignee, sequestrator, trustee, custodian or
similar official of any KPP Company or any of their Subsidiaries or of any part
of the Collateral or a substantial part of any of its other property, or
ordering the reorganization, winding-up or liquidation of its affairs; or any
involuntary petition against any KPP Company or any of their Subsidiaries
seeking any of the relief specified in this clause shall not be dismissed within
90 days of its filing; or
(h) any KPP Company or any of their Subsidiaries shall make a general
assignment for the benefit of its creditors; or any KPP Company or any of their
Subsidiaries shall consent to the
48
appointment of or taking possession by a receiver, liquidator, assignee,
sequestrator, trustee, custodian or similar official of such KPP Company or
Subsidiary or of any part of the Collateral or any substantial part of its other
property; or any KPP Company or any of their Subsidiaries shall have admitted to
its insolvency or inability to pay, or shall have failed to pay, its debts
generally as such debts become due; or any KPP Company or any of their
Subsidiaries or their directors or majority stockholders shall take any action
looking to the dissolution or liquidation of such KPP Company or Subsidiary
(other than as contemplated by Section 8.4 or Section 8.5); or
(i) there shall remain in force, undischarged, unsatisfied, unbonded and
unstayed, for more than 30 consecutive days final judgments, decrees or orders
for the payment of money in excess of an aggregate amount of $25,000,000 against
any KPP Company or any of their Subsidiaries; or
(j) (i) any KPP Company or any ERISA Affiliate shall incur any liability
in excess of $5,000,000 to a Plan or to the Internal Revenue Service or the
Pension Guaranty Benefit Corporation with respect to a Plan or (ii) a statutory
Lien shall be placed on the property of any KPP Company or any ERISA Affiliate
pursuant to ERISA which secures obligations in excess of $5,000,000; or
(k) any representation or warranty by or on behalf of the KPP Companies in
the Note Agreements, the Notes, any other Loan Document or in any certificate or
instrument furnished in connection therewith proves to have been false or
misleading in any material respect as of the date given or made;
then (i) upon the occurrence of any Event of Default described in subsections
(f), (g) or (h) of this section with respect to either KPP or STI (each a
"Bankruptcy Default"), all of the Notes shall automatically become immediately
due and payable; (ii) upon the occurrence with respect to any Note of any Event
of Default described in subsection (a) or (b), the Holder of any Note may at any
time during its continuance, by written notice to the KPP Companies, declare its
Note to be due and payable, whereupon such Note shall forthwith mature and
become due and payable; or (iii) upon the occurrence of any other Event of
Default, the Requisite Holders may at any time during its continuance, by
written notice to the KPP Companies, declare all of the Notes to be due and
payable, whereupon in each case all of the Notes shall forthwith mature and
become due and payable.
The amount payable upon the occurrence of a Bankruptcy Default shall be, to
the extent permitted by law, the entire unpaid principal amount of the Notes,
together with interest accrued thereon, and such amount shall be payable without
presentment, demand, protest or other requirement of any kind, all of which are
expressly waived by the KPP Companies and their Subsidiaries. The amount
payable upon an acceleration based on
49
any other Event of Default shall be, to the extent permitted by law, the entire
unpaid principal amount of the Notes so accelerated, the interest accrued
thereon to the date of acceleration, and the Applicable Premium Amount, and such
amount shall be payable without presentment, demand, protest or further notice,
all of which are expressly waived by the KPP Companies.
On any date on which the Requisite Holders give written notice to the KPP
Companies declaring all of the Notes to be due and payable pursuant to Section
11.1(iii), the Requisite Holders shall give written notice to the KPP Companies
and to all the other Holders of the amount of the Applicable Premium Amount of
the Notes so accelerated, which notice shall set forth in reasonable detail the
computation thereof. Within five Business Days after Requisite Holders receive
notice that any other Holder has given written notice to the KPP Companies
declaring its Note to be due and payable pursuant to Section 11.1(ii), the
Holder of such Note shall give written notice to the KPP Companies of the amount
of the Applicable Premium Amount of the Note so accelerated, which notice shall
set forth in reasonable detail the computation thereof, and the KPP Companies
shall provide written notice of such Applicable Premium Amount to the other
Holders. The Applicable Premium Amount set forth in any such notice shall be
binding on the KPP Companies and the Holders absent manifest error.
If, at any time after any or all of the Notes shall have been declared due
and payable pursuant to this Section 11.1 and before any judgment or decree for
the payment of monies due shall have been obtained or entered, the KPP Companies
shall pay in full the principal, interest and Applicable Premium Amount which
shall have become due and payable in respect of the Notes otherwise than by such
declaration, with interest upon all such overdue principal and the Applicable
Premium Amount and (to the extent that payment of such interest is enforceable
under applicable law) upon overdue interest at the Series A Overdue Rate and the
Series B Overdue Rate, as applicable, to the date of such payment, and an
additional amount sufficient to reimburse the Holders for their costs and
expenses incurred in connection with any such declaration, and the KPP Companies
shall remedy every other Event of Default, then the Requisite Holders, by
written notice to the KPP Companies, may (but shall have no obligation to)
rescind and annul such declaration and its consequences; but no such rescission
or annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.
11.2 Suits for Enforcement. Subject to the exercise by Trustee of its
---------------------
powers under the Security Documents, in case any one or more of the Events of
Default specified in Section 11.1 shall occur and be continuing, the Holder of
each Note may proceed to protect and enforce its rights by suit in equity,
action at law or by other appropriate proceeding, whether for the specific
performance (to the extent permitted by law) of any
50
covenant or agreement contained in such Note or the Note Agreements or any other
Loan Document or in aid of the exercise of any power granted therein, or may
proceed to enforce the payment of such Note or to enforce any other legal or
equitable right of such Holder. If any Holder of a Note shall demand payment
thereof or take any action in respect of a Default or an Event of Default, the
KPP Companies will forthwith give written notice to the other Holders of Notes,
specifying such action and the nature of the Default or Event of Default. The
notice to each Holder shall also set forth the respective names and addresses
of, and principal amounts of the Notes held by, the other Holders.
In case of a Default or Event of Default, the KPP Companies will pay to
each Holder such further amount as shall be sufficient to cover such Holder's
costs and expenses of collection and enforcement, including attorneys' fees, to
the extent provided in Section 13.2.
11.3 Remedies Cumulative. No remedy herein conferred upon any Holder is
-------------------
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11.4 Remedies Not Waived. No course of dealing or unwritten agreement or
-------------------
practice between the KPP Companies and any Holder shall operate as a waiver of
any right of any Holder and no delay on the part of any Holder in exercising any
right shall so operate.
11.5 Indemnity. Each KPP Company and their Subsidiaries, jointly and
---------
severally, agrees to indemnify and reimburse each Holder, upon demand, against
and for any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this section collectively called "liabilities
and costs") which to any extent (in whole or in part) may be imposed on,
incurred by, or asserted against such Holder growing out of, resulting from, or
in any other way associated with the Note Agreements, the Notes, the other Note
Purchase Documents or the transactions and events (including the enforcement or
defense thereof) at any time associated herewith or therewith or contemplated
herein or therein. THE FOREGOING INDEMNIFICATION AND REIMBURSEMENT OBLIGATIONS
OF THE KPP COMPANIES SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE
IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY SUCH HOLDER, PROVIDED THAT:
(a) Except as provided in the following subsection (b), no Holder
shall be entitled under this section to
51
receive indemnification for (i) that portion of any final judgment for
liabilities and costs which portion, determined in accordance with
principles of comparative fault, is based upon a finding that such Holder
has been grossly negligent or has engaged in willful misconduct, or (ii)
the liabilities and costs representing that portion of any out-of-court
settlement by a Holder which has been allocated by the parties to such
settlement to a claim that such Holder has been grossly negligent or has
engaged in willful misconduct.
(b) Each Holder shall be entitled under this section to receive
indemnification and reimbursement for any liabilities and costs arising
from a final judgment in favor of an Outside Party to the effect that such
Holder is somehow legally responsible (due to a theory of imputed
negligence or otherwise) for the negligence or other acts or omissions of
any KPP Company or any of their Affiliates.
(c) Each KPP Company shall (upon demand as the same are incurred)
indemnify and reimburse each Holder for all costs, expenses, and
disbursements of any kind or nature whatsoever (including reasonable fees
of attorneys, accountants, experts and advisors) which are incurred by such
Holder in defending against any claim or allegation that such Holder has
been grossly negligent or has engaged in willful misconduct. Each Holder
agrees to reimburse the KPP Companies for amounts paid to such Holder under
this Section 11.5(c) upon the determination in a final judgment that such
Holder has been grossly negligent or has engaged in willful misconduct.
(d) No Holder shall, without the consent of the KPP Companies, which
consent shall not be unreasonably withheld, enter into any out-of-court
settlement of any claim for liabilities and costs if the KPP Companies
would be obligated under this section to indemnify such Holder for amounts
paid by such Holder under such settlement. The KPP Companies will,
however, consent to any settlement proposed by such Holder which is
reasonable in light of the then existing circumstances.
As used in this section: the term "Holder" shall refer not only to each Person
who is the Holder of any Note at the time in question but also to any former
Holder of such Note (or of any predecessor Note) and to each director, officer,
agent, attorney, employee, representative and affiliate of such present or
former Holder, and the term "Outside Party" shall refer, with respect to any
Holder, to any Person other than such Holder, its owners, and the insurance or
other regulatory authorities which exercise jurisdiction over its ability to
purchase promissory notes and engage in transactions of the kind contemplated
herein.
52
SECTION 12. CONSENTS, WAIVERS AND AMENDMENTS. Any term, covenant,
--------------------------------
agreement or condition of the Notes or the Note Agreements or any other Loan
Document may, with the consent of the KPP Companies, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), but any such amendment or waiver must be made
in writing by one or more instruments signed by the Requisite Holders; provided
that:
(a) no such amendment or waiver shall, without the consent of all Holders,
(1) change the maturity of the principal of, or any installment of
interest on, any of the Notes, or reduce the principal amount thereof or
the interest thereon, or subordinate or otherwise modify the terms of
payment of the principal thereof or interest or premium thereon including
any extension of the time for, or change in the application or priority of,
any such payment, or
(2) give to any Note any preference over any other Note, or
(3) reduce the percentage of the principal amount of Notes the
Holders of which are required to approve any such amendment or effectuate
any such waiver, or
(4) except as provided in Section 10.4, amend any Guaranty or amend
any other Security Document where the effect of such amendment releases any
Collateral or adversely affects the perfection or priority of any Lien on
the Collateral, or
(5) amend or waive any of the provisions of this Section 12,
(6) amend any of the provisions of the Intercreditor Agreement, and
(b) no such waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon.
The KPP Companies will not, directly or indirectly, solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement, the Notes or other Note Purchase Documents unless
each Holder (irrespective of the amount of Notes then owned by it) shall
concurrently be informed thereof by the KPP Companies and shall be afforded the
opportunity of considering the same and shall be supplied by the KPP Companies
with sufficient information, including but not limited to the making of updated
representations and warranties comparable in scope to those set forth in Section
2, to enable it to make an informed decision with respect thereto. The KPP
Companies will not, directly or
53
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any Holder as
consideration for or as an inducement to the entering into by any Holder of any
waiver or amendment of any of the terms and provisions of this Agreement or
other Loan Document unless such remuneration is concurrently paid, on the same
terms, ratably to each Holder of then outstanding Notes. The KPP Companies will
not in connection with any solicitation, request or negotiation of any waiver or
amendment, directly or indirectly, prepay or offer to prepay (and shall
represent that they do not contemplate prepaying within the next twelve months)
any series that would not be prepaid ratably with the Notes of the other series,
and any prepayment made by the KPP Companies during the twelve months
immediately following such waiver or amendment, must be pro rata between the
Series A Notes and the Series B Notes, except for such difference in the offer
price between Series A Notes and Series B Notes which reflects only the
differences in the interest rates thereon and payment dates or maturity date
thereof and is reasonably determined.
Subject to the last sentence of this paragraph, any amendment or waiver
pursuant to this Section 12 shall apply equally to all Holders and shall be
binding upon them, upon each further Holder of any Note and upon the KPP
Companies whether or not such Note shall have been marked to indicate such
amendment or waiver. No such amendment or waiver shall extend to or affect any
obligation not expressly amended or waived or impair any right related thereto.
For purposes of determining whether the Holders of the requisite aggregate
principal amount of Notes at any time have agreed or consented to any amendment
or waiver pursuant to the provisions of this Section 12, any Notes held by any
KPP Company, any of their Subsidiaries or any Affiliate shall not be deemed
outstanding. Any consent made by a Holder that has transferred or has agreed to
transfer its Notes to a KPP Company, any of their Subsidiaries or any Affiliate
thereof and has provided or has agreed to provide such written consent as a
condition to such transfer shall be void and of no force and effect except
solely as to such Holder, and any amendments effected or waivers granted or to
be effected or granted that would not have been or would not be so effected or
granted but for such consent (and the consent of all other Holders that were
acquired under the same or similar conditions) shall be void and of no force and
effect retroactive to the date such amendment or waiver initially took or takes
effect, except solely as to such Holder.
SECTION 13. SPECIAL RIGHTS OF PURCHASER.
---------------------------
13.1 Method of Payment; Indemnity. Anything contained in the Notes to the
----------------------------
contrary notwithstanding, in the case of each Note held by you, KPOP and STI
will make all payments in respect of its Notes (including the final payment) of
principal thereof and the Applicable Premium Amount (if any) and interest
thereon by wire transfer in immediately available funds not later than
54
11:00 a.m. (local time at your address for payment specified on Schedule 1 or
Schedule 2, as appropriate), on the date each such payment is due pursuant to
the terms hereof and the terms of the Notes, to the account specified under your
name on Schedule 1 or Schedule 2, as appropriate (or in such other manner or at
such other address or account in the United States as you may from time to time
designate to the KPP Companies in writing), each such payment being accompanied
by the reference number specified on Schedule 1 or Schedule 2, as appropriate,
and by such other information as is necessary to identify the source and
application thereof, and all without any presentment or surrender of such Note
and without any notation of such payment being made thereon. You agree that in
the event you shall sell or transfer such Note you will notify the KPP Companies
of that fact and will prior to the delivery of such Note make, or cause to be
made, a notation thereon of all principal, if any, theretofore paid on such Note
and of the date to which interest has been paid on such Note. The KPP Companies
agree that, in the event that any Note held by you is lost, stolen or destroyed
and application is made, pursuant to the provisions of Section 14.3, for the
execution and delivery of a new Note in lieu thereof, an unsecured indemnity
agreement signed by you shall constitute indemnity satisfactory to the KPP
Companies.
13.2 Expenses. Whether or not the transactions contemplated herein shall
--------
be consummated, the KPP Companies shall pay all of your and the Trustee's
expenses, including out-of-pocket expenses, arising in connection therewith,
including the fees and disbursements of your special counsel and Trustee's
special counsel for all services incident to the preparation and negotiation of
the Note Agreements, the Notes, the other Note Purchase Documents and all other
documents and instruments delivered in connection therewith. The KPP Companies
shall also pay all compensation to the Trustee and any and all costs, expenses
or disbursements (including reasonable fees of attorneys, accountants, experts
and advisers) of any kind or nature whatsoever which is incurred by the Trustee
resulting from or in any other way associated with any of the Collateral, the
Note Purchase Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein. The KPP Companies shall also pay, and save you harmless from, any and
all liabilities with respect to the assignment of a private placement number
from Standard and Poor's CUSIP Service Bureau, trustee's fees and expenses,
environmental assessment charges, title charges, survey costs, filing,
registration and recording fees, mortgage recording taxes, stamp and other
taxes, duties, imposts, assessments and other charges which may be payable or
deemed to be payable in connection with the execution and delivery of this Note
Agreement, the Notes and the other Note Purchase Documents. The KPP Companies
agree, to the extent permitted by applicable law, to pay and indemnify you
against any costs and expenses, including reasonable attorneys' and accountants'
fees, incurred by you, any subsequent Holder or the Trustee in evaluating (in
55
connection with any controversy or potential controversy) and enforcing,
exercising or defending any rights or remedies under this Agreement, the Notes
and the other Note Purchase Documents or in responding to any subpoena or other
legal process issued in connection with this Agreement or the transactions
contemplated hereby or by reason of your or any subsequent Holder's having
acquired any Note, including without limitation, costs and expenses incurred in
any bankruptcy case. Without limiting the foregoing, to the extent permitted by
applicable law, the KPP Companies also will pay the reasonable fees, expenses
and disbursements of an investment bank or other firm acting as adviser (which
fees, expenses and disbursements may include, without limitation, reasonable
legal and accounting fees) to the Holders of the Notes following the occurrence
and during the continuance of a Default or an Event of Default or in connection
with any such amendment or waiver proposed in connection with any potential
Default or Event of Default or any workout, restructuring or similar
negotiations relating to this Agreement, the Notes and the other Note Purchase
Documents or any other Holder. The obligations of the KPP Companies under this
Section 13.2 shall survive the transfer of any Note or portion thereof or
interest therein by you or any subsequent Holder and the payment of any Note.
SECTION 14. REGISTRATION, TRANSFER OR EXCHANGE OF NOTES.
-------------------------------------------
14.1 Note Register. The KPP Companies shall keep at their office or
-------------
agency maintained as provided in Section 7.1 a register in which the KPP
Companies shall provide for the registration of Notes and for the registration
of transfer and exchange of Notes.
14.2 Surrender for Transfer. The Holder of each Note at its option may
----------------------
either in person or by duly authorized attorney surrender the same for
registration of transfer or exchange at such office or agency of the KPP
Companies and, without expense to such Holder (other than for transfer taxes, if
any), receive in exchange therefor a Note or Notes, each in the face amount of
at least $900,000 (or if the outstanding principal amount of a Note being so
transferred or exchanged is less than $900,000 at such time, then in the face
amount of amount then outstanding), dated as of the date to which interest has
been paid on the surrendered Note, and registered in the name of such Person or
Persons as may be designated by such Holder, for the same aggregate principal
amount as the then unpaid principal amount of such surrendered Note. Every Note
presented or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in the form of Exhibit D to this
Agreement, duly executed by the Holder of such Note or his attorney duly
authorized in writing. Every Note so made and delivered in exchange for any
surrendered Note shall in all other respects be in the same form and have the
same terms as such surrendered Note. No transfer or exchange of any Note shall
be valid unless made in the foregoing manner at such office or agency.
56
14.3 Loss, Theft, Destruction or Mutilation of Notes. Upon receipt of
-----------------------------------------------
evidence reasonably satisfactory to the KPP Companies of the loss, theft,
destruction or mutilation of any Note, and, in the case of any such loss, theft
or destruction, upon receipt of indemnity or instrument reasonably satisfactory
to the KPP Companies which may include unsecured corporate obligations in the
case of any institutional investor, or in the case of any such mutilation, upon
surrender and cancellation of the mutilated Note, the KPP Companies will make
and deliver, in lieu of such lost, stolen, destroyed or mutilated Note, a new
Note of like tenor and unpaid principal amount, dated as of the date to which
interest has been paid on such earlier Note.
14.4 Holders. Provided that the KPP Companies have complied with their
-------
obligation to register any transfer or exchange of a Note under Section 14.2,
the KPP Companies may deem and treat the Holder of each Note as the owner and
holder of such Note for the purpose of receiving payment of principal and
interest on such Note and for all other purposes whatsoever, whether or not such
Note shall be overdue.
SECTION 15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SUCCESSORS AND
----------------------------------------------------------
ASSIGNS. All covenants, agreements, representations and warranties made herein,
- -------
in the Notes, and in any documents and certificates delivered pursuant hereto
shall be deemed to have been relied upon by you, notwithstanding any
investigation heretofore or hereafter made by you or on your behalf, and shall
survive the issuance and delivery of the Notes and your purchase thereof and
payment therefor and shall continue in full force and effect so long as any Note
is outstanding and unpaid. In addition, the KPP Companies' obligations under
Sections 11.5 and 13.2 hereof shall survive the payment of the Notes. Whenever
in this Agreement either of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party, and all
covenants, agreements, representations and warranties in this Agreement
contained by or on behalf of the KPP Companies, or by or on behalf of you, shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto; provided that the KPP Companies may not assign any of their
rights under this Agreement or any other Loan Document without your written
consent.
SECTION 16. NOTICES AND OTHER COMMUNICATIONS. All notices and other
--------------------------------
communications provided for under the Note Agreements or under the Notes or the
other Note Purchase Documents shall be in writing and either delivered by
overnight delivery service with proof of delivery, or sent by facsimile
transmission, with copies delivered by overnight delivery service with proof of
delivery:
(a) if to any Holder, at its address (or addresses) specified on Schedule
1 or Schedule 2, as appropriate; and
57
(b) if to the KPP Companies, at:
2400 Lakeside Boulevard
Richardson, Texas 75082
Telecopier No.: (214) 699-1894
Attention: Edward D. Doherty
or at such other address as each party referred to in this section may hereafter
designate by like notice to the other parties. Any such notice or communication
shall be deemed to have been given (i) in the case of overnight delivery
service, as of the date of first attempted delivery at the address provided
herein, and (ii) in the case of facsimile transmission, when actually received.
SECTION 17. SEVERABILITY. If any term or provision hereof or of the Notes
------------
shall be determined to be illegal or unenforceable all other terms and
provisions hereof and of the Notes shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
SECTION 18. REFERENCES AND TITLES. All references in this Agreement to
---------------------
Exhibits, Schedules, sections, subsections and other subdivisions refer to the
Exhibits, Schedules, sections, subsections and other subdivisions of this
Agreement and the other Note Agreements unless expressly provided otherwise.
Titles appearing at the beginning of any subdivisions are for convenience only
and do not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
SECTION 19. COUNTERPARTS. This Agreement may be separately executed in
------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
SECTION 20. GOVERNING LAW. THIS AGREEMENT, THE NOTES, THE OTHER NOTE
-------------
PURCHASE DOCUMENTS, AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED IN
CONNECTION HEREWITH OR THEREWITH SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
58
NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 21. LIMITATION ON INTEREST. The Holders and the KPP Companies
----------------------
intend to contract in strict compliance with applicable usury law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained herein or in the Notes shall ever be
construed to provide for interest in excess of the maximum amount of interest
permitted to be charged by applicable law from time to time in effect. No KPP
Company nor any of their Subsidiaries nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
obligations hereunder or under the Notes shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions herein or in the Notes which may be in conflict or apparent
conflict herewith.
THIS WRITTEN NOTE AGREEMENT, THE NOTES AND THE OTHER NOTE PURCHASE
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
59
Upon your signing the form of acceptance on the enclosed counterpart of
this Agreement and returning such counterpart to the KPP Companies, this
Agreement shall become a binding agreement between you and the KPP Companies.
Very truly yours,
KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By: Kaneb Pipe Line Company, its
General Partner
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
STANTRANS, INC.
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
KANEB PIPE LINE PARTNERS, L.P
By: Kaneb Pipe Line Company, its
General Partner
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
SUPPORT TERMINAL SERVICES, INC.
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman
The foregoing agreement is
agreed to and accepted by:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ JAMES C. FIFIELD
--------------------------------
Name: JAMES C. FIFIELD
Title: Counsel
By: /s/ STEPHEN G. SKRIVANEK
--------------------------------
Name: STEPHEN G. SKRIVANEK
Title: Counsel
SUPPORT TERMINAL OPERATING
PARTNERSHIP, L.P.
By: Support Terminal Services,
Inc., its General Partner
By: /s/ Edward D. Doherty
--------------------------------
Name: Edward D. Doherty
Title:Chairman