**EXHIBIT 10.1**

 

**SALE AND PURCHASE AGREEMENT**

 

THISSALE AND PURCHASE AGREEMENT (the “Agreement”) is made and entered into as ofthe 1st day of July, 2005 (the “Effective Date”), by and among SUPPORTTERMINALS OPERATING PARTNERSHIP, L.P. (“STOP”), KANEB PIPE LINE OPERATINGPARTNERSHIP, L.P. (“KPOP”), SHORE TERMINALS LLC (“Shore”), and PACIFIC ENERGYGROUP LLC, a Delaware limited liability company (“Purchaser”).  STOP, KPOP and Shore are sometimescollectively referred to herein as “Sellers”.

 

**PRELIMINARY STATEMENT**

 

STOPowns two terminals located in Philadelphia, PA and one terminal located inPaulsboro, NJ.

 

KPOPowns a system of pipelines and terminals commonly referred to as the Kaneb WestSystem.

 

Shoreowns a terminal located in Martinez, CA and a terminal located in Richmond, CA.

 

Sellersare willing to sell, and Purchaser is willing to purchase, the Assets (definedbelow) in accordance with the terms of this Agreement.

 

NOWTHEREFORE, in consideration of the matters set forth in the PreliminaryStatement, the mutual promises and covenants herein set forth, and subject tothe terms and conditions hereof, the parties hereby agree as follows:

 

# **ARTICLE IDEFINITIONS**

# ** **

Thefollowing terms shall have the meanings set forth below for all purposes ofthis Agreement:

 

“**Affiliate**” means, with respect to a party, any individual orlegal business entity that, directly or indirectly, controls, is controlled by,or is under common control with, such party. The term “control” (including the term “controlled by”) as used in thepreceding sentence means the possession, directly or indirectly, of the powerto direct or cause the direction of management and policies.

 

“**Agreement**” means this Sale and Purchase Agreement.

 

“**Assets**” has the meaning specified in Section 2.1.

 

**“Assignment of Permits and Contracts”** has the meaning specified in Section 6.2.5.

 

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**“Assignments of Easements and Licenses”** has the meaning specified in Section 6.2.3.

 

**“Assignments of Leases”** has the meaning specified in Section 6.2.2.

 

“**Assumed Liabilities**” has the meaning specified in Section 4.2.

 

**“Bill of Sale”**has the meaning specified in Section 6.2.4.

 

**“CAG”**means the Office of the Attorney General of the State of California.

 

“**CAG Hold SeparateOrder**” has the meaning specified in Section 14.1.

 

**“California Consent Decree”**means the Consent Decree and Final Judgment filed on June 15, 2005 in TheState of California v. Valero L.P., Valero Energy Corporation, Kaneb Pipe LinePartners, L.P., and Kaneb Services LLC, Civil Action No. C-05-2419 (U.S.Dist. Ct., N.D. Cal.).

 

“**Casualty**”has the meaning specified in Section 14.3.1.

 

“**CBA**” has the meaning specified in Section 16.4.

 

**“Closing”** hasthe meaning specified in Section 6.1.

 

**“Closing Date”**has the meaning specified in Section 6.1.

 

“**Contracts**” has the meaning specified in Section 2.1.4.

 

“**CPUC**” has the meaning specified in Section 7.1.9.

 

**“Deeds”** hasthe meaning specified in Section 6.2.1.

 

**“Earnest Money L/C”** has the meaning specified in Section 3.2.

 

“**Effective Date**” has the meaning specified in the introductoryparagraph of this Agreement.

 

“**EnvironmentalClaims**” means any known, unknown, contingent or non-contingent loss,liability, claim (including tort claims, claims for personal injury, claims forproperty damage, natural resource damage claims, claims for injunctive relief,and claims for remediation activities), action, proceeding (including anynotice of non-compliance with or violation of Environmental Law), obligation(including any obligation to perform remediation activities required under EnvironmentalLaw in connection with any release of Hazardous Materials), suit, Order(including any compliance order, consent order, cleanup and abatement order andcease-and-desist order), lien, fine, penalty, damages, expense, cost and fees(including reasonable

 

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attorney and consultant feesand costs for investigation and defense) arising out of or related to aviolation of Environmental Law or a release of Hazardous Materials into theenvironment.

 

“**EnvironmentalLaws**” shall mean all applicable federal, state, and local Laws,common law, standards, prohibitions, restrictions, directives, interpretations,Orders, guidelines, permits, licenses, approvals and entitlements that relateto safety, the protection of human health and/or the environment or createrights or obligations in connection with the presence or release of HazardousMaterials.

 

“**Excluded Property**” has the meaning specified in Section 2.2.

 

“**Expenses**” has the meaning specified in Section 6.4.1.

 

**“FTC”**means the United States Federal Trade Commission.

 

“**FTC Hold SeparateOrder**” has the meaning specified in Section 14.1.

 

**“FTCOrder”** means the FTC’s proposed Decision and Order dated June 14,2005, in the matter of Valero L.P., Valero Energy Corporation, Kaneb ServicesLLC, and Kaneb Pipe Line Partners, L.P., Docket No. C-4141.

 

“**GovernmentalAuthority**” means any federal, state or local governmental authority,agency, board, commission, judicial body or other body having jurisdiction overthe matter.

 

“**HazardousMaterials**” means any substance which is listed, regulated or definedas a hazardous substance, hazardous material, toxic substance, hazardous waste,hazardous chemical, hazardous air pollutant, contaminant or pollutant under anyEnvironmental Laws.

 

“**Improvements**” has the meaning specified in Section 2.1.2.

 

“**Hold Separate Orders**”has the meaning specified in Section 14.1.

 

“**Income Taxes**” means any individual, partnership or corporateincome or franchise tax based on net income.

 

“**Indemnitee(s)**” has the meaning specified in Section 12.1.

 

“**Indemnitor(s)**” has the meaning specified in Section 12.1.

 

**“Intellectual Property”** means all patents, patent rights, trademarks, service marks, tradenames, and copyrights, and all applications for the foregoing, and all tradesecrets, know-how, inventions, research records, confidential information,product designs, engineering specifications and drawings, technical informationand other intellectual property rights.

 

“**Interim Period**” has the meaning specified in Section 14.2.

 

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“**Interim Policies**” has the meaning specified in Section 14.2.

 

**“Laws”** meansall laws, rules, regulations, statutes, ordinances, codes, plans, Orders,decrees, rulings and charges of any Governmental Authority, includingEnvironmental Laws.

 

“**Loss**” means any loss, liability, claim, action, proceeding,obligation, suit, judgment, decree, lien, fine, penalty, Tax, damages(excluding special, consequential, indirect or loss of profit damages, exceptas noted herein), expense, cost and fee. “Loss” shall include Environmental Claims and, in each instance, shallinclude all reasonable costs of investigating and defending any claim.

 

“**Obligated Party**” has the meaning specified in Section 6.4.5.

 

“**Order**” means any judgment, order, writ, injunction or decreeof any Governmental Authority having jurisdiction over the matter.

 

**“Outside Closing Date**” has the meaning specified in Section 6.1.

 

“**Permits**” means the permits, licenses, registrations, andcertificates from any Governmental Authority required to own or operate, andrelating exclusively to the operation or ownership of the Assets.

 

“**Permitted Encumbrances**” has the meaning specified in Section 11.1.

 

“**Personal Property**” has the meaning specified in Section 2.1.3.

 

“**Purchase Price**” has the meaning specified in Section 3.1.

 

“**Purchaser**” has the meaning specified in the introductoryparagraph.

 

“**Purchaser Default**” has the meaning specified in Section 19.3.

 

“**Real Property**” means all real property interests (includingleasehold, easement and right of way interests) included in the Assets.

 

**“RP Agreements”** means the leases, easements, licenses andrights of way included within the definition of “Real Property”.

 

“**Receiving Party**” has the meaning specified in Section 6.4.5.

 

“**Retained Liabilities**”has the meaning specified in Section 4.1.

 

“**Sellers**” has the meaning specified in the introductoryparagraph.

 

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“**Sellers’ Knowledge**” means the actual knowledge of any of thepersons listed on Schedule 1-S as of the date a particularrepresentation or warranty is made without any review of files or other duediligence on the part of such persons.

 

“**Sharing Party**” has the meaning specified in Section 6.4.5.

 

“**Taxes**”means any and all federal, state, local and foreign taxes, charges, fees,levies, imposts, assessments, withholdings, impositions, or other similargovernmental charges and any interest, liens, additions to tax or penaltiesthereon; provided, however that “Taxes” shall not include any of the foregoingitems which were imposed due to Environmental Claims or violation ofEnvironmental Laws.

 

**“Taking”** hasthe meaning specified in Section 14.3.1.

 

“**Third Party**” means any person, group or entity (includingany corporation, partnership or other business entity) other than anIndemnitee.

 

“**Title Company**” has the meaning specified in Section 11.2.

 

“**Title****Commitment**” hasthe meaning specified in Section 11.2.

 

“**Title Objections**” has the meaning specified in Section 11.3.1.

 

“**Title Objections Notice**” has the meaning specified in Section 11.3.1.

 

“**Transfer Taxes**” has the meaning specified in Section 6.4.3.

 

“**Transferred Employee**” has the meaning specified in Section 16.1.

 

“**Transferred Intellectual Property**” has the meaning specifiedin Section 2.1.6.

 

“**Union**” has the meaning specified in Section 16.4.

 

“**WPSC**” has the meaning specified in Section 7.1.9.

 

## **ARTICLE IISALE AND PURCHASE OF ASSETS**

## ** **

**2.1**                               **Sale of Assets**.  Onthe terms and subject to the conditions of this Agreement and for theconsideration stated herein, at the Closing, Purchaser shall purchase andreceive from Sellers, and Sellers shall sell and deliver to Purchaser, all ofSellers’ right, title and interest in and to the following properties and assets(collectively, the **“Assets”**):

 

2.1.1                        The Real Property, as more particularlydescribed in Attachment I hereto;

 

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2.1.2                        The improvements located on the RealProperty, including buildings, facilities, fixtures, aboveground andunderground storage tanks, aboveground and underground piping and relatedon-site facilities and appurtenances (the **“Improvements”**);

 

2.1.3                        All supplies, machinery, equipment, rollingstock, computers, spare parts, tools, drawings, plats, equipment manuals, operatingrecords and data, books and records, cost and pricing information, trainingmaterials and records, maintenance and inspection reports and furniture andother personal property used exclusively in the operation of the Assets ascurrently operated by Sellers (the **“Personal Property”**);

 

2.1.4                        Subject to Article XVII, all of Sellers’rights and obligations under all contracts used exclusively in the operation ofthe Assets (but excluding the RP Agreements) (the **“Contracts”**);

 

2.1.5                        Subject to Article XVII, the Permits;and

 

2.1.6                        The Intellectual Property listed on AttachmentIII (the **“Transferred Intellectual Property”**).

 

**2.2****                              ****Excluded Property****. **Notwithstanding****anything else in this Agreement, the Assets exclude thefollowing (collectively, the **“Excluded Property”**):

 

2.2.1                        Intra-company accounts and contracts of Sellersincluding, without limitation, any accounts and contracts between any Sellerand any of its Affiliates, other than the contracts set forth on Schedule 2.2.1;

 

2.2.2                        Cash or bank accounts of Sellers;

 

2.2.3                        Accounts receivable, notes receivable,employee receivables and other receivables;

 

2.2.4                        Proprietary trade names, trademarks, servicemarks, logos, trade dress, insignia, and imprints of Sellers and all signs whosepurpose is to display any of the foregoing and all forms and documents whichincorporate any of the foregoing;

 

2.2.5                        All Intellectual Property other than theTransferred Intellectual Property.

 

2.2.6                        All rights to any of Sellers’ claims (whetheror not filed) for any federal, state, local, or foreign Income Tax or Taxrefunds or carrybacks.

 

2.2.7                        Thefollowing documents:  (A) all minutebooks, tax returns, partnership documents of Sellers or any of their Affiliatesas well as other business records or related documents of Sellers or any oftheir Affiliates that are not related to the Assets; and (B) all recordsthat are (i) covered by theattorney-client privilege or work product doctrine, except to the extent suchdocuments relate to claims or litigation included in the Assumed Liabilities

 

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(provided that such documents shall be subject to a joint defenseagreement to be entered by Sellers and Purchaser before such documents areprovided), (ii) not readily severable from Sellers’ general records throughdiligent efforts, or (iii) required by applicable Law to be retained by Sellersor any of Sellers’ Affiliates in its care, custody, or control.

 

2.2.8                        All rights in connection with and assets ofany employee benefit or similar plans.

 

2.2.9                        All insurance policies and rights thereunder,except as provided in Section 14.2.

 

2.2.10                  The capital stock of any Affiliate of anySeller.

 

2.2.11                  Any other properties or assets of Sellers notspecifically described herein as being part of the “Assets.”

 

**2.3**                               **As-Is Sale****. **EXCEPT AS OTHERWISEEXPRESSLY PROVIDED IN THIS AGREEEMENT, ALL ASSETS TO BE CONVEYED HEREUNDER WILLBE CONVEYED ON AN “AS IS”, “WHERE IS”, AND “WITH ALL FAULTS” BASIS AT THECLOSING, INCLUDING ANY ENVIROMENTAL CONDITIONS, AND SELLER MAKES NO, AND HEREBYDISCLAIMS ALL, REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, STATUTORY OROTHERWISE, CONCERNING THE PHYSICAL CONDITION, UTILITY OR OPERATABILIY OF ANY OFTHE ASSETS, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OROF FITNESS FOR PARTICULAR OR ORDINARY USES OR PURPOSES.

 

PURCHASER HASINSPECTED (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED ITS RIGHT TOINSPECT), THE ASSETS FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICALAND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOTLIMITED TO, CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE, ORDISPOSAL OF HAZARDOUS MATERIALS IN, ON, OR UNDER THE ASSETS.  PURCHASER IS RELYING SOLELY UPON ITS OWN INSPECTIONOF THE ASSETS. WITHOUT LIMITATION OF THE FOREGOING, SELLER MAKES NO, AND HEREBYDISCLAIMS ANY, WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OROTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS,PROJECTIONS, INFORMATION, OR MATERIALS NOW, HERETOFORE, OR HEREAFTER FURNISHEDOR MADE AVAILABLE TO PURCHASER IN CONNECTION WITH THIS AGREEMENT OR THETRANSACTIONS CONTEMPLATED HEREBY.  ANYAND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION, AND OTHERMATERIALS (WRITTEN OR ORAL) FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE ORDISCLOSED TO PURCHASER ARE PROVIDED TO PURCHASER AS A CONVENIENCE AND SHALL NOTCREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST SELLER, AND ANY RELIANCE ONOR USE OF THE SAME SHALL BE AT PURCHASER’S SOLE RISK TO THE MAXIMUM EXTENTPERMITTED BY LAW.

 

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**2.4****                              ****Use of Names****. **Byno later than ninety (90) days after Closing, Purchaser shall remove or causeto have removed the names and marks used by Sellers and Sellers’ Affiliates(including replacement of Sellers’ and their Affiliates name and number on anyapplicable pipeline markers) and all variations and derivations thereof andlogos relating thereto from the Assets. After expiration of such time period specified above, Purchaser shallnot make any use whatsoever of those names, marks, and logos.  If Purchaser has not completed such removalwithin ninety (90) days after Closing, Sellers shall have the right, but notthe obligation, to take such steps as are required to complete such name changeand removal or cause such name change and removal to be completed and Purchasershall promptly reimburse Sellers for any costs or expenses incurred by Sellersin connection therewith.

 

**2.5****                              ****Accounts Receivable;Revenue; Expenses****.**  From and after the Closing, Purchaser willuse its commercially reasonable efforts to assist Sellers and their authorizedrepresentatives in collecting the amounts due with respect to the accountsreceivable of Sellers from use of the Assets prior to the Closing, whichefforts shall include, without limitation, commercially reasonable assistancein billing for such accounts receivable and reasonable access to customer filesand records with respect to such accounts receivable.  Purchaser agrees that it will pay to Sellerswithin thirty (30) days of receipt by Purchaser (i) any amounts receivedby Purchaser with respect to such accounts receivable, and (ii) anyrevenues attributable to the Assets prior to the month of Closing to the extentsame are paid to Purchaser.  Sellers agree that they willpromptly pay to Purchaser within thirty (30) days of receipt by Sellers anyamounts received by Seller with respect to the operation of the Assets afterthe Closing Date, including, without limitation, revenues and accountsreceivable.

 

**2.6****                              ****FTC Order****.**  The Assets described herein are consistentwith the terms “Philadelphia Area Terminals”, “San Francisco Bay Terminals” and“West Pipeline System” in the FTC Order, it being understood that nothing inthis Section 2.6 is intended to enlarge or contract the Assets to beconveyed pursuant to this Agreement.

 

## **ARTICLE IIIPURCHASE PRICE**

## ** **

**3.1**                               **Consideration**.  Thecash price to be paid by Purchaser for the transfer, sale and assignment by Sellersof the Assets is Four Hundred Fifty Five Million Dollars ($455,000,000) (subjectto adjustments as expressly provided for in this Agreement) (the **“Purchase Price”**).  Onthe Closing Date, Purchaser shall pay the Purchase Price to Sellers by wiretransfer of immediately available funds to the account designated by Sellers.If the capital projects described on Schedule 3.1 are notcompleted before the Closing, then thePurchase Price shall be reduced by the budgeted amount remaining to be paid tocomplete such capital projects.

 

**3.2****                               EarnestMoney L/C. **Within one businessday after the Effective Date, Purchasershall deliver to Sellers an irrevocable stand-by letter of credit drawnon a bank acceptable to Sellers and in form and substance satisfactory toSellers, in the amount of Five Percent(5%) of the Purchase Price (the **“Earnest Money L/C”**) asconsideration for Seller’s entry into this Agreement.  The Earnest Money L/C shall providethat it may be drawn upon by

 

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Sellers upon Sellers’certification to the issuing bank of a Purchaser Default under thisAgreement.  In the event the Closing occurs, Sellersshall return the Earnest Money L/C to Purchaser as a condition to payment of thePurchase Price.  In the event the Closingdoes not occur by the Outside Closing Date and the failure to close is not theresult of a Purchaser Default hereunder, then Sellers shall return the EarnestMoney L/C to Purchaser on the third business day following the Outside ClosingDate.  If the Closing does not occur bythe Outside Closing Date and the failure to close is the result of Purchaser Defaulthereunder, then Sellers shall be entitled to draw the full amount of theEarnest Money L/C in accordance with Section 19.3.

 

**3.3**                               **Allocation of Purchase Price**.  Sellersand Purchaser agree that subsequent to the execution of this Agreement theywill discuss the proper allocation for purposes of IRS Form 8594 ofamounts paid in connection with the transactions contemplated hereunder.   If the parties are able to reach anagreement, it shall be attached hereto as Attachment IV, and the partiesshall file IRS Forms 8594 consistently with the terms of such Attachment IV.  If the parties are not able to reach anagreement, each party shall make such filings as are required of it underapplicable tax laws applying the requirements of Section 1060 of the Codein its own discretion.  The parties agreethat they shall promptly advise each other regarding the existence of any taxaudit, controversy or litigation related to such allocation, and, upon requestfrom the other party, shall from time to time provide further informationconcerning the tax positions being asserted by the Internal Revenue Serviceand, if any settlement of the issue is reached, the amount(s) so determined.

 

## **ARTICLE IVRETAINED LIABILITIES; ASSUMED LIABILITIES; PURCHASER’S RELEASE**

## ** **

**4.1****                              ****Sellers’ Retained Liabilities**.  Sellersshall retain only the following liabilities (the **“RetainedLiabilities”**):

 

4.1.1                        except for certain multiemployer plan withdrawal liability expresslyassumed by Purchaser as provided in Section 4.2 below, all liabilities andobligations for: (i) salary, wages and benefits for any current or formeremployees of Sellers and their Affiliates pertaining to their employment by Sellersat or in connection with the Assets (including liabilities to thePension Benefit Guaranty Corporation or to any plan, including a multiemployerplan, under Title IV of the Employee Retirement Income Security Act of 1974, asamended arising, in whole or in part, out of events or conduct that occurred onor prior to the Closing, including but not limited to any liability that istriggered by the closing of the transactions contemplated by this Agreement), and (ii) any violations of law bySellers relating to the hiring, employment or termination of employment of anycurrent or former employees of Sellers pertaining to their employment by Sellersat the Assets;

 

4.1.2                        all costs for property furnished or services rendered to or for thebenefit of the Assets on or before the Closing Date, and all indebtedness forborrowed money and related liens;

 

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4.1.3                        any (1) liability of Sellers and theirAffiliates for Income Taxes and (2) liability of Sellers for Taxes arisingduring, or relating to, any period (or portion thereof) ended on or before theClosing Date; provided, however, that Purchaser shall assume those Taxes setforth in Sections 6.4.2 and 6.4.3; and

 

4.1.4                        all liabilities and obligations arising out of any of the ExcludedProperty.

 

**4.2**                               **Purchaser’s Assumed Obligations**.  Exceptfor the Retained Liabilities, Purchaser shall assume, and pay, perform anddischarge when due, all liabilities and obligations relating to the Assets,whether arising before or after the Closing, whether known or unknown, includingall Environmental Claims relating to the pre- and post-Closing ownership oroperation of the Assets, and including any withdrawal liability under anymultiemployer plan which is triggered by an action or event after the Closing (the**“Assumed Liabilities”**).

 

**4.3**                               **Purchaser’s Release**.  Effective as of the Closing, Purchaser herebyunconditionally releases and discharges Sellers, Sellers’ Affiliates, and the partners,employees, officers and directors of Sellers and Sellers’ Affiliates, from all ofthe Assumed Liabilities, which include all environmental liabilities (includingall Environmental Claims) relating to or arisingout of the Assets, whether existing or asserted before or after the ClosingDate,  whether based on past, present orfuture conditions or events, whether or not known to Purchaser on the ClosingDate and wherever located.  This releaseincludes, but is not limited to, any environmental liabilities under theComprehensive Environmental Response, Compensation and Liability Act of 1980,as amended, the Resource Conservation and Recovery Act of 1976, as amended, thefederal Clean Air Act, as amended, and other Environmental Laws, and environmentalliabilities for injury, death, destruction, loss or damage to the personor property of Purchaser and its employees arising out (i) theenvironmental condition of the Assets, and (ii) the existence of HazardousMaterials at the Assets.

 

In connection with this release, Purchaser hereby expresslywaives the benefits of any statute limiting the waiver of unknown claims,including Section 1542 of the California Civil Code which reads asfollows:

 

“A general release does not extend to claims which the creditor doesnot know or suspect to exist in his favor at the time of executing the releasewhich if known to him must have materially affected his settlement with thedebtor.”

 

For the avoidance of doubt,nothing in Sections 4.2 or 4.3 are intended to deprive Purchaser of its rightsagainst Sellers under Sections 6.4 or 12.1 (as limited by Section 12.3).

 

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**ARTICLE VRELATED AGREEMENTS**

 

At the Closing, Sellers and Purchaser shallenter into the following agreement:

 

5.1                                 Transition Services Agreement substantiallyin the form of Exhibit A.

 

## **ARTICLE VICLOSING**

## ** **

**6.1****                              ****Time and Place**.** **The closing of the transactioncontemplated hereby (the **“Closing”**)shall be held at Seller’s offices in San Antonio, Texas, on or before the daywhich is the tenth business day to occur following the satisfaction or waiverof the conditions set forth in Article VII unless another time, place ordate is agreed to in writing by the parties hereto (the day of the Closingbeing referred to herein as the **“Closing Date”**). If the Closing does not occur by December 15,2005 (the **“Outside Closing Date”**), a party that isnot then in material default under this Agreement may, by written notice to theother party, terminate this Agreement without further obligation to the otherparty, and if Purchaser is not then in material default under this Agreement,Seller shall return the Earnest Money L/C to Purchaser within 3 businessdays after giving or receiving notice of termination pursuant to this Section 6.1.

 

**6.2**                               **Sellers’ Deliveries**.  Atthe Closing, Sellers shall do the following:

 

6.2.1                        deliver to the Title Company special warrantydeeds for Seller’s right, title and interest to the fee-owned portions of the RealProperty, subject to the Permitted Encumbrances, in the forms attached as Exhibit B(**“Deeds”**), executed and acknowledged by Sellers,which documents shall also be executed and acknowledged by Purchaser;

 

6.2.2                        deliver to the Title Company assignments of leasesfor the leased portions of the Real Property, in the forms attached as Exhibit C(**“Assignments of Leases”**), executed andacknowledged by Sellers, which documents shall also be executed andacknowledged by Purchaser;

 

6.2.3                        deliver to the Title Company assignments of easementsand licenses for the easement and license portions of the Real Property, in theforms attached as Exhibit D (**“Assignments of Easementsand Licenses”**), executed and acknowledged by Sellers, whichdocuments shall also be executed and acknowledged by Purchaser;

 

6.2.4                        deliver to Purchaser a bill of sale for thePersonal Property, in the form attached as Exhibit E (**“Bill of Sale”**), executed by Sellers, which document shallalso be executed by Purchaser;

 

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6.2.5                        deliver to Purchaser an assignment of Permitsand Contracts, in the form attached as Exhibit F (**“Assignment of Permits and Contracts”**), executed by Sellers,which document shall also be executed by Purchaser;

 

6.2.6                        deliver to Purchaser possession of the Assets,subject to the Permitted Encumbrances;

 

6.2.7                        deliver to Purchaser counterparts executed bySellers of those agreements required by the provisions of Article V;

 

6.2.8                        deliver to Purchaser certified copies of eachSeller’s duly executed organizational documents or governing instruments, andcertified copies of appropriatepartnership or limited liability company action by Sellers authorizing thetransactions contemplated by this Agreement and authorizing the person(s)executing the documents referenced in this Section 6.2 to enter into thisAgreement and such other documents on behalf of Sellers;

 

6.2.9                        deliver to Purchaser a certificate that therepresentations and warranties made by Sellers in this Agreement are true andcorrect in all material respects as of the Closing Date, as though made at andas of the Closing Date;

 

6.2.10                  deliver to Purchaser a certificate of non-foreignstatus substantially in the form attached as Exhibit G and aCalifornia Form 597W, in the form attached as Exhibit H,executed by Sellers; and

 

6.2.11                  deliver to the Title Company such affidavitsand certificates as the Title Company shall reasonably require; provided,however, that such affidavits and certificates do not require any increase inthe liability of Sellers under this Agreement.

 

**6.3****                              ****Purchaser’s Deliveries**.  Atthe Closing, Purchaser shall do the following:

 

                                                                                                6.3.1                        pay the Purchase Price to Sellers in accordance with Section 3.1,and reimburse Sellers for sales tax as provided in Section 6.4.2;

 

6.3.2                        deliver to Sellers counterparts executed byPurchaser of all those agreements required by the provisions of Article V;

 

6.3.3                        deliver to Sellers an assumption of all AssumedLiabilities in the form of Exhibit I;

 

6.3.4                        deliver to Sellers certified copies ofappropriate partnership action by Purchaser authorizing the transactionscontemplated by this Agreement and authorizing the person(s) executing thedocuments referenced in this Section 6.3 to enter into this Agreement andsuch other documents on behalf of Purchaser;

 

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6.3.5                        deliver to Sellers a certificate that therepresentations and warranties made by Purchaser in this Agreement are true andcorrect in all material respects as of the Closing Date, as though made at andas of the Closing Date; and

 

6.3.6                        deliver to Sellers counterparts of thedocuments identified in Section 6.2, executed (and acknowledged whererequired) by Purchaser.

 

**6.4****                              ****Apportionment of Taxes andUtilities**.

 

6.4.1                        The following items relating to the Assets: (i) generalreal estate ad valorem taxes for the then current fiscal year, (ii) personalproperty taxes, (iii) charges for utilities or municipal charges, and (iv) otherprepaid expenses related to the Assets and their operations (collectively, **“Expenses”**), shall be prorated as of the Closing Date andshall be adjusted at the Closing. Subject to such pro-ration, Sellers shall pay all Expenses assessedagainst the Assets for periods on or before the Closing Date; *provided, however*, that if any Expenses are payable ininstallments, Sellers shall be responsible for paying only those installmentsthat relate to periods on or before the Closing Date.  Subject to such pro-ration, Purchaser shallpay all Expenses assessed against the Assets for all periods after the ClosingDate.

 

6.4.2                        Sellers (i) shall collect from Purchaserat Closing sales tax reimbursement in such amount (which shall be in additionto the Purchase Price provided for herein) as is determined by applying theapplicable sales tax rate to the taxable value of the personal property includedwithin the Assets, and (ii) shall pay such sales tax reimbursement to theapplicable Governmental Authority in accordance with applicable legalrequirements. 

 

6.4.3                        Purchaser shall pay and assume all liabilityfor the sales tax, documentary transfer tax, real property filing fees, and anyother similar Taxes (other than Income Taxes) (collectively, **“Transfer Taxes”**), whether imposed on Sellers or Purchaser,and whether paid with a return or imposed by a Governmental Authority uponaudit, arising from the transfer of Assets contemplated by this Agreement.

 

6.4.4                        If any of the Expenses to be apportioned in Section 6.4.1are not readily determinable as of the time of Closing, such apportionmentsshall, to the extent necessary, be based on the parties’ reasonable estimatethereof.  The parties shall cooperatewith each other in making the calculations upon which any Expenses are to beallocated in favor of Sellers or Purchaser, as the case may be.  Such apportionments made on the basis ofestimates shall be recalculated as soon as possible after the availability ofrequired information, but in any event within one (1) year of the time ofdelivery of this Agreement, and any overpayments or underpayments due a partyshall be adjusted by suitable payments from the applicable party.

 

6.4.5                        After the Closing Date, if either Purchaseror Sellers (as applicable, the **“Receiving Party”**)receives a bill for Expenses that covers periods both before and after theClosing Date, the Receiving Party shall pay such bill and invoice the otherparty (the **“Sharing Party”**) for the portionof the Expenses payable by such other party in accordance with the principlesof proration set forth in Section 6.4.1, in which event the Sharing Partyshall promptly

 

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reimbursethe Receiving Party upon receipt of such invoice.  After the Closing Date, if a Receiving Partyreceives a bill for Expenses that covers only a period for which the ReceivingParty is not responsible under the terms of this Agreement, then the ReceivingParty shall forward the bill to the party who is responsible for such Expensesin accordance with the terms of this Agreement (the **“ObligatedParty”**) for payment directly by the Obligated Party.  The Obligated Party shall pay such bill intimely fashion (except to the extent that it is being protested through properprocedures and the Obligated Party uses reasonable best efforts to cause thegovernmental authority or other person issuing such bill to correct the name onthe account).

 

6.4.6                        Any refunds received in respect of Expensesapportioned pursuant to this Section shall be paid to the party to whomsuch Expenses are apportioned pursuant to this Section if received fromthe payor by another party.

 

6.4.7                        Sellers and Purchaser will provide each otherwith such cooperation and information as each may reasonably request of theother with regard to the preparation and filing of returns, or the conduct ofan audit or other proceeding in respect of Taxes.

 

**6.5****                              ****Lease Payments**.  Ator prior to the Closing, Sellers shall pay or cause to be paid all rentalpayments for the period from June 1, 1998 through December 31, 2004,under that certain Contra Costa County Submerged Lands General Lease (Lease No. PRC4769.1)(such payments being at the annual rate of Seventy Nine Thousand ThreeHundred Seventy Dollars ($79,370) for a total of Five Hundred Twenty TwoThousand Two Hundred Fifty Five Dollars ($522,255) for the period), less theactual annual rental payments made during such period and the cash bond ofFifty Thousand Dollars ($50,000) being held by the State of California underthe existing “hold-over” lease.

 

## **ARTICLE VIICONDITIONS PRECEDENT TO CLOSING**

## ** **

Subject to the terms hereof, the obligationsof Sellers and Purchaser at the Closing are subject to the satisfaction orwaiver at or prior to the Closing of each of the respective conditions setforth below.

 

**7.1****                              ****Conditions to Purchaser’sObligations**.  The obligations of Purchaser at the Closingare subject to the following conditions:

 

7.1.1                  Sellers shall have performed (a) in allmaterial respects those covenants required by this Agreement to be performed byit at or prior to the Closing that are not qualified by materiality, and (b) inall respects those covenants required by this Agreement that are qualified bymateriality to be performed by it at or prior to the Closing;

 

7.1.2                  Sellers shall have delivered to Purchaser allagreements, instruments, certificates and documents required to be so deliveredunder this Agreement, including those listed in Section 6.2;

 

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7.1.3                  There shall not be in effect any Orderbarring the consummation of the transactions contemplated by this Agreement;

 

7.1.4                  The FTC and theCAG shall have approved the transaction contemplated by this Agreement and thePurchaser as required by the FTC Order and the California Consent Decree inaccordance with Section 19.1;

 

7.1.5                  Purchaser shall have received the TitleCommitments described in Section 11.2 of this Agreement;

 

7.1.6                  Any Title Objections shall have been resolvedin accordance with the provisions of Section 11.3 of this Agreement;

 

7.1.7                  Sellers’ representations andwarranties set forth in Article VIII shall be true and correct in allmaterial respects on and as if made on the Closing Date;

 

7.1.8                  The transactions contemplated by thefollowing two agreements have been consummated: (i) the Agreement and Plan of Merger dated as of October 31,2004, by and among Valero L.P., Riverwalk Logistics, L.P., Valero GP, LLC, VLISub A LLC, and Kaneb Services LLC; and (ii) the Agreement and Plan ofMerger dated as of October 31, 2004, by and among Valero L.P., RiverwalkLogistics, L.P., Valero GP, LLC, VLI Sub B LLC, Kaneb Pipe Line Partners L.P.,and Kaneb Pipe Line Company LLC; and

 

7.1.9                  The Colorado Public UtilitiesCommission (the **“CPUC”**) and theWyoming Public Service Commission (the **“WPSC”**)shall have approved the transaction contemplated by this Agreement.

 

**7.2**                               **Conditions to Sellers’Obligations**.  The obligations of Sellers at the Closing aresubject to the following conditions:

 

7.2.1                        Purchaser shall have performed (a) in all material respects thosecovenants required by this Agreement to be performed by it at or prior to theClosing that are not qualified by materiality, and (b) in all respectsthose covenants required by this Agreement to be performed by it at or prior tothe Closing that are qualified by materiality;

 

7.2.2                        Purchaser shall have delivered to Sellers the Purchase Price and allagreements, instruments, certificates and documents required to be so deliveredunder this Agreement or such other agreements or instruments, including thoselisted in Section 6.3;

 

7.2.3                        There shall not be in effect any Orderbarring the consummation of the transactions contemplated by this Agreement;

 

7.2.4                        The FTCand the CAG shall have approved the transaction contemplated by this Agreementand the Purchaser as required by the FTC Order and the California ConsentDecree in accordance with Section 19.1;

 

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7.2.5                        Purchaser’s representations andwarranties set forth in Article VIII shall be true and correct in allmaterial respects on and as if made on the Closing Date;

 

7.2.6                        The transactions contemplated by the followingtwo agreements have been consummated:  (i) theAgreement and Plan of Merger dated as of October 31, 2004, by and amongValero L.P., Riverwalk Logistics, L.P., Valero GP, LLC, VLI Sub A LLC, andKaneb Services LLC; and (ii)  the Agreement and Plan of Merger dated as ofOctober 31, 2004, by and among Valero L.P., Riverwalk Logistics, L.P.,Valero GP, LLC, VLI Sub B LLC, Kaneb Pipe Line Partners L.P., and Kaneb PipeLine Company LLC; and

 

7.2.7                        TheCPUC and the WPSC shall have approved the transaction contemplated by thisAgreement.

 

## **ARTICLE VIIISELLERS’ REPRESENTATIONS AND WARRANTIES**

## ** **

Sellers hereby warrant andrepresent to Purchaser that, except as set forth on the schedules attachedhereto:

 

**8.1****                              ****Organization**.  STOPis a limited partnership duly organized, validly existing and in good standingunder the laws of the State of Delaware and is in good standing and dulyqualified to do business in each state in which the character of the Assets orthe nature of its business relating to the Assets requires it to be soqualified, except for states as to which the failure to be so qualified or ingood standing would not have a material adverse affect on the Assets.  KPOP is a limited partnership duly organized,validly existing and in good standing under the laws of the State of Delawareand is in good standing and is duly qualified to do business in each state inwhich the character of the Assets or the nature of its business relating to theAssets requires it to be soqualified, except for states as to which the failure to be so qualified or ingood standing would not have a material adverse affect on the Assets.  Shore is a limited liability company dulyorganized, validly existing and in good standing under the laws of the State ofDelaware and is in good standing and is duly qualified to do business in eachstate in which the character of the Assets or the nature of its businessrelating to the Assets requires it to be so qualified, except for states as towhich the failure to be so qualified or in good standing would not have amaterial adverse affect on the Assets.

 

**8.2****                              ****Authority; Enforceability**. Sellers have the partnership or limited liability company (asapplicable) power and authority to execute and deliver this Agreement and eachagreement and instrument delivered or to be delivered by Sellers pursuanthereto, and to carry out its obligations hereunder and thereunder.  The execution, delivery and performance ofthis Agreement and each agreement and instrument delivered or to be deliveredpursuant hereto by Sellers, and the consummation of the transactions providedfor hereby and thereby, have been duly authorized and approved by all requisitepartnership or limited liability company (as 

 

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applicable)action of Sellers and no other act or proceeding on the part of Sellers or theirAffiliates is necessary to authorize the execution, delivery or performance ofthis Agreement or of such other agreements and instruments, or the transactionscontemplated hereby or thereby; and each of this Agreement and such agreementsand instruments is, or upon its execution and delivery will be,  legal, valid, binding and enforceable againstSellers in accordance with its respective terms, subject to the effects ofbankruptcy, insolvency, reorganization, moratorium, and other laws of generalapplication relating to creditors’ rights and equitable remedies.

 

**8.3****                              ****No Breach**.  Theexecution and delivery of this Agreement and each agreement and instrumentdelivered or to be delivered pursuant hereto by Sellers, and the consummationof the transactions provided for hereby and thereby and the compliance by Sellerswith any of the provisions hereof or thereof does not and will not violate, orconflict with, or result in a breach of, any provisions of the constituentdocuments of Sellers.

 

**8.4****                              ****Actions and Proceedings**.  Thereis no legal action pending, or, to Sellers’ Knowledge, threatened, againstSellers or any of their Affiliates involving the ownership or operation of anyof the Assets that would be material to the Assets, and Sellers have notreceived written notice from any applicable Governmental Authority of anypending or threatened condemnation against all or any material part of the RealProperty.

 

**8.5****                              ****Brokers**.  Allnegotiations relating to this Agreement, the agreements and instrumentsdelivered pursuant hereto, and the transactions contemplated hereby and therebyhave been carried on without the intervention of any person acting on behalf ofSellers or their Affiliates in such manner as to give rise to any valid claimagainst Purchaser for any broker’s or finder’s fee or similar compensation inconnection with the transactions contemplated hereby or thereby.

 

**8.6****                              ****Compliance with Laws; Permits**.

 

8.6.1                        To Sellers’ Knowledge, Sellers are inmaterial compliance with all applicable Laws in connection with the ownershipand operation of the Assets and, to Sellers’ Knowledge, except as has alreadybeen disclosed to Purchaser or is known by Purchaser, no event has occurred orcondition exists on the Assets that would constitute a violation of or requireany remediation or clean up under any Environmental Law as the Assets arecurrently operated by Sellers; Sellershave provided Purchaser with copies of all material excess emissions reportsand Title V compliance certifications for the past five (5) years for allterminals included in the Assets; and

 

8.6.2                        Attachment II lists all material Permits currently held bySellers with respect to the Assets.

 

**8.7****                              ****Employee Matters**.

 

8.7.1                        Other than the CBA, Sellers are not party toany collective bargaining agreement or similar agreement with respect toemployees of Sellers employed at the Assets; and

 

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8.7.2                        There is no labor strike, slowdown, work stoppage orlockout in effect or, to Sellers’ Knowledge, threatened against or otherwiseaffecting the employees of Sellers involved in the operations at the Assets.

 

**8.8**                               **Material Contracts; Notice of Defaults**. All contracts (but specificallyexcluding any RP Agreements) that are material to the ownership or operation ofthe Assets or that would impose a material obligation or liability on Purchaserare set forth on Schedule 8.8. To Sellers’ Knowledge, there is no existing material default under, orevent or circumstance which with notice or lapse of time would give rise to amaterial default on the part of Sellers or any other party under, any of thematerial contracts (but specifically excluding any RP Agreements).  No Seller has received written notice of anycontinuing or uncured default on the part of such Seller with respect to anymaterial contract (but specifically excluding any RP Agreements), which defaultor defaults would, singly or in the aggregate, materially adversely affect theownership, operation or value of such Seller’s interest in any of the Assets.

 

## **ARTICLE IXPURCHASER’S REPRESENTATIONS AND WARRANTIES**

## ** **

Purchaser hereby warrantsand represents to Sellers that:

 

**9.1**                               **Organization**. Purchaser is a limited liability company duly organized, validlyexisting and in good standing under the laws of the State of Delaware.

 

**9.2**                               **Authority; Enforceability**. Purchaser has the partnership power and authority to execute and deliverthis Agreement and each agreement and instrument delivered or to be deliveredby Purchaser pursuant hereto, and to carry out its obligations hereunder andthereunder.  The execution, delivery andperformance of this Agreement and each agreement and instrument delivered or tobe delivered pursuant hereto by Purchaser, and the consummation of thetransactions provided for hereby and thereby, have been duly authorized andapproved by all requisite partnership action of Purchaser, and no other act orproceeding on the part of Purchaser or its Affiliates is necessary to authorizethe execution, delivery or performance of this Agreement or of such otheragreements and instruments, or of the transactions contemplated hereby orthereby; and each of this Agreement and such agreements and instruments is, orupon its execution and delivery will be, legal, valid, binding and enforceableagainst Purchaser in accordance with its respective terms, subject to theeffects of bankruptcy, insolvency, reorganization, moratorium, and other lawsof general application relating to creditor’s rights and equitable remedies.

 

**9.3**                               **No Breach**.  Theexecution and delivery of this Agreement and each agreement and instrumentdelivered or to be delivered pursuant hereto by Purchaser, and the consummationof the transactions provided for hereby and thereby and the compliance byPurchaser with any of the provisions hereof or thereof does not and will notviolate, or conflict with, or result in a breach of, any provisions of theconstituent documents of Purchaser.

 

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**9.4**                               **Brokers**.  Allnegotiations relating to this Agreement, the agreements and instrumentsdelivered pursuant hereto, and the transactions contemplated hereby and therebyhave been carried on without the intervention of any person acting on behalf ofPurchaser or its Affiliates in such manner as to give rise to any valid claimagainst Sellers for any broker’s or finder’s fee or similar compensation inconnection with the transactions contemplated hereby or thereby.

 

**9.5**                               **Financing**. Purchaser has obtained a financing commitment for, and will haveavailable to it at the Closing immediately available funds necessary toconsummate, the transactions contemplated by this Agreement.

 

**ARTICLE X**

** **

**CHANGES IN REPRESENTATIONS ANDWARRANTIES**

** **

If either Sellers or Purchaser discovers on or before the Closing thatany representation or warranty made by it was or becomes not true and correctin any material respect, it shall so notify the other party in writing.  The representations and warranties made inthis Agreement shall be deemed to be modified by any matter contained in suchnotice.  In the case of any such changein the representations or warranties by Sellers, if the cumulative changes somade would adversely affect the fair market value of the Assets by 0.5% or moreof the Purchase Price, Purchaser may object thereto by written notice toSellers within ten days after receipt of the notice.  If such objection notice is not given withinthe ten day period, or the cumulative changes do not have such adverseeffect, then such change shall not give rise to any right or remedy.  If such objection notice is timely given andthe effect of the cumulative changes on the fair market value of the Assetsexceeds such amount, and Sellers determine that they cannot cure such adverseeffect prior to the Closing by using commercially reasonable efforts, then theparties shall negotiate in good faith a reduction of the Purchase Price tofairly reflect the impact of the change on the fair market value of the Assets.  In the event that the parties are unable toagree on a reduction of the Purchase Price prior to the Closing, then theparties agree to submit the matter to binding arbitration under the CommercialArbitration Rules of the American Arbitration Association for resolutionafter the Closing.

 

## **ARTICLE XI**

## ** **

## **TITLE MATTERS**

## ** **

## **11.1**                        Definition of Permitted Encumbrances.  As used herein, the term “Permitted Encumbrances” means any or all of thefollowing:

## ** **

## **11.1.1**                  All liens and encumbrancesthat will be released at Closing.

## ** **

11.1.2                  Liens for current Taxes orassessments not yet due or delinquent on the Closing Date or, if delinquent,that are being contested in good faith in the ordinary course of business;

 

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11.1.3                  Materialmen’s, mechanic’s, repairman’s,employee’s, contractor’s, operator’s and other similar liens or charges arisingin the ordinary course of business for amounts not yet delinquent;

 

11.1.4.               All rights to consent by, requirednotices to, filings with, or other actions by governmental agencies inconnection with the sale or conveyance of the Real Property if the same arecustomarily obtained subsequent to such sale or conveyance;

 

11.1.5                  Easements, rights of way, servitudes,covenants, conditions, restrictions, reservations and other rights on, over orwith respect to any of the Real Property which do not materially interfere withthe current use or operations on the properties; and

 

11.1.6                  Any encumbrances which do not,individually or in the aggregate, materially interfere with the current use orownership of the Real Property subject thereto or affected thereby.

 

**11.2****                       ****Title Commitments**. Sellers have caused or shall cause Fidelity National Title InsuranceCompany (**“Title Company”**), whose address isFidelity National Title Insurance Company – National Title Services, 1900 WestLoop South, Suite 650, Houston, Texas, 77027, Attn: Rhonda Obaugh, toissue standard commitments for title insurance (**“TitleCommitments”**) for the fee-owned portions of those tracts of RealProperty listed on Attachment V.  TheTitle Commitments shall commit the Title Company to issue to Purchaser an ownertitle insurance policy on the basic form of policy then commonly in use by theTitle Company in the applicable state.  Sellershall pay the basic premium for such policies in the amounts listed on AttachmentV.  If Purchaser requires: (a) any “comprehensive,”“extended coverage” or similar endorsement (if available), (b) thedeletion of any exception from the policies, or (c) the issuance of anyother endorsements to the policies, any additional premium charged thereforshall be borne by Purchaser. Sellers shall be under no obligation to make anyadditional payments, assume any additional liabilities or take any additionalactions beyond those required in this Agreement in order to facilitate theissuance of any endorsements or the making of any modifications to thepolicies.  The issuance of any such endorsements ordeletions shall not be a condition to Closing.

 

**11.3**                        **Title Objections.**

 

11.3.1                  Within fifteen (15) days afterreceiving the Title Commitments, but in no event earlier than ten (10) daysafter the Effective Date of this Agreement, Purchaser shall notify Sellers inwriting of any encumbrance or defect to the fee-owned portions of the RealProperty listed on Attachment V (excluding Permitted Encumbrances) that,in Purchaser’s judgment, are unacceptable (the **“TitleObjections”**). Purchaser may not object to any PermittedEncumbrances.  The notice of Purchaser’sTitle Objections (the **“Title Objections Notice”**)shall include (i) a description of the alleged Title Objections, and (ii) theReal Property affected.

 

11.3.2                  Seller shall elect, in its solediscretion, to do one of the following with regard to such TitleObjections:  (i) cause such encumbranceor defect to be removed, (ii)

 

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indemnify the Title Company against liability from such Title Objectionso that the Title Company insures around such encumbrance or defect, or (iii) indemnifythe Purchaser against any Losses arising from such Title Objection.  Sellers shall notify Purchaser of theirelection at least five days prior to Closing.

 

11.3.3                  Purchaser’s sole and exclusive remedywith regard to objections regarding the state of title of the Real Propertyshall be the procedure set forth in this Article XI.  Purchaser’s sole and exclusive remedy for anyTitle Objections shall be the remedy set forth in Section 11.3.2 above.

 

## **ARTICLE XII**

## ** **

## **INDEMNIFICATION**

## ** **

**12.1****                       ****Indemnification Obligations**.** **Sellers and Purchaser (**“Indemnitor(s)”**) each shall release, defend, indemnify andhold harmless the other and its or their Affiliates, as well as the partners, officers,directors and employees of any of them (**“Indemnitee(s)”**),from and against each and every Loss, which results from, arises out of or isattributable in any way to any of the following:

 

12.1.1                  any liability or obligation expressly assumedor retained by the Indemnitor pursuant to this Agreement;

 

12.1.2                  any breach of a representation or warranty madeby the Indemnitor in this Agreement or in documents delivered by the Indemnitorat the Closing; or

 

12.1.3any breach of the obligations, covenants or agreements made by the Indemnitorin this Agreement or in documents delivered by the Indemnitor at the Closing.

 

**12.2****                       ****Procedures**.

 

12.2.1                  In the event that any officer or registeredagent of Indemnitee receives actual notice of any written claim by a ThirdParty giving rise to a right of indemnification of such Indemnitee hereunder,the Indemnitee shall, within sixty (60) days after receipt of such notice, givewritten notice thereof to the Indemnitor setting forth the facts andcircumstances giving rise to such claim for indemnification and shall tenderthe defense of such claim to the Indemnitor. If the Indemnitee fails to give such notice and tender such defensewithin such 60-day period, the Indemnitee shall be solely responsible for anyLoss with respect to such claim to the extent the Loss is attributable to suchfailure; but failure to give such notice and tender such defense within such 60-dayperiod shall not result in a forfeiture or waiver of any rights toindemnification for any Loss with respect to such claim to the extent the Lossis not attributable to such failure.

 

12.2.2                  The Indemnitor shall be solely responsiblefor selecting the attorneys to defend any matter subject to indemnificationand/or taking all actions necessary or appropriate to

 

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resolve,defend, and/or settle such matters, and shall be entitled to contest, on itsown behalf and on the Indemnitee’s behalf, the existence or amount of anyobligation, cost, expense, debt or liability giving rise to such claim.  The Indemnitor shall keep the Indemniteefully and timely informed as to actions taken on such matters.  The Indemnitee shall cooperate fully with theIndemnitor and its counsel and shall provide them reasonable access to theIndemnitee’s employees, consultants, agents, attorneys, accountants, and filesto the extent necessary or appropriate to defend or resolve the matter, theIndemnitor reimbursing the Indemnitee with respect to the cost of any suchaccess.  The Indemnitee shall have theright, but not the duty, to participate with attorneys of its own choosing, atits own expense, in the defense of any Loss for which the Indemnitor isobligated to defend and indemnify it, and to approve any settlement thataffects it, without relieving the Indemnitor of any obligations hereunder.

 

**12.3****                       ****Certain Limitations**. Notwithstanding anything to the contrary in this Article XIIor elsewhere in this Agreement, the Indemnitor shall not have any obligationwith respect to Losses subject to indemnification by the Indemnitor hereunderas a result of a breach(es) of the representations or warranties set forth inany of Sections 8.4, 8.6, 8.7 or 8.8 (i) unless the cumulative, aggregateamount of all such Losses exceeds or is reasonably expected to exceed $500,000,in which case only the excess shall be subject to indemnification under this Article XII,(ii) unless written notice of such Loss, in reasonable detail, isdelivered to the Indemnitor within 12 months of Closing, and (iii) to theextent the cumulative, aggregate amount of all such Losses that such Indemnitorhas paid or would be obligated to pay exceeds $10,000,000.  For purposes of the $10,000,000 limitationset forth in clause (iii) of the preceding sentence, Sellers shall bedeemed to be one “Indemnitor” such that the maximum aggregate amount of Losseswith respect to which Sellers collectively shall be obligated to indemnify allIndemnitees shall be limited to such $10,000,000.  To the extent Losses are incurred as a resultof claims of a Third Party and such Third Party is determined to be entitled toconsequential, special, punitive or indirect damages, the Indemnitee shall beentitled to indemnification from such damages notwithstanding the exclusion ofsuch damages generally from the definition of “Losses.”  For purposes of determining if a breach of arepresentation or warranty qualified by materiality in this Agreement hasoccurred, the materiality qualifier shall apply; provided that for purposes ofcalculating the Loss incurred or suffered by the Indemnitee, the materialityqualifier shall not apply.

 

**12.4****                       ****Exclusive Remedy**.  Exceptas otherwise provided in Article XIX, the indemnification provided for inthis Article XII****be theexclusive remedy in any action seeking damages or any other form of monetaryrelief brought by any party to this Agreement against another party to this Agreementwith respect to any provision of this Agreement, the transactions contemplatedby this Agreement and/or any document or instrument delivered in connectionwith or pursuant to this Agreement, provided that nothing herein shall beconstrued to limit the right of a party, in a proper case, to seek injunctiverelief for a breach of this Agreement or any such other document or instrument.  Purchaser hereby waives, to the fullestextent permitted under applicable law, any and all other rights, claims andcauses of action, known or unknown, it or any indemnified person may haveagainst Sellers relating to this Agreement or the transactions pursuant to thisAgreement.  Any indemnity payment underthis Article XII shall be treated as an adjustment to the Purchase Pricefor tax purposes unless a final determination (which shall include theexecution of a Form 870-AD or successor form) with respect to theindemnified party or any of its Affiliates

 

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causes any such payment notto be treated as an adjustment to the Purchase Price for U.S. Federal incometax purposes.

 

## **ARTICLE XIII**

## ** **

## **RECORDS & ACCESS**

## ** **

**13.1**                        **Access to Records**.  Therecords relating to the Assets will be made available to Purchaser and itsrepresentatives at the places where they are normally kept during regularbusiness hours for inspection and review through the Closing Date.  Priorto Closing, Sellers shall have the right to copy any records relating to the Assets.

 

**13.2**                        **Preservation of Records**.  Purchaserand Sellers shall not destroy or otherwise dispose of any records acquired,removed, or retained hereunder for a period of seven years following theClosing Date or such longer period as required by applicable regulations, laws,statutes, or court orders, except upon 30 day’s prior written notice to theother party (upon receipt of such notice, the other party (the **“receiving party”**) may elect that such records betransferred to the receiving party at the sole cost and expense of thereceiving party).  During such seven yearperiod, Sellers and Purchaser shall make such records available to the otherparty or its authorized representatives (at such other party’s sole expense)upon reasonable request for any business, legal or technical need in a mannerwhich does not unreasonably interfere with the record holder’s businessoperations.

 

**13.3****                        Accessto Assets After Closing.** Purchaser shall afford duly authorizedrepresentatives of Sellers reasonable access to the Assets and the employeesafter the Closing Date with respect to any legal, technical or operationalmatter relating to (a) Sellers’ obligations under this Agreement, (b) theoperation of the Assets before the Closing, and (c) Sellers’ removal ofany Excluded Property from the Assets; provided in each case that Sellers givePurchaser reasonable prior notice, and provided further that such access doesnot unreasonably interfere with Purchaser’s normal operations.  It is understood and agreed that Sellersshall remove all Excluded Property from the Assets prior to the Closing, or, ifnecessary, as soon as practicable thereafter.

 

## **ARTICLE XIV**

## ** **

## **SELLERS’ INTERIM OPERATIONS; CASUALTY; CONDEMNATION**

## ** **

**14.1****                 ****Interim Operations**.  Fromand after the Effective Date until the Closing Date, Sellers will comply withthe provisions of the FTC’s Order to Hold Separate and Maintain Assets dated June 14,2005 (the **“FTC Hold Separate Order”**) and theOrder to Hold Separate and Maintain Assets filed with the U.S. District Courtfor the Northern District of California on June 15, 2005 (the **“CAG Hold Separate Order,”** and, together with the FTC HoldSeparate Order, the **“Hold Separate Orders”**)and, except as otherwise expressly contemplated or permitted

 

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hereby, or to the extentrequired under the Hold Separate Orders, or otherwise with the prior writtenconsent of Purchaser (which consent shall not be unreasonably delayed orwithheld):

 

14.1.1                  Sellers shall conduct their business relatingto the Assets in all material respects in the ordinary course of business andshall use commercially reasonable efforts to:

 

(i)                                     preserve intact the Assets and the operationthereof and keep available its key employees involved in the operation of theAssets;

 

(ii)                                  maintain in effect all material Permits,including all material Permits that are required for Sellers to carry on the operationsof the Assets; and

 

(iii)                               maintain (including performing scheduledmaintenance) and repair all of the material Assets in a manner consistent withpast practices.

 

**14.2****                       ****Interim Insurance Arrangements****.**Sellers shall use commercially reasonableefforts to maintain in effect the insurance policies listed on Part I of Schedule 14.2(the **“Interim Policies”**) with regard to theAssets from the Effective Date through the Closing **(**the**“Interim Period”)** under the same termsand conditions as were in effect before the Effective Date. Subject to thebalance of this paragraph, Sellers shall cause Purchaser to be listed as anadditional insured on the Interim Policies during the Interim Period. In orderto partially compensate Sellers for the premiums payable under the InterimPolices during the Interim Period: (i) if the Closing occurs on or before October 1,2005, the Purchase Price shall be increased by $261,530; or (ii) if theClosing occurs after October 1, 2005, the Purchase Price shall beincreased by $261,530, plus an amount equal to 50% of the premium paid bySellers to maintain such Interim Policies in effect from October 1, 2005until Closing, provided that if Sellers cannot extend such Interim Policies ona commercially reasonable basis past October 1, 2005, Sellers will insteadcause Purchaser to be named as an additional insured with regard to the Assets onthe Valero excess liability policies listed on Part II of Schedule 14.2for such remaining portion of the Interim Period.

 

**14.3****                       ****Casualty or Condemnation****.**

 

14.3.1                  Sellers shall give Purchaser prompt notice of(i) any fire or other casualty materially affecting a material portion of theAssets (a **“Casualty”**) between the Effective Dateand the Closing Date and (ii) any actual, pending or proposed condemnationof a material portion of the Assets, as to which Sellers have received writtennotice from the condemning authority (**“Taking”**).

 

14.3.2                  In the event the Assets suffer a Casualtysubsequent to the Effective Date, but prior to the Closing Date, Purchaser’sobligation to close hereunder shall not be affected, and Sellers shall electeither (i) to repair or make adequate provision for the repair (withan appropriate reduction or reimbursement of the Purchase Price for anypost-Closing interruption of the operation of the Assets resulting from the post-Closingportion of such repairs, if such repairs are not completed before Closing,provided that Purchaser does nothing to delay the expeditious completion of suchrepairs by the applicable party post-Closing) of such Assets prior 

 

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toClosing, or (ii) to provide Purchaser with a credit against the PurchasePrice in an amount agreed upon by Sellers and Purchaser to represent thereduction in the value of the Assets by reason of the Casualty, taking intoaccount any repairs actually made by Sellers to such Assets prior to theClosing Date.

 

14.3.3                  In the event of a Taking, Purchaser’sobligation to close hereunder shall not be affected, but all sums of money (orother consideration) awarded as damages or otherwise received on account ofsuch Taking shall be applied as a credit to Purchaser to the Purchase Price,and all claims for any such award shall be assigned to Purchaser.

 

**14.4****                        Accessto Properties**.  Upon advancenotice to Sellers, Sellers hereby consent to Purchaser conducting, at Purchaser’ssole risk and expense, on-site visual inspections of the Assets.  In connection with any such on-site visual inspections,Purchaser agrees not to interfere with the normal operation of the Assets inany material respect and agrees to comply with all requirements and safetypolicies of the operator of which Purchaser has notice.  In connection with the granting of suchaccess, Purchaser represents that it is adequately insured and, except to theextent caused by a Seller’s gross negligence or willful misconduct, waives,releases and agrees to indemnify, defend and save and hold harmless Sellers andSellers’ respective representatives against all claims for injury to, or deathof, persons or for damage to property or other claims arising in any way fromthe access afforded to Purchaser hereunder or the activities of Purchaser.  This waiver, release and indemnity byPurchaser shall survive termination of this Agreement.

 

## **ARTICLE XV**

## ** **

## **PUBLICITY**

## ** **

At all times prior to theClosing, no party will make any press release or other public statementconcerning this Agreement or the transactions contemplated hereby, except uponmutual agreement, or as required by law. No public statement or third-party disclosure will be made withoutadvance notice to and prior approval of the other party, except as required bylaw.  No such approval will be unreasonablywithheld or delayed.

 

## **ARTICLE XVI**

## ** **

## **EMPLOYEE MATTERS**

## ** **

**16.1****                       ****Sellers’ Employees**. Purchaser agrees to offer employment to each of Sellers’ employees employedwith respect to the Assets, a list of such employees is set forth on Schedule 16.1.** **Anysuch employee who accepts employment with Purchaser and who is not covered by acollective bargaining agreement is referred to herein as a “**Transferred Employee.**” Any such employee who acceptsemployment with Purchaser and who is covered by a collective bargainingagreement is referred to herein as a **“Transferred UnionEmployee”**.  Purchaser furtheragrees that it will take no employment action, including, without limitation,any plant

 

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closing,mass layoff, change of conditions of employment, or employment loss within themeaning of the WARN Act, for a period of at least ninety (90) days afterClosing, which causes Losses to any Seller under the Worker AdjustmentRetraining Notification Act, 29 U.S.C. Sec. 2101 et. seq.  Purchaser shall employ each TransferredEmployee for a period of at least 12 months beginning on the Closing Date(unless earlier terminated for cause or unless Purchaser pays salary andseverance as provided in Section 16.3).

 

**16.2****                        Benefits.**

 

16.2.1                  Purchaser shall cause benefits to be providedto each Transferred Employee for a period of at least 12 months beginning onthe Closing Date (unless earlier terminated for cause).  These benefits, as well as the compensationapplicable to each Transferred Employee, shall be, in the aggregate,substantially comparable to those offered by Sellers to such employees prior tothe Closing Date, which benefits are described on Schedule 16.2.  Purchaser shall ensure that all of itsbenefit plans, other than Purchaser’s 401(k) plan, in which the TransferredEmployees participate after Closing recognize the years of service with Sellersand/or its Affiliates (together with any predecessors thereof that previouslyemployed any such Transferred Employees and as to which Sellers recognize suchyears of service) prior to the Closing for eligibility, vesting and benefitdetermination purposes, but Purchaser shall have no obligation to recognizesuch years of service for benefit accrual purposes.  Purchaser shall ensure that its 401(k)plan shall recognize years of service with Sellers and/or its Affiliates(together with any predecessors thereof that previously employed any suchTransferred Employees and as to which Sellers recognize such years of service)prior to the Closing for eligibility and vesting under such 401(k) plan but notfor calculating the employer matching contribution under such 401(k) plan.

 

16.2.2                  With respect to each Transferred Employee whoelects to participate in Purchaser’s welfare plans, Purchaser shall waive anypre-existing condition exclusions to coverage, any evidence of insurabilityprovisions, any active at work requirement and any waiting period or servicerequirements that did not exist or had been waived or otherwise satisfied underSellers’ welfare plans, provided the Transferred Employee enrolls within 30days after the Closing.  For eachTransferred Employee who enrolls in Purchaser’s health plan, Purchaser shallalso apply towards any deductible requirements and out-of-pocket maximum limitsunder its health plans applicable to the year of Closing, any amounts paid bysuch Transferred Employee toward such requirements and limits under Sellers’health plans.  Sellers will provide thenecessary information to Purchaser within 30 days after the end of the calendarmonth following the calendar month in which the Closing occurs.

 

16.2.3                  Purchaser shall honor the TransferredEmployees’ accrued vacation entitlement.

 

16.2.4                  Purchaser agrees to accept as a directrollover employees’ account balances from Sellers’ savings plans for any TransferredEmployee who so elects.  Purchaser shallhold Sellers harmless from any claims by employees for adverse Tax treatment tothe extent relating to improper roll-overs performed by or on behalf ofPurchaser in connection with this Agreement.

 

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**16.3****                       ****Severance****.**  Purchasershall provide Transferred Employees terminated by Purchaser or any of itsAffiliates without cause within one-year after the Closing (a) severance atleast equal to the amount payable under Sellers’ severance plan attached heretoas Attachment VI, based on the Transferred Employees’ rate of pay as ofthe Closing, together with (b) an amount equal to the salary or wages thatsuch terminated Transferred Employee would have received (based on his or her salaryor wages on the date of termination) through the 12-month anniversary of theClosing Date had he not been terminated.

 

**16.4****                       ****TransferredUnion Employees****.**  Purchaser agreesto continue to recognize United Steelworkers Union Local 2-0286 (the “**Union**”) as the exclusive representative for the employees inthe bargaining unit covered by the collective bargaining agreement referencedon Schedule 8.7 (the “**CBA**”).  Subject to any limitations imposed byapplicable Law or applicable memoranda or letters of understanding, Purchasershall maintain the CBA in full force and effect during its current term, exceptfor changes permitted under the CBA, applicable memoranda or letters ofunderstanding or mutually agreed to between Purchaser and the Union, and exceptthat Purchaser shall not be required to continue any employee benefitscurrently provided to the Transferred Union Employees, but shall be entitled toestablish such benefits as may be allowed by the CBA.  Purchasershall employ each Transferred Union Employee for a period of at least 12 monthsbeginning on the Closing Date (unless earlier terminated for cause or unlessPurchaser pays salary and severance as provided in this Section 16.4).  Provided that it will not violate the termsof the CBA, Purchaser shall provide Transferred Union Employees terminated byPurchaser or any of its Affiliates without cause within one year after theClosing (a) severance payable under the CBA, plus an amount to make theaggregate severance at least equal to the amount payable under Sellers’severance plan attached hereto as Attachment VI, based on theTransferred Employees’ rate of pay as of the Closing, together with (b) anamount equal to the salary or wages that such terminated Transferred Union Employeewould have received (based on his or her salary or wages on the date oftermination) through the 12-month anniversary of the Closing Date had he notbeen terminated.

 

## **ARTICLE XVII**

## ** **

## **TRANSFER OF PERMITS AND ASSIGNMENT OF CONTRACTS**

## ** **

**17.1****                       ****Permits and Contracts****.**  Eachof Sellers and Purchaser agrees to use its commercially reasonable efforts toobtain the transfer of the Permits, Contracts and RP Agreements from Sellers toPurchaser prior to Closing.  If there areprohibitions against, or conditions to, the conveyance of any Permits, Contractsor RP Agreements, without the prior written consent of third parties either asa result of the provisions thereof or the requirements of applicable Law, andsuch written consents are not obtained on or prior to the Closing, then (i) anyprovision contained in this Agreement to the contrary withstanding, thetransfer of title to, or interest in, such Permits, Contracts or RP Agreementspursuant to this Agreement shall not become effective unless and until suchconsent requirement is satisfied, waived or no longer applies, (ii) untilsuch consent requirement is satisfied, waived or no longer applies, Sellershall (without infringing on the legal rights of any third party, breaching anysuch Permit, Contract or RP Agreement, or violating any Law) provide Purchaserwith the equivalent benefits of the

 

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Permit, Contract or RPAgreement, by subcontract, sublease or otherwise, on the condition thatPurchaser shall cooperate and assist in such efforts and shall bear alleconomic burdens and other obligations and liabilities of Seller regarding thispost-Closing period under the Permit, Contract or RP Agreement, notwithstandingthe fact that the same has not been transferred to Purchaser, and (iii) Closing shall not be delayedpending satisfaction, waiver or expiration of such consent requirement.  When and if such consent requirement is sosatisfied, waived or no longer applies, to the extent permitted by applicableLaw, the assignment of such Permits, Contracts or RP Agreements shall becomeeffective automatically as of the Closing Date, without further action on thepart of Sellers or Purchaser and without payment of further consideration.  After Closing, Sellers shall reasonably cooperatewith Purchaser, at Purchaser’s request and expense, to procure the transfer ofany Permits, Contracts or RP Agreements not transferred to Purchaser at Closing.

 

**17.2****                       ****Acquisition Contracts with PriorOwners****.** Sellers agree to use commercially reasonableefforts to obtain consent to assignment of Sellers’ rights under theacquisition contracts with prior owners listed on Schedule 8.8 at Closing.  If consent is obtained, Sellers will conveysuch rights to Purchaser at Closing.

 

## **ARTICLE XVIII**

## ** **

## **COVENANTS**

## ** **

## **18.1**                        Cooperation.  Each of theparties shall assist and cooperate with one another to effect promptly, andshall give any notices to, make any filings with, and use its respectivereasonable best efforts to obtain, all consents, approvals, and authorizationsof, or any exemptions by, all Governmental Authorities in connection with thetransactions contemplated by this Agreement. Each of the parties shall as promptly as practicable use its bestefforts to (i) prepare and furnish all necessary applications, informationand documentation (including furnishing all information requested by anyGovernmental Authorities); (ii) take all other actions that may benecessary to demonstrate to the FTC and CAG that Purchaser is an acceptablepurchaser of the Assets, and that Purchaser will effectively compete in themarketplace using the Assets; and (iii) obtain FTC and CAG approval ofPurchaser as an acceptable purchaser of the Assets and assist in causing theFTC Order and the California Consent Decree to become final without adversemodification.  Without limiting thegenerality of the foregoing, Purchaser shall do whatever is necessary, properor advisable to assist and cooperate with Sellers in obtaining necessaryconsents, approvals or orders of all Governmental Authorities necessary toconsummate the transactions contemplated by this Agreement.

## ** **

**18.2****                        Transition**.  In addition to the specific obligationscreated by the Transition Services Agreement, to the extent consistent with applicableLaws, each of the parties shall reasonably cooperate with each other and shallcause its officers, employees, agents and representatives to reasonablycooperate with each other for a period of 60 days after Closing to ensure theorderly transition of the Assets and the Assumed Liabilities to Purchaser andto minimize the disruption to the respective businesses of the parties hereto(including the parties’ relationships with customers and suppliers) resultingfrom the transactions contemplated hereby.

 

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**18.3****                        Access to Financial Information.**

 

(a)                                  Purchaser shall use reasonable commercial efforts to obtain writtenconfirmation from the staff of the United States Securities and ExchangeCommission that neither Purchaser nor its Affiliates are required to disclosehistorical financial statement information regarding or relating to the Assets,for any period prior to the Closing Date, as required under Rule 3-05 ofRegulation S-X promulgated under the Securities Exchange Act of 1934.

 

(b)                                 To the extent Purchaser is unable to obtain the writtenconfirmation contemplated in Section 18.3(a), then upon the writtenrequest of Purchaser, at Purchaser’s sole cost and expense and only to theextent necessary to comply with the disclosure obligations of Purchaser or itsAffiliates under Rule 3-05 of Regulation S-X, Sellers shall use reasonablecommercial efforts to provide Purchaser and its representatives (including itslegal counsel and independent auditors) reasonable access during normalbusiness hours to such historical financial information as may then be inSellers’ possession or control or to which Sellers’ have rights of access thatis necessary to allow Purchaser to prepare the historical financial statementsrequired by Rule 3-05 of Regulation S-X, and to enable the audit thereof.

 

(c)                                  The obligations of Sellers to disclose or provide reasonable accessto any such historical financial information shall terminate three (3) yearsafter the Effective Date.  Sellers shallhave no liability whatsoever to Purchaser or any other person for informationprovided or disclosed hereunder, or the accuracy or sufficiency thereof or inconnection with any claim arising out of such information.  Purchaser acknowledges that Sellers make norepresentation or warranty with respect to any such information and expresslydisclaim any implied or constructive representation or warranty.  Purchaser shall reimburse Sellers for anyactual costs incurred by Sellers in performing the obligations under this Section 18.3and shall indemnify Sellers for any and all Losses incurred by Sellers withrespect to such matter.

 

**18.4****                        Amendments**.  Without limiting the other provisions of thisArticle XVIII, and subject to Article XIX, each of the parties agreesto make any and all amendments or modifications to this Agreement and theTransition Services Agreement as are required by the FTC or the CAG in order toobtain FTC and CAG approval of this Agreement and of Purchaser as an acceptablepurchaser of the Assets, provided that any such amendments are not,individually or in the aggregate, materially adverse to Sellers taken as awhole (or any one of them), or Pacific Energy Partners, L.P. and its Affiliates,taken as a whole.

 

## **ARTICLE XIX**

## ** **

## **TERMINATION;DEFAULT; REMEDIES**

## ** **

**19.1**                        **Terminationfor Adverse Conditions**. Notwithstanding anything contained herein to the contrary, thisAgreement may be terminated and the transactions contemplated hereby abandonedat any time prior to Closing by Sellers if (i) either the FTC or CAGconditions its approval of this Agreement or the transaction contemplatedhereby in a manner that is materially adverse to STOP, KPOP or Shore; or (ii) theFTC or CAG staff advise the parties that Purchaser is not an acceptablepurchaser of the Assets or that the Agreement is not acceptable, and despitethe parties’ good faith efforts to modify such agreement, negotiations with theFTC

 

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or CAG staff have terminated without a mutually acceptableresolution.  Notwithstanding anythingcontained herein to the contrary, this Agreement may be terminated and thetransactions contemplated hereby abandoned at any time prior to Closing byPurchaser if the FTC or CAG conditions its approval of this Agreement or thetransaction contemplated hereby in a manner that is materially adverse toPacific Energy Partners, L.P. and its Affiliates, taken as a whole.

 

**19.2**                        **FTCMandated Termination or Rescission**.  If the FTC, at the time it determines to makefinal the FTC Order, notifies Sellers (or any one of them) that Purchaser isnot an acceptable acquirer of the Assets or that the manner in which thedivestiture was accomplished is not acceptable, then Sellers shall have theright to effect the rescission of this Agreement upon written notice toPurchaser of such notice received from the FTC. Within three business days after receipt of any such notice, Sellersshall return the Earnest Money L/C to Purchaser unless a Purchaser Defaultcaused such notification.

 

**19.3****                        PurchaserDefault.**  In the event of materialnon-performance, default or breach of this Agreement by Purchaser that resultsin the failure to consummate this Agreement (a **“PurchaserDefault”**), then Sellers may, at their sole option and as their soleremedy, take any of the following courses of action:

 

19.3.1                  terminate thisAgreement and draw upon the Earnest Money L/C as liquidated damages, asfollows:

 

IF PURCHASER DEFAULTS INITS OBLIGATIONS UNDER THIS AGREEMENT RESULTING IN A FAILURE TO CLOSE THETRANSACTION ON OR BEFORE THE OUTSIDE CLOSING DATE, THEN PURCHASER AGREES THATSELLERS WILL INCUR DAMAGES BY REASON OF SUCH DEFAULT WHICH ARE IMPRACTICAL ANDEXTREMELY DIFFICULT TO ASCERTAIN OR QUANTIFY. PURCHASER AND SELLERS, IN A REASONABLE EFFORT TO ASCERTAIN SELLERS’DAMAGES, HAVE AGREED BY PLACING THEIR INITIALS BELOW THAT AN AMOUNT EQUAL TOTHE FULL AMOUNT OF THE EARNEST MONEY L/C SHALL BE DEEMED TO CONSTITUTE AREASONABLE ESTIMATE OF SELLERS’ DAMAGES UNDER APPLICABLE LAW, INCLUDING CALIFORNIACODE OF CIVIL PROCEDURE SECTION 1671. ACCORDINGLY, IF PURCHASER SO DEFAULTS IN ITS OBLIGATIONS UNDER THISAGREEMENT, SELLERS SHALL HAVE THE RIGHT TO DRAW DOWN THE FULL AMOUNT OF THEEARNEST MONEY L/C AS LIQUIDATED DAMAGES.

 

 
|                 |   |   |                     |   |
|----------------------|--------|--------|--------------------------|--------|
| Initials for  Seller |   |   | Initials for  Purchaser; |   |

 

or

 

19.3.2                  enforcespecific performance of this Agreement and the transaction provided for hereinaccording to the terms hereof by all means available at law or in equity.

 

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**19.4****                        Electionof Remedies. **In the event Sellerselect first to enforce this Agreement by specific performance and at any timeduring pursuit of enforcement elects not to pursue specific performance, thenSellers shall be entitled to pursue their remedies under this Article XIX asif it had elected to do so as above set forth, and such subsequent election topursue its courses of action under this Article XIX shall be deemed to bean election of remedies at that time and not before.

 

**19.5****                        Sellers’Default.**  In the event ofnon-performance, default or breach of this Agreement by Sellers that results inthe failure to consummate this Agreement, then Purchaser may, at its soleoption, as its exclusive remedy, enforce specific performance of this Agreementand the transaction provided for herein according to the terms hereof by allmeans available at law or in equity.

 

## **ARTICLE XX**

## **BULK SALES**

## ** **

Sellers and Purchaser herebywaive compliance with any applicable bulk sales or similar laws.

 

## **ARTICLE XXI**

## **ASSIGNMENT**

## ** **

Provided that Purchaserremains liable for all of its obligations under this Agreement, Purchaser mayassign at Closing to up to three (3) of its Affiliates title to all or aportion of the Assets with at least ten (10) days prior notice toSellers.  Except as provided in theimmediately preceding sentence, thisAgreement may not be assigned by any party, in whole or in part without theprior written consent of the other party, which consent shall not beunreasonably withheld.  This Agreementshall inure to the benefit of, and be binding upon, the parties hereto andtheir respective heirs, legal representatives, successors and permittedassigns. This agreement is not intended to, and does not create, any rights inany third parties.

 

## **ARTICLE XXII**

## ** **

## **PAYMENTS**

## ** **

**22.1**                        **Terms of Payment**. Unless otherwise specified herein, any payment to be made hereundershall be made in U.S. dollars by wire transfer of immediately available funds,without discount or deduction, or by such other means as the parties may agree.

 

**22.2**                        **Interest**.  Anyamount not paid by any party when due hereunder shall bear interest from thedate upon which payment was due through the date of payment at a rate equal

 

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to one percent (1%) abovethe prime rate of interest as announced by Chase Manhattan Bank N.A. in NewYork City from time to time.

 

## **ARTICLE XXIII**

## ** **

## **NOTICES**

## ** **

**23.1**                        **Notices**.  Allnotices or other communications required hereunder shall be in writing, shallbe addressed as specified below and shall be deemed to have been given:  (a) at the time of delivery whendelivered personally; (b) upon receipt when sent by Federal Express, orsimilar recognized overnight service; or (c) upon completion of successfultransmission (with electronic confirmation of receipt) when sent by facsimile(unless transmission is completed outside recipient’s normal working hours, inwhich case such notice shall be deemed given at the start of recipient’s nextbusiness day), immediately followed by U.S. posting, postage prepaid.

 

Sellers:

 

Valero L.P.

c/o RichardLashway

Director -Corporate Development, Economic Analysis

Valero EnergyCorporation

One Valero Way

San Antonio,Texas  78249-1616

Phone: (210)345-2901

Fax:     (210)345-2270

 

Purchaser:

5900Cherry Avenue

LongBeach, California 90805-4408

Attn:  General Counsel

Phone:  (562) 728-2800

Fax:  (562) 728-2823

 

AnyParty may change its address or facsimile number by providing written notice tothe others in accordance with the foregoing.

 

## **ARTICLE XXIV**

## **GENERAL; ADDITIONAL COVENANTS**

## ** **

**24.1****                       ****Entire Agreement**.  ThisAgreement, including all of the Attachments, Exhibits and Schedules hereto,constitutes the entire understanding between the parties with respect to thesubject matter contained herein and supersedes any prior understandings,negotiations or

 

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agreements,whether written or oral, between them respecting such subject matter (otherthan the Confidentiality Agreement dated May 10, 2005, between Valero L.P.and Purchaser, which shall continue in full force and effect).

 

**24.2****                       ****Construction**. Words of any gender used in this Agreement shall be construed to includeany other gender, and words in the singular number shall include the plural,and vice versa, unless the context requires otherwise. The use of the phrase “including,”or phrases of similar import, shall be deemed to include the phrase “withoutlimitation”.

 

**24.3****                       ****Captions**.  Thecaptions used in connection with the Articles and Sections of this Agreementare for convenience only and shall not be deemed to enlarge, limit or otherwisemodify the meaning or interpretation of the language of this Agreement.  Any references to “Articles”, “Sections”, “Attachments”,“Exhibits”, and “Schedules” are to Articles, Sections, Attachments, Exhibits,and Schedules of this Agreement. Each Attachment, Exhibit, and Schedule referredto herein is incorporated into this Agreement by such reference; provided thatto the extent of any conflict or inconsistency between any of the Attachments,Exhibits or Schedules and this Agreement, this Agreement will prevail.

 

**24.4****                       ****Severability**.  Ifany provision of this Agreement is held illegal, invalid or unenforceable, suchillegality, invalidity or unenforceability will not affect any other provisionhereof.  This Agreement shall in suchcircumstances be deemed modified to the extent necessary to render enforceablethe provisions hereof.

 

**24.5**                        **No****Waiver**.  Thefailure of any party to insist upon strict performance of any of the terms orconditions of this Agreement will not constitute a waiver of any of its rightshereunder.

 

**24.6**                        **Parties in Interest; No ThirdParty Beneficiary**.  This Agreement shall inure to the benefit ofand be binding upon Purchaser and Sellers and their respective successors andassigns.  Except as otherwise providedherein, nothing in this Agreement will be construed as conferring upon anyperson or entity other than Purchaser and Sellers, and their respectivesuccessors in interest, any right, remedy or claim under or by reason of thisAgreement.

 

**24.7**                        **Governing Law; Choice of Forum**. ** **This Agreement shall be governed byand construed in accordance with the laws of the State of Texas applicable toagreements made and to be performed entirely in the State of Texas.  Any claims arising from or related to thisAgreement (whether in contract, tort or otherwise) shall be governed by thelaws of the State of Texas.  The partiesirrevocably submit to the exclusive jurisdiction of the United States DistrictCourt for the Western District of Texas for any such claims, except for thosematters over which that Court does not have subject matter jurisdiction.  Where the United States District County forthe Western District of Texas does not have subject matter jurisdiction, theparties irrevocably submit to the exclusive jurisdiction of a state districtcourt sitting in Bexar County, Texas.

 

**24.8**                        **Best Efforts; Time of Essence**. Except as otherwise specifically provided herein, Purchaser and Sellersshall each use its best efforts to satisfy the conditions to Closing and

 

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otherwiseconsummate the transactions contemplated by this Agreement as promptly aspractical.  Time is of the essence withrespect to the Closing of this Agreement.

 

**24.9**                        **Counterparts**.  ThisAgreement may be executed in any number of counterparts and any party heretomay execute any such counterpart, each of which when executed by both partiesand delivered shall be deemed to be an original.

 

**24.10**                 **Extensions of Time; Waiver**.  Itis agreed that any party to this Agreement may extend time for performance byany other party hereto or waive the performance of any obligation of any otherparty hereto or waive any inaccuracies in the representations and warranties ofany other party, but any such waiver shall be in writing, and shall notconstitute or be construed as a waiver of any other obligation, condition,representation or warranty under this Agreement.

 

**24.11****                ****Further Assurances**. Purchaser and Sellers shall take such additional action, and shallcooperate with one another, as may be reasonably necessary to effectuate theterms of this Agreement and any agreement or instrument delivered pursuanthereto.

 

**24.12****                ****No Presumption Against Drafter**. Purchaser and Sellers have each fully participated in the negotiationand drafting of this Agreement.  If anambiguity, question of intent or question of interpretation arises, thisAgreement must be construed as if drafted jointly, and there must not be anypresumption, inference or conclusion drawn against any party by virtue of thefact that its representative has authored this Agreement or any of its terms.

 

**24.13****                ****Amendments**** **This Agreement cannotbe altered, amended, changed or modified in any respect or particular unlesseach such alteration, amendment, change or modification shall have been agreedto by each of the parties hereto and reduced to writing in its entirety andsigned and delivered by each party.

 

 

**[Remainderof page intentionally left blank]**

 

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**IN WITNESS WHEREOF**, each of the parties hereto has caused thisAgreement to be duly executed as of the Effective Date.

 
| **SELLERS:**                                        |
|-----------------------------------------------------|
|                                                |
| **SUPPORT TERMINALS OPERATING  PARTNERSHIP, L.P.,** |
| a Delaware limited  partnership                     |
|                                                |
| By:                                                 | Support Terminal Services, Inc.,  its general partner |
|                                                |
|                                                | By: |   |  /s/ Curtis V.  Anastasio |   |
|                                                |   | Curtis V. Anastasio, |
|                                                |   | President and Chief  Executive Officer |
|                                                |
|                                                |
| **KANEB PIPE LINE OPERATING  PARTNERSHIP, L.P.,**   |
| a Delaware limited  partnership                     |
|                                                |
| By:                                                 | Kaneb Pipe Line Company  LLC, its general partner |
|                                                |
|                                                | By: |   |  /s/ Curtis V.  Anastasio |   |
|                                                |   | Curtis V. Anastasio, |
|                                                |   | President and Chief  Executive Officer |
|                                                |
|                                                |
| **SHORE TERMINALS LLC,**                            |
| a Delaware limited  liability company               |
|                                                |
| By:                                                 | Kaneb Pipe Line Operating  Partnership, L.P., its sole member |
|                                                |
|                                                | By: | Kaneb Pipe Line Company  LLC, its general partner |
|                                                |
|                                                |
|                                                |   | By: |   |   /s/ Curtis V.  Anastasio |   |
|                                                |   |   | Curtis V. Anastasio, |
|                                                |   |   | President and Chief  Executive Officer |
|                                                |
|                                                |
| **PURCHASER:**                                      |
|                                                |
| PACIFIC  ENERGY GROUP LLC,                          |
| a  Delaware limited liability company               |
|                                                |
|                                                |
| By:                                                 |   | /s/ Irvin Toole, Jr. |   |
|                                                | Irvin Toole, Jr., |
|                                                | President and Chief Executive Officer |
|                                                     |  |  |  |  |  |  |  |  |  |  |  |

 

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