<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,1997
Commission file number 333-26497
TRAVELCENTERS OF AMERICA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3856519
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24601 Center Ridge Road, Suite 200
Westlake, OH 44145-5634
(Address of principal executive offices, including zip code)
(440) 808-9100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of March 15, 1998, there were outstanding 621,011 shares of Common Stock, par
value $0.01 per share. The outstanding shares of Common Stock of the registrant
were issued in transactions not involving a public offering. As a result, there
is no public market for the registrant's Common Stock.
<PAGE>
INDEX
<TABLE>
<S> <C> <C>
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . 11
Item 7. Management's Discussion and Analysis. . . . . . . . . . . . . 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . 20
Item 8. Financial Statements and Supplementary Data . . . . . . . . . 21
Item 9. Changes in and Disagreements With Accountants . . . . . . . . 59
PART III
Item 10. Directors and Executive Officers of the Registrant. . . . . . 59
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . 59
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Item 13. Certain Relationships and Related Transactions. . . . . . . . 60
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 60
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
1
<PAGE>
PART I
ITEM 1. BUSINESS
HISTORY AND ORGANIZATION
TravelCenters of America, Inc. (the "Company") was formed in 1992 by an
institutional investor group (the "Investor Group") led by The Clipper Group,
L.P. ("Clipper"), as well as certain then prospective franchisees and
individuals who at the time were members of the Company's management. The
Company was originally incorporated as National Auto/Truckstops Holdings
Corporation but changed its name in March 1997. The Company is a holding
company whose sole assets consist of the stock of its three direct
wholly-owned subsidiaries: TA Operating Corporation, d/b/a TravelCenters of
America ("TA"), National Auto/Truckstops, Inc. ("National") and TA Franchise
Systems, Inc. ("TAFSI"). TA has one wholly-owned subsidiary, TA Travel,
L.L.C. ("TA Travel") and participates (50% interest) in TABB, a joint venture
to market to and bill fleet customers for products and services at an
expanded network of sites. Prior to March 1997, the Company had two
wholly-owned subsidiaries, National and TA Holdings Corporation ("TA
Holdings"). TA Holdings was the parent of TA, which itself was the parent of
TAFSI. In March 1997, a restructuring was completed whereby the current
structure was effected and TA Holdings was merged into the Company. TA
Travel was organized in October 1997.
The Company's operations are conducted through three distinct types of
travel centers: sites owned or leased by the Company and operated by the
Company ("Company-operated Sites"), sites owned or leased by the Company and
leased to independent lessee-franchisees ("Operators") of the Company who
operate the sites ("Leased Sites") and sites owned or leased and operated by
independent franchisees ("Franchisee-Owners") of the Company
("Franchisee-Owner Sites").
In April 1993, the Company acquired (the "National Acquisition") the
truckstop network assets (the "National Network") of a subsidiary of Unocal
Corporation (together with its subsidiaries "Unocal") in a series of asset
purchase transactions. The National Network included a total of 139
facilities, of which 95 were Leased Sites, 42 were Franchisee-Owner Sites,
and two sites were Company-operated Sites. Included in such purchase was the
acquisition of six Leased Sites located in California (the "California
Properties") pursuant to separate agreements. Prior to the National
Acquisition, certain of the Operators of the California Properties brought
suit to challenge the sale of their respective truckstops to the Company. See
Item 3 "Legal Proceedings." As part of the National Acquisition, Unocal
agreed to indemnify the Company against certain environmental liabilities
occurring prior to 1993 (the "Unocal Environmental Agreement," see
"--Regulation--Environmental Regulation"), entered into a non-compete agreement
for a ten-year period terminating on April 13, 2003, granted the Company a
license to use certain Unocal trademarks, and granted the Company a
royalty-free license to use the ACCESS 76 on-line information retrieval and
credit card system. The National Network, which operates under the licensed
"Unocal 76" and related trademarks, has been providing quality products and
services for over 35 years and until 1997 had been the largest chain of full
service travel centers or truckstops, based on number of locations in the
United States. Pure Oil Company ("Pure") founded the National Network and
Unocal acquired National in connection with Unocal's merger with Pure in
1965.
In December 1993, the Company acquired (the "TA Acquisition") the
truckstop network assets (the "TA Network") of certain subsidiaries of The
British Petroleum Company p.l.c. (together with its subsidiaries "BP"). The
TA Network included 38 Company-operated Sites and six Franchisee-Owner Sites.
As part of the TA Acquisition, BP agreed to indemnify the Company against
certain environmental liabilities with respect to which claims are made prior
to December 11, 2004 or December 11, 1996 (the relevant date depending upon
the nature of the underlying claim) ( the "BP Environmental Agreement," see
"--Regulation--Environmental Regulation"), entered into a noncompete agreement
for a seven-year period commencing on December 10, 1993 and granted the
Company the right, title and interest in and to certain copyrights,
trademarks, service marks and other intellectual property, including,
"Truckstops of America," "TA" and "Country Pride." The TA Network, which now
operates under the Company-owned "TravelCenters of America" and "TA"
trademarks, has been providing quality products
2
<PAGE>
and services to the trucking industry and to nonprofessional travelers for
over 30 years. BP, through its subsidiary formerly known as the Standard Oil
Company of Ohio ("Sohio"), acquired TA from Ryder System, Inc. ("Ryder") in
1984. Ryder founded the TA Network in 1973.
COMBINATION PLAN, CAPITAL PROGRAM AND REFINANCING
Historically, under the Company's ownership, each of the TA and National
Networks (the "Existing Networks") was separately managed and financed.
However, in January 1997 the Company's Board of Directors approved a
management proposal (the "Combination Plan") that calls for the integration
of the Existing Networks into a single network (the "Network") to be operated
under the TA trademark under the leadership of a single management team.
During 1997 the Company, pursuant to the Combination Plan, significantly
reshaped the composition of the Existing Networks: 27 Leased Sites were
converted to Company-operated Sites, 27 Franchisee-Owner Sites were
terminated, 15 Leased Sites were sold to the related Operators, all National
Network Company-operated Sites were converted to TA Network Company-operated
Sites and Operators of 29 National Network Leased Sites terminated their
franchise agreements with National and signed franchise agreements with TAFSI.
The Company has initiated a capital program to upgrade, rebrand and
reimage the Network's travel centers and to build new travel centers (the
"Capital Program"). Under this Capital Program, the Company intends to invest
in excess of $200 million in the Network's sites by the end of 2001, with
approximately $150 million to be spent by the end of 1998, and the Operators
and Franchisee-Owners will also be investing additional amounts for reimaging
and other projects at the sites they operate.
To facilitate the Combination Plan and Capital Program, in March 1997
the Company refinanced the existing indebtedness of TA and National with new
borrowings by the Company (the "Refinancing"). The Company issued $125
million aggregate principal amount of 10 1/4% Senior Subordinated Notes due
2007, entered into a Credit Agreement through which it obtained an $80
million senior secured term loan facility and a $40 million revolving credit
facility, redeemed all of the outstanding Subordinated Notes of TA and
National (the "National Old Subordinated Notes" and the "TA Old Subordinated
Notes") and a portion of the Senior Notes of TA (the "TA Old Senior Notes"),
and exchanged $85.5 million aggregate principal amount of Senior Secured
Notes of the Company for the Senior Notes of National (the "National Old
Senior Notes") and the unredeemed TA Old Senior Notes.
BUSINESS OVERVIEW
The Company owns, operates and franchises more full-service travel
centers in the United States than any of its competitors, with 127 network
sites nationwide, including 83 Company-owned and operated locations. The
Company's travel centers are full service facilities offering a broad range
of fuel and nonfuel products, services and amenities to trucking fleets,
professional truck drivers and other motorists. In addition to diesel fuel
and gasoline, the travel centers provide truck maintenance and repair
services and products, full service and fast food dining, travel and
convenience stores, telecommunications services and various hospitality and
rest-related amenities. This broad range of products and services
distinguishes the travel centers from traditional truckstops, which focus on
the sale of diesel fuel, and provides diverse revenue sources for the
Company. In addition, the Company is the only industry participant with a
centralized procurement, warehousing and distribution system.
The Company's broad range of products and services, together with its
comprehensive geographic coverage, has enabled the Company to become a
leading supplier of diesel fuel to many of the largest long-haul trucking
fleets in the United States. Management believes the Company's position as a
leading supplier of diesel fuel to major trucking fleets positions it to
continue to increase its sales of higher margin nonfuel products and services
to fleets and their drivers as well as to independent drivers.
3
<PAGE>
The travel centers feature a variety of well recognized national brands
which attract professional truck drivers, motorists and other customers who
often satisfy both fuel and nonfuel needs at the same stop. The Company's
nationally recognized fast food and motel brands include Burger King, Dunkin'
Donuts, Kentucky Fried Chicken, Long John Silver's, Pizza Hut, Sbarro,
Subway, Taco Bell, DayStop, HoJo Inn and Travelodge. The Company also offers
such well recognized gasoline brands as BP, Exxon, Mobil, Shell and Unocal
76. This portfolio of brands strongly appeals to what market research
indicates are customers' priorities of quality, convenience and consistency
of product offerings, as well as cleanliness and safety.
CENTRALIZED PURCHASING AND DISTRIBUTION
The TA Network maintains a dedicated distribution and warehouse center
(the "Distribution Center"). The Distribution Center is the only dedicated
purchasing, warehousing and distribution center in the travel center and
truckstop industry. The Distribution Center is located in Nashville,
Tennessee and has approximately 85,000 square feet of storage space.
SUPPLY
The Company purchases fuel from various suppliers at rates that
fluctuate with market prices and reset daily, and resells fuel to certain
franchisees and to the public at prices that the Company establishes daily.
By contracting for only a portion of its monthly diesel fuel requirements and
by establishing supply relationships with an average of four or five
alternate suppliers per location, the Company has been able effectively to
create competition for the Company's business among the Company's various
diesel fuel suppliers on a daily basis. This flexibility has improved the
Company's purchasing position and helped it partially to offset the decline
in retail diesel fuel margins. Purchases made by the Company are delivered
directly from suppliers' terminals to the travel centers. The Company does
not keep substantial quantities of fuel in inventory and is therefore
susceptible to price increases and interruptions in supply. The Company
currently engages in only minimal hedging in connection with its diesel fuel
purchases.
COMPETITION
The travel center and truckstop industry is highly competitive and
fragmented. Based on industry data, the Company believes that there are
approximately 2,500 travel centers and truckstops nationwide, of which
approximately 500 are full service travel centers. In the United States,
there are generally two types of facilities designed to service the trucking
industry: pumper-only truckstops, which provide fuel, typically at discounted
prices, with limited additional services, and full service travel centers,
such as those in the Company's networks, which have a broad range of product
and service offerings to fleet and independent truck drivers and nontruck
traffic, including fuel products, fast food and casual dining restaurants;
truck maintenance and repair products and services; and secure parking areas.
Fuel and nonfuel products and services can be obtained by long-haul truck
drivers from a wide variety of sources other than the Company, including
regional full service travel center and pumper-only truckstop chains,
independently owned and operated truckstops, some large service stations and
fleet-operated fueling terminals.
The Company believes that it experiences substantial competition from
pumper-only truckstop chains and that such competition is based principally
on diesel fuel prices. In the pumper-only truckstop segment, the largest
networks (based on number of facilities and gallons of diesel fuel sold) are
Marathon Ashland Petroleum LLC, selling primarily under the Speedway and
SuperAmerica brandnames, and Pilot Corporation. Additional substantial
competition is experienced from major full service networks and independent
chains and is based principally on diesel fuel prices and customer service.
In the full service travel center segment, the largest networks (other than
the Company) are operated by Flying J Inc. ("Flying J") and Petro Stopping
Centers, L.P.; however, only some of Flying J's sites offer full service. The
Company's vehicle products and truck maintenance and repair service
operations compete with regional full service travel center and truckstop
chains, full service independently owned and operated truckstops, independent
garages and auto parts service centers. The Company's travel centers compete
with a variety of establishments located within walking distance of its
sites, including full service and fast food restaurants and electronics,
drug, health and beauty aid and travel and convenience stores.
4
<PAGE>
A significant portion of all intercity diesel fuel consumption by fleets
and companies with their own trucking capability occurs through self-fueling
at both dedicated terminals and at fuel depots strategically located across
the country. Such terminals often provide facilities for truck maintenance
and repair. The Company's pricing decisions for diesel fuel and repair
services cannot be made without considering the existence of these operations
and their capacity for expansion. However, the Company believes that a
trucking industry trend has been to reduce the use of such terminals and to
outsource fuel and repair services in order to maximize the benefits of
competitive fuel pricing, superior driver amenities and reduced environmental
compliance expenditures.
RELATIONSHIPS WITH THE OPERATORS AND FRANCHISEE-OWNERS
Pursuant to the Combination Plan, the Company offered a new TA franchise
agreement (the "Network Franchise Agreement") and a new lease agreement (the
"Network Lease Agreement" or "Network Lease" and, together with the Network
Franchise Agreement, the "Network Agreements") to certain of National's then
existing Operators, and in connection therewith, upon such franchisee's
acceptance of such offer, terminated the then existing National lease (the
"National Lease Agreement") and National franchise agreement (the "National
Franchise Agreement," and, together with the National Lease Agreement, the
"National Agreements") at those locations. During 1997, 29 former National
Operators signed Network Agreements with the Company. Existing TA
Franchisee-Owners will be allowed to continue their franchises under the
Network Franchise Agreement upon expiration of their existing TA franchise
agreements (the "Existing TA Franchise Agreements"), which have an average
remaining term of approximately four years.
TA licenses its trademarks to TAFSI. The Company enters into its
franchise agreements with Operators and Franchisee-Owners of travel centers
in the TA Network through TAFSI, and TAFSI collects franchise fees and
royalties under such agreements. TAFSI's assets consist primarily of the
rights under the Existing TA Franchise Agreements, the Network Franchise
Agreements and its trademark licenses from TA. TAFSI has no significant
tangible assets. The National Franchise Agreements are between National and
the respective Operator.
REGULATION
FRANCHISE REGULATION. The relationship between National and the
National Network Operators is governed by the Petroleum Marketing Practices
Act (the "PMPA"), 15 U.S.C. Section 2801 et.seq. The relationship between
TAFSI and the TA Network Operators and Franchisee-Owners is not governed by
the PMPA because TAFSI does not license its franchisees to sell fuel under a
refiner's brand. Among other things, the PMPA limits the circumstances under
which franchisors such as National may terminate or fail to renew a franchise
agreement, and it imposes notification and other requirements in those cases
where termination or nonrenewal is permissible.
National and TAFSI are also subject to state franchise laws, some of
which require National and TAFSI to register with the state before it may
offer a franchise, require National and TAFSI to deliver specified disclosure
documentation to potential franchisees, and impose special regulations upon
petroleum franchises. Some state franchise laws also impose restrictions on
National's and TAFSI's ability to terminate or not to renew its respective
franchises, and impose other limitations on the terms of the franchise
relationship or the conduct of the franchisor. The PMPA, which applies to
the National Network Operators, preempts state laws with respect to
termination or nonrenewal unless such laws are consistent with the PMPA.
Finally, a number of states include, within the scope of their petroleum
franchising statutes, prohibitions against price discrimination and other
allegedly anticompetitive conduct. These provisions supplement applicable
antitrust laws at the federal and state levels.
The Company is subject to regulation under the Federal Trade Commission
("FTC") rule entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures," and the FTC requires that
franchisors make extensive disclosure to prospective franchisees but does not
require registration.
The Company cannot predict the effect of any future federal, state, or
local legislation or regulation on its franchising operations.
5
<PAGE>
ENVIRONMENTAL REGULATION. The Company's operations and properties are
subject to extensive regulation pursuant to federal, state and local laws,
regulations and ordinances that (i) govern activities and operations that may
have adverse environmental effects, such as discharges to air, soil and
water, as well as handling, storage and disposal practices for petroleum
products and other hazardous and toxic substances ("Hazardous Substances") or
(ii) impose liability and damages for the costs of cleaning up sites affected
by, and for damages resulting from, past spills and disposal or other
releases of Hazardous Substances ("Environmental Laws").
The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated Sites and Leased Sites
to store petroleum products and waste. These tanks must comply with
requirements of Environmental Laws regarding tank construction, integrity
testing, leak detection and monitoring, overfill and spill control, release
reporting, financial assurance and corrective action in case of a release
from a UST or AST into the environment. At certain locations, the Company
also is subject to Environmental Laws relating to vapor recovery and
discharges to water. The Company believes that all of its travel centers are
in material compliance with applicable requirements of Environmental Laws.
The Company is making necessary upgrades to USTs to comply with federal
regulations which will take effect in December 1998. These upgrades are
expected to be completed in 1998 at a remaining estimated cost to the Company
of approximately $6 to $8 million. The Company does not believe that such
costs will have a material adverse effect on the Company and the Capital
Program incorporates funds to complete such upgrades.
The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connection therewith, will be material to the
Company's results of operation or financial condition. The Company is
conducting investigatory and/or remedial actions with respect to releases
and/or spills of Hazardous Substances that have occurred subsequent to the
National Acquisition and the TA Acquisition, respectively, at fewer than 30
Network properties. While the Company cannot precisely estimate the ultimate
costs it will incur in connection with the investigation and remediation of
these properties, based on its current knowledge, the Company does not expect
that the costs to be incurred at these properties, individually or in the
aggregate, will be material to the Company's results of operation or
financial condition. While the aforementioned matters are, to the best
knowledge of the Company, the only proceedings for which the Company is
currently exposed to potential liability (particularly given the Unocal and
BP indemnities discussed below), there can be no assurance that additional
contamination does not exist at these or additional Network properties, or
that material liability will not be imposed in the future. If additional
environmental problems arise or are discovered, or if additional
environmental requirements are imposed by government agencies, increased
environmental compliance or remediation expenditures may be required, which
could have a material adverse effect on the Company.
In connection with the National Acquisition, Phase I environmental
assessments of the then 97 Company-owned National Network properties were
conducted. Pursuant to the Unocal Environmental Agreement, Phase II
environmental assessments of all such National properties are required to be
completed by the year 2000. As of December 31, 1997, 10 of the Phase II
assessments were in progress and 87 had been completed. The Company
contributed $500,000 toward the total cost of the Phase II environmental
assessments, and Unocal is responsible for the remainder of the cost. The
Unocal Environmental Agreement provides that Unocal is responsible for all
costs incurred for remediation of environmental contamination (the
remediation must achieve compliance with the Environmental Laws in effect on
the date the remedial action is completed) and for otherwise bringing the
properties into compliance with Environmental Laws (as in effect at the date
of the National Acquisition) with respect to environmental contamination or
non-compliance identified in the Phase I or Phase II environmental
assessments, which environmental contamination or non-compliance existed on
or prior to the date of the National Acquisition. Under the terms of the
Unocal Environmental Agreement, Unocal also must indemnify the Company
against any other environmental liabilities that arise out of conditions at,
or ownership or operations of, the National Network prior to the date of the
National Acquisition. Pursuant to the Unocal Environmental Agreement, Unocal
is obligated to indemnify the Company for claims made before April 14, 2004.
Except as described above, Unocal
6
<PAGE>
does not have any responsibility for any environmental liabilities arising
out of the ownership or operations of the National Network after the date of
the National Acquisition. There can be no assurance that, if additional
environmental claims or liabilities were to arise under the Unocal
Environmental Agreement, Unocal would not dispute the Company's claims for
indemnification thereunder.
Prior to the TA Acquisition, all of the then 38 TA locations were
subject to Phase I and Phase II environmental assessments, undertaken at BP's
expense. The BP Environmental Agreement provides that, with respect to
environmental contamination or non-compliance with Environmental Laws
identified in the Phase I or Phase II environmental assessments, BP is
responsible for all costs incurred for remediation of such environmental
contamination (the remediation must achieve compliance with the Environmental
Laws in effect on the date the remedial action is completed) and for
otherwise bringing the properties into compliance with Environmental Laws (as
in effect at the date of the TA Acquisition). The BP Environmental Agreement
further provides that BP must indemnify the Company against any other
environmental liabilities that arise out of conditions at, or ownership or
operations of, the TA locations prior to the date of the TA Acquisition. With
respect to liabilities relating to the investigation and remediation of
environmental contamination, BP is obligated to indemnify the Company for
liabilities with respect to which claims are made before December 11, 2004.
With respect to liabilities otherwise relating to non-compliance with
Environmental Laws (for example, equipment), BP is obligated to indemnify the
Company for liabilities with respect to which claims were made before
December 11, 1996. Except as described above, BP does not have any
responsibility for any environmental liabilities arising out of the ownership
or operations of the TA Network after the date of the TA Acquisition. There
can be no assurance that, if additional environmental claims or liabilities
were to arise under the BP Environmental Agreement, BP would not dispute the
Company's claims for indemnification thereunder.
OTHER REGULATION. The Company, the Operators and the Franchisee-Owners
are required to comply with federal, state and local government regulations
applicable to service station and lubrication operations and consumer food
services businesses generally, including those relating to the preparation
and sale of food, minimum wage requirements, overtime, working, health, fire,
safety and sanitation conditions, mandated health insurance coverage and
citizenship requirements, as well as regulations relating to zoning,
construction, business licensing and employment. The Company believes that it
is in material compliance with the provisions applicable to it and has no
knowledge of material violations of these provisions by its Operators and
Franchisee-Owners.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 8,000 people
on a full- or part-time basis. Of this total, approximately 7,730 are
employees at the Company-operated Sites, approximately 210 perform
managerial, operational or support services at the headquarters or elsewhere
and approximately 60 employees staff the Distribution Center. Except for
five employees at one Company-operated Site, all of the Company's employees
are non-union.
ITEM 2. PROPERTIES
The Company's principal executive offices are leased and are located at
24601 Center Ridge Road, Suite 200, Westlake, Ohio 44145-5634. The
Distribution Center is a leased 85,000 square foot facility located at 1450
Gould Boulevard, LaVergne, Tennessee 37086-3535.
Of the 127 Network locations as of December 31, 1997, 83 are
Company-operated Sites, 35 are Leased Sites and the remaining 9 sites are not
owned by the Company. In addition to these operating travel center
locations, the Company has two stand-alone truck maintenance and repair
shops, two closed travel center facilities being held for sale and four
undeveloped travel center sites which are to be developed pursuant to the
Capital Program. Of these total 126 owned sites, the land and improvements
at three are leased, five are subject to ground leases of the entire site and
six are subject to ground leases of portions of such sites. Both the land
and improvements at one of the four sites to be developed will be leased.
The Company considers its facilities suitable and adequate for the purposes
for which they are used.
7
<PAGE>
Each of the TA and National travel centers is a full service facility
located on or near an interstate highway and identified with TA or Unocal 76
signage. As part of the Combination Plan, the National travel centers that
have joined the Network are being rebranded under the TA trademark. All fuel
and nonfuel products and services are generally available 24 hours per day
and 365 days per year.
PROPERTY. The layout of the Company-owned travel centers generally vary
from site to site. The Company-owned facilities are located on properties
averaging 22 acres, of which an average of approximately 19 acres are
developed. The majority of the developed acres contain the main building,
housing one or more restaurants, a travel and convenience store and driver
amenities, a truck maintenance and repair shop, separate truck and car fuel
islands, separate truck and car paved parking and, in some cases, motels. The
remaining developed acres contain landscaping and access roads.
FUEL ISLANDS. Company sites have diesel fuel islands that accommodate
ten pumps on average, most of which are dual fill pumps that can fill each of
a typical truck's two tanks simultaneously. In addition, travel centers
generally have a gasoline island which can accommodate four to eight
automobiles simultaneously. Certain locations also have one and sometimes two
additional convenience stores located at the fuel islands.
TRUCK MAINTENANCE AND REPAIR SHOP. Virtually all travel centers have
truck maintenance and repair shops nearly all of which operate 24 hours per
day and 365 days per year. The typical travel center repair shop has between
two and four service bays, a parts storage room and fully trained mechanics
on duty at all times. These shops offer extensive maintenance and emergency
repair and road services, from basic services such as oil changes and tire
repair to specialty services such as diagnostics and repair of air
conditioning, air brake and electrical systems.
MAIN BUILDING. The main building at each travel center contains a full
service and, in many instances, one or more fast food restaurants; a travel
and convenience store; a fuel desk; driver amenity areas, including a lounge,
television room, private showers and laundry; and ATM machines, as well as
office space and training rooms for the employees of the travel center. As
part of the Capital Program, the Company has allocated funds to expand the
main building floor space for a majority of the former National Network sites
that have been converted to the Network in order to create adequate space
within the main building to implement the Company's fast food program or to
increase the size of the travel centers' store or gaming and vending areas.
FULL SERVICE AND FAST FOOD RESTAURANTS. All Company travel centers have
full service restaurants that offer seating for an average of approximately
130 to 155 customers. The TA Network has associated its full service
restaurants with the Company-owned "Country Pride" brand name. The Company
has also promoted the installation of nationally branded fast food
restaurants, such as Burger King, Dunkin' Donuts, Kentucky Fried Chicken,
Long John Silver's, Pizza Hut, Sbarro, Subway and Taco Bell, at its travel
centers. The Company generally attempts to locate fast food offerings within
the main travel center building (as opposed to constructing stand-alone
buildings). As of December 31, 1997, 52 of the 118 Company-owned travel
centers offered at least one nationally branded fast food offering.
TRAVEL AND CONVENIENCE STORE. Each travel center has a travel and
convenience store that caters to truck drivers, motorists, recreational
vehicle and bus customers. The travel and convenience stores sell food and
snack items, beverages, non-prescription drug and beauty aids, batteries,
automobile accessories, music and audio products. In addition to complete
convenience store offerings, the travel and convenience stores also sell
items specifically designed for the truck driver's on-the-road lifestyle,
including laundry supplies and clothing as well as truck accessories. The
typical Company-owned store averages approximately 1,700 square feet.
MOTELS. Thirteen of TA's travel centers currently have Company-owned
motels, with an average capacity of 35 rooms. Eleven of these motels are
operated under franchise grants from nationally branded motel chains,
including DayStop, HoJo Inn and Travelodge. The remaining two motels are TA
branded motels. TA currently remits royalty and advertising fees to its
motel franchisors at rates ranging from 3% to 8% of gross revenues.
8
<PAGE>
ADDITIONAL SERVICES. Travel centers provide professional drivers with
access to specialized business services, including an information center
where drivers can send and receive faxes, overnight mail and other
communications, and a banking desk where drivers can cash checks and receive
funds transfers from fleet operators. Most sites have installed telephone
rooms with 20 to 25 pay telephones with AT&T long distance service. To meet
the personal needs of truck drivers, the typical travel center has designated
"truck driver only" areas, including a television room with a VCR and
comfortable seating for drivers, a barber shop, a laundry area with washers
and dryers, 6 to 12 private showers and dressing rooms. Travel centers
located in Louisiana and Nevada also feature gaming operations. All travel
centers have truck scales.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is a party to litigation in the ordinary
course of its business involving, by way of example, matters such as breach
of contract, actions under PMPA or other franchise regulations, actions under
Environmental Laws, bankruptcy claims, condemnation matters, employment
claims, negligence and other similar claims. Certain of such claims are
covered by the Company's third party insurance policies or indemnification
agreements with BP or Unocal. While claims for damages in such litigation in
certain instances may not be covered by an insurance policy or an
indemnification agreement or may be in excess of the Company's insurance
coverage, the Company does not expect its existing litigation to have a
material adverse effect on the Company. The following describes the more
significant pending matters in which the Company is involved as of December
31, 1997.
FORTY-NINER TRUCK PLAZA LITIGATION. This action was commenced in
California Superior Court, Sacramento County, on January 28, 1993 by four
Operators of National Leased Sites in California. The complaint asserts
claims on behalf of each of the plaintiffs against the Company, Clipper and
Unocal based upon alleged violations by Unocal of the California Business and
Professions Code and of an alleged contract by failing to provide the
plaintiffs with a bona fide offer or right of first refusal to purchase their
truckstops in connection with the sale of the plaintiffs' truckstops by
Unocal to the Company. Two of the plaintiffs settled their claims prior to
commencement of the trial. The claims of two plaintiffs, who are franchisees
of National in Sacramento and Santa Nella, California, were tried, and the
jury rendered a verdict awarding $4.0 million in compensatory damages jointly
and severally against the Company, Unocal and Clipper, and assessing punitive
damages against them in the amount of $1.5 million, $7.0 million and $1.6
million, respectively. On August 1, 1995, the court granted the defendants'
motions for a new trial on all issues, although it denied defendants' motions
for judgment notwithstanding the verdict. On October 22, 1997, the California
Court of Appeal filed a decision affirming the trial court's orders granting
a new trial and denying defendants' motions for judgment notwithstanding the
verdict. The Court of Appeal also reversed an order of the trial court
granting a nonsuit on plaintiffs' claim against the Company and Clipper for
civil conspiracy. The California Supreme Court has denied review. No date
has been set for retrial. Pursuant to the asset purchase and related
agreements between the Company and Unocal, the Company believes that Unocal
is required to indemnify it for attorneys' fees and compensatory damages.
Unocal has contested certain of the amounts comprising the Company's claim
for indemnification. The indemnification agreement between the Unocal
Entities and the Company does not by its terms cover punitive damages. The
Company entered into an agreement indemnifying Clipper in connection with the
Company's purchase of the properties in the National Network, and Clipper has
asserted and the Company has concurred that this agreement obligates the
Company to pay any compensatory and punitive damages assessed against Clipper.
9
<PAGE>
CHARLESTON, WEST VIRGINIA LITIGATION. This action was commenced on
April 17, 1996 in the Circuit Court of Berkeley County, West Virginia. The
amended complaint, brought on behalf of eighteen National Operators, alleges
that the Company's fuel pricing policies and practices violate the PMPA and
the Uniform Commercial Code and constitute a breach of the contractual duty
of good faith and fair dealing and unjust enrichment. The amended complaint
also asserts claims of fraud and fraud in the inducement, apparently based on
alleged representations made by the Company concerning fuel pricing. The
amended complaint asserts claims against the Company, Clipper and certain
present and former directors and officers of the Company, and seeks actual
and punitive damages in an unspecified sum. The Company has removed the case
to federal court, and the court has granted the Company's motion to transfer
the case to federal court in Nashville, Tennessee.
The Company has entered into settlement agreements with 13 of the
plaintiffs pursuant to which the claims of those plaintiffs have been
dismissed with prejudice.
On March 31, April 1 and April 7, 1997, three of the plaintiffs filed
motions for a preliminary injunction. The motions sought an order requiring,
among other things, that the Company sell to the movants all of the movants'
requirements of diesel fuel at a price per gallon of not more than two cents
above the Oil Price Information Service average price under the terms of the
Company's existing lease and franchise agreements. In addition, on April 22,
1997, two of the movants filed a motion seeking a temporary restraining order
for substantially the same relief. On May 21, 1997, the court denied the
plaintiffs' motions. Plaintiffs appealed the trial court's denial of their
motions to the United States Courts of Appeals for both the Fourth and the
Sixth Circuits. By order dated August 1, 1997, all proceedings in the
district court were stayed pending the completion of all appeals. On
September 11, 1997, the Fourth Circuit dismissed plaintiffs' appeal for lack
of jurisdiction. On December 16, 1997, the Sixth Circuit dismissed
plaintiffs' appeal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION. The outstanding shares of Common Stock of the
registrant were issued in transactions not involving any public
offering. As a result, there is no public market for the registrant's
Common Stock.
(b) HOLDERS. As of March 15, 1998, the outstanding shares of Common
Stock were held of record by 48 stockholders, of which 27
stockholders have their shares included in a voting trust (see
Item 13--"Certain Relationships and Related Transactions").
(c) DIVIDENDS. The registrant's senior indebtedness prohibits, except
in very limited circumstances, the payment of cash dividends on, and
sets limits on redemptions and repurchases of, the registrant's
Common Stock. In addition, the indenture to which the registrant is
a party prohibits, prior to April 1, 2007, the payment of cash
dividends on, Uand sets limits on redemptions and repurchases of,
the registrant's Common Stock. The registrant has not paid any cash
dividends to holders of Common Stock and does not expect to declare
or pay cash dividends to holders of Common Stock in the foreseeable
future.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for
the Company. As discussed elsewhere in this Report, such data presents the
Company's investment in TA as net assets of subsidiary held for disposition
for the period from January 1, 1994 to September 30, 1996. Accordingly,
given the Company's decision to retain TA and pursue the Combination Plan,
such data should be read in conjunction with "Management's Discussion and
Analysis" and the audited financial statements and related notes thereto of
the Company included elsewhere in this Report in order to view what the
Company's results would have been had TA been fully consolidated in 1996 and
1995.
<TABLE>
<CAPTION>
THE COMPANY (1)
---------------------------------------------------------------------------
OPERATING
PERIOD
APRIL 15, 1993
YEAR ENDED DECEMBER 31, THROUGH
------------------------------------------------------- DECEMBER 31,
1997 1996 1995 1994 1993 (2)
---------- ---------- --------- ---------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Fuel. . . . . . . . . . . . . . . . . . . . . . $ 708,637 $ 550,212 $ 376,148 $ 396,748 $ 306,141
Nonfuel . . . . . . . . . . . . . . . . . . . . 293,843 99,991 27,948 18,887 9,193
Rent and royalties. . . . . . . . . . . . . . . 36,848 46,055 51,801 51,740 33,153
---------- ---------- ---------- ---------- ----------
Total revenues. . . . . . . . . . . . . . . . $1,039,328 $ 696,258 $ 455,897 $ 467,375 $ 348,487
Gross profit (excluding depreciation) . . . . . . . $ 266,244 $ 127,564 $ 79,074 $ 76,227 $ 52,706
Income from operations. . . . . . . . . . . . . . . $ 22,345 $ 24,118 $ 29,884 $ 29,496 $ 21,841
Extraordinary loss. . . . . . . . . . . . . . . . . $ (5,554) $ - $ - $ - $ -
Net income (loss) . . . . . . . . . . . . . . . . . $ (5,763) $ 5,533 $ 9,926 $ 9,692 $ 7,488
Income (loss) before extraordinary item
per common share:
Basic . . . . . . . . . . . . . . . . . . . . . $ (7.56) $ (0.81) $ 3.04 $ 3.43 $ 6.08
Diluted . . . . . . . . . . . . . . . . . . . . $ (7.56) $ (0.81) $ 0.57 $ 0.64 $ 1.55
BALANCE SHEET DATA (END OF PERIOD):
Total assets. . . . . . . . . . . . . . . . . . . . $ 507,792 $ 425,889 $ 297,231 $ 294,961 $ 284,168
Total debt (net of unamortized discount). . . . . . $ 290,125 $ 224,435 $ 139,991 $ 153,938 $ 157,310
Mandatorily redeemable preferred
stock(3). . . . . . . . . . . . . . . . . . . . $ 61,404 $ 53,885 $ 47,286 $ 41,495 $ 36,431
Working capital . . . . . . . . . . . . . . . . . . $ 86,103 $ 23,766 $ 9,872 $ 18,421 $ 23,784
OTHER FINANCIAL AND OPERATING DATA:
Total diesel fuel sold (in thousands of
gallons). . . . . . . . . . . . . . . . . . . . 975,495 713,754 641,901 663,777 446,972
Capital expenditures, excluding
acquisitions of network assets. . . . . . . . . $ 60,818 $ 20,545 $ 19,930 $ 10,993 $ 2,986
EBITDA(4) . . . . . . . . . . . . . . . . . . . . . $ 63,553 $ 60,940 $ 63,198 $ 69,047 $ 51,858
Cash flows (used in) provided by:
Operating activities. . . . . . . . . . . . . . $ 41,670 $ 27,620 $ 19,436 $ 26,357 $ 589
Investing activities. . . . . . . . . . . . . . $ (37,987) $ (22,254) $ (17,601) $ (10,993) $ (191,027)
Financing activities. . . . . . . . . . . . . . $ 44,294 $ 15,222 $ (14,141) $ (3,446) $ 193,968
Consolidated coverage ratio (5) . . . . . . . . . . 2.08 2.82 2.95 3.12 3.29
NUMBER OF SITES (END OF PERIOD)(6):
Company-Owned and Operated Sites. . . . . . . . . . 83 58 46 39 40
Company-Owned and Leased Sites. . . . . . . . . . . 35 77 89 96 95
Franchisee-Owned Sites. . . . . . . . . . . . . . . 9 35 38 41 41
---------- ---------- ---------- ---------- ----------
Total Sites . . . . . . . . . . . . . . . . . . 127 170 173 176 176
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
11
<PAGE>
Notes to Selected Consolidated Financial Data
(1) For the period from January 1, 1994 to September 30, 1996, the Company's
investment in TA was presented as net assets of subsidiary held for
disposition and TA's results of operations were excluded from the Company's
consolidated results of operations until December 31, 1994 and subsequently
included therein as a single amount in the Company's consolidated income
statement through September 30, 1996. Effective September 30, 1996, the
decision was made to retain TA and, subsequently, the Company chose to
pursue the Combination Plan. Accordingly, at such time TA was no longer
carried as net assets of subsidiary held for disposition. At that date, the
carrying value of the Company's investment in TA of $44.6 million was
allocated to the identifiable assets and liabilities and was based on the
estimated current fair values at that date. In addition, the results of
operations and cash flows of TA are included in the consolidated results of
operations and cash flows of the Company from October 1, 1996.
(2) Effective April 14, 1993 and December 10, 1993, the Company acquired
National and TA, respectively. Although the Company was organized in
1992, business operations did not commence until April 15, 1993, when
the National Acquisition was consummated. Prior to the National
Acquisition, the only activities of the Company were the recruitment of
employees and the negotiation of the National Acquisition. Expenses
incurred during the Company's pre-operating period are immaterial and
have been included in the results for the operating period from April
15, 1993 through December 31, 1993.
(3) "Mandatorily redeemable preferred stock" is comprised of two series of
convertible preferred stock which accumulate dividends semi-annually at
a compound annual rate of 13.5%. Both series are mandatorily redeemable
in 2008 and are held by certain members of the Investor Group.
(4) "EBITDA" is defined herein as income from operations plus the sum of
depreciation; amortization; refinancing, transition and development
costs; gains and losses on sales of property and equipment; and other
noncash charges, and is presented because it is commonly used by
certain investors and analysts to analyze and compare operating
performance, and to determine a company's ability to service and incur
debt. EBITDA should not be considered in isolation from, or a
substitute for, net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a
measure of profitability or liquidity: The EBITDA amounts herein
present the Company's results as though TA had not been accounted for
as a subsidiary held for disposition and had, instead, been fully
consolidated (see Note 1 above).
(5) This ratio is computed by dividing EBITDA by the sum of gross interest
expense and amortization of debt discount.
(6) The number of sites data shown for all years reflects the total number
of Company sites in the Existing Networks.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the audited
financial statements.
OVERVIEW
The Company is a holding company which, through its wholly-owned
subsidiaries, owns, operates and franchises more travel centers in the United
States than any of its competitors with 127 network sites nationwide,
including 118 Company-owned locations. The Company currently operates a
network of 121 travel centers in 36 states under the "TravelCenters of
America" or "TA" brand names and a network of six travel centers in four
states under the licensed "Unocal 76" and related brand names.
12
<PAGE>
The Company was formed in December 1992 to facilitate the National
Acquisition in April 1993. In December 1993, the Company acquired the TA
Network. In connection with the TA Acquisition, the Investor Group and
certain members of TA's management granted an option to the Company whereby
the Company could repurchase its equity held by such Investor Group and
management members in exchange for consideration consisting of cash and all
of the equity of TA (the "Repurchase"). If the Repurchase had been
consummated, the Company and the National Network would have been owned by
the Operator and Franchisee-Owner stockholders of the Company and certain
members of National's management, and TA would have been owned by the
Investor Group and certain members of TA's management. During the nine
months ended September 30, 1996, TA and National were separately managed and
financed and in the Company's consolidated financial statements TA was
presented as net assets of subsidiary held for disposition and TA's results
of operations were included in the Company's consolidated financial
statements as a single amount. Effective September 30, 1996, the decision
was made to retain TA, and, subsequently, the Company chose to pursue the
combination of the TA and National networks. After September 30, 1996, TA
was no longer carried as net assets of subsidiary held for disposition and
TA's results of operations were consolidated with the Company's.
Historically, under the Company's ownership, National operated
principally as a franchisor. As a result, its revenues consisted primarily
of wholesale diesel fuel sales to Operators and Franchisee-Owners, rent from
Operators of Leased Sites and nonfuel franchise royalty payments. Since
early 1995, National has increased its number of Company-operated Sites as
certain Operators terminated their franchise and lease agreements. In
contrast, TA operated principally as an owner-operator of travel centers.
Consequently, while TA derived the majority of its revenues from retail
diesel fuel sales, the majority of its gross profit has been derived from,
and its principal strategic focus has been, the sale of higher margin nonfuel
products and services.
COMBINATION PLAN
During the year ended December 31, 1997, the Company incurred
approximately $15.2 million of expenses related to the Combination Plan.
These costs, identified as transition expenses in the Company's consolidated
financial statements, are expected to total approximately $20.0 million, of
which approximately $2.5 million is expected to be incurred in 1998. These
expenses relate to, among other things, (i) employee separations, (ii) the
costs to convert National Network travel centers to Network travel centers,
(iii) the costs to dispose of travel centers or terminate lease or franchise
agreements, and (iv) the costs of integrating the management and operations
of the Existing Networks into the Network, including relocation, travel,
training, and legal expenses.
EMPLOYEE TERMINATIONS
As a result of the Combination Plan, which was approved by the Board of
Directors in January 1997, most of National's corporate-level employees have
been or will be terminated. In January 1997, certain of National's executive
officers resigned and related severance costs of $0.8 million were
recognized. In May 1997, management finalized its plans regarding employee
terminations and, accordingly, the related costs were recognized. This
expense totaled approximately $1.8 million. Pursuant to the Company's plans,
111 employees are to be terminated, 106 of which had been severed through
December 31, 1997. Through December 31, 1997, approximately $2.0 million of
termination benefits had been paid to such terminated employees. The
remaining accrual for termination benefits of approximately $0.6 million at
December 31, 1997 will be substantially paid by March 1998.
NETWORK RATIONALIZATION
Throughout 1997, the Company continued to refine and execute its plans
for improving the profitability of the Network through rebranding of its
sites under the TA brand name and rationalizing the number and locations of
its travel centers. For the year ended December 31, 1997, 15 National Leased
Sites were sold to the Operators of those sites for a net gain on sale of
$11.9 million. The Company anticipates additional site sales during 1998 as
it continues rationalizing the Network. During the year ended December 31,
1997, relationships with the Franchisee-Owners of 27 Franchisee-Owner Sites
were terminated. Beginning in July 1997, those National Network franchisees
whose sites have been selected for inclusion in the Network began to convert
their franchises to TAFSI
13
<PAGE>
from National, a process that includes rebranding of the travel centers,
installation of TA's store and shop programs, training of the franchisees in
TA's operating procedures and revisions to the franchise agreements and,
where applicable, lease agreements, such that there will be an increase in
the royalty the Company receives as a percentage of the franchisees' nonfuel
revenues and a decrease in fixed rent revenue. The Company expects these new
agreements will result in reduced revenue in the short term, but that in the
long term increased franchisee nonfuel revenues will result in a net increase
in the Company's revenue. Through December 31, 1997, 29 National franchisees
had signed TAFSI franchise agreements.
SITE CONVERSIONS
During 1997, the Company converted 27 National Leased Sites to
Company-operated Sites by acquiring the travel center operations from the
related Operators. Such conversions typically result in decreased rent
revenue and increased operating expenses, offset to varying degrees for each
individual site by increased fuel and nonfuel revenues.
Management expects that, over time, the increased revenues will exceed
the decreases in rent revenue and increases in operating expenses, especially
as TA management, marketing, operations, safety and training programs are
fully implemented at the former National Company-operated Sites converted to
TA operation. In June 1997, 14 of the National Company-operated Sites were
converted to TA Company-operated Sites, and in July 1997, the then remaining
21 National Company-operated Sites were so converted. National Leased Sites
subsequently converted to Company-operated Sites were converted to TA
Company-operated Sites at the time of the acquisitions of the site operations
from the respective Operators. During the first few months of operation
after both the conversion from a Leased Site and the conversion to a TA
branded site (with respect to all former National travel centers), the
operating results of each converted travel center are adversely affected by
the costs (such as for maintenance and supplies) of bringing the travel
centers into compliance with TA's standards. In addition, the Company has
chosen to increase the number of employees at the converted sites in order to
improve customer service and increase revenues and, as a consequence,
employees were hired in anticipation of the expected revenue increases. For
these reasons, the Company anticipates that the operating results of these
converted travel centers will continue to improve in 1998.
The following table sets forth the number and type of ownership and
management of the travel centers operating in each of the Company's networks.
<TABLE>
<CAPTION>
TA NATIONAL
-------------- --------------
DECEMBER 31, DECEMBER 31,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Company-owned and operated sites(1) 83 40 - 18
Company-owned and leased sites 29 - 6 77
---- ---- ---- ----
Company-owned sites 112 40 6 95
Franchisee-owner sites 9 8 - 27
---- ---- ---- ----
Total 121 48 6 122
---- ---- ---- ----
---- ---- ---- ----
Stand-alone shops 2 2 - -
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
(1) Excludes two closed sites.
14
<PAGE>
The following discussions and analyses of Results of Operations and of
Liquidity and Capital Resources present detail on the Company's combined
results, which differ from the Company's consolidated results reflected in
the audited financial statements for each of the two years ended December 31,
1996, as a result of the presentation of TA as assets of subsidiary held for
disposition during all or a portion of those periods. The following table
and the 1996 and 1995 amounts discussed in the Results of Operations and
Liquidity and Capital Resources sections present the Company's consolidated
amounts for 1996 and 1995 as though TA had not been held for disposition and
had instead been fully consolidated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
-------- -------- ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
Fuel $ 708.6 $ 752.2 $590.4
Nonfuel 293.8 236.8 198.6
Rent and royalties 36.8 47.4 53.3
-------- -------- ------
Total revenues 1,039.3 1,036.4 842.3
Cost of revenues (excluding depreciation) 773.1 803.5 634.7
-------- -------- ------
Gross profit (excluding depreciation) 266.2 232.9 207.6
Operating expenses 168.3 129.4 102.2
Selling, general and administrative expenses 35.6 42.8 43.3
Refinancing, transition and development costs 15.2 2.7 1.9
Depreciation and amortization 35.8 27.0 22.6
(Gain) loss on sales of property and equipment (11.2) 1.5 0.4
Other operating (income) expense, net 0.2 (0.2) (0.2)
-------- -------- ------
Income (loss) from operations 22.3 29.7 37.4
Interest (expense), net (22.9) (20.8) (20.9)
-------- -------- ------
Income (loss) before income taxes and extraordinary item (0.6) 8.9 16.5
Provision (benefit) for income taxes (0.3) 3.4 6.6
-------- -------- ------
Income (loss) before extraordinary item (0.3) 5.5 9.9
Extraordinary item (net of taxes) (5.5) - -
-------- -------- ------
Net (loss) income $(5.8) $5.5 $9.9
-------- -------- ------
-------- -------- ------
EBITDA $63.6 $60.9 $63.2
-------- -------- ------
-------- -------- ------
</TABLE>
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
REVENUES
The Company's consolidated revenues for 1997 were $1,039.3 million,
which represents an increase over the prior year of $2.9 million.
Fuel revenue for 1997 reflects a decrease from 1996 of $43.6 million, or
5.8%. The decrease resulted from an approximately 5.4% decrease in average
retail diesel prices, partially offset by an increase in diesel gallons sold
of 7.7 million gallons (0.8%). The decrease in average retail prices is a
result of petroleum industry conditions and competitive pressures. The
slight volume increase stems from the success of fleet marketing efforts,
including the effects of the Pathway Program (a diesel fuel hedging program
offered to fleets in conjunction with Simons Petroleum, Inc.) and the TABB
relationship.
15
<PAGE>
Nonfuel revenue in 1997 has increased 24.1% over 1996, primarily due to
the increased number of Company-operated Sites offering nonfuel products and
services: from December 31, 1996 through December 31, 1997, 27 Leased Sites
were converted to Company-operated Sites. In addition, a new TA site was
opened in September 1996, and two stand-alone TA shops were opened in
mid-1996.
Rent and royalty revenue for 1997 decreased 22.4% from 1996 as a result
of (i) conversions of Leased Sites to Company-operated Sites, (ii) sales of
Leased Sites and (iii) the rent reductions that became effective when former
National franchisees signed new franchise and lease agreements with the
Company. Rent revenue is expected to continue to decline in 1998, reflecting
the full year effects of the 1997 activity. The new franchise and lease
agreements provide for reduced fixed rents but increased franchise royalty
rates to be applied to nonfuel revenues generated by the franchisees'
operations. New franchise and lease agreements were signed by 29 Operators
during 1997.
GROSS PROFIT
The Company's gross profit for 1997 was $266.2 million, compared to
$232.9 million for 1996, an increase of $33.3 million, or 14.3%. The increase
in the Company's gross profit was primarily due to increases in nonfuel
revenues and diesel fuel margins, partially offset by decreased rent and
royalty revenue, resulting from the conversions of travel centers from Leased
Sites to Company-operated Sites, sales of Leased Sites and terminations of
Franchisee-Owner Sites during 1997.
OPERATING AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses include the direct expenses of Company-operated Sites
and selling, general and administrative expenses ("SG&A") include corporate
overhead and administrative costs.
The Company's operating expenses increased by $38.9 million, or 30.1%,
to $168.3 million for 1997, as compared to 1996. The increase reflects the
increased number of Company-operated Sites during 1997 as a result of the
1996 addition of three new-build TA sites (including the two stand-alone
shops) and the conversion of 27 Leased Sites to Company-operated Sites during
1997.
The Company's SG&A decreased from $42.8 million in 1996 to $35.6 million
in 1997, a 16.8% decrease, primarily as a result of personnel reductions at
National pursuant to the Combination Plan, partially offset by increased
staffing in the operational support and business development areas at TA, as
well as decreased occupancy and other expenses stemming from the Combination
Plan.
REFINANCING, TRANSITION AND DEVELOPMENT COSTS
Refinancing, transition and development costs for 1997 increased from
$2.7 million for 1996 to $15.2 million. The 1997 costs were incurred in
effecting the combination of National and TA, including recognition of
employee termination benefits of $2.6 million, while the 1996 amount is
comprised of $1.4 million of expenses incurred in a failed refinancing
attempt by National and $1.3 million incurred at TA in connection with an
attempted acquisition and the design of the travel center prototype.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of $35.8 million for 1997 increased by
$8.8 million from 1996. This increase was mainly due to impairment charges
of approximately $7.5 million included in 1997 depreciation and amortization
expense and the effects of the capital expenditures made during 1996 and
1997, as well as the increased amortization of deferred financing costs
stemming from the Refinancing.
16
<PAGE>
INCOME FROM OPERATIONS
Income from operations for the Company for 1997 was $22.3 million as
compared to $29.7 million in 1996, a decrease of $7.4 million or 24.9%. The
decrease is attributable to the transition expenses and impairment charges
incurred in 1997, as well as the effect of decreased rent revenue and
increased operating costs resulting from the conversions of Leased Sites to
Company-operated Sites, partially offset by increased nonfuel sales margins
as a result of the site conversions, gains from the sales of Leased Sites and
headquarters synergies, all of which is due to the execution of the
Combination Plan throughout 1997. EBITDA for the Company for 1997 was $63.6
million, as compared to $60.9 million for 1996. The increased EBITDA in 1997
is largely derived from increased gross profit as a result of a greater
number of Company-operated Sites and synergies realized in SG&A expense,
partially offset by reduced rent revenue, primarily as a result of the
Combination Plan.
INTEREST (EXPENSE), NET
Interest expense for 1997 was $22.9 million, $2.1 million higher than
for 1996 as a result of the increased net debt balance after consummation of
the Refinancing (discussed in Liquidity and Capital Resources below) on March
27, 1997.
OTHER ITEMS
The extraordinary loss of $5.5 million in 1997 results from the
refinancing of the Company's indebtedness on March 27, 1997 and represents
the write-off of the then remaining unamortized balances of deferred
financing costs ($7.8 million) and debt discount ($1.3 million) related to
the prior indebtedness. The reported amount of the extraordinary loss is net
of the applicable income tax benefit of $3.6 million
1996 COMPARED TO 1995
REVENUES
The Company's revenues for 1996 were $1,036.4 million compared to $842.3
million for 1995, an increase of $194.1 million or 23.0%.
The increased revenue was primarily attributable to a $161.8 million, or
27.4%, increase in fuel revenue, in conjunction with a $38.2 million, or
19.2%, increase in nonfuel sales and a $5.9 million, or 11.1%, decrease in
rent and royalty income.
Increases in fuel revenue were derived from increased volume and
increased average selling prices. The volume increases resulted from
increases in sales to fleets (including increased sales through the Pathway
Program) and the addition of one TA travel center in November 1995 and
another in September 1996, partially offset by lost volume from terminations
of National Franchisee-Owner Sites.
The nonfuel revenue increase is primarily attributable to the 1996
conversion of eleven Leased Sites to Company-operated Sites, and full year
effects of six such conversions in 1995, as well as the addition of a new
travel center in November 1995, another new travel center in September 1996,
two stand-alone shops opened in mid-1996 and the addition of 14 fast food
kiosks during 1996.
The decrease in rent and royalty is a result of the Leased Site
conversions described previously.
GROSS PROFIT
The Company's gross profit for 1996 was $232.9 million, compared to
$207.6 million for 1995, an increase of $25.3 million or 12.2%. The increase
in gross profit was primarily due to an increase in diesel fuel volume as
described above and an increase in nonfuel revenues which is primarily a
result of the site conversions described above, partially offset by decreased
rent and royalty income as a result of those site conversions.
17
<PAGE>
OPERATING AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's operating expenses increased from $102.2 million in 1995
to $129.4 million in 1996. The Company's SG&A decreased from $43.3 million
in 1995 to $42.8 million in 1996. The operating expense increase was
associated with an increase in the number of Company-operated Sites, due to
the site conversions described above as well as the 1996 addition of one new
travel center and two stand-alone truck maintenance and repair shops. The
decrease in SG&A was primarily due to a reduction in bad debt expense and
reduced levels of financial assistance to Operators and Franchisee-Owners,
partially offset by costs of expanded field support and training as well as
planning and development costs.
REFINANCING, TRANSITION AND DEVELOPMENT COSTS
Refinancing, transition and development costs increased from $1.9
million in 1995 to $2.7 million in 1996. Costs incurred at National for never
competed refinancing attempts were $1.4 million in 1996, compared to $0.9
million for 1995. In addition, at TA, transition and development expenses
for 1996 were $1.3 million compared to $1.0 million for 1995. In 1996, these
costs were incurred in pursuit of a potential acquisition as well as in
connection with the design of the TravelCenter prototype. In 1995, the costs
primarily included expenses incurred during TA's development of its strategic
plan and as TA transitioned to a stand-alone operation.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for 1996 and 1995 were $27.0 million and
$22.6 million, respectively, an increase of $4.4 million. The increased
level of depreciation is related to the capital expenditures discussed below.
INCOME FROM OPERATIONS
Income from operations for the Company for 1996 was $29.7 million as
compared to $37.4 million in 1995, a decrease of $7.7 million. The decrease
in income from operations is primarily attributable to the conversion of
Leased Sites to Company-operated Sites. This decrease resulted in part from
start-up costs incurred upon conversion of the Leased Sites and the lack of a
corporate infrastructure at National to manage Company-operated Sites. This
decrease in income from operations at National is also attributable to
distractions associated with the Repurchase. EBITDA decreased from $63.2
million in 1995 to $60.9 million in 1996.
INTEREST (EXPENSE), NET
Interest expense for 1996 was $20.8 million compared to $20.9 million
for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements consist principally of working capital
needs, payments of principal and interest on outstanding indebtedness and
capital expenditures, including expenditures for acquisitions, expansion and
environmental upgrades.
Net cash provided by operating activities totaled $41.7 million in 1997,
$39.5 million in 1996 and $27.3 million in 1995. The increase in net cash
flows provided by operating activities in 1997 compared to 1996 was primarily
due to increased EBITDA in 1997, as discussed previously, partially offset by
growth in working capital requirements as a result of the increased number of
Company-operated Sites and increased interest expense as a result of the
Refinancing.
Net cash used in investing activities for 1997 was $38.0 million versus
$28.5 million in 1996 and $29.5 million in 1995. The amount for 1997
reflects a $46.6 million increase in expenditures related to capital
additions and conversions of Leased Sites to Company-operated Sites, offset
by a $37.0 million increase in proceeds from sales of property and equipment
resulting from the sales of 15 Leased Sites to the respective Operators.
18
<PAGE>
Net cash flows provided by financing activities were $44.3 million in
1997 while for 1996 and 1995 the net cash flows used in financing activities
were $2.8 million and $18.1 million in 1995, respectively. The change in the
amount of financing activity cash flows in 1997 from 1996 was due to the
Company's Refinancing and recapitalization completed in March 1997. Required
debt repayments for the next five years are significantly lower than they
would have been in the absence of the Refinancing.
On March 27, 1997, the Company was refinanced and currently has
outstanding $290.1 million of indebtedness, consisting of $125.0 million
principal amount of Senior Subordinated Notes, $85.5 million principal amount
of Senior Notes and a $79.6 million term loan facility. The Company also has
a $40.0 million revolving credit facility, which, except for $1.5 million
used for letters of credit, was not drawn upon at December 31, 1997. The
Senior Notes have no amortization requirements until 2001, the Senior
Subordinated Notes are due 2007 and the term facility has annual amortization
requirements of $0.5 million until 2004.
The Company expects to invest in excess of $200 million in the Network
between 1997 and the end of 2001 (with approximately $150 million of this
amount expected to be spent by the end of 1998) in connection with the
Capital Program to upgrade, rebrand, reimage and increase the number of
travel centers. Approximately $50 million of the capital expenditures
intended to be made represents normal ongoing maintenance and related capital
expenditures. The Company has budgeted additional expenditures in order to
add new sites, rebrand and reimage sites, add additional nonfuel offerings
(such as fast food offerings) at existing sites, make required environmental
improvements, and purchase, install and upgrade its information systems.
The Company anticipates that it will be able to fund its 1998 working
capital requirements and capital expenditures primarily from funds generated
from the Refinancing, funds generated from operations, funds generated from
asset sales, and, to the extent necessary, from borrowings under the
revolving facility. The Company's long-term liquidity requirements,
including capital expenditures, are expected to be financed by a combination
of internally generated funds, borrowings and other sources of external
financing as needed.
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to various
Environmental Laws.
The Company owns and operates USTs and ASTs at Company-operated Sites
and Leased Sites which must comply with certain statutory and regulatory
requirements by December 22, 1998. The Company is making necessary upgrades
to comply with those requirements. The Company expects to spend a total of
approximately $6 million to $8 million in 1998 to complete the upgrade of
USTs and other environmental related costs. In addition, the Company has
estimated the current ranges of remediation costs at currently active sites
and what it believes will be its ultimate share for such costs after required
indemnification and remediation is performed by Unocal and BP under the
respective Environmental Agreements and has a reserve for such matters of
$0.9 million as of December 31, 1997. While it is not possible to quantify
with certainty the environmental exposure, in the opinion of management, the
potential liability, beyond that considered in the reserve, for all
environmental proceedings, based on information known to date, will not have
a material adverse effect on the financial condition, results of operations
or liquidity of the Company.
"YEAR 2000" ISSUES
The Company has made and will continue to make certain investments in
its software systems and applications to ensure the Company is year 2000
compliant. The Company is currently in the process of evaluating its computer
software and databases to determine the nature and extent of the
modifications that will be required to prevent problems related to the year
2000. The financial impact to the Company has not been and is not
anticipated to be material to its financial position or results in any given
year.
19
<PAGE>
FORWARD-LOOKING STATEMENTS
The Company is making this statement in order to satisfy the "safe
harbor" provision contained in the Private Securities Litigation Reform Act
of 1995. The statements contained in this report that are not statements of
historical fact may include forward-looking statements that involve a number
of risks and uncertainties. Moreover, from time to time the Company may
issue other forward-looking statements. Such forward-looking statements are
made based on management's expectations and beliefs concerning future events
impacting the Company and are subject to uncertainties and factors relating
to the Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the control of the Company,
that could cause actual results of the Company to differ materially from
those matters expressed in or implied by forward-looking statements. The
following factors are among those that could cause actual results to differ
materially from the forward-looking statements: competition from other
travel center and truckstop operators, including additional or improved
services or facilities of competitors; the economic condition of the trucking
industry, which in turn is dependent on general economic factors; diesel and
gasoline fuel pricing; availability of fuel supply; and difficulties that may
be encountered by the Company or its franchisees in implementing the
Combination Plan. The forward-looking statements should be considered in
light of these factors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to commodity price risk and interest rate risk.
The Company's fuel purchase contracts provide for purchase prices based on
average market prices for diesel and gasoline, exposing the Company to
commodity price risk. The Company mitigates this risk exposure in a few
ways, but primarily by maintaining only a few days of inventory on hand and
selling a large portion of its fuel volume under "cost plus" pricing
formulae, which minimize the effect on the Company's margins of sudden sharp
changes in commodity market prices. The Company manages the price exposure
related to sales volumes not covered by cost plus arrangements through the
use, on a limited basis, of derivative instruments designated by management
as hedges of anticipated purchases. The total volume covered by open
derivative contracts during 1997 and at December 31, 1997 was immaterial. In
addition, the fair market value and deferred gains and losses of open
derivative contracts at December 31, 1997 was immaterial. The interest rate
risk faced by the Company results from the highly-leveraged position of the
Company and its level of variable rate indebtedness, the rates for which are
based on short-term lending rates, primarily the London Interbank Offered
Rate. The following table summarizes information about the Company's
financial instruments that are subject to changes in interest rates:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------
FIXED RATE VARIABLE RATE
INDEBTEDNESS INDEBTEDNESS
--------------------------- ----------------------------
WEIGHTED WEIGHTED
PAYMENT AVERAGE PAYMENT AVERAGE
AMOUNT INTEREST RATE AMOUNT INTEREST RATE
----------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Year Ended December 31:
1998 . . . . . . . . . . . . . . $ - $ 500 8.69%
1999 . . . . . . . . . . . . . . - 500 8.69%
2000 . . . . . . . . . . . . . . - 500 8.69%
2001 . . . . . . . . . . . . . . 17,750 8.94% 500 8.69%
2002 . . . . . . . . . . . . . . 17,750 8.94% 500 8.69%
Thereafter. . . . . . . . . . . . . 125,000 10.25% 127,125 8.76%
-------- --------
Total . . . . . . . . . . . . . . . $160,500 9.96% $129,625 8.72%
-------- --------
-------- --------
Fair value. . . . . . . . . . . . . $155,183 $129,625
-------- --------
-------- --------
</TABLE>
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index to Consolidated Financial Statements and Supplementary Data: PAGE
----
<S> <C>
Financial Statements:
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . 22
Consolidated Balance Sheet at December 31, 1997 and 1996. . . . . . . . 23
Consolidated Statement of Income and Retained Earnings for
the three years ended December 31, 1997 . . . . . . . . . . . . . . . 24
Consolidated Statement of Cash Flows for the three years
ended December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . 25
Notes to the Consolidated Financial Statements. . . . . . . . . . . . . 26
Supplementary Data:
Quarterly financial data - unaudited . . . . . . . . . . . . . . . . . . 59
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
TravelCenters of America, Inc.
In our opinion, the consolidated financial statements listed
in the accompanying index, after the restatement described in Note 21,
present fairly, in all material respects, the financial position of
TravelCenters of America, Inc. and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
March 16, 1998
22
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1997 1996
------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,756 $ 23,779
Accounts receivable (less allowance for doubtful accounts of $2,707 for 1997
and $3,502 for 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,433 54,371
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,718 29,082
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,740 3,877
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,256 10,530
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 187,903 121,639
Notes receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,692 2,744
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 286,472 269,366
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,651 19,657
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,786 8,379
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,288 4,104
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $507,792 $425,889
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 14,000
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . 500 17,250
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,035 33,399
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 72,265 33,224
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 101,800 97,873
Commitments and contingencies (Note 17)
Long-term debt (net of unamortized discount) . . . . . . . . . . . . . . . . . . 289,625 193,185
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,985 9,452
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,479 5,914
-------- --------
400,889 306,424
Mandatorily redeemable senior convertible participating preferred stock. . . . . 61,404 53,885
Other preferred stock, common stock and other stockholders' equity . . . . . . . 43,945 50,743
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,554 14,837
-------- --------
45,499 65,580
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $507,792 $425,889
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 708,637 $550,212 $376,148
Nonfuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293,843 99,991 27,948
Rent and royalties . . . . . . . . . . . . . . . . . . . . . . . . 36,848 46,055 51,801
---------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039,328 696,258 455,897
Cost of revenues (excluding depreciation). . . . . . . . . . . . . . 773,084 568,694 376,823
---------- -------- --------
Gross profit (excluding depreciation). . . . . . . . . . . . . . . . 266,244 127,564 79,074
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . 168,334 56,077 12,018
Selling, general and administrative expenses . . . . . . . . . . . . 35,619 31,265 30,965
Refinancing, transition and development costs. . . . . . . . . . . . 15,212 2,197 831
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 35,840 17,838 11,379
(Gain) loss on sales of property and equipment . . . . . . . . . . . (11,244) 1,464 363
Other operating (income) expense, net. . . . . . . . . . . . . . . . 138 (140) (167)
Income of subsidiary held for disposition. . . . . . . . . . . . . . - (5,255) (6,199)
---------- -------- --------
Income from operations . . . . . . . . . . . . . . . . . . . . . . . 22,345 24,118 29,884
Interest (expense), net. . . . . . . . . . . . . . . . . . . . . . . (22,898) (15,236) (13,344)
---------- -------- --------
(Loss) income before income taxes and extraordinary item . . . . . . (553) 8,882 16,540
(Benefit) provision for income taxes . . . . . . . . . . . . . . . . (344) 3,349 6,614
---------- -------- --------
(Loss) income before extraordinary item. . . . . . . . . . . . . . . (209) 5,533 9,926
Extraordinary loss (less applicable income tax benefit of $3,608). . (5,554) - -
---------- -------- --------
Net (loss) income. . . . . . . . . . . . . . . . . . . . . . . . . . (5,763) 5,533 9,926
Less: preferred dividends. . . . . . . . . . . . . . . . . . . . . (7,520) (6,599) (5,791)
Retained earnings beginning of the year:
As previously reported . . . . . . . . . . . . . . . . . . . . . . - 16,994 11,948
Adjustments (Note 21). . . . . . . . . . . . . . . . . . . . . . . - (1,091) (180)
---------- -------- --------
As restated. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,837 15,903 11,768
---------- -------- --------
Retained earnings end of the year. . . . . . . . . . . . . . . . . . $ 1,554 $ 14,837 $ 15,903
---------- -------- --------
---------- -------- --------
Earnings per common share:
Income (loss) before extraordinary item. . . . . . . . . . . . . . $ (7.56) $ (0.81) $ 3.04
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . (5.44) - -
---------- -------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . $ (13.00) $ (0.81) $ 3.04
---------- -------- --------
---------- -------- --------
Earnings per common share - assuming dilution:
Income (loss) before extraordinary item. . . . . . . . . . . . . . $ (7.56) $ (0.81) $ 0.57
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . (5.44) - -
---------- -------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . $ (13.00) $ (0.81) $ 0.57
---------- -------- --------
---------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,763) $ 5,533 $ 9,926
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . 5,554 - -
Net income of subsidiary held for disposition. . . . . . . . . . . - (3,153) (3,754)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 35,840 17,838 11,379
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . (4,330) 394 1,693
Provision for doubtful accounts. . . . . . . . . . . . . . . . . . 1,688 2,545 2,089
(Gain) loss on sale of property and equipment. . . . . . . . . . . (11,244) 1,464 363
Changes in assets and liabilities, adjusted for the effects of
acquisitions of network assets and the reconsolidation of a
subsidiary previously held for disposition:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . (20,773) 5,822 (3,256)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,422 (1,588) 284
Other current assets . . . . . . . . . . . . . . . . . . . . . . 448 (3,617) (4,537)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (4,364) (2,083) 5,043
Other current liabilities. . . . . . . . . . . . . . . . . . . . 42,648 6,005 218
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544 (1,540) (12)
--------- -------- --------
Net cash provided by operating activities. . . . . . . . . . . . . 41,670 27,620 19,436
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of network assets . . . . . . . . . . . . . . . . . . . (15,127) (2,352) (575)
Proceeds from sales of property and equipment. . . . . . . . . . . . 37,958 643 1,404
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (60,818) (20,545) (19,930)
Refund of purchase price . . . . . . . . . . . . . . . . . . . . . . - - 1,500
--------- -------- --------
Net cash used in investing activities. . . . . . . . . . . . . . . (37,987) (22,254) (17,601)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings. . . . . . . . . . . . . . . . . . . . . . 3,750 14,000 -
Revolving loan repayments. . . . . . . . . . . . . . . . . . . . . . (17,750) - -
Long-term debt borrowings. . . . . . . . . . . . . . . . . . . . . . 205,000 - -
Long-term debt repayments. . . . . . . . . . . . . . . . . . . . . . (126,675) (12,375) (14,075)
Proceeds from issuance of stock. . . . . . . . . . . . . . . . . . . 329 39 -
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . (7,456) (751) (66)
Debt issuance costs. . . . . . . . . . . . . . . . . . . . . . . . . (12,904) - -
Reconsolidation of subsidiary previously held for disposition. . . . - 14,309 -
--------- -------- --------
Net cash (used in) provided by financing activities. . . . . . . . 44,294 15,222 (14,141)
--------- -------- --------
Net increase (decrease) in cash. . . . . . . . . . . . . . . . . 47,977 20,588 (12,306)
Cash at the beginning of the year. . . . . . . . . . . . . . . . . . . 23,779 3,191 15,497
--------- -------- --------
Cash at the end of the year. . . . . . . . . . . . . . . . . . . . . . $ 71,756 $ 23,779 $ 3,191
--------- -------- --------
--------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION AND SUMMARY OF OPERATING STRUCTURE
The Company, through its operating subsidiaries, is a nationwide
marketer of truck and auto fuel and related products and services through two
networks of full-service travel centers (121 operated under the "TA" and
"TravelCenters of America" trademarks (the "TA Network") and six operated
under the "Unocal 76" trademark (the "National Network")) in 36 states. Of
the network locations at December 31, 1997, the Company owns or leases 118
locations, 35 of which are leased to independent lessee-franchisees
("Operators") of the Company ("Leased Sites"), and 83 of which are operated
by the Company ("Company-operated Sites"). Nine locations are owned or
leased and operated by independent franchisees ("Franchisee-Owners") of the
Company ("Franchisee-Owner Sites"). The Company purchases and resells diesel
fuel, gasoline and other travel center products and services to consumers,
commercial fleets, operators and independent franchisees; provides fleet
credit card and customer information services through its proprietary ACCESS
76 and STAR billing systems; conducts centralized purchasing programs;
creates promotional programs; and, as a franchisor, assists the Operators and
Franchisee-Owners in providing service to commercial fleets and the motoring
public.
The Company was incorporated on December 2, 1992 as National/Auto
Truckstops Holdings Corporation. The Company's name was changed to
TravelCenters of America, Inc. in March 1997. In April 1993, the Company
acquired (the "National Acquisition") the National Network assets from a
subsidiary of Unocal Corporation ("Unocal") and in December 1993 acquired
(the "TA Acquisition") the TA Network assets from subsidiaries of The British
Petroleum Company p.l.c. ("BP").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The TA Acquisition required the consent of the operators and independent
franchisees who were holders of the Company's former Class A Common Stock
(the "Operator Stockholders"). The Operator Stockholders consented to the TA
Acquisition and, in connection therewith, the Company was granted an option
to repurchase, for cash and its stock in TA Holdings Corporation ("TAHC"),
all of its equity securities, including its mandatorily redeemable preferred
stock, and warrants not held by the Operator Stockholders and senior
management of National. Accordingly, the Company's consolidated financial
statements presented the net assets of TAHC as held for disposition. The
carrying value thereof represented the purchase price paid to acquire TAHC
plus TAHC's results of operations subsequent to December 31, 1994. TAHC's
results of operations for 1995 and through September 30, 1996 were included
in the Company's consolidated statement of income and retained earnings as a
single amount. Effective September 30, 1996, a decision was made to retain
TAHC and, subsequently, the Company chose to pursue the combination of the
operations of the TA and National Networks. Accordingly, at that date, the
carrying value of the Company's investment in TAHC of $44,637,000 was
allocated to the identifiable assets and liabilities based on the current
fair values as of that date. In addition, the results of operations and cash
flows of TAHC are included in the consolidated results of operations and cash
flows of the Company from October 1, 1996. TAHC had net income of $3,153,000
and $3,754,000 for the nine months ended September 30, 1996 and the year
ended December 31, 1995, respectively.
For a pro forma presentation of the Company's consolidated results of
operations for each of the two years ended December 31, 1996, as though TAHC
had not been held for disposition for the period January 1, 1994 through
September 30, 1996, see Note 22.
26
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
TravelCenters of America, Inc. and its wholly owned subsidiaries, TA
Operating Corporation ("TA"), TA Franchise Systems Inc. ("TAFSI") and
National Auto/Truckstops, Inc. ("National"), and TA Travel, L.L.C., a wholly
owned subsidiary of TA. The Company's 50% investment in TABB L.L.C., a joint
venture which jointly markets to and bills fleet customers for purchases at
the combined networks of the Company and its co-venturer, is accounted for by
the equity method. Intercompany accounts and transactions have been
eliminated. TAHC was consolidated until the time of the Company's
recapitalization (see Note 3) in March 1997, at which time it was merged into
the Company. TAHC had been the parent of TA, which had been the parent of
TAFSI.
REVENUE RECOGNITION
Fuel sales and related costs are recognized at the time of delivery of
motor fuel and other products to customers at either the terminal or the
Leased Sites and Franchisee-Owner Sites and at the time of final sale to
consumers at the Company-operated Sites and at those locations that operated
under fuel consignment agreements.
Franchise and royalty revenues are recognized at the point such revenues
are earned, typically when collectible and when the Company has fulfilled
substantially all of its obligations under the related agreements.
INVENTORIES
Inventories are stated at cost, which approximates market value, cost
being determined on the first in, first out basis for petroleum products and
principally as the weighted average costs for nonfuel merchandise.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, initially determined in
accordance with purchase accounting principles and based largely on
independent professional appraisals. Depreciation is computed on a
straight-line basis over the following estimated useful lives of the assets:
Buildings and site improvement. . . . . . . . 15 years
Pumps and underground storage tank. . . . . . 5-10 years
Machinery and equipment . . . . . . . . . . . 3-10 years
Furniture and fixture . . . . . . . . . . . . 5-10 years
Repair and maintenance costs are charged to expense as incurred, while
major renewals and betterments are capitalized. The cost and related accumulated
depreciation of property and equipment sold, replaced or otherwise disposed are
removed from the accounts. Any resulting gains or losses are recognized in
operations.
27
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DEFERRED FINANCING COSTS AND INTANGIBLE ASSETS
Deferred financing costs were recorded in conjunction with issuing
long-term debt and are being amortized on a basis approximating the interest
method over the lives of the related debt instruments, ranging from five to
ten years. The intangible assets are being amortized on a straight-line basis
over their estimated lives, principally the terms of the related contractual
agreements giving rise to them (see Note 8).
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No.
(SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," impairment charges are recognized when
the carrying values of long-lived assets to be held and used in the business
exceed the estimated undiscounted future cash flows of those assets, and when
the carrying values of long-lived assets to be disposed of exceed the
estimated fair value less cost to sell for those assets. Such impairment
charges are recognized in the period during which the circumstances
surrounding an asset to be held and used have changed such that the carrying
value is no longer recoverable, or during which a commitment to a plan to
dispose of the asset is made. Such tests are performed at the individual
travel center level. In addition, intangible assets are subjected to further
evaluation in accordance with Accounting Principles Board Opinion 17,
"Intangible Assets," and impairment charges are recognized when events and
circumstances indicate the carrying value of the intangible asset exceeds the
future benefit of the asset. Impairment charges are included in depreciation
and amortization in the income statement.
CLASSIFICATION OF COSTS AND EXPENSES
Cost of revenues represents the costs of fuels and other products sold,
including freight. Operating expenses consist primarily of labor,
maintenance, supplies, utilities, warehousing, purchasing and occupancy
costs. Development expenses represent costs incurred to primarily acquire and
establish new Network locations. Refinancing expenses represent nonrecurring
costs incurred in attempts to refinance the Company's indebtedness.
Transition expenses represent the nonrecurring costs incurred by the Company
in connection with effecting the Combination Plan, including severance and
relocation expenses, costs to convert Leased Sites to Company-operated Sites,
costs to dispose of Leased Sites and terminate Franchisee-Owner Sites and
costs to consolidate management and operation of the Company's two networks
into a single network. Costs of advertising are expensed as incurred.
ENVIRONMENTAL REMEDIATION
The Company provides for remediation costs and penalties when the
responsibility to remediate is probable and the amount of associated costs is
reasonably determinable. Generally, the timing of remediation accruals
coincides with completion of a feasibility study or the commitment to a
formal plan of action. If recoveries of remediation costs from third parties
are probable, a receivable is recorded. Accruals are not recorded for the
costs of remediation activities undertaken on behalf of the Company by Unocal
and BP, at Unocal's and BP's sole expense (see Note 17).
INCOME TAXES
Deferred income tax assets and liabilities are established to reflect
the future tax consequences of differences between the tax bases and
financial statement bases of assets and liabilities.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an initial maturity of three months or less to
be cash equivalents.
28
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company grants credit to its customers and may require letters of
credit or other collateral.
DERIVATIVE INSTRUMENTS
On a limited basis, the Company engages in commodity risk management
activities within the normal course of its business as an end-user of
derivative instruments. These commodity-based instruments are used to manage
exposure to price fluctuations related to the anticipated purchase of diesel
fuel and gasoline.
Changes in market value of derivative instruments are deferred and are
subsequently recognized in income in the same period as the underlying
transaction. Recorded deferred gains or losses are reflected within other
current assets or other current liabilities.
At December 31, 1997 and 1996 the amount of open derivative contracts
and the related fair market value and deferred gains and losses were
immaterial.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which estimation is
practicable:
CASH AND SHORT-TERM INVESTMENTS, ACCOUNTS RECEIVABLE AND
ACCOUNTS PAYABLE: The fair values of financial instruments
classified as current assets or liabilities approximate the
carrying values due to the short-term maturity of the
instruments.
LONG-TERM DEBT: The fair value of the Company's fixed-rate
indebtedness that is publicly traded is estimated based on the quoted
price for those notes. The fair value of the Company's fixed-rate
indebtedness that is not publicly traded is estimated based on the
current borrowing rates available to the Company for financings with
similar terms and maturities. The fair values of the Company's
variable-rate indebtedness approximates the carrying value of that
indebtedness. (See Note 11.)
RECLASSIFICATIONS
Certain reclassifications of prior years' data have been made to conform
with the current year presentation.
3. RECAPITALIZATION, RESTRUCTURING AND COMBINATION
On March 27, 1997, the Company was recapitalized and restructured
pursuant to a series of transactions in which (i) the Company's
subsidiaries were restructured such that the Company directly owns its
three subsidiaries, TA, TAFSI and National (the Company's former
subsidiary, TAHC, was merged into the Company as of such date), (ii) the
Company's indebtedness under the old National and TA debt agreements was
refinanced (the "Refinancing"), and (iii) TA and National guaranteed the
Company's indebtedness under its new credit facilities (see Note 11).
Consequent to the early extinguishment of the Company's prior
indebtedness, the Company recognized an extraordinary loss, net of
applicable income taxes, of $5,554,000 as a result of writing off the then
remaining unamortized balances of deferred financing costs and debt
discount related to those prior borrowings of approximately $7,847,000 and
$1,315,000, respectively. The approximately $12,903,000 of financing costs
associated with the Company's new borrowings have been capitalized and will
be amortized over the lives of the related new debt instruments.
29
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As a result of the combination of the Company's two networks under the
existing TA management, most of National's corporate-level employees have
been or will be terminated. In January 1997, certain of National's
executive officers resigned and related severance costs of approximately
$774,000 were recognized. In May 1997 management finalized its plans
regarding the employee terminations and, accordingly, the related expense
of approximately $1,833,000 was recognized. The severance expense, which
totalled approximately $2,607,000 for the year ended December 31, 1997, is
included in the income statement within refinancing, transition and
development costs. Pursuant to the Company's plans, 111 employees have
been or will be terminated. Through December 31, 1997, approximately
$2,032,000 of termination benefits had been paid to the 106 employees
actually terminated. At December 31, 1997, the remaining accrual for
termination benefits, which will be substantially paid by March 1998, was
approximately $575,000.
4. EARNINGS PER SHARE
In 1997 the Company adopted SFAS No. 128, "Earnings Per Share." The
computation of basic earnings per common share is based upon the
weighted-average number of shares of common stock outstanding. Previously
reported earnings per share (EPS) have been restated. A reconciliation of
the income and shares used in the computation follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------------------------------------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before extraordinary item. . . . . . . . . $ (209)
Less: Preferred stock dividends . . . . . . . . . . . . (7,520)
Basic EPS and Diluted EPS
---------
Income (loss) available to common stockholders. . . . $ (7,729) 1,022 $(7.56)
--------- ------ --------
--------- ------ --------
</TABLE>
The assumed conversion of stock options, warrants and convertible series of
preferred stock would have an anti-dilutive effect on earnings per share for
1997. Effective January 1, 1998, 157,000 options to purchase common stock were
granted to management and non-employee directors.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------------------------------------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C>
Income before extraordinary item . . . . . . . . . . . . $ 5,533
Less: Preferred stock dividends . . . . . . . . . . . . (6,599)
Basic EPS and Diluted EPS ---------
Income (loss) available to common stockholders. . . . $ (1,066) $ 1,319 $ (0.81)
--------- ------- ---------
--------- ------- ---------
</TABLE>
30
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The assumed conversion of stock options, warrants and convertible series of
preferred stock would have an anti-dilutive effect on earnings per share for
1996.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------------------------------------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C>
Income before extraordinary item . . . . . . . . . . . . $ 9,926
Less: Preferred stock dividends . . . . . . . . . . . . (5,791)
---------
Basic EPS
Income available to common stockholders . . . . . . . 4,135 1,361 $ 3.04
-------
-------
Effect of Dilutive Securities
Options and warrants. . . . . . . . . . . . . . . . . 140
Convertible preferred stock . . . . . . . . . . . . . 5,729
--------- -----
Diluted EPS
Income available to common stockholders plus
assumed conversions . . . . . . . . . . . . . . . . . $ 4,135 7,230 $ 0.57
--------- ----- -------
--------- ----- -------
</TABLE>
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
Nonfuel merchandise. . . . . . . . . . . . . . . . . . . . . . . $30,883 $26,090
Petroleum products . . . . . . . . . . . . . . . . . . . . . . . 2,835 2,992
Total inventories . . . . . . . . . . . . . . . . . . . . . . $33,718 $29,082
</TABLE>
6. NOTES RECEIVABLE
The Company has notes receivable agreements with certain Operators and
Franchisee-Owners to finance on a long-term basis past due accounts receivable
owed by those customers. Certain of these customers are related parties (see
Note 16). The notes have terms ranging from six months to six years and
principally accrue interest at a variable rate of the prime lending rate plus 2
percent. The Company also has notes receivable from management stockholders
received as partial consideration for purchases of common stock (see Note 14).
These notes have terms of nine years and accrue interest at fixed rates between
4.76 and 6.42 percent.
31
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Notes receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Principal amount of notes outstanding . . . . . . . $2,939 $5,561
Less: allowance for doubtful accounts . . . . . . . 877 1,316
------ ------
2,062 4,245
Less: amounts due within one year . . . . . . . . . 370 1,501
------ ------
Notes receivable, net . . . . . . . . . . . . . . . $1,692 $2,744
------ ------
------ ------
</TABLE>
The amount due within one year is included within other current assets on the
balance sheet.
7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Land and land improvements. . . . . . . . . . . . . $ 51,230 $ 52,028
Buildings and improvements. . . . . . . . . . . . . 206,249 213,573
Machinery, equipment and furniture. . . . . . . . . 58,464 52,225
Construction in progress. . . . . . . . . . . . . . 44,975 8,647
-------- --------
Total cost. . . . . . . . . . . . . . . . . . . . . 360,918 326,473
Less: accumulated depreciation. . . . . . . . . . . 74,446 57,107
-------- --------
Property and equipment, net . . . . . . . . . . . . $286,472 $269,366
-------- --------
-------- --------
</TABLE>
During 1995, the Company received from Unocal a refund of $1,500,000 of
the purchase price paid in 1993 in consideration of property improvements
required by the asset purchase agreement but not yet completed by Unocal.
This amount was recorded as a reduction to property and equipment.
Pursuant to the Combination Plan, nine Company-operated Sites were being
held for sale as of December 31, 1997. Two of these travel centers were
closed in late 1997. The Company expects all of these sales to be completed
within 1998. The total carrying value of these sites at December 31, 1997
was $10,401,000. Based on the Company's estimated sales proceeds and costs
of selling these sites, an impairment charge totalling $559,000 has been
recognized with respect to two of the sites. This impairment charge is
included in depreciation and amortization in the income statement. As
Company-operated Sites during 1997, these nine sites generated income from
operations of $847,000.
32
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Noncompetition agreements. . . . . . . . . . . . . $ 26,200 $ 26,200
Leasehold interest . . . . . . . . . . . . . . . . 1,724 1,724
Trademarks . . . . . . . . . . . . . . . . . . . . 2,313 2,313
Franchise goodwill . . . . . . . . . . . . . . . . 7,348 994
-------- --------
Total cost . . . . . . . . . . . . . . . . . . . . 37,585 31,231
Less: accumulated amortization . . . . . . . . . . 21,934 11,574
-------- --------
Intangible assets, net . . . . . . . . . . . . . . $ 15,651 $ 19,657
-------- --------
-------- --------
</TABLE>
As part of the National and TA Acquisitions, the Company entered into
noncompetition agreements with Unocal and BP pursuant to which Unocal and BP
each agreed to refrain from re-entering the truckstop business for periods of
10 and 7 years, respectively, from the acquisition dates. The intangible
assets related to these noncompetition agreements represent the present
values of the estimated cash flows the Company would lose due to competition
resulting from re-entry of Unocal or BP into the travel center market were
they not constrained from doing so. The intangible assets are being amortized
over the 10 and 7 year periods.
Leasehold interest represents the value, obtained through the TA
Acquisition, of favorable lease provisions at one TA Network location, the
lease for which extended 112 years from the TA Acquisition. The leasehold
interest is being amortized over the 112 year period. Trademarks relates
primarily to the Company's purchase of the "Truckstops of America" and
"Country Pride" trademarks, service marks, trade names and commercial
symbols. The trademarks are being amortized over their estimated economic
life of 15 years.
Franchise goodwill results from the acquisitions during 1997 and 1996 of
the businesses and operating assets related to Leased Sites, and represents
the excess of amounts paid to the related Operators over the fair values of
the tangible assets acquired. This goodwill was being amortized on a
straight-line basis over fifteen years. During the fourth quarter of 1997,
as a result of a review of the operations of the acquired travel centers, an
impairment charge of $6,941,000 was recorded to write off this goodwill.
This charge is included in depreciation and amortization in the income
statement.
9. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Taxes payable, other than income taxes. . . . . . $ 16,605 $ 8,305
Accrued wages and benefits. . . . . . . . . . . . 9,587 4,872
Interest payable. . . . . . . . . . . . . . . . . 4,371 2,525
Other accrued liabilities . . . . . . . . . . . . 41,702 17,522
-------- --------
Total other accrued liabilities . . . . . . . . . $ 72,265 $ 33,224
-------- --------
-------- --------
</TABLE>
33
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. REVOLVING LOAN
As a result of the Refinancing, the Company has available a revolving loan
facility of $40,000,000 (see Note 11). The interest rate for borrowings under
this revolving loan facility is based on either an alternate base rate (ABR)
plus 1.50 percent or an adjusted London Interbank Offered Rate (LIBOR) plus 2.50
percent. After March 27, 1998, if certain conditions are satisfied, the spread
added to the baseline rates will be reduced by 0.25 percent. There were no
borrowings under the new revolving loan facility at December 31, 1997 (although
$1,529,000 was utilized for letters of credit). There were $14,000,000 of
outstanding borrowings at December 31, 1996 under the prior revolving loan
facilities.
11. LONG-TERM DEBT
In March 1997, the Company refinanced its outstanding indebtedness (see
Note 3).
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
INTEREST MATURITY 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Senior secured term loans (a). . . . . . . . . . . . (b) 1999 $ - $ 39,800
Senior secured term loans (c). . . . . . . . . . . . (d) 2000 - 42,000
Senior secured term loans (e). . . . . . . . . . . . (f) 2005 79,625 -
Senior secured notes (g) . . . . . . . . . . . . . . 8.76% 2002 - 65,000
Senior secured notes (h) . . . . . . . . . . . . . . 8.63% 2002 - 25,000
Senior secured notes - Series I (i). . . . . . . . . 8.94% 2002 35,500 -
Senior secured notes - Series II (j) . . . . . . . . (k) 2005 50,000 -
Subordinated notes (l) . . . . . . . . . . . . . . . 12.50% 2003 - 25,000
Subordinated notes (m) . . . . . . . . . . . . . . . 12.00% 2003 - 15,000
Senior subordinated notes (n). . . . . . . . . . . . 10.25% 2007 125,000 -
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . 290,125 211,800
Less: amounts due within one year . . . . . . . . . 500 17,250
Less: unamortized discount. . . . . . . . . . . . . - 1,365
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . $289,625 $193,185
-------- --------
-------- --------
</TABLE>
________________________________
(a) On April 13, 1993, the Company entered into a $100,000,000 Credit Agreement
with a group of banks. This Credit Agreement consisted of three components:
term loans of a maximum $70,000,000, swingline loans not to exceed
$3,000,000, and revolving loans (see Note 10) not to exceed $30,000,000
(including any swingline loans outstanding). No borrowings under the
swingline loan were outstanding at December 31, 1996. This borrowing was
retired as a result of the Refinancing.
(b) Interest accrued at variable rates based on an adjusted LIBOR (5.625% at
December 31, 1996) plus 2 3/4 percent. The average effective interest rates
for the years ended December 31, 1996 and 1995 were 9.5 percent and 9.4
percent, respectively.
34
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(c) On December 9, 1993, the Company entered into a $73,000,000 Credit
Agreement with a group of banks. This Credit Agreement consisted of three
components: term loans of a maximum $53,000,000, swingline loans not to
exceed $3,000,000, and revolving loans (see Note 10) not to exceed
$20,000,000 (including any swingline loans outstanding and letters of
credit issued). There were no borrowings under the swingline loan or
revolving loan commitments. There were $1,529,000 of outstanding letters of
credit under the Credit Agreement at December 31, 1996. This borrowing was
retired as a result of the Refinancing.
(d) Interest accrued at variable rates based on an adjusted LIBOR plus 2 3/4
percent. The average effective interest rates for the years ended
December 31, 1996 and 1995 were 8.9 percent and 9.1 percent, respectively.
(e) On March 21, 1997, in connection with the Refinancing, the Company entered
into a $120,000,000 Credit Agreement with a group of banks. This Credit
Agreement consists of three components: term loans of a maximum
$80,000,000, swingline loans not to exceed $5,000,000, and revolving loans
(see Note 10) not to exceed $40,000,000 (including any swingline loans
outstanding and letters of credit issued). There have been no borrowings
under the swingline loan or revolving loan commitments to date. Payments of
principal, interest and commitment fees related to the Credit Agreement are
scheduled at each quarter end in installments of principal ranging from
$125,000 to $11,750,000, with the first payment due on June 30, 1997, and
the last quarterly payment due on March 27, 2005. Optional prepayments are
allowed under the Credit Agreement and, in addition, annual prepayments of
principal may be required based, among other things, on excess cash flows
generated by the Company. Commitment fees are calculated as 1/2 of 1
percent on the average daily unused amount of the revolving loan
commitment. There were $1,529,000 of outstanding letters of credit under
the Credit Agreement at December 31, 1997.
(f) Interest accrues at variable rates based on either an alternate
base rate (ABR) or an adjusted LIBOR. The rate at which interest
accrues is calculated as either the ABR rate plus 2.0 percent or the
LIBOR rate plus 3.0 percent, each such spread being subject to a
reduction should the Company meet certain conditions. Management has the
option to select which rate is to be applied at the beginning of each
loan period, the term of which varies from 1 month to 6 months. The
Company has met the certain conditions and, accordingly, the spread
added to the baseline rates has been reduced to 1 3/4 percent and 2 3/4
percent, respectively. The interest rate was set on December 31, 1997 at
8.6875 percent for 3 months. The average effective interest rate for
1997 was 8.58 percent.
(g) On April 13, 1993, the Company issued $65,000,000 of Senior Secured Notes.
This borrowing was retired as a result of the Refinancing.
(h) On December 9, 1993, the Company issued $25,000,000 of Senior Secured
Notes. This borrowing was retired as a result of the Refinancing.
(i) On March 21, 1997, in connection with the Refinancing, the Company
issued $35,500,000 of Series I Senior Secured Notes. Interest payments
on these notes are due semiannually on June 30 and December 31.
Optional prepayments are allowed under the note purchase agreement and
required payments are due on June 30, 2001, December 31, 2001, June 30,
2002 and December 31, 2002 in the amount of $8,875,000 each, such
amounts to be reduced by certain other prepayments. In the event of
certain prepayments, the Company may be subject to the make-whole
provision of the note agreement, which requires payment of a prepayment
premium to the holders of the Series I Senior Secured Notes. In
addition, annual prepayments of principal may be required based, among
other things, on excess cash flows generated by the Company.
35
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(j) On March 21, 1997, in connection with the Refinancing, the Company
issued $50,000,000 of Series II Senior Secured Notes. Interest payments
on these notes are due semiannually on March 31 and September 30.
Optional prepayments are allowed under the note purchase agreement and
required principal payments are scheduled at each quarter end in
installments of principal ranging from $5,000,000 to $7,500,000, with
the first payment made on June 30, 2003 and the last quarterly payment
due on March 31, 2005, such amounts to be reduced by certain other
prepayments. In the event of prepayments, the Company may be subject to
the break funding cost provision of the note agreement. In addition,
annual prepayments of principal may be required based, among other
things, on excess cash flows generated by the Company.
(k) Interest accrues at a rate based on an adjusted LIBOR. The rate at which
interest accrues is calculated as the LIBOR rate plus 3.0 percent, which
rate can be reduced after March 27, 1998 by 0.25 percent, if certain
conditions are met. The interest rate is reset at the beginning of each
loan period, the term of which is 6 months. The interest rate was set on
September 30, 1997 at 8.8438 percent. The average effective interest rate
for 1997 was 8.86 percent.
(l) On April 13, 1993, the Company issued $25,000,000 of Subordinated
Notes. The holders of the Subordinated Notes also received warrants to
purchase 128,206 shares of the Company's common stock, resulting in a
discount of $1,282,000 to the principal balance of these Subordinated
Notes. This borrowing was retired as a result of the refinancing.
(m) On December 10, 1993, the Company issued $15,000,000 of
Subordinated Notes. The holders of the Subordinated Notes also received
80,520 shares of the Company's common stock, resulting in a discount of
$805,000 to the principal balance of these Subordinated Notes. This
borrowing was retired as a result of the Refinancing.
(n) On March 27, 1997, in connection with the Refinancing, the Company
issued $125,000,000 of Senior Subordinated Notes. Interest payments on
these notes are due semiannually on April 1 and October 1. Optional
prepayments are allowed under certain circumstances under the note
purchase agreement, any such payments reducing the required payment of
$125,000,000 due April 1, 2007.
The borrowings under the Credit Agreement and Senior Secured Note
Exchange Agreement are secured by mortgages on substantially all of the
Company's property and equipment in the manner described in the Master
Collateral and Intercreditor Agreement negotiated between the lending banks
under the Credit Agreement and the Senior Secured Note holders. In the event
of a change in control of the Company, the total amount outstanding under the
debt agreements described above may be declared immediately due and payable.
Under the terms of the Credit Agreement and the Senior Secured Note
Exchange Agreement, the Company is required to maintain certain affirmative and
negative covenants, including minimum interest coverage, minimum debt service
coverage, minimum consolidated net worth, minimum current ratio, maximum
leverage ratio and maximum amounts of capital expenditures. The Company was in
compliance with the covenants at December 31, 1997.
Under the terms of the Indenture for the Senior Subordinated Notes due
2007, the Company is required to maintain certain affirmative and negative
covenants that, among other things, provide for a minimum coverage ratio. The
Company was in compliance with the covenants at December 31, 1997.
Scheduled payments of long-term debt in the next five years are
$500,000 in 1998; $500,000 in 1999; $500,000 in 2000; $18,250,000 in 2001 and
$18,250,000 in 2002.
36
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Based on the borrowing rates currently available to the Company for
bank loans and other indebtedness with similar terms and average maturities and
the year-end quoted market price of the Senior Subordinated Notes, the fair
value of long-term debt at December 31, 1997 and 1996 approximated the recorded
value.
12. LEASE COMMITMENTS
The Company has entered into lease agreements covering certain of its
travel center locations, warehouse and office space, computer and office
equipment and vehicles. Most long-term leases include renewal options and, in
certain cases, purchase options. Future minimum lease payments required under
operating leases that have remaining noncancelable lease terms in excess of one
year, as of December 31, 1997, were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
<S> <C>
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,642
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,537
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,104
2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,781
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . 30,216
-------
$53,080
-------
-------
</TABLE>
Total rental expenses on all operating leases were approximately
$5,658,000, $1,357,000 and $676,000 for the years ended December 31, 1997, 1996
and 1995, respectively.
13. MANDATORILY REDEEMABLE SENIOR CONVERTIBLE PARTICIPATING PREFERRED STOCK
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Series I--3,000,000 shares authorized, $0.01 par value;
2,680,656 shares issued and outstanding, shown at
redemption value. . . . . . . . . . . . . . . . . . . . $45,531 $39,956
Series II--1,000,000 shares authorized, $0.01 par value;
934,344 shares issued and outstanding, shown at
redemption value. . . . . . . . . . . . . . . . . . . . 15,873 13,929
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $61,404 $53,885
------- -------
------- -------
</TABLE>
VOTING RIGHTS. Holders of Series I Mandatorily Redeemable Senior
Convertible Preferred Stock are entitled to vote on all matters, other than the
election of directors (see Note 14--Common Stock-Voting Rights below), submitted
to a vote of the Company's stockholders. Series II Mandatorily Redeemable Senior
Convertible Preferred Stock is non-voting.
37
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DIVIDENDS. Dividends accumulate on the original $10.00 per share
purchase price at a rate of 13.5 percent per annum, compounded semi-annually,
and are not paid currently but accumulate and increase the liquidation
preference. Such dividends accrue whether or not declared by the Board of
Directors. Accrued dividends totaled $25,254,000 and $17,735,000 at December
31, 1997 and 1996, respectively. Holders also participate pro rata, on a
share for share basis, with the outstanding Convertible Preferred Stock and
Common Stock, in dividends and distributions, other than liquidating
distributions.
CONVERSION. The conversion rights of the holders are the same as
those for holders of the Series I and Series II Convertible Preferred Stock,
respectively, (see Note 14--Convertible Preferred Stock-Conversion below)
except, if the Company consummates an underwritten public offering of Common
Stock pursuant to which the net offering price per share is equal to or
greater than the Trigger Price (defined as an amount equal to $10.00 plus
interest at a rate of 13.5 percent per annum, compounded semi-annually, from
the closing date of the TA Acquisition to the date of such public offering)
and the net proceeds raised in the offering are at least $50 million, the
Company will have the right to require that each share of Series I
Mandatorily Redeemable Senior Convertible Participating Preferred Stock be
converted into one share of Series I Convertible Preferred Stock and that
each share of Series II Mandatorily Redeemable Senior Convertible
Participating Preferred Stock be converted into one share of Series II
Convertible Preferred Stock.
LIQUIDATION PREFERENCE. Upon liquidation, holders are entitled to
receive the Senior Liquidation Preference, defined as $10.00 plus the amount
of all accrued and unpaid dividends to the liquidation date, before any
payment is made to holders of Convertible Preferred Stock or Common Stock.
Any remaining amounts available for distribution to the Company's equity
holders will be distributed in the following order of priority:
(i) holders of Convertible Preferred Stock shall be entitled to
receive $10.00 for each outstanding share,
(ii) holders of Common Stock shall be entitled to receive $10.00
for each outstanding share of Common Stock,
(iii) holders of Convertible Preferred Stock and Common Stock
shall be entitled to receive an amount such that, including such amounts
distributed in (i) and (ii) above, they have each received an amount equal
to the Senior Liquidation Preference,
(iv) holders of Mandatorily Redeemable Senior Convertible
Participating Preferred Stock, Convertible Preferred Stock and Common Stock
shall be entitled to receive amounts such that the amount distributed in
respect of each outstanding share of Mandatorily Redeemable Senior
Convertible Participating Preferred Stock pursuant to this clause shall
equal 50 percent of the amount distributed in respect of each outstanding
share of Convertible Preferred Stock and Common Stock pursuant to this
clause.
OPTIONAL REDEMPTION. If the Company proposes to declare and pay
any dividends or other distributions in respect of Convertible Preferred
Stock or Common Stock, the Company shall first offer to utilize such proceeds
to redeem shares of the Mandatorily Redeemable Senior Convertible
Participating Preferred Stock at a redemption price per share equal to the
Senior Liquidation Preference. Any portion not used to redeem shares of
Mandatorily Redeemable Senior Convertible Participating Preferred Stock may
be utilized by the Company to pay dividends pari passu to the holders of
outstanding shares of Mandatorily Redeemable Senior Convertible Participating
Preferred Stock, Convertible Preferred Stock and Common Stock.
CALL OPTION. The Company may, at its option and at any time, call
for redemption all (but not less than all) of the outstanding shares at a
price per share equal to the Senior Liquidation Preference. The holders will
be provided an opportunity to convert such shares into shares of Common Stock
prior to the redemption.
38
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MANDATORY REDEMPTION. The Company shall redeem all of the then
outstanding shares on December 10, 2008, at a redemption price per share
equal to the Senior Liquidation Preference.
14. OTHER PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Convertible Preferred Stock:
Series I--3,000,000 shares authorized, $0.01 par value;
2,594,876 shares outstanding. . . . . . . . . . . . . . . . . . . $ 26 $ 26
Series II--1,500,000 shares authorized, $0.01 par value;
1,237,374 shares outstanding. . . . . . . . . . . . . . . . . . . 12 12
Common Stock - 30,000,000 shares authorized, $0.01
par value; 633,511 shares outstanding at
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . 14 -
Class A Common Stock--5,000,000 shares authorized, $0.01
par value; 1,036,250 shares outstanding at
December 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . - 11
Class B Common Stock--25,000,000 shares authorized, $0.01
par value; 256,198 shares outstanding at
December 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . - 3
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 52,305 51,649
Treasury stock--at cost; 780,200 and 88,200 shares at
December 31, 1997 and 1996, respectively . . . . . . . . . . . . . . (8,412) (958)
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $43,945 $50,743
-------- --------
-------- --------
</TABLE>
In April 1993, the Company issued 1,111,250 shares of Class A
Common Stock, 56,500 shares of Class B Common Stock and 3,832,250 shares of
Convertible Preferred Stock, which consists of 2,594,876 shares of Series I
Convertible Preferred Stock and 1,237,374 shares of Series II Convertible
Preferred Stock.
In December 1993, the Company issued 165,520 shares of Class B
Common Stock and 3,615,000 shares of Mandatorily Redeemable Senior
Convertible Participating Preferred Stock, which consists of 2,680,656 shares
of Series I Mandatorily Redeemable Senior Convertible Participating Preferred
Stock and 934,344 shares of Series II Mandatorily Redeemable Senior
Convertible Participating Preferred Stock (see Note 13).
As of March 6, 1997 the Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") and by-laws of
the Company and the by-laws of National, as the case may be, were amended to:
(i) eliminate the supermajority voting requirements of the Company's
stockholders and the Company's and National's boards of directors that were
applicable to certain actions taken with respect to the Company or National,
(ii) eliminate all designations of classes of common stock, the
convertibility of one class of common stock into another and all class votes
of holders of common stock, (iii) change the names of the Class A Common
Stock and the Class B Common Stock to Common Stock, (iv) provide that all of
the outstanding shares of preferred stock of the Company be convertible into
Common Stock on the same basis as they previously had been into Class B
Common Stock, and (v) eliminate class votes for Directors of the Company and
to provide that Directors will be elected by holders of Common Stock and
Series I Preferred Stock voting together as a single class.
39
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONVERTIBLE PREFERRED STOCK
VOTING RIGHTS. Each share of Series I Convertible Preferred Stock
entitles the holder to one vote on all matters, other than the election of
directors, submitted to a vote of the Company's stockholders. Series II
Convertible Preferred Stock is non-voting.
DIVIDENDS. See Common Stock--Dividends below.
CONVERSION. Each share of Series I Convertible Preferred Stock is
convertible into a share of Common Stock at any time at the option of the
holder.
Each share of Series II Convertible Preferred Stock is convertible at
any time at the option of the holder into such number of shares of Common Stock
that in the aggregate do not exceed the lesser of (i) one share of Common Stock
for each share of Series II Convertible Preferred Stock converted or (ii) the
number that equals 25 percent of the outstanding shares of Common Stock
immediately following such conversion (a total of 211,170 at December 31, 1997
for all Series II preferred shares). Following the conversion of at least 75
percent of the outstanding Convertible Preferred Stock into Common Stock, the
Company is entitled to convert each remaining share of Convertible Preferred
Stock into a share of Common Stock.
LIQUIDATION PREFERENCE. See Note 13--Liquidation Preference above.
COMMON STOCK
VOTING RIGHTS. Each share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of the Company's stockholders.
DIVIDENDS. Holders of Common Stock are entitled to receive
dividends if, and when, declared by the Board of Directors of the Company.
The Company is precluded from paying dividends or making distributions to the
holders of any of its equity securities while any shares of Convertible
Preferred Stock or Mandatorily Redeemable Senior Convertible Participating
Preferred Stock are outstanding except for dividends and distributions of
capital stock of the Company; unless (i) in any fiscal year the dividends and
distributions do not exceed 50 percent of the Company's net income for the
prior fiscal year and (ii) if immediately after payment of such dividends or
the making of any such distributions, the value of the Company's stockholder
equity would exceed the value of the aggregate liquidation preference of the
outstanding shares of Convertible Preferred Stock and Mandatorily Redeemable
Senior Convertible Participating Preferred Stock by at least one dollar.
LIQUIDATION PREFERENCE. See Note 13--Liquidation Preference above.
WARRANTS. The purchasers of the $25,000,000 Subordinated Notes
issued in April 1993 received warrants with an exercise price of $0.01 per
share which are exercisable for 128,206 shares of Common Stock, resulting in
a discount of $1,282,000 to the principal balance of the Subordinated Notes
(see Note 11).
REPURCHASE RIGHTS. Certain members of the Company's senior
management have purchased shares of the Company's Common Stock pursuant to
individual management subscription agreements (see Note 16). The Company has
the right to repurchase, and the employees have the right to require the
Company to repurchase, at formula prices, the Common Stock upon termination
of employment. The formula prices are based on the consolidated operating
results and indebtedness of the Company. At December 31, 1997, the formula
price was $23.25 per share. Compensation expense recognized with regard to
these shares during the years ended December 31, 1997 and 1996 were $54,000
and $336,000 respectively. No compensation expense was recognized with regard
to these shares in 1995 as the formula price that year did not exceed the
purchase price of the shares.
40
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCK AWARD AND OPTION PLANS
1997 STOCK PLAN. During 1997, the Board of Directors approved the
adoption of the 1997 Stock Plan (the "1997 Plan"). The principal terms and
conditions of the Plan are as follows: a maximum of 750,000 shares of Common
Stock (subject to adjustment) may be issued pursuant to options and stock
appreciation rights granted to officers, non-employee directors and key
employees of the Company designated by the Compensation Committee; the option
exercise price for each option granted will be the fair market value of the
stock on the respective grant date; the options will vest on the December 31
of the year of grant upon the attainment of performance targets (outstanding
options and options with respect to shares reserved for future awards will
vest upon a "change of control" or "initial public offering" of the Company
(as such terms are defined in the 1997 Plan)), and remain exercisable for
limited periods following termination of employment; shares of Common Stock
acquired upon exercise of options are subject to call and put options upon
termination of employment; if a change of control occurs within six months
after termination of the employment of a former employee for "good reason,"
death, "disability" or termination other than for "cause" (as defined), an
adjustment will be made to the amount paid upon exercise of any call options
or put options (but, in the case of put options, only to the extent the
proceeds received by the former employee upon exercise of the put option are
used to repay indebtedness to the Company) so that the former employee will
be able to receive any amounts in excess of the call or put price payable in
the change of control transaction.
1993 STOCK PLAN. The 1993 Stock Incentive Plan (the "1993 Plan")
was approved by the Board of Directors and was effective as of December 10,
1993. The 1993 Plan provided for the granting of stock options and other
stock-based awards to employees and directors of the Company. Stock awards
granted under the 1993 Plan could be in the form of (i) stock options, (ii)
stock appreciation rights related to an option ("SAR"), and (iii) unrelated
SAR's. Stock options granted under the 1993 Plan allow the purchase of Common
Stock (formerly Class B Common Stock) at prices generally not less than fair
market value as determined by the Compensation Committee of the Board of
Directors. The total number of shares of Common Stock with respect to which
awards could be granted was 572,000. Common stock obtained as a result of the
exercise of the options is subject to call and put rights at formula prices
upon termination of employment. The formula prices are based on the
consolidated operating results and indebtedness of the Company. A portion of
the options vested at the end of each year in the five year period ending
December 31, 1997, based on attainment of certain specified financial
objectives at the end of each year, but no more quickly than ratably from the
date of grant through December 31, 1996. Vested options must be exercised
within 10 years of the date of grant. All unvested options under the 1993
Plan at December 31, 1996, were cancelled upon the adoption of the 1997 Plan.
The purchase prices at December 31, 1997, 1996 and 1995 used to
determine compensation expense related to options granted under the Company's
stock plans were $23.25, $15.69 and $11.69, respectively. Based on these
prices and the number of vested options in each year, compensation expense
recognized in relation to these options for the years ended December 31, 1997
and 1996 were $1,346,000, and $331,000, respectively. No compensation expense
was recognized for the year ended December 31, 1995.
41
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table reflects the status and activity of options under the
1997 and 1993 Plans:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
--------- ------- ---------
<S> <C> <C> <C>
Options outstanding, beginning of year . . . . . . 531,181 520,181 493,280
Granted. . . . . . . . . . . . . . . . . . . . . 163,000 11,000 69,900
Canceled . . . . . . . . . . . . . . . . . . . . (316,152) - (42,999)
--------- ------- ---------
Options outstanding, end of year . . . . . . . . . 378,029 531,181 520,181
--------- ------- ---------
--------- ------- ---------
Options exercisable, end of year . . . . . . . . . 378,029 330,436 213,440
Options available for grant, end of year . . . . . 587,000 40,819 51,819
</TABLE>
The weighted-average exercise price was $20.00 for those options
granted during 1997 and $18.27 for all outstanding options as of December 31,
1997. The weighted-average exercise price of the options cancelled in 1997
and 1995, the options granted in 1996 and 1995 and all outstanding options as
of each of December 31, 1996, 1995 and 1994 was $19.04. The following table
summarizes information about options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
EXERCISE OPTIONS OPTIONS
PRICE OUTSTANDING EXERCISABLE
----- ----------- -----------
<S> <C> <C>
$10.00. . . . . . . . . . . . . . . . . . . 67,988 67,988
$17.49. . . . . . . . . . . . . . . . . . . 71,757 71,757
$20.00. . . . . . . . . . . . . . . . . . . 163,000 163,000
$22.50. . . . . . . . . . . . . . . . . . . 75,284 75,284
------- -------
378,029 378,029
------- -------
------- -------
</TABLE>
The weighted-average remaining contractual life of all options
outstanding at December 31, 1997 was seven years.
15. INCOME TAXES
The (benefit) provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . $ 378 $ 2,557 $ 4,106
State . . . . . . . . . . . . . . . . - 398 815
-------- ------- -------
378 2,955 4,921
-------- ------- -------
Deferred:
Federal . . . . . . . . . . . . . . . (733) 74 1,297
State . . . . . . . . . . . . . . . . 11 320 396
-------- ------- -------
(722) 394 1,693
-------- ------- -------
Total . . . . . . . . . . . . . . . . $ (344) $ 3,349 $ 6,614
-------- ------- -------
-------- ------- -------
</TABLE>
42
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The difference between taxes calculated at the U. S. federal statutory
tax rate of 35 percent and the Company's total income tax provision is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. federal statutory rate applied to income before taxes and
extraordinary items. . . . . . . . . . . . . . . . . . . . . . . $(194) $3,109 $5,789
State income taxes, net of federal income tax benefit. . . . . . . 8 467 787
Benefit of tax credits . . . . . . . . . . . . . . . . . . . . . . (227) (150) (141)
Other - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 (77) 179
------ ------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(344) $3,349 $6,614
------ ------- -------
------ ------- -------
</TABLE>
For 1997, income tax benefits of $3,608,000 allocated to the
extraordinary loss of $9,162,000 differ from the amount calculated at the
federal statutory rate of 35 percent by $401,000. This difference is the result
of state tax benefits, net of the federal effect.
Deferred income tax assets and liabilities resulted from the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . $ 1,784 $ 2,252
Inventory . . . . . . . . . . . . . . . . . . . . . . . . 245 254
Organization and start-up costs . . . . . . . . . . . . . 35 156
Federal benefit of state deferred tax liabilities . . . . 518 515
Intangible assets . . . . . . . . . . . . . . . . . . . . 10,358 10,582
Deferred revenues . . . . . . . . . . . . . . . . . . . . 125 710
Minimum tax credit. . . . . . . . . . . . . . . . . . . . 3,323 2,647
Net operating loss carryforwards (expiring 2012). . . . . 2,726 -
General business credits (expiring 2009-2012) . . . . . . 1,077 769
Other accrued liabilities . . . . . . . . . . . . . . . . 2,442 1,106
------- -------
Total deferred tax assets. . . . . . . . . . . . . . 22,633 18,991
------- -------
Deferred tax liabilities:
Property and equipment . . . . . . . . . . . . . . . . . . 23,878 24,566
------- -------
Total deferred tax liabilities . . . . . . . . . . . 23,878 24,566
------- -------
Net deferred tax liabilities . . . . . . . . . . . . $ 1,245 $ 5,575
------- -------
------- -------
</TABLE>
The tax returns of the Company for 1994 through 1997 are subject to
examination by the Internal Revenue Service and state tax authorities. The
Company believes it has made adequate provision for income taxes and interest
that may become payable for years not yet examined.
43
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. RELATED PARTY TRANSACTIONS
The Company conducts a significant amount of its business with related
parties. Certain Operator Stockholders have an ownership interest in one or more
of the franchisee customers to whom the Company sells fuel and from whom the
Company receives rental income and/or royalty income. The transactions with
related parties are at prices and terms that are the same as for similar
transactions with unrelated entities.
The following table is a summary of balances and transactions with
Operator Stockholders at December 31, 1997 and 1996, and for each of the three
years ended December 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------
1997 1996 1997 1996 1995
------ ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Accounts receivable . . . . . . . . $7,469 $15,052
Notes receivable. . . . . . . . . . $ 944 $ 2,307
Fuel revenue. . . . . . . . . . . . $187,279 $269,179 $238,343
Rent revenue. . . . . . . . . . . . $ 22,380 $ 32,266 $ 35,543
Other revenues. . . . . . . . . . . $ 4,477 $ 5,534 $ 7,264
Cost of revenues. . . . . . . . . . $187,143 $268,343 $239,651
</TABLE>
During each of 1997, 1996 and 1995, the Company acquired the travel
center businesses and operating assets of certain of its Operator Stockholders.
Total consideration paid to these operators was $20,152,000 in 1997 for 23
sites, $3,185,000 in 1996 for five sites and $2,140,000 in 1995 for four sites.
During 1997, the Company sold to certain of its Operator Stockholders
12 of its travel center facilities. Total consideration received by the Company
from these sales was $30,983,000.
At December 31, 1997 and 1996, $27,000,000 and $67,000,000,
respectively, of the Company's indebtedness was owed to certain of the Company's
preferred stockholders. The interest expense incurred related to debt owed to
these stockholders was $3,636,000, $5,327,000 and $4,877,000 in 1997, 1996 and
1995, respectively.
Certain members of the Company's senior management have purchased
common stock of the Company pursuant to management subscription agreements
(see Note 14--Repurchase Rights). As a result of such purchases, the Company
has notes receivable from the management stockholders totaling $887,000 and
$909,000 at December 31, 1997 and 1996, respectively.
17. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to extensive regulation
pursuant to federal, state and local laws, regulations and ordinances that (i)
govern activities and operations that may have adverse environmental effects,
such as discharges to air, soil and water, as well as handling, storage and
disposal practices for petroleum products and other hazardous and toxic
substances ("Hazardous Substances") or (ii) impose liability and damages for the
costs of cleaning up sites affected by, and for damages resulting from, past
spills and disposal or other releases of Hazardous Substances ("Environmental
Laws").
44
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company owns and uses underground storage tanks ("USTs") and
aboveground storage tanks ("ASTs") at Company-operated and Leased Sites to store
petroleum products and waste. These tanks must comply with requirements of
Environmental Laws regarding tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, release reporting,
financial assurance and corrective action in case of a release from a UST or AST
into the environment. At certain locations, the Company also is subject to
Environmental Laws relating to vapor recovery and discharges to water. The
Company believes that all of its travel centers are in material compliance with
applicable requirements of Environmental Laws. The Company is making necessary
upgrades to USTs to comply with federal regulations which will take effect in
December 1998. These upgrades are expected to be completed in 1998 at a
remaining estimated cost to the Company of approximately $6 to $8 million. The
Company does not believe that such costs will have a material adverse effect on
the Company and the Capital Program incorporates funds to complete such
upgrades.
While the costs of compliance for these matters have not had a
material adverse impact on the Company, it is impossible to predict accurately
the ultimate effect these changing laws and regulations may have on the Company
in the future. The Company incurred capital expenditures, maintenance,
remediation and other environmental related costs of approximately $8,867,000,
$7,172,000 and $3,968,000 in 1997, 1996 and 1995, respectively.
In connection with the National Acquisition, Phase I environmental
assessments of the then 97 Company-owned National Network properties were
conducted. Pursuant to an environmental agreement entered into with Unocal at
the time of the National Acquisition (the "Unocal Environmental Agreement"),
Phase II environmental assessments of all such National properties are required
to be completed by the year 2000. As of December 31, 1997, 10 of the Phase II
assessments were in progress and 87 had been completed. The Company contributed
$500,000 toward the total cost of the Phase II environmental assessments, and
Unocal is responsible for the remainder of the cost. The Unocal Environmental
Agreement provides that Unocal is responsible for all costs incurred for
remediation of environmental contamination (the remediation must achieve
compliance with the Environmental Laws in effect on the date the remedial action
is completed) and for otherwise bringing the properties into compliance with
Environmental Laws (as in effect at the date of the National Acquisition) with
respect to environmental contamination or non-compliance identified in the Phase
I or Phase II environmental assessments, which environmental contamination or
non-compliance existed on or prior to the date of the National Acquisition.
Under the terms of the Unocal Environmental Agreement, Unocal also must
indemnify the Company against any other environmental liabilities that arise out
of conditions at, or ownership or operations of, the National Network prior to
the date of the National Acquisition. Pursuant to the Unocal Environmental
Agreement, Unocal is obligated to indemnify the Company for claims made before
April 14, 2004. Except as described above, Unocal does not have any
responsibility for any environmental liabilities arising out of the ownership or
operations of the National Network after the date of the National Acquisition.
There can be no assurance that, if additional environmental claims or
liabilities were to arise under the Unocal Environmental Agreement, Unocal would
not dispute the Company's claims for indemnification thereunder.
Prior to the TA Acquisition, all of the then 38 TA locations were
subject to Phase I and Phase II environmental assessments, undertaken at BP's
expense. An environmental agreement entered into with BP at the time of the TA
Acquisition (the "BP Environmental Agreement") provides that, with respect to
environmental contamination or non-compliance with Environmental Laws identified
in the Phase I or Phase II environmental assessments, BP is responsible for all
costs incurred for remediation of such environmental contamination (the
remediation must achieve compliance with the Environmental Laws in effect on the
date the remedial action is completed) and for otherwise bringing the properties
into compliance with Environmental Laws (as in effect at the date of the TA
Acquisition). The BP Environmental Agreement further provides that BP must
indemnify the Company against any other environmental liabilities that arise out
of conditions at, or ownership or operations of, the TA locations prior to the
date of the TA Acquisition. With respect to liabilities relating to the
investigation and remediation of environmental contamination, BP is obligated to
indemnify the Company for liabilities with respect
45
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to which claims are made before December 11, 2004. With respect to
liabilities otherwise relating to non-compliance with Environmental Laws (for
example, equipment), BP is obligated to indemnify the Company for liabilities
with respect to which claims were made before December 11, 1996. Except as
described above, BP does not have any responsibility for any environmental
liabilities arising out of the ownership or operations of the TA Network
after the date of the TA Acquisition. There can be no assurance that, if
additional environmental claims or liabilities were to arise under the BP
Environmental Agreement, BP would not dispute the Company's claims for
indemnification thereunder.
The Company has received notices of alleged violations of Environmental
Laws, or is aware of the need to undertake corrective actions to comply with
Environmental Laws, at Company-owned travel centers in a number of
jurisdictions. The Company does not expect that any financial penalties
associated with these alleged violations, instances of noncompliance, or
compliance costs incurred in connection therewith, will be material to the
Company's results of operation or financial condition. The Company is
conducting investigatory and/or remedial actions with respect to releases
and/or spills of Hazardous Substances that have occurred subsequent to the
National Acquisition and the TA Acquisition, respectively, at fewer than 30
Network properties. While the Company cannot precisely estimate the ultimate
costs it will incur in connection with the investigation and remediation of
these properties, based on its current knowledge, the Company does not expect
that the costs to be incurred at these properties, individually or in the
aggregate, will be material to the Company's results of operation or
financial condition. While the aforementioned matters are, to the best
knowledge of the Company, the only proceedings for which the Company is
currently exposed to potential liability (particularly given the Unocal and
BP indemnities discussed below), there can be no assurance that additional
contamination does not exist at these or additional Network properties, or
that material liability will not be imposed in the future. If additional
environmental problems arise or are discovered, or if additional
environmental requirements are imposed by government agencies, increased
environmental compliance or remediation expenditures may be required, which
could have a material adverse effect on the Company.
The Company has estimated the current ranges of remediation costs at
currently active sites and what it believes will be its ultimate share for such
costs after required indemnification and remediation is performed by Unocal and
BP under the environmental agreements and has a reserve of $892,000, for such
matters. While it is not possible to quantify with certainty the environmental
exposure, in the opinion of management, the potential liability, beyond that
considered in the reserve, for all environmental proceedings, based on
information known to date, will not have a material adverse effect on the
financial condition, results of operations or liquidity of the Company.
PENDING LITIGATION
FORTY-NINER TRUCK PLAZA LITIGATION. In connection with the
acquisition of the Network, the Company acquired six travel centers located in
California. In January 1993, the Operators of four of these travel centers (the
"California Plaintiffs") commenced litigation against Unocal, the Clipper Group,
L.P. ("Clipper," leader of the institutional investor group which formed the
Company) and the Company in California state court seeking, among other things,
specific performance by Unocal of their alleged rights, either under the
California Business and Professions Code (the "California Statute") or, in the
alternative, pursuant to alleged statements made by Unocal, to purchase their
travel centers at a fair market price and seeking compensatory and punitive
damages against the Company and others for both tortious interference with the
California Plaintiffs' alleged rights and civil conspiracy. The operator of a
fifth California travel center also asserted a purchase right, but never filed
suit. This property, together with the four properties operated by the
California Plaintiffs, are referred to herein as the "California Properties".
46
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Under the asset purchase agreements pursuant to which the Company acquired
the California Properties from Unocal, and related agreements, Unocal agreed to
indemnify the Company for, among other things, claims arising under the
California Statute arising out of or resulting from the sale of the California
Properties, including any amounts ("Excess Amounts") by which the original
purchase price paid by the Company for the California Properties exceeds the
price at which the Company might be ordered by a court to resell such
properties. Pursuant to such agreements, Unocal is not required to indemnify the
Company for awards of punitive damages. The Company cannot predict whether it
ultimately will be required to resell any or all of the California Properties to
the California Plaintiffs. However, in such event, the Company would seek
indemnification from Unocal for any Excess Amounts. The Company believes that
the claims asserted by the California Plaintiffs against the Company are without
merit and has engaged in a vigorous defense.
During 1995, the trial commenced and two of the California Plaintiffs
elected to settle their portion of the litigation with Unocal and the Company.
In resolution, the Company entered into an agreement whereby the Company
acquired the assets and operations of one of the related travel centers and paid
approximately $900,000 for the operations and certain assets used in the
operations. The other operator's issues were resolved at no cost to the Company
and that operator continues to operate the travel center under the existing
lease and franchise agreements.
On May 1, 1995, the jury rendered a verdict in favor of the two
remaining California Plaintiffs and against Unocal and the Company. The jury
determined that the two remaining California Plaintiffs were entitled to total
compensatory damages of $4,012,000, for which all defendants are jointly and
severably liable. On May 3, 1995, the jury rendered a verdict assessing punitive
damages against Unocal, Clipper and the Company in the amounts of $7,000,000,
$1,600,000 and $1,500,000, respectively. The California State Court rendered a
decision in favor of the defendants on the equitable claims asserted by the
California Plaintiffs and denying Plaintiffs' request for rescission of the
asset purchase agreements for the related California Properties. The Company
then filed motions with the trial court to enter judgement in its favor on
plaintiffs' damages claims notwithstanding the verdict, or in the alternative,
to order a new trial. On August 1, 1995, the California Court denied the motion
for judgement notwithstanding the verdict, but granted the defendants' motion
for a new trial on all issues. On October 22, 1997, the California Court of
Appeal filed a decision affirming the trial court's orders granting a new trial
and denying defendants' motions for judgement notwithstanding the verdict. The
Court of Appeal also reversed an order of the trial court granting a nonsuit on
plaintiff's claim against the Company and Clipper for civil conspiracy. The
California Supreme Court has denied review. No date has been set for retrial.
The Company's ultimate liability in the disposition of this matter is difficult
to estimate. However, it is management's belief that the outcome, while
potentially material to the Company's results of operations, is not likely to
have a material adverse effect on the Company's financial position.
The Company believes all compensatory damages ultimately awarded and
legal fees incurred in this matter are covered under the indemnification
agreement with Unocal. Legal costs incurred by the Company through December 31,
1997 total $5,689,000, of which Unocal has paid $1,000,000 to the Company to
date. Unocal has contested certain of the amounts comprising the Company's
claims for such indemnification. However, the Company believes that the effect
on the financial statements of any amounts not ultimately collected from Unocal
will not be material.
CHARLESTON, WEST VIRGINIA LITIGATION. This action was commenced on
April 17, 1996 in the Circuit Court of Berkeley County, West Virginia. The
amended complaint, brought on behalf of eighteen National Operators, alleges
that the Company's fuel pricing policies and practices violate the PMPA and the
Uniform Commercial Code and constitute a breach of the contractual duty of good
faith and fair dealing and unjust enrichment. The amended complaint also asserts
claims of fraud and fraud in the inducement, apparently based on alleged
representations made by the Company concerning fuel pricing. The amended
complaint asserts claims against the Company, Clipper and certain present and
former directors and officers of the Company, and seeks actual and punitive
damages in an unspecified sum. The Company has removed the case to federal
court, and the court has granted the Company's motion to transfer the case to
federal court in Nashville, Tennessee.
47
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has entered into settlement agreements with 13 of the
plaintiffs pursuant to which the claims of those plaintiffs have been
dismissed with prejudice.
On March 31, April 1 and April 7, 1997, three of the plaintiffs filed
motions for a preliminary injunction. The motions sought an order requiring,
among other things, that the Company sell to the movants all of the movants'
requirements of diesel fuel at a price per gallon of not more than two cents
above the Oil Price Information Service average price under the terms of the
Company's existing lease and franchise agreements. In addition, on April 22,
1997, two of the movants filed a motion seeking a temporary restraining order
for substantially the same relief. On May 21, 1997, the court denied the
plaintiffs' motions. Plaintiffs appealed the trial court's denial of their
motions to the United States Courts of Appeals for both the Fourth and the
Sixth Circuits. By order dated August 1, 1997, all proceedings in the
district court were stayed pending the completion of all appeals. On
September 11, 1997, the Fourth Circuit dismissed plaintiffs' appeal for lack
of jurisdiction. On December 16, 1997, the Sixth Circuit dismissed
plaintiffs' appeal. It is management's belief that the outcome of this matter
is not likely to have a material adverse effect on the Company's results of
operations, financial position or liquidity.
In addition to the above matters, the Company is the subject of, or
party to, a number of pending or threatened legal actions, contingencies and
commitments involving a variety of matters, including laws and regulations
relating to the environment. The ultimate resolution of these contingencies
could, individually or in the aggregate, be material to the Company's results
of operations, but is not expected to be material to the Company's financial
position or liquidity.
18. OPERATING LEASE COMMITMENTS
Of the 118 travel centers owned by the Company as of December 31,
1997, 35 locations are leased to Operators under operating lease
arrangements. Of these Leased Sites, 24 are leased to Operator Stockholders
(see Note 16). The lease agreements offered to related parties are the same
as those offered to unrelated parties. These cancelable lease arrangements
generally are for terms of three to five years. Rent revenue from such
operating lease arrangements totaled $29,433,000, $41,762,000 and $47,840,000
for 1997, 1996 and 1995, respectively.
19. OTHER INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating and Selling, general and administrative expenses include the
following:
Repairs and maintenance expenses . . . . . . . . . . . . . . . . . . $8,528 $2,860 $1,264
Advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . $9,141 $3,964 $3,082
Taxes other than payroll and income taxes. . . . . . . . . . . . . . $5,099 $2,429 $3,391
Interest (expense), net consists of the following:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . $(26,418) $(15,965) $(14,190)
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,520 729 846
---------- ---------- ---------
$(22,898) $(15,236) $(13,344)
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
48
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . $24,611 $16,597 $14,055
Income taxes . . . . . . . . . . . . . . . . . . $ 3,513 $ 1,321 $ 482
</TABLE>
During 1997, 1996 and 1995, the Company received $5,023,000,
$3,207,000 and $3,201,000, respectively, of inventory and property and
equipment in liquidation of trade accounts receivable and notes receivable.
Pursuant to the Refinancing (see Note 3), the Company extinguished
$85,500,000 of Senior Secured Notes through the issuance of Series I Senior
Secured Notes and Series II Senior Secured Notes of an aggregate equal face
amount.
21. PRIOR PERIOD ADJUSTMENTS
The balance of retained earnings at December 31, 1995 has been
restated from amounts previously reported to reflect the correction of errors
that had been made in the calculations of accrued dividends related to the
mandatorily redeemable senior convertible participating preferred stock
during the period from June 1994 through June 1997. These dividend accruals
do not enter into the determination of net income or loss. The total
adjustment amount at December 31, 1995, is $1,091,000, of which $911,000 is
applicable to 1995 and has been reflected as an increase in preferred
dividends on the statement of income and retained earnings for that year,
with the balance of the adjustment amount of $180,000 applicable to earlier
periods reflected as a reduction in retained earnings at January 1, 1995.
The preferred dividend amount for the year ended December 31, 1996
was increased by $1,719,000 from the amount previously reported, bringing the
total amount of the adjustment in retained earnings at December 31, 1996 to
$2,810,000.
22. UNAUDITED PRO FORMA PRESENTATION
The following schedule sets forth the consolidated results of
operations of the Company as though TAHC had not been held for disposition
and instead been fully consolidated since January 1, 1994. Amounts are shown
only for the years ended December 31, 1996 and 1995, as TAHC and TA were
fully consolidated for the entire year ended December 31, 1997.
49
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED PRO FORMA STATEMENT OF INCOME SCHEDULE:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Fuel . . . . . . . . . . . . . . . . . . . . . . $752,266 $590,398
Nonfuel. . . . . . . . . . . . . . . . . . . . . 236,780 198,584
Rent and royalties . . . . . . . . . . . . . . . 47,437 53,366
---------- ----------
Total revenues . . . . . . . . . . . . . . . . 1,036,483 842,348
Cost of revenues (excluding depreciation). . . . 803,535 634,700
---------- ----------
Gross profit (excluding depreciation). . . . . . 232,948 207,648
Operating expenses . . . . . . . . . . . . . . . 129,447 102,239
Selling, general and administrative expenses . . 42,811 43,278
Refinancing, transition and development costs. . 2,687 1,866
Depreciation and amortization. . . . . . . . . . 26,970 22,611
(Gain) loss on sales of property and equipment . 1,464 363
Other (income) expense, net. . . . . . . . . . . (140) (116)
---------- ----------
Income from operations . . . . . . . . . . . . 29,709 37,407
Interest income (expense), net . . . . . . . . . (20,827) (20,867)
---------- ----------
Income before provision for income taxes . . . 8,882 16,540
Provision for income taxes . . . . . . . . . . . 3,349 6,614
---------- ----------
Net income . . . . . . . . . . . . . . . . . . $5,533 $9,926
---------- ----------
---------- ----------
</TABLE>
23. CONDENSED CONSOLIDATING FINANCIAL STATEMENT SCHEDULES
The following schedules set forth the condensed consolidating
balance sheet schedules of the Company as of December 31, 1997 and 1996 and
condensed consolidating statement of income and retained earnings schedules
and condensed consolidating statement of cash flows schedules of the Company
for the years ended December 31, 1997, 1996 and 1995. In the following
schedules, "Parent Company" refers to the unconsolidated balances of
TravelCenters of America, Inc., "Guarantor Subsidiaries" refers to the
combined unconsolidated balances of TA and National, and "Nonguarantor
Subsidiary" refers to the balances of TAFSI. "Eliminations" represent the
adjustments necessary to (a) eliminate intercompany transactions, (b)
eliminate the Company's investments in its subsidiaries and (c) present TAHC
as a subsidiary held for disposition until September 30, 1996 (see Note 2).
The Guarantor Subsidiaries, TA and National, are wholly-owned
subsidiaries of the Company and have fully and unconditionally, jointly and
severally, guaranteed the Company's indebtedness. In the 10-K filing, the
Company has not presented separate financial statements and other disclosures
concerning the Guarantor Subsidiaries because management has determined such
information is not material to investors.
50
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . $59,592 $12,164 $ - $ - $71,756
Accounts receivable, net. . . . . . . . . . . . . . . - 67,927 506 - 68,433
Inventories . . . . . . . . . . . . . . . . . . . . . - 33,718 - - 33,718
Deferred income taxes . . . . . . . . . . . . . . . . - 3,740 - - 3,740
Other current assets. . . . . . . . . . . . . . . . . 14,176 38,971 2,591 (45,482) 10,256
--------- ------------ ------------ ------------ ------------
Total current assets. . . . . . . . . . . . . . . 73,768 156,520 3,097 (45,482) 187,903
Notes receivable, net . . . . . . . . . . . . . . . . 887 805 - - 1,692
Property and equipment, net . . . . . . . . . . . . . - 286,472 - - 286,472
Intangible assets . . . . . . . . . . . . . . . . . . - 15,651 - - 15,651
Deferred financing costs. . . . . . . . . . . . . . . 11,786 - - - 11,786
Other assets. . . . . . . . . . . . . . . . . . . . . 730 3,558 - - 4,288
Investment in subsidiaries. . . . . . . . . . . . . . 342,860 - - (342,860) -
--------- ------------ ------------ ------------ ------------
Total assets. . . . . . . . . . . . . . . . . . . $430,031 $463,006 $3,097 $(388,342) $507,792
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loans . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ - $ -
Current maturities of long-term debt. . . . . . . . . 500 - - - 500
Accounts payable. . . . . . . . . . . . . . . . . . . - 29,387 - (352) 29,035
Other accrued liabilities . . . . . . . . . . . . . . 32,601 83,905 889 (45,130) 72,265
--------- ------------ ------------ ------------ ------------
Total current liabilities . . . . . . . . . . . . 33,101 113,292 889 (45,482) 101,800
Long-term debt (net of unamortized discount). . . . . . 289,625 - - - 289,625
Deferred income taxes . . . . . . . . . . . . . . . . (852) 5,837 - - 4,985
Other liabilities . . . . . . . . . . . . . . . . . . - 230,371 - (225,892) 4,479
--------- ------------ ------------ ------------ ------------
Total liabilities . . . . . . . . . . . . . . . . 321,874 349,500 889 (271,374) 400,889
Mandatorily redeemable senior
convertible participating preferred stock . . . . . . 61,404 - - - 61,404
Other preferred stock, common stock and
other stockholders' equity. . . . . . . . . . . . . . 45,199 81,179 - (82,433) 43,945
Retained earnings . . . . . . . . . . . . . . . . . . . 1,554 32,327 2,208 (34,535) 1,554
--------- ------------ ------------ ------------ ------------
46,753 113,506 2,208 (116,968) 45,499
--------- ------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . . . . . . . $430,031 $463,006 $3,097 $(388,342) $507,792
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
51
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . $- $23,779 $- $- $23,779
Accounts receivable, net. . . . . . . . . . . . . . . - 54,294 1,051 (974) 54,371
Inventories . . . . . . . . . . . . . . . . . . . . . - 29,082 - - 29,082
Deferred income taxes . . . . . . . . . . . . . . . . - 3,877 - - 3,877
Other current assets. . . . . . . . . . . . . . . . . 499 10,236 2 (207) 10,530
--------- ------------ ------------ ------------ ------------
Total current assets. . . . . . . . . . . . . . . 499 121,268 1,053 (1,181) 121,639
Notes receivable, net . . . . . . . . . . . . . . . . . - 2,744 - - 2,744
Property and equipment, net . . . . . . . . . . . . . . - 273,219 - (3,853) 269,366
Intangible assets . . . . . . . . . . . . . . . . . . . - 19,657 - - 19,657
Deferred financing costs. . . . . . . . . . . . . . . . - 8,379 - - 8,379
Other assets. . . . . . . . . . . . . . . . . . . . . . 2,500 6,439 - (4,835) 4,104
Investment in subsidiaries. . . . . . . . . . . . . . . 119,818 - - (119,818) -
--------- ------------ ------------ ------------ ------------
Total assets. . . . . . . . . . . . . . . . . . . $122,817 $431,706 $1,053 $(129,687) $425,889
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving loans . . . . . . . . . . . . . . . . . . . $ - $ 14,000 $ - $ - $ 14,000
Current maturities of long-term debt. . . . . . . . . - 17,250 - - 17,250
Accounts payable. . . . . . . . . . . . . . . . . . . 1,555 34,143 - (2,299) 33,399
Other accrued liabilities . . . . . . . . . . . . . . 450 33,355 105 (686) 33,224
--------- ------------ ------------ ------------ ------------
Total current liabilities . . . . . . . . . . . . 2,005 98,748 98 (2,978) 97,873
Long-term debt (net of unamortized
discount) . . . . . . . . . . . . . . . . . . . . . . - 193,185 - - 193,185
Deferred income taxes . . . . . . . . . . . . . . . . . 92 9,891 - (531) 9,452
Other liabilities . . . . . . . . . . . . . . . . . . . 1 8,413 - (2,500) 5,914
--------- ------------ ------------ ------------ ------------
Total liabilities . . . . . . . . . . . . . . . . 2,098 310,237 98 (6,009) 306,424
Mandatorily redeemable senior
convertible participating preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . 53,885 - - - 53,885
Other preferred stock, common stock
and other stockholders' equity. . . . . . . . . . . . 51,997 85,033 - (86,287) 50,743
Retained earnings . . . . . . . . . . . . . . . . . . . 14,837 36,436 955 (37,391) 14,837
--------- ------------ ------------ ------------ ------------
66,834 121,469 955 (123,678) 65,580
--------- ------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity. . . . . . . . . . . . . . $122,817 $431,706 $1,053 $129,687 $425,889
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
52
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME AND RETAINED EARNINGS SCHEDULES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . $- $715,852 $- $(7,215) $708,637
Nonfuel . . . . . . . . . . . . . . . . . . . . . . . - 293,874 7 (38) 293,843
Rent and royalties. . . . . . . . . . . . . . . . . . - 41,656 3,414 (8,222) 36,848
--------- ------------ ------------ ------------ ------------
Total revenues. . . . . . . . . . . . . . . . . . . . - 1,051,382 3,421 (15,475) 1,039,328
Cost of revenues (excluding
depreciation) . . . . . . . . . . . . . . . . . . . . - 780,299 - (7,215) 773,084
--------- ------------ ------------ ------------ ------------
Gross profit (excluding depreciation) . . . . . . . . . - 271,083 3,421 (8,260) 266,244
Operating expenses. . . . . . . . . . . . . . . . . . . - 176,350 244 (8,260) 168,334
Selling, general and
Administrative. . . . . . . . . . . . . . . . . . . . 814 33,934 871 - 35,619
Refinancing, transition and development
costs . . . . . . . . . . . . . . . . . . . . . . . . - 14,961 251 - 15,212
Depreciation and amortization . . . . . . . . . . . . . 1,119 34,721 - - 35,840
(Gain) loss on sale of property and
equipment . . . . . . . . . . . . . . . . . . . . . . - (11,244) - - (11,244)
Other operating (income) expense, net . . . . . . . . . - 138 - - 138
--------- ------------ ------------ ------------ ------------
Income (loss) from operations . . . . . . . . . . . . . (1,933) 21,973 2,055 - 22,345
Interest (expense), net . . . . . . . . . . . . . . . . (2,629) (20,269) - - (22,898)
Equity income (loss). . . . . . . . . . . . . . . . . . (5,153) - - 5,153 -
--------- ------------ ------------ ------------ ------------
(Loss) income before income taxes and
extraordinary items . . . . . . . . . . . . . . . . . (9,715) 1,954 2,055 5,153 (553)
(Benefit) provision for income taxes. . . . . . . . . . (3,952) 509 802 2,297 (344)
--------- ------------ ------------ ------------ ------------
(Loss) income before extraordinary item . . . . . . . . (5,763) 1,445 1,253 2,856 (209)
Extraordinary loss (less applicable
income tax benefit) . . . . . . . . . . . . . . . . . - (5,554) - - (5,554)
--------- ------------ ------------ ------------ ------------
Net (loss) income . . . . . . . . . . . . . . . . . . . (5,763) (4,109) 1,253 2,856 (5,763)
Less: preferred dividends . . . . . . . . . . . . . . . (7,520) - - - (7,520)
Retained earnings (deficit) - beginning of
the year. . . . . . . . . . . . . . . . . . . . . . . 14,837 36,436 955 (37,391) 14,837
--------- ------------ ------------ ------------ ------------
Retained earnings (deficit) - end of the
year. . . . . . . . . . . . . . . . . . . . . . . . . $1,554 $32,327 $2,208 $(34,535) $1,554
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
53
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . $- $752,266 $- $(202,054) $550,212
Nonfuel . . . . . . . . . . . . . . . . . . . . . . . - 237,124 - (137,133) 99,991
Rent and royalties. . . . . . . . . . . . . . . . . . - 45,711 1,382 (1,038) 46,055
--------- ------------ ------------ ------------ ------------
Total revenues. . . . . . . . . . . . . . . . . . . . - 1,035,101 1,382 (340,225) 1 696,258
Cost of revenues (excluding
depreciation) . . . . . . . . . . . . . . . . . . . . - 802,133 - (233,439) 568,694
--------- ------------ ------------ ------------ ------------
Gross profit (excluding depreciation) . . . . . . . . . - 232,968 1,382 (106,786) 127,564
Operating expenses. . . . . . . . . . . . . . . . . . . - 130,849 - (74,772) 56,077
Selling, general and administrative . . . . . . . . . . 736 41,075 1,000 (11,546) 31,265
Refinancing, transition and
development costs . . . . . . . . . . . . . . . . . . - 2,687 - (490) 2,197
Depreciation and amortization . . . . . . . . . . . . . - 26,970 - (9,132) 17,838
(Gain) loss on sales of property and
equipment . . . . . . . . . . . . . . . . . . . . . . - 1,469 - (5) 1,464
Other operating (income) expense,
net . . . . . . . . . . . . . . . . . . . . . . . . .- (145) - 5 (140)
Income of subsidiary held for
disposition . . . . . . . . . . . . . . . . . . . . . - - - (5,255) (5,255)
--------- ------------ ------------ ------------ ------------
Income from operations. . . . . . . . . . . . . . . . . (736) 30,063 382 (5,591) 24,118
Interest (expense), net . . . . . . . . . . . . . . . . - (20,827) - 5,591 (15,236)
Equity income (loss). . . . . . . . . . . . . . . . . . 9,618 - - (9,618) -
--------- ------------ ------------ ------------ ------------
Income before provision for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . 8,882 9,236 382 (9,618) 8,882
Provision for income taxes. . . . . . . . . . . . . . . 3,349 3,410 138 (3,548) 3,349
--------- ------------ ------------ ------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . . . . 5,533 5,826 244 (6,070) 5,533
Less: preferred dividends . . . . . . . . . . . . . . . (6,599) - - - (6,599)
Retained earnings (deficit) - beginning
of the year . . . . . . . . . . . . . . . . . . . . . 15,903 30,610 711 (31,321) 15,903
--------- ------------ ------------ ------------ ------------
Retained earnings (deficit) - end of the
year. . . . . . . . . . . . . . . . . . . . . . . . . $14,837 $36,436 $955 $(37,391) $14,837
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
54
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . $- $590,398 $- $(214,250) $376,148
Nonfuel . . . . . . . . . . . . . . . . . . . . . . . - 198,584 - (170,636) 27,948
Rent and royalties. . . . . . . . . . . . . . . . . . - 51,801 1,565 (1,565) 51,801
--------- ------------ ------------ ------------ ------------
Total revenues. . . . . . . . . . . . . . . . . . . . - 840,783 1,565 (386,451) 455,897
Cost of revenues (excluding
depreciation) . . . . . . . . . . . . . . . . . . . . - 632,822 - (255,999) 376,823
--------- ------------ ------------ ------------ ------------
Gross profit (excluding depreciation) . . . . . . . . . - 207,961 1,565 (130,452) 79,074
Operating expenses. . . . . . . . . . . . . . . . . . . - 104,117 - (92,099) 12,018
Selling, general and
administrative. . . . . . . . . . . . . . . . . . . . 168 42,160 950 (12,313) 30,965
Refinancing, transition and development
costs . . . . . . . . . . . . . . . . . . . . . . . . - 1,866 - (1,035) 831
Depreciation and amortization . . . . . . . . . . . . . - 22,611 - (11,232) 11,379
(Gain) loss on sales of property and
equipment . . . . . . . . . . . . . . . . . . . . . . - 414 - (51) 363
Other operating (income) expense,
net . . . . . . . . . . . . . . . . . . . . . . . . . - (167) - - (167)
Income of subsidiary held for
disposition . . . . . . . . . . . . . . . . . . . . . - - - (6,199) (6,199)
--------- ------------ ------------ ------------ ------------
Income from operations. . . . . . . . . . . . . . . . . (168) 36,960 615 (7,523) 29,884
Interest (expense), net . . . . . . . . . . . . . . . . - (20,867) - 7,523 (13,344)
Equity income (loss). . . . . . . . . . . . . . . . . . 16,708 - - (16,708) -
--------- ------------ ------------ ------------ ------------
Income before provision for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . 16,540 16,093 615 (16,708) 16,540
Provision for income taxes. . . . . . . . . . . . . . . 6,614 6,454 227 (6,681) 6,614
--------- ------------ ------------ ------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . . . . 9,926 9,639 388 (10,027) 9,926
Less: preferred dividends . . . . . . . . . . . . . . . (5,791) - - - (5,791)
Retained earnings-beginning of the
year. . . . . . . . . . . . . . . . . . . . . . . . . 11,768 20,971 323 (21,294) 11,768
--------- ------------ ------------ ------------ ------------
Retained earnings-end of the year . . . . . . . . . . . $15,903 $30,610 $711 $(31,321) $15,903
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
55
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SCHEDULES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS (USED IN) PROVIDED BY
OPERATING ACTIVITIES: . . . . . . . . . . . . . . . . $(45,694) $87,364 $- $- $41,670
--------- ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of network assets. . . . . . . . . . . . - (15,127) - - (15,127)
Proceeds from sales of property and
equipment . . . . . . . . . . . . . . . . . . . . . - 37,958 - - 37,958
Capital expenditures. . . . . . . . . . . . . . . . . - (60,818) - - (60,818)
--------- ------------ ------------ ------------ ------------
Net cash used in investing
activities. . . . . . . . . . . . . . . . . . . . - (37,987) - - (37,987)
--------- ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings . . . . . . . . . . . . . . - 3,750 - - 3,750
Revolving loan repayments . . . . . . . . . . . . . . - (17,750) - - (17,750)
Long-term debt borrowings . . . . . . . . . . . . . . 205,000 - - - 205,000
Long-term debt repayments . . . . . . . . . . . . . . (375) (126,300) - - (126,675)
Proceeds from issuance of stock . . . . . . . . . . . 329 - - - 329
Repurchase of common stock. . . . . . . . . . . . . . (7,456) - - - (7,456)
Debt issuance costs . . . . . . . . . . . . . . . . . (12,904) - - - (12,904)
Intercompany advances . . . . . . . . . . . . . . . . (138,900) 138,900 - - -
--------- ------------ ------------ ------------ ------------
Net cash (used in) provided by
financing activities. . . . . . . . . . . . . . . 45,694 (1,400) - - 44,294
--------- ------------ ------------ ------------ ------------
Net increase in cash. . . . . . . . . . . . . . . - 47,977 - - 47,977
Cash at the beginning of the year . . . . . . . . . . . - 23,779 - - 23,779
--------- ------------ ------------ ------------ ------------
Cash at the end of the year . . . . . . . . . . . . . . $- $71,756 - $- $71,756
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
56
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SCHEDULES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS (USED IN) PROVIDED BY
OPERATING ACTIVITIES: . . . . . . . . . . . . . . . . $712 $38,763 $- $(11,855) $27,620
--------- ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of network assets. . . . . . . . . . . . - (2,352) - - (2,352)
Proceeds from sales of property and
equipment . . . . . . . . . . . . . . . . . . . . . - 965 - (322) 643
Capital expenditures. . . . . . . . . . . . . . . . . - (27,089) - 6,544 (20,545)
--------- ------------ ------------ ------------ ------------
Net cash used in investing
activities. . . . . . . . . . . . . . . . . . . . - (28,476) - 6,222 (22,254)
--------- ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings . . . . . . . . . . . . . . - 14,000 - - 14,000
Long-term debt repayments . . . . . . . . . . . . . . - (16,125) - 3,750 (12,375)
Reconsolidation of subsidiary
previously held for disposition . . . . . . . . . . - - - 14,309 14,309
Other . . . . . . . . . . . . . . . . . . . . . . . . (712) - - - (712)
--------- ------------ ------------ ------------ ------------
Net cash (used in) provided by
financing activities. . . . . . . . . . . . . . . (712) (2,125) - 18,059 15,222
--------- ------------ ------------ ------------ ------------
Net increase in cash. . . . . . . . . . . . . . . - 8,162 - 12,426 20,588
Cash at the beginning of the year . . . . . . . . . . . - 15,617 - (12,426) 3,191
--------- ------------ ------------ ------------ ------------
Cash at the end of the year . . . . . . . . . . . . . . $- $23,779 $- $- $23,779
--------- ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------
</TABLE>
57
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS (USED IN) PROVIDED BY
OPERATING ACTIVITIES:.......................... $66 $27,341 $- $ (7,971) $19,436
----- ------- --- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of network assets................. - (575) - - (575)
Proceeds from sales of property and
equipment.................................... - 1,770 - (366) 1,404
Capital expenditures........................... (32,183) 12,253 (19,930)
Refund of purchase price....................... - 1,500 - - 1,500
----- ------- --- -------- -------
Net cash used in investing activities........ - (29,488) - 11,887 (17,601)
----- ------- --- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt repayments...................... - (18,075) - 4,000 (14,075)
Other.......................................... (66) - - - (66)
----- ------- --- -------- -------
Net cash (used in) provided by
financing activities....................... (66) (18,075) - 4,000 (14,141)
----- ------- --- -------- -------
Net increase (decrease) in cash............ - (20,222) - 7,916 (12,306)
Cash at the beginning of the year................ - 35,839 - (20,342) 15,497
----- ------- --- -------- -------
Cash at the end of the year...................... $ - $15,617 $- $(12,426) $ 3,191
----- ------- --- -------- -------
----- ------- --- -------- -------
</TABLE>
58
<PAGE>
QUARTERLY FINANCIAL DATA - UNAUDITED
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(b)
----------- --------- --------- -----------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997 Data:
Total Revenue $265,113 $264,877 $250,312 $259,026
Gross Profit $59,235 $66,066 $69,775 $71,168
Income (loss) before extraordinary item $(106) $(2,798) $4,858 $(2,163)
Net income (loss) $(5,660) $(2,798) $4,858 $(2,163)
Earnings per common share (a):
Income (loss) before extraordinary item
Basic $(1.56) $(4.13) $2.93 $(5.52)
Diluted $(1.56) $(4.13) $0.43 $(5.52)
Net income (loss)
Basic $(6.07) $(4.13) $2.93 $(5.52)
Diluted $(6.07) $(4.13) $0.43 $(5.52)
1996 Data:
Total Revenue $131,409 $145,503 $143,772 $275,574
Gross Profit $20,513 $22,117 $23,523 $61,411
Net Income $916 $3,112 $2,702 $(1,197)
Earnings per common share (a):
Basic $(0.50) $1.13 $0.77 $(2.25)
Diluted $(0.50) $0.21 $0.14 $(2.25)
</TABLE>
(a) Per share amounts for all quarters other than the 1997 fourth quarter have
been restated as a result of applying the new accounting standard for
earnings per share.
(b) In the fourth quarter of 1997, the Company recognized impairment charges of
an aggregate amount of $7,500,000. In addition, transition expenses of
$4,254,00 were incurred in the 1997 fourth quarter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors and executive officers of the
Company required by this item is incorporated by reference to the material
appearing under the heading "Directors and Officers of the Registrant" in
Exhibit 99.1 to this Report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation required by this item is
incorporated by reference to the material appearing under the heading
"Executive Compensation" in Exhibit 99.1 to this Report.
59
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners
and management of the Company required by this item is incorporated by
reference to the material appearing under the heading "Security Ownership of
Certain Beneficial Owners and Management" in Exhibit 99.1 to this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
required by this item is incorporated by reference to the material appearing
under the heading "Certain Relationships and Related Transactions" in Exhibit
99.1 to this Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. Documents filed as part of this report:
1. Financial Statements
Financial statements filed as part of this report are listed in the Index
to Consolidated Financial Statements and Supplementary Data on page 21.
2. Financial Statement Schedules
All schedules are omitted because they are not applicable, not material or
the required information is shown in the financial statements listed above.
3. Exhibits
Reference is made to the Exhibit Index set forth at page i of this report.
B. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1997.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURUSANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
No annual report or proxy statement has been furnished to the
registrant's security holders. The registrant shall furnish to the
Commission for its information, at the time copies of such material are
furnished to its security holders, four copies of every proxy statement, form
of proxy or other proxy soliciting material sent to more than ten of the
registrant's security holders with respect to the registrant's annual
meeting. The foregoing material shall not be deemed to be "filed" with the
Commission or otherwise subject to the liabilities of Section 18 of the Act,
except to the extent that the registrant specifically incorporates it in this
Form 10-K by reference.
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRAVELCENTERS OF AMERICA, INC.
March 31, 1998 By:/s/ James W. George
-------------- -----------------------------
(Date) Name: James W. George
Title: Senior Vice President,
Chief Financial Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Edwin P. Kuhn President, Chief Executive Officer and
- -------------------------- Director (Principal Executive Officer) March 31, 1998
Edwin P. Kuhn
/s/ James W. George Senior Vice President, Chief Financial
- -------------------------- Officer and Secretary (Principal
James W. George Financial Officer and Principal
Accounting Officer) March 31, 1998
/s/ Walter E. Smith, Jr.
- --------------------------
Walter E. Smith, Jr. Director March 31, 1998
/s/ Margaret M. Eisen
- --------------------------
Margaret M. Eisen Director March 31, 1998
/s/ Robert B. Calhoun, Jr.
- -------------------------- Chairman of the Board of Directors and
Robert B. Calhoun, Jr. Director
March 31, 1998
/s/ Eugene P. Lynch
- --------------------------
Eugene P. Lynch Director March 31, 1998
/s/ Louis J. Mischianti
- --------------------------
Louis J. Mischianti Director March 31, 1998
/s/ Rolf H. Towe
- --------------------------
Rolf H. Towe Director March 31, 1998
/s/ Harrison T. Bubb
- --------------------------
Harrison T. Bubb Director March 31, 1998
</TABLE>
61
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit Page
Number
- -------- ---------------------------------------------------------- ---------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company....... (a)
3.2 Restated Certificate of Incorporation of National
Auto/Truckstops, Inc.......................................
3.3 Restated Certificate of Incorporation of TA Operating
Corporation................................................
3.4 Second Amended and Restated By-laws of the Company.........
3.5 Amended and Restated By-laws of National Auto/Truckstops,
Inc........................................................
3.6 Amended and Restated By-laws of TA Operating Corporation...
4.1 Indenture, dated March 27, 1997, among the Company, TA,
National and Fleet National Bank as Trustee ............... (a)
4.2 Exchange and Registration Rights Agreement, dated March
27, 1997, among the Company, the TA Subsidiary, the
National Subsidiary and Chase Securities, Inc.............. (a)
4.3 Form of Face of Initial Security (included in Exhibit 4.1
as Exhibit A).............................................. (a)
4.4 Form of Face of Exchange Security (included in Exhibit 4.1
as Exhibit B).............................................. (a)
4.5 Supplemental Indenture, dated March 1, 1998, among the
Company, TA, National, TA Travel and State Street Bank and
Trust Company as Trustee
9.1 Voting Trust Agreement, dated April 14, 1993, among the
Company, the Voting Trustee and the Operator Stockholders
named therein.............................................. (a)
9.2 Amendment No. 1 to Voting Trust Agreement, dated November
29, 1993, among the Company, the Voting Trustee and the
Operator Stockholders...................................... (a)
9.3 Amendment No. 2 to Voting Trust Agreement, dated March 6,
1997, among the Company, the Voting Trustee and the
Operator Stockholders...................................... (a)
10.1 Amended and Restated Registration Agreement among the (a)
Company, National I, National II, National III, Clipper
Truckstops, L.P., Clipper/Merchant, Olympus, Barclays
Bank, Barclays Mellon Bank, N.A. as Trustee for First
Plaza, UBS, Phoenix Insurance Company and Travelers dated
as of December 10, 1993.................................... (a)
10.2* 1993 Stock Incentive Plan of the Company................... (a)
10.3* Form of the Company's 1993 Stock Incentive
Plan--Nonqualified Stock Option Agreement--National Awards. (a)
10.4* Form of the Company's 1993 Stock Incentive
Plan--Nonqualified Stock Option Agreement--TA Awards....... (a)
i
<PAGE>
10.5* Termination, Consulting and Release Agreement, dated as of
January 17, 1997, among the Company, National and C.
William Osborne............................................ (a)
10.7 Purchase Agreement, dated March 24, 1997, among the
Company, the TA Subsidiary, the National Subsidiary and
Chase Securities, Inc...................................... (a)
10.8 Credit Agreement, dated as of March 21, 1997, among the
Company, the Chase Manhattan Bank as agent, fronting bank
and swingline lender and the Lenders party thereto......... (a)
10.9 Waiver No. 1 and Agreement, dated March 1, 1998, to the
Credit Agreement, dated March 21, 1997, among the Company,
The Chase Manhattan Bank and the Lenders................... (a)
10.10 Senior Note Exchange Agreement as of March 21, 1997, among
the Company, TA, National and the Noteholders listed on
Schedule 1 thereto......................................... (a)
10.11 Amendment and Waiver Agreement dated as of March 1, 1998,
amending the Senior Note Exchange Agreement, dated March
21, 1997................................................... (a)
10.12 Limited Liability Company Agreement of TABB, adopted as of
November 15, 1995, between the TA Subsidiary and Burns
Bros., Inc................................................. (a)
10.13* Stockholders' Agreement, dated as of March 6, 1996, among
the Company, the voting trust certificate holders named
therein, the Voting Trustee, the management stockholders
of the Company named therein, the additional stockholders
named therein, Clipper, National I, National II, National
III and Clipper/Merchant................................... (a)
10.14* Form of Executive Employment Agreement.....................
10.15 Schedule of Executive Employment Agreements omitted
pursuant to Instruction 2 to Item 601 of Regulation S-K....
10.16* 1997 Stock Incentive Plan of the Company.................. (b)
10.17* Form of Company's 1997 Stock Incentive Plan - Nonqualified
Stock Option Agreement.....................................
10.18* Form of Management Subscription Agreement..................
10.19* Schedule of Management Subscription Agreements omitted
pursuant to Instruction 2 to Item 601 of Regulation S-K....
21 List of Subsidiaries of the Company........................
27.1 Financial Data Schedule....................................
27.2 Restated Financial Data Schedules..........................
99.1 Information Required by Part III of Form 10-K..............
</TABLE>
(a) Incorporated herein by reference to exhibits filed with the Company's
Registration Statement on Form S-4 (File No. 333-26497) effective July 17,
1997.
ii
<PAGE>
(b) Incorporated herein by reference to an exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
* Executive compensation plans.
iii
<PAGE>
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
of
NATIONAL AUTO/TRUCKSTOPS, INC.
This Restated Certificate of Incorporation of National
Auto/Truckstops, Inc. was duly adopted in accordance with the provisions of
Sections 242 and 245 of the Delaware General Corporation Law. The original
Certificate of Incorporation was filed with the Secretary of State of the
State of Delaware on October 29, 1992 under the name National
Auto/Truckstops, Inc.
1. NAME. The name of the corporation is National
Auto/Truckstops, Inc. (the "Corporation").
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office is 1209 Orange Street, City of Wilmington,
County of New Castle, State of Delaware; and its registered agent at such
address is The Corporation Trust Company.
3. PURPOSES. The purpose of the Corporation is to engage in,
carry on and conduct any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law.
4. NUMBER OF SHARES. The total number of shares of stock that
the Corporation shall have authority to issue is: one thousand (1,000), all
of which shall be shares of Common Stock of the par value of one cent ($.01)
each.
<PAGE>
5. NAME AND ADDRESS OF INCORPORATOR. The name and mailing
address of the incorporator are: James T. Janover, 1285 Avenue of the
Americas, New York, New York 10019-6064.
6. ELECTION OF DIRECTORS. Members of the Board of Directors may
be elected either by written ballot or by voice vote.
7. LIMITATION OF LIABILITY. No Director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director, except for liability (a)
for any breach of the Director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174
of the Delaware General Corporation Law or (d) for any transaction from which
the director derived any improper personal benefits.
Any repeal or modification of the foregoing paragraph by the
stockholder of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such
repeal or modification.
<PAGE>
8. INDEMNIFICATION.
8.1 To the extent not prohibited by law, the Corporation
shall indemnify any person who is or was made, or threatened to be made, a
party to any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is
or was a director or officer of the Corporation, or at the request of the
Corporation, is or was serving as a director or officer of any other
corporation or in a capacity with comparable authority or responsibilities
for any partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees, disbursements and other charges). Persons who are not
directors or officers of the Corporation (or otherwise entitled to
indemnification pursuant to the preceding sentence) may be similarly
indemnified in respect of service to the Corporation or to an Other Entity at
the request of the Corporation to the extent the Board at any time specifies
that such persons are entitled to the benefits of this Section 8.
<PAGE>
8.2 The Corporation shall, from time to time, reimburse or
advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred in connection with any
Proceeding, in advance of the final disposition of such Proceeding; PROVIDED,
HOWEVER, that, if required by the Delaware General Corporation Law, such
expenses incurred by or on behalf of any Director or officer or other person
may be paid in advance of the final disposition of a Proceeding only upon
receipt by the Corporation of an undertaking, by or on behalf of such
Director or officer (or other person indemnified hereunder), to repay any
such amount so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right of appeal that such
Director, officer or other person is not entitled to be indemnified for such
expenses.
8.3 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Certificate of Incorporation,
the By-laws of the Corporation (the "By-laws"), any agreement, any vote of
stockholders or disinterested Directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office.
<PAGE>
8.4 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall continue as to a person who has ceased to be a Director or officer (or
other person indemnified hereunder) and shall inure to the benefit of the
executors, administrators, legatees and distributees of such person.
8.5 The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Section 8, the By-laws or
under Section 145 of the Delaware General Corporation Law or any other
provision of law.
8.6 The provisions of this Section 8 shall be a contract
between the Corporation, on the one hand, and each Director and officer who
serves in such capacity at any time which this Section 8 is in effect and any
other person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such Director, officer, or other person intend to be
legally bound. No repeal or modification of this Section 8 shall affect any
rights or obligations with respect to any state of facts then or theretofore
existing or thereafter arising or any proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
<PAGE>
8.7 The right to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent
jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such
indemnification or reimbursement or advancement of expenses is proper in the
circumstances nor an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel and its stockholders) that
such person is not entitled to such indemnification or reimbursement or
advancement of expenses shall constitute a defense to the action or create a
presumption that such person is not so entitled. Such a person shall also be
indemnified for any expenses incurred in connection with successfully
establishing his or her right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
8.8 Any Director or officer of the Corporation serving in any
capacity (a) another corporation of which a majority of the shares entitled
to vote in the election of its directors is held, directly or indirectly, by
the Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
<PAGE>
8.9 Any person entitled to be indemnified or to reimbursement
or advancement of expenses as a matter of right pursuant to this Section 8
may elect to have the right to indemnification or reimbursement or
advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to
the applicable Proceeding, to the extent permitted by law, or on the basis of
the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be
made, by a notice in writing to the Corporation, at the time indemnification
or reimbursement or advancement of expenses is sought; PROVIDED, HOWEVER,
that if no such notice is given, the right to indemnification or
reimbursement or advancement of expenses shall be determined by the law in
effect at the time indemnification or reimbursement or advancement of
expenses is sought.
9. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board of
Directors may from time to time make, alter or repeal the By-laws of the
Corporation; PROVIDED, HOWEVER, that any By-laws made, amended or repealed by
the Board of Directors may be amended or repealed, and any By-laws may be
made, by the stockholders of the Corporation.
WITNESS the signature of this Certificate this 27th day of March,
1998.
/s/ EDWIN P. KUHN
------------------------------------------
Name: Edwin P. Kuhn
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
of
TA OPERATING CORPORATION
This Restated Certificate of Incorporation of TA Operating Corporation
was duly adopted in accordance with the provisions of Sections 242 and 245 of
the Delaware General Corporation Law. The original Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware
on July 8, 1993 under the name T.S. Network Corp. A Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware
on December 10, 1993, under the name TA Operating Corporation. A further
Restated Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on March 25, 1997, under the name TA Operating
Corporation.
1. NAME. The name of the corporation is TA Operating Corporation (the
"Corporation").
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office is 1209 Orange Street, City of Wilmington,
County of New Castle, State of Delaware; and its registered agent at such
address is The Corporation Trust Company.
3. PURPOSES. The purpose of the Corporation is to engage in, carry on
and conduct any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law.
4. NUMBER OF SHARES. The total number of shares of stock that the
Corporation shall have authority to issue is: one thousand (1,000), all of
which shall be
<PAGE>
shares of Common Stock of the par value of one cent ($.01) each. Each such
share shall be entitled to one vote per share.
5. ELECTION OF DIRECTORS. Members of the Board of Directors may be
elected either by written ballot or by voice vote.
6. LIMITATION OF LIABILITY. No Director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a Director, except for liability (a) for any
breach of the Director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174
of the Delaware General Corporation Law or (d) for any transaction from which
the Director derived any improper personal benefits.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or
modification.
2
<PAGE>
7. INDEMNIFICATION.
7.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is
or was a director or officer of the Corporation, or at the request of the
Corporation, is or was serving as a director or officer of any other
corporation or in a capacity with comparable authority or responsibilities
for any partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees, disbursements and other charges). Persons who are not
directors or officers of the Corporation (or otherwise entitled to
indemnification pursuant to the preceding sentence) may be similarly
indemnified in respect of service to the Corporation or to an Other Entity at
the request of the Corporation to the extent the Board at any time specifies
that such persons are entitled to the benefits of this Section 7.
3
<PAGE>
7.2 The Corporation shall, from time to time, reimburse or advance
to any Director or officer or other person entitled to indemnification
hereunder the funds necessary for payment of expenses, including attorneys'
fees and disbursements, incurred in connection with any Proceeding, in
advance of the final disposition of such Proceeding; PROVIDED, HOWEVER, that,
if required by the Delaware General Corporation Law, such expenses incurred
by or on behalf of any Director or officer or other person may be paid in
advance of the final disposition of a Proceeding only upon receipt by the
Corporation of an undertaking, by or on behalf of such Director or officer
(or other person indemnified hereunder), to repay any such amount so advanced
if it shall ultimately be determined by final judicial decision from which
there is no further right of appeal that such Director, officer or other
person is not entitled to be indemnified for such expenses.
7.3 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 7 shall not be
deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Certificate of Incorporation,
the By-laws of the Corporation (the "By-laws"), any agreement, any vote of
stockholders or disinterested Directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office.
4
<PAGE>
7.4 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 7 shall
continue as to a person who has ceased to be a Director or officer (or other
person indemnified hereunder) and shall inure to the benefit of the
executors, administrators, legatees and distributees of such person.
7.5 The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Section 7, the By-laws or
under Section 145 of the Delaware General Corporation Law or any other
provision of law.
7.6 The provisions of this Section 7 shall be a contract between
the Corporation, on the one hand, and each Director and officer who serves in
such capacity at any time while this Section 7 is in effect and any other
person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such Director, officer, or other person intend to be
legally bound. No repeal or modification of this Section 7 shall affect any
rights or obligations with respect to any state of facts then or
5
<PAGE>
theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such
state of facts.
7.7 The rights to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 7 shall be
enforceable by any person entitled to such indemnification or reimbursement
or advancement of expenses in any court of competent jurisdiction. The
burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, its independent
legal counsel and its stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her
right to such indemnification or reimbursement or advancement of expenses, in
whole or in part, in any such proceeding.
6
<PAGE>
7.8 Any Director or officer of the Corporation serving in any
capacity (a) another corporation of which a majority of the shares entitled
to vote in the election of its directors is held, directly or indirectly, by
the Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
7.9 Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 7 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time
of the occurrence of the event or events giving rise to the applicable
Proceeding, to the extent permitted by law, or on the basis of the applicable
law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice
in writing to the Corporation, at the time indemnification or reimbursement
or advancement of expenses is sought; PROVIDED, HOWEVER, that if no such
notice is given, the right to indemnification or reimbursement or advancement
of expenses shall be determined by the law in effect at the time
indemnification or reimbursement or advancement of expenses is sought.
8. AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board may from time to time
adopt, amend or repeal the By-laws; PROVIDED, HOWEVER, that any By-laws
adopted or amended by the Board may be amended or repealed, and any By-laws
may be adopted,
7
<PAGE>
by a vote of the stockholders having at least a majority in voting power of
the then issued and outstanding shares of capital stock of the Corporation.
WITNESS the signature of this Certificate this 27th day of March,
1998.
/s/ EDWIN P. KUHN
------------------------------------
Name: Edwin P. Kuhn
Title: President and Chief Executive Officer
8
<PAGE>
EXHIBIT 3.4
SECOND AMENDED AND RESTATED BY-LAWS
of
TRAVELCENTERS OF AMERICA, INC.
(A Delaware Corporation)
________________________
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Business Day" means any day other than a Saturday, Sunday or other
day on which banking institutions are authorized by law to close in the City of
New York.
1.5 "By-laws" means these by-laws of the Corporation, as amended from time
to time.
1
<PAGE>
1.6 "Certificate of Incorporation" means the certificate of incorporation
of the Corporation, as amended, supplemented or restated from time to time.
1.7 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1.8 "Chief Executive Officer" means the Chief Executive Officer of the
Corporation.
1.9 "Chief Financial Officer" means the Chief Financial Officer of the
Corporation.
1.10 "Corporation" means TravelCenters of America, Inc.
1.11 "Directors" means Directors of the Corporation.
1.12 "Entire Board" means the total number of Directors that the
Corporation would have if there were no vacancies.
1.13 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.14 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.15 "President" means the President of the Corporation.
1.16 "Secretary" means the Secretary of the Corporation.
1.17 "Stockholders" means stockholders of the Corporation.
1.18 "Vice President" means a Vice President of the Corporation.
2
<PAGE>
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of stockholders shall be held at the
office of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of stockholders shall be held annually for
the election of Directors and the transaction of other business at such hour and
on such business day in April or as may be determined by the Board and
designated in the notice of meeting.
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual
meeting of stockholders for the election of Directors and the transaction of
other business is not held within the month specified in Section 2.2 hereof, the
Board shall call a meeting of stockholders for the election of Directors and the
transaction of other business as soon thereafter as convenient.
2.4 OTHER SPECIAL MEETINGS. A special meeting of stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board, the
Chairman of the Board, the Chief Executive Officer, or the Secretary. At any
special meeting of stockholders only such business may be transacted as is
related to the purpose or purposes of such meeting set forth in the notice
thereof given pursuant to Section 2.6 hereof or in any waiver of notice thereof
given pursuant to Section 2.7 hereof.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
stockholders entitled (i) to notice of or to vote at any meeting of stockholders
or any adjournment thereof, (ii) to express consent to corporate action in
writing without a meeting or (iii) to
3
<PAGE>
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock; or (b) any other lawful action, the Board
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and
which record date shall (x) in the case of clause (a)(i) above, not be more
than 60 nor less than 10 days before the date of such meeting, (y) in the
case of clause (a)(ii) above, not be more than 10 days after the date upon
which the resolution fixing the record date was adopted by the Board and (z)
in the case of clause (a)(iii) or (b) above, not be more than 60 days prior
to such action. If no such record date is fixed:
2.5.1 the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held;
2.5.2 the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action by the Board is required under the General Corporation Law,
shall be the first day on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody
of the book in which proceedings of meetings of stockholders are recorded;
and when prior action by the Board is required under the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
4
<PAGE>
close of business on the date on which the Board adopts the resolution
taking such prior action; and
2.5.3 the record date for determining stockholders for any purpose
other than those specified in Sections 2.5.1 and 2.5.2 shall be at the
close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided in
Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to notice of or to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
with postage prepaid, directed to the stockholder at his or her address as it
appears on the records of the Corporation. An affidavit of the Secretary or an
Assistant Secretary or of
5
<PAGE>
the transfer agent of the Corporation that the notice required by this
Section 2.6 has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken, and at the adjourned meeting any business may be transacted that might
have been transacted at the meeting as originally called. If, however, the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the stockholder or stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting (and so objects), to the transaction of any business on the ground that
the meeting has not been lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice unless so
required by statute, the Certificate of Incorporation or these By-laws.
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, or cause
to be prepared and made, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and
6
<PAGE>
showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination
of any stockholder, the stockholder's agent, or attorney, at the
stockholder's expense, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder (or agent or attorney
of a stockholder) who is present. The Corporation shall maintain the
stockholder list in written form or in another form capable of conversion
into written form within a reasonable time. The stock ledger shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the Corporation, or to vote
in person or by proxy at any meeting of stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise provided by
any statute, the Certificate of Incorporation or these By-laws, the holders of a
majority of all outstanding shares of stock entitled to vote at any meeting of
stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of any business at such meeting; PROVIDED, HOWEVER,
that in respect of any matter on which stockholders vote by class, a quorum
shall exist as to such matter if and only if a majority of the outstanding
shares of the class or classes of stock entitled to vote as a class thereon is
present in person or represented by proxy. When a quorum is once present to
organize a meeting of stockholders, it is not broken by the subsequent
withdrawal of any stockholders. The holders of a majority of the shares of
stock present in person or
7
<PAGE>
represented by proxy at any meeting of stockholders, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to
another time and place. Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in
the election of Directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; PROVIDED, HOWEVER, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate of
Incorporation, every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his or her
name on the record of stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock or votes with respect
to stock shall refer to such majority or other proportion of the votes of such
stock. The provisions of Sections 212 and 217 of the General Corporation Law
shall apply in determining whether any shares of capital stock may be voted and
the persons, if any, entitled to vote such shares; but the Corporation shall be
protected in assuming that the persons in whose names shares of capital stock
stand on the stock ledger of the Corporation are entitled to vote such shares.
At any meeting of stockholders (at which a quorum was present to organize the
meeting), all matters, except as otherwise provided by statute or by the
Certificate of Incorporation or by these By-laws, shall be decided by a majority
of the votes cast at such meeting by
8
<PAGE>
the holders of shares present in person or represented by proxy and entitled
to vote thereon, whether or not a quorum is present when the vote is taken.
All elections of Directors shall be by written ballot. In voting on any
other question on which a vote by ballot is required by law or is demanded by
any stockholder entitled to vote, the voting shall be by ballot. Each ballot
shall be signed by the stockholder voting or the stockholder's proxy and
shall state the number of shares voted. On all other questions, the voting
may be VIVA VOCE. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy. The validity and enforceability of any proxy shall be
determined in accordance with Section 212 of the General Corporation Law. A
stockholder may revoke any proxy that is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking
the proxy or by delivering a proxy in accordance with applicable law bearing
a later date to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting, the person presiding at the meeting may appoint, and on the request
of any stockholder entitled to vote thereat shall appoint, one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her
9
<PAGE>
ability. The inspectors shall (a) ascertain the number of shares outstanding
and the voting power of each, (b) determine the shares represented at the
meeting and the validity of proxies and ballots, (c) count all votes and
ballots, (d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors,
and (e) certify their determination of the number of shares represented at
the meeting and their count of all votes and ballots. The inspectors may
appoint or retain other persons or entities to assist the inspectors in the
performance of their duties. Unless otherwise provided by the Board, the
date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting shall be determined by the
person presiding at the meeting and shall be announced at the meeting. No
ballot, proxies or votes, or any revocation thereof or change thereto, shall
be accepted by the inspectors after the closing of the polls unless the Court
of Chancery of the State of Delaware upon application by a stockholder shall
determine otherwise.
2.12 ORGANIZATION. At each meeting of stockholders, the Chairman, or in
the absence of the Chairman the Chief Executive Officer, or in the absence of
the Chief Executive Officer the President, or in the absence of the President a
Vice President and in case more than one Vice President shall be present, then a
Vice President designated by the Board (or in the absence of any such
designation, the most senior Vice President, based on age, present), shall act
as chairman of the meeting. The Secretary, or in his or her absence one of the
Assistant Secretaries, shall act as secretary of the meeting. In case none of
the officers above designated to act as chairman or secretary of the meeting,
respectively, shall be present, a chairman or a secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast at such meeting by
the holders of
10
<PAGE>
shares of capital stock present in person or represented by proxy and
entitled to vote at the meeting.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 WRITTEN CONSENT OF STOCKHOLDERS WITHOUT A MEETING. Unless otherwise
provided in the Certificate of Incorporation, any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered (by hand or by certified or registered mail, return receipt
requested) to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within
60 days of the earliest dated consent delivered in the manner required by this
Section 2.14, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation as aforesaid. Prompt notice of the
taking of
11
<PAGE>
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these By-laws or the Certificate of
Incorporation or by statute, to be exercised and performed by the stockholders.
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The number of Directors shall
be fixed from time to time by action of the Board. Directors need not be
stockholders and shall hold office until a successor is elected and qualified or
until the Director's death, resignation or removal.
3.3 ELECTION. Directors shall be elected as provided in the Certificate
of Incorporation.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Vacancies on the Board
that arise for any reason, including vacancies resulting from an increase in the
number of Directors, may be filled by the affirmative vote of a majority of the
entire Board,
12
<PAGE>
although less than quorum, or by a sole remaining Director, and the
Director(s) so chosen shall hold office for a term expiring the next
following annual meeting of Stockholders, or, in each case until their
respective successors are duly elected and qualify, or until the respective
Directors' earlier death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written notice to
the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.6 REMOVAL. Any one or more (or all) of the Directors may be removed, at
any time, by the stockholders having at least a majority in voting power
eligible to elect Directors in accordance with the Certificate of Incorporation.
3.7 COMPENSATION. Each Director who is not an employee of the
Corporation, in consideration of his or her service as such, shall be entitled
to receive from the Corporation approximately $20,000 per annum plus
approximately $1,500 for attendance in person (and $750 for attendance by
telephone) at each Directors' meeting, together with reimbursement for the
reasonable out-of-pocket expenses, if any, incurred by such Director in
connection with the performance of his or her duties. Each Director who is not
an employee of the Corporation who shall serve as a member of any committee of
Directors in consideration of serving as such shall be entitled to such
additional amount per annum or such fees for attendance at committee meetings,
or both, as the Board may from time to time determine, together with
reimbursement for the reasonable out-of-pocket expenses, if any, incurred by
such Director in the performance of his or her duties. Nothing contained in
this Section 3.7 shall preclude any Director from serving the
13
<PAGE>
Corporation or its subsidiaries in any other capacity and receiving proper
compensation therefor.
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 ANNUAL MEETINGS. On the day when and at the place where the annual
meeting of stockholders for the election of Directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
hereof for special meetings of the Board or in a waiver of notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held without
notice at such times and at such places as shall from time to time be determined
by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called by the
Chairman, the Chief Executive Officer or the Secretary or by any two or more
Directors then serving on at least two Business Days' notice to each Director
given by one of the means specified in Section 3.14 hereof. Special meetings
shall be called by the Chairman, Chief Executive Officer or Secretary in like
manner and on like notice on the written request of any two or more of the
Directors then serving.
14
<PAGE>
3.12 TELEPHONE MEETINGS. Any Director or member of any committee
designated by the Board may participate, at his or her election, in any meeting
of the Board or of such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 3.12 shall constitute presence in person at such meeting. Each regular
or special meeting of the Board or any committee thereof shall have adequate
conference telephone or similar communications equipment available to allow any
Directors or committee members who choose to participate by telephone to do so
in accordance with this Section 3.12.
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least two
Business Days' notice of any adjourned meeting of the Board shall be given to
each Director whether or not present at the time of the adjournment shall be
given by one of the means specified in Section 3.14 hereof. Any business may be
transacted at an adjourned meeting that might have been transacted at the
meeting as originally called.
3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.17 hereof, whenever,
under the provisions of any statute, the Certificate of Incorporation or these
By-laws, notice is required to be given to any Director, such notice shall be
deemed given effectively if given in person or by telephone, by hand delivery,
or by telegram, telex, telecopy or similar means addressed to such Director at
such Director's address as it appears on the records of the Corporation.
15
<PAGE>
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these By-laws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman, or in the
absence of the Chairman the Chief Executive Officer, or in the absence of the
Chief Executive Officer, the President, or in the absence of the President, a
chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
16
<PAGE>
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required by
statute, the Certificate of Incorporation or the By-laws, the act of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board.
3.19 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a vote of the entire Board,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation. The Board may designate one or more Directors
as alternate members of any committee to replace absent or disqualified members
at any meeting of such committee. If a member of a committee shall be absent
from any meeting, or disqualified from voting thereat, the remaining member or
members present and not disqualified from voting, whether or not such member or
members constitute a quorum, may, by a unanimous vote, appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in a resolution of the Board
passed as aforesaid, shall have and may
17
<PAGE>
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be impressed on all papers that may require it, but no such
committee shall have the power or authority in reference to the following
matters: (i) approving or adopting, or recommending to the stockholders. any
action or matter expressly required by the GCL to be submitted to
stockholders for approval or (ii) adopting, amending or repealing any by-law
of the Corporation. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the
Board. Unless otherwise specified in the resolution of the Board designating
a committee, at all meetings of such committee a majority of the total number
of members of the committee shall constitute a quorum for the transaction of
business, and the vote of a majority of the members of the committee present
at any meeting at which there is a quorum shall be the act of the committee.
Each committee shall keep regular minutes of its meetings. Unless the Board
otherwise provides, each committee designated by the Board may make, alter
and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the
Board conducts its business pursuant to Article 3 of these By-laws.
ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a Chairman, a
Chief Executive Officer, a President, a Secretary, a Chief Financial Officer and
such other officers as the Board may appoint, including one or more Vice
Presidents and one or
18
<PAGE>
more Assistant Secretaries and Assistant Treasurers, who shall exercise such
powers and perform such duties as shall be determined from time to time by
the Board. The Board may designate one or more Vice Presidents as Executive
Vice Presidents and may use descriptive words or phrases to designate the
standing, seniority or areas of special competence of the Vice Presidents
elected or appointed by it. Any number of offices may be held by the same
person unless the Certificate of Incorporation or these By-laws otherwise
provide.
5.2 APPOINTMENT. The officers of the Corporation shall be chosen by the
Board annually or at such other time or times as the Board shall determine.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold office
until such officer's successor is chosen and qualifies or until such officer's
earlier death, resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Such resignation shall take effect at the
date of receipt of such notice or at such later time as is therein specified,
and, unless otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective. The resignation of an officer shall be without
prejudice to the contract rights of the Corporation, if any. Any officer
elected or appointed by the Board may be removed at any time, with or without
cause, by vote of a majority of the entire Board. Any vacancy occurring in any
office of the Corporation shall be filled by the Board. The removal of an
officer without cause shall
19
<PAGE>
be without prejudice to the officer's contract rights, if any. The election
or appointment of an officer shall not of itself create contract rights.
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any or all
of its officers or agents by bond or otherwise.
5.6 CHAIRMAN. The Chairman shall preside at all meetings of the Board and
shall exercise such powers and perform such other duties as shall be determined
from time to time by the Board.
5.7 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be the
Chief Executive Officer of the Corporation and shall have general supervision
over the business of the Corporation, subject, however, to the control of the
Board and of any duly authorized committee of Directors. The Chief Executive
Officer shall preside at all meetings of the stockholders and at all meetings of
the Board at which the Chairman is not present. All officers shall be subject
to the direction of the Chief Executive Officer. The Chief Executive Officer
may sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts and other instruments except in cases in which the signing and
execution thereof shall be expressly delegated by the Board or by these By-laws
to some other officer or agent of the Corporation or shall be required by
statute otherwise to be signed or executed and, in general, the Chief Executive
Officer shall perform all duties incident to the office of Chief Executive
Officer of a corporation and such other duties as may from time to time be
assigned to the Chief Executive Officer by the Board.
5.8 PRESIDENT. At the request of the Chief Executive Officer, or, in the
Chief Executive Officer's absence, at the request of the Board, the President
shall perform all of the duties of the Chief Executive Officer and, in so
performing, shall have all the powers
20
<PAGE>
of, and be subject to all restrictions upon, the Chief Executive Officer.
The President may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts or other instruments, except in cases in which
the signing and execution thereof shall be expressly delegated by the Board
or by these By-laws to some other officer or agent of the Corporation, or
shall be required by statute otherwise to be signed or executed, and the
President shall perform such other duties as from time to time may be
assigned to the President by the Board or by the Chief Executive Officer.
5.9 VICE PRESIDENTS. At the request of the President, or in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all of the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign
and execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in cases in which the signing and execution thereof
shall be expressly delegated by the Board or by these By-laws to some other
officer or agent of the Corporation, or shall be required by statute otherwise
to be signed or executed, and each Vice President shall perform such other
duties as from time to time may be assigned to such Vice President by the Board
or by the President.
5.10 SECRETARY. The Secretary shall attend all meetings of the Board and
of the stockholders and shall record all the proceedings of the meetings of the
Board and of the stockholders in a book to be kept for that purpose, and shall
perform like duties for committees of the Board, when required. The Secretary
shall give, or cause to be given, notice of all special meetings of the Board
and of the stockholders and shall perform such
21
<PAGE>
other duties as may be prescribed by the Board or by the Chief Executive
Officer, under whose supervision the Secretary shall be. The Secretary shall
have custody of the corporate seal of the Corporation, and the Secretary, or
an Assistant Secretary, shall have authority to impress the same on any
instrument requiring it, and when so impressed the seal may be attested by
the signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to
impress the seal of the Corporation and to attest the same by such officer's
signature. The Secretary or an Assistant Secretary may also attest all
instruments signed by the President or any Vice President. The Secretary
shall have charge of all the books, records and papers of the Corporation
relating to its organization and management, shall see that the reports,
statements and other documents required by statute are properly kept and
filed and, in general, shall perform all duties incident to the office of
Secretary of a corporation and such other duties as may from time to time be
assigned to the Secretary by the Board or by the Chief Executive Officer.
5.11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
charge and custody of, and be responsible for, all funds, securities and notes
of the Corporation; receive and give receipts for moneys due and payable to the
Corporation from any sources whatsoever; deposit all such moneys and valuable
effects in the name and to the credit of the Corporation in such depositaries as
may be designated by the Board; against proper vouchers, cause such funds to be
disbursed by checks or drafts on the authorized depositaries of the Corporation
signed in such manner as shall be determined by the Board and be responsible for
the accuracy of the amounts of all moneys so disbursed; regularly enter or cause
to be entered in books or other records maintained for the purpose
22
<PAGE>
full and adequate account of all moneys received or paid for the account of
the Corporation; have the right to require from time to time reports or
statements giving such information as the Chief Financial Officer may desire
with respect to any and all financial transactions of the Corporation from
the officers or agents transacting the same; render to the Chief Executive
Officer or the Board, whenever the Chief Executive Officer or the Board shall
require the Chief Financial Officer so to do, an account of the financial
condition of the Corporation and of all financial transactions of the
Corporation; exhibit at all reasonable times the records and books of account
to any of the Directors upon application at the office of the Corporation
where such records and books are kept; disburse the funds of the Corporation
as ordered by the Board; and, in general, perform all duties incident to the
office of Chief Financial Officer of a corporation and such other duties as
may from time to time be assigned to the Chief Financial Officer by the Board
or the Chief Executive Officer.
5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant Secretaries
and Assistant Treasurers shall perform such duties as shall be assigned to them
by the Secretary or by the Chief Financial Officer, respectively, or by the
Board or by the Chief Executive Officer.
23
<PAGE>
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided in
these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize the
Chief Executive Officer or any other officer, employee or agent of the
Corporation to effect loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances the person so authorized may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, and, when authorized by the Board so to do,
may pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances, or
otherwise limited.
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed shall
be deposited from time to time to the order of the Corporation with such banks,
trust companies, investment banking firms, financial institutions or other
depositaries as the
24
<PAGE>
Board may select or as may be selected by an officer, employee or agent of
the Corporation to whom such power to select may from time to time be
delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent with
the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
Chief Executive Officer or a Vice President and by the Secretary or an Assistant
Secretary or the Chief Financial Officer or an Assistant Treasurer, and may be
impressed with the seal of the Corporation or a facsimile thereof. The
signatures of the officers upon a certificate may be facsimiles, if the
certificate is countersigned by a transfer agent or registrar other than the
Corporation itself or its employee. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may, unless otherwise
ordered by the Board, be issued by the Corporation with the same effect as if
such person were such officer, transfer agent or registrar at the date of issue.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the
25
<PAGE>
certificate or certificates representing such shares of capital stock
properly endorsed for transfer and upon payment of all necessary transfer
taxes. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by
the Secretary or an Assistant Secretary or the transfer agent of the
Corporation. A person in whose name shares of capital stock shall stand on
the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as
against the Corporation, its stockholders and creditors for any purpose,
except to render the transferee liable for the debts of the Corporation to
the extent provided by law, until such transfer shall have been entered on
the books of the Corporation by an entry showing from and to whom transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.
7.4 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and
26
<PAGE>
registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws or with the
Certificate of Incorporation, concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the Certificate
of Incorporation and of law, the Board:
1.10.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such amounts
and at such time or times as it, in its discretion, shall deem advisable
giving due consideration to the condition of the affairs of the
Corporation;
1.10.2 may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance with
law, or any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
1.10.3 may set aside from time to time out of such surplus or
net profits such sum or sums as, in its discretion, it may think proper, as
a reserve
27
<PAGE>
fund to meet contingencies, or for equalizing dividends or for
the purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Article 8.
28
<PAGE>
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; PROVIDED, HOWEVER, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of any Director or officer or other person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, the Certificate of Incorporation, these
By-laws, any agreement, any vote of stockholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and reimbursement
or advancement of expenses provided by, or granted pursuant to, this Article 8
shall continue as to a person who has ceased to be a Director or officer (or
other person
29
<PAGE>
indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of an Other Entity, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article 8, the Certificate of Incorporation or
under section 145 of the General Corporation Law or any other provision of law.
8.6 BINDING EFFECT. The provisions of this Article 8 shall be a contract
between the Corporation, on the one hand, and each Director and officer who
serves in such capacity at any time while this Article 8 is in effect and any
other person entitled to indemnification hereunder, on the other hand, pursuant
to which the Corporation and each such Director, officer or other person intend
to be, and shall be legally bound. No repeal or modification of this Article 8
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
30
<PAGE>
8.7 PROCEDURAL RIGHTS. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent
jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such
indemnification or reimbursement or advancement of expenses is proper in the
circumstances nor an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel and its stockholders) that
such person is not entitled to such indemnification or reimbursement or
advancement of expenses shall constitute a defense to the action or create a
presumption that such person is not so entitled. Such a person shall also be
indemnified for any expenses incurred in connection with successfully
establishing his or her right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer of the
Corporation serving in any capacity (a) another corporation of which a majority
of the shares entitled to vote in the election of its directors is held,
directly or indirectly, by the Corporation or (b) any employee benefit plan of
the Corporation or any corporation referred to in clause (a) shall be deemed to
be doing so at the request of the Corporation.
31
<PAGE>
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be indemnified or to
reimbursement or advancement of expenses as a matter of right pursuant to this
Article 8 may elect to have the right to indemnification or reimbursement or
advancement of expenses interpreted on the basis of the applicable law in effect
at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office of the
Corporation correct and complete records and books of account recording the
financial transactions of the Corporation and minutes of the proceedings of the
stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
32
<PAGE>
9.2 FORM OF RECORDS. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by law,
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations, the accounts, books, minutes and other
records of the Corporation, or any of them, shall be open to the stockholders
for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
33
<PAGE>
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the President,
any Vice President, the Secretary or the Chief Financial Officer, or any one of
them, may execute and deliver on behalf of the Corporation proxies respecting
any and all shares or other ownership interests of any Other Entity owned by the
Corporation appointing such person or persons as the officer executing the same
shall deem proper to represent and vote the shares or other ownership interests
so owned at any and all meetings of holders of shares or other ownership
interests, whether general or special, and/or to execute and deliver consents
respecting such shares or other ownership interests; or any of the aforesaid
officers may attend any meeting of the holders of shares or other ownership
interests of such Other Entity and thereat vote or exercise any or all other
powers of the Corporation as the holder of such shares or other ownership
interests.
ARTICLE 13
AMENDMENTS
The Board of Directors may from time to time adopt, amend or repeal
the By-laws; PROVIDED, HOWEVER, that any By-laws adopted or amended by the Board
may be amended or repealed, and any By-laws may be adopted, by a vote of the
Stockholders having at least a majority in voting power of the capital stock of
the Corporation eligible to vote thereon under applicable law.
34
<PAGE>
EXHIBIT 3.5
AMENDED AND RESTATED BY-LAWS
of
NATIONAL AUTO/TRUCKSTOPS, INC.
(A Delaware Corporation)
________________________
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Business Day" means any day other than a Saturday, Sunday or
other day on which banking institutions are authorized by law to close in the
City of New York.
1.5 "By-laws" means the initial by-laws of the Corporation, as
amended from time to time.
1.6 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.7 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1
<PAGE>
1.8 "Chief Executive Officer" means the Chief Executive Officer of
the Corporation.
1.9 "Chief Financial Officer" means the Chief Financial Officer of
the Corporation.
1.10 "Corporation" means National Auto/Truckstops, Inc.
1.11 "Directors" means Directors of the Corporation.
1.12 "Entire Board" means the total number of Directors that the
Corporation would have, if there were no vacancies.
1.13 "General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended from time to time.
1.14 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.15 "President" means the President of the Corporation.
1.16 "Secretary" means the Secretary of the Corporation.
1.17 "Stockholders" means stockholders of the Corporation.
1.18 "Vice President" means a Vice President of the Corporation.
2
<PAGE>
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of stockholders shall be held
at the office of the Corporation or at such other place within or without the
State of Delaware as shall be specified or fixed in the notice of such meeting
or in the waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
and on such business day in April or as may be determined by the Board and
designated in the notice of meeting.
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual
meeting of stockholders for the election of Directors and the transaction of
other business is not held within the month specified in Section 2.2 hereof, the
Board shall call a meeting of stockholders for the election of Directors and the
transaction of other business as soon thereafter as convenient.
2.4 OTHER SPECIAL MEETINGS. A special meeting of stockholders (other
than a special meeting for the election of Directors), unless otherwise
prescribed by statute, may be called at any time by the Board or by the Chief
Executive Officer, by the President or by the Secretary. At any special meeting
of stockholders only such business
3
<PAGE>
may be transacted as is related to the purpose or purposes of such meeting
set forth in the notice thereof given pursuant to Section 2.6 hereof or in
any waiver of notice thereof given pursuant to Section 2.7 hereof.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
stockholders entitled (i) to notice of or to vote at any meeting of stockholders
or any adjournment thereof, (ii) to express consent to corporate action in
writing without a meeting or (iii) to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock; or (b) any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date was adopted by the Board
and which record date shall (x) in the case of clause (a)(i) above, be not more
than 60 nor less than 10 days before the date of such meeting, (y) in the case
of clause (a)(ii) above, be not more than 10 days after the date upon which the
resolution fixing the record date was adopted by the Board and (z) in the case
of clause (a)(iii) or (b) above, be not more than 60 days prior to such action.
If no such record date is fixed:
2.5.1 the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given, or,
if notice is waived,
4
<PAGE>
at the close of business on the day next preceding the day on which the
meeting is held;
2.5.2 the record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when
no prior action by the Board is required under the General Corporation Law,
shall be the first day on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody
of the book in which proceedings of meetings of stockholders are recorded;
and when prior action by the Board is required under the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board adopts the resolution
taking such prior action; and
2.5.3 the record date for determining stockholders for any
purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be at
the close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made as provided in this Section 2.5, such
determination shall
5
<PAGE>
apply to any adjournment thereof unless the Board fixes a new record date for
the adjourned meeting. Delivery made to the Corporation's registered office
in accordance with Section 2.5.2 shall be by hand or by certified or
registered mail, return receipt requested.
2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided
in Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute,
the Certificate of Incorporation or these By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than forty (in the case of any meeting for the election of directors) or
thirty (in all other instances) nor more than sixty days before the date of the
meeting, to each stockholder entitled to notice of or to vote at such meeting.
If mailed, such notice shall be deemed to be given when deposited in the United
States mail, with postage prepaid, directed to the stockholder at his or her
address as it appears on the records of the Corporation. An affidavit of the
Secretary or an Assistant Secretary or of the transfer agent of the Corporation
that the notice required by this Section 2.6 has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
6
<PAGE>
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken, and at the adjourned meeting
any business may be transacted that might have been transacted at the meeting
as originally called. If, however, the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the stockholder or stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice unless so required by statute, the
Certificate of Incorporation or these By-laws.
7
<PAGE>
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
or cause to be prepared and made, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
the stockholder's agent, or attorney, at the stockholder's expense, for any
purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice
of the meeting, or, if not so specified, at the place where the meeting is to
be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder (or agent or attorney of a stockholder) who is present. The
Corporation shall maintain the stockholder list in written form or in another
form capable of conversion into written form within a reasonable time. The
stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, the
holders of a
8
<PAGE>
majority of all outstanding shares of stock entitled to vote at any meeting
of stockholders, present in person or represented by proxy, shall constitute
a quorum for the transaction of any business at such meeting. When a quorum
is once present to organize a meeting of stockholders, it is not broken by
the subsequent withdrawal of any stockholders. The holders of a majority of
the shares of stock present in person or represented by proxy at any meeting
of stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its
own stock belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of Directors of such
other corporation is held, directly or indirectly, by the Corporation, shall
neither be entitled to vote nor be counted for quorum purposes; PROVIDED,
HOWEVER, that the foregoing shall not limit the right of the Corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate
of Incorporation, every stockholder of record shall be entitled at every meeting
of stockholders to one vote for each share of capital stock standing in his or
her name on the record of stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or
9
<PAGE>
other proportion of stock or votes with respect to stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in
determining whether any shares of capital stock may be voted and the persons,
if any, entitled to vote such shares; but the Corporation shall be protected
in assuming that the persons in whose names shares of capital stock stand on
the stock ledger of the Corporation are entitled to vote such shares. Holders
of redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the
stocks has been deposited with a bank, trust company, or other financial
institution under an irrevocable obligation to pay the holders the redemption
price on surrender of the shares of stock. At any meeting of stockholders
(at which a quorum was present to organize the meeting), all matters, except
as otherwise provided by statute or by the Certificate of Incorporation or by
these By-laws, shall be decided by a majority of the votes cast at such
meeting by the holders of shares present in person or represented by proxy
and entitled to vote thereon, whether or not a quorum is present when the
vote is taken. All elections of Directors shall be by written ballot. In
voting on any other question on which a vote by ballot is required by law or
is demanded by any stockholder entitled to vote, the voting shall be by
ballot. Each ballot shall be signed by the stockholder voting or the
stockholder's proxy and shall state the number of shares voted. On all other
questions, the voting may be VIVA
10
<PAGE>
VOCE. Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for such stockholder by proxy.
The validity and enforceability of any proxy shall be determined in
accordance with Section 212 of the General Corporation Law. A stockholder
may revoke any proxy that is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or
by delivering a proxy in accordance with applicable law bearing a later date
to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting, the person presiding at the meeting may appoint, and on the request
of any stockholder entitled to vote thereat shall appoint, one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall (a) ascertain the number of
shares outstanding and the voting power of each, (b) determine the shares
represented at the meeting and the validity of
11
<PAGE>
proxies and ballots, (c) count all votes and ballots, (d) determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors, and (e) certify their
determination of the number of shares represented at the meeting and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of their
duties. Unless otherwise provided by the Board, the date and time of the
opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting shall be determined by the person
presiding at the meeting and shall be announced at the meeting. No ballot,
proxies or votes, or any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery of the State of Delaware upon application by a stockholder shall
determine otherwise.
2.12 ORGANIZATION. At each meeting of stockholders, the Chairman, or
in the absence of the Chairman the Chief Executive Officer, or in the absence of
the Chief Executive Officer the President, or in the absence of the President a
Vice President and in case more than one Vice President shall be present, that
Vice President designated by the Board (or in the absence of any such
designation, the most senior Vice President, based on age, present), shall act
as chairman of the meeting. The Secretary, or in his or her absence one of the
Assistant Secretaries, shall act as secretary of the meeting. In case none of
the officers above designated to act as chairman or secretary of the meeting,
12
<PAGE>
respectively, shall be present, a chairman or a secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast at such meeting by
the holders of shares of capital stock present in person or represented by proxy
and entitled to vote at the meeting.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 WRITTEN CONSENT OF STOCKHOLDERS WITHOUT A MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having
13
<PAGE>
custody of the book in which proceedings of meetings of stockholders are
recorded. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within 60 days of
the earliest dated consent delivered in the manner required by this Section
2.14, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation as aforesaid. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented
in writing.
ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the Certificate
of Incorporation, the business and affairs of the Corporation shall be managed
by or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these By-laws or
14
<PAGE>
the Certificate of Incorporation or by statute, to be exercised and performed
by the stockholders.
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The Board shall consist
of one or more members. The number of Directors shall be fixed from time to
time by resolution adopted by a majority of the entire Board then in office,
whether or not present at a meeting. Each Director shall hold office until his
successor is elected and qualified, or until his earlier death, resignation or
removal.
3.3 ELECTION. The persons qualified to be Directors pursuant to
Section 3.2 hereof shall, except as otherwise required by statute or by the
Certificate of Incorporation, be elected by a plurality of the votes cast at a
meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Vacancies on the
Board that arise for any reason may be filled by the affirmative vote of a
majority of the entire Board, although less than a quorum, or by a sole
remaining Director, and the Director(s) so chosen shall hold office for a term
expiring the next following annual meeting of Stockholders, or, in each case
until their respective successors are duly elected and qualify, or until the
respective Directors' earlier death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written
notice to the Corporation. Such resignation shall take effect at the time
therein specified,
15
<PAGE>
and, unless otherwise specified in such resignation, the acceptance of such
resignation shall not be necessary to make it effective.
3.6 REMOVAL. Any or all of the Directors may be removed with or
without cause by vote of the holders of a majority of the shares then entitled
to vote at an election of Directors.
3.7 COMPENSATION. Each Director who is not an employee of the
Corporation, in consideration of his or her service as such, shall be entitled
to receive from the Corporation such amount per annum or such fees for
attendance at Directors' meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in connection with the performance
of his or her duties. Each Director who is not an employee of the Corporation
who shall serve as a member of any committee of Directors in consideration of
serving as such shall be entitled to such additional amount per annum or such
fees for attendance at committee meetings, or both, as the Board may from time
to time determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in the performance of his or her
duties. Nothing contained in this Section 3.7 shall preclude any Director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation therefor.
16
<PAGE>
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 ANNUAL MEETINGS. On the day when and at the place where the
annual meeting of stockholders for the election of Directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting, without
notice of such meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual meeting of the Board
may be held at any other time and place specified in a notice given as provided
in Section 3.11 hereof for special meetings of the Board or in a waiver of
notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman, the Chief Executive Officer or the Secretary or by any two or
more Directors then serving on at least two Business Days' notice to each
Director given by one of the means specified in Section 3.14 hereof. Special
meetings shall be called by the
17
<PAGE>
Chairman, Chief Executive Officer or Secretary in like manner and on like
notice on the written request of any two or more of the Directors then
serving.
3.12 TELEPHONE MEETINGS. Any Director or member of any committee
designated by the Board may participate, at his or her election, in any meeting
of the Board or of such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 3.12 shall constitute presence in person at such meeting. Each regular
or special meeting of the Board or any committee thereof shall have adequate
conference telephone or similar communications equipment available to allow any
Directors or committee members who choose to participate by telephone to do so
in accordance with this Section 3.12.
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least two
Business Days' notice of any adjourned meeting of the Board shall be given to
each Director whether or not present at the time of the adjournment, shall be
given by one of the means specified in Section 3.14 hereof. Any business may be
transacted at an adjourned meeting that might have been transacted at the
meeting as originally called.
18
<PAGE>
3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.17 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these By-laws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by hand
delivery, or by telegram, telex, telecopy or similar means addressed to such
Director at such Director's address as it appears on the records of the
Corporation.
19
<PAGE>
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the person or persons entitled to said notice, whether
before or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these By-laws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman, or in
the absence of the Chairman the Chief Executive Officer, or in the absence of
the Chief Executive Officer, the President, or in the absence of the President,
a chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
20
<PAGE>
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of
the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business at any meeting of the Board, but a majority of a
smaller number may adjourn any such meeting to a later date.
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required
by statute, the Certificate of Incorporation or the By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
21
<PAGE>
The Board may, by resolution passed by a vote of the entire Board,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation. The Board may designate one or more Directors
as alternate members of any committee to replace absent or disqualified members
at any meeting of such committee. If a member of a committee shall be absent
from any meeting, or disqualified from voting thereat, the remaining member or
members present and not disqualified from voting, whether or not such member or
members constitute a quorum, may, by a unanimous vote, appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in a resolution of the Board
passed as aforesaid, shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be impressed on all papers that may
require it, but no such committee shall have the power or authority in reference
to the following matters: (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the GCL to be submitted
to stockholders for approval or (ii) adopting, amending or repealing any By-law
of the Corporation. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board.
Unless otherwise specified in the resolution of the Board designating a
committee, at all meetings of such
22
<PAGE>
committee a majority of the total number of members of the committee shall
constitute a quorum for the transaction of business, and the vote of a
majority of the members of the committee present at any meeting at which
there is a quorum shall be the act of the committee. Each committee shall
keep regular minutes of its meetings. Unless the Board otherwise provides,
each committee designated by the Board may make, alter and repeal rules for
the conduct of its business. In the absence of such rules each committee
shall conduct its business in the same manner as the Board conducts its
business pursuant to Article 3 of these By-laws.
23
<PAGE>
ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a Chairman,
a Chief Executive Officer, a President, a Secretary, a Chief Financial Officer
and such other officers as the Board may appoint, including one or more Vice
Presidents and one or more Assistant Secretaries and Assistant Treasurers, who
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board. The Board may designate one or more Vice Presidents
as Executive Vice Presidents and may use descriptive words or phrases to
designate the standing, seniority or areas of special competence of the Vice
Presidents elected or appointed by it. Any number of offices may be held by the
same person unless the Certificate of Incorporation or these By-laws otherwise
provide.
5.2 APPOINTMENT. The officers of the Corporation shall be chosen by
the Board annually or at such other time or times as the Board shall determine.
5.3 COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that the officer
is also a Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold
office until such officer's successor is chosen and qualifies or until such
officer's earlier death,
24
<PAGE>
resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Such resignation shall take effect at the date of
receipt of such notice or at such later time as is therein specified, and,
unless otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective. The resignation of an officer shall be
without prejudice to the contract rights of the Corporation, if any. Any
officer elected or appointed by the Board may be removed at any time, with or
without cause, by vote of a majority of the entire Board. Any vacancy
occurring in any office of the Corporation shall be filled by the Board. The
removal of an officer without cause shall be without prejudice to the
officer's contract rights, if any. The election or appointment of an officer
shall not of itself create contract rights.
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise.
5.6 CHAIRMAN. The Chairman shall preside at all meetings of the
Board and shall exercise such powers and perform such other duties as shall be
determined from time to time by the Board.
5.7 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the Chief Executive Officer of the Corporation and shall have general
supervision over the business of the Corporation, subject, however, to the
control of the Board and of any duly authorized committee of Directors. The
Chief Executive Officer shall preside at all
25
<PAGE>
meetings of the stockholders and at all meetings of the Board at which the
Chairman is not present. All officers shall be subject to the direction of
the Chief Executive Officer. The Chief Executive Officer may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts and
other instruments except in cases in which the signing and execution thereof
shall be expressly delegated by the Board or by these By-laws to some other
officer or agent of the Corporation or shall be required by statute otherwise
to be signed or executed and, in general, the Chief Executive Officer shall
perform all duties incident to the office of Chief Executive Officer of a
corporation and such other duties as may from time to time be assigned to the
Chief Executive Officer by the Board.
5.8 PRESIDENT. At the request of the Chief Executive Officer, or, in
the Chief Executive Officer's absence, at the request of the Board, the
President shall perform all of the duties of the Chief Executive Officer and, in
so performing, shall have all the powers of, and be subject to all restrictions
upon, the Chief Executive Officer. The President may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts or other instruments,
except in cases in which the signing and execution thereof shall be expressly
delegated by the Board or by these By-laws to some other officer or agent of the
Corporation, or shall be required by statute otherwise to be signed or executed,
and the President shall perform such other duties as from time to time may be
assigned to the President by the Board or by the Chief Executive Officer.
26
<PAGE>
5.9 VICE PRESIDENTS. At the request of the President, or in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all of the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign
and execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in cases in which the signing and execution thereof
shall be expressly delegated by the Board or by these By-laws to some other
officer or agent of the Corporation, or shall be required by statute otherwise
to be signed or executed, and each Vice President shall perform such other
duties as from time to time may be assigned to such Vice President by the Board
or by the President.
5.10 SECRETARY. The Secretary shall attend all meetings of the Board
and of the stockholders and shall record all the proceedings of the meetings of
the Board and of the stockholders in a book to be kept for that purpose, and
shall perform like duties for committees of the Board, when required. The
Secretary shall give, or cause to be given, notice of all special meetings of
the Board and of the stockholders and shall perform such other duties as may be
prescribed by the Board or by the Chief Executive Officer, under whose
supervision the Secretary shall be. The Secretary shall have custody of the
corporate seal of the Corporation, and the Secretary, or an Assistant Secretary,
shall have
27
<PAGE>
authority to impress the same on any instrument requiring it, and when so
impressed the seal may be attested by the signature of the Secretary or by
the signature of such Assistant Secretary. The Board may give general
authority to any other officer to impress the seal of the Corporation and to
attest the same by such officer's signature. The Secretary or an Assistant
Secretary may also attest all instruments signed by the President or any Vice
President. The Secretary shall have charge of all the books, records and
papers of the Corporation relating to its organization and management, shall
see that the reports, statements and other documents required by statute are
properly kept and filed and, in general, shall perform all duties incident to
the office of Secretary of a corporation and such other duties as may from
time to time be assigned to the Secretary by the Board or by the Chief
Executive Officer.
5.11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
charge and custody of, and be responsible for, all funds, securities and notes
of the Corporation; receive and give receipts for moneys due and payable to the
Corporation from any sources whatsoever; deposit all such moneys and valuable
effects in the name and to the credit of the Corporation in such depositaries as
may be designated by the Board; against proper vouchers, cause such funds to be
disbursed by checks or drafts on the authorized depositaries of the Corporation
signed in such manner as shall be
28
<PAGE>
determined by the Board and be responsible for the accuracy of the amounts of
all moneys so disbursed; regularly enter or cause to be entered in books or
other records maintained for the purpose full and adequate account of all
moneys received or paid for the account of the Corporation; have the right to
require from time to time reports or statements giving such information as
the Chief Financial Officer may desire with respect to any and all financial
transactions of the Corporation from the officers or agents transacting the
same; render to the Chief Executive Officer or the Board, whenever the Chief
Executive Officer or the Board shall require the Chief Financial Officer so
to do, an account of the financial condition of the Corporation and of all
financial transactions of the Corporation; exhibit at all reasonable times
the records and books of account to any of the Directors upon application at
the office of the Corporation where such records and books are kept; disburse
the funds of the Corporation as ordered by the Board; and, in general,
perform all duties incident to the office of Chief Financial Officer of a
corporation and such other duties as may from time to time be assigned to the
Chief Financial Officer by the Board or the Chief Executive Officer.
5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Chief Financial Officer,
respectively, or by the Board or by the Chief Executive Officer.
29
<PAGE>
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided
in these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize
the Chief Executive Officer or any other officer, employee or agent of the
Corporation to effect loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances the person so authorized may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, and, when authorized by the Board so to do,
may pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances, or
otherwise limited.
30
<PAGE>
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation with such
banks, trust companies, investment banking firms, financial institutions or
other depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
31
<PAGE>
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
Chief Executive Officer or a Vice President and by the Secretary or an Assistant
Secretary or the Chief Financial Officer or an Assistant Treasurer, and may be
impressed with the seal of the Corporation or a facsimile thereof. The
signatures of the officers upon a certificate may be facsimiles, if the
certificate is countersigned by a transfer agent or registrar other than the
Corporation itself or its employee. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may, unless otherwise
ordered by the Board, be issued by the Corporation with the same effect as if
such person were such officer, transfer agent or registrar at the date of issue.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for
32
<PAGE>
transfer and upon payment of all necessary transfer taxes. Every certificate
exchanged, returned or surrendered to the Corporation shall be marked
"Cancelled," with the date of cancellation, by the Secretary or an Assistant
Secretary or the transfer agent of the Corporation. A person in whose name
shares of capital stock shall stand on the books of the Corporation shall be
deemed the owner thereof to receive dividends, to vote as such owner and for
all other purposes as respects the Corporation. No transfer of shares of
capital stock shall be valid as against the Corporation, its stockholders and
creditors for any purpose, except to render the transferee liable for the
debts of the Corporation to the extent provided by law, until such transfer
shall have been entered on the books of the Corporation by an entry showing
from and to whom transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to
time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
7.4 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. The holder
of any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
33
<PAGE>
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws or
with the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.
7.6 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.6.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such amounts
and at such time or times as it, in its discretion, shall deem advisable
giving due consideration to the condition of the affairs of the
Corporation;
34
<PAGE>
7.6.2 may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance with
law, or any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.6.3 may set aside from time to time out of such surplus
or net profits such sum or sums as, in its discretion, it may think proper,
as a reserve fund to meet contingencies, or for equalizing dividends or for
the purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
35
<PAGE>
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Article 8.
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to
time, reimburse or advance to any Director or officer or other person entitled
to indemnification hereunder the funds necessary for payment of expenses,
including
36
<PAGE>
attorneys' fees and disbursements, incurred in connection with any
Proceeding, in advance of the final disposition of such Proceeding; PROVIDED,
HOWEVER, that, if required by the General Corporation Law, such expenses
incurred by or on behalf of any Director or officer or other person may be
paid in advance of the final disposition of a Proceeding only upon receipt by
the Corporation of an undertaking, by or on behalf of such Director or
officer (or other person indemnified hereunder), to repay any such amount so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right of appeal that such Director, officer or
other person is not entitled to be indemnified for such expenses.
8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, the Certificate of
Incorporation, these By-laws, any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other
37
<PAGE>
person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article 8, the Certificate of
Incorporation or under section 145 of the General Corporation Law or any other
provision of law.
8.6 BINDING EFFECT. The provisions of this Article 8 shall be a
contract between the Corporation, on the one hand, and each Director and officer
who serves in such capacity at any time while this Article 8 is in effect and
any other person entitled to indemnification hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or modification of
this Article 8 shall affect any rights or obligations with respect to any state
of facts then or theretofore existing or thereafter arising or any proceeding
38
<PAGE>
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.7 PROCEDURAL RIGHTS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
39
<PAGE>
8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer
of the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be
indemni-fied or to reimbursement or advancement of expenses as a matter of right
pursuant to this Article 8 may elect to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be
made, by a notice in writing to the Corporation, at the time indemnification or
reimbursement or advancement of expenses is sought; PROVIDED, HOWEVER, that if
no such notice is given, the right to indemnification or reimbursement or
advancement of expenses shall be determined by the law in effect at the time
indemnification or reimbursement or advancement of expenses is sought.
40
<PAGE>
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office
of the Corporation correct and complete records and books of account recording
the financial transactions of the Corporation and minutes of the proceedings of
the stockholders, the Board and any committee of the Board. The Corporation
shall keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
41
<PAGE>
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
stockholders for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
42
<PAGE>
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the President,
any Vice President, the Secretary or the Chief Financial Officer, or any one of
them, may execute and deliver on behalf of the Corporation proxies respecting
any and all shares or other ownership interests of any Other Entity owned by the
Corporation appointing such person or persons as the officer executing the same
shall deem proper to represent and vote the shares or other ownership interests
so owned at any and all meetings of holders of shares or other ownership
interests, whether general or special, and/or to execute and deliver consents
respecting such shares or other ownership interests; or any of the aforesaid
officers may attend any meeting of the holders of shares or other ownership
interests of such Other Entity and thereat vote or exercise any or all other
powers of the Corporation as the holder of such shares or other ownership
interests.
ARTICLE 13
AMENDMENTS
43
<PAGE>
The Board of Directors may from time to time adopt, amend or repeal
the By-laws; PROVIDED, HOWEVER, that any By-laws adopted or amended by the Board
may be amended or repealed, and any By-laws may be adopted, by a vote of the
Stockholders having at least a majority in voting power of the then issued and
outstanding shares of capital stock of the Corporation.
44
<PAGE>
EXHIBIT 3.6
AMENDED AND RESTATED BY-LAWS
of
TA OPERATING CORPORATION
(A Delaware Corporation)
________________________
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Business Day" means any day other than Saturday, Sunday or other
day on which banking institutions are authorized by law to close in the City of
New York.
1.5 "By-laws" means the initial by-laws of the Corporation, as
amended from time to time.
1.6 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1
<PAGE>
1.7 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1.8 "Chief Executive Officer" means the Chief Executive Officer of
the Corporation.
1.9 "Chief Financial Officer" means the Chief Financial Officer of
the Corporation.
1.10 "Corporation" means TA Operating Corporation.
1.11 "Directors" means directors of the Corporation.
1.12 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
1.13 "General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended from time to time.
1.14 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.15 "President" means the President of the Corporation.
1.16 "Secretary" means the Secretary of the Corporation.
1.17 "Stockholders" means stockholders of the Corporation.
1.18 "Vice President" means a Vice President of the Corporation.
2
<PAGE>
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of stockholders shall be held
at the office of the Corporation or at such other place within or without the
State of Delaware as shall be specified or fixed in the notice of such meeting
or in the waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
and on such business day in April or as may be determined by the Board and
designated in the notice of meeting.
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual
meeting of stockholders for the election of Directors and the transaction of
other business is not held within the month specified in Section 2.2 hereof, the
Board shall call a meeting of stockholders for the election of Directors and the
transaction of other business as soon thereafter as convenient.
2.4 OTHER SPECIAL MEETINGS. A special meeting of stockholders (other
than a special meeting for the election of Directors), unless otherwise
prescribed by statute, may be called at any time by the Board or the Chief
Executive Officer, or by the President or by the Secretary. At any special
meeting of stockholders only such business may be transacted as is related to
the purpose or purposes of such meeting set forth in the
3
<PAGE>
notice thereof given pursuant to Section 2.6 hereof or in any waiver of
notice thereof given pursuant to Section 2.7 hereof.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
stockholders entitled (i) to notice of or to vote at any meeting of stockholders
or any adjournment thereof, (ii) to express consent to corporate action in
writing without a meeting or (iii) to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock; or (b) any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date was adopted by the Board
and which record date shall not be (x) in the case of clause (a)(i) above, more
than 60 nor less than 10 days before the date of such meeting, (y) in the case
of clause (a)(ii) above, more than 10 days after the date upon which the
resolution fixing the record date was adopted by the Board and (z) in the case
of clause (a)(iii) or (b) above, more than 60 days prior to such action. If no
such record date is fixed:
2.5.1 the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held;
4
<PAGE>
2.5.2 the record date for determining stockholders
entitled to express consent to corporate action in writing without a
meeting, when no prior action by the Board is required under the General
Corporation Law, shall be the first day on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded; and when prior action by the Board is required under the
General Corporation Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall
be at the close of business on the date on which the Board adopts the
resolution taking such prior action; and
2.5.3 the record date for determining stockholders for
any purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be
at the close of business on the day on which the Board adopts the
resolution relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
5
<PAGE>
2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided
in Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute,
the Certificate of Incorporation or these By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to notice of or to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
with postage prepaid, directed to the stockholder at his or her address as it
appears on the records of the Corporation. An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the Corporation that the notice
required by this Section 2.6 has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. When a meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken, and at the adjourned meeting any business may be transacted that might
have been transacted at the meeting as originally called. If, however, the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
6
<PAGE>
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the stockholder or stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice unless so required by statute, the
Certificate of Incorporation or these By-laws.
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
or cause to be prepared and made, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
the stockholder's agent, or attorney, at the stockholder's expense, for any
purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice
of the meeting, or, if not so specified, at the place where the meeting is to
be held. The list shall also be produced and kept at the
7
<PAGE>
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The Corporation shall maintain
the stockholder list in written form or in another form capable of conversion
into written form within a reasonable time. Upon the willful neglect or
refusal of the Directors to produce such a list at any meeting for the
election of Directors, they shall be ineligible for election to any office at
such meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders
or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, the
holders of one-third of all outstanding shares of stock entitled to vote at any
meeting of stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of any business at such meeting. When a
quorum is once present to organize a meeting of stockholders, it is not broken
by the subsequent withdrawal of any stockholders. The holders of a majority of
the shares of stock present in person or represented by proxy at any meeting of
stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; PROVIDED, HOWEVER, that
the foregoing shall not limit the right of the
8
<PAGE>
Corporation to vote stock, including but not limited to its own stock, held
by it in a fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate of
Incorporation, every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his or her
name on the record of stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of stockholders (at which a
quorum was present to organize the meeting), all matters, except as otherwise
provided by statute or by the Certificate of Incorporation or by these By-laws,
shall be
9
<PAGE>
decided by a majority of the votes cast at such meeting by the holders of
shares present in person or represented by proxy and entitled to vote
thereon, whether or not a quorum is present when the vote is taken. All
elections of Directors shall be by written ballot unless otherwise provided
in the Certificate of Incorporation. In voting on any other question on
which a vote by ballot is required by law or is demanded by any stockholder
entitled to vote, the voting shall be by ballot. Each ballot shall be signed
by the stockholder voting or the stockholder's proxy and shall state the
number of shares voted. On all other questions, the voting may be VIVA VOCE.
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy.
The validity and enforceability of any proxy shall be determined in
accordance with Section 212 of the General Corporation Law. A stockholder
may revoke any proxy that is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or
by delivering a proxy in accordance with applicable law bearing a later date
to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting, the person presiding at the meeting may appoint, and on the request
of any stockholder entitled to vote thereat shall
10
<PAGE>
appoint, one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall (a) ascertain the number of shares outstanding and the voting power of
each, (b) determine the shares represented at the meeting and the validity of
proxies and ballots, (c) count all votes and ballots, (d) determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors, and (e) certify their
determination of the number of shares represented at the meeting and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of their
duties. Unless otherwise provided by the Board, the date and time of the
opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting shall be determined by the person
presiding at the meeting and shall be announced at the meeting. No ballot,
proxies or votes, or any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery of the State of Delaware upon application by a stockholder shall
determine otherwise.
2.12 ORGANIZATION. At each meeting of stockholders, the Chairman, or
in the absence of the Chairman, the Chief Executive Officer, or in the absence
of the Chief Executive Officer, the President, or in the absence of the
President a Vice President, and in case more than one Vice
11
<PAGE>
President shall be present, that Vice President designated by the Board (or
in the absence of any such designation, the most senior Vice President, based
on age, present), shall act as chairman of the meeting. The Secretary, or in
his or her absence one of the Assistant Secretaries, shall act as secretary
of the meeting. In case none of the officers above designated to act as
chairman or secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, shall be chosen
by a majority of the votes cast at such meeting by the holders of shares of
capital stock present in person or represented by proxy and entitled to vote
at the meeting.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 WRITTEN CONSENT OF STOCKHOLDERS WITHOUT A MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) to the Corporation by delivery to its registered office in
the State of
12
<PAGE>
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless,
within 60 days of the earliest dated consent delivered in the manner required
by this Section 2.14, written consents signed by a sufficient number of
holders to take action are delivered to the Corporation as aforesaid. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the Certificate
of Incorporation, the business and affairs of the Corporation shall be managed
by or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these By-laws or the Certificate of
Incorporation or by statute, to be exercised and performed by the stockholders.
13
<PAGE>
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The Board shall consist
of one or more members. The number of Directors shall be fixed from time to
time by resolution adopted by a majority of the entire Board then in office,
whether or not present at a meeting. Each Director shall hold office until his
successor is elected and qualified, or until his earlier death, resignation or
removal.
3.3 ELECTION. Directors shall, except as otherwise required by
statute or by the Certificate of Incorporation, be elected by a plurality of the
votes cast at a meeting of stockholders by the holders of shares entitled to
vote in the election.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Unless otherwise
provided in the Certificate of Incorporation, newly created Directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any other reason, including the removal of Directors without
cause, may be filled by persons having the qualifications set forth in
Section 3.2 hereof by the affirmative votes of a majority of the entire Board,
although less than a quorum, or by a sole remaining Director, or may be elected
by a plurality of the votes cast by the holders of shares of capital stock
entitled to vote in the election at a special meeting of stockholders called for
that purpose. A Director elected to fill a vacancy shall be elected to hold
office until a successor is elected and qualified, or until the Director's
earlier death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written
notice to the Corporation. Such resignation shall take effect at the time
therein specified,
14
<PAGE>
and, unless otherwise specified in such resignation, the acceptance of such
resignation shall not be necessary to make it effective.
3.6 REMOVAL. Subject to the provisions of Section 141(k) of the
General Corporation Law, any or all of the Directors may be removed with or
without cause by vote of the holders of a majority of the shares then entitled
to vote at an election of Directors.
3.7 COMPENSATION. Each Director who is not an employee of the
Corporation, in consideration of his or her service as such, shall be entitled
to receive from the Corporation such amount per annum or such fees for
attendance at Directors' meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in connection with the performance
of his or her duties. Each Director who is not an employee of the Corporation
who shall serve as a member of any committee of Directors in consideration of
serving as such shall be entitled to such additional amount per annum or such
fees for attendance at committee meetings, or both, as the Board may from time
to time determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in the performance of his or her
duties. Nothing contained in this Section 3.7 shall preclude any Director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation therefor.
15
<PAGE>
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 ANNUAL MEETINGS. On the day when and at the place where the
annual meeting of stockholders for the election of Directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting, without
notice of such meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual meeting of the Board
may be held at any other time and place specified in a notice given as provided
in Section 3.11 hereof for special meetings of the Board or in a waiver of
notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called by
the Chairman, the Chief Executive Officer or the Secretary or by any two or more
Directors then serving on at least two Business Day's notice to each Director
given by one of the means specified in Section 3.14 hereof other than by mail.
Special meetings shall be called by the Chairman, Chief Executive Officer or
Secretary in like manner and on like notice on the written request of any two or
more of the Directors then serving.
16
<PAGE>
3.12 TELEPHONE MEETINGS. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting. Each regular or special meeting of the
Board or any committee thereof shall have adequate conference telephone or
similar communications equipment available to allow any one of the directors or
committee members who choose to participate by telephone to do so in accordance
with this Section 3.12.
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.17 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these By-laws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by hand
delivery, or by telegram, telex,
17
<PAGE>
telecopy or similar means addressed to such Director at such Director's
address as it appears on the records of the Corporation.
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these By-laws, a waiver thereof,
in writing, signed by the person or persons entitled to said notice, whether
before or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these By-laws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman, or in
the absence of the Chairman the Chief Executive Officer, or in the absence of
the Chief Executive Officer a chairman chosen by a majority of the Directors
present, shall preside. The Secretary shall act as secretary at each meeting of
the Board. In case the Secretary shall be absent from any meeting of the Board,
an Assistant Secretary shall perform the duties of secretary at such meeting;
and in the absence from any such meeting of the Secretary and all Assistant
Secretaries, the person presiding at the meeting may appoint any person to act
as secretary of the meeting.
18
<PAGE>
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required
by statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a vote of the entire Board,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation. The Board may designate one or more Directors
as alternate members of any committee to replace absent or disqualified members
at any meeting of such committee. If a member of a committee shall be absent
from any meeting, or disqualified from voting thereat, the remaining member or
members present
19
<PAGE>
and not disqualified from voting, whether or not such member or members
constitute a quorum, may, by a unanimous vote, appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in a resolution of the
Board passed as aforesaid, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be impressed on
all papers that may require it, but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting,
or recommending to the stockholders. any action or matter expressly required
by the GCL to be submitted to stockholders for approval or (ii) adopting,
amending or repealing any by-law of the Corporation. Such committee or
committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board. Unless otherwise specified in the
resolution of the Board designating a committee, at all meetings of such
committee a majority of the total number of members of the committee shall
constitute a quorum for the transaction of business, and the vote of a
majority of the members of the committee present at any meeting at which
there is a quorum shall be the act of the committee. Each committee shall
keep regular minutes of its meetings. Unless the Board otherwise provides,
each committee designated by the Board may make, alter and repeal rules for
the conduct of its business. In the absence of such rules each committee
shall conduct its business in the same manner as the Board conducts its
business pursuant to Article 3 of these By-laws.
20
<PAGE>
ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a Chairman,
a Chief Executive Officer, a President, a Secretary, a Chief Financial Officer
and such other officers as the Board may appoint, including one or more Vice
Presidents and one or more Assistant Secretaries and Assistant Treasurers, who
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board. The Board may designate one or more Vice Presidents
as Executive Vice Presidents and may use descriptive words or phrases to
designate the standing, seniority or areas of special competence of the Vice
Presidents elected or appointed by it. Any number of offices may be held by the
same person unless the Certificate of Incorporation or these By-laws otherwise
provide.
5.2 APPOINTMENT. The officers of the Corporation shall be chosen by
the Board annually or at such other time or times as the Board shall determine.
5.3 COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that the officer
is also a Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold
office until such officer's successor is chosen and qualifies or until such
officer's earlier death, resignation or removal. Any officer may resign at any
time upon written notice to the Corporation. Such resignation shall take effect
at the date of receipt of such notice or at
21
<PAGE>
such later time as is therein specified, and, unless otherwise specified, the
acceptance of such resignation shall not be necessary to make it effective.
The resignation of an officer shall be without prejudice to the contract
rights of the Corporation, if any. Any officer elected or appointed by the
Board may be removed at any time, with or without cause, by vote of a
majority of the entire Board. Any vacancy occurring in any office of the
Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any.
The election or appointment of an officer shall not of itself create contract
rights.
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise.
5.6 CHAIRMAN. The Chairman shall preside at all meetings of the
Board and shall exercise such powers and perform such other duties as shall be
determined from time to time by the Board.
5.7 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the Chief Executive Officer of the Corporation and shall have general
supervision over the business of the Corporation, subject, however, to the
control of the Board and of any duly authorized committee of Directors. The
Chief Executive Officer shall preside at all meetings of the stockholders and at
all meetings of the Board at which the Chairman is not present. The Chief
Executive Officer may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts and other instruments except in cases in which the
signing and execution thereof shall be expressly delegated by the Board or by
22
<PAGE>
these By-laws to some other officer or agent of the Corporation or shall be
required by statute otherwise to be signed or executed and, in general, the
Chief Executive Officer shall perform all duties incident to the office of Chief
Executive Officer of a corporation and such other duties as may from time to
time be assigned to the Chief Executive Officer by the Board.
5.8 PRESIDENT. At the request of the Chief Executive Officer, or, in
the Chief Executive Officer's absence, at the request of the Board, the
President shall perform all of the duties of the Chief Executive Officer and, in
so performing, shall have all the powers of, and be subject to all the
restrictions upon, the Chief Executive Officer. The President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in the cases in which the signing and execution
thereof shall be expressly delegated by the Board or these By-laws to some other
officer or agent of the Corporation, or shall be required by statute otherwise
to be signed or executed, and the President shall perform such other duties as
from time to time may be assigned to the President by the Board or the Chief
Executive Officer.
5.9 VICE PRESIDENTS. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign
and execute in the name of the Corporation deeds, mortgages,
23
<PAGE>
bonds, contracts or other instruments, except in cases in which the signing
and execution thereof shall be expressly delegated by the Board or by these
By-laws to some other officer or agent of the Corporation, or shall be
required by statute otherwise to be signed or executed, and each Vice
President shall perform such other duties as from time to time may be
assigned to such Vice President by the Board or by the President.
5.10 SECRETARY. The Secretary shall attend all meetings of the Board
and of the stockholders and shall record all the proceedings of the meetings of
the Board and of the stockholders in a book to be kept for that purpose, and
shall perform like duties for committees of the Board, when required. The
Secretary shall give, or cause to be given, notice of all special meetings of
the Board and of the stockholders and shall perform such other duties as may be
prescribed by the Board or by the President, under whose supervision the
Secretary shall be. The Secretary shall have custody of the corporate seal of
the Corporation, and the Secretary, or an Assistant Secretary, shall have
authority to impress the same on any instrument requiring it, and when so
impressed the seal may be attested by the signature of the Secretary or by the
signature of such Assistant Secretary. The Board may give general authority to
any other officer to impress the seal of the Corporation and to attest the same
by such officer's signature. The Secretary or an Assistant Secretary may also
attest all instruments signed by the President or any Vice President. The
Secretary shall have charge of all the books, records and papers of the
Corporation relating to its organization and management, shall see that the
reports, statements and other documents required by statute are properly kept
and filed and, in
24
<PAGE>
general, shall perform all duties incident to the office of Secretary of a
corporation and such other duties as may from time to time be assigned to the
Secretary by the Board or by the Chief Executive Officer.
5.11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
charge and custody of, and be responsible for, all funds, securities and notes
of the Corporation; receive and give receipts for moneys due and payable to the
Corporation from any sources whatsoever; deposit all such moneys and valuable
effects in the name and to the credit of the Corporation in such depositaries as
may be designated by the Board; against proper vouchers, cause such funds to be
disbursed by checks or drafts on the authorized depositaries of the Corporation
signed in such manner as shall be determined by the Board and be responsible for
the accuracy of the amounts of all moneys so disbursed; regularly enter or cause
to be entered in books or other records maintained for the purpose full and
adequate account of all moneys received or paid for the account of the
Corporation; have the right to require from time to time reports or statements
giving such information as the Chief Financial Officer may desire with respect
to any and all financial transactions of the Corporation from the officers or
agents transacting the same; render to the Chief Executive Officer or the Board,
whenever the Chief Executive Officer or the Board shall require the Chief
Financial Officer so to do, an account of the financial condition of the
Corporation and of all financial transactions of the Corporation; exhibit at all
reasonable times the records and books of account to any of the Directors upon
application at the office of the Corporation where such records and books are
kept;
25
<PAGE>
disburse the funds of the Corporation as ordered by the Board; and, in
general, perform all duties incident to the office of Chief Financial Officer
of a corporation and such other duties as may from time to time be assigned
to the Chief Financial Officer by the Board or the Chief Executive Officer.
5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Chief Financial Officer,
respectively, or by the Board or by the Chief Executive Officer.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided
in these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize
the Chief Executive Officer or any other officer, employee or agent of the
Corporation to effect loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances the person so authorized may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, and, when
26
<PAGE>
authorized by the Board so to do, may pledge and hypothecate or transfer any
securities or other property of the Corporation as security for any such
loans or advances. Such authority conferred by the Board may be general or
confined to specific instances, or otherwise limited.
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation with such
banks, trust companies, investment banking firms, financial institutions or
other depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
27
<PAGE>
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
Chief Executive Officer, the President or a Vice President and by the Secretary
or an Assistant Secretary or the Chief Financial Officer or an Assistant
Treasurer, and may be impressed with the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles,
if the certificate is countersigned by a transfer agent or registrar other than
the Corporation itself or its employee. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may, unless otherwise
ordered by the Board, be issued by the Corporation with the same effect as if
such person were such officer, transfer agent or registrar at the date of issue.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
28
<PAGE>
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to
time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
7.4 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. The holder
of any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums
29
<PAGE>
and with such surety or sureties as the Board may direct, to indemnify the
Corporation and its transfer agents and registrars against any claim that may
be made against any of them on account of the continued existence of any such
certificate so alleged to have been lost, destroyed, stolen or mutilated and
against any expense in connection with such claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws or
with the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.
7.6 RESTRICTION ON TRANSFER OF STOCK. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of stockholders
or among such stockholders and the
30
<PAGE>
Corporation. No restriction so imposed shall be binding with respect to
capital stock issued prior to the adoption of the restriction unless the
holders of such capital stock are parties to an agreement or voted in favor
of the restriction.
7.7 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such amounts
and at such time or times as it, in its discretion, shall deem advisable
giving due consideration to the condition of the affairs of the
Corporation;
7.7.2 may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance with
law, or any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such
surplus or net profits such sum or sums as, in its discretion, it may think
proper, as a reserve fund to meet contingencies, or for equalizing
dividends or for the purpose of maintaining or increasing the property or
business of the Corporation, or for any purpose it may think conducive to
the best interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a
31
<PAGE>
party to any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is
or was a Director or officer of the Corporation, or, at the request of the
Corporation, is or was serving as a director or officer of any other
corporation or in a capacity with comparable authority or responsibilities
for any partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees, disbursements and other charges). Persons who are not
directors or officers of the Corporation (or otherwise entitled to
indemnification pursuant to the preceding sentence) may be similarly
indemnified in respect of service to the Corporation or to an Other Entity at
the request of the Corporation to the extent the Board at any time specifies
that such persons are entitled to the benefits of this Article 8.
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to
time, reimburse or advance to any Director or officer or other person entitled
to indemnification hereunder the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred in connection with any
Proceeding, in advance of the final disposition of such Proceeding; PROVIDED,
HOWEVER, that, if required by the General Corporation Law, such expenses
incurred by or on behalf of any Director
32
<PAGE>
or officer or other person may be paid in advance of the final disposition of
a Proceeding only upon receipt by the Corporation of an undertaking, by or on
behalf of such Director or officer (or other person indemnified hereunder),
to repay any such amount so advanced if it shall ultimately be determined by
final judicial decision from which there is no further right of appeal that
such Director, officer or other person is not entitled to be indemnified for
such expenses.
8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, the Certificate of
Incorporation, these By-laws, any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or
33
<PAGE>
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article 8, the
Certificate of Incorporation or under section 145 of the General Corporation
Law or any other provision of law.
8.6 BINDING EFFECT. The provisions of this Article 8 shall be a
contract between the Corporation, on the one hand, and each Director and officer
who serves in such capacity at any time while this Article 8 is in effect and
any other person entitled to indemnification hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or modification of
this Article 8 shall affect any rights or obligations with respect to any state
of facts then or theretofore existing or thereafter arising or any proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.7 PROCEDURAL RIGHTS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of
34
<PAGE>
expenses is proper in the circumstances nor an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel
and its stockholders) that such person is not entitled to such
indemnification or reimbursement or advancement of expenses shall constitute
a defense to the action or create a presumption that such person is not so
entitled. Such a person shall also be indemnified for any expenses incurred
in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer
of the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be
indemni-fied or to reimbursement or advancement of expenses as a matter of right
pursuant to this Article 8 may elect to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent
35
<PAGE>
permitted by law, or on the basis of the applicable law in effect at the time
such indemnification or reimbursement or advancement of expenses is sought.
Such election shall be made, by a notice in writing to the Corporation, at
the time indemnification or reimbursement or advancement of expenses is
sought; PROVIDED, HOWEVER, that if no such notice is given, the right to
indemnification or reimbursement or advancement of expenses shall be
determined by the law in effect at the time indemnification or reimbursement
or advancement of expenses is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office
of the Corporation correct and complete records and books of account recording
the financial transactions of the Corporation and minutes of the proceedings of
the stockholders, the Board and any committee of the Board. The Corporation
shall keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so
36
<PAGE>
kept can be converted into clearly legible written form within a reasonable
time. The Corporation shall so convert any records so kept upon the request
of any person entitled to inspect the same.
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
stockholders for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the Chief
Executive Officer, the President, any Vice President, the Secretary or the Chief
Financial
37
<PAGE>
Officer, or any one of them, may execute and deliver on behalf of the
Corporation proxies respecting any and all shares or other ownership
interests of any Other Entity owned by the Corporation appointing such person
or persons as the officer executing the same shall deem proper to represent
and vote the shares or other ownership interests so owned at any and all
meetings of holders of shares or other ownership interests, whether general
or special, and/or to execute and deliver consents respecting such shares or
other ownership interests; or any of the aforesaid officers may attend any
meeting of the holders of shares or other ownership interests of such Other
Entity and thereat vote or exercise any or all other powers of the
Corporation as the holder of such shares or other ownership interests.
ARTICLE 13
EMERGENCY BY-LAWS
Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency,
which is defined as when a quorum of the Corporation's Directors cannot be
readily assembled because of some catastrophic event. During such emergency:
13.1 NOTICE TO BOARD MEMBERS. Any one member of the Board or any one
of the following officers: Chairman, Chief Executive Officer, President, any
Vice President, Secretary, or Chief Financial Officer, may call a meeting of the
Board. Notice of such meeting need be given only to those Directors whom it is
practicable to reach, and may be given in any practical manner, including by
publication and radio. Such notice shall be given at least six hours prior to
commencement of the meeting.
38
<PAGE>
13.2 TEMPORARY DIRECTORS AND QUORUM. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 ACTIONS PERMITTED TO BE TAKEN. The Board as constituted in
Section 13.2, and after notice as set forth in Section 13.1 may:
(a) prescribe emergency powers to any officer of the
Corporation;
(b) delegate to any officer or Director, any of the powers of
the Board;
(c) designate lines of succession of officers and agents, in the
event that any of them are unable to discharge their duties;
(d) relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
(e) take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
ARTICLE 14
ADOPTION, AMENDMENT AND REPEAL OF BY-LAWS
39
<PAGE>
The Board may from time to time adopt, amend or repeal the By-laws;
PROVIDED, HOWEVER, that any By-laws adopted or amended by the Board may be
amended or repealed, and any By-laws may be adopted, by a vote of the
Stockholders having at least a majority in voting power of the then issued and
outstanding shares of capital stock of the Corporation.
40
<PAGE>
EXHIBIT 4.5
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of March 1, 1998 among TA TRAVEL, L.L.C. (the "New
Subsidiary Guarantor"), a subsidiary of TA Operating Corporation
which is a subsidiary of TravelCenters of America, Inc. (or its
successor), a Delaware corporation (the "Company"), THE COMPANY,
on behalf of itself and the Subsidiary Guarantors (the "Existing
Subsidiary Guarantors") under the Indenture referred to below,
and STATE STREET BANK AND TRUST COMPANY, as successor to FLEET
NATIONAL BANK, a national banking association, as successor
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of March 27, 1997, providing
for the issuance of an aggregate principal amount of $125,000,000 of 10-1/4%
Senior Subordinated Notes due 2007 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantor
to execute and deliver to the Trustee a supplemental indenture pursuant to
which the New Subsidiary Guarantor shall unconditionally guarantee all of the
Company's obligations under the Securities pursuant to a Subsidiary Guaranty
on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Company and Existing Subsidiary Guarantors are authorized to execute and deliver
this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
1
<PAGE>
1. DEFINITIONS. (a) Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplement, except as otherwise herein
expressly provided or unless the context otherwise requires: (i) the terms and
expressions used herein shall have the same meanings as corresponding terms and
expressions used in the Indenture; and (ii) the words "herein," "hereof" and
"hereby" and other words of similar import used in this Supplement refer to this
Supplement as a whole and not to any particular section hereof.
2. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to Guarantee
the Company's obligations under the Securities on the term and subject to the
conditions set forth in Article 11 of the Indenture and to be bound by all other
applicable provisions of the Indenture.
3. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
6. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
TA TRAVEL, L.L.C.
By /s/ James W. George
-------------------------
Name: James W. George
2
<PAGE>
Title: Sr. VP and CFO
TRAVELCENTERS OF AMERICA, INC. on behalf
of itself and the Existing Subsidiary
Guarantors,
by /s/ James W. George
--------------------------
Name: James W. George
Title: Sr. VP and CFO
STATE STREET BANK AND TRUST COMPANY, as
successor to FLEET NATIONAL BANK as
successor Trustee,
by /s/ Susan C. Merker
---------------------------
Name: Susan C. Merker
Title: Assistant Vice President
3
<PAGE>
EXHIBIT 10.9
WAIVER NO. 1 AND AGREEMENT dated as of March 1, 1998 (this
"Agreement"), to the Credit Agreement dated as of March 21, 1997 (the
"Credit Agreement"), among TravelCenters of America, Inc., a Delaware
corporation (the "Borrower"), the financial institutions from time to
time party thereto (the "Lenders") and The Chase Manhattan Bank, a
New York banking corporation, as agent (in such capacity, the "Agent")
for the Lenders, as swingline lender (in such capacity, the "Swingline
Lender") and as fronting bank (in such capacity, the "Fronting Bank").
A. The Borrower has requested that the Lenders waive compliance by the
Borrower with certain provisions of the Credit Agreement to the extent necessary
to permit the formation by the Borrower of an indirect wholly owned subsidiary
that will engage solely in the business of acquiring, operating and maintaining
an airplane.
B. The Required Lenders are willing to enter into this Agreement on the
terms and subject to the conditions set forth herein.
C. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. WAIVER. The Lenders hereby waive compliance by the Borrower
and the Guarantors with (a) the provisions of Section 7.12 of the Credit
Agreement to the extent, but only to the extent, necessary to permit TA
Operating Corporation, a Delaware corporation ("TA"), to form and maintain as a
subsidiary TA Travel L.L.C., a Delaware limited liability company ("TA Travel"),
and (b) the provisions of Section 7.04 of the Credit Agreement to the extent,
but only to the extent, necessary to permit the Borrower and the Guarantors to
make investments (whether by means of capital contributions or intercompany
loans) in TA Travel from time to time in an aggregate amount not to exceed
$10,000,000 in the aggregate at any time outstanding, which investments are to
be used by TA Travel solely for the purchase, operation and maintenance of an
airplane (or any airplane purchased in replacement thereof) owned by TA Travel
(collectively, the "Airplane"). In connection with the operation of the
Airplane, (a) TA Travel has leased the Airplane to TA and (b) TA Travel and/or
TA may from time to time enter into operating agreements (any such agreement, an
"Operating Agreement") with airplane charter companies (any such charter
company, a "Charter Company") pursuant to which TA Travel and TA will permit the
Charter Company to operate the Airplane for the benefit of the (i) Borrower and
its subsidiaries or (ii) other persons.
1
<PAGE>
SECTION 2. AGREEMENT. (a) TA Travel agrees with the Lenders, the Agent,
the Swingline Lender and the Fronting Bank as follows:
(i) TA Travel shall, at all times during the term of the Credit
Agreement, engage solely in the business of acquiring, operating and
maintaining the Airplane, leasing the Airplane to TA and entering into
Operating Agreements with respect to the operation of the Airplane from
time to time;
(ii) by its signature below, TA Travel shall be deemed to be a
Guarantor for purposes of the Credit Agreement and TA Travel hereby agrees
to be bound by all the terms and provisions of, and to perform all the
obligations under, the Credit Agreement applicable to a Guarantor
thereunder (it being understood that, for purposes of the foregoing, any
reference in the Credit Agreement to a "Guarantor" shall be deemed to be a
reference to TA Travel); PROVIDED, HOWEVER, that, notwithstanding anything
to the contrary in the Credit Agreement, TA Travel will not (A) incur,
create, assume or permit to exist any Indebtedness in respect of Capital
Lease Obligations or (B) permit to exist any loans or advances by Borrower
to TA Travel or any investment by Borrower in TA Travel except as expressly
permitted by Section 1(b) hereof;
(iii) by its signature below, TA Travel agrees to become a party to
the Guarantee Agreement attached hereto as Exhibit A (the "TA Travel
Guarantee Agreement"), it being understood that each reference to the
"Guarantee Agreement" in the Credit Agreement shall be deemed to include
the TA Travel Guarantee Agreement;
(iv) by its signature below, TA Travel agrees to become a party to the
Security Agreement attached hereto as Exhibit B (the "TA Travel Security
Agreement"), it being understood that each reference to the "Security
Agreement" in the Credit Agreement shall be deemed to include the TA Travel
Security Agreement;
(v) TA Travel represents and warrants to each of the Lenders, the
Agent, the Swingline Lender and the Fronting Bank that, after giving effect
to this Agreement, all representations and warranties contained in the
Credit Agreement, the TA Travel Guarantee Agreement and the TA Travel
Security Agreement that relate to TA Travel are true and correct in all
material respects on and as of the date hereof with the same effect as
though made on the date hereof, except to the extent such representations
and warranties expressly relate to an earlier date; and
(vi) on or before April 30, 1998, in the case of the original
Airplane, and within thirty days of the purchase thereof, in the case of
any replacement Airplane, TA Travel shall grant to the Collateral Agent a
valid and perfected first priority security interest in the Airplane,
pursuant to documentation in form and substance satisfactory to the
Collateral Agent; and
(b) the Borrower agrees with the Lenders, the Agent, the Swingline
Lender and the Fronting Bank as follows:
(i) the Borrower shall cause TA Travel to engage, at all times during
the term of the Credit Agreement, solely in the business of acquiring,
operating and maintaining the Airplane, leasing the Airplane to TA and
entering into Operating Agreements with respect to the operation of the
Airplane from time to time;
2
<PAGE>
(ii) the Borrower will cause TA Travel to comply with its other
obligations pursuant to Section 2(a) hereof, including but not limited to
its obligations under the covenants in Article VI and Article VII of the
Credit Agreement;
(iii) the Borrower will not, and will not cause or permit either
Guarantor to, make any investments in TA Travel; PROVIDED, HOWEVER, the
Borrower or either Guarantor shall be permitted to make investments
(whether by means of capital contributions or intercompany loans) in TA
Travel in an aggregate amount not to exceed $10,000,000 in the aggregate at
any time outstanding, to the extent that such investments are used by TA
Travel solely for the purchase, operation and maintenance of the Airplane;
and
(iv) the representations and warranties made by TA Travel in
Section 2(a)(v) hereof are true and correct in all material respects on and
as of the date hereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the other parties
hereto to enter into this Agreement, the Borrower represents and warrants to
each of the Lenders, the Agent, the Swingline Lender and the Fronting Bank that
(a) after giving effect to this Agreement, the representations and warranties
set forth in Article IV of the Credit Agreement are true and correct in all
material respects on and as of the date hereof with the same effect as though
made on and as of the date hereof, except to the extent such representations and
warranties expressly relate to an earlier date, and (b) after giving effect to
this Agreement, no Default or Event of Default has occurred and is continuing.
SECTION 4. CONDITIONS TO EFFECTIVENESS. The waiver set forth in Section 1
shall become effective as of the date first above written on the date that the
Agent shall have received (a) counterparts of this Agreement that, when taken
together, bear the signatures of the Borrower and the Required Lenders, (b) the
TA Travel Guarantee Agreement shall have been duly executed by TA Travel, the
Collateral Agent and the other parties thereto, and shall be in full force and
effect, (c) the TA Travel Security Agreement shall have been duly executed by TA
Travel and the Collateral Agent and the other parties thereto, and shall be in
full force and effect, (d) a duly executed waiver and amendment to the Tranche A
Exchange Note Purchase Agreements in form and substance satisfactory to the
Agent and (e) a supplemental indenture, an officer's certificate and a letter of
counsel each in form and substance satisfactory to the Agent establishing and
confirming that TA Travel is a Subsidiary Guarantor, as such term is defined in
the Subordinated Note Indenture, of the Borrower and that the investments in TA
Travel permitted hereby are permitted pursuant to Section 4.04 of the
Subordinated Note Indenture.
SECTION 5. EFFECT OF AGREEMENT. Except as expressly set forth herein,
this Agreement shall not by implication or otherwise limit, impair, constitute a
waiver of, or otherwise affect the rights and remedies of the Lenders, the
Agent, the Collateral Agent, the Swingline Lender, the Fronting Bank or the
Borrower under the Credit Agreement or any Security Document, and shall not
alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement or any
Security Document, all of which are ratified and affirmed in all respects and
shall continue in full force and effect. Nothing herein shall be deemed to
entitle the Borrower to a consent to, or a waiver, amendment, modification or
other change of, any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any Security Document in similar
or different circumstances. This Agreement shall apply and be effective only
with respect to the provisions of the Credit Agreement specifically referred to
herein. Any default under this Agreement shall constitute an Event of Default
under the Credit Agreement.
3
<PAGE>
SECTION 6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
Delivery of any executed counterpart of a signature page of this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 7. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. HEADINGS. The headings of this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
SECTION 9. EXPENSES. The Company agrees to reimburse the Administrative
Agent for its reasonable out-of-pocket expenses in connection with this
Agreement, including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Agent.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the date and year
first above written.
TRAVELCENTERS OF AMERICA, INC.,
by /s/ James W. George
---------------------------
Name: James W. George
Title: Sr. VP and CFO
TA TRAVEL L.L.C.,
by /s/ James W. George
---------------------------
Name: James W. George
Title: Sr. VP and CFO
TA OPERATING CORPORATION,
by /s/ James W. George
---------------------------
Name: James W. George
Title: Sr. VP and CFO
NATIONAL AUTO/TRUCKSTOPS, INC.,
by /s/ James W. George
---------------------------
Name: James W. George
Title: Sr. VP and CFO
5
<PAGE>
THE CHASE MANHATTAN BANK,
individually and as Agent, Swingline Lender and
Fronting Bank,
by /s/ William J. Caggiano
---------------------------
Name: William J. Caggiano
Title: Managing Director
6
<PAGE>
CREDIT AGRICOLE INDOSUEZ,
by /s/ Katherine L. Abbott
----------------------------
Name: Katherine L. Abbott
Title: First Vice President
by /s/ Todd Voss
----------------------------
Name: Todd Voss
Title: First Vice President
7
<PAGE>
CRESCENT/MACH I PARTNERS, L.P.,
by TCW ASSET MANAGEMENT COMPANY,
its Investment Manger,
by
------------------------------
Name:
Title:
8
<PAGE>
KEYPORT LIFE INSURANCE COMPANY,
by Stein Roe & Farnham Inc., as agent
/s/ Richard Hegwood
------------------------------
Name: Richard Hegwood
Title: Senior Vice President
9
<PAGE>
KZH -SOLEIL CORPORATION,
by
-----------------------------
Name:
Title:
10
<PAGE>
KZH HOLDING CORPORATION III,
by
----------------------------
Name:
Title:
11
<PAGE>
KZH -CRESCENT CORPORATION,
by
----------------------------
Name:
Title:
12
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
New York Branch,
by /s/ Shuichi Tajima
---------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
13
<PAGE>
MANUFACTURERS AND TRADERS TRUST COMPANY,
by /s/ C. Gregory Vogelsang
---------------------------
Name: C. Gregory Vogelsang
Title: Assistant Vice President
14
<PAGE>
NATIONAL CITY BANK,
by /s/ Stanley J. Gregorin, Jr.
---------------------------
Name: Stanley J. Gregorin, Jr.
Title: Vice President
15
<PAGE>
PAMCO CAYMAN LTD.,
by Protective Asset Management Company as
Collateral Manager
/s/ Mark K. Okuda
--------------------------
Name: Mark K. Okuda
Title Executive Vice President
16
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST,
by /s/ Thomas C. Hunt
--------------------------
Name: Thomas C. Hunt
Title: Assistant Portfolio Manager
17
<PAGE>
MERRIL LYNCH PRIME RATE PORTFOLIO,
by
--------------------------
Name:
Title:
18
<PAGE>
SENIOR FLOATING RATE FUND, INC.,
by
--------------------------
Name:
Title:
19
<PAGE>
SENIOR DEBT PORTFOLIO,
by Boston Management and Research, as Investment
Advisor
/s/ Scott H. Page
-------------------------
Name: Scott H. Page
Title: Vice President
20
<PAGE>
SOCIETE GENERALE,
by /s/ Joseph A. Philbin
-------------------------
Name: Joseph A. Philbin
Title: Vice President
21
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST,
by /s/ Jeffrey W. Maillet
-------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice President and Director
22
<PAGE>
VAN KAMPEN CLO I, LIMITED,
by Van Kampen American Capital
Management, Inc., as Collateral
Manager
by /s/ Jeffrey W. Maillet
------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
23
<PAGE>
EXHIBIT 10.11
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
TRAVELCENTERS OF AMERICA, INC.
-----------------------
AMENDMENT AND WAIVER AGREEMENT
Dated as of March 1, 1998
amending the
Senior Secured Note Exchange Agreement
dated as of March 21, 1997
-----------------------
8.94% Series I Senior Secured Notes due 2002
Series II Senior Secured Notes due 2005
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
TRAVELCENTERS OF AMERICA, INC.
AMENDMENT AND WAIVER AGREEMENT
New York, New York
as of March 1, 1998
To the several Noteholders whose
names appear in the Acceptance
Form at the end hereof
Ladies and Gentlemen:
The undersigned, TRAVELCENTERS OF AMERICA, INC., a Delaware corporation
(the "COMPANY"), hereby agrees with you (the "NOTEHOLDER") as follows:
SECTION 1. SENIOR SECURED NOTE EXCHANGE AGREEMENT; PROPOSED WAIVERS AND
AMENDMENTS. Pursuant to the Senior Secured Note Exchange Agreement dated as
of March 21, 1997 (the "NOTE EXCHANGE AGREEMENT") entered into by the Company
with each of you, the Company issued and sold $35,500,000 aggregate principal
amount of its 8.94% Series I Senior Secured Notes due 2002 and $50,000,000
aggregate principal amount of its Series II Senior Secured Notes due 2005
(the "NOTES"), all of which remain outstanding on the date hereof. Unless
the context otherwise requires, capitalized terms used herein without
definition have the respective meanings ascribed thereto in the Note Exchange
Agreement.
The Company requests approval by the Noteholders of the formation of a
newly formed direct wholly-owned subsidiary of TA Operating Corporation
("TA") in a transaction that is briefly described in a letter to you dated
March 12, 1998 from the Company (the "AMENDMENT REQUEST LETTER") attached
hereto as EXHIBIT A. Because the transaction described in the Amendment
Request Letter will result in a breach of Sections 7.4, 7.8 and 7.12 of the
Note Exchange Agreement, the Company is requesting the waiver and amendment
described below.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to you that (a) after giving effect to this Agreement, the
representations and warranties set forth in Section 4 of the Note Exchange
Agreement are true and correct in all material respects on and as of the date
hereof with the same effect as though made on and as of the date hereof,
except to the extent such representations and warranties expressly relate to
an earlier date, and (b) after giving effect to this Agreement, no Default or
Event of Default has occurred and is continuing.
<PAGE>
The Company has not, directly or indirectly, paid or caused to be paid
any consideration (as supplemental or additional interest, a fee or
otherwise) to any Noteholder in order to induce such holder to enter into
this Agreement or take any other action in connection with the transactions
contemplated hereby, nor has the Company agreed to make such payment.
SECTION 3. WAIVER OF SECTIONS 7.4 AND 7.12. By acceptance of this
Agreement, you agree to waive compliance by the Company and the Guarantors
with (a) the provisions of Section 7.4 of the Note Exchange Agreement to the
extent, but only to the extent, necessary to permit the Company and the
Guarantors to make investments (whether by means of capital contributions or
intercompany loans) in TA Travel, L.L.C., a Delaware limited liability
company ("TA TRAVEL") from time to time in an aggregate amount not to exceed
$10,000,000 at any time outstanding, which investments are to be used by TA
Travel solely for the purchase, operation and maintenance of an airplane (or
any airplane purchased in replacement thereof) owned by TA Travel, and (b)
the provisions of Section 7.12 of the Note Exchange Agreement to the extent,
but only to the extent necessary to permit TA to form and maintain as a
subsidiary, TA Travel.
SECTION 4. AMENDMENTS TO THE NOTE EXCHANGE AGREEMENT. The Note Exchange
Agreement is amended pursuant to Section 13 thereof:
A. by adding the following new paragraph to the end of Section 1.5 of
the Note Exchange Agreement:
"Pursuant to the Waiver and Amendment Agreement by the Noteholders
dated as of March 1, 1998 (the "WAIVER AND AMENDMENT AGREEMENT"), the
Notes will be unconditionally guaranteed by TA Travel, L.L.C.
("TA TRAVEL"), a Delaware limited liability company and wholly-owned
subsidiary of TA, pursuant to a guarantee agreement, substantially in
the form of Exhibit B-1 hereto between the Guarantors and the Collateral
Agent. TA Travel will execute a waiver to the Credit Agreement and a
security agreement, substantially in the form of Exhibit D-1 hereto
between the Company, the Guarantors, TAFSI and the Collateral Agent.
For purposes of this Agreement, all references to a "Guarantor" or the
"Guarantors" shall include TA Travel if the context so warrants and any
reference to the "Guarantee Agreement" and the "Security Agreement" shall
be deemed to reference the guarantee agreement and security agreement
executed by TA Travel."
B. by deleting clause (i) of paragraph (b) to Section 7.8 of the Note
Exchange Agreement in its entirety and by substituting in lieu thereof the
following:
2
<PAGE>
"(i) engage at any time in any activities other than the business
currently conducted by it and business activities reasonably incidental
thereto (including the operation of restaurants) on Truckstop premises
(other than the business relating to the acquisition, operation and
maintenance of an airplane (or airplane purchased in replacement thereof)
conducted by TA Travel as set forth in Section 3 of the Waiver and
Amendment Agreement), or"
C. by adding the following paragraph to the end of Part A of Schedule
I to the Pledge Agreement attached as Exhibit E thereto as follows:
"4. The membership interest of TA Operating Corporation, a Delaware
corporation, in TA Travel L.L.C., a Delaware limited liability
company ("TA Travel")."
SECTION 5. EFFECTIVENESS OF THIS WAIVER AGREEMENT. This Agreement will
become effective when counterparts of this Agreement shall have been executed
and delivered by the Company and the Required Holders.
SECTION 6. EXPENSES. Without limiting the generality of Section 16.1
of the Note Exchange Agreement, the Company agrees to pay the reasonable fees
and disbursements and other charges of Willkie Farr & Gallagher, your special
counsel, for their services rendered in connection with the transactions
contemplated hereby and with respect to this Agreement and any other document
delivered pursuant to this Agreement and reimburse you for your out-of-pocket
expenses in connection with the foregoing.
SECTION 7. RATIFICATION. Except as modified hereby, the Note Exchange
Agreement is in all respects ratified and confirmed and the provisions
thereof shall remain in full force and effect.
SECTION 8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
3
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Agreement shall become
a binding agreement between you and the Company, subject to becoming
effective as hereinabove provided.
TRAVELCENTERS OF AMERICA, INC.
By JAMES W. GEORGE
Senior Vice President and
Chief Financial Officer
ACCEPTED AND AGREED:
NOTEHOLDERS:
THE TRAVELERS INDEMNITY COMPANY
By ROBERT M. MILLS
Investment Officer
Principal amount of Notes held: $12,000,000 (Series I)
THE TRAVELERS INSURANCE COMPANY
By ROBERT M. MILLS
Investment Officer
Principal amount of Notes held: $10,000,000 (Series I)
THE TRAVELERS LIFE AND ANNUITY COMPANY
By ROBERT M. MILLS
Investment Officer
Principal amount of Notes held: $5,000,000 (Series I)
OHIO NATIONAL LIFE ASSURANCE CORPORATION
By MICHAEL A. BOEDEKER
Authorized Representative
Principal amount of Notes held: $5,000,000 (Series I)
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By MICHAEL A. BOEDEKER
4
<PAGE>
Vice President, Fixed Income Securities
Principal amount of Notes held: $3,500,000 (Series I)
MELLON BANK, N.A., SOLELY IN ITS CAPACITY
AS TRUSTEE FOR BELL ATLANTIC MASTER TRUST
(AS DIRECTED BY JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY), AND NOT IN ITS
INDIVIDUAL CAPACITY
By BERNADETTE RIST
Authorized Signatory
Principal amount of Notes held: $2,000,000 (Series II)
BARNETT & CO.
By RICHARD McCORMICK
Assistant Treasurer
Principal amount of Notes held: $10,000,000 (Series II)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By MARLENE J. DeLEON
Investment Officer
Principal amount of Notes held: $11,000,000 (Series II)
COMMONWEALTH OF PENNSYLVANIA STATE EMPLOYEES'
RETIREMENT SYSTEM
By JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY,
AS INVESTMENT ADVISOR
By STEPHEN A. MACLEAN
Senior Investment Officer
Principal amount of Notes held: $2,000,000 (Series II)
KEYPORT LIFE INSURANCE COMPANY
By STEIN ROE & FARNHAM INCORPORATED,
AS AGENT
By RICHARD A. HEGWOOD
5
<PAGE>
Vice President
Principal amount of Notes held: $25,000,000 (Series II)
6
<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1997, and executed this
____ day of __________ 1997, by and between TA Operating Corporation, a
Delaware corporation (the "Company"), and Edwin P. Kuhn (the "Employee").
In consideration of the parties' desire to assure the Company of the
services of the Employee, and the mutual covenants herein contained, the
parties agree as follows:
1. EMPLOYMENT, ACCEPTANCE AND TERM. The Company hereby agrees to
employ the Employee, and the Employee agrees to serve the Company, for a
period of four (4) years commencing on the date hereof (the "Effective Date")
and ending on December 31, 2000 or such earlier date on which employment is
otherwise terminated in accordance with the terms of this Agreement (the
"Term"). The Employee acknowledges that the Company shall have no obligation
to extend the Term or to enter into a new employment agreement upon the
expiration of the Term. Unless otherwise agreed between the parties in
writing, any continuation of the Executive's employment beyond the expiration
of the Term shall constitute an employment at will and shall not extend the
terms of this Agreement.
2. DUTIES AND AUTHORITY.
<PAGE>
2.1 The Employee will serve as an officer of the Company, in
accordance with the Certificate of Incorporation and By-Laws of the Company
and subject to the direction of, and in accordance with the authority
delegated to the Employee by, the Board of Directors of the Company.
2.2 The Employee shall devote 100% of his full working time and
energies to the business and affairs of the Company and, in connection
therewith, shall perform such duties, functions and responsibilities as are
commensurate with and appropriate to the position of an officer of the
Company. Throughout the Term, the Employee will use his best efforts, skills
and abilities to promote the interests of the Company and its Affiliates.
For purposes of this Agreement, the term "Affiliates" shall mean,
collectively, TravelCenters of America, Inc., a Delaware corporation
("Holdings"), National Auto/Truckstops, Inc., a Delaware corporation
("National"), TA Franchise Systems Inc., a Delaware Corporation ("TAFSI"),
and all subsidiaries and affiliates of the Company, Holdings, National and
TAFSI.
3. COMPENSATION.
3.1 As compensation for all services to be rendered pursuant to
this Agreement, the Company shall pay the Employee during the Term a base
salary at the rate of Three Hundred Twenty Five Thousand Dollars ($325,000)
per annum (the "Base Salary"), payable currently in equal biweekly
installments or otherwise in accordance with the payroll policies of the
Company as from time to time in effect, LESS such deductions as shall be
required to be withheld by applicable law and regulations.
<PAGE>
3.2 For each fiscal year of the Company during the Term (a "Fiscal
Year"), commencing with the Fiscal Year ending December 31, 1997, the Company
shall pay to the Employee an annual bonus (the "Annual Bonus"). The amount
of each Annual Bonus shall be determined by the Compensation Committee of the
Board of Directors of the Company (the "Compensation Committee"), based fifty
percent (50%) upon Company performance (EBITDA goals) and fifty percent
(50%) upon the Employee's individual performance (MBO targets), and shall
range from zero (0) to fifty percent (50%) of the Base Salary (the "Maximum
Bonus"); PROVIDED, HOWEVER, that the Annual Bonus payable with respect to the
1997 Fiscal Year shall not be less than fifty percent (50%) of the Maximum
Bonus (the "1997 Guaranteed Bonus"), and that the Annual Bonus payable with
respect to the 1998 Fiscal Year shall not be less than twenty-five percent
(25%) of the Maximum Bonus (the "1998 Guaranteed Bonus"); and, PROVIDED
FURTHER, that there shall be no guaranteed bonus due to the Employee under
this Agreement after the 1998 Fiscal Year.
<PAGE>
4. ADDITIONAL BENEFITS.
4.1 BENEFIT PLANS. The Employee shall be entitled during the
Term, if and to the extent eligible, to participate in all employee benefit
plans of the Company which the Company provides to its executive employees
generally, including, without limitation, a health and medical insurance
plan, basic life insurance, supplemental life insurance, basic disability
benefit plan, supplemental disability benefit plan, relocation, retirement or
pension plan or similar benefit plans of the Company, whether now in
existence or hereafter adopted; PROVIDED, HOWEVER, that the Company shall not
be obligated to adopt, maintain or contribute to any such benefit plans
which, in its sole discretion, the Company believes would be imprudently
expensive or otherwise inappropriate.
4.2 DIRECTOR'S AND OFFICER'S INSURANCE. Holdings has purchased
and will use reasonable efforts to maintain, at the Company's expense,
Director's and Officer's liability insurance in a reasonable amount covering
all insurable acts of the Employee pursuant to this Agreement provided that
Employee's coverage will not be less extensive than that provided by Company
to any other director or officer of the Company.
4.3 FRINGE BENEFITS. The Employee shall be entitled during the
Term to the following additional benefits: (i) a company-owned automobile of
a make and model approved by the Compensation Committee as appropriate for an
officer of the position of the Employee; (ii) company-owned club membership
(or to the extent the club does not permit company membership, reimbursement
for individual membership) up to an aggregate maximum amount over the term of
this agreement of $40,000 for initiation
<PAGE>
fees, dues and fixed expenses only, paid by the Company and/or the Employee;
(iii) paid vacation days in accordance with standard Company policy for
similarly situated officers; and (iv) participation in a nonqualified
unfunded elective salary deferral plan adopted or to be adopted by the
Compensation Committee having such terms as the Compensation Committee
determines in its sole discretion are appropriate for the purpose of
providing certain benefits in excess of the benefits otherwise available
under the Company's employee benefit plan established pursuant to Code
sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code") which nonqualified plan provides or is expected to provide
tax-deferred savings opportunities through elective salary deferrals in
excess of certain of the limits set forth in Subchapter D of Chapter I of
Subtitle A of the Code.
5. TERMINATION OF EMPLOYMENT. The Employee's employment with the
Company shall terminate upon the death of the Employee, and the Company shall
have the right, by delivery of written notice to the Employee, to terminate
the Employee's employment as a result of the Employee's Permanent Disability
(as such term is defined in Section 5.1 hereof), for Cause or for any other
reason, the consequences of any such termination being as specified in this
Section 5:
5.1 DEATH; DISABILITY. If the Employee's employment with the
Company is terminated by reason of the Employee's death or Permanent
Disability, the Company's obligations under this Agreement shall be satisfied
by providing the benefits set forth in the Company's life insurance or
disability benefit plan or plans, as the case may be. The Employee shall not
be entitled to any other payments or compensation
<PAGE>
under this Agreement except for (i) Base Salary accrued and unpaid to the
date of death or disability, (ii) any vested benefits as of the date of death
or termination for disability under stock options granted to the Employee
pursuant to the terms of the National Auto/Truckstops Holdings Corporation
1993 Stock Incentive Plan and the TravelCenters of America, Inc. 1997 Stock
Incentive Plan (collectively, the "Stock Incentive Plans"), (iii) an amount
equal to the product of (x) the Annual Bonus, if any, determined by the
Compensation Committee for the year in which the termination occurs (or if
the termination occurs in Fiscal Year 1997 or Fiscal Year 1998, the 1997
Guaranteed Bonus or the 1998 Guaranteed Bonus, respectively, if larger, in
lieu of any Annual Bonus for such year), MULTIPLIED BY (y) the fraction, the
numerator of which equals the number of days the Employee was employed by the
Company during the Fiscal Year in which such termination occurs and the
denominator of which is 365, and (iv) if the Employee and/or his spouse and
dependents properly elect continued medical coverage ("COBRA") in accordance
with Code section 4980B, the Company will pay the entire cost of the
premiums for such continued medical coverage for the maximum required period
of coverage under Code section 4980B(f). "Permanent Disability," as used in
this Section 5.1, shall mean the physical or mental inability of the Employee
to perform, consistent with past practice, such Employee's duties as
specified in Section 2.1 hereof for at least 12 consecutive months.
5.2 RESIGNATION. If the Employee's employment with the Company is
terminated by reason of the Employee's resignation (other than for "Good
Reason" as defined in Section 5.5), all obligations of the Company,
including, without
<PAGE>
limitation, the obligation to pay salary or other amounts payable under this
Agreement to or for the benefit of the Employee, shall terminate upon the
effective date of such resignation, and the Employee shall not be entitled to
any compensation under this Agreement except for Base Salary accrued and
unpaid through, and vested benefits under stock options granted to the
Employee pursuant to the Stock Incentive Plans as of, the effective date of
such resignation.
5.3 COMPANY'S RIGHT TO TERMINATE FOR CAUSE. If the Employee shall
be discharged for "Cause" (as defined below), all obligations of the Company,
including, without limitation, the obligation to pay salary or other amounts
payable under this Agreement to or for the benefit of the Employee, shall
terminate upon the effective date of such discharge, and the Employee shall
not be entitled to any compensation under this Agreement except for Base
Salary accrued and unpaid through, and vested benefits under stock options
granted to the Employee pursuant to the Stock Incentive Plans as of, the
effective date of such discharge. As used in this Agreement, "Cause" shall
mean a discharge in one or more of the following events:
(i) the Employee's misappropriation of money or other assets or
property, breach of fiduciary duty, tortious conduct or other act of
dishonesty with respect to the Company or any Affiliate; the Employee's
conviction of, or plea of guilty or NOLO CONTENDERE to, any act of
fraud, embezzlement, tortious conduct or any crime for an offense that
constitutes a felony; or the Employee's indictment for any crime
involving dishonesty or moral turpitude;
<PAGE>
(ii) the Employee's continuing, repeated willful failure or
refusal to follow written directions of the Board of Directors of the
Company which failure or refusal continues following the Employee's
receipt of written notice from the Board for Directors advising him of
the acts or omissions that constitute the failure to perform his duties
as an officer of the Company, if such failure continues after the
Employee shall have had a reasonable opportunity to correct the act or
omissions so complained of;
(iii) a written determination by a licensed physician that the
Employee is a chronic alcoholic or addicted to narcotics; or
(iv) the Employee's breach of any covenant set forth in Section 6
hereof.
5.4 TERMINATION FOR ANY OTHER REASON OR RESIGNATION FOR GOOD
REASON. If (a) the Employee is discharged by the Company for any reason
(other than for "Cause" (as defined in Section 5.3 hereof) or by reason of
the Employee's death or "Permanent Disability" (as defined in Section 5.1
hereof)) or (b) the Employee's employment with the Company is terminated by
reason of the Employee's resignation for "Good Reason" (as defined in Section
5.5 hereof), then all obligations of the Employee and the Company hereunder
shall cease, except that the Employee shall be entitled to the following from
the Company:
(i) the Base Salary as set forth in Section 3.1 hereof payable on
the same dates and in the same amounts as if the Employee continued to
serve as an officer of the Company until the later of (A) December 31,
2000, or (B) twelve (12)
<PAGE>
months after the date of such discharge or resignation; PROVIDED,
HOWEVER, that if the Employee engages in any activity from which the
Employee derives or is contractually (including, without limitation,
pursuant to an employment agreement) entitled to compensation other than
in connection with a "competitive activity" (as such term is defined in
Section 6.1.1 hereof), then the Company's obligations under this clause
(i) shall be limited solely to the excess of (x) the amount the Employee
would have been due had the Employee remained in the employ of the
Company through the later of the dates set forth in clauses (A) and (B)
above in this clause (i), over (y) the total compensation the Employee
receives, derives or is contractually (including, without limitation,
pursuant to an employment agreement) entitled to as a result of engaging
in such activity for services performed, PROVIDED, that there shall be no
offset against the amount of the Base Salary the Employee would have been
due had the Employee remained in the employ of the Company for the first
twelve (12) months after the date of such discharge or resignation, which
amount shall be payable on such dates and in such manner as if the
Employee had continued to serve as an officer of the Company;
(ii) (a) if such discharge or resignation occurs on or prior to
December 31, 1997, the 1997 Guaranteed Bonus MULTIPLIED BY a fraction,
the numerator of which equals the number of days the Employee was
employed by the Company during the 1997 Fiscal Year and the denominator
of which is 365, in lieu of any Annual Bonus which may be due to the
Employee pursuant to Section 3.2; (b) if such discharge or resignation
occurs on or prior to December 31, 1998, the 1998 Guaranteed Bonus
MULTIPLIED BY a fraction, the numerator of which equals the number of
days the Employee
<PAGE>
was employed by the Company during the 1998 Fiscal Year
and the denominator of which is 365, in lieu of any Annual Bonus which
may be due to the Employee pursuant to Section 3.2; PROVIDED, HOWEVER,
that if the amount of the Annual Bonus determined by the Compensation
Committee for the Employee for the Fiscal Year in which the discharge or
resignation occurs, prorated as set forth below in this clause (ii),
exceeds the amount of the Guaranteed Bonus for the Employee for such
year, prorated as set forth above in this clause (ii), then, solely for
such Fiscal Year in which the Employee was so discharged or so resigned,
in lieu of any Annual Bonus or any Guaranteed Bonus which may be due to
the Employee pursuant to this clause (ii) or Section 3.2 hereof, an
amount equal to the product of (x) the Annual Bonus so determined by the
Compensation Committee for the Employee for such Fiscal Year MULTIPLIED
BY (y) a fraction, the numerator of which equals the number of days the
Employee was employed by the Company during the Fiscal Year in which the
Employee was so discharged or so resigned and the denominator of which is
365; and (c) if such discharge or resignation occurs after December 31,
1998, then no Guaranteed Bonus or Annual Bonus shall be due to the Employee
under this Agreement;
(iii) benefits under stock options granted to the Employee
pursuant to the Stock Incentive Plans vested as of the date of such
discharge or resignation; and
(iv) if the Employee (and/or his spouse and/or dependents)
properly elect continued COBRA medical coverage, the Company and the
Employee (and/or his spouse and/or dependents) each shall pay their same
portions of the premiums
<PAGE>
for such medical coverage as if the Employee had remained in the employ of
the Company until the later of (A) the maximum required period of coverage
under Code Section 4980B(f), or (B) December 31, 2000;
PROVIDED, HOWEVER, that, in each case in clauses (i) through (iv) above in
this Section 5.4, if at any time during which the Company is obligated to
make payments thereunder the Employee engages in a "competitive activity" (as
such term is defined in Section 6.1.1 hereof), then, as of the date the
Employee commences engaging in such competitive activity, all of the
Company's obligations to pay compensation or other amounts payable under this
Agreement to or for the benefit of the Employee shall terminate except for
(i) Base Salary then accrued and unpaid, (ii) any vested stock options
granted to the Employee under the Stock Incentive Plans, and (iii) the
Company's obligation to pay its portion of the COBRA premiums described in
clause (iv) of this Section 5.4 for the first twelve (12) months of such
COBRA coverage provided that valid COBRA elections are and remain in effect.
5.5 RESIGNATION FOR GOOD REASON. As used in this Agreement, "Good
Reason" shall mean a resignation by the Employee as a result of one or both
of the following events:
(i) a material reduction in the Employee's aggregate
compensation, duties or title with respect to the Company or any of its
Affiliates (other than nonsubstantive, titular or nominal changes); or
<PAGE>
(ii) a material breach of this Agreement by the Company or any
of its Affiliates unless such breach is substantially cured within a
reasonable period of time after written notice advising the Company of
the acts or omissions constituting such breach is actually received by
the Company in accordance with Section 9.1 hereof.
5.6 EMPLOYEE BENEFIT PLANS. In addition to such payments and
benefits as may be provided to the Employee upon his termination of
employment as set forth herein, the Employee (or his estate, legal
representative or employee benefit plan beneficiary, as the case may be),
shall be entitled to receive such other benefits as are expressly so provided
under the terms of any employee benefit plan or other contractual arrangement
maintained by the Company, as determined by the Compensation Committee;
provided, however, that the Compensation Committee may reduce benefits
hereunder or, if permissible, under any such other plan or arrangement to the
extent it determines in good faith that such benefits are clearly duplicative
and unintended (e.g., severance, company car).
6. COVENANTS OF THE EMPLOYEE.
6.1 COVENANTS AGAINST COMPETITION. The Employee acknowledges that
(a) the Company and its Affiliates are engaged in the business of operating a
truckstop network (the "Network"), with facilities that provide motor fuel
pumping along with one or more of the following services: truck care and
repair services, a fast food restaurant, a full-service restaurant, a
convenience store, showers, laundry facilities, telephones, recreation rooms,
truck weighing scales and other compatible
<PAGE>
business services approved by the Company (together with any other activities
in which the Company may be engaged during the Term and in which the Employee
materially participates, the "Business"); (b) the Employee is one of the
limited number of persons who developed the Business; (c) the Business is
conducted nationally; (d) the Employee's work for the Business has given him,
and will continue to give him, trade secrets of, and confidential information
concerning, the Business; and (e) the agreements and covenants contained in
this Section 6.1 are essential to protect the Business and the goodwill
associated with it. Accordingly, the Employee covenants and agrees as
follows:
6.1.1 NON-COMPETE. From the date hereof through the later
of (A) December 31, 2000 and (B) the last date through which the Employee is
entitled to receive any payment or benefit hereunder, the Employee shall not,
in the United States of America, directly or indirectly, (x) engage in a
business for his own account that competes with the Business, (y) enter the
employ of or render any services to a person that competes with the Business,
or (z) have an interest in any person that competes with the Business,
whether such interest is direct or indirect, and including any interest as a
partner, shareholder, trustee, consultant, officer or similarly situated
person (the foregoing activities specified in foregoing clauses (x), (y) and
(z) being deemed engaging in a "competitive activity"); PROVIDED, HOWEVER,
that in any case, the Employee may own, solely as an investment, securities
of any person that are publicly traded if the Employee (a) is not a
controlling person and (b) does not, directly or indirectly, own 5% or more
of any class of securities of such person. After the date which is the later
of (A)
<PAGE>
and (B) in the preceding sentence, the Employee shall be free to engage in
any lawful business activities, including activities directly competitive
with the Business.
6.1.2 CONFIDENTIAL INFORMATION. The Employee agrees that,
neither during the Term nor at any time thereafter shall he (i) disclose to
any person not employed by the Company, or not engaged to render services to
the Company or (ii) use for the benefit of himself or others, any
confidential information of the Company, any of the Company's Affiliates or
of the Business obtained by him, including, without limitation, "know-how,"
trade secrets, details of customers', suppliers', manufacturers' or
distributors' contracts with the Company or any of the Company's Affiliates,
pricing policies, financial data, operational methods, marketing and sales
information, marketing plans or strategies, product development techniques or
plans, plans to enter into any contract with any person or any strategies
relating thereto, technical processes, designs and design projects, and other
proprietary information of the Company, the Company's Affiliates or of the
Business or the business of any of the Company's Affiliates; PROVIDED,
HOWEVER, that this provision shall not preclude the Employee from (a) making
any disclosure required by law or court order or (b) using or disclosing
information (i) known generally to the public (other than information known
generally to the public as a result of a violation of this Section 6.1 by the
Employee), (ii) acquired by the Employee outside of his affiliation with the
Company or any of the Company's Affiliates, or (iii) of a general nature
(that is, not related specifically to the Business) that ordinarily would be
learned, developed or obtained by individuals similarly active and/or
employed in similar capacities by other companies in the same Business as the
Company or any of the
<PAGE>
Company's Affiliates. The Employee agrees that all confidential information
of the Company or any of the Company's Affiliates shall remain the Company's
or the Company's Affiliates', as the case may be, property and shall be
delivered to the Company or to the Company's Affiliates, as the case may be,
promptly upon the termination of the Employee's employment with the Company
or at any other time on request. The covenant contained in this Section
6.1.2 shall survive, as provided herein, the termination of Employee's
employment with the Company for any reason.
6.1.3 NONSOLICITATION BY RESTRICTED PERSONS. From the
date hereof and through the later of (A) December 31, 2001 and (B) the last
date through which the Employee is entitled to receive any payment or benefit
hereunder, the Employee shall not, directly or indirectly, (a) solicit any
employee to leave the employment of the Company or the employment of any of
the Company's Affiliates or (b) hire any employee who has left the employ of
the Company or the employ of any of the Company's Affiliates within six (6)
months after termination of such employee's employment with the Company or
such employee's employment with any of the Company's Affiliates, as the case
may be (unless such employee was discharged by the Company without Cause and
excepting clerical and similar employees). The covenant contained in this
Section 6.1.3 shall survive, as provided herein, the termination of the
Employee's employment with the Company for any reason.
7. RIGHTS AND REMEDIES UPON BREACH OF COVENANTS. If the Employee
breaches, or threatens to commit a breach of, any of the provisions of
Section 6 hereof (the "Restrictive Covenants"), the Company shall have the
following rights and remedies,
<PAGE>
each of which rights and remedies shall be independent of the others and
severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to
the Company at law or in equity:
7.1 SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
7.2 SEVERABILITY OF COVENANTS. The Employee acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in
geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect to the greatest extent
possible, without regard to the invalid portions.
7.3 BLUE-PENCILLING. If any court construes any of the
Restrictive Covenants, or any part thereof, to be unenforceable because of
the duration of such provision or the area covered thereby, such court shall
have the power to reduce the duration or area of such provision and, in its
reduced form, such provision shall be enforceable and shall be enforced to
the greatest extent possible.
7.4 ENFORCEABILITY IN JURISDICTIONS. The parties intend to and
hereby do limit jurisdiction to enforce the Restrictive Covenants upon the
courts of the
<PAGE>
jurisdiction of the Employee's last principal place of business under this
Agreement and the sites of the alleged breach of the Restrictive Covenants.
8. REPRESENTATIONS OF EMPLOYEE. The Employee hereby represents and
warrants to the Company (a) that there are no restrictions, agreements or
understandings whatsoever to which the Employee is a party which would
prevent or make unlawful the execution or performance of this Agreement or
his employment hereunder and (b) that the execution of this Agreement and the
Employee's employment hereunder shall not constitute a breach of any
contract, agreement or understanding to which he is a party or by which he is
bound.
9. OTHER PROVISIONS.
9.1 NOTICES. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
sent by facsimile transmission or overnight courier or sent by registered or
certified mail, return receipt requested, postage prepaid, and shall be
deemed given when so delivered personally or sent by facsimile transmission
or overnight courier, or if mailed, four days after the date of mailing, as
follows:
(i) if to the Company, to it at:
TA Operating Corporation, d/b/a Truckstops of
America, Inc.
24601 Center Ridge Road, Suite 300
Westlake, Ohio 44145-5634
Attention: General Counsel
Telecopy No.: (216) 808-3301
<PAGE>
and a copy to:
TravelCenters of America, Inc.
24601 Center Ridge Road, Suite 300
Westlake, Ohio 44145-5634
Attention: General Counsel
Telecopy No: (216) 808-3301
and a copy to:
The Clipper Group, L.P.
650 Madison Avenue, 9th Floor
New York, New York 10022
Attention: Rolf H. Towe
Telecopy No.: (212) 940-6055
or at such other address as such person may hereafter
designate to the Employee by notice as provided herein; and
(ii) if to the Employee, to him at the address set forth below or
at such other address as the Employee may hereafter designate
to each of the persons listed in clause (i) above by notice
as provided herein.
Either party may give any notice or other communication hereunder using
any other means (including ordinary mail or electronic mail), but no such
notice or other communication shall be deemed to have been duly given unless
and until it actually is received by the individual for whom it is intended.
Either party may change the address to which notices and other communications
hereunder are to be delivered by giving the other party notice in the manner
herein set forth.
9.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all
<PAGE>
prior agreements, written or oral, with respect thereto, including, without
limitation, the employment agreement by and between the Company and the
Employee dated as of December 10, 1993. The Employee acknowledges that, as
of the date this Agreement is executed, he has received all amounts accrued
or due under any prior agreements, and that he is not entitled to receive
additional amounts pursuant to any such agreements.
9.3 WAIVERS AND AMENDMENTS. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or a privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which any party
may otherwise have at law or in equity.
9.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio applicable to
agreements made and to be performed entirely within such State.
9.5 ASSIGNMENT. This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. The Company may
assign this Agreement and its rights, together with its obligations,
hereunder to any entity that controls the Company, is controlled by the
Company or is under common control
<PAGE>
with the Company or in connection with any sale, transfer or other
disposition of all or substantially all of its assets or business, whether by
merger, consolidation or otherwise.
9.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.7 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
9.8 SHAREHOLDER APPROVAL. The Employee's right to receive any
payment or benefit hereunder in connection with his termination of employment
or otherwise which may be characterized as a "parachute payment" (within the
meaning of Code section 280G), or deemed to constitute a payment made in
connection with or contingent upon a change of control of the Company for
purposes of Code section 280G is contingent upon and subject to the written
approval of holders of record of stock of the Company representing more than
seventy-five percent (75%) of the voting power of all outstanding stock of
the Company on the date this Agreement is adopted (determined without regard
to any stock actually or constructively owned by the Employee and by certain
other persons as determined by the Company). Such shareholder approval is
being obtained concurrently herewith.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date first above written.
TA OPERATING CORPORATION
By:
--------------------------------------
Name:
----------------------------------
Title:
----------------------------------
-----------------------------------------
Edwin P. Kuhn
<PAGE>
NOTE: FOR ADDITIONAL SIGNATURE PAGES SEE DS1: 343502
<PAGE>
EXHIBIT 10.15
SCHEDULE OF OMITTED EXECUTIVE EMPLOYMENT AGREEMENTS
The following documents have been omitted as Exhibits to the
Registration Statement because they are on substantially identical terms as
Exhibit 10.22 in all material respects other than with respect to the amounts
payable to the executives under the agreements.
<TABLE>
<CAPTION>
Annual
Agreement Compensation
------------------------------------------ ----------------
<S> <C>
1. Executive Employment Agreement, dated
as of January 1, 1997, by and between
TA and Edwin P. Kuhn $ 325,000
2. Executive Employment Agreement, dated
as of January 1, 1997, by and between
TA and James W. George $ 210,000
3. Executive Employment Agreement, dated
as of January 1, 1997, by and between
TA and Michael H. Hinderliter $ 210,000
4. Executive Employment Agreement, dated
as of January 1, 1997, by and between
TA and Timothy L. Doane $ 210,000
</TABLE>
<PAGE>
EXHIBIT 10.17
TRAVELCENTERS OF AMERICA, INC.
1997 STOCK INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of January 1, 1997, between
TravelCenters of America, Inc., a Delaware corporation (the "Company"), and
___________ (the "Optionee"), an officer, employee or director of the Company
or one of its Affiliates.
The Compensation Committee (the "Committee") of the Company's Board of
Directors (the "Board"), as administrator of the TravelCenters of America,
Inc. 1997 Stock Incentive Plan (the "Plan"), has determined that the purposes
of the Plan will be furthered by awarding to the Optionee options under the
Plan. Capitalized terms defined in the Plan and not otherwise defined herein
shall have the meaning given such terms in the Plan.
The Optionee may have previously received options to acquire common stock
of the Company pursuant to the National Auto/Truckstops Holdings Corporation
1993 Stock Incentive Plan. Such options are currently exercisable to the
extent vested as of December 31, 1996, but shall not become further vested or
exercisable.
In consideration of the foregoing and of the mutual undertakings set
forth in this Nonqualified Stock Option Agreement ("Agreement"), the Company
and the Optionee agree as follows:
SECTION 1. GRANT OF OPTION.
1.1. The Company hereby grants to the Optionee options to purchase the
number of shares of common stock, par value $.01 per share, of the Company
("Common Stock"), at the times, in the amounts and at the purchase prices set
forth on Exhibit A hereto (collectively, the "Options").
1.2. Each Option granted hereby is intended to be a nonqualified stock
option subject to the provisions of section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), and is not intended to qualify for special
tax treatment as a statutory stock option subject to the provisions of
section 422 of the Code.
SECTION 2. VESTING AND EXERCISABILITY; CHANGE OF CONTROL; IPO.
<PAGE>
2.1. No portion of any Option shall be vested or exercisable prior to
December 31, 1997, except in the event of a "Change of Control" or "IPO", as
described in Section 2.5 hereof, or subsequent to December 31, 2006.
2.2. Each Option shall vest and become exercisable, in whole or in part,
in accordance with Exhibit B attached hereto, with respect to the shares of
Common Stock subject thereto if and only if, and to the extent that, the
applicable performance targets established by the Committee with respect to
such Option are determined by the Committee to be satisfied. If the
applicable performance targets are not satisfied, then such Option shall not
vest or become exercisable and shall be forfeited, subject to the following
sentence. To the extent that an Option shall not vest or become exercisable,
in whole or in part, solely because the applicable performance targets have
not been satisfied, then the shares of Common Stock covered by such Option
shall again become available for awards to be granted to the Optionee on or
before December 31, 2000, for options to purchase shares of Common Stock at
an option exercise price at or greater than the then Fair Market Value of
Common Stock on the respective date of grant, as determined by the Committee,
as evidenced by a written agreement executed by the Company and the Optionee,
and on such other terms and conditions as determined by the Committee in its
sole discretion, subject to the terms of the Plan.
2.3. The Options may be exercised at any time and from time to time in
whole or in part for the shares of Common Stock subject thereto, within the
limitations on exercisability set forth above.
2.4. Unless terminated earlier, the unexercised portion of the Options
shall automatically and without notice terminate and become null and void on
December 31, 2006.
2.5. If a "Change of Control" or initial public offering ("IPO") (as such
terms are defined in Plan Section 3.11(e)) is effective prior to January 1,
2001, and the Optionee is an "Eligible Grantee" (as such term is defined in
Plan Section 3.11(c)), then effective upon the consummation of the Change of
Control or IPO (a) each outstanding Option granted with respect to the
calendar year in which the Change of Control or IPO is effective (including
any Option which was granted with respect to a prior calendar year and which
did not then vest and become exercisable, which was regranted with respect to
the calendar year in which such Change of Control or IPO is effective) shall
immediately become fully vested and exercisable, and (b) each Option to be
granted with respect to each calendar year thereafter shall immediately be
granted and become fully vested and exercisable. The option exercise price
for each such option described in clause (b) of the preceding sentence shall
be the option exercise price for the most recent option granted under the
Plan in the event of a Change of Control, or the price per share at which
shares of Common Stock are offered in the IPO in the event of an IPO. There
shall be no acceleration of the grant or vesting of any Option if a Change of
Control or IPO becomes
<PAGE>
effective after December 31, 2000. A Change of Control or IPO shall not
cause any Option granted with respect to any calendar year prior to the
calendar year in which the Change of Control or IPO becomes effective to
become further vested or exercisable.
SECTION 3. METHOD OF EXERCISE. Each Option or any part thereof may be
exercised in accordance with Section 2 of this Agreement by giving written
notice of exercise to the Company, on a form to be provided by the Committee
for that purpose, and by specifying the number of whole shares of Common
Stock with respect to which the Option is being exercised, together with full
payment of the purchase price for the number of shares purchased. Payment of
the purchase price shall be made by certified or official bank check payable
to the Company (or the equivalent thereof acceptable to the Committee), or by
cashless exercise in accordance with Plan Section 2.6(c) provided that only
shares of Common Stock held by the Optionee for at least six months prior to
the date of exercise may be used for such purpose. As soon as practicable
after it receives payment of the purchase price, subject to the provisions of
Plan Section 3.2, the Company shall deliver to the Optionee a certificate or
certificates for the shares of Common Stock so purchased, which shares shall
bear a restrictive legend in accordance with Section 6 of this Agreement (or
as otherwise determined by the Committee). The shares of Common Stock so
delivered automatically shall become subject to the terms and conditions of
the Supplemental Institutional and Management Stockholders' Agreement, dated
as of April __, 1997 (the "Supplemental Stockholders' Agreement") by and
among the Company, the Optionee and the other parties thereto, as it may be
amended, copies of which are on file in the office of the Company and will be
furnished to the Optionee.
SECTION 4. TERMINATION OF EMPLOYMENT OR SERVICE.
4.1. IN GENERAL. The non-vested portion of any Option shall terminate
and expire upon the Optionee's termination of employment or service; the
vested portion shall expire when it may no longer be exercised pursuant to
the provisions of the Plan and this Agreement (including this Section 4).
The "vested portion" of any Option shall mean the portion thereof which is
vested (whether or not then exercisable) immediately prior to the Optionee's
termination of employment for any reason.
4.2. IMPROPER ACTIVITY; QUIT.
(a) IMPROPER ACTIVITY. If the Optionee's employment is terminated
for cause, whether or not he is a party to a written employment contract, the
vested and exercisable portion of each Option granted hereunder may be
exercised until the earlier of (a) 30 days after his employment terminates or
(b) the date on which the Option otherwise terminates or expires in
accordance with the applicable provisions of the Plan and this Agreement.
For purposes of this Section 4, an Optionee's employment shall be deemed to
be terminated for "cause" if he is discharged for "cause" or any like term as
defined in a written employment contract with the Optionee, if any.
<PAGE>
(b) QUIT. If the Optionee quits employment, whether or not he is a
party to a written employment contract, each Option granted hereby shall
terminate and expire as of the close of business on the day the Optionee's
employment terminates.
4.3. REGULAR TERMINATION; PERMANENT DISABILITY. If the Optionee's
employment terminates for reasons other than as provided in Section 4.2 or
4.4 of this Agreement, including for "Permanent Disability," the vested and
exercisable portion of each Option granted hereunder may be exercised until
the earlier of (a) 60 days after his employment terminates or (b) the date on
which the Option otherwise terminates or expires in accordance with the
applicable provisions of the Plan and this Agreement.
4.4. DEATH. In the event that the Optionee's employment terminates by
reason of death, or if the Optionee's employment shall terminate as described
in Section 4.3 of this Agreement and he dies within the 60-day period
described therein and while some portion of any Option is vested and/or
exercisable, the portion, if any, of any such Options which were vested and
exercisable immediately prior to the Optionee's death shall be exercisable by
the person to whom the Options have passed under the Optionee's will (or, if
applicable, pursuant to the laws of descent and distribution) until the
earlier of (a) one year after the Optionee's death or (b) the date on which
the Options otherwise terminate or expire in accordance with the applicable
provisions of the Plan and this Agreement (disregarding Section 4.3 of this
Agreement).
4.5. PAYMENT. For purposes of any post-employment exercisability of each
Option in accordance with this Section 4, payment of the purchase price in
accordance with Section 3 of this Agreement shall be satisfied if made in
accordance with Plan Section 2.6(b)(i) or (c).
SECTION 5. CALL AND PUT OPTIONS; LOOK BACK RIGHT.
5.1. CALL AND PUT OPTIONS. The shares of Common Stock issued upon
exercise of all or any portion of an Option shall be subject to a call right
by the Company, the other "Management Stockholders" and the "Investors" (as
such terms are defined in Plan Section 2.8) and shall be subject to a put
right by the Optionee (and his estate, legal representative and "Permitted
Transferees" (as such term is defined in Plan Section 3.3)) following the
Optionee=s termination of employment, all in accordance with the provisions
of Plan Section 2.8. Notwithstanding the preceding sentence and the
provisions of Plan Section 2.8, no Option shall be subject to any call right
or put right if, and to the extent, that any such right would cause the
Company, a Management Stockholder, an Investor, or the Optionee (or his
estate, legal representative or Permitted Transferee) to incur any liability
under Rule 16b-3 of the Act.
<PAGE>
5.2. LOOK BACK RIGHT. The shares of Common Stock issued upon exercise of
all or any portion of an Option shall be entitled to participate in the look
back right following the Optionee's termination of employment in accordance
with the provisions of Plan Section 3.11(d).
SECTION 6. NON-TRANSFERABILITY.
6.1. No right granted to the Optionee under the Plan or this Agreement
shall be assignable or transferable (whether by operation of law or otherwise
and whether voluntarily or involuntarily), other than by will or by the laws
of descent and distribution. During the lifetime of the Optionee, all rights
granted to the Optionee under the Plan or under this Agreement shall be
exercisable only by the Optionee, and shall not be exercisable prior to
December 31, 1997, except in the event of a "Change of Control" or "IPO", as
described in Section 2.5 hereof. Shares of Common Stock acquired upon
exercise of any portion of an option granted to an Optionee under the Plan
shall not be transferable to any person other than (i) to the Optionee's
parent, spouse, ex-spouse or child (or any trust for the benefit of any such
person) or (ii) pursuant to the laws of descent and distribution. Such
shares shall remain subject to the call option as set forth in Plan Section
2.8(a) and the put option as set forth in Plan Section 2.8(b) upon the
Optionee's termination. Each transferee shall agree in writing to be bound
by all of the provisions of the Plan and this Agreement, and no such
transferee shall be permitted to make any transfer other than in accordance
with the terms of the Plan or this Agreement. Any sale, assignment,
mortgage, pledge, encumbrance or other transfer in violation of this Section
6 shall be null and void and of no force and effect.
6.2. The certificate or certificates of shares of Common Stock issued
pursuant to the terms of this Agreement shall bear a legend in substantially
the following form:
"The securities represented by this certificate are subject to the terms
and conditions (including forfeiture and restrictions against transfer)
contained in a Nonqualified Stock Option Agreement entered into between
the registered holder hereof and TravelCenters of America, Inc. Copies
of such Nonqualified Stock Option Agreement are on file in the Office of
the Secretary of TravelCenters of America, Inc. The securities
represented by this certificate are further subject to a Supplemental
Institutional and Management Stockholders' Agreement dated as of April
__, 1997 among the issuer of such securities (the "Company") and certain
of the Company's stockholders. A copy of such Supplemental Institutional
and Management Stockholders' Agreement will be furnished without charge
by the Company to the holder hereof upon written request. By acceptance
of this certificate, each holder hereof agrees to be bound by the
provisions of such agreements."
<PAGE>
SECTION 7. RIGHT OF DISCHARGE RESERVED.
Nothing in the Plan or this Agreement shall confer upon the Optionee the
right to continue in the employment or service of the Company or any of its
Affiliates or affect any right that the Company or such Affiliate may have to
terminate the employment or service of the Optionee.
SECTION 8. NO STOCKHOLDER RIGHTS.
Neither the Optionee nor any person succeeding to the Optionee's rights
hereunder shall have any rights as a stockholder with respect to any shares
subject to an Option until the date of the issuance of a stock certificate or
certificates to him for such shares. Except for adjustments made pursuant to
Plan Section 3.5 (as described in Section 9 of this Agreement), no adjustment
shall be made for dividends, distributions or other rights (whether ordinary
or extraordinary, and whether in cash, securities or other property) for
which the record date is prior to the date such stock certificate is issued.
SECTION 9. PLAN PROVISIONS TO PREVAIL.
This Agreement shall be subject to all of the terms and provisions of the
Plan, which are incorporated hereby and made a part hereof, including,
without limitation, the provisions of Plan Section 3.2 (generally relating to
consents required by securities and other laws), Plan Section 3.4 (generally
relating to tax withholding obligations), Plan Section 3.5 (generally
relating to adjustments to the number of shares of Common Stock subject to
the Option and the option exercise price, upon certain changes in
capitalization, provided that the Committee shall be required to make an
appropriate adjustment in the circumstances described in Plan Section 3.5)
and Plan Section 3.11 (generally relating to the effects of certain
reorganizations and other extraordinary transactions, provided that in such
an event payment of the purchase price in accordance with Section 3 of this
Agreement shall be satisfied if made in accordance with Plan Section
2.6(b)(i) or (c)). In the event there is any inconsistency between any of
the provisions of the Agreement and the Plan, the provisions of the Plan
shall govern.
<PAGE>
SECTION 10. OPTIONEE'S ACKNOWLEDGMENTS.
By entering into this Agreement the Optionee agrees and acknowledges that
(a) he has received and read a copy of the Plan, including Plan Section
3.8(c) (generally relating to waivers of continued exercise or vesting of
awards, damages and severance entitlements related to non-continuation of
awards), and accepts this Option upon all of the terms thereof, (b) he agrees
to be bound by the provisions of the Supplemental Stockholders' Agreement
described in Section 3 of this Agreement and to execute such documents with
respect thereto as the Committee may require, and (c) that none of the Board,
the Committee, the Affiliates (including their respective parents and
subsidiaries) and their respective shareholders, officers, directors,
employees, agents and counsel shall be liable for any action or determination
with respect to the Plan or any award thereunder or this Agreement.
SECTION 11. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the
extent set forth in Plan Section 3.3 and Section 6 of this Agreement, the
heirs and personal representatives of the Optionee.
SECTION 12. GOVERNING LAW.
THIS AGREEMENT IS DEEMED ADOPTED, MADE AND DELIVERED IN NEW YORK AND
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
SECTION 13. NOTICES.
Any notice or other communication required or which may be given
hereunder shall be given in writing and shall be delivered personally, sent
by facsimile transmission or overnight courier or sent by registered or
certified mail, return receipt requested, postage prepaid, and shall be
deemed given when so delivered personally or sent by facsimile transmission
or overnight courier, or if mailed, four days after the mailing, as follows,
to:
TravelCenters of America, Inc.
24601 Center Ridge Road, Suite 300
Westlake, Ohio 44145-5634
Attention: General Counsel
Telecopy No.: (216) 808-3301
<PAGE>
and a copy to:
The Clipper Group, L.P.
650 Madison Avenue, 9th Floor
New York, New York 10022
Attention: Rolf H. Towe
Telecopy No.: (212) 940-6055
or at such other address as the Company may hereafter designate to the
Optionee by notice as provided herein. All notices to be given to the
Optionee hereunder shall be addressed to the Optionee at the address set
forth below or at such other address as the Optionee may hereafter designate
to the Company by notice as provided herein. Either party may give any notice
or other communication hereunder using any other means (including ordinary
mail or electronic mail), but no such notice or other communication shall be
deemed to have been duly given unless and until it actually is received by
the individual for whom it is intended. Either party may change the address
to which notices and other communications hereunder are to be delivered by
giving the other party notice in the manner herein set forth.
SECTION 14. CANCELLATION AND SUBSTITUTION OF OPTION.
The Committee may cancel any Option granted under the Plan and issue a
new award in substitution therefor upon such terms as the Committee may in
its sole discretion determine (provided that the substituted award shall
satisfy all applicable Plan requirements as of the date such new award is
made) without the Optionee's consent, where the substituted award confers
upon the Optionee, until exercised, substantially the same net economic
benefit inherent in the replaced Option, taking into account any
post-exercise puts and calls, etc., and with the Optionee's consent if
otherwise.
SECTION 15. SECTION HEADINGS.
The section headings contained herein are for the purposes of convenience
only and are not intended to define or limit the contents of said sections.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
TravelCenters of America, Inc.
By:
--------------------------------
Name:
--------------------------
Title:
--------------------------
ATTEST:
--------------------
------------------------------
(Optionee)
------------------------------
(Address)
<PAGE>
EXHIBIT A
The Optionee shall receive options to purchase shares of Common Stock as
determined by the Committee. Subject to Section 2.5 of this Agreement, such
options are granted as of January 1, 1997 (the "1997 Option"), January 1,
1998 (the "1998 Option"), January 1, 1999 (the "1999 Option") and January 1,
2000 (the "2000 Option"), each at the then Fair Market Value of Company Stock
on the respective date of grant, as determined by the Committee, as follows:
<TABLE>
<CAPTION>
Grant Date Number of Shares
---------- ----------------
<S> <C>
January 1, 1997 (1997 Option)
------
January 1, 1998 (1998 Option)
------
January 1, 1999 (1999 Option)
------
January 1, 2000 (2000 Option)
------
</TABLE>
By:
----------------------------
Name:
-----------------------
Title:
----------------------
Signed:
-------------------------------
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Highest Percent Percent of Shares Becoming
of Performance Vested and Exercisable if Percent of
Targets Met Performance Targets Met*
---------------- ------------------------
<S> <C>
100% or more 100%
99% 80%
98% 64%
97% 48%
96% 32%
95% 20%
less than 95% 0
</TABLE>
* Each Option shall vest and become exercisable on the December 31 in the
year of grant in accordance with the above schedule (and to the extent the
applicable performance targets have not been met then such Option shall not
vest or become exercisable and shall be forfeited); provided, however, that
the percent of shares becoming vested and exercisable (a) will be
proportionately adjusted on a straight line basis if actual performance falls
between the percentages listed on the above schedule, and (b) in all events,
the Committee, in its sole discretion, may reduce (but not increase) the
percent of performance targets to be met and may increase (but not reduce)
the percent of shares becoming vested and exercisable if performance targets
are met.
<PAGE>
EXHIBIT 10.18
MANAGEMENT SUBSCRIPTION AGREEMENT
MANAGEMENT SUBSCRIPTION AGREEMENT, dated as of November____, 1997, between
TravelCenters of America, Inc., a Delaware corporation (the "Company"), and
________________ (the "Purchaser").
WHEREAS, the Purchaser is an employee of either the Company or one
of its subsidiaries;
WHEREAS, the Purchaser wishes to subscribe for and purchase, and
the Company desires to issue and sell to the Purchaser, certain authorized
but unissued shares of common stock, par value $.01 per share, of the Company
(the "Common Stock") on the terms and subject to the conditions set forth
herein;
WHEREAS, the Purchaser is concurrently herewith becoming party to a
Stockholders' Agreement, dated as of March 6, 1997, among the Company and
certain of its stockholders (the "Stockholders' Agreement"), which provides
certain restrictions on the transfer of the Common Stock;
WHEREAS, the Purchaser agrees to enter into an Institutional and
Management Stockholder's Agreement and a Supplemental Institutional and
Management Stockholder's Agreement, substantially in the forms attached
hereto as Exhibits A and B, respectively, or in a form or forms mutually
agreeable to the Purchaser and the Company, which agreements also provide
certain restrictions on the transfer of Common Stock; and
WHEREAS, the Purchaser and the Company wish to provide for certain
additional arrangements with respect to the Purchaser's right to hold and
dispose of the shares of Common Stock acquired by the Purchaser hereunder.
<PAGE>
2
Accordingly, the Purchaser and the Company hereby agree as follows:
1. PURCHASE AND SALE OF SHARES. Subject to the terms set forth
in this Agreement, and in reliance upon the representations, warranties and
agreements of the Purchaser or the Beneficiary, as the case may be, contained
herein, the Company hereby issues and sells to the Purchaser, and the
Purchaser hereby subscribes for, the shares of Common Stock set forth
opposite his name on Schedule A hereto (the "Shares"), at a price of ____ per
share, for the aggregate purchase price set forth in Schedule A hereto (the
"Purchase Price").
2. CLOSING OF THE PURCHASE AND SALE; PAYMENT FOR SHARES. The
closing of the transactions contemplated hereby shall take place at the
offices of the Company, at such other time, date and place as the Company and
the Purchaser shall mutually agree (the "Closing"). At the Closing, the
Company shall deliver to the Purchaser a duly executed certificate
representing the Shares, and the Purchaser shall pay the Purchase Price to
the Company either (i) in cash or (ii) in a combination of cash and a note
payable to the Company (the "Note"), in the respective amounts set forth in
Schedule A.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
<PAGE>
3
(b) The execution, delivery and performance of this
Agreement, and the execution, issuance, sale and delivery of the Shares have
been duly authorized by all necessary corporate action on the part of the
Company. The Shares, when issued, shall be validly issued, and, upon payment
to the Company by the Purchaser of the full Purchase Price (including payment
of any Notes delivered as a portion thereof), shall be fully paid and
nonassessable.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER OR THE
BENEFICIARY. The Purchaser or, if the Purchaser is other than an individual,
the Beneficiary, represents and warrants to the Company, that:
(a) he is acquiring the Shares for his own account and not
with a view to distributing or reselling the Shares in any transaction that
would be in violation of any federal or state securities laws;
(b) he (i) is familiar with the business of the Company, (ii)
has had an opportunity to discuss with representatives of the Company the
condition of and prospects for the continued operation of the Company and
such other matters as he deemed appropriate in considering whether to invest
in the Shares and (iii) has been provided access to all available information
about the Company requested by him;
(c) he understands that the Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
registered or qualified under the securities laws of any state, and that he
may not sell or otherwise transfer the Shares unless the Shares are
subsequently registered under the Securities Act
<PAGE>
4
and registered or qualified under applicable state securities laws, or unless
an exemption is available that permits the sale or transfer without such
registration or qualification;
(d) he understands that each certificate representing the
Shares shall contain the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED, OR OTHERWISE
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH
ACT AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
(e) if a Note is delivered to the Company as part of the
Purchase Price, he understands that each certificate representing the Shares
shall bear a legend satisfying the requirements of Section 156 of the General
Corporation Law of the State of Delaware as to partly paid shares;
(f) he has made his own investigation whether or not to
invest in the Shares and that he has sufficient business and financial
experience so as to enable him to evaluate the merits and risks associated
with the purchase of the Shares;
(g) he is able to bear the economic risk of a total loss of
his investment in the Company and he has adequate means of providing for his
current needs and foreseeable personal contingencies and has no need for his
investment in the Shares to be liquid; and
<PAGE>
5
(h) he understands that the purchase of the Shares involves
various risks, including, among others, that it is unlikely that any market
will exist for any resale of the Shares and that the Shares are subject to
the provisions of the Stockholders' Agreement and also will be subject to the
terms and conditions of loan or credit agreements and related security
documents entered into by the Company.
5. REPRESENTATIONS OF THE BENEFICIARY. If the Purchaser is other
than an individual, the Beneficiary represents that he has authority to
instruct the Purchaser to enter into this Management Subscription Agreement.
6. RESTRICTIONS ON DISPOSITION OF THE SHARES. The Purchaser
agrees that as a condition of his subscription for the Shares he will become
party to the Stockholders' Agreement and acknowledges that the Stockholders'
Agreement contains certain provisions restricting the transfer or assignment
of the Shares. In addition, the Purchaser agrees to enter into an
Institutional and Management Stockholder's Agreement and a Supplemental
Institutional and Management Stockholder's Agreement, substantially in the
forms attached hereto as Exhibits A and B respectively, or in a form or
forms mutually agreeable to the Purchaser and the Company, which agreements
also provide certain restrictions on the transfer of the Common Stock.
7. CALL AND PUT OPTIONS. The Company and the Purchaser agree
that call and put options shall be available with respect to Shares as set
forth in Sections 2.8 and 3.11(d) of the TravelCenters of America, Inc. 1997
Stock Incentive Plan (the "Plan"),
<PAGE>
6
which sections shall be applied and interpreted consistently with other
sections of the Plan. Such options shall be exercised at a Call Purchase
Price or Put Purchase Price, as the case may be, as provided in Exhibit A and
Exhibit B to the Plan.
8. STOCKHOLDERS' AGREEMENT CONTROLS. If any provision of this
Agreement conflicts with or is contrary to any provision of the Stockholders'
Agreement, such provision of the Stockholders' Agreement shall control.
9. MISCELLANEOUS.
(a) RULES OF CONSTRUCTION. In this Agreement, unless the
context otherwise requires, words in the singular number or in the plural
number shall each include the singular number and the plural number, words of
the masculine gender shall include the feminine and the neuter, and, when the
sense so indicates, words of the neuter shall refer to any gender.
(b) FURTHER ASSURANCES. Each party hereto shall do and
perform or cause to be done and performed all further acts and shall execute
and deliver all other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(c) GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without
giving effect to the conflicts of laws principles thereof.
<PAGE>
7
(d) SPECIFIC PERFORMANCE. The parties hereto acknowledge
that there will be no adequate remedy at law for a violation of any of the
provisions of this Agreement and that, in addition to any other remedies that
may be available, all of the provisions of this Agreement shall be
specifically enforceable in accordance with their respective terms.
(e) INVALIDITY OF PROVISION. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction.
(f) NOTICE. All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall be deemed to
have been given when received by the party to whom such notice is to be given
at its address set forth below, or such other address for the party as shall
be specified by notice given pursuant hereto:
If to the Company, to:
TravelCenters of America, Inc.
24601 Center Ridge Road
Suite 300
Westlake, OH 44145-5634
Attention: Corporate Secretary
Fax: 440-808-3301
<PAGE>
8
with a copy to:
Paul, Weiss, Rifkind, Wharton &
Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner, Esq.
Fax: 212-757-3900
If to the Purchaser, to the address set forth in
Schedule A hereto.
(g) BINDING EFFECT. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(h) AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented only by written agreement of the party
against whom enforcement of such amendment, modification or supplement is
sought.
(i) HEADINGS; EXECUTION IN COUNTERPARTS. The headings and
captions contained herein are for convenience only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement
may be executed in any number of counterparts, each of which shall be deemed
to be an original and all of which together shall constitute one and the same
instrument.
(j) NO RIGHTS TO EMPLOYMENT. Nothing in this Agreement shall
constitute an offer of employment to [name of employee] or be construed to
require the Company or any of its affiliates to continue [name of employee]
in the employ of the Company or any of its affiliates for any stated period
of time.
<PAGE>
9
(k) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
<PAGE>
10
IN WITNESS WHEREOF, the Purchaser and the Company have executed
this Agreement as of the date first above written.
TRAVELCENTERS OF AMERICA, INC.
By:
---------------------------
Name:
Title:
-----------------------------
<PAGE>
SCHEDULE A
Shares of Aggregate
Common Cash Note Purchase
Stock Issued Amount Amount Price
- ------------ ------ ------ ---------
Address of the Purchaser:
<PAGE>
EXHIBIT 10.19
SCHEDULE OF OMITTED MANAGEMENT SUBSCRIPTION
The following documents have been omitted as Exhibits to the
Registration Statement because they are on substantially identical terms as
Exhibit 10.18 in all material respects other than with respect to the numbers
and purchase prices of shares purchased by each of the executives under the
agreements.
<TABLE>
Agreement # of Shares
-------------------------------------------- ------------
<S> <C>
1. Management Subscription Agreements
between the Company and Edwin P. Kuhn 15,452
2. Management Subscription Agreements
between the Company and Edwin P. Kuhn 11,590
3. Management Subscription Agreements
between the Company and Edwin P. Kuhn 11,590
4. Management Subscription Agreements
between the Company and Edwin P. Kuhn 7,727
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation Doing Business As
- -------------------------------------- ----------------- -------------------
<S> <C> <C>
TA Operating Corporation Delaware Travel Centers of America
National Auto/Truckstops, Inc. Delaware -
TA Franchise Systems, Inc. Delaware -
TA Travel, L.L.C. (a) Delaware -
</TABLE>
(a) Wholly-owned by TA Operating Corporation.
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 71,756
<SECURITIES> 0
<RECEIVABLES> 71,140
<ALLOWANCES> 2,707
<INVENTORY> 33,718
<CURRENT-ASSETS> 187,903
<PP&E> 286,472
<DEPRECIATION> 0
<TOTAL-ASSETS> 507,792
<CURRENT-LIABILITIES> 101,800
<BONDS> 289,625
61,404
38
<COMMON> 14
<OTHER-SE> 45,447
<TOTAL-LIABILITY-AND-EQUITY> 507,792
<SALES> 1,002,480
<TOTAL-REVENUES> 1,039,328
<CGS> 773,084
<TOTAL-COSTS> 773,084
<OTHER-EXPENSES> 243,899
<LOSS-PROVISION> 1,688
<INTEREST-EXPENSE> 22,898
<INCOME-PRETAX> (553)
<INCOME-TAX> (344)
<INCOME-CONTINUING> (209)
<DISCONTINUED> 0
<EXTRAORDINARY> (5,554)
<CHANGES> 0
<NET-INCOME> (5,763)
<EPS-PRIMARY> (13.00)
<EPS-DILUTED> (13.00)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 JUN-30-1997 MAR-31-1997 DEC-31-1996
<CASH> 76,816 79,492 74,910 23,779
<SECURITIES> 0 0 0 0
<RECEIVABLES> 69,085 60,924 60,142 57,873
<ALLOWANCES> 4,405 4,310 3,851 3,502
<INVENTORY> 32,491 33,710 29,821 29,082
<CURRENT-ASSETS> 186,638 180,230 175,794 121,639
<PP&E> 264,523 265,698 267,618 269,366
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 487,912 483,674 479,831 425,889
<CURRENT-LIABILITIES> 72,942 71,397 62,480 97,873
<BONDS> 289,750 289,875 290,000 193,185
59,463 57,522 55,704 53,885
38 38 38 38
<COMMON> 14 14 14 14
<OTHER-SE> 52,644 50,362 56,805 65,528
<TOTAL-LIABILITY-AND-EQUITY> 487,912 483,674 479,831 425,889
<SALES> 755,747 512,042 255,393 650,203
<TOTAL-REVENUES> 780,302 529,990 265,113 696,258
<CGS> 585,226 404,689 205,878 568,694
<TOTAL-COSTS> 585,226 404,689 205,878 568,694
<OTHER-EXPENSES> 174,937 119,076 54,304 103,446
<LOSS-PROVISION> 1,404 606 376 2,545
<INTEREST-EXPENSE> 16,954 10,967 5,105 15,236
<INCOME-PRETAX> 3,185 (4,742) (174) 8,882
<INCOME-TAX> 1,231 (1,838) (68) 3,349
<INCOME-CONTINUING> 1,954 (2,904) (106) 5,533
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> (5,554) (5,554) (5,554) 0
<CHANGES> 0 0 0 0
<NET-INCOME> (3,600) (8,458) (5,660) 5,533
<EPS-PRIMARY> (8.23) (10.29) (0.50) (0.81)
<EPS-DILUTED> (8.23) (10.29) (0.50) (0.81)
</TABLE>
<PAGE>
EXHIBIT 99.1
INFORMATION REQUIRED BY PART III OF FORM 10-K
DIRECTORS AND OFFICERS OF THE REGISTRANT
The executive officers and members of the Board of Directors of the
Company and their ages, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Edwin P. Kuhn . . . . . . 55 President, Chief Executive Officer and
Director
James W. George . . . . . 46 Senior Vice President, Chief Financial
Officer and Secretary
Timothy L. Doane . . . . 40 Senior Vice President
Michael H. Hinderliter. . 48 Senior Vice President
Steven C. Lee . . . . . . 34 Vice President, General Counsel and
Assistant Secretary
Walter E. Smith, Jr . . . 57 Director
Margaret M. Eisen . . . . 44 Director
Robert B. Calhoun, Jr . . 55 Chairman of the Board of Directors and
Director
Eugene P. Lynch . . . . . 36 Director
Louis J. Mischianti . . . 38 Director
Rolf H. Towe. . . . . . . 59 Director
Harrison T. Bubb. . . . . 58 Director
</TABLE>
Officers of the Company are appointed by the Board of Directors and
serve at its discretion. The term of office for each Director expires when
such Director's successor is elected and qualified.
Edwin P. Kuhn was named President, Chief Executive Officer and Director
of the Company and its subsidiaries in January 1997. Mr. Kuhn has served as
President and Chief Executive Officer of TA since the closing of the TA
Acquisition in December 1993. Mr. Kuhn served as the General Manager (the
most senior position and effective President) of TA under BP's ownership from
April 1992 to December 1993. Prior to joining TA, Mr. Kuhn spent 25 years
with Sohio and BP in a series of retail site operating positions, most
recently as the Retail Marketing Regional Manager for all BP retail
facilities in the states of Ohio, Pennsylvania and Kentucky.
James W. George was named Senior Vice President, Chief Financial Officer
and Secretary of the Company and its subsidiaries in January 1997. Mr. George
has served as a Vice President and Chief Financial Officer of TA since the
closing of the TA Acquisition in December 1993. From August 1990 to December
1993, Mr. George served as the Controller (the most senior financial
position) of TA under BP's ownership. Prior to joining TA, Mr. George spent
ten years with Sohio and BP in a series of accounting and finance positions.
Timothy L. Doane was named Senior Vice President, Market Development of
the Company and its subsidiaries in January 1997. Mr. Doane has served as a
Vice President, Market Development of TA since 1995.
1
<PAGE>
Prior to joining TA, Mr. Doane spent 15 years with Sohio and BP in a series
of positions including Director of Procurement (for all purchases except
crude oil), Manager of BP's Procare Automotive Service (a chain of
stand-alone automobile repair garages in three midwestern states),
International Brand Manager (in the United Kingdom) and Division Manager in
retail marketing.
Michael H. Hinderliter was named Senior Vice President, Marketing of the
Company and its subsidiaries in January 1997. Mr. Hinderliter has served as a
Vice President, Marketing of TA since the closing of the TA Acquisition in
December 1993. From August 1992 to December 1993, Mr. Hinderliter served as
the Marketing Manager of TA under BP's ownership. From 1989 to August 1992,
Mr. Hinderliter was the manager of BP Truckstops Limited, BP's truckstop
network in the United Kingdom. Prior thereto, Mr. Hinderliter spent 14 years
with TA under Ryder, Sohio and BP ownership in a series of positions which
included serving as a Fleet Sales Manager, Division Manager and location
General Manager.
Steven C. Lee was named Vice President and General Counsel of the
Company and its subsidiaries in December 1997. From September 1995 to
November 1997, Mr. Lee served as Assistant Vice President and Corporate
Counsel of Premier Farnell Corporation (formerly Premier Industrial
Corporation). Mr. Lee practiced law with Calfee, Halter & Griswold from 1989
to 1995.
Walter E. Smith, Jr. has been a Director of the Company since July 1995.
Mr. Smith has operated travel centers under franchises from National or TA
since 1993. Mr. Smith is a director of Citrus Financial Services, Inc., a
bank holding company in Vero Beach, FL, and the chief executive officer of
four separate private corporations which operate TA travel centers.
Margaret M. Eisen has been a Director of the Company since April 1997.
Ms. Eisen has served as Managing Director, North American Equities since June
1995 at General Motors Investment Management Corporation ("GMIMC"), the
investment advisor to First Plaza Group Trust ("First Plaza"). From March
1993 to June 1995 and from March 1992 to March 1993, Ms. Eisen served as
Director, Worldwide Pension Investments and as Director, Equity Portfolio
Strategy, respectively, at Du Pont Pension Fund Investment, E. I. Du Pont de
Nemours and Company.
Robert B. Calhoun, Jr. has been a Director of the Company since April
1993 and was elected Chairman of the Board of Directors in September 1996.
Mr. Calhoun has been President of Clipper Asset Management Corporation, which
is the sole general partner of Clipper, as well as certain of its affiliates
and related entities, since 1991. Mr. Calhoun also serves as director of
Avondale Mills, Inc., Hvide Marine Incorporated, Interstate Bakeries
Corporation and several private companies.
Eugene P. Lynch has been a Director of the Company since April 1993. Mr.
Lynch has been employed by Clipper or its affiliates and related entities
since 1991 and has served as a Managing Director since 1993. Mr. Lynch also
serves as a director of AVTEAM, Inc., Owosso Corporation and several private
companies.
Louis J. Mischianti has been a Director of the Company since October
1992. Mr. Mischianti has been employed by Olympus Advisory Partners, Inc., an
affiliate of Olympus Private Placement Fund, L.P. ("Olympus"), since May
1994. Mr. Mischianti was employed by Clipper or its affiliates from 1991 to
April 1994. Mr. Mischianti serves as a director of several private companies.
Rolf H. Towe has been a Director of the Company since July 1996. Mr.
Towe has served as a Senior Managing Director of Clipper and its affiliates
since 1991. Mr. Towe also serves as a director of American Heritage Life
Insurance Company, Sterling Chemicals Holdings, Inc. and several private
companies.
Harrison T. Bubb was elected as a Director of the Company on March 25,
1998. Mr. Bubb spent over 35 years with Sohio and BP in various positions,
including Vice President - Strategic Development, Director - Retail Europe,
Vice President - Marketing (USA) and General Manager - Retail Sales.
2
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation awarded to, earned by or paid to the Chief Executive Officer and
each of the four other most highly compensated executive officers of the
Company as of December 31, 1997 (the "Named Executive Officers") for services
rendered to the Company and its subsidiaries for 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------- ------------
Securities All Other
Underlying Compen-
Name and Principal Position Year Salary($) Bonus($)(1) Options(#) sation($)(2)
--------------------------- ---- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Edwin P. Kuhn . . . . . . . . . . . . . . . . . . . . 1997 325,000 162,500 - 4,243
President, Chief Executive Officer and Director(3) 1996 230,000 92,000 - 4,204
1995 220,000 88,000 - 2,165
James W. George . . . . . . . . . . . . . . . . . . . 1997 210,000 105,000 - 4,241
Senior Vice President, Chief Financial Officer and 1996 144,000 57,600 - 360
Secretary (4) 1995 136,500 54,600 - 348
Michael H. Hinderliter . . . . . . . . . . . . . . . 1997 210,000 105,000 - 4,953
Senior Vice President (4) 1996 144,000 57,600 - 360
1995 136,500 54,600 - 348
Timothy L. Doane . . . . . . . . . . . . . . . . . . 1997 210,000 105,000 - 529
Senior Vice President (4)(5) 1996 138,000 55,200 - 348
1995 86,666 34,666 - 216
C. William Osborne . . . . . . . . . . . . . . . . . 1997 22,038 - - -
President, Chief Executive Officer and Director(6) 1996 264,452 26,445 - 1,235
1995 257,500 20,214 - 1,152
</TABLE>
- --------------------
(1) Represents bonus for services rendered in the indicated year.
(2) Represents life insurance premiums paid by the Company. Mr. Kuhn's amount
includes $3,424 in 1997, $3,628 in 1996, and $1,613 in 1995, reflecting his
use of a Company automobile. Messrs. George's, and Hinderliter's amounts
include $3,712, and $4,424, respectively, for their use of Company
automobiles in 1997.
(3) Elected as Chief Executive Officer and President of the Company and as a
director, effective January 21, 1997.
(4) Elected as Senior Vice President of the Company, effective January 21,
1997.
(5) Mr. Doane has been employed by the Company since May 1995.
(6) In 1997, Mr. Osborne received severance and consulting payments of
$176,300.
Mr. Steven C. Lee began employment with the Company in December 1997,
and was elected as Vice President, General Counsel and Assistant Secretary
effective December 17, 1997.
3
<PAGE>
OPTION GRANTS.
The following table sets forth certain information regarding stock
options granted in 1997 pursuant to the Company's 1997 Stock Incentive Plan
(the "1997 Stock Plan") to the executive officers named in the Summary
Compensation Table. One-hundred percent of the options listed below have
vested based on 1997 earnings. Vested options may be exercised at any time
after December 31 of the year of grant and will remain exercisable through
December 31, 2006, at which time they will terminate.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
---------------------------------------------------------------- --------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE OF
NAME GRANTED FISCAL YEAR OPTIONS EXPIRATION DATE 5% 10%
------ ----------- ------------- ----------------- ----------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Edwin P. Kuhn 31,000 19.9% $20.00 December 31, 2006 156,296 237,563
James W. George 18,000 11.6% $20.00 December 31, 2006 90,753 137,940
Michael H. Hinderliter 18,000 11.6% $20.00 December 31, 2006 90,753 137,940
Timothy L. Doane 18,000 11.6% $20.00 December 31, 2006 90,753 137,940
</TABLE>
Vested options may be exercised at any time after December 31, 1997.
Options may also, at the discretion of the Company, vest and/or become
exercisable at earlier dates than otherwise provided in the event of certain
changes in control or Reorganization Events (as defined in the 1997 Stock
Plan). Vested options are exercisable for limited periods following
termination of employment of a named executive officer; non-vested options
terminate upon termination of employment. Securities obtained as a result of
the exercise of options may not be transferred except to certain family
members and, upon termination of employment or death, are subject to call and
put rights that, generally, give the Company the right, but not the
obligation, for a specified time period to purchase such securities from the
named executives at a formula price and give the named executives the right,
but not the obligation, for a specified time period to sell such securities
to the Company at a second formula price. Pursuant to either of the
foregoing formulas, a purchase price per share is derived by subtracting
consolidated indebtedness (as defined in the 1997 Stock Plan) from a
specified multiple of EBITDA (as defined in the 1997 Stock Plan) and dividing
the result by the sum of the number of issued and outstanding shares of
capital stock of the Company plus the number of shares of capital stock of
the Company subject to certain warrants.
1993 STOCK PLAN. Stock options to purchase shares of the Company's
Common Stock, par value $0.01 per share ("Common Stock") have been granted to
the Named Executive Officers prior to 1996 pursuant to the Company=s 1993
Stock Incentive Plan (the "1993 Stock Plan") as Series I, Series II and
Series III options, as follows: Mr. Kuhn, 15,860, 16,721 and 17,799 options;
both of Messrs. George and Hinderliter, 9,818, 10,364 and 11,018 options;
Mr. Doane, 7,364, 7,773, and 8,263 options; and Mr. Osborne, 25,175, 26,573
and 28,252 options, respectively. The option exercise price for each Series
I, Series II and Series III option is as follows: $10.00 per share, $17.49
per share and $22.50 per share, respectively. Fifty percent of each of the
Series I, II and III options have vested with respect to Mr. Osborne;
however, all of such options have been canceled. See "--Termination,
Consulting and Release Agreement with C. William Osborne." Seventy-five
percent of each series of options have vested with respect to Messrs. Kuhn,
George and Hinderliter and 67% of each series of options have vested with
respect to Mr. Doane. Options are currently exercisable to the extent vested
as of December 31, 1996 and remain exercisable for limited periods following
termination of employment of the Named Executive Officer. All such unvested
options have been canceled in connection with the adoption of the 1997 Stock
Plan. Common Stock
4
<PAGE>
acquired upon the exercise of options may not be transferred except to
certain family members and are subject to call and put options upon
termination of employment. The call and put option pricing formula under the
1993 Stock Plan and option agreements has been modified to the formula under
the 1997 Stock Plan. It is also expected that if a change of control occurs
within six months after termination of employment for "good reason," death,
"disability" or termination other than for "cause" (as defined), an
adjustment will be made to the amount paid upon exercise of any call options
or put options (but, in the case of put options, only to the extent the
proceeds received by the former employee upon exercise of the put option are
used to repay indebtedness to the Company) so that the former employee will
be able to receive any amounts in excess of the call or put price payable in
the change of control transaction. See "Certain Transactions--Stockholders'
Agreements--Supplemental Institutional and Management Stockholders'
Agreement."
The following table sets forth information concerning the value of
unexercised options as of December 31, 1997 held by the Named Executive
Officers.
AGGREGRATED OPTION EXERCISES IN LAST FISCAL YEAR AND
LAST FISCAL YEAR-END OPTION VALUES TABLE
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING OPTIONS IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED AT 1997 YEAR-END (#) AT 1997 YEAR-END ($)
NAME (#)(1) ($)(1) EXERCISABLE/UNEXERCISABLE(2) EXERCISABLE/UNEXERCISABLE(2)(3)
---- ----------- -------- ---------------------------- -------------------------------
<S> <C> <C> <C> <C>
- - 69,539 / - 345,382 / -
Edwin P. Kuhn . . . . . . . . . . . .
James W. George . . . . . . . . . . . - - 41,359 / - 209,586 / -
Michael H. Hinderliter . . . . . . . - - 41,359 / - 209,586 / -
Timothy L. Doane . . . . . . . . . . - - 34,058 / - 160,442 / -
C. William Osborne . . . . . . . . . - - - / -(4) _ / -(4)
</TABLE>
- ---------------------
(1) No options were exercised by any Named Executive Officer in 1997.
(2) The portion of all options granted pursuant to the 1993 Stock Plan which
were unexercisable as of December 31, 1996 were canceled in connection with
the adoption of the 1997 Stock Plan.
(3) Based on a stock price of $23.25 per share.
(4) All options of Mr. Osborne, 50% vested at December 31, 1996, have been
canceled.
COMPENSATION OF DIRECTORS
In September 1996, the Company's Board of Directors unanimously agreed
to waive all Board of Directors retainers and meeting fees. Beginning in
1997, each non-employee director will be granted, subject to being disclaimed
by such directors, 1,250 stock options each year pursuant to the 1997 Stock
Plan, although there is no assurance such an arrangement will continue in the
future. Members of the Company's Board of Directors also receive reasonable
out-of-pocket expenses in connection with travel to and attendance at
meetings.
EMPLOYMENT AGREEMENTS AND STOCKHOLDERS' AGREEMENTS WITH EDWIN P. KUHN, JAMES W.
GEORGE, MICHAEL H. HINDERLITER AND TIMOTHY L. DOANE
The Company has entered into an employment agreement, a stockholder's
agreement and a Supplemental Institutional and Management Stockholders'
Agreement with each of Edwin P. Kuhn, James W. George, Michael H. Hinderliter
and Timothy L. Doane (the "Executives"). The principal terms and conditions
of the Executives' employment agreements are as follows:
5
<PAGE>
The Executives shall be employed by the Company from January 1, 1997
through December 31, 2000 (unless terminated earlier). The employment
agreements provide for annual base salaries, subject to approved increases,
of $325,000 for Mr. Kuhn and $210,000 for Messrs. George, Hinderliter and
Doane, respectively; annual bonuses of up to 50% of annual base salary,
minimum 25% of base salary for 1997 and 12.5% of base salary for 1998 (the
"Guaranteed Bonuses"); participation in Company employee benefit plans; and
certain fringe benefits.
If an Executive's employment is terminated prior to December 31, 2000:
(i) by his resignation (other than for "good reason" (this term and each
subsequent term in quotation marks referenced in this paragraph as defined in
the employment agreements) or for "cause", he shall be entitled to only his
accrued and unpaid base salary and any vested benefits under the Company's
1993 and 1997 Stock Plans; (ii) by reason of death or "permanent disability",
then in addition to the foregoing, any annual or guaranteed bonus (whichever
is greater), pro-rated, and Company-paid continued medical coverage; and
(iii) by his resignation for good reason or by the Company for any other
reason, base salary until December 31, 2000 (or if later, for one year)
subject to offset, his guaranteed bonus, if any (or, if greater, any annual
bonus, pro-rated), any vested benefits under the Company's 1993 and 1997
Stock Plans and subsidized medical coverage; provided that if the Executive
engages in a "competitive activity," he shall instead only be entitled to
his accrued and unpaid base salary, any vested benefits under the Company's
1993 and 1997 Stock Plans and subsidized medical coverage. If any payments
and the value of benefits are "contingent on a change of control" within the
meaning of section 280G of the Internal Revenue Code of 1986, as amended
(which could include, for example and without limitation, the accelerated
vesting of stock options upon a change of control), then the Company may be
denied an income tax deduction for all or a portion of such payments, and the
recipient thereof may be subject to a 20% excise tax in addition to income
tax otherwise imposed. The Executives' employment agreements also include
non-competition and non-solicitation covenants and confidentiality
agreements.
For a description of the stockholder's agreements and Supplemental
Institutional and Management Stockholders' agreement to be entered into by
the Executives, see "Certain Relationships and Related
Transactions--Stockholders' Agreements."
TERMINATION, CONSULTING AND RELEASE AGREEMENT WITH C. WILLIAM OSBORNE
The Company has entered into a Termination, Consulting and Release
Agreement with C. William Osborne, former President and Chief Executive
Officer of the Company on the principal terms and conditions described below
as of January 17, 1997 (the "Termination Agreement").
Mr. Osborne resigned from all positions and directorships with the
Company and its affiliates and was entitled to continued base salary through
January 31, 1997, 1996 fiscal year bonus (10% of annual base salary), any
vested benefits under the Company's retirement or group health plans and
reimbursement for up to six months of outplacement services.
Mr. Osborne was retained as a consultant from February 1, 1997 (the
"Initial Payment Date") through January 31, 1998 (the "Final Payment Date"),
in consideration for payment on February 28, 1997 of $176,300, continued
medical coverage for up to one year, and severance of $88,150 on the Final
Payment Date.
Certain stock options held by Mr. Osborne under the Company's 1993 Stock
Plan were canceled without consideration. The Series I options were canceled
for the right to receive (i) on or about the Initial Payment Date, (x) the
product of $13.00 and the number of shares of Common Stock into which the
Series I options held by Mr. Osborne could be converted minus (y) the option
exercise price and (ii) on the Final Payment Date, the product of $2.69 and
such number of shares. Shares of Common Stock held by Mr. Osborne or by his
transferees were purchased by the Company for (i) an amount payable on or
about the Initial Payment Date equal to the product of $10.00 and such number
of shares and (ii) an amount payable on the Final Payment Date equal to the
product of $5.69 and such number of shares.
6
<PAGE>
The outplacement service reimbursements and all deferred payments were
conditioned upon Mr. Osborne's service as a consultant not being terminated
for "cause" (as defined in the Termination Agreement). Mr. Osborne also
executed a general release of claims and covenants regarding confidentiality,
non-solicitation of employees or clients and non-disparagement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of April 1997, the members of the Executive Compensation Committee of
the Board of Directors were Robert B. Calhoun, Jr., Louis J. Mischianti and
Rolf H. Towe. Hugh D. Schmieder, Bruce D. Dorbeck, Walter M. Cain and Louis
J. Mischianti served as members of the Executive Compensation Committee of
the Board of Directors during fiscal year 1996 and through April 1997.
Messrs. Schmieder, Dorbeck and Cain are former Directors of the Company, each
of whom resigned in April 1997. Mr. Schmieder was an Operator of three travel
centers and is a Franchisee-Owner with respect to one travel center. Mr.
Dorbeck was an Operator of one travel center and a lessee (but not a
franchisee) of an additional travel center. During fiscal year 1996, Mr. Cain
was employed by GMIMC, the investment advisor to First Plaza, but resigned as
of April 1997. Messrs. Calhoun and Towe are employed by Clipper and/or its
affiliates and Mr. Mischianti is employed by an affiliate of Olympus.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Prior to March 6, 1997 the Company had two classes of common stock.
However, pursuant to the amendment and restatement of the Company's
Certificate of Incorporation effected on March 6, 1997, the Company currently
has only one class of common stock.
The Company has one class of Common Stock outstanding and four classes
of convertible preferred stock outstanding: Series I and Series II
Convertible Preferred Stock, par value $0.01 per share ("Series I Preferred"
and "Series II Preferred," respectively), and Series I and Series II Senior
Convertible Participating Preferred Stock, par value $0.01 per share ("Series
I Senior" and "Series II Senior," respectively).
At the option of the holder thereof, Series I Preferred and Series I
Senior may be converted to Common Stock at any time on a one for one basis.
Series II Preferred and Series II Senior also may be converted to Common
Stock on a one for one basis; however, the total number of shares that may be
converted at any one time is limited to a percentage determined by reference
to a formula reflecting the number of outstanding shares of Common Stock at
the time of conversion. Pursuant to this formula, as of December 31, 1997,
Clipper/Merchant I, L.P. ("Clipper/Merchant"), which holds of record all
outstanding shares of Series II Preferred and Series II Senior, could have
elected to convert a combined total of 211,170 shares of Series II Preferred
and Series II Senior (out of a total of 2,171,718 shares) to an equal number
of shares of Common Stock.
7
<PAGE>
The following table sets forth the number of shares of capital stock of
the Company beneficially owned, as of February 15, 1998, by each person known
by the Company to beneficially own more than 5% of any class of capital stock
of the Company (other than directors and officers, see "Directors and
Officers").
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF STATED
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS OF STOCK CLASS(1)
- ------------------------ ------------ -------------- ----------
<S> <C> <C> <C>
United States Trust Company of New York . . . . . . . . . 417,500(2) Common 65.9%
770 Broadway
New York, NY 10003
Clipper Capital Associates, L.P.(3) . . . . . . . . . . . 4,661,702 Common(4) 88.0
650 Madison Avenue 2,594,876 Series I Preferred(5) 100.0
New York, NY 10022 1,237,374 Series II Preferred(5) 100.0
1,855,656 Series I Senior(5) 69.2
934,344 Series II Senior(5) 100.0
UBS Capital LLC . . . . . . . . . . . . . . . . . . . . . 478,680 Common(6) 45.2
299 Park Avenue 425,000 Series I Senior 15.9
New York, NY 10171
First Plaza Group Trust . . . . . . . . . . . . . . . . . 3,945,391 Common(7) 86.2
c/o Mellon Bank, N.A. 2,044,750 Series I Preferred(8) 78.8
One Mellon Bank Center 1,800,000 Series I Senior(8) 67.1
Pittsburgh, PA 15258
Olympus Private Placement Fund, L.P. . . . . . . . . . . 494,039 Common(9) 43.8
Metro Center 277,500 Series I Preferred(10) 10.7
One Station Place 200,000 Series I Senior 7.5
Stamford, CT 06902
The Travelers Indemnity Company . . . . . . . . . . . . . 200,000 Common(11) 24.0
One Tower Square 200,000 Series I Senior 7.5
Hartford, CT 06183
Barclays U.S.A., Inc. . . . . . . . . . . . . . . . . . . 222,866 Common(12) 26.9
600 Fifth Avenue 185,000 Series I Preferred(13) 7.1
New York, NY 10020
Merchant Truckstops, L.P.(14) . . . . . . . . . . . . . . 211,170 Common(15) 25.0
11 Madison Avenue 1,225,000 Series II Preferred 99.0
New York, NY 10010
</TABLE>
- --------------------
(1) With respect to Common Stock, reflects beneficial ownership of Common
Stock, assuming the conversion into Common Stock by the listed stockholder
of any preferred stock and the exercise by the listed stockholder of any
warrants to purchase Common Stock owned by such stockholder to the extent
currently convertible or exercisable within 60 days after February 15,
1998.
(2) United States Trust Company of New York holds these shares in its capacity
as Voting Trustee under the Voting Trust Agreement. See "Certain
Relationships and Related Transactions."
(3) Clipper Capital Associates, L.P. ("CCA") directly owns 62,298 shares of
Series I Preferred and 37,474 shares of Series I Senior and is the general
partner of four limited partnerships that are the record owners of the
remainder of these shares: (i) National Partners I, L.P. ("National I"),
(ii) National Partners II, L.P. ("National II"), (iii) National Partners
III, ("National III") and (iv) Clipper/Merchant. CCA thus may be said to
beneficially own all such shares owned by these four limited partnerships.
Clipper Capital Associates, Inc. ("CCI") is the general partner of CCA, and
the sole stockholder of CCI is Robert B. Calhoun, Jr., a director of the
Company. By virtue of such relationship, CCI and Mr. Calhoun may be deemed
to beneficially own these shares. CCI and Mr. Calhoun disclaim beneficial
ownership of all such shares except to the extent of any pecuniary interest
they may have therein. See footnote 3 to the following security ownership
table.
8
<PAGE>
(4) Includes shares of Common Stock that could be issued upon conversion of all
outstanding shares of preferred stock of the Company held of record by the
following: (i) CCA: 62,298 shares of Series I Preferred and 37,474 shares
of Series I Senior, (ii) National I: 2,065,405 shares of Series I Preferred
and 1,818,182 shares of Series I Senior, (iii) National II: 186,869 shares
of Series I Preferred, (iv) National III: 280,304 shares of Series I
Preferred and (v) Clipper Merchant: 1,237,374 shares of Series II Preferred
and 934,344 shares of Series II Senior. As of February 15, 1998, a combined
total of only 211,170 shares of the two Series II classes held by
Clipper/Merchant were convertible, as described above. For further
discussion of National I, National II, National III and Clipper/Merchant
see footnotes 8, 10, 13 and 14 below.
(5) See footnote 4 above.
(6) Includes 53,680 shares of Common Stock held of record and 425,000 shares of
Common Stock that could be issued upon conversion of Series I Senior.
(7) Includes 100,641 shares of Common Stock that could be issued upon exercise
of warrants, 2,044,750 shares of Common Stock that could be issued upon
conversion of Series I Preferred and 1,800,000 shares of Common Stock that
could be issued upon conversion of Series I Senior. For further discussion
of First Plaza's share ownership, see footnote 8 below.
(8) First Plaza, as limited partner of National I and under National I's
partnership agreement, may be deemed to beneficially own 2,044,750 shares
of Series I Preferred and 1,800,000 shares of Series I Senior held of
record by National I.
(9) Includes 16,539 shares of Common Stock that could be issued upon exercise
of warrants, 277,500 shares of Common Stock that could be issued upon
conversion of Series I Preferred and 200,000 shares of Common Stock that
could be issued upon conversion of Series I Senior. For further discussion
of Olympus' share ownership, see footnote 10 below.
(10) Olympus, as limited partner of National III and under National III's
partnership agreement, may be deemed to beneficially own 277,500 shares of
Series I Preferred held of record by National III. Olympus disclaims
beneficial ownership of all such shares, except to the extent of any
pecuniary interest it may have therein.
(11) Includes 200,000 shares of Common Stock that could be issued upon
conversion of Series I Senior.
(12) Includes 26,840 shares of Common Stock held by an affiliate, 11,026 shares
of Common Stock that could be issued upon exercise of warrants held by an
affiliate, and 185,000 shares of Common Stock that could be issued upon
conversion of Series I Preferred. For further discussion of Barclays' share
ownership, see footnote 13 below.
(13) Barclays, as limited partner of National II and under National II's
partnership agreement, may be deemed to beneficially own 185,000 shares of
Series I Preferred held of record by National II. Barclays disclaims
beneficial ownership of all such shares, except to the extent of any
pecuniary interest it may have therein.
(14) Merchant Truckstops, L.P. ("Merchant"), as the limited partner of
Clipper/Merchant and under Clipper/Merchant's partnership agreement, may be
deemed to beneficially own 1,225,000 shares of Series II Preferred held of
record by Clipper/Merchant. Merchant is a limited partnership of which
Merchant Truckstops, Inc. ("Merchant Inc.") is the general partner, and
Merchant Inc. is an indirect wholly-owned subsidiary of Credit Suisse Group
("CS"). By virtue of such relationship, Merchant Truckstops and CS may be
deemed to beneficially own these shares. Merchant, Merchant Inc. and CS
disclaim beneficial ownership of all such shares, except to the extent of
any pecuniary interest they may have therein.
(15) Includes 211,170 shares of Common Stock that could be issued upon
conversion of shares of Series II Preferred that were eligible for
conversion as of February 15, 1997, as described above.
9
<PAGE>
DIRECTORS AND OFFICERS
The following table sets forth the number of shares of capital stock of
the Company beneficially owned, as of February 15, 1998, by each of the
Company's executive officers and directors, and all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF STATED
NAME OWNERSHIP(1) CLASS OF STOCK CLASS(1)
- ---- ------------ -------------- ----------
<S> <C> <C> <C>
Edwin P. Kuhn . . . . . . . . . . . . . . . . . . . 84,991 Common 12.1%
James W. George . . . . . . . . . . . . . . . . . . 52,949 Common 7.8
Michael H. Hinderliter . . . . . . . . . . . . . . 52,949 Common 7.8
Timothy L. Doane . . . . . . . . . . . . . . . . . 41,785 Common 6.3
Walter E. Smith, Jr.(2) . . . . . . . . . . . . . . 50,000 Common 7.9
Margaret M. Eisen . . . . . . . . . . . . . . . . . - - -
Robert B. Calhoun, Jr. . . . . . . . . . . . . . . 4,661,702 Common(3) 88.0
2,594,876 Series I Preferred(3) 100.0
1,237,374 Series II Preferred(3) 100.0
1,855,656 Series I Senior(3) 69.2
934,344 Series II Senior(3) 100.0
Eugene P. Lynch . . . . . . . . . . . . . . . . . . - - -
Louis J. Mischianti . . . . . . . . . . . . . . . . - - -
Rolf H. Towe . . . . . . . . . . . . . . . . . . . - - -
Harrison T. Bubb . . . . . . . . . . . . . . . . . - - -
(All directors and officers as a group (12
persons))(2) . . . . . . . . . . . . . . . . . . 4,944,376 Common 90.2
2,594,876 Series I Preferred 100.0
1,237,374 Series II Preferred 100.0
1,855,656 Series I Senior 69.2
934,344 Series II Senior 100.0
C. William Osborne(4) . . . . . . . . . . . . . . . - - -
</TABLE>
- ---------------
(1) In the case of Common Stock, reflects beneficial ownership of Common Stock,
assuming the exercise by the listed stockholder of options to purchase
Common Stock owned by such stockholder to the extent currently exercisable
within 60 days after February 15, 1998.
(2) Walter E. Smith, Jr., a Director of the Company, owns 50,000 shares of
Common Stock which are held pursuant to the Voting Trust Agreement. See
footnote 2 to the previous table and "Certain Relationships and Related
Transactions."
(3) CCA, National I, National II, National III and Clipper/Merchant are the
record owners of these shares. Mr. Calhoun is the sole stockholder of CCI,
which is the general partner of CCA. CCA is the general partner of each of
National I, National II, National III and Clipper/Merchant. By virtue of
such relationships, Mr. Calhoun may be deemed to beneficially own all of
such shares. Mr. Calhoun disclaims beneficial ownership of such shares,
except to the extent of any pecuniary interest he may have therein. See
footnotes 3, 4, and 5 to the previous security ownership table.
(4) Mr. Osborne resigned from all of his positions with the Company effective
January 21, 1997. All shares of Common Stock beneficially owned by Mr.
Osborne were repurchased on February 28, 1997, pursuant to the terms of the
Termination Agreement between the Company and Mr. Osborne.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
VOTING TRUST AGREEMENT
Voting and transfer of the shares of Common Stock beneficially owned by
Operators and Franchisee-Owners ("Certificate Holders") are governed by a
voting trust agreement dated as of April 14, 1993, as amended as of March 6,
1997, among the Certificate Holders, United States Trust Company of New York
as the voting trustee (the "Voting Trustee") and the Company (the "Voting
Trust Agreement"). The Operators' and
10
<PAGE>
Franchisee-Owners' beneficial ownership interest in such shares is evidenced
by voting trust certificates (the "Voting Trust Certificates"). In connection
with any matter that may be put to a vote of the Company's stockholders, the
Voting Trustee will vote all of the shares subject to the Voting Trust
Agreement in the manner determined by a vote by the Certificate Holders.
Transfers of the Voting Trust Certificates or beneficial interests in shares
of Common Stock represented thereby are only permitted in accordance with
applicable securities laws and are also subject to certain restrictions.
Certain provisions of the Voting Trust Agreement may only be amended by a
vote of Certificate Holders holding a majority of the Voting Trust
Certificates and a vote of the holders of a majority of the shares of Series
I Preferred Stock (and the holders of Common Stock issued upon conversion of
Series I Preferred Stock) together with the consent of the Company. The
Voting Trust Agreement will terminate on the earlier of (i) April 14, 2003,
unless Certificate Holders beneficially owning 65% of the shares subject to
the Voting Trust Agreement elect to continue the Voting Trust or (ii) upon
the consent of the Company and the vote of the holders of Voting Trust
Certificates who beneficially own more than 75% of the shares subject to the
Voting Trust Agreement.
STOCKHOLDERS' AGREEMENTS
GLOBAL STOCKHOLDERS' AGREEMENT. The Voting Trustee, Certificate
Holders, certain members of the Investor Group (members of such group
referred to individually as an "Investor") holding preferred stock, certain
members of management (the "Management Stockholders") and the Company are
parties to a stockholders' agreement, dated as of April 14, 1993, as amended
as of March 6, 1997 (the "Global Stockholders' Agreement"). Pursuant to the
Global Stockholders' Agreement, the Management Stockholders have agreed not
to sell any shares of Common Stock except for certain family transfers,
transfers pursuant to the laws of descent and distribution, and certain other
exceptions. The Global Stockholders' Agreement provides that, in the event of
any sale (whether by merger or sale of the stock) of the Company effected on
the same terms for each holder of capital stock of the Company, a stockholder
party to the Global Stockholders' Agreement has no right to dissent and be
paid the appraised value of his or her shares and, in the event of a stock
sale, is required to sell his or her shares to any purchaser in such sale.
The Global Stockholders' Agreement will terminate on the earlier of April 14,
2003 or the consummation of a registered public offering of the Company's
stock.
SUPPLEMENTAL STOCKHOLDERS' AGREEMENT. The Company and certain Investors
are parties to a supplemental stockholders' agreement, dated as of December
10, 1993, which the parties thereto expect to amend (the "Supplemental
Stockholders' Agreement"). The Supplemental Stockholders' Agreement sets
forth analogous provisions for the transfer of preferred stock as the Global
Stockholders' Agreement sets forth for transfer of shares held by Management
Stockholders.
INSTITUTIONAL AND MANAGEMENT STOCKHOLDERS' AGREEMENT. The Company and
the Investor Group are parties to a preferred and common stockholders'
agreement, dated as of December 10, 1993 (the "Institutional and Management
Stockholders' Agreement") to establish in part the composition of the
Company's Board of Directors and to provide for certain participation rights
related to the sale of stock by major stockholders. This agreement is
expected to be amended and restated to add Management Stockholders as parties
and provide for certain other changes.
The parties to the Institutional and Management Stockholders' Agreement
are required to vote their shares to elect to the Board of Directors two
nominees of Clipper Capital Associates, L.P. ("CCA"), an affiliate of
Clipper, one nominee of National Partners III, L.P. ("National III"), two
nominees of National Partners, L.P. ("National I") and one nominee jointly
chosen by National I and CCA. After the liquidation of National I, First
Plaza will assume National I's rights and after the liquidation of National
III, Olympus will assume National III's rights, with respect to nominating
directors under the agreement. Under certain conditions, the rights of
certain parties to nominate directors may increase or decrease. The right to
nominate a director ceases when any party (together with its affiliates)
sells any shares governed by the agreement unless such shares have been
registered under the Securities Act or sold pursuant to Rule 144 under the
Securities Act. The portion of the Institutional and Management Stockholders'
Agreement pertaining to the Board of Directors terminates on December 10,
2003 unless extended. In
11
<PAGE>
the event that the Company becomes publicly held, the Institutional and
Management Stockholders' Agreement will terminate except for that portion of
the agreement pertaining to nomination of directors.
The Institutional and Management Stockholders' Agreement provides for
the right of such stockholders to participate in certain sales of stock of
the Company by other parties. In addition, the agreement requires Management
Stockholders to participate in any sale of the Company.
Any transferee of a party to the Institutional and Management
Stockholders' Agreement must become party to that agreement according to its
terms.
SUPPLEMENTAL INSTITUTIONAL AND MANAGEMENT STOCKHOLDERS' AGREEMENT. The
Company expects to enter into a Supplemental Institutional and Management
Stockholders' Agreement with the Investor Group and the Management
Stockholders, the principal terms and conditions of which are expected to be
as follows: shares of Common Stock held by Management Stockholders will be
subject to call and put options upon termination of employment of Management
Stockholders; the call and put option pricing formulae under the 1993 Stock
Plan and option agreements have been modified; if a change of control occurs
within six months after termination of the employment of a Management
Stockholder for "good reason," death, "disability" or termination other than
for "cause" (as defined), an adjustment will be made to the amount paid upon
exercise of any call options or put options (but, in the case of put options,
only to the extent the proceeds received by the Management Stockholder upon
exercise of the put option are used to repay indebtedness to the Company) so
that the Management Stockholders will be able to receive any amounts in
excess of the call or put price payable in the change of control transaction;
and the option exercise price of vested and exercisable Series III options
granted under the 1993 Stock Plan was reduced from $28.56 per share to $22.50
per share.
CERTAIN INDEBTEDNESS FORMERLY HELD BY STOCKHOLDERS AND RELATED TRANSACTIONS
On the day the Refinancing transactions were finalized (the "Closing
Date"), immediately prior to the consummation of the Refinancing, First
Plaza, Olympus and Barclays Bank PLC (together with its affiliates,
"Barclays") owned $19.6 million, $3.2 million and $2.1 million in principal
amount, respectively, of National's Old Subordinated Notes and each owned,
individually (directly or through affiliates), more than 5% of at least one
class of the Company's capital stock. In connection with the issuance of
National's Old Subordinated Notes, the Company issued a total of 128,206
warrants exercisable at $0.01 per warrant for an equal number of shares of
Common Stock. First Plaza, Olympus and Barclays received 100,641, 16,539 and
11,026 warrants, respectively. Immediately prior to the Closing Date,
Clipper/Merban, L.P. ("Clipper/Merban"), an affiliate of Clipper, Union Bank
of Switzerland (together with its affiliates, "UBS") and Barclays held $6.0
million, $6.0 million and $3.0 million in principal amount, respectively, of
TA's Old Subordinated Notes and each owned, individually (directly or through
affiliates), more than 5% of at least one class of the Company's capital
stock. In connection with the issuance of TA's Old Subordinated Notes, the
Company issued a total of 80,520 shares of Common Stock, with 53,680 such
shares issued to UBS and 26,840 such shares issued to Barclays. In lieu of
receiving shares of Common Stock in connection with the issuance of the Old
Subordinated Notes to it, Clipper/Merban received a right to a contingent
payment upon early redemption of the TA Old Subordinated Notes held by it in
the amount necessary to cause the yield on its Old Subordinated Notes to
aggregate 14%. As part of the Refinancing, all outstanding indebtedness under
the Old Subordinated Notes was repaid in full, Clipper/Merban received a
payment equal to approximately $480,000 pursuant to its contingent payment
right described above and the warrants and Common Stock referred to above
remain outstanding. In April 1993, the Company entered into an agreement
(the "First Clipper Agreement") and related indemnity for financial advisory
services to be provided, on an exclusive basis, by Clipper and Clipper
Capital Partners, L.P. (together, the "Clipper Entities") to the Company and
National. In December 1993, the First Clipper Agreement was restated and
amended in connection with the TA Acquisition and TA Holdings and TA entered
into an agreement (the "Second Clipper Agreement" and, together with the
First Clipper Agreement, the "Clipper Agreements") and related indemnity for
financial advisory services to be provided, on an exclusive basis, by the
Clipper Entities to TA Holdings and TA. In consideration for services
provided pursuant to such agreements, the Company, National, TA Holdings and
TA agreed to compensate the Clipper
12
<PAGE>
Entities at rates established by the Clipper Entities consistent with those
rates customarily charged by nationally recognized investment firms. The
terms of the Clipper Agreements continue until such time as Clipper and its
affiliates no longer own, in the aggregate, 5% or more of the equity
securities of the Company. To date, no fees have been paid or have become
payable to the Clipper Entities pursuant to the Clipper Agreements or the
related indemnity other than fees paid to Clipper at the time of the National
Acquisition and the time of the TA Acquisition. Clipper has also been
reimbursed from time to time by the Company for out of pocket expenses,
including legal fees. Upon the closing of the Transactions, the Company
reimbursed Clipper for approximately $137,000 in connection with Clipper's
payment for certain consulting services rendered to the Company and the
reimbursement of out of pocket expenses incurred in connection therewith by
Charles L. Dunlap, a former Director of the Company. Margaret M. Eisen, who
is employed by GMIMC, the investment advisor to First Plaza, and Louis J.
Mischianti, who is employed by an affiliate of Olympus, are Directors of the
Company. Robert B. Calhoun, Jr., Rolf H. Towe and Eugene P. Lynch, each of
whom are Directors of the Company, are employed by Clipper or its affiliates.
On the Closing Date, immediately prior to the consummation of the
Refinancing, the Travelers Insurance Company (together with its affiliates,
"Travelers") owned, in the aggregate, $7.0 million and $20.0 million in
principal amount of TA's and National's Old Senior Notes, respectively, and
owned, in the aggregate, more than 5% of at least one class of the Company's
capital stock. The Old Senior Notes held by Travelers were exchanged by the
Company for Senior Notes as part of the Refinancing. See Item 1-"The
Combination Plan, Capital Program and the Refinancing."
TRANSACTIONS WITH OPERATOR STOCKHOLDERS AND DIRECTOR
As of December 31, 1997, Operators controlling 22 travel centers owned
an aggregate of 298,750 shares of the Company's Common Stock, which
represents approximately 4.8% of the issued and outstanding Common Stock
giving effect to the conversion of preferred stock and the exercise of
warrants. The Company's transactions with these Operators are at prices and
on terms that are the same as similar transactions with non-stockholder
Operators. Such Operator stockholders have entered into the Voting Trust
Agreement with the Company and the Voting Trustee.
Walter E. Smith, Jr., a Director of the Company, is an Operator of four
travel centers.
TRANSACTIONS WITH OFFICERS
As of December 31, 1997, the Company had issued to Edwin P. Kuhn, James
W. George, Timothy L. Doane and Michael H. Hinderliter, 15,452, 11,590,
7,727, and 11,590, shares of Common Stock (the "Management Shares"),
respectively, pursuant to certain management subscription agreements
(together, the "Management Subscription Agreement"). Each Management
Subscription Agreement provides for a purchase price of the Management Shares
of between $10 and $15 per share. As described below, the Company financed a
portion of the purchase price of the Management Shares.
The Management Subscription Agreement gives the Company the right, but
not the obligation, for 60 days following the employee's cessation of
employment with the Company, for any reason whatsoever, to repurchase the
Management Shares at a formula price and gives the employee the right, but
not the obligation, for an additional 60 days to sell the Management Shares
to the Company at a second formula price. Pursuant to either of the foregoing
formulas, the purchase price per share is equal to the product of (a) a
specified multiple of EBITDA (as defined in the Management Subscription
Agreement) of the Company for the most recent four consecutive full fiscal
quarters less the aggregate amount of consolidated indebtedness of the
Company and (b) a fraction, the numerator of which is equal to the number of
Management Shares being repurchased by the Company and the denominator of
which equals the number of fully diluted shares of capital stock of the
Company. The credit facilities, the Senior Notes and the Indenture limits the
Company's ability to repurchase the Management Shares.
13
<PAGE>
In connection with the purchase of the Management Shares, each of the
members of senior management who entered into the Management Subscription
Agreement also received financing from the Company with respect to no more
than one half of the purchase price of such manager's stock purchases. In
connection with such financing, each such manager executed a note in favor of
the Company (each, a "Management Note") and a pledge agreement (each a
"Management Pledge Agreement"). The Management Notes for the Named Executives
total $251,110 in principal amount, and are payable by the following Named
Executives in the indicated principal amount as follows: Edwin P. Kuhn,
$77,260; James W. George, $57,950; Timothy L. Doane, $57,950 and Michael H.
Hinderliter, $57,950. With respect to the Management Notes, interest accrues
at an annual rate of 4.76% for Messrs. Kuhn, George and Hinderliter and 6.01%
for Mr. Doane, in each case compounded semi-annually. Accrued and unpaid
interest, together with unpaid principal, if not sooner paid, is due and
payable on the earliest of (i) the date of cessation of employment of such
employee, (ii) the date such employee is no longer the owner of the
particular Management Shares and (iii) the tenth anniversary of the
Management Note.
14
