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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 31,1998
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, 1999, there were outstanding 599,877 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.
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INDEX
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PART I
Item 1. Business...................................................................2
Item 2. Properties.................................................................9
Item 3. Legal Proceedings.........................................................11
Item 4. Submission of Matters to a Vote of Security Holders.......................11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.....12
Item 6. Selected Financial Data...................................................13
Item 7. Management's Discussion and Analysis......................................14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................26
Item 8. Financial Statements and Supplementary Data...............................27
Item 9. Changes in and Disagreements With Accountants.............................65
PART III
Item 10. Directors and Executive Officers of the Registrant........................66
Item 11. Executive Compensation....................................................66
Item 12. Security Ownership of Certain Beneficial Owners and Management............66
Item 13. Certain Relationships and Related Transactions............................66
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...........67
SIGNATURES ..........................................................................70
</TABLE>
1
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PART I
ITEM 1. BUSINESS
BUSINESS OVERVIEW
TravelCenters of America, Inc. (the "Company") owns, operates and
franchises more full-service travel centers in the United States than any of its
competitors, with 143 network sites located in 39 states nationwide, including
103 Company 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 quick serve
restaurant ("QSR") 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.
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 QSR and motel brands include Burger King, Dairy Queen,
Dunkin' Donuts, Kentucky Fried Chicken, Little Caesars, Long John Silver's,
McDonald's, Pizza Hut, Sbarro, Subway, Taco Bell, Wendy's, DayStop, HoJo Inn and
Travelodge. The Company also offers such well recognized gasoline brands as
Amoco, Arco, BP, Chevron, Conoco, 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.
HISTORY AND ORGANIZATION
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"). 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").
2
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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. 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 noncompetition 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 noncompetition 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 and services to the trucking industry and to nonprofessional travelers
for over 30 years, and is now the largest chain of full service travel centers
or truckstops, based on number of locations in the United States. 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.
In December 1998, the Company acquired (the "Burns Acquisition")
substantially all of the truckstop network assets (the "Burns Network") of Burns
Bros., Inc. and certain of its affiliates (collectively "Burns"). Specifically,
the Company acquired from Burns the land, buildings, equipment and inventories
at 17 of the 19 sites comprising the Travel Stops division of Burns (the two
remaining sites were closed by Burns); the equipment and inventory used in
Burns' fuel wholesaling and transportation businesses and certain accounts
receivable related to the acquired assets. The 17 acquired sites are located in
9 western and north-western states. (See "-Burns Acquisition.")
On February 26, 1999, the Company entered into a merger agreement
pursuant to which the Company intends to acquire (the "TPOA Acquisition") 100%
of the voting stock of Travel Ports of America, Inc. ("TPOA") at a price of
$4.30 per share. Under the terms of the merger agreement and certain ancillary
agreements, the Company will pay cash of approximately $40.5 million for all of
TPOA's common shares except approximately 653,000 common shares, held by TPOA's
chairman and chief executive officer, that will be exchanged for approximately
85,000 shares of the Company's common stock. In addition, the Company expects to
pay cash of approximately $15 million to $20 million to retire substantially all
of TPOA's indebtedness expected to be outstanding at the merger date and to pay
various costs of the transaction. TPOA operates a network (the "TPOA Network")
of 16 travel centers in seven states, primarily in the northeastern U.S. This
acquisition, if ultimately consummated, is expected to close in June 1999. A
closing of the merger is subject to a variety of conditions, including approval
by TPOA's shareholders.
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BURNS ACQUISITION
The Burns Acquisition was closed on December 3, 1998 for a total
acquisition cost of $60.7 million. The total is comprised of cash consideration
to Burns of $56.2 million, cash paid for other acquisition costs of $0.6 million
and assumed liabilities of $3.9 million. The cash used to fund this acquisition
was provided by new borrowings (see "- Refinancings"). For the fiscal year ended
June 30, 1998, the 17 acquired sites sold 162.2 million gallons of diesel fuel
and had nonfuel sales and operating expenses of $44.7 million and $28.1 million,
respectively. The results of operations of the Burns Network sites are included
in the Company's consolidated results only from December 4, 1998. The following
table sets forth selected pro forma financial data assuming the Burns
Acquisition had occurred on January 1, 1998.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------
PRO FORMA
THE COMPANY EFFECT OF
THE COMPANY WITHOUT THE THE BURNS THE COMPANY
AS REPORTED BURNS SITES ACQUISITION PRO FORMA
-------------- -------------- -------------- --------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Total revenue........................................... $ 923.8 $ 914.5 $ 146.3 $1,060.8
Gross profit............................................ $ 296.7 $ 293.7 $ 38.3 $ 332.0
Income from operations.................................. $ 19.1 $ 18.9 $ 5.4 $ 24.3
Income (loss) before extraordinary item................. $ (4.2) $ (4.3) $ 3.3 $ (1.0)
EBITDA(1)............................................... $ 68.7 $ 68.2 $ 8.5 $ 76.7
</TABLE>
(1) "EBITDA" is defined as set forth in Note 4 to Selected Financial Data in
Item 6.
COMBINATION PLAN AND CAPITAL PROGRAM
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") to integrate 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 1998 and 1997 the Company, pursuant to the Combination Plan,
significantly reshaped the composition of the Existing Networks as follows:
- 32 Leased Sites were converted to Company-operated Sites, five
during 1998 and 27 during 1997,
- 27 Franchisee-Owner Sites were terminated, all during 1997,
- Two Company-operated Sites were sold during 1998 and 15 Leased Sites
were sold during 1997,
- All National Network Company-operated Sites were converted to TA
Network Company-operated Sites during 1997,
- Operators of 29 National Network Leased Sites terminated their
franchise agreements with National and signed franchise agreements
with TAFSI during the last half of 1997.
Consequently, and giving effect to the Burns Acquisition, as of
December 31, 1998, the Company's Network was comprised of 141 sites, 17 of which
were operating under Burns Bros. signage which is expected to be substantially
replaced with TA signage during 1999. The remaining two sites are Leased Sites
that continue to operate in the National Network.
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In 1997, the Company 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, as revised as a result of the
Burns Acquisition, the Company intends to invest approximately $260 million in
the Network's sites by the end of 2001, with $150 million having been spent by
the end of 1998. The Operators and Franchisee-Owners will also be investing
additional amounts for reimaging and other projects at the sites they operate.
The following table summarizes the changes in the composition of the Network
since the Combination Plan and Capital Program were implemented.
<TABLE>
<CAPTION>
COMPANY- FRANCHISEE-
OPERATED LEASED OWNER TOTAL
SITES SITES SITES SITES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Number of sites at December 31, 1996 58 77 35 170
1997 Activity:
-New sites - - 1 1
-Conversions of Leased Sites to
Company-operated Sites 27 (27) - -
-Sales of sites - (15) - (15)
-Terminations of Franchisee-
Owner Sites - - (27) (27)
------ ------ ------ -----
Number of sites at December 31, 1997 85 35 9 129
1998 Activity:
-New sites - - 1 1
-Conversions of Leased Sites to
Company-operated Sites 5 (5) - -
-Sales of sites (2) - - (2)
-Burns Acquisition 17 - - 17
------ ------ ------ ----
Number of sites at December 31, 1998 105 30 10 145
Closed sites (held for sale) (2) - - (2)
------ ------ ------ -----
Number of operating sites at
December 31, 1998 103 30 10 143
====== ====== ====== =====
</TABLE>
REFINANCINGS
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 "1997 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 (the "Term Loan") and a $40 million revolving
credit facility, redeemed all of the then outstanding Subordinated Notes of TA
and National, respectively, and a portion of the Senior Notes of TA (the "TA Old
Senior Notes"), and, pursuant to a Senior Secured Note Exchange Agreement,
exchanged $85.5 million aggregate principal amount of Senior Secured Notes
($35.5 million of Series I Senior Secured Notes and $50 million of Series II
Senior Secured Notes) of the Company for the Senior Notes of National and the
unredeemed TA Old Senior Notes.
In order to complete the Burns Acquisition and facilitate future
Network growth and development, including the TPOA Acquisition, in December 1998
the Company increased the Term Loan by $150 million (the "1998 Refinancing"). Of
the total amount borrowed, $50 million was utilized to retire the Company's
Series II Senior Secured Notes and $42 million was specified to prefund planned
capital expenditures and business acquisitions. See "Liquidity and Capital
Resources" in Item 7 for further discussion of the 1998 Refinancing.
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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. Other than pipeline tenders, fuel purchases made by the
Company are delivered directly from suppliers' terminals to the travel centers.
The Company operates a small fleet of tankers to haul fuel to certain of its own
sites and to deliver supply to a select number of wholesale customers, but
contracts with common carriers for the majority of its fuel hauling needs. The
Company does not keep substantial quantities of fuel in inventory and is
therefore susceptible to price increases and interruptions in supply. In the
western United States, the Company utilizes pipeline tenders and leased terminal
space to mitigate the risk of supply disruptions. The Company currently engages
in only minimal hedging in connection with its fuel purchases.
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.
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 offer a broad range of products and services 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; other driver amenities; 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, nonfuel product and service offerings 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, fleet
maintenance terminals, independent garages, truck dealerships 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 restaurants, QSRs and electronics, drug, health and beauty aid and
travel and convenience stores.
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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 TAFSI
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 seven 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.
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Environmental Regulation. The Company's operations and properties are
subject to extensive regulation pursuant to federal, state and local laws,
regulations and ordinances ("Environmental Laws") 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.
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 has made necessary upgrades to USTs to comply with federal regulations
which took effect on December 22, 1998, and believes that all of its travel
centers, including those acquired in the Burns Acquisition, are in material
compliance with applicable requirements of Environmental Laws.
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 connections therewith, will be material to the
Company's results of operations 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. 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 operations 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 were completed by
Unocal by December 31, 1998. 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.
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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.
In connection with the Burns Acquisition, all of the 17 sites acquired
were subject to Phase I environmental assessments. Based on the results of those
assessments nine of the sites were subject to Phase II environmental
assessments. The purchase price paid to Burns was adjusted based on the findings
of the Phase I and Phase II environmental assessments. Under the asset purchase
agreement with Burns (the "Burns Agreement"), the Company released Burns from
any environmental liabilities that may have existed as of the Burns Acquisition
date, other than certain non-waived environmental claims as specified in the
Burns Agreement.
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, 1998, the Company employed approximately 9,800
people on a full- or part-time basis. Of this total, approximately 9,490 are
employees at the Company-operated Sites and in fuel transportation,
approximately 250 perform managerial, operational or support services at the
headquarters or elsewhere and approximately 60 employees staff the Distribution
Center. 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.
9
<PAGE> 11
Of the 143 Network locations as of December 31, 1998, 103 are
Company-operated Sites, 30 are Leased Sites and the remaining 10 sites are not
owned by the Company. In addition to these operating travel center locations,
the Company has two closed travel center facilities being held for sale and four
travel center sites which are currently under construction pursuant to the
Capital Program. Of these total 139 owned sites, the land and improvements at
three are leased, three 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 being developed will be leased. The
Company considers its facilities suitable and adequate for the purposes for
which they are used.
Each of the Company's travel centers is a full service facility located
on or near an interstate highway and identified with TA, Unocal 76 or Burns
Bros. Travel Stops signage. As part of the Combination Plan, the National travel
centers that have joined the Network have been rebranded under the TA trademark
and the Burns Network sites will be substantially rebranded during 1999. 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 vary from site
to site. Generally, 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. Other than at the Burns Network
sites, virtually all of the Company's travel centers have truck maintenance and
repair shops which operate 24 hours per day and 365 days per year. Currently,
only two Burns Network sites include truck maintenance and repair shops. 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 restaurant and, in many instances, one or more QSRs; 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 140
customers. The TA Network has associated its full service restaurants with the
Company-owned "Country Pride" and "Mrs. B's" brand names. The Company has also
promoted the installation of nationally branded fast food restaurants, such as
Burger King, Dairy Queen, Dunkin' Donuts, Kentucky Fried Chicken, Little
Caesar's, Long John Silver's, McDonald's, Pizza Hut, Sbarro, Subway, Taco Bell
and Wendy's at its travel centers. The Company generally attempts to locate QSR
offerings within the main travel center building (as opposed to constructing
stand-alone buildings). As of December 31, 1998, 56 of the 133 Company-owned
travel centers offered at least one nationally branded QSR.
10
<PAGE> 12
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. Fourteen of TA's travel centers currently have Company-owned
motels, with an average capacity of 38 rooms. Twelve of these motels are
operated under franchise grants from nationally branded motel chains, including
DayStop, HoJo Inn, Super 8 and Travelodge. The remaining two motels are TA and
Burns branded motels. TA currently remits royalty and advertising fees to its
motel franchisors at rates ranging from 3% to 8% of gross revenues.
Additional Services. Most TA 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,
Nevada and Oregon also feature gaming operations. All travel centers have truck
scales.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of its business. The Company is not now
involved in any litigation, individually, or in the aggregate, which could have
a material adverse effect on the Company's business, financial condition,
results of operations or cash flows. The following describes the current status
of the pending matter previously disclosed.
Forty-Niner Truck Plaza Litigation. This action was commenced in
California Superior Court, Sacramento County, on January 28, 1993 by four then
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 first
trial, which ended with a court order for a retrial. On September 1, 1998, one
of the two remaining plaintiffs entered into a settlement agreement with Unocal
and the Company and dismissed its claims in the case. The retrial of this case
with the one remaining plaintiff commenced on February 16, 1999. On March 8,
1999, the trial was suspended upon the request of all parties in order to
complete negotiation of a definitive settlement agreement, the general terms of
which have been agreed to by all parties. Although the Company believes that the
proposed settlement would not have a material adverse effect on its consolidated
financial statements, there can be no assurance that the proposed settlement
will be implemented, if at all, on terms satisfactory to the Company.
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 1998.
11
<PAGE> 13
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 a
public offering. As a result, there is no public market for
the registrant's Common Stock.
(b) Holders. As of March 15, 1999, the outstanding shares of
Common Stock were held of record by 48 stockholders, of which
26 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, and 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.
12
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for
the Company. Such data presents the Company's investment in TA as net assets of
subsidiary held for disposition until 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 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. The results of operations and other financial and
operating data of the 17 sites acquired in the Burns Acquisition are included in
the Company's consolidated financial statements beginning on December 4, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1998 1997 1996(1) 1995(1) 1994(1)
--------- ----------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(2):
Revenues:
Fuel ................................ $ 554,735 $ 708,637 $ 550,212 $ 376,148 $ 396,748
Nonfuel ............................. 347,531 293,843 99,991 27,948 18,887
Rent and royalties .................. 21,544 36,848 46,055 51,801 51,740
--------- ----------- --------- --------- ---------
Total revenues ................... $ 923,810 $ 1,039,328 $ 696,258 $ 455,897 $ 467,375
Gross profit (excluding depreciation) ... $ 296,661 $ 266,244 $ 127,564 $ 79,074 $ 76,227
Income from operations .................. $ 19,093 $ 22,345 $ 24,118 $ 29,884 $ 29,496
Extraordinary loss ...................... $ (3,905) $ (5,554) $ - $ - $ -
Net income (loss) ....................... $ (8,082) $ (5,763) $ 5,533 $ 9,926 $ 9,692
Income (loss) before extraordinary item
per common share:
Basic ............................ $ (21.12) $ (7.56) $ (0.81) $ 3.04 $ 3.43
Diluted .......................... $ (21.12) $ (7.56) $ (0.81) $ 0.57 $ 0.64
BALANCE SHEET DATA (END OF PERIOD):
Total assets ............................ $ 610,061 $ 507,792 $ 425,889 $ 297,231 $ 294,961
Total debt (net of unamortized discount). $ 392,459 $ 290,125 $ 224,435 $ 139,991 $ 153,938
Mandatorily redeemable preferred
stock(3) ............................ $ 69,974 $ 61,404 $ 53,885 $ 47,286 $ 41,495
Working capital ......................... $ 99,568 $ 86,103 $ 23,766 $ 9,872 $ 18,421
OTHER FINANCIAL AND OPERATING DATA:
Total diesel fuel sold (in thousands of
gallons) ............................ 973,812 975,495 713,754 641,901 663,777
Capital expenditures, excluding
acquisitions of network assets ...... $ 65,704 $ 60,818 $ 20,545 $ 19,930 $ 10,993
EBITDA(4) ............................... $ 68,708 $ 63,553 $ 60,940 $ 63,198 $ 69,047
Cash flows (used in) provided by:
Operating activities ................ $ 48,521 $ 41,670 $ 27,620 $ 19,436 $ 26,357
Investing activities ................ $(125,505) $ (37,987) $ (22,254) $ (17,601) $ (10,993)
Financing activities ................ $ 94,428 $ 44,294 $ 15,222 $ (14,141) $ (3,446)
Ratio of EBITDA to interest expense,
net(5) .............................. 2.71 2.78 2.82 2.95 3.12
NUMBER OF SITES (END OF PERIOD)(6):
Company-operated Sites .................. 103 83 58 46 39
Leased Sites ............................ 30 35 77 89 96
Franchisee-Owner Sites .................. 10 9 35 38 41
--------- ----------- --------- --------- ---------
Total Sites ......................... 143 127 170 173 176
========= =========== ========= ========= =========
</TABLE>
13
<PAGE> 15
Notes to Selected 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) The company completed the Burns Acquisition effective December 4, 1998.
The results of operations and cash flows from the 17 sites acquired in the
Burns Acquisition are included beginning on that date.
(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, transition expense, 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) The ratio of EBITDA to interest expense, net set forth is different than
the Consolidated Coverage Ratio (as defined in the indenture related to
the Company's 10 1/4% Senior Subordinated Notes due 2007). The
Consolidated Coverage Ratios for the years ended December 31, 1998 and
1997 were 2.21 and 2.08, respectively.
(6) The number of sites data shown for all years reflects the total number of
Company sites, regardless of the brand names under which they are
operating.
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 143 network sites nationwide, including
133 Company-owned locations. The Company currently operates or franchises a
network of 124 travel centers in 36 states under the "TravelCenters of America"
or "TA" and related brand names, a network of 17 sites in 9 states under the
"Burns Bros. Travel Stops" and related brand names, and two travel centers in
two states under the licensed "Unocal 76" and related brand names.
14
<PAGE> 16
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 December 1998, the Company acquired the Burns 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. (See "-Combination Plan" below.) 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 fuel wholesaler and franchisor, with relatively few
Company-Operated sites. 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. 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
There are three primary elements to the Combination Plan that was
adopted in January 1997 and has been executed by the Company throughout 1997 and
1998: (1) integrating the management of the TA and National Networks, (2)
converting the Existing Network sites to one Network, and (3) rationalizing and
further developing the Company's Network. As a result of implementing the
Combination Plan, for the years ended December 31, 1998 and 1997, the Company
incurred approximately $3.6 million and $15.2 million, respectively, of expense,
included in refinancing, transition and development costs in the Company's
consolidated financial statements. 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. Transition expenses
related to the Combination Plan are expected to aggregate approximately $20
million, with the remainder of the expenses to be incurred over the next two
years. In addition, the Company expects to incur approximately $2.0 million of
transition expenses as a result of the Burns Acquisition and expects to incur
further transition expenses if the TPOA Acquisition is ultimately consummated.
Integrating Management of the Existing Networks
As part of the Combination Plan, the Company's headquarters was moved
from the National headquarters in Nashville, TN to the TA headquarters in
Westlake, OH and management of the Existing Networks was centralized under the
TA management team. Offers of employment in Westlake were made to several
National corporate-level employees, but most opted to remain in Nashville and,
accordingly, most of National's corporate-level employees were 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 of $1.8 million were recognized. Termination benefits of
approximately $2.0 million and $0.6 million were paid to the 111 terminated
National employees in the years ended December 31, 1997 and 1998, respectively.
All such payments were made by March 31, 1998.
15
<PAGE> 17
Rationalizing and Developing the Network
At the time the Combination Plan was approved, there were 122 sites
operating in the National Network (19 Company-operated Sites, 76 Leased Sites
and 27 Franchisee-Owner Sites) and 48 sites operating in the TA Network (40
Company-operated Sites and eight Franchisee-Owner Sites). As a result of their
history as competitors, there were markets in which each of the Existing
Networks had a site. Certain markets can support such coverage, but others
cannot, so the Company reviewed its networks in order to rationalize the total
number of sites and reduce oversaturation in certain markets. As a result, the
Company identified up to 23 National Network Company-owned sites to be sold and
a minimum of 23 National Network Franchisee-Owner Sites to be terminated.
During 1997, 15 National Network Leased Sites were sold to the
operators of those sites for a net gain on sale of $11.9 million and all 27 of
the National Network Franchisee-Owner Sites were terminated. In 1998, two
Company-operated Sites were sold for a net gain on sale of $0.7 million. At
December 31, 1998, two closed sites were being held for sale. The net carrying
value of these two sites at December 31, 1998 is $2.0 million and the Company
expects them to be sold for a gain.
In addition to the sites held for sale, the Company may sell other
operating sites. As the Company acquires additional sites, such as in the Burns
and TPOA Acquisitions, new market overlaps are created, thus providing the
opportunity to sell sites if buyers offering sufficient amounts can be
identified. Further, the Company's agreements with its franchises provide the
franchisees with limited protected territories in which the Company may not
operate TA branded facilities. In such cases, sales of sites within those
territories may become necessary or economically attractive.
In addition to the site sales and terminations, the Combination Plan,
as well as the Company's strategic plan, contemplates further development and
expansion of the Network into key markets in which the Network is not adequately
represented, which involves constructing or acquiring new sites as well as
improving existing sites. Pursuant to the Capital Program, as adjusted for the
Burns Acquisition, a significant amount of the capital expenditures planned for
1999 through 2002 are for improvements at existing sites such as reimaging,
rebranding, constructing new QSRs, expanding the travel stores and convenience
stores, expanding existing and constructing additional shop bays, and rebranding
and upgrading the gasoline islands. Further, through both capital expenditures
and leasing, the Company is expecting to open five newly built travel centers in
1999 through 2001.
Converting the Existing Networks into One Network
As described above, there were 122 sites in the National Network at the
outset of the Combination Plan and a key component of the Combination Plan is to
integrate the Existing Networks into one. This task was partially completed by
the sales of 17 Leased Sites and the termination of 27 Franchisee-Owner sites
during 1997 and 1998. A second step was the conversion of all National Network
Company-operated Sites to TA Network Sites. This conversion involved significant
costs for activities such as hiring and training employees at the sites,
installing TA's store, shop and accounting systems and programs, implement TA
management, marketing, operations, safety and training programs, relocating site
management employees and rebranding the sites as TA sites. The remaining step
was conversion of the Leased Sites, which has been accomplished in two ways:
acquiring the leasehold interests of the Operators at 30 Leased Sites (four in
1998 and 26 in 1997) and negotiating Network Agreements with the Operators at 29
Leased Sites (one in 1998 and 28 in 1997). One Operator of a Leased Site who had
signed the Network Agreements sold his leasehold interest to the Company during
1998. As a result of the above, at December 31, 1998, there remained only two
sites operating under the National Agreements.
16
<PAGE> 18
The process of converting Leased Sites from the National Agreements to
the Network Agreements 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 and lease agreements that reduce the
fixed rent payable by the Operators (calculated as a percentage of nonfuel
revenues and a rate per gallon of fuel sold). Converting to the Network
Agreements has resulted in reduced revenue in the short term, but the Company
believes that, in the long term, total revenue will be increased as a result of
increased franchisee nonfuel revenues.
The following table sets forth the number and type of ownership and
management of the travel centers operating in the Company's networks.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997
-----------------------------
<S> <C> <C>
Company-owned and operated sites(1) 103 83
Company-owned and leased sites 30 35
-------- --------
Company-owned sites 133 118
Franchisee-owner sites 10 9
-------- --------
Total 143 127
======== ========
Stand-alone shops - 2
======== ========
</TABLE>
(1) Excludes two closed sites in both 1998 and 1997.
TPOA ACQUISITION
On February 26, 1999, the Company entered into a merger agreement
pursuant to which the Company intends to acquire 100% of the voting stock of
TPOA at a price of $4.30 per share. Under the terms of the merger agreement and
certain ancillary agreements, the Company will pay cash of approximately $40.5
million for all of TPOA's common shares except approximately 653,000 common
shares, held by TPOA's chairman and chief executive officer, that will be
exchanged for approximately 85,000 shares of the Company's common stock. In
addition, the Company expects to pay cash of approximately $15 million to $20
million to retire substantially all of TPOA's indebtedness expected to be
outstanding at the merger date and to pay various costs of the transaction. TPOA
operates a network of 16 travel centers in seven states, primarily in the
northeastern U.S. This acquisition, if ultimately consummated, is expected to
close in June 1999. A closing of the merger is subject to a variety of
conditions, including approval by TPOA's shareholders.
17
<PAGE> 19
RESULTS OF OPERATIONS
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 the year ended December 31, 1996, as a result
of the presentation in the consolidated statements of TA as assets of subsidiary
held for disposition during a portion of that year. The following table and the
1996 amounts discussed in the Results of Operations and Liquidity and Capital
Resources sections present the Company's consolidated amounts for 1996 as though
TA had not been held for disposition and had instead been fully consolidated.
The results of operations of the 17 sites acquired in the Burns Acquisition are
included in the following beginning December 4, 1998, the date of the Burns
Acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
------------------------------ ---------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
Fuel....................................................... $ 554.7 $ 708.6 $ 752.2
Nonfuel.................................................... 347.5 293.8 236.8
Rent and royalties......................................... 21.5 36.8 47.4
-------- -------- --------
Total revenues............................................. 923.8 1,039.3 1,036.4
Cost of revenues (excluding depreciation)....................... 627.1 773.1 803.5
-------- -------- --------
Gross profit (excluding depreciation)........................... 296.7 266.2 232.9
Operating expenses.............................................. 195.8 168.3 129.4
Selling, general and administrative expenses.................... 34.3 35.6 42.8
Refinancing, transition and development costs................... 3.6 15.2 2.7
Depreciation and amortization................................... 44.7 35.8 27.0
(Gain) loss on sales of property and equipment.................. (1.2) (11.2) 1.5
Stock compensation expense...................................... 2.5 1.4 0.7
Other operating (income) expense, net........................... (2.1) (1.2) (0.9)
-------- -------- --------
Income (loss) from operations................................... 19.1 22.3 29.7
Interest (expense), net......................................... (25.4) (22.9) (20.8)
-------- -------- --------
Income (loss) before income taxes and extraordinary item........ (6.3) (0.6) 8.9
Provision (benefit) for income taxes............................ (2.1) (0.3) 3.4
-------- -------- --------
Income (loss) before extraordinary item......................... (4.2) (0.3) 5.5
Extraordinary item (net of taxes)............................... (3.9) (5.5) -
-------- -------- --------
Net (loss) income............................................... $ (8.1) $ (5.8) $ 5.5
======== ======== ========
EBITDA(1)....................................................... $ 68.7 $ 63.6 $ 60.9
======== ======== ========
</TABLE>
(1) "EBITDA" is defined as set forth in Note 4 to Selected Financial Data in
Item 6.
1998 COMPARED TO 1997
Revenues
The Company's consolidated revenues for 1998 were $923.8 million, which
represents a decrease from the prior year of $115.5 million, or 11.1%.
18
<PAGE> 20
Fuel revenue for 1998 reflects a decrease from 1997 of $153.9, or
21.7%. The decrease resulted from an approximately 21.9% decrease in average
retail prices and a decrease of 1.7 million gallons sold (0.2%). The decrease in
average retail prices primarily results from decreased crude oil prices and also
from competitive pressures. The slight volume decrease is the net of increases
in volumes at sites in operation in both 1997 and 1998 of 10.3%, offset by
reductions for sites sold in 1997.
Nonfuel revenue in 1998 increased 18.3% from 1997 primarily as a result
of an increased number of Company-operated Sites offering nonfuel products and
services. There were 27 Leased Sites converted to Company-operated Sites
throughout 1997, resulting in a full year of operations for these sites in 1998.
An additional five Leased Sites were converted to Company-operated Sites during
1998. Further, on a same-site basis, nonfuel revenue increased 5.8% in 1998
versus 1997.
Rent and royalty revenue for 1998 decreased $15.3 million 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 Network Agreements with the Company. These changes
occurred primarily throughout 1997, and the decreases in 1998 reflect the full
year effects of these changes. 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. On a same-site basis,
rent revenue for 1998 reflects a decrease of $1.8 million, or 11.6%, from 1997,
while royalty revenue for 1998 reflects an increase of $2.2 million, or 55.3%,
over 1997.
Gross Profit
The Company's gross profit for 1998 was $296.7 million, compared to
$266.2 million for 1997, an increase of $30.5 million, or 11.5%. The increase in
the Company's gross profit was primarily due to increases in nonfuel revenues,
diesel fuel margins, and royalty revenue, partially offset by decreased rent
revenue as discussed above.
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 $27.4 million, or 16.3%,
to $195.8 million for 1998, as compared to 1997. The increase reflects a full
year of operations for the 27 Leased Sites that were converted to
Company-operated Sites during 1997, as well as increases from the five Leased
Sites converted to Company-operated Sites during 1998. In addition, the growth
in nonfuel revenue requires an increase in operating expenses, particularly
labor, to support the revenue growth.
The Company's SG&A decreased 3.7% from $35.6 million in 1997 to $34.3
million in 1998 as a result of continued synergy savings as a result of the
Combination Plan.
Refinancing, Transition and Development Costs
Refinancing, transition and development costs for 1998 decreased from
$15.2 million in 1997 to $3.6 million in 1998. The 1998 costs were incurred in
continuing to effect the combination of National and TA, as well as expenses
incurred in beginning the combination of the Burns Network into the Network. The
decrease from 1997 reflects the relative level of effort in 1998 versus 1997 on
transition activities at the former National Network sites.
19
<PAGE> 21
Depreciation and Amortization
Depreciation and amortization of $44.7 million for 1998 increased $8.9
million from 1997. During the first quarter of 1998, the useful lives of certain
machinery, equipment and furniture were revised downward from 10 years to five
years to conform National's estimated useful lives to those of TA. The effect of
this change in estimate resulted in reductions in income before extraordinary
items, net income and earnings per share of $9.5 million, $5.7 million and $9.08
per share, respectively. In addition, an impairment charge of $0.6 million
recorded in the 1997 fourth quarter with respect to certain sites being held for
sale was completely reversed in the 1998 second quarter. This reversal was based
on increases in the estimated sales prices of the respective sites. In 1997,
impairment charges related to goodwill and certain sites being held for sale of
approximately $7.5 million were included in depreciation and amortization.
Exclusive of the above amounts, depreciation and amortization increased
approximately $8.1 million between years, primarily due to the significant level
of capital expenditures in 1998 and 1997.
Income From Operations
Income from operations for the Company was $19.1 million for 1998 as
compared to $22.3 million in 1997, which is a decrease of $3.2 million, or
14.3%. The decrease is attributable to the increase in depreciation and
amortization and operating expenses and the decrease in gains on sales or
property and equipment and rent and royalty revenues, partially offset by
increased nonfuel sales margins, increased diesel margins and headquarters
synergies. EBITDA for the Company for 1998 was $68.7 million, compared to $63.6
million for 1997. The increased EBITDA for 1998 is largely derived from
increased gross profit as a result of a greater number of Company-operated Sites
and increased diesel margins, partially offset by the increased operating
expenses incurred by the increased revenue levels and reductions in rent and
royalty revenues.
Interest (Expense), net
Interest expense for 1998 was $25.4 million, $2.5 million higher than
1997. This is a result of the increased net debt balance after completing the
1998 Refinancing and a full year of interest expense on the increased net debt
balance from the 1997 Refinancing (both as discussed in Liquidity and Capital
Resources below).
Other Items
The extraordinary loss of $3.9 million results from the 1998
Refinancing and represents the write-offs of the then remaining unamortized
balance of deferred financing costs related to the extinguished indebtedness
($5.9 million) and approximately $15.8 thousand of break funding fees paid to
holders of redeemed senior notes. The reported amount of the extraordinary loss
is net of the applicable income tax benefit of $2.0 million.
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.).
20
<PAGE> 22
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. The
stand-alone shops were located at Burns sites that are now owned by the Company.
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 newly built 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 1997 Refinancing.
21
<PAGE> 23
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
1997 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
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 and compliance.
Net cash provided by operating activities totaled $48.5 million in
1998, $41.7 million in 1997 and $27.6 million in 1996. The increase in net cash
flows provided by operating activities in 1998 versus 1997 is primarily
attributable to increased EBITDA partially offset by growth in working capital
requirements primarily resulting from the increased number of Company-operated
sites and increased interest expense as a result of the 1998 Refinancing. 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 1997 Refinancing.
Net cash used in investing activities for 1998 was $125.5 million
versus $38.0 million in 1997 and $22.3 million in 1996. The amount of net cash
used in investing activities in 1998 reflects $65.7 million of capital
expenditures in accordance with the Capital Program and consistent with 1997, as
well as $6.4 million for the conversions of five leased sites to
Company-operated Sites and approximately $56.8 million for the Burns
Acquisition. These uses of cash are partially offset by $3.4 million of proceeds
from sales of property and equipment comprised primarily of the sales of two
Company-operated sites and condemnation proceeds related to a third
Company-operated Site. The amount for 1997 reflects a $53.0 million increase in
expenditures related to capital additions and conversions of Leased Sites to
Company-operated Sites, as contemplated by the Capital Program, partially offset
by a $37.3 million increase in proceeds from sales of property and equipment
primarily resulting from the sales of 15 Leased Sites to the respective
Operators.
22
<PAGE> 24
Net cash flows provided by financing activities were $94.4 million in
1998, $44.3 million in 1997 and $15.2 million in 1996. The increased cash flows
from investing activities in 1998 versus 1997 reflects the 1998 Refinancing. The
change in the amount of financing activity cash flows in 1997 from 1996 was due
to the Company's 1997 Refinancing and recapitalization. Required debt repayments
for the next five years are significantly lower than they would have been in the
absence of the 1997 Refinancing.
In order to provide for its growth, the Company, among other things,
has completed refinancings in each of 1998 and 1997. In the 1997 Refinancing,
completed on March 27, 1997, the Company repaid or exchanged all of its
previously existing indebtedness and issued $125 million principal amount of
Senior Subordinated Notes, $85.5 million principal amount of Senior Secured
Notes ($35.5 million of fixed-rate Series I and $50.0 million of floating-rate
Series II), and an $80 million term loan facility which was fully borrowed. The
Company also has a $40.0 million revolving credit facility, which, except for
$1.5 million used for letters of credit, had not been drawn upon through
December 31, 1998. In the 1998 Refinancing, completed on December 3, 1998, the
Company increased the term loan facility, and its borrowings under the facility,
by $150.0 million. The proceeds of the borrowing were used to redeem the Series
II Senior Secured Notes ($50.0 million), fund the Burns Acquisition
(approximately $56.8 million), and prefund $42.0 million of planned capital
expenditures and business acquisitions, with the remainder used for costs of the
1998 Refinancing and accrued interest. The $42.0 million for prefunded capital
expenditure and business acquisitions was required to be maintained in a cash
collateral account and to be used only for such expenditures. Provisions of the
debt agreements require the Company to use $30.0 million of the cash collateral
account balance for a business acquisition, or to repay the $30.0 million in the
event the Company did not enter a definitive purchase agreement prior to March
31, 1999, and complete the acquisition by December 31, 1999. As the TPOA
Acquisition is expected to close well before December 31, 1999, the Company
anticipates using the $30.0 million to partially fund the TPOA Acquisition. 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 $1.4 million until 2003. The interest rate on the Term Loan was
increased by a percentage point to LIBOR plus 3.75%.
The Company expects to invest approximately $260 million in the Network
between 1997 and the end of 2001 (with $150 million of this amount having been
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 QSR offerings) at existing sites, make
required environmental improvements, and purchase, install and upgrade its
information systems. The capital expenditures budget for 1999 is approximately
$60 million.
The Company anticipates that it will be able to fund its 1999 working
capital requirements and capital expenditures primarily from funds generated
from the refinancings, 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.
FREIGHTLINER RELATIONSHIP
The Company has signed a letter of intent with Freightliner Corporation
("Freightliner") to become an authorized provider of express service, minor
repair work and a specified menu of warranty repairs to Freightliner's
customers. Under the proposed agreement, the Company will be incorporated into
Freightliner's 24-hour customer assistance center database and be a major
referral point for emergency and roadside repairs and will also have access to
Freightliner's parts distribution, service and technical information systems.
Freightliner, a DaimlerChrysler Company, is the leading heavy truck manufacturer
in North America. The Company believes this relationship will result in a
considerable increase in nonfuel revenues generated by the Company's truck
maintenance and repair shops.
23
<PAGE> 25
Freightliner has also agreed to acquire a minority ownership interest
in the Company. However, at this time a specific ownership percentage has not
yet been determined. Consummation of the related agreements to finalize the
various aspects of the Company's proposed relationship with Freightliner is
subject to a variety of conditions, including satisfactory completion of
customary due diligence review procedures and successful negotiation of
definitive agreements.
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to certain
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 that went into effect on December 22, 1998. The Company has made
all necessary upgrades to comply with those requirements. During 1998,
approximately $6.7 million of environmental-related expenditures were incurred
with respect to remediation, maintenance, compliance, monitoring and capital
items, including costs to upgrade USTs and to meet the December 22, 1998
requirements. In addition, the Company has estimated the current ranges of
estimated 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, including those matters for which
the Company assumed the related liability as part of the Burns Acquisition, of
$3.9 million as of December 31, 1998. 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 and environmental
laws currently enacted, will not have a material adverse effect on the financial
condition, results of operations or liquidity of the Company.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue results from date sensitive computer programs that
improperly handle dates beyond 1999. This issue will impact virtually every
business that relies on a computer, including the Company, its customers and
suppliers and other third party service providers such as credit and trucking
fleet billing card providers, utilities and other basic service providers. The
Company's management is working to ensure that its Year 2000 issues are
addressed on a company-wide basis, which includes (1) internal information
technology (IT) systems such as any hardware and software used to process daily
operational data and information; (2) non-IT systems or embedded technology such
as micro-controllers contained in various equipment; and (3) Year 2000
compliance of key third parties, including suppliers, customers and third party
credit and trucking fleet billing card providers, especially those with which
the Company conducts business electronically.
The Company is currently in the process of making its IT systems Year
2000 compliant. As a result of the Combination Plan, management determined a new
IT system would be required to handle the combined operations of TA and
National, as neither TA's nor National's current IT systems have the capability
of handling the combined operations as effectively as desired. To this end, the
Company has begun implementing the SAP Enterprise Resource Planning system that
will replace substantially all of the legacy financial IT systems currently in
use, some of which are not Year 2000 compliant. The SAP system is Year 2000
compliant, and management expects to begin using the financial, asset management
and project system modules of the new system during the second quarter of 1999.
A second phase of the implementation of SAP, which will replace the Company's
fuel management and accounting systems, is targeted for completion in October of
1999. This implementation has not been accelerated due to Year 2000 issues. Only
minor modifications are necessary to current systems that will continue to be
used, such as the Access 76 fleet billing system and certain retail point of
sale systems, and management is confident these modifications will be completed
and tested prior to December 31, 1999. The costs of these modifications are not
expected to be material to the Company's financial position or results of
operations.
24
<PAGE> 26
The Company is currently in the process of surveying and testing its
significant non-IT systems, such as in fuel pumps, cash registers and truck
repair equipment, to determine whether such systems are Year 2000 compliant. As
a result of the significant capital improvements made at the Company's sites,
included under the Capital Program, over the past few years, substantially all
of the Company's mission critical non-IT systems recently have been upgraded or
are in the process of being upgraded and are believed to be Year 2000 compliant,
although the Company is still in the process of formally testing and evaluating
its non-IT systems. The Company expects to complete this process by June 30,
1999.
The Company's management believes that its efforts and plans to ensure
its internal IT and non-IT systems are Year 2000 compliant are adequate and,
therefore, the greatest risk to the Company's operations lies with third
parties. The Company is still in the early stages of contacting key third
parties and, accordingly, has not yet determined what its most reasonably likely
worst case scenario is with respect to Year 2000 issues. Consequently, the
Company has not yet prepared a contingency plan for dealing with that scenario.
The Company expects that it will complete its third party surveys and
assessments by June 30, 1999. When that process is complete, management will
complete an analysis of its most reasonably likely worst case scenario and a
contingency plan to deal with that scenario will be developed.
While management believes the Company is adequately addressing the Year
2000 issue and will not suffer a material adverse effect from such issues, there
is no guarantee that the estimated completion dates and costs will be achieved.
In addition, there is no guarantee that key third parties will be successful in
completing their Year 2000 efforts. If needed modifications are not made on a
timely basis, including to third parties' systems, and/or contingency plans are
not implemented, the Year 2000 issue could have an adverse effect on the
Company's operations and, potentially, its financial condition.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"), which requires entities to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Changes in the fair values are required to be recognized in
income when they occur, except for derivatives that qualify as hedges. For the
Company, adoption of this standard is required for the first quarter of 2000. At
this time, the Company has not completed its analysis of the effect on its
financial statements of adopting FAS 133. However, as the Company utilizes
derivatives on a limited basis and only as hedges of either commodity price risk
or interest rate risk, the effect of FAS 133 on the Company's statement of
income is not expected to be material.
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; the potential future impact of Year 2000 related issues; and
difficulties that may be encountered by the Company or its franchisees in
implementing the Combination Plan, integrating the Burns sites into the Network,
completing the TPOA Acquisition and finalizing the Freightliner agreements. The
forward-looking statements should be considered in light of these factors.
25
<PAGE> 27
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 at
any point in time during 1998 was immaterial. There were no open derivative
contracts at December 31, 1998. 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, 1998
--------------------------------------------------------------
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:
1999................................... $ 43 9.99% $ 1,446 8.90%
2000................................... 47 9.99% 1,446 8.90%
2001................................... 17,803 10.02% 1,446 8.90%
2002................................... 17,809 10.15% 1,446 8.90%
2003................................... 66 10.28% 65,448 8.90%
Thereafter.................................. 127,802 10.33% 157,657 8.90%
----------- -----------
Total....................................... $ 163,570 10.17% $ 228,889 8.90%
=========== ===========
Fair value.................................. $ 151,437 $ 228,889
=========== ===========
</TABLE>
26
<PAGE> 28
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.................................................................. 28
Consolidated Balance Sheet at December 31, 1998 and 1997........................................... 29
Consolidated Statement of Income and Retained Earnings for the three years ended December 31, 1998. 30
Consolidated Statement of Cash Flows for the three years ended December 31, 1998................... 31
Notes to the Consolidated Financial Statements..................................................... 32
Supplementary Data:
Quarterly financial data - unaudited................................................................ 65
</TABLE>
27
<PAGE> 29
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 present fairly, in all material respects, the financial
position of TravelCenters of America, Inc. and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cleveland, Ohio
March 16, 1999
28
<PAGE> 30
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash (Note 12).................................................................... $ 89,200 $ 71,756
Accounts receivable (less allowance for doubtful accounts of $3,907 for 1998 and 61,012 68,433
$2,707 for 1997)...............................................................
Inventories....................................................................... 42,952 33,718
Deferred income taxes............................................................. 4,459 3,740
Other current assets.............................................................. 12,619 10,256
----------- -----------
Total current assets......................................................... 210,242 187,903
Notes receivable, net................................................................ 1,239 1,692
Property and equipment, net.......................................................... 361,803 286,472
Intangible assets.................................................................... 21,141 15,651
Deferred financing costs............................................................. 9,284 11,786
Deferred income taxes................................................................ 2,924 -
Other assets......................................................................... 3,428 4,288
----------- -----------
Total assets................................................................. $ 610,061 $ 507,792
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............................................. $ 1,594 $ 500
Accounts payable.................................................................. 20,915 29,035
Other accrued liabilities......................................................... 88,165 72,265
----------- -----------
Total current liabilities.................................................... 110,674 101,800
Commitments and contingencies (Note 18)
Long-term debt (net of unamortized discount)......................................... 390,865 289,625
Deferred income taxes................................................................ 937 4,985
Other long-term liabilities.......................................................... 9,162 4,479
----------- -----------
511,638 400,889
Mandatorily redeemable senior convertible participating preferred stock.............. 69,974 61,404
Other preferred stock, common stock and other stockholders' equity................... 43,547 43,945
Retained earnings (deficit).......................................................... (15,098) 1,554
----------- -----------
28,449 45,499
Total liabilities and stockholders' equity................................... $ 610,061 $ 507,792
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 31
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Fuel................................................................... $ 554,735 $ 708,637 $ 550,212
Nonfuel................................................................ 347,531 293,843 99,991
Rent and royalties..................................................... 21,544 36,848 46,055
---------- ---------- ----------
Total revenues...................................................... 923,810 1,039,328 696,258
Cost of revenues (excluding depreciation)................................. 627,149 773,084 568,694
---------- ---------- ----------
Gross profit (excluding depreciation)..................................... 296,661 266,244 127,564
Operating expenses........................................................ 195,751 168,334 56,077
Selling, general and administrative expenses.............................. 34,256 35,619 31,265
Refinancing, transition and development costs............................. 3,648 15,212 2,197
Depreciation and amortization............................................. 44,662 35,840 17,838
(Gain) loss on sales of property and equipment............................ (1,195) (11,244) 1,464
Stock compensation expense................................................ 2,500 1,400 667
Other operating income, net............................................... (2,054) (1,262) (807)
Income of subsidiary held for disposition................................. - - (5,255)
---------- ---------- ----------
Income from operations.................................................... 19,093 22,345 24,118
Interest (expense), net................................................... (25,371) (22,898) (15,236)
---------- ---------- ----------
(Loss) income before income taxes and extraordinary item.................. (6,278) (553) 8,882
(Benefit) provision for income taxes...................................... (2,101) (344) 3,349
---------- ---------- ----------
(Loss) income before extraordinary item................................... (4,177) (209) 5,533
Extraordinary loss, less applicable income tax benefits of $2,012 in 1998
and $3,608 in 1997 (Note 12)........................................... (3,905) (5,554) -
---------- ---------- ----------
Net (loss) income......................................................... (8,082) (5,763) 5,533
Less: preferred dividends.............................................. (8,570) (7,520) (6,599)
Retained earnings-beginning of the year................................... 1,554 14,837 15,903
---------- ---------- ----------
Retained earnings (deficit)-end of the year............................... $ (15,098) $ 1,554 $ 14,837
========== ========== ==========
Earnings per common share: $ (21.12) $ (7.56) $ (0.81)
Income (loss) before extraordinary item
Extraordinary loss $ (6.47) (5.44) -
--------- --------- ---------
Net income (loss) $ (27.59) $ (13.00) $ (0.81)
========= ========= =========
Earnings per common share - assuming dilution: $ (21.12) $ (7.56) $ (0.81)
Income (loss) before extraordinary item
Extraordinary loss (6.47) (5.44) -
--------- --------- ---------
Net income (loss) $ (27.59) $ (13.00) $ (0.81)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE> 32
TRAVELCENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1998 1997 1996
--------------- --------------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................................... $ (8,082) $ (5,763) $ 5,533
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Extraordinary loss................................................. 3,905 5,554 -
Net income of subsidiary held for disposition...................... - - (3,153)
Depreciation and amortization...................................... 44,662 35,840 17,838
Deferred income tax provision...................................... (7,691) (4,330) 394
Provision for doubtful accounts.................................... 1,355 1,688 2,545
Provision for stock compensation................................... 2,500 1,400 667
(Gain) loss on sale of property and equipment...................... (1,195) (11,244) 1,464
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.............................................. 12,034 (20,773) 5,822
Inventories...................................................... (4,028) 1,422 (1,588)
Other current assets............................................. (2,954) 448 (3,617)
Accounts payable................................................. (8,933) (4,364) (2,083)
Other current liabilities........................................ 17,475 42,648 6,005
Other, net......................................................... (527) (856) (2,207)
----------- ----------- -----------
Net cash provided by operating activities.......................... 48,521 41,670 27,620
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of network assets........................................ (63,215) (15,127) (2,352)
Proceeds from sales of property and equipment......................... 3,414 37,958 643
Capital expenditures.................................................. (65,704) (60,818) (20,545)
----------- ----------- -----------
Net cash used in investing activities.............................. (125,505) (37,987) (22,254)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings............................................. - 3,750 14,000
Revolving loan repayments............................................. - (17,750) -
Long-term debt borrowings............................................. 229,250 205,000 -
Long-term debt repayments............................................. (129,987) (126,675) (12,375)
Proceeds from issuance of stock....................................... - 329 39
Repurchase of common stock............................................ (475) (7,456) (751)
Debt issuance costs................................................... (4,360) (12,904) -
Reconsolidation of subsidiary previously held for disposition...... - - 14,309
----------- ----------- -----------
Net cash provided by financing activities.......................... 94,428 44,294 15,222
----------- ----------- -----------
Net increase (decrease) in cash.................................. 17,444 47,977 20,588
Cash at the beginning of the year........................................ 71,756 23,779 3,191
----------- ----------- -----------
Cash at the end of the year.............................................. $ 89,200 $ 71,756 $ 23,779
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE> 33
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 three
networks of full-service travel centers (124 operated under the "TA" and
"TravelCenters of America" trademarks (the "TA Network"), two operated under the
"Unocal 76" trademark (the "National Network") and 17 operated under the "Burns
Bros. Travel Stops" trademark (the "Burns Network")) in 39 states. Of the
network locations at December 31, 1998, the Company owns or leases 133
locations, 30 of which are leased to independent lessee-franchisees
("Operators") of the Company ("Leased Sites"), and 103 of which are operated by
the Company ("Company-operated Sites"). Ten 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 (together with its subsidiaries "Unocal") and in December 1993
acquired (the "TA Acquisition") the TA Network assets from subsidiaries of The
British Petroleum Company p.l.c. (together with its subsidiaries "BP"). In
December 1998 the Company acquired (the "Burns Acquisition") the Burns Network
from Burns Bros., Inc., and certain of its affiliates (collectively "Burns").
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 for the nine months ended September 30, 1996.
For a pro forma presentation of the Company's consolidated results of
operations for the year 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.
32
<PAGE> 34
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. Intercompany accounts and transactions have been eliminated.
TAHC was included in the consolidated financial statements until the time of the
Company's recapitalization (see Note 4) 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
customer's facility and at the time of final sale to consumers at the
Company-operated Sites.
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:
<TABLE>
<CAPTION>
<S> <C>
Buildings and site improvements........................... 15 years
Pumps and underground storage tanks....................... 5-10 years
Machinery and equipment................................... 3-10 years
Furniture and fixtures.................................... 5-10 years
</TABLE>
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.
33
<PAGE> 35
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 (see Note 12). 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 9).
INTERNAL-USE SOFTWARE COSTS
During the application development stage of an internal-use computer
software project, the Company capitalizes (i) the external direct costs of
materials and services consumed in developing or obtaining the internal-use
computer software, (ii) to the extent of time spent directly on the project,
payroll costs of employees directly associated with and who devote time to the
project, and (iii) related interest costs incurred. Internal and external costs
incurred in the preliminary project stage and post-implementation stage, such as
for exploring alternative technologies, vendor selection and maintenance, are
expensed as incurred, as are all training costs. The costs of significant
upgrades and enhancements that result in additional functionality are accounted
for in the same manner as similar costs for new software projects. The costs of
all other upgrades and enhancements are expensed as incurred.
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.
34
<PAGE> 36
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 18).
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.
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, 1998 there were no open derivative contracts. At
December 31, 1997 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 12.)
35
<PAGE> 37
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RECLASSIFICATIONS
Certain reclassifications of prior years' data have been made to
conform with the current year presentation.
3. ACQUISITIONS
Burns Acquisition. On December 3, 1998, the Company acquired
substantially all of the truckstop assets owned by Burns for cash consideration
of $56,800,000 and the assumption of certain liabilities. Specifically, the
Company acquired from Burns the land, buildings, equipment and inventories at 17
of the 19 sites comprising the Travel Stops division of Burns, the equipment and
inventories used in Burns' fuel wholesaling and transportation businesses and
certain accounts receivable related to the acquired assets. For the fiscal year
ended June 30, 1998, these sites sold 162,200,000 gallons of diesel fuel and had
non-fuel sales and operating expenses of $44,700,000 and $28,100,000,
respectively.
The total cost of the assets acquired was $60,728,000, comprised of the
cash consideration paid to Burns of $56,240,000, liabilities assumed of
$3,920,000 and direct costs of the acquisition of $568,000. Under purchase
accounting principles, the cost was allocated to the assets acquired on the
basis of their fair values at the acquisition date as follows:
<TABLE>
<CAPTION>
FAIR VALUE ALLOCATED COSTS
---------------- -----------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Accounts receivable......................... $ 6,542 $ 6,542
Inventories................................. 3,839 3,839
Other current assets........................ 471 471
Property & equipment........................ 56,950 49,876
---------- ----------
$ 67,802 $ 60,728
========== ==========
</TABLE>
TPOA Acquisition. On February 26, 1999, the Company entered into a
merger agreement pursuant to which the Company intends to acquire (the "TPOA
Acquisition") 100% of the voting stock of Travel Ports of America, Inc. ("TPOA")
at a price of $4.30 per share. Under the terms of the merger agreement and
certain ancillary agreements, the Company will pay cash of approximately
$40,500,000 for all of TPOA's common shares except approximately 653,000 common
shares, held by TPOA's chairman and chief executive officer, that will be
exchanged for approximately 85,000 shares of the Company's common stock. In
addition, the Company expects to pay cash of approximately $15,000,000 to
$20,000,000 to retire substantially all of TPOA's indebtedness expected to be
outstanding at the merger date and to pay various costs of the transaction. TPOA
operates a network (the "TPOA Network") of 16 travel centers in seven states,
primarily in the northeastern U.S. This acquisition, if ultimately consummated,
is expected to close in June 1999. A closing of the merger is subject to a
variety of conditions, including approval by TPOA's shareholders.
36
<PAGE> 38
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. 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 "1997 Refinancing"), and
(iii) TA and National guaranteed the Company's indebtedness under its new credit
facilities. The Company's credit facilities were amended in December 1998 (the
"1998 Refinancing"). See Note 12 for further discussion of each of the 1998
Refinancing and the 1997 Refinancing.
There are three primary elements to the Combination Plan that was
adopted in January 1997 and has been executed by the Company throughout 1997 and
1998: (1) integrating the management of the TA and National Networks, (2)
converting the Existing Network sites to one Network, and (3) rationalizing and
further developing the Company's Network. As a result of implementing the
Combination Plan, for the years ended December 31, 1998 and 1997, the Company
incurred approximately $3,648,000 and $15,212,000 respectively, of expense,
included in refinancing, transition and development costs in the Company's
consolidated financial statements. 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. 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.
5. EARNINGS PER SHARE
The computation of basic earnings per common share is based upon the
weighted-average number of shares of common stock outstanding. A reconciliation
of the income and shares used in the computation follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------- ------------------------------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before extraordinary item....................... $ (4,177)
Less: Preferred stock dividends.............................. (8,570)
------------
Basic EPS and Diluted EPS
Income (loss) available to common stockholders........... $ (12,747) 604 $ (21.12)
============ ============ ==========
</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 1998. Effective January 1, 1999, 232,750 options to purchase common
stock were granted to management and non-employee directors.
37
<PAGE> 39
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<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 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.
<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
Income available to common stockholders.................. $ (1,066) 1,319 $ (0.81)
========== ========== ==========
</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
1996.
6. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
--------------- ---------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Nonfuel merchandise................................................... $ 39,973 $ 30,883
Petroleum products.................................................... 2,979 2,835
---------- ----------
Total inventories............................................... $ 42,952 $ 33,718
========== ==========
</TABLE>
38
<PAGE> 40
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. 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 17). 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 15).
These notes have terms of nine years and accrue interest at fixed rates between
4.86 and 7.0 percent.
Notes receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Principal amount of notes outstanding....................................... $ 2,351 $ 2,939
Less: allowance for doubtful accounts....................................... 280 877
--------- ---------
2,071 2,062
Less: amounts due within one year........................................... 832 370
--------- ---------
Notes receivable, net....................................................... $ 1,239 $ 1,692
========= =========
</TABLE>
The amount due within one year is included within other current assets
on the balance sheet.
8. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
--------------- ---------------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Land and land improvements................................................. $ 65,112 $ 51,697
Buildings and improvements................................................. 220,025 173,177
Machinery, equipment and furniture......................................... 107,895 91,069
Construction in progress................................................... 80,599 44,975
--------- ---------
Total cost................................................................. 473,631 360,918
Less: accumulated depreciation............................................. 111,828 74,446
--------- ---------
Property and equipment, net................................................ $ 361,803 $ 286,472
========= =========
</TABLE>
Pursuant to the Combination Plan, nine Company-operated Sites were
being held for sale as of December 31, 1997. Based on the Company's estimated
sales proceeds and costs of selling these sites, an impairment charge totalling
$559,000 was recognized in 1997 with respect to two of the sites. This
impairment charge is included in depreciation and amortization in the income
statement. As a result of revised estimates of probable sale proceeds, this
impairment reserve was reversed in the second quarter of 1998. During 1998, two
of these sites were sold, and condemnation proceeds were received for a portion
of a third site that was condemned by the state as part of a highway
construction project. The Company has re-evaluated the remaining seven sites and
determined that it would no longer actively market for sale five of those sites.
The total carrying value of the two sites held for sale at December 31, 1998 was
$2,011,000. As of December 31, 1998, the estimated net sales proceeds of the two
sites held for sale exceed the respective carrying values. During 1998, these
two sites generated a loss from operations of $56,000.
39
<PAGE> 41
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During the first quarter of 1998, the estimated useful lives of certain
machinery, equipment and furniture were revised downward from 10 years to five
years in order to conform National's estimated useful lives to those of TA. The
effect of this change in estimate resulted in reductions in income before
extraordinary items, net income and earnings per share of $9.5 million, $5.7
million and $9.08, respectively. This change resulted in these assets becoming
fully depreciated at March 31, 1998.
9. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997
-------------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Noncompetition agreements...................................... $ 26,200 $ 26,200
Leasehold interest............................................. 1,724 1,724
Trademarks..................................................... 2,313 2,313
Franchise goodwill............................................. 16,631 7,348
---------- ----------
Total cost..................................................... 46,868 37,585
Less: accumulated amortization................................. 25,727 21,934
---------- ----------
Intangible assets, net......................................... $ 21,141 $ 15,651
========== ==========
</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
ten and seven 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. These intangible assets are being amortized over the
ten and seven 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 11 1/2 years from the TA Acquisition. The leasehold interest
is being amortized over the 11 1/2 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 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. For the years ended December 31, 1998, 1997 and 1996, the Company
recorded acquired goodwill of $9,283,000, $6,354,000 and $994,000, respectively.
This goodwill is 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 with
respect to the goodwill. This charge is included in depreciation and
amortization in the income statement.
40
<PAGE> 42
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
-------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Taxes payable, other than income taxes................................ $ 14,422 $ 16,605
Accrued wages and benefits............................................ 13,366 10,968
Interest payable...................................................... 4,852 4,371
Other accrued liabilities............................................. 55,525 40,321
---------- ----------
Total other accrued liabilities....................................... $ 88,165 $ 72,265
========== ==========
</TABLE>
11. REVOLVING LOAN
The Company has available a revolving loan facility of $40,000,000 (see
Note 12). The interest rate for borrowings under this revolving loan facility is
based on either an alternate base rate (ABR) plus 1.75 percent or an adjusted
London Interbank Offered Rate (LIBOR) plus 2.75 percent. Commitment fees are
calculated as 1/2 of 1 percent of the daily average unused amount of the
revolving loan commitment. There were no borrowings outstanding under the
revolving loan facility at December 31, 1998 or 1997, although $1,529,000 of
available borrowings were reserved for letters of credit at both December 31,
1998 and 1997.
12. LONG-TERM DEBT
In March 1997 the Company completed the 1997 Refinancing, whereby it
refinanced the existing indebtedness of TA and National with new borrowings by
the Company. The Company issued $125,000,000 aggregate principal amount of 10
1/4% Senior Subordinated Notes due 2007, entered into a Credit Agreement through
which it obtained an $80,000,000 senior secured term loan facility (the "Term
Loan") and a $40,000,000 revolving credit facility, redeemed all of the
outstanding Subordinated Notes of TA and National, respectively, and a portion
of the Senior Notes of TA (the "TA Old Senior Notes"), and, pursuant to a Senior
Secured Note Exchange Agreement, exchanged $85,500,000 aggregate principal
amount of Senior Secured Notes ($35,500,000 of Series I Senior Secured Notes and
$50,000,000 of Series II Senior Secured Notes) of the Company for the Senior
Notes of National and the unredeemed TA Old Senior Notes.
In December 1998 the Company completed the 1998 Refinancing by
increasing the Term Loan by $150,000,000. Of the total amount borrowed,
$50,000,000 was utilized to retire the Company's Series II Senior Secured Notes
and $42,000,000 was specified to prefund planned capital expenditures and
business acquisitions and required to be placed in a cash collateral account
until used for such expenditures. Provisions of the debt agreements require the
Company to use $30,000,000 of the cash collateral account balance for a business
acquisition, or to use the $30,000,000 to repay indebtedness in the event that
an acquisition is not completed by December 31, 1999. The Company anticipates
using the $30,000,000 to partially fund the TPOA Acquisition (see Note 3).
41
<PAGE> 43
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
INTEREST MATURITY 1998 1997
------------ ------------ --------------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Term Loan (a)....................................... (b) 2005 228,889 79,625
Series I Senior Secured Notes(c).................... 8.94% 2002 35,500 35,500
Series II Senior Secured Notes(d)................... (e) 2005 - 50,000
Senior Subordinated Notes(f)........................ 10.25% 2007 125,000 125,000
Note payable(g)..................................... 5.0% 2018 4,919 -
---------- ----------
Total....................................... 394,308 290,125
Less: amounts due within one year................... 1,594 500
Less: unamortized discount.......................... 1,849 -
---------- ----------
Total....................................... $ 390,865 $ 289,625
========== ==========
</TABLE>
- ----------
(a) On March 21, 1997, in connection with the 1997 Refinancing, the Company
entered into a Credit Agreement with a group of lenders. On November 24,
1998, in connection with the 1998 Refinancing, the Company amended its
Credit Agreement. The Credit Agreement consists of three components: Term
Loans of a maximum $230,000,000 (increased from $80,000,000 in the 1998
Refinancing), swingline loans not to exceed $5,000,000, and revolving loans
(see Note 11) 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
$362,000 to $34,000,000, with the first payment under the amended agreement
due on December 31, 1998, 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.
(b) 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 2.75 percent or the LIBOR rate plus
3.75 percent. 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
one month to six months. The interest rate was set on December 4, 1998 at
8.9 percent for six months. The average effective interest rate for 1998
was 8.74 percent.
(c) On March 21, 1997, in connection with the 1997 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.
(d) On March 21, 1997, in connection with the 1997 Refinancing, the Company
issued $50,000,000 of Series II Senior Secured Notes. As part of the 1998
Refinancing, these notes were repaid.
(e) Interest accrued at a rate based on an adjusted LIBOR. The average
effective interest rate for 1998 was 8.6 percent.
42
<PAGE> 44
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(f) On March 27, 1997, in connection with the 1997 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.
(g) On September 1, 1998, in connection with the purchase of the operating
assets of a Leased Site, the Company issued a note payable to the former
Operator of the site for $4,919,000. The note bears interest at 5%, and
requires quarterly payments of principal and interest of $98,000 thru
October 1, 2018. The note was recorded net of a discount of $1,875,000.
From September 1, 1998 to March 4, 1999, this note was temporarily secured
via assignment of a cash investment of an amount equal to the original
principal amount of the note. On March 4, 1999 a mortgage interest in the
related travel center was provided to the former Operator as replacement
security for this note and the cash was returned to the Company.
Upon the early extinguishment of the Company's prior indebtedness as a
result of the 1997 Refinancing, the Company recognized an extraordinary loss,
net of applicable income taxes, of $5,554,000. This extraordinary loss consisted
of the write-off of the remaining unamortized balances of deferred financing
costs and debt discount related to the prior indebtedness of $7,847,000 and
$1,315,000, respectively. Approximately $12,904,000 of financing costs
associated with the new indebtedness issued as part of the 1997 Refinancing were
capitalized. As part of the 1998 Refinancing, the Company retired the Series II
Senior Secured Notes and substantially modified the Credit Agreement, resulting
in the early extinguishment of the outstanding balances of both the Series II
Senior Secured Notes and the term loan facilities of the Credit Agreement.
Accordingly, the deferred financing costs related to these borrowings were
written off as an extraordinary loss, net of applicable income taxes, of
$3,905,000. Approximately $4,360,000 of financing costs related to the Credit
Agreement modification were incurred as part of the 1998 Refinancing.
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 (as defined in the relevant instruments) 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 consolidated
net worth, minimum current ratio, maximum leverage ratio and maximum amounts of
capital expenditures. The Company was in compliance with the covenants
throughout 1998 and at December 31, 1998.
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 throughout 1998 and at December 31,
1998.
Scheduled payments of long-term debt in the next five years are
$1,594,000 in 1999; $1,601,000 in 2000; $19,359,000 in 2001; $19,367,000 in 2002
and $65,628,000 in 2003.
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, 1998 and 1997 approximated the recorded
value.
43
<PAGE> 45
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. 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, 1998, were as follows:
<TABLE>
<CAPTION>
YEAR ENDING (IN THOUSANDS OF DOLLARS)
- ----------- -------------------------
DECEMBER 31,
<S> <C>
1999 ............................................................................ $ 5,804
2000 ............................................................................ 5,904
2001 ............................................................................ 5,411
2002 ............................................................................ 4,799
2003 ............................................................................ 4,194
Thereafter....................................................................... 40,676
-----------
$ 66,788
===========
</TABLE>
Total rental expenses on all operating leases were approximately
$6,743,000, $5,658,000 and $1,357,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
14. MANDATORILY REDEEMABLE SENIOR CONVERTIBLE PARTICIPATING PREFERRED STOCK
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
--------------- ------------
(IN THOUSANDS OF DOLLARS)
<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...................................................... $ 51,888 $ 45,533
Series II-1,000,000 shares authorized, $0.01 par value;
934,344 shares issued and outstanding, shown at
redemption value....................................................... 18,086 15,871
--------- ---------
Total............................................................. $ 69,974 $ 61,404
========= =========
</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 15-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.
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 $33,824,000 and $25,254,000 at December 31,
1998 and 1997, 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.
44
<PAGE> 46
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 15-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.
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.
45
<PAGE> 47
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. OTHER PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
--------------- ---------------
(IN THOUSANDS OF DOLLARS)
<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; 599,877 and 633,513 shares outstanding at
December 31, 1998 and 1997, respectively........................................ 14 14
Additional paid-in capital......................................................... 52,382 52,305
Treasury stock-at cost; 817,700 and 780,200 shares at
December 31, 1998 and 1997, respectively........................................ (8,887) (8,412)
--------- ---------
Total...................................................................... $ 43,547 $ 43,945
========= =========
</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 14).
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.
During the years ended December 31, 1998, 1997 and 1996 the Company
issued 3,864; 35,339 and 5,152, respectively, shares of Common Stock to certain
members of management for cash and notes receivable (see Note 7)
aggregating $77,000, $655,000 and $77,000, respectively.
CONVERTIBLE PREFERRED STOCK
Voting Rights. Each share of Series I Convertible Preferred Stock
entitles the holder to one vote on all matters submitted to a vote of the
Company's stockholders. Series II Convertible Preferred Stock is non-voting.
46
<PAGE> 48
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 199,959 at December 31, 1998
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 14 - 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 14 - Liquidation Preference above.
Warrants. In April 1993 the Company issued warrants with an exercise
price of $0.01 per share which are exercisable for 128,206 shares of Common
Stock.
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. 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, 1998, 1997 and 1996, the formula prices were $25.00, $23.25 and
$15.69 per share. Compensation expense recognized with regard to these shares
during the years ended December 31, 1998, 1997 and 1996 were $62,000, $54,000
and $336,000, respectively.
47
<PAGE> 49
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TREASURY STOCK
From time to time the Company has acquired shares of its Common Stock
from former members of management and Operator Stockholders. For the years ended
December 31,1998, 1997 and 1996, the Company purchased 37,500; 692,000 and
75,000 treasury shares, respectively. These shares were recorded at their
acquisition costs of $475,000, $7,456,000 and $751,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
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 1997 Stock 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 stated market value of the
stock on the respective grant date, such stated market value to be determined
annually based on a formula, specified in the 1997 Stock Plan, that is, based on
the consolidated operating results and indebtedness of the Company; 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 Stock
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 Stock Plan")
was approved by the Board of Directors and was effective as of December 10,
1993. The 1993 Stock 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 Stock 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 Stock 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 Stock Plan.
The purchase prices at December 31, 1998, 1997 and 1996 used to
determine compensation expense related to options granted under the Company's
stock plans were $25.00, $23.25 and $15.69, 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, 1998, 1997 and
1996 were $2,438,000, $1,346,000, and $331,000, respectively.
48
<PAGE> 50
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects the status and activity of options under
the 1997 Stock Plan and the 1993 Stock Plan:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Options outstanding, beginning of year.................... 376,779 531,181 520,181
Granted................................................ 161,750 161,750 11,000
Canceled............................................... - (316,152) -
---------- -------- ----------
Options outstanding, end of year.......................... 538,529 376,779 531,181
========== ========== ==========
Options exercisable, end of year.......................... 538,529 376,779 330,436
Options available for grant, end of year.................. 426,500 588,250 40,819
</TABLE>
The weighted-average exercise price was $23.25 and $20.00 for those
options granted during 1998 and 1997, respectively, and $19.74 and $18.27 for
all outstanding options as of December 31, 1998 and 1997, respectively. The
weighted-average exercise price of the options cancelled in 1997, the options
granted in 1996 and all outstanding options as of December 31, 1996, was $19.04.
The following table summarizes information about options outstanding at
December 31, 1998:
<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............................................................ 161,750 161,750
$22.50............................................................ 75,284 75,284
$23.25............................................................ 161,750 161,750
----------- ----------
538,529 538,529
=========== ==========
</TABLE>
The weighted-average remaining contractual life of all options
outstanding at December 31, 1998 was 7.4 years.
49
<PAGE> 51
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. INCOME TAXES
The (benefit) provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
--------------- --------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal......................................... $ 4,089 $ 3,524 $ 2,557
State........................................... 1,501 462 398
---------- ---------- --------
5,590 3,986 2,955
---------- ---------- --------
Deferred:
Federal......................................... (6,565) (3,880) 74
State........................................... (1,126) (450) 320
---------- ---------- --------
(7,691) (4,330) 394
---------- ---------- --------
Total...................................... $ (2,101) $ (344) $ 3,349
========== ========== ========
</TABLE>
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,
----------------------------------------------
1998 1997 1996
------------------------------ ---------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
U.S. federal statutory rate applied to income before taxes and
extraordinary items.......................................... $ (2,198) $ (194) $ 3,109
State income taxes, net of federal income tax benefit........... 243 8 467
Non-deductible meals and entertainment.......................... 129 65 80
Adjustment of prior year estimated tax liability................ - - (239)
Benefit of tax credits.......................................... (320) (227) (98)
Other - net..................................................... 45 4 30
--------- --------- ---------
Total................................................... $ (2,101) $ (344) $ 3,349
========= ========= =========
</TABLE>
For 1998, income tax benefits of $2,012,000 allocated to the
extraordinary loss of $5,917,000 differ from the amount calculated at the
federal statutory rate of 35 percent by $59,000. This difference is due to
graduated tax rates. 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 and graduated tax rates.
50
<PAGE> 52
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax assets and liabilities resulted from the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
-------------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable................................................. $ 1,199 $ 1,784
Inventory........................................................... 299 245
Organization and start-up costs..................................... - 35
Federal benefit of state deferred tax liabilities................... - 518
Intangible assets................................................... 11,511 10,358
Deferred revenues................................................... 887 125
Minimum tax credit.................................................. 5,472 3,323
Net operating loss carryforwards.................................... - 2,726
General business credits (expiring 2009-2012)....................... 1,561 1,077
Other accrued liabilities........................................... 4,039 2,442
---------- ----------
Total deferred tax assets...................................... 24,968 22,633
---------- ----------
Deferred tax liabilities:
Property and equipment.............................................. (18,480) (23,878)
Federal liability for state deferred tax assets..................... (42) -
---------- ----------
Total deferred tax liabilities................................. (18,522) (23,878)
---------- -----------
Net deferred tax assets (liabilities).......................... $ 6,446 $ (1,245)
========== ===========
</TABLE>
The tax returns of the Company for 1995 through 1998 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.
17. RELATED PARTY TRANSACTIONS
Certain of the Company's stockholders have an ownership interest in one
or more of the franchisee customers to whom the Company sells fuel and certain
non-fuel products and from whom the Company receives rental income and royalty
income. The transactions with related parties are at prices and terms that are
the same as for similar transactions with unrelated entities. As of December 31,
1998, 21 of the Leased Sites were operated by related parties.
51
<PAGE> 53
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table is a summary of balances and transactions with
Operator Stockholders at December 31, 1998 and 1997, and for each of the three
years ended December 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------ ---------------------------------------------
1998 1997 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Accounts receivable............... $ 5,124 $ 7,469
Notes receivable.................. $ 1,277 $ 944
Fuel revenue...................... $ 65,786 $ 187,279 $ 269,179
Rent revenue...................... $ 8,957 $ 22,380 $ 32,266
Other revenues.................... $ 6,369 $ 4,477 $ 5,534
Cost of revenues.................. $ 64,369 $ 187,143 $ 268,343
</TABLE>
During each of 1998, 1997 and 1996, the Company acquired the travel
center businesses and operating assets of certain of its Operator Stockholders.
Total consideration paid to these operators was $1,610,000 in 1998 for one site,
$20,152,000 in 1997 for 23 sites and $3,185,000 in 1996 for five 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 each of December 31, 1998 and 1997, $27,000,000 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
$2,414,000, $3,636,000 and $5,327,000 in 1998, 1997 and 1996, respectively.
Certain shareholders of the Company were paid fees aggregating $400,000
as consideration for their financial advisory services provided in completing
the 1998 Refinancing.
Certain members of the Company's senior management have purchased
common stock of the Company pursuant to management subscription agreements (see
Note 15 -Repurchase Rights). As a result of such purchases, the Company has
notes receivable from the management stockholders totaling $967,000 and $887,000
at December 31, 1998 and 1997, respectively.
18. 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
("Environmental Laws") 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.
52
<PAGE> 54
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 has made necessary upgrades to USTs to comply with federal regulations
which took effect on December 22, 1998, and believes that all of its travel
centers, including those acquired in the Burns Acquisition, are in material
compliance with applicable requirements of Environmental Laws.
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 $6,721,000, $8,867,000
and $7,172,000 in 1998, 1997 and 1996, respectively.
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. While the Company cannot precisely estimate the ultimate
costs it will incur in connection with the investigation and remediation of
these matters, based on its current knowledge, the Company does not expect that
the costs to be incurred for these matters, 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 $3,890,000, 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.
Pursuant to an environmental agreement entered into with Unocal at the
time of the National Acquisition (the "Unocal Environmental Agreement"), 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 conducted at each of the sites acquired from Unocal,
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
53
<PAGE> 55
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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 conducted at each of the
sites acquired from BP, 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.
PENDING LITIGATION
Forty-Niner Truck Plaza Litigation. In connection with the acquisition
of the National 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," organizer 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 or, in the alternative, pursuant to an
alleged contract with Unocal, to purchase their travel centers at what they
alleged was 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 four properties
operated by the California Plaintiffs are referred to herein as the "California
Properties". Two of the California Plaintiffs settled their claims prior to
commencement of the first trial, which ended with a court order for a retrial.
On September 1, 1998, one of the two remaining plaintiffs entered into a
settlement agreement with Unocal and the Company, and dismissed its claims in
the case. The retrial of this case with the one remaining plaintiff commenced on
February 16, 1999. On March 8, 1999, the trial was suspended upon the request of
all parties in order to complete negotiation of a definitive settlement
agreement, the general terms of which have been agreed to by all parties. The
effect of the proposed settlement on the Company's consolidated financial
statements is not expected to be material.
In addition to the above matter, 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 is
not expected to be material to the Company's results of operations, financial
position or liquidity.
54
<PAGE> 56
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. OPERATING LEASE COMMITMENTS
Of the 133 travel centers owned by the Company as of December 31, 1998,
30 are leased to Operators under operating lease arrangements. Of these Leased
Sites, 21 are leased to Operator Stockholders (see Note 17). 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
$14,271,000, $29,433,000 and $41,762,000 for 1998, 1997 and 1996, respectively.
20. OTHER INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
1998 1997 1996
-------------- -------------- --------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Operating and Selling, general and administrative expenses include the
following:
Repairs and maintenance expenses.................................... $ 9,208 $ 8,528 $ 2,860
Advertising expenses................................................ $ 8,058 $ 9,141 $ 3,964
Taxes other than payroll and income taxes........................... $ 5,573 $ 5,099 $ 2,429
Interest (expense), net consists of the following:
Interest expense.................................................... $ (28,285) $ (26,418) $ (15,965)
Interest income..................................................... 2,914 3,520 729
----------- ----------- -----------
$ (25,371) $ (22,898) $ (15,236)
=========== =========== ===========
</TABLE>
21. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1998 1997 1996
----------------------------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................................................ $ 27,804 $ 24,611 $ 16,597
Income taxes (net of refunds)....................................... $ (1,224) $ 3,445 $ 1,321
</TABLE>
During 1998, 1997 and 1996 the Company received $1,068,000, $5,023,000
and $3,207,000, respectively, of inventory and property and equipment in
liquidation of trade accounts receivable and notes receivable.
During 1998, the Company issued a note payable for $3,044,000 (net of a
discount of $1,875,000) in exchange for property and goodwill acquired.
Pursuant to the 1997 Refinancing, 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.
55
<PAGE> 57
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 year ended December 31, 1996, as TAHC and TA were fully consolidated for
the entire year for each of the years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
---------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C>
Revenues:
Fuel........................................................................ $ 752,266
Nonfuel..................................................................... 236,780
Rent and royalties.......................................................... 47,437
-----------
Total revenues........................................................... 1,036,483
Cost of revenues (excluding depreciation)...................................... 803,535
-----------
Gross profit (excluding depreciation).......................................... 232,948
Operating expenses............................................................. 129,447
Selling, general and administrative expenses................................... 42,811
Refinancing, transition and development costs.................................. 2,687
Depreciation and amortization.................................................. 26,970
(Gain) loss on sales of property and equipment 1,464
Other (income) expense, net.................................................... (140)
-----------
Income from operations...................................................... 29,709
Interest income (expense), net................................................. (20,827)
-----------
Income before provision for income taxes.................................... 8,882
Provision for income taxes..................................................... 3,349
-----------
Net income.................................................................. $ 5,533
===========
</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, 1998 and 1997 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, 1998, 1997 and 1996. 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.
56
<PAGE> 58
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET SCHEDULES:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------------------------ -------------- --------------- ---------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash.................................. $ 59,665 $ 29,535 $ - $ - $ 89,200
Accounts receivable, net.............. - 60,176 836 - 61,012
Inventories........................... - 42,952 - - 42,952
Deferred income taxes................. - 4,459 - - 4,459
Other current assets.................. 98,323 29,210 7,860 (122,774) 12,619
---------- ---------- ---------- ----------- ----------
Total current assets............. 157,988 166,332 8,696 (122,774) 210,242
Notes receivable, net.................... 967 272 - - 1,239
Property and equipment, net.............. - 361,803 - - 361,803
Intangible assets........................ - 21,141 - - 21,141
Deferred financing costs................. 9,284 - - - 9,284
Deferred income taxes.................... 879 2,045 - - 2,924
Other assets............................. 730 6,398 - (3,700) 3,428
Investment in subsidiaries............... 338,205 - - (338,205) -
---------- ---------- ---------- ----------- ----------
Total assets..................... $ 508,053 $ 557,991 $ 8,696 $ (464,679) $ 610,061
========== ========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.. $ 1,446 $ 148 $ - $ - $ 1,594
Accounts payable...................... - 20,908 7 - 20,915
Other accrued liabilities............. 18,988 189,022 2,916 (122,761) 88,165
---------- ---------- ---------- ----------- ----------
Total current liabilities........ 20,434 210,078 2,923 (122,761) 110,674
Long-term debt (net of unamortized
discount)............................. 387,942 2,923 - - 390,865
Deferred income taxes.................... - 937 - - 937
Other liabilities........................ - 232,566 - (223,404) 9,162
---------- ---------- ---------- ----------- ----------
Total liabilities................ 408,376 446,504 2,923 (346,165) 511,638
Mandatorily redeemable senior convertible
participating preferred stock......... 69,974 - - - 69,974
Other preferred stock, common stock and
other stockholders' equity............ 44,801 84,880 - (86,134) 43,547
Retained earnings........................ (15,098) 26,607 5,773 (32,380) (15,098)
---------- ---------- ---------- ----------- ----------
29,703 111,487 5,773 (118,514) 28,449
---------- ---------- ---------- ----------- ----------
Total liabilities and
stockholders' equity.......... $ 508,053 $ 557,991 $ 8,696 $ (464,679) $ 610,061
========== ========== ========== =========== ==========
</TABLE>
57
<PAGE> 59
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<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:
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>
58
<PAGE> 60
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF INCOME AND RETAINED EARNINGS SCHEDULES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------------------------------
PARENT GUARANTOR NONGUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------------- -------------- -------------- ----------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Fuel................................... $ - $ 554,735 $ - $ - $ 554,735
Nonfuel................................ - 346,504 1,257 (230) 347,531
Rent and royalties..................... - 32,949 6,875 (18,280) 21,544
---------- ---------- ---------- ---------- ----------
Total revenues......................... - 934,188 8,132 (18,510) 923,810
Cost of revenues (excluding depreciation). - 627,149 - - 627,149
---------- ---------- ---------- ---------- ----------
Gross profit (excluding depreciation)..... - 307,039 8,132 (18,510) 296,661
Operating expenses........................ 160 212,530 1,571 (18,510) 195,751
Selling, general and
Administrative........................ 829 32,556 871 - 34,256
Transition expense........................ - 3,648 - - 3,648
Depreciation and amortization............. 1,482 43,180 - - 44,662
(Gain) loss on sale of property and
equipment.............................. - (1,195) - - (1,195)
Stock compensation expense................ - 2,500 - - 2,500
Other operating (income) expense, net..... - (2,054) - - (2,054)
---------- ---------- ---------- ---------- -----------
Income (loss) from operations............. (2,471) 15,874 5,690 - 19,093
Interest (expense), net................... - (25,368) (3) - (25,371)
Equity income (loss)...................... (2,155) - - 2,155 -
---------- ---------- ---------- ---------- ----------
(Loss) income before income taxes and
extraordinary items.................... (4,626) (9,494) 5,687 2,155 (6,278)
(Benefit) provision for income taxes...... (449) (3,774) 2,122 - (2,101)
---------- ---------- ---------- ---------- ----------
(Loss) income before extraordinary item (4,177) (5,720) 3,565 2,155 (4,177)
Extraordinary loss (less applicable income
tax benefit)........................... (3,905) - - - (3,905)
---------- ---------- ---------- ---------- ----------
Net (loss) income......................... (8,082) (5,720) 3,565 2,155 (8,082)
Less: preferred dividends................. (8,570) - - - (8,570)
Retained earnings (deficit) - beginning of
the year............................... 1,554 32,327 2,208 (34,535) 1,554
---------- ---------- ---------- ---------- ----------
Retained earnings (deficit) - end of the
year................................... $ (15,098) $ 26,607 $ 5,773 $ (32,380) $ (15,098)
========== ========== ========== ========== ==========
</TABLE>
59
<PAGE> 61
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<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)
Stock compensation expense................ - 1,400 - - 1,400
Other operating (income) expense, net..... - (1,262) - - (1,262)
---------- ---------- ---------- ---------- ----------
Income (loss) from operations............. (1,933) 22,223 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>
60
<PAGE> 62
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<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) 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
Stock compensation expense.................. - 667 - - 667
Other operating (income) expense, net....... - (812) - 5 (807)
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>
61
<PAGE> 63
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SCHEDULES:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------------------------------
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: $ (2,396) $ 50,917 $ - $ - $ 48,521
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of network assets........ - (63,215) - - (63,215)
Proceeds from sales of property and
equipment.......................... - 3,414 - - 3,414
Capital expenditures.................. - (65,704) - - (65,704)
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities....................... - (125,505) - - (125,505)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings............. 229,250 - - - 229,250
Long-term debt repayments............. (129,987) - - - (129,987)
Repurchase of common stock............ (475) - - - (475)
Debt issuance costs................... (4,360) - - - (4,360)
Intercompany advances................. (91,959) 91,959 - - -
---------- ---------- ---------- ---------- ----------
Net cash (used in) provided by
financing activities............. 2,469 91,959 - - 94,428
---------- ---------- ---------- ---------- ----------
Net increase in cash............. 73 17,371 - - 17,444
Cash at the beginning of the year........ 59,592 12,164 - - 71,756
---------- ---------- ---------- ---------- ----------
Cash at the end of the year.............. $ 59,665 $ 29,535 $ - $ - $ 89,200
========== ========== ========== ========== ==========
</TABLE>
62
<PAGE> 64
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<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: $ 13,898 $ 27,772 $ - $ - $ 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 (decrease) in cash.. 59,592 (11,615) - - 47,977
Cash at the beginning of the year........ - 23,779 - - 23,779
---------- ---------- ---------- ---------- ----------
Cash at the end of the year.............. $ 59,592 $ 12,164 - $ - $ 71,756
========== ========== ========== ========== ==========
</TABLE>
63
<PAGE> 65
TRAVELCENTERS OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<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>
64
<PAGE> 66
QUARTERLY FINANCIAL DATA - UNAUDITED
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(A)
------------------------------- --------------- ---------------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1998 Data:
Total Revenue $ 213,324 $ 229,537 $ 238,335 $ 242,614
Gross Profit $ 66,174 $ 72,164 $ 78,975 $ 79,348
Income (loss) before extraordinary item $ (7,283) $ 678 $ 2,387 $ 41
Net income (loss) $ (7,283) $ 678 $ 2,387 $ (3,864)
Earnings per common share:
Income (loss) before extraordinary item:
Basic $ (14.97) $ (2.34) $ 0.29 $ (3.63)
Diluted $ (14.97) $ (2.34) $ 0.05 $ (3.63)
Net income (loss):
Basic $ (14.97) $ (2.34) $ 0.29 $ (10.16)
Diluted $ (14.97) $ (2.34) $ 0.05 $ (10.16)
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:
Income (loss) before extraordinary item:
Basic $ (1.56) $ (4.13) $ 2.93 $ (5.52)
Diluted $ (1.56) $ (4.13) $ 0.64 $ (5.52)
Net income (loss):
Basic $ (6.07) $ (4.13) $ 2.93 $ (5.52)
Diluted $ (6.07) $ (4.13) $ 0.64 $ (5.52)
</TABLE>
(a) In the fourth quarter of 1998, the Company recognized an extraordinary
loss, net of the applicable income tax benefit of $2,012,000, of $3,905,000
with respect to the early extinguishment of indebtedness. In the fourth
quarter of 1997, the Company recognized impairment charges of an aggregate
amount of $7,500,000. In addition, transition expenses of $4,254,000 were
incurred in the 1997 fourth quarter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
65
<PAGE> 67
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.
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.
66
<PAGE> 68
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 27.
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
On December 18, 1998, the Company filed a Form 8-K reporting its
acquisition of substantially all of the truckstop network assets of
Burns Bros., Inc. and affiliates as of December 3, 1998.
67
<PAGE> 69
[This Page Intentionally Left Blank]
68
<PAGE> 70
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
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.
69
<PAGE> 71
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, 1999 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 March 31, 1999
------------------------------ Director (Principal Executive Officer)
Edwin P. Kuhn
Senior Vice President, Chief Financial
/s/ James W. George Officer and Secretary (Principal
------------------------------ Financial Officer and Principal March 31, 1999
James W. George Accounting Officer)
/s/ Margaret M. Eisen Director March 31, 1999
------------------------------
Margaret M. Eisen
Chairman of the Board of Directors and
/s/ Robert B. Calhoun, Jr. Director March 31, 1999
------------------------------
Robert B. Calhoun, Jr.
/s/ Eugene P. Lynch Director March 31, 1999
------------------------------
Eugene P. Lynch
/s/ Louis J. Mischianti Director March 31, 1999
------------------------------
Louis J. Mischianti
/s/ Rolf H. Towe Director March 31, 1999
------------------------------
Rolf H. Towe
/s/ Harrison T. Bubb Director March 31, 1999
------------------------------
Harrison T. Bubb
</TABLE>
70
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit Page
- ----------- ----------------------------------------------------------------------------------------------- ----
<S> <C> <C>
2.1 Asset Purchase Agreement, dated October 17, 1998, between TA and Burns Bros. Inc..............
2.2 Amendment to Asset Purchase Agreement, dated December 3, 1998, between TA and Burns
Bros. Inc.....................................................................................
2.3 Agreement and Plan of Merger by and among the Company, TP Acquisition, Inc. and TPOA,
dated as of February 26, 1999................................................................. (e)
2.4 Share Exchange Agreement by and among the Company and E. Philip Saunders, dated as of
February 26, 1999............................................................................. (e)
2.5 Voting Agreement, dated as of February 26, 1999, among the Company, TP Acquisition,
Inc. and E. Philip Saunders and John M. Holohan............................................... (e)
3.1 Restated Certificate of Incorporation of the Company.......................................... (a)
3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Company.......... (d)
3.3 Restated Certificate of Incorporation of National Auto/Truckstops, Inc........................ (b)
3.4 Restated Certificate of Incorporation of TA Operating Corporation............................. (b)
3.5 Second Amended and Restated By-laws of the Company............................................ (b)
3.6 Amended and Restated By-laws of National Auto/Truckstops, Inc................................. (b)
3.7 Amended and Restated By-laws of TA Operating Corporation...................................... (b)
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............................................ (b)
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)
</TABLE>
i
<PAGE> 73
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
- ---------- ------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
10.1 Amended and Restated Registration Agreement among the 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
10.4* Awards ....................................................................................... (a)
10.5 Credit Agreement, dated as of March 21, 1997, as amended and restated as of
November 24, 1998, among the Company, the Chase Manhattan Bank as agent, fronting bank
and swingline lender and the Lenders party thereto............................................
10.6 Senior Note Exchange Agreement as of March 21, 1997, among the Company, TA, National
and the Noteholders listed on Schedule 1 thereto.............................................. (a)
10.7 Amendment and Waiver Agreement dated as of March 1, 1998, amending the Senior Note
Exchange Agreement, dated March 21, 1997...................................................... (b)
10.8 Supplemental Agreement, dated as of November 24, 1998, amending the Senior Secured Note
Exchange Agreement dated as of March 21, 1997 (as amended)....................................
10.9 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)
10.10* Form of Executive Employment Agreement........................................................ (b)
10.11* Schedule of Executive Employment Agreements omitted pursuant to Instruction 2 to Item
601 of Regulation S-K......................................................................... (b)
10.12* 1997 Stock Incentive Plan of the Company...................................................... (c)
10.13* Form of Company's 1997 Stock Incentive Plan - Nonqualified Stock Option Agreement............. (b)
10.14* Form of Management Subscription Agreement..................................................... (b)
10.15* Schedule of Management Subscription Agreements omitted pursuant to Instruction 2 to
Item 601 of Regulation S-K....................................................................
10.16* Form of Note..................................................................................
10.17* Schedule of Notes omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.............
21 List of Subsidiaries of the Company...........................................................
27.1 Financial Data Schedule.......................................................................
99.1 Information Required by Part III of Form 10-K.................................................
</TABLE>
ii
<PAGE> 74
(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.
(b) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
(c) 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.
(d) Incorporated herein by reference to an exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(e) Incorporated herein by reference to exhibits filed with the Company's
Schedule 13D dated as of February 26, 1999.
* Executive compensation plans.
iii
<PAGE> 1
Exhibit 2.1
ACQUISITION OF CERTAIN ASSETS
OF
BURNS BROS., INC.
BY
TA OPERATING CORPORATION
ASSET PURCHASE AGREEMENT
October 17, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I......................................................................4
PURCHASE OF ASSETS...........................................................4
1.1 Definitions............................................................4
1.2 Purchased Assets......................................................10
1.3 Retained Assets.......................................................12
ARTICLE II....................................................................13
ASSUMPTION OF LIABILITIES...................................................13
2.1 Assumed Liabilities...................................................13
2.2 Closing Balance Sheet.................................................13
2.3 Retained Liabilities..................................................14
2.4 Satisfaction of Liabilities by Seller.................................15
ARTICLE III...................................................................16
CONSIDERATION...............................................................16
3.1 Consideration Generally...............................................16
3.2 Determination and Payment of Inventory Amount.........................16
3.3 Determination and Payment of Receivables Amount.......................17
3.4 Allocation of Purchase Price..........................................17
ARTICLE IV....................................................................17
REPRESENTATIONS AND WARRANTIES OF SELLER....................................17
4.1 Organization..........................................................17
4.2 Agreements............................................................18
4.3 Financial.............................................................19
4.4 Legal.................................................................21
4.5 Business..............................................................22
4.6 Employee Benefits.....................................................24
4.7 Assets................................................................24
4.8 Real Property.........................................................27
ARTICLE V.....................................................................29
REPRESENTATIONS AND WARRANTIES OF BUYER.....................................29
5.1 Organization and Power................................................29
5.2 Agreements............................................................30
ARTICLE VI....................................................................30
CONDITIONS TO CLOSING.......................................................30
6.1 Conditions to Buyer's Obligations.....................................30
6.2 Conditions to Seller's Obligation.....................................35
6.3 Mutual Conditions.....................................................37
ARTICLE VII...................................................................38
CLOSING.....................................................................38
ARTICLE VIII..................................................................39
COVENANTS...................................................................39
8.1 Pre-Closing Covenants.................................................39
8.2 Miscellaneous Covenants...............................................41
8. 3 Employee Covenants...................................................45
8.4 Assets Sold As-Is.....................................................46
8.5 Confidentiality.......................................................46
8.6 Waiver of Environmental Claims........................................46
8.7 Bulk Sales Law........................................................47
ARTICLE IX....................................................................47
INDEMNIFICATION.............................................................47
9.1 Survival of Representations and Warranties............................47
9.2 Indemnification by Seller.............................................47
9.3 Indemnification by Buyer..............................................48
i
<PAGE> 3
9.4 Third Party Claims....................................................49
9.5 Limitations on Indemnification of Buyer Indemnified Parties...........50
9.6 Limitations on Indemnification of Seller Indemnified Parties..........50
ARTICLE X.....................................................................51
MISCELLANEOUS...............................................................51
10.1 Entire Agreement.....................................................51
10.2 Successors and Assigns; Third Party Beneficiaries....................51
10.3 Headings; Drafting...................................................51
10.4 Modification and Waiver..............................................51
10.5 Notices..............................................................51
10.6 Governing Law; Waiver of Jury Trial..................................52
10.7 Attorneys' Fees......................................................53
10.8 Counterparts.........................................................53
10.9 Severability.........................................................53
10.10 Statement Required by Oregon Statute................................53
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Schedule 1.2(a) - Cash
Schedule 1.2(b) - Tangible Personal Property
Schedule 1.2(b-i) - Exceptions to Tangible Personal Property
Schedule 1.2(c) - Inventory
Schedule 1.2(e) - Deposits
Schedule 1.2(f) - Purchase and Sale Contracts
Schedule 1.2(i) - Additional Contract Rights
Schedule 1.2(j) - Leased Signs and Sign Sites
Schedule 1.2(k) - Real Property
Schedule 1.2(n) - Pipeline Rights
Schedule 1.2(o) - Headquarters Assets
Schedule 1.3(c) - Enterprises' Property
Schedule 1.3(e) - Certain Assets at Lounge at Troutdale, Oregon
Schedule 2.1(b) - Assumed Liabilities
Schedule 2.2.1(a) - Excluded Receivables
Schedule 2.2.1(b) - Bad Debt Reserve
Schedule 3.2 - Used Tire Valuation
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1.2 - Qualification
Schedule 4.3.1 - Financial Statements
Schedule 4.3.3 - Absence of Changes
Schedule 4.3.4 - Taxes
Schedule 4.4.1 - Compliance with Laws
Schedule 4.4.4 - Litigation
Schedule 4.4.5 - A.D.A. Matters
Schedule 4.5.1(a) - Employment
Schedule 4.5.1(b) - Employee Claims
Schedule 4.5.1(c) - Criminal Convictions
Schedule 4.5.2 - Worker Adjustment and Retraining Notification Act
Schedule 4.5.3 - Contracts
Schedule 4.5.5 - Suppliers and Customers
Schedule 4.5.7 - Prepayments and Deposits
Schedule 4.5.8 - Capital Projects
Schedule 4.6(a) - Employee Benefit Plans
Schedule 4.6(b) - Benefits to Non-Employees
Schedule 4.6(c) - Benefits Owed due to Transaction
Schedule 4.7.1 - Title
Schedule 4.7.4 - Environmental Matters
Schedule 4.7.6 - Intellectual Property
Schedule 4.7.7 - Leased Material Tangible Assets
Schedule 4.8.1 - Real Property - Legal Descriptions
Schedule 4.8.12 - Real Property - Betterment, Assessment
Schedule 4.8.13 - Real Property - Options, Leases
Schedule 4.9.1 - Conflicts of Interest
Schedule 6.1.10 - U.S. Bank Letter
Schedule 8.3.1 - Employment
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into this 17th day of
October, 1998, by and between Burns Bros., Inc., an Oregon corporation
("Seller") and TA Operating Corporation, a Delaware corporation ("Buyer").
RECITAL:
A. The parties desire that Seller, Burns Family Realty Co., an
Oregon general partnership ("Realty") and Burns Bros. Enterprises, Inc., a
Nevada corporation ("Enterprises") sell to Buyer and that Buyer purchase from
Seller, Realty and Enterprises substantially all of the assets of Seller, Realty
and Enterprises (other than Nevada gaming assets owned and operated by
Enterprises) relating to or used in the operation of Seller's truckstop
business, including but not limited to its operation of truckstops,
travelcenters, travel stores, lounges, motels, restaurants, video poker, quick
service restaurants, truckwashes and truck tire shops at or on the Owned Real
Property (as hereinafter defined) and Seller's fuel hauling and wholesale fuel
business (collectively, the "Business") upon the terms hereinafter set forth.
In consideration of and in reliance upon the representations,
warranties and obligations contained in this Agreement, the parties agree as
follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 Definitions. Accounting terms used herein and not otherwise
defined herein shall have the meanings given to them under generally accepted
accounting principles. When used in this Agreement, the following terms in all
of their tenses and cases shall have the meanings assigned to them below or
elsewhere in this Agreement as indicated below:
"Acquisition Balance Sheets" is defined in Section 4.3.1.
"Affiliate" of any Person means any person directly or indirectly
controlling, controlled by or under common control with any such Person and any
officer, director or controlling person of such Person.
"Assumed Balance Sheet Liabilities" is defined in paragraph (a) of
Section 2.1.
"Assumed Contracts" means the Contracts listed on Schedules 1.2(f),
(i) and (j).
"Assumed Liabilities" is defined in Section 2. 1.
<PAGE> 6
"BFR Assets" means (i) the building, trade fixtures and equipment
owned by Realty and used in the operation of the Business at Rye Patch, Nevada
and (ii) one high-rise sign located at each of the following Owned Real
Properties: Kadoka, South Dakota; Stockton, Iowa; Waco, Nebraska; Spencer, South
Dakota; Overton, Nebraska; Sinclair, Wyoming; Troutdale, Oregon; Coachella,
California; Cheyenne, Wyoming; and Fort Bridger, Wyoming. The BFR Assets do not
include the land at Rye Patch, Nevada, which is owned by Seller, or gaming
equipment at Rye Patch, Nevada or Mill City, Nevada, which is owned by
Enterprises.
"BFR Asset Purchase Agreement" means that certain Asset Purchase
Agreement by and between Burns Family Realty Company, as seller, and TA
Operating Corporation, as buyer, executed and delivered contemporaneously with
this Agreement and providing for the purchase and sale of the BFR Assets.
"Books and Records" means all books and records of Seller relating
to the Business and properties of Seller used in the Business, including, but
not limited to, (i) all books and records relating to the purchase of materials
and supplies, sales of products, dealings with customers, invoices, suppliers'
lists and personnel records, (ii) all contracts, reports, opinions, maps and
other documents affecting the title to or the value of the properties of Seller,
(iii) Tax Returns, and (iv) all financial and operating data, files and other
information with respect to Seller's Business, but excluding minute books and
stock records of Seller.
"Business" is defined in Recital A.
"Buyer" means TA Operating Corporation or its permitted assigns.
"Buyer Indemnified Parties" is defined in Section 9.2.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ss.ss. 96-1 et seq.
"Closing" and "Closing Date" are defined in Article VII.
"Closing Amount" is defined in Section 3.1.
"COBRA" is defined in Section 8.3.3.
"Contract" means any commitment, understanding, instrument, lease,
pledge, mortgage, indenture, note, license, agreement, purchase or sale order,
contract, promise or similar arrangement evidencing or creating any obligation,
whether written or oral.
"Disposal" means disposal as defined by RCRA or as defined by any
applicable similar Law of any jurisdiction where Seller has conducted business
or a jurisdiction where there has been a Release of Hazardous Substances in
connection with the conduct of the Business.
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"Employee Benefit Plan" means any employee benefit plan (as defined
in Section 3.3 of ERISA), or any employment contract, employee loan, incentive
compensation, profit sharing, retirement, pension, deferred compensation,
severance termination pay, stock option or purchase plan, guaranteed annual
income plan, fund or arrangement, payroll incentive policy, fund, agreement or
arrangement, noncompetition or consulting agreement, hospitalization,
disability, life or other insurance plan, or other employee fringe benefit
program or plan, or any other plan, payroll practice, policy, fund, agreement or
arrangement similar to or in the nature of the foregoing, oral or written
relating to the Business of Seller.
"Employee Claims" is defined in Section 4.5.1.
"Enterprises" means Burns Bros. Enterprises, Inc., a Nevada
corporation.
"Enterprises Asset" means that certain high-rise electronic message
board sign owned by Enterprises and located at the following Owned Real
Property: Mill City, Nevada.
"Enterprises Asset Purchase Agreement" means that certain Asset
Purchase Agreement by and between Burns Bros. Enterprises, Inc., as seller, and
TA Operating Corporation, as buyer, executed and delivered contemporaneously
with this Agreement and providing for the purchase and sale of the Enterprises
Asset.
"Environmental Reports" is defined in Section 6.1.11.
"Environmental Law" means any federal, state or local Law pertaining
to the environment or the health or safety of the public or employees, including
but not limited to the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss.ss. 9601 et seq.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss.ss. 6901 et seq.; any state
or local Law similar to CERCLA or RCRA; the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. ss. 11011, et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. ss.ss. 1801 et seq.; the Clean Air Act, 42 U.S.C.
ss.ss. 7401 et seq.; the Clean Water Act, 33 U.S.C. ss.ss. 1251 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. ss.ss. 651 et seq.; the Toxic
Substances Controls Act, 15 U.S.C. ss.ss. 2602 et seq., each as amended; all
regulations issued pursuant to the foregoing; all permits issued to Realty or
Seller or any of their subsidiaries pursuant to the foregoing; and any other
state, federal or local Law, whether currently in existence or hereafter
enacted, pertaining to:
(i) the existence, cleanup and/or remedy of contamination on
property;
(ii) the emission or discharge of Hazardous Substances into the
environment, including, without limitation, into sewer systems or within
buildings;
(iii) the control of hazardous wastes;
(iv) the use, generation, transport, treatment, storage, disposal,
removal or recovery of Hazardous Substances, including building materials; or
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(v) worker or community protection.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Gaming Agreement" is defined in Section 6.3.3.
"Governmental Authority" means any foreign, federal, state, regional
or local authority, agency, body, court or instrumentality, regulatory or
otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.
"Hazardous Substances" means any hazardous substance, extremely
hazardous substances, toxic substances, hazardous waste, pollutant, contaminant
and any other substance, material or waste regulated by an Environmental Law and
any regulations promulgated pursuant thereto, or which requires investigation or
remediation under any applicable Environmental Law. Hazardous Substances
include, without limitation, Petroleum Products, asbestos, urea formaldehyde and
polychlorinated biphenyls, regardless of whether specifically listed or
designated as a hazardous substance under any Environmental Law.
"H-S-R" is defined in Section 6.3.1.
"Independent Accountants" is defined in Section 3.2.
"Intellectual Property Rights" is defined in paragraph (g) of
Section 1.2.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Inventory Amount" is defined in Section 3.2.
"Knowledge of Buyer" means the actual knowledge of any elected
officer of Buyer.
"Knowledge of Seller" means the actual knowledge of Bruce Burns,
Steve Gross, Kirk French, Dave Summers, Pat Schauer, Pat Jameson, Jim Bye, Greg
McPherson or Jack Fairfield.
"Law" means any common law and any federal, state, regional, local
or foreign law, rule, statute, ordinance, rule, order or regulation.
"Liabilities" means responsibilities, obligations, duties,
commitments, claims and liabilities of any and every kind, whether known or
unknown, accrued, absolute, contingent or otherwise.
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"Lien" means any lien, charge, covenant, condition, easement,
adverse claim, demand, encumbrance, limitation, security interest, option,
pledge, or any other title defect or restriction of any kind.
"Listed Assets" is defined in Section 1.2.
"Material Contract" means any Contract relating to the Business and
pursuant to which Seller is obligated to expend, in the aggregate, $25,000 in
any six (6) month period, and any other Contract otherwise material to Seller's
Business.
"Non-Waived Environmental Claim" is defined in Section 8.4.
"Owned Real Property" is defined in Section 1.2.
"Permitted Encumbrance" is defined in Section 6.3.8.
"Person" means any individual, corporation, partnership, limited
liability company, association or any other entity or organization.
"Petroleum Products" means petroleum, gasoline, oil, fuel oil,
diesel fuel and petroleum solvents, petroleum by-products or any other product
or substance derived from petroleum.
"Plan" means any Employee Benefit Plan with respect to which Seller
currently is, or during the three year period preceding the date hereof has
been, the sponsor, a party or obligated to make contributions.
"Protected Information" is defined in Section 8.1.2.
"Purchase Price" is defined in Section 3.1.
"Purchased Assets" is defined in Section 1.2.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended, and as codified in the Solid Waste Disposal Act, 42 U.S.C. ss. 6901, et
seq. All references to RCRA in this Agreement incorporate all regulations at 40
CFR. ss. 260, et seq., promulgated pursuant to RCRA as well as all state
statutes and regulations adopted pursuant to RCRA or similar statutes of any
state.
"Realty" means Burns Family Realty Co., an Oregon general
partnership.
"Receivables Amount" is defined in Section 3.3.
"Release" means any direct or indirect spilling, pumping, pouring,
emitting, emptying, placing, discharging, injecting, escaping, leaking, dumping
or disposing on or into any
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<PAGE> 10
building or facility or the environment, whether intentional or unintentional,
known or unknown, and includes a threatened Release.
"Retention Amount" is defined in Section 8.2.10.
"Salable Inventory" is defined in Section 3.2.
"Seller" means Burns Bros., Inc., an Oregon corporation.
"Seller Indemnified Parties" is defined in Section 9.3.
"Storage" means storage as defined by RCRA or as defined by any
applicable similar Law of any jurisdiction where Seller has conducted business
or a jurisdiction where there has been a Release of Hazardous Substances in
connection with the conduct of the Business; provided, however, that the term
"Storage" as used herein shall not be limited to the storage of "hazardous
wastes" as defined in RCRA, but shall extend to encompass the storage of any
Hazardous Substances.
"TABB" is defined in Section 6.3.4.
"Tax" means any tax, charge or assessment by or liability to any
Governmental Authority, including, but not limited to, any deficiency, interest
or penalty.
"Tax Refund Claim" is defined in Section 1.3(d).
"Tax Returns" is defined in Section 4.3.4.
"Title Company" shall mean First American Title Insurance Company.
"Trade Secret" means any information which, if known to a competitor
of the owner of the information, could be harmful to the owner of the
information.
"Transport" means transport as defined by RCRA or as defined by any
applicable similar Law of any jurisdiction where Seller has conducted business
or a jurisdiction where there has been a Release of Hazardous Substances in
connection with the conduct of the Business.
"Treatment" means treatment as defined by RCRA or as defined by any
applicable similar Law of any jurisdiction where Seller has conducted business
or a jurisdiction where there has been a Release of Hazardous Substances in
connection with the conduct of the Business.
"Waived Environmental Claim" is defined in Section 8.6.
1.2 Purchased Assets. Seller agrees to sell, transfer and assign to
Buyer, free and clear of all Liens except Permitted Encumbrances, and Buyer
agrees to purchase from Seller, substantially all of the assets of Seller
relating to or used in the operation of the Business, whether
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<PAGE> 11
known or unknown, tangible or intangible, and wherever located, existing as of
the Closing, except the assets listed in Section 1.3. The assets of Seller to be
purchased and sold pursuant to this Agreement are sometimes hereinafter
collectively referred to as the "Purchased Assets." The Purchased Assets
include, but are not limited to, all of the following assets of Seller relating
to or used in the operation of the Business:
(a) Cash. Cash in the amount listed in Schedule 1.2(a). In the
event the aggregate amount of cash on hand at the Owned Real
Properties at the time of the inventory referred to in Section
3.2 is less than the total shown on Schedule 1.2(a), Seller
shall deliver the shortfall to Buyer immediately after
Closing. In the event the aggregate amount of cash on hand at
the Owned Real Properties at the time of the inventory
referred to in Section 3.2 is more than the total shown on
Schedule 1.2(a), Buyer shall deliver the excess to Seller
immediately after Closing. Cash purchased and sold under this
Agreement does not include cash or imprest funds of
Enterprises at Mill City, Nevada or Rye Patch, Nevada.
(b) Tangible Personal Property. All equipment, machinery,
leasehold improvements, computers (both computer hardware and
software owned and licensed), furniture, fixtures, motor
vehicles (including but not limited to any vehicles used in
connection with fuel hauling or wholesale fuel business),
office equipment and tooling, including, but not limited to,
(i) personal property used by (x) any site-level employee or
(y) any employee at Seller's headquarters who is hired by
Buyer, in the conduct of his or her duties, including,
automobiles, fax machines, cell phones and laptop computers,
and (ii) those assets described or identified on Schedule
1.2(b), attached hereto (the "Listed Assets"), but excluding
the computer software listed on Schedule 1.2(b-i), which is
nonassignable;
(c) Inventory. Inventories of fuel and non-fuel products, goods,
raw materials, purchased parts, spare parts and
work-in-process as of the Closing Date (including such
inventories at the Wilsonville, Oregon, and Portland, Oregon,
travelstops) and including inventories of fuel products owned
by Seller and stored at bulk storage terminals listed on
Schedule 1.2(c));
(d) Receivables. Any and all trade accounts receivable of Seller
(including without limitation credit card receivables,
receivables due from third-party billing companies, board
charges and other amounts due on open account, and customer
notes) as of the Closing Date (including such receivables
which pertain to Wilsonville, Oregon, and Portland, Oregon,
travelstops);
(e) Deposits. Prepaid assets and deposits listed on Schedule
1.2(e) attached hereto;
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(f) Purchase and Sale Contract Rights. All rights of Seller under
contracts which were made in the ordinary course of business
providing for the purchase or sale of goods or services, which
contracts are disclosed to Buyer on Schedule 1.2(f) attached
hereto;
(g) Intellectual Property Rights. All intellectual property of
Seller, if any, relating to the Business, including
copyrights, copyright registrations, designs, blueprints,
engineering data, know-how, software, patents, patent
applications, trademarks, trade dress and trade names, all
applications and registrations for such trademarks, trade
dress and trade names (including without limitation the
copyright registrations listed on Schedule 4.7.6), and any and
all goodwill related thereto or associated therewith
(including, without limitation, any and all rights to the name
"Mrs. B's", "TABB" and derivatives thereof, and any names,
trademarks or trade dress substantially similar to those used
by Seller in connection with the Business, and rights to use
the name "Burns Bros." in connection with the operation of
Buyer's primary business on or at the Owned Real Property for
a period of five (5) years after the Closing) and all rights
of Seller under related license agreements listed on Schedule
4.7.6) to the extent the license agreements may be assigned
(the "Intellectual Property Rights");
(h) Listings. All customer and supplier lists, if any, and related
correspondence;
(i) Additional Contract Rights. Such other contract rights, such
as distributor, franchise, jobber and dealer agreements, and
leases for existing facilities and equipment, as are listed on
Schedule 1.2(i);
(j) Leased Signs and Sign Sites. Rights under (i) leases of
billboard signs, (ii) leases of sites for billboard signs
owned by Seller and (iii) leases or other agreements for
highway logo board signs, used in connection with the Business
and listed on Schedule 1.2(j);
(k) Real Property. All real estate and interests in real estate
(including, but not limited to, all buildings and
improvements) used or usable in connection with the Business,
including without limitation, the sites listed on Schedule
1.2(k), attached hereto, and all "out parcels," including, but
not limited to the out parcels located in Corning, California,
and Troutdale, Oregon (collectively, the "Owned Real
Property");
(1) Truck Repair Shops. The free-standing truck repair shops at
the Corning and Coachella, California, sites (including all
fixtures and improvements) that are currently being leased to
Buyer;
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(m) Permits and Licenses. To the extent assignable under law,
rights under such permits and licenses, including but not
limited to beer, wine and liquor permits, as Buyer may elect
to include in the assets to be acquired;
(n) Pipeline Rights. All rights, if any, to the transport of fuel
through common carrier pipelines as described on Schedule
1.2(n); and
(o) Headquarters Assets. Certain personal property located at and
used in the operation of Seller's headquarters offices at
Weatherly Building, Suite 1200, 516 S. E. Morrison Street,
Portland, Oregon 97214 and listed on Schedule 1.2(o).
1.3 Retained Assets. Seller shall not sell, transfer or assign to
Buyer, and Buyer shall not purchase from Seller, the following assets relating
to the Business:
(a) Certain Real and Personal Property. The real estate and
personal property (excluding inventory and accounts
receivable) located at, and used in the operation of Seller's
Wilsonville, Oregon, and Portland, Oregon, facilities, and the
real estate and personal property located at, and used in the
operation of Seller's Minden, Iowa, or Ellensburg, Washington
facilities;
(b) Headquarters Assets. All of the personal property located at
and used in the operation of Seller's headquarters offices at
Weatherly Building, Suite 1200, 516 S.E. Morrison Street,
Portland, Oregon 97214, except the personal property listed on
Schedule 1.2(o) or as described in Section 1.2(b)(i);
(c) Enterprises' Property. All assets owned by Enterprises at the
Mill City and Rye Patch, Nevada, facilities listed on Schedule
1.3(c);
(d) Tax Refund Claim. Those certain claims of Seller against the
Internal Revenue Service and the Oregon Department of Revenue
for refund of income taxes arising from Seller's
understatement of cost of goods sold on tax returns filed
prior to June 30, 1992 (the "Tax Refund Claim"); and
(e) Certain Assets at Lounge at Troutdale, Oregon. The personal
property located at and used in the operation of the lounge
and video poker facility at the Troutdale, Oregon facility,
and listed on Schedule 1.3(e).
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ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumed Liabilities. Buyer agrees to assume only the following
obligations (the "Assumed Liabilities") of Seller existing as of the Closing:
(a) those liabilities and obligations of Seller relating to the
Business and which relate to operations or events arising from
and after the Closing Date under the Assumed Contracts and in
respect of which Seller is not in default as of the Closing
Date;
(b) those current liabilities of Seller relating to the Business
and reflected on the modified August 31, 1998, balance sheet
attached hereto as Schedule 2.1(b) (other than the current
portion of any long-term debt, liabilities related to
environmental matters, workers' compensation or insurance
claims and all employee-related liabilities) to the extent the
same are outstanding on the Closing Date, together with such
similar liabilities as are incurred by Seller in the ordinary
course of business between August 31, 1998, and the Closing
Date and are reflected on the Final Closing Balance Sheet (as
hereinafter defined) (the "Assumed Balance Sheet
Liabilities"); and
(c) outstanding "Loyal Fueler" liabilities and obligations.
Nothing in this Section 2.1 shall be construed or implied to impose upon Buyer
any Liabilities retained by Seller under Section 2.3.
2.2 Closing Balance Sheet
2.2.1 Preparation of Preliminary Closing Balance Sheet. Within
forty-five (45) days after the Closing, Seller will prepare and deliver to Buyer
a balance sheet (the "Preliminary Closing Balance Sheet") as of the Closing
reflecting, among other things: (a) the current liabilities of Seller, excluding
the current portion of any long-term debt, liabilities related to environmental
matters, workers' compensation or insurance claims, and reducing such
liabilities by an amount equal to identifiable and realizable payment term
discounts; and (b) an amount equal to the accounts receivable of the Business
(excluding any accounts receivable which are subject to the American Credit
Industry Insurance Company credit insurance policy and the notes and accounts
receivable listed on Schedule 2.2.1(a), attached hereto), minus the amount of
the Assumed Balance Sheet Liabilities, minus a reserve for bad debts mutually
agreed upon by Seller and Buyer as forth on Schedule 2.2.1(b) (the "Receivables
Amount"). Except as provided in the preceding sentence, the balance sheet shall
be prepared in accordance with generally accepted accounting principles on a
basis consistent with Seller's past practice; provided, however, that to the
extent that any of Seller's past accounting principles were not in accordance
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with generally accepted accounting principles, such nonconforming practices
shall not be followed in the preparation of the Preliminary Closing Balance
Sheet;
2.2.2 Preliminary Closing Balance Sheet Review. Upon Seller's
delivery of the Preliminary Closing Balance Sheet, all work papers, documents
and records used or generated by Seller (or its accountants) in connection with
the preparation of the Preliminary Closing Balance Sheet shall be made available
to Buyer. Buyer shall review the Preliminary Closing Balance Sheet and, on or
before the 30th day after Buyer's receipt of the Preliminary Closing Balance
Sheet, Buyer shall deliver to Seller, in writing, any objections or disputes
which it may have with respect to whether the Preliminary Closing Balance Sheet
was prepared in accordance with the provisions of this Agreement.
2.2.3 Preliminary Closing Balance Sheet Dispute. If Buyer makes a
timely objection to the Preliminary Closing Balance Sheet, and Buyer and Seller
are unable to resolve their disputes within fifteen (15) days after Buyer's
objection, the dispute shall be resolved by arbitration in Denver, Colorado,
before Arthur Andersen & Co. (the "Independent Accountants"). The Independent
Accountants shall conduct such arbitration and perform their services in
compliance with the provisions and guidelines of this Agreement, as
expeditiously as possible, and deliver a revised Preliminary Closing Balance
Sheet to Seller and Buyer as a result thereof. The fees and expenses of the
Independent Accountants for the resolution of the dispute shall be shared
equally by Buyer and Seller.
2.2.4 Final Closing Balance Sheet. The Preliminary Closing Balance
Sheet shall be deemed final and binding upon the parties and shall become the
"Final Closing Balance Sheet" upon the earliest to occur of the following:
(a) the mutual agreement of Buyer and Seller to and acceptance of
the Preliminary Closing Balance Sheet;
(b) Buyer's failure to object timely in writing to the Preliminary
Closing Balance Sheet; or
(c) the receipt by Buyer and Seller of a revised Preliminary
Balance Sheet as a result of arbitration before the
Independent Accountants.
2.3 Retained Liabilities. Notwithstanding anything in this Agreement
to the contrary, Buyer does not assume and will not become responsible for any
Liability (whether known or unknown) of Seller except the Assumed Liabilities,
and Seller shall be responsible for, and shall satisfy and discharge, all
Liabilities relating or pertaining to it or the Business, other than the Assumed
Liabilities. Without limiting the generality of the foregoing, the following are
included among the Liabilities of Seller which Buyer does not expressly or
impliedly assume:
(a) Long-Term Debt. All of the long-term debt, including the
current portion thereof and including all interest thereon of
Seller;
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(b) Product Liability. All Liabilities with respect to products
manufactured, sold or leased by Seller prior to the Closing,
without regard to (i) the basis or theory of claim
(negligence, strict tort, breach of express or implied
warranty, fraud or failure to warn, test, inspect or instruct
or otherwise), (ii) the nature of the damages sought (property
damage, economic loss, personal injury, wrongful death or
other) or (iii) whether the claim arose or is asserted before
or after the Closing;
(c) Product Warranty or Shortage. All Liabilities of Seller to
customers or third parties with respect to shortages or
defects in goods delivered to customers or in transit to
customers prior to the Closing, including, but not limited to,
Liabilities for product warranty claims;
(d) Services. All Liabilities to customers or third parties with
respect to services performed by Seller prior to the Closing;
(e) Claims. All Liabilities of Seller with respect to any pending,
threatened or unasserted litigation, claim, demand,
investigation or proceeding including, without limitation,
Liabilities relating to any Tax owed or alleged to be owed to
any Governmental Authority with respect to matters which
occurred prior to the Closing;
(f) Employees. All Liabilities arising out of the employment
relationship between Seller and any of its employees or former
employees existing at any time, whether before or after the
Closing, including, but not limited to, all Liabilities
relating to any Employee Benefit Plan sponsored or maintained
by Seller or any Affiliate of Seller or to which Seller has
made contributions, claims arising under any collective
bargaining agreement or trust, all severance claims of any
employee of such Seller (including, but not limited to, such
claims relating to or resulting from the consummation of the
transactions contemplated hereby) and all workers'
compensation, unemployment compensation or state or federal
discrimination claims, claims arising under the Family and
Medical Leave Act, the Fair Labor Standards Act, the National
Labor Relations Act, OSHA, ERISA, the Americans with
Disabilities Act, the Age Discrimination in Employment Act,
contract claims (express or implied) or tort claims, demands,
investigations or proceedings relating to matters which
occurred prior to the Closing;
(g) Breaches. Any Liability the existence of which is a breach of
any representation, warranty or covenant of Seller in this
Agreement; and
(h) Taxes. All taxes owed to any Governmental Authority relating
to the periods prior to and including the Closing Date.
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2.4 Satisfaction of Liabilities by Seller. To preserve for Buyer the
opportunity to maintain good relations with Seller's creditors and to preclude
the assertion of claims for nonpayment against Buyer, Seller agrees to pay or
otherwise satisfy and discharge in the ordinary course of business after the
Closing or otherwise in accordance with their terms all Liabilities relating to
the Business owed to Seller's creditors, except Assumed Liabilities and
liabilities disputed in good faith by Seller; provided, that, Buyer's interests
will not be jeopardized by such disputes.
ARTICLE III
CONSIDERATION
3.1 Consideration Generally. As consideration for the Purchased
Assets (the "Purchase Price"), Buyer shall:
(a) at the Closing, assume the Assumed Liabilities and pay to an
account designated by Seller the Closing Amount (as
hereinafter defined), in cash by bank wire transfer;
(b) pay to an account designated by Seller the Inventory Amount
(as defined in Section 3.2 below) in accordance with Section
3.3.2 below; and
(c) pay to an account designated by Seller the Receivables Amount
(as defined in Section 3.3.3 below) in accordance with Section
3.3.3 below (if the Receivables Amount is a positive number).
As used herein, "Closing Amount" shall mean an amount equal to: (i)
$46,326,000, less (ii) the amount, if any, as may be agreed upon by Seller and
Buyer as a Purchase Price adjustment due to or in consideration of the results
of the Environmental Reports; less (iii) an amount equal to the average number
of months, and/or the relevant portion thereof (expressed as a decimal), that
Loyal Fueler coupons are, on average, outstanding from date of issue to date of
redemption, multiplied by $35,000.
3.2 Determination and Payment of Inventory Amount. On the Closing
Date, Seller and Buyer shall conduct a physical inventory of the facilities
operated by Seller at or upon any of the Owned Real Property and at Wilsonville
and Portland, Oregon. Each of Buyer and Seller may designate such employees or
third parties as it elects to participate in or observe the taking of the
inventory. All Salable Inventory (as hereinafter defined) which is non-fuel
inventory and supplies shall be valued at Seller's cost of such inventory as of
the Closing Date, as shown by Seller's Books and Records, except that used tires
shall be valued in accordance with Schedule 3.2, attached hereto. All Salable
Inventory comprised of fuel shall be valued as follows: (a) at each site, at the
lowest OPIS-based rack price offered and available by any current vendor of
Seller for such fuel at such site on the day of the inventory (except for fuel
stored in bulk at the Rye Patch and Fort Bridger sites, which shall be valued in
accordance with (b) below); (b) for all fuel stored at the Rye Patch and Fort
Bridger bulk storage tanks and, for all fuel stored
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in bulk in off-site terminals, at: (i) Seller's cost if Buyer, in writing,
previously approved the purchase by Seller of the fuel being valued; or (ii) if
Buyer did not previously approve, in writing, the purchase of the fuel being
valued on a FIFO basis, at the lower of Seller's cost or the applicable OPIS
rack or the specific market platts-based price attributable to such fuel on the
day before the inventory is conducted. The resulting amount shall be the
"Inventory Amount." As used herein, "Salable Inventory" shall mean (i) all fuel,
and (ii) all nonfuel inventory and supplies (including but not limited to raw
materials, products, goods, purchased parts and work-in-process) which are
salable or usable in the ordinary course of business, in accordance with Buyer's
or Seller's standard business practices. In the event that Buyer and Seller are
unable to agree upon the Inventory Amount, and are unable to resolve any
disputes or disagreements with respect thereto within fifteen (15) days after
the Closing Date, the dispute shall be resolved by binding arbitration in
Denver, Colorado, before the Independent Accountants; provided, however, that
the amount determined by the Independent Accountants to be Salable Inventory
shall be no less than the amount asserted by Buyer and no more than the amount
asserted by Seller. The Independent Accountants shall conduct such arbitration
and perform their services as expeditiously as possible, in accordance with the
provisions of this Agreement. The fees and expenses of the Independent
Accountants shall be shared equally by Buyer and Seller. The Inventory Amount
shall be due and payable within ten (10) days after the earlier to occur of (i)
the mutual agreement by Buyer and Seller of the Inventory Amount; or (ii) the
delivery by the Independent Accountants of a determination of the Inventory
Amount.
3.3 Determination and Payment of Receivables Amount. If the
Receivables Amount, based upon the Final Closing Balance Sheet, is a positive
number, such amount shall be paid by Buyer to Seller, by bank wire transfer,
within ten (10) days after such final determination of the Receivables Amount.
If the Receivables Amount, based upon the Final Closing Balance Sheet, is a
negative number, such amount shall be paid by Seller to Buyer, by bank wire
transfer, within ten (10) days after such final determination of the Receivables
Amount.
3.4 Allocation of Purchase Price. The allocation of the Purchase
Price set forth in Schedule 3.4, attached hereto, shall be deemed to be the
allocation of the aggregate consideration among the Purchased Assets for
purposes of Section 1060 of the Internal Revenue Code of 1986, as amended. Buyer
and Seller agree to be bound by such allocation and to complete and attach
Internal Revenue Service Form 8594 to their respective tax returns accordingly.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Organization.
4.1.1 Organization and Power. Seller is a corporation duly
organized and validly existing under the laws of the State of Oregon. Seller has
full corporate power to: (a)
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own, lease and operate its assets and carry on its business as and where such
assets are now owned or leased and as such business is presently being
conducted; and (b) execute, deliver and perform this Agreement and all other
agreements and documents to be executed and delivered by it in connection
herewith.
4.1.2 Qualification. Schedule 4.1.2 lists the only states in
which Seller: (a) owns or leases real property; (b) maintains sales offices or
sales agents; or (c) maintains inventory. Seller is qualified to do business as
a foreign corporation in each of the states listed on Schedule 4.1.2 and in each
other jurisdiction where failure to qualify would give rise to any liability or
otherwise have an adverse effect on Seller.
4.2 Agreements.
4.2.1 Enforceability. All requisite corporate action, other
than an affirmative vote of Seller's Directors and shareholders, to approve,
execute, deliver and perform this Agreement and each other agreement and
document delivered by Seller in connection herewith has been taken by Seller.
This Agreement and each other agreement and document delivered by Seller in
connection herewith have been duly executed and delivered by Seller, and,
subject to an affirmative vote of Seller's Directors and shareholders,
constitute the binding obligations of Seller enforceable in accordance with
their respective terms.
4.2.2 Consents. Except for: (a) consents or approvals required
by H-S-R; (b) consents and approvals required for assignment of Assumed
Contracts; (c) consents required under the permits and licenses listed on
Schedule 4.4.1 to be assigned to Buyer; and (d) approval by Seller's Directors
and shareholders; no approval or consent of, or filing with, any Person or
Governmental Authority is required to be obtained or made by Seller in
connection with the transactions contemplated hereby or the execution, delivery
or performance by Seller of this Agreement or any other agreement or document
delivered by or on behalf of Seller, in connection herewith.
4.2.3 No Conflicts. No action taken by or on behalf of Seller
in connection herewith, including, but not limited to, the execution, delivery
and performance of this Agreement, and each other agreement and document
delivered by Seller at Closing, and the consummation of the transactions
contemplated hereby:
(a) conflicts with or violates:
(i) any Law;
(ii) Seller's Articles of Incorporation or Bylaws;
(iii) any Contract by which Seller is bound relating to the
Business (except to the extent the Contract is an
Assumed Contract and the consent of the other party is
required for the assignment of such Assumed Contract);
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(iv) any order, arbitration award, judgment, decree or other
similar restriction to which Seller is subject; or
(b) constitutes an event which, after notice or lapse of time or
both, could result in any of the foregoing.
4.3 Financial.
4.3.1 Financial Statements. Schedule 4.3.1 consists of.
(a) the balance sheet of Seller as at June 30, 1997, and June 30,
1998, and the related statements of operations, stockholders'
equity and cash flows for the twelve-month periods then ended,
audited by Deloitte & Touche LLP, certified public
accountants; and
(b) the unaudited balance sheet of Seller as at August 31, 1998
(the "Acquisition Balance Sheets"), and the related unaudited
statement of income and cash flows for the two-month period
then ended.
All such financial statements were prepared from Seller's books of account in
accordance with generally accepted accounting principles applied consistently
with Seller's past practice, are accurate and complete, and present fairly the
financial position, results of operations and cash flows of Seller at the dates
and for the periods indicated, except, with respect to the unaudited interim
financial statements described in (b) above, for the absence of footnote
disclosure and customary year-end audit adjustments of a normal recurring type
which would not be material in the aggregate. The books of account of Seller
accurately reflect all items of income and expense (including, but not limited
to, accruals) and all assets and liabilities of Seller in accordance with normal
accrual accounting practices, subject to customary year-end and audit
adjustments of a normal, recurring type which would not be material in the
aggregate.
4.3.2 Absence of Undisclosed Liabilities. Seller has no
Liabilities which could affect the Business except:
(a) to the extent provided for or reserved against on the
Acquisition Balance Sheets or the Financial Statements
comprising Schedule 4.3.1;
(b) current liabilities which have arisen in the ordinary course
of business consistent with past practice since the date of
the Acquisition Balance Sheets, all of which have been
recorded on Seller's books; and
(c) performance obligations under the terms of the Contracts
listed on Schedules 1.2(f), (i) and (j) attached hereto.
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Since August 31, 1998, there has not been any incurrence (whether discharged or
not) of any Liability by Seller other than current liabilities incurred, and
obligations entered into, in the ordinary course of business consistent with
past practice.
4.3.3. Absence of Changes. Since June 30, 1998, Seller's
operations relating to the Business have been operated only in the ordinary
course consistent with past practice. Without limiting the generality of the
foregoing, since that date, except as described on Schedule 4.3.3, there has not
been with respect to Seller's conduct of the Business, any:
(a) waiver, release, cancellation or compromise of any debts owed
to it or claims or rights against others exceeding $25,000 in
the aggregate;
(b) adverse change in existing credit arrangements with any bank
or other institution;
(c) act or omission by Seller out of the ordinary course of
business which had the effect of increasing the cash to be
retained by Seller at the Closing or the current payables, if
any, to be assumed by Buyer at the Closing, whether through
change in practice with respect to the timing of payment of
accounts payable, the timing of collection of accounts
receivable, the rate of purchase of inventory or otherwise;
(d) purchase or lease of (or commitment to purchase or lease) any
assets (other than inventory) in excess of $30,000
individually or $200,000 in the aggregate;
(e) (i) except in the ordinary course of business consistent with
past practice, creation, incurrence or assumption of any debt,
(ii) assumption, guarantee, endorsement or other act of
becoming liable or responsible for the obligation of any other
Person, or (iii) except in the ordinary course of business
consistent with past practice, making of any loans or advances
or capital contributions to, or investments in, any other
Person;
(f) new Contract entered into, except in the ordinary course of
business consistent with past practice, or then existing
Contract modified or terminated under circumstances which
might adversely affect the condition (financial or otherwise)
or prospects of the Business;
(g) sale or disposition of any assets other than inventory in the
ordinary course of business; or
(h) unusual or novel method of transacting business engaged in by
Seller or any change in Seller's accounting procedures or
practices or Seller's financial structure.
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4.3.4 Taxes. All Tax returns, reports and declarations
(collectively, "Tax Returns") required by any Governmental Authority to be filed
in connection with the properties, business, income, expenses, net worth or
franchises of Seller have been timely filed, except federal and state income tax
returns for Seller's fiscal year ended June 30, 1998, as to which Seller has
obtained a filing extension to March 15, 1999 and such Tax Returns were correct
and complete as of the date of filing, except to the extent of the Tax Refund
Claim. Seller has delivered to Buyer copies of its most recent Tax Returns. To
the Knowledge of Seller, all Taxes due in connection with the properties,
business, income, expenses, net worth and franchises of Seller have been
accounted for and paid, other than any Tax which is not yet due or which, if
due, is not yet delinquent, is being contested in good faith or has not been
finally determined, and for which in all cases reserves have been established on
the most recent unaudited interim balance sheet included in Schedule 4.3.1 which
are sufficient to cover the payment of all such Taxes. There are no Tax claims,
audits or proceedings pending in connection with the properties, business,
income, expenses, net worth or franchises of Seller and, to the Knowledge of
Seller, there are no such threatened claims, audits or proceedings. There are no
Tax Liabilities of Seller (or any Affiliate of Seller) which could result in
Liability to Buyer as a transferee or successor, or otherwise attach to the
Purchased Assets. Except as disclosed in this Section 4.3.4, Seller has not
requested or obtained any extension of the time in which to file any tax return
that has not been filed, or to pay any tax that has not been paid. Seller has
not executed or filed with the Internal Revenue Service or any other taxing
authority (whether domestic or foreign) any agreement or waiver extending the
period of assessment or collection of any taxes, nor are any of the foregoing
entities a party to any pending action or proceeding, nor to the Knowledge of
Seller is any action or proceeding threatened by an governmental authority for
assessment or collection of taxes. Except as set forth on Schedule 4.3.4, the
IRS has not audited the federal income tax return of Seller for any of the seven
(7) most recent fiscal years.
4.4 Legal.
4.4.1 Compliance with Laws. Seller has not been, in the past
five (5) years, or is not in violation of any outstanding arbitration award,
judgment, order or decree, or any Law relating or pertaining to the Business,
including, any antidiscrimination, wage, hour, working condition, payroll
withholding, pension, building, zoning or Tax Law (but excluding any
Environmental Law). Except as set forth on Schedule 4.4.1, Seller has received
no written notice alleging a violation of Law by Seller within the past three
years. Set forth on Schedule 4.4.1, is a list of all permits, licenses,
approvals or authorizations of any Governmental Authority currently used by
Seller or any Affiliate in the conduct of the Business. To the Knowledge of
Seller, all such permits, licenses, approvals and authorizations have been
legally obtained and maintained by Seller and are in full force and effect. No
proceeding is pending to revoke or limit any of them or otherwise impose any
conditions or obligations on the possession or transfer of any such permits,
licenses, approvals or authorizations. In the past three years, there have been
no claims, notices, orders or directives issued by any Governmental Authority
with respect to the Business or any of the assets used in connection with the
Business. To the Knowledge of Seller, Seller is not required to make any
expenditures to achieve or maintain compliance with any Law.
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4.4.2 Product Warranty. In connection with the conduct of the
Business there have been no material product or service warranty claims made by
customers of Seller in the past three years, and there are no product and/or
service warranties outstanding or currently being offered to customers of
Seller.
4.4.3 Product Liability. No product liability or other tort
claims have been made or, to the Knowledge of Seller, threatened against Seller
relating to products sold or services performed by Seller in connection with the
Business in the past five years. To the Knowledge of Seller, there are no
defects in the design or manufacture of products manufactured or sold by Seller
in connection with the Business or any failure by Seller to warn, test, inspect
or instruct of dangers which could form the basis for a product recall (whether
or not at the request of a Governmental Authority) or a cause of action for
product liability.
4.4.4 Litigation. Except as described on Schedule 4.4.1 or
4.4.4:
(a) no claim, litigation, investigation or proceeding against
Seller is pending or, to the Knowledge of Seller, threatened,
or has been concluded in the past three years pertaining to
the Business;
(b) to the Knowledge of Seller, there is no state of facts or
event which forms the basis for such a claim, litigation,
investigation or proceeding; and
(c) no arbitration award or judgment, order or decree of any
Governmental Authority is outstanding against Seller or its
assets, business or products.
4.4.5 Compliance with Title III of Americans with Disabilities
Act. To the Knowledge of Seller, except as set forth as Schedule 4.4.5, Seller's
conduct of the Business has complied with the applicable provisions of Title III
of the Americans with Disabilities Act, 42 U.S.C. ss. 12181, et seq, including,
but not limited to, the requirements of ss. `302 of the Americans with
Disabilities Act, 42 U.S.C. ss. 12182. With respect to the Business, there are
no pending or, to the Knowledge of Seller, threatened controversies or claims by
any person alleging violation of Title III of the Americans with Disabilities
Act, 42 U.S.C. ss. 12181, et. seq.
4.5 Business.
4.5.1 Employment. As of the date of this Agreement, Seller
uses no leased employees or employees of a staffing agency in relation to the
Business. Schedule 4.5.1(a) lists the names, current hourly or annual
compensation and bonus rates and other compensation arrangements of the
employees of each Seller who are engaged in the operation of the Business.
Seller has paid in full to all employees, or made appropriate accruals for on
its books of account, all wages, commissions, bonuses and other direct
compensation for all services performed by them. Seller has withheld or
collected from each payment made to each of its employees the amount of all
Taxes required to be withheld or collected therefrom, and Seller has paid the
same when due to the proper Governmental Authorities. Except as set forth in
Schedule 4.4.4, there are no pending controversies, grievances or claims by any
of the employees,
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former employees or beneficiaries of employees of Seller pending with respect to
their employment or benefits incident thereto, including, but not limited to,
sexual harassment and discrimination claims and claims arising under workers'
compensation laws (collectively, "Employee Claims"). Except as set forth on
Schedule 4.5.1(b), there have been no Employee Claims in the past three years.
Except for the contract with Teamsters Local No. 305 covering certain employees
at Troutdale, Wilsonville and Portland, there is no union representation of any
employees engaged in the conduct of the Business, and to the Knowledge of Seller
there has been no attempt by a labor organization to organize Seller's employees
engaged in the conduct of the Business into a collective bargaining unit within
the past three years, and to the Knowledge of Seller there is no imminent threat
of an attempt to organize such a union. To the Knowledge of Seller, except as
set forth on Schedule 4.5.1(c), no employee of Seller engaged in the conduct of
the Business has been convicted of any felony or drug related criminal offense.
Since June 30, 1998, there has not been any general increase made or promised in
the level or rate of salaries or compensation (including, but not limited to,
bonuses) of Seller's employees engaged in the conduct of the Business, or
increases made or promised in the salary or compensation (including, but not
limited to, bonuses) paid to or accrued for the benefit of any such employee,
director, representative or agent of Seller.
4.5.2 Worker Adjustment and Retraining Notification Act.
Schedule 4.5.2 indicates each place of business where Seller has employees
employed in the Business, and lists by each site comprising the Owned Real
Property each employee of Seller employed in the Business who incurred (i) an
employment termination, other than due to a discharge for cause or voluntary
departure; (ii) a layoff for any reason, or (iii) a reduction in hours of work
of more than fifty percent (50%), in each case during the ninety (90) days
preceding the date hereof, indicating next to the employee's name, the date of
each such occurrence(s). At no time during the ninety (90) days preceding the
Closing did Seller employ fewer than one thousand (1,000) employees. Schedule
4.5.2 and the number of employees set forth in the preceding sentence will be
updated as of the Closing to provide such information for the 90-day period
immediately prior to the Closing Date. Seller has taken no action (or failed to
take any action) prior to the Closing which could require delivery of any notice
under the Worker Adjustment and Retraining Notification Act.
4.5.3 Contracts. Schedule 4.5.3 contains a complete and
accurate list of all Material Contracts. Seller has delivered to Buyer accurate
and complete copies of each such written Material Contract, and an accurate and
complete written description of each such oral Material Contract, in each case
with all modifications and amendments thereto. Since June 30, 1998, there has
been no modification or termination of any Material Contract relating to the
Business under circumstances which might have an adverse effect on Buyer or any
Seller.
4.5.4 Compliance with Contracts. Seller is not in default
under or in violation of any Material Contract or Assumed Contract. No event has
occurred which, with notice or lapse of time or both, would constitute such a
default or violation of any Material Contract or Assumed Contract. To the
Knowledge of Seller, there is no default under or violation of any Material
Contract or Assumed Contract by any other party thereto.
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4.5.5 Suppliers and Customers. Except as set forth on Schedule
4.4.5, no supplier or customer which, to the Knowledge of Seller, accounted for
more than 5% of Seller's sales or purchases in any one of the past three fiscal
years in connection with the Business, has terminated or, to the Knowledge of
Seller, threatened to terminate its relationship with Seller, nor has it during
the past year decreased or delayed materially, or threatened to decrease or
delay materially, its services or supplies to such Seller or its usage of such
Seller's services or products. To the Knowledge of Seller, the transactions
contemplated by this Agreement will not adversely affect the business
relationship heretofore maintained by any Seller with any such supplier or
customer. Seller is not required, in the ordinary course of business, to provide
any bonding or any other financial security arrangements in connection with any
transactions with any customers or suppliers relating to the Business, except in
connection with Seller's contract with ARCO listed on Schedule 1.2(f).
4.5.6 Purchases and Sales. Since June 30, 1998, except as
disclosed on Schedule 4.3.3, Seller has not made purchase commitments in excess
of the normal requirements of the Business.
4.5.7 Prepayments and Deposits. Except as set forth on
Schedule 4.5.7, Seller has not received any prepayments or deposits from
customers for products to be shipped, or services to be performed, in the future
relating to the Business.
4.5.8 Capital Projects. Schedule 4.5.8 contains a description
of all capital construction projects or series of related projects committed for
or authorized by Seller relating to the Business involving the expenditure of
$25,000 or more per project (or in the aggregate with respect to a series of
related projects).
4.6 Employee Benefits. All Plans are set forth on Schedule 4.6(a),
and complete and correct copies of all written Plans, and summary plan
descriptions thereof, if any and summaries of all oral Plans have been delivered
to Buyer. None of the Plans is a multiemployer plan (as defined in ERISA). All
the Plans are (and for all prior periods have been) Tax qualified and no
reportable event (within the meaning of Section 4043 of ERISA) has occurred with
respect thereto. All of the Plans have been operated in compliance with their
respective terms and all Laws, and all contributions required by Law or Contract
to any such Plan have been made. Except as set forth on Schedule 4.6(b), none of
the Plans provide benefits to Persons who are not employees, or their families,
of a Seller. To the Knowledge of Seller, Seller has no liability of any nature
(whether known or unknown, and whether absolute, accrued, contingent or
otherwise) with respect to any Employee Benefit Plan (including, without
limitation, any prior plans and any plans maintained by any predecessor,
affiliated or related entities), other than for payments or benefits due in the
ordinary course under the Plans, none of which are overdue. Except as set forth
on Schedule 4.6(c), no Seller maintains any Plan under which it would be
obligated to pay benefits because of the consummation of the transactions
contemplated by this Agreement.
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4.7 Assets.
4.7.1 Title. As of the Closing, all of the Purchased Assets
will be owned by Seller free and clear of all Liens, except for Permitted
Encumbrances. Except for the BFR Assets, the Enterprises Asset and assets leased
under Contracts listed on Schedule 1.2(f) or retained by Seller pursuant to
Section 1.3, and except for those permits and licenses which are not assigned or
assignable to Buyer, and are listed on Schedule 4.7.1, the Purchased Assets
include all assets located at the Owned Real Property or used by Seller in
connection with the Business. All of the Assumed Contracts are valid, in full
force and effect and enforceable in accordance with their terms by Seller.
4.7.2 [Intentionally Omitted]
4.7.3 Inventories. All inventories of Seller relating to the
Business can be used, consumed or sold in the usual and ordinary course of
business as now conducted (except obsolete, damaged or otherwise unsalable
inventory) and are not in amounts in excess of normal requirements. Except as
disclosed on Schedule 4.3.3, since June 30, 1998, there has been no change in
the amount of Seller's inventory relating to the Business, except for changes as
a result of the purchase and sale of (or adjustment to) inventory in the
ordinary course of business consistent with past practice.
4.7.4 Environmental Matters. To the Knowledge of Seller,
except as disclosed in Schedule 4.7.4, each Seller is in full compliance with
all Environmental Laws, any similar state laws and any regulations promulgated
pursuant thereto, and the terms and conditions of all certificates, approvals
and permits required thereunder. Except as disclosed in the Environmental
Reports and except as set forth on Schedule 4.7.4, Seller has not received any
communications, whether from a Governmental Authority, citizens' group, employee
or other individual or entity, that alleges that Seller is not in compliance
with any Environmental Law, and to the Knowledge of Seller there are no existing
circumstances that may prevent or interfere with such full compliance in the
future.
(a) Except as described on Schedule 4.7.4, to the Knowledge of
Seller: (i) no underground storage tanks are located on or currently owned,
occupied or used by Seller, (ii) during the last ten (10) years, there has been
no Disposal or Release of any Hazardous Substances in excess of any reportable
quantity under any applicable Law at or from the Owned Real Property; (iii)
during the last ten (10) years, there has been no Release of any Hazardous
Substances at any or from any properties adjacent to the Owned Real Property;
(iv) there has been no generation, Treatment, Transport, Storage or Disposal of
any Hazardous Substances by Seller at or from the Owned Real Property, now or
during the last ten (10) years, in violation of any Environmental Laws; (v)
during the last ten (10) years, there has been no Treatment, Storage or Disposal
or arrangement for Disposal of Hazardous Substances by Seller on any property
not owned, operated or leased by Seller except in full compliance with
applicable Environmental Laws; (vi) Seller has not, during the last ten (10)
years, sent a Hazardous Substance to a site that, pursuant to any Environmental
Law (1) has been placed or proposed for placement on the National Priorities
List or any similar state list, or (2) is subject to or the
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source of an order, demand or request from a Governmental Authority to take
"response," "corrective," "removal," or "remedial" action, as defined in any
Environmental Law, or to pay for the costs of any such action at the site;
(b) To the Knowledge of Seller, Seller has timely filed all reports
required to be filed, and has generated and maintained all data, documentation
and records required under, all Environmental Laws in connection with the
Business. To the Knowledge of Seller, Seller has (or had at all appropriate
times) timely obtained all certificates, approvals, authorizations,
registrations and permits required under all Environmental Laws in connection
with the Business (all of which certificates, approvals, authorizations,
registrations and permits are listed on Schedule 4.7.4 and are in full force and
effect, and copies of which have been furnished to Buyer).
(c) To the Knowledge of Seller, Schedule 4.7.4 also contains an
accurate and complete list of all environmental reports, audits and assessments
prepared for Seller or in Seller's possession with respect to the Business in
the past ten (10) years.
(d) Except as set forth on Schedule 4.7.4, the Owned Real Property
and the conduct of the Business are in compliance with the federal standards
promulgated by U.S. EPA at 53 Fed. Reg. 37082 (Sept.23, 1988), including but not
limited to the performance standards and upgrading requirements set forth is 40
CFR. Part 280 et seq.
4.7.5 Condition. To the Knowledge of Seller, all of the
tangible assets used by Seller in the conduct of the Business are in good
operating condition, normal wear and tear excepted, and are capable of being
used for their intended purpose in the ordinary course of business consistent
with past practice.
4.7.6 Intellectual Property. Schedule 4.7.6 lists Intellectual
Property Rights relating to the Business owned by Seller or in which (as noted
on such Schedule) Seller has any interests, rights or licenses. To the Knowledge
of Seller, there has not been any infringement or alleged infringement by others
of any such Intellectual Property Rights. Except as set forth on Schedule 4.7.6,
Seller is not a party to any Contract, whether as licensor, licensee,
franchisor, franchisee, dealer, distributor or otherwise, with respect to any
Intellectual Property Rights or Trade Secret used in connection with the
Business. Seller has the unrestricted right to sell or assign to Buyer all such
owned Intellectual Property Rights and all such licenses or other rights. The
Intellectual Property Rights constitute all of the intellectual property rights
used by Seller in the conduct of the Business, and such Intellectual Property
Rights are valid and in full force and effect. There have been no interference
actions or other judicial, arbitration or other adversary proceedings to which
Seller is or was a party concerning such Intellectual Property Rights. The
manufacture, use, performance or sale of products or services incorporating or
used in connection with such Intellectual Property Rights does not violate or
infringe on any Intellectual Property Right or other right of any Person, and
Seller has not otherwise infringed any Intellectual Property Right, Trade Secret
or other right of any Person in its conduct of the Business. Seller has the
exclusive right to use and the unrestricted right to transfer to Buyer all of
Seller's Trade Secrets relating to the Business, and to the Knowledge of Seller,
none of the Trade Secrets of
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Seller used in connection with the Business have been used, divulged, or
appropriated for the benefit of any past or present employee of Seller or other
Person, or to the detriment of Seller. Seller has not disposed of or permitted
to lapse, or otherwise failed to preserve Seller's right to use any Intellectual
Property Rights described or referred to in this Section 4.7.6.
4.7.7 Extent. Schedule 4.7.7 lists all of the material
tangible assets leased by any Seller with respect to the Business. Except for
the assets listed in Section 1.3, included in the Purchased Assets are all of
those assets which are being used to operate the Business of each Seller as
presently conducted. The Purchased Assets include all assets reflected on the
Acquisition Balance Sheets and all assets acquired by any Seller after the date
of the Acquisition Balance Sheets relating to the Business, except those assets
which:
(a) have been disposed of prior to the Closing in the
ordinary course of business consistent with past
practice;
(b) have been disposed of with the prior written consent of
Buyer; or
(c) are described in Section 1.3.
Since June 30, 1998, there has not been any damage to or disposition (except for
the sale of inventory in the ordinary course of business consistent with past
practice) or loss of (whether or not covered by insurance) any asset of any
Seller which is used in connection with the Business. Over the period covered by
the financial statements included in Schedule 4.3.1, no aspect of, or adjunct
to, the Business was conducted by any Affiliate of any Seller or any Affiliate
of any shareholder or former shareholder of any Seller, other than business
conducted by Enterprises.
4.8 Real Property.
4.8.1 Legal Descriptions. The Owned Real Property is set forth
on Schedule 4.8.1.
4.8.2 As of the Closing, Seller will have good and clear
record and marketable title to the Owned Real Property, free from all easements,
rights of way, tenancies, claims, liens, security interests, encumbrances and
defects of any kind, except for Permitted Encumbrances. All real estate taxes,
assessments, water and sewer charges and other municipal charges or impact fees,
to the extent due and owing, have been paid in full.
4.8.3 To the Knowledge of Seller, the Owned Real Property is
presently zoned to permit the operation of a full service truckstop or travel
center. To the Knowledge of Seller, said zoning is pursuant to statute or
ordinance, not pursuant to any variance or conditional permit granted with
respect to the Owned Real Property, and does not require any further approval or
any other action by Seller to permit it to be operated as a truckstop or travel
center.
4.8.4 To the Knowledge of Seller, all applicable permits,
declarations, and other evidences of compliance from regulatory authorities
required to be maintained for the
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Owned Real Property and for the operation and use of the Owned Real Property,
including, without limitation, those regulating the division of real property
and environmental matters, and fire prevention/sprinkler systems and equipment,
and the health, safety and welfare of patrons and employees of Seller's business
have been obtained and are maintained in current compliance with applicable Law.
All warranties (which have not by their terms expired) in favor of Seller from
contractors having constructed said improvements will be assigned and conveyed
to Buyer on Closing without encumbrance, to the extent enforceable by the terms
of such warranties.
4.8.5 To the Knowledge of Seller, except as disclosed on
Schedule 4.4.5, the Owned Real Property, and the use, operation, maintenance and
management thereof, are not in violation of any restrictive covenant, agreement
or permit applicable thereto, or of any building code, ordinance, statute,
regulation or requirement of any governmental authority having jurisdiction
thereto, specifically including (without limitation to) the Americans with
Disabilities Act, 42 U.S.C. ss. 12181, et seq., and no Seller has received any
notices regarding any such violation.
4.8.6 To the Knowledge of Seller, no Owned Real Property is
located in any conservation, historic or other special designation district.
4.8.7 Except as set forth on Schedule 4.8.11, to the Knowledge
of Seller, Seller has not been notified of possible future improvements by any
public authority, any part of the cost of which would or might be assessed
against the Owned Real Property, or of any contemplated future assessments of
any kind.
4.8.8 All utility services currently used by Seller for the
operation of the Owned Real Property as a full service truckstop or
travelcenter, including water supply, propane gas or natural gas, electric and
telephone facilities are available and adequate to the Owned Real Property as
currently used by Seller.
4.8.9 As of the date the deed is filed for record, the Owned
Real Property shall be free from mechanic's liens for labor and materials
furnished or, except for those ongoing projects described on Schedule 4.5.8, the
possibility of the rightful filing thereof, other than as caused by Buyer. If
any material or labor has been furnished to the Owned Real Property within the
one hundred twenty (120) day period immediately preceding the date the deed is
filed for record, Seller, upon Buyer's request, shall furnish evidence
satisfactory to Buyer that Seller has made payment in full for all such material
and labor, that payment is not yet due or that Seller is contesting such charges
in good faith and that Buyer's interest will not be jeopardized by such contest.
4.8.10 All federal, state and local tax returns (including tax
returns concerning "gross receipts") required to be filed with respect to the
Owned Real Property have been timely, duly and accurately completed and filed.
All federal, state and local taxes arising in connection with the ownership and
operation of the Owned Real Property which have become due and payable have been
paid in full, and no audit proceedings are currently pending with respect to the
Owned Real Property.
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4.8.11 Except as disclosed on Schedule 4.8.11, Seller has not
received written notice of taking, condemnation, betterment or assessment,
actual or proposed, with respect to the Owned Real Property.
4.8.12 Except as disclosed on Schedules 1.2(f) (i) and (j), no
Owned Real Property is subject to any options, purchase or sale contracts,
leases or rights of occupancy or other agreements, and from the date hereof
until the Closing Date, Seller will not do, commit or suffer to be done any act
or thing, or enter into any agreement other than with Buyer, which could
adversely affect Seller's present title to the Owned Real Property.
4.9 Miscellaneous.
4.9.1 Conflicts of Interest. Except as described on Schedule
4.9.1, no shareholder, director or employee of any Seller nor any relative of
any shareholder, director or employee of any Seller nor Affiliate of any of the
foregoing:
(a) owns, directly or indirectly, any interest in any
tangible or intangible property, asset or right which
any Seller uses in the Business; or
(b) is a party to any Contract with Seller relating to the
Business.
4.9.2 No Brokers. No broker, finder or other Person acting in
a similar capacity on behalf of Seller has rendered any services in connection
with the transactions contemplated hereby, and no such broker, finder or other
Person shall be entitled to a commission or other compensation in connection
with or as a result of the transactions contemplated hereby.
4.9.3 Full Disclosure. No representation or warranty by Seller
in this Agreement and no statement contained in any Schedule to this Agreement
contains any untrue statement of a material fact.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization and Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has full corporate power to execute, deliver and perform this Agreement
and all other agreements and documents to be executed and delivered by it in
connection herewith.
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5.2 Agreements.
5.2.1 Enforceability. All requisite corporate action to
approve, execute, deliver and perform this Agreement and each other agreement
and document delivered by Buyer in connection herewith has been taken by Buyer.
This Agreement and each other agreement and document delivered by Buyer in
connection herewith have been duly executed and delivered by Buyer and
constitute the binding obligations of Buyer enforceable in accordance with their
respective terms.
5.2.2 Consents. Except for consents or approvals required by
H-S-R, no approval or consent of, or filing with, any Person or Governmental
Authority is required to be obtained or made by Buyer in connection with the
transactions contemplated hereby or the execution, delivery or performance by
Buyer of this Agreement or any other agreement or document delivered by or on
behalf of Buyer in connection herewith.
5.2.3 No Conflicts. No action taken by or on behalf of Buyer
in connection herewith, including, but not limited to, the execution, delivery
and performance of this Agreement, and each other agreement and document
delivered by it in connection herewith, conflicts with or violates:
(a) any Law;
(b) Buyer's Articles or Certificate of Incorporation or By-laws;
(c) any Contract to which it is a party or by which it is bound;
or
(d) any order, arbitration award, judgment, decree or other
similar restriction to which Buyer is subject;
or constitutes an event which, after notice or lapse of time or both, could
result in any of the foregoing.
5.2.4 Litigation. No litigation is pending, or to the
Knowledge of Buyer threatened, against Buyer which could prevent Buyer from
entering into, or performing its obligations under, this Agreement.
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ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligation of Buyer to
perform this Agreement is subject to satisfaction of the following conditions at
or before the Closing, it being an explicit condition that all agreements and
documents to be delivered to Buyer at Closing which are not attached as Exhibits
(and therefore deemed satisfactory to Buyer) must be in form and substance
satisfactory to Buyer:
6.1.1 Agreements Performed. Seller shall have performed all of
the obligations under this Agreement to be performed by it at or before the
Closing;
6.1.2 Representations Accurate. The representations and
warranties of Seller contained herein shall continue to be accurate in all
material respects as if made as of the Closing;
6.1.3 Seller's Certificate. Buyer shall have received a
certificate signed by an appropriate officer of Seller, certifying as to the
matters set forth in Sections 6. 1.1 and 6.1.2 above;
6.1.4 Opinion. Buyer shall have received the legal opinion of
counsel to Seller satisfactory to Buyer as to its assumptions and exceptions, to
the effect that:
(a) Seller is a corporation duly organized and validly existing
under the laws of the State of Oregon. Seller is duly
qualified to do business and is in good standing as a foreign
corporation in the states listed next to its name on Schedule
4.1.2 and in each other jurisdiction where failure to qualify
could have a material adverse effect on such Seller;
(b) Seller has the corporate power and authority to (i) own its
property and carry on the Business as presently conducted,
(ii) sell the Purchased Assets to Buyer, and (iii) execute,
deliver and perform this Agreement and each other agreement
and document executed and delivered by Seller at Closing;
(c) This Agreement and each other agreement and document executed
and delivered by Seller at Closing have been duly authorized
by all necessary corporate action on the part of Seller and
have been duly executed and delivered by Seller and are the
legal, valid and binding obligations of Seller enforceable
(subject to the effect of bankruptcy and other laws affecting
the rights of creditors generally) in accordance with their
respective terms;
(d) The execution, delivery and performance of this Agreement and
each other agreement or document executed and delivered by
Seller at Closing, do not
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(i) conflict with any of the provisions of Seller's Articles
of Incorporation or By-Laws, (ii) to such counsel's knowledge,
violate any order, arbitration award, judgment, decree or
similar restriction to which such Seller is subject, or breach
or constitute a default under, or grounds for the acceleration
of, any obligation of such Seller under any material agreement
by which such Seller is bound, or result in the creation or
imposition of any Lien against any of the Purchased Assets,
(iii) require the consent or approval of, or other action by
or filing with, any Person or Governmental Authority, or (iv)
violate any Law applicable to Seller;
(e) The instruments of transfer delivered to Buyer pursuant to
Subsection 6.1.13 with respect to the Purchased Assets other
than the Owned Real Property are in form sufficient to
transfer to Buyer, and upon due execution and delivery will
effectively vest in Buyer, all right, title and interest of
each Seller in and to such Purchased Assets (for those
Purchased Assets located in a state other than Oregon, counsel
may assume that the laws of such state are consistent with the
laws of the State of Oregon); and
(f) To such counsel's knowledge, except as listed on Schedule
4.4.1 or 4.4.4, no claim, litigation, investigation or
proceeding is pending or threatened against Seller or has been
concluded by Seller in the past three years and no arbitration
award, judgment, order, decree or similar restriction is
outstanding against Seller or its assets, business or
products;
6.1.5 Good Standing. Buyer shall have received a certificate
of Seller's existence dated no more than ten (10) days prior to the Closing Date
from the State of Oregon and, where applicable, good standing certificates [and
state tax clearance certificates] dated no more than 10 days prior to the
Closing Date from Seller's state of incorporation and from each other state in
which Seller is qualified to do business as a foreign corporation;
6.1.6 No Change. There shall have been no material adverse
change in the financial condition, results of operations, assets, business or
prospects of Seller between June 30, 1998, and the Closing Date, including,
without limitation, any material change in the values of or the relationships
between and among the accounts receivable, inventories or trade payables of
Seller from the respective values of such assets reflected on the Acquisition
Balance Sheets or any material change in the existence or condition of any of
the Listed Assets or Owned Real Property;
6.1.7 Legal Action. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks to
or could reasonably be expected to prevent, delay or impose conditions on the
consummation of the transactions contemplated by this Agreement;
6.1.8 Due Diligence Review. Buyer shall have completed its due
diligence review of Seller and the Business, the results of which shall be
satisfactory to Buyer
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including but not limited to confirmation by Buyer of the accuracy of Seller's
historical financial statements described in Section 4.3.1;
6.1.9 Consents. Except for video poker and other
jurisdictional gaming approvals and licenses required by the State of Oregon,
and except for liquor, beer and wine licenses, Buyer shall have received all
consents, approvals, permits, licenses and registrations of all Persons and
Governmental Authorities necessary for Buyer to execute, deliver and perform
this Agreement and for Buyer to operate the Business of Seller as heretofore
conducted or Buyer shall have entered into a lease with Seller whereby Seller
shall continue such operations for the benefit of Buyer pursuant to Section
6.1.22;
6.1.10 Environmental Review. Buyer shall have received a Phase
I environmental site assessment and compliance review pertaining to each site or
parcel comprising the Owned Real Property, and such Phase II environmental site
assessments as Buyer determines are necessary or appropriate as a result of
Phase I reports (collectively, the "Environmental Reports"), in each case the
results of which shall be in form and substance satisfactory to Buyer. Buyer and
Seller shall make adjustments to the Closing Amount as anticipated by Section
3.1 based on the results of the Environmental Reports, except to the extent the
matters or conditions disclosed therein are disclosed in the October 16, 1997
letter to U.S. Bank attached hereto as Schedule 6.1.10;
6.1.11 Deeds. Seller shall have delivered to the Title Company
general warranty deeds, in form and substance satisfactory to Buyer, executed in
recordable form and warranting fee simple to the Owned Real Property in Buyer,
free of all Liens except Permitted Encumbrances;
6.1.12 Lien Terminations. Buyer shall have received
terminations of any and all security interests in, and releases of any and all
Liens other than Permitted Encumbrances on, the Purchased Assets, including but
not limited to, UCC Termination Statements from the secured creditors of Seller;
6.1.13 Transfer Instruments. Buyer shall have received general
bills of sale and assignment in form and substance satisfactory to it and signed
by Seller, and such certificates of title (including, but not limited to, those
for motor vehicles), endorsements, assignments in recordable form (including,
but not limited to, those relating to Seller's Intellectual Property Rights),
affidavits, and other instruments of transfer as shall be required to enable
Buyer to acquire the Purchased Assets free and clear of any Liens except
Permitted Encumbrances;
6.1.14 Title Insurance. Buyer shall have received a pro forma
title insurance commitment, dated as of the Closing Date and signed at the
Closing by an authorized agent of the Title Company, to issue owner's policies
of title insurance pertaining to the Owned Real Property. Each such title policy
to be issued pursuant to such commitment, shall be in ALTA Form 1970-B (rev.
10-17-70) with extended coverage and without any standard Schedule B
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exceptions, and with such endorsements as Buyer or its lender may require, and
in amounts acceptable to Buyer, and shall insure in Buyer good title to the
Owned Real Property on Closing;
6.1.15 Survey. Buyer shall have received a land title survey
of each Owned Real Property, prepared in accordance with the ALTA/ACSM Minimum
Detail Requirements adopted in 1997 (including Table A, items 1,2, 3, 4, 5, 6,
7(a) and 7(b), 8, 9, 10, 11 and 15), and otherwise acceptable to Buyer. The
surveys shall certify the acreage of each parcel, provide flood zone
certification and identify and depict the portion(s) of any parcel that are, in
any way, dedicated highways, rights-of-way or streets. The surveys shall depict
all gaps, gores, overlaps, easements, encroachments, and the survey related
exceptions reflected on the title commitments to be prepared for each Owned Real
Property. The face of each survey shall note all exceptions from the
corresponding title commitment as are reflected in the survey, shall include the
surveyor's metes and bounds description of the property, and shall be certified
to Seller, Buyer, Buyer's lender and the Title Company;
6.1.16 Certified Resolutions. Buyer shall have received copies
of the resolutions duly adopted by the Board of Directors and shareholders of
Seller authorizing the execution, delivery and performance of this Agreement and
the other agreements, instruments and documents contemplated hereby, duly
certified by the Secretary or Assistant Secretary of such Seller, which
resolutions shall be in full force and effect on the Closing Date;
6.1.17. Leases. Buyer shall have received an assignment, in
form and substance acceptable to Buyer, of Seller's right, title and interest
under any existing leases for any real property used in connection with the
Business except for the corporate headquarters located in Portland, Oregon and
the property located in Ellensburg, Washington;
6.1.18 Wilsonville, Oregon. Seller shall have ceased all
operations at Seller's Wilsonville, Oregon, facility, and shall have filed and
recorded in the appropriate recorder's office, a restriction pertaining to the
Wilsonville, Oregon, facility, in form and substance reasonably satisfactory to
Buyer, which prohibits the future operation of a truckstop, travel center, truck
facility or repair business, or any similar business on such property, but
permits the operation of an automobile service and fueling station (excluding
service to Class Eight vehicles) selling gasoline and diesel and the operation
of a convenience store;
6.1.19 Consulting Agreement. Buyer and Bruce E. Burns shall
have entered into an agreement, in form and substance satisfactory to Buyer and
Mr. Burns, pursuant to which Mr. Burns agrees that any conduct or activity by
him relating to the truckstop business, during the one-year period following the
Closing Date, shall be exclusively as a consultant to Buyer;
6.1.20. Permits and Licenses. Seller shall have assigned to
Buyer such permits and licenses, to the extent assignable under Law, including
but not limited to beer, wine and liquor permits, as Buyer elects to include in
the Purchased Assets;
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6.1.21 Ongoing Projects. Seller shall have completed in
accordance with existing plans and to Buyer's satisfaction, the capital
improvements currently being made to the Boise, Idaho, Parowan, Utah, and
Barstow, California, facilities;
6.1.22 Gaming Lease. Buyer and Seller shall have entered into
a lease for the lounge and video poker facility at the Troutdale, Oregon
facility, in form and substance satisfactory to Buyer, pursuant to which Seller
shall lease the lounge and video poker facility from Buyer, and pursuant to
which Buyer is required to purchase the lounge and video poker facility within
six (6) months after Buyer has obtained all necessary permits and lottery
contract to operate the lounge and video poker facility;
6.1.23 Certain Schedules. The Schedules set forth below, which
shall be delivered by Seller after execution hereof, and any Schedule which is
modified, changed or amended after the date hereof by Seller, shall be in a form
acceptable to Buyer: Schedules 1.2(b-i), 1.2(n), 1.2(o), 1.3(e), 2.1(b),
2.2.1(a), 2.2.1(b), 4.3.1, 4.3.3, 4.3.4, 4.4.5, 4.5.1(c), 4.5.3, 4.5.5, 4.5.8,
4.6(b), 4.6(c), 4.7.1, 4.7.6, 4.7.7, 4.8.1, 4.9.1 and 6.1.10;
6.1.24 Receipt of Occupancy Certificate. Buyer shall have
received from Seller a copy of Seller's current and valid occupancy certificate
with respect to each parcel of Owned Real Property;
6.1.25 Tank Compliance. Seller shall have provided to Buyer
evidence, reasonably satisfactory to Buyer and its lenders, verifying that the
Owned Real Property and the conduct of the Business are in compliance with the
federal standards promulgated by U.S. EPA at 53 Fed. Reg. 37082 (Sept.23, 1988),
including but not limited to the performance standards and upgrading
requirements set forth is 40 CFR. Part 280 et seq.;
6.1.26 Director Approval. This Agreement shall have been
approved by Buyer's Board of Directors; and
6.1.27 Other. Buyer shall have received each other document
required to be delivered to Buyer hereunder.
6.2 Conditions to Seller's Obligation. The obligation of Seller to
perform this Agreement is subject to satisfaction of the following conditions at
or before the Closing, it being an explicit condition that all agreements and
documents to be delivered to Seller at Closing which are not attached as
Exhibits (and therefore deemed satisfactory to Seller) must be in form and
substance satisfactory to Seller:
6.2.1 Agreements Performed. Buyer shall have performed all of
the obligations under this Agreement to be performed by it at or before the
Closing;
6.2.2 Representations Accurate. The representations and
warranties of Buyer contained herein shall continue to be accurate in all
material respects just as if made as of the Closing;
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6.2.3 Buyer Certificate. Seller shall have received a
certificate, signed by an appropriate officer of Buyer certifying as to the
matters set forth in Sections 6.2.1 and 6.2.2 above;
6.2.4 Legal Action. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks to
or could reasonably be expected to prevent, delay or impose conditions on the
consummation of the transactions contemplated by this Agreement;
6.2.5 Certified Resolutions. Seller shall have received copies
of the resolutions duly adopted by the Board of Directors of Buyer authorizing
the execution, delivery and performance of this Agreement and the other
agreements, instruments and documents contemplated hereby, duly certified by the
Secretary or Assistant Secretary of Buyer all of which resolutions shall be in
full force and effect on the Closing Date;
6.2.6 Wire Transfer. Seller shall have received immediately
available funds by wire transfer in an amount equal to the Closing Amount;
6.2.7 Opinion. Seller shall have received the legal opinion of
Buyer's counsel, dated as of the Closing Date, satisfactory to Seller as to its
assumptions and exceptions, to the effect that:
(a) Buyer is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware;
(b) Buyer has the corporate power and authority to purchase the
Purchased Assets from Seller, and to execute, deliver and
perform this Agreement and each other agreement and document
executed and delivered by Buyer at Closing;
(c) This Agreement and each other agreement and document executed
and delivered by Buyer at Closing have been duly authorized by
all necessary corporate action on the part of Buyer, have been
duly executed and delivered by Buyer and are the legal, valid
and binding obligations of Buyer, enforceable (subject to the
effect of bankruptcy and other laws affecting the rights of
creditors generally) in accordance with their respective
terms;
(d) The execution, delivery and performance of this Agreement and
each other agreement and document executed and delivered by
Buyer at Closing, do not (i) conflict with any of the
provisions of its Articles or Certificate of Incorporation or
By-laws, or (ii) to such counsel's knowledge, violate any
order, arbitration award, judgment, decree or similar
restriction to which it is subject or breach or constitute a
default under or grounds for the
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acceleration of any of their material obligations under any
material agreement by which either of them is bound, (iii)
require the consent or approval of, or other action by or
filing with, any Person or Governmental Authority; or (iv)
violate any law applicable to Buyer;
6.2.8 Assumption of Contracts. Buyer shall have executed and
delivered an instrument, in form and substance satisfactory to Seller, whereby
Buyer assumes the obligations of Seller coming due under the Assumed Contracts
on and after the Closing Date;
6.2.9 Shareholder Approval. This Agreement shall have been
approved by Seller's Board of Directors and shareholders at a meeting called for
that purpose; and
6.2.10 Other. Seller shall have received each other document
required to be delivered to it hereunder.
6.3 Mutual Conditions. The obligation of Seller and Buyer to perform
this Agreement is subject to the satisfaction of the following mutual conditions
at or before the Closing:
6.3.1 Hart-Scott-Rodino Filing; Liens. All applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("H-S-R")
shall have expired without additional inquiry (or early termination of the
waiting period shall have been granted), and all governmental approvals and
third-party consents required for transfer of the Purchased Assets to Buyer (not
including transfer or issuance of liquor, beer or wine licenses or video poker
or other jurisdictional gaming licenses issued by the State of Oregon) and
releases of Liens on the Purchased Assets shall have been obtained.
6.3.2 Name Use. Buyer and Seller shall have entered into a
mutually acceptable agreement, pursuant to which Seller shall permit Buyer to
use the name "Burns Bros." in connection with the operation of Buyer's primary
business on or at the Owned Real Property, for a period of five (5) years after
the Closing;
6.3.3 Gaming Operations. Buyer and Enterprises shall have
entered into a mutually acceptable agreement relating to the continued conduct
of gaming operations at the Mill City and Rye Patch, Nevada facilities (the
"Gaming Agreement"), and the Nevada Gaming Commission and the Nevada Gaming
Control Board shall have approved the Gaming Agreement, if required;
6.3.4 Services Agreement. Buyer and Seller shall have entered
into a mutually acceptable Services Agreement, in form and substance acceptable
to Buyer and Seller, providing for Seller to render to Buyer certain clerical
and administrative services following the Closing;
6.3.5 Termination Agreement. Buyer and Seller shall have
entered into mutually acceptable agreements terminating the shop leases
pertaining to the Coachella and
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Corning, California facilities and the existing joint venture between Buyer and
Seller ("TABB"), and providing for the reconciliation of the accounts of each of
Buyer and Seller with TABB and the satisfaction of all outstanding obligations
of the parties to each other under such joint venture.
6.3.6 BFR Asset Purchase Agreement. The parties shall have
executed and all conditions precedent to the closing of the BFR Asset Purchase
Agreement shall have occurred, and the parties thereto shall have indicated in
writing that they are prepared to close the BFR Asset Purchase Agreement on the
Closing Date.
6.3.7 Enterprises Asset Purchase Agreement. The parties shall
have executed and all conditions precedent to the closing of the Enterprises
Asset Purchase Agreement shall have occurred, and the parties thereto shall have
indicated in writing that they are prepared to close the Enterprises Asset
Purchase Agreement on the Closing Date.
6.3.8 Permitted Encumbrances. Buyer and Seller shall have
agreed upon Permitted Encumbrances in the manner set forth in this Section
6.3.8. Promptly upon execution and delivery of this Agreement, Buyer shall order
from the Title Company, and shall review, preliminary title reports or
preliminary commitments for the policies of title insurance described in Section
6.1.14 and shall order and review the land title surveys described in Section
6.1.15. Within fourteen (14) days after Buyer has received all preliminary title
reports or commitments and surveys, Buyer shall give Seller written notice of
any objection to title disclosed by the reports, commitments and surveys. Within
fourteen (14) days after receipt of Buyer's notice, Seller shall notify Buyer of
those objections which Seller agrees to cause to be removed or otherwise cured.
In the event Seller agrees to cause to be removed or otherwise cured less than
all of the conditions of title specified in Buyer's notice of objections, Buyer
shall determine whether or not to accept title subject to the uncured
objections, and shall so notify Seller in writing within five (5) days after the
receipt of Seller's notice. In the event Buyer notifies Seller that Buyer elects
not to accept title subject to all or some of the uncured objections, Buyer and
Seller shall negotiate in good faith concerning the uncured objections. All
conditions of title disclosed by the preliminary title reports or commitments
and the surveys and not objected to by Buyer, all uncured objections which Buyer
subsequently accepts in writing, and all Assumed Contracts, shall constitute
"Permitted Encumbrances." Notwithstanding anything in this Agreement to the
contrary, Seller shall cause to be removed at Closing all mortgages, trust deeds
and security interests.
6.3.9 Subway Asset Purchase Agreement. The parties shall have
executed and all conditions precedent to the closing of the Subway Asset
Purchase Agreement shall have occurred, and the parties thereto shall have
indicated in writing that they are prepared to close the Subway Asset Purchase
Agreement on the Closing Date.
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ARTICLE VII
CLOSING
If the conditions to the parties' obligations enumerated in Article
VI are satisfied, consummation of the transactions contemplated hereby (the
"Closing") shall take place on November 30, 1998, at the offices of Lane Powell
Spears Lubersky LLP, 800 Pacific Building, 520 S.W. Yamhill Street, Portland,
Oregon 97204 (the "Closing Date"), or at such other time or place as parties may
mutually agree. The transfers and deliveries described in Article VI shall be
mutually interdependent and regarded as occurring simultaneously, and no such
transfer or delivery shall become effective until all the other transfers and
deliveries provided for in Article VI have also been made. The transfers and
deliveries herein contemplated shall be deemed to have occurred and the Closing
shall be effective as of 11:59 p.m. on the Closing Date (at each location
according to its time zone).
ARTICLE VIII
COVENANTS
8.1 Pre-Closing Covenants.
8.1.1 Conduct of Business. From the date hereof until the
Closing, except to the extent that Buyer otherwise consents in writing, and
except as disclosed in Schedule 4.3.3, Seller shall operate the Business
substantially as presently operated and only in the ordinary course consistent
with past practice. During such period, Seller agrees to consult with Buyer with
respect to all matters which could materially affect the Business. Seller will
use reasonable efforts to preserve intact its present business organization and
its relationships with persons having business dealings with Seller. Without
limiting the generality of the foregoing, except as disclosed on Schedule 4.3.3,
Seller will not do any of the following related to the Business without Buyer's
written consent:
(a) purchase or lease (or commit to purchase or lease) any assets
(other than inventory) in excess of $30,000 individually or
$200,000 in the aggregate;
(b) (i) except in the ordinary course of business, consistent with
past practice, create, incur or assume any debt, (ii) assume,
guarantee, endorse or otherwise become liable or responsible
for the obligation of any other Person, or (iii) except in the
ordinary course of business, consistent with past practice,
make any loans, advances or capital contributions to, or
investments in, any other Person;
(c) (i) increase in any manner the rate of compensation of any of
its employees, other than normal scheduled increases using
standards consistent with past practice or as required by any
collective bargaining agreement, (ii) pay or agree to pay,
other than those explicitly agreed to by
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Buyer, any bonus, pension, retirement allowance, severance or
other employee benefit not required or permitted by any
existing Plan of Seller;
(d) permit any of its assets to be subjected to any Lien, other
than mechanic's liens incurred in the ordinary course of
business;
(e) enter into any Contract, except in the ordinary course of
business consistent with past practice, involving less than
$5,000 in the aggregate, or modify or terminate any Contract
under circumstances which might adversely affect the condition
(financial or otherwise) or prospects of the Business;
(f) sell or dispose of any assets other than inventory in the
ordinary course of business;
(g) engage in any unusual or novel method of transacting business
or change any accounting procedures or practices or its
financial structure;
(h) take any action which could affect the historical
relationships between the various categories of its current
assets and current liabilities (e.g. the ratio of inventories
and accounts receivable to trade payables or the level of
petty cash);
(i) take any action to accelerate the generation of revenues
beyond the level that would result from operations in the
ordinary course (other than the liquidation of obsolete
inventory); or take any action the taking of which, or omit to
take any action the omission of which, would cause any of the
representations and warranties herein to fail to be true and
correct in all respects as though made at and as of the date
of such action or omission, except as otherwise specifically
contemplated by this Agreement.
8.1.2 Access. From the date hereof until the Closing, Seller
shall provide Buyer and its lenders, investment bankers, underwriters and other
representatives full access to such Seller's personnel, facilities, Books and
Records and such other information and Persons of Seller relating to the
Business as Buyer may request. Seller shall permit Buyer to perform such
engineering, environmental and workplace condition surveys and other physical
inspections as Buyer may deem necessary. In addition, Seller agrees to provide
Buyer and its representatives access to Seller's suppliers and customers
relating to the Business to the extent requested by Buyer. Buyer agrees to
exercise its rights under this Subsection 8.1.2 so as to not unreasonably
interfere with the normal conduct of Seller's business, and shall restore
properties surveyed or inspected by Buyer to their condition prior to the survey
or inspection.
8.1.3 Interim Financial Statements. Within thirty (30) days
after the end of each calendar month prior to the Closing, Seller will deliver
to Buyer the unaudited balance sheet of Seller and the related statements of
income for the month then ended and for that portion of such fiscal year ended
with the last day of such monthly accounting period, in each case
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certified by an officer of such Seller to fairly present the financial position
and results of operations of such Seller, in conformity with generally accepted
accounting principles consistently applied in accordance with Seller's past
practices, as at the date stated and for the periods indicated on a basis
consistent with past practice.
8.1.4 Supplemental Disclosure. Seller will immediately notify
Buyer of any event or circumstance which: (a) makes it necessary to correct any
representation and warranty contained in Article IV which has been rendered
inaccurate thereby; or (b) arises hereafter and which, had it existed on or
prior to the date hereof, would have resulted in an inaccuracy in a
representation and warranty contained in Article IV.
8.1.5 Satisfaction of Conditions. Seller agrees to use its
best efforts to cause each of the conditions set forth in Section 6.1 and 6.3 to
be satisfied at or before the Closing. Buyer agrees to use its best efforts to
cause each of the conditions set forth in Section 6.2 and 6.3 to be satisfied at
or before the Closing.
8.1.6 Termination. This Agreement may be terminated by written
agreement of Buyer and Seller at any time after March 31, 1999, if the Closing
shall not have taken place on or before such date. If this Agreement is
terminated pursuant to this Section 8.1.6, all provisions of this Agreement
other than Section 8.2.4 and the last sentence of Section 8.1.2, shall become
void without any liability on the part of any party.
8.2 Miscellaneous Covenants.
8.2.1 Voting Agreement. Simultaneously with the execution
hereof, each of Bruce E. Burns, Bruce Investment Co., Scott F. Burns and Scott
Frimoth Investment Co. shall execute and deliver to Buyer an agreement, in form
and substance acceptable to Buyer, pursuant to which each of them agrees: (a) to
vote his shares of capital stock of Seller in favor of the sale of assets
described herein; and (b) not to transfer any such shares prior to the Closing
Date (or the termination of this Agreement in accordance with its terms), except
transfers to his children, spouse, niece or nephew or to a trust for the benefit
of his children, spouse, niece or nephew which shall not exceed 15,000 shares of
capital stock, in the aggregate.
8.2.2 Gaming and Liquor Licenses. Seller shall use reasonable
efforts to the extent practicable and permitted by Law, to enable the Buyer to
obtain the gaming license related to the Troutdale, Oregon, video poker
facility, and liquor licenses related to any of the Owned Real Property.
8.2.3 Publicity. All public announcements relating to this
Agreement or the transactions contemplated hereby will be made only as may be
agreed upon by Seller and Buyer or as required by Law. If public disclosure or
notice is required by Law, the disclosing party will use its best efforts to
give the other party prior written notice of the disclosure to be made.
8.2.4 Expenses, Transfer Taxes. Except to the extent otherwise
specifically provided in this Agreement, Buyer shall pay all of the fees and
expenses incident to the transactions
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contemplated by this Agreement which are incurred by Buyer or its
representatives (including all fees of finders, attorneys or accountants
retained by Buyer), and Seller shall pay all of the fees and expenses incident
to the transactions contemplated by this Agreement which are incurred by Seller
or its representatives (including all fees of finders, attorneys or accountants
retained by Seller). Seller shall pay all sales or other transfer Taxes, if any,
payable in connection with the transactions contemplated by this Agreement.
Buyer shall be responsible for the H-S-R filing fees; Seller shall be
responsible for all costs and expenses incurred in connection with the
Environmental Reports. Seller and Buyer shall each be responsible for 50% of the
premium for extended coverage insurance policies insuring Buyer's title to the
Owned Real Property in the amount of the Purchase Price allocated to each
Property pursuant to this Agreement, and Buyer shall pay such additional amounts
as the Title Company may charge for endorsements requested by Buyer. Buyer and
Seller shall share equally the cost of surveys of the Owned Real Property
conducted by Buyer or at its request pursuant to this Agreement.
8.2.5 No Assignment. With the prior written consent of Seller,
which consent shall not be unreasonably withheld, Buyer may assign all or any
part of this Agreement and all or any part of its rights or obligations
hereunder to an Affiliate of Buyer, in which event, Seller shall execute and
deliver any documents reasonably requested by the assignee(s) in connection with
such assignments, but no such assignment shall relieve Buyer of its obligations
hereunder. Except as provided in the preceding sentence, and except as provided
in Section 8.2.6, no assignment by any party of this Agreement or any right or
obligation hereunder may be made without the prior written consent of all other
parties, which consent may be withheld with or without cause, and any assignment
attempted without that consent will be void.
8.2.6 Section 1031 Exchange. Subject to Section 8.2.11, Seller
intends to exchange all or part of the Owned Real Property and tangible personal
property included within the Purchased Assets for property of like kind in a
transaction qualifying as a Section 1031 tax-deferred, non-simultaneous
exchange. Seller may assign Seller's interest in this Agreement to an
accommodator for the purpose of effecting the exchange. Buyer agrees to
cooperate with Seller to effect the exchange, it being understood and agreed
that Buyer will not be obligated to incur additional expense or liability by
reason of the exchange.
8.2.7 Further Assurances. Seller appoints Buyer, effective as
of the Closing, the attorney of such Seller with full power of substitution, in
the name of Buyer, or the name of such Seller, on behalf of and for the benefit
of Buyer, to collect all receivables and other items hereby transferred and
assigned to Buyer, to endorse, without recourse, all checks in the name of such
Seller the proceeds of which Buyer is entitled to hereunder, to prosecute, in
the name of such Seller or otherwise, all proceedings which Buyer may deem
proper to enforce any claim of any kind in or to the Purchased Assets, to defend
and compromise all actions in respect of any of the Purchased Assets, and to do
everything in relation thereto as Buyer may reasonably deem advisable. Seller
agrees that the foregoing powers are coupled with an interest, shall be
irrevocable, and shall not be affected by the dissolution of Seller or for any
other reason. Seller further agrees that Buyer shall retain for its own account
any amounts collected pursuant to the foregoing powers, and Seller shall pay or
transfer to Buyer, if and when received, any amounts which shall be received by
Seller after the Closing in respect of any receivables or other assets or rights
hereby transferred to Buyer.
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Seller further agrees that, at any time and from time to time after the Closing,
it will, upon the request of Buyer, do all such further acts as may be
reasonably required to further transfer, assign and confirm to Buyer, or to aid
and assist in the collection, gaining of possession by Buyer of or maintaining,
any of the Purchased Assets, or to vest in Buyer good and marketable title to
the personal property included in the Purchased Assets, including but not
limited to obtaining or transferring permits or licenses or doing such other
things as may be reasonably necessary to allow Buyer to conduct its business in
substantially the same manner as Seller operated the Business.
8.2.8 Assignment of Contracts, Rights, Etc. Anything contained
in this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Contract or any claim or any right or
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way affect the rights of Buyer thereunder. Seller shall use
its reasonable efforts (excluding the payment of money other than assignment
fees with respect to Assumed Contracts, which shall be the obligation of Seller)
to obtain the consent of the other party to any of the foregoing to the
assignment thereof to Buyer in all cases in which such consent is required for
assignment or transfer. If such consent is not obtained, Seller agrees to
cooperate with Buyer in any reasonable arrangement designed to provide for Buyer
the benefits thereunder, including, but not limited to, having (a) Buyer act as
agent for Seller for reasonable compensation, and (b) Seller enforce for the
benefit of Buyer at Buyer's expense, any and all rights of Seller against the
other party thereto arising out of the cancellation by such other party or
otherwise.
8.2.9 Product Warranty. Although Buyer does not expressly or
impliedly assume any of the product warranty or product liability obligations of
Seller, Buyer shall have the right after the Closing, on Seller's behalf, to
perform Seller's obligations under its product warranties in accordance with
Buyer's business judgment consistent with the ongoing operation of Buyer's
business. The performance by Buyer of any of Seller's product warranty
obligations shall not give rise to any rights in Seller, or any third party.
Seller agrees to reimburse Buyer upon demand for Buyer's costs in performing
such obligations for Seller, including, but not limited to, out-of-pocket costs
and internal labor, material and overhead costs at Buyer's normal rates.
8.2.10 Closing of Wilsonville, Oregon, Facility. Seller shall
use reasonable efforts to assist Buyer in transferring the business of its
customers at the Wilsonville, Oregon, facility to Buyer's facilities at Eugene,
Oregon, Troutdale, Oregon, or Aurora, Oregon, as the case may be. Except as
disclosed on Schedule 4.3.3, prior to ceasing such operations, Seller will
continue to conduct business at such site consistent with past practice. Seller
covenants and agrees that it will take such acts and provide such notices as may
be required by Law in connection with the closing of the Wilsonville, Oregon,
facility (or any other truckstop or travelcenter facility), including but not
limited to providing such notices, if any, as are required by the Worker
Adjustment and Retraining Notification Act and complying with or assuming all
contractual or bargaining obligations under any collective bargaining agreements
relating to any such facility.
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8.2.11 Retention of Proceeds.
(a) Seller covenants and agrees that for a period which is the
longer of (i) two (2) years following the Closing Date (the
"General Breach Retention Period") or (ii) the date upon which
all claims for indemnification timely made by Buyer under
Section 9.2(a) (other than claims for a breach of a
representation or warranty under Section 4.2.1, 4.3.4, 4.7.4
or the first sentence of Section 4.7.1, which are covered by
Subsection (b) below) or Sections 9.2(b), (e) or (h) (the
"General Breach Indemnification Sections") have been resolved
and satisfied, Seller shall maintain a net worth (in
accordance with generally accepted accounting principles)
equal to at least $7,000,000 (the "General Breach Retention
Amount"). Each of Bruce E. Burns, Bruce Investment Co., Scott
Frimoth Investment Co. or Scott F. Burns covenants and agrees,
that if: (x) a claim for indemnification is timely made by
Buyer under the General Breach Indemnification Sections, (y)
the amount of Seller's net worth is less than the General
Breach Retention Amount at the time Seller agrees to pay the
claim or a final judgment or arbitration award is rendered in
favor of Buyer on the claim (the "Settlement Date"), and (z)
any amounts or funds have been distributed by Seller to Bruce
E. Burns, Bruce Investment Co., Scott Frimoth Investment Co.
or Scott F. Burns or any other Person on or after the Closing
Date as dividends, stock redemption payments or otherwise with
respect to Seller's capital stock (excluding distributions to
pay taxes on Seller's income in the event Seller files an S
election), then Bruce E. Burns, Bruce Investment Co., Scott
Frimoth Investment Co. or Scott F. Burns, jointly and
severally, shall be liable to Buyer for and with respect to
such indemnification claim, to the extent that the amount of
Seller's net worth on the Settlement Date is less than the
General Breach Retention Amount; provided, however that the
joint and several liability of each of Bruce E. Burns, Bruce
Investment Co., Scott Frimoth Investment Co. or Scott F. Burns
shall not exceed the amount so distributed (excluding
distributions to pay taxes on Seller's income in the event
Seller files an S election), collectively, to Bruce E. Burns,
Bruce Investment Co., Scott Frimoth Investment Co. or Scott F.
Burns during the period beginning on the Closing Date and
ending on the date of the claim is paid.
(b) Seller covenants and agrees that for a period which is the
longer of (i) six (6) years following the Closing Date (the
"Other Breach Retention Period") or (ii) the date upon which
all claims for indemnification timely made by Buyer under
Sections 9.2(a) (solely with respect to a claim in a breach of
a representation or warranty under Section 4.2.1, 4.3.4, 4.7.4
of the first sentence of Section 4.7.1) or Sections 9.2(c),
(d) or (f) (the "Other Breach Indemnification Sections") have
been resolved and satisfied, Seller shall maintain a net worth
equal to at least $7,000,000 (the "Other Breach Retention
Amount"). Each of Bruce E. Burns, Bruce Investment Co., Scott
Frimoth Investment Co. or Scott F. Burns covenants and agrees,
that if: (x) a
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claim for indemnification is timely made by Buyer under the
Other Breach Indemnification Sections, (y) the amount of
Seller's net worth is less than the Other Breach Retention
Amount at the time Seller agrees to pay the claim of a final
judgment or arbitration award is rendered in favor of Buyer on
the claim (the "Settlement Date") and (z) any amounts or funds
have been distributed by Seller to Bruce E. Burns, Bruce
Investment Co., Scott Frimoth Investment Co. or Scott F. Burns
or any other Person on or after the Closing Date as dividends,
stock redemption payments or otherwise with respect to
Seller's capital stock (excluding distributions to pay taxes
on Seller's income in the event Seller files an S election),
then Bruce E. Burns, Bruce Investment Co., Scott Frimoth
Investment Co. or Scott F. Burns, jointly and severally, shall
be liable to Buyer for and with respect to such
indemnification claim, to the extent that the amount of
Seller's net worth on the Settlement Date is less than the
Other Breach Retention Amount; provided, however that the
joint and several liability of each of Bruce E. Burns, Bruce
Investment Co., Scott Frimoth Investment Co. or Scott F. Burns
shall not exceed the amount so distributed (excluding
distributions to pay taxes on Seller's income in the event
Seller files an S election), collectively, to Bruce E. Burns,
Bruce Investment Co., Scott Frimoth Investment Co. or Scott F.
Burns during the period beginning on the Closing Date and
ending on the date of the claim is paid.
8.2.12 Transfer of Permits. Seller shall cooperate with Buyer
in preparing and filing all notices, applications, reports or other documents
required to obtain or, where permitted by Law, to transfer all permits listed on
Schedule 4.4.1 from Seller to Buyer.
8.3 Employee Covenants.
8.3.1 Employment. Pending the Closing, Seller shall use
reasonable efforts to retain the services of Seller's employees relating to the
Business (except employees terminated in the ordinary course of business) and to
encourage them to continue their employment with Buyer after the Closing. Buyer
shall offer employment to the thirteen (13) "headquarters" employees of Seller
identified on Schedule 8.3.1, attached hereto, on terms and conditions
substantially consistent with those presently provided to such persons by
Seller. Buyer also agrees to offer employment to most of the employees of Seller
who are actively working at the sites comprising the Owned Real Property.
Subject to the foregoing, each such offer of employment by Buyer shall be
subject to and conditioned upon Buyer's usual and customary hiring practices and
policies, including but not limited to drug testing, and each employee who is
offered and accepts employment with Buyer shall be entitled to receive only
those benefits (but with credit to such employees for their years of service
with Seller) which are consistent with those provided to other employees of
Buyer in comparable positions. The employment by Buyer of any employee of Seller
who accepts the terms of employment offered by Buyer will commence at the
Closing. Seller agrees in this regard to cooperate with Buyer by permitting
Buyer, prior to the Closing, to meet with Seller's employees who are engaged in
the conduct of the Business at such reasonable times as shall be approved by a
representative of Seller and to distribute to such employees such forms and
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other documents relating to employment by Buyer after the Closing as Buyer shall
reasonably request. Except as otherwise provided in this Section 8.3.1, Seller
shall pay the cost of any compensation, severance or other benefits which may be
payable to any employees of such Seller to whom Buyer does not offer employment
or to such other persons as shall claim compensation, severance or other
benefits in connection with the consummation of the transactions contemplated by
this Agreement. Nothing in this Section 8.3.1 shall be deemed to require Buyer
to retain any of the employees it hires for any period of time or in any
particular position.
8.3.2 Tax Deposits. Seller shall make all required deposits
through the Closing for all withholding, social security and unemployment
insurance Taxes relating to Seller's employees who become employees of Buyer and
shall file timely quarterly and annual reports with respect to such Taxes in
accordance with applicable Law whether such reports are due prior to or after
the Closing.
8.3.3 COBRA Compliance. Seller agrees that it will timely
provide all notices and any continuation of health benefit coverage required to
be provided to any of such Seller's employees, former employees, or the
beneficiaries or dependent employees or former employees, under Part 6 of
Subtitle B of Title I of ERISA 4980B(f) of the Code (herein collectively
referred to as "COBRA"), to the extent such notices and continuation of health
benefit coverage are required to be provided by Seller by reason of events
occurring prior to or on the Closing Date or by reason of the transactions
contemplated by this Agreement. For purposes of the foregoing, Seller agrees
that it will treat employees who are engaged in the conduct of the Business (and
such employees' beneficiaries and dependents) as of the Closing Date as having
incurred a "qualifying event" (within the meaning of ERISA Section 603 ) and
Code Section 498013(f)(3)) on the Closing Date. Seller agrees that it will
continue the health benefit coverage required by COBRA and the provisions of
this Agreement irrespective of the elimination of any health benefit plan of
such Seller.
8.4 Assets Sold As-Is. Buyer has inspected the Purchased Assets and
is acquainted with their condition, and subject to the covenants,
representations and warranties stated in this Agreement, takes the Purchased
Assets "as-is" as of the date of this Agreement, and subject to ordinary wear
and tear prior to the Closing Date. Seller has not made and does not make any
representations as to the physical condition, expenses, operation or any other
matter or thing affecting or related to the Business or Purchased Assets, except
as specifically set forth in this Agreement. Buyer acknowledges that all
representations, warranties and covenants which Seller has made, and upon which
Buyer relied in making this Agreement, have been included in this Agreement.
Seller disclaims the implied warranties of fitness for a particular purpose and
of merchantability.
8.5 Confidentiality. Buyer and Seller acknowledge and agree that
certain letter agreement dated August 6, 1998 from Seller to Buyer, and signed
by Buyer, pertaining to the confidentiality of Evaluation Material, as defined
therein, and the confidentiality of a possible Acquisition Transaction, as
defined therein, remains in effect in accordance with its terms, except that
each of Buyer and Seller may disclose to any person that Evaluation Material has
been made available to Buyer and that discussions are taking place concerning a
possible Acquisition
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Transaction, and except that Buyer may discuss Evaluation Material with Seller's
employees and may make employment offers to Seller's employees in accordance
with the terms of this Agreement.
8.6 Waiver of Environmental Claims.
(a) Effective as of the Closing, Buyer and its Affiliates forever
waive, release and discharge any claim Buyer may have, now or in the future,
against Seller or against Seller's officers, directors, shareholders, employees,
agents, successors or assigns by reason of contamination of the Owned Real
Property existing at Closing, known or unknown, or by reason of any Storage or
Release of Hazardous Substances on the Owned Real Property prior to the Closing,
known or unknown, or any violation of Environmental Law, known or unknown, on
the Owned Real Property prior to Closing ("Waived Environmental Claims").
Notwithstanding the foregoing, Buyer does not waive any claim Buyer may have
against Seller for (i) indemnity under Section 9.2(a) by reason of breach or
inaccuracy of the representations and warranties stated in Section 4.7.4; (ii)
any known or unknown environmental contamination, Storage or Release of
Hazardous Substances or violation of Environmental Law relating to any property
other than the Owned Real Property, or for any environmental claim brought by
any third party other than a Governmental Authority (the "Non-Waived
Environmental Claims").
(b) In the event Buyer sells a part or all of the Owned Real
Property, Buyer agrees to use its reasonable efforts to secure a similar waiver
from the buyer of such Owned Real Property.
8.7 Bulk Sales Law. In consideration of the indemnity obligation of
Seller pursuant to Section 9.2(c), Buyer and Seller hereby waive compliance with
the bulk sales provisions of Article 6 of the Uniform Commercial Code as it may
be in effect in the states where Seller owns assets to be conveyed to Buyer
hereunder and any other bulk sales laws of any jurisdiction that may be
applicable to the transactions contemplated hereby.
8.8 Taxes. Seller shall file any Tax Returns required to be filed in
connection with the period up to and including the Closing Date and shall be
responsible for all Taxes owed for such periods and for all costs incurred in
the preparation of such Tax Returns.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The covenants,
representations and warranties of Seller and of Buyer in this Agreement shall
survive the Closing and shall continue to be binding regardless of any
investigation made at any time by any party. Nevertheless, the right of the
Buyer Indemnified Parties (as such term is defined in Section 9.2) to bring
claims for any misrepresentation or breach of warranty or covenant is subject to
the time limits contained in paragraph (a) of Section 9.5, and the right of the
Seller Indemnified Parties (as
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such term is defined in Section 9.3) to bring claims for any misrepresentation
or breach of warranty or covenant is subject to the time limits contained in
paragraph (a) of Section 9.6.
9.2 Indemnification by Seller. Seller shall indemnify Buyer and its
Affiliates and the shareholders, directors, employees and agents of Buyer and
its Affiliates (collectively, the "Buyer Indemnified Parties") against and hold
them harmless from:
(a) Representations. All Liability, loss, damage or deficiency
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty by Seller herein;
(b) Covenants. All Liability, loss, damage or deficiency resulting
from or arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Seller herein;
(c) Liabilities. Any imposition (including, but not limited to,
imposition by operation of any bulk transfer or other Law) or attempted
imposition by a third party upon any of the Buyer Indemnified Parties of any
Liability of Seller which Buyer has not specifically agreed to assume under
Section 2.1 of this Agreement;
(d) Taxes. All Liability, loss, damage or deficiency resulting from
or arising out of any Tax related matter concerning Seller or the Purchased
Assets which pertains or relates to the period prior to the Closing Date;
(e) Brokers and Finders. All Liability, loss, damage or deficiency
resulting from or arising out of the claims of any broker, finder or other
Person acting in a similar capacity on behalf of Seller in connection with the
transactions herein contemplated;
(f) Environmental. All Liability, loss, damage or deficiency
resulting from or arising out of any Non-Waived Environmental Claim (as defined
in Section 8.6);
(g) Mechanic's Liens. All liability, loss, damage or deficiency
resulting from or arising out of any mechanic's lien which is filed against any
Purchased Asset as a result of or in connection with services or work performed
prior to the Closing; and
(h) Costs. Any and all costs and expenses (including, but not
limited to, legal and accounting fees) related to any of the foregoing.
9.3 Indemnification by Buyer. Buyer shall indemnify Seller and its
Affiliates and the shareholders, directors, employees and agents of Seller
(collectively, the "Seller Indemnified Parties") against and hold them harmless
from:
(a) Representations. All Liability, loss, damage or deficiency
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty by Buyer herein;
48
<PAGE> 50
(b) Covenants. All Liability, loss, damage or deficiency resulting
from or arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Buyer herein;
(c) Liabilities. Any imposition (including, but not limited to, by
operation of Law) or attempted imposition by a third party upon any of the
Seller Indemnified Parties of any Liability which Buyer specifically agreed to
assume under Section 2.1 of this Agreement;
(d) Brokers and Finders. All Liability, loss, damage or deficiency
resulting from or arising out of the claims of any broker, finder or other
Person acting in a similar capacity on behalf of Buyer or in connection with the
transactions herein contemplated; and
(e) Costs. Any and all related costs and expenses (including, but
not limited to, legal and accounting fees) related to any of the foregoing.
9.4 Third Party Claims. If any legal proceedings are instituted or
any claim is asserted by any third party in respect of which the Seller
Indemnified Parties on the one hand, or the Buyer Indemnified Parties on the
other hand, may be entitled to indemnity hereunder, the party asserting such
right to indemnity shall give the party from whom indemnity is sought written
notice thereof. A delay in giving such notice shall only relieve the recipient
of the obligation to indemnify to the extent the recipient suffers actual
prejudice because of the delay. The party from whom indemnity is sought shall
have the right, at its option and expense, to participate in the defense of such
a proceeding or claim, but not to control the defense, negotiation or settlement
thereof, which control shall at all times rest with the party asserting such
right to indemnity, unless the proceeding or claim involves only money damages
(not an injunction or other equitable relief) and unless the party from whom
indemnity is sought:
(a) irrevocably acknowledges in writing full responsibility for
and agrees to fully indemnify the party asserting such right
to indemnity, and
(b) furnishes satisfactory evidence of the financial ability to
indemnify the party asserting such right to indemnity,
in which case the party from whom indemnity is sought may assume such control
through counsel of its choice and at its expense, but the party asserting such
right to indemnity shall continue to have the right to be represented, at its
own expense, by counsel of its choice in connection with the defense of such a
proceeding or claim. If the party from whom indemnity is sought does not assume
control of the defense of such a proceeding or claim, the entire defense of the
proceeding or claim by the party asserting such right to indemnity, any
settlement made by the party asserting such right to indemnity, and any judgment
entered in the proceeding or claim shall be deemed to have been consented to by,
and shall be binding on, the party from whom indemnity is sought as fully as
though it alone had assumed the defense thereof and a judgment had been entered
in the proceeding or claim in the amount of such settlement or judgment, except
that the right of the party from whom indemnity is sought to contest the right
of the other to indemnification under
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<PAGE> 51
Section 9.2 or 9.3 of this Agreement, as the case may be, with respect to the
proceeding or claim shall not be extinguished. If the party from whom indemnity
is sought does assume control of the defense of such a proceeding or claim, it
will not, without the prior written consent of the party asserting such right to
indemnity, settle the proceeding or claim or consent to entry of any judgment
relating thereto which does not include as an unconditional term thereof the
giving by the claimant to the party asserting such right to indemnity a release
from all Liability in respect of the proceeding or claim. The parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such proceeding or claim.
9.5 Limitations on Indemnification of Buyer Indemnified Parties. The
indemnification of the Buyer Indemnified Parties provided for under Section 9.2
shall be limited in certain respects as follows:
(a) Any claim for indemnification under Section 9.2 by the Buyer
Indemnified Parties shall be made by the second anniversary of
the Closing Date; provided, however, that notwithstanding the
foregoing: (i) there shall be no limits on the time for making
a claim for indemnification pursuant to (x) Section 9.2(c) or
(y) Section 9.2(a) relating to a breach of the representations
or warranties contained in Subsection 4.2.1 or the first
sentence of Subsection 4.7.1, (ii) a claim for indemnification
pursuant to Section 9.2(a) relating to the representations and
warranties contained in Subsection 4.3.4, or a claim pursuant
to Section 9.2(d) may be made until the 60th day following the
expiration of the applicable statute of limitations for either
the assessment or collection of Taxes and (iii) a claim for
indemnification pursuant to Section 9.2(a) relating to the
representations and warranties contained in Subsection 4.7.4,
or a claim pursuant to Section 9.2(f), may be made until the
sixth (6th) anniversary of the Closing Date;
(b) The aggregate liability of Seller to the Buyer Indemnified
Parties for indemnification claims under paragraph (a) of
Section 9.2 (other than claims relating to the representations
and warranties contained in Subsections 4.2.1, 4.3.4, 4.7.4
and the first sentence of Subsection 4.7.1, as to which there
is no limit), and paragraphs (b), (e) and (h) of Section 9.2
shall not exceed $7,000,000.00; and
(c) Except for claims pursuant to Section 9.2(g), Seller shall not
have any liability hereunder unless the aggregate amount of
Liability, loss, damage or deficiency to be indemnified by
Seller ("Losses") exceeds $250,000.00 (the "Basket");
provided, that once such Losses have exceeded the Basket,
Seller shall be liable for all such Losses, including the
amount of the Basket.
50
<PAGE> 52
9.6 Limitations on Indemnification of Seller Indemnified Parties.
The indemnification of the Seller Indemnified Parties provided for under Section
9.3 shall be limited in certain respects as follows:
(a) Any claim for indemnification under Section 9.3 by the Seller
Indemnified Parties shall be made by the second anniversary of
the Closing Date; provided, however, that notwithstanding the
foregoing, there shall be no limits on the time for making a
claim for indemnification relating to the representations and
warranties contained in Subsections 5.2.1 or Section 9.3(c);
and
(b) Buyer's aggregate liability to the Seller Indemnified Parties
for indemnification claims under paragraph (a) of Section 9.3
(other than claims relating to the representations and
warranties contained in Subsection 5.2.1, as to which there is
no limit), and paragraphs (b) and (d) of Section 9.3 shall not
exceed $7,000,000.00.
ARTICLE X
MISCELLANEOUS
10. 1 Entire Agreement. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement among the parties concerning the subject matter
hereof. All negotiations among the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings or
agreements, oral or otherwise, in relation thereto among the parties other than
those incorporated herein and to be delivered hereunder.
10.2 Successors and Assigns; Third Party Beneficiaries. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer any rights
or remedies under this Agreement on any person or entity other than Buyer or
Seller, their respective successors and permitted assigns, and, to the extent
stated herein, their respective Affiliates, officers, directors, employees,
shareholders and agents.
10.3 Headings; Drafting. The headings of the articles, sections and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
hereof. This Agreement shall not be deemed drafted by either party.
10.4 Modification and Waiver. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by each of the parties hereto,
except that any of the terms or provisions of this Agreement may be waived in
writing at any time by the party entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall
51
<PAGE> 53
constitute a waiver of any other provisions hereof (whether or not similar). No
delay on the part of any party in exercising any right, remedy, power or
privilege hereunder shall operate as a waiver thereof or of any other right,
remedy, power or privilege.
10.5 Notices. Any notice, request, claim, instruction or other
document to be given hereunder by any party hereto to any other party shall be
in writing and delivered personally, by telecopy or sent by registered or
certified mail (postage prepaid return receipt requested),
If to Seller, to:
Burns Bros., Inc.
Weatherly Building, Suite 1200
516 S.E. Morrison Street
Portland, Oregon 97214
Attn: Bruce E. Burns
Telecopier: 503/233-7652
With a copy to:
Lane Powell Spears Lubersky LLP
520 S.W. Yamhill Street, Suite 800
Portland, Oregon 97204
Attn: Richard H. Williams, Esq.
Telecopier: 503/224-0388
If to Buyer, to:
TA Operating Corporation
24601 Center Ridge Road, Suite 200
Westlake, Ohio 44145-5634
Attn: Edwin P. Kuhn, President and CEO
Telecopier: 404/808-3301
With a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attn: Philip M. Dawson, Esq.
Telecopier: 216/241-0816
or at such other address for a party as shall be specified by like notice.
Notices sent by registered or certified mail, postage prepaid, return receipt
requested, shall be deemed to have been given
52
<PAGE> 54
two (2) business days after being mailed; otherwise, notices shall be deemed to
have been given when delivered to such address.
10.6 Governing Law; Waiver of Jury Trial. This Agreement shall be
deemed to be made in and in all respects shall be interpreted, construed and
governed by and in accordance with the laws of the State of Oregon without
regard to the conflict of law principles thereof.
Each party acknowledges and agrees that any controversy that may
arise under this Agreement is likely to involve complicated and difficult
issues, and therefore each such party hereby irrevocably and unconditionally
waives any right such party may have to a trial by jury in respect of any
litigation directly or indirectly arising out of or relating to this Agreement
or the transactions contemplated by this Agreement. Each party certifies and
acknowledges that (i) no representative, agent or attorney of any other party
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver (ii) each party
understands and has considered the implications of this waiver, (iii) each party
makes this waiver voluntarily, and (iv) each party has been induced to enter
into this Agreement by, among other things, the mutual waivers and
certifications in this Section 10.6.
10.7 Attorneys' Fees. If any suit or arbitration proceeding is
brought against any party hereto to enforce, interpret, declare rights under or
rescind this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs (including deposition transcript and expert
witness fees) and disbursements incurred in such suit or proceeding, and in any
appeal or review thereof.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which, when together, shall constitute one and the same instrument.
10.9 Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstances shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not effect
any other provision hereof and this Agreement shall remain in force and be
effectuated as if such illegal, invalid or unenforceable provision is not part
of this Agreement.
10.10 Statement Required by Oregon Statute. THE TROUTDALE, OREGON,
PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE PROTECTION
DISTRICT PROTECTING STRUCTURES. THE TROUTDALE, OREGON, PROPERTY IS SUBJECT TO
LAND USE LAWS AND REGULATIONS, WHICH, IN FARM OR FOREST ZONES, MAY NOT AUTHORIZE
CONSTRUCTION OR SITING OF A RESIDENCE AND WHICH LIMIT LAWSUITS AGAINST FARMING
OR FOREST PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES. BEFORE SIGNING OR
ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD
CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED
USES AND EXISTENCE OF FIRE PROTECTION FOR STRUCTURES.
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<PAGE> 55
10.11 Exhibits and Schedules. The Exhibit and Schedules referred to
in this Agreement shall be deemed to be an integral part of this Agreement.
10.12 Pronouns. The use of a particular pronoun herein shall not be
restrictive as to gender or number but shall be interpreted in all cases as the
context may require.
10.13 Time Periods. Except as otherwise provided herein, any action
required hereunder to be taken within a certain number of days shall be taken
within that number of calendar days; provided, however, that if the last day for
taking such action falls on a weekend or a holiday, the period during which such
action may be taken shall be automatically extended to the next business day.
10.14 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against either party.
INTENDING TO BE LEGALLY BOUND, the parties have signed this
Agreement as of the date first above written.
SELLER:
BURNS BROS., INC.
By /s/ Bruce E. Burns
-------------------------------------
Title President
-----------------------------------
BUYER:
TA OPERATING CORPORATION
By /s/ Edwin P. Kuhn
-------------------------------------
Title President
-----------------------------------
54
<PAGE> 56
ACKNOWLEDGMENT
Intending to be legally bound, the undersigned hereby acknowledge
and agree to be bound by Section 8.2.11 of this Agreement:
/s/ Bruce E. Burns
-------------------------------------
Bruce E. Burns
/s/ Scott F. Burns
-------------------------------------
Scott F. Burns
BRUCE INVESTMENT CO.
By: /s/ Bruce E. Burns
---------------------------------
Its: Vice President
---------------------------------
SCOTT FRIMOTH INVESTMENT CO.
By: /s/ Scott F. Burns
---------------------------------
Its Vice President
---------------------------------
55
<PAGE> 1
Exhibit 2.2
AMENDMENT OF ASSET PURCHASE AGREEMENT
This Amendment of Asset Purchase Agreement is entered into this 3rd
day of December, 1998, by and between Burns Bros. Inc., an Oregon corporation
("Seller"), and TA Operating Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller and Buyer are parties to that certain Asset Purchase
Agreement, dated October 17, 1998 ("Purchase Agreement");
WHEREAS, Seller and Buyer desire to amend the Purchase Agreement in
accordance herewith;
NOW THEREFORE, in consideration of the premises above and the mutual
covenants and agreements set forth herein and in the Purchase Agreement, the
parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined, shall
have the meanings ascribed thereto in the Purchase Agreement.
2. Section 1.1 shall be amended by including, in alphabetical order,
the following definitions:
"Ancillary Documents" means the Subway Purchase Agreement, the
Enterprises Asset Purchase Agreement, the BFR Asset Purchase Agreement, the
Services Agreement, the General Bill of Sale and Assignment, the Assumption
Agreement, the Trademark Assignment, the Gaming Agreement and the Intellectual
Property License Agreement.
"Assumption Agreement" means that certain Assumption Agreement by
and between Seller and Buyer, executed by Buyer and delivered contemporaneously
with this Agreement.
"Gaming Agreement" means the Lease of Real Property for Gaming
Purposes at Mill City, NV and the Lease of Real Property for Gaming Purposes at
Rye Patch, NV both by and between Enterprises and Buyer, executed and delivered
contemporaneously with this Agreement.
"General Bill of Sale and Assignment" means that certain General
Bill of Sale and Assignment executed by Seller and delivered contemporaneously
with this Agreement.
"Intellectual Property License Agreement" means that certain License
Agreement by and between Buyer and Seller, executed and delivered
contemporaneously with this Agreement.
<PAGE> 2
"Services Agreement" means that certain Services Agreement by and
between Seller and Buyer, executed and delivered contemporaneously with this
Agreement.
"Subway Purchase Agreement" means that certain Subway Purchase
Agreement by and between Seller and Buyer, executed and delivered
contemporaneously with this Agreement.
"Trademark Assignment" means that certain Assignment executed and
delivered by Seller contemporaneously with this Agreement.
"Transaction Documents" means this Agreement and each other
agreement and document executed and delivered at Closing.
3. The definition of "Receivables Amount" in Section 1.1 of the
Purchase Agreement shall be and hereby is amended by deleting the reference to
"Section 3.3" in such definition and replacing it with "Section 2.2.1."
4. Section 1.2(k) of the Purchase Agreement shall be and hereby is
deleted in its entirety and the following shall be substituted therefor:
(k) Real Property. All real estate and interests in real estate
(including, but not limited to, all buildings and
improvements) used or usable in connection with the Business,
including without limitation, the sites listed on Schedule
1.2(k), attached hereto, and all contiguous and noncontiguous
"out parcels," including, but not limited to the out parcels
located in Corning, California and Troutdale, Oregon
(collectively, the "Owned Real Property");
5. Section 1.3(e) of the Purchase Agreement shall be and hereby is
deleted in its entirety and the following shall be substituted therefor:
(e) Certain Assets at Troutdale, Oregon. The personal property
(including equipment, but excluding food inventory) located at
and used in the operation of the kitchen and lounge and video
poker facility at the Troutdale, Oregon, facility, and listed
on Schedule 1.3(e).
6. The first sentence of Section 2.2.1 of the Purchase Agreement
shall be and hereby is deleted and the following shall be substituted therefor:
2.2.1 Preparation of Preliminary Closing Balance Sheet. Within
forty-five (45) days after the Closing, Seller will prepare and
deliver to Buyer a balance sheet (the "Preliminary Closing Balance
Sheet") as of the Closing reflecting, among other things: (a) the
current liabilities of Seller, excluding the current portion of any
long-term debt, liabilities related to environmental matters,
workers' compensation or insurance claims and all employee related
matters, and reducing such liabilities by an amount equal to
identifiable and
2
<PAGE> 3
realizable payment term discounts; and (b) an amount equal to the
accounts receivable of the Business (including accounts receivable
which relate or pertain to TABB, but excluding accounts receivable
which are subject to the American Credit Industry Insurance Company
credit insurance policy and the notes and accounts receivable listed
on Schedule 2.2.1(a), attached hereto), minus the amount of the
Assumed Balance Sheet Liabilities, minus a reserve for bad debts
mutually agreed upon by Seller and Buyer as forth on Schedule
2.2.1(b), which shall include a reserve of $130,000 relating to TABB
receivables (the "Receivables Amount").
7. Section 3.1 of the Purchase Agreement shall be and hereby is
amended by deleting item (ii) from the last paragraph of Section 3.1 and
replacing it with the following: "(ii) $1,500,000.00 (Environmental Reports
Adjustment)."
8. Section 3.1 of the Purchase Agreement shall be and hereby is
amended by deleting item (iii) from the last paragraph of Section 3.1 and
replacing it with the following: "(iii) $70,000.00 (Loyal Fueler Adjustment)."
9. Section 6.1.5 of the Purchase Agreement shall be and hereby is
deleted in its entirety and the following shall be substituted therefor:
6.1.5 Good Standing. Buyer shall have received a certificate of
Seller's existence dated no earlier than November 19, 1998, from the
State of Oregon and, where applicable, good standing certificates
from Seller's state of incorporation and from each other state in
which Seller is qualified to do business as a foreign corporation,
and tax clearance certificate(s) from the State of Oregon, each of
which shall be of a date reasonably contemporaneous to the Closing
Date;
10. Section 8.2.5 of the Purchase Agreement shall be and hereby is
deleted in its entirety and the following shall be substituted therefor:
8.2.5 No Assignment. With the prior written consent of Seller, which
consent shall not be unreasonably withheld, Buyer may assign all or
any part of this Agreement and all or any part of its rights or
obligations hereunder to an Affiliate of Buyer, in which event,
Seller shall execute and deliver any documents reasonably requested
by the assignee(s) in connection with such assignments, but no such
assignment shall relieve Buyer of its obligations hereunder. Buyer
may, without the prior written consent of Seller, assign this
Agreement as part of the sale of all or substantially all of its
business or pursuant to a collateral assignment for the benefit of
The Chase Manhattan Bank, or any successor lender, as collateral
agent. Except as provided in the preceding sentences, and except as
provided in Section 8.2.6, no assignment by any party of this
Agreement or any right or obligation hereunder may be made without
the prior written consent of all other parties, which consent may be
withheld with or without cause, and any assignment attempted without
that consent will be void.
3
<PAGE> 4
11. Section 8.2.11 of the Purchase Agreement shall be and hereby is
amended by deleting $7,000,000 where it appears in subsections (a) and (b) and
replacing it with the following: "$5,500,000."
12. Sections 9.5(b) and 9.6(b) shall be and hereby are amended by
deleting $7,000,000 where is appears and replacing it with the following:
"$5,500,000."
13. Section 10.9 of the Purchase Agreement shall be and hereby is
deleted in its entirety and the following shall be substituted therefor:
If any provision of this Agreement or a Transaction Document or the
application of any such provision to any person or circumstances
shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not effect any other provision hereof and
this Agreement or the Transaction Document, as applicable, shall
remain in force and be effectuated as if such illegal, invalid or
unenforceable provision is not part of such agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
of Asset Purchase Agreement as the date just written above.
BURNS BROS., INC.
By: /s/ Bruce E. Burns
------------------------------
Its: President
-----------------------------
TA OPERATING CORPORATION
By: /s/ Timothy L. Doane
------------------------------
Its: Senior Vice President
-----------------------------
<PAGE> 1
Exhibit 10.5
- --------------------------------------------------------------------------------
TravelCenters of America, Inc.
$270,000,000
Credit Agreement
dated as of
March 21, 1997,
as amended
and restated as of
November 24, 1998
Chase Securities Inc.
as Arranger
The Chase Manhattan Bank
as Agent
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Defined Terms...................................... 2
SECTION 1.02. Terms Generally.................................... 26
ARTICLE II
The Credits
SECTION 2.01. Commitments; Continuation of Existing Term Loans 27
SECTION 2.02. Loans.............................................. 27
SECTION 2.03. Notice of Borrowings............................... 29
SECTION 2.04. Evidence of Debt; Repayment of Loans............... 29
SECTION 2.05. Fees............................................... 30
SECTION 2.06. Interest on Loans.................................. 30
SECTION 2.07. Default Interest................................... 31
SECTION 2.08. Alternate Rate of Interest......................... 31
SECTION 2.09. Termination and Reduction of Commitments........... 31
SECTION 2.10. Conversion and Continuation of Term Borrowings 32
SECTION 2.11. Repayment of Term Borrowings....................... 33
SECTION 2.12. Optional Prepayment................................ 34
SECTION 2.13. Mandatory Prepayments.............................. 35
SECTION 2.14. Reserve Requirements; Change in Circumstances 37
SECTION 2.15. Change in Legality................................. 39
SECTION 2.16. Indemnity.......................................... 39
SECTION 2.17. Pro Rata Treatment................................. 40
SECTION 2.18. Sharing of Setoffs................................. 40
SECTION 2.19. Payments........................................... 41
SECTION 2.20. Taxes.............................................. 41
SECTION 2.21. Swingline Loans.................................... 43
ARTICLE III
Letters of Credit
SECTION 3.01. Issuance of Letters of Credit...................... 44
SECTION 3.02. Participations; Unconditional Obligations.......... 44
SECTION 3.03. LC Fee............................................. 45
SECTION 3.04. Agreement to Repay LC Disbursements................ 45
<PAGE> 3
Contents, page 2
Page
----
SECTION 3.05. Letter of Credit Operations........................ 46
SECTION 3.06. Cash Collateralization............................. 46
SECTION 3.07. Termination of LC Commitment....................... 47
SECTION 3.08. Fronting Bank Fees................................. 47
SECTION 3.09. Resignation or Removal of Fronting Bank............ 47
ARTICLE IV
Representations and Warranties
SECTION 4.01. Organization; Powers............................... 48
SECTION 4.02. Authorization...................................... 48
SECTION 4.03. Enforceability..................................... 48
SECTION 4.04. Governmental Approvals............................. 49
SECTION 4.05. Financial Statements............................... 49
SECTION 4.06. No Material Adverse Change......................... 49
SECTION 4.07. Title to Properties; Possession Under Leases. 49
SECTION 4.08. Subsidiaries....................................... 50
SECTION 4.09. Litigation; Compliance with Laws................... 50
SECTION 4.10. Agreements......................................... 50
SECTION 4.11. Federal Reserve Regulations........................ 50
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act..................................... 51
SECTION 4.13. Use of Proceeds.................................... 51
SECTION 4.14. Tax Returns........................................ 51
SECTION 4.15. No Material Misstatements.......................... 51
SECTION 4.16. Employee Benefit Plans............................. 51
SECTION 4.17. Environmental and Safety Matters................... 52
SECTION 4.18. Solvency........................................... 52
SECTION 4.19. Employment and Management Agreements............... 53
SECTION 4.20. Capitalization..................................... 53
SECTION 4.21. Security Documents................................. 54
SECTION 4.22. Labor Matters...................................... 55
SECTION 4.23. Location of Real Property and Leased Premises 55
SECTION 4.24. Insurance.......................................... 55
SECTION 4.25. Delivery of Documents.............................. 55
SECTION 4.26. Fees and Expenses.................................. 56
SECTION 4.27. Year 2000.......................................... 56
ARTICLE V
Conditions of Lending and Issuance of
Letters of Credit
SECTION 5.01. All Credit Events.................................. 57
<PAGE> 4
Contents, page 3
Page
----
SECTION 5.02. Borrowing Under the Additional
Term Loan Facility.............................. 57
ARTICLE VI
Affirmative Covenants
SECTION 6.01. Existence; Business and Properties................. 61
SECTION 6.02. Insurance.......................................... 62
SECTION 6.03. Obligations and Taxes.............................. 63
SECTION 6.04. Financial Statements, Reports, etc................. 64
SECTION 6.05. Litigation and Other Notices....................... 65
SECTION 6.06. ERISA.............................................. 66
SECTION 6.07. Maintaining Records; Access to Properties and
Inspections..................................... 66
SECTION 6.08. Use of Proceeds.................................... 66
SECTION 6.09. Fiscal Year........................................ 66
SECTION 6.10. Further Assurances................................. 66
SECTION 6.11. Rate Protection Agreements......................... 67
SECTION 6.12. Environmental and Safety Laws...................... 67
SECTION 6.13. Material Contracts................................. 68
SECTION 6.14. Certificates of Occupancy, Permits and Zoning 68
ARTICLE VII
Negative Covenants
SECTION 7.01. Indebtedness....................................... 70
SECTION 7.02. Liens.............................................. 72
SECTION 7.03. Sale and Leaseback Transactions.................... 74
SECTION 7.04. Investments, Loans and Advances.................... 75
SECTION 7.05. Mergers, Consolidations, Sales of Assets and
Acquisitions.................................... 76
SECTION 7.06. Dividends and Distributions........................ 78
SECTION 7.07. Transactions with Affiliates....................... 78
SECTION 7.08. Business of Borrower, the Guarantors and TAFSI 78
SECTION 7.09. Limitations on Debt Prepayments.................... 81
SECTION 7.10. Amendment of Certain Documents and Subordinated
Notes........................................... 81
SECTION 7.11. Limitation on Leases............................... 82
SECTION 7.12. Subsidiaries....................................... 82
SECTION 7.13. Capital Expenditures............................... 82
SECTION 7.14. Consolidated Net Worth............................. 83
SECTION 7.15. Current Ratio...................................... 83
SECTION 7.16. Interest Expense Coverage Ratio.................... 83
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Contents, page 4
Page
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SECTION 7.17. Leverage Ratio..................................... 84
ARTICLE VIII
Events of Default.................................................... 84
ARTICLE IX
The Agent............................................................ 87
ARTICLE X
Miscellaneous
SECTION 10.01. Notices............................................ 89
SECTION 10.02. Survival of Agreement.............................. 90
SECTION 10.03. Binding Effect..................................... 90
SECTION 10.04. Successors and Assigns............................. 90
SECTION 10.05. Expenses; Indemnity................................ 93
SECTION 10.06. Right of Setoff.................................... 94
SECTION 10.07. APPLICABLE LAW..................................... 94
SECTION 10.08. Waivers; Amendment................................. 94
SECTION 10.09. Interest Rate Limitation........................... 95
SECTION 10.10. Entire Agreement................................... 95
SECTION 10.11. WAIVER OF JURY TRIAL............................... 95
SECTION 10.12. Severability....................................... 96
SECTION 10.13. Counterparts....................................... 96
SECTION 10.14. Headings........................................... 96
SECTION 10.15. Jurisdiction; Consent to Service of Process........ 96
SECTION 10.16. Investment of Certain Escrowed Amounts............. 96
SECTION 10.17. Confidentiality.................................... 97
SECTION 10.18. Pre-Funding Escrow Arrangements.................... 98
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Contents, page 5
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Exhibits
Exhibit A Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Assignment of Leases and Rents
Exhibit D Form of Collateral Account Agreement
Exhibit E Form of Collateral Assignment
Exhibit F-1 Form of Guarantee Agreement
Exhibit F-2 Form of TA Travel Guarantee Agreement
Exhibit G Form of Indemnity and Subrogation Agreement
Exhibit H Form of Intercreditor Agreement
Exhibit I Form of Mortgage
Exhibit J Form of Pledge Agreement
Exhibit K-1 Form of Security Agreement
Exhibit K-2 Form of TA Travel Security Agreement
Exhibit L Form of Trademark Security Agreement
Exhibit M-1 Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
Exhibit M-2 Form of Opinion of Local Counsel
Exhibit N Form of Aircraft Mortgage
Exhibit O Terms and Conditions for Escrow Funding
Schedules
Schedule 1.01(a) Mortgaged Properties
Schedule 1.01(c) Mortgage Filing Offices
Schedule 2.01 Commitments and Lenders
Schedule 4.07(b) Lease Exceptions
Schedule 4.07(c) Notices of Condemnation
Schedule 4.09 Litigation
Schedule 4.19 Employment and Management Agreements
Schedule 4.20(a)(i) Stockholders
Schedule 4.20(a)(ii) Holders of Voting Trust Certificates
Schedule 4.20(f) Agreements Relating to Capital Stock
Schedule 4.21 UCC Filing Offices
Schedule 4.23(a) Owned Real Property
Schedule 4.23(b) Leased Real Property
Schedule 5.02(a) Local Counsel Listing
Schedule 6.02(e) Certain Phase II Environmental Consultant Insurance
Schedule 6.14 Modified Mortgaged Properties
Schedule 7.01 Indebtedness
Schedule 7.02 Liens
Schedule 7.03 Sale Lease-Back Transactions
Schedule 7.05(g) Permitted Truckstops Dispositions
Schedule 7.07 Permitted Affiliate Transactions
Schedule 7.11(a) Leases
<PAGE> 7
1
CREDIT AGREEMENT dated as of March 21, 1997, as
amended and restated as of November 24, 1998, among
the Borrower, the Lenders, the Agent, the Fronting
Bank and the Swingline Lender (each such term and
each other term used but not defined in this
introductory statement having the meaning assigned
thereto in Article I).
The Borrower, the Lenders party thereto, the Agent, the Fronting
Bank and the Swingline Lender are parties to a Credit Agreement dated as of
March 21, 1997, as amended as of March 1, 1998 (as in effect immediately before
the Restatement Closing Date, the "Original Credit Agreement"), pursuant to
which (a) such Lenders made Term Loans to the Borrower in an aggregate principal
amount of $80,000,000, (b) the Swingline Lender committed to make Swingline
Loans to the Borrower, at any time and from time to time prior to the Revolving
Credit Maturity Date, in an aggregate principal amount at any time outstanding
not in excess of $5,000,000, (c) such Lenders committed to make Revolving Loans
to the Borrower, at any time and from time to time prior to the Revolving Credit
Maturity Date, in an aggregate principal amount at any time outstanding not in
excess of $40,000,000 minus the sum of (i) the aggregate principal amount of
Swingline Loans outstanding at such time and (ii) the LC Exposure at such time,
and (d) the Fronting Bank committed to issue Letters of Credit, in an aggregate
face amount at any time outstanding not in excess of $20,000,000.
The Borrower has requested that the Original Credit Agreement be
amended and restated in order to (a) permit the Borrower to effect on the
Restatement Closing Date the Burns Acquisition and the Series II Tranche A
Exchange Note Refinancing, (b) increase the Term Loan Commitments by an
aggregate amount of $150,000,000, (c) permit the Borrower under certain
conditions specified herein to effect the Additional Permitted Acquisition, (d)
permit the release of certain real property previously included in the
Collateral and (e) effect certain other amendments to the Original Credit
Agreement. The transactions described in the foregoing clauses (a) and (b),
together with the amendment and restatement of the Original Credit Agreement in
accordance with this Agreement, are referred to herein collectively as the
"Additional Transactions".
The proceeds of the Additional Term Loans to be made by the Lenders
on the Restatement Closing Date are to be used solely to (a) fund the cash
purchase price of approximately $55,000,000 to be paid in connection with the
Burns Acquisition, (b) repay in full all the Series II Tranche A Exchange Notes
in an aggregate principal amount of $50,000,000 plus accrued interest and any
Break Funding Costs (as defined in the Tranche A Exchange Note Purchase
Agreements as in effect immediately prior to the consummation of the Additional
Transactions) related thereto to but excluding the date of payment, (c) fund up
to $30,000,000 of the cash purchase price to be paid in connection with the
Additional Permitted Acquisition, (d) fund anticipated capital expenditures of
the Borrower and its subsidiaries and (e) pay the fees and expenses incurred in
connection with the Additional Transactions and pay certain other related
expenses. The proceeds of the Swingline Loans and the Revolving Loans are to be
used and the Letters of Credit are to be issued solely for general corporate
purposes of the Borrower and its subsidiaries.
The Lenders, the Swingline Lender and the Fronting Bank are willing
to amend and restate the Original Credit Agreement in the form hereof for such
purposes, the Lenders and the Swingline Lender are willing
<PAGE> 8
2
to extend such credit to the Borrower and the Fronting Bank is willing to issue
Letters of Credit for the account of the Borrower, in each case on the terms and
subject to the conditions set forth herein. Accordingly, the parties hereto
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Alternate Base Rate in accordance with
the provisions of Article II.
"ABR Spread" shall mean (a) in the case of Term Loans, 2.75% per
annum and (b) in the case of Revolving Loans, 1.75% per annum.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Accredited Lessee" shall have the meaning assigned to such term in
Section 7.08(b)(ii).
"Additional Permitted Acquisition" shall mean a single acquisition
(by merger, consolidation, asset purchase or otherwise) in a single transaction
or series of related transactions of substantially all the assets from, or 100%
of the outstanding shares or other equity interests in, any Person, for
aggregate consideration not exceeding $65,000,000 (including assumed
Indebtedness but excluding up to $5,000,000 of consideration comprised of the
Borrower's Common Stock), provided that:
(a) the Borrower or any Guarantor shall have entered into a
definitive purchase agreement, definitive merger agreement, definitive
tender offer agreement or other similar definitive agreement with respect
to such acquisition not later than March 31, 1999, and such acquisition
shall have been consummated not later than December 31, 1999,
(b) the business or Person acquired shall be in the same principal
line of business as TA and National,
(c) such acquisition shall have been approved by such Person's board
of directors and shall not have been preceded by an unsolicited offer by
the Borrower for such Person,
(d) neither the Borrower nor any of its subsidiaries shall assume or
otherwise become liable for any Indebtedness in connection with such
acquisition (except for Indebtedness permitted by Section 7.01),
<PAGE> 9
3
(e) in the case of the acquisition (by merger, consolidation or
otherwise) of 100% of the outstanding shares or other equity interests of
such Person, simultaneously with or immediately following such
acquisition, either (i) such acquired Person shall be merged with and into
one of the Guarantors or (ii)(A) the Borrower or any Guarantor shall grant
the Collateral Agent a first-priority pledge of 100% of the shares or
other equity interests of such Person and (B) such Person shall become a
Guarantor (by merger, consolidation or otherwise, including by the merger
of a then existing Guarantor into such Person with such Person being the
surviving entity, provided that such Person assumes by operation of law
all of the liabilities and obligations of the existing Guarantor) and
shall take all actions that may be required under applicable law or that
the Required Lenders, the Agent or the Collateral Agent may reasonably
request in order to create and perfect first-priority security interests
in substantially all of such Person's personal property and significant
real property to secure the Obligations, such pledges, security interests
and Liens being created in the case of each of the foregoing clauses (A)
and (B) at the Borrower's expense and cost, pursuant to the Borrower's
obligations under Section 6.10 and pursuant to security agreements,
mortgages, deeds of trust and other instruments and documents in form and
substance satisfactory to the Collateral Agent (provided that the
Collateral Agent's approval of such instruments and documents shall not
limit in any way the rights of the Required Lenders pursuant to Section
6.10),
(f) immediately after giving effect to such acquisition and any
related transactions, no Default or Event of Default shall have occurred
and be continuing or would result therefrom,
(g) all transactions related to such acquisition shall be
consummated in accordance with applicable laws,
(h) the Borrower's chief financial officer shall have provided the
Agent with a certification, reasonably satisfactory to the Agent, that
such acquisition will not result in the assumption by the Borrower or any
of its subsidiaries of any material environmental and employee health and
safety exposures or other material contingent liabilities, and
(i) after giving pro forma effect to such acquisition (including
taking into account any expense reductions reasonably expected by the
Borrower to result within 12 months following such acquisition, as set
forth in a Responsible Officer's certificate delivered to the Agent), (A)
the Borrower shall be in compliance with Sections 7.14, 7.15, 7.16 and
7.17, (B) the Borrower's Consolidated Net Worth shall not be any lower
than the Borrower's actual Consolidated Net Worth immediately before
giving pro forma effect to such acquisition, (C) the Borrower's Interest
Expense Coverage Ratio for the most recently completed period of four
consecutive fiscal quarters shall not have decreased by more than 0.25
from the Borrower's actual Interest Expense Coverage Ratio for such period
before giving pro forma effect to such acquisition (assuming that such
acquisition occurred on the first day of such period) and (D) the
Borrower's Leverage Ratio shall not have increased by more than 0.50 from
the Borrower's actual Leverage Ratio immediately before giving pro forma
effect to such acquisition.
"Additional Reserve Amount" shall have the meaning assigned to such
term in Section 5.02(z).
<PAGE> 10
4
"Additional Term Loans" shall mean the term loans made by a Lender
to the Borrower pursuant to clause (b) of Section 2.01. Each Additional Term
Loan shall be a Eurodollar Term Loan or an ABR Term Loan.
"Additional Term Loan Commitments" shall mean, with respect to each
Lender, the commitment of such Lender to make Additional Term Loans hereunder as
set forth in clause (b) of Section 2.01, or in the Assignment and Acceptance
pursuant to which such Lender assumed its Additional Term Loan Commitment, as
the same may be reduced from time to time pursuant to Section 2.09. The
aggregate principal amount of the Additional Term Loan Commitments is
$150,000,000 on the Restatement Closing Date.
"Additional Term Loan Facility" shall mean the aggregate amount of
the Lenders' Additional Term Loan Commitments.
"Additional Transactions" shall have the meaning assigned to such
term in the introductory statement to this Agreement.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate
in effect for such Interest Period and (b) Statutory Reserves. For purposes
hereof, the term "LIBO Rate" shall mean the rate (rounded upwards, if necessary,
to the next 1/16 of 1%) at which dollar deposits approximately equal in
principal amount to the Agent's portion of such Eurodollar Borrowing and for a
maturity comparable to such Interest Period are offered to the principal London
office of the Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Administrative Fees" shall have the meaning assigned to such term
in Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
Person specified.
"Agent" shall mean The Chase Manhattan Bank, a New York banking
corporation, in its capacity as agent for the Lenders.
"Airplane" shall have the meaning assigned to such term in Section
7.04(l).
"Airplane Mortgage" shall mean the aircraft mortgage previously
granted to the Collateral Agent on the Airplane, including any assignment of
leases and rents, as amended and restated as of the Restatement Closing Date and
substantially in the form of Exhibit N, and any similar mortgage granted on a
replacement Airplane pursuant to Section 6.10.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day,
<PAGE> 11
5
(b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, the
term "Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Agent as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective on the
date such change is publicly announced as being effective. The term "Base CD
Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment Rate. The term
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it. The term "Federal Funds
Effective Rate" shall mean, for any day, the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York or, if such rate is not so published
for any day that is a Business Day, the average of quotations for the day of
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate
or both for any reason, including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or both, of
the first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"Ancillary Agreements" shall mean the TA Ancillary Agreements, the
National Ancillary Agreements and the Burns Ancillary Agreements.
"Applicable Percentage" of any Participating Lender shall mean the
percentage of the aggregate Revolving Credit Commitments represented by such
Participating Lender's Revolving Credit Commitment.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Agent as the then-current net annual assessment rate that will be employed in
determining amounts payable by the Agent to the Federal Deposit Insurance
Corporation (or any successor) for insurance by such Corporation (or such
successor) of time deposits made in dollars at the Agent's domestic offices.
"Asset Purchase Agreements" shall mean the TA Asset Purchase
Agreement, the National Asset Purchase Agreement and the Burns Asset Purchase
Agreement.
<PAGE> 12
6
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Agent, in the form
of Exhibit B or such other form as shall be approved by the Agent.
"Assignments of Leases and Rents" shall mean the Assignments of
Leases and Rents, each as amended and restated as of the Restatement Closing
Date and substantially in the form of Exhibit C, between the Borrower and the
Collateral Agent.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrower" shall mean TravelCenters of America, Inc., a Delaware
corporation.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect,
provided that a group of Existing Term Loans and Additional Term Loans all of a
single Type and as to which a single Interest Period is in effect shall be
deemed to be a single Borrowing.
"Burns" shall mean Burns Bros., Inc., an Oregon corporation.
"Burns Acquisition" shall mean the acquisition by TA of Burns'
Travel Stops Division for aggregate cash consideration of approximately
$55,000,000 pursuant to the Burns Asset Purchase Agreement.
"Burns Ancillary Agreements" shall mean the Subway Purchase
Agreement, the Enterprises Asset Purchase Agreement, the BFR Asset Purchase
Agreement, the Services Agreement, the General Bill of Sale and Assignment, the
Assumption Agreement, the Trademark Assignment, the Gaming Agreement and the
Intellectual Property License Agreement (each as defined in the Burns Asset
Purchase Agreement).
"Burns Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated as of October 17, 1998, between Burns and TA, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms of this Agreement.
"Burns Network" shall mean the Travel Stops Division of Burns
acquired by TA in the Burns Acquisition.
"Business Day" shall mean any day (other than a Saturday, Sunday or
legal holiday in the State of New York) on which banks are open for business in
New York City; provided, however, that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" shall mean, for any period, the sum of all
amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment and other capital expenditures on a consolidated
statement of cash flows for the Borrower and its subsidiaries during such period
(including the amount of assets leased under any Capital Lease Obligation).
Notwithstanding the foregoing, the term "Capital Expenditures" shall not include
(a) capital expenditures in respect of the reinvestment of sales proceeds,
insurance proceeds and
<PAGE> 13
7
condemnation proceeds received by the Borrower or its subsidiaries in connection
with the sale, transfer or other disposition of the Borrower's or its
subsidiaries' business units, assets or properties, if (as contemplated in the
definition of the term "Prepayment Event") such reinvestment (including, in the
case of insurance proceeds, reinvestment in the form of restoration or
replacement of damaged property) shall have resulted in the event giving rise to
the receipt of such amounts not being considered a "Prepayment Event" as
contemplated in the definition of such term, (b) Transition Capital Expenditures
made during such period, (c) the purchase price with respect to the Additional
Permitted Acquisition or (d) the purchase price with respect to the Burns
Acquisition.
"Capital Lease Obligations" of any Person shall mean the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Cash Interest Expense" shall mean, for any period, the net interest
expense of the Borrower and its subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, excluding (a) any fees and expenses
payable or amortized during such period by the Borrower or its subsidiaries in
connection with the Transactions and (b) any interest on the Subordinated Notes
not paid in cash prior to maturity of the Subordinated Notes. For purposes of
the foregoing, net interest expense shall be determined after giving effect to
any net payments made or received by the Borrower with respect to Rate
Protection Agreements.
"Casualty" shall have the meaning assigned to such term in Section 9
of the Guarantee Agreement.
"CBLA Certificate of Deposit" shall have the meaning assigned to
such term in Section 7.02(o).
"CERCLA" shall have the meaning assigned to such term in the
definition of the term "Environmental and Safety Laws".
A "Change in Control" shall be deemed to have occurred if:
(a) any Person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on March 21, 1997), other
than (i) the Institutional Investors (including the First Boston Entities
(as defined below)) or (ii) the Management Purchasers and their Permitted
Transferees (as set forth in Section 2(b) of the Stockholders Agreement),
shall directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, have the ability to elect a majority
of the board of directors of the Borrower;
(b)(i) the Institutional Investors (including the First Boston
Entities) or (ii) the First Boston Entities, respectively, shall cease to
own in the aggregate, directly or indirectly, beneficially and of record,
shares representing at least 65% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower
held by such Persons on March 21, 1997, provided that such 65% shall be
reduced by the dilution suffered by such Persons as a result of any
issuance by the Borrower after the Closing Date
<PAGE> 14
8
of any capital stock representing ordinary voting power (A) for fair value
for cash to non-Affiliates of the applicable parties under clause (i) or
(ii) above, as the case may be, or (B) to its employees to the extent that
the shares issued to such employees do not exceed 15% of the
then-outstanding capital stock having ordinary voting power;
(c) any Person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on March 21, 1997), other
than the Institutional Investors (including the First Boston Entities),
shall own directly or indirectly, beneficially or of record, shares
representing more than the lesser at any time of (i) 35% of the aggregate
ordinary voting power represented by the issued and outstanding capital
stock of the Borrower and (ii) the percentage of the aggregate ordinary
voting power represented by the shares owned directly or indirectly,
beneficially or of record, by the Institutional Investors (including the
First Boston Entities) at such time;
(d) a majority of the seats (other than vacant seats) on the board
of directors of the Borrower shall at any time be occupied by Persons who
were neither (i) nominated by the Institutional Investors (including the
First Boston Entities) or the Management Purchasers and their Permitted
Transferees nor (ii) elected by directors so nominated;
(e) any "Change in Control" (however denominated) shall have
occurred under the Tranche A Exchange Note Purchase Agreements or the
Subordinated Note Indenture;
(f) the Borrower shall cease to own and control directly, of record
and beneficially (other than as a result of a merger of one Guarantor into
another Guarantor permitted pursuant to Section 7.05(h)(iv)), 100% of each
class of outstanding capital stock of each Guarantor and TAFSI free and
clear of all Liens (other than any Liens created under the Pledge
Agreement); or
(g) any Guarantor or TAFSI shall issue any class of capital stock
(or security convertible into any of its capital stock) that is not
pledged to the Collateral Agent for the ratable benefit of the Secured
Parties.
For purposes of this definition, the term "First Boston Entities" shall mean
Credit Suisse First Boston Corporation, The Clipper Group, L.P., Merchant
Truckstops, L.P., Clipper Capital Associates, L.P. and Clipper/Merchant I, L.P.
and their Affiliates and any of their designees on the Closing Date. For
purposes of clause (b) of this definition, the Convertible Preferred Stock and
the Senior Convertible Participating Preferred Stock shall be deemed to
constitute capital stock with ordinary voting power. For purposes only of
clauses (a), (c) and (d) of this definition, the term "Institutional Investor"
shall be deemed to include any other holder or holders of shares of the Borrower
having ordinary voting power if any Institutional Investor or First Boston
Entity (other than an Institutional Investor deemed to be an Institutional
Investor solely by virtue of this provision) shall hold the irrevocable general
proxy of each such holder in respect of the shares held by such holder.
"Class" (a) when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans or Term Loans, (b) when used in reference to any Commitment, refers to
whether such Commitment is a Revolving Credit Commitment or a Term Loan
Commitment and (c) when used in reference to any Lender, refers to whether such
Lender is a Term Lender or a Revolving Lender.
<PAGE> 15
9
"Closing Date" shall mean March 27, 1997.
"Code" shall mean the Internal Revenue Code of 1986, or any
successor statute thereto, as the same may be amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include the Lockbox Collateral and the
Mortgaged Properties.
"Collateral Account" shall have the meaning assigned to such term in
the Collateral Account Agreement.
"Collateral Account Agreement" shall mean the Collateral Account
Agreement, as amended and restated as of the Restatement Closing Date and
substantially in the form of Exhibit D, between the Borrower and the Collateral
Agent for the benefit of the Secured Parties.
"Collateral Agent" shall mean The Chase Manhattan Bank, as
Collateral Agent under the Intercreditor Agreement, the Security Documents and
the Guarantee Agreement.
"Collateral Assignment" shall mean the Collateral Assignment, as
amended and restated as of the Restatement Closing Date and substantially in the
form of Exhibit E, from the Borrower, TAFSI, TA and National to the Collateral
Agent, providing for the assignment to the Collateral Agent of the Environmental
Agreements, the Ancillary Agreements, the Franchise Agreements, the Rate
Protection Agreements and certain other agreements specified in such Collateral
Assignment.
"Commitment" shall mean, with respect to each Lender, such Lender's
Term Loan Commitment and Revolving Credit Commitment.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05(a).
"Common Stock" shall have the meaning assigned to such term in
Section 4.20.
"Condemnation Proceeds" shall have the meaning assigned to such term
in Section 9 of the Guarantee Agreement.
"Consolidated Net Worth" shall mean, at any date, on a consolidated
basis for the Borrower and its subsidiaries, (a) the sum of (i) common stock
taken at par or stated value, (ii) preferred stock (other than preferred stock
that is mandatorily redeemable on or prior to the first anniversary of the
latest final maturity of the then outstanding Tranche A Exchange Notes) taken at
its liquidation value, (iii) capital surplus relating to common stock and (iv)
retained earnings (or deficit) at such date minus (b) the sum of treasury stock
at such date (other than treasury stock repurchased pursuant to Section 7.06),
all determined in accordance with GAAP and after giving effect to all
adjustments required thereby, but excluding any adjustments required by purchase
accounting.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
<PAGE> 16
10
"Convertible Preferred Stock" shall mean the convertible perpetual
preferred stock of the Borrower, par value $.01 per share, which stock is
convertible into the Common Stock of the Borrower.
"Credit Event" shall have the meaning assigned to such term in
Article V.
"Current Assets" as of any date shall mean the total assets that
would properly be classified as current assets of the Borrower and its
subsidiaries on a consolidated basis as of such date in accordance with GAAP.
"Current Liabilities" as of any date shall mean the total
liabilities that would properly be classified as current liabilities (other than
the current portion of Funded Debt) of the Borrower and its subsidiaries on a
consolidated basis as of such date in accordance with GAAP.
"Current Ratio" shall mean as of any date the ratio of Current
Assets as of such date to Current Liabilities as of such date.
"Default" shall mean any event or condition that upon notice, lapse
of time or both would constitute an Event of Default.
"Default Rate" shall have the meaning assigned to such term in
Section 2.07.
"dollars" or "$" shall mean lawful money of the United States.
"EBITDA" with respect to the Borrower and its subsidiaries for any
period shall mean the sum of (a) Net Income for such period, (b) all Federal,
state, local and foreign income taxes deducted in determining such Net Income,
(c) interest expense deducted in determining such Net Income, (d) depreciation,
amortization and other noncash charges deducted in determining such Net Income
and (e) to the extent deducted in determining such Net Income with respect to
any fiscal quarter ending on or prior to December 31, 2000, transition costs
paid during such period, provided that the aggregate amount of all transition
costs incurred after the Closing Date and permitted to be added back to Net
Income pursuant to this definition shall not exceed $15,000,000. For the
purposes of calculating the Interest Expense Coverage Ratio, the term "EBITDA"
shall not include the gain on the initial sale of assets to any lessee in
connection with the leasing of any Truckstop in accordance with Section 7.08.
"Effectiveness Agreement" shall mean the Effectiveness Agreement
dated as of November 24, 1998, among the Borrower, the Departing Lenders (as
defined therein), the Continuing Lenders (as defined therein) and the Additional
Lenders (as defined therein), the Agent, the Fronting Bank and the Swingline
Lender.
"Environmental Agreements" shall mean (a) the Environmental
Agreement dated as of July 22, 1993 (as amended, supplemented or otherwise
modified from time to time), among BP Exploration & Oil Inc., TA and certain
other parties and (b) the Environmental Agreement dated as of November 23, 1992
(as amended, supplemented or otherwise modified from time to time), between
Union Oil Company of California and National.
"Environmental and Safety Laws" shall mean any and all applicable
current and future treaties, laws, regulations, enforceable requirements,
binding determinations, orders, decrees,
<PAGE> 17
11
judgments, injunctions, permits, approvals, authorizations, licenses,
permissions, notices or binding agreements issued, promulgated or entered by any
Governmental Authority, relating to the environment, to employee health or
safety as it pertains to the use or handling of, or exposure to, Hazardous
Substances, to preservation or reclamation of natural resources or to the
management, release or threatened release of contaminants or noxious odors,
including the Hazardous Materials Transportation Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1977, the Clean Air
Act of 1970, as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1970, as amended, the Emergency Planning
and Community Right-to-Know Act of 1986, the Safe Drinking Water Act of 1974, as
amended, and any similar or implementing state or local laws and all amendments
or regulations promulgated thereunder.
"Environmental Claim" shall mean any written notice of any
Governmental Authority alleging potential liability for damage to the
environment or by any Person alleging potential liability for personal injury
(including sickness, disease or death), in either case, resulting from or based
upon (a) the presence or Release (including intentional and unintentional,
negligent and nonnegligent, sudden or nonsudden, accidental or nonaccidental
leaks or spills) of any Hazardous Substance at, in or from the property, whether
or not owned or leased by the Borrower or a Guarantor or (b) any other
circumstances forming the basis of any violation, or alleged violation, of any
Environmental and Safety Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is, was or hereafter becomes a member of a group of which the
Borrower is a member and which is treated as a single employer under Section 414
of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Eurodollar Term Loan or Eurodollar
Revolving Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at
a rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in
Article VIII.
"Excess Cash Flow" shall mean, for any period, the consolidated Net
Income of the Borrower and its subsidiaries during such period plus, without
duplication, (a) (i) the aggregate amounts deducted in determining such Net
Income in respect of all deferred charges and depreciation,
<PAGE> 18
12
amortization and other noncash charges (including any interest expense other
than Cash Interest Expense), (ii) all noncash losses deducted in determining
such Net Income, (iii) to the extent not included in such Net Income, the
aggregate amount of all income tax refunds received during such period, (iv) the
principal amount of any Indebtedness incurred or assumed pursuant to Section
7.01(c) during such period, (v) the aggregate amount of Indebtedness with
respect to Capital Lease Obligations incurred pursuant to Sections 7.01(d) and
7.11(c) during such period and (vi) the net negative change, if any, in Net
Working Capital during such period minus (b) (i) all noncash gains and credits
included in such Net Income, (ii) scheduled payments during such period of the
principal of Term Loans, (iii) scheduled payments during such period of the
principal of Indebtedness permitted under Section 7.01 other than the Loans
(including the Tranche A Exchange Notes and the Subordinated Notes), but only to
the extent that such payments cannot by their terms be reborrowed or redrawn,
(iv) prepayments during such period of Term Loans pursuant to Section 2.12 and
Tranche A Exchange Notes (as contemplated by Section 2.12) other than in
connection with the Series II Tranche A Exchange Note Refinancing, (v) the
aggregate amount of Capital Expenditures and Transition Capital Expenditures of
the Borrower and its subsidiaries made and permitted hereunder during such
period (other than the amount of such Capital Expenditures and Transition
Capital Expenditures that were financed during such period with funds released
to the Borrower from the Collateral Account), (vi) repayments during such period
of the portion of Capital Lease Obligations of the Borrower and its subsidiaries
not allocable to Cash Interest Expense and (vii) the net positive change, if
any, in Net Working Capital during such period, in each case determined in
accordance with GAAP.
"Existing Term Loans" shall mean the term loans made to the Borrower
by the Lenders on the Closing Date pursuant to clause (a) of Section 2.01 of the
Original Credit Agreement. Each Existing Term Loan shall be a Eurodollar Term
Loan or an ABR Term Loan. The aggregate principal amount of the Existing Term
Loans outstanding on the Restatement Closing Date is $79,250,000.
"Existing Term Loan Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Existing Term Loans to the
Borrower on the Closing Date as set forth in clause (a) of Section 2.01 of the
Original Credit Agreement and as reflected on Schedule 2.01 thereto, or in the
Assignment and Acceptance pursuant to which such Lender assumed its Existing
Term Loan Commitment, as the same may be reduced from time to time pursuant to
Section 2.09.
"Existing Term Loan Facility" shall mean the aggregate amount of the
Lender's Existing Term Loan Commitments.
"Facilities" shall mean, collectively, the Term Facilities and the
Revolving Facility.
"Fees" shall mean the Administrative Fees, the Commitment Fees, the
LC Fees, the fees specified in Section 2.05(c) and the fees specified in Section
3.08.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, Treasurer or Controller of such
corporation.
"First Plaza" shall mean the First Plaza Group Trust, a trust
organized under the laws of the State of New York.
<PAGE> 19
13
"Franchise Agreements" shall mean the Franchise Agreements pursuant
to which the Franchisees have or shall become franchisees of any Guarantor or
TAFSI.
"Franchisee" shall mean each party who has executed, or will
execute, a Franchise Agreement with any Guarantor or TAFSI.
"Fronting Bank" shall mean The Chase Manhattan Bank, a New York
banking corporation, in its capacity as fronting bank for Letters of Credit.
"Funded Debt" as to any Person shall mean all Indebtedness of such
Person that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the option of
such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders to
extend credit during a period of more than one year from such date, including
all amounts of Funded Debt required to be paid or prepaid within one year from
the date of its creation and, in the case of the Borrower, Indebtedness in
respect of the Loans and the Swingline Loans.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including any
obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness; provided, however, that
the term "Guarantee" shall not include endorsements for collection or deposit,
in either case in the ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement, as amended
and restated as of the Restatement Closing Date and substantially in the form of
Exhibit F-1, between each of the Guarantors and the Collateral Agent, provided
that, solely with respect to TA Travel, the term "Guarantee Agreement" shall
mean the TA Travel Guarantee Agreement, as amended and restated as of the
Restatement Closing Date and substantially in the form of Exhibit F-2, between
TA Travel and the Collateral Agent.
"Guarantors" shall mean TA, National, TA Travel and each other
Person that is or becomes a party to the Guarantee Agreement, as a guarantor,
and the permitted successors and assigns of each such Person.
"Hazardous Substances" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, material or waste, including petroleum, its
derivatives, by-products and other hydrocarbons, or any substance having any
constituent elements, displaying any of the foregoing
<PAGE> 20
14
characteristics, including polychlorinated biphenyls ("PCBs"), asbestos or
asbestos-containing material, and any substance, waste or material regulated
under Environmental and Safety Laws.
"Indebtedness" of any Person shall mean, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed by such Person, (g) all Guarantees by such Person of Indebtedness
of others, (h) all Capital Lease Obligations of such Person, (i) all obligations
of such Person in respect of interest rate protection agreements, foreign
currency exchange agreements or other interest or exchange rate hedging
arrangements, (j) all obligations of such Person as an account party to
reimburse any bank or any other Person in respect of letters of credit and
bankers' acceptances and (k) all obligations of such Person in respect of
fuel-supply hedging agreements and arrangements. The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or member, other than to the extent that the
instrument or agreement evidencing such Indebtedness expressly limits the
liability of such Person in respect thereof pursuant to provisions and terms
reasonably satisfactory to the Agent.
"Indemnity and Subrogation Agreement" shall mean the Indemnity,
Subrogation and Contribution Agreement, as amended and restated as of the
Restatement Closing Date and substantially in the form of Exhibit G, between the
Borrower, the Guarantors and the Collateral Agent.
"Institutional Investors" shall mean The Clipper Group, L.P., First
Plaza, Credit Suisse First Boston Corporation, Barclays USA, Inc., Olympus
Private Placement Fund, L.P., Clipper/ Merchant I, L.P., Clipper Capital
Associates, L.P., National Partners, L.P., National Partners III, L.P., UBS
Capital Corporation, The Travelers Indemnity Company, The Phoenix Insurance Co.
and their respective Affiliates.
"Insurance Proceeds" shall have the meaning assigned to such term in
Section 9 of the Guarantee Agreement.
"Intercreditor Agreement" shall mean the Master Collateral and
Intercreditor Agreement, as amended and restated as of the Restatement Closing
Date and substantially in the form of Exhibit H, among the Secured Parties and
the Collateral Agent, and, from and after the incurrence of any Tranche A
Exchange Note Refinancing Indebtedness pursuant to Section 7.01(g), the term
"Intercreditor Agreement" shall include any intercreditor agreement entered into
in connection with the incurrence of such Tranche A Exchange Note Refinancing
Indebtedness.
"Interest Expense Coverage Ratio" shall mean with respect to the
Borrower and its subsidiaries on a consolidated basis, for any period, the ratio
of (a) EBITDA for such period to (b) Cash Interest Expense for such period.
<PAGE> 21
15
"Interest Payment Date" shall mean, with respect to any Loan, the
last day of the Interest Period applicable to the Borrowing of which such Loan
is a part and, in the case of a Eurodollar Borrowing with an Interest Period of
more than three months' duration, each day that would have been an Interest
Payment Date had successive Interest Periods of three months' duration been
applicable to such Borrowing and, in addition, the date of any refinancing or
conversion of such Borrowing with or to a Borrowing of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months thereafter, as the Borrower may elect, and (b) as to any ABR
Borrowing, the period commencing on the date of such Borrowing or on the last
day of the immediately preceding Interest Period applicable to such Borrowing,
as the case may be and ending on the earliest of (i) the next succeeding March
31, June 30, September 30 or December 31, (ii) the Revolving Credit Maturity
Date or the Term Loan Maturity Date, as applicable, and (iii) the date such
Borrowing is converted to a Borrowing of a different Type in accordance with
Section 2.10 or repaid or prepaid in accordance with Section 2.11, 2.12 or 2.13;
provided, however, that, if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, in the case of a Eurodollar Borrowing only, such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Interest Rate Spreads" shall mean the ABR Spread and LIBOR Spread.
"LC Commitment" shall mean $20,000,000, as the same may be reduced
from time to time pursuant to Section 3.07. The LC Commitment shall
automatically and permanently terminate on LC Maturity Date.
"LC Disbursement" shall mean any payment or disbursement made by the
Fronting Bank under or pursuant to a Letter of Credit.
"LC Exposure" shall mean, at any time of determination, the sum of
(a) the aggregate undrawn amount of all Letters of Credit outstanding at such
time and (b) the aggregate amount that has been drawn under such Letters of
Credit but for which the Fronting Bank or the Lenders, as the case may be, have
not been reimbursed by the Borrower at such time.
"LC Fee" shall have the meaning assigned to such term in Section
3.03.
"LC Maturity Date" shall mean the fifth Business Day prior to March
27, 2004.
"Leasehold Mortgage" shall mean any Mortgage that is a leasehold or
subleasehold mortgage.
"Lenders" shall mean the financial institutions party hereto.
"Letters of Credit" shall mean letters of credit issued by the
Fronting Bank for the account of the Borrower pursuant to Section 3.01(a).
<PAGE> 22
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"Leverage Ratio" shall mean, on any date, the ratio of (a) Total
Debt of the Borrower and its subsidiaries determined on a consolidated basis as
of such date to (b) EBITDA of the Borrower and its subsidiaries determined on a
consolidated basis for the period of four consecutive fiscal quarters most
recently ended as of such date.
"LIBOR Spread" shall mean (a) in the case of Term Loans, 3.75% per
annum and (b) in the case of Revolving Loans, 2.75% per annum.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, assignment for security (whether collateral or
otherwise), hypothecation, encumbrance, easement, restriction, covenant, lease,
sublease, charge or security interest in or on such asset, (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement or financing lease having substantially the same economic
effect as any of the foregoing relating to such asset, (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities and (d) zoning or land use restrictions.
"Loan Documents" shall mean this Agreement, the Effectiveness
Agreement, the Intercreditor Agreement, the Security Documents, the Guarantee
Agreement and the Indemnity and Subrogation Agreement.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Lockbox Agreements" shall mean the lockbox agreements among the
Borrower, TAFSI, each of the Guarantors other than TA Travel, the Collateral
Agent and a Sub-Agent (as defined in each Lockbox Agreement), as amended and
restated as of the Restatement Closing Date and substantially in the form of
Annex 1 to the Security Agreement or in such other form as the Collateral Agent
may specify.
"Lockbox Collateral" shall have the meaning assigned to such term in
each of the Lockbox Agreements.
"Management Purchasers" shall mean the officers, directors or
employees of the Borrower or its subsidiaries who have purchased or will
purchase Common Stock of the Borrower.
"Margin Stock" shall have the meaning assigned to such term under
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse effect
on the business, assets, operations, prospects or condition, financial or
otherwise, or the material agreements of the Borrower and its subsidiaries,
taken as a whole, (b) a material impairment of the ability of the Borrower, any
of the Guarantors or TAFSI to perform any of its obligations under any
Transaction Document to which it is or will be a party or (c) a material
impairment of the rights of or benefits available to the Agent, the Fronting
Bank, the Swingline Lender, the Collateral Agent or the Lenders under any Loan
Document.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage Amendment" shall mean an amendment to an existing mortgage
or deed of trust, leasehold mortgage, assignment of leases and rents or other
security document previously granted to the Collateral Agent with respect to a
Mortgaged Property in connection with the Original
<PAGE> 23
17
Credit Agreement, delivered pursuant to Section 5.02(l) or pursuant to Section
6.10, and which amendment has the effect of causing such mortgage or deed of
trust, leasehold mortgage, assignment of leases and rents or other security
document, as so amended, to be substantially in the form of the Mortgage
attached hereto as Exhibit I (or Exhibit C in the case of any amendment of an
assignment of leases and rents).
"Mortgaged Properties" shall mean the owned real properties and
leasehold and subleasehold interests of the Guarantors specified on Schedule
1.01(a).
"Mortgages" shall mean the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, assignments of leases and rents (including
any Assignments of Leases and Rents, substantially in the form of Exhibit C),
modifications and other security documents, delivered pursuant to clause (i) of
Section 5.02(l) (or clause (i) of Section 5.02(l) of the Original Credit
Agreement) or pursuant to Section 6.10, each as amended by any applicable
Mortgage Amendment and (except in the case of any Leasehold Mortgage)
substantially in the form of Exhibit I.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"National" shall mean National Auto/Truckstops, Inc., a Delaware
corporation that is a direct, wholly owned subsidiary of the Borrower and a
Guarantor.
"National Ancillary Agreements" shall have the meaning assigned to
the term "Ancillary Agreements" in the National Asset Purchase Agreement and
shall include the Bill of Sale, the Assignment and Assumption Agreement, the
Non-Competition Agreement, the Office Sublease, the Credit Card Agreement, the
Trademark License Agreement, the Software License Agreement and the Services
Agreement (each as defined in the National Asset Purchase Agreement).
"National Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated as of November 23, 1992, between National and Union Oil Company
of California, as amended, supplemented or otherwise modified from time to time
in accordance with the terms of this Agreement.
"National Senior Notes" shall mean National's 8.76% Senior Secured
Notes due 2002 that were repaid in full in connection with the Recapitalization.
"Net Cash Proceeds" shall mean, with respect to any Prepayment Event
or any issuance of equity of the Borrower or its subsidiaries, (a) the gross
cash proceeds (including insurance proceeds, condemnation awards and payments
from time to time in respect of installment obligations, if applicable) received
by or on behalf of the Borrower or any subsidiary thereof in respect of such
Prepayment Event or equity issuance, less (b) the sum of (i) in the case of a
Prepayment Event, the amount, if any, of all taxes (other than income taxes)
payable by the Borrower or any subsidiary thereof in connection with such
Prepayment Event and the Borrower's good-faith best estimate of the amount of
all income taxes payable in connection with such Prepayment Event (to the extent
that such amount shall have been set aside for the purpose of paying such income
taxes), (ii) in the case of a Prepayment Event that is an asset sale or
disposition, (A) the amount of
<PAGE> 24
18
any reasonable reserve established in accordance with GAAP against any
liabilities associated with the assets sold or disposed of and retained by the
Borrower or any subsidiary thereof, provided that the amount of any subsequent
reduction of such reserve (other than in connection with a payment in respect of
any such liability) shall be deemed to be Net Cash Proceeds of a Prepayment
Event occurring on the date of such reduction, and (B) the amount applied to
repay any Indebtedness (other than the Term Loans and the Tranche A Exchange
Notes) to the extent such Indebtedness is required by its terms to be repaid as
a result of such Prepayment Event and (iii) reasonable and customary fees,
commissions and expenses and other costs paid by the Borrower or any subsidiary
thereof in connection with such Prepayment Event or equity issuance (other than
those payable to the Borrower or any Affiliate of the Borrower (other than
customary financial advisory fees payable to The Clipper Group, L.P. or its
Affiliates in connection therewith to the extent that such fees are no greater
than the financial advisory fees that a third party could have obtained for the
same services after negotiation at arm's-length)), in each case only to the
extent not already deducted in arriving at the amount referred to in clause (a).
"Net Income" shall mean, for any period, the aggregate net income
(or net deficit) of the Borrower and its subsidiaries determined on a
consolidated basis for such period, which shall be equal to gross revenues for
the Borrower and its subsidiaries determined on a consolidated basis during such
period less the aggregate for the Borrower and its subsidiaries determined on a
consolidated basis during such period of, without duplication, (a) cost of goods
sold, (b) interest expense, (c) operating expenses, (d) selling, general and
administrative expenses, (e) taxes, (f) depreciation, depletion and amortization
of properties and (g) any other items that are treated as expense under GAAP,
all computed in accordance with GAAP; provided, however, that the term "Net
Income" shall exclude, for all purposes other than for the purposes of
calculating Consolidated Net Worth, (i) extraordinary gains or losses from the
sale of assets other than in the ordinary course of business, (ii) one-time
charges taken in connection with the Transactions or in connection with the
Additional Permitted Acquisition, if any, and (iii) any write-up in the value of
any asset.
"Net Working Capital" shall mean, with respect to any Person and its
subsidiaries on a consolidated basis at any date, (a) the sum of inventory,
current receivables (including trade receivables and current rent receivables)
and prepaid expenses minus (b) the sum of accrued expenses payable and trade
payables, as each of such items would appear on a consolidated balance sheet of
such Person and its subsidiaries as of the date of determination in accordance
with GAAP.
"Network Operator" shall mean each independent auto/truckstop
operator who will lease or sublease a Truckstop from any Guarantor.
"1997 Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Borrower dated February 1997.
"1998 Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Borrower dated October 1998.
"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreement and the Security Documents.
"Operators" shall mean independent auto/truckstop operators who
lease or sublease their facilities from National.
<PAGE> 25
19
"Original Credit Agreement" shall have the meaning assigned to such
term in the introductory statement to this Agreement.
"Outstanding Letters of Credit" shall mean at any time the Letters
of Credit outstanding at such time.
"Participating Lender" shall mean at any time any Lender with a
Revolving Credit Commitment at such time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Perfection Certificate" shall mean the Perfection Certificate,
substantially in the form of Annex 2 to the Security Agreement, prepared by the
Borrower.
"Permitted Business Acquisition" shall mean any acquisition of
assets from, or shares or other equity interests in, any Person (other than the
Additional Permitted Acquisition) if (a) immediately after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing or
would result therefrom, (b) all transactions related thereto shall be
consummated in accordance with applicable laws, (c) in the case of any
acquisition of shares or other equity interests in any Person, such acquisition
is an acquisition of 100% of the shares or other equity interests of such Person
and, simultaneously with or immediately following such acquisition, such
acquired Person is merged with and into one of the Guarantors and (d) neither
the Borrower nor any of its subsidiaries shall assume or otherwise become liable
for any Indebtedness in connection with such acquisition (except for
Indebtedness permitted by Section 7.01).
"Permitted Developer" shall have the meaning assigned to such term
in Section 10 of the Guarantee Agreement.
"Permitted Development Entity" shall be a corporation or limited
partnership that does not satisfy the criteria to be considered a "subsidiary"
as contemplated in the definition thereof.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within three months from the date of acquisition
thereof;
(b) without limiting the provisions of paragraph (d) below,
investments in commercial paper maturing within three months from the date
of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard & Poor's and from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits (including Eurodollar time deposits) maturing within three
months from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, (i)
any domestic office of the Agent or (ii) any domestic office of any other
commercial bank of recognized standing organized under the laws of the
United
<PAGE> 26
20
States of America or any state thereof that has a combined capital and
surplus and undivided profits of not less than $250,000,000 and which is
rated (or the senior debt securities of the holding company of such
commercial bank are rated) A or better by Standard & Poor's or A2 by
Moody's, or carrying an equivalent rating by another nationally recognized
rating agency if neither of the two named rating agencies shall rate such
commercial bank (or the holding company of such commercial bank);
(d) investments in commercial paper maturing within three months
from the date of acquisition thereof and issued by (i) the holding company
of the Agent or (ii) the holding company of any other commercial bank of
recognized standing organized under the laws of the United States of
America or any state thereof that has (A) a combined capital and surplus
in excess of $250,000,000 and (B) commercial paper rated at least A-1 or
the equivalent thereof by Standard & Poor's or at least P-1 or the
equivalent thereof by Moody's, or carrying an equivalent rating by another
nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of investments;
(e) repurchase agreements having a term of seven days or less with
(i) any domestic office of the Agent or (ii) any domestic office of any
other commercial bank of recognized standing organized under the laws of
the United States of America or any state thereof that has combined
capital and surplus and undivided profits of not less than $250,000,000
and which is rated (or the senior debt securities of the holding company
of such commercial bank are rated) A or better by Standard & Poor's or A2
by Moody's, or carrying an equivalent rating by another nationally
recognized rating agency if neither of the two named rating agencies shall
rate such bank relating to marketable direct obligations issued or
unconditionally guaranteed by the United States but only if the securities
collateralizing such repurchase agreements are delivered to or to the
order of the Collateral Agent;
(f) other investment instruments approved in writing by the Required
Lenders and offered by financial institutions that have a combined capital
and surplus and undivided profits of not less than $250,000,000; and
(g) investments consisting of Rate Protection Agreements.
"Permitted Joint Venture" shall have the meaning assigned to such
term in Section 7.04(h).
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code that
is maintained for employees of the Borrower or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement, as amended and
restated as of the Restatement Closing Date and substantially in the form of
Exhibit J, among the Borrower, each of the Guarantors (other than TA Travel),
TAFSI and the Collateral Agent.
<PAGE> 27
21
"Prepayment Account" shall have the meaning assigned to such term in
Section 2.13(g).
"Prepayment Amount" shall have the meaning assigned to such term in
Section 2.13(d).
"Prepayment Event" shall mean (a) any sale, transfer or other
disposition of any business units, assets or other properties of the Borrower or
any subsidiary thereof (including dispositions in the nature of casualties (to
the extent covered by insurance) or condemnations (including any Casualty or
Condemnation in respect of a Mortgaged Property as contemplated in Section 9 of
the Guarantee Agreement), (b) any sale and leaseback of any asset or the
mortgaging of any real property other than (i) any Sale and Lease-Back
Transaction permitted by Section 7.03 or (ii) pursuant to a Mortgage (or a
modification thereof) by the Borrower or any subsidiary thereof or (c) the
issuance or incurrence by the Borrower or any subsidiary thereof of any
Indebtedness (excluding any Indebtedness permitted under Section 7.01), or the
issuance or sale by the Borrower or any subsidiary thereof of any debt
securities or any obligations convertible into or exchangeable for, or giving
any Person or entity any right, option or warrant to acquire from the Borrower
or any subsidiary thereof any Indebtedness or any such debt securities or any
such convertible or exchangeable obligations (excluding any Indebtedness
permitted under Section 7.01). Notwithstanding the foregoing, the term
"Prepayment Event" shall not include:
(i) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business
permitted pursuant to Section 7.05(b) not exceeding in the aggregate
$1,000,000 in any fiscal year, provided that (A) at any time when such
sales, transfers and other dispositions in the ordinary course of business
shall exceed $1,000,000 in any fiscal year, the resultant Prepayment Event
shall include the entire amount of such sales, transfers and dispositions
since the date of such most recent payment, if any, with respect to such
fiscal year and not just amounts above such dollar threshold and (B) to
the extent that the Borrower or any of its subsidiaries shall have
reinvested on the date of such Prepayment Event (or certified to the Agent
that it intends to reinvest within 180 days of such Prepayment Event) any
of the proceeds of such sales, transfers and dispositions in equipment,
vehicles or other assets used in the principal lines of business of the
Borrower's subsidiaries, the resultant Prepayment Event shall be reduced
by the lesser of (1) $1,000,000 and (2) the amount so reinvested or to be
reinvested;
(ii) sales of inventory in the ordinary course of business;
(iii) sales, transfers and other dispositions of Truckstops and the
related assets permitted pursuant to Section 7.05(d) or 7.05(g) resulting
in Net Cash Proceeds in an aggregate amount not exceeding (A) during the
period commencing on the Closing Date and ending on December 31, 2000,
$70,000,000 and (B) during each period of four consecutive fiscal quarters
ending on each December 31 thereafter, $7,500,000, provided that (1) such
Net Cash Proceeds are either (x) used to repay or voluntarily prepay Loans
or Series I Tranche A Exchange Notes, in accordance with this Agreement
and the Tranche A Exchange Note Purchase Agreements, on such date as may
be elected by the Borrower or (y) reinvested in other Truckstop properties
and related assets, (2) in connection with any such reinvestment, the
Borrower (x) provides the Agent and the Collateral Agent with such
opinions, documents, certificates, title insurance policies (as required
by Section 5.02(l)), surveys and other insurance policies as they may
reasonably request and (y) takes such other
<PAGE> 28
22
actions as the Agent and the Collateral Agent may reasonably deem
necessary or appropriate (including actions with respect to the delivery
to the Collateral Agent of a first priority Mortgage as required by
Section 5.02(l) and assignment with respect to the related real property
for the ratable benefit of the Secured Parties) and (3) the Borrower,
pending any such repayment, voluntary prepayment or reinvestment, promptly
deposits such Net Cash Proceeds in a cash collateral account established
with the Collateral Agent for the benefit of the Secured Parties;
(iv) the receipt of insurance or condemnation proceeds (other than
Condemnation Proceeds and Insurance Proceeds in respect of Mortgaged
Properties), provided that (A) such proceeds are reinvested in equipment,
vehicles or other assets used in the principal lines of business of the
Borrower's subsidiaries within 180 days after the receipt thereof and (B)
the Borrower, pending such reinvestment, promptly deposits such proceeds
so received and unreinvested in a cash collateral account established with
the Collateral Agent for the benefit of the Secured Parties;
(v) the receipt of Condemnation Proceeds and Insurance Proceeds in
respect of Mortgaged Properties to the extent that (A) such Condemnation
Proceeds or Insurance Proceeds are used to restore, repair or locate,
acquire and replace the related Mortgaged Property in accordance with
Section 9 of the Guarantee Agreement, (B) such Condemnation Proceeds or
Insurance Proceeds, pursuant to Section 9 of the Guarantee Agreement, are
not otherwise required to be applied as a mandatory prepayment pursuant to
Section 2.13(b) or (C) to the extent permitted by Section 9 of the
Guarantee Agreement, any Condemnation Proceeds or Insurance Proceeds are
(1) reinvested in equipment, vehicles or other assets used in the
principal lines of business of the Borrower's subsidiaries within 180 days
after the receipt thereof and (2) the Borrower, pending such reinvestment,
has deposited such amounts in an escrow account with the Collateral Agent
as contemplated in Section 9 of the Guarantee Agreement;
(vi) except as otherwise specified in Section 10 of the Guarantee
Agreement, any sale, transfer and other disposition of any portion of a
Mortgaged Property in connection with the development of such property as
permitted in, and in accordance with, the provisions of Section 10 of the
Guarantee Agreement; and
(vii) in respect of any Mortgaged Property, sales, transfers and
other dispositions of any portion of the Land (as defined in the related
Mortgage) on which there are no significant improvements that are
permitted pursuant to Section 7.05(f) in an aggregate amount not exceeding
$2,000,000 in any fiscal year or $8,000,000 since the Closing Date,
provided that (A) the proceeds of each such sale are reinvested in
equipment, vehicles or other assets used in the principal lines of
business of the Borrower's subsidiaries within 180 days of the date of
such sale and (B) the Borrower, pending such reinvestment, promptly
deposits such proceeds so received and unreinvested in a cash collateral
account established with the Collateral Agent for the benefit of the
Secured Parties.
"Pro Forma Balance Sheet" shall have the meaning assigned to such
term in Section 4.05(a).
"Pro Rata Share" shall mean, in relation to any amount, (a) with
respect to all the Lenders as a group, a share of such amount determined by
multiplying such amount by a fraction, the
<PAGE> 29
23
numerator of which shall be the sum of the aggregate principal amount of Loans
and Swingline Loans outstanding at the time plus the aggregate face amount of
all Letters of Credit outstanding at the time plus the aggregate unused amount
of the Revolving Credit Commitments in effect at the time (the sum of the
foregoing amounts being referred to as the "Lenders' Amount"), and the
denominator of which shall be the sum of the Lenders' Amount and the aggregate
outstanding principal amount of Series I Tranche A Exchange Notes outstanding at
the time (the sum of the foregoing amounts being referred to as the "Denominator
Amount"), and (b) with respect to the Series I Tranche A Exchange Note
Purchasers, a share of such amount determined by multiplying such amount by a
fraction, the numerator of which shall be the aggregate outstanding principal
amount of Series I Tranche A Exchange Notes outstanding at the time, and the
denominator of which shall be the Denominator Amount. After the incurrence of
any Tranche A Exchange Note Refinancing Indebtedness, the Pro Rata Share shall
be determined, mutatis mutandis, with respect to the analogous provisions of the
Tranche A Exchange Note Refinancing Indebtedness.
"Rate Protection Agreements" shall mean (a) interest rate cap
agreements, (b) interest rate swap agreements, (c) interest rate collar
agreements or (d) similar agreements, in each case entered into by Borrower to
provide protection to the Borrower against fluctuations in interest rates. Each
Rate Protection Agreement shall be on terms satisfactory to the Agent with a
counterparty satisfactory to the Agent.
"Recapitalization" shall mean the series of transactions completed
by the Borrower on the Closing Date, in which (a) TA Holdings Corporation, a
Delaware corporation, was merged with and into the Borrower, causing TA and
TAFSI to become direct wholly owned subsidiaries of the Borrower, (b) National
repaid in full (i) all amounts then outstanding under its senior secured credit
facility and (ii) the National Senior Notes and (c) TA repaid in full (i) all
amounts outstanding under its senior secured credit facility and (ii) the TA
Senior Notes. In connection with the Recapitalization, (a) the Borrower entered
into the Original Credit Agreement and borrowed $80,000,000 under the Existing
Term Loan Facility thereunder, (b) the Borrower issued the Subordinated Notes,
(c) the Borrower issued the Tranche A Exchange Notes in exchange for (i)
$65,000,000 aggregate principal amount of the National Senior Notes and (ii)
$20,500,000 aggregate principal amount of the TA Senior Notes and (d) the
Borrower made capital contributions or advances to National and TA in amounts
sufficient to enable them to pay the amounts outstanding under their respective
senior secured credit facilities and their respective senior subordinated notes,
to redeem certain TA Senior Notes, to pay accrued interest relating to all of
the foregoing and to pay related expenses.
"Register" shall have the meaning assigned to such term in Section
10.04(d).
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Release" shall mean any discharge, emission, release, or threat
thereof, including a "Release" as defined in CERCLA at 42 U.S.C. ss. 9601(22),
and the term "Released" has a meaning correlative thereto.
<PAGE> 30
24
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
"Required Lenders" shall mean, at any time, Lenders holding Loans, a
share of the used LC Commitment and unused Commitments representing more than
50% of the aggregate of (a) the aggregate principal amount of the Loans and
Swingline Loans at such time, (b) the LC Exposure at such time and (c) the
aggregate unused Commitments at such time.
"Resellers" shall mean independent auto/truckstop operators who own
their facilities and who are part of the National network.
"Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.
"Restatement Closing Date" shall mean the date of the first
Borrowing hereunder in respect of the Additional Term Loan Commitments.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Revolving Loans hereunder as set
forth in clause (c) of Section 2.01, as the same may be reduced from time to
time pursuant to Section 2.09. The aggregate principal amount of the Revolving
Credit Commitments is $40,000,000 on the Restatement Closing Date.
"Revolving Credit Maturity Date" shall mean March 27, 2004.
"Revolving Credit Utilization" shall mean, at any time of
determination, the sum of (a) the aggregate principal amount of Revolving Loans
outstanding at such time, (b) the aggregate principal amount of Swingline Loans
outstanding at such time and (c) the LC Exposure at such time.
"Revolving Facility" shall mean the aggregate of the Lenders'
Revolving Credit Commitments.
"Revolving Lender" shall mean any Lender that has a Revolving Credit
Commitment.
"Revolving Loans" shall mean the revolving loans made by the Lenders
to the Borrower pursuant to clause (c) of Section 2.01. Each Revolving Loan
shall be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Sale and Lease-Back Transaction" shall have the meaning assigned to
such term in Section 7.03.
<PAGE> 31
25
"Secured Parties" shall have the meaning assigned to such term in
the Security Agreement.
"Security Agreement" shall mean the Security Agreement, as amended
and restated as of the Restatement Closing Date and substantially in the form of
Exhibit K-1, among the Borrower, each of the Guarantors, TAFSI and the
Collateral Agent, provided that, solely with respect to TA Travel, the term
"Security Agreement" shall mean the TA Travel Security Agreement, substantially
in the form of Exhibit K-2, between TA Travel and the Collateral Agent.
"Security Documents" shall mean the Mortgages (including any
Assignment of Leases and Rents, any Leasehold Mortgage and the Mortgage
Amendments), the Security Agreement, the Pledge Agreement, the Collateral
Assignment, the Lockbox Agreements, the Trademark Security Agreement, the
Collateral Account Agreement, the Airplane Mortgage and each of the security
agreements, mortgages and other instruments and documents executed and delivered
pursuant to any of the foregoing or pursuant to Section 6.10.
"Senior Convertible Participating Preferred Stock" shall mean the
Borrower's Series I Senior Convertible Participating Preferred Stock, par value
$.01 per share, and the Borrower's Series II Senior Convertible Participating
Preferred Stock, par value $.01 per share.
"Senior Funded Debt" means all Funded Debt of the Borrower and its
subsidiaries other than the Subordinated Notes (or the Subordinated Note
Refinancing Indebtedness).
"Series I Tranche A Exchange Note Purchasers" shall mean the Series
I Tranche A Exchange Note Purchasers party to the Tranche A Exchange Note
Purchase Agreements and their successors and assigns, including the holders of
the Series I Tranche A Exchange Notes from time to time.
"Series I Tranche A Exchange Notes" shall mean the 8.94% Series I
Senior Secured Notes due 2002 of the Borrower issued pursuant to the Tranche A
Exchange Note Purchase Agreements in an aggregate principal amount of
$35,500,000.
"Series II Tranche A Exchange Note Purchasers" shall mean the Series
II Tranche A Exchange Note Purchasers party to the Tranche A Exchange Note
Purchase Agreements and their successors and assigns, including the holders of
the Series II Tranche Exchange Notes from time to time.
"Series II Tranche A Exchange Note Refinancing" shall mean the
repayment in full as of the Restatement Closing Date of all of the Series II
Tranche A Exchange Notes in an aggregate principal amount of $50,000,000 plus
accrued interest thereon and any Break Funding Costs (as defined in the Tranche
A Exchange Note Purchase Agreements as in effect immediately prior to the
consummation of the Additional Transactions) related thereto to but excluding
the date of such repayment.
"Series II Tranche A Exchange Notes" shall mean the Series II Senior
Secured Notes due 2005 of the Borrower issued pursuant to the Tranche A Exchange
Note Purchase Agreements in an aggregate principal amount of $50,000,000 and to
be repaid in full on the Restatement Closing Date pursuant to the Series II
Tranche A Exchange Note Refinancing.
<PAGE> 32
26
"Special Mandatory Prepayment" shall have the meaning assigned to
such term in Section 2.13(i).
"Standard & Poor's" shall mean Standard & Poor's Rating Group.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum applicable reserve percentages,
including any marginal, special, emergency or supplemental reserves (expressed
as a decimal) established by the Board and any other banking authority to which
the Agent is subject (a) with respect to the Base CD Rate (as such term is used
in the definition of the term "Alternate Base Rate") for new negotiable
nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months and (b) with respect to the Adjusted LIBO
Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include those imposed pursuant to Regulation D of
the Board. Eurodollar Loans shall be deemed to constitute Eurocurrency
Liabilities and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offset that may be available from time to
time to any Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stockholders Agreement" shall mean the Stockholders Agreement dated
as of April 14, 1993, as amended as of March 6, 1997, and as further amended,
supplemented or otherwise modified from time to time in accordance with the
terms of this Agreement, among certain Institutional Investors, certain
Resellers, certain Operators and the Borrower.
"Subordinated Note Documents" shall mean the Subordinated Note
Guarantees, the Subordinated Note Indenture and the Subordinated Notes.
"Subordinated Note Guarantees" shall mean, collectively, the
Guarantees of the Guarantors guaranteeing repayment of the Subordinated Notes.
"Subordinated Note Indenture" shall mean the Senior Subordinated
Note Indenture dated as of March 24, 1997, among the Borrower, the Guarantors
and Fleet National Bank, as trustee, as amended from time to time in accordance
with the terms hereof and thereof.
"Subordinated Note Refinancing Indebtedness" shall mean any
Indebtedness incurred by the Borrower as contemplated in Section 7.01(h) in
connection with the refinancing of the Subordinated Notes.
"Subordinated Notes" shall mean (a) the Senior Subordinated Notes
due 2007 issued by the Borrower pursuant to the Subordinated Note Indenture and
(b) all senior subordinated notes of the Borrower issued in exchange for
Subordinated Notes on terms substantially identical to the terms of the
Subordinated Notes.
"subsidiary" shall mean, with respect to any Person (herein referred
to as the "parent"), any corporation, partnership, limited liability company,
association or other business entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or more than 50% of the general partnership interests are,
at the time any determination is being made, owned, controlled or held or (b)
that is, at the time any
<PAGE> 33
27
determination is made, otherwise Controlled by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Swingline Lender" shall mean The Chase Manhattan Bank, in its
capacity as Swingline lender.
"Swingline Loans" shall mean the Swingline loans made by the
Swingline Lender pursuant to Section 2.21.
"TA" shall mean TA Operating Corporation, a Delaware corporation
that is a direct wholly owned subsidiary of the Borrower and a Guarantor.
"TA Ancillary Agreements" shall have the meaning assigned to the
term "Ancillary Agreements" in the TA Asset Purchase Agreement and shall include
the Non-Competition Agreement, the Credit Card Agreement, the Services
Agreement, the Office Sub-Lease, the Assignment and Assumption Agreement, the
TAFSI Assumption Agreement, the Jobber Agreement, the Supplemental Agreement,
the Trademark Assignment and the Software License Agreement (each as defined in
the TA Asset Purchase Agreement).
"TA Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated as of July 22, 1993, as amended by Amendment No. 1 thereto dated
as of December 9, 1993, and as further amended, supplemented or otherwise
modified from time to time in accordance with the terms set forth in this
Agreement, among TA, BP Exploration & Oil, Inc. and Truckstops Corporation of
America, Inc.
"TA Travel" shall mean TA Travel, L.L.C., a Delaware limited
liability company that is a direct wholly owned subsidiary of TA and a
Guarantor.
"TAFSI" shall mean TA Franchise Systems Inc., a Delaware corporation
that is a direct wholly owned subsidiary of the Borrower.
"TA Senior Notes" shall mean TA's 8.63% Senior Secured Notes due
2002 that were repaid in full in connection with the Recapitalization.
"TA Stockholders Agreement" shall mean the Stockholders Agreement
dated as of December 10, 1993, among the Borrower and the stockholders party
thereto, as amended in accordance with the Borrower's Consent Solicitation dated
February 13, 1997, as the same may be further amended, modified or supplemented
in accordance with the provisions of this Agreement.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Facilities" shall mean, collectively, the Existing Term Loan
Facility and the Additional Term Loan Facility.
"Term Lender" shall mean any Lender that has a Term Loan Commitment.
"Term Loan Commitments" shall mean, with respect to each Lender,
such Lender's Existing Term Loan Commitment, if any, and Additional Term Loan
Commitment, if any.
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28
"Term Loan Maturity Date" shall mean March 27, 2005.
"Term Loan Repayment Amount" shall have the meaning assigned to such
term in Section 2.11(a).
"Term Loan Repayment Date" shall have the meaning assigned to such
term in Section 2.11(a).
"Term Loans" shall mean the Existing Terms Loans and the Additional
Term Loans.
"The Clipper Group, L.P." shall mean The Clipper Group, L.P., a
limited partnership organized under the laws of the State of Delaware.
"Total Debt" shall mean, with respect to the Borrower and its
subsidiaries on a consolidated basis at any time, all Capital Lease Obligations,
Indebtedness for borrowed money and Indebtedness in respect of deferred purchase
price of property or services of the Borrower and its subsidiaries at such time
and all preferred stock at such time mandatorily redeemable on or prior to the
first anniversary of the Term Loan Maturity Date, less the amount of cash and
cash equivalents set forth on the Borrower's consolidated balance sheet at such
time (including all amounts on deposit in the Collateral Account at such time)
in excess of $2,500,000.
"Trademark Security Agreement" shall mean the Trademark Security
Agreement, as amended and restated as of the Restatement Closing Date and
substantially in the form of Exhibit L, among the Borrower, TA, National, TAFSI
and the Collateral Agent.
"Tranche A Exchange Note Documents" shall mean the Tranche A
Exchange Note Purchase Agreements, the Tranche A Exchange Notes, the Guarantee
Agreement, the Security Documents and the Intercreditor Agreement.
"Tranche A Exchange Note Purchase Agreements" shall mean the Senior
Secured Note Exchange Agreements, each dated as of March 21, 1997, between the
Borrower and the Tranche A Exchange Note Purchasers party thereto, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms of this Agreement. After the incurrence of any Tranche A Exchange Note
Refinancing Indebtedness, the term "Tranche A Exchange Note Purchase Agreements"
shall include all agreements (or comparable documents, such as loan agreements
or indentures) entered into by the Borrower in connection with the sale or
issuance of such refinancing Indebtedness.
"Tranche A Exchange Note Purchasers" shall mean the Series I Tranche
A Exchange Note Purchasers and the Series II Tranche A Exchange Note Purchasers
party to the Tranche A Exchange Note Purchase Agreements and their successors
and assigns, including the holders of the Tranche A Exchange Notes from time to
time. After the incurrence of any Tranche A Exchange Note Refinancing
Indebtedness, the term "Tranche A Exchange Note Purchasers" shall include all
original purchasers of such refinancing Indebtedness and their successors and
assigns, including the holders of the Tranche A Exchange Notes from time to
time.
"Tranche A Exchange Note Refinancing Indebtedness" shall mean any
Indebtedness incurred by the Borrower as contemplated in Section 7.01(g) in
connection with the refinancing of
<PAGE> 35
29
either series of the Tranche A Exchange Notes, provided that the Additional Term
Loans shall not constitute Tranche A Exchange Note Refinancing Indebtedness.
"Tranche A Exchange Notes" shall mean the Series I Tranche A
Exchange Notes and the Series II Tranche A Exchange Notes, in each case issued
pursuant to the Tranche A Exchange Note Purchase Agreements. After the
incurrence of any Tranche A Exchange Note Refinancing Indebtedness, the term
"Tranche A Exchange Notes" shall include all notes issued in respect of the
Tranche A Exchange Note Refinancing Indebtedness.
"Transaction Documents" shall mean the Loan Documents, the Tranche A
Exchange Note Documents and the Subordinated Note Documents.
"Transactions" shall mean the Recapitalization and the Additional
Transactions.
"Transition Capital Expenditures" shall mean, for any period, all
capital expenditures (other than the Burns Acquisition and the Additional
Permitted Acquisition, if any) made by the Borrower and its subsidiaries during
such period to the extent that such capital expenditures (a) are in an amount in
excess of the Capital Expenditures permitted to be made during such period under
Section 7.13(a) of this Agreement and (b) are capital expenditures substantially
similar to those described in Section 10 of the 1997 Confidential Information
Memorandum or Section 11 of the 1998 Confidential Information Memorandum.
"Truckstop" shall mean each full service truckstop facility that, as
of any date, is part of the network and that is owned by the Borrower or its
subsidiaries or leased by the Borrower or its subsidiaries as lessee or
sublessee.
"Type" when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall include
the Adjusted LIBO Rate and the Alternate Base Rate.
"Voting Trust" shall mean the Voting Trust established pursuant to
the terms of the Voting Trust Agreement.
"Voting Trust Agreement" shall mean the Voting Trust Agreement dated
as of April 14, 1993, as amended as of March 6, 1997, among the Borrower,
certain Resellers, certain Operators and United States Trust Company of New
York, as trustee, as the same may be amended, modified or supplemented in
accordance with the provisions of this Agreement.
"Voting Trust Certificates" shall mean the Voting Trust Certificates
issued pursuant to the terms of the Voting Trust Agreement.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The
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30
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation". All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed to be references to Articles and Sections
of, and Exhibits and Schedules to, this Agreement unless the context shall
otherwise require. Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made and all financial statements required to be delivered hereunder shall be
prepared in accordance with GAAP as in effect from time to time, applied on a
basis consistent with the application used in the financial statements referred
to in Section 4.05(b).
ARTICLE II
The Credits
SECTION 2.01. Commitments; Continuation of Existing Term Loans. On
the terms and subject to the conditions and relying upon the representations and
warranties herein set forth:
(a) each Lender that has made Existing Term Loans agrees, severally
and not jointly, to continue Existing Term Loans on the Restatement
Closing Date in the aggregate principal amount set forth opposite such
Lender's name on Schedule 2.01;
(b) each Lender having an Additional Term Loan Commitment agrees,
severally and not jointly, to make Additional Term Loans to the Borrower
on the Restatement Closing Date in an aggregate principal amount not to
exceed the Additional Term Loan Commitment set forth opposite such
Lender's name on Schedule 2.01; and
(c) each Lender having a Revolving Credit Commitment agrees to make
Revolving Loans to the Borrower, at any time and from time to time on or
after the Restatement Closing Date and prior to the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in an
aggregate principal amount at any time outstanding not to exceed (after
giving effect to all Revolving Credit Loans repaid, and all reimbursements
of LC Disbursements made, concurrently with the making of any Revolving
Credit Loans) an amount equal to the difference between (i) the Revolving
Credit Commitment set forth opposite such Lender's name on Schedule 2.01,
as the same may be reduced from time to time pursuant to Section 2.09, and
(ii) such Lender's Applicable Percentage of the sum of (A) the aggregate
principal amount of Swingline Loans outstanding at such time and (B) the
LC Exposure at such time.
Within the limits set forth in clause (c) of the preceding sentence, the
Borrower may borrow, pay or prepay and reborrow Revolving Loans on or after the
Restatement Closing Date and prior to the Revolving Credit Maturity Date, on the
terms and subject to the conditions and limitations set forth herein. All
Existing Term Loans and Revolving Loans that are outstanding on the Restatement
Closing Date shall remain outstanding in accordance with the terms hereof,
subject to repayment and prepayment as provided herein. Amounts paid or prepaid
in respect of Term Loans may not be reborrowed.
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SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Existing Term Loan Commitments, Additional Term Loan
Commitments or Revolving Credit Commitments, as the case may be; provided,
however, that the failure of any Lender to make any Loan shall not in itself
relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Loan required to be made by such other Lender). The
Loans comprising each Borrowing shall be in an aggregate principal amount that
is an integral multiple of $500,000 and not less than $3,000,000 (or in the case
of the Revolving Credit Commitments, the lesser of $3,000,000 and an aggregate
principal amount equal to the remaining balance of the Revolving Credit
Commitments).
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans, as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option fulfill its Commitment
with respect to any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan, provided that any exercise of such
option shall not (i) affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement or (ii) impose any additional
obligation on the part of the Borrower pursuant to Section 2.14. Borrowings of
more than one Type may be outstanding at the same time; provided, however, that
the Borrower shall not be entitled to request any Borrowing that, if made, would
result in an aggregate of more than six separate Eurodollar Loans of any Lender
being outstanding hereunder at any one time. For purposes of the foregoing,
Loans having different Interest Periods, regardless of whether they commence on
the same date, shall be considered separate Loans.
(c) Subject to paragraph (e) below and except with respect to Loans
made pursuant to paragraph (f) below, each Lender shall make a Loan in the
amount of its pro rata portion, as determined under Section 2.17, of each
Borrowing hereunder on the proposed date thereof by wire transfer of immediately
available funds to such account in New York City as the Agent may designate not
later than 12:00 noon, New York City time, and the Agent shall by 3:00 p.m., New
York City time, credit the amounts so received to the general deposit account of
the Borrower maintained with the Agent or, if a Borrowing shall not occur on
such date because any condition precedent herein specified shall not have been
met, return the amounts so received to the respective Lenders. Unless the Agent
shall have received notice from a Lender prior to the date of any Borrowing that
such Lender will not make available to the Agent such Lender's portion of such
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Borrowing in accordance with this paragraph (c)
and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have made such portion available to the Agent, such Lender and
the Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent at (i) in the case of the Borrower, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Lender, for the first such day, the Federal Funds Effective Rate,
and thereafter, the Alternate Base Rate. If such Lender shall repay to the Agent
such corresponding amount, such amount shall constitute such Lender's Loan as
part of such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Revolving Credit Borrowing if the
Interest Period requested with respect thereto would end after the Revolving
Credit Maturity Date.
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(e) The Borrower may refinance all or any part of any Revolving
Credit Borrowing with a Revolving Credit Borrowing of the same or a different
Type, subject to the conditions and limitations set forth in this Agreement. Any
Revolving Credit Borrowing or part thereof so refinanced shall be deemed to be
repaid or prepaid in accordance with Section 2.04 or 2.12, as applicable, with
the proceeds of a new Revolving Credit Borrowing, and the proceeds of the new
Revolving Credit Borrowing, to the extent they do not exceed the principal
amount of the Revolving Credit Borrowing being refinanced, shall not be paid by
the Lenders to the Agent or by the Agent to the Borrower pursuant to paragraph
(c) above.
(f) If the Agent has not received from the Borrower the payment
required by Section 3.04(a) by 11:00 a.m., New York City time, on the date on
which the Fronting Bank has notified the Borrower that payment of a draft
presented under any Letter of Credit will be made (or such later time as is not
later than three hours after the Borrower shall have received such notice or, if
the Borrower shall have received such notice later than 2:00 p.m., New York City
time, on such Business Day, not later than 10:00 a.m., New York City time, on
the immediately following Business Day), as provided in Section 3.04(a), the
Agent will notify not later than 12:00 noon, New York City time, the Fronting
Bank and each Participating Lender of the LC Disbursement and, in the case of
each Participating Lender, its Applicable Percentage of such LC Disbursement.
Each Participating Lender will pay by wire transfer of immediately available
funds to the Agent not later than 4:00 p.m., New York City time, on such date an
amount equal to such Participating Lender's Applicable Percentage of such LC
Disbursement (it being understood that such amount shall constitute an ABR
Revolving Loan of such Lender and such payment shall be deemed to have reduced
the LC Exposure), and the Agent will promptly pay such amount to the Fronting
Bank. The Agent will promptly remit to each Participating Lender its Applicable
Percentage of any amounts subsequently received by the Agent from the Borrower
in respect of such LC Disbursement. If any Lender shall not have made its
Applicable Percentage of such LC Disbursement available to the Fronting Bank as
provided above, such Lender agrees to pay interest on such amount, for each day
from and including the date such amount is required to be paid in accordance
with this paragraph (f) to but excluding the date an amount equal to such amount
is paid to the Agent for prompt payment to the Fronting Bank at, for the first
such day, the Federal Funds Effective Rate, and thereafter, the Alternate Base
Rate.
SECTION 2.03. Notice of Borrowings. The Borrower shall give the
Agent written or telecopy notice (or telephone notice promptly confirmed in
writing or by telecopy) (a) in the case of a Eurodollar Borrowing, not later
than 11:00 a.m., New York City time, three Business Days before a proposed
borrowing and (b) in the case of an ABR Borrowing, not later than 12:00 noon,
New York City time, one Business Day before a proposed borrowing. Such notice
shall be irrevocable and shall in each case refer to this Agreement and specify
(i) whether the Borrowing then being requested is to be a Term Borrowing or a
Revolving Credit Borrowing, and whether such Borrowing is to be a Eurodollar
Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a
Business Day) and the amount thereof; and (iii) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto. If no election
as to the Type of Borrowing is specified in any such notice, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any
Eurodollar Borrowing is specified in any such notice, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. If the
Borrower shall not have given notice in accordance with this Section 2.03 of its
election to refinance a Revolving Credit Borrowing prior to the end of the
Interest Period in effect for such Borrowing, then the Borrower shall (unless
such Borrowing is repaid at the end of such Interest Period) be deemed to have
given notice of an election to refinance such Borrowing with an ABR Borrowing.
The Agent shall promptly advise the Lenders of any notice given pursuant to this
Section 2.03 and of
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each Lender's portion of the requested Borrowing and shall promptly notify each
Lender of the determination of the Adjusted LIBO Rate applicable to any
Eurodollar Loan.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The
outstanding principal balance of each Loan shall be payable (i) in the case of a
Revolving Loan or a Swingline Loan, on the Revolving Credit Maturity Date and
(ii) in the case of a Term Loan, as provided in Section 2.11.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender from time to time, including
the amounts of principal and interest payable and paid to such Lender from time
to time under this Agreement.
(c) The Agent shall maintain accounts in which it will record (i)
the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, and, with respect to each Term Loan, whether
such Loan is an Existing Term Loan or an Additional Term Loan, (ii) the amount
of any principal or interest due and payable or to become due and payable from
the Borrower to each Lender hereunder and (iii) the amount of any sum received
by the Agent hereunder from the Borrower or any Guarantor and each Lender's
share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall be prima facie evidence of the existence and
amounts of the obligations therein recorded; provided, however, that the failure
of any Lender or the Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the
event any Lender shall request and receive a promissory note payable to such
Lender and its registered assigns, the interests represented by such note shall
at all times (including after any assignment of all or part of such interests
pursuant to Section 10.04) be represented by one or more promissory notes
payable to the payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Agent, the following fees (each, a "Commitment Fee") (i) on the last
day of March, June, September and December in each year and on each date on
which any of the Revolving Credit Commitments of such Lender shall expire or be
terminated as provided herein, a commitment fee of 0.50% per annum on the
average daily unused amount of the Revolving Credit Commitment (without giving
effect to any deemed reduction thereto in connection with the issuance of
Swingline Loans) of such Lender during the preceding quarter (or other period
ending with the date on which any portion of the Revolving Credit Commitments of
such Lender shall expire or be terminated) and (ii) on the Restatement Closing
Date, a commitment fee of 0.50% per annum on the average daily unused amount of
the Additional Term Loan Commitments of such Lender during the period commencing
with the date upon which this Agreement and/or the Effectiveness Agreement is
executed by such Lender and the Borrower. The Commitment Fee due to each Lender
in respect of its Revolving Credit Commitment shall continue to accrue with
respect to the current quarter from and including the first day of the current
quarter in accordance with the terms hereof. For purposes of calculating
Commitment Fees in respect of Revolving Credit Commitments, any portion of such
Revolving Credit Commitments unavailable due to outstanding Letters of Credit
shall be deemed to be used
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34
amounts. All Commitment Fees shall be computed on the basis of the actual number
of days elapsed in a year of 360 days.
(b) The Borrower agrees to pay to the Agent, for its own account,
fees (the "Administrative Fees") (i) at the time and in the amounts agreed upon
in the fee letter agreement dated February 14, 1997, between the Borrower and
the Agent, which shall continue in effect with respect to such Administrative
Fees until March 27, 1999, and (ii) thereafter at the time and in the amounts
agreed upon in the fee letter agreement dated October 26, 1998, between the
Borrower and the Agent.
(c) The Borrower agrees to pay to the Agent, for payment to the
other Lenders (to the extent applicable), on the Restatement Closing Date (i) an
amendment fee equal to 0.25% of the aggregate Revolving Credit Commitments of
the Lenders as of the Restatement Closing Date and (ii) an up-front fee equal to
0.50% of the sum of (A) the aggregate outstanding principal balance of the
Existing Term Loans and (B) the aggregate Additional Term Loan Commitments, each
as of the Restatement Closing Date, and the Agent shall pay to each Lender on
the Restatement Closing Date that portion of such fees as is owing to such
Lender.
(d) The Borrower agrees to pay to the Fronting Bank, for its own
account, the fees specified in Section 3.08.
(e) All Fees (other than the fees payable to the Fronting Bank under
Section 3.08) shall be paid on the dates due, in immediately available funds, to
the Agent for distribution, if and as appropriate, among the Lenders. Once paid,
none of the Fees shall be refundable under any circumstances (other than
corrections of error in payment).
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be, when the Alternate Base Rate is determined by
reference to the Prime Rate and over a year of 360 days at all other times) at a
rate per annum equal to the Alternate Base Rate plus the ABR Spread.
(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the LIBOR Spread.
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Agent, and such determination shall be presumptively correct absent
manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or Swingline Loan or any
other amount becoming due hereunder or under any Security Document, by
acceleration or otherwise, the Borrower shall on demand from time to time pay
interest, to the extent permitted by law, on such defaulted amount up to (but
not including) the date of actual payment (after as well as before judgment) at
a rate per annum (the "Default Rate") (computed on the basis of the actual
number of days elapsed over a year
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35
of 360 days) equal to (a) in the case of any Loan or Swingline Loan, the rate
applicable to such Loan under Section 2.06 plus 2% per annum and (b) in the case
of any other amount, the rate that would be applicable to an ABR Revolving Loan
under Section 2.06 plus 2% per annum.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Agent shall have determined that
dollar deposits in the principal amounts of the Loans comprising such Borrowing
are not generally available in the London interbank market, or that the rates at
which such dollar deposits are being offered will not adequately and fairly
reflect the cost to any Lender of making or maintaining its Eurodollar Loan
during such Interest Period, or that reasonable means do not exist for
ascertaining the Adjusted LIBO Rate, the Agent shall, as soon as practicable
thereafter, give written or telecopy notice of such determination to the
Borrower and the Lenders. In the event of any such determination, any request by
the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall,
until the Agent shall have advised the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, be deemed to be a
request for an ABR Borrowing. Each determination by the Agent hereunder shall be
conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The
Existing Term Loan Commitments terminated upon the making of the Existing Term
Loans. The Additional Term Loan Commitments shall be automatically terminated at
5:00 p.m., New York City time, on the Restatement Closing Date. The Revolving
Credit Commitments and the LC Commitment shall be automatically terminated at
5:00 p.m., New York City time, on the Revolving Credit Maturity Date and the LC
Maturity Date, respectively. Notwithstanding the foregoing, all the Additional
Term Loan Commitments shall be automatically terminated at 5:00 p.m., New York
City time, on December 31, 1998, if the initial borrowing under the Additional
Term Loan Facility has not occurred by such time.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Agent, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Additional Term
Loan Commitments or the Revolving Credit Commitments; provided, however, that
(i) each partial reduction of such Commitments shall be in an integral multiple
of $500,000 and in a minimum principal amount of $3,000,000 and (ii) the
Borrower shall not be permitted to terminate or reduce the Revolving Credit
Commitments if, as the result of such termination or reduction, (A) the LC
Commitment would exceed the aggregate remaining amount of the Revolving Credit
Commitments or (B) the Revolving Credit Utilization would exceed the aggregate
remaining Revolving Credit Commitments. The LC Commitments may be voluntarily
terminated or reduced by the Borrower as provided in Section 3.07.
(c) The Revolving Credit Commitments and the LC Commitments shall be
permanently reduced as provided in Section 2.13(e).
(d) Each reduction in the Additional Term Loan Commitments or the
Revolving Credit Commitments hereunder shall be made ratably among the
applicable Lenders in accordance with their respective applicable Commitments.
The Borrower shall pay to the Agent for the account of the applicable Lenders,
on the date of each termination or reduction, the Commitment Fees on the amount
of the Commitments so terminated or reduced accrued to but excluding the date of
such termination or reduction.
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(e) Nothing in this Section 2.09 shall prejudice any rights that the
Borrower may have against any Lender that fails to lend as required hereunder
prior to the date of termination of any Commitment.
SECTION 2.10. Conversion and Continuation of Term Borrowings. The
Borrower shall have the right at any time (subject to Section 2.08) upon prior
irrevocable notice to the Agent (i) not later than 12:00 noon, New York City
time, one Business Day prior to conversion, to convert any Eurodollar Term
Borrowing into an ABR Term Borrowing, (ii) not later than 11:00 a.m., New York
City time, three Business Days prior to conversion or continuation, to convert
any ABR Term Borrowing into a Eurodollar Term Borrowing or to continue any
Eurodollar Term Borrowing as a Eurodollar Term Borrowing for an additional
Interest Period and (iii) not later than 11:00 a.m., New York City time, three
Business Days prior to conversion, to convert the Interest Period with respect
to any Eurodollar Term Borrowing to another permissible Interest Period, subject
in each case to the following:
(a) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Term Borrowings;
(b) if less than all the outstanding principal amount of any Term
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(c) each conversion shall be effected by each Lender by applying the
proceeds of the new Term Loan of such Lender resulting from such
conversion to the Term Loan (or portion thereof) of such Lender being
converted, and accrued interest on a Term Loan (or portion thereof) being
converted shall be paid by the Borrower at the time of conversion;
(d) if any Eurodollar Term Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower shall
pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;
(e) any portion of a Term Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as a
Eurodollar Term Borrowing;
(f) any portion of a Eurodollar Term Borrowing that cannot be
converted into or continued as a Eurodollar Term Borrowing by reason of
subparagraph (e) above shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Term Borrowing;
and
(g) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than a Term Loan Repayment Date occurring
on or after the first day of such Interest Period if, after giving effect
to such selection, the aggregate outstanding amount of (i) the Eurodollar
Term Borrowings with Interest Periods ending on or prior to such Term Loan
Repayment Date and (ii) the ABR Term Borrowings would not be at least
equal to the principal amount of Term Borrowings to be paid on such Term
Loan Repayment Date.
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37
Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Term Borrowing that the Borrower requests be converted or continued, (ii)
whether such Term Borrowing is to be converted to or continued as a Eurodollar
Term Borrowing or an ABR Term Borrowing, (iii) if such notice requests a
conversion, the date of such conversion (which shall be a Business Day) and (iv)
if such Term Borrowing is to be converted to or continued as a Eurodollar Term
Borrowing, the Interest Period with respect thereto. If no Interest Period is
specified in any such notice with respect to any conversion to or continuation
as a Eurodollar Term Borrowing, the Borrower shall be deemed to have selected an
Interest Period of one month's duration. The Agent shall advise the other
Lenders of any notice given pursuant to this Section 2.10, of the Agent's
determination, if applicable, of the Adjusted LIBO Rate of any Eurodollar Loan
and of each Lender's portion of any converted or continued Term Borrowing. If
the Borrower shall not have given notice in accordance with this Section 2.10 to
continue any Term Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.10 to convert such
Term Borrowing), such Term Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into a new Interest Period as an ABR Term Borrowing.
The Borrower shall be deemed to elect in accordance with this
Section 2.10 (including Section 2.10(d)) to convert as of the Restatement
Closing Date all Eurodollar Term Borrowings comprised of Existing Term Loans
(and the current Interest Period with respect to each such Eurodollar Term
Borrowing shall be deemed to terminate as of the Restatement Closing Date) to
such Type and Interest Period as the Borrower elects in a notice with respect to
such Borrowing(s) delivered to the Agent in accordance with and subject to the
requirements of this Section 2.10, including the immediately preceding paragraph
of this Section 2.10 with respect to any failure by the Borrower to deliver such
a notice or to specify therein an Interest Period with respect to a Eurodollar
Term Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) The Borrower shall
pay to the Agent, for the account of the Lenders, on each March 31, June 30,
September 30 and December 31 in any period set forth below (each such date being
a "Term Loan Repayment Date") a principal amount of the Term Loans (such amount,
as adjusted from time to time pursuant to Sections 2.12(b) and 2.13(e), being
called the "Term Loan Repayment Amount") equal to (i) one-half of the amount set
forth below for the period from and including the Restatement Closing Date to
and including March 31, 1999, and (ii) one-quarter of the amount set forth below
for each such other period, together in each case with accrued and unpaid
interest on the principal amount to be paid to but excluding the date of such
payment:
From and Including: To and Including: Amount:
Restatement Closing Date March 31, 1999 $723,186
April 1, 1999 March 31, 2000 $1,446,372
April 1, 2000 March 31, 2001 $1,446,372
April 1, 2001 March 31, 2002 $1,446,372
April 1, 2002 March 31, 2003 $1,446,372
April 1, 2003 March 31, 2004 $86,782,334
April 1, 2004 Term Loan Maturity Date $135,958,992
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38
On each Term Loan Repayment Date, the Agent shall apply the Term Loan Repayment
Amount paid to the Agent to pay the Term Loans. Prior to the Restatement Closing
Date, $750,000 aggregate principal amount of the Existing Term Loans were repaid
pursuant to Section 2.11(a) of the Original Credit Agreement.
(b) To the extent not previously paid, all Term Borrowings shall be
due and payable on the Term Loan Maturity Date, together with accrued and unpaid
interest on the principal amount to be paid to but excluding the date of
payment.
(c) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12 Optional Prepayment. (a) The Borrower shall have the
right at any time and from time to time to prepay (i) Revolving Credit
Borrowings, (ii) Term Borrowings or (iii) if the Borrower specifically elects,
Term Borrowings and outstanding Series I Tranche A Exchange Notes in accordance
with the provisions of the Tranche A Exchange Note Purchase Agreements, in each
case in whole or in part, upon at least three Business Days' prior written or
telecopy notice (or telephone notice promptly confirmed by written or telecopy
notice) to the Agent; provided, however, that each partial prepayment shall be
in an amount that is an integral multiple of $500,000.
(b) Each prepayment of principal of the Term Borrowings pursuant to
paragraph (a) above shall be applied first, to reduce the scheduled payments of
principal due under Section 2.11(a) during the 12 month period following the
date of such prepayment and second, pro rata against the remaining scheduled
payments of principal due under Section 2.11(a).
(c) Each notice of prepayment shall specify (i) the amount to be
prepaid, (ii) the prepayment date, (iii) whether the prepayment relates to
Revolving Credit Borrowings, to Term Borrowings or to both Term Borrowings and
outstanding Series I Tranche A Exchange Notes and (iv) the principal amount to
be prepaid of (A) Revolving Credit Borrowings (or portion thereof) or (B) Term
Borrowings (or portion thereof). Each such notice shall be irrevocable and shall
commit the Borrower to prepay such obligations by the amount specified therein
on the date specified therein. All prepayments of Borrowings under this Section
2.12 shall be subject to Section 2.16 but otherwise without premium or penalty.
All prepayments under this Section 2.12 shall be accompanied by accrued interest
on the principal amount being prepaid to but excluding the date of payment.
(d) On each prepayment date with respect to the prepayment of any
Term Borrowing in respect of which the Borrower shall also be making a voluntary
prepayment of Series I Tranche A Exchange Notes, the Borrower shall deliver to
the Agent for application pursuant to paragraph (a) above an amount equal to the
Lenders' Pro Rata Share of such prepaid amounts. On or before the delivery of
all amounts to be prepaid with respect to the Term Borrowings, the Borrower
shall with respect to the Pro Rata Share of such prepaid amounts attributable to
the Series I Tranche A Exchange Notes give notice of such optional prepayment of
such Pro Rata Share pursuant to Section 5.2 of the Tranche A Exchange Note
Purchase Agreements (or the analogous provision, if any, in respect of the
Tranche A Exchange Note Refinancing Indebtedness). Pending payment to the
Tranche A Exchange Note Purchasers, the Borrower shall deposit the Pro Rata
Share of such prepaid amounts attributable to the Series I Tranche A Exchange
Notes in an escrow account with the Collateral Agent pursuant to paragraph (f)
below.
<PAGE> 45
39
(e) At any time that (i) the Borrower shall elect to prepay both
Term Borrowings and Series I Tranche A Exchange Notes pursuant to paragraph (d)
above or (ii) an offer notice is required to be delivered to the Series I
Tranche A Exchange Note Purchasers pursuant to Section 2.13(d), the Borrower
shall give (or cause to be given) to the Agent an additional written notice
(which notice shall be included, as applicable, in the prepayment notice
delivered pursuant to paragraph (a) above or the Financial Officer's Certificate
delivered pursuant to Section 2.13(f)). Such written notice shall, (i) in the
case of an optional prepayment pursuant to paragraph (d) above, set forth a
reasonably detailed calculation of the amounts to be paid to the Lenders and the
amounts to be paid to the Series I Tranche A Exchange Note Purchasers as
contemplated in paragraph (d) above and (ii) in the case of a notice relating to
a Prepayment Event, describe in reasonable detail the facts and circumstances
giving rise to such Prepayment Event and a reasonably detailed calculation of
the Net Cash Proceeds therefrom and the amounts to be paid to the Lenders and to
be offered to the Series I Tranche A Exchange Note Purchasers in accordance with
Section 2.13(d).
(f) If (i) any voluntary prepayment of Series I Tranche A Exchange
Notes is to be made in connection with an optional prepayment of Term Borrowings
pursuant to paragraph (d) above or (ii) there is a prepayment in connection with
any Prepayment Event pursuant to Section 2.13(d), the Borrower will,
concurrently with any such prepayment under this Agreement, make effective
provision whereby the Series I Tranche A Exchange Note Purchasers' Pro Rata
Share of the related prepaid amount, together with interest to the related
prepayment date, is placed in escrow with the Collateral Agent until the related
prepayment date in respect of the Series I Tranche A Exchange Notes, whereupon
such amounts shall be applied to the prepayment of the Series I Tranche A
Exchange Notes or, in the case of amounts attributable to rejected or deemed
rejected offers as contemplated in Section 2.13(d), prepayments of obligations
outstanding under this Agreement as contemplated under Section 2.13(d).
(g) Except as contemplated in the definition of the term "Excess
Cash Flow", no optional prepayment of Term Borrowings made by the Borrower
pursuant to this Section 2.12 shall reduce the Borrower's obligation to make
mandatory prepayments pursuant to Section 2.13(d) or Section 2.13(e).
SECTION 2.13. Mandatory Prepayments. (a) On the date of any
termination or reduction of the Revolving Credit Commitments pursuant to Section
2.09, the Borrower shall pay or prepay so much of the Swingline Loans and
Revolving Credit Borrowings as shall be necessary in order that (i) the
aggregate principal amount of Swingline Loans and Revolving Loans outstanding at
such time will not exceed (ii) the aggregate Revolving Credit Commitments (after
giving effect to such termination or reduction and after giving effect to each
deemed reduction to the Revolving Credit Commitments in connection with the
making of a Swingline Loan) less the aggregate LC Exposure at such time.
(b) Substantially simultaneously with (and in any event not later
than the Business Day next following) the occurrence of a Prepayment Event, the
Borrower shall apply an amount equal to 100% of the Net Cash Proceeds therefrom
to prepay obligations outstanding under this Agreement and the outstanding
Series I Tranche A Exchange Notes in accordance with paragraph (d) below.
(c) No later than the earlier of (i) 105 days after the end of each
fiscal year, commencing with the fiscal year ending on December 31, 1999, and
(ii) the date on which the financial statements with respect to such period are
delivered pursuant to Section 6.04(a), the
<PAGE> 46
40
Borrower shall apply an amount equal to 50% of Excess Cash Flow for such period
to prepay obligations outstanding under this Agreement and the outstanding
Series I Tranche A Exchange Notes in accordance with paragraph (d) below.
(d) Upon the occurrence of any event described in paragraph (b) or
(c) above, the Borrower shall (i) offer to pay to the Agent (for application to
the prepayment of obligations outstanding under this Agreement in accordance
with paragraph (e) below) an amount equal to the Lenders' Pro Rata Share of the
amount to be prepaid as a result of such event (such amount, the "Prepayment
Amount") and (ii) offer to prepay the Series I Tranche A Exchange Notes in the
manner set forth in Section 5.3 of the Tranche A Exchange Note Purchase
Agreements (or the analogous provision, if any, in respect of any Tranche A
Exchange Note Refinancing Indebtedness) in an amount equal to the Pro Rata Share
of the Prepayment Amount attributable to the Series I Tranche A Exchange Notes.
If any Series I Tranche A Exchange Note Purchaser rejects or is deemed to reject
(as provided in Section 5.3 of the Tranche A Exchange Note Purchase Agreements
(or the analogous provision, if any, in respect of any Tranche A Exchange Note
Refinancing Indebtedness)) such offer, then on the related date for payment the
Collateral Agent shall (i) allocate such Series I Tranche A Exchange Note
Purchaser's share of such Net Cash Proceeds to the Term Loans and (ii) offer to
apply such amount to the prepayment of obligations outstanding under this
Agreement in accordance with paragraphs (e) and (f) below.
(e) Mandatory prepayments of outstanding obligations under this
Agreement made by the Borrower pursuant to paragraphs (b) or (c) above or
paragraph (i) below shall be applied, subject to paragraph (h) below, first, to
prepay scheduled payments of principal due on the Term Borrowings under Section
2.11(a) after the date of such prepayment in the manner described in the
immediately following sentence and second, following the payment in full of all
Term Loans, permanently to reduce Swingline Loans, Revolving Loans and the
Revolving Credit Commitments. Each such mandatory prepayment of principal of the
Term Borrowings shall be applied to reduce the scheduled payments of principal
due under Section 2.11(a) after the date of such prepayment (i) in the case of
mandatory prepayments described in clause (c) of the definition of the term
"Prepayment Event", in the inverse order of maturity and (ii) in the case of
mandatory prepayments described in paragraph (c) above, all other Prepayment
Events and any prepayment pursuant to paragraph (h) or paragraph (i) below, pro
rata.
(f) The Borrower shall deliver to the Agent, (i) at the time of each
prepayment required under paragraph (b), paragraph (c), paragraph (h) or
paragraph (i) of this Section 2.13, a certificate signed by a Financial Officer
of the Borrower setting forth in reasonable detail the calculation of the amount
of such prepayment and (ii) at least three Business Days prior to the time of
each prepayment required under this Section 2.13 (if known at such time), a
notice of such prepayment. In the case of a prepayment pursuant to paragraph (d)
above, such officer's certificate shall also set forth the information required
to be included therein pursuant to Section 2.12(e). Each required notice of
prepayment (i) shall specify the prepayment date, whether the related prepayment
relates solely to obligations under this Agreement or if it also relates to
outstanding Series I Tranche A Exchange Notes, the Type of each Borrowing being
prepaid, the principal amount of each Borrowing (or portion thereof) to be
prepaid and, if outstanding Series I Tranche A Exchange Notes are to be prepaid,
the principal amount of such outstanding Series I Tranche A Exchange Notes (or
portion thereof) to be prepaid, (ii) shall be irrevocable and (iii) shall commit
the Borrower to prepay such obligations by the amount stated therein on the date
stated therein. All prepayments of Borrowings and Swingline Loans under this
Section 2.13 shall be subject to Section 2.16, but shall otherwise be without
premium or penalty. All prepayments of Borrowings and Swingline Loans
<PAGE> 47
41
under this Section 2.13 (other than prepayments pursuant to paragraph (c) above
or paragraph (i) below) shall be accompanied by accrued interest on the
principal amount being prepaid to but excluding the date of payment. All
prepayments of Borrowings and Swingline Loans pursuant to paragraph (c) or
paragraph (i) of this Section 2.13 shall be applied first to the payment of
accrued interest on the principal amount being prepaid and then to the payment
of such principal.
(g) Net Cash Proceeds and such other amounts to be applied pursuant
to this Section 2.13 to the prepayment of Term Borrowings and Revolving Credit
Borrowings shall be applied, as applicable, first to reduce outstanding ABR Term
Borrowings and ABR Revolving Credit Borrowings. Any amounts remaining after each
such application shall, at the option of the Borrower, be applied to prepay
Eurodollar Term Borrowings or Eurodollar Revolving Credit Borrowings, as the
case may be, immediately or shall be deposited in the Prepayment Account (as
defined below). The Agent shall apply any cash deposited in the Prepayment
Account (i) allocable to Term Borrowings to prepay Eurodollar Term Borrowings
and (ii) allocable to Revolving Credit Borrowings to prepay Eurodollar Revolving
Credit Borrowings, in each case on the last day of their respective Interest
Periods (or, at the direction of the Borrower, on any earlier date) until all
outstanding Term Borrowings or Revolving Credit Borrowings, as the case may be,
have been prepaid or until all the allocable cash on deposit with respect to
such Borrowings has been exhausted. For purposes of this Agreement, "Prepayment
Account" shall mean an account established by the Borrower with the Agent and
over which the Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal for application in accordance with this paragraph
(g). The Agent will, at the request of the Borrower, invest amounts on deposit
in the Prepayment Account in Permitted Investments maturing prior to the last
day of the applicable Interest Periods of the Eurodollar Term Borrowings or
Eurodollar Revolving Credit Borrowings to be prepaid, as the case may be;
provided, however, that (i) the Agent shall not be required to make any
investment that, in its sole judgment, would require or cause the Agent to be
in, or would result in any, violation of any law, statute, rule or regulation
and (ii) the Agent shall have no obligation to invest amounts on deposit in the
Prepayment Account if a Default or Event of Default shall have occurred and be
continuing. The Borrower shall indemnify the Agent for any losses relating to
the investments so that the amount available to prepay Eurodollar Borrowings on
the last day of the applicable Interest Periods is not less than the amount that
would have been available had no investments been made pursuant thereto. Other
than any interest earned on such investments, the Prepayment Account shall not
bear interest. Interest or profits, if any, on such investments shall be
deposited in the Prepayment Account and reinvested as specified above. If the
maturity of the Loans has been accelerated pursuant to Article VIII, the Agent
may, in its sole discretion, apply all amounts on deposit in the Prepayment
Account to satisfy any of the Obligations. The Borrower hereby grants to the
Agent, for its benefit and the benefit of the Fronting Bank, the Swingline
Lender and the Lenders, a security interest in the Prepayment Account.
(h) Any Term Lender may, subject to the following sentence, elect by
notice to the Agent in writing or by telecopy (or by telephone promptly
confirmed in writing or by telecopy) at least one Business Day prior to any
prepayment of Term Loans required to be made by the Borrower for the account of
such Lender pursuant to this Section 2.13, to decline all or a portion of such
prepayment (including any amount rejected by any Series I Tranche A Exchange
Note Purchaser and offered to such Term Lender pursuant to paragraph (d) above)
and, under such circumstances, the Borrower shall retain all amounts (such
amounts the "Declined Amounts") that would otherwise be used to repay Term Loans
pursuant thereto. In the event that any portion of the Declined Amounts has not
been invested in assets used in the principal lines of business of the Borrower
or its subsidiaries or used by the Borrower to make an optional prepayment
pursuant to Section 2.12 during the one-year period after such Declined Amounts
were so declined, the Borrower shall be
<PAGE> 48
42
required, on the last day of such one-year period, to apply an amount equal to
100% of the remaining portion of such Declined Amounts to the prepayment of
obligations outstanding under this Agreement in accordance with paragraph (e)
above.
(i) Any portion of the Additional Reserve Amount that is not used to
fund the Additional Permitted Acquisition, if any, shall be applied by the
Borrower in accordance with the immediately following sentence and paragraphs
(e), (f), (g) and (h) of this Section 2.13 to the prepayment of obligations
outstanding under this Agreement (the "Special Mandatory Prepayment"). The
Special Mandatory Prepayment shall be made by the Borrower not later than (a)
March 31, 1999, if the Borrower shall have not executed a definitive purchase
agreement, definitive merger agreement, definitive tender offer agreement or
other similar definitive agreement with respect to the Additional Permitted
Acquisition by such date, or (b) December 31, 1999, if such a definitive
agreement shall have been executed by March 31, 1999, regardless of whether or
not the Additional Permitted Acquisition shall have been consummated, provided
that the Special Mandatory Prepayment shall not be made by the Borrower so long
as a "Default" or "Event of Default" under the Loan Documents or the Tranche A
Exchange Note Documents (as such terms are defined therein) has occurred and is
continuing.
(j) The provisions of this Section 2.13 are subject to the
Intercreditor Agreement as long as any Series I Tranche A Exchange Notes are
outstanding.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after March 21, 1997, any change
in applicable law or regulation or in the interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) shall change the
basis of taxation of payments to any Lender of the principal of or interest on
any Eurodollar Loan made by such Lender or any Letter of Credit reimbursement
obligations, Fees or other amount payable hereunder (other than changes in
respect of income and franchise taxes imposed on such Lender by the jurisdiction
in which such Lender is organized or has its principal office or by any
political subdivision or taxing authority thereof or therein), or shall impose,
modify, or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of or credit extended by
such Lender (except any such reserve requirement that is reflected in the
Adjusted LIBO Rate or in the Alternate Base Rate) or shall impose on such Lender
or the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit issued hereunder,
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan or increase the cost to any
Lender of issuing or maintaining any Letter of Credit or to reduce the amount of
any sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise) by an amount deemed by such Lender to be material, then
the Borrower will pay to such Lender following receipt of a certificate of such
Lender to such effect in accordance with Section 2.14(c) such additional amount
or amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.
(b) If any Lender, the Swingline Lender or the Fronting Bank shall
have determined that the applicability of any law, rule, regulation, agreement
or guideline adopted pursuant to or arising out of the July 1988 report of the
Basic Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption after March 21, 1997, of any other law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change in any of the foregoing or
in the interpretation or administration of
<PAGE> 49
43
any of the foregoing by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or any lending office of such Lender), the Swingline Lender or
the Fronting Bank or any Lender's, the Swingline Lender's or the Fronting Bank's
holding company with any request or directive regarding capital adequacy issued
under any law, rule, regulation or guideline (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on such Lender's, the Swingline
Lender's or the Fronting Bank's capital or on the capital of such Lender's, the
Swingline Lender's or the Fronting Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by such Lender, the Swingline
Loans made by the Swingline Lender or the Letters of Credit issued by the
Fronting Bank pursuant hereto to a level below that which such Lender, the
Swingline Lender or the Fronting Bank or such Lender's, the Swingline Lender's
or the Fronting Bank's holding company could have achieved but for such
applicability, adoption, change or compliance (taking into consideration such
Lender's, the Swingline Lender's or the Fronting Bank's policies and the
policies of such Lender's, the Swingline Lender's or the Fronting Bank's holding
company with respect to capital adequacy) by an amount deemed by such Lender,
the Swingline Lender or the Fronting Bank to be material, then from time to time
the Borrower shall pay to such Lender, the Swingline Lender or the Fronting Bank
following receipt of a certificate of such Lender, the Swingline Lender or the
Fronting Bank to such effect in accordance with Section 2.14(c) such additional
amount or amounts as will compensate such Lender, the Swingline Lender or the
Fronting Bank or such Lender's, the Swingline Lender's or the Fronting Bank's
holding company for any such reduction suffered. Notwithstanding any other
provision in this paragraph (b), none of any Lender, the Swingline Lender or the
Fronting Bank shall be entitled to demand compensation pursuant to this
paragraph (b) if it shall not be the general practice of such Lender, the
Swingline Lender or the Fronting Bank, as applicable, to demand such
compensation in similar circumstances under comparable provisions of other
comparable credit agreements.
(c) A certificate of each Lender, the Swingline Lender or the
Fronting Bank setting forth such amount or amounts as shall be necessary to
compensate such Lender, the Swingline Lender or the Fronting Bank or its holding
company as specified in paragraph (a) or (b) above, as the case may be, and
setting forth in reasonable detail an explanation of the basis of requesting
such compensation in accordance with paragraph (a) or (b) above, shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay each Lender, the Swingline Lender or the Fronting Bank the
amount shown as due on any such certificate delivered by it within 10 days after
its receipt of the same.
(d) Failure on the part of any Lender, the Swingline Lender or the
Fronting Bank to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect to
any period shall not constitute a waiver of such Lender's, the Swingline
Lender's or the Fronting Bank's right to demand compensation with respect to
such period or any other period, except that none of any Lender, the Swingline
Lender or the Fronting Bank shall be entitled to compensation under this Section
2.14 for any costs incurred or reductions suffered with respect to any date
unless such Lender, the Swingline Lender or the Fronting Bank, as applicable,
shall have notified the Borrower that it will demand compensation for such costs
or reductions under paragraph (c) above not more than six months after the later
of (i) such date and (ii) the date on which such Lender, the Swingline Lender or
the Fronting Bank, as applicable, shall have become aware of such costs or
reductions. The protection of this Section 2.14 shall be available to each
Lender, the Swingline Lender or the Fronting Bank regardless of any possible
contention of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition that shall have occurred or been imposed.
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(e) Each Lender will, at the request of the Borrower, designate a
different lending office if such designation (i) will avoid the need for, or
minimize the amount of, any compensation to which such Lender is entitled
pursuant to this Section 2.14 and (ii) will not, in the sole judgment of such
Lender, be otherwise disadvantageous to such Lender.
(f) With respect to any Lender that is entitled to any compensation
pursuant to paragraph (a) above, the Borrower shall have the right to elect by
notice to such Lender that all outstanding Eurodollar Loans made by such Lender
be automatically converted to ABR Loans as of the effective date of such notice
and that any requests thereafter by the Borrower for a Eurodollar Borrowing
shall, as to such Lender only, be deemed a request for an ABR Loan.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other
provision herein, if after March 21, 1997, any change in any law or regulation
or in the interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by
such Lender hereunder, whereupon any request by the Borrower for a
Eurodollar Borrowing shall, as to such Lender only, be deemed a request
for an ABR Loan unless such declaration shall be subsequently withdrawn;
and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrower by
any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last
day of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
borrowing hereunder the applicable conditions set forth in Article V, (b) any
failure by the Borrower to borrow or to refinance, convert or continue any Loan
hereunder after irrevocable notice of such borrowing, refinancing, conversion or
continuation has been given pursuant to Section 2.03 or 2.10, (c) any payment,
prepayment or conversion of a Eurodollar Loan required by any other provision of
this Agreement or otherwise made or deemed made on a date other than the last
day of the Interest Period applicable thereto, (d) any default in payment or
prepayment of the principal amount of any Loan or any part thereof or interest
accrued thereon, as and when due and payable (at the due date thereof, whether
by scheduled maturity, acceleration, irrevocable notice of prepayment or
otherwise) or (e) the occurrence of any Event of
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45
Default, including, in each such case, any loss or reasonable expense sustained
or incurred or to be sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or any part thereof
as a Eurodollar Loan. Such loss or reasonable expense shall be equal to the sum
of (a) such Lender's actual costs and expenses incurred (other than any lost
profits) in connection with, or by reason of, any of the foregoing events and
(b) an amount equal to the excess, if any, as reasonably determined by such
Lender of (i) its cost of obtaining the funds for the Loan being paid, prepaid,
converted or not borrowed, converted or continued (assumed to be the Adjusted
LIBO Rate applicable thereto) for the period from and including the date of such
payment, prepayment, conversion or failure to borrow, convert or continue to but
excluding the last day of the Interest Period for such Loan (or, in the case of
a failure to borrow, convert or continue, the Interest Period for such Loan that
would have commenced on the date of such failure) over (ii) the amount of
interest (as reasonably determined by such Lender) that would be realized by
such Lender in reemploying the funds so paid, prepaid, converted or not
borrowed, converted or continued for such period or Interest Period, as the case
may be. A certificate of any Lender setting forth in reasonable detail any
amount or amounts that such Lender is entitled to receive pursuant to this
Section 2.16 shall be delivered to the Borrower and shall be conclusive absent
manifest error.
SECTION 2.17. Pro Rata Treatment. Except as required under Section
2.15, each Borrowing, each payment or prepayment of principal of any Borrowing,
each payment of interest on the Loans, each payment of the Commitment Fees, each
payment of the LC Fees, each reduction of the Additional Term Loan Commitments
or the Revolving Credit Commitments and each refinancing of any Borrowing with,
conversion of any Borrowing to or continuation of any Borrowing as a Borrowing
of any Type shall be allocated pro rata among the Lenders in accordance with
their respective applicable Commitments (or, if such Commitments shall have
expired or been terminated, in accordance with the respective principal amounts
of their applicable outstanding Loans). Each Lender agrees that in computing
such Lender's portion of any Borrowing to be made hereunder, the Agent may, in
its discretion, round each Lender's percentage of such Borrowing, computed in
accordance with Section 2.01, to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower, or pursuant to a claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any applicable bankruptcy,
insolvency, or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans or LC
Exposure as a result of which the unpaid principal portion of its Loans or its
LC Exposure shall be proportionately less than the unpaid principal portion of
the Loans of any other Lender or any other Lender's LC Exposure, such Lender
shall be deemed simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to such other Lender the purchase price for, a
participation in the Loans of such other Lender or the LC Exposure of such other
Lender, so that the aggregate unpaid principal amount of the Loans, LC Exposures
and participations in Loans and LC Exposures held by each Lender shall be in the
same proportion to the aggregate unpaid principal amount of all Loans and LC
Exposures then outstanding as the principal amount of such Lender's Loans and LC
Exposures prior to such exercise of banker's lien, setoff or counterclaim or
other event was to the principal amount of all Loans and LC Exposures
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that, if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.18 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower expressly
consents to
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46
the foregoing arrangements and agrees that any Lender holding a participation in
a Loan or LC Exposure deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrower to such Lender by reason thereof as fully as if
such Lender had made a Loan directly to the Borrower in the amount of such
participation.
SECTION 2.19. Payments. (a) Except as provided in Sections 2.05(d),
the Borrower shall make each payment (including principal of or interest on any
Borrowing or any Fees or other amounts but excluding payments in respect of
Swingline Loans) hereunder and under any other Loan Document not later than
12:00 noon, New York City time, on the date when due in dollars to the Agent
(for the account of the Agent, the Fronting Bank or the Lenders, as the case may
be), at its offices at 270 Park Avenue, New York, New York, in immediately
available funds. The Agent shall promptly remit in dollars to the Agent, the
Fronting Bank or the Lenders, as the case may be, its share of such payments
received by the Agent.
(b) The Borrower shall make each payment in respect of Swingline
Loans not later than 12:00 noon, New York City time, on the date when due to the
Swingline Lender at its offices at 270 Park Avenue, New York, New York.
(c) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.19, free and clear of and
without deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the net income of the Agent, the Fronting Bank, the
Swingline Lender or any Lender (or any transferee or assignee thereof, including
a participation holder (any such entity being called a "Transferee")) and
franchise taxes imposed on the Agent, the Fronting Bank, the Swingline Lender or
any Lender (or Transferee) by the United States or any jurisdiction under the
laws of which the Agent, the Fronting Bank, the Swingline Lender or any such
Lender (or Transferee) is organized or has its principal office or lending
office or any political subdivision or taxing authority thereof or therein (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If any Taxes are required
to be deducted from or in respect of any sum payable hereunder to any Lender (or
any Transferee), the Agent, the Swingline Lender or the Fronting Bank, (i) the
sum payable shall be increased by the amount necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.20) such Lender (or Transferee), the Agent, the Swingline
Lender or the Fronting Bank (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deduction, and (iii) the Borrower shall pay the full
amount deducted to the relevant taxing authority or other Governmental Authority
in accordance with applicable law; provided, however, that no Transferee of any
Lender shall be entitled to receive any greater payment under this paragraph (a)
than such Lender would have been entitled to receive with respect to the rights
assigned, participated or otherwise transferred unless such assignment,
participation or transfer shall have been made at a time when the circumstances
giving rise to such greater payment did not exist.
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(b) In addition, the Borrower agrees to pay any current or future
stamp, intangible or documentary taxes or any other excise or property taxes,
charges or similar levies (including mortgage recording taxes and similar fees),
together with interest, penalties and fees, that arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, any Assignment and Acceptance entered into at the
request of the Borrower or any other Loan Document (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Lender (or Transferee), the
Agent, the Swingline Lender and the Fronting Bank for the full amount of Taxes
and Other Taxes paid by such Lender (or Transferee), the Agent, the Swingline
Lender or the Fronting Bank, as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted by
the relevant taxing authority or other Governmental Authority. Such
indemnification shall be made within 30 days after the date any Lender (or
Transferee), the Agent, the Swingline Lender or the Fronting Bank, as the case
may be, makes written demand therefore. If a Lender (or Transferee), the Agent,
the Swingline Lender or the Fronting Bank shall become aware that it is entitled
to receive a refund in respect of Taxes or Other Taxes as to which it has been
indemnified by the Borrower pursuant to this Section 2.20, it shall promptly
notify the Borrower of the availability of such refund and shall, within 30 days
after receipt of a request by the Borrower, apply for such refund at the
Borrower's expense. If any Lender (or Transferee), the Agent, the Swingline
Lender or the Fronting Bank receives a refund in respect of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower pursuant to this
Section 2.20, it shall promptly notify the Borrower of such refund and shall,
within 15 days of receipt, repay such refund to the Borrower, net of all
out-of-pocket expenses of such Lender, the Agent, the Swingline Lender or the
Fronting Bank and without any interest (other than the interest, if any,
included in such refund); provided, however, that the Borrower, upon the request
of such Lender (or Transferee), the Agent, the Swingline Lender or the Fronting
Bank, agrees to return such refund (plus penalties, interest or other charges)
to such Lender (or Transferee), the Agent, the Swingline Lender or the Fronting
Bank in the event such Lender (or Transferee), the Agent, the Swingline Lender
or the Fronting Bank is required to repay such refund. Nothing contained in this
paragraph (c) shall require any Lender (or Transferee), the Agent, the Swingline
Lender or the Fronting Bank to make available any of its tax returns (or any
other information relating to its taxes that it deems to be confidential).
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrower in respect of any payment to any Lender (or
Transferee), the Agent, the Swingline Lender or the Fronting Bank, the Borrower
will furnish to the Agent, at its address referred to in Section 10.01, the
original or a certified copy of a receipt evidencing payment thereof or other
evidence reasonably satisfactory to such Lender (or Transferee), the Agent, the
Swingline Lender or the Fronting Bank, as the case may be.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.20
shall survive the payment in full of the principal of and interest hereunder or
any Loan Document.
(f) Each Lender (or Transferee) or successor Fronting Bank that is
organized under the laws of a jurisdiction other than the United States, any
State thereof or the District of Columbia (a "Non-U.S. Lender") shall deliver to
the Borrower and the Agent two copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with
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respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 872(h)(3)(B) of the Code of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from U.S. Federal withholding tax on
payments of interest by the Borrower under this Agreement and the other Loan
Documents. Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement. Notwithstanding any provision of
Section 2.20(a) to the contrary, the Borrower shall not have any obligation to
pay any Taxes or Other Taxes (except to the extent required by law) pursuant to
Section 2.20 to the extent that such Taxes or Other Taxes result from (i) the
failure of any Lender (or Transferee), the Agent, the Fronting Bank or the
Swingline Bank to comply with its obligations pursuant to this Section 2.20(f),
unless as a result of any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof such compliance is no longer necessary,
or (ii) any representation made on Form 1001 or 4224 or successor applicable
form on certification by the Lender (or Transferee), the Agent, the Fronting
Bank, or the Swingline Bank incurring such Taxes or Other Taxes proving to have
been incorrect, false or misleading in any material respect when so made or
deemed to be made.
(g) Any of the Agent, the Fronting Bank, the Swingline Lender or any
Lender (or Transferee) claiming any additional amounts payable pursuant to this
Section 2.20 shall use reasonable efforts, consistent with legal and regulatory
restrictions (including reasonable efforts to change the jurisdiction of its
applicable lending office), to avoid the need for or reduce the amount of any
such additional amounts that may thereafter accrue, provided that such efforts
would not, in the sole determination of such Lender (or Transferee), Agent,
Fronting Bank, or Swingline Lender, as the case may be, be otherwise
disadvantageous to such Lender (or Transferee), the Agent, the Fronting Bank, or
the Swingline Lender.
SECTION 2.21. Swingline Loans. (a) On the terms and subject to the
conditions and relying upon the representations and warranties herein set forth,
the Swingline Lender agrees, at any time and from time to time from and
including the Closing Date to but excluding the earlier of the Revolving Credit
Maturity Date and the termination of the Revolving Credit Commitments, in
accordance with the terms hereof, to make Swingline Loans (which shall be ABR
Borrowings) to the Borrower in an aggregate principal amount at any time
outstanding not to exceed the lesser of (i) $5,000,000 and (ii) the difference
between (A) the aggregate Revolving Credit Commitments, as the same may be
reduced from time to time pursuant to Section 2.09, at such time and (B) the sum
of the aggregate principal amount of Revolving Loans outstanding at such time
and the LC Exposure at such time. Each Lender's Revolving Credit Commitment
shall be deemed utilized by an amount equal to such Lender's pro rata share
(based upon the percentage that such Lender's Revolving Credit Commitment bears
to the aggregate amount of the Revolving Loan Commitments on such date) of each
Swingline Loan. Immediately upon the making of each Swingline Loan, the
Swingline Lender shall be deemed to have sold and transferred to each such
Lender, and each such Lender shall be deemed to have purchased and received from
the Swingline Lender, in each case irrevocably and without any further action by
any party, an undivided interest and participation in such Swingline Loan and
the Obligations of the Borrower under this Agreement in respect thereof in an
amount equal to such Lender's pro rata share (determined as aforesaid) of such
Swingline Loan. Each Swingline Loan shall be in a principal amount that is an
integral multiple of $500,000 and shall be made available to the Borrower by
means of a credit to the general deposit account of the Borrower
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by 3:00 p.m. on the date such Swingline Loan is requested to be made pursuant to
paragraph (b) below. Within the limits set forth in the first sentence of this
paragraph, the Borrower may borrow, pay or prepay and reborrow Swingline Loans
on or after the Closing Date and prior to the Revolving Credit Maturity Date on
the terms and subject to the conditions and limitations set forth herein.
(b) The Borrower shall give the Swingline Lender telephonic, written
or telecopy notice (in the case of telephonic notice, such notice shall be
promptly confirmed in writing or by telecopy) not later than 12:00 noon, New
City time, on the day of a proposed borrowing. Such notice shall be delivered on
a Business Day, shall be irrevocable and shall refer to this Agreement and shall
specify the requested date (which shall be a Business Day) and amount of such
Swingline Loan. The Swingline Lender shall give the Agent prompt written or
telecopy advice of any notice received from the Borrower pursuant to this
paragraph (b).
(c) Forthwith upon demand by the Swingline Lender, each Lender shall
pay to the Agent, as payment for its participation, such Lender's pro rata
percentage (as determined in paragraph (a) above) of each outstanding Swingline
Loan (but without any requirement for compliance with the provisions of Sections
2.01, 2.02 and 2.03 or the applicable conditions set forth in Article V) and
shall make available to the Agent for the account of the Swingline Lender, in
the same day funds if the Swingline Lender makes such demand prior to 11:00
a.m., New York City time, and otherwise in funds available on the next Business
Day, the amount of its participation. If any Lender shall not have made such
amount available to the Agent, such Lender and the Borrower severally agree to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date of demand by the Swingline Lender until the date such
amount is paid to the Agent at (i) in the case of the Borrower, the interest
rate applicable at such time under Section 2.06 to an ABR Revolving Loan and
(ii) in the case of such Lender, the Federal Funds Effective Rate. If such
Lender shall pay to the Agent such amount, such amount so paid shall constitute
such Lender's Revolving Credit Loan for purposes of this Agreement and the
aggregate amount of Swingline Loans outstanding shall be reduced by the amount
of each such Revolving Credit Loan (it being understood that (i) each Lender's
obligation to make such payment is absolute and unconditional and shall not be
affected by any event or circumstance whatsoever, including the occurrence of
any Default or Event of Default hereunder or the failure of any condition
precedent set forth in Article V to be satisfied, or any delay on the Swingline
Lender's part in demanding payment, and (ii) each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever).
ARTICLE III
Letters of Credit
SECTION 3.01. Issuance of Letters of Credit. (a) The Fronting Bank
agrees, on the terms and subject to the conditions hereinafter set forth, to
issue Letters of Credit, in a form reasonably acceptable to the Agent and the
Fronting Bank, appropriately completed, for the account of the Borrower, at any
time and from time to time on and after the Closing Date until the earlier of
the LC Maturity Date and the termination of the LC Commitment in accordance with
the terms hereof; provided, however, that any Letter of Credit shall be issued
by the Fronting Bank only if, and each request by the Borrower for the issuance
of any Letter of Credit shall be deemed a representation and warranty of the
Borrower that, immediately following the issuance of any such Letter of Credit,
(i) the LC Exposure shall not exceed the LC Commitment in effect at such time
and
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(ii) the Revolving Credit Utilization at such time shall not exceed the
aggregate Revolving Credit Commitments at such time.
(b) Each Letter of Credit shall expire at the close of business on
the earlier of the date that is 12 months after the date of issuance of such
Letter of Credit and the LC Maturity Date, unless such Letter of Credit expires
by its terms on an earlier date. Each Letter of Credit shall provide for
payments of drawings in dollars.
(c) Each issuance of any Letter of Credit shall be made on at least
three Business Days' prior written or telecopy notice from the Borrower to the
Fronting Bank and the Agent (which shall give prompt notice thereof to each
Participating Lender) specifying the date of issuance, the date on which such
Letter of Credit is to expire (which shall comply with paragraph (b) above), the
amount of such Letter of Credit, the name and address of the beneficiary of such
Letter of Credit and such other information as may be necessary or desirable to
complete such Letter of Credit. The Fronting Bank will give the Agent and the
Agent will give to each Participating Lender reasonably prompt notice of the
issuance and amount of each Letter of Credit and the expiration of each Letter
of Credit.
SECTION 3.02. Participations; Unconditional Obligations. (a) By the
issuance of a Letter of Credit and without any further action on the part of the
Fronting Bank or the Participating Lenders in respect thereof, the Fronting Bank
hereby grants to each Participating Lender, and each Participating Lender hereby
agrees to acquire from the Fronting Bank, a participation in such Letter of
Credit equal to such Participating Lender's Applicable Percentage of the face
amount of such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Participating
Lender hereby absolutely and unconditionally agrees to pay to the Agent, on
behalf of the Fronting Bank in accordance with Section 2.02(f), such
Participating Lender's Applicable Percentage of each LC Disbursement made by the
Fronting Bank; provided, however, that the Participating Lenders shall not be
obligated to make any such payment to the Fronting Bank with respect to any
wrongful payment or disbursement made under any Outstanding Letter of Credit as
a result of the gross negligence or wilful conduct of the Fronting Bank. Each
Letter of Credit previously issued pursuant to the Original Credit Agreement
shall remain outstanding in accordance with the terms hereof and of such Letter
of Credit, subject to repayment of LC Disbursements as provided herein.
(b) Each Participating Lender acknowledges and agrees that its
obligation to acquire participations pursuant to paragraph (a) of this Section
3.02 in respect of Letters of Credit is absolute and unconditional and shall not
be affected by any circumstance whatsoever, including the occurrence and
continuance of an Event of Default or Default hereunder, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
SECTION 3.03. LC Fee. The Borrower agrees to pay to the Agent for
the account of the Participating Lenders for each calendar quarter (or shorter
period commencing with March 21, 1997, or ending with the first date on which
the LC Commitment shall have expired or been terminated and there shall be no
Outstanding Letters of Credit) a fee (the "LC Fee") on the average daily amount
of the Outstanding Letters of Credit at a rate per annum equal to the LIBOR
Spread in effect for Revolving Loans at the beginning of such period. The LC Fee
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days. The Agent agrees to disburse to each Participating Lender its pro
rata portion of such LC Fee promptly upon receipt. The LC Fee shall be paid in
arrears on the last day of March, June, September and December of each year and
on
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the Revolving Credit Maturity Date (or the first date on which the LC Commitment
shall have expired or been terminated and there shall be no Outstanding Letters
of Credit, if earlier), commencing on the first such date following the Closing
Date. Once paid, the LC Fee shall not be refundable in any circumstances (other
than corrections of error in payment).
SECTION 3.04. Agreement To Repay LC Disbursements. (a) If the
Fronting Bank shall pay any draft presented under a Letter of Credit, the
Borrower shall pay to the Agent, on behalf of the Fronting Bank, an amount equal
to the amount of such draft before 11:00 a.m., New York City time, on the
Business Day on which the Fronting Bank shall have notified the Borrower that
payment of such draft will be made (or such later time as is not later than
three hours after the Borrower shall have received such notice or, if the
Borrower shall have received such notice later than 2:00 p.m., New York City
time, on any Business Day, not later than 10:00 a.m., New York City Time, on the
immediately following Business Day). The Agent will promptly pay any such
amounts received by it to the Fronting Bank. In the event that, after the
payment of any such amount to the Fronting Bank, the Fronting Bank shall not pay
such amount in respect of such draft, the Fronting Bank shall return to the
Agent, for the account of the Borrower, any such unpaid amount, together with
interest thereon accrued at the Federal Funds Effective Rate then in effect from
and including the date such amount was paid by the Borrower to the Agent to but
excluding the date such amount was repaid by the Fronting Bank to the Agent.
(b) The Borrower's obligation to repay the Fronting Bank for LC
Disbursements made by the Fronting Bank under the Outstanding Letters of Credit
shall be absolute, unconditional and irrevocable under any and all circumstances
and irrespective of the following:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right that
the Borrower or any other Person may at any time have against the
beneficiary under any Letter of Credit, the Fronting Bank, the Agent or
any other Lender (other than the defense of payment in full in accordance
with the terms of this Agreement or a defense based on the gross
negligence or wilful misconduct of the Fronting Bank) or any other Person
in connection with this Agreement or any other agreement or transaction;
(iii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect,
provided that payment by the Fronting Bank under such Letter of Credit
against presentation of such draft or document shall not have constituted
gross negligence or wilful misconduct of the Fronting Bank;
(iv) payment by the Fronting Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit, provided that such payment shall not have
constituted gross negligence or wilful misconduct of the Fronting Bank;
and
(v) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing, provided that such other circumstance or
event shall not have been the result of gross negligence or wilful
misconduct of the Fronting Bank.
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It is understood that in making any payment under a Letter of Credit
(A) the Fronting Bank's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary equals the amount of
such draft and whether or not any document presented pursuant to such Letter of
Credit proves to be insufficient in any respect, if such document on its face
appears to be in order, and whether or not any other statement or any other
document presented pursuant to such Letter of Credit proves to be forged or
invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever, and (B) any noncompliance in any immaterial respect of the
documents presented under a Letter of Credit with the terms thereof shall, in
each case, not be deemed wilful misconduct or gross negligence of the Fronting
Bank.
SECTION 3.05. Letter of Credit Operations. The Fronting Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under an Outstanding Letter of Credit to
ascertain that the same appear on their face to be in conformity with the terms
and conditions of such Outstanding Letter of Credit. The Fronting Bank shall as
promptly as possible, but in no event later than two hours after such demand for
payment, give oral notification, confirmed by facsimile notice, to the Agent and
the Borrower of such demand for payment and shall as promptly as possible, but
in no event later than two hours prior to any payment in respect of such demand,
give oral notification, confirmed by facsimile notice, to the Agent and the
Borrower of the determination by the Fronting Bank as to whether such demand for
payment was in accordance with the terms and conditions of such Outstanding
Letter of Credit and whether the Fronting Bank has made or will make an LC
Disbursement thereunder, provided that the failure to give such notice shall not
relieve the Borrower of its obligation to reimburse the Fronting Bank with
respect to any such LC Disbursement, and the Agent shall promptly give each
Participating Lender notice thereof.
SECTION 3.06. Cash Collateralization. If any Event of Default shall
occur and be continuing, the Borrower shall on the Business Day it receives
notice from the Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Participating Lenders holding participations in
Outstanding Letters of Credit representing at least 51% of the aggregate undrawn
amount of all Outstanding Letters of Credit) therefor, deposit in an account
with the Collateral Agent, for the benefit of the Participating Lenders, an
amount in cash equal to the LC Exposure as of such date. Such deposit shall be
held by the Collateral Agent as collateral for the payment and performance of
the Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall (a) automatically be applied by the Agent to reimburse the
Fronting Bank for LC Disbursements, (b) be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time and
(c) if the maturity of the Loans has been accelerated (but subject to the
consent of Participating Lenders holding participations in Outstanding Letters
of Credit representing at least 51% of the aggregate undrawn amount of all
Outstanding Letters of Credit), such amount (to the extent not applied as
aforesaid) shall be applied to satisfy the Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of an
Event of Default, such amount (to the extent not applied as aforesaid) shall be
returned to the Borrower within three Business Days after all Events of Default
have been cured or waived. The provisions of this
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Section 3.06 are subject to the provisions of the Intercreditor Agreement as
long as any Series I Tranche A Exchange Notes are outstanding.
SECTION 3.07. Termination of LC Commitment. (a) The Borrower may
permanently terminate, or from time to time in part permanently reduce, the LC
Commitment, in each case upon at least three Business Days' prior written or
facsimile notice to the Agent and the Fronting Bank; provided that, after giving
effect to such termination or reduction, the LC Commitment shall not be less
than the LC Exposure at such time or greater than the aggregate Revolving Credit
Commitments at such time. The Borrower shall pay to the Agent for the account of
the Participating Lenders, on the date of such termination or reduction, the LC
Fees on the amount of the LC Commitment so terminated or reduced accrued to but
excluding the date of such termination or reduction.
(b) The LC Commitment shall be permanently reduced as provided in
Section 2.13(e).
SECTION 3.08. Fronting Bank Fees. (a) The Borrower shall pay to the
Fronting Bank, for its own account, such commissions, issuance fees, transfer
fees and other fees and charges in connection with the issuance or
administration of each Letter of Credit as the Borrower and the Fronting Bank
shall agree.
(b) The Borrower shall pay to the Fronting Bank, for its own
account, a fronting fee (the "Fronting Fee") on the average daily aggregate
maximum amount available to be drawn (assuming compliance with all conditions to
drawing) under all outstanding Letters of Credit at the rate of 0.20% per annum,
payable in arrears on the last day of each March, June, September and December
of each year and on the Revolving Credit Maturity Date (or the first date on
which the LC Commitment shall have expired or been terminated and there shall be
no Outstanding Letters of Credit, if earlier), commencing on the first such date
following the Closing Date. The Fronting Fee shall be computed on the basis of
the actual number of days elapsed over a year of 360 days.
SECTION 3.09. Resignation or Removal of Fronting Bank. (a) The
Fronting Bank may resign at any time by giving 180 days' prior written notice to
the Agent, the Lenders and the Borrower, and may be removed at any time by the
Borrower by notice to the Fronting Bank, the Agent and the Lenders. Upon any
such resignation or removal, the Borrower shall (within 180 days after such
notice of resignation or removal) either appoint a Lender (with the consent of
such Lender) as successor, or terminate the unutilized LC Commitment; provided,
however, that, if the Borrower elects to terminate the unutilized LC Commitment,
the Borrower may at any time thereafter that the Revolving Credit Commitments
are in effect reinstate by notice to the Agent and the Lenders the LC Commitment
in connection with the appointment of a successor Fronting Bank. Subject to
paragraph (b) below, upon the acceptance of any appointment as Fronting Bank
hereunder by a successor Fronting Bank, such successor shall succeed to and
become vested with all the interests, rights and obligations of the retiring
Fronting Bank and the retiring Fronting Bank shall be discharged from its
obligations to issue additional Letters of Credit hereunder. At the time such
removal or resignation shall become effective, the Borrower shall pay all
accrued and unpaid fees pursuant to Section 2.05(d). The acceptance of any
appointment as Fronting Bank hereunder by a successor Fronting Bank shall be
evidenced by an agreement entered into by such successor, in a form satisfactory
to the Borrower and the Agent, and, from and after the effective date of such
agreement, (i) such successor shall be a party hereto and have all the rights
and obligations of the Fronting Bank under this Agreement and the other Loan
Documents and (ii) references herein and in
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the other Loan Documents to the "Fronting Bank" shall be deemed to refer to such
successor or to any previous Fronting Bank, or to such successor and all
previous Fronting Banks, as the context shall require.
(b) After the resignation or removal of the Fronting Bank hereunder,
the retiring Fronting Bank shall remain a party hereto and shall continue to
have all the rights and obligations of the Fronting Bank under this Agreement
and the other Loan Documents with respect to Letters of Credit issued by it
prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
ARTICLE IV
Representations and Warranties
The Borrower represents and warrants to each of the Lenders, the
Agent, the Swingline Lender and the Fronting Bank that:
SECTION 4.01. Organization; Powers. Each of the Borrower, TAFSI and
the Guarantors (a) is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(b) has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business and in good standing in every jurisdiction where such
qualification is required, except where the failure so to qualify or be in good
standing would not result in a Material Adverse Effect and (d) has the power and
authority (corporate or otherwise) to execute, deliver and perform its
obligations under each of the Transaction Documents and each other agreement or
instrument contemplated thereby to which it is or will be a party and, in the
case of Borrower, to borrow hereunder.
SECTION 4.02. Authorization. The execution, delivery and performance
by the Borrower, each Guarantor and TAFSI, as applicable, of each of the
Transaction Documents to which it is a party, the borrowings hereunder, the
creation of the security interests contemplated by the Security Documents and
the other transactions contemplated by the Transaction Documents (including the
Additional Transactions) (a) have been duly authorized by all requisite
corporate and, if required, stockholder action and (b) will not (i) violate (A)
any provision of law, statute, rule or regulation, other than any law, statute,
rule or regulation, the violation of which will not result in a Material Adverse
Effect, or of the certificate of incorporation, certificate of formation or
other constitutive documents or by-laws of the Borrower, any Guarantor or TAFSI,
(B) any order of any Governmental Authority or (C) any provision of any material
indenture, agreement or other instrument to which the Borrower, any Guarantor or
TAFSI is a party or by which any of them or any of their property (including the
Mortgaged Properties) or assets is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture, agreement or other instrument or (iii)
result in the creation or imposition of any Lien (other than any Lien created
under the Security Documents) upon or with respect to any property or assets now
owned or hereafter acquired by the Borrower, any Guarantor or TAFSI.
SECTION 4.03. Enforceability. This Agreement has been duly executed
and delivered by the Borrower and constitutes, and each other Transaction
Document to which the Borrower, each Guarantor or TAFSI is a party constitutes,
or when executed and delivered by it will
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constitute, a legal, valid and binding obligation of the Borrower, such
Guarantor or TAFSI, as the case may be, enforceable against it in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).
SECTION 4.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority by any Guarantor, TAFSI or the Borrower is or will be required in
connection with the Additional Transactions, except such as have been made or
obtained and are in full force and effect and other than filings, recordings and
approvals (i) to record deeds and leases with respect to real properties, (ii)
to record and/or perfect the security interest created by the Security
Documents, (iii) to record a leasehold memorandum, if currently unrecorded, in
respect of any leasehold interest to which a Leasehold Mortgage relates and (iv)
that are not material to the Borrower, any Guarantor or TAFSI individually or in
the aggregate.
SECTION 4.05. Financial Statements. (a) The unaudited pro forma
consolidated balance sheet of the Borrower and its subsidiaries as of December
31, 1997 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies
of which have heretofore been furnished to each Lender, has been prepared giving
effect (as if such events had occurred on such date) to (i) the Additional
Transactions (including the Borrowings under this Agreement contemplated to be
made on the Restatement Closing Date), (ii) the Sale and Lease-Back Transactions
contemplated under Section 7.03(a) and (iii) the payment of fees and expenses in
connection with the foregoing. The Pro Forma Balance Sheet has been prepared
based on the assumptions used to prepare the pro forma financial information
contained in the 1998 Confidential Information Memorandum, is based on the best
information available to the Borrower as of the date of delivery thereof, and
presents fairly on a pro forma basis the estimated consolidated financial
position of the Borrower and its subsidiaries as of December 31, 1997, assuming
that the events specified in the preceding sentence had actually occurred at
December 31, 1997.
(b) The Borrower has heretofore furnished to the Lenders its
consolidated and consolidating balance sheets and related statements of
operations, stockholders' equity and cash flows as of and for the fiscal years
ended December 31, 1997, 1996 and 1995, audited by and accompanied by the
opinion of Price Waterhouse (or Price Waterhouse LLP, as the case may be),
independent public accountants. Such financial statements present fairly the
financial condition and results of operations and cash flows of the Borrower and
its consolidated subsidiaries as of such dates and for such periods. Such
financial statements and the notes thereto disclose all material liabilities
required under GAAP to be disclosed, direct or contingent, of the Borrower and
its consolidated subsidiaries as of the dates thereof. Such financial statements
were prepared in accordance with GAAP applied on a consistent basis.
SECTION 4.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, properties, financial
condition, contingent liabilities, prospects or material agreements of the
Borrower and its subsidiaries, taken as a whole, since December 31, 1997.
SECTION 4.07. Title to Properties; Possession Under Leases. (a)
After giving effect to the consummation of the Additional Transactions on the
Restatement Closing Date, each of the Borrower, the Guarantors and TAFSI will
have good and marketable title to, or valid leasehold
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interests in, all its material properties and assets (including, in the case of
the Guarantors, all Mortgaged Property); all such material properties and assets
shall be free and clear of Liens, other than Liens expressly permitted by
Section 7.02; and, except for (i) leases of Mortgaged Properties set forth on
Schedule 7.02 and (ii) leases permitted pursuant to Section 7.03, no material
portion of any Mortgaged Property shall be subject to any lease, license,
sublease or other agreement granting to any Person any right to use, occupy, or
enjoy the same.
(b) Except as set forth on Schedule 4.07(b), after giving effect to
the consummation of the Additional Transactions on the Restatement Closing Date,
each Guarantor shall have complied with all material obligations under all
material leases to which such Guarantor shall then be a party, and all such
leases shall be in full force and effect; each Guarantor shall enjoy peaceful
and undisturbed possession under all such material leases under which it is
tenant. Neither the Borrower nor TAFSI is a party to any lease.
(c) Except as set forth on Schedule 4.07(c), neither the Borrower
nor any Guarantor has received any notice of, or has any knowledge of, any
pending or contemplated condemnation proceeding affecting the Mortgaged
Properties or any sale or disposition thereof in lieu of condemnation.
(d) Neither the Borrower nor any Guarantor is obligated under any
right of first refusal, option or other contractual right to sell, assign or
otherwise dispose of any Mortgaged Property or any interest therein.
SECTION 4.08. Subsidiaries. As of the Restatement Closing Date, (a)
the Borrower has no subsidiaries other than the Guarantors and TAFSI, (b) none
of the Guarantors other than TA has any subsidiaries, (c) TA has no subsidiaries
other than TA Travel and (d) TAFSI has no subsidiaries.
SECTION 4.09. Litigation; Compliance with Laws. (a) Except as set
forth on Schedule 4.09, there are no actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower, any
Guarantor or TAFSI or any business, property (including the network of
Truckstops operated by the Borrower's subsidiaries), assets or rights of any
such Person (i) that involve any Transaction Document or the Transactions or
(ii) as to which there is a reasonable possibility of an adverse determination
and which, if adversely determined, could, individually or in the aggregate,
result in a Material Adverse Effect.
(b) None of the Borrower, the Guarantors or TAFSI, nor any of their
respective material properties or assets, are in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate any material law, rule, regulation or statute (including any
zoning, building, Environmental and Safety Law, ordinance, code or approval or
any building permits) or any restrictions of record or agreements affecting the
Mortgaged Property or are in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority, where such violation
or default could reasonably be expected to result in a Material Adverse Effect.
The issuance of the Letters of Credit will not violate any applicable law or
regulation or violate or be prohibited by any judgment, writ, injunction, decree
or order of any Governmental Authority, where such violation would have a
Material Adverse Effect.
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(c) Certificates of occupancy and permits are in effect for 80% of
the aggregate value of the Mortgaged Properties, as currently constructed.
SECTION 4.10. Agreements. After giving effect to the Additional
Transactions, none of the Borrower, the Guarantors or TAFSI is in default in any
manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness, or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound, where such default could reasonably be expected to result in a Material
Adverse Effect.
SECTION 4.11. Federal Reserve Regulations. (a) None of the Borrower,
the Guarantors or TAFSI is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock.
(b) No part of the proceeds of any Letter of Credit or any Loan or
Swingline Loan will be used by the Borrower, any Guarantor or TAFSI, whether
directly or indirectly, and whether immediately, incidentally or ultimately, for
any purpose that entails a violation of, or is inconsistent with, the provisions
of the Regulations of the Board, including Regulations U and X.
SECTION 4.12. Investment Company Act; Public Utility Holding Company
Act. None of the Borrower, the Guarantors or TAFSI (a) is an "investment
company" as defined in, or is subject to regulation under, the Investment
Company Act of 1940 or (b) is a "holding company" as defined in, or is subject
to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 4.13. Use of Proceeds. The Borrower (i) will use the Letters
of Credit and the proceeds of the Revolving Loans, any Swingline Loans and the
Additional Term Loans only for the purposes specified in the preamble to this
Agreement and (ii) the proceeds of the Existing Term Loans have been or will be
used only for the purposes specified in the preamble to the Original Credit
Agreement.
SECTION 4.14. Tax Returns. Each of the Borrower, TAFSI and the
Guarantors has filed or caused to be filed all material Federal, state and local
tax returns required to have been filed by it or with respect to it and has paid
or caused to be paid all taxes required to have been paid by it, except taxes
that are being contested in good faith by appropriate proceedings and for which
the Borrower, TAFSI or such Guarantor shall have set aside on its books adequate
reserves in accordance with GAAP. Each of the Borrower, TAFSI and the Guarantors
has filed or made adequate provision in accordance with GAAP on its books for
any material taxes payable by it in connection with the Transactions.
SECTION 4.15. No Material Misstatements. The information provided by
or on behalf of the Borrower and contained in the 1998 Confidential Information
Memorandum (including all attachments and exhibits thereto), as supplemented,
and as supplemented further by information heretofore provided in writing by or
on behalf of the Borrower to the Lenders, when taken as a whole, was, as of the
date of the 1998 Confidential Information Memorandum, the dates otherwise
specified therein or the dates upon which such information was provided in
writing, accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading, provided that (a) the statements
therein describing documents and agreements are summaries only and as such are
qualified in their entirety by reference to such documents and agreements, (b)
to the extent any such information therein was
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based upon or constitutes a forecast or projection, the Borrower represents only
that it acted in good faith and utilized reasonable assumptions, due and careful
consideration and the best information known to it at the time in the
preparation of such information and (c) as to the information that is specified
as having been supplied by third parties other than Affiliates of the Borrower,
the Borrower represents only that it is not aware of any material misstatement
therein or omission therefrom.
SECTION 4.16. Employee Benefit Plans. Each of the Borrower, the
Guarantors, TAFSI and their ERISA Affiliates is in compliance in all material
respects with the applicable provisions of ERISA and the regulations and
published interpretations thereunder. No Reportable Event has occurred, been
waived or exists as to which the Borrower, any Guarantor, TAFSI or any ERISA
Affiliate was or is required to file a report with the PBGC, and the present
value of all benefit liabilities under each Plan (based on those assumptions
used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed by more than $2,000,000 the value of the assets of such Plan.
None of the Borrower, the Guarantors, TAFSI or any ERISA Affiliate has incurred
any Withdrawal Liability that could result in a Material Adverse Effect. None of
the Borrower, the Guarantors, TAFSI or any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated where such
reorganization or termination has resulted or could reasonably be expected to
result, through increases in the contributions required to be made to such Plan
or otherwise, in a Material Adverse Effect.
SECTION 4.17. Environmental and Safety Matters. (a) After giving
effect to the Additional Transactions, each of the Borrower, the Guarantors and
TAFSI is in compliance with all Environmental and Safety Laws, with the
exception of instances that will not in the aggregate result in any material
liability on the part of the Borrower, TAFSI or the applicable Guarantor,
individually or collectively.
(b) (i) None of the Borrower, the Guarantors, or TAFSI has received
notice of any failure to comply with, nor has any such notice been issued that
has not been fully satisfied so as to bring any property of the Borrower, TAFSI
or any Guarantor into full compliance with, all Environmental and Safety Laws,
except where such noncompliance could not reasonably be expected to have a
Material Adverse Effect; (ii) after giving effect to the Additional
Transactions, the plants and facilities of the Borrower and its subsidiaries do
not use, manage, treat, store or dispose of any Hazardous Substances in
violation of any Environmental and Safety Laws, except where such violations
could not reasonably be expected to have a Material Adverse Effect; (iii) after
giving effect to the Additional Transactions, all licenses, permits or
registrations (or any extensions thereof) required under any Environmental and
Safety Law for the business of the Borrower and its subsidiaries as proposed to
be conducted have been obtained and each of the Borrower and its subsidiaries is
in compliance therewith, except for the failure to obtain such licenses, permits
or registrations or to comply therewith which could not reasonably be expected
to have a Material Adverse Effect; and (iv) neither the Borrower nor any of its
subsidiaries is in noncompliance with, breach of or default under any applicable
writ, order, judgment, injunction or decree where such noncompliance, breach or
default will materially and adversely affect the ability of the Borrower or any
of its subsidiaries, as applicable, to operate any real property owned or leased
by it, and no event has occurred and is continuing that, with the passage of
time or the giving of notice or both, will constitute such noncompliance, breach
or default thereunder.
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(c) (i) No Hazardous Substance has been Released (and no oral or
written notification of such Release has been filed) or is present whether or
not in a reportable or threshold planning quantity, at, on or under any property
owned or leased by the Borrower or any of its subsidiaries during the period of
the Borrower's or such subsidiary's ownership or lease of such property, or to
the knowledge of the Borrower or such subsidiary at any time previous to such
ownership or lease, under conditions that require remedial action under
applicable Environmental and Safety Laws, except where such remedial action
could not reasonably be expected to have a Material Adverse Effect, (ii) no
property now or previously owned or leased by the Borrower or any of its
subsidiaries has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances to any site listed, or proposed for
listing, on the National Priorities List promulgated pursuant to CERCLA, on
CERCLIS (as defined in CERCLA) or on any similar Federal, state or foreign list
of sites requiring investigation or cleanup, except where any liability for such
transportation or arrangement for transportation could not reasonably be
expected to result in a Material Adverse Effect. Neither the Borrower nor any of
its subsidiaries is aware of any event, condition or circumstance involving
environmental pollution or contamination, or employee safety or health relating
to the use or handling of, or exposure to, Hazardous Substances, that could
reasonably be expected to result in a Material Adverse Effect.
(d) The Borrower and its subsidiaries are conducting and will
continue to conduct their respective businesses and operations in an
environmentally responsible manner, and the Borrower and its subsidiaries, taken
as a whole, are not and have no reason to believe that they will be subject to
any requirement of Environmental and Safety Laws that will result in cash
expenditures related to environmental, health or safety matters that could have
a Material Adverse Effect.
SECTION 4.18. Solvency. After giving effect to the Additional
Transactions to occur on the Restatement Closing Date, (a) the fair salable
value of the assets of (i) the Borrower and its subsidiaries, on a consolidated
basis, and (ii) each Guarantor will exceed the amount that will be required to
be paid on or in respect of the existing debts and other liabilities (including
contingent liabilities) of the Borrower and its subsidiaries, on a consolidated
basis, and such Guarantor, respectively, as they mature, (b) the assets of (i)
the Borrower and its subsidiaries, on a consolidated basis, and (ii) each
Guarantor will not constitute unreasonably small capital to carry out their
businesses as conducted or as proposed to be conducted, including the capital
needs of the Borrower and its subsidiaries, on a consolidated basis, or such
Guarantor, respectively (taking into account, in each case, the particular
capital requirements of the businesses conducted by such entities and the
projected capital requirements and capital availability of such businesses), and
(c) neither the Borrower nor the Guarantors intend to, nor do they believe that
they will, incur debts beyond their ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be received by them and
the amounts to be payable on or in respect of their obligations).
SECTION 4.19. Employment and Management Agreements. Except as
disclosed on Schedule 4.19, as of the Restatement Closing Date there are no (a)
employment agreements covering management employees of the Borrower, TAFSI or
any Guarantor or other material agreements relating to the compensation of
management employees (including the issuance of securities of the Borrower to
management employees), (b) agreements for management or consulting services to
which the Borrower, TAFSI or any Guarantor is a party or by which any of them is
bound or (c) collective bargaining agreements or other labor agreements covering
any of the employees of the Borrower, any Guarantor or TAFSI.
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SECTION 4.20. Capitalization. (a) As of the Restatement Closing Date
and after giving effect to the Additional Transactions, the authorized capital
stock of the Borrower consists of (i) 30,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock"), of which 596,013 shares are issued
and outstanding and (ii) 20,000,000 shares of Preferred Stock, par value $.01
per share, of which (A) 6,000,000 shares have been designated shares of
Convertible Preferred Stock, Series I, par value $.01 per share (the "Series I
Preferred Stock"), (B) 2,500,000 shares have been designated shares of
Convertible Preferred Stock, Series II, par value $.01 per share (the "Series II
Preferred Stock," and together with the Series I Preferred Stock, the "Junior
Preferred Stock"), (C) 3,000,000 have been designated Senior Convertible
Participating Preferred Stock, Series I, par value $.01 per share, ("Series I
Senior Preferred Stock") and (D) 1,000,000 shares have been designated shares of
Senior Convertible Participating Preferred Stock, Series II, par value $.01 per
share ("Series II Senior Preferred Stock" and, together with the Series I Senior
Preferred Stock, the "Senior Preferred Stock"). All outstanding shares of
capital stock of the Borrower are fully paid and nonassessable. As of the
Restatement Closing Date, 380,000 shares of the Common Stock are owned of record
by the Voting Trust in accordance with the terms of the Voting Trust Agreement.
Set forth on Schedule 4.20(a)(i) is a list of every Person that, as of the
Restatement Closing Date, will own beneficially (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934 or any successor thereto)
and of record shares of any class of capital stock of the Borrower, together
with the number of shares of such class so owned. Set forth on Schedule
4.20(a)(ii) is a list of every Person that, to the Borrower's knowledge based on
information provided to it by the Voting Trustee under the Voting Trust
Agreement, as of the Restatement Closing Date, will own beneficially and of
record Voting Trust Certificates, together with the number of shares represented
by such certificates so owned.
(b) At all times following the Restatement Closing Date, the
authorized capital stock of TA will consist of 1,000 shares of Common Stock, par
value $.01 per share, of which 100 shares will be issued and outstanding at all
times. All outstanding shares of capital stock of TA are fully paid and
nonassessable and are owned beneficially and of record by the Borrower.
(c) At all times following the Restatement Closing Date, the
authorized capital stock of National will consist of 1,000 shares of Common
Stock, par value $.01 per share, of which 10 shares will be issued and
outstanding at all times. All outstanding shares of capital stock of National
are fully paid and nonassessable and are owned beneficially and of record by the
Borrower.
(d) At all times following the Restatement Closing Date, the
authorized capital stock of TAFSI will consist of 1,000 shares of Common Stock,
par value $1 per share, of which 100 shares will be issued and outstanding at
all times. All outstanding shares of capital stock of TAFSI are fully paid and
nonassessable and are owned beneficially and of record by the Borrower.
(e) All outstanding membership interests of TA Travel are fully paid
and nonassessable and are owned beneficially and of record by TA.
(f) Except as set forth on Schedule 4.20(f), as of the Restatement
Closing Date, there are no outstanding subscriptions, options, warrants, calls,
rights (including preemptive rights) or other agreements or commitments
(including pursuant to management or employee stock plans or similar plans) of
any nature relating to any capital stock of the Borrower, TAFSI, TA, National or
any other Guarantor.
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SECTION 4.21. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and proceeds thereof and, when
the Collateral is delivered to the Collateral Agent, the Pledge Agreement shall
constitute a fully perfected first-priority Lien on, and security interest in,
all right, title and interest of the Borrower, each Guarantor or TAFSI, as
applicable, in such Collateral and the proceeds thereof, in each case prior and
superior in right to any other Person.
(b) The Security Agreement and the Collateral Account Agreement are
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined, respectively, in the Security Agreement and the
Collateral Account Agreement) and proceeds thereof, and when financing
statements in appropriate form are filed in the offices specified on Schedule
4.21 (or, in the case of TAFSI, in the offices of the Secretary of State of the
State of Ohio) and, in the case of cash included in the Collateral under the
Collateral Account Agreement, when such cash is deposited in the Collateral
Account, each of the Security Agreement and the Collateral Account Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Borrower, TAFSI and each Guarantor, as applicable, in
such Collateral and the proceeds thereof, in each case prior and superior in
right to any other Person, other than with respect to Liens expressly permitted
by Section 7.02.
(c) The Mortgages (as amended by each applicable Mortgage Amendment)
are effective to create in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable Lien on all of
each Guarantor's right, title and interest in and to the Mortgaged Properties
thereunder and the proceeds thereof, and, when the Mortgages are filed in the
offices specified on Schedule 1.01(c), the Mortgages shall constitute fully
perfected Liens on, and security interests in, all right, title and interest of
such Guarantor in such Mortgaged Properties and the proceeds thereof, in each
case prior and superior in right to any other Person, other than with respect to
rights of Persons pursuant to Liens expressly permitted by Section 7.02.
(d) The Trademark Security Agreement is effective to create in favor
of the Collateral Agent, for ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Trademark Security Agreement) and the proceeds thereof, and upon the filing of
assignment statements with the United States Patent and Trademark Office,
together with financing statements in appropriate form filed in the offices
specified on Schedule 4.21, the Trademark Security Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Borrower, TAFSI and each Guarantor in such Collateral and the proceeds
thereof, in each case prior and superior in right to any other Person, other
than with respect to Liens expressly permitted by Section 7.02.
(e) The Collateral Assignment is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable assignment of, transfer of all right, title and interest of the
Borrower, TAFSI or each Guarantor, as applicable, in, and security interest in,
the Assigned Contracts (as defined in the Collateral Agreement) and proceeds
thereof, and when financing statements in appropriate form are filed in the
offices specified on Schedule 4.21, the Collateral Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Borrower, TAFSI or such Guarantor, as applicable, in such Assigned
Contracts and the proceeds thereof, in each case prior and superior in right to
any other Person, other than with respect to Liens expressly permitted by
Section 7.02.
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SECTION 4.22. Labor Matters. There are no strikes, lockouts or
slowdowns against the Borrower or any of its subsidiaries pending or, to the
Borrower's knowledge, threatened. The hours worked by and payment made to
employees of the Borrower and its subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable Federal, state, local or
foreign law dealing with such matters, where such violations could reasonably be
expected to result in a Material Adverse Effect. The consummation of the
Additional Transactions will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any of its subsidiaries is a party or by which the
Borrower or any of its subsidiaries is bound on the Restatement Closing Date.
SECTION 4.23. Location of Real Property and Leased Premises. (a)
Schedule 4.23(a) lists completely and correctly as of the Restatement Closing
Date all real property owned by the Guarantors and the addresses thereof. Each
Guarantor will own in fee all the real property set forth on Schedule 4.23(a)
with respect to such Guarantor.
(b) Schedule 4.23(b) lists completely and correctly as of the
Restatement Closing Date all real property leased or subleased by the Guarantors
and the addresses thereof. Each Guarantor has a valid lease or sublease in all
the real property set forth on Schedule 4.23(b) with respect to such Guarantor.
(c) None of the Borrower, TAFSI or TA Travel owns or leases any real
property.
(d) Schedule 6.14 lists completely and correctly as of the
Restatement Closing Date (i) each Mortgaged Property that was not a Mortgaged
Property on March 21, 1997, and (ii) each Mortgaged Property that has any
material improvement located upon such Mortgaged Property that was constructed
after March 21, 1997.
SECTION 4.24. Insurance. The Borrower and each Guarantor maintains
(after giving effect to insurance it has caused each Network Operator, if any,
to maintain) with financially sound insurance companies insurance on all its
properties in at least such amounts and against at least such risks (but,
including in any event, all-risk casualty, public liability and product
liability) as are usually insured against in the same general geographic area by
companies engaged in the same or similar business. The Borrower has been named
as an additional insured party on each insurance policy that it has caused each
Guarantor and each Network Operator, if any, to maintain.
SECTION 4.25. Delivery of Documents. (a) The Borrower has previously
made available, and has caused each Guarantor to make available, to the Agent
true, correct and complete copies of all real property leases or subleases,
easement agreements, option agreements and other agreements, instruments and
documents (whether or not recorded) that encumber or otherwise affect the real
property listed on Schedules 4.23(a) and 4.23(b).
(b) On or prior to the Restatement Closing Date, each Lender has
received complete certified copies (as certified to by, as applicable, the
Secretary of the Borrower, the applicable Guarantor or TAFSI) of the
Environmental Agreements, the Stockholders Agreement, the TA Stockholders
Agreement, the Tranche A Exchange Note Purchase Agreements and the Subordinated
Note Indenture, including all exhibits, schedules and disclosure letters
referred to therein or delivered pursuant thereto (if any), and all amendments
thereto, waivers relating thereto and other side letters or agreements affecting
the terms thereof. None of such documents and agreements has been amended,
supplemented or otherwise modified, nor have any of the provisions thereof been
waived,
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in each case in any manner that, in the reasonable judgment of the Agent, is
adverse in any material respect to the Lenders, except pursuant to a written
agreement or instrument that has heretofore been consented to by the Required
Lenders.
(c) Each of the Stockholders Agreement, the TA Stockholders
Agreement, the Environmental Agreements, the Tranche A Exchange Note Purchase
Agreements and the Subordinated Note Indenture has been duly executed and
delivered by the Borrower, TAFSI and the applicable Guarantor and, to the
Borrower's knowledge, by each party thereto and each of the material terms and
provisions thereof is in full force and effect.
(d) Each of the Franchise Agreements has been duly executed and
delivered by the Borrower, TAFSI and the applicable Guarantor and, to the
Borrower's knowledge, by each party thereto and each is in full force and
effect, there having been no default thereunder by the Borrower, TAFSI or the
applicable Guarantor. There has been no amendment, change or modification to any
Franchise Agreement that is adverse in any respect to the interests of the
Secured Parties without the written consent of the Collateral Agent.
(e) On or before November 24, 1998, each Lender has received
complete certified copies (as certified by the Secretary of the Borrower) of
each of the Burns Asset Purchase Agreement and the Burns Ancillary Agreements,
including all exhibits, schedules and disclosure letters referred to therein or
delivered pursuant thereto (if any), and all amendments thereto, waivers
relating thereto or other side letters or agreements affecting the terms
thereof. None of such documents and agreements has been amended, supplemented or
otherwise modified since November 24, 1998, nor have any of the provisions
thereof been waived, in each case except for any such amendment, supplement or
other modification that does not adversely affect, or is otherwise reasonably
satisfactory to, the Lenders or (ii) pursuant to a written agreement or
instrument that has heretofore been consented to by the Required Lenders.
SECTION 4.26. Fees and Expenses. The aggregate amount of fees and
expenses incurred in connection with the Additional Transactions by the
Borrower, TAFSI and the Guarantors will not exceed $4,000,000.
SECTION 4.27. Year 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's and
its subsidiaries' computer systems and (ii) to the Borrower's knowledge after
due inquiry, equipment containing embedded microchips (including systems and
equipment supplied by others or with which Borrower's or its subsidiaries'
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed in all material respects prior to any expected
failure date caused by a year 2000 problem and in any case prior to December 31,
1999. The cost to the Borrower of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Borrower (including
reprogramming errors and the failure of others' systems or equipment) could not
reasonably be expected to result in a Default, an Event of Default or to have a
Material Adverse Effect. Except for such of the reprogramming referred to in the
immediately preceding sentence as may be necessary, the computer and management
information systems of the Borrower and its subsidiaries are, and, with ordinary
course upgrading and maintenance, will continue for the term of this Agreement
to be, sufficient to enable the Borrower and its subsidiaries to conduct their
business without the occurrence of any Material Adverse Effect.
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ARTICLE V
Conditions of Lending and Issuance of Letters of Credit
The obligations of the Lenders to make Loans hereunder, the
obligation of the Swingline Lender to make Swingline Loans hereunder and the
obligation of the Fronting Bank to issue any Letter of Credit (each, a "Credit
Event") hereunder are subject to the satisfaction of the following conditions:
SECTION 5.01. All Credit Events. On the date of each Credit Event
other than a Borrowing in which Revolving Credit Loans are refinanced with new
Revolving Credit Loans (without any increase in the aggregate principal amount
of Revolving Credit Loans outstanding) as contemplated by Section 2.02(e) and
other than any Revolving Credit Loan made pursuant to Section 2.02(f):
(a) The Agent and, where applicable, the Fronting Bank or the
Swingline Lender shall have received a notice of such Credit Event as
required by Section 2.03, Section 3.01(c) and Section 2.21(b),
respectively.
(b) The representations and warranties set forth in Article IV
hereof shall be true and correct in all material respects on and as of the
date of such Credit Event with the same effect as though made on and as of
such date, except to the extent such representations and warranties
expressly relate to an earlier date or that there are changes to the
factual information contained in such representations and warranties that
do not reflect any violation of or failure to comply with any provision of
this Agreement or any other Loan Document.
(c) The Borrower shall be in compliance with all the material terms
and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately after
such Credit Event no Event of Default or Default shall have occurred and
be continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the
matters specified in paragraphs (b) and (c) of this Section 5.01.
Continuations and conversions of outstanding Term Borrowings pursuant to
Section 2.10 shall not be deemed to be new Borrowings for the purpose of
this Section 5.01.
SECTION 5.02. Borrowing Under the Additional Term Loan Facility. On
the Restatement Closing Date:
(a) The Agent shall have received a favorable written opinion of (i)
Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Borrower, the
Guarantors and TAFSI, to the effect set forth in Exhibit M-1 and (ii) each local
counsel listed on Schedule 5.02(a) to the effect set forth in Exhibit M-2, in
each case (A) dated the Restatement Closing Date, (B) addressed to the Agent,
the Fronting Bank, the Lenders, the Swingline Lender and the Collateral Agent
and (C) covering such other matters incidental to the Loan Documents and the
Transactions as the Agent shall request. The Borrower hereby instructs each such
counsel to deliver its opinion to the Agent.
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(b) All legal matters incident to this Agreement and the Borrowings
hereunder shall be satisfactory to the Lenders and their counsel and to Cravath,
Swaine & Moore, counsel for the Agent.
(c) The Agent shall have received (i) a copy of the certificate of
incorporation (or certificate of formation), including all amendments thereto,
of each of the Borrower, TAFSI and the Guarantors, certified as of recent date
by the Secretary of State of the State of Delaware, and a certificate as to the
good standings of each of the Borrower, TAFSI and the Guarantors as of a recent
date, from such Secretary of State; (ii) a certificate of the Secretary or
Assistant Secretary of each of the Borrower, TAFSI and the Guarantors dated the
Restatement Closing Date and certifying (A) that, if applicable, attached
thereto is a true and complete copy of the By-laws of the Borrower, TAFSI or
such Guarantor, as the case may be, as in effect on the Restatement Closing Date
and at all times since a date prior to the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors (or Managers or Managing
Member) of the Borrower, TAFSI or such Guarantor, as the case may be,
authorizing the execution, delivery, and performance of the Transaction
Documents to which the Borrower, TAFSI or such Guarantor is or will be a party
and, in the case of the Borrower, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate of incorporation (or certificate of
formation) of the Borrower, TAFSI or such Guarantor, as the case may be, has not
been amended since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to clause (i) above and (D) as
to the incumbency and specimen signature of each officer executing any
Transaction Document or any other document delivered in connection herewith on
behalf of the Borrower, such Guarantor or TAFSI, as the case may be; (iii) a
certificate of another officer as to the incumbency and specimen signature of
the Secretary or Assistant Secretary executing the certificate pursuant to (ii)
above; and (iv) such other documents as the Lenders or their counsel or Cravath,
Swaine & Moore, counsel for the Agent, may reasonably request.
(d) The Agent shall have received a certificate, dated the
Restatement Closing Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in paragraphs (b)
and (c) of Section 5.01.
(e) The Agent shall have received all Fees and other amounts due and
payable on or prior to the Restatement Closing Date.
(f) The Intercreditor Agreement shall have been duly executed by the
Borrower, the Series I Tranche A Exchange Note Purchasers and the Collateral
Agent, and shall be in full force and effect.
(g) The Guarantee Agreement shall have been duly executed by each
Guarantor and the Collateral Agent, and shall be in full force and effect. The
Indemnity and Subrogation Agreement shall have been duly executed by the
Borrower, each applicable Guarantor and the Collateral Agent and shall be in
full force and effect.
(h) The Pledge Agreement shall have been duly executed by the
parties thereto and delivered to the Collateral Agent and shall be in full force
and effect, and all the outstanding capital stock of each Guarantor and TAFSI
shall have been duly and validly pledged thereunder to the Collateral Agent for
the ratable benefit of the Secured Parties and certificates representing such
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shares, accompanied by instruments of transfer and stock powers endorsed in
blank, shall be in the actual possession of the Collateral Agent.
(i) Each of the Security Agreement, the Trademark Security
Agreement, the Collateral Assignment, the Collateral Account Agreement and the
Airplane Mortgage shall have been duly executed by the Borrower and all other
parties thereto and shall have been delivered to the Collateral Agent and shall
be in full force and effect on such date and each document (including each
Uniform Commercial Code financing statement) required by law or reasonably
requested by the Agent to be filed, registered or recorded in order to create in
favor of the Collateral Agent for the benefit of the Secured Parties a valid,
legal and perfected first-priority security interest in or lien on the
Collateral (subject to any Lien expressly permitted by Section 7.02) described
in each of such agreements shall have been delivered to the Collateral Agent.
(j) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code filings (or equivalent filings) made with respect
to the Borrower, each Guarantor and TAFSI in the States (or other jurisdictions)
in which are located the chief executive offices of such Persons, any offices of
such Persons in which records have been kept relating to Accounts and the other
jurisdiction in which Uniform Commercial Code filings (or equivalent filings)
are to be made pursuant to the preceding paragraph, together with copies of the
financing statements (or similar documents) disclosed by such search, and
accompanied by evidence satisfactory to the Agent that the Liens indicated in
any such financing statement (or similar document) would be permitted under
Section 7.02 or have been released.
(k) The Collateral Agent shall have received a Perfection
Certificate with respect to each of the Guarantors, TAFSI and the Borrower dated
the Restatement Closing Date and duly executed by a Responsible Officer of each
such entity.
(l) (i) Each of the Security Documents, in form and substance
satisfactory to the Lenders, relating to each of the Mortgaged Properties
(including each Mortgage, each Mortgage Amendment and each Assignment of Leases
and Rents, as applicable) shall have been duly executed by the parties thereto
and delivered to the Collateral Agent and shall be in full force and effect,
(ii) each of such Mortgaged Properties shall not be subject to any Lien other
than those permitted under Section 7.02, (iii) each of such Security Documents
shall have been filed and recorded in the recording office as specified on
Schedule 1.01(c) (or a lender's title insurance policy (or to the extent
available from the applicable title company, a bring down endorsement, dated as
of the Restatement Closing Date, to an existing title insurance policy
previously issued to the Collateral Agent with respect to a Mortgaged Property),
in form and substance acceptable to Agent, insuring such Security Document as a
first lien on such Mortgaged Property (subject to any Lien expressly permitted
by Section 7.02) shall have been received by Agent) and, in connection
therewith, the Agent shall have received evidence satisfactory to it of each
such filing and recordation and (iv) the Collateral Agent shall have received
such other documents, including a policy or policies of title insurance issued
by a nationally, recognized title insurance company (or to the extent available
from the applicable title company, a bring down endorsement, dated as of the
Restatement Closing Date, to an existing title insurance policy previously
issued to the Collateral Agent with respect to a Mortgaged Property), together
with such endorsements, coinsurance and reinsurance as may be requested by the
Agent, the Fronting Bank, the Swingline Lender and the Lenders, insuring the
Mortgages as valid first liens on the Mortgaged Properties, free of Liens other
than those permitted under Section 7.02, together with such surveys, abstracts,
appraisals and legal opinions required to be furnished pursuant to the terms of
the Mortgages or to obtain such policies of title insurance (or such bring down
endorsements to
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such existing policies of title insurance), or such additional legal opinions as
reasonably requested by the Agent, the Fronting Bank, the Swingline Lender or
the Lenders.
(m) The Additional Transactions shall have been consummated or shall
be consummated simultaneously with the closing of the Additional Term Loan
Facility in accordance with documentation reasonably satisfactory to the Lenders
and applicable law, and the Lenders shall (i) be reasonably satisfied with the
terms and conditions of the Burns Asset Purchase Agreement and the Burns
Ancillary Agreements, (ii) be reasonably satisfied with the terms and conditions
of any agreements or other instruments entered into or delivered in connection
with the Series II Tranche A Exchange Note Refinancing and (iii) be satisfied
that, in connection with the Additional Transactions, the aggregate amount of
fees and expenses shall not exceed $4,000,000.
(n) The Burns Acquisition shall have been consummated (i) in
accordance with applicable law, (ii) in accordance with the terms and conditions
of the Burns Asset Purchase Agreement and the Burns Ancillary Agreements,
without giving effect to any amendments, supplements or waivers thereto on or
after November 24, 1998, other than any amendment, supplement and/or waiver that
does not adversely affect, or is otherwise reasonably satisfactory to, the
Lenders, and (iii) on other terms reasonably satisfactory to the Lenders.
(o) The Series II Tranche A Exchange Notes in an aggregate principal
amount of $50,000,000 shall have been repaid in full and all obligations
thereunder and security interests relating thereto shall have been discharged,
and the Agent shall have received reasonably satisfactory evidence of such
repayment, termination and discharge.
(p) After giving effect to the Additional Transactions, the
Guarantors, TAFSI and the Borrower shall have no liabilities other than (i) the
Loans under the Facilities, (ii) the Series I Tranche A Exchange Notes, (iii)
the Subordinated Notes, (iv) the Guarantee Agreement, (v) the Subordinated Note
Guarantees and (vi) other liabilities satisfactory to the Lenders and
Indebtedness permitted under Section 7.01.
(q) The Lenders shall have received a satisfactory pro forma
consolidated balance sheet of the Borrower as of December 31, 1997, after giving
effect to the Additional Transactions and the Sale Lease-Back Transactions
contemplated under Section 7.03(a) and the Lenders shall be reasonably satisfied
that such balance sheet is not materially inconsistent with the projections
previously furnished to the Lenders.
(r) The Lenders shall be satisfied in all respects with the tax and
ERISA positions and the contingent tax and other liabilities of each Guarantor,
TAFSI and the Borrower and the plans of such Guarantor and the Borrower with
respect thereto.
(s) The Lenders shall have received a solvency certificate, in form
and substance satisfactory to the Agent, from the Chief Financial Officer of the
Borrower, together with such other evidence reasonably requested by the Lenders,
of the solvency of (i) the Guarantors, TAFSI and the Borrower, on a consolidated
basis, and (ii) each Guarantor, in each case after giving effect to the
Additional Transactions.
(t) All requisite Governmental Authorities and third parties shall
have approved or consented to the Additional Transactions to the extent
required, all applicable appeal periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that has or
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would have a reasonable likelihood of restraining, preventing or imposing
burdensome conditions on the transactions contemplated hereby.
(u) There shall be no litigation or administrative proceedings or
other legal or regulatory developments, actual or threatened, that, in the
judgment of the Lenders, involve a reasonable possibility of a material adverse
effect on the business, assets, operations, properties, financial condition,
contingent liabilities, prospects or material agreements of the Guarantors,
TAFSI and the Borrower, taken as a whole, or the ability of the Guarantors,
TAFSI and the Borrower, taken as a whole, to perform its obligations under the
Loan Documents, or the ability of the parties to consummate the Additional
Transactions or the validity or enforceability of any of the Loan Documents or
the rights, remedies and benefits available to the Agent, the Fronting Bank, the
Swingline Lender, the Collateral Agent and the Lenders under the Loan Documents,
or which would be materially inconsistent with the assumptions underlying the
projections set forth in the 1998 Confidential Information Memorandum.
(v) The Mortgaged Properties shall each be in compliance with all
applicable material laws, rules, regulations, statutes (including any zoning,
building, Environmental and Safety Law, ordinance, code or approval or any
building permits) and all restrictions of record and all material agreements
affecting the Mortgaged Property and all decrees or orders of any Governmental
Authority with jurisdiction with respect thereto, except to the extent such
non-compliance or failure to obtain any necessary permits are not reasonably
likely to result in a Material Adverse Effect.
(w) The Agent shall have received the certified documents required
to be delivered to it pursuant to Section 4.25(b).
(x) The Agent shall have received (i) satisfactory title insurance
policies (or to the extent available from the applicable title company, bring
down endorsements, dated as of the Restatement Closing Date, to existing title
insurance policies previously issued to the Collateral Agent) for each Mortgaged
Property and (ii) either (A) a satisfactory certificate from a Responsible
Officer of the applicable Guarantor certifying to the applicable title company
that, since the date of the surveys relating to the Mortgaged Properties of such
Guarantor delivered to the Agent in connection with the Original Credit
Agreement, there have been no material improvements or alterations at such
Mortgaged Properties, provided that such certificate shall comply with the title
company's requirements with respect to issuing the applicable satisfactory title
insurance policy or bring down endorsement thereto without any survey exception,
or (B) a current survey (or an update of a survey previously certified to the
Collateral Agent), in form and substance reasonably acceptable to the Agent, of
such Mortgaged Property.
(y) The Agent shall have received a satisfactory certificate from a
Responsible Officer of the applicable Guarantor certifying that, to the best of
his knowledge, all New Improvements (as defined in Section 6.14) located upon
each Mortgaged Property set forth on Schedule 6.14 have been completed in
accordance with applicable laws, rules, regulations and statutes.
(z) The Borrower shall have deposited directly into the Collateral
Account proceeds from the Additional Term Loans, together with a portion of the
Borrower's excess cash, in an aggregate amount not less than $42,000,000,
including $30,000,000 reserved to fund a portion of the Additional Permitted
Acquisition and/or the Special Mandatory Prepayment (such $30,000,000
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together with any interest earned and received on such amount under the terms of
the Collateral Account Agreement, the "Additional Reserve Amount").
(aa) The Agent shall be reasonably satisfied as to the amount and
nature of any material environmental and employee health and safety exposures to
which the Borrower or any of its subsidiaries may be subject, and the plans of
the Borrower with respect thereto, after giving effect to the Additional
Transactions and the consummation of the other transactions contemplated hereby
which are to occur on the Restatement Closing Date.
(bb) The Airplane Mortgage shall have been duly executed by TA
Travel and shall have been delivered to the Collateral Agent and shall be in
full force and effect on such date, and each document required by law or
reasonably requested by the Agent to be filed, registered or recorded in order
to create in favor of the Collateral Agent for the benefit of the Secured
Parties a valid, legal and perfected first priority security interest in or lien
on the Airplane shall have been delivered to the Collateral Agent.
ARTICLE VI
Affirmative Covenants
The Borrower covenants and agrees with each Lender, the Agent, the
Fronting Bank and the Swingline Lender that, so long as this Agreement shall
remain in effect or the principal of or interest on any Loan or Swingline Loan
or LC Disbursement, any Fees or any other expenses or amounts payable under any
Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Borrower will and will cause each of its subsidiaries
to:
SECTION 6.01. Existence; Businesses and Properties. (a) Do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business, maintain and operate such business in
substantially the manner in which it is currently conducted and operated; comply
in all material respects with all material applicable laws, rules, regulations
and statutes (including any zoning, building, Environmental and Safety Law,
ordinance, code or approval or any building permits or any restrictions of
record or agreements affecting the Mortgaged Property) and decrees and orders of
any Governmental Authority, whether now in effect or hereafter enacted; and at
all times maintain and preserve all property material to the conduct of such
business and keep such property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
(c) Maintain all financial records in accordance with GAAP.
SECTION 6.02. Insurance. (a) Keep (and/or cause the related Network
Operator, if any, to keep) its properties (including Improvements and Personal
Property (each as defined in the Mortgages)) insured at all times by financially
sound and reputable insurers against loss by fire,
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casualty and such other hazards as may be afforded by an "all risk" policy or a
fire policy covering "special" causes of loss, including building ordinance law
endorsements; cause all such policies to be endorsed or otherwise amended to
include a "standard" or "New York" lender's loss payable endorsement, in form
and substance reasonably satisfactory to the Agent and the Collateral Agent,
which endorsement shall provide that, from and after the Closing Date, the
insurance carrier shall pay all proceeds otherwise payable to the Borrower, the
applicable Guarantor or the applicable Network Operator, if any, under such
policies directly to the Collateral Agent unless (i) the amounts so payable
shall not exceed $50,000 and (ii) the insurance carrier shall not have received
written notice from the Agent or the Collateral Agent that an Event of Default
has occurred and, if received, such notice shall not have been withdrawn (with
the Agent agreeing to withdraw such notice if the related Event of Default shall
have been cured and no other Event of Default shall then exist), cause all such
policies to provide that neither the Borrower, the Guarantors, the Agent, the
Collateral Agent nor any other party shall be a coinsurer thereunder and to
contain a "Replacement Cost Endorsement", without any deduction for
depreciation, and such other provisions as the Agent or the Collateral Agent may
reasonably require from time to time to protect its interest; deliver (and/or
cause the related Network Operator, if any, to deliver) original or certified
copies of all such policies to the Collateral Agent; cause each such policy to
provide that it shall not be canceled, modified or not renewed (i) by reason of
nonpayment of premium upon not less than 10 days' prior written notice thereof
by insurer to the Agent and the Collateral Agent or (ii) for any other reason
upon not less than 30 days' prior written notice thereof by insurer to the Agent
and the Collateral Agent; deliver to the Agent and the Collateral Agent, prior
to the cancellation, modification or nonrenewal of any such policy of insurance,
a copy of a renewal or replacement policy (or other evidence of renewal of a
policy previously delivered to the Agent and the Collateral Agent) together with
evidence satisfactory to the Agent and the Collateral Agent of payment of the
premium therefor; and cause each all-risk policy maintained by the Borrower or
any Guarantor to be endorsed to provide for a waiver by the related insurer of
all its rights to recovery against any Network Operator for damage covered by
such policy.
(b) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated (i) a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency, obtain
(and/or cause the related Network Operator, if any, to obtain) flood insurance
in such total amount as the Collateral Agent or the Agent may from time to time
require, and otherwise comply with the National Flood Insurance Program as set
forth in said Flood Disaster Protection Act of 1973, as it may be amended from
time to time or (ii) "Zone I" area, obtain (and/or cause the related Network
Operator, if any, to obtain) earthquake insurance in such total amount as the
Agent, the Collateral Agent or the Required Lenders may from time to time
require.
(c) With respect to any Mortgaged Property, carry and maintain
(and/or cause the related Network Operator, if any, to maintain) comprehensive
general liability insurance including the "broad form CGL endorsement" and
coverage on an occurrence basis against claims made for personal injury
(including bodily injury, death and property damage) and umbrella liability
insurance against any and all claims, in no event for a combined single limit of
less than $5,000,000, naming the Collateral Agent as an additional insured, on
forms satisfactory to the Collateral Agent.
(d) Notify (and/or cause each Network Operator, if any, to notify)
the Agent and the Collateral Agent immediately whenever any separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.02 is taken out by the
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Borrower, any Guarantor or any Network Operator and promptly deliver to the
Agent and the Collateral Agent a duplicate original copy of such policy or
policies.
(e) Use reasonable efforts to cause the Phase II Consultant (as
defined in the Environmental Agreement) to maintain, and name the Borrower as an
additional insured wherever permissible under, the contracts of insurance
coverage at levels at least as high as set forth in Schedule 6.02(e).
(f) In connection with the covenants set forth in this Section 6.02,
it is understood and agreed that:
(i) neither the Agent, the Lenders, the Swingline Lender, the
Fronting Bank, the Tranche A Exchange Note Purchasers, nor their agents or
employees shall be liable for any loss or damage insured by the insurance
policies required to be maintained under this Section 6.02, it being
understood that (A) the Borrower shall look, and shall cause each
Guarantor to look, solely to its insurance company or any other parties
other than the aforesaid parties for the recovery of such loss or damage
and (B) such insurance company shall have no rights of subrogation against
the Agent, the Collateral Agent, the Lenders, the Swingline Lender, the
Fronting Bank, the Tranche A Exchange Note Purchasers or their agents or
employees. If, however, the insurance policies do not provide waiver of
subrogation rights against such parties as requested above, then the
Borrower hereby agrees, to the extent permitted by law, to waive its right
of recovery, if any, against the Agent, the Collateral Agent, the Lenders,
the Swingline Lender, the Fronting Bank, the Tranche A Exchange Note
Purchasers and their agents and employees; and
(ii) the designation of any form, type or amount of insurance
coverage by the Agent or the Collateral Agent under this Section 6.02,
shall in no event be deemed a representation, warranty, or advice by the
Agent or the Collateral Agent that such insurance is adequate for the
purposes of the Borrower's and each Guarantor's business or the protection
of the Borrower's and each Guarantor's properties and the Agent and the
Collateral Agent shall have the right from time to time to require the
Borrower to keep (and/or cause any Guarantor or the related Network
Operator, if any, to keep) other insurance in such form and amount as the
Agent or the Collateral Agent may reasonably request, provided that such
insurance shall be obtainable on commercially reasonable terms.
SECTION 6.03. Obligations and Taxes. Pay its Indebtedness and other
obligations promptly, and in accordance with their terms and pay and discharge
promptly when due all material taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, its well as all
lawful claims for labor, materials and supplies or otherwise that, if unpaid,
might give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such obligation, tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Borrower, TAFSI or a Guarantor, as applicable, shall have
set aside on its books adequate reserves with respect thereto in accordance with
GAAP and such contest operates to suspend collection of the contested
obligation, tax, assessment or charge and enforcement of a Lien and, in the case
of a Mortgaged Property, there is no risk of forfeiture of such property.
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SECTION 6.04. Financial Statements, Reports, etc. Furnish to the
Agent and each Lender:
(a) as soon as available, and in no event later than 105 days after
the end of each fiscal year (or 90 days during any time that the Borrower
is subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended), the consolidated and consolidating
balance sheets and related statements of income and cash flow, showing the
consolidated financial condition of the Borrower and its consolidated
subsidiaries as of the close of such fiscal year and the results of their
operations during such year, all audited by PriceWaterhouseCoopers LLP or
other independent public accountants of recognized national standing
reasonably acceptable to the Required Lenders and accompanied by an
opinion of such accountants (which shall not be qualified in any material
respect) to the effect that such consolidated financial statements fairly
present the consolidated financial condition and results of operations of
the Borrower and its consolidated subsidiaries on a consolidated basis in
accordance with GAAP consistently applied;
(b) as soon as available, and in no event later than 60 days (or 45
days during any time that the Borrower is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended)
after the end of each of the first three fiscal quarters of each fiscal
year, the unaudited consolidated and consolidating balance sheets and
related statements of income and changes in financial position, showing
the consolidated financial condition of the Borrower and its consolidated
subsidiaries as of the close of such fiscal quarter and the results of
their operations during such fiscal quarter and the then elapsed portion
of the fiscal year, all certified by a Financial Officer of the Borrower
as fairly presenting the consolidated financial condition and results of
operations of the Borrower and its consolidated subsidiaries in accordance
with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes required by GAAP;
(c) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate of the accounting firm or a Financial Officer
of the Borrower opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal interpretations)
(i) certifying that no Event of Default or Default has occurred or, if
such an Event of Default or Default has occurred, specifying the nature
and extent thereof and any corrective action taken or proposed to be taken
with respect thereto and (ii) setting forth computations in reasonable
detail satisfactory to the Agent demonstrating compliance with the
covenants contained in Sections 7.13. 7.14, 7.15, 7.16 and 7.17;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any of its subsidiaries with the Securities and Exchange
Commission, or any governmental authority succeeding to any of or all the
functions of said Commission, or with any national securities exchange, or
distributed to any of their shareholders, as the case may be;
(e) promptly following the preparation thereof, copies of each
management letter prepared by the Borrower's, a Guarantor's or TAFSI's
auditors (together with any response thereto prepared by the Borrower,
such Guarantor or TAFSI);
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(f) as soon as available, and in any event no later than 105 days
after the end of each fiscal year historical summary data for the
immediately preceding year and forecasted financial projections and
summary data through the end of the then current fiscal year, in
substantially the same form and format as set forth in Section 11 of the
1998 Confidential Information Memorandum (including a specification of the
underlying assumptions and a management discussion of historical results),
all certified by a Financial Officer of the Borrower to be a fair summary
of its results and its good faith estimate of the forecasted financial
projections and results of operations for the period through the
then-current fiscal year;
(g) upon the earlier of (i) 105 days after the end of each fiscal
year of the Borrower and (ii) the date on which the financial statements
with respect to such period are delivered pursuant to paragraph (a) above,
a certificate of a Financial Officer of the Borrower setting forth, in
detail satisfactory to the Agent, the amount of Excess Cash Flow, if any,
for such period;
(h) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of any Guarantor,
TAFSI or the Borrower, or compliance with the terms of any Loan Document,
as the Agent, the Fronting Bank, the Swingline Lender or any Lender may
reasonably request;
(i) promptly, a copy of any amendment or waiver of any provisions of
any agreement referenced in Section 7.10, any amendment or waiver of any
provision of the Tranche A Exchange Note Documents not requiring the
consent or approval of the Lenders or any other amendment or waiver of any
provisions of any agreement to the extent that such amendment or waiver is
required hereunder to be furnished to the Agent, the Fronting Bank or any
Lender;
(j) promptly, a copy of any notice of a default received by the
Borrower, TAFSI or any Guarantor under any other Loan Document;
(k) promptly a copy of any notice of default received by the
Borrower, TAFSI or any Guarantor (i) from any Tranche A Exchange Note
Purchaser under the Tranche A Exchange Note Purchase Agreements or (ii)
under the Subordinated Note Indenture;
(l) a copy of all notices (other than regarding any scheduled or
mandatory repayments), certificates, financial statements and reports, as
and when delivered by or on behalf of the Borrower, TAFSI or any Guarantor
(i) to the Tranche A Exchange Note Purchasers under the Tranche A Exchange
Note Purchase Agreements or (ii) under the Subordinated Note Indenture
(except to the extent any such notice, certificate, financial statement or
report is otherwise required to be delivered pursuant to this Agreement);
and
(m) a copy of all solicitations or requests for any proposed waiver
or amendment of any of the provisions of the Tranche A Exchange Note
Documents or Subordinated Note Indenture (but only if the consent or
approval of the Lenders is required in connection therewith).
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SECTION 6.05. Litigation and Other Notices. Furnish to the Agent,
the Fronting Banks, the Swingline Lender, the Collateral Agent and each Lender
prompt written notice of the occurrence of the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any Person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect; and
(c) any development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Effect.
SECTION 6.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and (b) furnish to the Agent, the Fronting Bank,
the Swingline Lender and each Lender (i) as soon as possible, and in any event
within 30 days after any Responsible Officer of the Borrower or any Guarantor or
any ERISA Affiliate either knows or has reason to know that any Reportable Event
has occurred, as to which the Borrower, any Guarantor, TAFSI or any ERISA
Affiliate was or is required to file a report with the PBGC, that alone or
together with any other Reportable Event could reasonably be expected to result
in liability of the Borrower, TAFSI, any Guarantor or any ERISA Affiliate to the
PBGC in an aggregate amount exceeding $2,000,000, a statement of a Financial
Officer of the Borrower setting forth details as to such Reportable Event and
the action proposed to be taken with respect thereto, together with a copy of
the notice, if any, of such Reportable Event given to the PBGC, (ii) promptly
after receipt thereof, a copy of any notice the Borrower, TAFSI or any Guarantor
or any ERISA Affiliate may receive from the PBGC relating to the intention of
the PBGC to terminate any Plan or Plans, (other than a Plan maintained by an
ERISA Affiliate that is considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) or to appoint a trustee to
administer any Plan or Plans, (iii) within 10 days after the due date for filing
with the PBGC pursuant to Section 412(n) of the Code of a notice of failure to
make a required installment or other payment with respect to a Plan, a statement
of a Financial Officer of the Borrower, TAFSI or such Guarantor, as applicable,
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together with a copy of such notice given to the PBGC and
(iv) promptly and in any event within 30 days after receipt thereof by the
Borrower, TAFSI or any Guarantor or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA
Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a
determination that a Multiemployer Plan is, or is expected to be, terminated or
in reorganization, in each case within the meaning of Title IV of ERISA.
SECTION 6.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by the Agent, the Fronting Bank, the Swingline
Lender, the Collateral Agent or any Lender to visit and inspect the financial
records, and the properties of the Borrower, TAFSI and each Guarantor at
reasonable times and upon reasonable notice and as often as reasonably requested
and to make extracts from and copies of such financial records, and permit any
representatives designated by the Agent, the Fronting Bank, the Swingline
Lender, the Collateral Agent or any Lender to discuss the
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affairs, finances and condition of the Borrower, TAFSI or any Guarantor or any
properties of Borrower or any Guarantor with the officers thereof.
SECTION 6.08. Use of Proceeds. Use the Letters of Credit and the
proceeds of the Revolving Loans, any Swingline Loans and the Additional Term
Loans only for the purposes set forth in the preamble to this Agreement and use
the proceeds of the Existing Term Loans only for the purposes set forth in the
preamble to the Original Credit Agreement.
SECTION 6.09. Fiscal Year. Cause its fiscal year to end on December
31 of each year.
SECTION 6.10. Further Assurances. (a) Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or which the Required Lenders, the Agent or the Collateral Agent may
reasonably request, in order to effectuate the transactions contemplated by the
Transaction Documents and in order to grant, preserve, protect and perfect the
validity and first priority of the security interests created or intended to be
created by the Security Documents. In addition, from time to time, each of the
Borrower, TAFSI and the Guarantors will, at its cost and expense, promptly
secure the Obligations by pledging or creating, or causing to be pledged or
created, perfected security interests with respect to such of its assets and
properties as the Agent or the Required Lenders shall designate (it being
understood that it is the intent of the parties that the Obligations shall be
secured by, among other things, substantially all the assets of the Borrower,
each Guarantor and TAFSI (including real and other properties acquired
subsequent to the Restatement Closing Date)). Such security interests and Liens,
will be created under the Security Documents and other security agreements,
mortgages, deeds of trust and other instruments and documents, in form and
substance satisfactory to the Required Lenders, and each of the Borrower, TAFSI
and the Guarantors shall deliver or cause to be delivered to the Lenders all
such instruments and documents, (including legal opinions, title insurance
policies and lien searches) as the Required Lenders shall reasonably request to
evidence compliance with this Section 6.10. Each of the Borrower and the
Guarantors agrees to provide such evidence as the Required Lenders shall
reasonably request as to the perfection and priority status of each such
security interest and Lien.
(b) To the extent that the Borrower, TAFSI or any Guarantor (other
than TA Travel) is not already a party to a Lockbox Agreement, within 90 days
following the Restatement Closing Date, enter into Lockbox Agreements with
financial institutions reasonably acceptable to the Agent.
(c) In the event that TA Travel acquires any replacement Airplane,
cause TA Travel, within 30 days of the purchase thereof, to grant to the
Collateral Agent a valid and perfected first-priority security interest in the
replacement Airplane pursuant to documentation in form and substance reasonably
satisfactory to the Collateral Agent.
(d) If any additional direct or indirect subsidiary of the Borrower
is organized or acquired by the Borrower after the date hereof, (i) notify the
Agent and the Lenders of such subsidiary's organization or acquisition, (ii)
cause such subsidiary, simultaneously with its organization or acquisition, to
execute and become a party to the Guarantee Agreement, the Indemnity and
Subrogation Agreement, the Security Agreement and each applicable other Security
Document in favor of the Collateral Agent and to execute and become a party to
the Intercreditor
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Agreement and (iii) if any shares of capital stock or other equity interest or
Indebtedness of such subsidiary are owned by or on behalf of the Borrower or any
Guarantor, cause such Person, simultaneously with such subsidiary's organization
or acquisition, to pledge to the Collateral Agent such shares, evidence of such
other equity interests and promissory notes evidencing such Indebtedness
pursuant to the Pledge Agreement. The Borrower agrees to provide such evidence
as the Collateral Agent shall reasonably request as to the perfection and
priority status of each security interest and Lien created pursuant to such
Security Documents.
SECTION 6.11. Rate Protection Agreements. In the case of the
Borrower, have in effect or enter into within 150 days following the Restatement
Closing Date, and maintain at any time prior to the date that is two years
following the Restatement Closing Date, Rate Protection Agreements satisfactory
to the Agent, with respect to the Loans, to the extent necessary to cause not
less than 50% of the Funded Debt of the Borrower and its subsidiaries on a
consolidated basis at such date to be (a) Indebtedness that accrues interest at
a fixed rate and/or (b) Indebtedness with respect to which such a Rate
Protection Agreement is in effect.
SECTION 6.12. Environmental and Safety Laws. (a) Comply with, and
use its best efforts to ensure compliance by all tenants and subtenants
(including each Network Operator, if any) with, all Environmental and Safety
Laws and obtain and comply with and maintain, and use its best efforts to ensure
that all tenants and subtenants (including each Network Operator, if any) obtain
and comply with and maintain, any and all licenses, approvals, registrations or
permits required by Environmental and Safety Laws, except to the extent that
failure to so comply or to obtain and comply with and maintain such licenses,
approvals, registrations and permits does not have, and could not reasonably be
expected to result in, a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions, required under
Environmental and Safety Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities respecting Environmental and Safety
Laws, except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings would not have a
Material Adverse Effect.
(c) Notify the Agent of any of the following that is likely to have
a Material Adverse Effect:
(i) any Environmental Claim that the Borrower, TAFSI or any
Guarantor receives, including one to take or pay for any remedial,
removal, response or cleanup or other action with respect to any Hazardous
Substance contained on any property owned or leased by the Borrower, such
Guarantor or TAFSI;
(ii) any notice of any alleged violation of or knowledge by the
Borrower, Holdings, TAFSI or any Guarantor of a condition that might
reasonably result in a violation of any Environmental and Safety Law;
(iii) any commencement or threatened commencement of any judicial or
administrative proceeding or investigation alleging a violation or
potential violation of any requirement of any Environmental and Safety Law
by the Borrower, TAFSI or any Guarantor; and
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(iv) any Release or threat of Release that could reasonably be
expected to result in a Material Adverse Effect.
(d) Without limiting the generality of Section 10.05(b), indemnify
the Agent, the Fronting Bank, the Swingline Lender, the Collateral Agent and
each Lender and each of their respective directors, officers, employees, agents
and Affiliates (each such Person being called an "Indemnitee") against, and to
hold each Indemnitee harmless from, any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses (including reasonable
counsel fees, expert and consultant fees, charges and disbursements) of whatever
kind or nature arising out of, or in any way relating to, the violation of,
noncompliance with or liability under any Environmental and Safety Laws
applicable to the operations of the Borrower or any Guarantor or to the
Mortgaged Properties, or any orders, requirements or demands of Governmental
Authorities related thereto, including reasonable attorneys' and consultants'
fees, investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or wilful misconduct of the Indemnitee
seeking indemnification therefor. This indemnity shall continue in full force
and effect regardless of the termination of this Agreement and the other Loan
Documents.
SECTION 6.13. Material Contracts. Maintain in full force and effect
(including exercising any available renewal option and without amendment or
modification) all its material contracts (including each operating lease
permitted by Section 7.08) unless the failure so to maintain such contracts (or
the amendments or modifications thereto) individually or in the aggregate, would
not have a Material Adverse Effect, and promptly notify each Lender of each
failure to comply with this Section 6.13.
SECTION 6.14. Certificates of Occupancy, Permits and Zoning. (a)
Within 270 days following the Restatement Closing Date, the Borrower shall
deliver, to the extent not previously delivered, the following documents to the
Collateral Agent for Mortgaged Properties set forth on Schedule 6.14 having (x)
80% of the aggregate value of all Mortgaged Properties set forth on such
Schedule that were not Mortgaged Properties on March 21, 1997 (the "New
Mortgaged Properties") and (y) 80% of the aggregate value of the Mortgaged
Properties (other than any New Mortgaged Properties) set forth on such Schedule
that have Additional Improvements (as defined below):
(i) a copy of the original permanent certificate or certificates of
occupancy or completion, as the same may have been amended or issued from
time to time, covering (A) if such Mortgaged Property is a New Mortgaged
Property, any material improvement located upon such Mortgaged Property
(an "Acquired Improvement") or (B) if such Mortgaged Property is not a New
Mortgaged Property, any material improvement located upon such Mortgaged
Property that was constructed after March 21, 1997 (an "Additional
Improvement" and, the Acquired Improvements and Additional Improvements
collectively, the "New Improvements"), in each case that were required to
have been issued by the appropriate Governmental Authority for such New
Improvement or (ii) a letter from an appropriate Governmental Authority
stating that at the time of construction certificates of occupancy were
not required for each such New Improvement for which a certificate as
described above has not been delivered and, if reasonably requested by the
Agent or Collateral Agent, suitable evidence of the date of construction
of each New Improvement on such Mortgaged Property;
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(ii) without limiting the Borrower's obligations under Section 6.12,
a copy of all material licenses, permits and authorizations (other than
certificates of occupancy or completion, all applications, plans and
filings necessary for the issuance of any such certificate and all
licenses, permits and authorizations that were no longer required once any
such certificate was issued) that were necessary for the construction of
each New Improvement located upon the Mortgaged Property or that are
necessary for the current operation of such New Improvement; and
(iii) one of the following: (A) written confirmation from the
applicable zoning commission or other appropriate Governmental Authority
stating that, with respect to each Mortgaged Property as built, it
complies with existing land use and zoning ordinances, regulations and
restrictions applicable to such property, (B) an opinion from local
counsel acceptable to the Agent to the same effect as covered by clause
(A) above or (C) a zoning endorsement satisfactory to the Agent in
connection with the Collateral Agent's mortgagee title insurance policy of
such Mortgaged Property.
(b) After the Restatement Closing Date, the Borrower shall use
commercially reasonable efforts to obtain (and promptly upon obtaining the same
deliver to the Collateral Agent):
(i) estoppel certificates from ground lessors of any Mortgaged
Property dated not earlier than September 1, 1998;
(ii) estoppel certificates from each Network Operator of each
Mortgaged Property dated not earlier than March 21, 1997; and
(iii) to the extent not already obtained, subordination and
attornment agreements from each Network Operator of each New Mortgaged
Property, unless the related operating lease by its terms, is subject and
subordinate to the Lien of the applicable Mortgage or Leasehold Mortgage.
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ARTICLE VII
Negative Covenants
The Borrower covenants and agrees with each Lender, the Agent, the
Fronting Bank and the Swingline Lender that, so long as this Agreement shall
remain in effect or the principal of or interest on any Loan or Swingline Loan
or LC Disbursement, any Fees or any other expenses or amounts payable under any
Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Borrower will not, and will not cause or permit any of
its subsidiaries to:
SECTION 7.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:
(a) Indebtedness existing on March 21, 1997, and set forth on
Schedule 7.01 (but not any extensions, renewals or replacements of such
Indebtedness);
(b) Indebtedness created under the Loan Documents;
(c) in the case of the Guarantors, Indebtedness consisting of
purchase money Indebtedness incurred in the ordinary course of business
after the Closing Date to finance Capital Expenditures or Transition
Capital Expenditures permitted under Section 7.13; provided, however, that
(i) for purposes of Section 7.13, the aggregate principal amount of any
such Indebtedness shall be deemed to be a Capital Expenditure or a
Transition Capital Expenditure, as the case may be, at the time incurred
or assumed, (ii) the aggregate of (A) the aggregate principal amount of
Indebtedness permitted pursuant to this Section 7.01(c) and (B) any
Capital Lease Obligations permitted pursuant to Sections 7.01(d) and
7.11(c) shall not exceed $25,000,000 at any time outstanding and (iii)
such Indebtedness is incurred within 90 days after the making of the
Capital Expenditures or Transition Capital Expenditures financed thereby;
(d) in the case of the Guarantors other than TA Travel, Indebtedness
in respect of Capital Lease Obligations permitted under Section 7.11(c);
(e) in the case of the Borrower or any Guarantor, Indebtedness in
respect of fuel-supply, hedging agreements and arrangements, provided that
any such agreements or arrangements shall have been entered into for bona
fide hedging purposes and pursuant to a written fuel-supply hedging policy
approved by the board of directors of the Borrower;
(f)(i) in the case of the Borrower, Indebtedness in respect of the
Series I Tranche A Exchange Notes and the Subordinated Notes and (ii) in
the case of the Guarantors, Indebtedness in respect of the Tranche A
Exchange Note Guarantees and the Subordinated Note Guarantees;
(g) Indebtedness that arises from the refinancing from time to time
by the Borrower of the Series I Tranche A Exchange Notes (and the related
Tranche A Exchange Note Guarantees) and ranks pari passu with or
subordinate to the Loans, the Swingline Loans, any unreimbursed LC
Disbursements and the guarantees of each Guarantor supporting the Loans,
the Swingline Loans and any unreimbursed LC Disbursements; provided,
however,
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that (A) such refinancing must be in whole and not in part with respect to
all the Series I Tranche A Exchange Notes, (B) the weighted average
interest rate applicable to such Indebtedness must be less than or equal
to the interest rate applicable to the Series I Tranche A Exchange Notes
being refinanced, (C) no material terms applicable to such Indebtedness or
the related guarantees shall be more favorable to the refinancing lenders
than the terms that are applicable to the Series I Tranche A Exchange Note
Purchasers, (D) the weighted average life to maturity of such Indebtedness
shall be greater than or equal to the weighted average life to maturity of
the Series I Tranche A Exchange Notes being refinanced and the first
scheduled principal payment in respect of such Indebtedness shall not be
earlier than the first scheduled principal payment in respect of such
Series I Tranche A Exchange Notes, (E) such Indebtedness shall be
Indebtedness of the Borrower, (F) the priority of the security interest in
the collateral securing the repayment of such Indebtedness (if such
Indebtedness is to be secured) and the total amount or share of the
collateral to be made available to secure such Indebtedness shall be no
more senior or favorable than that which secured the repayment of the
Series I Tranche A Exchange Notes being refinanced at the time of such
refinancing and the refinancing lenders shall enter into an intercreditor
agreement with the Lenders in substantially the form of the Intercreditor
Agreement (or in such other form as may be reasonably acceptable to the
Required Lenders) providing for the sharing of collateral on such basis,
(G) the principal amount of such Indebtedness shall be less than or equal
to the principal amount then outstanding of the Series I Tranche A
Exchange Notes being refinanced and (H) such Indebtedness may not be
incurred if at the time of such refinancing a Default or Event of Default
has occurred and is continuing or would result therefrom;
(h) Indebtedness that arises from the refinancing from time to time
by the Borrower of the Subordinated Notes and is subordinate to the
Obligations (which, if required by the terms of any Indebtedness incurred
pursuant to Section 7.01(g) above in connection with any refinancing of
the Series I Tranche A Exchange Notes, shall include such refinancing
Indebtedness); provided, however, that (i) such refinancing must be in
whole and not in part, (ii) the weighted average interest rate applicable
to such Indebtedness must be less than or equal to the interest rate
applicable to the Subordinated Notes, (iii) no material terms applicable
to such Indebtedness (including the subordination provisions thereof)
shall be more favorable to the refinancing lenders than the terms that are
applicable under the Subordinated Note Indenture prior to such
refinancing, (iv) the weighted average life to maturity of such
Indebtedness shall be greater than or equal to the weighted average life
to maturity of the Subordinated Notes and the first scheduled principal
payment in respect of such Indebtedness shall not be earlier than the
first scheduled principal payment in respect of the Subordinated Notes,
(v) such Indebtedness shall be Indebtedness of the Borrower, (vi) such
Indebtedness shall be unsecured, (vii) the guarantees by the Guarantors of
such Indebtedness shall be no more favorable to the refinancing lenders
than the Subordinated Note Guarantees, (viii) the principal amount of such
Indebtedness shall be less than or equal to the principal amount then
outstanding of the Subordinated Notes and (ix) such Indebtedness may not
be incurred if at the time of such refinancing a Default or Event of
Default has occurred and is continuing or would result therefrom;
(i) in the case of TAFSI, Indebtedness to the Borrower or any
Guarantor, provided that the amount of all such Indebtedness does not
exceed $3,000,000 in the aggregate at any time outstanding;
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(j) in the case of any Guarantor, Indebtedness to the Borrower, the
other Guarantors or TAFSI, provided that TA Travel shall not permit to
exist any Indebtedness to the Borrower, another Guarantor or TAFSI that is
not permitted under Section 7.04(l);
(k) in the case of the Borrower, Rate Protection Agreements;
(l) in the case of the Guarantors, other unsecured Indebtedness in
an aggregate principal amount at any time outstanding not in excess of
$5,000,000;
(m) in the case of the Borrower, Indebtedness to any of its
subsidiaries;
(n) in the case of the Borrower, Guarantees by the Borrower of
obligations of its subsidiaries permitted pursuant to Section 7.03(a);
(o) in the case of TA, Indebtedness assumed by it in connection with
the Burns Acquisition, which Indebtedness exists on the Restatement
Closing Date and is not created in contemplation of the Burns Acquisition
and the consummation thereof, provided that the aggregate principal amount
of such Indebtedness outstanding shall not at any time exceed $3,000,000
(and any extensions, renewals, refinancings or replacements of such
Indebtedness, in any such case, without any increase in the principal
amount thereof);
(p) in the case of any Guarantor, Indebtedness assumed by it in
connection with the Additional Permitted Acquisition, which Indebtedness
exists on the date on which the Additional Permitted Acquisition is
consummated and is not created in contemplation of the Additional
Permitted Acquisition and the consummation thereof, provided that the
aggregate principal amount of such Indebtedness outstanding shall not at
any time exceed $10,000,000 (and any extensions, renewals, refinancings or
replacements of such Indebtedness, in any such case, without any increase
in the principal amount thereof); and
(q) Indebtedness of National represented by that certain Promissory
Note dated September 1, 1998, made by National in favor of Mid California
Auto/Truck Plaza, Inc. in an aggregate principal amount at any time
outstanding not in excess of $4,919,350.
SECTION 7.02. Liens. Create, incur, assume or permit to exist any
Lien on any property or assets (including stock or other securities of any
Person) now owned or hereafter acquired by it or on any income or revenues or
rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower or any subsidiary
thereof existing on March 21, 1997, and set forth on Schedule 7.02
(including, to the extent any such Lien is the result of a lease, any
extensions, renewals or replacements of such lease, provided that the
annual lease payment under any such extension, renewal or replacement
shall be no less than the fair market rental value of the leased property
as of the date of such extension, renewal or replacement), provided that
such Liens shall secure only those obligations that they secured on March
21, 1997;
(b) in the case of any Guarantor, any Lien existing on any property
or asset prior to the acquisition thereof (by merger, consolidation, asset
purchase or otherwise) by such Guarantor (including pursuant to the Burns
Acquisition, a Permitted Business Acquisition or the Additional Permitted
Acquisition) or existing at the time such Guarantor becomes a
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subsidiary of the Borrower or another Guarantor pursuant to the Additional
Permitted Acquisition, including any such Lien securing Indebtedness
permitted under Section 7.01(o) or Section 7.01(p) but excluding any such
Lien securing any other Indebtedness, provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition, (ii)
such Lien does not extend to cover any other property or assets of such
Guarantor as a result of or after giving effect to such acquisition or
such Guarantor becoming a subsidiary of the Borrower or another Guarantor
(except for additional property in the nature of improvements to property
already subject to such Lien or additions to accounts receivable or
inventory, as the case may be, already subject to such Lien) and (iii)
such Lien does not (A) materially interfere with the use, occupancy and
operation of any property, (B) materially reduce the fair market value of
such property but for such Lien or (C) result in any material increase in
the cost of operating, occupying or owning (or leasing) such property,
provided further that a Guarantor may substitute for any property or asset
subject to any such Lien securing Indebtedness permitted under Section
7.01(o) or Section 7.01(p) other property or assets with a fair market
value substantially the same as or less than the fair market value of the
substituted property or assets (as determined in good faith by the
Borrower's board of directors) and not otherwise subject to the Lien of a
Loan Document, so long as (i) the property or asset for which such
substitution is made is fully and effectively released from such Lien and
(ii) the property or assets being subjected to such Lien are held by a
Guarantor;
(c) Liens for taxes, assessments or governmental charges not yet due
and payable (or due and payable but not yet delinquent) or which are being
contested in compliance with Section 6.03 or Section 6.12;
(d) in the case of the Guarantors, carriers', warehousemen's,
mechanics', materialmen's, repairmen's, landlord's or other like Liens
arising in the ordinary course of business and securing obligations that
are not due and payable or which are being contested in compliance with
Section 6.03;
(e) in the case of the Guarantors, pledges and deposits made in the
ordinary course of business in compliance with workmen's compensation,
unemployment insurance and other social security laws or regulations;
(f) (i) in the case of the Guarantors, pledges and deposits to
secure the performance of bids, trade contracts (other than for
Indebtedness) leases, statutory obligations surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business and (ii) in the case of the Borrower and the
Guarantors, pledges and deposits to secure Indebtedness permitted under
Section 7.01(e);
(g) in the case of the Guarantors, zoning restrictions, easements,
rights-of-way, restrictions on use of real property and other similar
encumbrances that do not materially impair the current use or the value of
the property subject thereto;
(h) in the case of the Guarantors, purchase money security interests
in real property, improvements thereto or equipment hereafter acquired
(or, in the case of improvements, constructed), provided that (i) such
security interests secure Indebtedness permitted by Section 7.01(c), (ii)
such security interests are incurred, and the Indebtedness secured thereby
is created, within 90 days after such acquisition (or construction), (iii)
the
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Indebtedness secured thereby does not exceed 75% of the lesser of the cost
or the fair market value of such real property, improvements or equipment
at the time of such acquisition (or construction) and (iv) such security
interests do not apply to any other property or assets;
(i) Liens incurred in connection with Capital Lease Obligations
permitted by Section 7.01(d), provided that such Liens do not extend to
any other property or assets of such Person;
(j) any Lien created under the Loan Documents;
(k) the lease or sublease of retail space, office space or space for
truck weigh stations at any Truckstop so long as (i) in the case of retail
or office space either (A) the term of the lease or sublease does not
exceed three years or (B) such lease or sublease does not result in the
lease or sublease of real property of the Borrower or any of its
subsidiaries in excess of 3,000 square feet at any one location to any one
lessee or (ii) in the case of space leased or subleased for truck weigh
stations, such lease or sublease does not result in the lease or sublease
of real property of the Borrower or any of its Subsidiaries in excess of
8,000 square feet at any one location to any one lessee;
(l) the lease or sublease of retail space and office space at any
Truckstop other than as described in clause (k) above, provided that (i)
the lease with respect thereto shall (A) contain provisions consistent
with and not in conflict with any term, condition, covenant or agreement
contained in any Loan Document, (B) require the lessee to deliver estoppel
certificates to the Collateral Agent in compliance with clause (iii)
below, (C) provide that such lease is subject and subordinate in all
respects to the applicable Mortgage and (D) constitute an "operating
lease" (and not a financing lease) for all purposes, (ii) in each case,
the Borrower shall have delivered to the Collateral Agent, reasonably in
advance of the execution and delivery thereof, copies of such lease and
all other agreements to be entered into by the Borrower or any of its
subsidiaries in connection therewith, (iii) the Borrower shall have
delivered to the Agent within 30 days of a request therefor by the
Collateral Agent, an estoppel certificate of any lessee in form and
substance satisfactory to the Agent, (iv) in each case, the Borrower
shall, at its expense, take such action as shall be necessary or as shall
be reasonably requested by the Collateral Agent to assign to the
Collateral Agent, for the benefit of the Secured Parties, a perfected
security interest in its rights under such lease and other agreements,
including the execution, delivery and recording of an Assignment of Leases
and Rents substantially in the form of Exhibit C, (v) after giving effect
to the entering into of such lease, no Default or Event of Default shall
have occurred and be continuing, (vi) promptly after execution of such
lease, an executed copy of such lease and a certificate of an officer of
the Borrower certifying that such lease complies with the provisions of
this Section 7.02(l) shall be delivered to the Agent and (vii) the lease
or sublease of such space: (A) shall not result in the representations and
warranties contained in the related Mortgage or in this Agreement to be
untrue, (B) shall not result in any material adverse effect on the value
or operations of the related Mortgaged Property as a Truckstop, (C) shall
have no effect on the Collateral Agent's Lien on the remaining Land under
the related Mortgage, (D) shall not restrict ingress and egress to, the
operation of or in any way interfere with the business currently conducted
on the Mortgaged Property and (E) shall be done and conducted, as
applicable, in accordance with all material laws, rules, regulations or
statutes (including any zoning, building, Environmental and Safety Laws,
ordinances, codes
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or approvals or any building permits) or any restrictions of record or
agreements affecting the Mortgaged Property;
(m) Liens on the properties described on Schedule 7.03;
(n) Liens on National's real property on which is located National's
Truckstop in Santa Nella, CA; and
(o) Liens on National's Certificate of Deposit, face amount of
$4,919,350, County Bank of Los Angeles, CA (the "CBLA Certificate of
Deposit") to secure Indebtedness permitted by Section 7.01(q), provided
that the Borrower shall cause such Lien to be released and terminated (and
shall provide to the Collateral Agent evidence, reasonably satisfactory to
the Collateral Agent, of such release and termination) not later than the
three-month anniversary of the Restatement Closing Date.
SECTION 7.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any Person whereby it shall sell,
lease or transfer any property, real or personal, used or useful in the business
of the Borrower or its subsidiaries, whether now owned or hereafter acquired,
and thereafter rent or lease such property or other property that it intends to
use for substantially the same purpose or purposes as the property being sold,
leased or transferred (any such transaction, a "Sale and Lease-Back
Transaction"), other than (a) any Sale and Lease-Back Transactions involving the
properties described on Schedule 7.03, including any improvements to the
properties subject to such Sale and Lease-Back Transactions by such Person,
provided that the aggregate lease payments paid by the Borrower and its
subsidiaries with respect to such properties in any fiscal year shall not exceed
$6,000,000, or (b) any Sale and Lease-Back Transaction with respect to property
acquired by the Borrower or any subsidiary thereof following the Restatement
Closing Date, if such Sale and Lease-Back Transaction (i) involves a sale by the
Borrower or any subsidiary thereof for consideration equal to at least the
then-current fair market value of such property and (ii) results in a Capital
Lease Obligation or an operating lease permitted by Section 7.11, in either case
entered into to finance a Capital Expenditure permitted by Section 7.13
consisting of (A) the initial acquisition by the Borrower or such subsidiary of
the property sold or transferred in such Sale and Lease-Back Transaction or (B)
the development of a Truckstop on such property.
SECTION 7.04. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of Indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other Person, except:
(a) in the case of the Borrower, investments by the Borrower in the
capital stock of, and loans to, the Guarantors other than TA Travel and in
promissory notes described in Section 7.04(e);
(b) Permitted Investments;
(c) in the case of the Guarantors, pledges and deposits permitted
under subsection (f) of Section 7.02;
(d) in the case of the Guarantors, loans or advances to employees in
the ordinary course of business in an aggregate amount outstanding to any
single employee at any time
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not in excess of $10,000 (or, if and to the extent such loans or advances
shall be used by such employees solely for relocation expenses, $100,000)
and in an aggregate amount outstanding for all employees at any time not
in excess of $1,000,000 (which loans and advances shall not be forgiven);
(e) in the case of any Guarantor, promissory notes evidencing loans
made by the Borrower to members of such Guarantor's management or the
Institutional Investors to enable them to purchase shares of the
Borrower's Common Stock, provided that (i) the amount loaned to any single
member of management or any single Institutional Investor shall not exceed
50% of the aggregate purchase price of the shares purchased by such member
or Institutional Investor with the proceeds of any such loan, (ii) all the
shares purchased by such member or Institutional Investor with the
proceeds of any such loan shall be retained by such Guarantor for the
benefit of the Secured Parties until such time as such loan shall have
been repaid, (iii) the aggregate amount of all such loans outstanding at
any time shall not exceed $1,500,000, (iv) such loans shall not be
forgiven by the Borrower, (v) any shares purchased by any Institutional
Investor with the proceeds of any such loan shall be resold to members of
the Borrower's management as soon as such a resale may be consummated in
accordance with applicable state and federal securities laws and (vi) any
member of the Borrower's management who purchases shares pursuant to the
preceding clause (v) shall assume all obligations under the loans the
proceeds of which were used by such Institutional Investor to purchase
such shares;
(f) in the case of the Borrower, investments by the Borrower in the
capital stock of, and loans to, TAFSI that are consistent with the
limitations on the business of TAFSI set forth in Section 7.08;
(g) in the case of the Borrower and the Guarantors other than TA
Travel, investments in connection with (i) Permitted Business
Acquisitions, it being understood that the aggregate purchase
consideration paid in any such investment shall (A) constitute a Capital
Expenditure during the period in which such investment occurs or (B) if
and to the extent the Borrower and its subsidiaries are not permitted to
incur additional Capital Expenditures under Section 7.13(a) at the time of
such investment, constitute a Transition Capital Expenditure during the
period in which such investment occurs or (ii) the Additional Permitted
Acquisition, it being understood that (A) the Borrower and such Guarantors
may fund up to $30,000,000 of the cash purchase price in connection with
such acquisition from the Additional Reserve Amount deposited in the
Collateral Account and the remainder of the cash purchase price from
either their cash on hand and/or the proceeds of Revolving Credit
Borrowings to the extent then available and (B) the Additional Permitted
Acquisition shall not constitute a Capital Expenditure or Transition
Capital Expenditure for purposes of Section 7.13, provided that the
Borrower's investments permitted pursuant to this Section 7.04(g) shall be
limited to investments in capital stock of, and other equity ownership
interests in, the acquired entities and shall not include any operating
assets;
(h) intentionally omitted;
(i) in the case of the Borrower, Rate Protection Agreements;
(j) investments not otherwise permitted by this Section 7.04,
including without limitation, in the case of the Guarantors and TAFSI,
investments in any joint venture (any
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such joint venture, a "Permitted Joint Venture"), so long as the amount of
all such investments does not exceed $11,000,000 in the aggregate at any
time outstanding and none of such investments is prohibited by the
Subordinated Note Documents or any comparable documents entered into by
the Borrower in connection with Subordinated Note Refinancing Indebtedness
(except to the extent waived or consented to by holders of the
Subordinated Notes or Subordinated Note Refinancing Indebtedness in
accordance with the Subordinated Notes Documents or such comparable
documents);
(k) in the case of the Guarantors and TAFSI, intercompany loans and
advances to TAFSI and the Guarantors other than TA Travel to the extent
permitted under subsections (i), (j) and (m) of Section 7.01;
(l) in the case of the Borrower and Guarantors other than TA Travel,
investments by Borrower and such Guarantors in the membership interests
of, and loans to, TA Travel, provided that (i) the aggregate amount of all
investments by the Borrower and such Guarantors in TA Travel does not
exceed $10,000,000 in the aggregate at any time outstanding, and (ii) such
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");
(m) in the case of TA, the investment by TA in the Burns Network in
connection with the Burns Acquisition and pursuant to the terms and
conditions of the Burns Asset Purchase Agreement;
(n) in the case of the Borrower, repurchases of Subordinated Notes
to the extent permitted by clause (v) of Section 7.09(a); and
(o) in the case of National, an investment in the CBLA Certificate
of Deposit.
SECTION 7.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, assign,
lease, sublease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of the assets (whether now owned or
hereafter acquired) or any capital stock of any Guarantor or TAFSI, or purchase,
lease or otherwise acquire (in one transaction or a series of transactions) all
or any substantial part of the assets of any other Person; provided, however,
that the foregoing shall not prohibit:
(a) sales of Permitted Investments for cash;
(b) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business
(to the extent that the Borrower shall have complied with the provisions
of Section 2.13(b));
(c) sales of inventory in the ordinary course of business;
(d) sales, transfers and other dispositions of Truckstops and the
related assets for at least the then-current fair market value of such
assets (other than any such sales, transfers and other dispositions
permitted under Section 7.05(g)), with the related Net Cash Proceeds being
applied in accordance with the provisions of Section 2.13(b) and the
definition of the
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term "Prepayment Event", if (i) the aggregate number of Truckstops so
sold, transferred or disposed of pursuant to this subsection (d) shall not
exceed 10 since the Closing Date, (ii) the aggregate amount of Net Cash
Proceeds received by the Borrower in respect of such sales, transfers and
dispositions shall not exceed $30,000,000 since the Closing Date, (iii)
the consideration received in any such transaction shall consist of
immediately available funds in an amount equal to at least 75% of the
then-current fair market value of the applicable asset(s) (with any
instrument evidencing consideration other than immediately available funds
being pledged to the Collateral Agent as Collateral pursuant to the Pledge
Agreement), (iv) no Default or Event of Default shall have occurred and be
continuing and no such event shall occur as the result of such proposed
transaction and (v) prior to any such proposed transaction, the Agent and
the Collateral Agent shall have received a certificate of a Financial
Officer of the Borrower describing the proposed transaction (including the
consideration to be received) and certifying as to the compliance with the
foregoing provisions on a prospective basis;
(e) sublicenses by the Borrower, any Guarantor or TAFSI to
Franchisees and Network Operators, if any, of the trademarks and
servicemarks owned by the Borrower, such Guarantor or TAFSI;
(f) sales, transfers and other dispositions of any portion of a
Mortgaged Property in connection with the development of such property as
permitted in, and in accordance with, the provisions of Section 10 of the
Guarantee Agreement;
(g) sales, transfers and other dispositions of the parcels of real
estate listed on Schedule 7.05(g) (which Schedule may be amended by the
Borrower from time to time to substitute another parcel of real estate for
any parcel of real estate that is then listed on such Schedule and has not
been sold, transferred or otherwise disposed of on or prior to the date of
such substitution) and the related Truckstop assets, with the related Net
Cash Proceeds being applied in accordance with the provisions of Section
2.13(b) and the definition of the term "Prepayment Event";
(h) in the case of TAFSI and the Guarantors other than TA Travel,
(i) the acquisition of assets from, or shares or other equity interests
in, any Person in connection with a Permitted Business Acquisition, a
Permitted Joint Venture or the Additional Permitted Acquisition, (ii) the
merger of any Person with and into one of the Guarantors (other than TA
Travel) as required by the definition of the term "Permitted Business
Acquisition" or as permitted by the definition of the term "Additional
Permitted Acquisition", (iii) the merger of one of the Guarantors (other
than TA Travel) with and into any Person as permitted by the definition of
the term "Additional Permitted Acquisition" and (iv) the merger of one
such Guarantor with and into another such Guarantor (provided that (A) the
Borrower provides the Agent and the Collateral Agent with at least 60 days
prior notice, (B) the Borrower complies with all of its obligations under
Section 6.10 and (C) immediately after giving effect thereto no Default or
Event of Default shall have occurred or be continuing or would result
therefrom);
(i) leases permitted by Section 7.08;
(j) sales, leases or other transfers of assets in connection with
Sale and Lease-Back Transactions permitted by Section 7.03;
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(k) in the case of any Guarantor or TAFSI, any sale, transfer or
other disposition of any asset to TAFSI or another Guarantor (other than
TA Travel), as the case may be, provided that the aggregate fair market
value of all assets transferred to TAFSI by the Guarantors does not exceed
$3,000,000; or
(l) in the case of TA, the acquisition of assets from Burns in
connection with the Burns Acquisition, provided that such acquisition is
consummated pursuant to the terms and conditions of the Burns Asset
Purchase Agreement.
SECTION 7.06. Dividends and Distributions. (a) Declare or pay
directly or indirectly, any dividend or make any other distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any shares of its capital stock or directly
or indirectly redeem, purchase, retire or otherwise acquire for value any shares
of any class of its capital stock or set aside any amount for any such purpose;
provided, however, that (i) each of the Guarantors and TAFSI may declare and pay
dividends or make other distributions to the Borrower or another Guarantor and
(ii) so long as no Default or Event of Default shall have occurred and be
continuing or shall be caused thereby, the Borrower may declare and pay
dividends or make other distributions to repurchase or redeem Common Stock of
the Borrower (A) from officers, directors or employees of the Borrower who are
no longer employed by the Borrower, so long as the aggregate amount of such
dividends or other distributions paid (1) during any fiscal year or (2) since
the Closing Date shall not exceed the sum of $1,000,000 or $3,000,000,
respectively, plus, in each case, the proceeds of any resale of such Common
Stock or common stock, as the case may be, to other or new employees, directors
or officers of the Borrower made prior to or within 180 days after such
repurchases or redemptions and (B) from Operators, so long as the aggregate
amount of such repurchases since the Closing Date shall not exceed $15,000,000.
(b) Permit its subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Borrower other than any (A)
consensual encumbrances or restrictions incurred as a result of the Tranche A
Exchange Note Purchase Agreements or the Subordinated Note Indenture and (B)
consensual encumbrances or restrictions that are incurred in connection with any
Tranche A Exchange Notes Refinancing Indebtedness or any Subordinated Note
Refinancing Indebtedness, provided that such encumbrances or restrictions are no
more onerous than the encumbrances and restrictions described in clause (A)
above.
SECTION 7.07. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
that the Borrower, TAFSI and each Guarantor may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions no less favorable to the Borrower, TAFSI or such Guarantor, as the
case may be, than could be obtained on an arm's-length basis from unrelated
third parties, provided that the foregoing provisions shall not restrict (a) any
transaction listed on Schedule 7.07 or (b) any transaction with an Affiliate
expressly permitted by this Agreement (including transactions expressly
permitted by Section 7.02, 7.04, 7.05 or 7.06).
SECTION 7.08. Business of Borrower, the Guarantors and TAFSI. (a) In
the case of the Borrower, engage at any time in any business or business
activity other than (A) the ownership of all the outstanding capital stock of
one of more Guarantors and of TAFSI, together with the
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activities directly related thereto, (B) the exercise of its rights and the
performance of its obligations under or contemplated by the Transaction
Documents and (C) actions required by law to maintain its status as a
corporation.
(b) In the case of each Guarantor other than TA Travel, (i) engage
in any activities other than the business currently conducted by it, TA or
National and business activities reasonably incidental thereto (including the
operation of restaurants) or (ii) lease any Truckstop to a third-party operator,
or engage any third-party operator to operate any Truckstop, or otherwise cease
to conduct directly the operation of any Truckstop (other than in connection
with any sale, lease or other transfer of such Truckstop in accordance with
Section 7.05); provided, however, that such Guarantor may lease Truckstops to
creditworthy third-party operators with experience in the operation of similar
facilities who shall at the time become Franchisees if (A) in each case, the
lease shall (1) provide for payment of rent and all other material amounts
payable thereunder at rates at least equal to the fair market rental value as a
full-service truckstop facility (using for such purpose the highest number
resulting at the time from at least three standard methods of determining fair
market rental value), as of the date such lease is executed by such Guarantor,
of the entire premises covered by such lease for the term thereof, including any
renewal options, (2) require the lessee to use and operate the Truckstop in a
manner consistent with industry standards from time to time for the operation of
similar facilities and in any event in compliance with the applicable Franchise
Agreement as of the date such lease is executed by such Guarantor, (3) have a
term not longer than 10 years, provided that such lease may be renewed for a
period of up to 10 years, or successive periods of up to 10 years each, if such
lease shall provide for payment of rent and all other material amounts payable
thereunder at rates reasonably believed by such Guarantor, as of the date such
lease or renewal is entered into, to be the fair market rental value (determined
as aforesaid) of the entire premises covered by such lease for each such period,
(4) contain provisions consistent with and not in conflict with any term,
condition, covenant or agreement contained in any Loan Document, (5) require the
lessee to deliver estoppel certificates to the Collateral Agent in compliance
with clause (D) below, (6) provide that such lease is subject and subordinate in
all respects to the applicable Mortgage and may be terminated by such Guarantor
in case of default under or termination of the applicable Franchise Agreement
and (7) constitute an "operating lease" (not a financing lease) for all
purposes, (B) in each case, such Guarantor shall have delivered to the Agent,
reasonably in advance of the execution and delivery thereof, copies of such
lease and all other agreements to be entered into by such Guarantor in
connection therewith, (C) such Guarantor shall have delivered to the Agent
within 30 days of a request therefor by the Agent, an estoppel certificate of
any lessee in form and substance satisfactory to the Agent, (D) in each case,
such Guarantor shall, at its expense, take such action as shall be necessary or
as shall be reasonably requested by the Collateral Agent to assign to the
Collateral Agent, for the benefit of the Secured Parties, a perfected security
interest in its rights under such lease and other agreements, including the
execution, delivery and recording of an Assignment of Leases and Rents
substantially in the form of Exhibit C, (E) the Interest Expense Coverage Ratio
on the date of such lease for the period of four fiscal quarters ending with the
last full fiscal quarter immediately preceding such date (giving effect to the
entering into of such lease as if it had been entered into on the first day of
such period but without giving effect to any transfer to the lessee of the
obligation to make capital expenditures that were made by such Guarantor) shall
be equal to or greater than the Interest Expense Coverage Ratio for such period
(without giving effect to the entering into of such lease), (F) after giving
effect to the entering into of such lease, no Default or Event of Default shall
have occurred and be continuing and there shall have been no decrease in
Consolidated Net Worth, (G) the consideration received by such Guarantor from
the lessee in connection with such lease (including any franchise fee and
consideration from the sale of inventory or other assets relating to such
Truckstop) shall be paid in cash and, in the case of assets, shall equal
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the greater of (1) the then-current fair market value of such assets and (2) the
book value of such assets as reflected on such Guarantor's financial statements
at such time, (H) the lessee shall be an Accredited Lessee (as defined below),
(I) the lessee shall not be a lessee or operator of more than three other
Truckstops leased by the Guarantors pursuant to this Section 7.08 (provided that
no more than 10 persons may be lessee of more than one Truckstop leased pursuant
to this Section 7.08 and no more than five persons may be lessee of more than
two Truckstops leased pursuant to this Section 7.08), (J) such lease shall
prohibit the lessee from mortgaging such lessee's leasehold interest in the
Truckstop or such lease, (K) the rent payable at a fixed or contractual rate
under such lease shall equal or exceed 70% of the total rent payable under such
lease assuming such lease had been entered into on the first day of the period
of four consecutive fiscal quarters ending with the last full fiscal quarter
immediately preceding the date of such lease and (L) promptly after execution of
such lease, an executed copy of such lease and a certificate of an officer of
the Borrower certifying that such lease complies with the provisions of this
Section 7.08 shall be delivered to the Agent; provided, further, that such
Guarantor may (i) enter into extensions, renewals and replacements of leases
permitted pursuant to Section 7.02(a) and (ii) lease or sublease retail space
and office space at any Truckstop to the extent permitted pursuant to Section
7.02(k) and Section 7.02(l).
For purposes of this Agreement, "Accredited Lessee" shall mean with
respect to a proposed lessee:
(i) if the proposed lessee is a franchisee of any Guarantor and has,
for at least two years prior to the proposed lease, been in compliance
with all requirements of such lessee's franchise agreement or franchise
agreements with such Guarantor,
(A) if such lessee is not a lessee of any other Truckstop
pursuant to this Section 7.08, an "accredited investor" within the
meaning of paragraph (a)(5), (a)(6) or (a)(8) of Rule 501 under the
Securities Act of 1933, as amended,
(B) if such lessee is (after giving effect to the proposed
lease) a lessee of two Truckstops pursuant to this Section 7.08, an
"accredited investor" as aforesaid, except that for purposes of
paragraph (a)(6) of said Rule 501, the individual and joint income
requirements shall be $400,000 and $600,000, respectively, and
(C) if such lessee is (after giving effect to the proposed
lease) a lessee of three Truckstops pursuant to this Section 7.08,
an "accredited investor" as aforesaid, except that for purposes of
paragraph (a)(5) of said Rule 501, the net worth requirement shall
be $1,500,000 and for purposes of paragraph (a)(6) of said Rule
5.01, the individual and joint income requirements shall be $600,000
and $900,000, respectively; and
(ii) if the proposed lessee is not a franchisee of any Guarantor or,
if the proposed lessee is such a franchisee but has not been such for at
least two years in compliance with such lessee's franchise agreement or
franchise agreements as described in clause (i) above,
(A) if such lessee is not a lessee of any other Truckstop
pursuant to this Section 7.08, an "accredited investor" within the
meaning of paragraphs (a)(5) and (a)(6) of said Rule 501 or a
partnership or other entity in which each of the equity owners
constitutes an "accredited investor" within the meaning of both such
paragraphs of said Rule,
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(B) if such lessee is (after giving effect to the proposed
lease) a lessee of two Truckstops pursuant to this Section 7.08, a
person meeting the requirements of subclause (A) above, except that
for purposes of paragraph (a)(6) of said Rule 501, the individual
and joint income requirements shall be $400,000 and $600, 000,
respectively, and
(C) if such lessee is (after giving effect to the proposed
lease) a lessee of three Truckstops pursuant to this Section 7.08, a
person meeting the requirements of subclause (A) above, except that
for purposes of paragraph (a)(5) of said Rule 501, the net worth
requirement shall be $1,500,000 and for purposes of paragraph (a)(6)
of said Rule, the individual and joint income requirements shall be
$600,000 and $900,000, respectively.
(c) In the case of TAFSI, (i) engage in any activities other than
the franchising of auto/truckstops and activities incidental thereto in
accordance with its past practice, (ii) own or acquire any material assets
(other than assets under the Franchise Agreements) or (iii) incur any material
liabilities (other than liabilities under the Transaction Documents and
Franchise Agreements).
(d) In the case of TA Travel, engage in any activities other than
the business of acquiring, operating and maintaining the Airplane, leasing the
Airplane to TA and entering into operating agreements with airplane charter
companies with respect to the operation of the Airplane from time to time.
SECTION 7.09. Limitations on Debt Prepayments. (a) Optionally
prepay, repurchase or redeem or otherwise defease or segregate funds with
respect to any Indebtedness for borrowed money (including, in the case of the
Borrower, the Subordinated Notes and the Series I Tranche A Exchange Notes);
provided, however, that the foregoing shall not prevent the Borrower from (i)
making any payment pursuant to Section 2.12 or 2.13, (ii) refinancing of Series
I Tranche A Exchange Notes (or Tranche A Exchange Note Refinancing Indebtedness)
or the Subordinated Notes (or the Subordinated Note Refinancing Indebtedness)
pursuant to, and in accordance with, the provisions of Section 7.01(g) or
7.01(h), respectively (provided that, from and after any such refinancing, this
Section 7.09 shall apply to the Indebtedness incurred in connection with such
refinancing), (iii) prepaying or otherwise refinancing any Indebtedness
permitted pursuant to clauses (i), (j), (l), (m) or (q) of Section 7.01, (iv)
effecting the Series II Tranche A Exchange Note Refinancing or (v) prepaying,
repurchasing, redeeming or defeasing up to $15,000,000 aggregate principal
amount of the Subordinated Notes during the term of this Agreement (provided
that (i) the entire amount of such prepayment, repurchase, redemption or
defeasance during any fiscal year shall be funded solely from the sum of
(without duplication) (A) the 50% of Excess Cash Flow for the immediately
preceding fiscal year (beginning on or after January 1, 1999) that the Borrower
is not required pursuant to Section 2.13(c) to apply to prepay obligations
outstanding under this Agreement and the outstanding Series I Tranche A Exchange
Notes and (B) any portion of the amount available pursuant to the preceding
clause (A) with respect to any prior fiscal year (beginning on or after January
1, 1999) other than the immediately preceding fiscal year and not used prior to
the current fiscal year to fund the prepayment, repurchase, redemption or
defeasance of Subordinated Notes and (ii) immediately after giving effect
thereto no Default or Event of Default shall have occurred or be continuing or
would result therefrom).
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(b) Permit any amendment or modification to the terms of any
Subordinated Note, any Subordinated Note Guarantee or the Subordinated Note
Indenture if the effect of such amendment or modification is to impose
additional or increased scheduled or mandatory repayment, retirement, repurchase
or redemption obligations in respect of such Indebtedness or to require any
scheduled or mandatory payment to be made in respect of the Subordinated Notes
prior to the date that such payment would otherwise be due; or permit any
amendment or modification to the terms of the Series I Tranche A Exchange Notes
or the Tranche A Exchange Note Purchase Agreements unless made in compliance
with Section 7.04 of the Intercreditor Agreement (or the analogous provision, if
any, of any successor agreement).
SECTION 7.10. Amendment of Certain Documents and Subordinated Notes.
Permit any termination of, or any amendment or modification that in the
reasonable judgment of the Agent is adverse in any material respect to the
Lenders to, (a) the Certificate of Incorporation (or Certificate of Formation)
of the Borrower, TAFSI or any Guarantor, (b) if applicable, the Bylaws of the
Borrower, TAFSI or any Guarantor, (c) the Subordinated Notes, the Subordinated
Guarantees and the Subordinated Note Indenture, (d) either Environmental
Agreement, (e) the Ancillary Agreements and (f) any Asset Purchase Agreement
without the prior written consent of the Required Lenders. Without limiting the
generality of the foregoing, with respect to the Subordinated Notes, the
Subordinated Guarantees and the Subordinated Note Indenture, it is understood
that (a) any increase in the interest, fees or other amounts payable in
connection therewith, (b) any amendment that imposes additional covenants or
events of default or makes more restrictive the covenants or events of default
contained therein and (c) any amendment that renders the subordination
provisions contained therein less favorable to the Lenders shall in each case
require the consent of the Required Lenders.
SECTION 7.11. Limitation on Leases. Create or suffer to exist any
obligations on the part of the Borrower or any of its subsidiaries for the
payment of rents for any property under leases or agreements to lease, except,
in the case of any Guarantor:
(a) (i) leases (other than leases of real property) of such
Guarantor entered into in the ordinary course of business and in existence
on March 21, 1997, having annual lease payments of less than $250,000 and
(ii) leases of such Guarantor in existence on March 21, 1997, and listed
on Schedule 7.11(a) (and, in each case, any extensions, renewals or
replacements of such leases, provided that the annual lease payment under
any such extension, renewal or replacement shall be no greater than the
fair market rental value of the leased property, as of the date of such
extension, renewal or replacement for the term of such extension, renewal
or replacement);
(b) operating leases entered into after March 21, 1997 by such
Guarantor as lessee (i) in the ordinary course of business in a manner and
to an extent consistent with historical practices of the networks of
Truckstops operated by the Borrower's subsidiaries as of March 21, 1997
and (ii) in connection with Sale and Lease-Back Transactions permitted by
Section 7.03(b), provided that the aggregate annual lease payments under
all leases described in this clause (b) shall not exceed $15,000,000;
(c) Capital Lease Obligations incurred by such Guarantor to finance
the acquisition of equipment and other property, provided that (i) the
aggregate of (A) the aggregate annual rental payments in respect of all
such Capital Lease Obligations and (B) any purchase money Indebtedness
permitted pursuant to Section 7.01(c) shall not exceed $15,000,000 at
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any time outstanding, (ii) each Capital Lease Obligation at the time of
its incurrence shall have an average life to maturity greater than the
average life to maturity of the outstanding Term Loans, (iii) none of the
related leases shall contain financial covenants and (iv) for purposes of
Section 7.13, the amount of such aggregate annual rental payments shall be
deemed to be Capital Expenditures in the year in which they are incurred;
(d) any fair market value leases entered into by TA or National in
connection with the relocation of its offices; and
(e) leases permitted pursuant to Section 7.03(a).
SECTION 7.12. Subsidiaries. After giving effect to the Additional
Transactions, in the case of the Borrower, have any direct or indirect
subsidiaries other than (a) TA, National, TA Travel and TAFSI, (b) any other
direct or indirect wholly owned subsidiary of the Borrower that is organized
under the laws of a State within the United States and that becomes a Guarantor
pursuant to Section 6.10 and (c) any Permitted Joint Venture that is a direct or
indirect subsidiary of the Borrower. Each of TA, National and TAFSI shall remain
a wholly owned subsidiary of the Borrower and TA Travel shall remain a wholly
owned subsidiary of TA, provided that any Guarantor (other than TA Travel) may
be merged into another Guarantor (other than TA Travel) if such merger is
permitted by Section 7.05(h)(iv).
SECTION 7.13. Capital Expenditures. (a) In the case of the Borrower
and its consolidated subsidiaries, permit Capital Expenditures during any fiscal
year, commencing with the fiscal year ending December 31, 1997, to exceed
$35,000,000; provided, however, that the amount of permitted Capital
Expenditures in any fiscal year shall be increased by (a) an amount equal to 50%
of the excess of (i) consolidated EBITDA for the immediately preceding fiscal
year over (ii) $70,000,000 and (b) the lesser of (i) 25% of the total amount of
permitted Capital Expenditures for the immediately preceding fiscal year
(including amounts permitted as a result of the application of clause (a) but
excluding any unused Capital Expenditures carried forward to such preceding
year) and (ii) the total amount of unused permitted Capital Expenditures for the
immediately preceding fiscal year (excluding any unused Capital Expenditures
carried forward to such preceding year). Notwithstanding the foregoing, the
aggregate amount of Capital Expenditures permitted in any fiscal year shall not
exceed $45,000,000.
(b) In the case of the Borrower and its consolidated subsidiaries,
(i) permit Transition Capital Expenditures to exceed (A) during any fiscal year,
commencing with the fiscal year ending December 31, 1997, $50,000,000 or (B)
during the term of this Agreement, $160,000,000 or (ii) permit the aggregate
purchase consideration in connection with Permitted Business Acquisitions that,
pursuant to Section 7.04(g), constitutes a Transition Capital Expenditure to
exceed $25,000,000 during the term of this Agreement.
SECTION 7.14. Consolidated Net Worth. Permit Consolidated Net Worth
at any time to be less than $90,000,000 plus, without duplication, (a) 50% of
Net Income for each fiscal quarter (beginning with the fiscal quarter ending
June 30, 1997) for which Net Income is positive, plus (b) 100% of the Net Cash
Proceeds of any primary offering of equity securities consummated by the
Borrower or any Guarantor after the Closing Date, plus (c) 100% of any capital
contribution made to the Borrower or any Guarantor after the Closing Date by any
holder of their respective capital stock, minus (d) amounts paid to repurchase
or redeem Common Stock of the Borrowers from Operators as permitted by Section
7.06(a)(ii).
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SECTION 7.15. Current Ratio. Permit on the last day of any fiscal
quarter the Current Ratio to be less than 1.00 to 1.00.
SECTION 7.16. Interest Expense Coverage Ratios. (a) Permit the
Interest Expense Coverage Ratio for any fiscal year ending on a date set forth
below to be less than the ratio set forth opposite such date:
Fiscal Year: Ratio:
- ----------- -----
December 31, 1998 1.75
December 31, 1999 2.00
December 31, 2000 2.25
December 31, 2001 2.50
December 31, 2002 2.75
December 31, 2003 3.00
December 31, 2004, and thereafter 3.25
(b) Incur Indebtedness if, after giving effect to the incurrence of
such Indebtedness, the ratio of EBITDA to Cash Interest Expense determined on
the last day of the most recently completed period of four consecutive fiscal
quarters for such period, as if such Indebtedness had been incurred at the
beginning of such period, would be less than 1.00 to 1.00.
SECTION 7.17. Leverage Ratio. Permit the Leverage Ratio on any date
during any fiscal quarter ending on the last day of or during any period
indicated below to be in excess of the ratio set forth opposite such period:
From and Including: To and Including: Ratio:
- ------------------ ---------------- -----
July 1, 1998 December 31, 1998 5.25 to 1.00
January 1, 1999 December 31, 1999 4.75 to 1.00
January 1, 2000 December 31, 2000 4.50 to 1.00
January 1, 2001 December 31, 2001 3.75 to 1.00
January 1, 2002 December 31, 2002 3.25 to 1.00
January 1, 2003 December 31, 2003, and thereafter 3.00 to 1.00
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ARTICLE VIII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in any Loan
Document or any amendment or modification thereof or waiver thereunder, or
any representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished
pursuant any Loan Document or any amendment or modification thereof or
waiver thereunder, shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any
Loan or Swingline Loan or LC Disbursement when and as the same shall
become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or Swingline Loan or any Fee or any other amount (other than an amount
referred to in (b) above) due under any Loan Document, when and as the
same shall become due and payable, and such default shall continue
unremedied for a period of three Business Days;
(d) default shall be made in the due observance or performance by
the Borrower of any covenant, condition or agreement contained in Section
2.12(d), 2.13(b), 6.01, 6.05, 6.08, 6.11, 6.12, 6.13, Section 9 or 10 of
the Guarantee Agreement or in Article VII (other than Section 7.02);
(e) default shall be made in the due observance or performance by
the Borrower, any Guarantor or TAFSI of any covenant, condition or
agreement contained in any Loan Document (other than those defaults
specified in (b), (c) or (d) above) and such default shall continue
unremedied for a period of the earlier of (i) 30 days after an executive
officer of the Borrower, such Guarantor or TAFSI first becomes aware or
should have become aware thereof and (ii) 15 days after notice thereof
from the Agent or any Lender to the Borrower, such Guarantor or TAFSI, as
applicable;
(f) the Borrower or any of its subsidiaries shall (i) fail to pay
any principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $2,000,000, when and as
the same shall become due and payable (after giving effect to any
applicable grace period) or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness (after giving
effect to any applicable grace period) if the effect of any failure
referred to in this clause (ii) is to cause, or to permit the holder or
holders of such Indebtedness or a trustee on its or their behalf (with or
without the giving of notice, the lapse of time or both) to cause, such
Indebtedness to become due prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Borrower or
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any of its subsidiaries, or of a substantial part of the property or
assets of the Borrower or any of its subsidiaries, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law, (ii)
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its
subsidiaries or for a substantial part of the property or assets of the
Borrower or any of its subsidiaries or (iii) the winding-up or liquidation
of the Borrower or any of its subsidiaries and such proceeding or petition
shall continue undismissed for 30 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) the Borrower or any of its subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner (but within 30 days in any event), any proceeding
or the filing of any petition described in paragraph (g) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any of
its subsidiaries or for a substantial part of the property or assets of
the Borrower or any of its subsidiaries, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action for the purpose
of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $2,000,000 (to the extent not covered by insurance)
shall be rendered against the Borrower, TAFSI or any Guarantor or any
combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
levy upon assets or properties of the Borrower, TAFSI or any Guarantor to
enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(1) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Borrower, TAFSI, any Guarantor or any ERISA Affiliate to the PBGC or to a
Plan in an aggregate amount exceeding $2,000,000 and, within 30 days after
the reporting of any such Reportable Event to the Agent or after the
receipt by the Agent of the statement required pursuant to Section
6.06(b)(iii), the Agent shall have notified the Borrower in writing that
(i) the Required Lenders have reasonably determined that, on the basis of
such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (A) for the termination of
such Plan or Plans by the PBGC, (B) for the appointment by the appropriate
United States District Court of a trustee to administer such Plan or Plans
or (C) for the imposition of a lien in favor of a Plan and (ii) as a
result thereof an Event of Default exists hereunder; or a trustee shall be
appointed by a United States District Court to administer any such Plan or
Plans; or the PBGC shall institute proceedings to terminate any Plan or
Plans;
(k) (i) the Borrower, any Guarantor, TAFSI or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the
Borrower, such Guarantor, TAFSI or such ERISA Affiliate
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does not have reasonable grounds for contesting such Withdrawal Liability
or is not in fact contesting such Withdrawal Liability in a timely and
appropriate manner and (iii) the amount of the Withdrawal Liability
specified in such notice, when aggregated with all other amounts required
to be paid to Multiemployer Plans in connection with Withdrawal
Liabilities (determined as of the date or dates of such notification),
either (A) is $2,000,000 or more and the Required Lenders have reasonably
determined that the Borrower, such Guarantor, TAFSI or such ERISA
Affiliate will not be able to make the payments required in connection
with such Withdrawal Liability or (B) is less than $2,000,000 and any
payment due as a result of such liability remains unpaid 30 days after
such payment is due;
(l) the Borrower, any Guarantor, TAFSI or any ERISA Affiliate shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if solely as a result of such reorganization
or termination the aggregate annual contributions of the Borrower, each
Guarantor, TAFSI and each ERISA Affiliate to all Multiemployer Plans that
are then in reorganization or have been or are being terminated have been
or will be increased over the amounts required to be contributed to such
Multiemployer Plans for their most recently completed plan years by an
amount exceeding $2,000,000 and the Required Lenders have reasonably
determined that the Borrower, such Guarantor, Holdings, TAFSI or such
ERISA Affiliate will not be able to make the payments required in
connection with such contribution;
(m) there shall have occurred a Change in Control;
(n) any material security interest purported to be created by any
Security Document shall cease to be, or shall be asserted by the Borrower,
any Guarantor or TAFSI not to be, a valid, perfected, first priority
(except as otherwise expressly provided in this Agreement or such Security
Document) security interest in the securities, assets or properties
covered thereby, except to the extent that any such loss of perfection or
priority results from the failure of the Collateral Agent to maintain
possession of certificates representing securities pledged under the
Pledge Agreement (except to the extent that such loss is covered by a
lender's title insurance policy and the related insurer promptly after
such loss shall have acknowledged in writing that such loss is covered by
such title insurance policy);
(o) any Loan Document shall not be for any reason or shall be
asserted by the Borrower, any Guarantor or TAFSI not to be in full force
and effect and enforceable in all material respects in accordance with its
terms;
(p) the Obligations and the guarantees thereof pursuant to the
Guarantee Agreement shall cease to constitute, or shall be asserted by the
Borrower or any Guarantor not to constitute, senior indebtedness under the
subordination provisions of the Subordinated Notes, the Subordinated
Guarantees and the Subordinated Note Indenture (or the provisions of the
Subordinated Note Refinancing Indebtedness) or such subordination
provisions shall be invalidated or otherwise cease to be a legal, valid
and binding obligation of the parties thereto, enforceable in accordance
with its terms; or
(q) any material provision of the Guarantee Agreement or any Loan
Document shall cease to be in full force and effect and enforceable in
accordance with its terms for any reason whatsoever or any Guarantor or
TAFSI shall contest or deny in writing the validity or
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enforceability of any of its obligations under the Guarantee Agreement or
any other Loan Document, as applicable, or the Obligations hereunder shall
cease to be entitled to the benefits of any Security Document, this
Agreement or the Intercreditor Agreement for any reason whatsoever;
then, and in every such event (other than an event with respect to the Borrower
or any of its subsidiaries described in paragraph (g) or (h) above), and at any
time thereafter during the continuance of such event, the Agent may and, at the
request of the Required Lenders, shall (subject to the terms of the
Intercreditor Agreement, as long as any Series I Tranche A Exchange Notes are
outstanding), by notice to the Borrower, take any of or all the following
actions, at the same or different times: (i) terminate forthwith the Commitments
and the LC Commitment, (ii) declare the Loans and the Swingline Loans then
outstanding to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans and the Swingline Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees and
all other liabilities of the Borrower accrued hereunder and under any other Loan
Document, shall become forthwith due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein or in any other Loan Document
to the contrary notwithstanding, (iii) require cash collateral as contemplated
by Section 3.06 and (iv) exercise any remedies available under any Loan Document
or otherwise; and in any event with respect to the Borrower or any of its
subsidiaries described in paragraph (g) or (h) above, the Commitments and the LC
Commitment shall automatically terminate and the principal of the Loans and the
Swingline Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder
and under any other Loan Document, shall automatically become due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any other Loan Document to the contrary notwithstanding.
Notwithstanding the foregoing, in the event that a nonpayment
default under paragraph (a), (d), or (e) above is solely the result of any
Network Operator's failure to perform its obligations to any Guarantor pursuant
to any operating lease with such Guarantor permitted by Section 7.08, then, so
long as (i) there shall not be a similar failure by more than two other Network
Operators and (ii) such Guarantor has rights against such Network Operator
(including compelling such Network Operator to cure such default, exercising its
self-help remedies as landlord under such operating lease or terminating such
operating lease and taking possession of the premises within the time for cure
as provided herein) and the Agent, in its reasonable judgment, is satisfied that
such Guarantor is diligently and with best efforts prosecuting such enforcement
until cure of such default, no Event of Default shall be deemed to have occurred
hereunder with respect thereto.
ARTICLE IX
The Agent
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Agent (which
term for purposes of this Article shall be deemed to refer to the Agent and the
Collateral Agent) on behalf of the Fronting Bank, the Swingline Lender and the
Lenders. Each of the Lenders, and each subsequent holder of any Loan by its
acceptance thereof, the Fronting Bank and the Swingline Lender hereby
irrevocably authorize the Agent to take such actions on their behalf and to
exercise such powers as are specifically delegated to
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the Agent by the terms and provisions hereof and of the other Loan Documents,
together with such actions and powers as are reasonably incidental thereto. The
Agent is hereby expressly authorized by the Lenders, the Fronting Bank and the
Swingline Lender, without hereby limiting any implied authority, (a) to receive
on behalf of the Lenders, the Fronting Bank and the Swingline Lender all
payments of principal of and interest on the Loans, the Swingline Loans and LC
Disbursements and all other amounts due to the Lenders, the Fronting Bank and
the Swingline Lender hereunder, and promptly to distribute to each Lender, the
Fronting Bank and the Swingline Lender its proper share of each payment so
received; (b) to give notice on behalf of each of the Lenders to the Borrower of
any Event of Default specified in this Agreement of which the Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to promptly
distribute to each Lender and the Fronting Bank copies of all notices, financial
statements and other materials delivered by the Borrower and the Guarantors
pursuant to this Agreement as received by the Agent (including notices of an
occurrence of any Event of Default).
Neither the Agent nor any of its directors, officers, employees or
agents shall be liable as such for any action taken or omitted by any of them
except for its, his or her own gross negligence or wilful misconduct, or be
responsible for any statement, warranty or representation herein or the contents
of any document delivered in connection herewith, or be required to ascertain or
to make any inquiry concerning the performance or observance by the Borrower,
TAFSI or any Guarantor of any of the terms, conditions, covenants or agreements
contained in any Loan Document. The Agent shall not be responsible to the
Lenders or the Fronting Bank or the Swingline Lender for the due execution,
genuineness, validity, enforceability or effectiveness of this Agreement or any
other Loan Documents or other instruments or agreements. The Agent shall in all
cases be fully protected in acting, or refraining from acting, in accordance
with written instructions signed by the Required Lenders and, except as
otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders and the Fronting
Bank. The Agent shall, in the absence of knowledge to the contrary, be entitled
to rely on any instrument or document believed by it in good faith to be genuine
and correct and to have been signed or sent by the proper Person or Persons.
Neither the Agent nor any of its directors, officers, employees or agents shall
have any responsibility to the Borrower, any Guarantor or TAFSI on account of
the failure of or delay in performance or breach by any Lender, the Fronting
Bank or the Swingline Lender of any of its obligations hereunder or to any
Lender or to the Fronting Bank or to the Swingline Lender on account of the
failure of or delay in performance or breach by any other Lender or the Fronting
Bank or the Borrower, TAFSI or any Guarantor of any of their respective
obligations hereunder or under any other Loan Document or in connection herewith
or therewith. The Agent may execute any and all duties hereunder by or through
agents or employees and shall be entitled to rely upon the advice of legal
counsel selected by it with respect to all matters arising hereunder and shall
not be liable for any action taken or suffered in food faith by it in accordance
with the advice of such counsel.
The Lenders, the Fronting Bank and the Swingline Lender hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
unless it shall be requested in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by notifying the Lenders, the
Fronting Bank, the Swingline Lender and the Borrower. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have
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accepted such appointment within 30 days after the retiring Agent gives notice
of its resignation, then the retiring Agent may, on behalf of the Lenders and
the Fronting Bank, appoint a successor Agent, which shall be a bank with an
office in New York, New York, having a combined capital and surplus of at least
$500,000,000 or an Affiliate of any such bank. Upon the acceptance of any
appointment as Agent hereunder by a successor bank, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder. After the Agent's resignation hereunder, the provisions
of this Article and Sections 6.12(d) and 10.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
With respect to the Loans made by it hereunder the Agent, in its
individual capacity and not as Agent, shall have the same rights and powers as
any other Lender and may exercise the same as though it were not the Agent, and
the Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower, any Guarantor, TAFSI
or any Affiliate thereof as if the Agent were not the Agent.
Each Lender, the Fronting Bank, and the Swingline Lender agree (a)
to reimburse the Agent, on demand, in the amount of its pro rata share (based on
its Commitment hereunder) of any expenses incurred for the benefit of the
Lenders, the Fronting Bank and the Swingline Lender by the Agent, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, the Fronting Bank and the Swingline Lender, that shall
not have been reimbursed by the Borrower and (b) to indemnify and hold harmless
the Agent and any of its directors, officers, employees or agents, on demand, in
the amount of such pro rata share, from and against any and all liabilities,
taxes, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by or asserted against it in its capacity as the Agent or
any of them in any way relating to or arising out of this Agreement or any other
Loan Document or any action taken or omitted by it or any of them under this
Agreement or any other Loan Document, to the extent the same shall not have been
reimbursed by the Borrower, provided that no Lender shall be liable to the Agent
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or wilful misconduct of the Agent or any of its directors,
officers, employees or agents.
Each Lender, the Fronting Bank and the Swingline Lender acknowledge
that they have, independently and without reliance upon the Agent, any other
Lender, the Fronting Bank or the Swingline Lender and based on such documents
and information as they have deemed appropriate, made their own credit analysis
and decision to enter into this Agreement and the Intercreditor Agreement. Each
Lender, the Fronting Bank and the Swingline Lender also acknowledge that they
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as they shall from time to time deem
appropriate, continue to make their own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
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ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telex, graphic scanning or other telegraphic
communications equipment of the sending party, as follows:
(a) If to the Borrower, TAFSI or any Guarantor, at 24601 Center
Ridge Road, Suite 200, Westlake, Ohio 44145-5634, Attention of Edwin P.
Kuhn, President and CEO (Telecopy No. (440) 808-3301); with a copy to The
Clipper Group, L.P., 650 Madison Avenue, 9th Floor, New York, New York
10022, Attention of Rowan G.P. Taylor (Telecopy No. (212) 940-6055); with
a copy to Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019, Attention of Valerie E. Radwaner, Esq.
(Telecopy No. (212) 757-3990).
(b) If to the Agent, the Swingline Agent or the Fronting Bank, at
270 Park Avenue, 10th Floor, New York, New York 10017, Attention of
William J. Caggiano (Telecopy No. (212) 972-0009); with a copy to The
Chase Manhattan Bank Loan and Agency Services Group, One Chase Manhattan
Plaza, New York, NY 10081, Attention of Nathaniel Spivey (Telecopy No.
(212) 552-5662).
(c) If to a Lender, at its address (or telecopy number) set forth on
Schedule 2.01 or in the Assignment and Acceptance pursuant to which such
Lender shall have become a party hereto.
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy or other telegraphic communications equipment of the sender,
or on the date five Business Days after dispatch by certified or registered mail
if mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 10.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section 10.01.
The Agent shall deliver a copy of each Administrative Questionnaire received by
it to the Borrower.
SECTION 10.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower, each Guarantor and TAFSI
herein and/or in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the Lenders, the Fronting Bank and the
Swingline Lender and shall survive the making by the Lenders of the Loans, the
making by the Swingline Lender of the Swingline Loans and the issuance of
Letters of Credit by the Fronting Bank regardless of any investigation made by
the Lenders, the Fronting Bank and the Swingline Lender or on their behalf, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or Swingline Loan or any Fee or any other amount
payable under this Agreement or any other Loan Document is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments and
the LC Commitment have not been terminated.
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SECTION 10.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower, the Agent, the Fronting Bank
and the Swingline Lender and when the Agent shall have received copies hereof
that, when taken together, bear the signatures of each Lender, and thereafter
shall be binding upon and inure to the benefit of the Borrower, the Agent, the
Fronting Bank, the Swingline Lender and each Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior consent of
all the Lenders.
SECTION 10.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the Agent, the Fronting
Bank, the Swingline Lender or the Lenders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement and the
Intercreditor Agreement (including all or a portion of its Commitments and the
Loans at the time owing to it); provided, however, that (i) except in the case
of (A) any assignment to a Lender or an Affiliate of such Lender or, in the case
of a non-bank Lender, a Person under common management with such Lender or (B)
any assignment to an assignee reasonably acceptable to the Borrower (it being
understood that any Lender shall be deemed to be acceptable to the Borrower for
purposes of this clause) if such assignment was requested by any Governmental
Authority having jurisdiction over the assigning Lender, the Borrower (the
consent of which shall not be unreasonably withheld, it being understood that it
would be reasonable for the Borrower to withhold such consent in the case of any
assignment that would have the result of increasing the number of Lenders) and,
if any such assignment includes all or a portion of any Lender's Revolving
Credit Commitment, each of the Agent and the Fronting Bank, must give their
prior written consent to such assignment, (ii) the amount of the Commitment of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Agent) shall not be less than $5,000,000 (or (i) if the amount of the
assigning Lender's Commitment is less than $5,000,000, an amount equal to the
amount of such Commitment or (ii) in the case of an assignment by a non-bank
Lender to a Person under common management with such non-bank Lender, in an
amount not less than $1,000,000), (iii) the parties to each such assignment
shall execute and deliver to the Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500 and (iv) the assignee, if it
shall not be a Lender, shall deliver to the Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this
Section 10.04, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five Business Days after
the execution thereof (unless waived by the Agent), (i) the assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a Lender under
this Agreement and the Intercreditor Agreement and (ii) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement and the
Intercreditor Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement and the Intercreditor Agreement, such Lender
shall cease to be a party hereto and to the Intercreditor Agreement but shall
continue to be entitled to the benefits of Sections 6.12(d) and 10.05 and, with
respect only to liabilities of the Borrower thereunder to such Lender that have
accrued or otherwise arise by reason of circumstances or events prior to the
assignment of its rights and obligations
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hereunder, Sections 2.14, 2.16 and 2.20, as well as to any Fees accrued for its
account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Commitments and LC Commitment, and the outstanding balances of its Term
Loans and Revolving Credit Loans, in each case without giving effect to
assignments thereof that have not become effective, are as set forth in such
Assignment and Acceptance; (ii) except as set forth in clause (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower, any Guarantor or TAFSI or
the performance or observance by the Borrower, any Guarantor or TAFSI of any of
its obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement and the Intercreditor Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 6.04 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the Intercreditor
Agreement; (vi) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonable incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all the obligations that by the terms of
this Agreement and the Intercreditor Agreement are required to be performed by
it as a Lender.
(d) The Agent shall maintain at one of its offices in The City of
New York a copy of each Assignment and Acceptance delivered to it and a register
for the recordation of the names and addresses of the Lenders, and the
Commitments and LC Commitment of, and principal amount of the Loans owing to,
each Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive in the absence of manifest error and
the Borrower, the Agent, the Fronting Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower, the Fronting Bank, and any Lender, at any
reasonable time and from time to time upon reasonable prior notice. No
assignment pursuant to this Section 10.04 shall be effective unless and until it
has been recorded in the Register as provided in this clause (d).
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and the written consent of the Agent to such assignment, the Agent
shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the
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Register and (iii) give prompt notice thereof to the Lenders, the Fronting Bank
and the Swingline Lender.
(f) Each Lender may without the consent of the Borrower or the Agent
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitments and the Loans owing to it); provided, however, that (i) such
Lender's obligations under this Agreement and the Intercreditor Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if
they were Lenders, provided that the Borrower shall not be required to reimburse
the participating lenders or other entities pursuant to Section 2.14, 2.16 or
2.20 in an amount that exceeds the amount that would have been payable
thereunder to such Lender had such Lender not sold such participation and (iv)
the Borrower, the Agent, the Fronting Bank, the Swingline Lender and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the Intercreditor Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to the Loans or LC
Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (provided that the participating bank or other
entity may be provided with the right to approve amendments, modifications or
waivers affecting it with respect to (A) any decrease in the Fees payable
hereunder with respect to Loans in which the participating bank or other entity
has purchased a participation, (B) any change in the amount of principal of, or
decrease in the rate at which interest is payable, on the Loans in which the
participating bank or other entity has purchased a participation, (C) any
extension of the dates fixed for scheduled payments of principal of or interest
on the Loans in which the participating bank or other entity has purchased a
participation or (D) any release of all or substantially all the Collateral).
(g) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 10.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower, each Guarantor and TAFSI
furnished to such Lender by or on behalf of the Borrower, any Guarantor or
TAFSI, provided that, prior to any such disclosure of information designated by
the Borrower, any Guarantor or TAFSI as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 10.17.
(h) In the event that Standard & Poor's, Moody's, and Thompson's
BankWatch shall, after the date that any Lender becomes a Revolving Lender,
downgrade the long-term certificate of deposit ratings of such Lender, and the
resulting ratings shall be BBB+ or lower, Baa1 or lower and BBB+ or lower, then
the Fronting Bank shall have the right, but not the obligation, at its own
expense, upon notice to such Lender and the Agent, to replace (or to request the
Borrower to use its reasonable efforts to replace) such Lender with an assignee
(in accordance with and subject to the restrictions contained in paragraph (b)
above), and such Lender hereby agrees to transfer and assign without
representation, warranty or recourse (in accordance with and subject to the
restrictions contained in paragraph (b) above) all its interests, rights and
obligations in respect of its Revolving Credit Commitment to such assignee;
provided, however, that (i) no such assignment shall conflict with any law, rule
and regulation or order of any Governmental Authority and (ii) the Fronting Bank
or such assignee, as the case may be, shall pay to such Lender in immediately
available funds on the
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date of such assignment the principal of and interest accrued to the date of
payment on the Loans made by such Lender hereunder and all other amounts accrued
for such Lender's account or owed to it hereunder.
(i) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
(j) The Borrower shall not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Agent, the Fronting
Bank, the Swingline Lender and each Lender. Except as provided in Section 3.09
and Section 2.21, respectively, neither the Fronting Bank nor the Swingline
Lender may assign or delegate any of its respective rights and duties hereunder
without the prior written consent of the Borrower and Agent.
SECTION 10.05. Expenses; Indemnity. (a) The Borrower agrees to pay
all out-of-pocket expenses incurred by the Agent, the Fronting Bank, the
Swingline Lender and the Collateral Agent in connection with the preparation of
this Agreement and the other Loan Documents or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall be consummated) or
incurred by the Agent, the Fronting Bank, the Swingline Lender, the Collateral
Agent or any Lender in connection with the enforcement or protection of their
rights in connection with this Agreement and the other Loan Documents or in
connection with the Loans made or the Letters of Credit issued hereunder,
including the reasonable fees, other charges and disbursements of Cravath,
Swaine & Moore, counsel for the Agent, the Collateral Agent and the Fronting
Bank and of local counsel, and, in connection with any such enforcement or
protection, the reasonable fees, other charges and disbursements of any other
counsel for the Agent, the Fronting Bank, the Swingline Lender, the Collateral
Agent or any Lender. The Borrower further agrees that it shall indemnify the
Agent, the Fronting Bank, the Swingline Lender, the Collateral Agent, the
Lenders from and hold them harmless against any documentary taxes, assessments
or charges made by any Governmental Authority by reason of the execution and
delivery and/or recordation of this Agreement or any of the other Loan
Documents.
(b) The Borrower agrees to indemnify the Agent, the Fronting Bank,
the Swingline Lender, the Collateral Agent and each Lender and each of their
respective directors, officers, employees, agents and Affiliates (each such
Person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements, incurred
by or asserted against any Indemnitee arising out of, in any way connected with,
or as a result of (i) the execution or delivery of this Agreement or any other
Loan Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereby or thereto of their respective obligations
hereunder or thereunder or the consummation of the Transactions and the other
transactions contemplated hereby or thereby, (ii) the use of the Letters of
Credit or the proceeds of the Loans and the Swingline Loans or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claim, damages, liabilities or related expenses result from actions or events
taking place after any of such Indemnitees takes possession of the Mortgaged
Property at issue by foreclosure or transfer in lieu of foreclosure
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or are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transaction, contemplated hereby, the
repayment of any of the Loans or the Swingline Loans, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Agent, the Fronting
Bank, the Collateral Agent, the Swingline Lender or any Lender. All amounts due
under this Section 10.05 shall be payable on written demand therefor.
SECTION 10.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, and the Agent shall have declared, or the Required
Lenders shall have requested the Agent to declare, the Loans and the Swingline
Loans immediately due and payable pursuant to Article VIII, each Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by applicable law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower or any Guarantor against any of and all the obligations
of such entity now, or hereafter existing under this Agreement and other Loan
Documents held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such other Loan Document and although
such obligations may be unmatured. The rights of each Lender under this Section
10.06 are (i) in addition to other rights and remedies (including other rights
of setoff) that such Lender may have and (ii) subject to the terms of the
Intercreditor Agreement.
SECTION 10.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN THE MORTGAGES) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.08. Waivers; Amendment. (a) No failure or delay on the
part of the Agent, the Fronting Bank, the Swingline Lender, the Collateral Agent
or any Lender in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Agent, the Fronting Bank,
the Swingline Lender, the Collateral Agent and the Lenders hereunder and under
the other Loan Document are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
(b) Neither this Agreement, the Guarantee Agreement or any of the
Security Documents nor any provision hereof or thereof may be waived, amended or
modified except, in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by the Borrower and the Required Lenders, or,
in the case of the Guarantee Agreement, or any of the Security Documents,
pursuant to an agreement or agreements in writing entered into by the
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Borrower, the Collateral Agent (and any of the Guarantors and TAFSI, if they are
parties thereto) and consented to by the Required Lenders; provided, however,
that no such agreement shall (i) reduce the principal amount of, or extend the
scheduled maturity of, any principal of or interest on, any Loan, or forgive any
such payment or any part thereof, or reduce the rate of interest on any Loan,
without the prior written consent of each Lender adversely affected thereby,
(ii) increase the Commitment or reduce or extend the date for payment of the
fees payable to any Lender without the prior written consent of such Lender,
(iii) amend or modify the provisions of Section 2.17, the provisions of this
Section or the definition of the term "Required Lenders" without the prior
written consent of each Lender, (iv) release all or substantially all of the
Collateral under the Security Documents or any guarantor under the Guarantee
Agreement other than as expressly permitted hereunder or under such Security
Documents or such Guarantee Agreement without the prior written consent of each
Lender, (v) change any provisions of any Loan Document in a manner that by its
terms adversely affects the rights in respect of prepayments to be made to
Lenders holding Loans of any Class differently than those holding Loans of any
other Class, without the written consent of Lenders holding a majority in
interest of the outstanding Loans and unused Commitments of each affected Class,
(vi) waive, in whole or in part, any payment, including any mandatory
prepayment, without the written consent of Lenders holding a majority in
interest of the outstanding Loans and unused Commitments of each affected Class
or (vii) change the rights of the Term Lenders to decline mandatory prepayments
as provided in Section 2.13(h), without the written consent of Lenders holding a
majority in interest of the outstanding Term Loans, and provided further that no
such agreement shall amend, modify, or otherwise affect the rights or duties of
the Agent, the Fronting Bank, or the Swingline Lender hereunder without the
prior written consent of the Agent, the Fronting Bank or the Swingline Lender,
as the case may be
(c) Notwithstanding the provisions of paragraph (b) above, as long
as any Series I Tranche A Exchange Notes are outstanding the provisions of the
Intercreditor Agreement shall supersede any contrary provisions herein regarding
consents, amendments, modifications and waivers.
SECTION 10.09. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the applicable interest rate, together
with all fees and charges that are treated as interest under applicable law
(collectively, the "Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for, charged, received,
taken or reserved by any Lender or the Swingline Lender, shall exceed the
maximum lawful rate (the "Maximum Rate") that may be contracted for, charged,
taken, received or reserved by such Lender or the Swingline Lender in accordance
with applicable laws, the rate of interest payable to such Lender or the
Swingline Lender, together with all Charges payable to such Lender or the
Swingline Lender, shall be limited to the Maximum Rate.
SECTION 10.10. Entire Agreement. This Agreement and the other Loan
Documents and the fee letters referred to in Section 2.05(c) constitute the
entire contract between the parties relative to the subject matter hereof. Any
previous agreement among the parties with respect to the subject matter hereof
is superseded by this Agreement and the other Loan Documents. Nothing in this
Agreement or in the other Loan Documents, expressed or implied, is intended to
confer upon any party other than the parties hereto and thereto any rights,
remedies, obligations or liabilities under or by reason of this Agreement or the
other Loan Documents.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
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RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.11.
SECTION 10.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10.13. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective as provided in Section 10.03.
SECTION 10.14. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 10.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrower or its properties in
the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
<PAGE> 115
109
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 10.16. Investment of Certain Escrowed Amounts. (a) In the
event that the Borrower or any Guarantor deposits money with the Collateral
Agent, or such money is received directly by the Collateral Agent, pursuant to
or in connection with (i) the definition of the term "Prepayment Event" (in
connection with any deposit of Net Cash Proceeds pending any permitted
application of such money contemplated by such definition (other than with
respect to any Mortgaged Property Casualty or Condemnation governed by Section 9
of the Guarantee Agreement)) or (ii) Section 9 of the Guarantee Agreement (in
connection with any Mortgaged Property Casualty or Condemnation), the Borrower
and each Guarantor understands and agrees that (A) such amounts shall be held as
collateral for the payment of the Obligations in separate escrow accounts (or
sub-accounts of a single escrow account) with the Collateral Agent for the
benefit of the Secured Parties, (B) the Collateral Agent shall have exclusive
dominion and control over such accounts (or subaccount), (C) other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest, (D) interest or
profits, if any, on such investments shall accumulate in such accounts (or
sub-accounts) and (E) amounts held in such accounts (or sub-accounts) shall be
released or applied (1) in the case of Section 9 of the Guarantee Agreement, as
provided in (and subject to the provisions of) such Section and (2) in all other
cases, upon the demand by the Borrower or the applicable Guarantor in connection
with the Borrower's or such Guarantor's application of such amounts within the
specified period of time in accordance with the definition of the term
"Prepayment Event". Amounts deposited in the Collateral Account pursuant to
Section 5.02(z) shall be subject to the terms and conditions of the Collateral
Account Agreement and not to this Section 10.16(a).
(b) Nothing in this Section 10.16 shall prevent the Collateral Agent
from applying at any time all or any part of the amounts on deposit in the
above-contemplated accounts (or subaccounts) to the curing of any Event of
Default under this Credit Agreement. The provisions of this Section 10.16 are
subject to the provisions of the Intercreditor Agreement so long as any Series I
Tranche A Exchange Notes are outstanding.
SECTION 10.17. Confidentiality. Except as otherwise provided in
Section 10.04(g), each of the Agent, the Fronting Bank, the Swingline Lender and
each of the Lenders agrees to keep confidential (and (i) to cause its respective
officers, directors and employees to keep confidential and (ii) to use its
commercially reasonable efforts to cause its respective agents and
representatives to keep confidential) the Information and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Agent, the Fronting Bank, the Swingline Lender or any Lender shall be
permitted to disclose Information (a) to such of its respective officers,
directors, employees, professional advisors, agents and representatives as need
to know such Information, (b) to the extent requested by any regulatory
authority, (c) to direct contractual counterparties in swap agreements, provided
that any such contractual counterparty agrees to be bound by the provisions of
this Section 10.17, (d) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process or (e) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Agreement or (ii) becomes available to the Agent, the Fronting
Bank, the Swingline Lender or any Lender on a nonconfidential basis from a
source other than the Borrower. For the purposes of this Section, the term
"Information" shall mean all financial statements, certificates, reports,
agreements and information
<PAGE> 116
110
(including all analyses, compilations and studies prepared by the Agent, the
Fronting Bank, the Swingline Lender or any Lender based on any of the foregoing)
that are received from the Borrower and relate to the Borrower, any Guarantor or
TAFSI, any shareholder of the Borrower or any employee, customer or supplier of
the Borrower, any Guarantor or TAFSI, other than any of the foregoing that were
available to the Agent, the Fronting Bank, the Swingline Lender or any Lender on
a nonconfidential basis prior to its disclosure thereto by the Borrower, and
which are, in the case of Information provided after March 21, 1997, clearly
identified at the time of delivery as confidential. The provisions of this
Section 10.17 shall remain operative and in full force and effect regardless of
the expiration and term of this Agreement. Notwithstanding the foregoing, the
parties hereto agree that the filing of any of the Loan Documents or the Tranche
A Exchange Note Documents (to the extent necessary in the reasonable judgment of
the Collateral Agent after consulting with the Borrower) to properly assure the
validity or priority of the Collateral Agent's Lien under any Security Document
or to the extent required by local counsel in order to render an opinion in form
and substance reasonably satisfactory to the Collateral Agent in connection with
such Lien will not result in a violation of the foregoing confidentiality
provisions.
SECTION 10.18. Pre-Funding Escrow Arrangements. The Borrower intends
that the consummation of the Additional Transactions and the Restatement Closing
Date occur on December 3, 1998, and desires that the Lenders make on the
Restatement Closing Date substantially simultaneously with the consummation of
the Additional Transactions Additional Term Loans in an aggregate principal
amount equal to $150,000,000 (such aggregate amount of the Loans to be made on
the Restatement Closing Date, the "Initial Loan Amount"). In order to ensure
that the Initial Loan Amount will be available at the time of the consummation
of the Additional Transactions on the Restatement Closing Date, the Borrower may
request, subject to the terms and conditions set forth in Exhibit O, that the
Lenders pre-fund (the "Escrow Funding") the Initial Loan Amount by transferring
an amount equal to the Initial Loan Amount (such amount, the "Delivered Funds")
to an account designated by the Agent (such account, the "Escrow Account") on
the Business Day immediately prior to the Restatement Closing Date (the "Escrow
Funding Date"). The agreements and understandings set forth in Exhibit O will
apply with respect to (a) the arrangements for the Escrow Funding and (b) the
release (the "Escrow Release") of the Delivered Funds to the Borrower as the
Initial Loan Amount upon the satisfaction of the conditions set forth in
Sections 5.01 and 5.02.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
TRAVELCENTERS OF AMERICA, INC.,
by
/s/ James W. George
------------------------------------
Name: James W. George
Title: Sr. VP & CFO
<PAGE> 117
111
THE CHASE MANHATTAN BANK,
by
/s/ Laurie B. Perper
------------------------------------
Name: Laurie B. Perper
<PAGE> 118
112
Title: Vice President
<PAGE> 119
113
M&T BANK,
by
/s/ R. Buford Sears
------------------------------------
Name: R. Buford Sears
Title: Administrative Vice President
CREDIT AGRICOLE INDOSUEZ,
by
/s/ David Bouhl
------------------------------------
Name: David Bouhl
Title: Head of Corporate Banking
Chicago
by
/s/ W. Leroy Startz
------------------------------------
Name: W. Leroy Startz
Title: First Vice President
NATIONAL CITY BANK,
by
/s/ Chris D. Thornton
------------------------------------
Name: Chris D. Thornton
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH,
by
/s/ Koji Sasayama
------------------------------------
Name: Koji Sasayama
Title: Deputy General Manager
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
/s/ Jeffrey W. Maillet
------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
VAN KAMPEN CLO I, LIMITED,
<PAGE> 120
114
BY: VAN KAMPEN AMERICAN
CAPITAL MANAGEMENT, INC., AS
COLLATERAL MANAGER
by
/s/Jeffrey W. Maillet
------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
MERRILL LYNCH PRIME RATE
PORTFOLIO,
BY: MERRILL ASSET MANAGEMENT,
L.P., AS INVESTMENT ADVISOR
by
/s/ Gilles Marchand
------------------------------------
Name: Gilles Marchand
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.,
by
/s/ Gilles Marchand
------------------------------------
Name: Gilles Marchand
Title: Authorized Signatory
ML CLO XX PILGRIM (CAYMAN) LTD. (as
assignee)
BY: PILGRIM INVESTMENTS, INC. AS
ITS INVESTMENT MANAGER
by
/s/ Jason T. Groom
------------------------------------
Name: Jason T. Groom
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO,
BY: BOSTON MANAGEMENT AND
RESEARCH AS INVESTMENT
ADVISOR
by
/s/ Payson F. Swaffield
------------------------------------
<PAGE> 121
115
Name: Payson F. Swaffield
Title: Vice President
KZH CRESCENT-3 LLC,
by
/s/ Virginia Conway
------------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE> 122
116
KZH CRESCENT LLC,
by
/s/ Virginia Conway
------------------------------------
Name: Virginia Conway
Title: Authorized Agent
BOEING CAPITAL CORPORATION,
by
/s/ Daniel O. Anderson
------------------------------------
Name: Daniel O. Anderson
Title: Vice President - Operations
ALLSTATE LIFE INSURANCE COMPANY,
by
/s/ David Walsh
------------------------------------
Name: David Walsh
Title: Authorized Signatory
by
/s/ Patricia W. Wilson
------------------------------------
Name: Patricia W. Wilson
Title: Authorized Signatory
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
by
/s/ Tomoki Kubo
------------------------------------
Name: Tomoki Kubo
Title: Vice President
THE HUNTINGTON NATIONAL BANK,
by
/s/ Timothy M. Ward
------------------------------------
Name: Timothy M. Ward
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH,
<PAGE> 123
117
by
/s/ Teiji Teramoto
------------------------------------
Name: Teiji Teramoto
Title: Vice President and Manager
<PAGE> 124
118
BALANCED HIGH - YIELD FUND I LTD.,
BY: BHF-BANK AKTIENGESELLSCHAFT
acting through its New York Branch as
Attorney-in-Fact
by
/s/ John Sykes
------------------------------------
Name: John Sykes
Title: Vice President
by
/s/ Hans J. Scholz
------------------------------------
Name: Hans J. Scholz
Title: Assistant Vice President
NATEXIS BANQUE BFCE,
by
/s/ Frank H. Madden, Jr.
------------------------------------
Name: Frank H. Madden, Jr.
Title: Vice President
by
/s/ William C. Maier
------------------------------------
Name: William C. Maier
Title: Senior Vice President
PARIBAS CAPITAL FUNDING LLC,
by
/s/ Jeffrey J. Youle
------------------------------------
Name: Jeffrey J. Youle
Title: Director
PINEHURST TRADING, INC.,
by
/s/ Allen D. Shifflet
------------------------------------
Name: Allen D. Shifflet
Title: President
STAR BANK, NATIONAL ASSOCIATION,
<PAGE> 125
119
by
/s/ Mark A. Whitson
------------------------------------
Name: Mark A. Whitson
Title: Vice President
<PAGE> 126
120
KZH III LLC,
by
/s/ Virginia Conway
------------------------------------
Name: Virginia Conway
Title: Authorized Agent
PAMCO CAYMAN LTD.,
BY: HIGHLAND CAPITAL
MANAGEMENT, L.P., AS
COLLATERAL MANAGER
by
/s/ Mark Okada
------------------------------------
Name: Mark Okada
Title: Executive Vice President
KZH SOLEIL -2 LLC,
by
/s/ Virginia Conway
------------------------------------
Name: Virginia Conway
Title: Authorized Agent
THE TRAVELERS INSURANCE
COMPANY,
by
/s/ Allen R. Cantrell
------------------------------------
Name: Allen R. Cantrell
Title: Investment Officer
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY INC.,
by
/s/ John B. Wheeler
------------------------------------
Name: John B. Wheeler
Title: Managing Director
CYPRESSTREE INVESTMENT FUND, L.L.C.,
<PAGE> 127
121
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
ITS MANAGING MEMBER
by
/s/ Timothy M. Barns
------------------------------------
Name: Timothy M. Barns
Title: Managing Director
CYPRESSTREE SENIOR FLOATING RATE
FUND,
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.,
AS PORTFOLIO MANAGER
by
/s/ Timothy M. Barns
------------------------------------
Name: Timothy M. Barns
Title: Managing Director
NORTH AMERICAN SENIOR FLOATING
RATE FUND,
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
AS PORTFOLIO MANAGER
by
/s/ Timothy M. Barns
------------------------------------
Name: Timothy M. Barns
Title: Managing Director
KZH CYPRESSTREE - 1 LLC,
by
/s/ Virginia Conway
------------------------------------
Name: Virginia Conway
Title: Auhtorized Agent
CYPRESSTREE INSTITUTIONAL FUND, LLC,
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
ITS MANAGING MEMBER
<PAGE> 128
122
by
/s/ Timothy M. Barns
------------------------------------
Name: Timothy M. Barns
Title: Managing Director
<PAGE> 1
EXHIBIT 10.8
================================================================================
TRAVELCENTERS OF AMERICA, INC.
------------------------
SUPPLEMENTAL AGREEMENT
Dated as of November 24, 1998
amending the
Senior Secured Note Exchange Agreement dated as of March 21, 1997 (as amended)
------------------------
Re: 8.94% Series I Senior Secured Notes Due 2002
================================================================================
[Exhibits B-1, B-2 and D-1 through H set forth in Annex IV to the Supplemental
Agreement have been conformed to the documents as executed and delivered. Annex
V to the Supplemental Agreement contain photocopies of the legal opinions as
delivered on the Effective Date. Also annexed to this document is a copy of the
Amended Credit Agreement (without exhibits) referred to in section 1 of the
Supplemental Agreement, as executed and delivered.]
<PAGE> 2
Table of Contents
Page
----
Supplemental Agreement
Section 1. Note Agreement and the Notes; Proposed Amendments................1
Section 2. Representations and Warranties of the Company....................1
Section 3. Representation of the Noteholder.................................3
Section 4. Consent of the Amended Credit Agreement; Release of Certain
Collateral....................................................4
Section 5. Amendments of Note Agreement, Etc................................4
Section 6. Effectiveness of this Supplemental Agreement.....................4
Section 7. Notation of Notes................................................5
Section 8. Expenses.........................................................6
Section 9. Ratification.....................................................6
Section 10. Counterparts....................................................6
Section 11. Governing Law...................................................6
<PAGE> 3
TRAVELCENTERS OF AMERICA, INC.
SUPPLEMENTAL AGREEMENT
as of November 24, 1998
Re: 8.94% Series I Senior Secured Notes Due 2002
TO THE SEVERAL NOTEHOLDERS WHOSE
NAMES APPEAR IN THE ACCEPTANCE
FORM AT THE END HEREOF
Ladies and Gentlemen:
TRAVELCENTERS OF AMERICA, INC., a Delaware corporation (the
"Company"), hereby agrees with you as follows:
Section 1. Note Agreement and the Notes; Proposed Amendments.
Pursuant to the Senior Secured Note Exchange Agreement dated as of March 21,
1997, as amended by the Amendment and Waiver Agreement dated as of March 1, 1998
(as so amended the "Note 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 (the "Fixed Rate Notes") and
$50,000,000 aggregate principal amount of its Series II Senior Secured Notes due
2005 (the "Floating Rate Notes"). Unless the context otherwise requires,
capitalized terms used herein without definition have the respective meanings
ascribed thereto in the Note Agreement.
Concurrently with the effectiveness of this Supplemental Agreement,
the Credit Agreement is being amended and restated pursuant to a Credit
Agreement dated as of March 21, 1997, as amended and restated as of November 24,
1998 (the "Amended Credit Agreement"), and the Company intends to prepay the
Floating Rate Notes pursuant to Section 5.2 of the Note Agreement. In connection
therewith the Company proposes to amend the Note Agreement as hereinafter set
forth (the Note Agreement as so amended is sometimes called the "Amended Note
Agreement").
1
<PAGE> 4
Section 2. Representations and Warranties of the Company. The
Company represents and warrants to you as follows:
A. Organization, Authorization, Etc. Each of the Company, TAFSI and
the Guarantors is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority to execute, deliver and perform its
obligations under this Supplemental Agreement and the Amended Note Agreement.
The execution and delivery of this Supplemental Agreement and the
performance of this Supplemental Agreement and the Amended Note Agreement have
been duly authorized by all necessary corporate and, if required, stockholder
action on the part of the Company. This Supplemental Agreement and the Amended
Note Agreement are legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws relating
to or affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
B. Compliance with Laws, Other Instruments, Etc. The execution,
delivery and performance by the Company of this Supplemental Agreement and the
Amended Note Agreement do not and will not (i) violate (A) any provision of any
law, statute, rule or regulation, other than any law, statute, rule or
regulation, the violation of which will not result in a Material Adverse Effect,
or of the certificate of incorporation, certificate of formation, or other
constitutive documents or by-laws of the Company, any Guarantor or TAFSI, (B)
any order of any Governmental Authority or (C) any provision of any material
indenture, agreement or other instrument to which the Company, the Guarantors or
TAFSI is a party or by which any of them or any of their property (including the
Mortgaged Property) or assets is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture, agreement or other instrument or (iii)
result in the creation or imposition of any Lien (other than any Lien created
under the Security Documents) upon or with respect to any property or assets now
owned or hereafter acquired by the Company, any Guarantor or TAFSI.
2
<PAGE> 5
C. Governmental Authorizations, Etc. No approval, authorization or
consent of, or registration, filing or declaration with, any state, federal or
local governmental body is required in connection with the execution, delivery
or performance by the Company of this Supplemental Agreement, except such as
have been made or obtained and are in full force and effect and other than
filings, recordings and approvals (i) to record deeds and leases with respect to
real properties, (ii) to record and/or perfect the Liens created by the Security
Documents, (iii) to record a leasehold memorandum, if currently unrecorded, in
respect of any leasehold interest to which a Leasehold Mortgage relates, and
(iv) that are not material to the Company, any Guarantor or TAFSI, individually
or in the aggregate.
D. No Default, etc. Except as set forth in a letter from the Company
delivered to the Noteholder prior to the date hereof, no Event of Default or
Default has occurred and is continuing, and neither the Company, any Guarantor
nor TAFSI is in default (whether or not waived) in the performance or observance
of any of the terms, covenants or conditions contained in any instrument
evidencing any Indebtedness and there is no pending request by the Company, a
Guarantor or TAFSI for any amendment or waiver in respect of any contemplated or
possible default with respect to such Indebtedness and no event has occurred and
is continuing which, with notice or lapse of time or both, would become such a
default.
E. No Undisclosed Fees. Except for prepayment of the Floating Rate
Notes pursuant to Section 5.2 of the Note Agreement on the Effective Date
referred to below and except for the fees described in Section 2.05 of the
Amended Credit Agreement 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 holder of Notes or any Lender in order to induce such
holder to enter into this Supplemental Agreement or to induce such Lender to
enter into the Amended Credit Agreement or to induce such holder or Lender to
take any other action in connection with the transactions contemplated hereby,
nor has the Company agreed to make any such payment.
F. Delivery of Documents. The Company has provided to each
Noteholder true and complete copies of all documents executed by or provided by
the Company to the Collateral Agent and to the Lenders under the Credit
Agreement.
3
<PAGE> 6
G. Notes Not Held by Company, Etc. Neither the Company nor any
Subsidiary or Affiliate of the Company directly or indirectly owns any of the
Notes.
H. Other Representations and Warranties. The representations and
warranties of the Company contained in Article IV of the Amended Credit
Agreement are true and correct in all material respects on and as of the date of
such Amended Credit Agreement. The schedules to the Amended Credit Agreement
with respect to the representations and warranties of the Company set forth in
Article IV of the Amended Credit Agreement are set forth in Annex II hereto.
Section 3. Representation of the Noteholder. You represent to the
Company that you are the beneficial owner of Fixed Rate Notes in the aggregate
unpaid principal amount set forth below your name in the acceptance form of this
Supplemental Agreement.
Section 4. Consent of the Amended Credit Agreement; Release of
Certain Collateral.
A. Pursuant to Section 7.12 of the Intercreditor Agreement, by
acceptance of this Supplemental Agreement, you hereby consent to the
modifications of the Credit Agreement as reflected in the Amended Credit
Agreement.
B. Pursuant to Section 13 of the Note Agreement and Section 7.12 of
the Security Agreement, by acceptance of this Supplemental Agreement, you hereby
consent to the release of certain real property previously included in the
Collateral, as contemplated and reflected in the Amended Credit Agreement.
Section 5. Amendments of the Note Agreement, Etc. The Note Agreement
is amended pursuant to Section 13 thereof
A. by changing Sections 1, 5 to 7, inclusive, 9, 10.1, 13(a) and
16.6 to read in their entirety as respectively set forth in Annex I
hereto,
B. by changing Schedules 1.1(a), 5.2(b), 6.14, and 7.1-7.11(a),
inclusive, thereto to read in their entirety as set forth in Annex III
hereto, and
C. by changing the Exhibits thereto to read in their entirety as set
forth in Annex IV hereto.
4
<PAGE> 7
Section 6. Effectiveness of this Supplemental Agreement. This
Supplemental Agreement will become effective on the date (the "Effective Date")
on which all of the following conditions precedent shall have been satisfied:
A. Proceedings. All proceedings taken by the Company in connection
with the transactions contemplated hereby and all documents and papers incident
thereto shall be satisfactory to you, and you and your special counsel shall
have received all such counterpart originals or certified or other copies of
such documents and papers, all in form and substance satisfactory to you, as you
or they may reasonably request in connection therewith.
B. Execution of this Supplemental Agreement. Counterparts of this
Supplemental Agreement shall have been executed and delivered by the Company and
the holders of all of the outstanding Fixed Rate Notes.
C. Representations and Warranties, Etc. The representations and
warranties of the Company contained in Section 2 of this Supplemental Agreement
shall be true in all material respects on and as of the Effective Date as though
such representations and warranties had been made on and as of the Effective
Date, except to the extent such representations and warranties expressly relate
to an earlier date or that there are changes to the factual information
contained in such representations and warranties that do not reflect any
violation of or failure to comply with any provision of the Amended Credit
Agreement, and you shall have received a certificate of a senior financial
officer of the Company, dated the Effective Date, to such effect and to the
effect that the conditions in Subsections D and F of this Section 6 have been
complied with by the Company.
D. Floating Rate Notes. The Company shall have prepaid in full the
Floating Rate Notes as described above.
E. Credit Agreement Documents. The Amended Credit Agreement and the
other Credit Agreement Documents, as amended and restated as of the Effective
Date, and any other document executed in connection therewith, shall have been
duly executed and delivered by the parties thereto in form and substance
reasonably satisfactory to the Noteholder and shall be in full force and effect
and the Noteholder shall have received an executed counterpart of each such
document.
5
<PAGE> 8
F. Restatement Closing Date under the Amended Credit Agreement. The
transactions to be consummated under the Amended Credit Agreement for the
Restatement Closing Date defined therein shall have been consummated, upon
satisfaction of the conditions precedent thereto in Section 5.02 of the Amended
Credit Agreement. The Noteholder shall have received true and complete copies of
each certificate, opinion or other writing then or theretofore delivered to any
party to the Amended Credit Agreement in respect of the satisfaction of such
conditions precedent (without duplication as to conditions specifically set
forth in this Section 6), and in the case of opinions of counsel or other
experts not addressed to the Noteholder, an appropriate reliance letter
addressed to the Noteholder.
G. Opinion of Counsel. You shall have received an opinion, dated the
Effective Date, addressed to you and otherwise satisfactory in scope and
substance to you, from Paul, Weiss, Rifkind, Wharton & Garrison and Steven C.
Lee, General Counsel of the Company, substantially in the form as set forth in
Annex V to this Supplemental Agreement, and each local counsel listed on
Schedule 5.2(b) of the Amended Note Agreement, and covering such other matters
incident to the transactions contemplated hereby as you may reasonably request.
H. Payment of Fees. The Company shall have paid the fees and
disbursements and other charges of your special counsel as contemplated by
Section 8 of this Supplemental Agreement.
Section 7. Notation of Notes. Prior to any transfer of an
outstanding Note by the holder thereof, such holder may either make a notation
on such Note to reflect this Supplemental Agreement or surrender such Note for a
new Note in accordance with Section 11 of the Amended Note Agreement. Any Note
executed and delivered after the Effective Date shall either bear such a
notation or the text of such Note shall be modified to make reference to this
Supplemental Agreement.
Section 8. Expenses. Without limiting the generality of Section 16.1
of the Amended Note 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 Supplemental Agreement and any
other document delivered pursuant to this
6
<PAGE> 9
Supplemental Agreement and reimburse you for your out-of-pocket expenses in
connection with the foregoing.
In furtherance of the foregoing, on the Effective Date the Company
will pay or cause to be paid the reasonable fees and disbursements and other
charges of Willkie Farr & Gallagher which are reflected in the statement of
Willkie Farr & Gallagher delivered to the Company prior to the Effective Date.
The Company will also pay promptly upon receipt of supplemental statements
therefor, reasonable additional fees, if any, and disbursements and other
charges of Willkie Farr & Gallagher in connection with the transactions
contemplated hereby (including disbursements and other charges unposted as of
the Effective Date).
Section 9. Ratification. Except as amended hereby, the Note
Agreement is in all respects ratified and confirmed and the provisions thereof
shall remain in full force and effect.
Section 10. Counterparts. This Supplemental 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 11. Governing Law. This Supplemental Agreement shall be
governed by and construed in accordance with New York law.
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If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Supplemental Agreement
shall become a binding agreement between you and the Company, subject to
becoming effective as hereinabove provided.
TRAVELCENTERS OF AMERICA, INC.
/s/ James W. George
------------------------------
By: JAMES W. GEORGE
Senior Vice President and
Chief Financial Officer
ACCEPTED AND AGREED:
THE TRAVELERS INDEMNITY COMPANY
/s/ Robert M. Mills
By: ROBERT M. MILLS
Investment Officer
Principal Amount of Notes Held: $12,000,000
THE TRAVELERS INSURANCE COMPANY
/s/ Robert M. Mills
By: ROBERT M. MILLS
Investment Officer
Principal Amount of Notes Held: $10,000,000
THE TRAVELERS LIFE AND ANNUITY COMPANY
/s/ Robert M. Mills
By: ROBERT M. MILLS
Investment Officer
Principal Amount of Notes Held: $5,000,000
8
<PAGE> 11
OHIO NATIONAL LIFE ASSURANCE CORPORATION
/s/ Michael A. Boedeker
By: MICHAEL A. BOEDEKER
Vice President, Fixed Income Securities
Principal Amount of Notes Held: $5,000,000
THE OHIO NATIONAL LIFE INSURANCE COMPANY
/s/ Michael A. Boedeker
By: MICHAEL A. BOEDEKER
Vice President, Fixed Income Securities
Principal Amount of Notes Held: $3,500,000
9
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ANNEX I
(to Supplemental Agreement)
[Amended Sections 1, 5-7, inclusive,
9, 10.1, 13(a) and 16.6]
* * * * *
1. THE ORIGINAL NOTES AND THE RECAPITALIZATION; THE NOTES; ADDITIONAL
TRANSACTIONS
Capitalized terms used in this Agreement shall have the meanings
assigned thereto in Section 9.
1.1. The Original Notes.
National Auto/Truckstops, Inc., a Delaware corporation ("National"),
is a wholly-owned Subsidiary of the Company. In order to provide the financing
for the acquisition of a truckstop network (the "National Network"), National
issued $65,000,000 aggregate principal amount of its 8.76% Senior Secured Notes
due 2002 (the "National Notes"). In order to provide the financing for the
acquisition of another truckstop network (the "TA Network" and, together with
the National Network, the "Network"), TA Operating Corporation, a Delaware
corporation ("TA"), which is a wholly-owned Subsidiary of the Company, issued
$25,000,000 aggregate principal amount of its Senior Secured Notes due 2002 (the
"TA Notes" and, together with the National Notes, the "Original Notes").
1.2. The RECAPITALIZATION.
In March 1997 the Company was recapitalized and restructured
pursuant to a series of transactions in which, inter alia, (a) TA became a
direct wholly-owned Subsidiary of the Company, (b) TA Franchise Systems Inc., a
Delaware corporation ("TAFSI"), became a direct wholly-owned Subsidiary of the
Company, (c) National and TA repaid certain outstanding Indebtedness, and (d)
the obligations of National in respect of the National Notes and TA in respect
of the TA Notes were discharged. The transactions described in the preceding
sentence are sometimes collectively referred to as the "Recapitalization".
In order to finance the Recapitalization (i) the Company issued
$125,000,000 aggregate principal amount of its Senior Subordinated Notes due
2007 (the "Subordinated Notes"),
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(ii) $4,500,000 unpaid principal amount of TA Notes were redeemed, (iii) the
Company issued the Notes and the Floating Rate Notes in exchange for all
unredeemed Original Notes pursuant to the several Senior Secured Note Exchange
Agreements dated as of March 21, 1997 (the "Original Exchange Agreements")
between the Company and the institutional investors named in Schedule I thereto,
(iv) the Company entered into the Original Credit Agreement and borrowed
$80,000,000 under the Existing Term Loan Facility thereunder, and (v) the
Company made capital contributions or advances to National and TA in amounts
sufficient to enable National and TA to discharge their respective existing
Indebtedness and to pay accrued interest on the Original Notes, transaction
costs and other related expenses.
1.3. The Notes.
As part of the Recapitalization, the Company has duly authorized an
issue of its 8.94% Series I Senior Secured Notes due 2002 in an aggregate
principal amount of $35,500,000 (the "Notes"), each such note to mature, bear
interest and otherwise be substantially in the form of Exhibit A hereto. As used
herein, the term "Notes" shall include all notes originally issued pursuant to
this Agreement and the other agreements referred to in Section 4.27 and all
notes delivered in substitution or exchange for any of said notes and, where
applicable, shall include the singular number as well as the plural.
1.4. Additional Transactions.
Concurrently with the effectiveness of the Supplemental Agreement,
the Original Credit Agreement is being amended and restated in order to (a)
increase the commitments under the Term Loans by an aggregate amount of
$150,000,000 (the "Additional Term Loans"), (b) permit the Company to acquire
Burns' Travel Stops Division, (c) prepay the Floating Rate Notes pursuant to
Section 5.2 of the Original Exchange Agreements, (d) permit the Company under
certain conditions to effect the Additional Permitted Acquisition, (e) release
certain real property previously included in the Collateral and (f) effect other
amendments to the Original Credit Agreement. The transactions described in the
foregoing clauses (a) and (b), together with the amendment and restatement of
the Original Credit Agreement and the amendment to this Agreement pursuant to
the Supplemental
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Agreement, are referred to herein collectively as the "Additional Transactions".
The proceeds of the Additional Term Loans to be made by the Lenders
are being used on and after the Restatement Closing Date solely to (i) fund the
cash purchase price of approximately $55,000,000 to be paid in connection with
the Burns Acquisition, (ii) prepay the Floating Rate Notes, (iii) fund up to
$30,000,000 of the cash purchase price to be paid in connection with the
Additional Permitted Acquisition, (iv) fund anticipated capital expenditures of
the Company and its Subsidiaries and (v) pay the fees and expenses incurred in
connection with the Additional Transactions.
1.5. Security for the Notes.
Effective as of the Restatement Closing Date, the Notes will be
unconditionally guaranteed by National, TA and TA Travel (individually, a
"Guarantor" and collectively with each other Person that is or becomes a party
to the Guarantee Agreement as a guarantor, and the permitted successors and
assigns of each such Person, the "Guarantors"), pursuant to an amended and
restated guarantee agreement, substantially in the form of Exhibit B-1 hereto,
between the Guarantors (other than TA Travel)and the Collateral Agent and a
guarantee agreement, substantially in the form of Exhibit B-2 hereto, between TA
Travel and the Collateral Agent (collectively, the "Guarantee Agreement").
Effective as of the Restatement Date, the Notes will be secured, equally and
ratably with the Term Facility and the Revolving Credit Facility (including the
Swingline Loans and the Letters of Credit) respectively provided pursuant to the
Credit Agreement, by the Security Documents, including, inter alia, (a)
mortgages, leasehold mortgages, deeds of trust and assignments of leases and
rents, substantially in the form of Exhibit C-1 hereto, from National or TA to
the Collateral Agent covering the Mortgaged Properties (collectively the
"Original Mortgages"), as respectively amended by any applicable Mortgage
Amendment (as so amended, the "Mortgages"), (b) the Airplane Mortgage,
substantially in the form of Exhibit C-2 hereto (b) an amended and restated
security agreement, substantially in the form of Exhibit D-1 hereto, between the
Company, the Guarantors (other than TA Travel) and TAFSI and the Collateral
Agent and a security agreement, substantially in the form of Exhibit D-2 hereto,
between the Company, TA Travel and the Collateral Agent (collectively, the
"Security Agreement"), (c) an amended and
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restated pledge agreement, substantially in the form of Exhibit E hereto,
between the Company, the Guarantors and TAFSI and the Collateral Agent (the
"Pledge Agreement"), (d) an amended and restated collateral assignment,
substantially in the form of Exhibit F hereto, from the Company, the Guarantors
and TAFSI to the Collateral Agent providing for the assignment to the Collateral
Agent of the Environmental Agreements, the Ancillary Agreements, the Franchise
Agreements, the Rate Protection Agreements and certain other agreements
specified in such Collateral Assignment (the "Collateral Assignment"), (e) one
or more amended and restated lockbox agreements between the Company, the
Guarantors and TAFSI and the Collateral Agent (and a sub-agent as appropriate),
in the form provided for in the Security Agreement (collectively the "Lockbox
Agreements"), (f) an amended and restated trademark security agreement,
substantially in the form of Exhibit G hereto, between the Company, the
Guarantors and TAFSI and the Collateral Agent (the "Trademark Security
Agreement") and (g) an amended and restated Collateral Account Agreement.
Effective as of the Restatement Closing Date, the respective rights of the
holders of the Notes and the Lenders party to the Credit Agreement with respect
to the Collateral and other matters shall be governed by an amended and restated
master collateral and intercreditor agreement, substantially in the form of
Exhibit H hereto, among the Noteholders, such Lenders and the Collateral Agent
(the "Intercreditor Agreement").
* * * * *
5. PREPAYMENT OF NOTES.
In addition to the payment of the entire unpaid principal amount of
the Notes at the final maturity date thereof, the Company will make required,
and may make optional, prepayments of the Notes as hereinafter provided.
5.1. Required Prepayment.
On June 30, 2001, December 31, 2001 and June 30, 2002 the Company
will prepay $8,875,000 aggregate principal amount of the Notes (or, if less, the
unpaid balance thereof), at the principal amount to be prepaid, together with
accrued interest on such principal amount to the date of such prepayment,
without premium, whether or not any optional prepayment has been or is being
made pursuant to Section 5.2; provided that upon any partial prepayment of the
Notes pursuant to Section 5.3 or 5.4,
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the principal amount of each required prepayment of the Notes becoming due under
this Section 5.1 on and after the date of such partial prepayment shall be
reduced in the same proportion as the aggregate unpaid principal amount of the
Notes is reduced as a result of such partial prepayment.
5.2. Optional Prepayments.
The Company, upon not less than 10 or more than 30 days' prior
written notice of the date and amount of optional prepayment to the holders of
the Notes, may prepay at any time all or from time to time any part (in an
integral multiple of $1,000,000) of the Notes, upon payment of the principal
amount so to be prepaid, together with accrued interest on such principal amount
to the date of such prepayment and the Make-Whole Premium.
5.3. Prepayments in Connection with Available Proceeds.
(a) If at any time the Company shall have Available Proceeds (as
hereinafter defined), the Company will, promptly and in any event within five
days after such Available Proceeds are identified as such, give written notice
thereof to the holders of the Notes, which notice shall contain an irrevocable
offer by the Company to apply to the prepayment of the Notes (pro rata according
to the respective unpaid principal amounts of Notes held by each such holder) an
amount (rounded to the nearest $1,000) equal to such Available Proceeds, such
prepayment to be made on a date (the "Available Proceeds Prepayment Date")
specified in such notice (which date shall be not less than 10 days and not more
than 30 days after the date of such notice), in each case at the principal
amount so to be prepaid, together with accrued interest on such principal amount
to the Available Proceeds Prepayment Date but without premium. Each holder of a
Note may reject such offer (in whole but not in part with respect to any Note)
and shall be deemed to have rejected such offer unless such holder shall have
accepted such offer by notice delivered to the Company in writing or by telecopy
(or by telephone promptly confirmed in writing or by telecopy) at least three
Business Days prior to the Available Proceeds Prepayment Date. If any such
holder shall have rejected (or be deemed to have rejected) such prepayment
offer, such holder shall not be deemed to have waived its rights under this
Section 5.3 with respect to any later prepayment offer. A holder of more than
one Note may exercise its option under this Section in respect of all or any one
of its Notes. If any holder of Notes rejects or is
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deemed to have rejected such prepayment offer, then on the Available Proceeds
Prepayment Date the share of such Available Proceeds attributable to such Notes
shall be applied to the prepayment of obligations outstanding under the Credit
Agreement in accordance with paragraphs (e) and (f) of Section 2.13 thereof (or
the analogous provisions, if any, in respect of Refinancing Indebtedness).
(b) The Company shall, not less than two Business Days prior to the
Available Proceeds Prepayment Date, deliver to each holder of Notes a notice
specifying (i) the aggregate principal amount of all Notes to be prepaid by the
Company on the Available Proceeds Prepayment Date, and (ii) the principal amount
of Notes held by such holder to be prepaid on the Available Proceeds Prepayment
Date.
(c) [Intentionally Omitted].
(d) In the case of any Prepayment Event or other event giving rise
to Available Proceeds, in respect of which the Company is required to prepay
Loans, Swingline Loans and Letters of Credit pursuant to Section 2.13 of the
Credit Agreement (or the analogous provisions in respect of Credit Agreement
Refinancing Indebtedness) prior to the Available Proceeds Prepayment Date, the
Company will, concurrently with such prepayment pursuant to the Credit Agreement
(or in respect of Credit Agreement Refinancing Indebtedness), make effective
provision whereby the Available Proceeds are placed in escrow with the
Collateral Agent until the Available Proceeds Prepayment Date whereupon such
amounts shall be applied to prepayments under this Section 5.3 (or the analogous
provisions in respect of Refinancing Indebtedness).
(e) "Available Proceeds" means, at any date of determination,
(i) in the case of Net Cash Proceeds resulting from a Prepayment
Event, an amount equal to the Pro Rata Share of the holders of the Notes
in respect of such Net Cash Proceeds, and
(ii) in the case of any fiscal year of the Company, commencing with
the fiscal year ending on December 31, 1999, for which Excess Cash Flow
exists, 50% of Excess Cash Flow for such fiscal year less the portion, if
any, of such percentage applied (or required concurrently to be applied)
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pursuant to Section 2.13(c) of the Credit Agreement (or the analogous
provisions in respect of Credit Agreement Refinancing Indebtedness) to the
prepayment of obligations under the Credit Agreement (or in respect of
Credit Agreement Refinancing Indebtedness).
The Company will furnish to the holders of the Notes, concurrently
with the financial statements and other information furnished pursuant to
Sections 6.4(a) and (b), a certificate of a Financial Officer of the Company
containing computations in reasonable detail showing whether any Available
Proceeds existed during the fiscal period covered by such financial statements
and the source of such Available Proceeds.
5.4. Prepayment in Connection with a Change in Control.
Promptly and in any event within five Business Days after the
occurrence of a Change in Control, the Company will give written notice thereof
to the holders of the Notes, which notice shall (a) describe the Change in
Control in reasonable detail and specify the Change in Control Prepayment Date
and the Response Date (as respectively defined below) in respect thereof, (b)
contain an irrevocable offer by the Company to prepay all Notes at the prices
specified below on the date therein specified (the "Change in Control Prepayment
Date"), which shall be not less than 20 nor more than 45 days after the date of
such notice, and (c) state that such offer is conditioned upon acceptance
thereof by the Required Holders. Each holder of a Note shall notify the Company
of such holder's acceptance or rejection of such offer by giving written notice
of such acceptance or rejection to the Company at least 10 days prior to the
Change in Control Prepayment Date (the "Response Date"). If the Required Holders
accept such offer, the Company shall, no later than two days after the Response
Date, send written notice of such acceptance to each holder of a Note which had
rejected such offer, which notice shall advise each such holder that it may, by
notice to the Company no later than five days prior to the Change in Control
Prepayment Date, rescind its prior rejection and accept such offer. The failure
by the holder of a Note to respond to such offer in writing on or before the
Response Date shall be deemed to be a rejection of such offer by such holder in
respect of such Change in Control. The Company shall (but only if the Required
Holders shall have accepted such offer as provided above) prepay on the Change
in Control Prepayment Date all of the Notes held by the holders as to which such
offer has
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been so accepted, at the unpaid principal amount of each such Note, together
with accrued interest thereon to the Change in Control Prepayment Date and the
Make-Whole Premium with respect to such Note. If the Required Holders fail to
accept such offer, such offer shall be deemed to be rejected (and any
acceptances thereof shall be ineffective) and the Company shall give written
notice thereof to the holders of all Notes no more than five days after the
Response Date. If any holder shall reject such prepayment offer and, if
applicable, not exercise its right to rescind such rejection, such holder shall
be deemed to have waived its rights under this Section 5.4 to require prepayment
of all Notes held by such holder in respect of such Change in Control but not in
respect of any subsequent Change in Control. A holder of more than one Note may
exercise its option under this Section 5.4 in respect of all or any one of such
Notes.
5.5. Obligation to Prepay after Notice; Make-Whole Computation.
The principal amount of the Notes designated for prepayment in any
notice of optional prepayment given pursuant to Section 5.2 shall become due and
payable on the date fixed for prepayment, together with accrued interest on such
principal amount to the date of such prepayment and the amount of any Make-Whole
Premium. Two Business Days prior to the date fixed for any prepayment under this
Agreement that includes a Make-Whole Premium, the Company will furnish to each
holder of a Note being so prepaid a certificate signed by a Financial Officer of
the Company setting forth in reasonable detail the computation and the
methodology and assumptions made in connection therewith and attaching a copy of
the source of the market data by which the Treasury Yield was determined in
connection with such computation.
5.6. Application of Prepayments.
Each prepayment of less than all outstanding Notes pursuant to
Section 5.1 or 5.2 shall be applied by the Company pro rata, as nearly as may
be, to all outstanding Notes according to the respective unpaid principal
amounts thereof.
5.7. Note Purchase Prohibition.
The Company will not, and will not permit any of its Affiliates to,
directly or indirectly acquire any Note, by purchase or otherwise, except (a) by
way of payment or prepayment
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thereof by the Company in accordance with the provisions of the Notes and of
this Agreement or (b) pursuant to an offer to purchase made by any such
Affiliate and which complies with the following conditions:
(i) such offer shall require such Affiliate to purchase Notes on the
same terms and conditions, pro rata among all Notes tendered; and
(ii) such purchase shall not be made, directly or indirectly, in
connection with and in anticipation of or in consideration of any waiver
or amendment of any provision of this Agreement or any Transaction
Document.
Promptly and in any event within five Business Days after each such
purchase of Notes, the Company will furnish each holder of the Notes with a
certificate of a Financial Officer describing such purchase (including the
aggregate principal amount of Notes so purchased and the purchase price
therefor) and certifying that such purchase was made in compliance with the
requirements of this Section.
6. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that, so long as any of the Notes
shall remain outstanding, the Company will and will cause each of its
Subsidiaries to:
6.1. Existence; Businesses and Properties; Keep Books.
(a) Do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is currently conducted and operated; comply
in all material respects with all material applicable laws, rules, regulations
and statutes (including any zoning, building, Environmental and Safety Law,
ordinance, code or approval or any building permits or any restrictions of
record or agreements affecting the Mortgaged Property) and decrees and orders of
any Governmental Authority, whether now in effect or
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hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.
(c) Maintain all financial records in accordance with GAAP.
6.2. Insurance.
(a) Keep (and/or cause the related Network Operator, if any, to
keep) the Company's properties (including Improvements and Personal Property
(each as defined in the Mortgages)) insured at all times by financially sound
and reputable insurers against loss by fire, casualty and such other hazards as
may be afforded by an "all risk" policy or a fire policy covering "special"
causes of loss, including building ordinance law endorsements; cause all such
policies to be endorsed or otherwise amended to include a "standard" or "New
York" lender's loss payable endorsement, in form and substance reasonably
satisfactory to the Required Holders and the Collateral Agent, which endorsement
shall provide that, from and after the Closing Date, the insurance carrier shall
pay all proceeds otherwise payable to the Company, the applicable Guarantor or
the applicable Network Operator under such policies directly to the Collateral
Agent unless (i) the amounts so payable shall not exceed $50,000 and (ii) the
insurance carrier shall not have received written notice from any holder of a
Note or the Collateral Agent that an Event of Default has occurred and, if
received, such notice shall not have been withdrawn (with the Required Holders
agreeing to withdraw such notice if the related Event of Default shall have been
cured and no other Event of Default shall then exist); cause all such policies
to provide that neither the Company, the Guarantors, any holder of a Note, the
Collateral Agent nor any other party shall be a coinsurer thereunder and to
contain a "Replacement Cost Endorsement", without any deduction for
depreciation, and such other provisions as the Required Holders or the
Collateral Agent may reasonably require from time to time to protect their or
its interest; deliver (and/or cause the related Network Operator, if any, to
deliver) original or certified copies of all such policies to the Collateral
Agent; cause each such policy to provide that it shall not be canceled,
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modified or not renewed (i) by reason of nonpayment of premium upon not less
than 10 days' prior written notice thereof by insurer to the Collateral Agent or
(ii) for any other reason upon not less than 30 days' prior written notice
thereof by insurer to the holders of the Notes and the Collateral Agent; deliver
to the holders of the Notes and the Collateral Agent, prior to the cancellation,
modification or nonrenewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Collateral Agent) together with evidence satisfactory to the
Collateral Agent of payment of the premium therefor; and cause each all risk
policy maintained by the Company or any Guarantor to be endorsed to provide for
a waiver by the related insurer of all its rights to recovery against any
Network Operator for damage covered by such policy.
(b) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated (i) a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency, obtain
(and/or cause the related Network Operator, if any, to obtain) flood insurance
in such total amount as the Collateral Agent or the Required Holders may from
time to time require, and otherwise comply with the National Flood Insurance
Program as set forth in said Flood Disaster Protection Act of 1973, as it may be
amended from time to time, or (ii) a "Zone 1" area, obtain (and/or cause the
related Network Operator, if any, to obtain) earthquake insurance in such total
amount as the Collateral Agent or the Required Holders may from time to time
require.
(c) With respect to any Mortgaged Property, carry and maintain
(and/or cause the related Network Operator, if any, to maintain) comprehensive
general liability insurance including the "broad form CGL endorsement" and
coverage on an occurrence basis against claims made for personal injury
(including bodily injury, death and property damage) and umbrella liability
insurance against any and all claims, in no event for a combined single limit of
less than $5,000,000, naming the Collateral Agent as an additional insured, on
forms satisfactory to the Collateral Agent.
(d) Notify (and/or cause the related Network Operator, if any, to
notify) the holders of the Notes and the Collateral Agent immediately whenever
any separate insurance concurrent in form or contributing in the event of loss
with that required to
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be maintained under this Section 6.2 is taken out by the Company, any Guarantor
or any Network Operator; and promptly deliver to the Collateral Agent a
duplicate original copy of such policy or policies.
(e) Use its reasonable efforts to cause the Phase II Consultant (as
defined in the Environmental Agreements) to maintain, and name the Company as an
additional insured wherever permissible under the contracts of insurance,
coverage at levels at least as high as set forth in Schedule 6.2(e).
(f) In connection with the covenants set forth in this Section 6.2,
it is understood and agreed as follows:
(i) Neither the Noteholder nor the holders from time to time of the
Notes, nor their agents or employees shall be liable for any loss or
damage insured by the insurance policies required to be maintained under
this Section 6.2, it being understood that (A) the Company shall look, and
shall cause each Guarantor to look, solely to its insurance company or any
other parties other than the aforesaid parties for the recovery of such
loss or damage and (B) such insurance company shall have no rights of
subrogation against the Noteholder or any such holder or their agents or
employees. If, however, the insurance policies do not provide waiver of
subrogation rights against such parties, as requested above, then the
Company hereby agrees, to the extent permitted by law, to waive its right
of recovery, if any, against the Noteholder, the holders from time to time
of the Notes and their agents and employees.
(ii) The designation of any form, type or amount of insurance
coverage by the Noteholder, any holder of a Note or the Collateral Agent
under this Section 6.2, shall in no event be deemed a representation,
warranty or advice by the Noteholder, such holder or the Collateral Agent
that such insurance is adequate for the purposes of the Company's and each
Guarantor's business or the protection of the Company's and each
Guarantor's properties and the Required Holders and the Collateral Agent
shall have the right from time to time to require the Company to keep
(and/or cause any Guarantor or the related Network Operator, if any, to
keep) other insurance in such form and amount as the Required Holders or
the Collateral Agent may reasonably request, provided that
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such insurance shall be obtainable on commercially reasonable terms.
6.3. Obligations and Taxes.
Pay its Indebtedness and other obligations promptly and in
accordance with their terms and pay and discharge promptly when due all material
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such obligation, tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Company, a
Guarantor or TAFSI, as applicable, shall have set aside on its books adequate
reserves with respect thereto in accordance with GAAP and such contest operates
to suspend collection of the contested obligation, tax, assessment or charge and
enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk
of forfeiture of such property.
6.4. Financial Statements, Reports, Etc.
Furnish to each holder of a Note (in duplicate):
(a) as soon as available, and in no event later than 105 days (or 90 days during
any time that the Company is subject to the periodic reporting requirements of
the Securities Exchange Act of 1934, as amended) after the end of each fiscal
year, the consolidated and consolidating balance sheets and related statements
of income and cash flow, showing the consolidated financial condition of the
Company and its consolidated Subsidiaries as of the close of such fiscal year
and the results of their operations during such year, all audited by
PriceWaterhouseCoopers LLP or other independent public accountants of recognized
national standing and accompanied by an opinion of such accountants (which shall
not be qualified in any material respect) to the effect that such consolidated
financial statements fairly present the consolidated financial condition and
results of operations of the Company and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
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(b) as soon as available, and in no event later than 60 days (or 45
days during any time that the Company is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended) after the end
of each of the first three fiscal quarters of each fiscal year, the unaudited
consolidated and consolidating balance sheets and related statements of income
and changes in financial position, showing the consolidated financial condition
of the Company and its consolidated Subsidiaries as of the close of such fiscal
quarter and the results of their operations during such fiscal quarter and the
then elapsed portion of the fiscal year, all certified by a Financial Officer of
the Company as fairly presenting the consolidated financial condition and
results of operations of the Company and its consolidated Subsidiaries in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes required by GAAP;
(c) concurrently with any delivery of financial statements under
subsection (a) or (b) above, a certificate of the accounting firm or a Financial
Officer of the Company opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to accounting
matters and disclaim responsibility for legal interpretations) (i) certifying
that no Event of Default or Default has occurred during the period covered by
such financial statements or, if such an Event of Default or Default has
occurred, specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto and (ii) setting forth
computations in reasonable detail demonstrating compliance with the covenants
contained in Sections 7.13, 7.14, 7.15, 7.16 and 7.17;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Company or any of its Subsidiaries with the Securities and Exchange Commission,
or any governmental authority succeeding to any of or all the functions of said
Commission, or with any national securities exchange, or made generally
available to its other security holders, or distributed to its shareholders, as
the case may be;
(e) a copy of all solicitations or requests for any proposed waiver
or amendment of any of the provisions of the Credit Agreement Documents or
Subordinated Note Documents (but
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only if the consent or approval of holders of the Notes is required in
connection therewith);
(f) promptly following the preparation thereof, copies of each
management letter prepared by the Company's, any Guarantor's or TAFSI's auditors
(together with any response thereto prepared by the Company, such Guarantor or
TAFSI);
(g) as soon as available, and in any event no later than 105 days
after the end of each fiscal year of the Company, historical summary data for
the immediately preceding year and forecasted financial projections and summary
data through the end of the then-current fiscal year, in substantially the same
form and format as set forth in Section 11 of the 1998 Confidential Information
Memorandum (including a specification of the underlying assumptions and a
management discussion of historical results), all certified by a Financial
Officer of the Company to be a fair summary of its results and its good faith
estimate of the forecasted financial projections and results of operations for
the period through the then-current fiscal year;
(h) upon the earlier of (i) 105 days after the end of each fiscal
year of the Company and (ii) the date on which the financial statements with
respect to such period are delivered pursuant to subsection (a) above, a
certificate of a Financial Officer of the Company setting forth, in reasonable
detail, the amount of Excess Cash Flow, if any, for such period;
(i) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of the Company, any
Guarantor or TAFSI, or compliance with the terms of any Financing Document, as
such holder may reasonably request;
(j) promptly, a copy of any amendment or waiver of any provisions of
any agreement referred to in Section 7.10, any amendment or waiver of any
provision of the Credit Agreement Documents not requiring the consent or
approval of holders of the Notes;
(k) promptly, a copy of any notice of a default received by the
Company, any Guarantor or TAFSI under any other Financing Document;
(l) promptly, a copy of any notice of default received by the
Company, any Guarantor or TAFSI (i) from the Agent or any
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Lender under the Credit Agreement or (ii) under the Subordinated Note Indenture;
and
(m) a copy of all notices (other than regarding any scheduled or
mandatory repayments), certificates, financial statements and reports, as and
when delivered by or on behalf of the Company, any Guarantor or TAFSI (i) to the
Agent or any Lender under the Credit Agreement or (ii) under the Subordinated
Note Indenture (except to the extent any such notice, certificate, financial
statement or report is otherwise required to be delivered pursuant to this
Agreement).
6.5. Litigation and Other Notices.
Furnish to each holder of a Note prompt written notice of the
occurrence of the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority, against
the Company or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect; and
(c) any development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Effect.
6.6. ERISA.
(a) Comply in all material respects with the applicable provisions
of ERISA.
(b) Furnish to each holder of a Note (i) as soon as possible, and in
any event within 30 days after any Responsible Officer of the Company or any
Guarantor or any ERISA Affiliate either knows or has reason to know that any
Reportable Event has occurred, as to which the Company, any Guarantor, TAFSI or
any ERISA Affiliate was or is required to file a report with the PBGC, that
alone or together with any other Reportable Event could reasonably be expected
to result in liability of the Company, any Guarantor, TAFSI or any ERISA
Affiliate to the PBGC
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in an aggregate amount exceeding $2,000,000, a statement of a Financial Officer
of the Company setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a copy of any notice the Company, any Guarantor, TAFSI or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) or to appoint a trustee to administer any Plan or
Plans, (iii) within 10 days after the due date for filing with the PBGC pursuant
to Section 412(n) of the Code of a notice of failure to make a required
installment or other payment with respect to a Plan, a statement of a Financial
Officer of the Company, such Guarantor or TAFSI, as applicable, setting forth
details as to such failure and the action proposed to be taken with respect
thereto, together with a copy of such notice given to the PBGC and (iv) promptly
and in any event within 30 days after receipt thereof by the Company, any
Guarantor, TAFSI or any ERISA Affiliate from the sponsor of a Multiemployer
Plan, a copy of each notice received by the Company or any ERISA Affiliate
concerning (A) the imposition of Withdrawal Liability or (B) a determination
that a Multiemployer Plan is, or is expected to be, terminated or in
reorganization, in each case within the meaning of Title IV of ERISA.
6.7. Access to Properties and Inspections.
Permit any representatives designated by the Noteholder or any other
institutional holder of a Note to visit and inspect the financial records and
the properties of the Company, any Guarantor and TAFSI at reasonable times and
upon reasonable notice and as often as reasonably requested and to make extracts
from and copies of such financial records, and permit any representatives
designated by any such holder to discuss the affairs, finances and condition of
the Company, the Guarantors and TAFSI or any properties of Company with, and to
be advised as to the same by, their officers, employees, environmental
consultants and other experts and independent accountants (and by this provision
the Company, the Guarantors and TAFSI authorize such consultants and accountants
to discuss such affairs, finances and accounts, whether or not a representative
of the Company, any Guarantor or TAFSI is present), all at such reasonable times
and to such reasonable extent as such holder may
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desire; and the Company, the Guarantors and TAFSI jointly and severally agree to
pay all out-of-pocket expenses incurred by the Noteholder and each such holder
in connection with the Noteholder's or such holder's exercise of rights pursuant
to this Section 6.7 at any time while a Default or Event of Default has occurred
and is continuing.
6.8. [Intentionally Omitted].
6.9. Fiscal Year.
Cause its fiscal year to end on December 31 of each year.
6.10. Further Assurances.
(a) Execute any and all further documents, financing statements,
agreements and instruments, and take all further action (including filing
Uniform Commercial Code and other financing statements, mortgages and deeds of
trust) that may be required under applicable law, or which the Required Holders
or the Collateral Agent may reasonably request, in order to effectuate the
transactions contemplated by the Transaction Documents and in order to grant,
preserve, protect and perfect the validity and first priority of the security
interests created or intended to be created by the Security Documents. In
addition, from time to time, each of the Company, each Guarantor and TAFSI will,
at its cost and expense, promptly secure the Obligations by pledging or
creating, or causing to be pledged or created, perfected security interests with
respect to such of its assets and properties as the Required Holders shall
designate (it being understood that it is the intent of the parties that the
Obligations shall be secured by, among other things, substantially all the
assets of the Company, the Guarantors and TAFSI (including real and other
properties acquired subsequent to the Restatement Closing Date)). Such security
interests and Liens will be created under the Security Documents and other
security agreements, mortgages, deeds of trust and other instruments and
documents in form and substance satisfactory to the Required Holders, and each
of the Company, each Guarantor and TAFSI shall deliver or cause to be delivered
to all holders of the Notes all such instruments and documents (including legal
opinions, title insurance policies and lien searches) as the Required Holders
shall reasonably request to evidence compliance with this Section 6.10. Each of
the Company and each Guarantor
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agrees to provide such evidence as the Required Holders shall reasonably request
as to the perfection and priority status of each such security interest and
Lien.
(b) To the extent that the Company, TAFSI or any Guarantor (other
than TA Travel) is not already a party to a Lockbox Agreement, within 90 days
following the Restatement Closing Date, enter into Lockbox Agreements with
financial institutions reasonably acceptable to the Collateral Agent.
(c) In the event that TA Travel acquires any replacement Airplane,
cause TA Travel, within 30 days of the purchase thereof, to grant to the
Collateral Agent a valid and perfected first-priority security interest in the
replacement Airplane pursuant to documentation in form and substance reasonably
satisfactory to the Collateral Agent.
(d) If any additional direct or indirect Subsidiary of the Company
is organized or acquired by the Company after the Restatement Closing Date, (i)
notify the holders of the Notes and the Collateral Agent of such Subsidiary's
organization or acquisition, (ii) cause such Subsidiary, simultaneously with its
organization or acquisition, to execute and become a party to the Guarantee
Agreement, the Indemnity and Subrogation Agreement, the Security Agreement and
each applicable other Security Document in favor of the Collateral Agent and to
execute and become a party to the Intercreditor Agreement and (iii) if any
shares of capital stock or other equity interest or Indebtedness of such
Subsidiary are owned by or on behalf of the Company or any Guarantor, cause such
Person, simultaneously with such Subsidiary's organization or acquisition, to
pledge to the Collateral Agent such shares, evidence of such other equity
interests and promissory notes evidencing such Indebtedness pursuant to the
Pledge Agreement. The Company agrees to provide such evidence as the Collateral
Agent shall reasonably request as to the perfection and priority status of each
security interest and Lien created pursuant to such Security Documents.
6.11. Rate Protection Agreements.
In the case of the Company, have in effect or enter into within 150
days following the Restatement Closing Date Rate Protection Agreements required
to be maintained under the Credit Agreement.
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6.12. Environmental and Safety Laws.
(a) Comply with, and use its best efforts to ensure compliance by
all tenants and subtenants (including each Network Operator, if any) with, all
Environmental and Safety Laws and obtain and comply with and maintain, and use
its best efforts to ensure that all tenants and subtenants (including each
Network Operator, if any) obtain and comply with and maintain, any and all
licenses, approvals, registrations or permits required by Environmental and
Safety Laws, except to the extent that failure to so comply or to obtain and
comply with and maintain such licenses, approvals, registrations and permits,
individually or in the aggregate, does not have and could not reasonably be
expected to result in a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions, required under
Environmental and Safety Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities respecting Environmental and Safety
Laws, except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings, individually or in
the aggregate, would not have a Material Adverse Effect.
(c) Notify the holders of the Notes of any of the following that,
individually or in the aggregate, is likely to have a Material Adverse Effect:
(i) any Environmental Claim that the Company, any Guarantor or TAFSI
receives, including one to take or pay for any remedial, removal, response
or cleanup or other action with respect to any Hazardous Substance
contained on any property owned or leased by the Company, such Guarantor
or TAFSI;
(ii) any notice of any alleged violation of or knowledge by the
Company, any Guarantor or TAFSI of a condition that might reasonably
result in a violation of any Environmental and Safety Law;
(iii) any commencement or threatened commencement of any judicial or
administrative proceeding or investigation alleging a violation or
potential violation of any requirement of any Environmental and Safety Law
by the Company, any Guarantor or TAFSI; and
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(iv) any Release or threat of Release which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect, based on an objective standard.
(d) Without limiting the generality of Section 16.4, indemnify the
Noteholder, the Collateral Agent and each holder from time to time of the Notes
and each of their respective directors, officers, employees, agents and
Affiliates (each such person being called an "Indemnitee") against, and hold
each Indemnitee harmless from, any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses (including reasonable
counsel fees, expert and consultant fees, charges and disbursements) of whatever
kind or nature arising out of, or in any way relating to, the violation of,
noncompliance with or liability under any Environmental and Safety Laws
applicable to the operations of the Company or any Guarantor or to the Mortgaged
Properties, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, reasonable attorneys' and
consultants' fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Indemnitee seeking indemnification therefor. The obligation of the Company
under this Section shall survive the payment of the Notes.
6.13. Material Contracts.
Maintain in full force and effect (including, without limitation,
exercising any available renewal option and without amendment or modification)
all its material contracts (including each operating lease permitted by Section
7.8) unless the failure so to maintain such contracts (or the amendments or
modifications thereto), individually or in the aggregate, would not have a
Material Adverse Effect, and promptly notify the holder of each Note of each
failure to comply with this Section 6.13.
6.14. Certificates of Occupancy, Permits and Zoning.
(a) Within 270 days following the Restatement Closing Date, the
Company shall deliver, to the extent not previously delivered, the following
documents to the Collateral Agent for Mortgaged Properties set forth on Schedule
6.14 having (x) 80% of
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the aggregate value of all Mortgaged Properties set forth on such Schedule that
were not Mortgaged Properties on March 21, 1997 (the "New Mortgaged Properties")
and (y) 80% of the aggregate value of the Mortgaged Properties (other than any
New Mortgaged Properties) set forth on such Schedule that have Additional
Improvements (as defined below):
(i) (A) a copy of the original permanent certificate or certificates
of occupancy or completion, as the same may have been amended or issued
from time to time, covering (x) if such Mortgaged Property is a New
Mortgaged Property, any material improvement located upon such Mortgaged
Property (an "Acquired Improvement") or (y) if such Mortgaged Property is
not a New Mortgaged Property, any material improvement located upon such
Mortgaged Property that was constructed after March 21, 1997 (an
"Additional Improvement" and the Acquired Improvements and Additional
Improvements are collectively the "New Improvements"), in each case that
were required to have been issued by the appropriate Governmental
Authority for such New Improvement or (B) a letter from an appropriate
Governmental Authority stating that at the time of construction
certificates of occupancy were not required for each such New Improvement
for which a certificate as described above has not been delivered if
reasonably requested by the Collateral Agent and suitable evidence of the
date of construction of each New Improvement on such Mortgaged Property;
(ii) without limiting the Company's obligations under Section 6.12,
a copy of all material licenses, permits and authorizations (other than
certificates of occupancy or completion, all applications, plans and
filings necessary for the issuance of any such certificate and all
licenses, permits and authorizations that were no longer required once any
such certificate was issued) that were necessary for the construction of
each New Improvement located upon the Mortgaged Property or that are
necessary for the current operation of such New Improvement; and
(iii) one of the following: (A) written confirmation from the
applicable zoning commission or other appropriate Governmental Authority
stating that, with respect to each Mortgaged Property as built, it
complies with existing land use and zoning ordinances, regulations and
restrictions applicable to such property, (B) an opinion from local
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counsel acceptable to the Collateral Agent to the same effect as covered
by clause (A) above or (C) a zoning endorsement satisfactory to the
Collateral Agent in connection with the Collateral Agent's mortgagee title
insurance policy of such Mortgaged Property.
(b) After the Restatement Closing Date, the Company shall use
commercially reasonable efforts to obtain (and promptly upon obtaining the same
deliver to the Collateral Agent):
(i) estoppel certificates from ground lessors of any Mortgaged
Property dated not earlier than September 1, 1998;
(ii) estoppel certificates from each Network Operator of each
Mortgaged Property dated not earlier than March 21, 1997; and
(iii) to the extent not already obtained, subordination and
attornment agreements from each Network Operator of each New Mortgaged
Property, unless the related operating lease by its terms, is subject and
subordinate to the Lien of the applicable Mortgage or Leasehold Mortgage.
7. NEGATIVE COVENANTS.
The Company covenants and agrees that, so long as any of the Notes
shall remain outstanding, the Company will not and will not permit any of its
Subsidiaries to:
7.1. Indebtedness.
Incur, create, assume or permit to exist any Indebtedness, except:
(a) Indebtedness existing on March 21, 1997 and set forth on
Schedule 7.1 (but not any extensions, renewals or replacements of such
Indebtedness);
(b) Indebtedness represented by the Notes;
(c) in the case of the Guarantors, Indebtedness consisting of
purchase money Indebtedness incurred in the ordinary course of business after
the Closing Date to finance Capital Expenditures or Transition Capital
Expenditures permitted under Section 7.13; provided, however, that (i) for
purposes of Section 7.13 the aggregate principal amount of any such
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Indebtedness shall be deemed to be a Capital Expenditure or a Transition Capital
Expenditure, as the case may be, at the time incurred or assumed, (ii) the
aggregate of (A) the aggregate principal amount of Indebtedness permitted
pursuant to this subsection and (B) all Capital Lease Obligations permitted
pursuant to Sections 7.1(d) and 7.11(c) shall not exceed $25,000,000 at any time
outstanding and (iii) such Indebtedness is incurred within 90 days after the
making of the Capital Expenditures or Transition Capital Expenditures financed
thereby;
(d) in the case of the Guarantors other than TA Travel, Indebtedness
in respect of Capital Lease Obligations permitted under Section 7.11(c);
(e) in the case of the Company or any Guarantor, Indebtedness in
respect of fuel-supply hedging agreements and arrangements, provided that any
such agreements or arrangements shall have been entered into for bona fide
hedging purposes pursuant to a written fuel-supply hedging policy approved by
the board of directors of the Company;
(f) (i) in the case of the Company, Indebtedness represented by the
Loans, the Swingline Loans, the Letters of Credit and the Subordinated Notes and
(ii) in the case of the Guarantors, Indebtedness represented by the Guarantee
Agreement and the Subordinated Note Guarantees;
(g) Indebtedness arising from the refinancing from time to time by
the Company of the Loans, the Swingline Loans and the Letters of Credit under
the Credit Agreement and the Guarantee Agreement in respect of such
Indebtedness, in any case ranking pari passu with or subordinate to the Notes
and the Guarantee Agreement; provided, however, that (i) such refinancing must
be in whole and not in part with respect to such Loans, (ii) the weighted
average interest rate (or applicable margins) applicable to such Indebtedness
must be less than or equal to the interest rate (or applicable margins)
applicable to the Loans, (iii) no material terms applicable to such Indebtedness
or the related guarantees shall be more favorable to the refinancing lenders or
note purchasers than the terms that are applicable to the Lenders under the
Credit Agreement Documents (or to lenders or note purchasers in respect of
refinancing Indebtedness then outstanding), (iv) the weighted average life to
maturity of such Indebtedness shall be greater than or equal to the remaining
weighted average life to maturity of the Term Loans (or of the
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term loan portion of any refinancing Indebtedness then outstanding), and the
first scheduled principal payment or required prepayment in respect of such
Indebtedness shall not be earlier than the first scheduled principal payment in
respect of the Term Loans, (v) such Indebtedness shall be Indebtedness of the
Company, (vi) the priority of the security interest in the collateral securing
the repayment of such Indebtedness (if such Indebtedness is to be secured) and
the total amount or share of the collateral to be made available to secure such
Indebtedness shall be no more senior or favorable than that which secured the
repayment of the Loans or the Notes (or any refinancing Indebtedness then
outstanding) at the time of such refinancing and the refinancing lenders or note
purchasers shall enter into an intercreditor agreement with the Collateral Agent
and the holders of the Notes then outstanding in substantially the form of the
Intercreditor Agreement (or in such other form as may be reasonably acceptable
to the Required Holders) providing for the sharing of collateral on such basis,
(vii) the principal amount of such Indebtedness shall be less than or equal to
the principal amount then outstanding of the Loans (or any refinancing
Indebtedness then outstanding) and (viii) such Indebtedness may not be incurred
if at the time of such refinancing a Default or Event of Default has occurred
and is continuing or would result therefrom;
(h) Indebtedness arising from the refinancing from time to time by
the Company of the Subordinated Notes that is subordinate to the Obligations
(which, if required by the terms thereof, shall include any Indebtedness
incurred pursuant to Section 7.1(g) above in connection with any refinancing of
the Loans); provided, however, that (i) such refinancing must be in whole and
not in part, (ii) the weighted average interest rate applicable to such
Indebtedness must be less than or equal to the interest rate applicable to the
Subordinated Notes, (iii) no material terms applicable to such Indebtedness
(including the subordination provisions thereof) shall be more favorable to the
refinancing lenders than the terms that are applicable under the Subordinated
Note Indenture prior to such refinancing, (iv) the weighted average life to
maturity of such Indebtedness shall be greater than or equal to the weighted
average life to maturity of the Subordinated Notes and the first scheduled
principal payment in respect of such Indebtedness shall not be earlier than the
first scheduled principal payment in respect of the Subordinated Notes, (v) such
Indebtedness shall be Indebtedness of the Company, (vi) such Indebtedness shall
be unsecured, (vii) the
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guarantees by the guarantors of such Indebtedness shall be no more favorable to
the refinancing lenders than the Subordinated Note Guarantees, (viii) the
principal amount of such Indebtedness shall be less than or equal to the
principal amount then outstanding of the Subordinated Notes and (ix) such
Indebtedness may not be incurred if at the time of such refinancing a Default or
Event of Default has occurred and is continuing or would result therefrom;
(i) in the case of TAFSI, Indebtedness to the Company or any
Guarantor, provided that the amount of all such Indebtedness does not exceed
$3,000,000 in the aggregate at any time outstanding;
(j) in the case of any Guarantor, Indebtedness to the Company, the
other Guarantors or TAFSI; provided that TA Travel shall not permit to exist any
Indebtedness to the Company, another Guarantor or TAFSI that is not permitted
under Section 7.4(l);
(k) Rate Protection Agreements required by Section 6.11 of the
Credit Agreement (or the analogous provision, if any, of any Credit Agreement
Refinancing Indebtedness);
(l) in the case of the Guarantors, other unsecured Indebtedness in
an aggregate principal amount at any time outstanding not in excess of
$5,000,000; (m) in the case of the Company, Indebtedness to any of its
Subsidiaries;
(n) in the case of the Company, Guarantees by the Company of
obligations of its Subsidiaries permitted pursuant to Section 7.3(a);
(o) in the case of TA, Indebtedness assumed by it in connection with
the Burns Acquisition, which Indebtedness exists on the Restatement Closing Date
and is not created in contemplation of the Burns Acquisition and the
consummation thereof, provided that the aggregate principal amount of such
Indebtedness outstanding shall not at any time exceed $3,000,000 (and any
extensions, renewals, refinancings or replacements of such Indebtedness, in any
such case, without any increase in the principal amount thereof);
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(p) in the case of any Guarantor, Indebtedness assumed by it in
connection with the Additional Permitted Acquisition, which Indebtedness exists
on the date on which the Additional Permitted Acquisition is consummated and is
not created in contemplation of the Additional Permitted Acquisition and the
consummation thereof, provided that the aggregate principal amount of such
Indebtedness outstanding shall not at any time exceed $10,000,000 (and any
extensions, renewals, refinancings or replacements of such Indebtedness, in any
such case, without any increase in the principal amount thereof); and
(q) Indebtedness of National represented by that certain Promissory
Note dated September 1, 1998, made by National in favor of Mid California
Auto/Truck Plaza, Inc. in a principal amount at any time outstanding not in
excess of $4,919,350.
7.2. Liens.
Create, incur, assume or permit to exist any Lien on any property or
assets (including stock or other securities of any person) now owned or
hereafter acquired by it or on any income or revenues or rights in respect of
any thereof, except:
(a) Liens on property or assets of the Company or any Subsidiary
thereof existing on March 21, 1997 and set forth on Schedule 7.2 (including, to
the extent any such Lien is the result of a lease, any extensions, renewals or
replacements of such lease, provided that the annual lease payment under any
such extension, renewal or replacement shall be no less than the fair market
rental value of the leased property as of the date of such extension, renewal or
replacement), provided that such Liens shall secure only those obligations that
they secured on March 21, 1997;
(b) in the case of any Guarantor, any Lien existing on any property
or asset prior to the acquisition thereof (by merger, consolidation, asset
purchase or otherwise) by such Guarantor (including pursuant to the Burns
Acquisition, a Permitted Business Acquisition or the Additional Permitted
Acquisition) or existing at the time such Guarantor becomes a Subsidiary of the
Company or another Guarantor pursuant to the Additional Permitted Acquisition,
including any such Lien securing Indebtedness permitted under Section 7.1(o) or
Section 7.1(p) but excluding any such Lien securing any other Indebtedness,
provided that (i) such Lien is not created in
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contemplation of or in connection with such acquisition, (ii) such Lien does not
extend to cover any other property or assets of such Guarantor as a result of or
after giving effect to such acquisition or such Guarantor becoming a Subsidiary
of the Company or another Guarantor (except for additional property in the
nature of improvements to property already subject to such Lien or additions to
accounts receivable or inventory, as the case may be, already subject to such
Lien) and (iii) such Lien does not (A) materially interfere with the use,
occupancy and operation of any property, (B) materially reduce the fair market
value of such property but for such Lien or (C) result in any material increase
in the cost of operating, occupying or owning (or leasing) such property,
provided further that a Guarantor may substitute for any property or asset
subject to any such Lien securing Indebtedness permitted under Section 7.1(o) or
Section 7.1(p) other property or assets with a fair market value substantially
the same as or less than the fair market value of the substituted property or
assets (as determined in good faith by the Company's board of directors) and not
otherwise subject to the Lien of a Financing Document, so long as (i) the
property or asset for which such substitution is made is fully and effectively
released from such Lien and (ii) the property or assets being subjected to such
Lien are held by a Guarantor;
(c) Liens for taxes, assessments or governmental charges not yet due
and payable (or due and payable but not yet delinquent) or which are being
contested in compliance with Section 6.3 or 6.12;
(d) in the case of the Guarantors, carriers', warehousemen's,
mechanics', materialmen's, repairmen's, landlord's or other like Liens arising
in the ordinary course of business and securing obligations that are not due and
payable or which are being contested in compliance with Section 6.3;
(e) in the case of the Guarantors, pledges and deposits made in the
ordinary course of business in compliance with worker's compensation,
unemployment insurance and other social security laws or regulations;
(f) (i) in the case of the Guarantors, pledges and deposits to
secure the performance of bids, trade contracts (other than for Indebtedness),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
and
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(ii) in the case of the Company and the Guarantors, pledges and deposits to
secure Indebtedness permitted under Section 7.1(e);
(g) in the case of the Guarantors, zoning restrictions, easements,
rights-of-way, restrictions on use of real property and other similar
encumbrances that do not materially impair the current use or the value of the
property subject thereto;
(h) in the case of the Guarantors, purchase money security interests
in real property, improvements thereto or equipment hereafter acquired (or, in
the case of improvements, constructed), provided that (i) such security
interests secure Indebtedness permitted by Section 7.1(c), (ii) such security
interests are incurred, and the Indebtedness secured thereby is created, within
90 days after such acquisition (or construction), (iii) the Indebtedness secured
thereby does not exceed 75% of the lesser of the cost and the fair market value
of such real property, improvements or equipment at the time of such acquisition
(or construction) and (iv) such security interests do not apply to any other
property or assets;
(i) Liens incurred in connection with Capital Lease Obligations
permitted by Section 7.1(d), provided that such Liens do not extend to any other
property or assets of such person;
(j) any Lien created under the Financing Documents;
(k) the lease or sublease of retail space, office space or space for
truck weigh stations at any Truckstop so long as (i) in the case of retail or
office space either (A) the term of the lease or sublease does not exceed three
years or (B) such lease or sublease does not result in the lease or sublease of
real property of the Company or any of its Subsidiaries in excess of 3,000
square feet at any one location to any one lessee or (ii) in the case of space
leased or subleased for truck weigh stations, such lease or sublease does not
result in the lease or sublease of real property of the Company or any of its
Subsidiaries in excess of 8,000 square feet at any one location to any one
lessee;
(l) the lease or sublease of retail space and office space at any
Truckstop other than as described in clause (k) above, provided that (i) the
lease with respect thereto shall (A) contain provisions consistent with and not
in conflict with any term, condition, covenant or agreement contained in any
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Financing Document, (B) require the lessee to deliver estoppel certificates to
the Collateral Agent in compliance with clause (iii) below, (C) provide that
such lease is subject and subordinate in all respects to the applicable Mortgage
and (D) constitute an "operating lease" (and not a financing lease) for all
purposes, (ii) in each case, the Company shall have delivered to the Collateral
Agent, reasonably in advance of the execution and delivery thereof, copies of
such lease and all other agreements to be entered into by the Company or any of
its Subsidiaries in connection therewith, (iii) the Company shall have delivered
to the Collateral Agent within 30 days of a request therefor by the holder of
any Note, an estoppel certificate of any lessee in form and substance
satisfactory to the Collateral Agent, (iv) in each case, the Company shall, at
its expense, take such action as shall be necessary or as shall be reasonably
requested by the Collateral Agent to assign to the Collateral Agent, for the
benefit of the Secured Parties, a perfected security interest in its rights
under such lease and other agreements, including the execution, delivery and
recording of an Assignment of Leases and Rents substantially in the form of
Exhibit C, (v) after giving effect to the entering into of such lease, no
Default or Event of Default shall have occurred and be continuing, (vi) promptly
after execution of such lease, an executed copy of such lease and a certificate
of an officer of the Company certifying that such lease complies with the
provisions of this Section 7.2(l) shall be delivered to the Collateral Agent and
(vii) the lease or sublease of such space: (A) shall not result in the
representations and warranties contained in the related Mortgage or in this
Agreement to be untrue, (B) shall not result in any material adverse effect on
the value or operations of the related Mortgaged Property as a Truckstop, (C)
shall have no effect on the Collateral Agent's Lien on the remaining Land under
the related Mortgage (as defined therein), (D) shall not restrict ingress and
egress to, the operation of or in any way interfere with the business currently
conducted on the Mortgaged Property and (E) shall be done and conducted, as
applicable, in accordance with all material laws, rules, regulations or statutes
(including any zoning, building, Environmental and Safety Laws, ordinances,
codes or approvals or any building permits) or any restrictions of record or
agreements affecting the Mortgaged Property;
(m) Liens on the properties described on Schedule 7.3;
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(n) Liens on National's real property on which is located National's
Truckstop in Santa Nella, CA; and
(o) Liens on National's Certificate of Deposit, face amount of
$4,919,350, County Bank of Los Angeles, CA (the "CBLA Certificate of Deposit")
to secure Indebtedness permitted by Section 7.1(q), provided that the Company
shall cause such Lien to be released and terminated (and shall provide to the
Collateral Agent evidence, reasonably satisfactory to the Collateral Agent, of
such release and termination) not later than the three-month anniversary of the
Restatement Closing Date.
7.3. Sale and Leaseback Transactions.
Enter into any arrangement, directly or indirectly, with any person
whereby it shall sell, lease or transfer any property, real or personal, used or
useful in the business of the Company or its Subsidiaries, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
that it intends to use for substantially the same purpose or purposes as the
property being sold, leased or transferred (any such transaction a "Sale and
Leaseback Transaction"), other than (a) any Sale and Leaseback Transactions
involving the properties described on Schedule 7.3, including any improvements
to the properties subject to such Sale and Lease-Back Transactions by such
Person, provided that the aggregate lease payments paid by the Company and its
Subsidiaries with respect to such properties in any fiscal year shall not exceed
$6,000,000 or (b) any Sale and Leaseback Transaction with respect to property
acquired by the Company or any Subsidiary following the Restatement Closing
Date, if such Sale and Leaseback Transaction (i) involves a sale by the Company
or any Subsidiary for consideration equal to at least the then-current fair
market value of such property and (ii) results in a Capital Lease Obligation or
an operating lease permitted by Section 7.11, in either case entered into to
finance a Capital Expenditure permitted by Section 7.13 consisting of (A) the
initial acquisition by the Company or such Subsidiary of the property sold or
transferred in such Sale and Leaseback Transaction or (B) the development of a
Truckstop on such property.
7.4. Investments, Loans and Advances.
Purchase, hold or acquire any capital stock, evidences of
Indebtedness or other securities of, make or permit to exist
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any loans or advances to, or make or permit to exist any investment or any other
interest in, any other Person, except:
(a) investments by the Company in the capital stock of, and loans
to, the Guarantors other than TA Travel and in promissory notes described in
Section 7.4(e);
(b) Permitted Investments;
(c) in the case of the Guarantors, pledges and deposits permitted by
Section 7.2(f);
(d) in the case of the Guarantors, loans or advances to employees in
the ordinary course of business in an aggregate amount outstanding to any single
employee at any time not in excess of $10,000 (or, if and to the extent such
loans or advances shall be used by such employees solely for relocation
expenses, $100,000) and in an aggregate amount outstanding for all employees at
any time not in excess of $1,000,000 (which loans and advances shall not be
forgiven by the Company);
(e) in the case of any Guarantor, promissory notes evidencing loans
made by the Company to members of such Guarantor's management or the
Institutional Equity Investors to enable them to purchase shares of Common
Stock, provided that (i) the amount loaned to any single member of management or
any single Institutional Equity Investor shall not exceed 50% of the aggregate
purchase price of such member's or Institutional Equity Investor's shares, (ii)
all the shares purchased by such member or Institutional Equity Investor with
the proceeds of any such loan shall be retained by such Guarantor for the
benefit of the Secured Parties until such time as such loan shall have been
repaid, (iii) the aggregate amount of all such loans outstanding at any time
shall not exceed $1,500,000, (iv) such loans shall not be forgiven by the
Company, (v) any shares purchased by any Institutional Equity Investor with the
proceeds of any such loan shall be resold to members of the Company's management
as soon as such a resale may be consummated in accordance with applicable state
and federal securities laws and (vi) any member of the Company's management who
purchases shares pursuant to the preceding clause (v) shall assume all
obligations under the loans the proceeds of which were used by such
Institutional Equity Investor to purchase such shares;
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(f) investments by the Company in the capital stock of, and loans
to, TAFSI that are consistent with the limitations on the business of TAFSI set
forth in Section 7.8;
(g) in the case of the Company and the Guarantors other than TA
Travel, investments in connection with (i) Permitted Business Acquisitions, it
being understood that the aggregate purchase consideration paid in any such
investment shall (A) constitute a Capital Expenditure during the period in which
such investment occurs or (B) if and to the extent the Company and its
Subsidiaries are not permitted to incur additional Capital Expenditures under
Section 7.13(a) at the time of such investment, constitute a Transition Capital
Expenditure during the period in which such investment occurs or (ii) the
Additional Permitted Acquisition, it being understood that (A) the Company and
such Guarantors may fund up to $30,000,000 of the cash purchase price in
connection with such acquisition from the Additional Reserve Amount deposited in
the Collateral Account and the remainder of the cash purchase price from either
their cash on hand and/or the proceeds of Revolving Credit Borrowings to the
extent then available and (B) the Additional Permitted Acquisition shall not
constitute a Capital Expenditure or Transition Capital Expenditure for purposes
of Section 7.13, provided that the Company's investments permitted pursuant to
this Section 7.4(g) shall be limited to investments in capital stock of, and
other equity ownership interests in, the acquired entities and shall not include
any operating assets;
(h) [Intentionally Omitted].
(i) Rate Protection Agreements required by Section 6.11 of the
Credit Agreement (or the analogous provision, if any, of any Credit Agreement
Refinancing Indebtedness);
(j) investments not otherwise permitted by this Section 7.4,
including without limitation, in the case of the Guarantors and TAFSI,
investments in any joint venture (any such joint venture, a "Permitted Joint
Venture") so long as the amount of all such investments does not exceed
$11,000,000 in the aggregate at any time outstanding and none of such
investments is prohibited by the Subordinated Note Documents or any comparable
documents entered into by the Company in connection with Subordinated Note
Refinancing Indebtedness (except to the extent waived or consented to by holders
of the Subordinated Notes or
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Subordinated Note Refinancing Indebtedness in accordance with the Subordinated
Note Documents or such comparable documents); and
(k) in the case of the Guarantors and TAFSI, intercompany loans and
advances to TAFSI and the Guarantors other than TA Travel to the extent
permitted under Sections 7.1(i), (j) and (m);
(l) in the case of the Company and Guarantors other than TA Travel,
investments by Company and such Guarantors in the membership interests of, and
loans to, TA Travel, provided that (i) the aggregate amount of all investments
by the Company and such Guarantors in TA Travel does not exceed $10,000,000 in
the aggregate at any time outstanding, and (ii) such 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");
(m) in the case of TA, the investment by TA in the Burns Network in
connection with the Burns Acquisition and pursuant to the terms and conditions
of the Burns Asset Purchase Agreement;
(n) in the case of the Company, repurchases of Subordinated Notes to
the extent permitted by clause (iv) of Section 7.9(a); and
(o) in the case of National, an investment in the CBLA Certificate
of Deposit.
7.5. Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, assign, lease,
sublease or otherwise dispose of (in one transaction or in a series of
transactions) (i) all or any substantial part of the assets (whether now owned
or hereafter acquired) of the Company, any Guarantor or TAFSI, or (ii) the
capital stock of any Guarantor or TAFSI, or purchase, lease or otherwise acquire
(in one transaction or a series of transactions) all or any substantial part of
the assets of any other Person; provided, however, that the foregoing shall not
prohibit:
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(a) sales of Permitted Investments for cash;
(b) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business (to the
extent that the Company shall have complied with the provisions of Section 5.3);
(c) sales of inventory in the ordinary course of business;
(d) sales, transfers and other dispositions of Truckstops and the
related assets for at least the then-current fair market value of such assets
(other than any such sales, transfers and other dispositions permitted under
subsection (g) below), with the related Net Cash Proceeds being applied in
accordance with the provisions of Section 5.3 and the definition of the term
"Prepayment Event," if (i) the aggregate number of Truckstops so sold,
transferred or disposed of pursuant to this subsection (d) shall not exceed ten
since the Closing Date, (ii) the aggregate amount of Net Cash Proceeds received
by the Company in respect of such sales, transfers and dispositions pursuant to
this subsection (d) shall not exceed $30,000,000 since the Closing Date, (iii)
the consideration received in any such transaction shall consist of immediately
available funds in an amount equal to at least 75% of the then-current fair
market value of the applicable asset(s) (with any instrument evidencing
consideration in other than immediately available funds being pledged to the
Collateral Agent as Collateral pursuant to the Pledge Agreement), (iv) no
Default or Event of Default shall have occurred and be continuing and no such
event shall occur as the result of such proposed transaction and (v) prior to
any such proposed transaction, each holder of a Note and the Collateral Agent
shall have received a certificate of a Financial Officer of the Company
describing the proposed transaction (including the consideration to be received)
and certifying as to the compliance with the foregoing provisions on a
prospective basis;
(e) sublicenses by the Company, any Guarantor or TAFSI to
Franchisees and Network Operators, if any, of the trademarks and servicemarks
owned by the Company, such Guarantor or TAFSI;
(f) sales, transfers and other dispositions of any portion of a
Mortgaged Property in connection with the development of such property as
permitted in, and in accordance with, the provisions of Section 10 of the
Guarantee Agreement;
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(g) sales, transfers and other dispositions of the parcels of real
estate listed on Schedule 7.5(g) (which Schedule may be amended by the Company
from time to time to substitute another parcel of real estate for any parcel of
real estate that is then listed on such Schedule and has not been sold,
transferred or otherwise disposed of on or prior to the date of such
substitution) and the related Truckstop assets, with the related Net Cash
Proceeds being applied in accordance with the provisions of Section 5.3 and the
definition of the term "Prepayment Event";
(h) in the case of TAFSI and the Guarantors other than TA Travel,
(i) the acquisition of assets from, or shares or other equity interests in, any
Person in connection with a Permitted Business Acquisition, a Permitted Joint
Venture or the Additional Permitted Acquisition, (ii) the merger of any Person
with and into one of the Guarantors (other than TA Travel) as required by the
definition of the term "Permitted Business Acquisition" or as permitted by the
definition of the term "Additional Permitted Acquisition", (iii) the merger of
one of the Guarantors (other than TA Travel) with and into any Person as
permitted by the definition of the term "Additional Permitted Acquisition" and
(iv) the merger of one such Guarantor with and into another such Guarantor
(provided that (A) the Company provides the Agent and the Collateral Agent with
at least 60 days prior notice, (B) the Company complies with all of its
obligations under Section 6.10 and (C) immediately after giving effect thereto
no Default or Event of Default shall have occurred or be continuing or would
result therefrom);
(i) leases permitted by Section 7.8;
(j) sales, leases or other transfers of assets in connection with
Sale and Leaseback Transactions permitted by Section 7.3; and
(k) in the case of any Guarantor or TAFSI, any sale, transfer or
other disposition of any asset to TAFSI or another Guarantor (other than TA
Travel), as the case may be, provided that the aggregate fair market value of
all assets transferred to TAFSI by the Guarantors does not exceed $3,000,000; or
(l) in the case of TA, the acquisition of assets from Burns in
connection with the Burns Acquisition, provided that
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such acquisition is consummated pursuant to the terms and conditions of the
Burns Asset Purchase Agreement.
7.6. Dividends and Distributions.
(a) Declare or pay, directly or indirectly, any dividend or make any
other distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, with respect to any shares of its
capital stock or directly or indirectly redeem, purchase, retire or otherwise
acquire for value any shares of any class of its capital stock or set aside any
amount for any such purpose except that (i) each Guarantor and TAFSI may declare
and pay dividends or make other distributions to the Company or another
Guarantor, and (ii) the Company may declare and pay dividends or make other
distributions to repurchase or redeem Common Stock (A) from officers, directors
or employees of the Company who are no longer employed by the Company so long as
no Default or Event of Default shall have occurred and be continuing immediately
before and after giving effect to such payment, repurchase or redemption and the
aggregate amount of such dividends and other distributions (1) during any fiscal
year shall not exceed $1,000,000 and (2) since the Closing Date shall not exceed
$3,000,000, plus, in each case, the proceeds of any resale of such Common Stock
to other or new employees, directors or officers of the Company made prior to or
within 180 days after such repurchases or redemptions and (B) from Operators, so
long as the aggregate amount of such repurchases since the Closing Date shall
not exceed $15,000,000.
(b) Permit its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Company other than any (A) consensual
encumbrances or restrictions set forth in the Credit Agreement or the
Subordinated Note Indenture and (B) consensual encumbrances or restrictions that
are incurred in connection with any Refinancing Indebtedness provided that such
encumbrances or restrictions are no more onerous than the encumbrances and
restrictions described in clause (A) above.
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7.7. Transactions with Affiliates.
Sell or transfer any property or assets to, or purchase or acquire
any property or assets from, or otherwise engage in any other transactions with,
any of its Affiliates, except that the Company, each Guarantor and TAFSI may
engage in any of the foregoing transactions in the ordinary course of business
at prices and on terms and conditions no less favorable to the Company, such
Guarantor or TAFSI, as the case may be, than could be obtained on an
arm's-length basis from unrelated third parties, provided that the foregoing
shall not restrict (a) any transaction listed on Schedule 7.7 or (b) any
transaction with an Affiliate expressly permitted by this Agreement (including
transactions expressly permitted by Section 7.2, 7.4, 7.5 or 7.6).
7.8. Business of Company, the Guarantor and TAFSI.
(a) In the case of the Company, engage at any time in any business
or business activity other than (a) the ownership of all the outstanding capital
stock of one or more Guarantor and of TAFSI, together with the activities
directly related thereto, (B) the exercise of its rights and the performance of
its obligations under or contemplated by the Transaction Documents and (c)
actions required by law to maintain its status as a corporation.
(b) In the case of a Guarantor (other than TA Travel),
(i) engage at any time in any activities other than the business
currently conducted by it, TA or National and business activities
reasonably incidental thereto (including the operation of restaurants) on
Truckstop premises, or
(ii) lease any Truckstop to a third-party operator, or engage any
third party operator to operate any Truckstop, or otherwise cease to
conduct directly the operation of any Truckstop (other than in connection
with a sale, lease or other transfer of such Truckstop in accordance with
Section 7.5); provided, however, that such Guarantor may lease Truckstops
to credit-worthy third-party operators with experience in the operation of
similar facilities who shall at the time become Franchisees if (A) in each
case the lease shall (I) provide for payment of rent and all other
material amounts payable thereunder at rates at least equal to the fair
market rental value as a full service truckstop facility (using for such
purpose the highest number
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resulting at the time from at least three standard methods of determining
fair market rental value), as of the date such lease is executed by such
Guarantor, of the entire premises covered by such lease for the term
thereof, including any renewal options, (II) require the lessee to use and
operate the Truckstop in a manner consistent with industry standards from
time to time for the operation of similar facilities (and in any event in
compliance with the applicable Franchise Agreement), (III) have a term not
longer than ten years, except that such lease may be renewed for a period
of up to ten years, or successive periods of up to ten years each, if such
lease shall provide for payment of rent and all other material amounts
payable thereunder at rates reasonably believed by such Guarantor, as of
the date such lease or renewal is entered into, to be the fair market
rental value (determined as aforesaid) of the entire premises covered by
such lease for each such period, (IV) contain provisions consistent with
and not in conflict with any term, condition, covenant or agreement
contained in any Financing Document, (V) require the lessee to deliver
estoppel certificates to the Collateral Agent in compliance with clause
(D) below, (VI) provide that such lease is subject and subordinate in all
respects to the applicable Mortgage and may be terminated by such
Guarantor in case of a default under or termination of the applicable
Franchise Agreement and (VII) constitute an "operating lease" (not a
financing lease) for all purposes, (B) in each case, such Guarantor shall
have delivered to the holders of the Notes, reasonably in advance of the
execution and delivery thereof, copies of such lease and all other
agreements to be entered into by such Guarantor in connection therewith,
(C) such Guarantor shall have delivered to the holders of the Notes within
30 days of a request therefor by the holders of the Notes, an estoppel
certificate of any lessee in form and substance satisfactory to the
Required Holders, (D) in each case, such Guarantor, at its expense, take
such action as shall be necessary or as shall be reasonably requested by
the Required Holders and the Collateral Agent to assign to the Collateral
Agent, for the benefit of the Secured Parties, a perfected security
interest in its rights under such lease and other agreements, including
the execution, delivery and recording of an assignment of leases and rents
substantially in the form included in Exhibit C, (E) on the date of such
lease the pro forma Interest Expense Coverage Ratio in respect of the
period of four fiscal quarters
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ending with the last full fiscal quarter immediately preceding such date
(giving effect to the entering into of such lease as if it had been
entered into on the first day of such period but not giving effect to any
transfer to the lessee of the obligation to make capital expenditures that
were made by such Guarantor), shall be equal to or greater than the
Interest Expense Coverage Ratio for such period, (F) after giving effect
to the entering into of such lease, no Default or Event of Default shall
have occurred and be continuing and there shall have been no decrease in
Consolidated Net Worth, (G) the consideration to such Guarantor from the
lessee in connection with such lease (including without limitation any
franchise fee and consideration for the sale of inventory or other assets
relating to such Truckstop) shall be paid in cash and, in the case of
assets, shall equal the greater of (x) the then-current fair market value
of such assets and (y) the book value of such assets as reflected on such
Guarantor's financial statements at such time, (H) the lessee shall be an
Accredited Lessee (as below defined), (I) the lessee shall not be a lessee
or operator of more than three Truckstops leased by the Guarantors
pursuant to this Section 7.8 (provided that no more than ten persons may
be lessee of more than one Truckstop leased pursuant to this Section 7.8
and no more than five persons may be lessee of more than two Truckstops
leased pursuant to this Section 7.8), (J) such lease shall prohibit the
lessee from mortgaging such lessee's leasehold interest in the Truckstop
or such lease, (K) the rent payable at a fixed or contractual rate under
such lease shall equal or exceed 70% of the total rent payable under such
lease assuming such lease had been entered into on the first day of the
period of four consecutive fiscal quarters ending with the last full
fiscal quarter immediately preceding the date of such lease and (L)
promptly after execution of such lease, an executed copy of such lease and
a certificate of an officer of the Company certifying that such lease
complies with the provisions of this Section 7.8 shall be delivered to the
holders of the Notes; and provided, further, that such Guarantor may (i)
enter into extensions, renewals and replacements of leases permitted
pursuant to Section 7.2(a) and (ii) lease or sublease retail space and
office space at any Truckstop to the extent permitted pursuant to Sections
7.2(k) and (l).
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As used in clause (ii) above, "Accredited Lessee" shall mean with
respect to a proposed lessee:
(1) in case the proposed lessee is a franchisee of a Guarantor who
has, for at least two years prior to the proposed lease, been in
compliance with all requirements of such lessee's franchise agreement or
franchise agreements with such Guarantor,
(A) if such lessee is not a lessee of any other Truckstop
pursuant to this Section 7.8, an "accredited investor" within the
meaning of paragraph (a)(5), (a)(6) or a(8) of Rule 501 under the
Securities Act of 1933, as amended,
(B) if such lessee is (after giving effect to the proposed
lease) a lessee of two Truckstops pursuant to this Section 7.8, an
"accredited investor" as aforesaid, except that for purposes of
paragraph (a)(6) of said Rule 501, the individual and joint income
requirements shall be $400,000 and $600,000, respectively, and
(C) if such lessee is (after giving effect to the proposed
lease) a lessee of three Truckstops pursuant to this Section 7.8, an
"accredited investor" as aforesaid, except that for purposes of
paragraph (a)(5) of said Rule 501, the net worth requirement shall
be $1,500,000 and for purposes of paragraph (a)(6) of said Rule, the
individual and joint income requirements shall be $600,000 and
$900,000, respectively; and
(2) in case the proposed lessee is not a franchisee of any Guarantor
or, in case the proposed lessee is such a franchisee but has not been such
for at least two years in compliance with such lessee's franchise
agreement or franchise agreements as described in clause (1) above,
(A) if such lessee is not a lessee of any other Truckstop
pursuant to this Section 7.8, an "accredited investor" within the
meaning of paragraphs (a)(5) and (a)(6) of said Rule 501 or a
partnership or other entity in which each of the equity owners
constitutes an "accredited investor" within the meaning of both such
paragraphs of said Rule,
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(B) if such lessee is (after giving effect to the proposed
lease) a lessee of two Truckstops pursuant to this Section 7.8, a
person meeting the requirements of subclause (A) above, except that
for purposes of paragraph (a)(6) of said Rule 501, the individual
and joint income requirements shall be $400,000 and $600,000,
respectively, and
(C) if such lessee is (after giving effect to the proposed
lease) a lessee of three Truckstops pursuant to this Section 7.8, a
person meeting the requirements of subclause (A) above, except that
for purposes of paragraph (a)(5) of said Rule 501, the net worth
requirement shall be $1,500,000 and for purposes of paragraph (a)(6)
of said Rule, the individual and joint income requirements shall be
$600,000 and $900,000, respectively.
(c) In the case of TAFSI, (i) engage in any activities other than
the franchising of auto/truckstops and activities incidental thereto in
accordance with its past practice, (ii) own or acquire any material assets
(other than assets under the Franchise Agreements) or (iii) incur any material
liabilities (other than liabilities under the Transaction Documents and
Franchise Agreements).
(d) In the case of TA Travel, engage in any activities other than
the business of acquiring, operating and maintaining the Airplane, leasing the
Airplane to TA and entering into operating agreements with airplane charter
companies with respect to the operation of the Airplane from time to time.
7.9. Limitations on Debt Prepayments.
(a) Optionally prepay, repurchase or redeem or otherwise defease or
segregate funds with respect to any Indebtedness for borrowed money (including,
in the case of the Company, the Subordinated Notes) other than the Notes;
provided, however, that the foregoing shall not prevent the Company from (i)
making any payment pursuant to Section 2.12 or 2.13 of the Credit Agreement,
(ii) refinancing Indebtedness under the Credit Agreement or the Subordinated
Notes pursuant to, and in accordance with, the provisions of Section 7.1(g) or
(h), respectively (whereupon this Section 7.9 shall apply to the Indebtedness
incurred in connection with any such refinancing),
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(iii) prepaying or otherwise refinancing any Indebtedness permitted in Section
7.1(i), 7.1(j), 7.1(l), 7.1(m) or 7.1(q), or (iv) prepaying, repurchasing,
redeeming or defeasing up to $15,000,000 aggregate principal amount of the
Subordinated Notes during the term of this Agreement (provided that (i) the
entire amount of such prepayment, repurchase, redemption or defeasance during
any fiscal year shall be funded solely from the sum of (without duplication) (A)
the 50% of Excess Cash Flow for the immediately preceding fiscal year (beginning
on or after January 1, 1999) that the Company is not required to apply to prepay
the Notes pursuant to Section 5.1 or required pursuant to Section 2.13(c) of the
Credit Agreement to apply to prepay obligations outstanding under the Credit
Agreement and (B) any portion of the amount available pursuant to the preceding
clause (A) with respect to any prior fiscal year (beginning on or after January
1, 1999) other than the immediately preceding fiscal year and not used prior to
the current fiscal year to fund the prepayment, repurchase, redemption or
defeasance of Subordinated Notes and (ii) immediately after giving effect
thereto no Default or Event of Default shall have occurred or be continuing or
would result therefrom). Without limiting the foregoing, neither the Credit
Agreement nor the Subordinated Note Indenture nor any document in respect of
Credit Agreement Refinancing Indebtedness or Subordinated Note Refinancing
Indebtedness shall prevent the Company from electing to apply to the optional
prepayment of Notes from time to time pursuant to Section 5.2 an aggregate
amount (allocable to principal and Make-Whole Premium) in each case at least
equal to the Pro Rata Share of the holders of the Notes in respect of each
optional prepayment of the Term Loans pursuant to Section 2.12 of the Credit
Agreement (or the analogous provision in respect of Credit Agreement Refinancing
Indebtedness).
(b) Permit any amendment or modification to the terms of any
Subordinated Note, any Subordinated Note Guarantees or the Subordinated Note
Indenture if the effect of such amendment or modification is to impose
additional or increased scheduled or mandatory repayment, retirement, repurchase
or redemption obligations in respect of the Indebtedness evidenced by such notes
or to require any scheduled or mandatory payment to be made in respect of such
notes prior to the date that such payment would otherwise be due; or permit any
amendment or modification to the terms of the Credit Agreement or any agreement
relating to Refinancing Indebtedness unless made in compliance with Section
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7.04 of the Intercreditor Agreement (or the analogous provision of any successor
thereto).
7.10. Amendment of Certain Documents and Subordinated Notes.
(a) Permit any termination of, or any amendment or modification that
is adverse in any material respect to the interests of the holders of the Notes
to, (i) the Certificate of Incorporation (or Certificate of Formation) of the
Company, any Guarantor or TAFSI, (ii) if applicable, the By-laws of the Company,
any Guarantor or TAFSI, (iii) the Subordinated Notes, the Subordinated Note
Guarantees and the Subordinated Note Indenture, (iv) any Asset Purchase
Agreement, (v) the Environmental Agreements and (vi) the Ancillary Agreements,
in each case without the prior written consent of the Required Holders.
(b) Without limiting the generality of the foregoing, with respect
to the Subordinated Notes, the Subordinated Note Guarantees and the Subordinated
Note Indenture, it is understood that (i) any increase in the interest, fees or
other amounts payable in connection therewith, (ii) any amendment that imposes
additional covenants or events of default or makes more restrictive the
covenants or events of default contained therein or (iii) any amendment that
renders the subordination provisions contained therein less favorable to the
Noteholder shall in each case require the consent of the Required Holders.
7.11. Limitation on Leases.
Create or suffer to exist any obligations on the part of the Company
of any of its Subsidiaries for the payment of rents for any property under
leases or agreements to lease, except, in the case of any Guarantor:
(a) (i) leases (other than leases of real property) of such
Guarantor entered into in the ordinary course of business and in existence on
March 21, 1997 having annual lease payments of less than $250,000 and (ii)
leases of such Guarantor in existence on March 21, 1997 and listed on Schedule
7.11(a) (and any extensions, renewals or replacements of such leases, provided
that the annual lease payment under any such extension, renewal or replacement
shall be no greater than the fair market rental value of the leased property, as
of the date of such extension, renewal or replacement for the term of such
extension, renewal or replacement);
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(b) operating leases entered into after the date hereof by such
Guarantor as lessee (i) in the ordinary course of business in a manner and to an
extent consistent with historical practices of the Network as of March 21, 1997
and (ii) in connection with Sale and Leaseback Transactions permitted by Section
7.3(b), provided that the aggregate annual lease payments under all leases
described in this clause (b) shall not exceed $15,000,000;
(c) Capital Lease Obligations incurred by such Guarantor to finance
the acquisition of equipment and other property, provided that (i) the aggregate
of (A) all such Capital Lease Obligations and (B) all purchase money
Indebtedness permitted pursuant to Section 7.1(c) shall not exceed $15,000,000
at any time outstanding, (ii) each Capital Lease Obligation at the time of its
incurrence shall have an average life to maturity greater than the average life
to maturity of the Notes, (iii) none of the related leases shall contain
financial covenants and (iv) for purposes of Section 7.13, the amount of such
aggregate annual rental payments shall be deemed to be Capital Expenditures in
the year in which they are incurred;
(d) any fair-market-value leases entered into by TA or National in
connection with the relocation of its offices; and
(e) leases permitted pursuant to Section 7.3(a).
7.12. Subsidiaries.
After giving effect to the Additional Transactions, in the case of
the Company, have any direct or indirect Subsidiaries other than (a) TA,
National, TA Travel and TAFSI, (b) any other direct or indirect wholly owned
Subsidiary of the Company that is organized under the laws of a State within the
United States and that becomes a Guarantor pursuant to Section 6.10 and (c) any
Permitted Joint Venture that is a direct or indirect Subsidiary of the Company.
Each of TA, National and TAFSI shall remain a wholly owned Subsidiary of the
Company and TA Travel shall remain a wholly owned Subsidiary of TA; provided
that any Guarantor (other than TA Travel) may be merged into another Guarantor
(other than TA Travel) if such merger is permitted by Section 7.5(h)(iv).
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7.13. Capital Expenditures.
(a) Make or permit Capital Expenditures during any fiscal year, to
exceed $35,000,000; provided, however, that the amount of permitted Capital
Expenditures in any fiscal year shall be increased by (i) an amount equal to 50%
of the excess of (A) consolidated EBITDA for the immediately preceding fiscal
year over (B) $70,000,000 and (ii) the lesser of (A) 25% of the total amount of
permitted Capital Expenditures for the immediately preceding fiscal year
(including amounts permitted as a result of the application of clause (i) but
excluding any unused Capital Expenditures carried forward to such preceding
year) and (B) the total amount of unused permitted Capital Expenditures for the
immediately preceding fiscal year (excluding any unused Capital Expenditures
carried forward to such preceding year). Notwithstanding the foregoing, the
aggregate amount of Capital Expenditures permitted in any fiscal year shall not
exceed $45,000,000.
(b) (i) Permit Transition Capital Expenditures to exceed (A)
$50,000,000 during any fiscal year, or (ii) $160,000,000 during the term of this
Agreement or (ii) permit the aggregate purchase consideration in connection with
Permitted Business Acquisitions that, pursuant to Section 7.4(g), constitute
Transition Capital Expenditures to exceed $25,000,000 during the term of this
Agreement.
7.14. Consolidated Net Worth.
Permit Consolidated Net Worth at any time to be less than
$90,000,000, plus, without duplication, (a) 50% of Net Income for each fiscal
quarter for which Net Income is positive, plus (b) 100% of the Net Cash Proceeds
of any primary offering of equity securities consummated by the Company or any
Guarantor after the Closing Date, plus (c) 100% of any capital contribution made
to the Company or any Guarantor after the Closing Date by any holder of its
respective capital stock (without duplication), minus (d) amounts paid to
repurchase or redeem Common Stock of the Company from Operators as permitted by
Section 7.6(a)(ii).
7.15. Current Ratio.
Permit on the last day of any fiscal quarter the ratio of Current
Ratio to be less than 1.00 to 1.00.
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7.16. Interest Expense Coverage Ratio.
(a) Permit the Interest Expense Coverage Ratio for any fiscal year ending on a
date indicated below to be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
December 31, 1998 1.75
December 31, 1999 2.00
December 31, 2000 2.25
December 31, 2001 2.50
December 31, 2002 2.75
</TABLE>
(b) Incur Indebtedness if, after giving effect to the incurrence of
such Indebtedness, the Interest Expense Coverage Ratio determined on the last
day of the most recently completed period of four consecutive fiscal quarters
for such period, as if such Indebtedness had been incurred at the beginning of
such period, would be less than 1.00 to 1.00.
7.17. Leverage Ratio.
Permit the Leverage Ratio on any date during any fiscal quarter
ending on the last day of or during any period indicated below to be in excess
of the ratio set forth opposite such period:
<TABLE>
<CAPTION>
From and Including: To and Including: Ratio:
------------------ ---------------- -----
<S> <C> <C>
July 1, 1998 December 31, 1998 5.25 to 1.00
January 1, 1999 December 31, 1999 4.75 to 1.00
January 1, 2000 December 31, 2000 4.50 to 1.00
January 1, 2001 December 31, 2001 3.75 to 1.00
January 1, 2002 December 31, 2002 3.25 to 1.00
</TABLE>
* * * * *
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9. DEFINITIONS.
9.1. Definitions.
Except as otherwise specified or as the context may otherwise
require, the following terms shall have the respective meanings set forth below:
"Acquired Improvement" shall have the meaning ascribed in Section
6.14.
"Additional Improvement" shall have the meaning ascribed in Section
6.14.
"Additional Permitted Acquisition" shall have the meaning set forth
in the Credit Agreement.
"Additional Reserve Amount" shall have the meaning set forth in the
Credit Agreement.
"Additional Term Loans" shall have the meaning ascribed in Section
1.4.
"Additional Transactions" shall have the meaning ascribed in Section
1.4.
"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
Person specified.
"Airplane" shall have the meaning ascribed in Section 7.4(l).
"Airplane Mortgage" shall mean the aircraft mortgage previously
granted to the Collateral Agent on the Airplane, including any assignment of
leases and rents, as amended and restated as of the Restatement Closing Date and
any similar mortgage granted on a replacement Airplane pursuant to Section 6.10.
"Ancillary Agreements" shall mean the TA Ancillary Agreements, the
National Ancillary Agreements and the Burns Ancillary Agreements.
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"Asset Purchase Agreements" shall mean the TA Asset Purchase
Agreement, the National Asset Purchase Agreement and the Burns Asset Purchase
Agreement.
"Available Proceeds" shall have the meaning ascribed in Section 5.3.
"Burns" shall mean Burns Bros., Inc., an Oregon corporation.
"Burns Acquisition" shall mean the acquisition by TA of Burns'
Travel Stops Division for aggregate cash consideration of approximately
$55,000,000 pursuant to the Burns Asset Purchase Agreement.
"Burns Ancillary Agreements" shall mean the Subway Purchase
Agreement, the Enterprises Asset Purchase Agreement, the BFR Asset Purchase
Agreement, the Services Agreement, the General Bill of Sale and Assignment, the
Assumption Agreement, the Trademark Assignment, the Gaming Agreement and the
Intellectual Property License Agreement (each as defined in the Burns Asset
Purchase Agreement).
"Burns Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated as of October 17, 1998, between Burns and TA, as amended,
supplemented or otherwise modified from time to time.
"Burns Network" shall mean the Travel Stops Division of Burns
acquired by TA in the Burns Acquisition.
"Business Day" shall mean any day (other than a Saturday, Sunday or
legal holiday in the State of New York) on which banks are open for business in
New York City.
"Capital Expenditures" shall mean, for any period, the sum of all
amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment and other capital expenditures on a consolidated
statement of cash flows for the Company during such period (including the amount
of assets leased under any Capital Lease Obligation). Notwithstanding the
foregoing, the term "Capital Expenditures" shall not include (a) capital
expenditures in respect of the reinvestment of sales proceeds, insurance
proceeds and condemnation proceeds received by the Company or its Subsidiaries
in connection with the sale, transfer or other disposition of the
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Company's or its Subsidiaries' business units, assets or properties, if (as
contemplated in the definition of the term "Prepayment Event") such reinvestment
(including, in the case of insurance proceeds, reinvestment in the form of
restoration or replacement of damaged property) shall have resulted in the event
giving rise to the receipt of such amounts not being considered a Prepayment
Event as contemplated in the definition of such term, (b) Transition Capital
Expenditures made during such period, (c) the purchase price with respect to the
Additional Permitted Acquisition or (d) the purchase price with respect to the
Burns Acquisition.
"Capital Lease Obligations" of any Person shall mean the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Cash Interest Expense" shall mean, for any period, the interest
expense (net of interest income) of the Company and its Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, excluding (a)
any fees and expenses payable or amortized during such period by the Company and
its Subsidiaries in connection with the Transactions and (b) any interest on the
Subordinated Notes not paid in cash prior to the maturity of the Subordinated
Notes. For purposes of the foregoing, interest expense (net of interest income)
shall be determined after giving effect to any net payments made or received by
the Company with respect to Rate Protection Agreements.
"Casualty" shall have the meaning ascribed in Section 9 of the
Guarantee Agreement.
"CBLA Certificate of Deposit" shall have the meaning assigned to
such term in Section 7.2(o).
"CERCLA" shall have the meaning ascribed in the definition of the
term "Environmental and Safety Laws."
A "Change in Control" shall be deemed to have occurred if:
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(a) any person or Group (as below defined) other than (i) the
Institutional Equity Investors (including the First Boston Entities (as
below defined)) or (ii) the Management Investors and their Permitted
Transferees (as set forth in Section 2(b) of the Stockholders Agreement),
shall directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, have the ability to elect a majority
of the board of directors of the Company;
(b) (i) the Institutional Equity Investors (including the First
Boston Entities) or (ii) the First Boston Entities, respectively, in the
aggregate cease to own, directly or indirectly, beneficially and of
record, shares representing at least 65% of the aggregate ordinary voting
power represented by the shares of capital stock of the Company held by
such persons on March 21, 1997, provided that such 65% shall be reduced by
the dilution suffered by such persons solely as a result of issuances by
the Company after the Closing Date of additional shares of capital stock
having ordinary voting power (A) for fair value for cash to non-Affiliates
of the applicable parties under clause (i) or (ii) above, as the case may
be, or (B) to its employees to the extent that such additional shares of
capital stock issued to such employees do not at any time exceed 15% of
the then outstanding capital stock having ordinary voting power;
(c) any person or Group, other than the Institutional Equity
Investors (including the First Boston Entities), owns (directly or
indirectly, beneficially or of record) issued and outstanding voting stock
of the Company representing more than the lesser at any time of (i) 35% of
the aggregate ordinary voting power represented by issued and outstanding
capital stock of the Company and (ii) the percentage of the aggregate
ordinary voting power represented by the shares owned directly or
indirectly, beneficially or of record, by the Institutional Equity
Investors (including the First Boston Entities) at such time;
(d) a majority of the seats (other than vacant seats) on the board
of directors of the Company shall at any time be occupied by persons who
were neither (i) nominated by the Institutional Equity Investors
(including the First Boston Entities) or the Management Investors and
their Permitted Transferees nor (ii) elected by directors so nominated;
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(e) any "Change in Control" (as such term is defined in the Credit
Agreement and in the Subordinated Note Indenture) shall have occurred by
reason of facts or circumstances not otherwise constituting a Change in
Control hereunder (unless the event of default under the Credit Agreement
resulting from such Change in Control has been waived pursuant to the
Credit Agreement; provided that if any consideration for such waiver has
been paid to the Lenders, then an amount bearing the same relation to the
aggregate unpaid principal amount of Notes at the time outstanding as the
amount of such consideration bears to the outstanding principal amount of
Indebtedness under the Credit Agreement shall be allocated and paid
concurrently to the holders of the Notes in proportion to the respective
unpaid principal amounts held by each such holder);
(f) The Company ceases to own and control directly, of record and
beneficially, all of the issued and outstanding capital stock of each
Guarantor and TAFSI (other than as a result of a merger of one Guarantor
into another Guarantor permitted pursuant to Section 7.5(h)(iv)), free and
clear of all Liens (other than Liens created under the Pledge Agreement);
or
(g) any Guarantor or TAFSI issues any class of capital stock (or
security convertible into its capital stock) that is not pledged to the
Collateral Agent for the ratable benefit of the Secured Parties.
For purposes of clause (b) above the Convertible Preferred Stock and
the Senior Convertible Participating Preferred Stock shall be deemed to
constitute capital stock with ordinary voting power, and for purposes of clauses
(a), (c) and (d) above an Institutional Equity Investor shall be deemed to own
all shares of the Company having ordinary voting power in respect of which such
Institutional Equity Investor or First Boston Entity shall hold the irrevocable
general proxy of the holder of such shares in respect of such shares. For
purposes of this definition: the "First Boston Entities" shall mean Credit
Suisse First Boston Corporation, The Clipper Group, L.P., Clipper Capital
Associates, L.P., Clipper/Merchant I, L.P., Merchant Truckstops, L.P. and their
Affiliates and any of their designees on March 21, 1997; and "Group" shall mean
a group within the meaning of Rule 13d-5 of the Securities and Exchange
Commission as in effect on March 21, 1997.
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"Closing Date" shall have the meaning ascribed in Section 2.
"Code" shall mean the Internal Revenue Code of 1986, or any
successor statute thereto, as the same may be amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include the Lockbox Collateral and the
Mortgaged Properties.
"Collateral Account" shall have the meaning given such term in the
Collateral Account Agreement.
"Collateral Account Agreement" shall mean the Collateral Account
Agreement, as amended and restated as of the Restatement Closing Date, between
the Company and the Collateral Agent for the benefit of the Secured Parties.
"Collateral Agent" shall mean The Chase Manhattan Bank, as
Collateral Agent under the Intercreditor Agreement, the Security
Documents and the Guarantee Agreement.
"Collateral Assignment" shall have the meaning ascribed in Section
1.5.
"Common Stock" shall have the meaning ascribed in Section 4.19.
"Condemnation Proceeds" shall have the meaning ascribed in Section 9
of the Guarantee Agreement.
"Consolidated Net Worth" shall mean, at any date, on a consolidated
basis for the Company and its Subsidiaries, (a) the sum of (i) common stock
taken at par or stated value, (ii) preferred stock (other than preferred stock
that is mandatorily redeemable on or prior to the first anniversary of the
latest final maturity of the then outstanding Notes) taken at its liquidation
value, (iii) capital surplus relating to common stock and (iv) retained earnings
(or deficit) at such date minus (b) the sum of treasury stock at such date
(other than treasury stock repurchased pursuant to Section 7.6), all determined
in accordance with GAAP and after giving effect to all adjustments required
thereby, but excluding any adjustments required by purchase accounting.
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"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Convertible Preferred Stock" shall mean the Series I Preferred
Stock and the Series II Preferred Stock.
"Credit Agreement" shall mean the Original Credit Agreement, as
amended and restated as of November 24, 1998 and as further amended, modified or
supplemented in accordance with the provisions of this Agreement. After the
incurrence of any Credit Agreement Refinancing Indebtedness, the term "Credit
Agreement" shall include all agreements (or comparable documents, such as loan
agreements or indentures) entered into by the Company in connection with the
sale or issuance of such refinancing Indebtedness.
"Credit Agreement Documents" shall mean the Credit Agreement, the
Security Documents, the Intercreditor Agreement and the Guarantee Agreement.
"Credit Agreement Refinancing Indebtedness" shall mean any
Indebtedness incurred by the Company as contemplated by Section 7.1(g) in
connection with the refinancing of Indebtedness under the Credit Agreement.
"Current Assets" as of any date shall mean the total assets that
would properly be classified as current assets of the Company and its
Subsidiaries on a consolidated basis as of such date in accordance with GAAP.
"Current Liabilities" as of any date shall mean the total
liabilities that would properly be classified as current liabilities (other than
the current portion of Funded Debt) of the Company and its Subsidiaries on a
consolidated basis as of such date in accordance with GAAP.
"Current Ratio" shall mean as of any date the ratio of Current
Assets as of such date to Current Liabilities as of such date.
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"Default" shall mean any event or condition that upon notice, lapse
of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States.
"EBITDA" with respect to the Company and its Subsidiaries for any
period shall mean the sum of (a) Net Income for such period, (b) all Federal,
state, local and foreign income taxes deducted in determining such Net Income,
(c) interest expense deducted in determining such Net Income, (d) depreciation,
amortization and other noncash charges deducted in determining such Net Income
and (e) to the extent deducted from such Net Income with respect to any fiscal
quarter ending on or prior to December 31, 2000, transition costs paid during
such period, provided that the aggregate amount of all transition costs incurred
after the Closing Date and permitted to be added back to Net Income pursuant to
this definition shall not exceed $15,000,000. For purposes of calculating the
Interest Expense Coverage Ratio, "EBITDA" shall not include the gain on the
initial sale of assets to any lessee in connection with the leasing of any
Truckstop in accordance with Section 7.8.
"Environmental Agreements" shall mean (a) the Environmental
Agreement entered into as of July 22, 1993, among BP Exploration & Oil Inc., TA
and certain other parties, as amended by Amendment No. 1 thereto dated December
9, 1993, and by the letter agreement dated as of December 9, 1993, and as
further amended, modified or supplemented in accordance with the provisions of
Section 7.10 and (b) the Environmental Agreement dated as of November 23, 1992,
between Union Oil Company of California and National, as amended, modified or
supplemented in accordance with the provisions of Section 7.10.
"Environmental and Safety Laws" shall mean any and all applicable
current and future treaties, laws, regulations, enforceable requirements,
binding determinations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations, licenses, permissions, notices or binding agreements
issued, promulgated or entered by any Governmental Authority, relating to the
environment, to employee health or safety as it pertains to the use or handling
of, or exposure to, Hazardous Substances, to preservation or reclamation of
natural resources or to the management, release or threatened release of
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contaminants or noxious odors, including the Hazardous Materials Transportation
Act, the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, the Clean Air Act of 1970 (to the extent it pertains to
the use or handling of, or exposure to, Hazardous Substances), as amended, the
Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of
1970, as amended, the Emergency Planning and Community Right-to-Know Act of
1986, the Safe Drinking Water Act of 1974, as amended, and any similar or
implementing state or local laws, and all amendments or regulations promulgated
thereunder.
"Environmental Claim" shall mean any written notice of any
Governmental Authority alleging potential liability for damage to the
environment or by any person alleging potential liability for personal injury
(including sickness, disease or death), in either case, resulting from or based
upon (a) the presence or Release (including intentional and unintentional,
negligent and nonnegligent, sudden or nonsudden, accidental or nonaccidental
leaks or spills) of any Hazardous Substance at, in or from the property, whether
or not owned or leased by the Company or a Guarantor or (b) any other
circumstances forming the basis of any violation, or alleged violation, of any
Environmental and Safety Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that was, is or hereafter becomes, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Code.
"Event of Default" shall have the meaning ascribed in Section 10.1.
"Excess Cash Flow" shall mean, for any period, the consolidated Net
Income of the Company and its Subsidiaries
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during such period plus, without duplication, (a)(i) the aggregate amounts
deducted in determining such Net Income in respect of all deferred charges and
depreciation, amortization and other noncash charges (including any interest
expense other than Cash Interest Expense), (ii) all noncash losses deducted in
determining such Net Income, (iii) to the extent not included in such Net
Income, the aggregate amount of all income tax refunds received during such
period, (iv) the principal amount of any Indebtedness incurred or assumed
pursuant to Section 7.1(c) during such period, (v) the aggregate amount of
Indebtedness with respect to Capital Lease Obligations incurred pursuant to
Sections 7.1(d) and 7.11(c) during such period and (vi) the net negative change,
if any, in Net Working Capital during such period minus (b)(i) all noncash gains
and credits included in such Net Income, (ii) scheduled required prepayments
during such period of the principal of the Notes, (iii) scheduled payments
during such period of the principal of Indebtedness permitted under Section 7.1
other than the Notes (including the Term Loans, the Refinancing Indebtedness and
the Subordinated Notes), but only to the extent that such payments cannot by
their terms be reborrowed or redrawn, (iv) prepayments during such period of
Term Loans and the Notes pursuant to Section 2.12 of the Credit Agreement and
Section 5.2, other than prepayment of the Floating Rate Notes on the Restatement
Closing Date, (v) the aggregate amount of Capital Expenditures and Transition
Capital Expenditures of the Company and its Subsidiaries made and permitted
hereunder during such period (other than the amount of such Capital Expenditures
and Transition Capital Expenditures that were financed during such period with
funds released to the Company and its Subsidiaries from the Collateral Account),
(vi) repayments during such period of the portion of Capital Lease Obligations
of the Company and its Subsidiaries not allocable to Cash Interest Expense and
(vii) the net positive change, if any, in Net Working Capital during such
period, in each case determined in accordance with GAAP.
"Existing Indebtedness" shall have the meaning ascribed in Section
1.2.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, treasurer or controller of such
corporation.
"Financing Documents" shall mean this Agreement, the other
agreements referred to in Section 4.27, the Notes, the
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Intercreditor Agreement, the Security Documents, the Guarantee Agreement and the
Indemnity and Subrogation Agreement.
"First Plaza" shall mean the First Plaza Group Trust, a trust
organized under the laws of the State of New York.
"Floating Rate Notes" shall mean the Company's Series II Senior
Secured Notes due 2005 which were issued by the Company pursuant to the Original
Exchange Agreements and were prepaid on the Restatement Closing Date.
"Franchise Agreements" shall mean the Franchise Agreements pursuant
to which the Franchisees have or shall become franchisees of a Guarantor or
TAFSI.
"Franchisee" shall mean each party who has executed, or will
execute, a Franchise Agreement with a Guarantor or TAFSI.
"Funded Debt" as to any Person shall mean all Indebtedness of such
Person that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the option of
such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders to
extend credit during a period of more than one year from such date, including
without limitation all amounts of Funded Debt required to be paid or prepaid
within one year from the date of its creation and, in the case of the Company,
all Indebtedness in respect of the Loans and the Swingline Loans under the
Credit Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any Person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of)
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such Indebtedness or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness, (b) to purchase property,
securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness or (c) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course of
business.
"Guarantee Agreement" shall have the meaning ascribed in Section
1.5.
"Guarantors" shall have the meaning ascribed in Section 1.5.
"Hazardous Substances" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, material or waste, including petroleum, its
derivatives, by-products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing characteristics, including,
without limitation, polychlorinated biphenyls ("PCBs"), asbestos or
asbestos-containing material, and any substance, waste or material regulated
under Environmental and Safety Laws.
"Indebtedness" of any Person shall mean, without duplication, (a)
all obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
assets purchased by such person, (e) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed by such person, (g) all Guarantees by such person of Indebtedness
of others, (h) all Capital Lease Obligations of such person, (i) all obligations
of such person in
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respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements, (j) all
obligations of such person as an account party to reimburse any bank or any
other person in respect of letters of credit and bankers' acceptances and (k)
all obligations of such person in respect of fuel-supply hedging agreements and
arrangements. The Indebtedness of any person shall include the Indebtedness of
any partnership or joint venture in which such person is a general partner or
member, other than to the extent that the instrument or agreement evidencing
such Indebtedness expressly limits the liability of such person in respect
thereof pursuant to provisions and terms reasonably satisfactory to the Required
Holders.
"Indemnity and Subrogation Agreement" shall mean the Indemnity,
Subrogation and Contribution Agreement, as amended and restated as of the
Restatement Closing Date, between the Company, the Guarantors and the Collateral
Agent.
"Institutional Equity Investors" shall mean The Clipper Group, L.P.,
First Plaza, Credit Suisse First Boston Corporation, Barclays USA, Inc., Olympus
Private Placement Fund, L.P., Clipper/Merchant I, L.P., Clipper Capital
Associates, L.P., National Partners, L.P., National Partners III, L.P., UBS
Capital Corporation, The Travelers Indemnity Company and The Phoenix Insurance
Company and their respective Affiliates.
"Insurance Proceeds" shall have the meaning ascribed in Section 9 of
the Guarantee Agreement.
"Intercreditor Agreement" shall have the meaning ascribed in Section
1.5; and from and after the incurrence of any Refinancing Indebtedness pursuant
to Section 7.1(g), the term "Intercreditor Agreement" shall include any
intercreditor agreement entered into in connection with the incurrence of such
Refinancing Indebtedness.
"Interest Expense Coverage Ratio" shall mean with respect to the
Company and its Subsidiaries on a consolidated basis, for any period, the ratio
of (a) EBITDA for such period to (b) Cash Interest Expense for such period.
"Interest Payment Date" shall mean each June 30 and December 31.
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"Leasehold Mortgage" shall mean any Mortgage that is a leasehold or
subleasehold mortgage.
"Lenders" shall have the meaning ascribed in the Original Credit
Agreement or the Credit Agreement, as the context requires. After the incurrence
of any Credit Agreement Refinancing Indebtedness, the term "Lender" shall
include all original lenders of such refinancing Indebtedness and their
successors and assigns.
"Letters of Credit" shall have the meaning ascribed in the Credit
Agreement.
"Leverage Ratio" shall mean on any date the ratio of (a) Total Debt
as of such date to (b) EBITDA for the period of four consecutive fiscal quarters
most recently ended as of such date.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, assignment for security (whether collateral or
otherwise), hypothecation, encumbrance, easement, restriction, covenant, lease,
sublease, charge or security interest in or on such asset, (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement, or financing lease having substantially the same economic
effect as any of the foregoing, relating to such asset, (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities and (d) zoning or land use restrictions.
"Loans" shall have the meaning ascribed in the Credit Agreement and
shall also include Swingline Loans and Letters of Credit. After the incurrence
of any Credit Agreement Refinancing Indebtedness, the term "Loans" shall include
all loans outstanding in respect of such refinancing Indebtedness.
"Lockbox Agreements" shall have the meaning ascribed in Section 1.5.
"Lockbox Collateral" shall have the meaning ascribed in each of the
Lockbox Agreements.
"Make-Whole Premium" shall mean, in connection with any prepayment
of a Note, the amount (but not less than zero) equal to the excess, if any, of
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(a) the sum of the Present Values (as hereinafter defined) of (1)
the principal amount of such Note being prepaid (assuming the required
prepayments pursuant to Section 5.1 and the principal balance of such Note
payable upon maturity are paid when due) and (2) the amount of interest
which would have been payable on each Interest Payment Date on the amount
of such principal being prepaid (assuming the required prepayments
pursuant to Section 5.1 and the principal balance of such Note payable
upon maturity and interest payments are paid when due), over
(b) the principal amount of such Note being prepaid.
For purposes of this definition, "Present Value" shall be determined
in accordance with generally accepted financial practice by discounting on a
semiannual basis to the date of such prepayment at a discount rate per annum
equal to the sum of the applicable Treasury Yield plus 0.50% (or 1.25% if such
prepayment date is after December 9, 1998); and the "Treasury Yield" for such
purpose shall be determined as of 10:00 A.M. New York City time on the third
Business Day prior to the date of such prepayment by reference to the yields of
those actively traded "On The Run" United States Treasury securities having a
maturity equal to the then-remaining weighted average life to maturity of such
Note as reported by the Telerate Access Service page 7677 (ask side) or the
equivalent page provided by Telerate Systems Incorporated (or any other
nationally recognized publicly available on-line source of similar market data),
provided that if such weighted average life to maturity is not equal to the
maturity of an actively traded "On The Run" United States Treasury security,
such yield shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the yields as so reported of actively traded "On The
Run" Treasury securities having a maturity closest to such weighted average life
to maturity . For purposes hereof, "On The Run" United States Treasury
securities refers to those United States Treasury securities which are most
recently auctioned.
"Management Investors" shall mean the officers, directors or
employees of the Company or its Subsidiaries who have purchased or will purchase
Common Stock.
"Margin Stock" shall have the meaning given such term under
Regulation U.
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"Material Adverse Effect" shall mean (a) a materially adverse effect
on the business, assets, operations, prospects or condition, financial or
otherwise, or the material agreements of the Company and its Subsidiaries, taken
as a whole, (b) a material impairment of the ability of the Company, any of the
Guarantors or TAFSI to perform any of its obligations under any Transaction
Document to which it is or will be a party or (c) a material impairment of the
rights of or benefits available to the Collateral Agent or the holders of Notes
under any Financing Document.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage Amendment" shall mean an amendment to an existing mortgage
or deed of trust, leasehold mortgage, assignment of leases and rents or other
security document previously granted to the Collateral Agent with respect to a
Mortgaged Property in connection with the Original Credit Agreement, delivered
pursuant to Section 5.02(l) of the Credit Agreement or pursuant to Section 6.10,
and which amendment has the effect of causing such mortgage or deed of trust,
leasehold mortgage, assignment of leases and rents or other security document,
as so amended to be substantially in the form of the Mortgage attached as
Exhibit I to the Credit Agreement (or Exhibit C thereto in the case of any
amendment of an assignment of leases and rents).
"Mortgaged Properties" shall mean the owned real properties and
leasehold and subleasehold interests of the Company and TAFSI specified on
Schedule 1.1(a).
"Mortgages" shall have the meaning ascribed in Section 1.5.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"National" shall have the meaning ascribed in Section 1.1.
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"National Ancillary Agreements" shall have the meaning assigned to
the term "Ancillary Agreements" in the National Asset Purchase Agreement and
shall include the Bill of Sale, the Assignment and Assumption Agreement, the
Non-Competition Agreement, the Office Sublease, the Credit Card Agreement, the
Trademark License Agreement, the Software License Agreement and the Services
Agreement (each as defined in the National Asset Purchase Agreement).
"National Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated as of November 23, 1992, between National and Union Oil Company
of California, as amended, supplemented or otherwise modified from time to time
in accordance with the terms of this Agreement.
"National Network" shall have the meaning ascribed in Section 1.1.
"National Notes" shall have the meaning ascribed in Section 1.1.
"National Purchase Agreements" shall have the meaning ascribed in
Section 1.1.
"Net Cash Proceeds" shall mean, with respect to any Prepayment Event
or any issuance of equity of the Company or its Subsidiaries, (a) the gross cash
proceeds (including insurance proceeds, condemnation awards and payments from
time to time in respect of installment obligations, if applicable) received by
or on behalf of the Company or any Subsidiary thereof in respect of such
Prepayment Event or equity issuance, less (b) the sum of (i) in the case of a
Prepayment Event, the amount, if any, of all taxes (other than income taxes)
payable by the Company or any Subsidiary thereof in connection with such
Prepayment Event and the Company's good-faith best estimate of the amount of all
income taxes payable in connection with such Prepayment Event (to the extent
that such amount shall have been set aside for the purpose of paying such income
taxes), (ii) in the case of a Prepayment Event that is an asset sale or
disposition, (A) the amount of any reasonable reserve established in accordance
with GAAP against any liabilities associated with the assets sold or disposed of
and retained by the Guarantor or any Subsidiary thereof, provided that the
amount of any subsequent reduction of such reserve (other than in connection
with a payment in respect of any such liability) shall be deemed to be Net Cash
Proceeds of
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a Prepayment Event occurring on the date of such reduction, and (B) the amount
applied to repay any Indebtedness (other than the Term Loans and the Notes) to
the extent such Indebtedness is required by its terms to be repaid as a result
of such Prepayment Event and (iii) reasonable and customary fees, commissions
and expenses and other costs paid by the Company or any Subsidiary thereof in
connection with such Prepayment Event or equity issuance (other than those
payable to the Company or any Affiliate of the Company (other than customary
financial advisory fees payable to The Clipper Group, L.P. or its Affiliates, in
connection therewith to the extent that such fees are no greater than the
financial advisory fees that a third party could have obtained for the same
services after negotiation at arm's length)), in each case only to the extent
not already deducted in arriving at the amount referred to in clause (a).
"Net Income" shall mean, for any period, the aggregate net income
(or net deficit) of the Company and its Subsidiaries determined on a
consolidated basis for such period, which shall be equal to gross revenues for
the Company and its Subsidiaries determined on a consolidated basis during such
period less the aggregate for the Company and its Subsidiaries determined on a
consolidated basis during such period, without duplication, of (a) cost of goods
sold, (b) interest expense, (c) operating expenses, (d) selling, general and
administrative expenses, (e) taxes, (f) depreciation, depletion and amortization
of properties and (g) any other items that are treated as expense under GAAP,
all computed in accordance with GAAP; provided, however, that the term "Net
Income" shall exclude, for all purposes other than for the purposes of
calculating Consolidated Net Worth, (i) extraordinary gains and losses from the
sale of assets other than in the ordinary course of business, (ii) one-time
charges taken in connection with the Transactions or in connection with the
Additional Permitted Acquisition, if any, and the other Transactions and (iii)
any write-up in the value of any asset.
"Net Working Capital" shall mean, with respect to any Person and its
Subsidiaries on a consolidated basis at any date, (a) the sum of inventory,
current receivables (including trade receivables and current rent receivables)
and prepaid expenses minus (b) the sum of accrued expenses payable and trade
payables, as each of such items would appear on a consolidated balance sheet of
such person and its Subsidiaries as of the date of determination in accordance
with GAAP.
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"Network" shall have the meaning ascribed in Section 1.1.
"Network Operator" shall mean each independent auto/truckstop
operator who will lease or sublease a Truckstop from any Guarantor.
"New Improvements" shall have the meaning ascribed in Section 6.14.
"New Mortgaged Properties" shall have the meaning ascribed in
Section 6.14.
"1997 Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Company dated February 1997.
"1998 Confidential Information Memorandum" shall mean the
Confidential Information Memorandum of the Company dated October 1998.
"Noteholders" shall mean the Noteholder and the other noteholders
listed in Schedule I hereto.
"Note Register" shall have the meaning ascribed in Section 11.
"Notes" shall have the meaning ascribed in Section 1.3.
"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreement and the Security Documents.
"Offering Memorandum" shall mean the Offering Memorandum of the
Company dated March 24, 1997, relating to the Subordinated Notes, as amended,
supplemented or otherwise modified from time to time.
"Operators" shall mean independent auto/truckstop operators who
lease or sublease their facilities from National.
"Original Credit Agreement" shall mean the Credit Agreement dated as
of March 21, 1997 by and among the Company, the Lenders party thereto and The
Chase Manhattan Bank, as agent for said Lenders.
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"Original Exchange Agreement" shall have the meaning ascribed in
Section 1.2.
"Original Notes" shall have the meaning ascribed in Section 1.1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Perfection Certificate" shall mean the Perfection Certificate,
substantially in the form of Annex 2 to the Security Agreement, prepared by the
Company.
"Permitted Business Acquisition" shall mean any acquisition of
assets from, or shares or other equity interests in, any Person (other than the
Additional Permitted Acquisition) if (a) immediately after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing or
would result therefrom, (b) all transactions related thereto shall be
consummated in accordance with applicable laws, (c) in the case of any
acquisition of shares or other equity interests in any Person, such acquisition
is an acquisition of 100% of the shares or other equity interests of such Person
and, simultaneously with or immediately following such acquisition, such
acquired Person is merged with and into one of the Guarantors and (d) neither
the Company nor any of its Subsidiaries shall assume or otherwise become liable
for any Indebtedness in connection with such acquisition (except for
Indebtedness permitted by Section 7.1).
"Permitted Developer" shall have the meaning ascribed in Section 10
of the Guarantee Agreement.
"Permitted Development Entity" shall be a corporation or limited
partnership that does not satisfy the criteria to be considered a "Subsidiary"
as contemplated in the definition thereof.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
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in each case maturing within three months from the date of acquisition
thereof;
(b) without limiting the provisions of paragraph (d) below,
investments in commercial paper maturing within three months from the date
of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard & Poor's and from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits (including eurodollar time deposits) maturing within three
months from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, (i)
any domestic office of The Chase Manhattan Bank or (ii) any domestic
office of any other commercial bank of recognized standing organized under
the laws of the United States of America or any state thereof that has a
combined capital and surplus and undivided profits of not less than
$250,000,000 and which is rated (or the senior debt securities of the
holding company of such commercial bank are rated) A or better by Standard
& Poor's or A2 or better by Moody's, or carrying an equivalent rating by
another nationally recognized rating agency if neither of the two named
rating agencies shall rate such commercial bank (or the holding company of
such commercial bank);
(d) investments in commercial paper maturing within three months
from the date of acquisition thereof and issued by (i) the holding company
of The Chase Manhattan Bank or (ii) the holding company of any other
commercial bank of recognized standing organized under the laws of the
United States of America or any state thereof that has (A) a combined
capital and surplus in excess of $250,000,000 and (B) commercial paper
rated at least A-1 or the equivalent thereof by Standard & Poor's or at
least P-1 or the equivalent thereof by Moody's, or carrying an equivalent
rating by another nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments;
(e) repurchase agreements having a term of seven days or less with
(i) any domestic office of The Chase Manhattan Bank or (ii) any domestic
office of any other commercial bank of recognized standing organized under
the laws of the
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United States of America or any state thereof that has a combined capital
and surplus and undivided profits of not less than $250,000,000 and which
is rated (or the senior debt securities of the holding company of such
commercial bank are rated) A or better by Standard & Poor's or A2 by
Moody's or carrying an equivalent rating by another nationally recognized
rating agency if neither of the two named rating agencies shall rate such
bank, in each case relating to marketable direct obligations issued or
unconditionally guaranteed by the United States but only if the securities
collateralizing such repurchase agreements are delivered to or on the
order of the Collateral Agent;
(f) other investment instruments approved in writing by the Required
Holders and offered by financial institutions that have a combined capital
and surplus and undivided profits of not less than $250,000,000; and
(g) investments consisting of Rate Protection Agreements.
"Permitted Joint Venture" shall have the meaning ascribed in Section
7.4(h).
"Person" or "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code that
is maintained for employees of the Company or any ERISA Affiliate.
"Pledge Agreement" shall have the meaning ascribed in Section 1.5.
"Prepayment Account" shall have the meaning ascribed in the
Intercreditor Agreement.
"Prepayment Event" shall mean (a) any sale, transfer or other
disposition of any business units, assets, franchises or other properties of the
Company or any Subsidiary thereof (including dispositions in the nature of
casualties (to the extent covered by insurance) or condemnations (including any
Casualty or Condemnation in respect of a Mortgaged Property as
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contemplated in Section 9 of the Guarantee Agreement)), (b) any sale and
leaseback of any asset or the mortgaging of any real property other than (i) any
Sale and Leaseback Transaction permitted by Section 7.3 or (ii) pursuant to a
Mortgage (or a modification thereof) by the Company or any Subsidiary thereof,
or (c) the issuance or incurrence by the Company or any Subsidiary thereof of
any Indebtedness (excluding any Indebtedness permitted under Section 7.1), or
the issuance or sale by the Company or any Subsidiary thereof of any debt
securities or any obligations convertible into or exchangeable for, or giving
any Person any right, option or warrant to acquire from the Company or any
Subsidiary thereof any Indebtedness or any such debt securities or any such
convertible or exchangeable obligations (excluding any Indebtedness permitted
under Section 7.1). Notwithstanding the foregoing, the term "Prepayment Event"
shall not include:
(i) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business
permitted pursuant to Section 7.5(b) not exceeding in the aggregate
$1,000,000 in any fiscal year, provided that (A) at any time when such
sales, transfers and other dispositions in the ordinary course of business
shall exceed $1,000,000 in any fiscal year, the resultant Prepayment Event
shall include the entire amount of such sales, transfers and dispositions
since the date of such most recent payment, if any, with respect to such
fiscal year and not just amounts above such dollar threshold and (B) to
the extent that the Company or any of its Subsidiaries shall have
reinvested on the date of such Prepayment Event (or certified to the
holders of the Notes that it intends to reinvest within 180 days of such
Prepayment Event) any of the proceeds of such sales, transfers and
dispositions in equipment, vehicles or other assets used in the principal
lines of business of the Subsidiaries, the resultant Prepayment Event
shall be reduced by the lesser of (I) $1,000,000 and (II) the amount so
reinvested or to be reinvested;
(ii) sales of inventory in the ordinary course of business;
(iii) sales, transfers and other dispositions of Truckstops and the
related assets permitted pursuant to Sections 7.5(d) or 7.5(g) resulting
in Net Cash Proceeds in
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an aggregate amount not exceeding (A) during the period commencing on the
Closing Date and ending on December 31, 2000, $70,000,000 and (B) during
each period of four consecutive fiscal quarters ending on each December 31
thereafter, $7,500,000, provided that (1) such Net Cash Proceeds are
either (x) used to prepay or voluntarily prepay the Notes or the Loans, in
accordance with Section 5.2 or 5.3 of this Agreement and Section 2.12 or
2.13 of the Credit Agreement, on such date as may be elected by the
Company or (y) reinvested in other Truckstop properties and related
assets, (2) in connection with any such reinvestment, the Company shall
(x) provide the holders of the Notes and the Collateral Agent with such
opinions, documents, certificates, title insurance policies (as required
by Section 3.14(a)), surveys and other insurance policies as they may
reasonably request and (y) take such other actions as the Required Holders
and the Collateral Agent may reasonably deem necessary or appropriate
(including actions with respect to the delivery to the Collateral Agent of
a first priority Mortgage as required by Section 3.14(a) and assignment
with respect to the related real property for the ratable benefit of the
Secured Parties) and (3) the Company, pending any such repayment,
voluntary prepayment or reinvestment, promptly deposits such Net Cash
Proceeds in a cash collateral account established with the Collateral
Agent for the benefit of the Secured Parties;
(iv) the receipt of insurance or condemnation proceeds (other than
Condemnation Proceeds and Insurance Proceeds in respect of Mortgaged
Properties), provided that (A) such proceeds are reinvested in equipment,
vehicles or other assets used in the Subsidiaries' principal lines of
business within 180 days after the receipt thereof and (B) the Company,
pending such reinvestment, promptly deposits such proceeds so received and
unreinvested in a cash collateral account established with the Collateral
Agent for the benefit of the Secured Parties;
(v) the receipt of Condemnation Proceeds and Insurance Proceeds in
respect of Mortgaged Properties to the extent that (A) such Condemnation
Proceeds or Insurance Proceeds are used to restore, repair or locate,
acquire and replace the related Mortgaged Property in accordance with
Section 9 of the Guarantee Agreement, (B) such Condemnation Proceeds or
Insurance Proceeds, pursuant to Section 9 of the
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Guarantee Agreement, are not otherwise required to be applied as a
mandatory prepayment pursuant to Section 2.13(b) of the Credit Agreement
and Section 5.3 or (C) to the extent permitted by Section 9 of the
Guarantee Agreement, any Condemnation Proceeds or Insurance Proceeds are
(I) reinvested in equipment, vehicles or other assets used in the
Subsidiaries' principal lines of business within 180 days after the
receipt thereof and (II) the Company, pending such reinvestment, has
deposited such amounts in an escrow account with the Collateral Agent as
contemplated in Section 9 of the Guarantee Agreement;
(vi) except as otherwise specified in Section 10 of the Guarantee
Agreement, any sale, transfer and other disposition of any portion of a
Mortgaged Property in connection with the development of such property as
permitted in, and in accordance with, the provisions of Section 10 of the
Guarantee Agreement; and
(vii) in respect of any Mortgaged Property, sales, transfers and
other dispositions of any portion of the Land (as defined in the related
Mortgage) that has no significant improvements on it that are permitted
pursuant to Section 7.5(f) in an aggregate amount not exceeding $2,000,000
in any fiscal year or $8,000,000 since the Closing Date, provided that (A)
the proceeds of each such sale are reinvested in equipment, vehicles or
other assets used in the Subsidiaries' principal lines of business within
180 days of the date of such sale and (B) the Company, pending such
reinvestment, promptly deposits such proceeds so received and unreinvested
in a cash collateral account established with the Collateral Agent for the
benefit of the Secured Parties.
"Pro Forma Balance Sheet" shall have the meaning ascribed in
Section 4.5(a).
"Pro Rata Share" shall mean, in relation to any amount, (a) with
respect to all the Lenders as a group, a share of such amount determined by
multiplying such amount by a fraction, the numerator of which shall be the sum
of the aggregate principal amount of Revolving Credit Loans (as defined in the
Credit Agreement), Swingline Loans and Term Loans outstanding at the time plus
the aggregate face amount of all Letters of Credit outstanding at the time under
the Credit Agreement plus the
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aggregate unused amount of Revolving Credit Commitments (as defined in the
Credit Agreement) in effect at the time (the sum of the foregoing amounts being
referred to as the "Lenders' Amount"), and the denominator of which shall be the
sum of the Lenders' Amount and the aggregate unpaid principal amount of the
Notes at the time outstanding (the sum of the foregoing amounts being referred
to as the "Denominator Amount"), and (b) with respect to the holders of the
Notes, a share of such amount determined by multiplying such amount by a
fraction, the numerator of which shall be the aggregate unpaid principal amount
of Notes, at the time outstanding, and the denominator of which shall be the
Denominator Amount. In making a determination of the Pro Rata Share with respect
to a Prepayment Event as of any date in a fiscal year prior to prepayment
pursuant to Section 2.12(d) of the Credit Agreement in respect of Excess Cash
Flow for the prior fiscal year, the Lenders' Amount shall be determined on a pro
forma basis after giving effect to such prepayment in respect of Excess Cash
Flow. After the incurrence of Refinancing Indebtedness, the Pro Rata Share shall
be determined, mutatis mutandis, with respect to the analogous provisions of the
Refinancing Indebtedness.
"Purchase Agreements" shall have the meaning ascribed in Section
1.1.
"Rate Protection Agreements" shall have the meaning ascribed in the
Credit Agreement.
"Recapitalization" shall have the meaning ascribed in Section 1.2.
"Refinancing Indebtedness" shall mean the Credit Agreement
Refinancing Indebtedness.
"Release" shall mean any discharge, emission, release, or threat
thereof, including a "Release" as defined in CERCLA at 42 U.S.C. ss. 9601(22),
and the term "Released" has a meaning correlative thereto.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
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"Required Holders" shall mean, at any time, the holder or holders of
at least 51% of the aggregate unpaid principal amount of the Notes then
outstanding.
"Resellers" shall mean independent auto/truckstop operators who own
their facilities and who are part of the National Network.
"Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.
"Restatement Closing Date" shall mean the "Effective Date" as
defined in the Supplemental Agreement as the date the Supplemental Agreement
becomes effective in accordance with the terms and provisions contained therein.
"Revolving Credit Facility" shall have the meaning ascribed in the
Credit Agreement.
"Sale and Leaseback Transaction" shall have the meaning ascribed in
Section 7.3.
"Secured Parties" shall have the meaning ascribed in the Security
Agreement.
"Security Agreement" shall have the meaning ascribed in Section 1.5.
"Security Documents" shall mean the Mortgages (including any
Assignment of Leases and Rents, any Leasehold Mortgage and the Mortgage
Amendment covering the Mortgaged Properties), the Security Agreement, the Pledge
Agreement, the Collateral Assignment, the Collateral Account Agreement, the
Lockbox Agreements, the Trademark Security Agreement, the Airplane Mortgage, and
each of the security agreements, mortgages and other instruments and documents
executed and delivered pursuant to any of the foregoing or pursuant to Section
6.10.
"Senior Convertible Participating Preferred Stock" shall mean the
Series I Senior Preferred Stock and the Series II Senior Preferred Stock.
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"Senior Funded Debt" means all Funded Debt of the Guarantor and its
Subsidiaries other than the Subordinated Notes (or the Subordinated Note
Refinancing Indebtedness).
"Series I Preferred Stock", "Series I Senior Preferred Stock",
"Series II Preferred Stock" and "Series II Senior Preferred Stock" shall have
the meaning ascribed in Section 4.19(a).
"Standard & Poor's" means Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc.
"Stockholders Agreement" shall mean the Stockholders Agreement dated
as of April 14, 1993, as amended as of March 6, 1997, among certain
Institutional Equity Investors, certain Resellers, certain Operators and the
Company and as the same may be further amended, modified or supplemented in
accordance with the provisions of this Agreement.
"Subordinated Note Documents" shall mean the Subordinated Note
Guarantees, the Subordinated Note Indenture and the Subordinated Notes.
"Subordinated Note Guarantees" shall mean, collectively, the
Guarantees of the Guarantors guaranteeing repayment of the Subordinated Notes.
"Subordinated Note Indenture" shall mean the Subordinated Note
Indenture, dated as of March 24, 1997, among the Company, the Guarantors and
Fleet National Bank, as trustee, as amended from time to time in accordance with
the terms hereof and thereof.
"Subordinated Note Refinancing Indebtedness" shall mean any
Indebtedness incurred by the Company as contemplated in Section 7.1(h).
"Subordinated Notes" shall have the meaning ascribed in Section 1.2.
"Subsidiary" shall mean, with respect to any person (herein referred
to as the "parent"), any corporation, partnership, limited liability company,
association or other business entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or more than 50% of the general
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partnership interests are, at the time any determination is being made, owned,
controlled or held or (b) that is, at the time any determination is made,
otherwise Controlled by the parent or one or more Subsidiaries of the parent or
by the parent and one or more Subsidiaries of the parent. Unless the context
otherwise requires, references to "Subsidiaries" shall mean Subsidiaries of the
Company.
"Supplemental Agreement" shall mean the Supplemental Agreement dated
as of November 24, 1998, supplementing and amending the Original Exchange
Agreement.
"Swingline Loans" shall have the meaning ascribed in the Credit
Agreement.
"TA" shall have the meaning ascribed in Section 1.1.
"TA Ancillary Agreements" shall have the meaning ascribed to the
term "Ancillary Agreements" in the TA Asset Purchase Agreement and shall include
the Non-Competition Agreement, the Credit Card Agreement, the Services
Agreement, the Office Sub-Lease, the Assignment and Assumption Agreement, the
TAFSI Assumption Agreement, the Jobber Agreement, the Supplemental Agreement,
the Trademark Assignment and the Software License Agreement (each as defined in
the TA Asset Purchase Agreement).
"TA Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated as of July 22, 1993, as amended by Amendment No. 1 thereto dated
as of December 9, 1993, among TA, BP Exploration & Oil, Inc. and Truckstops
Corporation of America, as the same may be further amended, supplemented or
otherwise modified from time to time in accordance with the terms of this
Agreement.
"TA Holdings" shall have the meaning ascribed in Section 1.1.
"TA Network" shall have the meaning ascribed in Section 1.1.
"TA Notes" shall have the meaning ascribed in Section 1.1.
"TA Purchase Agreements" shall have the meaning ascribed in Section
1.1.
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"TA Stockholders Agreement" shall mean the Stockholders Agreement
dated as of December 10, 1993 among the Company and the stockholders parties
thereto to be amended in accordance with the Company's Consent Solicitation
dated February 13, 1997, as the same may be amended, modified or supplemented in
accordance with the provisions of this Agreement.
"TA Subordinated Notes" shall mean all of TA's outstanding Series A
and Series B Senior Subordinated Notes due 2003.
"TA Travel" shall mean TA Travel, L.L.C., a Delaware limited
liability company that is a direct wholly owned Subsidiary of TA and a
Guarantor.
"TAFSI" shall have the meaning ascribed in Section 1.2.
"Term Facility" shall have the meaning ascribed in the Credit
Agreement.
"Term Lender" shall have the meaning ascribed in the Credit
Agreement.
"Term Loan Maturity Date" shall mean March 27, 2005.
"Term Loans" shall mean the Term Loans as defined in the Credit
Agreement.
"Total Debt" shall mean, with respect to the Company and its
Subsidiaries on a consolidated basis at any time, all Capital Lease Obligations,
Indebtedness for borrowed money, Indebtedness in respect of deferred purchase
price of property or services of the Company and its Subsidiaries and all
preferred stock at such time mandatorily redeemable on or prior to the first
anniversary of the Term Loan Maturity Date less the amount of cash and cash
equivalents set forth on the Company's consolidated balance sheet at such time
(including all amounts on deposit in the Collateral Account at such time) in
excess of $2,500,000.
"Trademark Security Agreement" shall have the meaning ascribed in
Section 1.5.
"Transaction Documents" shall mean the Credit Agreement Documents,
the Financing Documents and the Subordinated Note Documents.
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"Transactions" shall mean after the Restatement Closing Date, (a)
the transactions described in Section 4.2 of the Original Exchange Agreement and
(b) the Additional Transactions.
"Transition Capital Expenditures" shall mean, for any period, all
capital expenditures (other than the Burns Acquisition and the Additional
Permitted Acquisition, if any) made by the Company and its subsidiaries during
such period to the extent that such capital expenditures (a) are in an amount in
excess of the Capital Expenditures permitted to be made during such period under
Section 7.13(a) of this Agreement and (b) are capital expenditures substantially
similar to those described in Section 10 of the 1997 Confidential Information
Memorandum or Section 11 of the 1998 Confidential Information Memorandum.
"Truckstop" shall mean, as of any date, each full service truckstop
facility that is part of the Network and that is owned by the Company or a
Subsidiary or leased by the Company or a Subsidiary as lessee or sublessee.
"Voting Trust" shall mean the Voting Trust established pursuant to
the terms of the Voting Trust Agreement.
"Voting Trust Agreement" shall mean the Voting Trust Agreement dated
as of April 14, 1993, as amended as of March 6, 1997, among the Company, certain
Resellers, certain Operators and United States Trust Company of New York, as
trustee, as the same may be amended, modified or supplemented in accordance with
the provisions of this Agreement.
"Voting Trust Certificates" shall mean the Voting Trust Certificates
issued pursuant to the terms of the Voting Trust Agreement.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
9.2. Terms Generally.
The definitions in Section 9.1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed to
be
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followed by the phrase "without limitation." All references herein to Sections,
Exhibits and Schedules shall be deemed to be references to Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP as in effect from time to time.
* * * * *
[10.1 Events of Default; Acceleration of Maturity....]
If any of the following events ("Events of Default") shall have
occurred and be continuing (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or by operation of law or
otherwise), that is to say:
(a) any representation or warranty made or deemed made in this
Agreement or any Transaction Document or any amendment or modification
thereof or waiver thereunder, or any representation, warranty, statement
or information contained in any report, certificate, financial statement
or other instrument furnished pursuant to this Agreement or any
Transaction Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of all or any part of the
principal of, or premium (if any) on, any Note when and as the same shall
become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any
Note, when and as the same shall become due and payable, and such default
shall continue unremedied for a period of three Business Days;
(d) default shall be made in the due observance or performance by
the Company, of any covenant, condition or agreement contained in Section
5.3, 5.4, 6.1, 6.5, 6.11, 6.12, 6.13, 6.14, 7.1 or 7.3 to 7.17, inclusive,
or Section 8 or in Section 9 or 10 of the Guarantee Agreement;
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(e) default shall be made in the due observance or performance by
the Company, any Guarantor or TAFSI of any covenant, condition or
agreement contained in any Financing Document (other than those defaults
specified in subsection (b), (c) or (d) above) and such default shall
continue unremedied for a period of the earlier of (i) 30 days after an
executive officer of the Company, such Guarantor or TAFSI first becomes
aware or should have become aware thereof and (ii) 15 days after notice
thereof from any holder of any Note to the Company, such Guarantor or
TAFSI, as applicable;
(f) the Company or any of its Subsidiaries shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $2,000,000, when and as
the same shall become due and payable (after giving effect to any
applicable grace period) or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness (after giving
effect to any applicable grace period) if the effect of any failure
referred to in this clause (ii) is to cause, or to permit the holder or
holders of such Indebtedness or a trustee on its or their behalf (with or
without the giving of notice, the lapse of time or both) to cause, such
Indebtedness to become due prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Company or any of its Subsidiaries, or of a
substantial part of the property or assets of the Company or any of its
Subsidiaries, under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company or any of its Subsidiaries, or for a substantial
part of the property or assets of the Company or any of its Subsidiaries,
or (iii) the winding-up or liquidation of the Company or any of its
Subsidiaries; and such proceeding or petition shall continue undismissed
for 30 days or an order or decree approving or ordering any of the
foregoing shall be entered;
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(h) the Company or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner (but within 30 days in any event), any proceeding
or the filing of any petition described in paragraph (g) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any of
the its Subsidiaries, or for a substantial part of the property or assets
of the Company or any of its Subsidiaries, (iv) file an answer admitting
the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action for the purpose
of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $2,000,000 (to the extent not covered by insurance)
shall be rendered against the Company, any Guarantor or TAFSI or any
combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
levy upon assets or properties of the Company, any Guarantor or TAFSI to
enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(l) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Company, any Guarantor, TAFSI or any ERISA Affiliate to the PBGC or to a
Plan in an aggregate amount exceeding $2,000,000 and, within 30 days after
the reporting of any such Reportable Event to the holders of the Notes or
after the delivery of the statement required pursuant to Section
6.6(b)(iii), the Required Holders shall have notified the Company in
writing that (i) the Required Holders have reasonably determined that, on
the basis of
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such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (a) for the termination of
such Plan or Plans by the PBGC, (b) for the appointment by the appropriate
United States District Court of a trustee to administer such Plan or Plans
or (c) for the imposition of a lien in favor of a Plan and (ii) as a
result thereof an Event of Default exists hereunder; or a trustee shall be
appointed by a United States District Court to administer any such Plan or
Plans; or the PBGC shall institute proceedings to terminate any Plan or
Plans;
(k) (i) the Company, any Guarantor, TAFSI or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the
Company, such Guarantor, TAFSI or such ERISA Affiliate does not have
reasonable grounds for contesting such Withdrawal Liability or is not in
fact contesting such Withdrawal Liability in a timely and appropriate
manner and (iii) the amount of the Withdrawal Liability specified in such
notice, when aggregated with all other amounts required to be paid to
Multiemployer Plans in connection with Withdrawal Liabilities (determined
as of the date or dates of such notification), either (a) is $2,000,000 or
more and the Required Holders have reasonably determined that the Company,
such Guarantor, TAFSI or such ERISA Affiliate will not be able to make the
payments required in connection with such Withdrawal Liability or (B) is
less than $2,000,000 and any payment due as a result of such liability
remains unpaid 30 days after such payment is due;
(l) the Company, any Guarantor, TAFSI or any ERISA Affiliate shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if solely as a result of such reorganization
or termination the aggregate annual contributions of the Company, each
Guarantor, TAFSI and each ERISA Affiliate to all Multiemployer Plans that
are then in reorganization or have been or are being terminated have been
or will be increased over the amounts required to be contributed to such
Multiemployer Plans for their most recently completed plan years by an
amount exceeding $2,000,000 and the Required Holders have reasonably
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determined that the Company, such Guarantor, TAFSI or such ERISA Affiliate
will not be able to make the payments required in connection with such
contribution; (m) any material security interest purported to be created
by any Security Document shall cease to be, or shall be asserted by the
Company, any Guarantor or TAFSI not to be, a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement or such
Security Document) security interest in the securities, assets or
properties covered thereby, except to the extent that any such loss of
perfection or priority results from the failure of the Collateral Agent to
maintain possession of certificates representing securities pledged under
the Pledge Agreement (except to the extent that such loss is covered by a
lender's title insurance policy and the related insurer promptly after
such loss shall have acknowledged in writing that such loss is covered by
such title insurance policy);
(n) any Financing Document shall not be for any reason or shall be
asserted by the Company, any Guarantor or TAFSI, not to be in full force
and effect and enforceable in all material respects in accordance with its
terms;
(o) the Obligations and the guarantees thereof pursuant to the
Guarantee Agreement shall cease to constitute, or shall be asserted by the
Company or any Guarantor not to constitute, senior indebtedness under the
subordination provisions of the Subordinated Notes, the Subordinated
Guarantees and the Subordinated Note Indenture (or the provisions of the
Subordinated Note Refinancing Indebtedness) or such subordination
provisions shall be invalidated or otherwise cease to be a legal, valid
and binding obligation of the parties thereto, enforceable in accordance
with their terms; or
(p) any material provision of the Guarantee Agreement or any other
Financing Document shall cease to be in full force and effect and
enforceable in accordance with its terms for any reason whatsoever or any
Guarantor or TAFSI shall contest or deny in writing the validity or
enforceability of any of its obligations under the Guarantee Agreement or
any other Financing Document, as applicable, or the Notes shall cease to
be entitled to the benefits of any
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Security Document, this Agreement, or the Intercreditor Agreement for any
reason whatsoever;
then (i) upon the occurrence of an Event of Default with respect to the Company
or any of its Subsidiaries described in subsection (g) or (h) above, the unpaid
principal amount of all Notes, together with the interest accrued thereon, shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company or (ii) upon the occurrence and continuance of any other
Event of Default, the Required Holders may, by written notice to the Company,
declare the unpaid principal amount of all Notes to be, and the same shall
forthwith become, due and payable, together with the interest accrued thereon
and, to the extent permitted by law, an amount equal to the Additional Amount
(as hereinafter defined) in respect of each such Note, provided that during the
existence of an Event of Default described in subsection (b) or (c) above with
respect to any Note, the holder of such Note may, by written notice to the
Company, declare such Note to be, and the same shall forthwith become, due and
payable, together with the interest accrued thereon and, to the extent permitted
by law, an amount equal to the Additional Amount. If any holder of any Note
shall exercise the option specified in the proviso to the preceding sentence,
the Company will forthwith give written notice thereof to the holders of all
other outstanding Notes and each such holder may (whether or not such notice is
given or received), by written notice to the Company, declare the unpaid
principal amount of all Notes held by it to be, and the same shall forthwith
become, due and payable, together with the interest accrued thereon and, to the
extent permitted by law, an amount equal to the Additional Amount. If all Notes
are accelerated as specified above, the Company will forthwith give written
notice thereof to any holder of an outstanding Note which has not given written
notice to the Company with respect to such acceleration.
Notwithstanding the foregoing, in the event that a non-payment
default under subsection (a), (d) or (e) above is solely the result of any
Network Operator's failure to perform its obligations to any Guarantor pursuant
to any operating lease with such Guarantor permitted by Section 7.8, then, so
long as (i) there shall not be a similar failure by more than two other Network
Operators and (ii) such Guarantor has rights against such Network Operator with
respect to such default and has commenced
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enforcement of its rights against such Network Operator (including compelling
such Network Operator to cure such default, exercising such Guarantor's
self-help remedies as landlord under such operating lease or terminating such
operating lease and taking possession of the premises within the time for cure
as provided herein) and the Required Holders, in their reasonable judgment, are
satisfied that such Guarantor is diligently and with best efforts prosecuting
such enforcement until cure of such default, no Event of Default shall be deemed
to have occurred hereunder with respect thereto.
For purposes of this Section, the term "Additional Amount" means an
amount equal to the Make-Whole Premium that would be payable with respect to
such Note if the Company had elected to prepay such Note in full pursuant to
Section 5.2 on the date of acceleration.
The provisions of this Section are subject, however, to the
condition that if, at any time after all Notes have been declared due and
payable as aforesaid by the Required Holders, the Company shall pay all arrears
of interest on the Notes and all payments on account of the principal of and
premium (if any) on the Notes which shall have become due otherwise than by
acceleration (with interest on such principal, premium (if any) and, to the
extent permitted by law, on overdue payments of interest, at the rate specified
in the Notes with respect to overdue payments) and all Events of Default (other
than nonpayment of principal of and accrued interest on Notes due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
Section 13, then the holders of at least 75% of the aggregate unpaid principal
amount of the Notes at the time outstanding may, by written notice to the
Company, rescind and annul any such acceleration and its consequences; but no
such action shall affect any subsequent Default or Event of Default or impair
any right consequent thereon.
* * * * *
13. AMENDMENT AND WAIVER.
(a) Any provision of this Agreement or the Notes may, with the
consent of the Company, be amended or waived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required Holders
(subject to the
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provisions of the Intercreditor Agreement) provided, however, that
(i) no such amendment or waiver shall
(A) change the rate or the time of payment of interest on any
of the Notes, change the maturity of any of the Notes or affect the
premium payable on any prepayment of a Note, modify any of the other
provisions of this Agreement with respect to the payment or
prepayment or purchase of any Note, modify this Section 13 or
Section 14, reduce the percentage of the principal amount of the
Notes the holders of which are required to approve any such
amendment or effectuate any such amendment or effectuate any such
waiver, or change the percentage of the principal of the Notes the
holders of which are required to accelerate the maturity of the
Notes or rescind any such acceleration, without the consent of the
holders of all the Notes then outstanding, or
(B) modify the definition of "Make-Whole Premium" without the
consent of the holder of each Note affected thereby, and
(ii) no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
* * * * *
16.6 Notices.
All communications and notices provided for hereunder or under the
Notes shall be in writing and delivered, or sent by a nationally recognized
overnight courier for delivery on the following Business Day or by telex or
telecopy (with such telex or telecopy to be confirmed promptly in writing sent
by overnight courier as aforesaid) (A) if to the Noteholder, at its address as
set forth in Schedule I hereto, or (B) if to the Company, TAFSI or any
Guarantor, at 24601 Center Ridge Road, Suite 200, Westlake, Ohio 44145-5634,
Attention of Edwin P. Kuhn, President and CEO (Telecopy No. (440) 808-3301);
with a copy to The Clipper Group, L.P., 650 Madison Avenue, 9th Floor, New York,
New York 10022, Attention of Rowan G.P. Taylor (Telecopy No. (212) 940-6055);
with a copy to Paul, Weiss, Rifkind,
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Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019,
Attention of Valerie E. Radwaner, Esq. (Telecopy No. (212) 757-3990), or (C) if
to any other holder of a Note, at the address of such holder as it appears on
the Note Register. Any address may be changed from time to time and shall be the
most recent address furnished in writing (1) if by the Noteholder or any other
holder of a Note, to the Company, or (2) if by the Company to the Noteholder and
to each other holder of a Note.
<PAGE> 99
Annex II
(to Supplemental Agreement)
[Amended Schedules 1.01(c), 4.07(b) through 4.23(b), inclusive]
* * * * *
<PAGE> 100
Annex III
(to Supplemental Agreement)
[Amended Schedules 1.1(a), 5.2(b), 6.14, 7.1 through 7.11(a), inclusive]
* * * * *
<PAGE> 101
Annex IV
(to Supplemental Agreement)
[Amended Exhibits]
* * * * *
<PAGE> 102
Annex V
(to Supplemental Agreement)
[Opinions of Counsel]
<PAGE> 1
Exhibit 10.15
Schedule of Omitted Management Subscription Agreements
The following documents have been omitted as Exhibits to the Annual Report
on Form 10-K because they are on substantially identical terms as Exhibit 10.14
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>
<CAPTION>
Agreement # of Shares
- ----------------------------------------------- -------------
<S> <C>
1. Management Subscription Agreement
between the Company and Edwin P. Kuhn 15,452
2. Management Subscription Agreement
between the Company and James W. George 11,590
3. Management Subscription Agreement
between the Company and Michael H.
Hinderliter 11,590
4. Management Subscription Agreement
between the Company and Timothy L. 7,727
Doane
5. Management Subscription Agreement
between the Company and Steven C. Lee 3,864
</TABLE>
<PAGE> 1
Exhibit 10.16
NOTE
$ _______ [DATE]
FOR VALUE RECEIVED, ______________ (the "Borrower"), hereby
unconditionally promises to pay to the order of TravelCenters of America, Inc.,
a Delaware corporation (the "Company"), or its registered assigns, the aggregate
principal amount of _______________________________________ ($ ________) in
lawful money of the United States of America (the "Loan").
The Borrower is an employee of either the Company or one of its
subsidiaries. The Company and the Borrower have entered into a subscription
agreement, dated as of the date first above written (the "Subscription
Agreement"), pursuant to which the Borrower subscribed for shares of the
Company's Common Stock, par value $.01 per share (the "Shares"). The Borrower
has requested that the Company make the Loan to the Borrower as the purchase
price of the Shares, and the Company is willing to make the Loan to the
Borrower, upon the terms and subject to the conditions contained herein.
1. Interest and Payment. Interest shall accrue at an annual rate of
____ Percent, compounded semi-annually. Accrued and unpaid interest, together
with unpaid principal, if not sooner paid, shall be due and payable on the
earliest of (i) the date the Borrower or his transferees (as permitted in the
Stockholders' Agreement, dated as of March 6, 1997 between the Company and
certain of its stockholders) are no longer the beneficial owners of the Shares,
(ii) the lapse or waiver of the Borrower's put option under Section 6 of the
Management Subscription Agreement or the closing of the purchase of the
Borrower's Shares under such Section 6 and (iii) the ninth anniversary of
<PAGE> 2
the date first above written. The Loan may be prepaid, in whole or in part,
without premium or penalty, at any time.
2. Conditions. The obligation of the Company to make the Loan is
subject to the execution and delivery by the Borrower of the Pledge Agreement
dated the date hereof made by the Borrower to the Company in substantially the
form of Exhibit A hereto.
3. Miscellaneous. To the extent permitted by law, the Borrower
waives diligence, presentment, demand, demand for payment, notice of
non-payment, notice of dishonor, protest and notice of protest and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
No waiver or modification of the terms of this Note shall be valid
unless in writing signed by the Company and then only to the extent therein set
forth.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered on the day and year first above written.
----------------------------------------
[Borrower]
<PAGE> 3
PLEDGE AGREEMENT
Pledge Agreement, dated as of _____________, made by _____________
(the "Pledgor"), to TravelCenters of America, Inc., a Delaware corporation (the
"Company").
Pledgor is the owner of the shares (the "Pledged Shares") of stock
described in Schedule 1 hereto and issued by the Company. The Company has agreed
to lend Pledgor ___________________________________________ ($ ________) (the
"Loan"), to be evidenced by a note to be executed by Pledgor simultaneously
herewith (the "Note"). It is a condition precedent to the making of the Loan
under the Note that Pledgor shall have made the pledge contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Company to make the Loan under the Note, Pledgor hereby agrees with
the Company as follows:
1. Pledge. Pledgor hereby pledges to the Company and grants the
Company a security interest in the Pledged Shares.
2. Security for Obligations. This Pledge Agreement secures the
payment of all of Pledgor's obligations under the Note.
3. Delivery of Pledged Collateral. All certificates or instruments
representing or evidencing the Pledged Shares shall be delivered to and held by
the Company and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Company.
<PAGE> 4
4. Representations and Warranties. Pledgor represents and warrants
that Pledgor is the legal and beneficial owner of the Pledged Shares.
5. Further Assurances. Pledgor agrees that from time to time it will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Company may
request in order to perfect and protect the pledge and security interest granted
hereby.
6. Continuing Security Interest. This Agreement shall be a
continuing assignment of, and security interest in, the Pledged Shares and shall
remain in full force and effect until payment of all obligations under the Note.
Upon the payment in full of all such obligations, Pledgor shall be entitled to
the return of the Pledged Shares.
7. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of laws principles thereof. Capitalized terms that are not
defined herein shall have the meanings ascribed to them in the Note.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed and delivered as of the date first written above.
----------------------------------------
Name:
-----------------------------------
<PAGE> 1
Exhibit 10.17
Schedule of Omitted Notes
The following documents have been omitted as Exhibits to the Annual Report
on Form 10-K because they are on substantially identical terms as Exhibit 10.16
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>
<CAPTION>
Interest
Agreement Amount Rate
- ------------------------------------- ----------------- ------------------
<S> <C> <C>
1. Note between the Company and $77,260 4.76%
Edwin P. Kuhn
2. Note between the Company and $57,950 4.76%
James W. George
3. Note between the Company and $57,950 4.76%
Michael H. Hinderliter
4. Note between the Company and $57,950 6.01%
Timothy L. Doane
5. Note between the Company and $38,640 6.01%
Steven C. Lee
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE COMPANY
State of
Subsidiary Incorporation Doing Business As
- ---------------------------- ------------- -------------------------
TA Operating Corporation Delaware TravelCenters of America
National Auto/Truckstops, Inc. Delaware --
TA Franchise Systems, Inc. Delaware --
TA Travel, L.L.C. (a) Delaware --
TP Acquisition, Inc. New York --
(a) Wholly-owned by TA Operating Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUAIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 89,200
<SECURITIES> 0
<RECEIVABLES> 64,919
<ALLOWANCES> 3,907
<INVENTORY> 42,952
<CURRENT-ASSETS> 210,242
<PP&E> 361,803
<DEPRECIATION> 0
<TOTAL-ASSETS> 610,061
<CURRENT-LIABILITIES> 110,674
<BONDS> 390,865
69,974
38
<COMMON> 14
<OTHER-SE> 28,397
<TOTAL-LIABILITY-AND-EQUITY> 610,061
<SALES> 902,266
<TOTAL-REVENUES> 923,810
<CGS> 627,149
<TOTAL-COSTS> 627,149
<OTHER-EXPENSES> 277,568
<LOSS-PROVISION> 1,355
<INTEREST-EXPENSE> 25,371
<INCOME-PRETAX> (6,278)
<INCOME-TAX> (2,101)
<INCOME-CONTINUING> (4,177)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,905)
<CHANGES> 0
<NET-INCOME> (8,082)
<EPS-PRIMARY> (27.59)
<EPS-DILUTED> (27.59)
</TABLE>
<PAGE> 1
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:
NAME AGE POSITION
- ---- --- --------
Edwin P. Kuhn........................ 56 President, Chief Executive
Officer and Director
James W. George...................... 47 Senior Vice President,
Chief Financial Officer
and Secretary
Timothy L. Doane..................... 41 Senior Vice President
Michael H. Hinderliter............... 50 Senior Vice President
Steven C. Lee........................ 35 Vice President and General
Counsel
Margaret M. Eisen.................... 45 Director
Robert B. Calhoun, Jr................ 56 Chairman of the Board of
Directors and Director
Eugene P. Lynch...................... 37 Director
Louis J. Mischianti.................. 39 Director
Rolf H. Towe......................... 60 Director
Harrison T. Bubb..................... 59 Director
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. 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.
1
<PAGE> 2
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.
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> 3
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, 1998 (the "Named Executive Officers") for services rendered
to the Company and its subsidiaries for 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary($) Bonus($)(1) Options(#) ($)(2)
--------------------------- ---- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Edwin P. Kuhn...............................
President, Chief Executive Officer and
Director(3) 1998 350,000 175,000 - 8,285
1997 325,000 162,500 - 4,243
1996 230,000 92,000 - 4,204
James W. George.............................
Senior Vice President, Chief Financial
Officer and Secretary (4) 1998 225,000 112,500 - 4,364
1997 210,000 105,000 - 4,241
1996 144,000 57,600 - 360
Michael H. Hinderliter......................
Senior Vice President (4) 1998 225,000 112,500 - 6,460
1997 210,000 105,000 - 4,953
1996 144,000 57,600 - 360
Timothy L. Doane............................
Senior Vice President (4) 1998 225,000 112,500 - 7,757
1997 210,000 105,000 - 529
1996 138,000 55,200 - 348
Steven C. Lee...............................
Vice President and General Counsel) 1998 110,000 44,000 - 350
1997 9,167 3,667 - -
1996 - - - -
</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 $3,405 in 1998, $3,424 in 1997, and $3,628 in 1996, reflecting his
use of a Company automobile. Mr. George's amount includes $3,084 in 1998
and $3,712 in 1997 reflecting his use of a Company automobile. Mr.
Hinderliter's amount includes $4,960 in 1998 and $4,953 in 1997 reflecting
his use of a Company automobile. Mr. Doane's amount includes $6,917 in 1998
reflecting his use of a Company automobile.
(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. Lee began employment with the Company in December 1997, and was elected
as Vice President and General Counsel effective December 17, 1997.
3
<PAGE> 4
Option Grants.
The following table sets forth certain information regarding stock
options granted in 1998 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 1998
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.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
OPTION GRANTS IN LAST FISCAL YEAR PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------------------- -----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE
NAME GRANTED FISCAL YEAR OF OPTIONS EXPIRATION DATE 5% 10%
---- ------------- ----------------- ----------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Edwin P. Kuhn 31,000 19.9% $23.25 December 31, 2006 424,278 1,237,003
James W. George 18,000 11.6% $23.25 December 31, 2006 246,355 718,260
Michael H. Hinderliter 18,000 11.6% $23.25 December 31, 2006 246,355 718,260
Timothy L. Doane 18,000 11.6% $23.25 December 31, 2006 246,355 718,260
Steven C. Lee 6,000 3.9% $23.25 December 31, 2006 82,118 239,420
</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; and Mr. Doane,
7,364, 7,773, and 8,263 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. 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
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
4
<PAGE> 5
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, 1998 held by the Named Executive
Officers. No options were exercised by any Named Executive Officer in 1998.
AGGREGATED 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 1998YEAR-END (#) AT 1998YEAR-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(1)(2)
---- --- --- ---------------------------- -------------------------------
<S> <C> <C> <C> <C>
Edwin P. Kuhn.................... - - 100,539/- 521,326/ -
James W. George.................. - - 59,359/- 313,464/-
Michael H. Hinderliter........... - - 59,359/- 313,464/-
Timothy L. Doane................. - - 52,058/- 251,543/-
Steven C. Lee.................... - - 6,000/- 10,500/-
</TABLE>
- ---------------------
(1) 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.
(2) Based on a stock price of $25.00 per share.
COMPENSATION OF DIRECTORS
In September 1996, the Company's Board of Directors unanimously agreed
to waive all Board of Directors retainers and meeting fees, although there is no
assurance such an arrangement will continue in the future. Beginning in 1997,
each non-employee director was granted, subject to being disclaimed by such
directors, 1,250 stock options each year pursuant to the 1997 Stock Plan,
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:
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 12.5% of base salary
for 1998 (the "Guaranteed Bonuses"); participation in Company employee benefit
plans; and certain fringe benefits.
5
<PAGE> 6
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."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since April 1997, the members of the Executive Compensation Committee
of the Board of Directors have been Robert B. Calhoun, Jr., Louis J. Mischianti
and Rolf H. Towe. 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, 1998,
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 199,959 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.
6
<PAGE> 7
The following table sets forth the number of shares of capital stock of
the Company beneficially owned, as of February 15, 1999, 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....... 380,500(2) Common 63.3%
770 Broadway
New York, NY 10003
Clipper Capital Associates, L.P.(3)........... 4,528,567 Common(4) 88.3
650 Madison Avenue 2,472,952 Series I Preferred(5) 95.3
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............................... 500,739 Common(6) 47.8
299 Park Avenue 22,059 Series I Preferred 0.9
New York, NY 10171 425,000 Series I Senior 15.9
First Plaza Group Trust....................... 3,996,862 Common(7) 86.9
c/o Mellon Bank, NA 2,096,221 Series I Preferred(8) 80.8
One Mellon Bank Center 1,800,000 Series I Senior(8) 67.1
Pittsburgh, PA 15258
Olympus Private Placement Fund, L.P........... 523,451 Common(9) 46.6
Metro Center 306,912 Series I Preferred(10) 11.8
One Station Place 200,000 Series I Senior 7.5
Stamford, CT 06902
The Travelers Indemnity Company............... 200,000 Common(11) 25.0
One Tower Square 200,000 Series I Senior 7.5
Hartford, CT 06183
Merchant Truckstops, L.P.(12)................. 199,959 Common(13) 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, 1999.
(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 127,243 shares of
Series I Preferred and 37,474 shares of Series I Senior and is the
general partner of three limited partnerships that are the record owners
of the remainder of these shares: (i) National Partners I, L.P.
("National I"), (ii) National Partners, L.P. III, ("National III") and
(iii) Clipper/Merchant. CCA thus may be said to beneficially own all such
shares owned by these three 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.
(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: 127,243 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 III: 280,304 shares of Series I Preferred and (iv) Clipper
Merchant: 1,237,374 shares of Series II Preferred and 934,344 shares of
Series II Senior. As of February 15, 1999, a combined total of only
199,599 shares of the two Series II classes held by Clipper/Merchant were
convertible, as described above. For further discussion of National I,
National III and Clipper/Merchant see footnotes 8, 10 and 12 below.
(5) See footnote 4 above.
7
<PAGE> 8
(6) Includes 53,680 shares of Common Stock held of record, 22,059 shares of
Common Stock that could be issued upon conversion of Series I Preferred
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, 2,096,221 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 directly owns 51,471 shares of Series I Preferred. In
addition, 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, 306,912 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 directly owns 29,412 shares of Series I Preferred. In addition,
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) 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.
(13) Includes 199,599 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, 1999, as described above.
DIRECTORS AND OFFICERS
The following table sets forth the number of shares of capital stock of
the Company beneficially owned, as of February 15, 1999, 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........................ 121,991 Common 17.3
6,000 Series I Preferred *
James W. George...................... 71,449 Common 10.8
500 Series I Preferred *
Michael H. Hinderliter............... 71,949 Common 10.9
1,000 Series I Preferred *
Timothy L. Doane..................... 60,786 Common 9.3
1,000 Series I Preferred *
Steven C. Lee........................ 10,864 Common 1.8
1,000 Series I Preferred *
Margaret M. Eisen.................... - - -
Robert B. Calhoun, Jr................ 4,528,567 Common(2) 88.3
2,472,952 Series I Preferred(2) 95.3
1,237,374 Series II Preferred(2) 100.0
1,855,656 Series I Senior(2) 69.2
934,344 Series II Senior(2) 100.0
Eugene P. Lynch...................... - - -
Louis J. Mischianti.................. 2,500 Common *
Rolf H. Towe......................... 7,500 Common 1.2
Harrison T. Bubb..................... 1,250 Common *
(All directors and officers as a
group (11 persons))............... 4,876,856 Common 89.9
2,482,452 Series I Preferred 95.7
1,237,374 Series II Preferred 100.0
1,855,656 Series I Senior 69.2
934,344 Series II Senior 100.0
</TABLE>
8
<PAGE> 9
- -----------
(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, 1999.
(2) 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.
* The percentage of shares beneficially owned in class is less than one
percent of the class so owned.
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 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.
9
<PAGE> 10
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 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.
TRANSACTIONS AND RELATIONSHIPS WITH INVESTORS
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 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, the time of the TA Acquisition,
the time of the 1997 Refinancing and the time of the 1998
10
<PAGE> 11
Refinancing. In consideration for their services provided in completing the 1998
Refinancing, Clipper and Olympus were paid $266,667 and $133,333, respectively.
Clipper has also been reimbursed from time to time by the Company for out of
pocket expenses, including legal fees. Louis J. Mischianti, who is employed by
an affiliate of Olympus, is a Director 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.
As of December 31, 1998, The Travelers Insurance Company and its
affiliates (collectively "Travelers") owned in the aggregate $27,000,000 of the
Company's Series I Senior Secured Notes and also owned, in the aggregate, more
than 5% of at least one class of the Company's capital stock. Interest expense
related to this indebtedness for the year ended December 31, 1998 was
$2,414,000.
TRANSACTIONS WITH OPERATOR STOCKHOLDERS
As of December 31, 1998, Operators controlling 21 travel centers owned
an aggregate of 273,750 shares of the Company's Common Stock, which represents
approximately 3.1% 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. One such Operator, Walter E. Smith, Jr., was a Director of
the Company from July 1995 until May of 1998.
TRANSACTIONS WITH OFFICERS
As of December 31, 1998, the Company had issued to Edwin P. Kuhn, James
W. George, Timothy L. Doane, Michael H. Hinderliter and Steven C. Lee, 15,452,
11,590, 7,727, 11,590, and 3,864 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 $20 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.
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, Michael H. Hinderliter, $57,950 and Steven
C. Lee, $38,460. 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
Messrs. Doane and Lee, 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.
11
