<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------------
FORM 8-K
Current Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
----------------------------
DATE OF REPORT (Date of earliest event reported) - JUNE 21, 1997
DAIRY MART CONVENIENCE STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-12497 04-2497894
(State or other (Commission I. R. S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
210 BROADWAY EAST, CUYAHOGA FALLS, OH 44222
(Address of principal executive offices)
Registrant's Telephone number, including area code (330) 923-0421
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
On June 21, 1997, Dairy Mart Convenience Stores, Inc. (the "Company")
completed the sale of the assets relating to 156 convenience store and retail
gasoline locations in Connecticut, Massachusetts, Rhode Island, and New York to
DB Companies, Inc. ("DB"), a Rhode Island based convenience store operator
and gasoline wholesaler and retailer. The company received cash consideration
of approximately $39.3 million in the sale transaction. The amount of
consideration received in the transaction was determined by negotiations
between the Company and DB.
The principal assets sold by the Company to DB include inventories, convenience
store and gasoline fixtures and equipment, land, buildings, and building and
leasehold improvements.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information.
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
- ---------------------------------------------------------
The following unaudited pro forma consolidated statements of operations
of the Company for the fiscal year ended February 1, 1997 and the fiscal quarter
ended May 3, 1997, have been prepared assuming that the sale of 156 convenience
store and retail gasoline locations discussed in Item 2, had occurred as of the
beginning of the fiscal year ended February 1, 1997. These unaudited pro forma
consolidated statements of operations are not necessarily indicative of the
results which would have been reported if the transaction had occurred at the
beginning of the fiscal year ended February 1, 1997, or which may be reported in
the future. These unaudited pro forma consolidated statements of operations have
been prepared on the basis of and give effect to the adjustments described in
the accompanying notes, and should be read in conjunction with the related
notes, the unaudited pro forma condensed consolidated balance sheet and related
notes, the description contained in Item 2, and the audited financial statements
included in the Company's Annual Report or Form 10-K for the fiscal year ended
February 1, 1997.
The pro forma adjustments are based upon preliminary estimates only. As
a result, they may differ from amounts actually determined.
<PAGE> 4
DAIRY MART CONVENIENCE STORES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Dairy Mart Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues $585,746 $114,744(a) $471,002
--------- --------- ---------
Cost of goods sold and expenses:
Cost of goods sold 431,851 86,866 (a) 344,985
Operating and administrative expenses 145,631 26,660 (a) 118,971
Interest expense 10,877 285 (b) 10,592
--------- --------- ---------
588,359 113,811 474,548
--------- --------- ---------
Income (loss) before income taxes (2,613) 933 (3,546)
(Provision for) benefit from income taxes 727 (373)(c) 1,100
--------- --------- ---------
Net income (loss) ($1,886) $560 ($2,446)
========= ========= =========
Weighted average shares outstanding 4,441 4,441
========= =========
Income (loss) per share ($0.42) ($0.55)
========= =========
</TABLE>
See notes to Pro Forma Consolidated Statements of Operation
<PAGE> 5
DAIRY MART CONVENIENCE STORES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL QUARTER ENDED MAY 3, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Dairy Mart Pro Forma
Historical Adjustments Pro Forma
--------- --------- ---------
<S> <C> <C> <C>
Revenues $139,929 $27,015 (a) $112,914
--------- --------- ---------
Cost of goods sold and expenses:
Cost of goods sold 102,408 20,103 (a) 82,305
Operating and administrative expenses 34,730 6,343 (a) 28,387
Interest expense 2,767 157 (b) 2,610
--------- --------- ---------
139,905 26,603 113,302
--------- --------- ---------
Income (loss) before income taxes 24 412 (388)
(Provision for) benefit from income taxes (7) (165)(c) 158
--------- --------- ---------
Net income (loss) $17 $247 ($230)
========= ========= =========
Weighted average shares outstanding 4,756 4,756
========= =========
Income (loss) per share $0.00 ($0.05)
========= =========
</TABLE>
See notes to Pro Forma Consolidated Statements of Operation
<PAGE> 6
Dairy Mart Convenience Stores Inc., and Subsidiaries
Notes to the Pro Forma Consolidated Statements of Operations
(Unaudited)
a) Reflects the elimination of the historical revenues, costs of goods sold,
operating, and direct and indirect administrative expenses associated with
the retail locations sold.
b) Reflects the elimination of the historical interest expense related to debt
retired with the proceeds from the sale of the retail locations.
c) Represents the estimated income tax effect of the pro forma adjustments
discussed in Notes a and b.
<PAGE> 7
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------
The following unaudited pro forma condensed consolidated balance sheet
presents the unaudited condensed consolidated balance sheet of the Company as of
May 3, 1997, adjusted to reflect on a pro forma basis the disposition by the
Company of 156 convenience store and retail gasoline operations as discussed in
Item 2. The unaudited pro forma condensed consolidated balance sheet has been
prepared on the basis of and gives effect to the adjustments described in the
accompanying notes, and should be read in conjunction with the related notes,
the unaudited pro forma consolidated statements of operations and related notes,
the description contained in Item 2, and the audited financial statements
included in the Company's Annual Report or Form 10-K for the fiscal year ended
February 1, 1997.
The pro forma adjustments related to the Company's sale of the 156
convenience store and retail gasoline locations to DB are based on preliminary
estimates and are subject to further modifications. Final results will not be
determined until the completion of more detailed studies. As a result, the
adjustments reflected in the unaudited pro forma condensed consolidated balance
sheet may differ from amounts ultimately determined.
<PAGE> 8
DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MAY 3, 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Dairy Mart Pro Forma
Historical Adjustments Pro Forma
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments ....... $ 14,937 $ 23,648 (a) $ 38,585
Inventory ............................. 19,622 (2,810)(b) 16,812
Other current assets .................. 16,465 -- 16,465
--------- --------- ---------
Total current assets ............... 51,024 20,838 71,862
--------- --------- ---------
Property and Equipment, net .............. 97,639 (22,793)(c) 74,846
--------- --------- ---------
Other assets, net ........................ 26,192 (3,111)(d) 23,081
--------- --------- ---------
Total assets ............................. $ 174,855 $ (5,066) $ 169,789
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable ...................... $ 31,508 $ -- $ 31,508
Other current liabilities ............. 16,224 4,906 (e) 21,130
--------- --------- ---------
Total current liabilities .......... 47,732 4,906 52,638
--------- --------- ---------
Long-Term Obligations .................... 110,113 (14,293)(f) 95,820
--------- --------- ---------
Other Liabilities ........................ 8,973 4,273 (e) 13,246
--------- --------- ---------
Stockholders' Equity
Common stock .......................... 65 -- 65
Paid-in capital ....................... 30,667 -- 30,667
Retained earnings (deficit) ........... (7,690) 48 (g) (7,642)
Treasury stock, at cost ............... (5,005) -- (5,005)
Note receivable from DM Associates .... (10,000) -- (10,000)
--------- --------- ---------
Total Stockholders' equity ......... 8,037 48 8,085
--------- --------- ---------
Total liabilities and stockholders' equity $ 174,855 $ (5,066) $ 169,789
========= ========= =========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Balance Sheet.
<PAGE> 9
Dairy Mart Convenience Stores Inc., and Subsidiaries
Notes to the Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
a) Represents the gross proceeds from the sale of the retail locations, less
the proceeds used for the retirement of debt and the payment of other
fees and expenses associated with the sale.
b) Represents cost of inventory sold.
c) Represents the net book value of property and equipment sold.
d) Represents the sale or write-off of intangible and other assets related to
the retail locations sold, and the write-off of deferred financing costs
related to debt retired.
e) Represents an estimate of costs to be incurred for environmental
remediation, as well as legal and other professional fees associated with
the sale of the retail locations.
f) Represents long term debt retired.
g) Represents the estimated after tax gain associated with the sale of the
retail locations.
<PAGE> 10
(c) Exhibits. The following exhibits are filed herewith.
2.1 Asset Purchase Agreement dated March 6, 1997, between Dairy
Mart Convenience Stores, Inc. and DB Companies, Inc.
2.2 Closing Agreement dated June 19, 1997, between Dairy Mart
Convenience Stores, Inc. and DB Companies, Inc.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DAIRY MART CONVENIENCE STORES, INC.
Date: July 7, 1997 /s/ Gregory G. Landry
----------------------
Gregory G. Landry
Executive Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
AMONG
DAIRY MART CONVENIENCE STORES, INC.
ET AL.
AND
DB COMPANIES, INC.
<PAGE> 2
ASSET PURCHASE AGREEMENT
CONTENTS
Page
I. PURCHASE AND SALE OF ASSETS............................................2
1.1 Assets to be Sold.............................................2
1.2 Excluded Assets...............................................4
1.3 Assumed Liabilities...........................................5
1.4 Excluded Liabilities..........................................5
II. PURCHASE PRICE AND CLOSING.............................................6
2.1 Purchase Price................................................6
2.2 Inventory Value...............................................7
2.3 Closing.......................................................7
2.4 Proceedings at Closing........................................8
2.5 Deliveries by Seller to Buyer.................................8
2.6 Deliveries by Buyer to Seller.................................9
2.7 Post Closing.................................................10
III. ALLOCATION OF CERTAIN RECEIPTS AND EXPENSES...........................10
3.1 Payment of Personal Property Excise Taxes....................10
3.2 Real Estate Transfer Taxes...................................11
3.3 Property Taxes...............................................11
3.4 Tax Liability................................................11
3.5 Handling Franchisee Payments.................................12
3.6 Tax Information..............................................12
3.7 Rents, Deposits and Prepaid Expenses.........................12
3.8 Utilities....................................................13
3.9 Environmental and Tank Testing...............................13
3.10 Expense Percentage Rent......................................13
3.11 Income Percentage Rent.......................................14
3.12 Employees....................................................14
IV. REPRESENTATIONS AND WARRANTIES OF SELLER..............................15
4.1 Organization and Good Standing...............................15
4.2 Certificate of Incorporation and Bylaws; Ownership...........15
4.3 Due Authorization; Enforceability; Absence of Conflicts......15
4.4 Consents and Approvals.......................................16
4.5 Brokerage Fees...............................................16
4.6 Litigation...................................................16
4.7 Financial Statements.........................................17
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4.8 Absence of Changes or Events...................................17
4.9 Operations of the Northeast Division...........................19
4.10 Transactions with Certain Persons; The Assets..................19
4.11 Taxes..........................................................20
4.12 Compliance with Laws and Other Instruments.....................20
4.13 Employee Benefit Plans.........................................20
4.14 Employees......................................................20
4.15 Insurance......................................................21
4.16 Title to Assets................................................21
4.17 Condition of Tangible Properties...............................21
4.18 Permits, Licenses and Approvals................................21
4.19 Purchased Real Property........................................22
4.20 Leases and Contracts...........................................24
4.21 Excluded Contracts.............................................25
4.22 Identification of Assets.......................................26
4.23 Trademarks.....................................................26
V. REPRESENTATIONS AND WARRANTIES OF BUYER.................................26
5.1 Organization and Good Standing.................................27
5.2 Due Authorization; Enforceability; Absence of Conflicts........27
5.3 Consents and Approvals.........................................27
5.4 Brokerage Fees.................................................27
5.5 Litigation.....................................................27
5.6 Financing Commitments..........................................28
VI. ENVIRONMENTAL PROVISIONS................................................28
6.1 Definitions....................................................28
6.2 Representations and Warranties of Seller.......................30
6.3 Environmental Site Assessments and Tank Systems................31
6.4 Environmental Reports..........................................32
6.5 Significant or Disruptive Corrective Actions...................32
6.6 Responsibility for Environmental Conditions
and Environmental Compliance Failures........................33
6.7 Completion of Corrective Actions...............................34
6.8 Costs of Corrective Actions....................................35
6.9 Contributing Releases..........................................42
VII. ADDITIONAL AGREEMENTS AND COVENANTS.....................................42
7.1 Trademark License..............................................42
7.2 Non-Competition Agreement......................................43
7.3 Bulk Transfers.................................................43
7.4 Real Property Title Review.....................................43
7.5 Deletion of a Location.........................................44
7.6 Buyer's Investigation..........................................45
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7.7 Operations Prior to Closing...................................45
7.8 Termination...................................................46
7.9 Return of Initial Payment.....................................48
7.10 Information to be Provided....................................48
7.11 Mutual Cooperation............................................50
7.12 Performance by Each Seller....................................51
7.13 HSR Act Filings...............................................51
7.14 Condition of Assets; Identification of Tangible Personal
Property....................................................52
7.15 FIN-OP Receivables and Certain Franchisee Receivables.........53
7.16 Employees of Seller and Buyer.................................55
7.17 Agreements with Respect to Excluded Contracts.................55
VIII. CONDITIONS PRECEDENT TO CLOSING........................................55
8.1 Seller's Conditions Precedent.................................55
8.2 Buyer's Conditions Precedent..................................56
IX. INDEMNIFICATION........................................................58
9.1 Indemnification by Seller.....................................58
9.2 Indemnification by Buyer......................................59
9.3 Limitation on Certain Indemnification Claims..................59
9.4 Manner of Payment of Finally Determined Claims................60
9.5 Procedure for Obtaining Indemnification.......................60
9.6 Survival of Representations and Warranties and
Indemnification.............................................62
9.7 Exclusive Remedy..............................................62
9.8 Insurance.....................................................62
X. MISCELLANEOUS..........................................................62
10.1 Payment of Expenses and Fees..................................62
10.2 Public Announcements..........................................62
10.3 Books and Records; Personnel..................................63
10.4 Additional Assurances.........................................64
10.5 Assignment....................................................64
10.6 Entire Agreement..............................................64
10.7 Notices.......................................................64
10.8 Arbitration...................................................65
10.9 Attorneys' Fees...............................................65
10.10 No Third Party Beneficiaries..................................65
10.11 Liquor License Management.....................................65
10.12 Counterparts..................................................65
10.13 Governing Law; Interpretation.................................65
10.14 Table of Contents and Headings; Exhibits......................65
10.15 Severability..................................................66
10.16 Obligations of Seller.........................................66
10.17 Obligations of FIN-OP.........................................66
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EXHIBITS
<TABLE>
<CAPTION>
Tab
<S> <C> <C>
Exhibit 1 Locations..................................................................1
Exhibit 1.1(b) Purchased Leases...........................................................2
Exhibit 1.1(c) Franchise Agreements.......................................................3
Exhibit 1.1(h) Underground Storage Tanks..................................................4
Exhibit 1.1(j) Tenant Leases..............................................................5
Exhibit 1.3 Assumption Agreement.......................................................6
Exhibit 2.1(b) Deposit Escrow Agreement...................................................7
Exhibit 2.1(c) Environmental Escrow Agreement.............................................8
Exhibit 2.2 Inventory Valuation Procedure .............................................9
Exhibit 2.5(a)-1 to-4 Forms of Deeds............................................................10
Exhibit 2.5(b) Form of Assignment - Purchased Leases.....................................11
Exhibit 2.5(c) Form of Assignment - Franchise Agreements.................................12
Exhibit 2.5(e) Form of Bill of Sale - Inventory, Tangible Personal Property, ............13
Underground Storage Tanks, Books and Records, Intellectual Property
and Goodwill..............................................................14
Exhibit 2.5(g) Form of Assignment - Franchisee Leases and Tenant Leases..................15
Exhibit 2.7 Post Closing Procedures ..................................................16
Exhibit 3.5 Procedures for Franchisee Payments........................................17
Exhibit 4.1 Seller Information .......................................................18
Exhibit 4.3 Breach/Termination Exceptions.............................................19
Exhibit 4.6 Litigation................................................................20
Exhibit 4.7 Financial Information.....................................................21
Exhibit 4.8(b) Stores Closed During Fiscal Year 1997.....................................22
Exhibit 4.8(c) Notice of Termination.....................................................23
Exhibit 4.8(f) Business Changes..........................................................24
Exhibit 4.8(g) Litigation Settled........................................................25
Exhibit 4.10 Transactions with Certain Persons.........................................26
Exhibit 4.12 Compliance with Laws and other Instruments................................27
Exhibit 4.13 Employee Benefit Plans....................................................28
Exhibit 4.14 Employees.................................................................29
Exhibit 4.15 Insurance.................................................................30
Exhibit 4.16 Listed Permitted Encumbrances.............................................31
Exhibit 4.17 Condition of Tangible Properties..........................................32
Exhibit 4.18 Required Permits, Licenses and Approvals..................................33
Exhibit 4.19(a) Condemnation Proceedings..................................................34
Exhibit 4.19(e) Governmental Orders.......................................................35
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit 4.19(j) Contracts Related to Purchased Real Property..............................36
Exhibit 4.19(o) Assessments for Public Improvements.......................................37
Exhibit 4.20 Exceptions for Material Contracts.........................................38
Exhibit 4.21 Excluded Contracts........................................................39
Exhibit 4.23 Trademarks and Tradenames.................................................40
Exhibit 6.2(b) Environmental Notices.....................................................41
Exhibit 6.3 Environmental Protocol....................................................42
Exhibit 6.7 Access Agreement..........................................................43
Exhibit 6.8(a)-1 Contract Assignment.......................................................44
Exhibit 6.8(a)-2 Security Agreement........................................................45
Exhibit 7.1 Trademark License.........................................................46
Exhibit 7.2 Non-Competition Agreement.................................................47
Exhibit 7.5 Estimated Value of Locations..............................................48
Exhibit 7.10(f) Tenant Lease Estoppel Certificate.........................................49
Exhibit 7.10(g) Landlord's Estoppel Certificate...........................................50
</TABLE>
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") entered into as of this 6th day of March,
1997, by and between DAIRY MART CONVENIENCE STORES, INC., a Delaware
corporation ("Dairy Mart"), DAIRY MART, INC., a Massachusetts corporation
("DM-MA"), DAIRY MART EAST, INC., a Rhode Island corporation ("DM-RI"), CIA
FOODMARTS, INC., a New York corporation ("CIA-NY"), CONVENIENT GASOLINE, INC.,
a New York corporation ("CGI"), REMOTE SERVICES, INC., a Kentucky corporation
("RSI"), and CONVENIENT INDUSTRIES OF AMERICA, INC., a Kentucky corporation
("CIA-KY"), all with a principal place of business at 210 Broadway East,
Cuyahoga Falls, Ohio 44222 (Dairy Mart, DM-MA, DM-RI, CIA-NY, CGI, RSI and
CIA-KY are hereinafter individually and collectively sometimes referred to as
"Seller"), FINANCIAL OPPORTUNITIES, INC., a Kentucky corporation also with a
principal place of business at 210 Broadway East, Cuyahoga Falls, Ohio 44222
("FIN-OP"), and DB COMPANIES, INC., a Rhode Island corporation with a principal
place of business at 25 Concord Street, Pawtucket, Rhode Island 02860
(hereinafter referred to as "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller operates or franchises convenience stores under the
"Dairy Mart" name (the "DM Mark") in various parts of the United States,
including 161 convenience stores operated from the parcels of real property
listed in EXHIBIT 1 (each sometimes referred to as a "Location" and sometimes
collectively referred to as the "Locations") in the States of Connecticut,
Massachusetts, and Rhode Island and the Counties of Rockland, Westchester,
Putnam, Orange, Duchess, Ulster, Columbia and Greene in the State of New York
(collectively referred to as the "Northeast States" or the "Territory"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, on the terms set forth herein, the business of Seller
conducted through the Locations (the "Northeast Division") and the assets of
Seller related to the Locations as more particularly identified herein; and
WHEREAS, in consideration of the transactions contemplated by this
Agreement, Buyer desires to obtain the covenant of Seller not to conduct a
convenience store or retail gasoline distribution business in the Territory,
and Seller is willing to agree to such a covenant; and
Seller, FIN-OP and Buyer desire to provide for certain rights and
obligations with respect to the FIN-OP Receivables (as defined below),
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth
and, upon the terms and subject to the conditions hereinafter set forth, the
parties hereto agree as follows:
i
<PAGE> 8
I. PURCHASE AND SALE OF ASSETS
---------------------------
1.1 ASSETS TO BE SOLD. Upon the terms and subject to the conditions
set forth in this Agreement, at Closing (as defined in Section 2.3 hereof),
Seller shall sell, transfer and assign to Buyer, and Buyer shall purchase and
receive all of Seller's right, title and interest in and to the properties,
assets and rights of every nature, kind and description, tangible and
intangible (including goodwill), whether real, personal or mixed, whether
accrued, contingent or otherwise (other than the Excluded Assets as defined
below) primarily related to or primarily used or held for use in connection
with the Northeast Division or the Locations as the same now exist or, in
accordance with the terms of this Agreement, may exist as of Closing
(collectively the "Assets"), including without limitation the following:
(a) The real property owned by Seller listed as such on
EXHIBIT 1, together with all buildings, improvements, easements and
appurtenances thereon and thereto, but excluding any underground
storage tanks and lines located thereon or related thereto except as
provided in Section 1.1(h) below (whether operated by Seller or
franchised to a franchisee by Seller, collectively, the "Owned Real
Property");
(b) The real property leased by Seller listed as such in
EXHIBIT 1, together with all of Seller's interest in the buildings,
improvements, easements and appurtenances thereon and thereto,
including without limitation the leases listed in EXHIBIT 1.1(b)
(collectively, the "Purchased Leases"), but excluding any underground
storage tanks and lines located thereon or related thereto except as
provided in Section 1.1(h) below (whether operated by Seller or
franchised to a franchisee by Seller, collectively the "Leased Real
Property"; the Owned Real Property and the Leased Real Property are
sometimes collectively referred to herein as the "Purchased Real
Property");
(c) All franchise agreements, leases and other agreements
with franchisees (including related guaranties) of the Locations
listed as such in EXHIBIT 1, including without limitation those
franchise agreements, leases, other agreements and guaranties listed
on EXHIBIT 1.1(c) (collectively, the "Franchise Agreements"; the
leases with franchisees listed on Exhibit 1.1(c) are sometimes
collectively referred to herein as the "Franchisee Leases");
(d) All operating permits, tank registration permits, and
other permits, licenses, grants, concessions, franchises, filings and
other governmental authorizations, agreements and approvals, including
lottery agreements, and all applications for and amendments to any of
the foregoing, related to the Northeast Division or the Locations, all
to the extent transferable (collectively, the "Transferable Permits");
2
<PAGE> 9
(e) All inventories of merchandise and petroleum products
present at the Locations at Closing, except inventories owned by
franchisees with respect to the franchised Locations (collectively,
the "Inventory");
(f) Except for changes permitted by Section 4.8(b) hereof,
all tangible personal property now or as of the Closing primarily
related to the Northeast Division or located at the Locations,
including without limitation furniture, fixtures, and equipment;
leasehold improvements; gasoline and diesel fuel dispensing pumps;
maintenance equipment; new and used parts inventory; signs; vacuum
cleaners; cash registers, computers and computer software (other than
test systems to be removed and replaced prior to Closing); the
complete StoreMaster store-level daily sales reporting system and
host-level home office system, including the application development
environment, all sources codes, programming manuals, reference
materials and system documentation, operated at the Locations and from
Seller's Enfield, Connecticut offices (the "StoreMaster Software");
telephone systems and equipment; office equipment; and supplies and
advertising materials; as of the date of this Agreement and as
thereafter may be acquired by Seller up to Closing, but excluding any
underground storage tanks and lines located thereon or related thereto
except as provided in Section 1.1(h) below (collectively, the
"Tangible Personal Property");
(g) [Intentionally Omitted];
(h) The underground storage tanks, lines and related systems
used in connection with the Locations and listed on EXHIBIT 1.1(h)
(collectively, the "Underground Storage Tanks");
(i) All books and records now or as of the Closing primarily
related to the Northeast Division or the Locations, including price
lists, sales and promotional materials, sales records and data,
Location inspection records and reports, customer lists and customer
files and copies of personnel files for employees to be hired by
Buyer; and all plans and specifications, surveys, blueprints and
drawings now or as of the Closing related to any buildings and
improvements at any Location (collectively, the "Books and Records");
(j) The leases and other agreements with tenants of the
Purchased Real Property other than franchisees, including without
limitation the leases and other agreements listed in EXHIBIT 1.1(j)
(collectively, "Tenant Leases");
(k) All copyrights and, to the extent reduced to written or
other tangible form (including but not limited to electronic media),
all drawings, designs, plans, research, specifications, formulae,
processes, know-how, technology, trade secrets and other confidential
or proprietary information and other data and information (to the
extent not otherwise encompassed in Sections 1.1(a) through (i) above)
primarily
3
<PAGE> 10
related to the Northeast Division or the Locations or contemplated
improvements, supplements or additions to the operations of the
Northeast Division or the Locations; provided, however, that the
rights to any store designs are transferred only with respect to the
Locations and may not be used by Buyer for the construction of any new
stores (collectively, the "Intellectual Property"); and
(l) All telephone numbers, yellow page listings, and goodwill
related to the Locations (collectively, the "Goodwill").
1.2 EXCLUDED ASSETS. Seller and Buyer expressly understand and agree
that Seller is not hereunder selling, assigning, transferring, conveying or
delivering to Buyer any assets, properties, rights, contracts or claims other
than the Assets, including without limitation any of the following
(collectively, the "Excluded Assets"):
(a) The real property and improvements located at One Vision
Drive, Enfield, Connecticut and 240 South Road, Enfield, Connecticut
and the personal property located at such locations (other than the
StoreMaster Software and the Books and Records described above);
(b) The accounts receivable of Seller and any related
collateral interest, including Seller's interest in any percentage
rent due from franchisees with respect to operations prior to Closing,
except for Buyer's rights under Section 7.15 hereof;
(c) The properties, assets and rights of Seller primarily
related to its convenience store business located outside the
Territory;
(d) All tax refunds with respect to the Assets to the extent
the same relate to periods prior to the Closing;
(e) All insurance proceeds payable to Seller;
(f) All minute books and other corporate records of Seller;
(g) All reimbursements to which Seller is entitled under any
state environmental fund;
(h) All rights and payments due Seller under any Excluded
Contracts (as defined below);
(i) Any trademarks of Seller other than Buyer's rights to the
Trademarks pursuant to the Trademark License (as defined below);
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(j) All properties, assets and rights related to convenience
stores previously owned or operated by the Northeast Division and
closed prior to the date hereof but in no event including any
properties, assets and rights related to any Location; and
(k) All deposits and prepaid expenses for which Seller is not
given credit pursuant to Section 3.7 hereof.
1.3 ASSUMED LIABILITIES. Subject to the limitations set forth herein
and in Section 1.4 hereof, Buyer shall assume at the Closing and subsequently
pay, honor and discharge, in accordance with their terms and subject to any
defenses of Seller, the following liabilities and obligations of Seller to the
extent the same arise in connection with transactions and events occurring on
and after the Closing (collectively, the "Assumed Liabilities"):
(a) the Purchased Leases listed on EXHIBIT 1.1(b) assigned to
Buyer;
(b) the Franchise Agreements listed on EXHIBIT 1.1(c)
assigned to Buyer;
(c) the Transferable Permits to the extent assigned to Buyer;
and
(d) the Tenant Leases listed in EXHIBIT 1.1(j) assigned to
Buyer.
Buyer's obligations with respect to the Assumed Liabilities shall be set forth
in an Assumption Agreement substantially in the form attached hereto as EXHIBIT
1.3 (the "Assumption Agreement") except as otherwise expressly set forth
herein. The Assumed Liabilities shall in no event include any liabilities and
obligations arising out of the foregoing in connection with (i) any
transactions or events occurring before the Closing, (ii) any breach or default
of any of the foregoing occurring prior to or as a result of Closing, and (iii)
any deposits under Franchise Agreements and Tenant Leases not transferred to
Buyer pursuant to Section 3.7 hereof.
1.4 EXCLUDED LIABILITIES. The transaction contemplated by this
Agreement is the purchase and sale of assets and not a defacto merger of Seller
and Buyer. Buyer is not a successor in interest to Seller, and neither Seller
nor any officer of Seller shall have any continuing participation in the
ownership or management of the Northeast Division following the Closing. Except
as specifically set forth in Section 1.3, Seller and Buyer agree that Buyer
shall not assume or become liable for any debts, liabilities or obligations of
any kind of Seller existing on the Closing Date or thereafter incurred by
Seller, whether known or unknown, absolute or contingent, mature or unmatured,
liquidated or unliquidated, or accrued or pending, including without limitation
any debts, liabilities or obligations with respect to the Excluded Assets
(collectively, the "Excluded Liabilities").
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II. PURCHASE PRICE AND CLOSING
--------------------------
2.1 PURCHASE PRICE.
(a) As consideration for all the Assets, Buyer shall pay to
Seller Thirty Two Million Dollars ($32,000,000.00) plus the value of
the Inventory determined in accordance with Section 2.2 hereof,
subject to adjustment as provided in this Agreement. The aggregate
consideration for the Assets is referred to as the "Purchase Price".
If, as provided for in this Agreement, a portion of the Assets are
deleted from this Agreement, the Purchase Price will be computed in
accordance with Section 7.5 hereof.
(b) Of the Purchase Price, Four Hundred Thousand Dollars
($400,000.00) shall be paid upon execution of this Agreement
("Deposit"), with the balance to be paid at Closing, subject to
Section 2.2 hereof. The Deposit will be held in an interest bearing
escrow account by Citizens Bank of Rhode Island, as escrow agent
("Deposit Escrow Agent"), pursuant to a Deposit Escrow Agreement in
the form attached to this Agreement as EXHIBIT 2.1(b) (the "Deposit
Escrow Agreement"). At the Closing, the Deposit and all interest
earned thereon will be paid to Seller. One-half (1/2) of the interest
earned on the Deposit will be credited as a reduction to the final
balance due from Buyer to Seller at Closing. If the Closing does not
occur, the Deposit and interest earned thereon will be distributed in
accordance with Section 7.9 hereof.
(c) At the Closing, Seller will pay or deliver to State
Street Bank and Trust Company or other trustee mutually acceptable to
Seller and Buyer, as escrow agent ("Environmental Escrow Agent"), the
amount of money required to be contributed by Seller as of Closing to
the Environmental Escrow Fund (as defined below) under Section 6.8
hereof or, at Seller's election, a Letter of Credit (as defined below)
in such amount as contemplated by such Section, in each case to be
held pursuant to an Environmental Escrow Agreement in the form
attached to this Agreement as EXHIBIT 2.1(c) (the "Environmental
Escrow Agreement").
(d) All amounts payable at any time hereunder shall be paid
in United States Dollars by no later than 1:00 p.m. local time on the
date any such payment is due, in immediately available funds by wire
transfer, if to an escrow agent named hereunder, to one or more
accounts designated in writing for such purpose by such escrow agent,
if to Seller to one or more accounts designated in writing for such
purpose by Seller ("Seller's Bank Account"), and if to Buyer to one or
more accounts designated in writing for such purpose by Buyer
("Buyer's Bank Account").
(e) The Purchase Price shall be allocated among Owned Real
Property, Leased Real Property, Franchise Agreements, Inventory
(determined as set forth in Section 2.2 below), Underground Storage
Tanks, Books and Records, Tenant Leases,
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Intellectual Property, Tangible Personal Property, the Non-Competition
Agreement, and Good Will, as reasonably agreed by Buyer and Seller
prior to Closing. Subject to the requirements of any applicable tax
law and the rulings of any applicable governmental agency, all tax
returns and reports filed by Buyer and Seller shall be prepared
consistently with the foregoing allocation. Seller and Buyer each
agree to notify the other in the event any adjustment is so required
or imposed.
2.2 INVENTORY VALUE. The actual value of the Inventory to be paid by
Buyer to Seller shall be calculated and paid in accordance with this Section
2.2. The portion of the Purchase Price to be paid by Buyer at Closing will
include an amount equal to the estimated value of the Inventory (the "Estimated
Inventory Value"), but not in excess of Three Million Seven Hundred Thousand
Dollars ($3,700,000.00) (the "Closing Inventory Payment"). The Estimated
Inventory Value shall be the amount of Inventory shown on the balance sheet of
Seller for the most recently ended accounting period prior to Closing, prepared
in the ordinary course of business of Seller and certified in writing to Buyer
as of Closing by the Chief Financial Officer of Seller. Commencing on the day
before the Closing Date, RGIS (or another valuation service acceptable to Buyer
and Seller) shall count and compute the value of saleable non-petroleum
Inventory as of Closing using the valuation procedure and criteria set forth in
EXHIBIT 2.2. Buyer and Seller will share equally the costs of such Inventory
valuation and shall each be permitted to have a representative present during
such valuation. In addition, commencing on the day before the Closing Date,
Buyer and Seller shall jointly determine the actual quantities of saleable
petroleum Inventory as of Closing (the "Petroleum Inventory") and shall
promptly thereafter compute the value of the Petroleum Inventory using the
Petroleum Inventory valuation procedure and criteria set forth in EXHIBIT 2.2.
The determination of the actual Inventory shall commence as soon as practicable
on the day before the Closing Date and continue as rapidly as possible and
shall be completed within three (3) days. If the computed aggregate value of
Inventory exceeds the Closing Inventory Payment, Buyer shall pay the difference
to Seller within ten (10) days after the determination thereof, together with
interest thereon from the Closing Date to the date of payment at the prime rate
of Chase Manhattan Bank in New York in effect on the last business day prior to
Closing ("Prime Rate") by wire transfer to Seller's Bank Account; provided,
however, that to the extent that the computed value exceeds the sum of Three
Million Seven Hundred Thousand Dollars ($3,700,000.00), the amount in excess of
said Three Million Seven Hundred Thousand Dollars ($3,700,000.00) shall be paid
with interest at the Prime Rate from the Closing Date to the date of payment as
aforesaid on such date as may be determined by Buyer, but not later than sixty
(60) days after Closing. If the computed value is less than the Closing
Inventory Payment, Seller shall pay the difference to Buyer within ten (10)
days after the determination thereof, together with interest at the Prime Rate
thereon from the Closing Date to the date of payment by wire transfer to
Buyer's Bank Account.
2.3 CLOSING. The closing of the transactions contemplated hereby and
the transfer of the Assets (the "Closing"; the actual date as of which the
Closing occurs being referred to herein as the "Closing Date") shall occur at
the offices of Partridge, Snow & Hahn, 180 South
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Main Street, Providence, Rhode Island at 10 A.M. local time three (3) business
days following the satisfaction of all conditions to the Closing set forth in
Article VIII hereof (or the waiver thereof by the party or parties entitled to
waive any such condition) other than conditions relating to actions to be taken
at Closing by the parties hereto, but in no event later than May 15, 1997 (the
"Termination Date"); provided, however, that the Closing shall occur on that
Friday that is closest in time to the date otherwise determined in accordance
with the foregoing provisions for the Closing but not later than the
Termination Date.
2.4 PROCEEDINGS AT CLOSING. All proceedings to be taken and all
documents to be executed and delivered by Seller in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Buyer and its counsel. All proceedings to
be taken and all documents to be executed and delivered by Buyer in connection
with the consummation of the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Seller and its counsel. All
proceedings to be taken and any documents to be executed and delivered by any
of the parties at the Closing shall be deemed to have been taken, executed and
delivered simultaneously, and no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
2.5 DELIVERIES BY SELLER TO BUYER. At the Closing, Seller shall
deliver to Buyer the following:
(a) executed deeds with respect to the Owned Real Property
substantially in the form attached hereto as EXHIBITS 2.5(a)-1,
2.5(a)-2, 2.5(a)-3, and 2.5(a)-4 as appropriate;
(b) executed assignments of all Purchased Leases
substantially in the form attached hereto as EXHIBIT 2.5(b);
(c) executed assignments of all Franchise Agreements (other
than the Franchisee Leases) substantially in the form attached hereto
as EXHIBIT 2.5(c);
(d) executed assignments of all Transferable Permits as
required by applicable law;
(e) an executed bill of sale for the Inventory, Tangible
Personal Property, Underground Storage Tanks, Books and Records,
Intellectual Property and Goodwill substantially in the form attached
hereto as EXHIBIT 2.5(e);
(f) [Intentionally Omitted];
(g) executed assignments of all Franchisee Leases and all
Tenant Leases substantially in the form attached hereto as EXHIBIT
2.5(g);
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(h) an executed Environmental Escrow Agreement and the other
documents referenced in Section 6.8 hereof, including appropriate
UCC-1 Financing Statements;
(i) an executed Trademark License;
(j) an executed Non-Competition Agreement;
(k) the opinion of counsel for Seller referred to in Section
8.2(d) hereof;
(l) a receipt for the Purchase Price and the Trademark
Royalty (as defined below);
(m) evidence reasonably satisfactory to Buyer of the
contribution to the Environmental Escrow Agent of the money or Letter
of Credit contemplated by Section 6.8 hereof;
(n) with respect to each Seller and FIN-OP, certified copies
of resolutions adopted by the Boards of Directors of the Seller and
FIN-OP authorizing the execution of this Agreement, the sale of the
Assets to Buyer in accordance with the terms hereof, and the
performance of the Seller's and FIN-OP's respective obligations
hereunder;
(o) with respect to each Seller, a certificate of good
standing for the Seller from the Secretary of State and, if separately
provided, from each Division of Taxation, Tax Administrator or other
State Taxing Agency in the Seller's state of incorporation and in each
of the Northeast States where it is required to be qualified to do
business, and with respect to FIN-OP, comparable documents from its
state of incorporation; and
(p) customary and usual documents, instruments and
certificates required in connection with conveyances of real property
and leasehold interests and other assets under the respective laws of
the Northeast States, including a gap indemnity agreement if requested
by the title insurance company.
2.6 DELIVERIES BY BUYER TO SELLER. At the Closing, Buyer shall deliver
to Seller the following:
(a) immediately available funds in the amount of the balance
of the Purchase Price referred to in Section 2.1 hereof and the
Trademark Royalty referred to in Section 7.1 hereof, such funds to be
paid to Seller as provided herein;
(b) the opinion of counsel for Buyer referred to in Section
8.1(d) hereof;
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(c) the Assumption Agreement and the other agreements
referenced in Section 1.3 hereof;
(d) certified copies of resolutions adopted by the Board of
Directors of Buyer authorizing the execution of this Agreement and the
purchase of the Assets from Seller in accordance with the terms
hereof;
(e) a certificate of good standing for Buyer from the
Secretary of State in each of the Northeast States; and
(f) an executed Environmental Escrow Agreement and the other
agreements referenced in Section 6.8 hereof.
2.7 POST CLOSING. Sixty (60) days following Closing (the
"Post Closing"), Buyer and Seller shall account for all sums for which each is
responsible under Section 2.2, Article III and Section 7.5 of this Agreement
and make disbursements to the other party as appropriate. The Post Closing will
be conducted in accordance with EXHIBIT 2.7.
III. ALLOCATION OF CERTAIN RECEIPTS AND EXPENSES
-------------------------------------------
3.1 PAYMENT OF PERSONAL PROPERTY EXCISE TAXES.
(a) The Assets are comprised of (i) certain Inventory which
shall be acquired by Buyer for resale, (ii) other personal property
assets as to which the "isolated, casual or occasional sale" exemption
or similar exemption from Excise Taxes is or may be applicable, and
(iii) other personal property assets as to which other exemptions from
Excise Taxes are or may be applicable. Buyer is or will be registered
for federal and applicable state purposes as an exporter, importer,
retailer and position holder of petroleum and merchandise of the types
comprising the Inventory and other personal property assets. In order
to obtain any exemption or favorable tax rate, Buyer shall provide
Seller with any exemption or resale certificate, permit, license or
such other documentation as may be required by the taxing authorities
to establish the right to such exemption or tax rate. If any
exemptions claimed by Buyer are subsequently denied by taxing
authorities, and Seller is assessed additional taxes as a result of
the disallowed exemption certificates provided by Buyer, then Buyer
shall reimburse Seller, or its assignees, for such taxes, including
interest and penalty.
(b) All Excise Taxes imposed on the transfer of the Assets
constituting personal property shall be paid by Buyer, and Buyer and
Seller shall file such tax returns as each may be required to file in
connection therewith in accordance with applicable law; provided,
however, that payment of any such Excise Taxes which arise as a result
of the sale of Petroleum Inventory hereunder, taking into account any
exemption or favorable tax rate applicable to sales to Buyer or
otherwise available,
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shall occur on the date the amount of Petroleum Inventory is
determined under Section 2.2 hereof. Buyer shall indemnify, defend and
hold Seller harmless in accordance with the procedures in Article IX
hereof for any liability Seller may incur as a result of Buyer's
failure to pay any such taxes directly to the appropriate taxing
authorities.
(c) The term "Excise Taxes" shall include Federal, state and
local excise and sales and other documentary stamp, conveyance,
transfer, and other taxes or charges imposed on the sale of personal
property comprising the Assets but shall exclude income, franchise, or
like taxes levied on or measured by the net income of a party, which
taxes shall be the obligation of the party receiving such income, and
shall exclude real estate transfer taxes addressed in Section 3.2
hereof.
3.2 REAL ESTATE TRANSFER TAXES. All federal, state and local
documentary stamp, conveyance, transfer and other taxes or charges in lieu
thereof relating to the conveyance of the Assets constituting real property
shall be paid by Seller, and Seller shall prepare and file all related tax
returns.
3.3 PROPERTY TAXES. All real estate taxes, ad valorem personal
property and inventory taxes, fire district taxes, and other such charges
constituting a lien or encumbrance on any of the Assets, including special or
betterment assessments against any of the Assets which are payable in
installments over more than one (1) year (collectively "Property Taxes"), that
relate to a period (as established by the applicable custom and practice of the
state, county, city or town in which any respective Assets are situated and
regardless when the same may be payable) ending prior to the Closing Date shall
be the responsibility of the Seller. Property Taxes that, under such custom and
practice, cover the period in which the Closing occurs shall be prorated
between Seller and Buyer, with Seller being responsible for the portion of such
period prior to the Closing Date and Buyer being responsible for the portion of
such period on and after the Closing Date. Property Taxes that, under such
custom and practice, cover a period after the Closing shall be the
responsibility of the Buyer. All installments of Property Taxes having a due
date prior to the Closing Date shall be paid by Seller prior to the Closing
Date, and Buyer shall pay all installments of Property Taxes having a due date
on or after the Closing Date. At the Closing, the net amount of all Property
Tax adjustments computed in accordance with this Section, based upon which
party is responsible for such Property Taxes and which party is to pay such
Property Taxes, shall be added to or deducted from the Purchase Price. If the
amount of any Property Taxes is not fixed and determined as of the Closing, the
foregoing Closing adjustment shall be based on the amount thereof as reasonable
estimated at Closing, and an appropriate payment shall be made by Buyer or
Seller to the other promptly following a final determination of the amount
thereof.
3.4 TAX LIABILITY. Except as otherwise provided herein, (i) Seller
shall be responsible for and pay all taxes levied or imposed upon or in
connection with the Assets or the conduct or operation of the Locations prior
to the Closing Date, and (ii) Buyer shall be responsible for and pay all taxes
levied or imposed upon or in connection with the Assets or
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the conduct or operation of the Locations on and after the Closing Date. All
taxes constituting a lien or encumbrance on the Assets or any part thereof
(other than current Property Taxes permitted under Section 4.16(ii)) shall be
paid by Seller prior to the Closing. Any interest and penalties arising in
connection with taxes due under this Section shall be the responsibility of the
party required to timely file correct tax returns concerning such taxes.
Control of any legal or administrative proceedings concerning any such taxes,
and entitlement to any refunds or awards with respect to any such taxes, shall
rest with the party responsible for payment therefore under this Section;
provided, however, that, with respect to taxes that must be combined or joined
with one or more other tax issues which one party desires to contest, control
of such proceedings shall rest with the party having the larger amount of taxes
in dispute, and neither party may adjust, compromise or settle taxes which are
contested by or on behalf of the other party without the consent of the other
party. Buyer shall give Seller notice of any tax audit of any period for which
Seller is responsible within seven (7) days of receipt by Buyer of any such
notice, and Seller shall give Buyer notice of any tax audit of any period for
which Buyer is responsible within seven (7) days of receipt by Seller of any
such notice.
3.5 HANDLING FRANCHISEE PAYMENTS. None of Seller's accounts
receivables are being sold or transferred under this Agreement to Buyer;
provided, however, that Buyer and Seller agree that certain provisions should
apply with respect to accounts receivable owed to Seller as of Closing by
limited franchisees ("Limited Franchisee Receivables") and with respect to
accounts receivable owed to Seller as of Closing by full franchisees ("Full
Franchisee Receivables"; the Limited Franchisee Receivables and the Full
Franchisee Receivables are collectively referred to herein as the "Franchisee
Receivables"). The amounts outstanding under the Franchisee Receivables as of
December 28, 1996 are more particularly identified in a report provided by
Seller to Buyer noted as item 24 on EXHIBIT 4.7. Following the Closing, subject
to the provisions of Sections 3.7 and 7.15 hereof, Buyer and Seller agree that
all payments with respect to Franchisee Receivables owed to Seller and accounts
receivables owed by franchisees to Buyer shall be collected, processed and
adjusted between the parties as set forth on EXHIBIT 3.5 attached hereto.
3.6 TAX INFORMATION. Each party to this Agreement shall provide the
other party with access to all relevant documents, data and other information
which may be required by the other party for the purpose of preparing tax
returns and responding to any audit by any governmental agency. Each party to
this Agreement shall cooperate with all reasonable requests of the other party
made in connection with resisting or contesting the imposition of taxes or
filing related tax returns. Notwithstanding anything to the contrary in this
Agreement, neither party to this Agreement shall be required at any time to
disclose to the other income tax returns or other confidential tax information
except to the extent required by lawful government subpoena.
3.7 RENTS, DEPOSITS AND PREPAID EXPENSES. Rents, deposits, prepaid
expenses, and similar items relating to the Assets and benefitting Buyer shall
be prorated between the parties as of the date of Closing at the Post Closing.
Any refundable deposits acknowledged in
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writing by the holder thereof to be available to Buyer will be transferred to
the account of Buyer and Buyer will reimburse Seller at the Post Closing for
such deposits. Any deposits for which Buyer will become responsible with
respect to the Tenant Leases will be transferred to Buyer at the Post Closing.
To the extent Seller is lawfully permitted to do so, following the Closing,
Seller may setoff against any Franchisee Receivable owed to Seller by any
Franchisee the amount of any deposit held by Seller with respect to such
franchisee. Seller shall transfer to Buyer at the Post Closing the amount of
any deposit held by Seller that has not been so setoff by Seller or that
exceeds the Franchisee Receivable of such franchisee. Seller or Buyer shall
reimburse the other for the net amount of the foregoing as determined at the
Post Closing.
3.8 UTILITIES. Charges for water, gas, power, light and other utility
service shall be the responsibility of Seller with respect to service up to
the Closing Date and shall be Buyer's responsibility with respect to service
on and after the Closing Date.
3.9 ENVIRONMENTAL AND TANK TESTING. The cost of tank and
environmental testing done in accordance with Article VI of this Agreement
will be allocated in accordance with Article VI of this Agreement.
3.10 EXPENSE PERCENTAGE RENT. Percentage rent payable under leases of
Leased Real Property ("Expense Percentage Rent") will be allocated between
Seller and Buyer at the Post-Closing and paid as follows:
(a) Seller shall be responsible for all Expense Percentage
Rent due under any lease for any calendar year, any fiscal year, or
any other time period as set forth in such lease which elapses prior
to the Closing Date. Buyer shall be responsible for all Expense
Percentage Rent due under any lease for any calendar year, any fiscal
year, or any other time period as set forth in such lease which
commences on or after the Closing Date.
(b) For Expense Percentage Rent allocable to time periods in
which the Closing occurs, the following formula shall be used to
determine Seller's portion thereof: The threshold level of net sales
or gross sales, as provided in the applicable lease, shall be divided
by the number of days in the applicable period (the "Daily Threshold
Number"). The Daily Threshold Number shall be multiplied by the number
of days in the applicable period expiring prior to the Closing Date
(the "Aggregate Threshold Number"). The Aggregate Threshold Number
shall be subtracted from the total net sales or gross sales of Seller
(as provided in the applicable lease) for the portion of the period
expiring prior to Closing ("Percentage Rental Sales Number"). Seller
shall be responsible for Expense Percentage Rent based on the
resulting Percentage Rental Sales Number. Buyer shall be responsible
for all other Expense Percentage Rent for the applicable period.
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(c) All amounts of Expense Percentage Rent for which Seller
is responsible that are due and payable as of Closing shall be paid by
Seller prior to Closing. All amounts of Expense Percentage Rent for
which Seller is responsible that are due and payable after Closing
shall be paid by Seller to Buyer on or prior to the due date thereof.
3.11 INCOME PERCENTAGE RENT. Percentage rent payable under Franchisee
Leases or under Tenant Leases ("Income Percentage Rent") will be allocated
between Seller and Buyer at the Post-Closing and paid as follows:
(a) Seller shall be entitled to all Income Percentage Rent
payable by franchisees under any Franchise Leases and by tenants under
any Tenant Leases for any calendar year, any fiscal year, or any other
time period as set forth in such lease which elapses prior to the
Closing Date. Buyer shall be entitled to all Income Percentage Rent
payable by franchisees under any Franchise Leases and by tenants under
any Tenant Leases for any calendar year, any fiscal year, or any other
time period as set forth in such lease commencing on or after the
Closing Date.
(b) For Income Percentage Rent allocable to time periods in
which the Closing occurs, the following formula shall be used to
determine Seller's portion thereof: The threshold level of net sales
or gross sales, as provided in the applicable lease, shall be divided
by the number of days in the applicable period (the "Daily Threshold
Number"). The Daily Threshold Number shall be multiplied by the number
of days in the applicable period expiring prior to the Closing Date
(the "Aggregate Threshold Number"). The Aggregate Threshold Number
shall be subtracted from the total net sales or gross sales of the
respective franchisee or tenant (as provided in the applicable lease)
for the portion of the period expiring prior to Closing ("Percentage
Rental Sales Number"). Seller shall be entitled to Income Percentage
Rent based on the resulting Percentage Rental Sales Number. Buyer
shall be entitled to all other Income Percentage Rent for the
applicable period.
(c) Buyer shall pay to Seller all amounts of Income
Percentage Rent to which Seller is entitled promptly upon receipt
thereof by Buyer. Seller shall pay to Buyer all amounts of Income
Percentage Rent to which Buyer is entitled promptly upon receipt
thereof by Seller.
3.12 EMPLOYEES.
(a) Buyer, in its sole discretion, shall have the right but
not the obligation to offer employment to any or all employees of
Seller whose responsibilities are primarily related to the Northeast
Division (other than officers of Seller), including without limitation
all employees and supervisory personnel who currently work in or
supervise the operations of the convenience stores at each Location
(collectively, the
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"Employees"). It will be in the sole discretion of the Employees to
elect to accept any such offers of employment.
(b) Seller shall be liable for and shall pay all wages,
salaries, commissions and bonuses, expense allowances, and other sums
earned by or payable or owed to the Employees through Closing, all
payments that may be required to be made under any Employee Benefit
Plan (as defined below), and all termination, severance or similar
plan, policy or arrangement of Seller arising by virtue of the
termination of the employment of such Employees with Seller, including
accrued vacation, personal and sick pay through Closing.
IV. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Each Seller hereby represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING. The name of each Seller, its state
of incorporation, and each state in which it is qualified to do business as a
foreign corporation are set forth on EXHIBIT 4.1. Each Seller is a corporation
duly organized and validly existing and in good standing under the laws of its
state of incorporation and has the corporate power and authority to own its
property and to carry on its business (including the portion of the business of
the Northeast Division it conducts) as now conducted and to enter into and
deliver this Agreement and each other agreement, document, instrument or
certificate contemplated by this Agreement or to be executed by it in
connection with the consummation of the transactions contemplated by this
Agreement (all such other agreements, documents, instruments and certificates
required to be executed by any Seller being hereinafter referred to,
collectively, as the "Seller Documents") and to perform fully its obligations
and satisfy the terms and conditions hereunder and thereunder. Each Seller is
duly qualified to do business in each state in which the nature of its
activities conducted in connection with the business of the Northeast Division
or the character of the properties owned, leased or operated by it in
connection with the business of the Northeast Division requires such
qualification.
4.2 CERTIFICATE OF INCORPORATION AND BYLAWS; OWNERSHIP. Prior to
Closing, each Seller shall deliver to Buyer a true and complete copy of its
certificate of incorporation and all amendments thereto, certified by the
Secretary of State of its state of incorporation, and a true and complete copy
of its Bylaws as currently in effect, certified by its secretary. All of the
capital stock of each Seller other than Dairy Mart is directly owned by Dairy
Mart or indirectly owned by Dairy Mart through one or more subsidiaries owned
entirely by Dairy Mart. Dairy Mart has the corporate power and authority to
own, directly or indirectly, the capital stock of each Seller other than Dairy
Mart and to cause each such Seller to perform its obligations under this
Agreement.
4.3 DUE AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS. The
execution, delivery and performance by each Seller of this Agreement and each
Seller Document to which
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it is or will be a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by all necessary
corporate action on the part of each Seller. This Agreement has been, and the
Seller Documents will be at or prior to the Closing, duly executed and
delivered by each Seller, and (assuming the due authorization, execution and
delivery by the parties other than any Seller hereto and thereto) this
Agreement constitutes, and the Seller Documents when so executed and delivered
will constitute, legal, valid and binding obligations of each Seller,
enforceable against it in accordance with their respective terms. Except as set
forth on EXHIBIT 4.3 and except for consents of landlords required under the
Purchased Leases, none of the execution and delivery by any Seller of this
Agreement and the Seller Documents, or the consummation of the transactions
contemplated hereby or thereby, or compliance by any Seller with any of the
provisions hereof or thereof, will (i) conflict with, or result in the breach
of, any provision of the certificate of incorporation or by-laws of any Seller,
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any agreement, contract, indenture or other
instrument to which any Seller is a party or by which it or any of its
properties or assets, including without limitation any of the Assets, is bound
or subject, (iii) constitute a violation of any law applicable to any Seller,
or (iv) constitute or result in the creation of any lien or encumbrance upon
any of the Assets (other than a Permitted Encumbrance as defined below), which
conflict, violation, breach, termination or default under clause (ii) or (iii)
above, either individually or in the aggregate, would have a material adverse
effect on any of the properties, assets or operations of the Northeast
Division, including without limitation, any of the Assets or the Locations.
4.4 CONSENTS AND APPROVALS. Except for consents of landlords required
under the Purchased Leases, no consent, waiver, approval, order, permit or
authorization of, or declaration or filing with, or notification to, any person
or governmental body is required on the part of any Seller in connection with
the execution and delivery of this Agreement or the Seller Documents or the
compliance or performance by any Seller with any of the provisions hereof or
thereof, except compliance with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder (the "HSR
Act") and any governmental body that has issued any permit held by any Seller
with respect to the Northeast Division.
4.5 BROKERAGE FEES. No Seller is a party to, or in any way obligated,
directly or indirectly, under, any contract or outstanding claim for the
payment of any broker's, finder's or financial advisor's fee in connection with
the origin, negotiation, execution or performance of this Agreement, excluding
any amounts due and owing from Seller to Oppenheimer & Co., Inc., which amounts
Seller agrees to pay as and when due.
4.6 LITIGATION. Except as set forth on EXHIBIT 4.6, there is no
material legal or equitable action, suit, arbitration, or proceeding before any
court or governmental body pending, nor any order, decree, or judgment in
progress in effect, nor to the knowledge of any Seller are any of the foregoing
threatened, against or relating to any Seller in connection with
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the business of the Northeast Division, against or relating to any of the
Assets or any of the Locations, or against or relating to the transactions
contemplated by this Agreement. Without limiting the scope of the preceding
sentence, any order, suit, arbitration, proceeding, order, decree or judgment
shall be deemed material if it involves any existing or former franchisee in
the Territory, any existing or former employee whose employment was primarily
related to the Northeast Division or any Location, or any Environmental Law.
Except as set forth on EXHIBIT 4.6, with respect to all or part of the
Northeast Division or any of the Assets or any of the Locations, since January
1, 1996, (a) no citations, fines, or penalties have been asserted against any
Seller under any Environmental Law or any federal, state or local law relating
to occupational health and safety; (b) no citations, fines, or penalties have
been asserted against any Seller under any federal, state or local law relating
to the purchase, storage or sale of alcoholic beverages; and (c) no citations,
fines, or penalties of a material nature have been asserted against any Seller
under any other federal, state or local law.
4.7 FINANCIAL STATEMENTS. Seller has delivered to Buyer certain
unaudited financial information listed on EXHIBIT 4.7 relating to the business
of the Northeast Division and the Locations (such financial information,
together with any additional financial information to be provided by any Seller
to Buyer as required by this Agreement, are herein collectively referred to as
the "Financial Information"). Except as set forth on EXHIBIT 4.7 or disclosed
to Buyer in writing at the time any additional Financial Information is
provided to Buyer by Seller hereunder, all of the Financial Information (a) is
true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein not materially misleading when taken as a
whole, (b) has been prepared in accordance with accounting principles
consistently applied and maintained throughout the relevant periods, (c) fairly
presents the financial position, assets and known and determinable liabilities
of each Location at the dates indicated and the results of operations of the
Locations for the periods indicated, and (d) except as specifically noted
therein, does not reflect any material items of income not earned in the
ordinary course of business of each Location. No material items of income or
expense derived from or related to any Excluded Asset are reflected in the
Financial Information (other than income derived by Seller for rebates,
advertising allowances and similar payments, and expenses incurred by Seller,
under any Excluded Contracts).
4.8 ABSENCE OF CHANGES OR EVENTS. Since February 3, 1996, each Seller
has conducted the business of the Northeast Division only in the ordinary
course and has not, on behalf of, in connection with or relating to the
business of the Northeast Division or the Assets or the Locations:
(a) mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction on any of the
Northeast Division's property, business or assets, tangible or
intangible other than Liens (as defined below) to be discharged as of
Closing or Permitted Encumbrances (as defined below);
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(b) except as set forth on EXHIBIT 4.8(b), sold, transferred,
leased to others or otherwise disposed of any of Northeast Divisions's
property, business or assets, tangible or intangible, except for
inventory sold in the ordinary course of business, assets replaced in
the ordinary course of business with equivalent or superior assets,
dispositions in the ordinary course of business of assets of
immaterial value or unnecessary for the continued operation of any
Location consistent with the manner in which it was operated during
any period reflected in the Financial Information, or canceled or
compromised any material debt or claim, or waived or released any
right of substantial value;
(c) except as set forth on EXHIBIT 4.8(C), received any
notice of termination of any contract, lease or other agreement or
suffered any damage, destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate, has had a
materially adverse effect on the assets or operations of the Northeast
Division or any Location;
(d) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material change in its relations with its
employees, agents, customers or suppliers;
(e) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any United
States or foreign license, patent, copyright, trademark, trade name,
invention or similar rights used in connection with the Northeast
Business, or modified any existing rights with respect thereto;
(f) except as set forth on EXHIBIT 4.8(f), failed to
replenish the Northeast Division's inventories and supplies in a
normal and customary manner consistent with its prior practice, or
made any material purchase commitment in excess of the normal,
ordinary and usual requirements of its business, or made any material
change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice or industry standards;
(g) except as set forth on EXHIBIT 4.8(g), instituted,
settled or agreed to settle any material litigation, action or
proceeding before any court or governmental body primarily relating to
the operation of the Northeast Division or the Assets or any Location;
(h) suffered any change, event or condition which,
individually or in the aggregate, has had or would have a materially
adverse effect on the condition (financial or otherwise), properties,
assets, or operations of the Northeast Division or any Location,
including, without limitation, any materially adverse change in
revenues or costs (except for those recognized by Buyer through its
review of Financial Information
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through December 28, 1996), or any materially adverse change in
relations with employees, agents, customers or suppliers; or
(i) entered into any agreement or made any commitment to take
any of the types of action described in paragraphs (a) through (h)
above.
4.9 OPERATIONS OF THE NORTHEAST DIVISION. The business of the
Northeast Division has been carried on only through the Northeast Division and
not through any other divisions or any direct or indirect subsidiary or
affiliate of any Seller. No part of the business of the Northeast Division is
operated by Dairy Mart through any entity other than a Seller.
4.10 TRANSACTIONS WITH CERTAIN PERSONS; THE ASSETS. Except as set
forth on EXHIBIT 4.10, during the past three years, none of the Sellers has, in
connection with its operation of the Northeast Division, directly or
indirectly, purchased, leased from others or otherwise acquired any property or
obtained any services from, or sold, leased to others or otherwise disposed of
any property or furnished any services to, or otherwise dealt with (except with
respect to remuneration for services rendered as a director, officer or
employee of any Seller), in the ordinary course of business or otherwise, any
Affiliate of Dairy Mart, nor has any Seller or any Affiliate of Dairy Mart
provided any loan, furnished any service or sold or leased any property, assets
or rights to any franchisee, landlord or tenant of any Location except as set
forth in the Franchise Agreements (including franchisee receivables generated
in the ordinary course of business), the Purchased Leases, the Tenant Leases
and the FIN-OP Receivables and the Office Balances (as defined in Section 7.15
hereof). As used herein "Affiliate of Dairy Mart" shall mean (a) any person,
firm or corporation beneficially owning 10% or more of the common stock of
Dairy Mart (a "Major Stockholder"), (b) any person, firm or corporation which,
directly or indirectly, alone or together with others, controls, is controlled
by or is under common control with Dairy Mart, or (c) any of the other Sellers
or other division or subsidiary of any thereof. No Seller, in connection with
its operation of the Northeast Division, owes any amount to, or has any
contract with or commitment to, any Major Stockholder, directors, officers,
employees or consultants (other than compensation for current services not yet
due and payable and reimbursement of expenses arising in the ordinary course of
business), and none of such persons owes any amount to any Seller in connection
with its operation of the Northeast Division. The Assets and the Trademarks (as
defined below), taken as a whole, constitute (a) all of the properties and
assets relating to or used or held for use in connection with the Northeast
Division other than the Excluded Assets and (b) all of the properties and
assets the income and expenses of which are reflected in the Financial
Information (except for inventory sold in the ordinary course of business,
assets replaced in the ordinary course of business with equivalent or superior
assets, and dispositions in the ordinary course of business of assets of
immaterial value or unnecessary for the continued operation of any Location
consistent with the manner in which it was operated during any period reflected
in the Financial Information and except for income derived by Seller for
rebates, advertising allowances and similar payments, and expenses incurred by
Seller, under any excluded contracts).
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4.11 TAXES. No Seller is delinquent in the payment of any foreign or
domestic tax, assessment or governmental charge or deposit, which delinquency
has or, upon or as a result of the transfer of the Assets as contemplated by
this Agreement, would result in the imposition of a Lien (as defined below)
other than a Permitted Encumbrance (as defined below) on any of the Assets.
4.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set forth
in EXHIBIT 4.12, each Seller has complied with all existing laws, rules,
regulations, ordinances, orders, judgments and decrees applicable to the
business, properties or operations of the Northeast Division as presently
conducted, the failure to comply with which has had or would have, either
individually or in the aggregate, a material adverse effect on any of the
Locations, the Assets or the operations of the Northeast Division. No Seller
has received written notice of any proposed laws, rules, regulations,
ordinances, orders, judgments, decrees, governmental takings, condemnations or
other proceedings which would be applicable to the Assets, the Locations or the
operations of the Northeast Division and which would adversely affect in a
material manner any of the Locations, the Assets, or the operations of the
Northeast Division, either before or after the Closing, other than proposed
laws, rules and regulations generally applicable to businesses in the Territory
and convenience stores and gasoline stations of the type conducted by the
Northeast Division.
4.13 EMPLOYEE BENEFIT PLANS. EXHIBIT 4.13 sets forth a summary of each
Employee Benefit Plan of Seller. None of the Assets are subject to any lien in
favor of, or enforceable by, the Pension Benefit Guaranty Corporation, nor has
there been any reportable event as defined in ERISA, or other event or
condition, which presents a material risk of termination of any Employee
Benefit Plan by said Pension Benefit Guaranty Corporation. As used herein, the
term "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the term "Employee Benefit Plan" means each and every pension,
retirement, profit-sharing, deferred compensation, bonus or other incentive
plan, or other employee benefit program, arrangement, agreement or
understanding, or medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
ERISA, to which any Seller contributes or is a party or is bound or under which
it may have liability and under which employees or former employees of the
Northeast Division (or their beneficiaries) are eligible to participate or
derive a benefit.
4.14 EMPLOYEES. EXHIBIT 4.14 sets forth a correct and complete list of
all Employees (including their current basis and rate of compensation, bonuses
paid in the last two (2) fiscal years, salary review date and date of hire) and
a numerical list by position of all individuals whose employment by any Seller
related to the Northeast Division was terminated since February 3, 1996.
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4.15 INSURANCE. EXHIBIT 4.15 sets forth a complete and correct list
and description of all of the policies of liability and property insurance
carried by any Seller for the benefit of or in connection with the Assets or
business of the Northeast Division.
4.16 TITLE TO ASSETS. Each Seller has (a) good and marketable title in
fee-simple to all Purchased Real Property indicated in EXHIBIT 1 as being owned
by it; (b) good and marketable title to all leasehold interests indicated in
EXHIBIT 1 as being held by it; and (c) good title to all Inventory, all
Tangible Personal Property, all Underground Storage Tanks listed or required to
be listed in EXHIBIT 1.1(h), and all Intellectual Property, in each case free
and clear of any mortgages, liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of title of any nature
whatsoever ("Liens"), except (i) as indicated in EXHIBIT 4.16, (ii) liens for
current Property Taxes not yet due and payable, (iii) statutory liens of
warehousemen, mechanics and materialmen and other like statutory liens which
arose in the ordinary course of business and which will be discharged to the
satisfaction of Buyer on or before Closing, and (iv) such other encumbrances
and easements which do not, individually or in the aggregate, materially
detract from the value or interfere with the present or proposed use of the
properties affected thereby for the purposes for which they are currently used
(the "Permitted Encumbrances"). No Seller has transferred any interest in the
Franchise Agreements listed or required to be listed in EXHIBIT 1.1(c), the
Transferable Permits, the Books and Records, or the Goodwill and all such
assets and rights are free and clear from any Liens other then Permitted
Encumbrances. Upon the Closing, Buyer shall receive all right, title and
interest in and to the Assets free and clear from all Liens except Permitted
Encumbrances described in clauses (ii) and (iv) above.
4.17 CONDITION OF TANGIBLE PROPERTIES. Except as set forth on EXHIBIT
4.17, to the knowledge of any Seller, all buildings, structures and
improvements on the Purchased Real Property are structurally sound and in good
repair and all equipment, machinery, and mechanical systems and all air
conditioning, heating, ventilation, plumbing, and electrical systems in the
Purchased Real Property are in good operating condition, routine maintenance
and ordinary wear and tear excepted, and the roofs and basements are free of
leaks. Except as set forth on EXHIBIT 4.17, to the knowledge of any Seller, all
Tangible Personal Property is in a good operating condition, routine
maintenance and ordinary wear and tear excepted, is free from deferred
maintenance and known defects (except such minor defects as do not interfere
with the continued use thereof in the conduct of normal operations), and
complies in all material respects with applicable federal, state and local
laws. Notwithstanding any provision hereof to the contrary, the representations
set forth in this Section 4.17 shall not survive the Closing. For purposes of
this Section 4.17, the "knowledge of any Seller" shall mean the knowledge of
any store supervisor, any person working in the construction and store
maintenance department and any person to whom such persons report.
4.18 PERMITS, LICENSES AND APPROVALS. EXHIBIT 4.18 contains a complete
and correct list of all operating permits, tank registration permits, and other
permits, licenses, grants, concessions, franchises, filings and other
governmental authorizations and approvals, and all
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applications for and amendments to any of the foregoing, indicating whether or
not the same are transferable to Buyer, which are necessary for the conduct of
the business of the Northeast Division and which, if not obtained, the lack
thereof would have, either individually or in the aggregate, a material adverse
effect on any of the Locations, the Assets, or operations of the Northeast
Division. All of the foregoing have been duly made or obtained and are in full
force and effect, and except as noted in EXHIBIT 4.18, there are no proceedings
pending or, to Seller's knowledge, threatened which may result in the
revocation, cancellation or suspension, or any adverse modification, of any
thereof. Copies of each of the foregoing shall be provided to Buyer by Dairy
Mart upon Buyer's request.
4.19 PURCHASED REAL PROPERTY. With respect to any of the Purchased
Real Property:
(a) Except as set forth on EXHIBIT 4.19(a), there are no
pending or, to the knowledge of Seller, threatened condemnation or
eminent domain proceedings which would materially affect the Purchased
Real Property or any part thereof.
(b) All required curb cut and street opening permits or
licenses for vehicular access to and from any part of the Owned Real
Property and, to the knowledge of Seller, from any part of the Leased
Real Property to an adjoining public street have been obtained and
paid for in full.
(c) All streets, roads and avenues abutting the Owned Real
Property and, to the knowledge of Seller, the Leased Real Property
required for vehicular access to the Locations are publicly dedicated.
To the knowledge of Seller, all streets and alleys located within the
perimeter of the Purchased Real Property are private and have not been
dedicated to any public authority.
(d) All public utilities and the storm drainage facilities
required for the operation of the Owned Real Property and, to the
knowledge of Seller, the Leased Real Property, either enter the
subject real property through adjoining public streets or if they pass
through adjoining private land do so in accordance with valid public
easements or private easements which will inure to the benefit of
Buyer except, with respect to water supply, those Locations which are
served by wells owned by a Seller.
(e) Except as set forth on EXHIBIT 4.19(e), there are no
material agreements, consent orders, decrees, judgments, license or
permit-conditions, or other written directives, issued to Seller by a
municipal or other Federal, state or local governmental or
quasi-governmental department or agency which require any change in
the present condition or use of the Purchased Real Property.
(f) All material zoning, subdivision, use, building, housing,
safety, fire and health approvals, and all material permits and
licenses necessary to operate, occupy and use the Owned Real Property
and, to the knowledge of Seller, the Leased Real
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Property as used by Seller have been issued and are in full force and
effect, and Seller is in material compliance therewith. Seller has not
taken any action or made any improvements which would require
amending, modifying or supplementing the foregoing. Seller's use of
the Owned Real Property and, to the knowledge of Seller, the Leased
Real Property is not in material violation of applicable zoning and
subdivision laws and regulations.
(g) There are no written outstanding requirements or written
recommendations by a holder of a mortgage affecting the Owned Real
Property or, to the knowledge of Seller, the Leased Real Property or
by any insurance company which issued a policy with respect to the
Owned Real Property or, to the knowledge of Seller, the Leased Real
Property or by any board of fire underwriters or other body exercising
similar functions, requiring or recommending any repairs or work to be
done on the Owned Real Property or, to the knowledge of Seller, the
Leased Real Property.
(h) There are no pending real estate tax protest proceedings
affecting the Owned Real Property or, to the knowledge of Seller, the
Leased Real Property, and there are no tax exemptions or abatements
affecting the real estate taxes assessed against the Owned Real
Property or, to the knowledge of Seller, the Leased Real Property or
any special assessments thereof except as reflected in the Financial
Information.
(i) Seller has not received written notice from the holder of
any lien on the Purchased Real Property or any tenant of a Tenant
Lease or landlord of a Purchased Lease, asserting that a default or
breach exists or event has occurred which, with the giving of notice
or passage of time or both, would constitute a default or breach
thereunder, which default would have a material adverse effect on any
of the Purchased Real Property or the assets situated thereon or the
operations of the Northeast Division conducted thereat.
(j) Except as set forth on EXHIBIT 4.19(j), there are no
material outstanding contracts made by Seller for the construction or
repair of any improvements to any of the Purchased Real Property or
other material contracts (other than those terminable at will by
either party thereto) affecting any of the Purchased Real Property
such as, for example, but not by way of limitation, maintenance and
security agreements.
(k) All buildings, structures and improvements, including,
but not limited to, any driveways, garages, and all means of access,
are located completely within the boundary lines of the Owned Real
Property and do not materially encroach upon or under the property of
any other person or entity, and no building, structure or improvements
of any kind belonging to any other person or entity other than Seller
materially encroaches upon or under the Owned Real Property.
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(l) The air rights over the Owned Real Property have not been
leased, sold or otherwise transferred by Seller.
(m) There are no tenants, licensees or other third parties
with claims or rights to possession, use or occupancy of all or any
portion of the Owned Real Property, except for franchisees listed in
EXHIBIT 1.1(c) and tenants listed in EXHIBIT 1.1(j).
(n) No Seller is a "foreign person" as defined in the Foreign
Investment in Real Property Tax Act, 26 U.S.C. 1445(f)(3) ("FIRPTA"),
each Seller agrees to execute an affidavit to that effect, including
the Seller's federal tax identification numbers, prior to the Closing.
(o) Except as set forth on EXHIBIT 4.19(o), no material
assessment for public improvements payable by Seller has been made
against the Purchased Real Property which remains unpaid or which is
not reflected in the Financial Information.
4.20 LEASES AND CONTRACTS. Except as noted on the related exhibit,
Dairy Mart has delivered to Buyer complete and correct copies with all
amendments of all leases and other agreements with respect to the Purchased
Leases listed or required to be listed in EXHIBIT 1.1(b), all Franchise
Agreements listed or required to be listed in EXHIBIT 1.1(c), and all Tenant
Leases listed or required to be listed in EXHIBIT 1.1(j) (collectively, the
"Material Contracts"). Seller covenants and agrees to provide Buyer, as soon as
practicable after the date of this Agreement but in any event not less than ten
(10) days prior to Closing, with a complete and correct copy of each lease and
agreement noted on the related exhibit as not having been provided as of the
date hereof. Prior to Closing, the related exhibit shall be amended to reflect
such leases or agreements. With respect to the Material Contracts, except as
set forth on EXHIBIT 4.20:
(a) Each of the Material Contracts is legal, valid, binding,
enforceable (subject to applicable bankruptcy laws and other laws
affecting the rights of creditors generally), and in full force and
effect.
(b) There does not exist under any Material Contract any
material breach or default or event or condition which, after notice
or lapse of time or both, would constitute a material breach or
default thereunder by any Seller or, to the best knowledge of Seller,
by any other party thereto.
(c) Neither any Seller nor any other party to any of the
Material Contracts has waived or repudiated any material provision
thereof.
(d) There are no material disputes, oral agreements or
forbearance programs in effect as to any of the Material Contracts.
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(e) No amounts payable to Seller under any of the Material
Contracts has been prepaid, other than rent received by Seller not
more than one (1) month in advance.
(f) No Seller has made any deposit (other than security
deposits normal and customary in amount) in connection with any
Material Contract nor received any allowances or other up-front
payments (other than fees paid by franchisees at the inception of
their Franchise Agreement) in connection with any Material Contract.
Notwithstanding the foregoing, with respect to Tenant Leases, the
representations set forth in Section 4.20(b), (c), (d), (e) and (f) above are
limited to Seller's knowledge, and EXHIBIT 4.20 sets forth a schedule of the
date and amounts of the most recent rental payments received by Seller
thereunder.
4.21 EXCLUDED CONTRACTS. EXHIBIT 4.21 contains a complete and correct
list of all agreements, leases, contracts, obligations and commitments (other
than the Material Contracts listed in EXHIBITS 1.1(b), 1.1(c), and 1.1(j)) of
the following types, other than oral agreements terminable at will by either
party, (i) to which any Seller is a party or by which any Seller is bound and
which primarily relate to the Northeast Division or the Assets or (ii) by which
any of the Assets are bound (collectively, the "Excluded Contracts"):
(a) employment, consulting and agency agreements (other than
employment arrangements terminable at will without liability on the
part of the employer or upon payment of no more than applicable
statutory or regulatory severance or termination benefits);
(b) collective bargaining agreements;
(c) sales agency, manufacturer's representative,
distributorship or marketing agreements or vendor contracts;
(d) agreements, orders or commitments for the purchase of raw
materials, supplies or finished products, entered into outside the
ordinary course of business and, on an individual basis involving
payments or receipts in excess of Five Thousand Dollars ($5,000.00);
(e) licenses to or from others of any intellectual property,
trade secrets, and know-how and licenses of computer software;
(f) partnership, joint venture or other arrangements or
agreements involving a sharing of profits or expenses;
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(g) contracts or commitments to sell, lease or otherwise
dispose of any Assets other than in the ordinary course of business;
(h) contracts or commitments to lease any property, tangible
or intangible, for use at any of the Locations;
(i) contracts or commitments, including royalty agreements,
with any employee of any Seller;
(j) any other agreements, contracts and commitments material
to any Location or the Northeast Division.
Dairy Mart has delivered to Buyer complete and correct copies of all written
Excluded Contracts (other than those subject to confidentiality provisions),
together with all amendments thereto, and accurate descriptions of all oral
Excluded Contracts, listed on EXHIBIT 4.21 or required to be listed thereon.
4.22 IDENTIFICATION OF ASSETS. EXHIBITS 1 and 1.1(b) contain a
complete and correct list of all real property (together with the buildings and
improvements thereon) and leaseholds and other interests therein with respect
to which any Seller has any right, title or interest and which are primarily
related to or used or held for use in connection with the Northeast Division
(other than Excluded Assets). Except for the Excluded Contracts, the
StoreMaster Software, the Books and Records and the Trademarks, all of the
material properties and assets that produced the items of income and expense
reflected in the cash flows set forth in the Financial Information with respect
to the Locations are situated at the Locations, except for inventory sold in
the ordinary course of business, assets replaced in the ordinary course of
business with equivalent or superior assets, dispositions in the ordinary
course of business of assets of immaterial value or unnecessary for the
continued operation of any Location consistent with the manner in which it was
operated during any period reflected in the Financial Information. There is no
material consignment inventory at any Location.
4.23 TRADEMARKS. The DM Mark and the trademarks and tradenames listed
in EXHIBIT 4.23 (the "Trademarks") constitute all of the trademarks and
tradenames utilized by Seller specifically in connection with the Northeast
Division, except for the trademark "Special Occasion." Seller is the owner of
the Trademarks, all of the registrations of the Trademarks are listed in
EXHIBIT 4.23, and all such registrations are valid and in good standing. Except
as noted on EXHIBIT 4.23, to the best of Seller's knowledge, none of the
Trademarks infringe on the trademarks of any other person, nor is there any
pending claim of such infringement.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to each Seller as follows:
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5.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of its state
of incorporation, has the corporate power and authority to own its property and
to carry on its business as now conducted and to enter into and to carry out
the terms and conditions of this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
Buyer in connection with the consummation of the transactions contemplated by
this Agreement (all such other agreements, documents, instruments and
certificates required to be executed by Buyer being hereinafter referred to,
collectively, as the "Buyer Documents") and to perform fully its obligations
hereunder and thereunder.
5.2 DUE AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS. The
execution, delivery and performance by Buyer of this Agreement and each Buyer
Document has been duly authorized and approved by all necessary action on the
part of Buyer. This Agreement has been, and the Buyer Documents will be at or
prior to the Closing, duly executed and delivered by Buyer and (assuming the
due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and the Buyer Documents when so executed
and delivered will constitute, legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms. None of
the execution and delivery by Buyer of this Agreement and the Buyer Documents,
or the consummation of the transactions contemplated hereby or thereby, or
compliance by Buyer with any of the provisions hereof or thereof, will (i)
conflict with, or result in the breach of, any provision of the certificate or
incorporation or by-laws of Buyer, (ii) conflict with, violate, result in the
breach or termination of, or constitute a default under, any agreement to which
Buyer is a party or by which it or any of its properties or assets is bound or
subject or (iii) constitute a violation of any law applicable to Buyer.
5.3 CONSENTS AND APPROVALS. No consent, waiver, approval, order,
permit or authorization of, or declaration or filing with, or notification to,
any person or governmental body is required on the part of Buyer in connection
with the execution and delivery of this Agreement or the Buyer Documents or the
compliance by Buyer with any of the provisions hereof or thereof, except as
such qualification as may be required under applicable law in order for Buyer
to be the franchisor under the Franchise Agreements and except compliance with
the HSR Act.
5.4 BROKERAGE FEES. Buyer is not a party to, or in any way obligated,
directly or indirectly, under, nor has any knowledge of, any contract or
outstanding claim for the payment of any broker's, finder's or financial
advisor's fee in connection with the origin, negotiation, execution or
performance of this Agreement; excluding any amounts due and owing to Riparian
Partners, Ltd., which amounts Buyer agrees to pay as and when due.
5.5 LITIGATION. There is no legal proceeding pending or, to the
knowledge of the Buyer, threatened against the Buyer that seeks to enjoin or
obtain damages in respect of the consummation of the transactions contemplated
by this Agreement or that questions the validity
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of this Agreement, the Buyer Documents or any action taken or to be
taken by the Buyer in connection with the consummation of the transactions
contemplated hereby or thereby.
5.6 FINANCING COMMITMENTS. Buyer has delivered to Dairy Mart complete
and correct copies of all financing commitments, and all amendments thereto,
obtained by Buyer with respect to the transactions contemplated by this
Agreement (the "Financing Commitments").
VI. ENVIRONMENTAL PROVISIONS
------------------------
6.1 DEFINITIONS. For purposes of this Agreement, the terms described
below shall have the following meanings:
(a) "Damages" means all liabilities, obligations, losses,
damages, punitive damages, consequential damages, treble damages,
costs and expenses (including, without limitation, all reasonable
fees, disbursements and expenses of counsel, expert and consulting
fees and costs of investigations and feasibility studies and
responding to government requests for information or documents),
fines, and penalties, whether asserted or imposed by any person, firm,
corporation or governmental authority, (i) arising under Environmental
Laws as a result of ownership, leasing or operation of the Northeast
Business or any properties, owned, leased or operated by any Seller
prior to the Closing Date, (ii) arising from any Environmental
Condition or lack of Environmental Compliance at any Location (which,
for purposes of this Article VI, means each parcel of Purchased Real
Property comprising such Location) existing prior to Closing Date, or
(iii) arising in connection with or caused by the performance of the
Environmental Site Assessments (as defined below) or the performance
on behalf of Seller of any Corrective Actions (as defined below).
(b) "Environmental Conditions" means (i) any Release on,
under or emanating from any Location, whether originating on-site or
off-site, or (ii) any activity, inactivity or operations occurring on
or off of any Location that could require Remediation or investigatory
efforts.
(c) "Environmental Compliance" means compliance with any and
all Environmental Laws or Environmental Permits applicable to any
Location or operations or equipment used in connection with any
Location, including, but not limited to, (i) those establishing
requirements for any Environmental Permits for any Location and the
operations conducted thereat, (ii) those imposing standards for the
design, construction, operation, vapor recovery, and tightness of
underground storage tanks, lines and related systems and other
petroleum dispensing equipment, and (iii) those imposing requirements
concerning permits, approvals, filings, bonds and other matters
related to Remediation of Environmental Conditions and achieving
Environmental Compliance.
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(d) "Environmental Laws" means any and all Federal, state or
local laws (including common law), rules, orders, regulations,
statutes, ordinances, codes, guidelines properly enforced by
governmental authorities, administrative orders, or requirements of
any governmental authority regulating or imposing standards of
liability, standards of conduct or standards of remediation with
respect to protection of public health or environmental media
(including without limitation soil, surface water, ground water,
stream sediments or air), including but not limited to, the Resource
Conservation and Recovery Act ("RCRA"), the Toxic Substances Control
Act ("TSCA"), the Occupational Safety and Health Act of 1970, the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), the Hazardous Materials Transportation Act, the
Federal Insecticide, Fungicide, and Rodenticide Act, the Clean Water
Act, the Safe Drinking Water Act, the Clean Air Act, and applicable
state analogues, all as in effect on the date hereof and as amended
prior to Remediation Completion.
(e) "Environmental Permits" means any and all permits,
approvals, licenses, registrations, certificates, plans, contingency
plans, spill prevention control and countermeasure plans, consent
agreements, consent orders, stipulations, and authorizations which are
required by or issued pursuant to Environmental Laws.
(f) "Hazardous Materials" means any materials regulated as
hazardous or toxic under applicable Environmental Laws, including
without limitation petroleum, petroleum products, fuel oil,
derivatives of petroleum products or fuel oil, medical waste,
biomedical waste, or infectious materials.
(g) "Release" means any release, spill, leak, emission,
discharge, deposit, pumping, pouring, emptying, discharging,
injecting, escaping, leaching, disposing, dumping or migration of
Hazardous Materials into any indoor or outdoor environmental media
(including without limitation soil, surface waters, ground waters,
stream sediments and air), including the movement of Hazardous
Materials through or in any environmental media either on-site or
off-site. Release includes without limitation the abandonment of
barrels, containers or other closed receptacles containing Hazardous
Materials.
(h) "Remediation" means all actions necessary to ensure that
Environmental Conditions at any Location comply with Environmental
Laws, including without limitation, all actions to: (i) mitigate,
clean up, remove, treat or remediate Hazardous Materials in the indoor
or outdoor environment on-site of the Location or off-site of the
Location if emanating from the Location as required under applicable
Environmental Laws; (ii) control the Release of Hazardous Materials as
required under applicable Environmental Laws so that they do not
migrate, endanger or threaten to endanger public health or welfare of
the indoor or outdoor environment on-site of the Location or off-site
of the Location if emanating from the Location; (iii) perform
pre-remedial
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studies and investigations and post-remedial monitoring and care or
other assessments or monitoring as required under applicable
Environmental Laws; or (iv) respond to any government requests for
information or documents in any way relating to mitigation, cleanup,
removal, treatment or remediation or potential mitigation, cleanup,
removal, treatment or remediation of Hazardous Materials in the indoor
or outdoor environment pursuant to Environmental Laws.
(j) "Remediation Costs" are all fees, disbursements, costs
and expenses (including reasonable attorneys' fees and environmental
consulting fees) necessary or required to achieve Environmental
Compliance or to complete Remediation in accordance with Environmental
Laws.
6.2 REPRESENTATIONS AND WARRANTIES OF SELLER. In addition to any other
representations and warranties made in this Agreement, each Seller hereby
represents and warrants to Buyer as follows:
(a) To the knowledge of Seller, all Environmental Permits
necessary for the ownership and operation of any Location or for which
Seller has made formal application are listed on EXHIBIT 4.18, and a
copy of each such Environmental Permit has been delivered by Seller to
Buyer. To the knowledge of Seller, each such Environmental Permit is
in full force and effect for the benefit of Seller and the Location.
(b) Except as set forth on EXHIBIT 6.2(b), Seller has not
received any summons, citation, directive, order, claim, litigation,
judgment, letter or any other written communication from the United
States Environmental Protection Agency or any other Federal, state or
local agency or authority with jurisdiction to enforce Environmental
Laws, or any person, firm or corporation, (i) concerning any actual or
alleged intentional or unintentional act or omission or any condition
which constitutes or is alleged to constitute a lack of Environmental
Compliance or which has or is alleged to have resulted in the Release
of any Hazardous Material into any environmental media (including
soil, surface water, groundwater, stream sediments or air); (ii)
asserting or imposing any lien pursuant to any Environmental Laws; or
(iii) seeking information pursuant to Environmental Laws related to
Environmental Conditions or Environmental Compliance or asserting any
claim for Damages (collectively, "Environmental Notices").
(c) To the knowledge of Seller, no Location is listed on the
National Priorities List or on the CERCLIS under CERCLA, or on any
inventory of hazardous waste sites maintained by any state in which
any Location is situated.
(d) From and after the date hereof through Remediation
Completion, Seller shall provide Buyer and any Environmental
Consultant or Remediation Consultant with
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copies of (i) all Environmental Notices received by Seller, (ii)
results of all tightness and precision tests of underground storage
tanks, lines and related systems at the Locations, (iii) all written
documents, reports and other information (including any reports
prepared by environmental consultants engaged by Seller) in the
possession of Seller or its agents or known and reasonably available
to Seller with respect to Environmental Conditions and Environmental
Compliance, which documents, reports and information are material and
relevant to the operation of the Northeast Division or any Location,
and (iv) all information required under the Access Agreement (as
defined below).
(e) Exhibit 1.1(h) sets forth a listing of all Underground
Storage Tanks situated on any Location identifying, with respect to
each such Tank, the product dispensed, capacity, installation date,
tank material, spill and overfill protection, pump type, pipe
material, and active or inactive status.
6.3 ENVIRONMENTAL SITE ASSESSMENTS AND TANK SYSTEMS.
(a) Promptly following the execution of this Agreement,
Seller and Buyer shall jointly engage Groundwater Technology, Inc. (or
such other independent, qualified and properly licensed environmental
consulting firm as Seller and Buyer shall jointly select) (the
"Environmental Consultant") to conduct environmental site assessments
of Environmental Conditions and Environmental Compliance at each
Location (the "Environmental Site Assessments") and prepare
environmental reports (the "Environmental Reports") describing inter
alia the results of the Environmental Site Assessments with respect to
each Location as described below. The Environmental Site Assessments
shall be conducted and the Environmental Reports shall be prepared in
accordance with the requirements of EXHIBIT 6.3 (the "Environmental
Protocol"). Seller shall be responsible for all costs and expenses
related to the Environmental Site Assessments and the preparation of
the Environmental Reports, and Buyer shall reimburse Seller for
one-half (1/2) of such costs and expenses at Closing or on the
termination of this Agreement. Seller and Buyer shall have equal
access to all information developed by the Environmental Consultant
and shall each receive five (5) copies of all Environmental Reports.
(b) Without limiting the meaning of Environmental Compliance,
as part of the Environmental Site Assessments, the Environmental
Consultant shall perform tests on each underground petroleum product
storage tank, line and related system currently in use at each
Location to identify whether a defect exists in a tank, line or other
component of the system. The test procedure shall be pursuant to
applicable Environmental Laws and mutually agreed to by the parties,
and shall include, without limitation, tank and line precision testing
and testing for compliance with Stage I and Stage II vapor recovery to
the extent that Stage I and/or Stage II vapor recovery is required for
that Location by applicable Environmental Laws. In the event a tank,
line
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or related component does not initially test tight or meet applicable
vapor recovery standards, at Seller's option a retest may be made or
the tank, line or other related component may be uncovered to examine
auxiliary tank openings, fittings, fill pipes, vent pipes and other
accessories. If there are any defects in openings, fittings, fill
pipes, vent pipes or accessories such defects shall be corrected by
Seller. After the defects in openings, fittings, fill pipes, vent
pipes and accessories have been corrected, the tank, line or related
component shall be retested. In the event a tank, line or related
component does not test or retest tight or meet applicable vapor
recovery standards, and the defect is determined to be in the tank,
line or related component itself and not in such openings, fittings,
fill pipes, vent pipes or accessories, then the cost of labor and
materials associated with the repair or replacement of individual
underground storage tanks, lines or related components that fail
testing shall be assumed by Seller. All replacements will be of
like-kind tankage, lines and components as permitted under applicable
Environmental Laws; provided, however, that Buyer may contribute the
additional cost to bring any such replacements up to 1998 Standards
(as defined below). Seller's obligations under this Section 6.3(b)
shall constitute actions for which Seller is responsible to achieve
Environmental Compliance.
6.4 ENVIRONMENTAL REPORTS. The Environmental Report for any Location
shall set forth the Environmental Consultant's (a) conclusions concerning
whether there exists at such Location any Environmental Conditions or lack of
Environmental Compliance; (b) recommendations of Corrective Actions with
respect to such Location; and (c) estimate of the Remediation Costs of
performing all recommended Corrective Actions (the "Estimated Costs"). Subject
to Section 6.3(b) hereof, as used herein, "Corrective Actions" shall mean, for
any Location, (i) all Remediation required at such Location with respect to
Environmental Conditions for which Seller is responsible in accordance with
Section 6.6 hereof, and (ii) all actions necessary to achieve Environmental
Compliance at such Location with respect to any lack of Environmental
Compliance for which Seller is responsible in accordance with Section 6.6
hereof.
6.5 SIGNIFICANT OR DISRUPTIVE CORRECTIVE ACTIONS. If the Estimated
Costs for recommended Corrective Actions at a Location as set forth in the
Environmental Report for such Location exceed the sum of Four Hundred Thousand
Dollars ($400,000.00), Seller or Buyer may, in its respective discretion, elect
to delete the Location and related equipment, Inventory, licenses and permits
involved from this purchase and sale and to reduce the Purchase Price by an
amount determined in accordance with Section 7.5 hereof. In addition, if in the
reasonable judgment of Buyer, any recommended Corrective Actions at a Location
identified in an Environmental Report would materially interfere with operation
of the Location for normal business purposes and Seller is unwilling to make an
appropriate adjustment in the Purchase Price to compensate Buyer for such
interference, Buyer may in its sole discretion elect to delete the Location and
related equipment, Inventory, licenses and permits involved from this purchase
and sale and to reduce the Purchase Price by an amount determined in accordance
with Section 7.5 hereof. Finally, if following Closing and prior to
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Remediation Completion at any Location, a change in applicable Environmental
Law would cause the sum of Remediation Costs actually expended for Corrective
Actions at the Location plus the amount of Remediation Costs for Corrective
Actions remaining at such Location as reasonably estimated by the Remediation
Consultant to exceed the sum of Four Hundred Thousand Dollars ($400,000.00),
Seller may in its respective discretion elect to repurchase the Location and
related equipment, Inventory, licenses and permits involved from this purchase
and sale upon payment to Buyer of an amount determined for such Location in
accordance with Section 7.5 hereof plus the value of Inventory determined in
accordance with the valuation procedure set forth on EXHIBIT 2.2.
6.6 RESPONSIBILITY FOR ENVIRONMENTAL CONDITIONS AND ENVIRONMENTAL
COMPLIANCE FAILURES. Seller shall be responsible for all Environmental
Conditions at any Location identified in the Environmental Report for the
Location, shall be responsible to achieve Environmental Compliance at any
Location with respect to matters identified in the Environmental Report for the
Location, and shall be responsible for all Environmental Conditions and
Environmental Compliance arising in connection with or caused by the
performance of the Environmental Site Assessment or the performance on behalf
of Seller of any Corrective Actions. In addition, without limiting the scope of
the immediately preceding sentence, if deemed responsible in accordance with
the standard set forth below, Seller shall be responsible for the following
Environmental Conditions at any Location:
(a) With respect to any Location (i) that meets as of Closing
the standards for underground storage tank, line and system design,
construction and integrity established under Environmental Laws,
compliance with which is required by December 22, 1998 (the "1998
Standards") and (ii) for which the related Environmental Report
identifies Environmental Conditions requiring Remediation, any
Environmental Conditions on-site or off-site the Location that are
discovered within three (3) months after implementation at such
Location of a remediation plan meeting the requirements of Section
6.7(y); and
(b) With respect to any Location (i) that fails to meet 1998
Standards as of Closing and (ii) for which the related Environmental
Report does not identify Environmental Conditions requiring
Remediation, any Environmental Conditions on-site or off-site the
Location that are discovered prior to December 31, 1998 while taking
invasive actions to meet the 1998 Standards, including Remediation of
Hazardous Materials uncovered in the course of such actions; and
(c) With respect to any Location (i) that fails to meet 1998
Standards as of Closing and (ii) for which the related Environmental
Report identifies Environmental Conditions requiring Remediation, any
Environmental Conditions on-site or off-site the Location that are
discovered while taking actions to meet the 1998 Standards, including
Remediation of Hazardous Materials uncovered in the course of such
actions, or that
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are discovered within three (3) months after implementation at such
Location of a remediation plan meeting the requirements of Section
6.7(y); and
(d) With respect to any Location (i) that meets the 1998
Standards as of Closing and (ii) for which the related Environmental
Report does not identify any Environmental Conditions requiring
Remediation, Seller shall bear no additional responsibility for any
Environmental Conditions discovered following Closing.
With respect to Environmental Conditions set forth in subparagraphs (a) through
(c) above, Seller shall be deemed responsible for any such Environmental
Conditions if Seller acknowledges responsibility or if the Remediation
Consultant (as defined below) reasonably concludes, based on all relevant
information, that such Environmental Condition existed as of Closing. In making
such determination, inconclusive information shall be resolved in favor of
Seller and shall render Buyer responsible. Any Environmental Condition for
which Buyer is responsible shall be treated as a New Spill (as defined below).
Seller shall acknowledge to any governmental authority having a jurisdiction
over the Location and to any other person, firm or corporation interested
therein that Seller is the responsible party for any Environmental Conditions
or lack of Environmental Compliance for which Seller is responsible in
accordance with this Section 6.6 and will make all reports, filings and notices
required by law regarding any Corrective Actions regarding the same at each
Location, and Buyer shall be responsible for and make all reports, filings and
notices regarding all other Environmental Conditions and lack of Environmental
Compliance at any Location. Seller and Buyer shall cooperate with one another
in providing information necessary to complete any such reports, filings and
notices.
6.7 COMPLETION OF CORRECTIVE ACTIONS. Promptly following the Closing,
Seller shall cause an independent, qualified, licensed environmental consultant
(which may but need not be the Environmental Consultant) selected jointly by
Seller and Buyer (the "Remediation Consultant") to undertake and complete, at
Seller's expense, all Corrective Actions at each Location in accordance with
the requirements of applicable law. Seller shall remain obligated for all
Corrective Actions at any Location until such time as the Corrective Actions
have been completed in accordance with applicable Environmental Laws and the
standards of the environmental regulatory body having jurisdiction over the
Corrective Actions, as evidenced by (a) the written concurrence of such
regulatory body that no further Corrective Actions are required at such
Location or (b) a written report from the Remediation Consultant addressed to
Buyer and Seller that Environmental Compliance has been achieved at such
Location and that all Environmental Conditions at such Location have been
remediated in accordance with applicable Environmental Law and the remediation
plan approved in accordance with the requirements of Section 6.7(y), which
report is approved by an environmental consultant selected by Buyer at Buyer's
expense, which approval shall not be unreasonably withheld or delayed
("Remediation Completion"). Seller shall cause the Remediation Consultant to
complete the Corrective Actions at each Location as expeditiously as reasonably
practicable. Seller shall be responsible for all audits and reviews of any of
Corrective Actions performed by any regulatory body having jurisdiction over
the Location and the Corrective Actions within
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thirty (30) months of Remediation Completion with respect to the Location and
shall complete any further Corrective Actions that may be required by such
regulatory body in connection with such audit or review. Upon the expiration of
the thirty (30) month period, Buyer shall assume responsibility for any audits
or review. Prior to commencement of any Corrective Actions at a Location,
Seller shall provide Buyer (y) with a remediation plan prepared by the
Remediation Consultant, which plan and any amendment thereto or modification
thereof (i) shall be prepared to accomplish the Corrective Actions as soon as
practicable but with a view to reasonably completing all such Remediation
within five (5) years following the Closing taking into account the relative
significance of the Corrective Actions required at each Location, (ii) shall
meet the requirements of each environmental regulatory body having jurisdiction
over the Corrective Actions, (iii) shall be developed and implemented to
minimize the scope and duration of any disruption to the business of Buyer
conducted at the Location, and (iv) shall be subject to approval by Buyer and
Buyer's environmental consultant, which approval shall not be unreasonably
withheld or delayed, and (z) with an Access Agreement, signed by the
Remediation Consultant, substantially in the form attached hereto as EXHIBIT
6.7 (the "Access Agreement"). Buyer shall not be required to agree to any
permanent activity use limitation or other permanent restriction in connection
with the Corrective Actions. The Remediation Consultant shall provide Buyer
with copies of all notices, documents and filings made with respect to any
Location and the Corrective Actions and with such other information, at Buyer's
expense, as Buyer may from time to time reasonably request with respect to the
Corrective Actions.
6.8 COSTS OF CORRECTIVE ACTIONS.
(a) Seller shall timely pay all Remediation Costs with
respect to Corrective Actions, shall keep the Locations and other
property of Buyer free from any Liens asserted by the Remediation
Consultant and any person, firm or corporation performing Corrective
Actions at the direction of the Remediation Consultant, and shall
provide Buyer upon request with lien waivers from each of the
foregoing. The Remediation Consultant shall provide Buyer with copies
of all invoices submitted to Seller for Corrective Actions, and Seller
shall provide Buyer with copies of all payments made by Seller with
respect to such invoices. Seller shall provide Buyer with a true and
correct copy of all contracts between Seller and the Remediation
Consultant with respect to Corrective Actions, and all such contracts
shall be collaterally assigned by Seller to Buyer by a Collateral
Assignment of Contract substantially in the form attached hereto as
EXHIBIT 6.8(a)-1 (the "Contract Assignment"). As additional security
to Buyer for the performance by Seller of its obligations with respect
to Corrective Actions and the costs to be incurred by Buyer in the
event that Seller fails to perform such obligations, Seller shall
establish at Closing a fund (the "Environmental Escrow Fund") to be
held in escrow for the benefit of Buyer pursuant to the terms of the
Environmental Escrow Agreement. Seller shall pay or deliver to the
Environmental Escrow Agent at Closing and from time to time thereafter
money or a Letter of Credit in such amounts, form and substance as
shall then meet the requirements of this Section 6.8. In addition,
Seller
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shall grant Buyer a perfected first security interest in the
Environmental Escrow Fund and in all amounts to which Seller would be
entitled to reimbursement from any state underground storage tank or
comparable fund on account of any Corrective Actions at any Location
undertaken after the Closing, which security interest and related
rights and remedies shall be set forth in the Environmental Escrow
Agreement and in a Security Agreement substantially in the form
attached hereto as EXHIBIT 6.8(a)-2 (the "Security Agreement"), and
shall be exercisable upon a Seller's Default (as defined below). The
Environmental Escrow Agent shall invest and disburse the money
contributed to the Environmental Escrow Fund and the proceeds of any
Letter of Credit received by the Environmental Escrow Agent and held
in the Environmental Escrow Fund in accordance with the Environmental
Escrow Agreement. All interest or other income earned in connection
with investments of the Environmental Escrow Fund shall be added to
the Environmental Escrow Fund. Seller shall pay the reasonable costs
and expenses of the Environmental Escrow Agent and the costs of
obtaining any Letter of Credit.
(b) At Closing and every six (6) months thereafter until
Remediation Completion at all Locations (each a "Contribution Date"),
Seller shall contribute to the Environmental Escrow Fund an amount
equal to the following (the "Required Contribution"):
(i) if no Remediation Default or Seller Default (as
defined below) has occurred, (x) fifty percent (50%) of the
Remediation Costs for Corrective Actions estimated by the
Environmental Consultant or the Remediation Consultant, as
the case may be, to be undertaken within the twelve (12)
month period immediately succeeding the Contribution Date, as
provided to the Environmental Escrow Agent, less (y) the
balance of money then remaining in the Environmental Escrow
Fund; or
(ii) if a Remediation Default or Seller Default has
occurred, as certified to the Environmental Escrow Agent by
Buyer, (y) all Remediation Costs for Correction Actions
estimated by the Remediation Consultant to be undertaken
within the twelve (12) month period immediately succeeding
the Contribution Date, as provided to the Environmental
Escrow Agent, less (y) the balance of money then remaining in
the Environmental Escrow Fund.
In lieu of contributing money to the Environmental Escrow Fund, at the
election of Seller so long as no Seller Default has occurred, Seller
may deliver to the Environmental Escrow Agent an irrevocable letter of
credit ("Letter of Credit") in the amount of the Required Contribution
issued by a Eligible Bank (as defined below), payable upon drafts
issued by the Environmental Escrow Agent and otherwise in form and
substance reasonably acceptable to Buyer and the Environmental Escrow
Agent. Each Letter of Credit shall expire not earlier than seven (7)
days after the Contribution
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Date next succeeding the Contribution Date with respect to which it is
delivered to the Environmental Escrow Agent and shall be returned to
Seller as of such next succeeding Contribution Date upon the
contribution by Seller to the Environmental Escrow Fund of money or a
new Letter of Credit in the amount of the Required Contribution as of
such next succeeding Contribution Date. As used herein, "Eligible
Bank" shall mean (i) Bank of Boston Connecticut or such other
successor bank as may, from time to time, become Seller's principal
bank of account so long as any such successor bank has unrestricted
capital and surplus in excess of One Billion Dollars
($1,000,000,000.00), or (ii) a commercial bank reasonably acceptable
to Buyer.
(c) The Remediation Consultant shall provide Seller, Buyer
and Environmental Escrow Agent with reports at least thirty (30) days
prior to each Contribution Date setting forth the status of all
Corrective Actions, the Remediation Costs reasonably estimated by the
Remediation Consultant to complete all Corrective Actions, and the
Remediation Costs reasonably estimated by the Remediation Consultant
to be expended for Corrective Actions to be undertaken within the
twelve (12) month period immediately succeeding such Contribution
Date. In the event that the Remediation Consultant shall fail to
provide an estimate sufficient to establish the amount of any Required
Contribution at least thirty (30) days prior to the applicable
Contribution Date, the amount of the Required Contribution for such
Contribution Date shall be based on the last estimate provided by
either the Environmental Consultant or the Remediation Consultant, as
the case may be, as required by this Agreement.
(d) To the extent the balance of money remaining in the
Environmental Escrow Fund as of any Contribution Date exceeds the
Required Contribution as of such Contribution Date (an "Excess
Amount"), if no Seller Default has occurred, the Excess Amount shall
be distributed by the Environmental Escrow Agent to Seller from the
Environmental Escrow Fund on the day following such Contribution Date.
If a Seller Default has occurred under Section 6.8(f)(i), (ii), or
(iii) below, the Excess Amount existing as of a Contribution Date
shall be distributed by the Environmental Escrow Agent to Seller on
the day following the next succeeding Contribution Date (i.e., six
months and one day after the determination that an Excess Amount
exists) but only to the extent that an Excess Amount exists as of such
next succeeding Contribution Date. If a Seller Default has occurred
under Section 6.8(f)(iv) or (v) below, the Excess Amount existing as
of a Contribution Date shall be distributed by the Environmental
Escrow Agent to Seller on the day following the next succeeding
Contribution Date but only to the extent that (i) an Excess Amount
exists as of such next succeeding Contribution Date and (ii)(x) the
balance in the Environmental Escrow Fund plus (y) existing and, to the
extent reasonably likely to be recoverable, future amounts payable by
any state underground storage tank or comparable fund on account of
any Corrective Actions for which Seller is entitled to reimbursement
and which are secured by the Security Agreement, net of all reasonable
costs of recovery, exceed (z) the Remediation
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Costs for all Corrective Actions estimated by the Remediation
Consultant to be undertaken to achieve Remediation Completion at the
Locations.
(e) The occurrence of any one or more of the following events
shall constitute a "Remediation Default" hereunder:
(i) Seller shall fail to perform any material
covenant or satisfy any material condition under the Security
Agreement, and such failure shall continue for a period of
thirty (30) days after written notice of such failure is
given by Buyer to Seller; or
(ii) If, in accordance with the procedures set forth
in this Section 6.8(e), a determination is made by the
Dispute Panel (as defined below) or pursuant to arbitration
in accordance with this Agreement that Seller has failed
without Reasonable Excuse to carry out Corrective Actions at
any Location as required by this Agreement.
As used herein, "Reasonable Excuse" shall mean (i) any event beyond
the reasonable control of Seller, including any act of God, war, civil
disturbance, governmental orders or delays in receipt of required
governmental approvals or (ii) withdrawal by Buyer of Seller and
Remediation Consultant's right of access to the applicable Location
pursuant to the Access Agreement other than a withdrawal caused by a
breach of the Access Agreement by Seller or Remediation Consultant or
their representatives. If, at any time or from time to time, Seller
fails without Reasonable Excuse to carry out Corrective Actions at any
Location as required by this Agreement and such failure shall continue
for a period of thirty (30) days after written notice of such failure
is given by Buyer to Seller, Buyer may provide Seller with written
demand that a Dispute Panel be chosen (a "Dispute Notice") or may make
demand for arbitration under this Agreement. The Dispute Panel shall
consist of three independent, qualified, licensed environmental
consultants, one selected by Buyer in the Dispute Notice ("Buyer's
Consultant"), one selected by Seller within ten (10) days of receipt
of the Dispute Notice ("Seller's Consultant"), and one selected
jointly by Buyer's Consultant and Seller's Consultant within ten (10)
days of the selection of Seller' Consultant. The Dispute Panel shall
review the status of Corrective Actions and any remediation plan
meeting the requirements of Section 6.7(y) hereof and make a
determination, based on majority vote, whether Seller has failed
without Reasonable Excuse to carry out Corrective Actions at such
Location as required by this Agreement. If the Dispute Panel decides
that Seller has so failed, then, in such event, a Remediation Default
shall be deemed to have occurred under this Agreement. If the Dispute
Panel fails to render a decision within thirty (30) days of the
receipt by Seller of a Dispute Notice, Buyer may, notwithstanding the
giving of such Dispute Notice, make demand for arbitration in
accordance with this Agreement. In such event, the arbitration panel
shall decide whether Seller has failed without reasonable excuse to
carry out Corrective Actions at
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such Location as required by this Agreement. If the decision of the
arbitrators is that Seller has so failed, then, in such event, a
Remediation Default shall be deemed to have occurred under this
Agreement.
(f) The occurrence of any one or more of the following events
shall constitute a "Seller Default" hereunder:
(i) Seller shall fail to pay on or before the due
date thereof and such failure shall continue for a period of
fifteen (15) days after written notice of such failure is
given by Buyer to Seller: (1) any invoice or invoices (other
than those contested by Seller in good faith) aggregating
Five Thousand Dollars ($5,000.00) or more for Remediation
Costs for Corrective Actions, whether performed at the
direction of Seller or performed at the direction of Buyer
following a Remediation Default, or (2) any costs and
expenses arising out of the appointment and decision of the
Dispute Panel and any arbitration proceeding in which a
Remediation Default is found to exist and all costs and
expenses (including reasonable attorneys' fees) incurred by
Buyer in connection with any such appointment, decision or
proceeding; or
(ii) Any person, firm or corporation shall record a
notice of intention to claim a lien under any applicable
mechanics' lien law against, or any Lien shall be imposed on,
any Location or other property of Buyer in connection with
the performance of Corrective Actions and the same shall not
be bonded against or removed within thirty (30) days after
written notice of the existence thereof is given by Buyer to
Seller; or
(iii) Seller shall fail to contribute to the
Environmental Escrow Fund money or a new Letter of Credit in
the amount of the Required Contribution as of any
Contribution Date; or
(iv) The entry of an order for relief against Seller
within the meaning of the United States Bankruptcy Code or
other applicable insolvency statute; or
(v) The appointment of a receiver of any part of the
property of Seller, or an assignment for the benefit of
creditors by Seller, or the filing of a petition in
bankruptcy or the commencement of any proceedings by or
against Seller under any bankruptcy or insolvency laws or any
laws relating to the relief of debtors, readjustment of
indebtedness or reorganization of debtors, except for an
involuntary proceeding commenced against Seller which is
dismissed within sixty (60) days after the commencement
thereof without the entry of an order for relief or the
appointment of a receiver or trustee.
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(g) The Environmental Escrow Agent shall draw on any Letter
of Credit in the Environmental Escrow Fund:
(i) on the day following any Contribution Date if,
as of such Contribution Date, Seller has failed to contribute
to the Environmental Escrow Fund money or a new Letter of
Credit in the amount of the Required Contribution as of such
Contribution Date;
(ii) ten (10) days following receipt by
Environmental Escrow Agent of a certificate from Buyer that a
Remediation Default has occurred unless, prior to the making
of such draw by the Environmental Escrow Agent, Seller shall
have contributed additional money or an additional Letter of
Credit to the Environmental Escrow Fund so that the
Environmental Escrow Fund has the amount of the Required
Contribution for which Seller would have been responsible as
of the Contribution Date immediately preceding the date of
receipt of such certificate if a Remediation Default had
occurred prior to such Contribution Date; and
(iii) ten (10) days following receipt by
Environmental Escrow Agent of a certificate from Buyer that a
Seller Default has occurred unless, prior to the making of
such draw by the Environmental Escrow Agent, Seller shall
have contributed money to the Environmental Escrow Fund in
the face amount of the Letter of Credit, in which event the
Letter of Credit shall be returned to Seller.
(h) Upon the occurrence of a Remediation Default, Seller
shall contribute within five (5) days of such occurrence, such sum of
money or a Letter of Credit as is necessary to bring the amount of
money held in the Environmental Escrow Fund to the amount of the
Required Contribution for which Seller would have been responsible as
of the Contribution Date immediately preceding the occurrence of the
Remediation Default if a Remediation Default had occurred prior to
such Contribution Date, and Buyer may, at Buyer's election but without
election of remedies and without waiver of Buyer's right to exercise
any one or more of the following rights in connection with the same or
any other Remediation Default: (i) notify the Environmental Escrow
Agent that a Remediation Default has occurred, (ii) take such actions
and incur such Remediation Costs as Buyer deems reasonably necessary
at Seller's expense to complete the Corrective Actions in accordance
with the foregoing provisions at the Location with respect to which
the Remediation Default has occurred and, at such time as a
Remediation Default has occurred at four (4) or more Locations, at all
of the Locations and to cause Seller to fulfill its obligations under
the Asset Purchase Agreement and this Agreement, (iii) submit to
Seller for payment invoices for Remediation Costs for Corrective
Actions caused to be undertaken by Buyer and for costs and expenses
incurred in obtaining a determination of the existence of a
Remediation Default, (iv) exercise any other rights and remedies under
the Environmental Escrow Agreement and
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any Contract Assignment, and (vi) take such other actions and pursue
such other remedies as may be available to Buyer at law or in equity
by reason of the Seller Default. The exercise by Buyer of any one or
more of Buyer's rights or remedies hereunder shall not release Seller
from Seller's obligation to pay all Remediation Costs incurred by
Buyer for Corrective Actions as provided herein and all costs and
expenses for which Seller is liable hereunder by virtue of any
Remediation Default, and Seller shall indemnify and hold Buyer
harmless in accordance with Article IX from all loss, cost, damage and
expense (including reasonable attorney's fees) incurred by Buyer in
exercising any one or more of Buyer's remedies hereunder.
(i) Upon the occurrence of a Seller Default, Seller shall
contribute within five (5) days of such occurrence such sum of money
as is necessary to bring the amount of money held in the Environmental
Escrow Fund to the amount of the Required Contribution for which
Seller would have been responsible as of the Contribution Date
immediately preceding the occurrence of the Seller's Default if a
Seller's Default had occurred prior to such Contribution Date, and
Buyer may, at Buyer's election but without election of remedies and
without waiver of Buyer's right to exercise any one or more of the
following rights in connection with the same or any other Seller
Default: (i) notify the Environmental Escrow Agent that a Seller
Default has occurred, (ii) take such actions and incur such
Remediation Costs as Buyer deems reasonably necessary at Seller's
expense to complete the Corrective Actions in accordance with the
foregoing provisions and cause Seller to fulfill its obligations under
the Environmental Escrow Agreement and this Agreement, (iii) submit to
Seller for payment invoices for Remediation Costs for Corrective
Actions caused to be undertaken by Buyer and for other costs and
expenses for which Seller is liable hereunder or, at Buyer's election,
withdraw such amounts from the Environmental Escrow Fund in accordance
with the Environmental Escrow Agreement, (iv) exercise any other
rights and remedies under the Environmental Escrow Agreement, any
Contract Assignment and the Security Agreement, (v) to the extent sums
are expended for Corrective Actions for which Seller is or may be
entitled to obtain reimbursement from any state underground storage
tank or comparable fund for Corrective Actions undertaken at the
Locations after the Closing, file applications in Seller's name as
agent for Seller for reimbursement of such sums from any state
underground storage tank or comparable fund, such recoveries, less all
costs and expenses including reasonable environmental consulting and
legal fees paid or incurred by Buyer in connection with such
proceedings, to be paid to the Environmental Escrow Agent and
disbursed in accordance with the Environmental Escrow Agreement, and
(vi) take such other actions and pursue such other remedies as may be
available to Buyer at law or in equity by reason of the Seller
Default. The exercise by Buyer of any one or more of Buyer's rights or
remedies hereunder shall not release Seller from Seller's obligation
to pay all Remediation Costs incurred by Buyer for Corrective Actions
as provided herein and all costs and expenses for which Seller is
liable hereunder by virtue of any Seller's Default, and Seller shall
indemnify and hold Buyer harmless in accordance with Article IX from
all loss, cost, damage and expense
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(including reasonable attorney's fees) incurred by Buyer in exercising
any one or more of Buyer's remedies hereunder.
(j) The losing party shall be responsible for all costs and
expenses (including reasonable legal fees) arising out of, or incurred
by the successful party in connection with, the appointment and
decision of the Dispute Panel and any arbitration proceeding, and such
costs and expenses may be part of any arbitration award. In addition,
Seller shall pay Buyer all costs and expenses (including reasonable
legal fees) incurred by Buyer in connection with the exercise by Buyer
of any rights and remedies of Buyer arising hereunder or under
applicable law on account of any Remediation Default or Seller Default
hereunder. Whenever the day provided for any action or payment herein
shall fall on a day that is not a business day, such action or payment
may be taken or made on the next succeeding business day.
6.9 CONTRIBUTING RELEASES. If a Release occurs following Closing (a
"New Spill") at a Location where Corrective Actions are occurring or are to
occur, and the New Spill is unrelated to the Corrective Actions and is not due
to the negligence or wrongful conduct of Seller or the Remediation Consultant
in conducting the Corrective Actions, the Remediation Costs of the New Spill
shall be borne by Buyer. To the extent these Remediation Costs are not
discrete, the Remediation Costs for the Corrective Actions, on the one hand,
and the New Spill, on the other, shall be reasonably apportioned between Seller
and Buyer by the Remediation Consultant taking into account the nature and
extent of the remaining Corrective Actions and the additional Remediation that
will be required in connection with the New Spill. The Remediation Consultant
shall set forth the basis for such apportionment in a report to Seller and
Buyer. If Seller consents, which consent shall not be unreasonably withheld or
delayed, Buyer need not use the Remediation Consultant to perform Remediation
of the New Spill.
VII. ADDITIONAL AGREEMENTS AND COVENANTS
-----------------------------------
7.1 TRADEMARK LICENSE. At the Closing, Seller shall grant Buyer a
license substantially in the form of EXHIBIT 7.1 to use the Trademarks
exclusively in the Territory with respect to the Locations and merchandise sold
thereat for a period, as determined by Buyer, of up to three (3) years
following Closing (the "Trademark License"). In consideration of the Trademark
License and in addition to the Purchase Price, Buyer shall pay Seller at the
Closing a non-refundable royalty (the "Trademark Royalty") in the amount of
Four Million Dollars ($4,000,000.00). Prior to the expiration of the Trademark
License, Buyer shall remove all signs, and other references to the Trademark
from the Locations and, at Seller's election, destroy or, at Seller's expense,
turn them over to Seller. Buyer will indemnify, defend and hold Seller harmless
in accordance with Article IX for any liability, loss, cost or expense
resulting from continued display of the Trademarks following Closing.
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7.2 NON-COMPETITION AGREEMENT. At the Closing, each Seller shall enter
into a non-competition agreement substantially in the form of EXHIBIT 7.2 (the
"Non-Competition Agreement") restricting the ability of any Seller or affiliate
controlled by any Seller from competing with Buyer or engaging in the business
of operating or franchising convenience stores in the Territory for a period of
five (5) years from Closing.
7.3 BULK TRANSFERS. The parties hereto waive compliance with the
requirements of any applicable bulk sales law of any jurisdiction in connection
with the sale of the Assets to Buyer hereunder. Each Seller covenants and
agrees to pay and discharge when due all claims of creditors which could be
asserted against Buyer by reason of such non-compliance to the extent that such
liabilities are not specifically assumed by Buyer in accordance with this
Agreement. Seller will indemnify, defend and hold Buyer harmless in accordance
with Article IX for any loss, liability, cost or expense, including, without
limitation, attorneys' fees, suffered or incurred by Buyer by reason of the
failure of any Seller to pay or discharge such claims.
7.4 REAL PROPERTY TITLE REVIEW.
(a) Within thirty (30) calendar days following execution of
this Agreement by both parties, Seller and Buyer shall jointly engage
Commonwealth Land Title Insurance Company or such other title
insurance company as Seller and Buyer shall jointly select (the "Title
Company") to provide Buyer with title insurance commitments (the
"Commitments") for each of the fee-owned and leasehold properties set
forth on EXHIBIT 1, which shall provide upon recordation or filing of
the deeds or leasehold assignments specified herein, for the issue of
ALTA Form owner's title insurance policies at rates acceptable to
Buyer ("the Title Policies") insuring fee title to the properties
listed on EXHIBIT 1 and leasehold title to the properties listed in
EXHIBIT 1 to the Buyer or its assignees as provided herein, free and
clear of all Liens other than Permitted Encumbrances described in
Section 4.16(ii) and (iv) hereof and, with respect to leasehold
interests, excepting Permitted Encumbrances described in Section
4.16(ii) and (iv) hereof which may encumber fee title to the premises
and Liens which may encumber fee title to the premises that are
subordinated to the interest of Seller or as to which the holder has
agreed to an appropriate non-disturbance agreement with Seller
transferable to Buyer. In addition to the Commitments, Seller will
provide Buyer with copies of all encumbrances noted on any Title
Policy. The Title Policy may insure over any matter only to the extent
that acceptable affirmative insurance shall be provided as Buyer may
reasonably determine. Buyer shall have twenty (20) days after receipt
of the Commitments and copies of all noted encumbrances to review the
Commitments or supplements to the Commitments including copies of the
encumbrances. If Buyer, in its reasonable opinion, determines that
there exists any exception to insurance coverage which is not in
accordance with the foregoing, then Buyer shall notify Seller within
said twenty (20) day period of such exception. Should Buyer fail to so
notify Seller as aforesaid, all matters shown on the Commitments or
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supplements thereto shall be deemed to be acceptable to Buyer, and
Buyer shall take title subject thereto.
(b) Seller shall, promptly following Buyer's notification of
an unacceptable title exception contained in the Commitments or any
supplement thereto but in any event prior to Closing, diligently
endeavor to cure, or to make arrangements reasonably satisfactory to
Buyer to cure any such defect. If Seller is unable to cure or make
such arrangements to cure any such defect, then, at the election of
Buyer, the affected Location and related equipment, Inventory,
licenses and permits shall be excluded from the sale. The Purchase
Price shall be reduced by an amount computed in accordance with
Section 7.5 hereof. Seller shall pay the cost of title examination and
the issuance of the Commitments. Buyer shall pay the cost of any title
insurance coverage in amounts Buyer may require.
(c) If, prior to the date of Closing, all or any substantial
part of any Assets that would materially affect Buyer's ability to
operate any Location as it is currently operated shall be condemned by
governmental or other lawful authority, Buyer shall have no liability
for any such condemnation, and at its option, the affected Location
and related equipment, Inventory, licenses and permits shall be
excluded from the sale, and the Purchase Price shall be reduced by an
amount computed in accordance with Section 7.5. Buyer may elect to
keep the affected Location in the sale without reduction in Purchase
Price in which case Seller's interest in any condemnation that is not
subject to exclusion from this sale, Seller shall assign its interest
in any condemnation proceeds to Buyer.
7.5 DELETION OF A LOCATION. If a Location is to be deleted from the
sale prior to Closing for any reason permitted under this Agreement, the value
of such Location, including any portion thereof comprising Purchased Real
Property and all Franchise Agreements, Transferable Permits, Inventory,
Tangible Personal Property, Tenant Leases and Underground Storage Tanks
primarily related thereto, and the adjustment of the Purchase Price to be paid
by Buyer with respect to such value, shall be determined in accordance with
this Section 7.5. With respect to any Location that is Leased Real Property,
the Purchase Price for purposes of this Agreement and the amount thereof
payable by buyer at Closing shall be reduced by the amount determined for such
Location as set forth on EXHIBIT 7.5. With respect to any Location that is
Owned Real Property, the parties shall attempt to reach agreement prior to
Closing concerning the value of such Location. In the event that such parties
are unable to reach agreement prior to the Closing, the Purchase Price payable
at Closing shall be reduced by the amount determined for such Location as set
forth on EXHIBIT 7.5 (the "Estimated Value"), and within thirty (30) days
following the Closing Date, the value for such Location shall be determined by
appraisal in accordance with the following procedures. The value as so
determined (the "Appraised Value") shall equal the fair market value of all
real property interests comprising such Location as determined by an appraiser
jointly selected by the parties; provided, however, that if the parties are
unable to agree on a single appraiser, either
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party by written notice to the other may designate one appraiser, the other
party shall then designate one appraiser, and the two appraisers so designated
shall promptly designate a third appraiser. Such appraisers shall thereafter
promptly determine the fair market value of all real property interests
comprising such Location and shall deliver written appraisals reflecting such
determination to Buyer and Dairy Mart. The Appraised Value of such Location
shall be the average of the two (2) appraised values that are closest to each
other and the third appraisal shall be ignored for all purposes. Any appraiser
so designated shall be M.A.I. certified, each party shall bear the costs of the
appraiser selected by such party and the costs of the third appraiser shall be
borne equally by Buyer and Seller. If the Appraised Value exceeds the Estimated
Value of such Location, Seller shall pay the difference to Buyer as a further
reduction of the Purchase Price on account of such deletion within ten (10)
days after determination thereof, together with interest at the Prime Rate
thereon from the Closing Date to the date of payment by wire transfer to
Buyer's Bank Account. If the Appraised Value is less than the Estimated Value
of such Location, no further payment or adjustment shall be made under this
Agreement with respect to such Location.
7.6 BUYER'S INVESTIGATION. Following the execution of this Agreement
and until the Closing or sooner termination of this Agreement, Buyer, at its
expense, upon prior notice during normal business hours, may conduct such
evaluations, site inspections, tests and investigations with respect to the
Assets and the business of the Northeast Division and such review of leases and
other contracts as Buyer may desire; provided that such evaluations,
inspections and investigations shall not unreasonably interfere with Seller's
operations and the Assets are protected from loss or damage; and provided,
further, that Buyer shall indemnify and hold harmless Seller for all loss or
damage to any Purchased Real Property or Tangible Personal Property caused by
Buyer or Buyer's agents in connection with such evaluations, inspections and
investigations. Seller shall make available to all authorized representatives
of Buyer free and full access, during normal business hours and upon reasonable
notice, to the Assets and to such records of Seller relating to the Assets as
Buyer designates, subject to any obligations of confidentiality Seller may have
to third parties. Buyer shall keep all information it obtains as a result of
such access confidential and shall only use the same for the purpose of
effectuating the transactions contemplated by this Agreement.
7.7 OPERATIONS PRIOR TO CLOSING. Following the execution of this
Agreement and until Closing:
(a) Seller shall conduct the business of the Northeast
Division in the ordinary course, shall maintain existing insurance for
the Assets and the operation of the Northeast Division, and shall
maintain the Assets in good operating condition, reasonable wear and
tear excepted; provided, however, that Buyer's remedy for any failure
of Seller to maintain the Assets in good operating condition shall be
as provided in Section 7.14 hereof; and provided, further, that Seller
shall make reasonable efforts to keep Inventory at an aggregate level
of less than Three Million Seven Hundred
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Thousand Dollars ($3,700,000.00) unless in Seller's reasonable
judgment a higher level is required to operate the Locations properly.
(b) Seller shall not agree to any termination of (unless no
consent or agreement of Seller is required in connection with any
termination), nor shall Seller amend or waive, any of the material
terms and conditions in any of the Material Contracts or other
contracts and agreements to be transferred to Buyer without the
written consent of Buyer, which consent shall not be unreasonably
withheld or delayed; provided, however, that termination of any
Franchise Agreement upon default by the franchisee shall be as
reasonably determined by Seller after notice to Buyer;
(c) Seller shall use best efforts to renew all Purchased
Leases expiring prior to the closing on customary terms reasonably
determined by Seller after notice to Buyer;
(d) Seller shall use its reasonable efforts to preserve
existing relations with the landlords, tenants, franchises, Employees,
suppliers and customers associated with business of the Northeast
Division and the Assets and to comply with all of its obligations
under this Agreement and to fulfill all the conditions precedent to
Buyer's obligations;
(e) Without the written consent of Buyer, Seller shall not
sell, assign, transfer, convey, mortgage, pledge or in any other way
dispose of or encumber any of the Assets (other than the sale of
Inventory in the normal course of business, assets replaced in the
ordinary course of business with equivalent or superior assets,
dispositions in the ordinary course of business of assets of
immaterial value or unnecessary for the continued operation of any
Location consistent with the manner in which it was operated during
any period reflected in the Financial Information), materially change
the manner in which the business of the Northeast division is
presently conducted, materially change or alter any of the Locations
or take any action that would materially diminish or adversely affect
the business as presently conducted at any of the Locations. Except as
permitted by the immediately preceding sentence, Seller shall not
materially alter the Assets or remove any improvements, equipment or
property which comprise the Assets without the written consent of
Buyer; and
(f) Seller shall promptly notify Buyer of any matter that
would cause the representations and warranties set forth in Article IV
hereof not to be materially true and correct as of the occurrence of
such matter or as of the date of Closing.
7.8 TERMINATION.
(a) Subject to Section 7.8(b) hereof, this Agreement may be
terminated and the transactions provided for herein abandoned as
follows:
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(i) By mutual agreement in writing of Buyer and
each Seller, without liability of any party to the other at
any time prior to the Closing;
(ii) By Seller without liability to Buyer if any of
the conditions of Section 8.1 are not satisfied by Buyer or
waived by Seller as of the Termination Date, but such
termination shall not preclude Seller from exercising any
rights and remedies under this Agreement and applicable law
by virtue of the failure of Buyer to satisfy such conditions;
(iii) By Buyer without liability to any Seller if
any of the conditions of Section 8.2 are not satisfied by
each Seller or waived by Buyer as of the Termination Date,
but such termination shall not preclude Buyer from exercising
any rights and remedies under this Agreement and applicable
law by virtue of the failure of Seller to satisfy such
conditions;
(iv) By Buyer without liability to Seller if any
lender under any of the Financing Commitments refuses to
provide such financing and specifically confirms in writing
that such refusal is the result of (x) unacceptable
environmental exposure related to the Purchased Real Property
or the Assets and the aggregate Estimated Costs of
recommended Corrective Actions in the Environmental Reports
exceeds the sum of Four Million Dollars ($4,000,000.00), or
(y) a material adverse change in the results of operation of
Seller at the Locations from the results of operation
reflected in the Financial Information for the eleven (11)
fiscal periods ended December 28, 1996;
(v) By either the Buyer or the Seller without
liability to the other if there shall be in effect a
nonappealable final order of a court of competent
jurisdiction permanently prohibiting the consummation of the
transactions contemplated hereby;
(vi) By Buyer, if there has been a material
misstatement or material omission in a representation or a
material breach in any warranty or covenant on the part of
Seller the effect of which is not cured within ten (10)
business days after notice thereof has been given, or in the
case of a breach or default the effect of which can be cured
but cannot be cured within ten (10) days, if Seller
diligently commences to cure the same within said ten (10)
day period and thereafter fails to cure the effect of the
same within twenty (20) business days after such notice, but
such termination shall not preclude Buyer from exercising any
rights and remedies under this Agreement and applicable law
by virtue of Seller's misrepresentation or breach; or
(vii) By Seller, if there has been a material
misstatement or material omission in a representation or a
material breach in any warranty or covenant on
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the part of Buyer the effect of which is not cured within
ten (10) business days after notice thereof has been given,
or in the case of a breach or default the effect of which
can be cured but cannot be cured within ten (10) days, if
Buyer diligently commences to cure the same within said ten
(10) day period and thereafter fails to cure the effect of
the same within twenty (20) business days after such notice,
but such termination shall not preclude Seller from
exercising any rights and remedies under this Agreement and
applicable law by virtue of Buyer's misrepresentation or
breach.
(b) LIABILITIES AFTER TERMINATION. Upon any
termination of this Agreement pursuant to Section 7.8(a)
above and except as set forth in Section 7.9 hereof, the
terminating party hereto shall thereafter have no further
liability or obligation hereunder, but such termination shall
in no event relieve the other party hereto from any liability
to the terminating party for any breach of this Agreement
prior to the date of such termination, and the terminating
party shall thereafter be permitted to pursue all legal and
equitable remedies available to it under this Agreement and
applicable law, including the right of specific performance.
7.9 RETURN OF INITIAL PAYMENT. If either party hereto terminates this
Agreement pursuant to the provisions of Section 7.8(a)(i) or (v) hereof, or if
Buyer terminates this Agreement pursuant to the provisions of Section
7.8(a)(iii), (iv) or (vi) hereof, or if the transactions contemplated by this
Agreement are not consummated because Seller fails to close for any reason
other than those set forth in Section 7.8(a)(ii) or (vii) hereof, the Deposit
and interest thereon will be returned to Buyer. If Seller terminates this
Agreement pursuant to Section 7.8(a)(ii) or (vii) hereof, or if the
transactions contemplated by this Agreement are not consummated because Buyer
fails to close for any reason other than those set forth in Section 7.8(a)(i),
(iii), (iv), (v) or (vi), the Deposit and interest will be paid to Seller as
liquidated damages and not as a penalty and in lieu of all other remedies
against Buyer. In addition, if either party hereto terminates this Agreement
pursuant to the provisions of Section 7.8 hereof, the parties shall return to
each other all written materials obtained in connection with the transactions
contemplated hereby and shall use their best efforts to keep confidential all
such information acquired.
7.10 INFORMATION TO BE PROVIDED. To the extent not provided as
otherwise required by this Agreement, Seller will as promptly as practicable
but no more than thirty (30) days after the execution of this Agreement (or no
more than ten (10) days after the same become available), deliver to Buyer
copies of the following, to the extent they exist and are in Seller's
possession or obtainable by Seller:
(a) Profit and Loss Statements excluding overhead allocations
for each Location being transferred pursuant to this Agreement as of
February 1, 1997 and for each accounting period thereafter until
Closing.
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(b) Pro Forma balance sheet as of February 1, 1997 and as of
the close of each accounting period until Closing for the Locations to
be transferred pursuant to this Agreement, excluding any category of
assets or liabilities that Seller does not reflect down to a Location
level.
(c) A list of the tax filings made or to be made by Seller
for the Locations being transferred.
(d) Copies of all pending governmental orders or decrees
regarding environmental matters at the Locations.
(e) A list of store managers and first line supervisors and
division/zone managers.
(f) Seller shall use reasonable efforts to secure Estoppel
Certificates for each party to any of the Tenant Leases in the form
attached hereto as EXHIBIT 7.10(f).
(g) The consents of landlords to the assignment of leases
where the lease requires such consents. Seller shall use reasonable
efforts to secure Landlord's Estoppel Certificates from all lessors in
the form attached to this Agreement as EXHIBIT 7.10(g). The consents
of landlords and Landlord's Estoppel Certificates contemplated by this
Section shall, notwithstanding the foregoing, be provided by Seller to
Buyer within a reasonable time after received by Seller but in no
event less than ten (10) days prior to Closing.
(h) Information sufficient to locate, confirm or enforce
deposits or prepaid expenses allocated to Buyer pursuant to this
Agreement.
(i) A list and adequate summary of pending material
litigation as described in Section 4.6 hereof.
(k) Information and documentation reasonably required by the
Title Company from Seller to provide for the issuance of the Title
Policies without exceptions other than Permitted Encumbrances
described in Section 4.16(ii) and (iv) hereof.
(l) All surveys, maps, plans, consents or licenses in
Sellers' possession pertaining to any of the Locations being
transferred.
(m) Complete copies of all Purchased Leases, Franchise
Agreements, and Tenant Leases now in effect and all waivers and
consents in Seller's possession relating to the same.
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(n) All inspection, engineering, soil or architectural
notices, studies, reports and plans and specifications that relate to
the physical condition or operation of the Purchased Real Property or
any buildings, plants and structures located thereon.
(o) All certificates of occupancy, licenses, permits,
continuation certificates of occupancy, variances relating to
construction, use, location and/or distance, authorizations and
approvals with respect to the Purchased Real Property or any portion
thereof, the occupancy thereof or any present use thereof.
(p) All guarantees and warranties relating to the Purchased
Real Property, the buildings, plants or structures thereon or the
equipment used in connection with the ownership, operation or
maintenance thereof.
(q) All test results (including without limitation all
tightness and precision tests of underground storage tanks, lines and
related systems at the Locations) for tests after December 31, 1992,
environmental studies, evaluations and reports prepared about the
Purchased Real Property and the Assets.
(r) At the request of Buyer, any agreements, documents,
notices or correspondence relating to any matters described in
EXHIBITS 4.8(c), 4.19(a), 4.19(e), 4.19(j), and 4.19(o).
7.11 MUTUAL COOPERATION. From and after the date hereof and until the
date of Closing:
(a) Buyer hereby covenants and agrees with Seller that Buyer
shall use its reasonable efforts to cause the consummation of the
transactions contemplated hereby in accordance with the terms and
conditions hereof, and Seller hereby covenants and agrees with Buyer
that Seller shall use its reasonable efforts to cause the consummation
of the transactions contemplated hereby in accordance with the terms
and conditions hereof.
(b) Seller shall use reasonable efforts to obtain the written
consent to the transfer or assignment to Buyer of any of the Assets,
where the consent of any other party may be required for such
assignment and transfer. Buyer agrees to cooperate fully with Seller
to secure such consents, including supplying information about Buyer
as may be requested by landlords. Seller shall have the right, but not
the obligation, to offer additional consideration at Seller's expense
to a landlord to secure its consent to the assignment if such consent
is required by the lease. If a landlord does not consent to the
assignment, the Location may be deleted from this sale in accordance
with Section 7.5 unless Buyer elects to accept the Location without
the landlord's
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consent, in which event there will be no reduction in the
consideration paid Seller hereunder if Buyer so elects.
(c) Seller and Buyer shall each prepare any and all
documentation and supply any and all information required by any
governmental authority or agency thereof to be filed by Buyer or
Seller, as the case may be, prior to conveying the Purchased Real
Property as contemplated hereby, and shall timely make the necessary
filings or applications relating thereto. Buyer and Seller each agrees
to cooperate with the other in the completion, execution and
submission of any such filings or applications.
(d) Buyer shall take all actions required of Buyer under
applicable law to effect the transfer to Buyer of all Transferable
Permits and shall bear the costs of all permit transfer fees. Seller
shall cooperate with Buyer and shall take any actions reasonably
requested by Buyer as required under applicable law to effect the
transfer of the Transferable Permits to Buyer. In addition, Seller
shall take all actions required of Seller under applicable law to
obtain or renew all Transferable Permits which are necessary for the
conduct of the business of the Northeast Division and which, if not
obtained, the lack thereof would have, either individually or in the
aggregate, a material adverse effect on any of the Locations, Assets,
or operations of the Northeast Division. Seller shall bear all costs
associated with applying for, issuance or renewal of any such
Transferable Permits expiring prior to Closing. Seller and Buyer shall
execute any and all transfer documents and assist in obtaining any
consent required in connection with the transfer of the Transferable
Permits.
(e) Buyer shall take all actions required under applicable
law for Buyer to assume the obligations of Seller as franchisor under
the Franchise Agreements.
7.12 PERFORMANCE BY EACH SELLER. Dairy Mart agrees to use its
reasonable best efforts to cause the respective representations and warranties
of DM-MA, DM-RI, CIA-NY, CGI, RSI, FIN-OP, and CIA-KY to be true and correct in
all material respects as of the date hereof and as of the Closing Date and to
cause DM-MA, DM-RI, CIA-NY, CGI, RSI, FIN- OP, and CIA-KY to perform all of
their respective obligations under this Agreement and under each Agreement to
be executed by DM-MA, DM-RI, CIA-NY, CGI, RSI, FIN-OP, and CIA-KY respectively
in connection with the closing of the transactions contemplated hereby.
7.13 HSR ACT FILINGS. As soon as practicable, the Seller and Buyer
shall make any and all filings which are required under the HSR Act. Seller
will furnish to Buyer and Buyer will furnish to Seller such necessary
information and reasonable assistance as Buyer or Seller may request in
connection with its preparation of necessary filings or submissions to any
governmental agency, including, without limitation, any filings necessary under
the provisions of the HSR Act. Each party will supply the other with all
correspondence, filings,
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communications or memoranda between Seller or its representative, on the one
hand, and the Federal Trade Commission, the Antitrust Division of the U.S.
Department of Justice or any other governmental agency or authority or members
of their respective staffs, on the other, with respect to this Agreement or
the transactions contemplated hereby.
7.14 CONDITION OF ASSETS; IDENTIFICATION OF TANGIBLE PERSONAL
PROPERTY.
(a) Within a reasonable time prior to the Closing, Seller
and Buyer will jointly conduct an inspection of the Locations and the
Tangible Personal Property and prepare an inventory of the Tangible
Personal Property situated at each Location. To the extent that any
Location fails to have any material item of Tangible Personal
Property reasonably necessary to produce the results of operation
reflected in the Financial Information for the Location for the
fiscal period of Seller ended on February 3, 1996, Seller shall at
its own cost and expense replace such item prior to the Closing or
reduce the Purchase Price by the cost reasonably estimated to replace
such item. In the event that any inspection reveals (i) that any item
of Tangible Personal Property or any of the Purchased Real Property
is not in good operating condition, reasonable wear and tear
excepted; or (ii) that substantial defects or weaknesses exist in the
Purchased Real Property, including but not limited to structural,
roof, electrical, plumbing, HVAC and appliance defects; or (iii) that
asbestos present in any of the Purchased Real Property is friable or
otherwise inadequately treated so as to create a material risk of
harm to individuals; or (iv) that any condition disclosed on EXHIBIT
4.17 or EXHIBIT 4.19(e) has not been remedied, Seller shall at its
own cost and expense satisfactorily repair or replace such item of
Tangible Personal Property, or satisfactorily repair, replace or
remedy any defective condition, or satisfactorily abate or otherwise
treat any asbestos, as the case may be, prior to the Closing or
reduce the Purchase Price by the cost reasonably estimated of such
repair, replacement, remedy, abatement or treatment.
(b) In the event that, between the date of inspection
contemplated by Section 7.14(a) hereof and the Closing Date, any
damage occurs to any of the Locations or the Tangible Personal
Property situated thereat as a result of fire or other casualty,
Seller shall restore such Location to its former condition prior to
Closing or give Buyer a credit against the Purchase Price for the cost
of restoration.
(c) Should any disputes arise between Seller and Buyer
concerning Seller's obligations with respect to conditions described
in Section 7.14(a)(i), (ii) or (iii) above, Seller and Buyer shall
meet prior to Closing to attempt to resolve their differences and
shall agree on those matters upon which they can agree prior to
Closing. If, as of Closing, any remaining areas of material dispute
exist under this Section 7.14 with respect to any Location, at the
option of Seller, (x) such dispute shall be resolved after the Closing
by arbitration in accordance with this Agreement or (y) the affected
Location and related equipment, Inventory, licenses and permits shall
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be excluded from the sale and the Purchase Price shall be reduced by
an amount computed in accordance with Section 7.5 hereof.
7.15 FIN-OP RECEIVABLES AND CERTAIN FRANCHISEE RECEIVABLES.
(a) Certain limited and full franchisees of the Locations are
obligated to FIN-OP pursuant to the terms and conditions of certain
purchase money notes, security agreements and related guaranties made
by such franchisees and related parties in favor of FIN-OP and secured
generally by a first lien on the inventory and, in certain cases,
equipment owned by the franchisee (the "FIN-OP Receivables"). The
amounts outstanding under the FIN-OP Receivables as of December 28,
1996 are more particularly identified in a report provided by FIN-OP
to Buyer noted as item 23 on EXHIBIT 4.7 and attached therewith. As
noted in section 3.5 hereof, certain full franchisees of the Locations
are obligated to Seller for Full Franchisee Receivables pursuant to
the terms and conditions of certain demand credit and security
agreements made by such franchisees with Seller and secured generally
by a second lien on the inventory and, in certain cases, equipment
owned by the franchisee. Copies of the types of documents evidencing
the FIN-OP Receivables and Full Franchisee Receivables have been
provided to Buyer by FIN-OP and Seller.
(b) Following the Post Closing, Seller may make demand for
any Full Franchisee Receivable still owed by any full franchisee after
application to such Full Franchisee Receivable of any deposit held by
Seller with respect to such full franchisee in accordance with Section
3.7 hereof and of any amounts collected and paid to Seller with
respect to such full franchisee in accordance with EXHIBIT 3.5. In
addition, Seller may make demand for any Limited Franchisee Receivable
still owed by any limited franchisee after application to such Limited
Franchisee Receivable of any amounts collected and paid to Seller with
respect to such limited franchisee in accordance with EXHIBIT 3.5. In
connection with any such demand, Seller shall offer to permit any
franchisee with a Full Franchisee Receivable or a Limited Franchisee
Receivable in excess of Twelve Thousand Five Hundred Dollars
($12,500.00) to pay the entire amount of such receivable in equal
installments over a period of not less than twenty-four (24) months at
an interest rate not in excess of two percentage (2%) above the rate
applicable to such receivable for which no demand has been made the
("Required Installments").
(c) Following the Closing and so long as any balance shall
remain outstanding under the FIN-OP Receivables, Buyer shall have the
option to purchase the FIN-OP Receivable of any franchisee at a
purchase price equal to the outstanding principal balance thereof plus
accrued interest at the rate provided in documents evidencing the
FIN-OP Receivable through the date of purchase. In addition, following
the Closing and so long as any balance shall remain outstanding under
the Franchisee Receivables, Buyer shall have the option to purchase
the Franchisee
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Receivable of any franchisee at a purchase price equal to the
outstanding principal balance thereof plus accrued interest at the
rate provided in documents evidencing the Franchisee Receivable
through the in the date of purchase. If Buyer exercises the foregoing
option with respect to the FIN-OP Receivable of any franchisee who
also owes a Franchisee Receivable to Seller, Buyer shall concurrently
purchase the Franchisee Receivable of such franchisee. If Buyer
exercises the foregoing option with respect to the Franchisee
Receivable of any franchisee who also owes a FIN-OP Receivable, Buyer
shall concurrently purchase the FIN-OP Receivable of such franchisee.
Buyer may exercise either of the foregoing options at such time and
from time to time as Buyer may elect by giving notice to FIN-OP
and/or the Seller, as the case may be, and the closing of the
purchase shall occur as soon as practicable thereafter as reasonably
agreed by FIN-OP and/or Seller and Buyer but in no event more than
thirty (30) days after notice of the exercise of such option is given
by Buyer as provided herein. At the closing of the purchase, FIN-OP
and/or Seller shall tender to Buyer all of the original documents
evidencing or securing the FIN-OP Receivable and/or the Franchisee
Receivable to be purchased, duly endorsed and with all assignments
necessary for transfer and free of any Liens, together with a
certificate of an authorized officer of FIN-OP and/or Seller setting
forth the payment history of the related FIN-OP Receivable and/or
Franchisee Receivable and the current balance due thereunder; and
Buyer shall tender to FIN-OP and/or Seller the aforesaid purchase
price by wire transfer as provided herein in this Agreement.
(d) In the event that a franchisee shall fail to pay when
due any amount payable to FIN-OP under the terms and conditions of
the documents evidencing or securing the FIN-OP Receivable of such
franchisee, or in the event that a full franchisee shall, following
the Post Closing, fail to pay when due any Required Installment of a
Full Franchisee Receivable payable by such franchisee to Seller or
any Full Franchisee Receivable equal to or less than Twelve Thousand
Five Hundred Dollars ($12,500.00) payable by such franchisee to
Seller, and FIN-OP or Seller (as the case may be, herein the "Selling
Party"), in its discretion, shall determine to exercise its rights
under applicable law and the documents evidencing or securing such
FIN-OP Receivable or such Full Franchisee Receivable, the Selling
Party may send Buyer notice of the date and time of a secured party
sale to be conducted by the Selling Party of the inventory and/or
equipment securing such FIN-OP Receivable or such Full Franchisee
Receivable, as the case may be. Such sale may be a public sale or, at
the election of the Selling Party and if permitted by law, a private
sale to Buyer, in either case conducted in accordance with applicable
law. The date of any such sale shall not be less than fifteen (15)
days after notice of sale is given to Buyer. If the Selling Party is
the successful purchaser of the inventory and/or equipment at any
public sale, or if the Selling Party elects to conduct a private sale
to Buyer, then either immediately following such public sale or at
such private sale, at the option of Selling Party, Buyer shall
purchase such collateral at its Fair Market Value less the amount of
any Liens having a priority over the Lien of the Selling Party. As
used
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herein "Fair Market Value" shall mean, with respect to inventory, the
cost thereof based on a physical count conducted by RGIS or other
mutually acceptable inventory company and determined in accordance
with the procedures set forth in EXHIBIT 2.2; and shall mean, with
respect to equipment, the value of the equipment based on an appraisal
by a mutually acceptable appraiser valuing the equipment as part of a
going concern and not for purposes of liquidation. The costs of taking
inventory and obtaining such an appraisal shall be shared equally by
the Selling Party and Buyer.
(e) FIN-OP and/or Seller shall provide Buyer with statements,
not less frequently than quarterly, of the balances due under the
FIN-OP Receivables and the Franchisee Receivables and with notice of
any material defaults by a franchisee under the FIN-OP Receivables or
the Franchisee Receivables. Buyer agrees to provide FIN-OP and/or
Seller with the results of any audit conducted by Buyer of the
inventory and/or equipment a franchisee having an outstanding FIN-OP
Receivable and/or Full Franchisee Receivable, which audits Buyer
agrees to make not less often than two (2) times each calendar year.
7.16 EMPLOYEES OF SELLER AND BUYER. Except as permitted by Section
3.12(a) hereof, neither Seller nor Buyer shall, from the date hereof until five
(5) years after the Closing, interfere or attempt to interfere with any
employees of the other or induce or attempt to induce any such employees to
leave the employ of the other; provided, however, that advertising open
positions of employment in newspapers or engaging in other solicitation of
potential employees in a similarly general manner that is directed to the
general public and not to any employee of the other and the hiring of any
employee of the other who responds to any such general solicitation shall not
be a violation of this provision.
7.17 AGREEMENTS WITH RESPECT TO EXCLUDED CONTRACTS. As contemplated by
Section 4.16 hereof, Buyer is to receive title to the Assets free and clear of
any Liens except certain Permitted Encumbrances. To the extent that any Assets
required to be conveyed to Buyer hereunder, including any material item of
Tangible Personal Property identified in accordance with the procedures set
forth in Section 7.14 hereof, has been supplied by any vendor under an Excluded
Contract, or is subject to a Lien arising under an Excluded Contract, or is
leased under an Excluded Contract, without limiting the obligations of Seller
under Section 4.16 hereof, Seller shall take such actions prior to Closing as
may be required to transfer good title to such Assets, including such items of
Tangible Personal Property, to Buyer as of Closing free from any Liens except
as permitted by Section 4.16.
VIII. CONDITIONS PRECEDENT TO CLOSING.
-------------------------------
8.1 SELLER'S CONDITIONS PRECEDENT. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to each
of the following conditions:
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(a) The representations and warranties made by Buyer in this
Agreement shall be true in all material respects when made and on and
as of the Closing as though such representations and warranties were
made on and as of Closing. Seller shall have received from Buyer at
Closing satisfactory certificates to such effect signed by an
authorized officer of Buyer.
(b) Buyer shall have performed and complied in all material
respects with all provisions of this Agreement required to be
performed or complied with by Buyer prior to or at Closing. Seller
shall have received from Buyer at Closing satisfactory certificates to
such effect, signed by an authorized officer of buyer.
(c) No action or proceeding by or before any governmental
authority shall have been instituted (and not subsequently dismissed,
settled or otherwise terminated), which might restrain, prohibit or
invalidate any material portion of the transactions contemplated by
this Agreement.
(d) Seller shall have received from counsel for Buyer an
opinion, dated as of Closing, that all necessary corporate action has
been duly and validly taken on behalf of Buyer for the execution and
performance of this Agreement and all other agreements entered into or
instruments delivered by Buyer pursuant hereto, that all such
agreements and instruments are valid and binding on Buyer and
enforceable against Buyer, and that counsel has made reasonable
inquiries and, to such counsel's knowledge, Buyer is not subject to
any order, writ, injunction or decree of any court or governmental
authority that would prevent or restrain Buyer from fulfilling its
obligations under this Agreement or under any such other agreements or
instruments.
(e) All applicable waiting periods in respect of the
transactions contemplated by this Agreement under the HSR Act shall
have expired or early termination shall have been obtained.
(f) Buyer shall have executed and delivered to Seller at the
Closing each of the Buyer Documents and such additional documents as
may be reasonably requested by Seller in order to consummate the
transactions contemplated by this Agreement.
(g) Seller shall have received the Environmental Reports for
the Locations as provided by this Agreement.
(h) No more than twenty-four (24) Locations of any type, nor
more than fifteen (15) Locations at which gasoline and motor fuels are
sold, shall have been deleted from the purchase and sale for any
reason permitted under this Agreement.
8.2 BUYER'S CONDITIONS PRECEDENT. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to each
of the following conditions:
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(a) The representations and warranties made by Seller in this
Agreement shall be true in all materials respects when made and on and
as of the date of Closing as though such representations and
warranties were made on and as of Closing. Buyer shall have received
from Seller at Closing satisfactory certificates to such effect signed
by an authorized officer of Seller.
(b) Seller shall have performed and complied in all material
respects with all provisions of this Agreement required to be
performed or complied with by Seller prior to or at Closing. Buyer
shall have received from Seller at Closing satisfactory certificates
to such effect signed by an authorized officer of Seller.
(c) No action or proceeding by or before any governmental
authority shall have been instituted (and not subsequently dismissed,
settled or otherwise terminated), which might restrain, prohibit or
invalidate any material portion of the transactions contemplated by
this Agreement.
(d) Buyer shall have received from counsel for Seller an
opinion, dated as of Closing, that all necessary corporate action has
been duly and validly taken on behalf of Seller for the execution and
performance of this Agreement and all agreements and instruments
entered into or delivered by Seller pursuant hereto, that all such
agreements and instruments are valid and binding on Seller and
enforceable against Seller, and that counsel has made reasonable
inquiry and, to such counsel's knowledge, Seller is not subject to any
order, writ, injunction or decree of any count or governmental
authority that would prevent or restrain Seller from fulfilling its
obligations under this Agreement or under any such other agreement or
instrument.
(e) All applicable waiting periods in respect of the
transactions contemplated by this Agreement under the HSR Act shall
have expired or early termination shall have been obtained.
(f) The Seller shall have executed and delivered to Buyer at
the Closing each of the Seller Documents and such additional documents
as may be reasonably requested by Buyer in order to consummate the
transactions contemplated by this Agreement.
(g) Buyer shall have received the Environmental Reports for
the Locations as provided by this Agreement.
(h) No more than twenty-four (24) Locations of any type, nor
more than fifteen (15) Locations at which gasoline and motor fuels are
sold, shall have been deleted from the purchase and sale for any
reason permitted by this Agreement.
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IX. INDEMNIFICATION.
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9.1 INDEMNIFICATION BY SELLER. From and after the Closing, Seller
shall indemnify and hold harmless Buyer and its officers, directors,
shareholders, employees, consultants, agents and representatives wholly
harmless from, against and in respect of any and all liability, loss, cost and
expense whatsoever (including reasonable fees of legal counsel) that may be
incurred by Buyer or any such person (each a "Buyer Claim") as a result of any
one or more of the following:
(a) Any and all activities of any Seller and those of any
predecessor of any Seller prior to Closing, and any and all activities
of any Seller following the Closing with respect to its convenience
store business located outside the Territory;
(b) Any and all liabilities or obligations of any Seller and
those of any predecessor of any Seller and any claim by a third party
which arises from any such liability or obligation, including without
limitation any Excluded Liabilities and any tax liabilities, but
excluding Property Taxes described in Section 4.16(ii) and the Assumed
Liabilities;
(c) The inaccuracy or breach of any of the representations or
warranties made by any Seller in this Agreement or in any exhibit,
certificate or document delivered by Seller to the extent that the
same relates to a representation and warranty made hereunder;
(d) Seller's failure to perform any of its agreements
contained in this Agreement, in any Seller Document or in any other
agreement or instrument delivered in connection herewith;
(e) The failure of the parties to comply with any bulk sales
or transfer law;
(f) Any Environmental Conditions or lack of Environmental
Compliance for which Seller is responsible in accordance with this
Agreement, all Remediation Costs for Corrective Actions, all Damages,
any and all activities of Seller or its agents, including the
Remediation Consultant in performing Corrective Actions, and, except
to the extent caused by the negligence or willful misconduct of Buyer,
the presence of Seller and the Remediation Consultant and their
representatives on the Locations while performing Corrective Actions;
and
(g) Any claim by a franchisee that Buyer is liable to such
franchisee for the amount of any deposit setoff by Seller against the
Franchisee Receivable of such franchisee in accordance with Section
3.7 hereof.
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9.2 INDEMNIFICATION BY BUYER. From and after the Closing, Buyer shall
indemnify and hold Seller and its officers, directors, shareholders, employees,
consultants, agents and representatives wholly harmless from and against any
and all liability, loss, cost and expense whatsoever (including reasonable fees
of legal counsel) that may be incurred by any Seller (each a "Seller Claim") as
a result of any one or more of the following:
(a) Any and all activities of Buyer following the Closing;
(b) The inaccuracy or breach of any of the representations or
warranties made by Buyer in this Agreement or in any exhibit,
certificate or document delivered pursuant hereto;
(c) Buyer's failure to perform any of its agreements
contained herein or in any Agreement or instrument delivered in
connection herewith;
(d) Buyer's failure to pay any liabilities or perform any
obligations Assumed Liabilities or any claim by a third party which
arises from any such liability or obligation;
(e) Any Environmental Conditions or lack of Environmental
Compliance for which Buyer is responsible in accordance with this
Agreement and all Remediation Costs and Damages related to any of the
foregoing; and
(f) Any loss or damage to the Purchased Real Property or
Tangible Personal Property in connection with evaluations, inspections
and investigations thereof by Buyer in accordance with Section 7.6.
9.3 LIMITATION ON CERTAIN INDEMNIFICATION CLAIMS.
(a) Notwithstanding anything set forth in Section 9.1 above
to the contrary, Seller shall have no liability for any
indemnification obligation under Section 9.1(c) until the net
cumulative total of all Buyer Claims thereunder exceeds the sum of
Three Hundred Twenty Five Thousand Dollars ($325,000.00) (the "Seller
Threshold"); provided, however, that if the net cumulative total of
Buyer Claims under Section 9.1(c) exceeds the Seller Threshold, Seller
shall have no liability for the first Two Hundred Thousand Dollars
($200,000.00) of such Buyer Claims; and provided, further, that Seller
shall have no liability for Buyer Claims under Section 9.1(c) in
excess of Ten Million Dollars ($10,000,000.00).
(b) Notwithstanding anything set forth in Section 9.2 above
to the contrary, Buyer shall have no liability for any indemnification
obligation under Section 9.2(b) until the net cumulative total of all
Seller Claims exceeds the sum of
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Three Hundred Twenty Five Thousand Dollars ($325,000.00) (the "Buyer
Threshold"); provided, however, that if the net cumulative total of
Seller Claims under Section 9.2(b) exceeds the Buyer Threshold, Buyer
shall have no liability for the first Two Hundred Thousand Dollars
($200,000.00) of such Seller Claims; and provided, further, that Buyer
shall have no liability for Seller Claims under Section 9.2(b) in
excess of Ten Million Dollars ($10,000,000.00).
9.4 MANNER OF PAYMENT OF FINALLY DETERMINED CLAIMS. The amount of any
liability, loss, cost, or expense for which Buyer or Seller shall be finally
determined to have an obligation to indemnify the other pursuant to this
Article IX shall be paid by the indemnifying party to the indemnified party no
later than thirty (30) days after such final determination. Any indemnity
payment made pursuant to this Agreement will be treated as an adjustment to the
Purchase Price for tax purposes, unless a determination (as defined in Section
1313 of the Internal Revenue Code of 1986, as amended) with respect to the
indemnified party causes such payment not to constitute an adjustment to the
Purchase Price for United States federal income tax purposes. Either party
hereto (the "Offsetting Party") may offset and reduce (i) any amount payable by
the Offsetting Party to the other party pursuant to this Agreement or any other
agreement entered into in connection herewith by (ii) any and all amounts
payable by the other party pursuant to the foregoing provisions, as agreed to
by the other party in writing or as finally determined by arbitration or
otherwise in accordance with this Agreement.
9.5 PROCEDURE FOR OBTAINING INDEMNIFICATION
(a) In the event that either Seller or Buyer shall claim that
it is entitled to be indemnified pursuant to the terms of this Article
IX, it (the "Claiming Party") shall so notify the other party (the
"Indemnifying Party") in writing of such claim. Such notice shall
specify the basis of such claim and the liability, loss, cost or
expense incurred by, or imposed upon, the Claiming Party on account
thereof. If such liability, loss, cost or expense is liquidated in
amount, the amount stated in such notice shall be deemed the amount of
the claim of the Claiming Party as of the date of such notice,
provided that the statement of such amount shall not prevent or limit
the Claiming Party from making claims for additional liability, loss,
cost or expense which relate to the basis of the claim and which are
incurred after, or are unknown at, the time of the notice. If the
amount is not liquidated, the notice shall so state and, in such
event, a claim shall be deemed asserted against the Indemnifying Party
on behalf of the Claiming Party, but no payment shall be made on
account thereof until the amount of such claim is liquidated and the
claim is finally determined.
(b) The Indemnifying Party shall promptly consider the right
of the Claiming Party to indemnity with respect to any claim. If the
Indemnifying Party shall acknowledge the right of the Claiming Party
to indemnity in respect to a claim, then the amount of such claim, at
once if said claim is liquidated, or subsequently at
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such time as any unliquidated claim has become liquidated, shall be
deemed to be finally determined between the parties hereto subject to
additional claims contemplated in Section 9.5(a).
(c) If the Indemnifying Party shall not, within twenty (20)
days after the receipt of such notice, advise the Claiming Party, in
writing, that the Indemnifying Party acknowledges the right of the
Claiming Party to indemnity with respect to a claim, then the parties
hereto shall endeavor to settle and compromise said claim. If they are
unable to agree on any settlement or compromise, such claim for
indemnification shall be settled by appropriate arbitration, and any
liability established by reason of such settlement, compromise or
arbitration, shall be deemed to be finally determined and shall be
paid and satisfied in accordance with this Article IX.
(d) Each party shall promptly give written notice to the
other of any claim of a third party which may reasonably be expected
to result in a claim by the Claiming Party against the Indemnifying
Party; provided, however, that the failure of the Claiming Party to
provide such notice shall not affect the claim of the Claiming Party
for indemnification hereunder except to the extent that, and in such
case only to the extent that, the Indemnifying Party can establish
that such failure prejudiced the ability of the Indemnifying Party to
compromise or defend the asserted liability for which such notice
should have been given. The Indemnifying Party may undertake the
investigation and defense of such claim with its own counsel, and the
Claiming Party agrees to cooperate in good faith with the Indemnifying
Party and its counsel in the defense of such claim. Notwithstanding
the foregoing, the Claiming Party shall have the right to participate
in the investigation and defense of any such claim with its own
counsel at its own expense, except that the Indemnifying Party shall
bear the expense of such separate counsel if (i) the Indemnifying
Party shall not have employed counsel to represent the Claiming Party
within a reasonable time after notice of such claim is given to the
Indemnifying Party or (ii) the Indemnifying party shall authorize the
Claiming Party to employ separate counsel at the expense of the
Indemnifying Party. The Indemnifying Party agrees to cooperate in good
faith with any separate counsel of the Claiming Party in the defense
of such claim. The Claiming Party shall not settle, compromise, or
otherwise resolve any claim for which the Claiming Party is seeking
indemnification from the Indemnifying Party without the prior written
consent of the Indemnifying Party unless the Indemnifying Party is
disputing its obligation to provide indemnification for such claim, in
which event the Claiming Party may, without waiver or release of its
right to obtain indemnification from the Indemnifying Party, settle,
compromise or otherwise resolve such claim on such basis as the
Claiming Party in its sole discretion shall deem reasonable in the
circumstances. In no event may the Indemnifying Party settle,
compromise or otherwise resolve any claim unless the terms of such
settlement, compromise or resolution include a complete release of the
Claiming Party of any liability with respect thereto.
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9.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.
The representations, warranties and covenants set forth in this Agreement or in
any exhibit, schedule, certificate or other document or instrument delivered
pursuant to this Agreement, and the indemnification provisions contained in
this Agreement, shall survive the Closing; provided, however, that (a) any
claim for indemnification arising under Section 9.1(c) or Section 9.2(b) shall
be made not later than eighteen (18) months following the Closing; and (b) any
claim for indemnification under Sections 9.1(f) and 9.2(e) shall be made not
later than the later of (i) seven (7) years following Closing or (ii) three (3)
years following the completion of all Corrective Actions for Environmental
Conditions and Environmental Compliance failures for which Seller is
responsible under this Agreement at each Location. The conduct by the Buyer of
due diligence or other investigations of the business of the Northeast Division
and the Assets and the Locations, whether before or after the Closing, and the
information learned as a result of such investigations, shall not in any way
constitute a waiver by Buyer of the representations, warranties, covenants and
indemnification obligations of Seller set forth in this Agreement or otherwise
limit Buyer's ability to enforce any of the same. Seller and Buyer agree that,
except as specifically set forth in this Agreement, neither party (including
its representatives) has made or shall have liability for any representation or
warranty, express or implied, in connection with the transactions contemplated
by this Agreement.
9.7 EXCLUSIVE REMEDY. The indemnification obligations of Seller under
Section 9.1 and of Buyer under Section 9.2 shall constitute the exclusive
monetary remedy of the Buyer and Seller, respectively, with regard to any
liability of the Seller to Buyer and any liability of the Buyer to Seller
arising pursuant to this Agreement, except with respect to any liability for
fraud.
9.8 INSURANCE. Any liability, damage, loss or expense for which
indemnity or damages are sought pursuant to Article IX hereof shall be computed
after reduction for the net amount of any insurance proceeds actually received
by the party seeking indemnity or damages in respect of the matter giving rise
to the claim for indemnity or damage.
X. MISCELLANEOUS
-------------
10.1 PAYMENT OF EXPENSES AND FEES. Buyer and Seller shall each bear
their own costs and expenses, except as may be otherwise provided herein,
including, but not limited to, attorneys' fees incurred in connection with the
transactions contemplated by this Agreement; provided, however, Buyer shall pay
all recording fees in connection with the recording of any instrument of
transfer of the Assets from Seller to Buyer hereunder, and, if title insurance
is purchased by Buyer, the cost of such title insurance. Seller shall pay the
cost of the title examination referred to in Section 7.4(a).
10.2 PUBLIC ANNOUNCEMENTS. Neither Seller (or any of its Affiliates)
nor the Buyer (or any of its affiliates) shall make any public statement,
including, without limitation, any
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press release, with respect to this Agreement and the transactions contemplated
hereby, without the prior written consent of the other party (which consent may
not be unreasonably withheld), except as may be required by law or agreement
with any securities exchange. If a disclosure is required by law or agreement
with any securities exchange, the disclosing party shall make reasonable
efforts to afford the other party an opportunity to review and comment on the
proposed disclosure prior to the making of such disclosure.
10.3 BOOKS AND RECORDS; PERSONNEL. For a period of three (3) years
after the Closing (or such longer period as may be required by any governmental
body or ongoing legal proceeding):
(a) Buyer shall not dispose of or destroy any of the business
records and files included in the Assets. If Buyer wishes to dispose
of or destroy such records and files after that time, it shall first
give thirty (30) days' prior written notice to Seller and Seller shall
have the right, at its option and expense, upon prior written notice
to the Buyer within such thirty (30) day period, to take possession of
the records and files within sixty (60) days after the date of the
Seller's notice of the Buyer.
(b) Buyer shall allow the Seller and its representatives
access to all business records and files which are transferred to
Buyer in connection herewith, during regular business hours and upon
reasonable notice at Buyer's principal place of business or at any
location where such records are stored, and the Seller shall have the
right, at its own expense, to make copies of any such records and
files.
(c) Buyer shall make reasonably available to Seller, upon
written request and at Seller's expense (i) Buyer's personnel to
assist Seller in locating and obtaining records and files maintained
by Buyer and (ii) any of Buyer's personnel previously in Seller's
employ whose assistance or participation is reasonably required by
Seller in anticipation of, or preparation for, existing or future
litigation, arbitration, administrative proceeding or other matters in
which Seller or any of its affiliates is involved and which is related
to the Assets.
(d) Each of Seller and the Buyer shall cooperate fully with
each other and make available or cause to be made available to each
other for consultation, inspection and copying (at such other party's
expense) in a timely fashion such personnel, tax data, tax returns and
filings, files, books, records, documents, financial, technical and
operating data, computer records and other information as may be
reasonably required (i) for the preparation by Buyer or Seller of any
tax returns, elections, consents or certificates require to be
prepared and filed by Buyer or Seller or any appraisal of the Assets
or (ii) in connection with any audit or proceeding relating to taxes.
10.4 ADDITIONAL ASSURANCES. From time to time at the request and
expense of Buyer, Seller shall execute and deliver, or cause to be executed and
delivered, such
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instruments and documents and take such other action as Buyer may reasonably
request to more effectively assign, transfer and convey to Buyer or its
permitted assignees any of the Assets and to protect the right, title and
interest of Buyer therein and the enjoyment by Buyer thereof and otherwise to
carry out the intent of this Agreement. From time to time at the request and
expense of Seller, Buyer shall execute such further documents and instruments
as Seller may reasonably request to consummate or evidence the transactions
contemplated by this Agreement or otherwise to carry out the intent of this
Agreement.
10.5 ASSIGNMENT. Neither Seller nor Buyer shall assign any rights or
delegate any duties hereunder without the prior written consent of the other;
provided, however, that Buyer may assign, in whole or in part, its right
hereunder to one or more of its subsidiary companies, provided that no such
assignment shall relieve Buyer of its obligations hereunder.
10.6 ENTIRE AGREEMENT. This Agreement, including the exhibits and
other writings referred to herein or delivered pursuant hereto, constitutes the
entire agreement between Seller and Buyer with respect to the subject matter
hereof, and supersedes all prior oral or written agreements, commitments or
understandings with respect thereto. No amendment hereof shall be binding on
the parties unless in writing and signed by authorized representatives of all
parties hereto.
10.7 NOTICES. All notices and consents to be given hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
telexed with receipt acknowledged, mailed by certified mail or delivered by a
recognized commercial courier to the party at the address set forth below or
such other address as any party shall have designated by ten (10) days' notice
to the other:
If to Seller, to: Dairy Mart Convenience Stores, Inc.
210 Broadway East
Cuyahoga Falls, OH 44222
Attention: President
If to Buyer, by DB Companies, Inc.
U.S. Mail to: P.O. Box 9471
Providence, RI 02940
Attention: President
If to Buyer, by DB Companies, Inc.
courier to: 25 Concord Street
Pawtucket, RI 02860
Attention: President
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<PAGE> 71
Each of DM-MA, DM-RI, CIA-NY, CGI, RSI, CIA-KY and FIN-OP hereby appoint Dairy
Mart as agent to receive any notice to which any Seller or FIN-OP is entitled
to receive hereunder.
10.8 ARBITRATION. All claims, disputes and other matters in question
or dispute arising out of, or relating to, this Agreement, the other agreements
and instruments entered into or delivered pursuant hereto, or the transactions
contemplated hereby, other than those for which any party shall be entitled to
seek injunctive relief in accordance with applicable law, shall be finally
decided pursuant to Massachusetts law by arbitration in Hartford, Connecticut
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Each party shall select an arbitrator and the neutral arbitrator
shall be appointed in accordance with such rules. The award rendered by all or
a majority of the arbitrators shall be final, and judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
10.9 ATTORNEYS' FEES. In the event of any litigation or arbitration
proceedings between the parties hereto with regard to the subject matter
hereof, the prevailing party shall be entitled to recover its costs and
expenses incurred in connection with such suit or proceeding, including its
reasonable attorneys' fees.
10.10 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
and does not confer any rights or obligations on any party that is not a
signatory to this Agreement.
10.11 LIQUOR LICENSE MANAGEMENT. If there is a delay in the transfer
of beer, wine or liquor permits to be transferred to Buyer pursuant to Section
1.1(d) while waiting for regulatory approval, Buyer and Seller shall enter into
a management agreement to the extent permitted by law. The management agreement
will not exceed one hundred eighty (180) days. If it appears that regulatory
approval of the transfer is forthcoming and Seller and Buyer mutually agree,
the management agreement may be extended for additional periods of thirty (30)
days.
10.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be an original.
10.13 GOVERNING LAW; INTERPRETATION. This Agreement shall be governed
by and construed in accordance with the law of the Commonwealth of
Massachusetts, without giving effect to principles of conflicts of law. The
parties to this Agreement are represented by counsel and have fully negotiated
the terms hereof, and in interpreting the provisions of this Agreement or any
agreement contemplated hereby, no inference shall be drawn from the identity of
the party responsible for drafting the same.
10.14 TABLE OF CONTENTS AND HEADINGS; EXHIBITS. The table of contents
and section headings of this Agreement are for reference purposes only and are
to be given no effect in
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<PAGE> 72
the construction or interpretation of this Agreement. Each exhibit referenced
herein shall be deemed part of this Agreement and incorporated herein wherever
any reference is made thereto. Unless otherwise defined therein, capitalized
terms used in the exhibits to this Agreement shall have the meanings given to
such terms respectively in the body of this Agreement.
10.15 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validly or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
10.16 OBLIGATIONS OF SELLER. Whenever used herein, the term "Seller"
at all times shall refer to each of Dairy Mart, DM-MA, DM-RI, CIA-NY, CGI, RSI,
and CIA-KY and any one or more of them in any combination, and shall include
each of the parties identified as Seller and each of the other parties so
identified and each of the parties identified as Seller or any one or more of
the other parties so identified, as the context permits, and the
representations, warranties, covenants, obligations and liabilities of Seller
herein shall constitute the joint and several representations, warranties,
covenants, obligations and liabilities of each of Dairy Mart, DM-MA, DM-RI,
CIA-NY, CGI, RSI, and CIA-KY. Dairy Mart shall be jointly and severally liable
for the representations, warranties, covenants, obligations and liabilities of
FIN-OP hereunder.
10.17 OBLIGATIONS OF FIN-OP. FIN-OP hereby represents and warrants to
Buyer that each of the representations and warranties made by Seller with
respect to each Seller in Sections 4.1, 4.2, 4.3, and 4.4 hereof are true and
correct with respect to FIN-OP and that the representations and warranties of
FIN-OP set forth in Section 7.15 are true and correct. FIN-OP covenants and
agrees to perform its obligations under Section 7.15 hereof and agrees to
indemnify, defend and hold Buyer harmless in accordance with Article IX from
all loss, cost, damage and expense (including reasonable attorney's fees)
incurred by Buyer in connection with the inaccuracy of any representation and
warranty made by FIN-OP or any breach or default of any covenant and agreement
of FIN-OP hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
WITNESS DAIRY MART CONVENIENCE
STORES, INC., Seller
_________________________ By:_____________________________
Its
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<PAGE> 73
DAIRY MART, INC., Seller
_________________________ By:_____________________________
Its
DAIRY MART EAST, INC., Seller
_________________________ By:___________________________
Its
CIA FOOD MARTS, INC., Seller
________________________ By:____________________________
Its
CONVENIENT GASOLINE, INC., Seller
_________________________ By:____________________________
Its
REMOTE SERVICES, INC., Seller
_________________________ By:____________________________
Its
CONVENIENT INDUSTRIES OF
AMERICA, INC., Seller
_________________________ By:____________________________
Its
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<PAGE> 74
FINANCIAL OPPORTUNITIES, INC.
_________________________ By:____________________________
Its
DB COMPANIES, INC., Buyer
_________________________ By:____________________________
Its
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<PAGE> 75
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment") entered
into as of this 15th day of May, 1997, by and between DAIRY MART CONVENIENCE
STORES, INC., a Delaware corporation ("Dairy Mart"), DAIRY MART, INC., a
Massachusetts corporation ("DM-MA"), DAIRY MART EAST, INC., a Rhode Island
corporation ("DM-RI"), CIA FOODMARTS, INC., a New York corporation ("CIA-NY"),
CONVENIENT GASOLINE, INC., a New York corporation ("CGI"), REMOTE SERVICES,
INC., a Kentucky corporation ("RSI"), and CONVENIENT INDUSTRIES OF AMERICA,
INC., a Kentucky corporation ("CIA-KY"), all with a principal place of business
at 210 Broadway East, Cuyahoga Falls, Ohio 44222 (Dairy Mart, DM-MA, DM-RI,
CIA-NY, CGI, RSI and CIA-KY are hereinafter individually and collectively
sometimes referred to as "Seller"), FINANCIAL OPPORTUNITIES, INC., a Kentucky
corporation also with a principal place of business at 210 Broadway East,
Cuyahoga Falls, Ohio 44222 ("FIN-OP"), and DB COMPANIES, INC., a Rhode Island
corporation with a principal place of business at 25 Concord Street, Pawtucket,
Rhode Island 02860 (hereinafter referred to as "Buyer").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Seller, FIN-OP and Buyer entered into an Asset Purchase
Agreement dated as of March 6, 1997 (the "Agreement") with respect to the sale
and purchase of certain convenience stores operated or franchised under the
"Dairy Mart" name as more particularly described therein. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings given to
them respectively in the Agreement; and
WHEREAS, the parties desire to amend certain provisions of the
Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth and,
upon the terms and subject to the conditions hereinafter set forth, the parties
hereto agree as follows:
1. Amendment to Section 2.3. The Termination Date set forth in Section
2.3 of the Agreement is hereby extended by amending said Section 2.3 of the
Agreement by substituting the date "May 23, 1997" for the date "May 15, 1997"
appearing in the 7th and 8th lines thereof.
2. Ratification. Except as hereby amended, the Agreement is in all
respects ratified, adopted and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
<PAGE> 76
WITNESS DAIRY MART CONVENIENCE
STORES, INC., Seller
_________________________ By:
---------------------------------
Its
DAIRY MART, INC., Seller
_________________________ By:
---------------------------------
Its
DAIRY MART EAST, INC., Seller
_________________________ By:
---------------------------------
Its
CIA FOOD MARTS, INC., Seller
_________________________ By:
---------------------------------
Its
CONVENIENT GASOLINE, INC., Seller
_________________________ By:
---------------------------------
Its
REMOTE SERVICES, INC., Seller
_________________________ By:
---------------------------------
Its
- 2 -
<PAGE> 77
CONVENIENT INDUSTRIES OF
AMERICA, INC., Seller
_________________________ By:
---------------------------------
Its
FINANCIAL OPPORTUNITIES, INC.
_________________________ By:
---------------------------------
Its
DB COMPANIES, INC., Buyer
_________________________ By:
---------------------------------
Its
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<PAGE> 78
SECOND AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment") entered
into as of this 23rd day of May, 1997, by and between DAIRY MART CONVENIENCE
STORES, INC., a Delaware corporation ("Dairy Mart"), DAIRY MART, INC., a
Massachusetts corporation ("DM-MA"), DAIRY MART EAST, INC., a Rhode Island
corporation ("DM-RI"), CIA FOODMARTS, INC., a New York corporation ("CIA-NY"),
CONVENIENT GASOLINE, INC., a New York corporation ("CGI"), REMOTE SERVICES,
INC., a Kentucky corporation ("RSI"), and CONVENIENT INDUSTRIES OF AMERICA,
INC., a Kentucky corporation ("CIA-KY"), all with a principal place of business
at 210 Broadway East, Cuyahoga Falls, Ohio 44222 (Dairy Mart, DM-MA, DM-RI,
CIA-NY, CGI, RSI and CIA-KY are hereinafter individually and collectively
sometimes referred to as "Seller"), FINANCIAL OPPORTUNITIES, INC., a Kentucky
corporation also with a principal place of business at 210 Broadway East,
Cuyahoga Falls, Ohio 44222 ("FIN-OP"), and DB COMPANIES, INC., a Rhode Island
corporation with a principal place of business at 25 Concord Street, Pawtucket,
Rhode Island 02860 (hereinafter referred to as "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller, FIN-OP and Buyer entered into an Asset Purchase
Agreement dated as of March 6, 1997, as amended by a First Amendment to Asset
Purchase Agreement dated as of May 15, 1997 (as amended, the "Agreement"), with
respect to the sale and purchase of certain convenience stores operated or
franchised under the "Dairy Mart" name as more particularly described therein.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings given to them respectively in the Agreement; and
WHEREAS, the parties desire to further amend certain provisions of the
Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth and,
upon the terms and subject to the conditions hereinafter set forth, the parties
hereto agree as follows:
1. AMENDMENT TO SECTION 2.3. The Termination Date set forth in Section
2.3 of the Agreement, which date was extended by the First Amendment described
aforesaid from May 15, 1997 to May 23, 1997, is hereby further extended by
amending said Section 2.3 of the Agreement by substituting the date "May 28,
1997" for the date "May 23, 1997" as appearing in the 7th and 8th lines thereof
by virtue of said First Amendment.
2. RATIFICATION. Except as hereby amended, the Agreement is in all
respects ratified, adopted and confirmed.
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
WITNESS DAIRY MART CONVENIENCE
STORES, INC., Seller
_________________________ By:
--------------------------------------
Its
DAIRY MART, INC., Seller
_________________________ By:
--------------------------------------
Its
DAIRY MART EAST, INC., Seller
_________________________ By:
--------------------------------------
Its
CIA FOOD MARTS, INC., Seller
_________________________ By:
--------------------------------------
Its
CONVENIENT GASOLINE, INC., Seller
_________________________ By:
--------------------------------------
Its
REMOTE SERVICES, INC., Seller
_________________________ By:
--------------------------------------
Its
- 2 -
<PAGE> 80
CONVENIENT INDUSTRIES OF
AMERICA, INC., Seller
_________________________ By:
--------------------------------------
Its
FINANCIAL OPPORTUNITIES, INC.
_________________________ By:
--------------------------------------
Its
DB COMPANIES, INC., Buyer
_________________________ By:
--------------------------------------
Its
- 3 -
<PAGE> 81
THIRD AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment") entered
into as of this 28th day of May, 1997, by and between DAIRY MART CONVENIENCE
STORES, INC., a Delaware corporation ("Dairy Mart"), DAIRY MART, INC., a
Massachusetts corporation ("DM-MA"), DAIRY MART EAST, INC., a Rhode Island
corporation ("DM-RI"), CIA FOODMARTS, INC., a New York corporation ("CIA-NY"),
CONVENIENT GASOLINE, INC., a New York corporation ("CGI"), REMOTE SERVICES,
INC., a Kentucky corporation ("RSI"), and CONVENIENT INDUSTRIES OF AMERICA,
INC., a Kentucky corporation ("CIA-KY"), all with a principal place of business
at 210 Broadway East, Cuyahoga Falls, Ohio 44222 (Dairy Mart, DM-MA, DM-RI,
CIA-NY, CGI, RSI and CIA-KY are hereinafter individually and collectively
sometimes referred to as "Seller"), FINANCIAL OPPORTUNITIES, INC., a Kentucky
corporation also with a principal place of business at 210 Broadway East,
Cuyahoga Falls, Ohio 44222 ("FIN-OP"), and DB COMPANIES, INC., a Rhode Island
corporation with a principal place of business at 25 Concord Street, Pawtucket,
Rhode Island 02860 (hereinafter referred to as "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller, FIN-OP and Buyer entered into an Asset Purchase
Agreement dated as of March 6, 1997, as amended by a First Amendment to Asset
Purchase Agreement dated as of May 15, 1997 and a Second amendment to Asset
Purchase Agreement dated as of May 23, 1997 (as amended, the "Agreement"), with
respect to the sale and purchase of certain convenience stores operated or
franchised under the "Dairy Mart" name as more particularly described therein.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings given to them respectively in the Agreement; and
WHEREAS, the parties desire to further amend certain provisions of the
Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth and,
upon the terms and subject to the conditions hereinafter set forth, the parties
hereto agree as follows:
1. AMENDMENT TO SECTION 2.3. The Termination Date set forth in Section
2.3 of the Agreement, which date has been heretofore extended to May 28, 1997,
is hereby further extended by amending said Section 2.3 of the Agreement by
substituting the date "June 27, 1997" for the date "May 28, 1997" as appearing
in the Agreement as heretofore amended.
2. AMENDMENT TO SECTION 7.4(b). Section 7.4(b) of the Agreement is
hereby amended in its entirety to read as follows:
- 1 -
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(b) Seller shall, promptly following Buyer's notification of
an unacceptable title exception contained in the Commitments or any
supplement thereto but in any event prior to Closing, using all
reasonable efforts and good faith, diligently endeavor to cure, or to
make arrangements reasonably satisfactory to Buyer to cure, any such
defect. If Seller is unable to cure or make such arrangements to cure
any such defect, then, at the election of Buyer, (i) the affected
Location and related equipment, Inventory, licenses and permits shall
be excluded from the sale, and the Purchase Price shall be reduced by
an amount computed in accordance with Section 7.5 hereof, or (ii) Buyer
may, subject to the provisions of Section 7.18 hereof, waive such
defect and accept such title to the affected Location as the Seller may
deliver, in which event, the affected Location and related equipment,
Inventory, licenses and permits shall remain part of the sale, and
there shall be no reduction in the Purchase Price. Seller shall pay the
cost of title examination and the issuance of the Commitments. Buyer
shall pay the cost of any title insurance coverage in amounts Buyer may
require.
3. ADDITION OF SECTION 7.4(d). The Agreement is hereby amended by
adding thereto a new Section 7.4(d) to read as follows:
(d) Buyer agrees to accept title to Location #1615 (West
Haven, Connecticut) subject to that certain purchase money mortgage,
dated May 23, 1996, granted by DM-MA to Lillian H. Rocklen and Howard
W. Rocklen, Trustees under a trust agreement for the benefit of Lillian
H. Rocklen, dated September 4, 1990, and Rocklen, Incorporated, such
mortgage securing a promissory note in the original principal amount of
$350,000.00. The Purchase Price payable by Buyer at the Closing shall
be reduced by the amount of indebtedness secured as of the Closing Date
by such mortgage.
4. AMENDMENT TO SECTION 7.11(b). Section 7.11(b) of the Agreement is
hereby amended in its entirety to read as follows:
(b) Seller shall use all reasonable efforts and due diligence
to obtain the written consent to the transfer or assignment to Buyer of
any of the Assets, where the consent of any other party may be required
for such assignment and transfer. Buyer agrees to cooperate fully with
Seller to secure such consents, including supplying information about
Buyer as may be requested by landlords. Seller shall have the right,
but not the obligation, to offer additional consideration at Seller's
expense to a landlord to secure its consent to the assignment if such
consent is required by the lease. If a landlord does not consent to the
assignment, the Location may be deleted from this sale in accordance
with Section 7.5 unless Buyer elects to accept the Location without the
landlord's consent, in which event there will be no reduction in the
consideration paid Seller hereunder if Buyer so elects, subject to the
provisions of Section 7.18 hereof.
- 2 -
<PAGE> 83
5. ADDITION OF SECTION 7.18. The Agreement is hereby amended by adding
thereto a new Section 7.18 to read as follows:
7.18 REPURCHASE OF CERTAIN LOCATIONS. Notwithstanding any
provision of this Agreement to the contrary, if (a) Buyer accepts
assignment of a Purchased Lease notwithstanding (i) a defect in title
because of the failure of Seller to hold record title to Seller's
leasehold interest thereunder or, if the Purchased Lease is not a prime
lease, a defect because of the failure of any prime lessor through
which Seller holds its leasehold interest to hold record title to such
lessor's interest in the property subject to such Purchased Lease, or
(ii) Seller's inability to obtain a consent to the assignment of the
Purchased Lease to Buyer from the landlord under such Purchased Lease
whose consent to the assignment is required thereunder or from any
other landlord whose consent is required under any lease senior to such
Purchased Lease (the matters affecting Buyer's title or right to
possession described in clauses (i) and (ii) above being referred to
below as "Repurchase Exceptions"), and (b) prior to the first
anniversary of the Closing Date, a written claim is made or action or
proceeding is commenced seeking possession of the Location described in
such Purchased Lease from Buyer as a result of one or more Repurchase
Exceptions, and Buyer is dispossessed from such Location, whether or
not such dispossession occurs prior to or after such first anniversary,
then Seller shall repurchase such Location and all related equipment,
Inventory, licenses and permits from Buyer as hereinafter provided.
Buyer shall promptly give Seller written notice of any such claim,
action or proceeding upon Buyer's receipt thereof, and Seller may, at
its option, undertake the response to and defense of such claim, action
or proceeding. The provisions of Section 9.5(d) shall apply to such
claim, action or proceeding except that Buyer shall be under no
obligation whatsoever to respond to or defend any such action, claim or
proceeding. In the event Seller is required to repurchase a Location
and all related equipment, Inventory, licenses and permits from Buyer
as provided above, the repurchase price for such Location, equipment,
licenses and permits shall equal the amount that would have been
deducted from the Purchase Price in accordance with Section 7.5 hereof
had such Location been deleted prior to the Closing and the repurchase
price for the Inventory at such Location shall be determined in
accordance with the valuation procedure set forth on EXHIBIT 2.2. The
repurchase price shall be paid within ten (10) days of the date as of
which Buyer is dispossessed of such Location, and Buyer shall reconvey
to Seller with appropriate instruments of conveyance and assignment the
interest conveyed to Buyer in such Location, equipment, Inventory,
licenses and permits, except to the extent that the Purchased Lease is
terminated, modified or otherwise affected by the action or proceeding
under clause (b) above affecting Buyer's right to possession.
6. AMENDMENT TO SECTION 8.1(h). Section 8.1(h) of the Agreement is
hereby amended in its entirety to read as follows:
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<PAGE> 84
(h) No more than twelve (12) Locations of any type, nor more
than seven (7) Locations at which gasoline and motor fuels are sold,
shall have been deleted from the purchase and sale for any reason
permitted under this Agreement; provided, however, that the deletion of
Location #1605 (Prospect, Connecticut), Location #1616 (Ansonia,
Connecticut) and Location #3832 (West Warwick, Rhode Island) shall not
count toward either of the foregoing totals.
7. AMENDMENT TO SECTION 8.2(h). Section 8.2(h) of the Agreement is
hereby amended in its entirety to read as follows:
(h) No more than twelve (12) Locations of any type, nor more
than seven (7) Locations at which gasoline and motor fuels are sold,
shall have been deleted from the purchase and sale for any reason
permitted by this Agreement; provided, however, that the deletion of
Location #1605 (Prospect, Connecticut), Location #1616 (Ansonia,
Connecticut) and Location #3832 (West Warwick, Rhode Island) shall not
count toward either of the foregoing totals.
8. AMENDMENT TO SECTION 10.5. Section 10.5 of the Agreement is hereby
amended in its entirety to read as follows:
10.5 ASSIGNMENT. Neither Seller nor Buyer shall assign any
rights or delegate any duties hereunder without the prior written
consent of the other; provided, however, that Buyer may assign, in
whole or in part, (a) all of its rights hereunder to one or more of its
subsidiary companies and (b) its rights under Article VI and Section
9.1(f), including without limitation its rights under the Access
Agreement, the Environmental Escrow Agreement, the Contract Assignment
and the Security Agreement, to any lender or lenders of Buyer and such
lender or lenders may further assign such rights to any purchaser of
the interest of Buyer in all or part of the Assets, provided that no
such assignment shall relieve Buyer of its obligations hereunder. Buyer
shall give Seller prompt notice of any assignment permitted by the
foregoing provisions.
9. RATIFICATION. Except as hereby amended, the Agreement is in all
respects ratified, adopted and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
WITNESS DAIRY MART CONVENIENCE
STORES, INC., Seller
_________________________ By:
------------------------------
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<PAGE> 85
Its
DAIRY MART, INC., Seller
_________________________ By:
------------------------------
Its
DAIRY MART EAST, INC., Seller
_________________________ By:
------------------------------
Its
CIA FOOD MARTS, INC., Seller
_________________________ By:
------------------------------
Its
CONVENIENT GASOLINE, INC., Seller
_________________________ By:
------------------------------
Its
REMOTE SERVICES, INC., Seller
_________________________ By:
------------------------------
Its
CONVENIENT INDUSTRIES OF
AMERICA, INC., Seller
_________________________ By:
------------------------------
Its
FINANCIAL OPPORTUNITIES, INC.
- 5 -
<PAGE> 86
_________________________ By:
------------------------------
Its
DB COMPANIES, INC., Buyer
_________________________ By:
------------------------------
Its
- 6 -
<PAGE> 87
FOURTH AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FOURTH AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment")
entered into as of this 19th day of June, 1997, by and between DAIRY MART
CONVENIENCE STORES, INC., a Delaware corporation ("Dairy Mart"), DAIRY MART,
INC., a Massachusetts corporation ("DM-MA"), DAIRY MART EAST, INC., a Rhode
Island corporation ("DM-RI"), CIA FOODMARTS, INC., a New York corporation
("CIA-NY"), CONVENIENT GASOLINE, INC., a New York corporation ("CGI"), REMOTE
SERVICES, INC., a Kentucky corporation ("RSI"), and CONVENIENT INDUSTRIES OF
AMERICA, INC., a Kentucky corporation ("CIA-KY"), all with a principal place of
business at 210 Broadway East, Cuyahoga Falls, Ohio 44222 (Dairy Mart, DM-MA,
DM-RI, CIA-NY, CGI, RSI and CIA-KY are hereinafter individually and collectively
sometimes referred to as "Seller"), FINANCIAL OPPORTUNITIES, INC., a Kentucky
corporation also with a principal place of business at 210 Broadway East,
Cuyahoga Falls, Ohio 44222 ("FIN-OP"), and DB COMPANIES, INC., a Rhode Island
corporation with a principal place of business at 25 Concord Street, Pawtucket,
Rhode Island 02860 (hereinafter referred to as "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller, FIN-OP and Buyer entered into an Asset Purchase
Agreement dated as of March 6, 1997, as amended by a First Amendment to Asset
Purchase Agreement dated as of May 15, 1997, a Second Amendment to Asset
Purchase Agreement dated as of May 23, 1997, and a Third Amendment to Asset
Purchase Agreement dated as of May 28, 1997 (as amended, the "Agreement"), with
respect to the sale and purchase of certain convenience stores operated or
franchised under the "Dairy Mart" name as more particularly described therein.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings given to them respectively in the Agreement; and
WHEREAS, the parties desire to further amend certain provisions of the
Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth and,
upon the terms and subject to the conditions hereinafter set forth, the parties
hereto agree as follows:
1. AMENDMENT TO SECTION 3.3. The last two sentences of Section 3.3 of
the Agreement are hereby amended in their entirety to read as follows:
The net amount of all Property Tax adjustments computed in accordance
with this Section, based upon which party is responsible for such
Property Taxes and which party is to pay such Property Taxes, shall be
calculated as of the date of Closing at the Post Closing and paid to
the party entitled thereto. If the amount of any Property
<PAGE> 88
Taxes is not fixed and determined as of the Post Closing, the foregoing
adjustment shall be based on the amount thereof as reasonably estimated
at Post Closing, and an appropriate payment shall be made by Buyer or
Seller to the other promptly following a final determination of the
amount thereof.
2. AMENDMENT TO SECTION 10.13. The first sentence of Section 10.13 of
the Agreement is hereby amended in its entirety to read as follows:
This Agreement and each assignment of a Franchise Agreement
contemplated by Section 2.5 hereof shall be governed by and construed
in accordance with the law of the Commonwealth of Massachusetts,
without giving effect to principles of conflicts of law.
3. RATIFICATION. Except as hereby amended, the Agreement is in all
respects ratified, adopted and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
WITNESS DAIRY MART CONVENIENCE
STORES, INC., Seller
_________________________ By:
------------------------------
Its
DAIRY MART, INC., Seller
_________________________ By:
------------------------------
Its
DAIRY MART EAST, INC., Seller
_________________________ By:
------------------------------
Its
- 2 -
<PAGE> 89
CIA FOOD MARTS, INC., Seller
_________________________ By:
------------------------------
Its
CONVENIENT GASOLINE, INC., Seller
_________________________ By:
------------------------------
Its
REMOTE SERVICES, INC., Seller
_________________________ By:
------------------------------
Its
CONVENIENT INDUSTRIES OF
AMERICA, INC., Seller
_________________________ By:
------------------------------
Its
FINANCIAL OPPORTUNITIES, INC.
_________________________ By:
------------------------------
Its
DB COMPANIES, INC., Buyer
_________________________ By:
------------------------------
Its
- 3 -
<PAGE> 1
Exhibit 2.2
CLOSING AGREEMENT
-----------------
This Closing Agreement ("Agreement"), dated as of June 19, 1997, is by
and among DAIRY MART CONVENIENCE STORES, INC., a Delaware corporation ("Dairy
Mart"), DAIRY MART, INC., a Massachusetts corporation ("DM-MA"), DAIRY MART
EAST, INC., a Rhode Island corporation ("DM-RI"), CIA FOODMARTS, INC., a New
York corporation ("CIA-NY"), CONVENIENT GASOLINE, INC., a New York corporation
("CGI"), REMOTE SERVICES, INC., a Kentucky corporation ("RSI"), and CONVENIENT
INDUSTRIES OF AMERICA, INC., a Kentucky corporation ("CIA-KY"), all with a
principal place of business at 210 Broadway East, Cuyahoga Falls, Ohio 44222
(Dairy Mart, DM-MA, DM-RI, CIA-NY, CGI, RSI and CIA-KY are hereinafter
individually and collectively sometimes referred to as "Seller"), FINANCIAL
OPPORTUNITIES, INC., a Kentucky corporation also with a principal place of
business at 210 Broadway East, Cuyahoga Falls, Ohio 44222 ("FIN-OP"), and DB
COMPANIES, INC., a Rhode Island corporation with a principal place of business
at 25 Concord Street, Pawtucket, Rhode Island 02860 (hereinafter referred to as
"Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller, FIN-OP and Buyer entered into an Asset Purchase
Agreement dated as of March 6, 1997, as amended by a First Amendment to Asset
Purchase Agreement dated as of May 15, 1997, a Second Amendment to Asset
Purchase Agreement dated as of May 23, 1997, and a Third Amendment to Asset
Purchase Agreement dated as of May 28, 1997, and a Fourth Amendment to Asset
Purchase Agreement dated as of June 19, 1997 (as amended, the "Purchase
Agreement"), with respect to the sale and purchase of certain convenience stores
operated or franchised under the "Dairy Mart" name as more particularly
described therein. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings given to them respectively in the Agreement; and
WHEREAS, the parties are closing the transactions contemplated by the
Purchase Agreement and desire to amend certain of its terms and to clarify
certain of its provisions,
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth and,
upon the terms and subject to the conditions hereinafter set forth, the parties
hereto agree as follows:
1. DELETION OF LOCATIONS. Seller and Buyer agree that the following
Locations have been deleted from the purchase and sale pursuant to the
Purchase Agreement: Location #1605 (Prospect, Connecticut), Location
#1609 (Milford, Connecticut), Location #1616 (Ansonia, Connecticut),
Location #3832 (West Warwick, Rhode Island) and Location #6649 (Tappan,
New York). The parties agree that the value of such
<PAGE> 2
Locations and the adjustment of the Purchase Price in respect thereof
pursuant to Section 7.5 of the Agreement are as follows: Location
#1605--$46,079; Location # 1609--$0; Location #1616--$50,304; Location
#3832--$0; and Location #6649-- $181,908.
2. CONDITION OF ASSETS. The parties agree to be responsible for the
amounts and matters identified as their responsibility in ATTACHMENT A
hereto with respect to the repair of the Assets being transferred
pursuant to the Agreement, Buyer being identified on ATTACHMENT A as
"DB" and Seller being identified on ATTACHMENT A as "Dairy Mart" or
"DM". Seller shall complete all matters for which Seller is identified
as being responsible on ATTACHMENT A as soon as practicable and in
accordance with applicable law. The obligations of Sellers pursuant to
this paragraph 2 are in full satisfaction of the matters set
forth in Section 7.14 of the Agreement.
3. SPECIAL SITUATION LOCATIONS.
a. The parties are aware that the Franchisee of Location #6680
(Port Jervis, New York) has claimed that a Release at the
Location has been caused by tank testing carried out in an
allegedly negligent fashion by Tanknology Inc. Seller hereby
agrees to indemnify and hold harmless Buyer and its officers,
directors, shareholders, employees, consultants, agents and
representatives wholly harmless from, against and in respect
of any and all liability, loss, cost and expense whatsoever
(including reasonable fees of legal counsel) that may be
incurred by Buyer or any such person as a result of the matter
referred to in the preceding sentence. Buyer acknowledges that
Seller retains its rights against the Franchisee, Tanknology
Inc. and any other third party in respect of such matter.
Buyer also acknowledges that Seller shall not be required to
take Corrective Action at such Location until a reasonable
period of time has elapsed following Seller's discussions with
and actions against the Franchisee and Tanknology Inc.
regarding their responsibility, if any, for such matter;
provided, however, that Seller shall take Corrective Action
upon the imposition of any lien that materially affects the
Buyer's interest in the Purchased Lease.
b. With respect to Locations #2210 (South Amherst, Massachusetts)
and #2315 (Weymouth Landing, Massachusetts), Seller hereby
agrees to indemnify and hold harmless Buyer and its officers,
directors, shareholders, employees, consultants, agents and
representatives wholly harmless from, against and in respect
of any and all liability, loss, cost and expense whatsoever
(including reasonable fees of legal counsel) that may be
incurred by Buyer or any such person as a result of either or
both owner's claims that there is no valid and existing lease
with Seller with respect to such Locations, including without
limitation, the pending action commenced by Janet Sheppard,
Trustee of the
- 2 -
<PAGE> 3
Chauncy T. Simmons Trust vs. Phillips Petroleum Company.
Seller understands that following the Closing, Buyer intends
to attempt to exercise the purchase option with respect to
Location #2210 and Buyer shall indemnify and hold harmless
Seller and its officers, directors, shareholders, employees,
consultants, agents and representatives wholly harmless from,
against and in respect of any and all liability, loss, cost
and expense whatsoever (including reasonable fees of legal
counsel) that may be incurred by Seller or any such person as
a result of such attempted exercise of such purchase option.
c. With respect to Location #6605 (Hopewell Junction, New York),
Seller hereby agrees to indemnify and hold harmless Buyer and
its officers, directors, shareholders, employees, consultants,
agents and representatives wholly harmless from, against and
in respect of any and all liability, loss, cost and expense
whatsoever (including reasonable fees of legal counsel) that
may be incurred by Buyer or any such person as a result of the
owner's claim regarding Seller's alleged breach of the lease
covering such Location.
d. With respect to Location #6688 (Armonk, New York), Seller
shall be responsible for all expense and costs associated with
repairs that pursuant to the applicable lease are required to
be made at Seller's expense as of the Closing, and Seller
hereby agrees to indemnify and hold harmless Buyer and its
officers, directors, shareholders, employees, consultants,
agents and representatives wholly harmless from, against and
in respect of any and all liability, loss, cost and expense
whatsoever (including reasonable fees of legal counsel) that
may be incurred by Buyer or such person as a result of the
making of such repairs and any failure of Seller to complete
the same as required by the lease.
e. Seller agrees that if Buyer is dispossessed from any of the
Locations described in clauses (a) through (d) of this
paragraph 3 by reason of the matters described in such clauses
(a) through (d), then Seller shall repurchase such Location
and all related equipment, Inventory, licenses and permits
from Buyer as hereinafter provided. The repurchase price for
such Location, equipment, licenses and permits shall equal the
amount that would have been deducted from the Purchase Price
in accordance with Section 7.5 of the Purchase Agreement had
such Locations been deleted prior to the Closing and the
repurchase price for the Inventory at such Location shall be
determined in accordance with the valuation procedure set
forth on Exhibit 2.2 to the Purchase Agreement. The repurchase
price shall be paid within ten (10) days of the date as of
which Buyer is dispossessed of such Location, and Buyer shall,
except to the extent that the Purchased Lease for the
respective Location is terminated, modified or otherwise
affected by reason of the matters described in clauses (a)
through (d) affecting Buyer's right to possession, reconvey to
Seller with appropriate
- 3 -
<PAGE> 4
instruments of conveyance and assignment of interest conveyed
to Buyer in such Location, equipment, Inventory, licenses and
permits.
(f) Seller acknowledges and agrees that the indemnification set
forth above is separate from the indemnities set forth in
Article IX of the Purchase Agreement, that the limitation on
indemnification claims set forth in Section 9.3 of the
Purchase Agreement shall not apply to the indemnification set
forth herein, but the procedures set forth in Section 9.5
shall apply.
4. TITLE ISSUES. Seller acknowledges that Buyer has accepted and purchased
certain Purchased Leases for which Seller has responsibility to Buyer
under Section 7.18 of the Purchase Agreement. Seller and Buyer agree to
exercise reasonable efforts to obtain any notices or memoranda of lease
and consents to assignment of Seller's leasehold interests to Buyer
that may be required by any title insurance company in order to vest
record and insurable title in Buyer to any of such Purchased Leases.
5. CLOSING DATE. The documents evidencing the Closing of the transactions
contemplated by the Purchase Agreement are generally dated as of June
19, 1997 and it is anticipated that the payment of the Purchase Price
will occur on June 20, 1997. The parties hereby agree, however, that
the Closing shall be deemed to have occurred, and the Cut-over Time for
purposes of EXHIBIT 2.2 to the Purchase Agreement shall be deemed to
be, as of 12:01 a.m. on June 22, 1997. As part of the determination of
the aggregate value of the Inventory, the parties shall reconcile
sales, deposits, credit card transactions and other cash items at the
Locations based upon whether they relate to sales occurring before or
after the Closing Date and to whose credit they were made and make
appropriate adjustments therefore and pay for the same at the time and
in the same manner as the determination of Inventory.
6. INDEMNIFICATION FOR CERTAIN ISSUES. Sellers shall indemnify and hold
harmless Buyer and its officers, directors, shareholders, employees,
consultants, agents and representatives wholly harmless from, against
and in respect of any and all liability, loss, cost and expense
whatsoever (including reasonable fees of legal counsel) that may be
incurred by Buyer or any such person as a result of any one or more of
the following:
(a) Any tax liability of any kind or nature of DM-RI to the State
of Rhode Island, including without limitation, any liability
arising out of the failure of DM-RI to notify the Tax
Administrator and Department of Employment Security of the
State of Rhode Island of the sale of a major part in value of
DM-RI's assets in Rhode Island, except to the extent that the
liability for any such tax is imposed on Buyer by the Purchase
Agreement;
- 4 -
<PAGE> 5
(b) Any tax liability of any kind or nature of Conna Corporation,
a Kentucky corporation, to the State of New York, including
without limitation, any liability arising out of the failure
of Conna Corporation to be qualified as a foreign corporation
in the State of New York; or the failure of Conna Corporation
to be duly organized to have appropriate authority to transfer
to any Seller any interest in any of the Assets conveyed to
Buyer pursuant to the Purchase Agreement.
(c) Any tax liability of any kind or nature of CIA-NY and CGI to
the State of New York, including without limitation, any
liability that may be asserted against Buyer as a result of
Buyer's filing the New York Notification of Sale, Transfer or
Assignment in Bulk, with respect to the conveyance of Assets
in New York, except to the extent that the liability for any
such tax is imposed on Buyer by the Purchase Agreement;
(d) Any tax liability of any kind or nature of DM-MA and DM-RI to
the Commonwealth of Massachusetts, including without
limitation, any liability that may be asserted against Buyer
to the extent that any waiver of lien fails to include all of
the Locations being conveyed by DM-MA and DM-RI, except to the
extent that the liability for any such tax is imposed on Buyer
by the Purchase Agreement;
(e) Any tax liability of any kind or nature of DM-MA and RSI to
the State of Connecticut, including without limitation, any
liability that may be asserted against Buyer arising out of
the failure of DM-MA and RSI to provide sales tax liability
certificates, except to the extent that the liability for any
such tax is imposed on Buyer by the Purchase Agreement;
(f) Seller acknowledges and agrees that the indemnification set
forth above is separate from the indemnities set forth in
Article IX of the Purchase Agreement, that the limitation on
indemnification claims set forth in Section 9.3 of the
Purchase Agreement shall not apply to the indemnification set
forth herein, but the procedures set forth in Section 9.5
shall apply.
[Balance of page left blank intentionally; signatures on succeeding pages.]
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
WITNESS DAIRY MART CONVENIENCE
STORES, INC., Seller
_________________________ By:
------------------------------
Its
DAIRY MART, INC., Seller
_________________________ By:
------------------------------
Its
DAIRY MART EAST, INC., Seller
_________________________ By:
------------------------------
Its
CIA FOOD MARTS, INC., Seller
_________________________ By:
------------------------------
Its
CONVENIENT GASOLINE, INC., Seller
_________________________ By:
------------------------------
Its
REMOTE SERVICES, INC., Seller
_________________________ By:
------------------------------
Its
- 6 -
<PAGE> 7
CONVENIENT INDUSTRIES OF
AMERICA, INC., Seller
_________________________ By:
------------------------------
Its
FINANCIAL OPPORTUNITIES, INC.
_________________________ By:
------------------------------
Its
DB COMPANIES, INC., Buyer
_________________________ By:
------------------------------
Its
- 7 -
