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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
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TRAVEL PORTS OF AMERICA, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities
to which transaction applies: .....Common Stock, par value $.01 per share
(2) Aggregate number of securities
to which transaction applies: ......6,673,529, plus the realizable value
($4,118,364) of derivative securities
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): .......$4.30
(4) Proposed maximum aggregate value of transaction: ...........$32,814,538
(5) Total fee paid: ..............................................$6,562.91
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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TRAVEL PORTS OF AMERICA, INC.
3495 WINTON PLACE, BLDG. C
ROCHESTER, NEW YORK 14623
April 19, 1999
Dear Shareholder:
You are cordially invited to attend a special meeting of Shareholders of
Travel Ports of America, Inc., to be held at 9:00 a.m., local time, on Tuesday,
June 1, 1999, at the Holiday Inn Airport, 911 Brooks Avenue, Rochester, New York
14624.
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the Merger Agreement dated February 26, 1999, by and among
TravelCenters of America, Inc., TP Acquisition, Inc., a wholly-owned subsidiary
of TravelCenters, and Travel Ports, which, if approved, will result in the
acquisition of Travel Ports by TravelCenters and the payment in cash of $4.30,
without interest, for each share of Common Stock of Travel Ports. Approval of
this proposal requires the affirmative vote of at least two-thirds of the
outstanding shares of Common Stock. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
ADOPTED THE PROPOSED MERGER AGREEMENT AND HAS DETERMINED THAT THE MERGER IS
ADVISABLE AND IN THE BEST INTERESTS OF TRAVEL PORTS AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE
PROPOSAL TO ADOPT THE MERGER AGREEMENT BY THE SHAREHOLDERS.
The attached Proxy Statement describes the proposed transaction in detail,
sets forth the basis of the positive recommendation by the Board of Directors
and the opinion of McDonald Investments Inc., as to the fairness from a
financial point of view of the consideration to be paid to the shareholders. I
urge you to give this material your careful attention.
IF THE MERGER IS APPROVED, SHAREHOLDERS WILL RECEIVE APPROPRIATE
INSTRUCTIONS FOR EXCHANGING THEIR STOCK CERTIFICATES FOR CASH. PLEASE DO NOT
SEND IN YOUR STOCK CERTIFICATES AT THIS TIME.
Whether or not you intend to attend the special meeting and regardless of
the number of shares you own, we request that you complete, sign, date and
return the enclosed proxy card promptly in the accompanying prepaid envelope.
You may, of course, attend the special meeting and vote in person, even if you
have previously returned your proxy.
Sincerely,
/s/ E. Philip Saunders
--------------------------------------
E. Philip Saunders
Chairman and Chief Executive Officer
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TRAVEL PORTS OF AMERICA, INC.
3495 WINTON PLACE, BLDG. C
ROCHESTER, NEW YORK 14623
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 1999
To the Shareholders of TRAVEL PORTS OF AMERICA, INC.:
NOTICE HEREBY IS GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Travel Ports of America, Inc., a New York corporation (the
"Company"), will be held at 9:00 a.m., local time, on June 1, 1999, at the
Holiday Inn Airport, 911 Brooks Avenue, Rochester, New York 14624 for the
following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated February 26, 1999, among TravelCenters of America, Inc. ("TA"), TP
Acquisition, Inc., a wholly-owned subsidiary of TA ("TA Sub"), and the Company
(the "Merger Agreement"), pursuant to which TA Sub would be merged (the
"Merger") with and into the Company and the shareholders of the Company would
receive a cash payment of $4.30, without interest, for each share of the
Company's Common Stock held by them (other than certain shares which will be
exchanged for shares of TA and other than any shares owned by TA or the
Company), in accordance with the terms of the Merger Agreement described in the
accompanying Proxy Statement, a copy of which is attached to such Proxy
Statement as Annex I; and
2. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements hereof.
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock is required for adoption of the Merger
Agreement. Record holders of Common Stock at the close of business on April 15,
1999 are entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER CAREFUL REVIEW AND
CONSIDERATION OF THE TERMS OF THE MERGER AGREEMENT AND OTHER FACTORS, INCLUDING
THE OPINION OF MCDONALD INVESTMENTS INC. WITH RESPECT TO THE FAIRNESS OF THE
MERGER FROM A FINANCIAL POINT OF VIEW, HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND BELIEVES THAT THE MERGER IS ADVISABLE AND IN THE BEST INTERESTS OF
THE COMPANY'S SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS OF THE COMPANY
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT.
PLEASE EXECUTE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD WHETHER OR NOT
YOU EXPECT TO ATTEND THE SPECIAL MEETING. YOUR PROXY, ONCE GIVEN, MAY BE REVOKED
AT ANY TIME PRIOR TO THE SPECIAL MEETING BY FILING A PROXY BEARING A LATER DATE
AND PRESENTING IT AT THE SPECIAL MEETING OR BY YOUR APPEARING AT THE SPECIAL
MEETING AND VOTING IN PERSON. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE FOR
MAILING IN THE UNITED STATES.
By Order of the Board of Directors
/s/ William Burslem III
--------------------------------------
William Burslem III
Secretary
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING. PLEASE
DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE> 4
TRAVEL PORTS OF AMERICA, INC.
PROXY STATEMENT
MAILED ON OR ABOUT APRIL 19, 1999
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Travel Ports of America, Inc. of proxies for use at
the special meeting of shareholders to be held on June 1, 1999 at 9:00 a.m.,
local time, at the Holiday Inn Airport, 911 Brooks Avenue, Rochester, New York
14624, and all adjournments or postponements thereof.
The Board of Directors of Travel Ports has agreed to a merger transaction
in which Travel Ports will be acquired by TravelCenters of America, Inc., a
Delaware corporation, through the merger of a wholly-owned subsidiary of
TravelCenters with and into Travel Ports, with Travel Ports continuing as the
surviving corporation. Each share of Travel Ports common stock that you own,
however, will be converted into the right to receive cash in the amount of $4.30
per share.
In order to complete the merger, Travel Ports and TravelCenters must obtain
the necessary governmental approvals and third party consents, as well as the
approval of Travel Ports shareholders. Travel Ports will hold a special meeting
of shareholders to consider and vote on this Merger. This document describes
that meeting and the merger transaction.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE TAKE THE TIME TO VOTE BY COMPLETING AND MAILING THE ENCLOSED
PROXY CARD. IF YOU DATE AND MAIL YOUR PROXY CARD WITHOUT INDICATING HOW YOU WANT
TO VOTE, YOUR PROXY WILL BE VOTED AS A VOTE "FOR" THE MERGER. IF YOU DO NOT
RETURN YOUR CARD, OR IF YOU DO NOT INSTRUCT YOUR BROKER HOW TO VOTE ANY SHARES
HELD FOR YOU IN "STREET NAME," THE EFFECT WILL BE THE SAME AS A VOTE AGAINST
THIS MERGER.
THIS PROXY STATEMENT GIVES YOU DETAILED INFORMATION ABOUT THE PROPOSED
MERGER AND IT INCLUDES THE MERGER AGREEMENT AS ANNEX I. YOU ALSO CAN OBTAIN
INFORMATION ABOUT TRAVEL PORTS FROM PUBLICLY AVAILABLE DOCUMENTS WE HAVE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. WE ENCOURAGE YOU TO READ THIS
ENTIRE DOCUMENT CAREFULLY.
<PAGE> 5
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS.................................. 4
WHERE YOU CAN FIND MORE INFORMATION......................... 4
SUMMARY..................................................... 5
SPECIAL MEETING............................................. 8
General................................................... 8
Matters to be Considered.................................. 8
Recommendation of the Board of Directors.................. 8
Record Date; Proxies...................................... 8
Persons Making the Solicitation........................... 9
Quorum, Vote Required..................................... 9
THE MERGER.................................................. 9
General................................................... 9
Background of Merger...................................... 10
Reasons for the Merger.................................... 11
Opinion of Financial Advisor.............................. 12
Voting Agreement.......................................... 16
Interests of Certain Persons in the Merger................ 16
Operation and Management of the Company After the
Merger................................................. 18
Effective Date of the Merger.............................. 18
Effect of the Merger...................................... 18
Payment for Shares; Exchange Agent........................ 18
Treatment of Stock Options, Warrants, Convertible
Securities and Other Indebtedness...................... 19
Representations and Warranties............................ 20
Conditions to the Merger.................................. 20
Conduct of Business Pending the Merger.................... 21
No Solicitation by the Company............................ 21
Additional Agreements..................................... 22
Termination of the Merger Agreement; Amendments........... 22
Termination Fees; Expenses................................ 23
Certain Regulatory Matters................................ 23
Certain Federal Income Tax Consequences of the Merger..... 24
Accounting Treatment of the Merger........................ 24
BUSINESS.................................................... 25
General................................................... 25
Company Developments...................................... 25
Products and Services..................................... 27
Properties................................................ 28
Travel Plazas and Mini-Travel Plazas...................... 28
Other Facilities.......................................... 30
Competition............................................... 30
Regulation................................................ 30
Employees................................................. 30
Legal Proceedings......................................... 31
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY............. 31
NO DISSENTERS RIGHTS........................................ 31
SELECTED FINANCIAL DATA OF THE COMPANY...................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 33
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF
MANAGEMENT................................................ 36
SHAREHOLDER PROPOSALS....................................... 37
OTHER MATTERS............................................... 37
INDEX TO FINANCIAL STATEMENTS............................... F-1
ANNEX I -- Agreement and Plan of Merger
ANNEX II -- Opinion of McDonald Investments Inc.
ANNEX III -- Share Exchange Agreement
ANNEX IV -- Voting Agreement
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FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain forward-looking statements with
respect to the financial condition, results of operation and business of Travel
Ports. These statements may include statements for the period following the
consummation of the Merger. You can find many of these statements by looking for
words such as "believes," "expects," "anticipates," "estimates" or similar
expressions.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors that may cause actual results to be materially
different from those contemplated by the forward-looking statements include,
among others, the following possibilities:
- Further consolidations and other competitive pressures in Travel Ports'
industry may increase significantly.
- Revenues may be lower and costs may be higher than presently expected.
- Changes in the cost of diesel fuel and gasoline could affect Travel
Ports' profitability.
- General economic or business conditions may be less favorable than
expected.
- The costs associated with assuring that Travel Ports' properties conform
with all applicable environmental laws may be higher than expected.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended.
You may read and copy this information at the following SEC locations:
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Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W 7 World Trade Center City Corp. Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. may be obtained by calling the
SEC at 1-800-SEC-0330.
The SEC also maintains a worldwide website that contains reports, proxy
statements and other information about registrants, such as us, that file
electronically with the SEC. The address of that website is: http:www.sec.gov.
4
<PAGE> 7
SUMMARY
This brief summary highlights selected information from this Proxy
Statement. It does not contain all of the information that is important to you.
We urge you to carefully read the Proxy Statement and the Annexes attached to
this document to fully understand the merger. See "Where You Can Find More
Information" (Page 4). Where applicable, each item in this summary includes a
page reference directing you to a more complete description of that item.
THE PARTIES TO THE MERGER
TRAVEL PORTS OF AMERICA, INC.
3495 WINTON PLACE, BLDG. C
ROCHESTER, NEW YORK 14623
(716) 272-1810
Travel Ports of America, Inc., a New York corporation, has been primarily
engaged in the operation of 24-hour per day travel plazas. It presently operates
16 travel plazas and one fuel terminal in the states of New York, New Jersey,
North Carolina, New Hampshire, Indiana, Maryland and Pennsylvania. The travel
plazas sell, both to the trucking industry and to others, petroleum products
(such as diesel fuel, gasoline and lubricants). The travel plazas generally
include a truck service and repair shop, a tire and parts center, a truck wash,
scales for weighing trucks, parking facilities, motel rooms, a family style
restaurant, a travel store, shower and laundry facilities, game rooms, telephone
facilities, money transfer facilities, a convenience store at the gasoline pump
area, and billing and accounting services for truck fleet operators. See
"Business" starting on page 25.
TRAVELCENTERS OF AMERICA, INC.
24601 CENTER RIDGE ROAD (SUITE 200)
WESTLAKE, OHIO 44145
(440) 808-9100
TravelCenters of America, Inc., a Delaware corporation, was formed in 1992
by an institutional investor group led by The Clipper Group, L.P., as well as
certain then prospective franchisees and individuals who at the time were
members of TravelCenters management. TravelCenters was originally incorporated
as National Auto/ Truckstops Holding Corporation but changed its name in 1997.
TravelCenters is a holding company whose sole assets consist of the stock of its
three direct wholly-owned subsidiaries: TA Operating Corporation, d/b/a
TravelCenters of America, National Auto/Truckstops, Inc. and TA Franchise
Systems, Inc. TravelCenters owns, operates and franchises full service travel
centers and currently has 143 network sites nationwide, including 103
company-owned and operated locations. The travel centers are full service
facilities offering a broad range of fuel and non-fuel products, services and
amenities to trucking fleets, professional truck drivers and other motorists. In
addition to diesel fuel and gasoline, the travel centers provide truck
maintenance and repair services and products, full service and fast food dining,
travel and convenience stores, telecommunication services and various
hospitality and rest related amenities.
SPECIAL MEETING (PAGE 8)
The special meeting of shareholders of Travel Ports will be held on June 1,
1999 at 9:00 a.m., local time, at the Holiday Inn Airport, 911 Brooks Avenue,
Rochester, New York 14624.
RECORD DATE; VOTE REQUIRED (PAGES 8-9)
You can vote at the Special Meeting if you owned common stock of Travel
Ports at the close of business on April 15, 1999. On that date, there were
6,673,529 shares of Travel Ports common stock outstanding and entitled to vote.
To adopt the merger agreement, the holders of two-thirds of those shares must
vote in favor of doing so. You can cast one vote for each share of Travel Ports
common stock that you owned on April 15, 1999.
A failure to vote, either by not returning the enclosed proxy card or by
checking the "Abstain" box on the proxy card, will have the same effect as a
vote "Against" adoption of the merger agreement. Accordingly, the
5
<PAGE> 8
board of directors of Travel Ports urges you to complete, date and sign the
accompanying proxy card and return it promptly in the enclosed, postage paid
envelope.
As of April 15, 1999, directors and executive officers of Travel Ports held
approximately 2,445,796 shares (or 36.6%) of the Travel Ports' common stock
entitled to vote at the special meeting. We expect that each of them will vote
for adoption of the merger agreement and members of this group holding 36.3% of
Travel Ports common stock have entered into a contract with TravelCenters that
requires the members of the group to vote for adoption of the merger agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REASONS FOR THE MERGER (PAGES 8-11)
The board of directors of Travel Ports believes that the merger is
advisable and in your best interest. It unanimously recommends that you vote
"FOR" the proposal to adopt the merger agreement.
To review the background and reasons for the merger in greater detail, see
pages 10 through 12.
THE MERGER (PAGE 9)
The merger agreement is attached to this document as Annex I. Please read
the merger agreement. It is the legal document that governs the merger.
General (Page 9)
We propose a merger in which a wholly-owned subsidiary of TravelCenters
will merge into Travel Ports. Travel Ports will continue as a New York
corporation. When the merger is complete, each share of Travel Ports' common
stock will automatically convert into the right to receive cash in the amount of
$4.30, without any interest. Certain shares owned by the Chairman of the Board
of Directors and Chief Executive Officer of Travel Ports, however, will be
exchanged for shares of TravelCenters shortly before the closing of the Merger.
Opinion of Financial Advisor (Page 12)
McDonald Investments Inc. has delivered its opinion to Travel Ports' Board
of Directors that the cash consideration to be received in the merger is fair
from the financial point of view to the holders of Travel Ports common stock. A
copy of the opinion delivered by McDonald Investments is attached to this
document as Annex II. You should read the opinion completely to understand the
assumptions made, matters considered and limitations of the review undertaken by
McDonald Investments in providing this opinion.
Effective Date (Page 18)
The merger will occur shortly after all of the conditions to the closing of
the merger have been satisfied. It is currently expected that the merger will
occur promptly after the special meeting of shareholders. Shortly after the
merger is completed, you will be able to exchange your certificates of Travel
Ports common stock for the cash consideration.
Conditions to the Merger (Page 20)
The completion of the merger depends on a number of conditions being met.
In addition to some standard conditions regarding compliance with the merger
agreement, these include:
- Adoption of the merger agreement by Travel Ports' shareholders;
- Obtaining certain antitrust clearances in connection with the merger;
- Satisfactory completion by TravelCenters of certain environmental due
diligence examinations.
If the law permits, either TravelCenters or Travel Ports could choose to
waive a condition to its obligation to complete the merger even though that
condition had not been satisfied. We cannot be certain when (or if) the
conditions to the merger will be satisfied or waived, or that the merger will be
completed.
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Interest of Certain Persons in the Merger (Page 16)
You should be aware that certain members of the board of directors of
Travel Ports and Travel Ports' management have certain interests which may
present them with potential conflicts of interest in the merger. Among other
things, certain directors and officers will have the right to receive cash upon
the cancellation of outstanding stock options and warrants, the Chairman of the
Board will receive shares of TravelCenters pursuant to a share exchange
agreement and the President of Travel Ports would become a party to a consulting
agreement with TravelCenters. Each of these arrangements is described in more
detail in this proxy statement.
Conduct of Business Pending the Merger (Page 21)
Travel Ports has agreed to conduct its business pending the merger only in
the ordinary course, except as otherwise permitted by the merger agreement.
Travel Ports has also agreed not to take certain specified actions related to
its operations pending the merger without the consent of TravelCenters, except
as the merger agreement permits.
Termination Fee and Expenses (Page 23)
Travel Ports has agreed to pay TravelCenters a fee of $1,200,000 if the
merger agreement is terminated after certain events. Travel Ports is also
obligated to reimburse TravelCenters for certain of its expenses in connection
with certain termination events. These provisions are intended to increase the
likelihood that the merger with TravelCenters occurs (or to compensate
TravelCenters if the merger does not occur) and may discourage competing offers.
Certain Federal Income Tax Consequences (Page 24)
Your exchange of shares of common stock for cash pursuant to the merger
will be a taxable transaction for federal income tax purposes. You will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash you receive and your tax basis in the shares
surrendered, assuming that you don't have a special tax status or did not
acquire your shares pursuant to an incentive stock option or special
compensation arrangement.
Determining the actual tax consequences of the merger to you may be
complex. They will depend on your specific situation and on variables not within
our control. You should consult your own tax advisor for a full understanding of
the merger's tax consequences.
PRICE RANGE OF COMMON STOCK (PAGE 31)
The common stock of Travel Ports is traded on the Nasdaq National Market
under the symbol "TPOA." On February 25, 1999, the date preceding our
announcement of the proposed merger, the last sale price of a share of common
stock on the Nasdaq National Market was $3.25. The last sale price for the
common stock on April 15, 1999, the last full trading day prior to the printing
of this Proxy Statement, was $3.75. The market price of Travel Ports' common
stock will, of course, fluctuate prior to the merger. You should obtain current
stock price quotations for the common stock.
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<PAGE> 10
SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished by Travel Ports of America, Inc., a
New York corporation (the "Company"), to the holders of outstanding shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company in
connection with the solicitation of proxies by the Board of Directors of the
Company from holders of such shares. The proxies are to be used at the Special
Meeting of Shareholders of the Company (the "Special Meeting") to be held at the
Holiday Inn Airport, 911 Brooks Avenue, Rochester, New York 14624, at 9:00 a.m.,
local time, on June 1, 1999, and at any adjournments or postponements thereof.
Holders of Common Stock are entitled to one vote for each share held by them.
MATTERS TO BE CONSIDERED
THE PURPOSE OF THE SPECIAL MEETING IS TO CONSIDER AND VOTE UPON A PROPOSAL
TO ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS OF FEBRUARY 26, 1999 (THE
"MERGER AGREEMENT"), AMONG THE COMPANY, TRAVELCENTERS OF AMERICA, INC., A
DELAWARE CORPORATION ("TA"), AND TP ACQUISITION, INC., A NEW YORK CORPORATION
AND WHOLLY-OWNED SUBSIDIARY OF TA ("TA SUB"), PROVIDING FOR THE MERGER OF TA SUB
WITH AND INTO THE COMPANY (THE "MERGER"). As a result of the Merger, the Company
will continue as the surviving corporation (the "Surviving Corporation") and
will become a wholly-owned subsidiary of TA. In the Merger, each outstanding
share of Common Stock (other than certain shares owned by E. Philip Saunders,
which will be exchanged for shares of TA just prior to the Effective Time, and
any other shares owned by TA or the Company) will be converted into the right to
receive a cash payment of $4.30, without interest (the "Merger Consideration").
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously adopted the Merger
Agreement and has determined that the Merger is advisable and in the best
interests of the Company and its shareholders. Accordingly, the Board of
Directors of the Company unanimously recommends that the Company's shareholders
vote "FOR" adoption of the Merger Agreement. For a discussion of the factors
considered by the Company's Board of Directors in adopting the Merger Agreement
and the transactions contemplated thereby, see "The Merger -- Reasons for the
Merger."
RECORD DATE; PROXIES
Pursuant to the provisions of the New York Business Corporation Law and the
Company's By-Laws, the Board of Directors of the Company has fixed the close of
business on April 15, 1999 as the record date (the "Record Date") for the
determination of shareholders entitled to notice of, and to vote at, the Special
Meeting. Accordingly, only holders of record of shares of Common Stock at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Special Meeting.
A proxy card for use at the Special Meeting is enclosed. Shares of Common
Stock represented by properly executed proxies, unless such proxies have been
previously revoked, will be voted in accordance with the instructions indicated
in such proxies. If no instructions are so indicated, such shares will be voted
in favor of the adoption of the Merger Agreement and in the discretion of the
proxy holder as to any other matter that properly may come before the Special
Meeting. The Board of Directors of the Company knows of no business that will be
presented for consideration at the Special Meeting other than consideration of
the Merger Agreement. A shareholder who has given a proxy may revoke it at any
time prior to its exercise at the Special Meeting by filing an instrument
revoking it with the Company, by duly executing a proxy bearing a later date and
presenting it at the Special Meeting or by appearing at the Special Meeting and
voting in person. The mere presence at the Special Meeting of the person who has
given a proxy will not revoke such proxy.
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<PAGE> 11
PERSONS MAKING THE SOLICITATION
This solicitation of proxies is being made by the Board of Directors of the
Company. All expenses associated with soliciting proxies, including the
preparation, assembly, printing and mailing of this Proxy Statement, will be
borne by the Company. It is contemplated that proxies will be solicited
principally through the use of the mail, but officers, directors and employees
of the Company may solicit proxies personally or by telephone, without receiving
special compensation therefor. The Company has retained Georgeson & Company Inc.
to aid in the solicitation of proxies, including from brokers, bank nominees,
and other institutional owners at a cost of approximately $9,000.00. In
addition, the Company will reimburse banks, brokerage houses, and other
custodians, nominees and fiduciaries for their reasonable expenses in forwarding
these proxy materials to their principals.
QUORUM, VOTE REQUIRED
The presence, either in person or by properly executed proxy, of the
holders of a majority of the voting power of the outstanding shares of Common
Stock entitled to vote at the Special Meeting is necessary to constitute a
quorum at the Special Meeting.
The affirmative vote of the holders of two-thirds of the outstanding shares
of Common Stock is required to adopt the Merger Agreement. For purposes of
determining whether the Merger Agreement has been adopted by the shareholders,
the inspector of elections will exclude abstentions and broker non-votes from
the number of shares deemed to have voted on such matter at the Special Meeting.
Accordingly, abstentions and broker non-votes will have the effect of a "NO"
vote with respect to the adoption of the Merger Agreement.
As of the Record Date, 6,673,529 shares of Common Stock were outstanding
and held by approximately 1,900 record holders. Each shareholder of the Company
is entitled to one vote for each share of Common Stock held in his or her name
on the Record Date. Both the Chairman of the Board and the President of the
Company have agreed to vote each share of Common Stock of the Company
beneficially owned by him in favor of the Merger Agreement and the transactions
contemplated thereby. They were the beneficial holders of an aggregate of
2,424,307 shares of Common Stock on the Record Date (excluding outstanding but
unexercised options and warrants to purchase Common Stock), constituting
approximately 36.3% of the shares of Common Stock outstanding on such date.
Representatives of PricewaterhouseCoopers LLP, the principal accountants of
the Company, are expected to be present at the Special Meeting, will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
THE MERGER
The following information with respect to the Merger is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is included in this Proxy Statement as Annex I. The following information
includes a summary of the material terms of the Merger Agreement, which sets
forth the terms and conditions upon which the Merger is to be effected. If the
Merger Agreement is adopted by the requisite vote of shareholders at the Special
Meeting, and all other conditions to the obligations of the parties thereto are
satisfied or waived, the Merger will be consummated and TA Sub will merge with
and into the Company at the Effective Time (as defined below). The Company will
be the surviving corporation in the Merger, but will become a wholly-owned
subsidiary of TA. Shareholders are urged to read the Merger Agreement in its
entirety for a more complete description of the Merger.
GENERAL
Pursuant to the Merger Agreement, at the time the Merger becomes effective
(the "Effective Time"), each outstanding share of Common Stock, other than
certain shares owned by E. Philip Saunders, which will be exchanged for shares
of TA shortly before the Effective Time, and any other shares owned by TA or the
Company, will be converted automatically into the right to receive the Merger
Consideration. As a result of the
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Merger, holders of shares of Common Stock will cease to have an equity or other
interest in, or possess any rights as shareholders of, the Company, which will
be the surviving corporation in the Merger.
BACKGROUND OF MERGER
From time to time, the Company has reviewed various strategic alternatives
for enhancing profitability and maximizing shareholder value. These strategies
initially concentrated on enhancing the services provided to its customers at
its facilities and installing updated systems that provide entertainment and
communication services to customers, all with a view towards increasing sales
and earnings. It was anticipated that the market price for the Common Stock
would be favorably impacted by those innovations.
During 1997, management of the Company, in consultation with the Company's
Board of Directors, determined to explore alternative strategies for enhancing
shareholder value. In that regard, in the summer of 1997, representatives of the
Company met with two separate companies engaged in the travel plaza industry to
explore whether those companies would have any interest in a business
transaction related to the acquisition of the Company. Those discussions did not
result in any expressions of interest or proposals related to a business
transaction.
In October, 1998, E. Philip Saunders, Chairman and Chief Executive Officer
of the Company and John Holahan, President and Chief Operating Officer of the
Company, responded to an invitation from Edwin Kuhn, President of TA and met
with Mr. Kuhn and Timothy L. Doane, Senior Vice President of Market Development
of TA, in Rochester, New York, at which meeting they explored the possibility of
a business transaction and agreed to continue discussions. On November 4, 1998,
the parties entered into a Confidentiality Agreement and in several subsequent
meetings, the possibility of a business transaction was discussed. While TA had
initially proposed a merger consideration of $4.00 per share, representatives of
the Company indicated that recommendation of the transaction would require a
higher price. TA agreed to increase the merger consideration, subject, however,
to its ability to pay a portion of the price by issuance of TA shares. After
further negotiations, TA ultimately agreed to a merger consideration of $4.30
per share, contingent, however, upon Mr. Saunders' acceptance of TA shares for a
portion of his Common Stock. Execution of a voting agreement, pursuant to which
Messrs. Saunders and Holahan would agree to vote their shares of Common Stock in
favor of the Merger, also was a condition to TA's willingness to proceed.
On December 7, 1998, the parties entered into an exclusive dealing
agreement (the "Exclusive Dealing Agreement") and agreed on the scope and
schedule of the due diligence investigations to be performed by the parties and
a timetable for continuing discussions. A preliminary understanding on possible
valuation was reached, subject to due diligence and further discussions of terms
and conditions of the transaction. The Exclusive Dealing Agreement, which was
required by TA as a condition to its incurring the substantial expenses
associated with its anticipated due diligence examinations, provided that TA
would have access, on a confidential basis, to substantial information
concerning the Company. It also provided that, until the later of 21 days after
receipt by TA of requested information or seven days after its receipt of
environmental audits, but with an outside date of February 28, 1999, the Company
would deal exclusively with TA concerning a possible change of control
transaction. The Exclusive Dealing Agreement provided that, as its sole remedy
in the event of a breach by the Company, TA would be reimbursed for its actual
expenses up to $200,000. Thereafter, TA continued to perform extensive due
diligence, primarily at offsite locations and in reliance upon information
furnished to it by the Company. It was also determined that TA would not
commence its further required due diligence investigations of potential
environmental liabilities of the Company until after the execution of a merger
agreement and public announcement of the transaction.
On January 13, 1999, the Board of Directors of the Company appointed a
special committee (the "Special Committee") composed of Messrs. John H. Cline,
as Chairman, William A. DeNight and Wm. Patrick Marchbanks. The Special
Committee was delegated the authority to retain an investment advisor and
special counsel, all with a view towards making a recommendation to the full
Board of Directors related to any possible transaction between the Company and
TA. The Board, in consultation with Mr. Cline, as Chairman of the Special
Committee, also authorized management of the Company to continue negotiations
with TA and approved the retention by the Special Committee of McDonald
Investments Inc. ("McDonald Investments") as its financial
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advisor to evaluate the fairness, from a financial point of view, of any final
merger proposal. Negotiations with respect to a definitive merger agreement and
related agreements continued through the week of February 15, 1999. Those
discussions, which involved Mr. Cline, as Chairman of the Special Committee,
senior management, outside counsel and financial advisors, culminated on
February 17, 1999, in a proposal reflected in draft agreements incorporating
substantially all of the terms of the proposed merger, subject to final
negotiation and execution of the definitive merger agreement and adoption by
both Boards of Directors. Among other things, the parties reviewed drafts of the
Merger Agreement, a share exchange agreement (providing for the exchange by Mr.
Saunders of Company Common Stock for TA common stock) and a voting agreement
among TA, TA Sub and Messrs. Saunders and Holahan (See"The Merger-Interests of
Certain Persons in the Merger").
The TA Board of Directors held a telephonic meeting on February 12, 1999,
and the Special Committee of the Company met on February 17, 1999 in Rochester,
New York. The Special Committee received a complete briefing from outside
counsel and from McDonald Investments with respect to factors affecting the
Company's decision on the proposed merger, including strategic alternatives, and
valuation and merger structuring issues. Following the meeting of the Special
Committee, the full Board of Directors of the Company met and a similar
presentation was made to the full Board of Directors of the Company, at which
meeting the Special Committee made its recommendation that the Company proceed
with the merger transaction, subject, however to the Company's receipt of a
fairness opinion from McDonald Investments and subject also to specified
revisions to the Merger Agreement. Specifically, the Board of Directors of the
Company, consistent with the recommendation of the Special Committee,
unanimously approved and adopted the Merger Agreement and the transactions
contemplated thereby, subject to the termination fee required to be paid to TA
by the Company in certain circumstances being reduced, and subject to the Merger
Agreement providing that the Company receive ownership of real estate and
environmental reports being prepared by or on behalf of TA in certain
circumstances where TA's expenses were reimbursed. The Board of Directors also
unanimously approved and adopted the Voting Agreement and the Share Exchange
Agreement as described in the following paragraph.
During the course of the next week, senior management of the Company (with
input from Mr. Cline) and TA, as well as outside counsel, proceeded with
discussions related to the final agreements, as well as the completion by TA of
certain of its due diligence examinations and the completion of all necessary
schedules. The parties reached agreement on the specific items reflected in the
approval by the Board of Directors of the Company and senior management of TA
and the Company and outside counsel for both companies met in Rochester, New
York on Friday, February 26, 1999, at which time McDonald Investments delivered
its written fairness opinion to the Company and the Merger Agreement, the Share
Exchange Agreement, dated as of February 26, 1999, by and between TA and Mr.
Saunders (the "Share Exchange Agreement"), and the Voting Agreement, dated as of
February 26, 1999, by and among TA, TA Sub and Messrs. Saunders and Holahan (the
"Voting Agreement), together with the exhibits and schedules thereto were
finalized and executed by the parties thereto.
REASONS FOR THE MERGER
In determining whether to adopt the Merger and the Merger Agreement, the
Board of Directors consulted with the Company's management, as well as its legal
counsel, McDonald Investments and other advisors, and considered a number of
factors, including the following principal factors:
(i) the consideration to be received by the shareholders of the
Company in the Merger and the Board of Directors' view of the likelihood
that the Merger would deliver value to the shareholders of the Company
exceeding the value that could be expected in connection with continued
independence;
(ii) the oral presentation of McDonald Investments and the written
opinion of McDonald Investments with respect to its determination as to the
fairness of the Merger from a financial point of view to the Company's
shareholders, and the analyses, methodologies and conclusions underlying
such determination (see "The Merger -- Opinion of Financial Advisor");
(iii) the premium reflected in the excess of the Merger Consideration
over the trading prices of the Common Stock in recent quarters;
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(iv) the historical and recent earnings performance of the Company and
the trading prices of its Common Stock;
(v) the Company's future prospects and uncertainties in the business
in which the Company engages;
(vi) uncertainty with respect to the Company's ability to meet its
needs for current and future working capital;
(vii) conditions in the industry in which the Company competes,
including increased competition and consolidation in that industry;
(viii) the prices and multiples of value to sales and value to
earnings in recent acquisitions of companies deemed to be similar in
certain respects to the Company (see "The Merger -- Opinion of Financial
Advisor");
(ix) the likelihood that the Merger could be consummated, noting the
timing of and conditions to the Merger, and the expected effect of the
announcement of the Merger on relationships with the Company's customers,
employees, distributors, and suppliers;
(x) the terms and conditions set forth in the Merger Agreement,
including, but not limited to, the provisions in the Merger Agreement
permitting the Board of Directors to consider and respond to unsolicited
bona fide third-party offers to acquire the Company, subject to certain
limitations (see "The Merger -- No Solicitation by the Company") and
subject to a termination fee, and potential expense reimbursement, payable
by the Company in certain circumstances (see "Terms of the
Merger -- Termination Fee; Expenses"); and
(xi) the substantial capital requirements associated with the
development or acquisition of additional travel centers, which the Board
believes would be necessary to maintain long-term competitiveness in the
market.
The foregoing discussion of the information and factors considered by the
Board of Directors of the Company is not meant to be exhaustive but is believed
to include all material factors considered by the Board of Directors of the
Company. The Board of Directors did not quantify or attach any particular weight
to the various factors that it considered in reaching its determination that the
Merger Agreement is advisable, and in the best interest of, the shareholders of
the Company. Rather, the Board of Directors made its determination based on the
total mix of information available to it, and the judgments of individual
directors may have been influenced to a greater or lesser degree by different
factors. In considering the recommendation of the Board of Directors of the
Company with respect to the Merger, shareholders of the Company should be aware
that the interests of certain directors and executive officers with respect to
the Merger are or may be different from or in addition to the interests of the
shareholders of the Company generally. The Board of Directors was aware of these
interests, and took those interests into account. See "The Merger -- Interests
of Certain Persons in the Merger."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS ADOPTION OF THE MERGER
AGREEMENT BY THE SHAREHOLDERS OF THE COMPANY.
OPINION OF FINANCIAL ADVISOR
The terms of the Merger, including the Merger Consideration, were
determined by arms-length negotiation between the Company and TA. The Special
Committee retained McDonald Investments to deliver an opinion to its Board of
Directors as to the fairness from a financial point of view of the Merger
Consideration to the Company's shareholders. McDonald Investments delivered to
the Board of Directors of the Company its written opinion, dated February 26,
1999 (the "Opinion"), to the effect that, as of that date and based upon and
subject to the various considerations described therein, the Merger
Consideration of $4.30 per share in cash to be received by the public holders of
Common Stock pursuant to the Merger Agreement was fair to such shareholders from
a financial point of view. As set forth in its Opinion, McDonald Investments
assumed and relied upon, without independent verification, the accuracy and
completeness of the information reviewed by it for the purposes of its Opinion.
McDonald Investments did not make or obtain an independent evaluation or
appraisal of the assets or liabilities of the Company. McDonald Investments was
not authorized to, and did not, solicit from other parties
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<PAGE> 15
indications of interest with respect to combining with or acquiring the Company
or any of its assets. McDonald Investments was not involved in the negotiation
of the Merger Agreement or the determination of the amount of the Merger
Consideration.
At the February 17, 1999 meeting of the Special Committee and at the
meeting of the Company's Board of Directors later on that same date, at which
the Board of Directors reviewed and considered the terms of the Merger, McDonald
Investments made a presentation discussing the factors that it considered in
evaluating the proposed terms of the transaction and delivered its oral opinion
that the Merger Consideration was fair to holders of Common Stock from a
financial point of view. The presentation included a discussion of the basis
for, and the methodologies used by McDonald Investments to reach its oral
opinion. McDonald Investments subsequently delivered to the Company's Board of
Directors the Opinion, confirming its oral opinion.
THE FULL TEXT OF THE OPINION OF MCDONALD INVESTMENTS, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED AND MATTERS CONSIDERED IN, AND THE
LIMITATIONS ON, THE REVIEW UNDERTAKEN IN CONNECTION WITH ITS OPINION, IS
ATTACHED AS ANNEX II AND INCORPORATED IN THIS DOCUMENT BY REFERENCE. THE SUMMARY
OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION. THE OPINION WAS PROVIDED FOR THE INFORMATION AND
ASSISTANCE OF THE COMPANY'S BOARD OF DIRECTORS IN CONNECTION WITH ITS
CONSIDERATION OF THE TRANSACTION CONTEMPLATED BY THE MERGER AGREEMENT AND THE
OPINION DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW HOLDERS OF THE COMMON
STOCK SHOULD VOTE WITH RESPECT TO THE MERGER.
In connection with the Opinion, McDonald Investments reviewed, among other
things, the following:
(i) The Merger Agreement, including exhibits and schedules thereto;
(ii) Certain publicly available information concerning the Company,
including its Reports on Form 10-K and 10-Q;
(iii) Certain publicly available information concerning TA, including
its Reports on Form 10-K and 10-Q;
(iv) Certain other internal information, including financial and
operating projections, lease agreements and other documents related to the
Company;
(v) Certain publicly available information concerning the trading of,
and the trading market for, the Common Stock;
(vi) Certain other publicly available information with respect to
certain other companies believed by McDonald Investments to be comparable
to the Company and the trading markets for certain of such other companies'
securities;
(vii) Certain publicly available information concerning the nature and
terms of certain other transactions that McDonald Investments considered
relevant to its inquiry; and
(viii) TA's "Indicative Comparative Valuation Analysis," which
provides a basis for valuation of TA's common stock.
McDonald Investments also held discussions with members of the senior
management of the Company regarding the rationale for the Merger and the past
and current business operations, financial condition and future prospects of the
Company. In preparing the Opinion, McDonald Investments performed a variety of
financial and comparative analyses and made assumptions in conjunction with the
Company with respect to assets, financial conditions and other matters, many of
which are beyond the control of the Company. The estimates of value arrived at
by McDonald Investments based on such analyses and the valuation results
determined from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, and are inherently subject to
substantial uncertainty.
The following paragraphs summarize the most significant quantitative and
qualitative analyses performed by McDonald Investments in arriving at its
Opinion and reviewed by the Company's Board of Directors.
Selected Comparable Public Company Analysis. The comparable public company
analysis involves an analysis of publicly traded companies considered comparable
to the Company with regard to industry, performance and/or markets served. This
analysis is predicated on the theory that the market value of a company
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can be estimated by deriving market multiples from publicly traded companies
that relate their stock prices to earnings, cash flows or other measures of the
target company.
After screening applicable SIC codes and other relevant criteria, McDonald
Investments selected public companies that were reasonably similar in scope of
operations. These comparables consisted of Ultramar Diamond Shamrock Corp.;
Dairy Mart Convenience Stores; Uni-Marts Inc.; Casey's General Stores, Inc.;
Southland Corp.; and FFP Marketing Company, Inc.
Upon review of the comparable companies' market capitalizations and derived
trading multiples, it was determined that a select group of the comparable
companies provided the most insightful analysis. The select group, consisting of
Dairy Mart, Uni-Marts and FFP, includes companies with market capitalizations of
$16,000,000 to $21,000,000, which are most similar in size to the Company. The
remainder of the comparable companies ranged in market capitalization from
$700,000,000 to $1.9 billion and were excluded in order to provide more
meaningful conclusions.
The data and ratios McDonald Investments compared included, among other
things, leveraged market capitalization (current stock price multiplied by
shares outstanding plus debt, net of cash), to latest twelve months ("LTM")
sales, LTM earnings before interest, tax, depreciation and amortization
("EBITDA") and LTM earnings before interest and taxes ("EBIT"), as well as
fiscal year 1998 (year ended April 30, 1998) and estimated fiscal year 1999
price to earnings ("P/E") ratios.
An analysis of leveraged market capitalization to LTM sales yielded a range
of 0.1x to 0.3x with a mean (excluding the high and low) and median of 0.2x. An
analysis of leveraged market capitalization to LTM EBITDA yielded a range of
4.4x to 8.3x with a mean (excluding the high and low) and median of 5.5x. An
analysis of leveraged market capitalization to LTM EBIT yielded a range of 14.0x
to 15.1x with a median of 14.6x. An analysis of LTM P/E ratios yielded a range
of negative to 9.9x with a median of 9.9x. An analysis of estimated fiscal year
1998 P/E ratios yielded a range of 13.9x to 21.5x, with a median of 17.7x. The
price of the comparable companies as a multiple of book value yielded a range of
.6x to 2.1x, with a mean (excluding the high and low) and median of 0.9x.
McDonald Investments applied the valuation multiples, reflecting the average of
the comparable companies mean (excluding high and low) and median multiples and,
utilizing that methodology, determined that a valuation of $4.27 per share, as
applied to the Company, would be appropriate.
Discounted Cash Flow Analysis. McDonald Investments calculated an equity
value for the Company based upon the value, discounted to the present, of
estimates of projected cash flow over a 5 year period from fiscal year 2000 to
2004 and a projected fiscal year 2004 terminal value based upon 7.0 times fiscal
year end 2004 operating income. In conducting its analysis, McDonald Investments
utilized financial projections provided by the Company for fiscal years 2000 and
2001, and financial projections derived by McDonald Investments, in association
with management, for fiscal years 2002 through 2004.
The discount rate utilized was derived using the capital asset pricing
model ("CAPM"). Data utilized in the CAPM was gathered from companies deemed to
be similar in scope of operations to the Company and thus, is intended to
represent a weighted average cost of capital for a strategic industry buyer.
Based upon its calculations, McDonald Investments concluded that a weighted
average cost of capital of 14.3% was appropriate and applied that as a discount
rate in the discounted cash flow analysis. The equity value per share based on
this methodology ranged from $3.83 to $4.28, with the 14.3% discount rate
showing an equity value per share of $4.05, as compared to the equity value
implied by the Merger Consideration.
Comparable Merger and Acquisition Analysis. McDonald Investments analyzed
certain information related to selected transactions for which public
information was available. This analysis was conducted to determine relevant
valuation multiples for transactions deemed to be similar to the Company's
transaction. McDonald Investments identified transactions of companies and
industries related to the Company, including operators of travel plazas,
automotive repair and service operations, transporters of oil and natural gas,
and other related operations. It should be noted that few of these transactions
provide publicly available financials which can be utilized for valuation
purposes. However, after review of the transactions where financial information
was available, McDonald Investments then applied the transaction's multiples to
the Company's LTM sales and EBITDA figures to derive a valuation for the
Company. A discount of 15% was applied to the resulting valuations
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to compensate for the significant difference in size between the transaction
targets and the Company. Based upon that valuation methodology, McDonald
Investments determined that the valuation of the Company's shares was $3.45 per
share. It should be noted that no company, transaction or business used in this
analysis is identical to the Company or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical. Rather, it involves complex
considerations and judgments concerning differences and financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the comparable companies, selected transactions or
the business segment, company or transaction to which they are being compared.
Leveraged Buyout Analysis. McDonald Investments analyzed a leveraged buyout
transaction to determine the price a typical leveraged buyer could afford to pay
given prevailing market conditions. For purposes of this analysis, McDonald
Investments utilized the financial projections for fiscal year 2000 and 2001
provided by the Company and financial projections for fiscal years 2002 through
2004 derived by McDonald Investments in association with the Company's
management. The analysis was based on the following assumptions: (i) market
rates of interest on senior and subordinated debt of 8.5% and 12.5%,
respectively, (ii) target internal rates of return of 20% for subordinated debt
investors, (iii) maximum senior debt of 3.5 times LTM EBITDA, (iv) equity
requirement of greater than 25% of total capital employed in the transaction,
and (v) expected internal rates of return of 30% or greater for equity
investors. Applying that methodology to the Company's shares, McDonald
Investments determined a valuation for the Company's shares of $2.92 per share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the Opinion. In arriving at its fairness determination, McDonald
Investments considered the results of all of these analyses and did not
attribute particular weight to any analysis or factor considered by it; rather,
McDonald Investments made its determination as to fairness on the basis of its
experience and professional judgment after considering the results of all such
analyses. No company or transaction used in the above analysis as a comparison
is identical to the Company or the contemplated transaction. The analyses were
prepared solely for purposes of McDonald Investments providing its Opinion to
the Special Committee and to the Board of Directors as to the fairness of the
Merger Consideration pursuant to the Merger Agreement to the holders of shares
of Common Stock, from a financial point of view, and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, neither the
Company nor McDonald Investments or any other person assumes responsibility if
future results are materially different from those forecasted. As described
above, the Opinion to the Special Committee and to the Board of Directors was
one of the many factors taken into consideration by the Board of Directors in
making its determination to adopt the Merger Agreement.
McDonald Investments, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. The Company selected
McDonald Investments as its financial advisor because McDonald Investments is a
nationally recognized investment banking firm that has substantial experience in
transactions similar to the Merger.
McDonald Investments provides a full range of financial, advisory and
brokerage services and in the course of its normal trading activities may from
time to time effect transactions and hold positions in the securities of the
Company or TA for its own account or for the account of customers.
Pursuant to a Letter Agreement dated February 3, 1999, the Special
Committee of the Board of Directors of the Company engaged McDonald Investments
to undertake a study to enable it to render its opinion to the Board of
Directors of the Company as to the fairness from a financial point of view of
the consideration to be received by the Company's shareholders in the Merger
Agreement. As consideration for its services, the Company agreed to pay McDonald
Investments a nonrefundable retainer of $50,000 upon execution of that Letter
Agreement, plus
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$125,000, which was paid at the time McDonald Investments rendered its fairness
opinion. The Company also has agreed to indemnify McDonald Investments against
certain expenses and liabilities, including liabilities under the federal
securities laws, relating to or arising out of services performed by McDonald
Investments as financial advisor to the Company. During the two years prior to
its engagement, McDonald Investments did not perform investment banking or
financial advisory services for, or receive compensation from, the Company.
VOTING AGREEMENT
At the time of execution of the Merger Agreement, E. Philip Saunders and
John M. Holahan also entered into the Voting Agreement with TA and TA Sub. The
Voting Agreement is attached to this Proxy Statement as Annex IV. The Voting
Agreement requires Messrs. Saunders and Holahan to attend the Special Meeting
and to vote any shares of Common Stock beneficially owned by them for adoption
of the Merger Agreement. It also precludes, subject to limited exceptions, the
transfer prior to the Special Meeting of any shares of Common Stock owned by
them. Messrs. Saunders and Holahan also agreed in the Voting Agreement not to
solicit, initiate, encourage, facilitate or cooperate with any inquiry or the
making of any proposal related to an acquisition of the Company, except to the
extent required in the exercise of their fiduciary duties as Directors of the
Company.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders of the Company should be aware that certain members of
the Board of Directors and the Company's management have certain interests in
the Merger in addition to their interests solely as shareholders of the Company
which may present them with potential conflicts of interest in connection with
the Merger. For information with respect to management's beneficial ownership of
Common Stock, which Common Stock will, except as described below, be subject to
exchange for the Merger Consideration upon consummation of the Merger, see
"Principal Shareholders and Security Ownership of Management."
Share Exchange Agreement. Concurrently with the execution of the Merger
Agreement, TA entered into the Share Exchange Agreement with E. Philip Saunders,
a copy of which is attached to this proxy statement as Annex III. The Share
Exchange Agreement obligates Mr. Saunders, prior to the Effective Time of the
Merger, to exchange 653,025 shares of Common Stock for 85,000 shares of TA
common stock. The Share Exchange Agreement was requested by TA as part of its
negotiations relative to the Merger Transaction and its willingness to proceed
with the Merger at the price of $4.30 per share was conditioned upon the
execution of the Share Exchange Agreement. There is no active trading market for
TA shares and the exchange ratio was determined by negotiations between TA and
Mr. Saunders and was computed by the application of P/E ratios for the implicit
value of TA stock similar to those reflected for the Company in the Merger
Consideration. As such, the exchange ratio is not necessarily indicative of the
fair market value of the TA shares and does not represent the price at which
shares may have been sold or transferred in other arms-length transactions which
could be higher or lower. The Share Exchange Agreement also provides that TA
will use reasonable efforts to cause Mr. Saunders to be appointed to the Board
of Directors of TA. Mr. Saunders' right to maintain a position on the TA Board,
however, is subject to termination on the earlier of (i) three years; (ii) the
time at which he no longer owns at least 50,000 shares of TA stock; (iii) the
time TA concludes a public offering of its shares; or (iv) the consummation of a
change of control transaction related to TA (as defined in the Share Exchange
Agreement).
The Share Exchange Agreement also gives Mr. Saunders certain rights to
cause TA to repurchase his shares at a purchase price of $33.04 (reflecting the
implicit $4.30 value of the Company's shares surrendered in exchange). That
"put" right becomes exercisable in one-third increments, commencing on the first
anniversary of the Closing Date of the Merger, and the "put" right terminates on
the fourth anniversary of the Closing Date. TA's obligation to purchase,
however, may be deferred if it is then unable, due to legal or contractual
restrictions, to purchase the shares. TA's obligation also is subject to the
amendment of its certificate of incorporation clarifying that no stockholder
approval would be required for a repurchase and the Share Exchange Agreement
requires TA to effectuate such an amendment. TA also has a right to repurchase
Mr. Saunder's TA shares in certain limited circumstances at $36.34 per share
(reflecting a 10% increase in valuation). This "call" right is exercisable in
the event that TA desires to proceed with a transaction that is more restrictive
with regard to its ability to honor its put obligation than the restrictions
currently applicable. This right is exercisable by TA during
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the same period that Mr. Saunders can cause TA to repurchase his shares. Mr.
Saunders also will be required to become a party to TA's stockholders'
agreement, which generally provides that no TA shares may be transferred (other
than certain specified transfers).
Lease Agreements. The Merger Agreement also contains provisions affecting
certain existing agreements between Mr. Saunders and the Company. Specifically,
the agreement provides that, prior to the Effective Time of the Merger, the
Company will amend its sublease with Maybrook Realty, Inc., a corporation owned
in equal shares by Mr. Saunders and another individual, for the Maybrook, New
York Travel Plaza owned by the Company (the "Maybrook Lease"). The amended
sublease will provide two additional 10 year renewal options in favor of the
Company, in addition to the existing three, five year renewal options. The
amended sublease also will provide for specified rental increases and will amend
the Company's purchase option consideration from $3,500,000, to the greater of
the fair market value of the interest at that time or $4,500,000. The Merger
Agreement also provides that the existing consulting agreement between the
Company and Mr. Saunders will be terminated at the Effective Time. The Merger
Agreement also provides that TA will cause the Surviving Corporation to assume
the obligations of the Company under its diesel fuel supply agreement with
Griffith Oil Company, Inc., and will keep that agreement in place for at least
one year. While Mr. Saunders was previously a controlling shareholder of
Griffith Oil, he no longer has any ownership interest in that company. The
Company also is obligated, prior to the Effective Time, to enter into a written
lease in form and substance reasonably acceptable to TA with Mr. Saunders and
other owners with respect to certain real property associated with the business
operations of the Company in Dansville, New York, providing for quarterly rental
payments of $1,200. The specific terms of that written lease are set forth in
the Merger Agreement.
Consulting Agreement. Concurrently with the closing of the Merger, TA will
enter into a Consulting Agreement (the "Consulting Agreement") with John
Holahan, President and Chief Operating Officer of the Company. The Consulting
Agreement provides for a term of three years. Mr. Holahan will serve as a
consultant to TA and, in that capacity, will assist in the transition of the
Company's business and perform such other duties as may be designated by TA.
Pursuant to the terms of the Consulting Agreement, Mr. Holahan will be entitled
to receive a consulting fee of $120,000 per year. In addition, the Consulting
Agreement provides that Mr. Holahan cannot, during the term of the Consulting
Agreement or for two years thereafter, directly or indirectly, compete with TA
in the business of operating a truckstop or travel center. In consideration for
that agreement not to compete, TA will pay Mr. Holahan the sum of $30,000 per
year during each year of the Consulting Agreement.
The Consulting Agreement provides that TA may terminate the Consulting
Agreement (i) at the expiration of the three year term; (ii) 30 days after
delivery of written notice by Mr. Holahan of the voluntary termination of the
agreement; (iii) upon the death of Mr. Holahan; or (iv) at any time for cause
(as defined therein). In the event that the Consulting Agreement is terminated
as a result of Mr. Holahan's death, TA has agreed to pay his estate the
consulting fee for the balance of the three year term.
Indemnification and Insurance. The Merger Agreement provides that, for a
period of six years following the closing date, TA will cause the Surviving
Corporation to indemnify, defend and hold harmless the Directors, officers and
employees of the Company and its subsidiaries immediately prior to the Effective
Time to the same extent that the Company is required to indemnify such persons
on the date of the Merger Agreement. In addition, TA will cause the Surviving
Corporation to advance expenses incurred by Directors, officers and employees of
the Company and its subsidiaries immediately prior to the Effective Time,
subject to certain limitations set forth in the Merger Agreement. The Merger
Agreement also provides that TA will cause Directors and officers of the Company
and its subsidiaries immediately prior to the Effective Time to be covered for a
period of six years by the directors' and officers' liability insurance policy
maintained by the Company with respect to acts or omissions occurring prior to
the Effective Time.
Stock Option Plans. The Merger Agreement requires the Company to amend each
of its stock option plans no less than ten business days prior to the Effective
Time to provide that each outstanding option to purchase Common Stock will
become fully vested and exercisable immediately prior to such time, subject to
the following provisions. In addition, the Company is required to obtain from
each holder of options to purchase Common Stock an option cancellation
agreement. Pursuant to option cancellation agreements, each option holder will
agree to (i) exercise the stock option no later than the Effective Time, in
which case such option holder would
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receive the Merger Consideration for the shares acquired upon exercise, or (ii)
elect to receive payment in the amount equal to the product of (x) the total
number of shares of Common Stock subject to such option and (y) the excess of
the Merger Consideration over the exercise price per share of Common Stock
subject to such stock option, in exchange for cancellation of such stock option.
The number of options to acquire shares of Common Stock that are expected to be
fully vested and exercisable as a result of the Merger held by each executive
officer of the Company is as follows: John M. Holahan -- 493,992; and William
Burslem III -- 56,682.
Warrants. The Merger Agreement also provides that each holder of warrants
to purchase shares of Common Stock will enter into a cancellation agreement
pursuant to which such holder will receive payment in an amount equal to the
difference between the warrant exercise price and the Merger Consideration,
multiplied by the number of covered shares. Mr. Saunders holds warrants to
purchase 1,145 shares of Common Stock.
OPERATION AND MANAGEMENT OF THE COMPANY AFTER THE MERGER
Each of the Directors and officers of the Company will resign on the
Effective Date (as defined below). TA has elected to retain John Holahan as a
consultant to TA and TA will use reasonable efforts to cause E. Philip Saunders
to be appointed to TA's Board of Directors. See "Interests of Certain Persons in
the Merger." The employees of the Company will continue as employees of the
Surviving Corporation after consummation of the Merger unless and until
otherwise determined by TA or the Company. It is anticipated that, shortly after
consummation of the Merger, TA may transfer certain of the assets and operations
of the Surviving Corporation, including employees, to TA Operating Corporation,
a wholly-owned subsidiary of TA.
EFFECTIVE DATE OF THE MERGER
Pursuant to the Merger Agreement, TA Sub will be merged with and into the
Company at the Effective Time, and the Company will thereupon be the Surviving
Corporation. The Merger will become effective upon the filing of a Certificate
of Merger with the Secretary of State of the State of New York, and the date
upon which such effectiveness occurs is referred to as the "Effective Date." It
is anticipated that such filing will be made promptly following receipt of the
requisite approval of shareholders of the Company and satisfaction or waiver of
all other conditions to the Merger. Each of the parties to the Merger Agreement
will have certain rights to terminate the Merger Agreement in the event that the
Merger is not consummated on or before August 31, 1999. See "Termination of the
Merger Agreement; Amendments." Although it is anticipated that the Certificate
of Merger will be filed and the Effective Date will occur on or before August
31, 1999, there can be no assurance that there will be no further delay between
the date of the Special Meeting and the Effective Date, that the conditions to
the Merger will be satisfied or waived or that the Merger will occur. See
"Conditions to the Merger."
EFFECT OF THE MERGER
On the Effective Date, each share of Common Stock issued and outstanding
(other than certain shares owned by E. Philip Saunders, which will be exchanged
for shares of TA shortly before the Effective Time, and any other shares owned
by TA or the Company) will be converted into the right to receive, without
interest, the Merger Consideration. Upon consummation of the Merger,
shareholders will cease to have any further ownership or interest in the
Company.
The Company will be the Surviving Corporation upon the effectiveness of the
Merger and will succeed to all of the debts and liabilities and all of the
rights and property of the Company and TA Sub. The Surviving Corporation will
become a wholly-owned subsidiary of TA. As such, the Company will no longer be
subject to the reporting requirements of the Securities Exchange Act of 1934
(the "Exchange Act"). The Company's results of operations will be included in
the consolidated results of operations reflected in TA's periodic reports. TA
Sub will cease to exist following the Effective Date.
PAYMENT FOR SHARES; EXCHANGE AGENT
Upon the consummation of the Merger, each issued and outstanding share of
Common Stock, other than certain shares owned by E. Philip Saunders, which will
be exchanged for shares of TA shortly before the
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Effective Time, and any other shares owned by TA or the Company, will be deemed
for all purposes to represent only the right of the holder to receive the Merger
Consideration. American Stock Transfer & Trust Company will act as exchange
agent (the "Exchange Agent") in order to facilitate the payment in exchange for
certificates previously representing shares of Common Stock.
Instructions with regard to the surrender of certificates, together with a
letter of transmittal to be used for this purpose, will be mailed to
shareholders promptly after the Effective Date. Shareholders should surrender
certificates for shares of Common Stock only with a letter of transmittal. Each
holder shall deliver the stock certificate or certificates representing his or
her shares of Common Stock and related documentation by mailing such stock
certificates and related documentation to the Exchange Agent, for payment, as
promptly as practicable, by return mail. Each holder of shares held in street
name by a broker, dealer, clearing agency or other nominee should contact such
entity as soon as possible prior to the Effective Date to direct the entity to
tender their shares as instructed by the letter of transmittal. SHAREHOLDERS
SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Upon receipt of a certificate or certificates for Common Stock together
with a duly executed letter of transmittal, the Exchange Agent will issue cash
or a cash equivalent to the person or persons entitled thereto in an amount
equal to the product determined by multiplying the Merger Consideration by the
number of shares of Common Stock represented by such stock certificate or
certificates. NO INTEREST WILL ACCRUE TO HOLDERS OF COMMON STOCK IN RESPECT OF
PAYMENTS TO WHICH THEY BECOME ENTITLED UPON CONSUMMATION OF THE MERGER.
If any payment for shares of Common Stock is to be made in a name other
than that in which the certificate for such shares surrendered for payment are
registered on the stock transfer books of the Company as of the Effective Date,
it will be a condition of such payment that the certificate or certificates so
surrendered shall be properly endorsed or otherwise in proper form for transfer,
and that the person requesting such transfer pay to the Exchange Agent all
transfer or other taxes or establish that such taxes have been paid or are not
required to be paid.
TA has agreed in the Merger Agreement to transfer to the Exchange Agent,
not later than the Effective Date, all of the cash required for payment of the
Merger Consideration to be made to all holders of Common Stock. TA also has
agreed to make available the funds necessary to make the cash payments to
holders of options and warrants to purchase Common Stock (as described in the
following section) called for by the Merger Agreement.
TREATMENT OF STOCK OPTIONS, WARRANTS, CONVERTIBLE SECURITIES AND OTHER
INDEBTEDNESS
As of the Record Date, options and warrants to purchase approximately
1,007,308 shares of Common Stock were outstanding at exercise prices ranging
from $1.31 to $4.78 per share. Pursuant to the terms of the Merger Agreement,
each holder of an option or warrant to purchase Common Stock which is
outstanding immediately prior to the Effective Time will be required to enter
into a cancellation agreement with respect to such options or warrants. For
options or warrants that have an exercise price of less than $4.30 per share,
the cancellation agreements will provide that, as of the Effective Time, such
options and warrants will cease to be outstanding and will be converted into the
right to receive an amount in cash for each share purchasable under such option
or warrant, as the case may be, equal to $4.30 minus the per share exercise
price under such option or warrant, as the case may be. If the per share
exercise price under any option or warrant is equal to or greater than $4.30,
the cancellation agreements will provide that such option or warrant shall cease
to be outstanding as of the Effective Time, without further consideration to the
holder thereof. The Company is required to obtain cancellation agreements from
each holder of an option or warrant to purchase Shares prior to the Effective
Time.
As of the Record Date, the Company had outstanding convertible debt
securities in the aggregate principal amount of $5,254,000.00. These securities
are convertible into shares of Common Stock at conversion prices ranging from
$2.62 to $3.98 per share. Prior to the Effective Time, the Company is required
to cause each outstanding convertible security to be redeemed or otherwise paid
in full, or, at the option of the holder thereof, to be converted into shares of
Common Stock at specified prices in accordance with the terms of the convertible
security.
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In addition to the redemption of all convertible debt securities, the
Merger Agreement also requires the Company to take all action necessary to
arrange for the repayment in full, simultaneously with the Effective Time, of
all outstanding indebtedness of the Company, other than indebtedness owed (i)
pursuant to any capital lease, or (ii) pursuant to certain industrial
development bonds if so determined by TA. The Merger Agreement requires TA to
provide the Company with all funds necessary to make such repayment of
outstanding indebtedness.
REPRESENTATIONS AND WARRANTIES
Each of the Company, TA and TA Sub has made certain customary
representations and warranties in the Merger Agreement, including those which
relate to, among other things (i) organization and existence of each party and
its subsidiaries, (ii) the authorization, execution, delivery and performance of
the Merger Agreement and other matters relating to its enforceability, (iii) the
absence of broker fees, and (iv) the absence of any undisclosed consents,
approvals or authorizations required for the execution, delivery or performance
of the Merger Agreement and the consummation of the transactions contemplated
thereby.
The Company also has made certain customary representations and warranties
relating to, among other things (i) the absence of material adverse changes and
undisclosed liabilities, (ii) the Company's capital structure, (iii) the
Company's filing of all reports and documents required to be filed with the
Securities and Exchange Commission and the accuracy of filings made pursuant
thereto, (iv) the accuracy and preparation of certain financial statements of
the Company, (v) receipt of the Opinion, (vi) the adoption of the Merger
Agreement by the Company's Board of Directors and the recommendation of the
Board of Directors to the Company's shareholders of the adoption of the Merger
Agreement, (vii) the granting of approvals and the taking of steps to exempt the
Merger from the provisions of state anti-takeover laws, and (viii) other matters
relating to the conduct of the Company's business including, among other things,
the Company's employees, benefit plans, litigation, real estate, permits,
compliance with laws, including environmental laws, title to and condition of
properties, payment of taxes, Year 2000 compliance, absence of defaults,
government and other contracts, intellectual property rights, and the absence of
any undisclosed material adverse change in the financial condition, results of
operation, business or assets of the Company.
CONDITIONS TO THE MERGER
Consummation of the Merger by the Company is subject to the satisfaction of
certain conditions set forth in the Merger Agreement, including, but not limited
to (i) the making of all filings and the receipt of all consents,
authorizations, orders and approvals required by governmental or regulatory
authorities, or any nongovernmental third party, (ii) the accuracy of the
representations and warranties of TA and TA Sub as of the Effective Time, (iii)
the absence of any judgment, decree, injunction, ruling or order of any court,
governmental department, commission, agency or instrumentality outstanding
against any party to the Agreement which prohibits, restricts or delays
consummation of the Merger or of any of the conditions to the consummation of
the Merger, (iv) expiration or earlier termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act"); (v)
the adoption of the Merger Agreement by the shareholders of the Company; (vi)
the making available of funds by TA necessary to repay all outstanding
indebtedness of the Company, other than indebtedness (a) pursuant to any capital
lease or (b) pursuant to certain industrial development bonds if so determined
by TA, (vii) the performance or compliance in all material respects by TA and TA
Sub with all covenants and agreements pursuant to the Agreement, and (viii) the
delivery by counsel to TA and TA Sub of an opinion with respect to certain
matters, including, without limitation, the validity, binding effect and
enforceability of the Merger Agreement.
The obligation of each of TA and TA Sub to consummate the Merger is subject
to the satisfaction of conditions corresponding to those described for the
Company in the preceding paragraph. In addition, consummation of the Merger by
TA and TA Sub is subject to the following further conditions: (i) the receipt of
all required consents from third parties, (ii) no material adverse change since
April 30, 1998 in the business or financial condition of the Company, (iii) each
holder of any right, option or warrant to acquire Common Stock consenting to the
treatment of their options and warrants as provided in the Merger Agreement,
(iv) each holder of any other outstanding indebtedness of the Company, other
than (a) pursuant to any capital lease or (b) pursuant
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to certain industrial development bonds if so determined by TA, consenting to
repayment in full of such indebtedness, (v) execution and delivery of the
Consulting Agreement and the Maybrook Lease; (vi) the completion of the share
exchange transaction contemplated by the Share Exchange Agreement, (vii) the
termination of the Saunders Consulting Agreement, and (viii) the delivery by the
Company of an opinion of its counsel with respect to certain customary matters.
The Merger Agreement also provides that TA may terminate the Merger Agreement in
the event that its environmental due diligence discloses obligations, problems
or other liabilities reasonably estimated by TA to cost in the aggregate more
than $2.0 million.
The Merger Agreement provides that any party may waive any condition to its
obligation to consummate the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
The shareholders of the Company will retain their equity interest in the
Company until the Effective Date. Pursuant to the Merger Agreement, the Company
is required to conduct its business in the usual, regular and ordinary course of
business consistent with past practice and use its best efforts to preserve the
Company's business. The Company is further required to refrain from taking
certain actions without the written consent of TA (unless such actions are
provided for in the Merger Agreement), including, but not limited to (i)
declaring or paying any dividend on its capital stock, (ii) splitting, combining
or reclassifying any of its capital stock or issuing or authorizing the issuance
of any securities with respect to its capital stock, (iii) purchasing, redeeming
or otherwise acquiring shares of capital stock (except for outstanding options,
warrants or convertible securities), (iv) issuing, delivering, selling, pledging
or otherwise encumbering any shares of capital stock (other than upon the
exercise of presently outstanding options, warrants or convertible securities),
(v) amending its charter or bylaws, (vi) acquiring or agreeing to acquire any
other person or the assets or business operations of any person, (vii) selling,
licensing, mortgaging or otherwise encumbering or disposing of any of its
property or assets, other than properties or assets the value of which does not
exceed $50,000 individually and $200,000 in the aggregate and except for sales
of inventory in the ordinary course of business consistent with past practice,
(viii) incurring any indebtedness except for short-term borrowings and lease
obligations incurred in the ordinary course of business consistent with past
practice not in excess of $100,000 and borrowings in the ordinary course of
business consistent with past practice under the Company's existing revolving
line of credit that do not cause the outstanding balance of such line of credit
to exceed $1,000,000, (ix) making any loans, advances or capital contributions
to or investments in any other person, (x) paying, discharging or satisfying any
liabilities except in the ordinary course of business consistent with past
practice, (xi) waiving, releasing granting or transferring any rights of
material value or modify or change in any material respect any existing contract
other than in the ordinary course of business, (xii) adopting any resolution or
plan providing for or authorizing a complete or partial liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization, (xiii) entering into any new contract except in the ordinary
course of business consistent with past practice or modifying or terminating any
existing contract if it would have a material adverse effect on the Company or
enter into any license, franchise or similar agreements, (xiv) engaging in any
unusual or novel method of transacting business or change any accounting
principles, (xv) settling or compromising any litigation, except where the
amount paid in settlement or compromise is not material, (xvi) entering into any
fuel supply hedging agreements or similar agreements, (xvii) making any capital
expenditure in excess of $100,000 and not contemplated by the Company's capital
budget, (xviii) taking or omitting to take any action that would cause any of
the representations or warranties of the Company contained in the Merger
Agreement not to be true and correct, in all material respects, or (xix) buying,
selling, leasing, exercising any options, terminating or entering into any
agreement for the purchase, sale, lease, option or conveyance of any interest in
real property.
NO SOLICITATION BY THE COMPANY
The Merger Agreement also provides that the Company will not (i) initiate,
solicit, cooperate or encourage, or take any other action to facilitate any
inquiries or the making of any proposal or public announcement with respect to
any acquisition, tender offer, acquisition of beneficial ownership of (or the
right to vote) 20% or more of the Company's securities, dissolution, business
combination, sale, lease or other transfer of 10% or more of the assets of the
Company, or any other transaction similar to the Merger or any other material
corporate transaction
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("Alternative Transaction"), or (ii) except to the extent required in the
exercise of the fiduciary duties of the Board of Directors, as advised by
counsel, in connection with the receipt by the Company of any unsolicited
written proposal that the Board determines is reasonably likely to be more
favorable to the Company's shareholders than the Merger, engage or participate
in negotiations with, provide any nonpublic information or data to, or have any
discussions with, any person other than TA relating to an Alternative
Transaction. However, the Merger Agreement also provides that the foregoing
restrictions shall not prohibit the Company's Board of Directors from taking,
and disclosing to the Company's shareholders, a position with respect to an
Alternative Transaction pursuant to the applicable Securities and Exchange
Commission proxy statement or tender offer rules or, subject to the payment of
the Termination Fees described below, terminating the Merger Agreement to enter
into any agreement for an unsolicited Alternative Transaction, if the Board, in
exercising its fiduciary duties under applicable law as advised by counsel, and
after consultation with its financial advisors, determines the Alternative
Transaction to be superior to the Merger.
ADDITIONAL AGREEMENTS
In the Merger Agreement, the Company has made certain additional covenants
to TA and TA Sub. The Company has agreed, among other things (i) to afford TA
reasonable access to the Company's properties and personnel, (ii) to disclose to
TA such documents relating to the Company as TA may reasonably request and to
advise TA of certain material events, (iii) to submit the Merger Agreement to
its shareholders for adoption, to hold a special meeting to act on the Merger
Agreement and, subject to the fiduciary obligations of the Board of Directors,
to recommend the adoption of the Merger Agreement to its shareholders, and (iv)
to use all reasonable efforts to cause all things necessary, proper and
advisable for the consummation of the Merger to occur including obtaining any
necessary waivers, consents and approvals under material contracts of the
Company.
With respect to the matters contained in clause (iv) of the preceding
paragraph, TA and TA Sub have made reciprocal covenants to the Company.
TERMINATION OF THE MERGER AGREEMENT; AMENDMENTS
The Merger Agreement may be modified or amended by an agreement signed by
the parties. However, no amendment may be made after adoption by the Company's
shareholders that, by law, would require shareholder approval. It is the
intention of management of the Company to submit any amendment that might have a
material adverse effect on the rights of shareholders to the shareholders for
approval. The Merger Agreement expressly permits the waiver or extension of any
term, provision or condition in writing by the party entitled to the benefits
thereof.
The Merger Agreement provides that it may be terminated at any time,
whether before or after approval by the Company's shareholders, (i) by mutual
consent of the Company and TA, (ii) by either TA or the Company if any
governmental action shall have been taken to enjoin or prohibit the Merger or
any other legal restraint or prohibition against the Merger is in effect, (iii)
by the Company or TA if the Company executes a binding agreement with a third
party regarding an Alternative Transaction, (iv) by TA in the event of an
uncured material breach of the Merger Agreement on the part of the Company, (v)
by the Company in the event of an uncured material breach by TA or TA Sub, (vi)
by TA if there is a material adverse change with respect to the Company, (vii)
by TA if the Company's Board of Directors fails to recommend or withdraws,
modifies or changes its recommendation to adopt the Merger Agreement or takes
any position inconsistent with such recommendation, (viii) by either TA or the
Company if the shareholders of the Company do not adopt the Merger at the
Shareholder's Meeting, (ix) by either TA or the Company if the Opinion is
withdrawn after and as a result of Alternative Transaction or any bring-down
opinion requested by the Company is not delivered, (x) by TA, in the event that
its environmental due diligence discloses obligations, problems or other
liabilities reasonably estimated by TA to cost in the aggregate more than
$2,000,000 or (xi) by the Company or TA if the Merger shall not have been
consummated on or before August 31, 1999.
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TERMINATION FEES; EXPENSES
The Merger Agreement provides that, as noted below, the Company will pay TA
a termination fee of $1,200,000 (the "Termination Fee") immediately upon the
termination of the Merger Agreement under certain circumstances. The Termination
Fee is payable upon termination by the Company as a result of: (i) the Company's
execution of a binding agreement with a third party with respect to an
Alternative Transaction, (ii) a withdrawal by McDonald Investments of the
Opinion or failure to deliver a requested bring-down opinion or, (iii) after the
existence of an Alternative Transaction, the shareholders of the Company fail to
adopt the Merger Agreement; or if the Merger Agreement is terminated by TA as a
result of: (a) the Company's execution of an agreement with a third party with
respect to an Alternative Transaction, (b) the Company's Board of Directors'
failure to recommend or withdrawal, modification or change in its recommendation
to adopt the Merger Agreement, (c) the withdrawal by McDonald Investments of its
Opinion or a failure to deliver any requested bring-down opinion or, (d) after
the existence of an Alternative Transaction, the failure of the shareholders of
the Company to adopt the Merger Agreement. In addition, the Merger Agreement
provides that, if the Merger Agreement is terminated as a result of a material
breach by the Company of, or failure by the Company to perform in any material
respect, any representation, warranty, covenant or other agreement contained in
the Merger Agreement, or a material adverse change in the Company other than a
change that results solely from economic or industry conditions that are outside
the Company's control and that affects all multi-unit truckstop or travel center
operations (an "Industry-wide Material Adverse Change"), and the Company
thereafter and within twelve months following the termination, consummates a
transaction that would otherwise constitute an Alternative Transaction at a
price equal to or higher than the Merger Consideration, then the Company must
pay TA a deferred termination fee equal to $1,200,000 (the "Deferred Termination
Fee").
In addition to the payment of termination fees in the circumstances
described above, the Merger Agreement provides that, if the agreement is
terminated in circumstances requiring the payment of a Termination Fee, the
Company will also promptly reimburse TA and TA Sub in cash for all out-of-pocket
expenses, disbursements and fees actually paid or payable by or on behalf of
those parties incurred in connection with the Merger Agreement up to a maximum
of $1,000,000.
If the Merger Agreement is terminated by TA as a result of a breach by the
Company or as a result of a non-Industry-wide Material Adverse Change in the
Company, then the Company will promptly reimburse TA and TA Sub for such
expenses up to a maximum of $800,000. If the Merger Agreement is terminated by
TA in the event that TA's environmental due diligence discloses
environmental-related liabilities that are reasonably estimated by TA to cost
more than $2,000,000 (including the cost of investigation, consulting,
remediation and compliance), and net of any value reasonably expected by TA to
be recovered from existing insurance or indemnification, then the Company will
reimburse TA and TA Sub for such expenses up to a maximum of $200,000. In
connection with any termination of the Merger Agreement which results in a
reimbursement of TA's expenses (other than a termination as a result of
environmental liabilities exceeding $2,000,000), TA has agreed to transfer its
ownership interest to the Company in all title reports, survey work, appraisals
and environmental audits related to the Company's assets which TA acquired or
developed prior to the date of termination. If the Merger Agreement is
terminated by the Company as a result of a breach by TA or TA Sub, then TA has
agreed to reimburse the Company for its actual out-of-pocket expenses up to a
maximum of $500,000. If the Merger Agreement is terminated pursuant to any of
the circumstances described in this paragraph and thereafter TA is entitled to a
Deferred Termination Fee, the Company must promptly reimburse TA the difference
between $1,000,000 and the amount of any expenses previously reimbursed by the
Company.
The Merger Agreement provides that, except for payment of any termination
fees or specified reimbursement of expenses, each party thereto will separately
bear its own expenses incurred in the negotiation and performance of the Merger
Agreement.
CERTAIN REGULATORY MATTERS
The HSR Act requires both parties to file pre-merger notifications with the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the Federal Trade Commission ("FTC") and to observe the required waiting period
before consummating the acquisition. The Company and TA each filed a pre-merger
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notification with the FTC and the Antitrust Division and the pre-merger
notification waiting period will terminate on April 24, 1999. Termination of the
waiting period means that the parties will be free to complete the Merger
consistent with the HSR Act.
The Company and TA do not believe that any additional governmental filings
in the United States, other than the certificate of merger to be filed with the
New York Secretary of State, and other than filings in connection with the
dissolution of TA Sub, are required with respect to the Merger. The FTC, the
Antitrust Division or certain private parties could take such actions under the
HSR Act as they deem necessary or desirable. Consummation of the Merger is
conditioned upon, among other things, the absence of any preliminary or
permanent injunction or other order issued by any court or other judicial or
administrative body of competent jurisdiction which prohibits or prevents
consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary is a general discussion of certain anticipated United
States federal income tax consequences of the Merger to shareholders. The
summary assumes that shareholders are individuals or corporations who do not
have a special tax status (e.g., dealers in securities, nonresident aliens,
individual retirement accounts, or tax-exempt organizations). The discussion is
based upon existing federal tax law and does not address any state, local or
foreign tax consequences of the Merger. The discussion also does not describe
certain special tax rules that may apply to shareholders who acquired their
stock pursuant to incentive stock options or other stock compensation
arrangements.
The exchange by shareholders of their shares of Common Stock for the Merger
Consideration pursuant to the Merger will be a taxable transaction for federal
income tax purposes. A shareholder whose shares are exchanged generally will
recognize gain or loss equal to the difference between the amount of cash
received pursuant to the Merger and his adjusted tax basis in the shares
exchanged therefor. Such gain or loss will constitute capital gain or loss if
the shares exchanged in the Merger were held as capital assets. Capital gain or
loss will constitute long-term capital gain or loss if the shareholder's holding
period with respect to the shares is greater than one year and otherwise will
constitute short-term capital gain or loss.
Under current federal income tax law, the highest marginal tax rate
applicable to ordinary income of individuals is 39.6%, and the highest rate
applicable to corporations is 35%. Net capital gains (the excess of net
long-term capital gains over net short-term capital losses) generally are taxed
at rates up to 20% for individuals and at the regular corporate rates for
corporations. The excess of net short-term capital gains (the excess of short-
term capital gains over short-term capital losses) over net long-term capital
losses (the excess of long-term capital losses over long-term capital gains)
generally is taxed at the same rates as ordinary income for both individuals and
corporations, as applicable. Corporations may use capital losses only against
capital gains. Individuals may use capital losses only against capital gains and
up to $3,000 of ordinary income (married individuals filing separate returns may
each only apply capital losses against up to $1,500 of ordinary income).
Compensatory stock option holders whose options are canceled in connection with
the Merger in exchange for a cash payment will recognize ordinary compensation
income in the amount of such cash payment. The Company will be required to
withhold applicable federal and state taxes from such payment.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE MERGER, INCLUDING
POTENTIAL AND RECENT CHANGES OF LAW. THE FOREGOING SUMMARY IS INTENDED AS A
GENERAL DESCRIPTION ONLY OF CERTAIN MATERIAL TAX CONSEQUENCES AND DOES NOT
CONSIDER THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for under the "purchase" method whereby the
purchase price paid for Common Stock will be allocated based upon the fair value
of the assets acquired and the liabilities assumed pursuant to the Merger as of
the Effective Date.
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<PAGE> 27
BUSINESS
GENERAL
The Company operates sixteen 24-hour per day travel plazas in New York, New
Jersey, North Carolina, New Hampshire, Indiana, Maryland and Pennsylvania. The
Company also operates a single fuel terminal in Pennsylvania.
The Company has two wholly owned subsidiaries, which were organized in 1998
to facilitate the franchising of the Travel Port operations. Travel Port
Systems, Inc. is a Delaware company which owns the Travel Port trade name.
Travel Port Franchising, Inc., also a Delaware company, was formed to enter into
and administer franchising agreements with third-party franchisees. To date, no
franchises have been offered or sold.
The travel plazas sell, both to the trucking industry and to others,
petroleum products (such as diesel fuel, gasoline and lubricants). The travel
plazas generally include a truck service and repair shop, a tire and parts
center, a truck wash, scales for weighing trucks, parking facilities, motel
rooms, a family-style restaurant, a travel store, shower and laundry facilities,
game rooms, telephone facilities, money transfer facilities, a convenience store
at the gasoline pump area, and billing and accounting services for truck fleet
operators. The Company hopes to continue to attract both the trucking industry
and the general traveling public by maintaining clean, efficient travel plazas.
The Company derives certain benefits from being the operator of multiple
travel plazas. As it buys petroleum products, food and other merchandise for
several facilities, the Company is often able to acquire such products at
discounted prices on a volume basis.
In addition to favorable purchasing, the Company's multi-unit structure
provides marketing opportunities that might not otherwise be available. In
addition to normal drive-in traffic, truck stop operators, including the
Company, often enter into arrangements with the operators of truck fleets in
which the fleet operator sends all of its drivers who use an applicable route to
a certain travel plaza, primarily to take advantage of a centralized billing and
accounting system such as that offered by the Company. By offering several
facilities, on different routes, the Company is in a better position to attract
and retain such arrangements. Also, the Company maintains a sales force that
seeks out and attempts to enter into such arrangements with fleet operators
whose home offices may not be near some of the Company's facilities.
The products and merchandise purchased and sold by the Company are not
unique and generally can be obtained readily from a variety of sources at
competitive prices. There are many sources of petroleum products, tires and
truck parts, restaurant food, supplies and merchandise for the Company's travel
and convenience stores. Most of the products purchased by the Company are
acquired on an as needed basis, through purchase orders. The Company currently
buys petroleum products from major oil companies and from Griffith Oil Co., Inc.
The Company buys its restaurant food primarily from a single unrelated food
distributor, and its other products and merchandise from various suppliers.
Except for the Company's fuel purchase agreements, including the one with
Griffith Oil, which expires December 31, 2005, all of these arrangements can be
terminated at will.
The Company has no customer accounting for more than four percent (4%) of
its sales. Therefore, management believes that the loss of any single customer
would not have a materially adverse effect on the Company's business.
COMPANY DEVELOPMENTS
On April 30, 1994, the Company acquired certain assets of Exit 3 Truck
Services, Inc. in Greenland, New Hampshire. The acquisition consisted of the
purchase of inventory and the leasehold interest in the real property on which
the truck stop is located. The Company has since signed a new 20 year lease on
the real property with two five year extensions. The Company has purchase
options throughout the term of the lease.
On June 30, 1994, the Company entered into a $2,500,000 term loan agreement
with Fleet Bank of New York covering the acquisition and certain improvements to
the facility in Greenland, New Hampshire. Principal
25
<PAGE> 28
payments are $20,833.33 per month plus interest at the fixed rate of 9.65%. The
loan is amortized over ten years with a balloon payment due on June 29, 1999.
On September 29, 1994, the Company entered into an eight year term loan
with Fleet Bank of New York in the amount of $10,500,000. Proceeds from this
loan were used for payment of a term loan due in 1996 at prime plus 1.25%,
payment of $1.5 million due on its line of credit and capital expenditures. The
loan has a fixed rate of 10.12% with interest only for its initial six months.
From April 1, 1995 until the loan matures, a monthly payment of principal and
interest in the amount of $166,957.84 is payable with all remaining principal
and interest due September 29, 2002.
The Company, through a private placement, issued $4,650,000 of Convertible
Senior Subordinated Debentures due January 15, 2005, together with warrants to
purchase additional shares of Common Stock. The securities were sold under
Regulation D of the Securities Act of 1933 (the "Act") and in offshore
transactions under Regulation S of the Act. The debentures carry an annual
interest rate of 8.5%, payable quarterly, and are convertible into Common Stock
at a price equal to $3.00 per share at the option of the holder at any time. The
debentures are callable at the discretion of the Company at a redemption price
equal to 108% as of January 15, 1999, and gradually decreasing to 100% at
maturity on January 15, 2005. The warrants, which are exercisable at any time,
initially entitled warrant holders to purchase up to a total of 15,500 shares of
Common Stock at a price of $3.60 per share. The placement agent was issued
warrants for 77,500 shares of Common Stock at a price of $3.60 per share in
conjunction with this transaction. As a result of the stock dividend issued
April 29, 1997, the conversion price for the debentures was adjusted to $2.83
and the warrant price was adjusted to $3.40. The number of warrants was
increased to 98,580. As a result of the stock dividend issued April 23, 1998,
the debenture conversion price was adjusted to $2.62 and the warrant price was
adjusted to $3.15. The number of warrants was increased to 106,467.
During fiscal 1998, $500,000 of the 8.5% debentures were converted into
178,092 shares of Common Stock, after adjusting for the 1998 and 1997 stock
dividends of 8% and 6%, respectively. At March 1, 1999, $3,254,000 of the 8.5%
convertible senior subordinated debentures and 100,743 of the warrants remain
outstanding.
On March 1, 1996, the Company took over the operation of the Baltimore Port
Truck Plaza. The Company signed a seven year lease on the property.
On October 4, 1996, the Company entered into a permanent financing
arrangement for its Harborcreek, Pennsylvania facility (which was opened in June
1996) with Fleet Bank of New York in accordance with a Restated and Amended
Credit Agreement dated December 21, 1995 in the amount of $6,000,000. Interest
is fixed at 9.44% for ten years with level principal payments based upon a 15
year amortization. A balloon payment is due on September 30, 2006.
On November 6, 1996, the Company entered into an agreement with PNC Bank
that (a) refinanced a mortgage loan due 2001 covering two travel plazas in
Pennsylvania, as well as a term loan due in 1997 and (b) provided an additional
$5,000,000 for 1996/97 capital expenditures. Interest is fixed at 8.63% for five
years with level principal payments based upon a 15 year amortization. A balloon
payment is due on April 10, 2002.
On December 4, 1997, the Company completed the sale of (1) $2,000,000
principal amount of 7.81% Convertible Subordinated Debentures due December 4,
2007, convertible at $4.30 per share and (2) Warrants to purchase 40,000 shares
of Common Stock, par value $.01 per share, of the Company at a price of $5.16
per share to Cephas Capital Partners, L.P. A value of $100,000 has been assigned
to the warrants in accordance with Accounting Principles Board Opinion No. 14.
The values of the subordinated debentures and additional paid in capital were
adjusted accordingly. As a result of the stock dividend issued April 23, 1998,
the bond conversion price was adjusted to $3.98 and the warrant price was
adjusted to $4.78. The number of warrants was increased to 43,200.
The Company renewed the agreement with Fleet Bank of New York that (a)
provides a line of credit of $3,750,000 until September 28, 1999 and (b)
provides an additional $4,500,000 for a capital line of credit. The regular line
of credit is limited to the lesser of $3,750,000 or the sum of 80% of the
Company's accounts receivable under 90 days old, plus 45% of the Company's
inventory. As of April 30, 1998, the Company has utilized $200,000 of its
available line of credit as collateral for various letters of credit. The
capital line of credit
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<PAGE> 29
calls for interest only at prime plus 1/4% until September 28, 1999. At that
time the line can be repaid or amortized over 42 months with interest at an
increment over prime or LIBOR based upon funded debt to EBITDA. No advances have
been made against the capital line of credit.
PRODUCTS AND SERVICES
The Company provides the following products and services at its travel
plazas and mini-travel plazas.
Petroleum Products. The principal products sold by the Company at its
travel plaza locations are petroleum derivatives, primarily diesel fuel,
gasoline and lubricants. Each of the Company's travel plazas has diesel pump
islands accessible to all sizes of trucks and tractor-trailers, as well as
gasoline pump islands that are used primarily for automobiles at most locations.
In addition, a wide range of motor oils and other lubricants are available at
all locations.
An agreement between the Company and Griffith Oil, that expires December
31, 2005 requires the Company to purchase all of its petroleum products for
three of its facilities from Griffith Oil. The purchases for the three sites for
the most recent fiscal year were approximately 12.4% of all petroleum purchases.
In addition, the Company purchased spot market pipeline tenders (bulk purchases)
for its Berwick, Pennsylvania (Beach Haven) terminal, from Griffith Oil. These
pipeline tenders accounted for approximately 5.1% of the petroleum products
purchased by the Company during the fiscal year ended April 30, 1998. Management
believes that the terms of the purchase agreement and the spot market purchases
were fair and competitive when compared with contemporaneous purchasing
opportunities for similar products in like quantities from other vendors.
Parts and Service. Services and repairs are provided for trucks only. The
Company provides services on an as needed basis, in the case of breakdowns and
unforeseen problems, and for regularly scheduled periodic maintenance for truck
fleets and other customers. In addition to providing services and repairs, the
Company also stocks tires and commonly needed parts at most of its locations.
Repair facilities are not available at Belmont, New York, Greenland, New
Hampshire, Baltimore, Maryland or Lake Station, Indiana. Truck washes, truck
scales and paved parking areas large enough to accommodate a number of
over-sized vehicles are also available at some of the Company's facilities.
Restaurants. Each facility, with the exception of Mahwah, New Jersey,
includes a 24-hour, family style restaurant where customers are served a variety
of "home-cooked" meals. The Company operates most of its restaurants under the
name "Buckhorn Family Restaurant." The Company purchases its food products in
bulk from unaffiliated sources and meals are prepared and cooked in on-site
kitchens.
Motels. The Company's motel accommodations at travel plazas, which are
available to truck drivers and the general public, generally contain double
beds, basic furniture, a color television and a full bathroom. Rooms are
available at nightly rates ranging from $25-$49 per night. Public laundry
facilities are also available. Maybrook and Dansville, New York operate under a
franchise from Days Inn. Greencastle and Harborcreek, Pennsylvania and
Baltimore, Maryland operate under a franchise from the Rodeway Inn Division of
Choice Hotels International.
Shopping. The Company operates both travel stores and convenience stores.
Travel stores carry a wide range of products often purchased by truck drivers
including health and beauty aids, snacks, tobacco products, western style
clothing and footwear, electronic products (CB radios, radar detectors, small
televisions, radios, stereos), gift items and many other items. Convenience
stores, generally located near the gasoline pump islands and used more by the
general traveling public, offer bread, milk, beverages, snacks, food items and
other products usually found in such stores. The Company has an ATM machine at
all of its locations to provide cash services for its customers.
Billing and Accounting. The Company offers its own credit billing service
to truck fleet operators, permitting a driver to charge purchases of products
and services. This service provides the fleet operator with daily records of its
drivers' purchases through direct electronic transmission. The Company's
electronic billing system can accommodate customers who wish to pay on a cash
basis to avoid finance charges or the higher cost of credit billing.
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<PAGE> 30
PROPERTIES
The Company's principal office is located in approximately 7,567 square
feet of leased office space at 3495 Winton Place, Building C, Rochester, New
York 14623. The lease runs through December 1999 at an average annual rent of
$60,168 plus common area charges with an option for a three year extension until
December 2002 and an option for a five year extension until December 2007.
The Company attempts to locate its travel plazas at sites with a high
volume of truck and other traffic, as well as easy access for such highway
traffic. Sites are generally located just off interstate highways or on other
major highways. When and where possible, the Company seeks locations near
intersections of such major routes, so that facilities will be easily accessible
from more than one such route.
A description of the travel plazas, mini-travel plazas and other facilities
operated by the Company follows.
TRAVEL PLAZAS AND MINI-TRAVEL PLAZAS
Dansville, New York. This eight acre site is located at the Dansville
interchange of Interstate Route 390, a major north-south highway in western New
York. The site, which is approximately forty miles south of the New York State
Thruway and thirty miles north of US Route 17, is leased from the Livingston
County Industrial Development Agency. The lease expires in March 2000, at which
time the Company has both the right and the intention to buy all of the land and
improvements for $1.00. The travel plaza contains ten diesel pumps with card
readers, four gasoline fueling positions with pay at the pump capability, a
two-bay service area, a truck scale, six acres of paved parking, showers, a game
room, a one hundred thirty seat restaurant, a twenty room Days Inn motel, a
travel store and a small convenience store.
Maybrook, New York. This eighteen acre site is located at the Maybrook
interchange of Interstate Route 84, approximately ten miles east of US Route 17
and eight miles west of the New York State Thruway. It is sub-leased from a
corporation owned by two people, one of whom is the Chairman and Chief Executive
Officer of the Company, under a lease that expires in March 2004 with three five
year renewal options available. The travel plaza contains eleven diesel pumps,
four gasoline fueling positions, a three-bay service area, a truck scale,
showers, game room, eight acres of paved parking, a one hundred thirty-eight
seat restaurant, a Pizza Hut Express Quick Service Restaurant ("QSR"), a
thirty-six room Days Inn motel and a travel store.
Binghamton, New York. The Company owns a ten acre site located in suburban
Binghamton at the intersection of US Route 17 and Interstate Route 81. The
travel plaza contains eight diesel pumps, a two-bay service area, a truck scale,
six acres of paved parking, a seventy-seven seat restaurant, snack bar, showers,
a travel store and a convenience store with two gasoline pumps.
Mahwah, New Jersey. This six acre site in northern New Jersey is located on
US Route 17, one interchange south of the New York State Thruway and
approximately ten miles north of Interstate Route 80. It is leased from an
unrelated landlord for a term expiring February 2002. The travel plaza contains
five diesel fueling positions, a one-bay service area, approximately four and
one-half acres of paved parking, truck scales, twelve motel rooms, a travel
store and showers.
Fultonville, New York. The Company owns a twenty acre site at Exit 28 of
the New York State Thruway. The travel plaza contains eleven diesel pumps with
card readers, a two-bay service area, a truck scale, showers, seven acres of
paved parking, a one hundred twenty-seven seat restaurant, a fourteen room
motel, a travel store and a convenience store with four gasoline pumps.
Candler, North Carolina. The Company owns an eighteen acre site located at
Exit 37 of Interstate Route 40, less than ten miles west of Interstate Route 26
and Asheville, North Carolina. The travel plaza contains ten diesel pumps, four
gasoline pumps, a two-bay service area, a truck scale, showers, eight acres of
paved parking, a one hundred forty seat restaurant and a travel store.
Bloomsburg, Pennsylvania. The Company owns a sixteen acre site located at
Exit 34 on Interstate Route 80. The travel plaza contains twelve diesel pumps
with card readers, four pay at the pump gasoline pumps, a five-bay service area,
truck scales, game room, trucker lounge, snack bar, showers, laundromat, travel
store, a two hundred thirteen seat restaurant, a Subway QSR and convenience
store and lighted paved parking.
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Greenland, New Hampshire. This seven acre site is located at Exit 3 on
Interstate Route 95. This facility is leased from an unrelated landlord for a
term expiring April 2014. The travel plaza contains eight diesel pumps with card
readers, four gasoline pumps, a truck scale, showers, game room, travel and
convenience store, a one hundred fifty-eight seat restaurant, a Pizza Hut
Express QSR and lighted paved parking.
Milesburg, Pennsylvania. The Company owns an eleven and one half acre site
located at Exit 23 on Interstate Route 80. The travel plaza contains eight
diesel fueling lanes, four gasoline pumps, a three-bay service area, showers,
game room, travel store, a one hundred forty seat restaurant and lighted paved
parking.
Paulsboro, New Jersey. The Company owns a thirty-two acre site located at
the Mt. Royal Exit on Interstate Route 295. The travel plaza contains twelve
diesel pumps with card readers, eight gasoline pumps, a truck scale, a thirteen
room motel, laundromat, showers, a three-bay service area, game room, travel
store, a one hundred forty-two seat restaurant plus a banquet room and lighted
paved parking.
Porter, Indiana. The Company owns a thirty-six and one half acre site
located at 1600 US Highway 20 near Exit 22b on Interstate Route 94. This travel
plaza has a twenty-nine thousand square foot main building that contains a
travel store, a Subway QSR, trucker lounge, showers, game room, broker's offices
and a one hundred sixty-two seat restaurant plus a banquet room. Additionally
there is a two-bay service area, truck wash, twelve diesel pumps with card
readers, eight gasoline fueling lanes with pay at the pump capability and
approximately nine acres of lighted paved parking.
Lake Station, Indiana. This twenty-four acre site is located on US Highway
51, just north of Interstate Routes 80 and 90. This facility is leased from an
unrelated landlord until January 2009 with one ten year renewal option
available. This travel plaza has a thirty thousand square foot main building
that contains a travel store, convenience store, barber shop, a Subway QSR,
truckers' lounge, game room, laundromat, showers, brokers' offices and a one
hundred sixty-six seat restaurant. There are seventeen diesel fuel islands with
card readers covered by a canopy, truck wash, truck scales and paved parking for
approximately two hundred and fifty trucks. In addition there are four gasoline
pumps with pay at the pump capability.
Greencastle, Pennsylvania. The Company owns a twenty-seven acre site
located at Exit 3 on Interstate Route 81, a few miles north of the Maryland and
Pennsylvania state border. The travel plaza consists of four buildings, a
convenience store with gasoline fuel islands, a thirty-six room motel, a fuel
building with a four-bay service area, truck scales, trucker's store, snack bar,
twelve diesel pumps with card readers and a main building with a travel store,
showers, a telephone room, a game room, trucker lounge and a one hundred
forty-nine seat restaurant.
Baltimore, Maryland. The Company leases a twenty-one acre travel plaza and
(across the street) a two and one fifth acre gasoline/convenience store at Exit
57 on Interstate 95. The total facility consists of three buildings. The
gasoline and convenience store has 16 pumps for both gasoline and diesel. The
fuel building has a travel and convenience store and a Subway QSR. The main
building contains a super travel store, showers, a telephone room, a game room,
a Taco Bell Express QSR, a sixty room motel and a hundred thirty-eight seat
restaurant. There are 16 diesel pumps with card readers, truck scales and
secured parking for 260 trucks.
Harborcreek, Pennsylvania. The Company owns a seventy-two acre site of
which twenty-four acres are used for the travel plaza at Exit 10 on Interstate
90. The travel plaza consists of two buildings, a thirty-six room motel and a
main building. The main building has a travel and convenience store, a two
hundred twelve seat restaurant, a Pizza Hut Express QSR, showers, a telephone
room, a game room, a trucker lounge and a three bay shop. There are ten diesel
pumps with satellites and card readers, a truck wash and truck scales. There are
four double sided gasoline pumps with pay at the pump capability. There is paved
parking for two hundred fifty trucks in addition to car and RV spaces.
Belmont, New York. The Company owns a nine acre site at the Belmont
interchange on US Route 17, in southwestern New York state. The mini-travel
plaza contains five diesel fueling lanes, four gasoline fueling positions, a
travel store, a convenience store, a fifty-two seat restaurant and three acres
of paved parking.
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<PAGE> 32
OTHER FACILITIES
Berwick, Pennsylvania (Beach Haven). The Company owns a five acre site that
is a pipeline terminal consisting of five above ground storage tanks with a
total capacity of 2,411,585 gallons. It is used to store diesel fuel and home
heating oil. An office building/warehouse is also located at the site.
COMPETITION
The truck stop business, in general, and the separate aspects that make up
such business, are all highly competitive. There are many chain and single
operator truck stops throughout the Company's marketing area. The Company
attempts to satisfy its customers' needs by providing multiple services at one
location.
In addition to other truck stops, the Company faces competition from major
and independent oil companies and independent service station operators;
national and independent operators of motels and motel chains; national and
independent operators of restaurants, diners and other eating establishments;
and super markets, department stores, other convenience stores, drug stores and
other retail outlets.
Many of the Company's competitors, such as the major oil companies and
national and regional motel, restaurant and retail chains, are larger, better
established and have greater financial and other resources than the Company.
While the Company intends to attempt to offset these advantages by continuing to
offer all of its products and services in one, well chosen, highly visible and
easily accessible location, there can be no assurance that this marketing
strategy will be successful and profitable.
REGULATION
The Company's fueling operations are subject to federal, state and local
laws and regulations concerning environmental matters. These laws and
regulations affect the storing, dispensing and discharge of petroleum and other
wastes and affect the Company both in the securing of permits for its fueling
operations and in the ongoing conduct of such operations. Facilities that engage
primarily in dispensing petroleum products have in the last ten years been the
subject of close scrutiny by regulators. Although the Company believes that it
maintains operating procedures satisfactory to comply with such regulations and
scrutiny, maintains environmental insurance on most of its facilities, and to
date has not had any material environmental claim or expense, there can be no
assurance that significant cleanup or compliance costs may not be incurred by
the Company and may have a material adverse affect on the Company's earnings.
In addition, the Company's motel and restaurant operations are subject to
federal, state and local regulations concerning health standards, sanitation,
fire and general overall safety. In addition, truck stops must comply with the
requirements of local governmental bodies concerning zoning, land use and, as
discussed above, environmental factors. Difficulties in obtaining the required
licensing or approvals could result in delays or cancellations in the opening of
proposed new motor plazas. There have been no material problems with compliance
with regulations governing the Company's restaurant or motel operations.
EMPLOYEES
As of January 31, 1999, the Company had a total of 1,412 employees, 1,124
full-time and 288 part-time. Of the full-time employees, 31 are involved in the
corporate office and administrative activities, 111 in travel plaza management,
4 in sales and marketing, 1 in design and construction management and the
balance in general operating duties, where all of the part-time employees are
involved.
The Company has never had a work stoppage and none of its employees are
represented by a labor organization. The Company believes that it provides
working conditions, wages and benefits that are competitive with other providers
of similar products and services, and considers its employee relations to be
excellent.
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LEGAL PROCEEDINGS
The Company is not presently a party to any litigation (i) that is not
covered by insurance or (ii) which singly or in the aggregate would have a
material adverse effect on the Company's financial condition and results of
operations.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is publicly traded on the Nasdaq National Market under the
symbol "TPOA." At March 1, 1999, there were approximately 1,900 record holders
of Common Stock. The following table sets forth, for the calendar periods
indicated, the high and low sale prices per share for the Common Stock, as
reported by Nasdaq.
<TABLE>
<CAPTION>
CALENDAR
YEAR QUARTER HIGH LOW
-------- ------- ----- -----
<S> <C> <C> <C>
1997 First....................... $3.06 $2.25
Second...................... 3.00 2.37
Third....................... 4.50 2.62
Fourth...................... 4.37 3.25
1998 First....................... 4.12 3.25
Second...................... 4.25 2.87
Third....................... 3.31 2.69
Fourth...................... 3.19 2.44
1999 First....................... 4.12 2.75
Second...................... 3.94 3.69
(through April 15, 1999)
</TABLE>
On February 25, 1999, the date preceding the public announcement by the
Company of the execution of the Merger Agreement, the high and low sale prices
for the Common Stock as reported by Nasdaq were $3.44 and $3.25 per share,
respectively. The high and low sale prices for the Common Stock as reported by
Nasdaq on April 15, 1999, the last full trading day prior to the printing of
this Proxy Statement, were both $3.75 per share. Shareholders are urged to
obtain current market quotations for the Common Stock.
The Company has never paid any cash dividends and does not intend to do so
in the near future. The Merger Agreement prevents the Company from declaring or
paying any dividend or any other form of cash, stock or property distribution
without TA's consent while the Merger Agreement remains in effect.
NO DISSENTERS RIGHTS
Holders of the Common Stock do not have a right to dissent under New York
law in connection with the Merger. Section 910(a)(1)(C) of the New York Business
Corporation Law provides, in relevant part, that the right to dissent and
receive payment of the fair value of shares shall not be available to a
shareholder for shares which, at the record date fixed for the special meeting,
were designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., such as the
Company's shares of Common Stock.
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<PAGE> 34
SELECTED FINANCIAL DATA OF THE COMPANY
The following data, insofar as it relates to each of the fiscal years 1994
through 1998, has been derived from annual financial statements of the Company.
Consolidated balance sheets at April 30, 1997 and 1998 and the related
consolidated statements of income and of cash flow, for the three years ended
April 30, 1998 and notes thereto appear elsewhere in this Proxy Statement and
have been audited by independent accountants. The selected financial data for
the nine months ended January 31, 1999 and January 31, 1998 have been derived
from the Company's unaudited financial statements. In the opinion of management,
the unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position and the results of operation for these periods. Operating results for
the nine month period ended January 31, 1999 are not necessarily indicative of
the results that may be expected for the full year or any other period. The
selected financial data set forth below should be read in conjunction with the
Company's financial statements and the related notes thereto included elsewhere
in this Proxy Statement and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31 YEARS ENDED APRIL 30
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales.......................... $154,345,696 $161,767,434 $211,508,861 $207,103,805 $165,164,391
Gross profit....................... $ 38,005,700 $ 37,365,556 $ 48,734,292 $ 46,436,813 $ 39,142,697
Income before cumulative effect of
change in an accounting
principle........................ $ 1,834,709 $ 1,970,092 $ 2,337,680 $ 1,700,205 $ 1,690,500
Cumulative effect of change in an
accounting change................ $ 0 $ 0 $ 0 $ 0 $ 0
Net income......................... $ 1,834,709 $ 1,970,092 $ 2,337,680 $ 1,700,205 $ 1,690,500
EARNINGS PER SHARE:
Basic income per share:
Income before cumulative effect of
change in an accounting
principle........................ $ 0.28 $ 0.32 $ 0.38 $ 0.28 $ 0.28
Cumulative effect of change in an
accounting change................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income......................... $ 0.28 $ 0.32 $ 0.38 $ 0.28 $ 0.28
Basic shares outstanding........... 6,540,416 6,085,721 6,136,062 6,034,054 6,008,787
Diluted income per share:
Income before cumulative effect of
change in an accounting
principle........................ $ 0.24 $ 0.26 $ 0.30 $ 0.24 $ 0.24
Cumulative effect of change in an
accounting change................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income......................... $ 0.24 $ 0.26 $ 0.30 $ 0.24 $ 0.24
Diluted shares outstanding......... 8,616,360 8,293,105 8,563,866 8,002,261 7,975,631
BALANCE SHEET DATA:
Total assets....................... $ 65,646,875 $ 64,812,728 $ 64,812,728 $ 62,435,994 $ 55,278,604
Long term liabilities.............. $ 27,438,195 $ 31,038,315 $ 31,023,936 $ 32,082,537 $ 27,828,457
<CAPTION>
YEARS ENDED APRIL 30
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
STATEMENT OF OPERATIONS:
Net sales.......................... $153,267,079 $137,575,675
Gross profit....................... $ 38,237,699 $ 34,610,393
Income before cumulative effect of
change in an accounting
principle........................ $ 1,890,032 $ 1,457,613
Cumulative effect of change in an
accounting change................ $ 0 $ (99,735)
Net income......................... $ 1,890,032 $ 1,357,878
EARNINGS PER SHARE:
Basic income per share:
Income before cumulative effect of
change in an accounting
principle........................ $ 0.32 $ 0.25
Cumulative effect of change in an
accounting change................ $ 0.00 ($ 0.02)
Net income......................... $ 0.32 $ 0.23
Basic shares outstanding........... 5,986,122 5,964,551
Diluted income per share:
Income before cumulative effect of
change in an accounting
principle........................ $ 0.26 $ 0.23
Cumulative effect of change in an
accounting change................ $ 0.00 $ (0.02)
Net income......................... $ 0.26 $ 0.21
Diluted shares outstanding......... 6,601,217 6,039,624
BALANCE SHEET DATA:
Total assets....................... $ 51,370,810 $ 41,847,897
Long term liabilities.............. $ 25,726,157 $ 18,268,139
</TABLE>
32
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 31, 1999 AND 1998
Sales from operations were $154,345,696 for the first nine months of fiscal
1999, down $7,421,738, or 4.6% from the first nine months of last year. Retail
selling prices for diesel fuel declined $.15 per gallon from last year. If
pricing had remained the same, sales would have been approximately $13,635,000
higher. Sales of diesel gallons increased 8.9% for the first nine months. Retail
selling prices on gasoline also declined, reducing sales year-to-year by
approximately $2,070,000 or 16.4% on a decline of 1.5% on gallons sold.
Restaurant sales were up 5.0%, travel stores sales increased 5.7%, shop sales
increased 5.0% and car station and fast food sales were up 7.9%.
Gross profit for the first nine months was $38,005,700, an increase of
$640,144 or 1.7% from last year. Diesel fuel gross profit declined as a result
of lower retail margins from competitive pressure and a loss of $768,000 from
inventory hedging activity during the first six months of this year, resulting
from lower fuel costs and the future position the Company held. Gasoline gross
profit declined slightly as a result of decreased gallons. All other categories
increased as a result of the sales increases.
Operating expenses were $29,074,122 for the first nine months, an increase
of $782,032 or 2.8%. Salary and wages for the work force increased $540,000 or
4.3%. Depreciation expense increased $240,000 as a result of increased capital
expenditures.
General and administrative expenses of $3,964,541 increased $254,345 or
6.9%. Increases in salary and wages accounted for the majority of the increase.
Travel and entertainment expenses and professional fees accounted for the
remainder of the increase.
Interest expense of $2,154,668 reflects a decrease of $225,310 or 9.5% from
last year as a result of lower interest rates on variable rate debt and on
average lower levels of debt. Other income of $110,740, decreased $270,060, as a
result of a land sale in the third quarter last year, as well as lower interest
income and a one-time settlement last year.
YEAR ENDED APRIL 30, 1998 COMPARED TO YEAR ENDED APRIL 30, 1997
The Company had earnings of $3,960,000 before income taxes and $2,338,000
in net income on net sales of $211,509,000 in fiscal 1998 compared to earnings
of $2,903,000 before income taxes and $1,700,000 in net income on net sales of
$207,104,000 in fiscal 1997. Due to reductions in pump prices stemming from
lower fuel costs compared to the prior year, diesel fuel revenues decreased by
$14,480,000. During the fourth quarter, the Company had a loss of $472,000
reflected in diesel fuel cost of goods from inventory hedging activity resulting
from lower fuel costs and the future position held by the Company. Actual diesel
gallons increased 10.0% for the year. Revenues for gasoline declined from the
reduced pump prices also, but again, gallons increased 5.3%. Non-fuel sales
increased 6.3% for the year. There would have been a 9.1% sales increase if the
retail price of diesel fuel had remained constant with the prior year level.
Retail diesel gallons sold during 1998 were 120 million, an increase of 11
million gallons over the prior year. Sales of retail gasoline gallons were 12.7
million for 1998, an increase of 600,000 gallons from the prior year.
Gross profits increased $2,297,000 or 4.9% from the prior year. Non-fuel
gross profit increased $1,973,000 or 6.2%. Gasoline gross profit decreased
$183,000 primarily due to lower margins while diesel gross profit increased
$553,000. Retail margins per gallon of diesel fuel declined slightly when
compared to the prior year. The increase in gallons sold more than made up for
the reduced gross profit from the lower margins.
33
<PAGE> 36
Listed below is the breakdown of revenue and gross profits by major sales
classification for the fiscal years ended April 30, 1998, and April 30, 1997.
<TABLE>
<CAPTION>
PERCENT PERCENT PERCENT PERCENT
SALES OF 1998 OF 1998 OF 1997 OF 1997
CATEGORY REVENUE GROSS PROFIT REVENUE GROSS PROFIT
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Diesel Fuel........................................ 65 27 65 27
Gasoline........................................... 7 3 8 4
Restaurant......................................... 11 33 10 33
Store.............................................. 8 14 8 13
Shop............................................... 5 11 5 11
Motel.............................................. 1 4 1 3
Other.............................................. 3 8 3 9
</TABLE>
Operating expenses were $710,000 or 2.0% more than the prior year. Wages
increased $487,000 or 3.0%. Unemployment and workers' compensation insurance
declined $239,000. Equipment rental, depreciation and amortization increased
$431,000. Some of these increases are a result of the Harborcreek facility being
open the entire year versus only 46 weeks in 1997.
General and administrative expenses increased $527,000 or 11.6% as compared
to the prior year. Wages increased $185,000 as a result of additional staff,
salary increases and additional bonuses on the increased profits. Professional
fees increased $209,000 as a result of potential acquisition investigations and
new venture activity, public relations activity and the startup expenses of the
subsidiaries for franchising Travel Ports.
YEAR ENDED APRIL 30, 1997 COMPARED TO YEAR ENDED APRIL 30, 1996
The Company had earnings of $2,903,000 before income taxes and $1,700,000
in net income on net sales of $207,104,000. Net income was essentially flat on
an increase in net sales of $41,939,000 or 25.4%. Operating profits from
restaurant operations increased $483,000 or 22.3% over 1996. On a same unit
basis, restaurant operating profits increased $303,000 or 13.9%. This offset the
decline in fuel operations income, primarily resulting from the absence of a one
time gain of $412,000 in January 1996 when the Company exercised its option to
cancel a fixed price contract for diesel fuel.
Sales increased by $28,870,000 primarily from new travel plazas more than
offsetting the decrease resulting from the sale of a facility in Fairplay, South
Carolina in June 1995. On a same unit basis sales were up $13,070,000. Higher
retail selling prices of diesel fuel accounted for approximately $10,650,000 of
the overall sales increase.
Retail diesel gallons sold during 1997 were 109 million, an increase of 15
million gallons or 16% over the prior year. Same unit diesel gallons increased
1.3 million or 1%. Sales of retail gasoline gallons were 12.1 million for 1997,
an increase of 3.0 million gallons or 33% from the prior year. Same unit
gasoline sales increased 0.2 million or 2%.
Gross profits increased $7,294,000 from the prior year. Most of this
increase came from two new facilities. Non-fuel gross profit increased
$5,587,000 and gasoline gross profit increased $374,000 while diesel gross
profit increased $1,337,000. Retail diesel margins per gallon were flat when
compared to the prior year. Same unit gross profit increased $183,000 over 1996.
Fiscal 1996 included a one time gain of $412,000, as noted above.
34
<PAGE> 37
Listed below is the breakdown of revenue and gross profits by major sales
classification for the fiscal years ended April 30, 1997, and April 30, 1996.
<TABLE>
<CAPTION>
PERCENT PERCENT PERCENT PERCENT
SALES OF 1997 OF 1997 OF 1996 OF 1996
CATEGORY REVENUE GROSS PROFIT REVENUE GROSS PROFIT
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Diesel Fuel........................................ 65 27 64 29
Gasoline........................................... 8 4 7 3
Restaurant......................................... 10 33 11 32
Store.............................................. 8 13 8 13
Shop............................................... 5 11 6 12
Motel.............................................. 1 3 1 3
Other.............................................. 3 9 3 8
</TABLE>
Operating expenses were $6,254,000 or 21% more than the prior year. Same
unit expenses increased $40,000 or about 0.1%.
General and administrative expenses increased $288,000 or 7% as compared to
the prior year. Wages increased $212,000 as a result of additional staff and
salary increases. Legal and professional fees increased $102,000 as a result of
acquisition and new venture activity. Advertising decreased $69,000 from changes
in marketing programs.
Interest expense increased by $582,000 from the prior year as a result of
the increased levels of debt. Other income decreased from 1996 as a result of
lower interest income this year and the sale of two properties in 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's capital resources are derived mainly from cash provided by
operating activities. For the first nine months of fiscal 1999, operating
activities accounted for the generation of cash in the amount of $5,537,320,
compared to $5,456,023 in the prior year period. In fiscal 1998, operating
activities accounted for the generation of cash in the amount of $7,658,000
compared to $5,038,000 in fiscal 1997 and $3,208,000 in fiscal 1996.
Cash used in investing activities was $3,252,433 in the first nine months
of fiscal 1999, $5,781,000 in fiscal 1998, $7,295,000 in fiscal 1997 and
$11,532,000 in fiscal 1996. The spending in 1998 was at a reduced level from
1997 reflecting the completion of some major renovation projects. The Company
also received $1,368,000 of cash related to the Allentown mortgage that was paid
in full in 1997.
Financing activities used net cash of $2,795,624 in the first nine months
of fiscal 1999, and $930,000 in fiscal 1998 compared to net cash provided of
$3,725,000 in fiscal 1997. For fiscal 1999, principal payments on long term debt
were $2,876,425. The change in 1998 was the result of increased borrowings in
1997 and 1996 that funded the construction and renovation projects.
The overall result of the above activity was a net decrease of cash in the
amount of $510,737 in the first nine months of fiscal 1999 and a net increase of
cash in the amount of $947,000 in fiscal 1998 and $1,468,000 in fiscal 1997.
The Company's working capital, excluding current portion of long term debt,
was $2,896,000 at January 31, 1999 and $4,087,000 at April 30, 1998.
Fleet Bank of New York has renewed its commitment for the Company's
existing line of credit until September 28, 1999. The regular line of credit is
limited to the lesser of $3,750,000, or the sum of 80% of the Company's accounts
receivable under 90 days old, plus 45% of the Company's inventory. As of January
31, 1999, the Company had utilized $200,000 of its available line of credit as
collateral for various letters of credit. In addition, the Company has a
$4,500,000 line of credit available from Fleet Bank of New York for capital
expenditures. The capital line of credit calls for interest only at the prime
rate plus one-fourth of one percent until September 28, 1999. At that time, the
line can be repaid or amortized over 42 months with interest at an
35
<PAGE> 38
increment over prime or LIBOR based upon funded debt to EBITDA. No advances have
been made against the capital line of credit.
During the first quarter of fiscal 1999, the Company called $450,000 of its
8.5% Convertible Senior Subordinated Debentures due January 15, 2005. As a
result of the call the holders of $589,000 in debentures elected to convert
their debentures into common stock of the Company and holders of $11,000
principal amount of debentures elected payment in cash. Subsequent to January
31, 1999, holders of $296,000 in debentures converted their debentures into
Common Stock.
Certain loan agreements require that the Company maintain specified
minimums with regard to net worth, current maturity coverage and the incurrence
of additional indebtedness. In addition, the Company cannot declare dividends
without the consent of its primary lender. The Company believes it is in
compliance with such requirements and restrictions.
The cash requirements associated with the Company's expansion and
renovation programs will continue to be met through a combination of cash
generated from operations and bank financing.
YEAR 2000 READINESS DISCLOSURE
The Company is aware of the many areas affected by the Year 2000 computer
issue. Although management believes that the Company will not incur material
costs associated with the Year 2000 issue, there can be no assurances that all
hardware and software that the Company will use will be Year 2000 compliant.
Management cannot predict the amount of financial difficulties it may incur due
to vendors' inability to perform accounting according to their agreements with
the Company or the effects that other third parties may cause as a result of
this issue. Therefore, there can be no assurance that the failure or delay of
others to address the Year 2000 issue or that the costs involved in such process
will not have a material adverse effect on the Company's business, financial
condition and results of operation.
Based on testing results to date, which has included a review of all of the
Company's mission critical systems, they were, with one exception, deemed to be
Year 2000 compliant. The one exception relates to software associated with its
accounting system. However, new software, which the vendor represents is Year
2000 compliant, was installed during the second quarter of the current fiscal
year. Therefore, a contingency plan has not been developed with respect to those
systems. With regards to non-mission critical internal systems, the Company's
plans are to replace any systems that test as being noncompliant. Should outside
service providors not be able to provide compliant systems, the Company will
terminate those relationships and transfer to Year 2000 compliant vendors.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of the Record Date, by (i) each person known by
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock (without taking into account shares of Common Stock
that TA may be deemed to beneficially own as a result of the Voting Agreement
and the Share Exchange Agreement), (ii) each of the Company's directors and
executive officers, and (iii) all directors and executive officers of the
Company as a group. The nature of beneficial ownership shown in the table is,
unless otherwise noted, shares for which the
36
<PAGE> 39
owner has sole voting and sole investment power. Ownership information is based
upon information furnished by the respective persons listed.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY PERCENTAGE
NAME OWNED OF CLASS
---- ------------------- ----------
<S> <C> <C>
Silverstein Investments..................................... 351,238 5.3%
Limited Partnership
700 Ackerman Road
Columbus, Ohio 34201
E. Philip Saunders.......................................... 1,947,328(1) 28.7%
John M. Holahan............................................. 1,091,199(2) 15.2%
Wm. Patrick Marchbanks...................................... 30,117 *
John H. Cline............................................... 686 *
William Burslem III......................................... 57,254(3) *
William A. DeNight.......................................... 114 *
All Officers and Directors as a group (6 persons)........... 3,126,698(1)(2)(3) 42.6%
</TABLE>
- ---------------
(1) Includes: (a) 101,908 shares issuable upon conversion of convertible debt
securities; and (b) 1,145 shares issuable upon exercise of a warrant to
purchase shares of Common Stock.
(2) Includes: (a) 493,992 shares issuable upon the exercise of outstanding stock
options granted under the Company's plans; and (b) 17,175 shares issuable
upon conversion of convertible debt securities.
(3) Includes 56,682 shares issuable upon the exercise of outstanding stock
options granted under the Company's plans.
* Less than 1%.
SHAREHOLDER PROPOSALS
If the Merger is not consummated prior to the Company's 1999 Annual Meeting
of Shareholders, as disclosed in the Company's Proxy Statement for its 1998
Annual Meeting of Shareholders, any proposals of shareholders to be presented at
such meeting must be received by the Company no later than May 18, 1999 for
inclusion in the Company's Proxy Statement related to such meeting, subject to
the rules and regulations of the Securities and Exchange Commission. In
addition, the Company may use its discretion in voting proxies with respect to
shareholder proposals not included in the Proxy Statement for the 1999 Annual
Meeting of Shareholders, unless the Company receives notice of such proposals
prior to August 2, 1999.
OTHER MATTERS
Management knows of no other business to be transacted at the Special
Meeting, but, if any other matters do properly come before the Special Meeting,
the persons named as proxies or their substitute will vote or act with respect
to such other matters in accordance with the direction of a majority of the
Board of Directors of the Company.
By Order of the Board of Directors
/s/ William Burslem III
--------------------------------------
William Burslem III
Secretary
37
<PAGE> 40
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of PricewaterhouseCoopers, LLP....................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Consolidated Financial Statements.................. F-6
</TABLE>
F-1
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Travel Ports of America, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and of cash flows present fairly, in
all material respects, the financial position of Travel Ports of America, Inc.
and its subsidiaries at April 30, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
April 30, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Rochester, New York
June 19, 1998, except as to the information presented in note 16, for which the
date is March 29, 1999
F-2
<PAGE> 42
TRAVEL PORTS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
----------- --------------------------
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including interest-bearing
accounts of $3,162,400 and $2,727,500 in 1998 and
1997, respectively................................... $ 3,571,466 $ 4,082,203 $ 3,134,871
Accounts receivable, less allowance for doubtful
accounts of $170,000 at January 31, 1999 and $158,000
and $156,000 at April 30, 1998 and 1997,
respectively......................................... 4,879,087 4,167,966 4,357,665
Notes receivable....................................... 32,741 30,346 20,725
Inventories............................................ 6,452,123 5,726,512 5,763,023
Prepaid and other current assets....................... 738,215 884,864 1,231,509
Income taxes receivable................................ 214,676 491,941
Deferred taxes -- current.............................. 532,000 532,000 791,100
----------- ----------- -----------
Total current assets............................ 16,205,632 15,638,567 15,790,834
Notes receivable due after one year, less allowance of
$65,000 in 1998 and 1997............................... 551,580 575,548 738,997
Property, plant and equipment, net....................... 45,191,090 44,597,242 41,686,254
Goodwill................................................. 1,791,974 1,840,116 1,904,306
Other assets............................................. 1,906,599 2,161,255 2,315,603
----------- ----------- -----------
$65,646,875 $64,812,728 $62,435,994
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligation........................................... $ 3,453,081 $ 3,336,265 $ 3,207,254
Accounts payable....................................... 8,409,677 6,669,874 5,350,448
Accounts payable -- affiliate.......................... 236,263 1,179,927
Income taxes payable................................... 251,205
Accrued compensation................................... 1,635,909 1,900,184 1,714,677
Accrued sales and fuel tax............................. 1,924,594 1,806,814 1,925,570
Accrued expenses and other current liabilities......... 1,118,032 938,720 1,158,607
----------- ----------- -----------
Total current liabilities....................... 16,792,498 14,888,120 14,536,483
Long-term debt and capital lease obligation.............. 19,329,128 22,322,369 25,526,937
Convertible senior subordinated debentures............... 5,461,667 6,054,167 4,650,000
Deferred income taxes.................................... 2,647,400 2,647,400 1,905,600
----------- ----------- -----------
Total liabilities............................... 44,230,693 45,912,056 46,619,020
----------- ----------- -----------
Shareholders' equity:
Common stock, $.01 par value
Authorized -- 10,000,000 shares
Issued and outstanding -- 6,559,409 at January 31,
1999, 6,302,596 shares in 1998 (including 464,983
shares issued on April 10, 1998 as a stock
dividend, Note 12) and 5,574,965 shares in 1997... 65,594 63,026 55,749
Additional paid-in capital............................. 8,015,254 7,337,021 4,649,414
Retained earnings...................................... 13,335,334 11,500,625 11,111,811
----------- ----------- -----------
Total shareholders' equity...................... 21,416,182 18,900,672 15,816,974
----------- ----------- -----------
$65,646,875 $64,812,728 $62,435,994
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 43
TRAVEL PORTS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 31, YEARS ENDED APRIL 30,
----------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales and
operating revenues
(including consumer
excise taxes of
$54,097,500 in 1998,
$45,062,000 in 1997,
and $36,258,000 in
1996)............... $154,345,696 $161,767,434 $211,508,861 $207,103,805 $165,164,391
Cost of goods sold.... 116,339,996 124,401,878 162,774,569 160,666,992 126,021,694
------------ ------------ ------------ ------------ ------------
Gross profit..... 38,005,700 37,365,556 48,734,292 46,436,813 39,142,697
------------ ------------ ------------ ------------ ------------
Operating expenses.... 29,074,122 28,292,090 36,965,541 36,255,639 30,001,684
General and
administrative
expenses............ 3,964,541 3,710,196 5,087,839 4,560,796 4,273,191
Interest expense...... 2,154,668 2,379,978 3,155,072 3,103,045 2,520,728
Other income, net..... (110,740) (380,800) (434,640) (385,872) (537,406)
------------ ------------ ------------ ------------ ------------
Total expenses... 35,082,591 34,001,464 44,773,812 43,533,608 36,258,197
------------ ------------ ------------ ------------ ------------
Income before income
taxes............... 2,923,109 3,364,092 3,960,480 2,903,205 2,884,500
Provision for income
taxes............... 1,088,400 1,394,000 1,622,800 1,203,000 1,194,000
------------ ------------ ------------ ------------ ------------
Net income............ $ 1,834,709 $ 1,970,092 $ 2,337,680 $ 1,700,205 $ 1,690,500
============ ============ ============ ============ ============
Earnings per share --
basic............... $0.28 $0.32 $.38 $.28 $.28
===== ===== ==== ==== ====
Earnings per share --
diluted............. $0.24 $0.26 $.30 $.24 $.24
===== ===== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 44
TRAVEL PORTS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31, YEARS ENDED APRIL 30,
----------------------- --------------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income....................... $1,834,709 $1,970,092 $2,337,680 $1,700,205 $ 1,690,500
Depreciation and amortization.... 2,832,579 2,596,407 3,393,177 3,266,330 2,724,604
Provision for deferred income
taxes......................... 1,000,900 592,100 157,100
Gain on sale of assets........... (150,457) (13,812) (213,881)
Changes in operating assets and
liabilities --
Accounts receivable........... (711,121) (316) 189,699 (419) (674,011)
Inventories................... (725,611) (756,794) 36,511 (429,194) 456,994
Prepaid and other current
assets...................... 146,649 188,191 346,645 (309,480) (392,668)
Income taxes.................. 465,881 1,084,191 277,265 (361,344) (127,054)
Accounts payable and accounts
payable -- affiliate........ 1,503,540 546,498 375,762 (212,304) (751,744)
Accrued compensation.......... (264,275) (253,987) 185,507 253,815 125,557
Accrued sales and fuel tax.... 117,780 (59,963) (118,756) 677,984 199,937
Accrued expenses and other
current liabilities......... 186,813 123,339 (219,887) 1,751 99,176
Changes in other non-current
assets...................... 150,376 18,365 3,606 (127,290) (86,663)
---------- ---------- ---------- ---------- ------------
Net cash provided by
operating activities... 5,537,320 5,456,023 7,657,652 5,038,342 3,207,847
---------- ---------- ---------- ---------- ------------
Investing activities:
Expenditures for property, plant
and equipment................. (3,279,254) (4,970,597) (6,171,272) (8,723,016) (12,021,255)
Proceeds from sale of property,
plant and equipment........... 5,248 77,037 236,663 59,080 294,636
Net proceeds received from notes
receivable.................... 21,573 165,700 153,828 1,368,864 194,669
---------- ---------- ---------- ---------- ------------
Net cash used in
investing activities... (3,252,433) (4,727,860) (5,780,781) (7,295,072) (11,531,950)
---------- ---------- ---------- ---------- ------------
Financing activities:
Principal payments on long-term
debt.......................... (2,876,425) (2,387,613) (3,075,557) (8,961,395) (2,409,613)
Proceeds from borrowings......... 2,085,000 12,655,227 4,761,000
Proceeds from convertible senior
subordinated debentures....... (11,000) 100,000 2,000,000
Exercise of stock options........ 73,443 118,615 146,018 30,707 45,980
Proceeds from shareholder suit... 18,358
---------- ---------- ---------- ---------- ------------
Net cash (used in)
provided by financing
activities............. (2,795,624) (83,998) (929,539) 3,724,539 2,397,367
---------- ---------- ---------- ---------- ------------
Net (decrease) increase in cash and
equivalents...................... (510,737) 644,165 947,332 1,467,809 (5,926,736)
Cash and equivalents -- beginning
of year.......................... 4,082,203 3,134,871 3,134,871 1,667,062 7,593,798
---------- ---------- ---------- ---------- ------------
Cash and equivalents -- end of
year............................. $3,571,466 $3,779,036 $4,082,203 $3,134,871 $ 1,667,062
========== ========== ========== ========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year:
Interest paid.................... $2,287,567 $2,323,751 $3,077,082 $3,031,427 $ 2,504,368
Income taxes paid, net........... $ 588,178 $ 788,803 $1,194,000 $1,069,200 $ 1,164,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 45
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
1. THE COMPANY AND ITS ACCOUNTING POLICIES
The Company is primarily engaged in the operation of travel plazas and has
sixteen service plazas located in the states of New York, Pennsylvania, New
Jersey, Indiana, Maryland, North Carolina and New Hampshire. A significant
portion of the Company's sales and receivables are with companies in the
trucking and related industries.
During 1998, the Company organized wholly owned subsidiaries to facilitate
the franchising of the Travel Port operations. Travel Ports Systems, Inc. (TPS)
is a Delaware company which owns the Travel Port tradename. Travel Port
Franchising, Inc. (TPF), also a Delaware company, will enter into and administer
franchising agreements with third-party franchisees. Both subsidiaries are
consolidated into the Company's financial statements and all intercompany
transactions are eliminated. At April 30, 1998 the Company had not yet entered
into any franchising agreements with third parties.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with such principles requires the use of
estimates by management during the reporting period. Actual results could differ
from those estimates.
The Company's significant accounting policies follow.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is provided on the straight-line
basis over the estimated useful lives of the related assets as follows: land
improvements -- 15 years; buildings and improvements -- 39 years; and equipment
and fixtures -- 3 to 15 years. Leasehold improvements are amortized over the
remaining term of the applicable leases or their estimated useful lives,
whichever is shorter. Expenditures for maintenance and repairs are charged to
expense as incurred. Major improvements are capitalized.
Goodwill
The Company amortizes cost in excess of underlying net asset value of
companies acquired over 40 years. The amount presented on the balance sheet is
net of accumulated amortization of $727,488 and $663,298 at April 30, 1998 and
1997, respectively. Amortization expense for each of the years ended April 30,
1998, 1997 and 1996 was $64,190. The recoverability of these assets is
periodically evaluated at the operating unit level by an analysis of operating
results and cash flows and consideration of other significant events or changes
in the business environment.
Cash Equivalents
For purposes of this Statement, the Company considers all highly liquid
instruments with an original maturity of three months or less to be cash
equivalents.
F-6
<PAGE> 46
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Commodity Contracts
In order to reduce price risk caused by market fluctuations, the Company
enters into futures contracts and options hedging the purchase price of bulk
fuel products. The changes in the market value of such contracts have a high
correlation to the price changes of the hedged commodity. Contract positions are
designed to ensure that the Company will pay a defined maximum price for certain
quantities of its inventory purchases. Gains and losses and the related costs
paid or premium received for contracts which hedge the purchase prices of
commodities are deferred and subsequently included in income as part of the
hedged transaction when the underlying product is sold. At April 30, 1998, the
Company has entered into hedging commitments for a maximum of 9,240,000 gallons
for delivery during the period May 1998 through August 1998. The current market
value of these commitments is measured based on daily commodity trading market
prices. If these hedging commitments had been terminated as of April 30, 1998, a
loss of approximately $55,000 would have been realized. Due to the constant
fluctuations within the commodity markets, these estimated results may or may
not be realized. The Company does not hold or issue derivative instruments for
trading or speculative purposes.
Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable and inventories are valued
at their carrying amounts, which are reasonable estimates of fair value. The
fair value of long-term debt and convertible debentures is estimated using rates
currently available to the Company for debt with similar terms and maturities
and is not materially different from the carrying amount. The fair value of all
other financial instruments approximates cost as stated.
Federal Income Taxes
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when those
differences are expected to reverse.
Unaudited Interim Financial Information
The interim financial data included in these Financial Statements is
unaudited; however, in the opinion of management, such financial data includes
all adjustments of a normal recurring nature necessary for a fair presentation
of the Company's financial condition and results of operation. The financial
information is based in part on estimates and has not been audited by
independent accountants.
2. FACILITY ADDITIONS AND DISPOSALS
On June 15, 1996, the Company opened a new full service travel plaza in
Harborcreek, Pennsylvania. Total construction costs of approximately $8.3
million were financed through a combination of cash generated from operations
and bank financing (Note 8).
On March 1, 1996, the Company entered into a lease agreement for a facility
in Baltimore, Maryland which is operated as a full service travel plaza. The
term of the lease is seven years and is recorded as an operating lease (Note 7).
On June 15, 1995, the Company sold its Fairplay, South Carolina facility.
The Company received, as consideration, a cash down payment and a $600,000 note
receivable. This sale had no significant impact on operations.
3. EARNINGS PER SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share" (EPS). Basic EPS excludes the
effect of common stock equivalents and is computed by dividing income available
to common shareholders by the weighted average of common shares outstanding for
F-7
<PAGE> 47
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
the period. Diluted EPS reflects the potential dilution that could result if
securities or other contracts to issue common stock were exercised or converted
into common stock. Historical earnings per share have been restated to conform
with the provisions of SFAS 128.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 30,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per share:
Income applicable to common stock.................... $2,337,680 $1,700,205 $1,690,500
Weighted average common stock outstanding............ 6,136,062 6,034,054 6,008,787
Basic earnings per common share...................... $ .38 $ .28 $ .28
========== ========== ==========
Diluted earnings per share:
Income applicable to common stock.................... $2,337,680 $1,700,205 $1,690,500
Interest expense on convertible debentures........... 269,776 237,150 237,150
---------- ---------- ----------
$2,607,456 $1,937,355 $1,927,650
========== ========== ==========
Weighted average common stock outstanding.............. 6,136,062 6,034,054 6,008,787
Options and warrants................................... 341,323 193,648 192,285
Convertible debentures................................. 2,086,481 1,774,559 1,774,559
---------- ---------- ----------
8,563,866 8,002,261 7,975,631
========== ========== ==========
Diluted earnings per common share...................... $ .30 $ .24 $ .24
========== ========== ==========
</TABLE>
4. INVENTORIES
Major classifications of inventories are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
At FIFO cost:
Petroleum products............................ $ 837,080 $1,047,017
Store merchandise............................. 2,385,387 2,328,955
Parts for repairs and tires................... 1,823,610 1,803,705
Other......................................... 680,435 583,346
---------- ----------
$5,726,512 $5,763,023
========== ==========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Major classifications of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land.......................................... $ 6,418,083 $ 6,386,394
Land improvements............................. 13,079,873 11,949,337
Buildings and improvements.................... 26,132,301 24,031,725
Equipment and fixtures........................ 18,796,826 16,085,837
Leasehold improvements........................ 5,915,106 5,550,491
Construction in progress...................... 358,361 679,442
----------- -----------
70,700,550 64,683,226
Less -- Allowance for depreciation and
amortization............................. 26,103,308 22,996,972
----------- -----------
$44,597,242 $41,686,254
=========== ===========
</TABLE>
Interest costs capitalized aggregated $68,200 in 1997. No interest costs
were capitalized in 1998.
F-8
<PAGE> 48
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
These amounts include property, plant and equipment under a capital lease
as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Building........................................... $706,031 $706,031
Land improvements.................................. 243,969 243,969
-------- --------
950,000 950,000
Less -- Accumulated amortization................. 686,300 663,200
-------- --------
$263,700 $286,800
======== ========
</TABLE>
The leased assets relate to an agreement with the Livingston County
Industrial Development Agency under which the Agency's bond proceeds were used
to acquire, construct and equip an operating facility in Dansville, New York.
The Company has the option to buy the facility for $1 at the end of the lease
term, February 2000. Lease amortization amounted to $23,100 for each of the
years 1998, 1997, and 1996, and is included in depreciation and amortization
expense.
6. OTHER ASSETS
At April 30, 1998 and 1997, other assets include a leasehold interest in a
full service travel plaza in Greenland, New Hampshire with a carrying value of
$1,700,300 and $1,818,100, respectively. The leasehold interest represents the
amount paid by the Company for the rights to operate a full service plaza under
the terms of a twenty-year lease and is being amortized over the life of the
lease (Note 7).
Deferred financing costs included within other assets are being amortized
on a straight-line basis over the term of the related debt and have a carrying
value of $330,000 and $343,000 at April 30, 1998 and 1997, respectively.
Amortization expense for the leasehold interest and deferred financing for the
years ended 1998, 1997 and 1996 was $244,800, $233,800 and $244,300,
respectively.
7. LEASES
The Company leases six of its operating facilities and its home office
under various terms from 3 to 20 years. Certain of the operating leases contain
renewal options for periods beyond their original terms at specified rates of
payment and five of the leases include purchase options exercisable at future
dates. The Company has also entered into various leases of equipment and
property used in operations and related office space with various lease periods
and renewal options.
During fiscal 1997, the Company entered into a $3 million lease line of
credit with Fleet Capital Leasing. At April 30, 1998, approximately $1.2 million
of the line had been utilized to finance ten separate leases for equipment and
furniture and fixtures. Each lease qualifies as an operating lease in accordance
with SFAS 13 criteria, and annual payments are included in the future minimum
lease payment schedule below.
At April 30, 1998, future minimum payments required under non-cancelable
leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
----------- --------
<S> <C> <C>
1999............................................. $ 2,494,940 $ 55,001
2000............................................. 2,125,164 50,965
2001............................................. 2,089,611 11,315
2002............................................. 1,918,231
2003............................................. 1,696,702
Future........................................... 4,913,026
----------- --------
$15,237,674 117,281
===========
Less -- Amount representing interest........... 11,196
--------
Present value of net minimum lease payments...... $106,085
========
</TABLE>
F-9
<PAGE> 49
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Rental expense applicable to operating leases, net of sublease income of
$428,100, $356,900 and $333,900, amounted to $2,269,200, $2,501,100 and
$1,352,200, for 1998, 1997 and 1996, respectively.
8. DEBT AND CAPITAL LEASE OBLIGATION
Debt and capital lease obligation consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Mortgage loans:
Due 2002, LIBOR plus 2.25% and prime plus 1.000%, in 1998
and 1997, respectively................................. $ 108,680 $ 128,125
Due 2003, LIBOR plus 2.25% and prime plus .875%, in 1998
and 1997, respectively................................. 722,235 833,345
Due 2004, LIBOR plus 2.25% and prime plus .875%, in 1998
and 1997, respectively................................. 1,932,975 2,205,153
Due 2005, LIBOR plus 2.25% and prime plus .875%, in 1998
and 1997, respectively................................. 2,535,698 2,841,358
Due 2006, fixed rate of 9.44%............................. 5,400,006 5,800,002
Term loans:
Due 1999, fixed rate of 9.650%............................ 1,541,682 1,791,678
Due 2002, fixed rate of 10.120%........................... 7,099,727 8,325,718
Due 2002, fixed rate of 8.630%............................ 6,211,546 6,655,228
Obligation under capital lease, 8.50%....................... 106,085 153,584
----------- -----------
25,658,634 28,734,191
Less -- Portion due within one year, including amounts for
capital lease of $47,500 in 1998 and 1997.............. (3,336,265) (3,207,254)
----------- -----------
$22,322,369 $25,526,937
----------- -----------
</TABLE>
The LIBOR rate was 5.66% at April 30, 1998 and the prime interest rate was
8.50% at April 30, 1997.
The Company's primary lender has extended its commitment for the Company's
existing line of credit of $3,750,000 through September 28, 1999. In addition,
the Company also has a $4,500,000 capital line of credit. The working line of
credit is limited to the lesser of $3,750,000 or the sum of 80% of the Company's
accounts receivable under 90 days old, plus 45% of the Company's inventory. At
April 30, 1998, the Company had utilized $200,000 of its available line of
credit as collateral for various letters of credit. The remaining $3,550,000 is
available. The capital line of credit calls for interest only at prime plus .25%
until September 28, 1999. At that time the line can be repaid or amortized over
42 months with interest at prime plus .50%. No advances are outstanding against
the capital line of credit at April 30, 1998 and 1997.
None of the debt agreements outstanding during 1998 require material
compensating balances or commitment fees. Substantially all assets of the
Company have been pledged to secure the outstanding borrowings.
Certain loan agreements require that the Company maintain specified
minimums with regard to net worth, current maturity coverage and the incurrence
of additional indebtedness. In addition, the Company cannot declare dividends
without the consent of its primary lender. The Company is in compliance with
such requirements and restrictions.
Long-term debt requirements excluding capital leases, over the next five
years are as follows: 1999 -- $3,336,300; 2000 -- $3,478,900;
2001 -- $3,600,200; 2002 -- $8,200,400 and 2003 -- $2,294,000.
F-10
<PAGE> 50
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
9. CONVERTIBLE SENIOR SUBORDINATED DEBENTURES
In December 1997, the Company issued $2,000,000 of 7.81% convertible senior
subordinated debentures due December 4, 2007, together with warrants to purchase
40,000 additional shares of the Company's common stock, 43,200 after the 1998
stock dividend. No principal repayments are required until December 2002 at
which time $200,000 will be due and $400,000 a year thereafter until 2006 and
$200,000 in 2007. Interest is payable on a quarterly basis. The debentures may
be converted at the bondholders' option into 502,512 shares of the Company's
common stock at $3.98 per share. The warrants are exercisable at any time
through their expiration date of December 2007 at an exercise price of $4.78 per
share. A value of $100,000 was assigned to the warrants at issuance and has been
credited to additional paid-in capital.
In January 1995, the Company issued $4,650,000 of 8.5% convertible senior
subordinated debentures due January 15, 2005 together with warrants to purchase
93,000 additional shares of the Company's common stock. Due to the 1998 and 1997
stock dividends (Note 12), the warrants available at April 30, 1998 and 1997 are
106,467. No principal repayments are required until January 2001. Commencing in
January 2001, the Company is required to redeem, on an annual basis, 20% of the
outstanding balance of debentures at par. Interest is payable on a quarterly
basis. The debentures are subordinate to all other indebtedness and may be
converted at the bondholders' option into 1,583,969 shares of the Company's
common stock at $2.62 per share. The debentures were callable at the discretion
of the Company after January 15, 1998, at a redemption price equal to 109% of
the principal amount outstanding as of January 15, 1998, and gradually
decreasing to 100% of the principal amount outstanding at maturity on January
15, 2005. The warrants are exercisable at any time through their expiration date
of January 2005 at an exercise price of $3.15 per share.
During fiscal 1998, $500,000 of the 8.5% debentures were converted into
178,092 shares of common stock, adjusted for the 1998 and 1997 stock dividends
of 8% and 6%, respectively (Note 12). At April 30, 1998, $4,150,000 of the 8.5%
convertible senior subordinated debentures remain outstanding.
10. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current provision:
Federal.............................................. $ 435,800 $ 482,500 $ 810,300
State................................................ 186,100 128,400 226,600
---------- ---------- ----------
621,900 610,900 1,036,900
---------- ---------- ----------
Deferred provision:
Federal.............................................. 842,200 467,900 130,900
State................................................ 158,700 124,200 26,200
---------- ---------- ----------
1,000,900 592,100 157,100
---------- ---------- ----------
$1,622,800 $1,203,000 $1,194,000
========== ========== ==========
</TABLE>
The reconciliation of the federal statutory income tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal rate................................. $1,346,600 $ 987,100 $ 980,700
State income taxes, net of federal benefit............. 227,600 166,700 166,800
Amortization of goodwill............................... 21,800 21,800 21,800
Meals and entertainment................................ 25,700 24,800 22,000
Other.................................................. 1,100 2,600 2,700
---------- ---------- ----------
Effective tax rate..................................... $1,622,800 $1,203,000 $1,194,000
========== ========== ==========
</TABLE>
F-11
<PAGE> 51
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
A summary of the deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Bad debt reserve................................ $ 86,700 $ 84,600
Vacation accrual................................ 78,200 76,800
Inventory basis difference...................... 106,000 102,000
Book accruals not currently deductible for
tax........................................... 18,300 175,100
Alternative minimum tax......................... 242,800 362,000
---------- ----------
Gross deferred tax assets............. $ 532,000 $ 800,500
========== ==========
LIABILITIES
Depreciation.................................... $2,647,400 $1,915,000
---------- ----------
Gross deferred tax liabilities................ $2,647,400 $1,915,000
========== ==========
Net deferred tax liabilities.................. $2,115,400 $1,114,500
========== ==========
</TABLE>
11. EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution employee benefit plan covering
substantially all employees who have completed one year of service. Matching
contributions are made at the discretion of the Board of Directors at the rate
of 50 per cent of employee contributions up to 6 per cent of gross compensation.
Total Company matching contributions were $145,000, $119,200 and $104,500 for
1998, 1997 and 1996, respectively.
12. SHAREHOLDERS' EQUITY
Changes in shareholders' equity are as follows:
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at April 30, 1995................. $52,099 $3,767,741 $ 8,529,742 $12,349,582
Net income................................ 1,690,500 1,690,500
Exercise of options....................... 292 45,688 45,980
------- ---------- ----------- -----------
Balance at April 30, 1996................. 52,391 3,813,429 10,220,242 14,086,062
Net income................................ 1,700,205 1,700,205
Exercise of options....................... 203 30,504 30,707
Stock dividend............................ 3,155 805,481 (808,636) --
------- ---------- ----------- -----------
Balance at April 30, 1997................. 55,749 4,649,414 11,111,811 15,816,974
Net income................................ 2,337,680 2,337,680
Exercise of options....................... 846 146,689 147,535
Stock dividend............................ 4,650 1,942,699 (1,948,866) (1,517)
Issuance of warrants on 7.81% convertible
subordinate debentures.................. 100,000 100,000
Conversions of 8.5% convertible
subordinate debentures.................. 1,781 498,219 500,000
------- ---------- ----------- -----------
Balance at April 30, 1998................. $63,026 $7,337,021 $11,500,625 $18,900,672
======= ========== =========== ===========
</TABLE>
F-12
<PAGE> 52
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
On April 23, 1998, the Company declared an 8% stock dividend which was paid
to shareholders of record on April 10, 1998. The dividend was charged to
retained earnings in the amount of $1,947,349, which was based on the closing
price of $4.19 per share on the date of record. Average shares outstanding and
all per share amounts included in the accompanying financial statements and
notes are based on the increased number of shares giving retroactive effect to
the stock dividend.
On April 28, 1997, the Company declared a 6% stock dividend which was paid
to shareholders of record on April 17, 1997. The dividend was charged to
retained earnings in the amount of $808,636, which was based on the closing
price of $2.56 per share on the date of record. Average shares outstanding and
all per share amounts included in the accompanying financial statements and
notes are based on the increased number of shares giving retroactive effect to
the stock dividend.
13. STOCK OPTION PLANS
The Company has stock option plans for officers and other key employees.
Provisions of the plans are similar. Options may be granted at prices not less
than the fair market value at the date of grant and expire no later than ten
years after the date of grant. At April 30, 1998, a total of 173,560 options
were available for future grant under the existing plans. A summary of changes
in outstanding stock options is as follows:
<TABLE>
<CAPTION>
SHARES WEIGHTED AVERAGE
UNDER OPTION EXERCISE PRICE
------------ ----------------
<S> <C> <C>
Outstanding at April 30, 1995................ 483,950 $1.63
Granted...................................... 114,480 $2.94
Exercised.................................... (33,428) $1.38
Canceled..................................... (5,712) $1.77
-------
Outstanding at April 30, 1996................ 559,290 $1.92
Granted...................................... 187,091 $2.35
Exercised.................................... (23,239) $1.33
Canceled..................................... (4,006) $1.60
-------
Outstanding at April 30, 1997................ 719,136 $2.05
Granted...................................... 313,740 $2.86
Exercised.................................... (91,334) $1.62
-------
Outstanding at April 30, 1998................ 941,542 $2.36
=======
Exercisable at April 30, 1998................ 820,582 $2.21
=======
</TABLE>
During 1997, the Company adopted the disclosure requirements of SFAS 123,
"Accounting for Stock-Based Compensation." In accordance with SFAS 123, the
Company has elected not to recognize compensation cost related to stock options
with exercise prices equal to the market price at the date of issuance. If the
Company had elected to recognize compensation cost based on the fair value of
the options at grant date as prescribed by SFAS 123, net income and earnings per
share would have been reduced by $350,900 and $319,300, or $.06 and $.06 per
share, for the years ended April 30, 1998 and 1997, respectively. The weighted
average fair value of options granted during 1998 and 1997 were $2.04 and $1.84,
respectively, determined by the Black-Scholes option valuation model. The
following assumptions were used in the model: expected volatility of 63.3 per
cent, expected dividend yield of -0- per cent, and risk-free interest rate of
6.3 per cent. The expected lives of the options are 8 years. Forfeitures are
recognized as they occur.
F-13
<PAGE> 53
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
----------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$1.31 -- $2.02................ 335,533 5.2 $1.70
$2.18 -- $3.35................ 606,009 8.7 $2.73
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
----------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$1.31 -- $2.02................ 335,533 5.2 $1.70
$2.18 -- $2.94................ 485,049 8.4 $2.57
</TABLE>
14. RELATED PARTY TRANSACTIONS
The Company has renewed its long-term contract with a petroleum distributor
owned by a shareholder director for the supply of diesel fuel to certain motor
plazas. The original contract expired on December 31, 1995. However, the Company
continued to operate under a verbal agreement with similar terms throughout
1996. During 1997, a new ten-year contract was negotiated retroactive to January
1, 1996. Purchases under the contract and other open market purchases from this
company were $29,937,400 in fiscal 1998, $32,440,000 in fiscal 1997 and
$23,710,000 in fiscal 1996. At April 30, 1998 and 1997, $236,755 and $1,179,900,
respectively, were owed to this supplier under contract terms calling for
payment within fifteen days. During the fourth quarter, this distributor signed
a definitive agreement to be purchased by an unrelated third party.
The Maybrook, New York motor plaza is leased from a realty company owned by
two individuals, one of whom is a shareholder director of the Company. The lease
covers a period through March 2004 at which time the Company has the option to
purchase the facility for $3,500,000. Annual rentals under the lease are
$450,000.
The Company pays a shareholder director, fees and bonuses for consulting,
management and other services rendered to the Company. These fees and bonuses
amounted to approximately $213,600, $203,600 and $203,400 for the years 1998,
1997, and 1996, respectively.
F-14
<PAGE> 54
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
15. QUARTERLY DATA (UNAUDITED)
A capsule summary of the Company's audited quarterly net sales, gross
profit, net income and earnings per share for the years ended April 30, 1998 and
1997 is presented below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1998
Net sales.............. $56,397,785 $54,732,274 $50,637,375 $49,741,427 $211,508,861
Gross profit........... 13,360,963 12,485,980 11,518,613 11,368,736 48,734,292
Net income............. 901,241 732,770 336,081 367,588(1) 2,337,680
Net income per share:
Basic................ 0.15 0.13 0.05 0.06 0.39
Diluted.............. 0.12 0.10 0.04 0.05 0.31
Share price:
High................. 3 1/4 4 1/2 4 7/32 4 1/4 4 7/32
Low.................. 2 3/8 3 1/8 3 1/4 3 23/64 2 3/8
1997
Net sales.............. $46,488,936 $52,698,998 $52,152,573 $55,763,298 $207,103,805
Gross profit........... 11,648,378 12,071,153 10,931,519 11,785,763 46,436,813
Net income............. 690,401 536,748 49,098 423,958 1,700,205
Net income per share:
Basic................ 0.11 0.09 0.01 0.07 0.28
Diluted.............. 0.09 0.07 0.01 0.06 0.23
Share price:
High................. 3 5/8 3 1/2 3 1/3 3 1/16 3 5/8
Low.................. 2 2 9/16 2 1/8 2 1/4 2
</TABLE>
- ---------------
(1) During fiscal 1998, the Company discontinued its "T-Bucks" coupon
program, and accordingly, related accruals of $196,000 (after tax
impact of $115,600) were reversed into income during the fourth
quarter.
The Company's common stock is traded on the NASDAQ National Market System
under the symbol TPOA. There were approximately 1,900 shareholders of record at
April 30, 1998.
16. SUBSEQUENT EVENT
On February 26, 1999, the Company announced the execution of a merger
agreement with TravelCenters of America, Inc. and TP Acquisition, Inc., a
wholly-owned subsidiary of TravelCenters. Under the terms of the merger
agreement, TravelCenters will acquire the Company through the merger of TP
Acquisition with and into the Company, with the Company continuing as the
surviving corporation. TravelCenters will pay $4.30 for each outstanding common
share of the Company in connection with the merger. In addition, TravelCenters
entered into an agreement with the Company's Chairman and CEO, E. Philip
Saunders, pursuant to which he will exchange approximately 653,000 common shares
of the Company for shares of TravelCenters in an amount equal to between two and
three percent of the outstanding TravelCenters voting shares. The share exchange
will take place immediately prior to the consummation of the merger. The merger
is expected to be completed during the second calendar quarter of this year,
subject to regulatory and shareholder approvals, as well as the satisfaction of
selective due diligence matters and other customary closing conditions.
F-15
<PAGE> 55
EXECUTION COPY
ANNEX I
AGREEMENT AND PLAN OF MERGER
among
TRAVELCENTERS OF AMERICA, INC.,
TP ACQUISITION, INC.
and
TRAVEL PORTS OF AMERICA, INC.
Dated as of February 26, 1999
<PAGE> 56
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I
THE MERGER.......................................................... I-1
1.1 The Merger.................................................. I-1
1.2 Closing..................................................... I-2
1.3 Effective Time of the Merger................................ I-2
1.4 Effects of the Merger....................................... I-2
1.5 Certificate of Incorporation; By-Laws....................... I-2
1.6 Directors................................................... I-2
1.7 Officers.................................................... I-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITALIZATION OF THE CONSTITUENT I-2
CORPORATIONS........................................................
2.1 Effect on Capital Stock..................................... I-2
2.2 Stock Options, Warrants and Convertible Securities.......... I-3
2.3 Exchange of Certificates.................................... I-4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... I-6
3.1 Organization, Standing and Corporate Power.................. I-6
3.2 Subsidiaries................................................ I-6
3.3 Capital Structure........................................... I-6
3.4 Authority; Noncontravention; Consents....................... I-7
3.5 SEC Documents; Undisclosed Liabilities...................... I-8
3.6 Information Supplied........................................ I-8
3.7 Absence of Certain Changes or Events........................ I-8
3.8 Litigation; Labor Matters; Compliance with Laws............. I-9
3.9 Millennium Compliance....................................... I-9
3.10 Employee Benefit Plans...................................... I-10
3.11 Taxes....................................................... I-11
3.12 Environmental Matters....................................... I-11
3.13 Material Contracts.......................................... I-12
3.14 Brokers..................................................... I-13
3.15 Opinion of Financial Advisor................................ I-13
3.16 Board Recommendation........................................ I-13
3.17 Required Company Vote....................................... I-13
3.18 State Takeover Statutes..................................... I-14
3.19 Affiliate................................................... I-14
3.20 Intellectual Property....................................... I-14
3.21 Related Party Transactions.................................. I-14
3.22 Permits..................................................... I-15
3.23 Insurance Policies.......................................... I-15
3.24 Certain Business Practices.................................. I-15
3.25 Suppliers and Customers..................................... I-15
3.26 Warranties.................................................. I-15
3.27 Title to and Condition of Assets............................ I-16
3.28 Real Estate................................................. I-16
3.29 Perk Development Corp....................................... I-18
3.30 Vehicles.................................................... I-18
</TABLE>
I-i
<PAGE> 57
<TABLE>
<C> <S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO................ I-18
4.1 Organization, Standing and Corporate Power.................. I-18
4.2 Authority; Noncontravention; Consents....................... I-19
4.3 Brokers..................................................... I-19
4.4 Information Supplied........................................ I-19
4.5 Financing................................................... I-20
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER........... I-20
5.1 Conduct of Business in Ordinary Course...................... I-20
5.2 Changes in Employment Arrangements.......................... I-21
5.3 Severance................................................... I-22
5.4 WARN Act.................................................... I-22
ARTICLE VI
ADDITIONAL AGREEMENTS............................................... I-22
6.1 Proxy Statement; Shareholders Meeting....................... I-22
6.2 Access to Information; Confidentiality...................... I-23
6.3 Reasonable Best Efforts..................................... I-23
6.4 Public Announcements........................................ I-24
6.5 Other Offers to Acquire the Company......................... I-24
6.6 Resignation of Directors.................................... I-25
6.7 Notification of Certain Matters............................. I-25
6.8 State Takeover Laws......................................... I-25
6.9 Company 401(k) and Bonus Plan............................... I-26
6.10 State Environmental Transfer Notifications.................. I-26
6.11 Severance Plan.............................................. I-26
6.12 Option Cancellation Agreements.............................. I-26
6.13 Warrant Cancellation Agreements............................. I-26
6.14 Redemption of Convertible Debt Securities................... I-26
6.15 Repayment of Indebtedness................................... I-27
6.16 Environmental Diligence..................................... I-27
6.17 Amendment of Sublease....................................... I-27
6.18 Termination of Consulting Agreement for E. Philip I-27
Saunders....................................................
6.19 Griffith Oil Fuel Supply Contract........................... I-27
6.20 Indemnification............................................. I-28
6.21 Payment of Transfer Taxes................................... I-28
6.22 Non-Solicitation of Employees............................... I-28
6.23 Conflicts, Violations, Defaults, Assignments and Notices.... I-28
6.24 Wyoming Lease............................................... I-28
6.25 Termination of Options...................................... I-29
ARTICLE VII
CONDITIONS PRECEDENT TO MERGER...................................... I-29
7.1 Conditions to Each Party's Obligation....................... I-29
7.2 Conditions to Obligations of the Buyer and MergerCo......... I-29
7.3 Conditions to Obligations of the Company.................... I-31
</TABLE>
I-ii
<PAGE> 58
<TABLE>
<C> <S> <C>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER................................... I-32
8.1 Termination................................................. I-32
8.2 Effect of Termination....................................... I-33
8.3 Amendment................................................... I-33
8.4 Extension; Waiver........................................... I-33
8.5 Procedure for Termination, Amendment, Extension or Waiver... I-33
ARTICLE IX
GENERAL PROVISIONS.................................................. I-33
9.1 Nonsurvival of Representations and Warranties............... I-33
9.2 Fees and Expenses........................................... I-34
9.3 Notices..................................................... I-36
9.4 Definitions................................................. I-36
9.5 Interpretation.............................................. I-38
9.6 Counterparts................................................ I-38
9.7 Entire Agreement; No Third Party Beneficiaries.............. I-38
9.8 Governing Law Jurisdiction and Venue........................ I-38
9.9 Assignment.................................................. I-38
9.10 Enforcement................................................. I-38
</TABLE>
I-iii
<PAGE> 59
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
this 26th day of February, 1999, by and among TravelCenters of America, Inc., a
Delaware corporation ("Buyer"), TP Acquisition, Inc., a New York corporation and
wholly owned subsidiary of Buyer ("MergerCo"), and Travel Ports of America,
Inc., a New York corporation (the "Company"). Capitalized terms not otherwise
defined herein are defined in Section 9.4 of this Agreement.
WHEREAS, the respective Boards of Directors of the Company, Buyer and
MergerCo have determined that the merger of MergerCo with and into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement, is advisable and in the best interests of their respective companies
and shareholders, and such Boards of Directors have approved the Merger,
pursuant to which each common share, par value $.01 per share, of the Company
(the "Company Common Shares") issued and outstanding immediately prior to the
Effective Time of the Merger (as defined in Section 1.3) will be converted into
the right to receive cash, other than (i) Company Common Shares owned by the
Company or any of its Subsidiaries and (ii) Company Common Shares owned by
Buyer, MergerCo or any other Subsidiary of Buyer;
WHEREAS, the Merger and this Agreement require the affirmative vote of the
holders of two-thirds of the issued and outstanding Company Common Shares for
the approval thereof (the "Company Shareholder Approval");
WHEREAS, concurrently with the execution hereof, certain shareholders of
the Company have executed and delivered to Buyer and MergerCo a Voting Agreement
of even date herewith, in substantially the form attached hereto as Exhibit A
(the "Voting Agreement"), pursuant to which such shareholders have agreed to
vote in favor of the Merger and the adoption of this Agreement, and which Voting
Agreement has been relied upon by Buyer and MergerCo in their respective
decisions to execute this Agreement;
WHEREAS, concurrently with the execution hereof, E. Philip Saunders and
Buyer have executed and delivered a Share Exchange Agreement of even date
herewith, in substantially the form attached hereto as Exhibit B (the "Share
Exchange Agreement"), pursuant to which a contemplated share exchange (the
"Share Exchange") will occur prior to the Effective Time of the Merger (as
defined in Section 1.3), and which Share Exchange Agreement has been relied upon
by Buyer and MergerCo in their respective decisions to execute this Agreement;
WHEREAS, the Board of Directors of the Company has approved, in addition to
the Merger, the transactions contemplated by the Voting Agreement and the Share
Exchange Agreement; and
WHEREAS, Buyer, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Business Corporation Law of the State
of New York (the "NYBCL"), MergerCo shall be merged with and into the Company at
the Effective Time of the Merger (as defined in Section 1.3). At the Effective
Time of the Merger, the separate existence of MergerCo shall cease, and the
Company shall continue under the name "Travel Ports of America, Inc." as the
surviving corporation (the "Surviving Corporation") and shall be a wholly owned
subsidiary of Buyer. At the election of Buyer or MergerCo, (i) any direct or
indirect wholly owned subsidiary of Buyer may be substituted for and assume all
of the rights and obligations of MergerCo as a constituent corporation in the
Merger or (ii) the Company may be merged with and into MergerCo with MergerCo
continuing as the Surviving Corporation with the effects set forth above and in
Section 1.4. In either such event, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect the
I-1
<PAGE> 60
foregoing. In addition, at Buyer's election, the Merger may alternatively be
structured to allow Buyer to commence, or cause MergerCo, or any other direct or
indirect Subsidiary of Buyer, to commence, a tender offer to acquire all the
Company Common Shares; provided, however, that, in the event of the commencement
of a tender offer, the same consideration per share shall be paid to all
shareholders of the Company, whether pursuant to the tender offer or any
subsequent merger (except to the extent provided in the Share Exchange
Agreement) and, provided, further, that no such change shall (i) reduce or
change the form of the Merger Consideration (as defined in Section 2.1(d)), (ii)
diminish the benefits to be received by directors, officers or employees of the
Company or alter or change the amount or kind of consideration for, or the
treatment of, Company Stock Options, Company Warrants or Convertible Debt
Securities as set forth in this Agreement, (iii) adversely affect the tax
treatment to the Company's shareholders as a result of receiving the Merger
Consideration, (iv) materially impede or delay consummation of the Merger or (v)
result in any representation or warranty of any party becoming incorrect in any
material respect. In the event of such an election, the parties agree to execute
an appropriate amendment to this Agreement in order to reflect such election.
1.2 CLOSING. Unless this Agreement shall have been terminated pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") shall take place
at 10:00 a.m. on the second business day after the satisfaction or waiver of the
conditions set forth in Article VII (the "Closing Date"), at the offices of
Calfee, Halter & Griswold LLP, 1400 McDonald Investment Center, 800 Superior
Avenue, Cleveland, Ohio 44114-2688, unless another date, time or place is agreed
to in writing by the parties.
1.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date, the parties shall
file a Certificate of Merger and other appropriate documents (collectively, the
"Certificate of Merger") with the Department of State of the State of New York,
executed in accordance with the relevant provisions of the NYBCL, and the
parties shall make all other filings or recordings required under the NYBCL in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Department of State of the
State of New York or at such other time as is agreed to by the Company and
MergerCo and is specified in the Certificate of Merger in accordance with the
NYBCL (the "Effective Time of the Merger").
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the NYBCL.
1.5 CERTIFICATE OF INCORPORATION; BY-LAWS. The Certificate of Incorporation
and By-Laws of the Company, as in effect immediately prior to the Effective Time
of the Merger, shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation following the Merger.
1.6 DIRECTORS. The directors of MergerCo at the Effective Time of the
Merger shall be the directors of the Surviving Corporation following the Merger,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
1.7 OFFICERS. The officers of MergerCo at the Effective Time of the Merger
shall be the officers of the Surviving Corporation following the Merger, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITALIZATION
OF THE CONSTITUENT CORPORATIONS
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time of the Merger, by virtue
of the Merger and without any action on the part of the holder of any Company
Common Shares or any shares of capital stock of MergerCo:
(a) COMMON SHARES OF MERGERCO. Each common share of MergerCo issued
and outstanding immediately prior to the Effective Time of the Merger shall
be converted into one common share, par value $.01 per share, of the
Surviving Corporation.
I-2
<PAGE> 61
(b) CANCELLATION OF TREASURY SHARES OF THE COMPANY. Each Company
Common Share that is owned by the Company or any of its Subsidiaries
("Treasury Shares") shall be canceled and retired and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in
exchange therefor.
(c) CANCELLATION OF EXCLUDED SHARES. Each Company Common Share owned
by Buyer, MergerCo or any other Subsidiary of Buyer ("Excluded Shares")
issued and outstanding immediately prior to the Effective Time of the
Merger shall be canceled and retired and shall cease to exist, and no cash
or other consideration shall be delivered or deliverable in exchange
therefor.
(d) CONVERSION OF COMPANY COMMON SHARES. Subject to Section 2.3 below,
each issued and outstanding Company Common Share, other than Excluded
Shares, shall be converted into the right to receive in cash from the
Surviving Corporation following the Merger an amount equal to $4.30 (the
"Merger Consideration"). Contextually, the term "Merger Consideration"
shall mean the per share amount in reference to the consideration
designated on a per share basis, and otherwise shall refer to the aggregate
consideration represented by the per share amount multiplied by the total
number of Company Common Shares (other than Excluded Shares) then
outstanding. Subject to any applicable tax withholding requirements, the
Merger Consideration shall be paid to the holders of Company Common Shares
in cash.
(e) CANCELLATION OF COMPANY COMMON SHARES. At the Effective Time of
the Merger, all Company Common Shares issued and outstanding immediately
prior to the Effective Time of the Merger shall no longer be outstanding
and automatically shall be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such Company Common
Shares shall cease to have any rights with respect thereto, except the
right, if any, under this Section 2.1 to receive the Merger Consideration
applicable thereto upon the surrender of such certificate in accordance
with Section 2.3.
2.2 STOCK OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering the Company Stock
Option Plans (as defined below)) shall adopt such resolutions or take such other
actions as may be required to effect the following:
(a) amend the Roadway Motor Plazas, Inc. Employees Incentive Stock
Option Plan, the Roadway Motor Plazas, Inc. 1991 Employees Incentive Stock
Option Plan, the Travel Ports of America, Inc. 1993 Employees Incentive
Stock Option Plan, the Travel Ports of America, Inc. 1995 Employees
Incentive Stock Option Plan, the 1996 Incentive Stock Option Plan and any
other existing plans (collectively, the "Company Stock Option Plans")
and/or adjust the terms of each outstanding option to purchase any Company
Common Shares (collectively, "Company Stock Options") granted thereunder
and remaining unexercised to provide that, no less than 10 business days
prior to the Effective Time of the Merger, each Company Stock Option
outstanding immediately prior to such time shall vest;
(b) as soon as practicable following the date of this Agreement, but
in no event later than two business days following the mailing of the Proxy
Statement, cause written notification of the Merger to be given to each
holder of Company Stock Options granted under the Company Stock Option
Plans and obtain, as promptly thereafter as reasonably practicable, from
each holder of Company Stock Options an agreement, in form and substance
satisfactory to Buyer (an "Option Cancellation Agreement"), requiring each
holder thereof (i) with respect to any such Company Stock Options having an
exercise price less than the Merger Consideration, either to (A) exercise
such Company Stock Option (whether or not such Company Stock Option was
exercisable immediately before such notification was given) no later than
the Effective Time of the Merger or (B) elect to receive a cash payment in
an amount equal to the product of (I) the total number of Company Common
Shares subject to such Company Stock Option and (II) the excess of the
Merger Consideration over the exercise price per share of Company Common
Shares subject to such Company Stock Option, payable promptly following the
Effective Time of the Merger and (ii) with respect to all Company Stock
Options held by such holder, regardless of the exercise price thereof or
any election made pursuant to the foregoing provision, to surrender all
rights with respect to each Company Stock Option as of the Effective Time
of the Merger;
I-3
<PAGE> 62
(c) cause timely written notification of the Merger to be given to
each holder of an outstanding warrant (a "Company Warrant"), including,
without limitation, the warrants governed by the Cephas Capital Partners,
L.P. Stock Purchase Warrant (the "Cephas Warrant Agreement") or the 1995
Warrant Agreement (the "1995 Warrant Agreement") (collectively, the
"Warrant Agreements"), and obtain from each holder of Company Warrants an
agreement, in form and substance satisfactory to Buyer (a "Warrant
Cancellation Agreement"), requiring each holder thereof (i) with respect to
such Company Warrants having an exercise or conversion price less than the
Merger Consideration, either to (A) exercise such Company Warrant in
accordance with the terms of each Warrant Agreement or (B) elect to receive
a cash payment in an amount equal to the product of (I) the total number of
Company Common Shares subject to such Company Warrant and (II) the excess
of the Merger Consideration over the exercise price per share of Company
Common Shares subject to such Company Warrant payable promptly following
the Effective Time of the Merger or (ii) in the case of Company Warrants,
including warrants granted under the Cephas Warrant Agreement, which are
not in the money, cause the cancellation of such Company Warrants by taking
such other steps as may be necessary in order to cause such cancellations;
including making all payments required to be made in connection therewith,
and, in either case, with respect to all Company Warrants, regardless of
the exercise or conversion price thereof, to surrender all rights with
respect to each Company Warrant as of the Effective Time of the Merger;
(d) cause each outstanding convertible debt security, including,
without limitation, the Company's 8.5% Senior Subordinated Convertible
Debentures due January 15, 2005 (the "Convertible Debentures") and the
Company's 7.81% Convertible Subordinated Note due December 4, 2007 (the
"Convertible Note" and, collectively with the Convertible Debentures, the
"Convertible Debt Securities"), to be redeemed or otherwise paid in full,
or, at the option of the holder thereof, to be converted into Company
Common Shares, in accordance with the terms thereof, prior to the Effective
Time of the Merger; provided, however, that no such redemption or payment
of the Convertible Note shall occur without the prior consent and approval
of Buyer; and
(e) except as provided herein or as otherwise agreed to by the
parties, the Company Stock Option Plans, the Warrant Agreements, the
Convertible Debt Securities (and any indenture or other agreement governing
the terms thereof) and any other plans, programs or arrangements providing
for the issuance or grant of any other interest in respect of the capital
stock of the Company or any Subsidiary shall terminate as of the Effective
Time of the Merger, and the Company shall ensure that following the
Effective Time of the Merger no holder of a Company Stock Option, a Company
Warrant, any Convertible Debt Securities nor any participant in any Company
Stock Option Plan shall have any right thereunder to acquire any equity
securities of the Company or the Surviving Corporation following the
Merger.
Notwithstanding the foregoing, any payments made by the Company to holders of
Company Stock Options, Company Warrants or Convertible Debt Securities pursuant
to this Section 2.2 shall be reduced by any applicable withholding taxes and
shall be subject to the prior approval of Buyer. The Company shall provide Buyer
with a reasonable opportunity to review and comment on all notices,
correspondence and Contracts delivered pursuant to or in connection with this
Section 2.2 prior to the delivery of such documents and the Company shall use
its best efforts to reflect all such reasonable comments. The Company hereby
represents and warrants upon the taking of the actions specified above,
immediately following the Effective Time of the Merger, and after giving effect
to the payments described in this Section 2.2, no holder of a Company Stock
Option, or any participant in any Stock Option Plan, or any holder of any
Company Warrant or Company Debt Security shall have the right thereunder to
acquire equity securities of the Company or the Surviving Corporation, or any
other benefit, after the Merger.
2.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At the Effective Time of the Merger, Buyer shall
deposit or cause to be deposited the aggregate Merger Consideration with The
Chase Manhattan Bank, which shall act as exchange agent (the "Exchange Agent")
for the benefit of the holders of Company Common Shares and for exchange in
accordance with this Article II. Promptly after the Effective Time of the
Merger, the Exchange Agent shall mail to each record holder (other than holders
of Excluded Shares), as of the Effective Time of the Merger, of an outstanding
certificate or certificates that immediately prior to the Effective Time of the
Merger represented Company
I-4
<PAGE> 63
Common Shares (the "Certificates"), a letter of transmittal and instructions for
use in effecting the surrender of the Certificates for payment therefor (or such
other documents as may reasonably be required in connection with such surrender)
in customary form to be agreed upon by Buyer and the Company prior thereto.
(b) EXCHANGE PROCEDURES. After the Effective Time of the Merger, each
holder of an outstanding Certificate or Certificates shall, upon surrender to
the Exchange Agent of such Certificate or Certificates and acceptance thereof by
the Exchange Agent, be entitled to receive the amount of Merger Consideration
into which such surrendered Certificate or Certificates shall have been
converted pursuant to this Agreement. After the Effective Time of the Merger,
there shall be no further transfer on the records of the Company or its transfer
agent of Certificates, and if Certificates are presented to the Company for
transfer, they shall be canceled against delivery of the Merger Consideration
applicable thereto. If the Merger Consideration is to be remitted to a name
other than that in which any Certificate surrendered for exchange is registered,
it shall be a condition of such exchange that such Certificate shall be properly
endorsed, with signature guaranteed, or otherwise in proper form for transfer
and that the Person requesting such exchange shall pay to the Surviving
Corporation or its transfer agent any transfer or other taxes required or
establish to the satisfaction of the Surviving Corporation or its transfer agent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.3(b), each Certificate shall be deemed at any
time after the Effective Time of the Merger to represent only the right to
receive upon such surrender the Merger Consideration applicable thereto as
contemplated by Section 2.1. NO INTEREST WILL BE PAID OR WILL ACCRUE ON ANY CASH
PAYABLE AS MERGER CONSIDERATION. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Buyer, the posting by such Person of a bond in such amount as Buyer
reasonably may direct as indemnity against any claim that may be made against it
with respect to such Certificate, or the provision of other reasonable
assurances requested by Buyer, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration deliverable
with respect thereto pursuant to this Agreement.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON SHARES EXCHANGED FOR
CASH. All cash paid upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares represented by such
Certificates.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Merger Consideration
deposited with the Exchange Agent pursuant to this Section 2.3 (the "Exchange
Fund") that remains undistributed to the holders of Certificates for six months
after the Effective Time of the Merger shall be delivered to the Surviving
Corporation upon demand therefor, and any holders of Company Common Shares prior
to the Merger who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation, and only as general creditors
thereof, for payment of any claim for cash to which such holders may be
entitled.
(e) NO LIABILITY. None of Buyer, MergerCo, the Company or the Exchange
Agent shall be liable to any Person in respect of any cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificate shall not have been
surrendered prior to the earlier of (i) one year after the Effective Time of the
Merger and (ii) immediately prior to the date on which any cash in respect of
such Certificate would otherwise escheat to or become the property of any
Governmental Entity, any such cash, dividends or distributions in respect of
such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any Person previously entitled thereto.
(f) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund in U.S. Treasury securities or obligations of or
guaranteed by the United States of America or any agency thereof with a maturity
not later than one year from the date of this Agreement, either outright or in
connection with repurchase agreements covering such obligations, or in any fund
that invests solely in such securities, as directed by Buyer. Any interest and
other income resulting from such investments shall be paid to Buyer.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically referenced or accrued and reserved for in the SEC
Financial Statements (as defined in Section 3.5), the Company hereby represents
and warrants to Buyer and MergerCo as follows:
3.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite power
and authority to own, lease and operate its assets and to carry on its business
as and where such assets are now owned or leased and operated and as such
business presently is being conducted. Set forth in Section 3.1 of the attached
Disclosure Schedule delivered by the Company to MergerCo at the time of
execution of this Agreement (the "Disclosure Schedule") are complete and correct
copies of the Certificate of Incorporation, as amended, and By-Laws, as amended,
of the Company. The Company has delivered to MergerCo complete and correct
copies of the Certificate of Incorporation and By-Laws (or other comparable
organizational documents) of each of the Subsidiaries of the Company, in each
case as amended to the date of this Agreement. Each of the Company and its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction listed in Section 3.1 of the Disclosure Schedule
and in each other jurisdiction in which the nature of its business or the
ownership or leasing of its assets makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a Material Adverse
Effect with respect to the Company.
3.2 SUBSIDIARIES. Section 3.2 of the Disclosure Schedule lists all of the
Subsidiaries of the Company. All of the outstanding shares of capital stock,
partnership interests, membership interests or other ownership interests of each
such Subsidiary have been validly issued and are fully paid and nonassessable
and are owned (of record and beneficially) by the Company free and clear of all
Liens. Except for the ownership interests disclosed in Section 3.2 of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock of, or other ownership interests in, any other Person.
3.3 CAPITAL STRUCTURE.
(a) EQUITY SECURITIES. The authorized capital stock of the Company consists
of 10,000,000 Company Common Shares and 1,000 preferred shares, par value $.01
per share (the "Company Preferred Shares"). There are no outstanding Company
Preferred Shares. As of the close of business on February 12, 1999, there were
(i) 6,655,972 Company Common Shares issued and outstanding, (ii) no Treasury
Shares, (iii) 906,565 Company Common Shares issuable upon the exercise of
outstanding Company Stock Options, (iv) 179,960 Company Common Shares reserved
for issuance upon the exercise of authorized but unissued Company Stock Options,
(v) 143,943 Company Common Shares issuable upon the conversion of outstanding
Company Warrants and (vi) 1,762,056 Company Common Shares issuable upon the
exercise of the outstanding Convertible Debt Securities. Section 3.3(a) of the
Disclosure Schedule sets forth the exercise or conversion price, as the case may
be, as of the date hereof for each outstanding Company Stock Option, each
outstanding Company Warrant and each outstanding Convertible Debt Security.
Except as set forth above or in Section 3.3(a) of the Disclosure Schedule, no
shares of capital stock or other equity securities of the Company are
outstanding or reserved for issuance. All outstanding Company Common Shares are,
and all Company Common Shares that may be issued pursuant to the exercise of
Company Stock Options, the Company Warrants and the Convertible Debt Securities
will be when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to any preemptive rights. Except as described in
this Section 3.3 or in Section 3.3(a) of the Disclosure Schedule, there are no
outstanding securities, options, warrants, calls, rights or Contracts of any
kind to which the Company or any of its Subsidiaries is a party or by which any
of them is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity or voting securities of the Company or of any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right or
Contract. Except as set forth in Section 3.3(a) of the Disclosure Schedule, (i)
neither the Company nor any of its Subsidiaries is a party to or is bound by any
Contract to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of the Company or any of its Subsidiaries
and (ii) to the
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Knowledge of the Company, there are no irrevocable proxies with respect to any
shares of capital stock of the Company or any of its Subsidiaries.
(b) INDEBTEDNESS. Set forth in Section 3.3(b) of the Disclosure Schedule is
all outstanding Indebtedness of the Company and its Subsidiaries and, except
with respect to any capital leases of the Company that are not in default or
accelerated under the terms of such lease, all fees and penalty payments or
other costs associated with the prepayment of such Indebtedness.
(c) STOCK OWNERSHIP OF AFFILIATES. Section 3.3(c) of the Disclosure
Schedule sets forth the record and, to the Knowledge of the Company, beneficial
ownership of, and voting power in respect of, the capital stock of the Company
held by the Company's directors and officers and held by shareholders owning
five percent (5%) or more of the outstanding Company Common Shares.
(d) AGREEMENTS WITH SHAREHOLDERS. Except for the Contracts disclosed in
Section 3.3(d) of the Disclosure Schedule, there are no Contracts pursuant to
which the Company is or could be required to register Company Common Shares or
other securities under the Securities Act or, to the Knowledge of the Company,
other Contracts with or among any security holders of the Company with respect
to any securities of the Company.
3.4 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) AUTHORITY. The Company has the requisite corporate power and authority
to enter into this Agreement and, subject to the receipt of Company Shareholder
Approval with respect to the Merger, to consummate the transactions contemplated
hereby (including the transactions contemplated by the Voting Agreement and the
Share Exchange Agreement). The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby (including the transactions contemplated by the Voting Agreement and the
Share Exchange Agreement) have been duly authorized by the Company's Board of
Directors, which constitutes all necessary corporate action on the part of the
Company, subject, in the case of the Merger, to the receipt of Company
Shareholder Approval. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and subject to
general principles of equity.
(b) NONCONTRAVENTION. Except as disclosed in Section 3.4(b) of the
Disclosure Schedule, the execution and delivery of this Agreement, the Voting
Agreement and the Share Exchange Agreement do not, and the consummation of the
transactions contemplated thereby, including consummation of the Merger, will
not, conflict with, or result in any breach or violation of, or result in any
default (with or without notice or the lapse of time, or both) under, or give
rise to a right of termination, cancellation, acceleration or "put" with respect
to, or result in the loss of any benefit or other right or the creation of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries, under (i) the Certificate of Incorporation, as amended, or
By-Laws, as amended, of the Company or the comparable organizational documents
of any of its Subsidiaries, (ii) any Contract to which the Company or any of its
Subsidiaries is a party or to which any of their respective properties or assets
is subject, (iii) any Permit issued to the Company or any of its Subsidiaries or
to which any of their respective properties or assets is subject, or (iv) any
law, regulation, rule, judgment, order, decree or arbitration award to which the
Company or any of its Subsidiaries or any of their respective properties or
assets is subject other than any such conflicts, violations or defaults that are
set forth on Section 3.4(b) of the Disclosure Schedule and will be cured or
waived prior to the Shareholders Meeting.
(c) CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity
or any other Person under any Contract to which the Company or any Subsidiary is
a party or to which any of their respective properties or assets is subject, or
under any Permit issued to the Company or any of its Subsidiaries or to which
any of their respective properties or assets is subject, is required in
connection with the execution and delivery of this Agreement, the Voting
Agreement or the Share Exchange Agreement by the Company or the consummation by
the Company of the transactions contemplated thereby, other than (i) the filing
of a pre-merger notification and report form by the Company under the HSR Act,
(ii) the filing with the SEC of a proxy statement relating to the Company
Shareholder Approval (such proxy
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statement as amended or supplemented from time to time, the "Proxy Statement")
and such reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (iii) the filing of the
Certificate of Merger with the Department of State of the State of New York and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or notices as are
set forth in Section 3.4(c) of the Disclosure Schedule and (v) consents that are
not material to the transactions contemplated hereby or to Surviving
Corporation's financial condition, results of operations or ownership or
usefulness of its assets.
3.5 SEC DOCUMENTS; UNDISCLOSED LIABILITIES.
(a) SEC DOCUMENTS. The Company has timely filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1996 (collectively, and in each case including all exhibits and schedules
thereto and documents incorporated by reference therein, as amended, the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
(including any and all financial statements included therein) as of such dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements (including footnotes) of the
Company included in the SEC Documents (the "SEC Financial Statements") comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited consolidated quarterly statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be specifically indicated in the notes thereto), and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated income, shareholders'
equity and cash flows for the periods then ended.
(b) UNDISCLOSED LIABILITIES. Except as disclosed in Section 3.5 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
Liabilities other than (i) Liabilities reflected in accordance with generally
accepted accounting principles applied on a consistent basis on the most recent
balance sheet of the Company and its consolidated Subsidiaries included in the
SEC Financial Statements, (ii) Liabilities incurred in the ordinary course of
business consistent with past practice since the date of the most recent balance
sheet of the Company and its consolidated Subsidiaries included in the SEC
Financial Statements, and (iii) Liabilities specifically incurred in connection
with the transactions contemplated by this Agreement.
3.6 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date the Proxy Statement is first mailed to the Company's
shareholders or at the time of the Shareholders Meeting (as defined in Section
6.1), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is made by the Company
with respect to the information supplied by Buyer, MergerCo or any of their
Affiliates in writing specifically for inclusion in the Proxy Statement. The
Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the SEC
Documents or in Section 3.7 of the Disclosure Schedule, since April 30, 1998,
each of the Company and its Subsidiaries has conducted its business only in the
ordinary course consistent with past practice, and there is not and has not been
(i) any Material Adverse Change with respect to the Company, (ii) any condition,
event or occurrence that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or give rise to a Material Adverse
Change with respect to the Company, (iii) any event that, if it had taken place
following the execution of this Agreement, would not have been permitted by
Section 5.1 hereof without the prior written consent of
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MergerCo, or (iv) any condition, event or occurrence that could reasonably be
expected to prevent, hinder or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement.
3.8 LITIGATION; LABOR MATTERS; COMPLIANCE WITH LAWS.
(a) LITIGATION. Except as disclosed in Section 3.8(a) of the Disclosure
Schedule, there is no claim, suit, action, investigation or proceeding pending
or, to the Knowledge of the Company, threatened against or involving the Company
or any of its Subsidiaries that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect with respect to the
Company or prevent, hinder or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement nor is there any
judgment, decree, injunction, rule, order or arbitration award outstanding
against the Company or any of its Subsidiaries having or which in the future
could have any such effect.
(b) LABOR MATTERS. Except as disclosed in Section 3.8(b) of the Disclosure
Schedule, (i) neither the Company nor any of its Subsidiaries is a party to, or
is bound by, any collective bargaining agreement or other Contract with any
labor union or labor organization and, to the Knowledge of the Company, within
the past three years there has not been any attempt by any labor organization to
organize any of the employees of the Company or any Subsidiary into a collective
bargaining unit, and there is no imminent threat of an attempt to organize such
a union, (ii) neither the Company nor any of its Subsidiaries has been notified
of any proceeding asserting that it has committed an unfair labor practice or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment, (iii) there is no strike, work stoppage or other labor
dispute involving the Company or any of its Subsidiaries pending or, to the
Knowledge of the Company, threatened, (iv) there are no pending claims by any of
the employees, former employees or beneficiaries of employees of the Company or
any of its Subsidiaries with respect to their employment or the benefits
incident thereto, including without limitation any discrimination claims, sexual
harassment claims or workers' compensation claims and (v) other than any
Liability arising directly from an act of the Buyer not otherwise contemplated
by this Agreement or the transactions contemplated hereby, neither the Company
nor any of its Subsidiaries is liable for any severance pay or other payments to
any employee, former employee or beneficiary of any employee or former employee,
arising out of any termination of employment or other change in the legal
relationship with such Person or under any Employee Benefit Plan or Other Plan,
nor will the Company or any of its Subsidiaries have any Liability, under any
applicable Law or otherwise, as a result of the transactions contemplated hereby
or as a result of the termination of any employees by the Company or any of its
Subsidiaries prior to the Effective Time of the Merger.
(c) COMPLIANCE WITH LAWS. Except as disclosed in Section 3.8(c) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
violation of any law, regulation or rule that, individually or in the aggregate,
would have or could reasonably be expected to have a Material Adverse Effect on
the Company. Except as disclosed in Section 3.8(c) of the Disclosure Schedule,
there have been no allegations or inquiries concerning any violation of any law,
regulation or rule by the Company or any of its Subsidiaries within the past
three years, which violation or violations, individually or in the aggregate,
would have or could reasonably be expected to have a Material Adverse Effect on
the Company.
3.9 MILLENNIUM COMPLIANCE. Except as disclosed in Section 3.9 of the
Disclosure Schedule or in the SEC Documents, all information systems used in
connection with the operations of the Company and its Subsidiaries are
Millennium Compliant. For purposes of this Agreement, "Millennium Compliant"
means the ability when used individually or in conjunction with any other
systems, software or equipment to: (i) accurately process Date Data before,
after and across December 31, 1999 and throughout the year 2000 and beyond
(including by recognizing the year 2000 as a leap year); (ii) provide correct
results when moving backwards and forwards between the 20th and 21st century;
and (iii) function without error or without interruption related to or caused by
Date Data. For the purposes of this Agreement, "Date Data" means data that
represents or references dates in the same and/or different centuries. The
Company has made reasonable inquiries of its vendors and suppliers with respect
to whether their information systems are Millennium Compliant and, except as
disclosed in Section 3.9 of the Disclosure Schedule or in the SEC Documents, has
no basis for believing that any failure on the part of any vendor or supplier to
be Millennium Compliant will have a Material Adverse Effect on the Company.
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3.10 EMPLOYEE BENEFIT PLANS.
(a) GENERAL. Except as disclosed in Section 3.10(a) of the Disclosure
Schedule, neither the Company nor any entity which is or was considered one
employer with the Company under Section 4001(a)(14) of ERISA or Section 414(b)
or (c) of the Code (an "ERISA Affiliate") maintains or is required to contribute
to any Employee Benefit Plan or Other Plan. The Company has delivered to Buyer
accurate and complete copies of each such written Employee Benefit Plan and
Other Plan, and an accurate and complete written description of each such oral
Employee Benefit Plan and Other Plan, in each case with all modifications and
amendments thereto. Except as otherwise disclosed in Section 3.10(a) of the
Disclosure Schedule, no Employee Benefit Plan or Other Plan provides benefits
for persons who are not active employees or directors of the Company or any of
its Subsidiaries.
(b) NO BREACHES OR VIOLATIONS. Except as disclosed in Section 3.10(b) of
the Disclosure Schedule, each Employee Benefit Plan and Other Plan maintained by
the Company or any ERISA Affiliate has been operated, in all material respects,
in accordance with its terms and is not in violation of any law, regulation or
rule that individually or in the aggregate would have or could reasonably be
expected to have a Material Adverse Effect on the Company. Neither the Company
nor any ERISA Affiliate has, and to the Knowledge of the Company no other Person
has, engaged in any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code, excluding any transactions which are exempt
under Section 408 of ERISA or Section 4975 of the Code) with respect to any
Employee Benefit Plan which the Company or any ERISA Affiliate maintains, or to
which the Company or any ERISA Affiliate contributes, which could subject the
Company or any ERISA Affiliate or any such other Person to any Liability. No
event has occurred and no condition exists that would subject the Company or any
ERISA Affiliate to any Tax under Code Sections 4971, 4972, 4977 or 4979, or to a
fine under ERISA Sections 502(c) or 502(l).
(c) AMENDMENTS AND TERMINATIONS. Except as disclosed in Section 3.10(c) of
the Disclosure Schedule, each of the Company and each ERISA Affiliate has the
right to amend or terminate, without the consent of any other Person, any
Employee Benefit Plan or Other Plan which it maintains, except as prohibited by
law.
(d) NO NEW BENEFITS. Except as disclosed in Section 3.10(d) of the
Disclosure Schedule, neither the Company nor any ERISA Affiliate maintains any
Employee Benefit Plan or Other Plan under which it would be obligated to pay any
benefits as a result of the consummation of the transactions contemplated by
this Agreement. Since April 30, 1998, there has not been any increase made or
promised in the benefits payable under any Employee Benefit Plan or Other Plan
which is maintained or contributed to by the Company or any ERISA Affiliate.
Except as disclosed in Section 3.10(d) of the Disclosure Schedule, neither the
Company nor any ERISA Affiliate is obligated to make any payments or provide any
other benefits or is a party to any Contract that, on account of the
transactions contemplated in this Agreement, would obligate it or be reasonably
expected to obligate it to make any payments or provide any other benefits that
would constitute parachute payments within the meaning of Section 280G of the
Code.
(e) PENSION PLANS. Except as disclosed in Section 3.10(e) of the Disclosure
Schedule, there are no unfunded benefit liabilities within the meaning of
Section 4001(a)(16) of ERISA with respect to any Defined Benefit Plan maintained
by the Company or any ERISA Affiliate, as determined under reasonable actuarial
assumptions. No Pension Plan maintained by the Company or any ERISA Affiliate
which is subject to the requirements of Section 412 of the Code or Section 302
of ERISA has incurred an "accumulated funding deficiency" (as defined in such
applicable section and any regulations thereunder), whether or not waived.
(f) MULTIEMPLOYER PLANS. Except as disclosed in Section 3.10(f) of the
Disclosure Schedule, neither the Company nor any ERISA Affiliate is required,
nor has it ever been required, to contribute with respect to any Multiemployer
Plan.
(g) WELFARE PLAN. Except as disclosed in Section 3.10(g) of the Disclosure
Schedule, no Welfare Plan maintained by the Company or any ERISA Affiliate is
funded by a trust. Each Welfare Plan maintained by the Company or any ERISA
Affiliate which is intended to meet the requirements for Tax-favored treatment
under Subchapter B of Chapter 1 of the Code meets such requirements. With
respect to any Welfare Plan maintained by the Company or any ERISA Affiliate,
there is no disqualified benefit, as such term is defined in Code Section
4976(b), which would subject the Company or any ERISA Affiliate to a Tax under
Code Section 4976(a).
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(h) EMPLOYEES. Set forth in Section 3.10(h) of the Disclosure Schedule is
an accurate and complete list showing the names of all persons employed by the
Company or any of its Subsidiaries who received more than $75,000 in cash
compensation in 1998 or who are expected to receive more than $75,000 in cash
compensation in 1999 (including, without limitation, salary, commission and
bonus). Such list sets forth the present salary or hourly wage and 1998 cash
compensation (including, without limitation, salary, commission and bonus) of
each such person.
3.11 TAXES. Except as disclosed in Section 3.11 of the Disclosure Schedule,
the Company and each of its Subsidiaries, and any consolidated, combined,
unitary or aggregate group for Tax purposes of which the Company or any of its
Subsidiaries is a member, has timely filed or caused to be filed all Tax Returns
(as defined below) required to be filed by it and all such Tax Returns are true
and complete in all material respects. Each of the Company and each of its
Subsidiaries has paid all Taxes (as defined below) shown thereon to be due or
has provided adequate reserves in its financial statements for any Taxes that
have not been paid, whether or not shown as being due on any Tax Returns. Except
as disclosed in Section 3.11 of the Disclosure Schedule, (i) no claim for unpaid
Taxes has become a Lien against any property of the Company or any of its
Subsidiaries or is being asserted against the Company or any of its
Subsidiaries, (ii) no audit of any Tax Return of the Company or any of its
Subsidiaries is being conducted by any Tax authority, (iii) no extension of the
statute of limitations on the assessment of any Taxes has been granted to the
Company or any of its Subsidiaries and currently is in effect, and (iv) there is
no Tax sharing arrangement that will require any payment by the Company or any
of its Subsidiaries after the date of this Agreement. As used herein, the term
"Taxes" means all taxes of any kind, including without limitation those on or
measured by or referred to as income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, back-up withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity. As
used herein, the term "Tax Return" means any return, report or statement
required to be filed with any Governmental Entity with respect to Taxes. Except
as set forth in Section 3.11 of the Disclosure Schedule, there are no
assessments or, to the Company's Knowledge, proposed assessments, of Taxes
against the Company or any of its Subsidiaries. Except as disclosed in Section
3.11 of the Disclosure Schedule, within the past three years there have not been
any adjustments or, to the Company's Knowledge, proposed adjustments, to any
filed Tax Return of the Company or any of its Subsidiaries or to the manner in
which any Tax of the Company or any of its Subsidiaries is determined.
3.12 ENVIRONMENTAL MATTERS. Except as disclosed in Section 3.12 of the
Disclosure Schedule (a) to the Knowledge of the Company, the Company and its
current and former Subsidiaries are, and have been, in compliance with all
Environmental Permits (as defined below), and the Company and its current and
former Subsidiaries are, and have been, otherwise in compliance with all
applicable Environmental Laws (as defined below); (b) none of the Company or its
Subsidiaries has received any Environmental Claim (as defined below), and none
of the Company or its Subsidiaries has Knowledge of any threatened Environmental
Claim; (c) to the Knowledge of the Company, there are no circumstances,
conditions or events that could reasonably be expected to give rise to an
Environmental Claim, against the Company or any of its Subsidiaries; (d) to the
Knowledge of the Company, there are no (i) underground storage tanks, (ii)
polychlorinated biphenyls, (iii) asbestos or asbestos-containing materials, (iv)
urea-formaldehyde insulation, (v) sumps, (vi) surface impoundments, (vii)
landfills, (viii) sewers or septic systems or (ix) Hazardous Materials (as
defined below) present at any facility currently owned, leased, operated or
otherwise used or, to the Knowledge of the Company, formerly owned, leased,
operated or otherwise used, by the Company or any of its Subsidiaries that could
reasonably be expected to give rise to Liability of the Company or any of its
Subsidiaries under any Environmental Laws; (e) no modification, revocation,
reissuance, alteration, transfer, or amendment of the Environmental Permits, or
any review by, or approval of, any third party of the Environmental Permits is
required in connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby or the continuation of the
business of the Company or its Subsidiaries following such consummation; (f) to
the Knowledge of the Company, Hazardous Materials have not been generated,
transported, treated, stored, disposed of, released or threatened to be released
at, on, from or under any of the properties or facilities currently owned,
leased or otherwise used or, to the knowledge of the Company, formerly owned,
leased, operated or otherwise used, including without limitation for receipt of
the Company's wastes, by the Company or any of its Subsidiaries, in violation of
or in a
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manner or to a location that could give rise to any material Liability under any
Environmental Laws; (g) the Company and its Subsidiaries have not assumed,
contractually or by operation of law, any Liabilities under any Environmental
Laws and (h) without limiting the generality of the foregoing, the Owned Real
Property and Leasehold Premises and the conduct of the Company's business are in
compliance in all material respects with the federal standards regarding
underground storage tanks promulgated by U.S. Environmental Protection Agency at
53 Fed. Reg. 37082 (Sept. 23, 1988), including but not limited to the
performance standards and upgrading requirements set forth in 40 CFR Part 280,
et seq.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental Claim" means any written or oral notice, claim, demand,
action, complaint, proceeding, request for information or other communication by
any Person alleging Liability or potential Liability (including without
limitation Liability or potential Liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location currently owned, leased,
operated or otherwise used, or, to the Knowledge of the Company, formerly owned,
leased, operated or otherwise used, by the Company or any of its current or
former Subsidiaries, or (ii) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or Environmental Permit, or (iii)
otherwise relating to Liabilities under any Environmental Laws.
"Environmental Permits" means all Permits (as defined below) required under
Environmental Laws.
"Environmental Laws" means all applicable domestic and foreign federal,
state and local statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to regulation of Hazardous Materials and to
any contamination, pollution or protection of human health or the environment,
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Solid Waste Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, the Emergency
Planning and Community-Right-to-Know Act, and the Safe Drinking Water Act, all
as amended, and similar state and local laws.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials, substances and forces, including but not
limited to electromagnetic fields and radioactive materials, regulated pursuant
to, or that could form the basis of liability under, any Environmental Law.
"Permits" means all permits, licenses, registrations, permissions,
certificates and other authorizations, approvals and consents issued or granted
by any Governmental Entity and obtained by the Company or any of its
Subsidiaries or otherwise required in connection with the conduct or operation
of the Company's or any Subsidiary's business or facilities or the ownership,
lease or possession by the Company or any Subsidiary of any real, personal or
intangible property.
3.13 MATERIAL CONTRACTS. Except as set forth in Section 3.13 of the
Disclosure Schedule and other than employee compensation (except for written
employment agreements) in the ordinary course of business consistent with past
practice, neither the Company nor any Subsidiary is a party to or bound by (a)
any Contract (including, but not limited to, employment, advertising,
distribution and licensing agreements), that involves the performance of
services or the delivery of goods and/or materials by or to it and which (i)
cannot be terminated by the Company on 30 days or less notice without penalty
and (ii) involves an amount or value in excess of $100,000, (b) any Contract not
in the ordinary course of business relating to expenditures or liabilities in
excess of $100,000 in the aggregate including, without limitation, fuel purchase
agreements, (c) any Contract relating to capital expenditures not contemplated
by the 1998/1999 Capital Budget, attached hereto as Exhibit C (the "1998/1999
Capital Budget"), in excess of $50,000 in the aggregate, (d) any Contract
relating to Indebtedness, including, without limitation, hedging contracts, (e)
any loan or advance to (other than advances to employees in the ordinary course
of business in amounts of $25,000 or less to any individual and $50,000 or less
in the aggregate), or investment in, any person, any Contract relating to the
making of any such loan, advance or investment or any Contract involving a
sharing of profits, (f) any guarantee or other contingent liability in respect
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of any indebtedness or obligation of any person, (g) any management service,
consulting or any other similar type of Contract involving expenditures in
excess of $50,000, (h) any license, franchise or similar agreement, (i) any
Contract limiting the ability of the Company or any Subsidiary to engage in any
line of business or to compete with any person, (j) any warranty, guaranty or
other similar undertaking with respect to a contractual performance extended by
the Company or any Subsidiary, (k) any Contract whereby the Company or any
Subsidiary shares services with any third party, (l) any capital lease or lease
of personal property, (m) any Contract that is or was required to be filed as an
exhibit to the SEC Documents or (n) any amendment, modification or supplement in
respect of any of the foregoing ((a)-(n), collectively, the "Material
Contracts," provided that the term "Material Contract" shall not be deemed to
include any Contract under which the Company and each Subsidiary have both no
obligation to perform in the future and no right to the benefits of the future
performance of any other person). Except as otherwise set forth in Section 3.13
of the Disclosure Schedule, each Material Contract is valid, binding and in full
force and effect in accordance with its terms and there exists no default,
breach or event of default thereunder or event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) on the part
of the Company, any Subsidiary or, to the Knowledge of the Company, any other
person that, with the giving of notice, the lapse of time and/or the happening
of any other event or condition, would become a default, breach or event of
default thereunder, other than such breaches or defaults that would not or could
not be reasonably expected to result in a Material Adverse Effect. The Company
and its Subsidiaries have duly performed their respective obligations under each
Material Contract in all material respects to the extent such obligations have
occurred. The Company has provided or made available to MergerCo true and
complete copies of each Material Contract. Except as set forth in Section 3.13
of the Disclosure Schedule, no Material Contract relating to borrowed money
indebtedness imposes on the Company or any Subsidiary any penalty, fee or
service charge in connection with the prepayment, repayment or early payment of
any indebtedness thereunder. Other than as disclosed in Section 3.13 of the
Disclosure Schedule, no indebtedness for borrowed money of the Company or its
Subsidiaries contains any restriction upon the incurrence of indebtedness for
borrowed money by the Company or any of its Subsidiaries or restricts the
ability of the Company or any of its Subsidiaries to grant any Liens on its
properties or assets.
3.14 BROKERS. No broker, investment banker, financial advisor or other
Person, other than McDonald Investments Inc., the fees and expenses of which
will be paid by the Company pursuant to a fee agreement, a copy of which has
been provided to MergerCo, is entitled to any broker's, finder's, financial
advisor's or similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The aggregate fees payable to McDonald Investments Inc. shall not
exceed $175,000. The aggregate reimbursable expenses payable to McDonald
Investments Inc. shall not exceed $15,000.
3.15 OPINION OF FINANCIAL ADVISOR. The Company has received the written
opinion of McDonald Investments Inc. dated February 17, 1999 (including the
consent of McDonald Investments Inc. to the inclusion of such written opinion in
the Proxy Statement), to the effect that the consideration to be received by the
shareholders of the Company pursuant to the Merger is fair to the holders of
Company Common Shares from a financial point of view and a signed copy of such
opinion has been delivered to MergerCo.
3.16 BOARD RECOMMENDATION. The Board of Directors of the Company, at a
meeting duly called and held on February 17, 1999, has unanimously, in
accordance with the unanimous prior approval and recommendation by a special
committee comprised of independent Directors, (i) determined that this
Agreement, the Merger and the other transactions contemplated hereby (including
the transactions contemplated by the Voting Agreement and the Share Exchange
Agreement) are advisable and in the best interests of the Company and its
shareholders, (ii) authorized and approved this Agreement, the Merger and the
other transactions contemplated hereby and thereby (including the transactions
contemplated by the Voting Agreement and the Share Exchange Agreement), (iii)
subject to the other provisions hereof, resolved to recommend that the holders
of Company Common Shares approve this Agreement, the Merger and the other
transactions contemplated hereby (including the transactions contemplated by the
Voting Agreement and the Share Exchange Agreement), and (iv) approved the
transactions described in the first sentence of Section 3.29 and the assumption
and assignment agreement related thereto.
3.17 REQUIRED COMPANY VOTE. The Company Shareholder Approval is the only
vote of the holders of any class or series of the Company's securities necessary
to approve this Agreement or the transactions contemplated hereby.
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3.18 STATE TAKEOVER STATUTES. The Company has granted all approvals and
taken all other steps necessary to exempt the Merger and the other transactions
contemplated hereby and by the Voting Agreement and the Share Exchange Agreement
from the requirements and provisions of Section 912 of the NYBCL and any other
anti-takeover law such that none of the provisions of such Section 912 or any
other "business combination," "moratorium," "control bid," "control share," or
other state (and, to the Knowledge of the Company after due inquiry, any foreign
country) anti-takeover law (i) prohibits or restricts the Company's ability to
perform its obligations under this Agreement or its ability to consummate the
Merger and the other transactions contemplated hereby, (ii) would have the
effect of invalidating or voiding this Agreement or any provision hereof, or
(iii) would subject Buyer or MergerCo to any material impediment or condition in
connection with the exercise of their respective rights under this Agreement or
their ownership and operation of the business of the Company and its
Subsidiaries. If either of Messrs. Holahan or Saunders are an "interested
shareholder" of the Company, as such term is defined in Section 912 of the
NYBCL, they have been the beneficial owner of five percent or more of the
outstanding Company Common Shares on October 13, 1985, and have remained so
until such person's "stock acquisition date," as such term is defined in Section
912 of the NYBCL. Neither the Company nor any of its Subsidiaries has any rights
plan, preferred stock plan or similar Contract that applies to the transactions
contemplated hereby.
3.19 AFFILIATE. The Company hereby acknowledges that, at the date hereof,
Buyer is not an "affiliate" of the Company, as such term is defined in Rule
13e-3 under the Exchange Act by reason of its execution of the Voting Agreement
and Share Exchange Agreement.
3.20 INTELLECTUAL PROPERTY. As used herein, the term "Intellectual Property
Rights" means any intellectual property, including without limitation trade
names, trademarks and service marks and all registrations and applications
therefor, together with the goodwill of the business symbolized or represented
by the foregoing, mask works, works of authorship and all copyrights related
thereto and all registrations and applications therefor, inventions,
discoveries, designs, industrial models and all patent rights relating thereto
and all applications therefor and all reissues, divisions, continuations and
extensions thereof, know-how, trade secrets, processes, technology, discoveries,
formulae and procedures, customer lists and other proprietary information,
together with the right to sue for past infringement or improper, unlawful or
unfair use or disclosure of any of the foregoing. Section 3.20 of the Disclosure
Schedule lists all Intellectual Property Rights that are material to the
operations of the Company and its Subsidiaries, taken as a whole ("Material
Intellectual Property Rights") that are owned by the Company or any of its
Subsidiaries or with respect to which (as noted in Section 3.20 of the
Disclosure Schedule) the Company or any of its Subsidiaries has any right or
license. Except as disclosed in Section 3.20 of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries has infringed any Intellectual Property
Right of any other Person and no such infringement has been alleged by any other
Person within the past three years. Except as disclosed in Section 3.20 of the
Disclosure Schedule, to the Knowledge of the Company, there has not been any
infringement or alleged infringement by any other Person of any of the
Intellectual Property Rights of the Company or any of its Subsidiaries. Except
as disclosed in Section 3.20 of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries is a party to any Contract, whether as licensor,
licensee, franchisor, franchisee, dealer, distributor or otherwise, with respect
to any Material Intellectual Property Rights. Each of the Company and each of
its Subsidiaries has the right to use all Intellectual Property Rights as are
necessary to enable it to conduct all phases of its business in the manner
presently conducted by it. Except as disclosed in Section 3.20 of the Disclosure
Schedule, no other Person has any interest in, or right or license with respect
to, any of the Material Intellectual Property Rights owned by the Company or any
of its Subsidiaries. The Material Intellectual Property Rights listed in Section
3.20 of the Disclosure Schedule are valid and in full force and effect. Except
as set forth in Section 3.20 of the Disclosure Schedule, there have been no
interference actions or other judicial, arbitration or other adversary
proceedings concerning any of the Material Intellectual Property Rights of the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has disposed of or permitted to lapse, or otherwise failed to
preserve its right to use, any of its Material Intellectual Property Rights.
3.21 RELATED PARTY TRANSACTIONS. Except as set forth in Section 3.21 of the
Disclosure Schedule or as otherwise disclosed in the SEC Financial Statements,
no director, officer, partner, employee or Affiliate of the Company or any of
its Subsidiaries (i) has borrowed any monies from or has outstanding any
indebtedness or
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other similar obligations to the Company or any of its Subsidiaries, (ii) owns
any direct or indirect interest of any kind in, or is a director, officer,
employee, partner, Affiliate or associate of, or consultant or lender to, or
borrower from, or has the right to participate in the management, operations or
profits of, any Person or entity that is (x) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company or any of its
Subsidiaries, (y) engaged in a business related to the business of the Company
or any of its Subsidiaries, or (z) participating in any transaction to which the
Company or any of its Subsidiaries is a party, or (iii) is, individually or
through any of its Affiliates, or has been during the SEC Financial Statement
periods, otherwise a direct or indirect party to any Contract with the Company
or any of its Subsidiaries.
3.22 PERMITS. Each of the Company and each of its Subsidiaries has all
Permits that are material to the operation of the business of the Company or any
of its Subsidiaries and that are required under any law, regulation or rule for
the continuing operation of its business or ownership of its assets in
accordance with past practice ("Material Permits"). Section 3.22 of the
Disclosure Schedule contains a complete list of such Material Permits,
indicating which of such Material Permits requires the consent or approval of
any Governmental Entity or third party as a result of the transactions
contemplated hereby, exclusive of any Material Permits relating to state or
local sales, use or other Taxes. Each Material Permit issued to the Company or
to any of its Subsidiaries is in full force and effect and no proceeding is
pending to revoke, modify or limit any such Material Permit or to impose any new
conditions or obligations on the possession or transfer of any such Material
Permit. No outstanding written notice or, to the Knowledge of the Company, oral
notice of cancellation or termination of any Material Permit has been delivered
to the Company or any of its Subsidiaries, nor to the Knowledge of the Company
has any such cancellation or termination been threatened. If, and to the extent
reasonably necessary, the Company and its Subsidiaries will assist Buyer in
obtaining any assignments, or renewals of any such Material Permits, as may be
required in connection with the consummation of the transactions contemplated by
this Agreement.
3.23 INSURANCE POLICIES. Section 3.23 of the Disclosure Schedule contains a
list of all insurance policies of the Company and its Subsidiaries and each such
policy is in full force and effect. All premiums with respect to the insurance
policies listed on Section 3.23 of the Disclosure Schedule that are due and
payable prior to the Closing have been paid or will be paid prior to the
Closing, and no written notice of cancellation or termination has been received
by the Company with respect to any such policy. Except as disclosed in Section
3.23 of the Disclosure Schedule, to the Company's Knowledge, there are no
pending claims under any such insurance policies as to which the insurers have
denied coverage or otherwise reserved rights. To the Company's Knowledge,
neither the Company nor any Subsidiary has been refused any insurance with
respect to its assets or operations during the past five years.
3.24 CERTAIN BUSINESS PRACTICES. Neither the Company nor any of its
Subsidiaries, nor to the Company's Knowledge any directors, officers, agents or
employees of the Company or any of its Subsidiaries, (i) has used any funds for
unlawful contributions, gifts, entertainment or other expenses related to
political activity, (ii) has made any unlawful payment to any foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, (iii) has made any other payment prohibited by
applicable law, or (iv) has violated any law, rule or regulation relating to the
sale or export of technology or products into foreign countries. Except as set
forth in Section 3.24 of the Disclosure Schedule, neither the Company nor any of
its Subsidiaries nor, to the Knowledge of the Company, any of their respective
officers or key employees is a party to or is bound by any noncompetition or
similar Contract with any third party that restricts any business practices of
the Company or any of its Subsidiaries or such officers or key employees.
3.25 SUPPLIERS AND CUSTOMERS. Except as set forth in Section 3.25 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received in any one of the past three fiscal years any written notice from or,
to its Knowledge, any oral notice from, any supplier to or customer of the
Company or such Subsidiary of such supplier's or customer's intention to
materially and adversely alter its existing business relationship with the
Company or such Subsidiary.
3.26 WARRANTIES. Section 3.26 of the Disclosure Schedule sets forth
complete and accurate copies of all written product or service warranties or
guaranties, and descriptions of all oral product or service warranties or
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guaranties, currently offered by the Company or any of its Subsidiaries or
currently outstanding. None of the salesmen, employees, distributors or other
representatives or agents of the Company or any of its Subsidiaries is
authorized to undertake obligations to any customer or to other third parties in
excess of such warranties or guaranties and, to the Knowledge of the Company,
there have not been any material deviations from any such warranties or
guaranties.
3.27 TITLE TO AND CONDITION OF ASSETS. Except for inventory sold, used or
otherwise disposed of in the ordinary course of business for fair value, each of
the Company and its Subsidiaries has good and indefeasible title to all of its
assets and properties (both real and personal) and its interests therein, free
and clear of all Liens of any nature whatsoever other than (i) Liens set forth
in Section 3.27 of the Disclosure Schedule, (ii) Liens for current Taxes that
are not yet due and payable, and (iii) such easements and other imperfections of
title as are not material in character, amount or extent, do not impair the
ability of Buyer's lender(s) to obtain a valid and enforceable first priority
mortgage lien against such assets and properties and do not and will not
materially reduce the value of the property for commercial truckstop or travel
center uses, or interfere with the present use of, the assets or properties
subject thereto or affected thereby, or otherwise materially impair the business
operations of the Company or any of its Subsidiaries (the "Permitted
Encumbrances"). Except as set forth in Schedule 3.27, all machinery, equipment,
tools, supplies, leasehold improvements, furniture and fixtures owned or used by
the Company or any of its Subsidiaries (other than any such asset(s) of the
Company or its Subsidiaries that individually or in the aggregate have a total
replacement cost that does not exceed $400,000) are in good operating condition,
normal wear and tear excepted, and do not require any special or extraordinary
expenditures to remain in such condition beyond maintenance and repairs in the
ordinary course of business and comply with laws, rules and regulations and
orders applicable thereto.
3.28 REAL ESTATE.
(a) Except as set forth in Section 3.28(a) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries owns any real property or any
interest therein (the "Owned Properties").
(b) Except as set forth in Section 3.28(b) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries holds any leasehold interest in
any real property (the "Leasehold Premises"). Section 3.28(b) of the Disclosure
Schedule lists each of the leases and subleases with respect to the Leasehold
Premises or other real property to which the Company or any Subsidiary is a
party ("Leases"), and with respect to each Lease sets forth the term thereof,
the base rent payable with respect thereto, any security deposit relating
thereto, the termination date thereof and whether the Company or a Subsidiary
has subleased any part of the leasehold interest thereunder or assigned such
Lease and any renewal terms, purchase options or rights of first refusal
contained in such leases and subleases, and whether any such rights have been
exercised by the Company and its Subsidiaries. The Company and each Subsidiary
are not parties to any leases or subleases of real property other than the
Leases. The Company has heretofore delivered or made available to the Buyer and
MergerCo true and complete copies of all such Leases including all amendments,
modifications and waivers with respect thereto. Except as otherwise set forth in
Section 3.28(b) of the Disclosure Schedule: each Lease is in full force and
effect; subject to no assignments, liens or encumbrances relating to the Company
or any Subsidiary, all rents and additional rents due to date on each Lease have
been paid; neither the Company nor any Subsidiary has received any notice that
it is in default under any Lease and neither the Company nor any Subsidiary is
in default under any Lease in any material respect; no landlord is in default in
any material respect of any of its obligations under any Lease; and there exists
no event, occurrence, condition or act (including the consummation of the
transactions contemplated by this Agreement) that, with the giving of notice,
the lapse of time or the happening of any further event or condition, would
become a default by the Company or any Subsidiary under any Lease, which default
would or could reasonably be expected to have a material impact on the leasehold
interest in the property or the utility of such interest in any material
respect. Except as set forth in Section 3.28(b) of the Disclosure Schedule, the
Company or a Subsidiary is currently the lessee under each of the Leases and may
exercise all rights of a lessee under each of the Leases. Each Lease under which
the Company or a Subsidiary was not the original lessee was validly assigned to
the Company or such Subsidiary and any party that has a right of consent to such
assignment and of which the Company has Knowledge after due review of the
applicable Lease has consented to such assignment and has provided customary and
reasonable certificates of estoppel to Buyer for the benefit of Buyer, MergerCo
and its lender(s) and any other party having a right of consent to such
assignment has either consented
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to such assignment or has taken no action inconsistent with the granting of such
consent. Except as set forth on Section 3.28(b) of the Disclosure Schedule, none
of the Leases require notice to, the consent to the assignment of or the
approval of any third party in order to consummate the Merger or the
transactions contemplated hereby. Each of the Leases set forth on Section
3.28(b) of the Disclosure Schedule shall be assigned to Buyer at Closing
pursuant to valid, binding and enforceable assignment agreements and the Company
has provided to Buyer and its lender(s), with respect to all the Leases,
reasonable and customary certificates of estoppel, subordination and attornment.
(c) Except as set forth in Section 3.28(c) of the Disclosure Schedule, the
Company and its Subsidiaries own the Owned Properties and have valid leasehold
interests in the Leasehold Premises, free and clear of any Liens, covenants and
easements or title defects of any nature whatsoever, except for Permitted
Encumbrances.
(d) Except as set forth in Section 3.28(d) of the Disclosure Schedule and
except for the Owned Properties and Leasehold Premises set forth in Sections
3.28(a) and (b) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has owned and/or leased properties during the last ten (10) years.
(e) The Owned Properties and the Leasehold Premises are presently zoned to
permit the operation of a full service truckstop or travel center, except for
the Company's headquarters and its pipeline terminal and, where applicable,
comply with all subdivision and platting requirements established under
governing laws and ordinances. Said zoning is pursuant to statute or ordinance
and, except as set forth on Section 3.28(e) of the Disclosure Schedule, not
pursuant to any variance or conditional permit granted with respect to the Owned
Properties and the Leasehold Premises, and to the Knowledge of the Company or
its Subsidiaries, does not require any further approval or any other action by
the Company to permit it to be operated as a truckstop or travel center.
(f) Except as set forth in Section 3.28(f) of the Disclosure Schedule, the
portions of the buildings located on the Leasehold Premises that are used in the
Company's or any Subsidiary's business and the buildings located on the Owned
Properties are in compliance with applicable laws, rules, regulations,
ordinances and orders applicable thereto and, in the aggregate sufficient to
satisfy the Company's and its Subsidiaries' business activities as conducted
thereat.
(g) Each of the Leasehold Premises and Owned Properties: (i) has direct
access to public roads or access to public roads by means of an access easement
(which access easement is perpetual, in the case of each of the Owned
Properties, and for at least the remaining term of the Lease and any renewal
periods, in the case of each of the Leasehold Premises), such access being
sufficient to satisfy the current normal day-to-day transportation requirements
of the Company's and its Subsidiaries' businesses as presently conducted at such
parcel; (ii) involves no material encroachment of buildings and improvements
onto or off of the property lines or building set back and side yard
requirements established by applicable laws and ordinances; and (iii) is served
by all utilities, in such quantities as are sufficient to satisfy the current
business activities as conducted at such parcel, including the operation of a
full service truckstop or travel center in compliance with applicable laws.
(h) Except as set forth in Section 3.28(h) of the Disclosure Schedule,
neither the Company nor any Subsidiary has received notice of (i) any
condemnation proceeding with respect to any portion of the Leasehold Premises or
Owned Properties or any access thereto or that any such proceeding is
contemplated by any Governmental Entity; or (ii) any special assessment that may
affect any of the Leasehold Premises or Owned Properties, or that any such
special assessment is contemplated by any Governmental Entity.
(i) All applicable permits, declarations, inspections and other evidences
of compliance from regulatory authorities required to be maintained for the
Owned Properties and the Leasehold Premises or for the consummation of the
transactions contemplated by this Agreement, as relate to the Owned Properties
or Leasehold Premises, that are material to the operation and use of the Owned
Properties and Leasehold Premises, including, without limitation, those
regulating the division of real property (including certificates of occupancy)
and environmental matters, and fire prevention/sprinkler systems and equipment,
and the health, safety and welfare of patrons and employees of the Company's
business have been obtained and are maintained in current compliance with
applicable law in all material respects.
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(j) Except as set forth in Section 3.28(j) of the Disclosure Schedule, the
Owned Properties and Leasehold Premises, and the use, operation, maintenance and
management thereof, are not in violation of any restrictive covenant, agreement
or permit applicable thereto, or of any building code, ordinance, statute,
regulation or requirement of any governmental authority having jurisdiction
thereto, specifically including (without limitation to) the Americans with
Disabilities Act, 42 U.S.C. sec. 12181, et seq., and the Company has not
received any notices regarding any such violation.
(k) None of the Owned Properties or the Leasehold Premises is located in
any conservation, historic or other special designation district.
(l) Except as set forth in Section 3.28(l) of the Disclosure Schedule, the
Company has not been notified of possible future improvements by any public
authority, any part of the cost of which would or might be assessed against the
Owned Properties or the Leasehold Premises, or of any contemplated future
assessments of any kind.
(m) As of the date hereof and as of the Effective Time of the Merger, the
Owned Properties and the Leasehold Premises shall be free from mechanic's liens
for labor and materials furnished or, except for those ongoing projects
described in Section 3.28(m) of the Disclosure Schedule, the possibility of the
rightful filing thereof, other than as caused by Buyer. If any material or labor
has been furnished to the Owned Properties and the Leasehold Premises within the
one hundred twenty (120) day period immediately preceding the Effective Time of
the Merger, the Company, upon Buyer's request, shall furnish evidence
satisfactory to Buyer that the Company has made payment in full for all such
material and labor, that payment is not yet due or that the Company is
contesting such charges in good faith and that Buyer's interest will not be
jeopardized by such contest.
(n) Except as set forth in Section 3.28(n) of the Disclosure Schedule,
neither the Company nor any Subsidiary owns or holds, or is obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell, lease or dispose of the Owned Properties or Leasehold
Premises or any portion thereof or interest therein or in any other real
property.
(o) Except as set forth in Section 3.28(o) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to any options or
agreements for the purchase, sale, lease or license of any real property or any
interest therein, other than the Owned Properties and Leasehold Premises.
3.29 PERK DEVELOPMENT CORP. As of the date of this Agreement, the Company
has no, and Buyer shall not assume any, direct or indirect interest in,
obligation to, or liability (contingent or otherwise) relating to Perk
Development Corp. or Brambury Associates (collectively, "Perk"), any Affiliate
of Perk or any other Person that is related in any way to the Perkins Restaurant
franchises operated by Perk, including, without limitation, any landlords,
mortgage holders, suppliers, franchisors or other creditors of Perk
(collectively referred to as "Perk Related Parties"). The Company's expenses and
costs (paid and unpaid) associated with Perk and the Perk Related Parties will
not exceed $100,000 in the aggregate.
3.30 VEHICLES. Set forth on Section 3.30 of the Disclosure Schedule is a
complete and accurate list of motor vehicles (including, but not limited to, any
vehicles used in connection with fuel hauling or any wholesale fuel business)
used by the Company or any of its employees.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO
Each of Buyer and MergerCo hereby jointly and severally represents and
warrants to the Company as follows:
4.1 ORGANIZATION, STANDING AND CORPORATE POWER. Buyer and MergerCo are
corporations duly organized, validly incorporated and in good standing in the
States of Delaware and New York, respectively, and each has the requisite
corporate power and authority to own, lease and operate its assets and to carry
on its business as and where such assets are now owned or leased and operated
and as such business presently is being conducted. Each of Buyer and MergerCo is
duly qualified or licensed to do business and is in good standing in each
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jurisdiction in which the nature of its business or the ownership or leasing of
its assets makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed (individually or
in the aggregate) would not have a Material Adverse Effect with respect to Buyer
or MergerCo.
4.2 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) AUTHORITY. Each of Buyer and MergerCo has the requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of
Buyer and MergerCo and the consummation by each of Buyer and MergerCo of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each of Buyer and MergerCo. This Agreement has
been duly executed and delivered by, and constitutes a valid and binding
obligation of, each of Buyer and MergerCo, enforceable against each of them in
accordance with its terms subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other Laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
(b) NONCONTRAVENTION. Except as disclosed in Section 4.2 of the Disclosure
Schedule delivered by MergerCo to the Company at the time of execution of this
Agreement (the "MergerCo Disclosure Schedule"), the execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby, including consummation of the Merger, will not, conflict with, or result
in any breach or violation of, or result in any default (with or without notice
or the lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration with respect to, or result in the loss of any
benefit or other right or the creation of any Lien upon any of the properties or
assets of Buyer or MergerCo, under (i) the Certificate of Incorporation or
By-laws, as amended, of either Buyer or MergerCo, (ii) any Contract to which
Buyer or MergerCo is a party or to which any of their respective properties or
assets is subject, (iii) any Permit issued to Buyer or MergerCo or to which any
of their respective properties or assets is subject, or (iv) any law,
regulation, rule, judgment, order, decree or arbitration award to which either
Buyer or MergerCo or any of their respective properties or assets is subject,
other than, in the case of clauses (ii), (iii) and (iv), any such conflicts,
breaches, violations, defaults, rights, losses or Liens that individually or in
the aggregate could not have a Material Adverse Effect with respect to either
Buyer or MergerCo or could not prevent, hinder or materially delay the ability
of MergerCo to consummate the transactions contemplated by this Agreement.
(c) CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity
or any other Person under any Contract to which Buyer or MergerCo is a party or
to which any of their respective properties or assets is subject, or under any
Permit issued to Buyer or MergerCo or to which any of their respective
properties or assets is subject, is required in connection with the execution
and delivery of this Agreement by either Buyer or MergerCo or the consummation
by Buyer and MergerCo of any of the transactions contemplated hereby, except for
(i) the filing of a pre-merger notification and report form under the HSR Act,
(ii) the filing with the SEC of the Proxy Statement and such reports under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (iii) the filing of the Certificate of Merger
with the Department of State of the State of New York and the filing of
appropriate documents with the relevant authorities of other states in which
Buyer or MergerCo is qualified to do business, and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices as are set forth in Section 4.2 of the MergerCo Disclosure Schedule or
as may be required under the "takeover" or "blue sky" laws of various states.
4.3 BROKERS. No broker, investment banker, financial advisor or other
Person, other than Clipper Capital Partners, L.P. and Olympus Partners, LLP is
entitled to any broker's, finder's, financial advisor's or similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Buyer, MergerCo or any of their
respective Affiliates.
4.4 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Buyer, MergerCo or any of their Affiliates in writing specifically
for inclusion or incorporation by reference in the Proxy Statement will, at the
time the Proxy Statement is first mailed to the Company's shareholders or at the
time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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4.5 FINANCING. Assuming (i) that there is no breach by the Company of, or
failure by the Company to perform, any representation, warranty, covenant or
other agreement contained in this Agreement and (ii) that Buyer has no right to
terminate pursuant to Section 8.1(j), in each case, as of the date of this
Agreement and as of the Closing Date, Buyer has available internal funds or
commitments from creditworthy financial institutions to provide the funds
required to pay the Merger Consideration and to consummate the transactions
herein contemplated.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as set forth in Section
5.1 of the Disclosure Schedule, during the period from the date of this
Agreement through the Effective Time of the Merger (except as otherwise
specifically required by the terms of this Agreement), the Company shall, and
shall cause its Subsidiaries to, act and carry on their respective businesses in
the usual, regular and ordinary course of business consistent with past practice
and use its and their respective best efforts to preserve intact their current
business organizations, preserve their goodwill, keep available the services of
their current officers and employees, maintain all material properties and
assets in customary condition and repair (reasonable wear and use and damage by
fire and unavoidable casualty excepted), maintain their Books and Records in
accordance with past practice, comply in all material respects with all
applicable laws, and preserve their relationships with customers, suppliers,
sales representatives, distributors and others having business dealings with
them. Without limiting the generality of the foregoing, during the period from
the date of this Agreement through the Effective Time of the Merger, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of Buyer:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned Subsidiary of the Company to
its parent company in accordance with applicable law;
(ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(iii) purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities,
except for (a) the acquisition of Company Common Shares from holders of Company
Stock Options outstanding on the date of this Agreement, in full or partial
payment of the exercise price payable by such holders upon the exercise of such
Company Stock Options, (b) the acquisition of outstanding Company Warrants or
(c) the redemption of Convertible Debt Securities, in each case in accordance
with Section 2.2;
(iv) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any of its
Subsidiaries, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible securities or any other securities or equity equivalents (other
than the issuance of Company Common Shares upon the proper exercise of Company
Stock Options or Company Warrants or upon a conversion pursuant to the
Convertible Debt Securities);
(v) amend its Certificate of Incorporation, By-Laws or other organizational
documents;
(vi) acquire or agree to acquire any other Person or the assets or business
operations of such Person by merger, consolidation, purchase of stock or assets,
or in any other manner;
(vii) other than as specifically permitted by Section 5.1 of the Disclosure
Schedule, sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets other than any such
properties or assets the value of which do not exceed $50,000 individually and
$200,000 in the aggregate, except sales of inventory in the ordinary course of
business consistent with past practice;
(viii) incur any Indebtedness, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its Subsidiaries, enter into any agreement to maintain any financial statement
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condition of another Person or enter into any arrangement having the economic
effect of any of the foregoing, except for (a) short-term borrowings and lease
obligations incurred in the ordinary course of business consistent with past
practice not in excess of $100,000 in the aggregate and (b) borrowings in the
ordinary course of business consistent with past practice under the Company's
existing revolving line of credit that do not cause the outstanding balance of
such revolving line of credit to exceed $1,000,000 at any time; provided,
however, that the Company shall provide written notice to Buyer
contemporaneously with the notice provided to the bank of such drawdown, or, if
no notice to a bank is provided, such notice shall be delivered to Buyer within
48 hours after the Company receives notice from the bank of a drawdown, of the
amount of and purpose for any such borrowings or incurrence of Indebtedness;
(ix) make any loans, advances or capital contributions to, or investments
in, any other Person, other than to the Company or any direct or indirect wholly
owned Subsidiary of the Company;
(x) pay, discharge or satisfy any Liabilities, except for the payment,
discharge or satisfaction of Liabilities (i) in the ordinary course of business
consistent with past practice, (ii) in accordance with their terms as in effect
on the date hereof, (iii) to the extent permitted by Section 5.1(xv) or (iv) as
otherwise contemplated by this Agreement;
(xi) waive, release, grant or transfer any rights of material value or
modify or change in any material respect any existing Contract, Permit or other
document, other than in the ordinary course of business consistent with past
practice;
(xii) adopt any resolution or plan providing for or authorizing a complete
or partial liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization;
(xiii) enter into any new Contract except in the ordinary course of
business consistent with past practice or modify or terminate any existing
Contract if such modification or termination would have a Material Adverse
Effect on the Company or enter into any license, franchise or similar
agreements;
(xiv) engage in any unusual or novel method of transacting business or
change any accounting principle used by it, except for such changes as may be
required by generally accepted accounting principles or by law or regulation;
(xv) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises of litigation
where the amount paid (after giving effect to insurance proceeds actually
received) in settlement or compromise is not material to the Company;
(xvi) enter into any fuel-supply hedging agreements or similar arrangements
(which shall not include for these purposes any fixed price supply agreements
with customers in amounts not in excess of $50,000 in the aggregate);
(xvii) make any capital expenditures by the Company and its Subsidiaries in
excess of $100,000 in the aggregate and not contemplated by the Company's
1998/1999 Capital Budget;
(xviii) except as specifically contemplated by this Agreement, take any
action the taking of which, or omit to take any action the omission of which,
would cause any of the representations or warranties of the Company contained
herein to not continue to be true and correct in all material respects as though
made at and as of the date of such action or omission (except to the extent such
representation or warranty specifically refers to another date);
(xix) authorize any of, or commit or agree to take any of, the foregoing
actions; or
(xx) buy, sell, lease, exercise any options (other than in the ordinary
course of business), terminate or enter into any agreement for the purchase,
sale, lease, option or conveyance of any interest in real property including the
Owned Property and the Leasehold Premises.
5.2 CHANGES IN EMPLOYMENT ARRANGEMENTS. Except as set forth in Section 5.2
of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
shall (i) adopt or amend any Employee Benefit Plan or Other Plan (except as may
be required by law or this Agreement), other than increases in compensation or
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benefits for employees who are not officers or directors in the ordinary course
of business consistent with past practice or as required by any collective
bargaining agreement, or (ii) increase the compensation or benefits of any
officer or director. Buyer acknowledges that the determination and calculation
of all performance-based bonuses payable by the Surviving Corporation pursuant
to any bonus letters to corporate staff referred to on Section 3.10 of the
Disclosure Schedule in the ordinary course of business and consistent with past
practice shall be made without reference to costs and expenses incurred in
connection with the transactions contemplated by this Agreement, provided that
such bonuses and costs and expenses are properly accrued in accordance with
generally accepted accounting principles.
5.3 SEVERANCE. Neither the Company nor any of its Subsidiaries shall enter
into any new or modified severance or termination arrangement or increase or
accelerate any benefits payable under any severance or termination pay policies
in effect on the date hereof other than as set forth in Section 6.11 herein.
5.4 WARN ACT. Neither the Company nor any of its Subsidiaries shall
effectuate a "plant closing" or "mass layoff," as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act") or
any similar state law affecting in whole or in part any site of employment,
facility, operating unit or employee of the Company or any Subsidiary, without
the prior written consent of MergerCo and without complying with the notice
requirements and other provisions of the WARN Act or any similar state law.
Between the date hereof and the Closing Date, the Company shall provide prompt
written notice of any "employment loss," as that term is defined in the WARN
Act, suffered by any employee of the Company's headquarters located in
Rochester, New York that occurs prior to the Closing Date. Buyer acknowledges
that the Surviving Corporation shall be responsible for the delivery of any
notices to employees of the Surviving Corporation that are required by the WARN
Act.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PROXY STATEMENT; SHAREHOLDERS MEETING.
(a) PREPARATION OF PROXY STATEMENT. Promptly following the date of this
Agreement, but no later than March 17, 1999, the Company shall prepare and file
with the SEC the Proxy Statement in preliminary form. The Company will use its
best efforts to cause the Proxy Statement to be mailed to the Company's
shareholders as promptly as practicable after clearance thereof with the SEC.
If, at any time prior to the Shareholders Meeting, any event with respect to the
Company, its Subsidiaries, directors, officers, and/or the Merger or the other
transactions contemplated hereby shall occur, which is required to be described
in the Proxy Statement, the Company shall so describe such event and, to the
extent required by applicable law, shall cause such description to be
disseminated to the Company's shareholders.
(b) REQUEST FOR BRING-DOWN FAIRNESS OPINION. If determined by the Board of
Directors of the Company to be appropriate, the Company shall request the
delivery of the bring-down fairness opinion referred to in Section 7.3(f) from
McDonald Investments Inc. prior to completion of SEC review of the Proxy
Statement.
(c) REVIEW OF PROXY STATEMENT AND OTHER MATERIALS. The Company will
immediately notify Buyer of the receipt of any comments from the SEC (and
provide Buyer with a copy thereof) regarding the Proxy Statement and the
approval of the Proxy Statement by the SEC. Buyer shall be given a reasonable
opportunity to review and comment on all filings by the Company with the SEC and
all mailings to the Company's shareholders in connection with the Merger prior
to the filing or mailing thereof, and the Company shall use its best efforts to
reflect all such reasonable comments.
(d) SHAREHOLDERS MEETING. Subject to the other provisions of this Section
6.1(d), the Company will, as promptly as practicable following the date of this
Agreement and in consultation with Buyer, duly call, give notice of, convene and
hold a meeting of its shareholders (the "Shareholders Meeting") for the purpose
of approving this Agreement, the Merger and the other transactions contemplated
hereby. The Company will, through its Board of Directors, recommend to its
shareholders approval of the foregoing matters and seek to obtain all votes and
approvals thereof by the shareholders, as set forth in Section 3.16; provided,
however, that the
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obligations contained herein shall be subject to the provisions of Section 6.5
of this Agreement. Subject to the foregoing, such recommendation, together with
a copy of the opinion referred to in Section 3.15, shall be included in the
Proxy Statement. The Company will use its best efforts to hold the Shareholders
Meeting as soon as practicable after the date hereof.
(e) STOCK TRANSFER RECORDS. The Company will cause its transfer agent to
make stock transfer records relating to the Company available to Buyer to the
extent reasonably necessary to effectuate the intent of this Agreement.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall, and shall
cause its Subsidiaries and the officers, employees, agents and representatives
of the Company and its Subsidiaries, to afford to Buyer, MergerCo and their
respective agents, representatives and potential financing sources, reasonable
access to the personnel and the Books and Records of the Company and its
Subsidiaries and all of their properties (including for purposes of Section 6.16
hereof) during normal business hours prior to the Effective Time of the Merger.
The Company shall permit Buyer throughout the period prior to the Closing to
meet with employees and other agents of the Company at such reasonable times as
shall be approved by the Company. The Company shall permit Buyer to perform such
engineering, environmental and workplace condition surveys and other physical
inspections as Buyer may deem necessary. During the period prior to the
Effective Time of the Merger, the Company shall, and shall cause its
Subsidiaries and the officers, employees, agents and representatives of the
Company and its Subsidiaries, to furnish promptly to Buyer (i) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws and
(ii) all other information concerning its business, properties, financial
condition, operations and personnel as Buyer may from time to time reasonably
request. Except as required by law, until the Effective Time of the Merger each
of the Company, Buyer and MergerCo shall hold, and shall cause its respective
directors, officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
confidence to the extent required by and in accordance with that certain
Confidentiality Agreement, dated October 19, 1998, by and between the Company
and the Buyer. In the event of conflict between any provision of such
Confidentiality Agreement and any provision of this Agreement, this Agreement
shall prevail.
6.3 REASONABLE BEST EFFORTS.
(a) TAKING OF NECESSARY ACTIONS. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take or cause to be taken all actions, and to do or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement. Buyer, MergerCo and the Company will use their
respective reasonable best efforts and cooperate with one another to promptly
(i) determine whether any filings are required to be made or consents,
approvals, waivers or Permits are required to be obtained (or, which if not
obtained, would result in a breach or violation, or an event of default,
termination or acceleration, of any law, regulation, rule, Contract or Permit)
in connection with the transactions contemplated by this Agreement, and (ii)
make any such filings, furnish information required in connection therewith and
timely seek to obtain any such consents, approvals, waivers or Permits.
(b) ANTITRUST FILINGS. Each party promptly will file all documents required
to be filed with any Governmental Entity under the HSR Act or under any other
antitrust or similar laws, rules or regulations of any Governmental Entity
(collectively with the HSR Act, "Antitrust Laws") with respect to the
transactions contemplated hereby and shall cooperate with each other party to
the extent necessary to assist any other party in the preparation of such
filings. Buyer shall be responsible for payment of the $45,000 initial filing
fee required by the HSR Act. In connection with the receipt of any necessary
approvals under any Antitrust Laws, the Company agrees to take all reasonable
action required in order to comply with any Antitrust Laws in connection with
the transactions contemplated by this Agreement; provided that no divestiture of
any material business, product lines or assets or any material undertakings of
the Company shall be made unless acceptable to both the Company and to Buyer.
Notwithstanding any provision contained herein, Buyer and Surviving Corporation
shall not be required to make any divestitures or provide any undertakings that
may be requested in connection with any Antitrust Laws or to consent to the
making or provision thereof by the Company or its Subsidiaries.
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(c) DELISTING OF COMPANY COMMON SHARES. Each of the parties agrees to
cooperate with each other party in taking or causing to be taken all action
necessary to delist the Company Common Shares from the Nasdaq National Market
("Nasdaq"), provided that such delisting shall not be effective until after the
Effective Time of the Merger. The parties also acknowledge that it is MergerCo's
intent that, following the Merger, the Company Common Shares will not be quoted
on Nasdaq or listed on any national securities exchange.
6.4 PUBLIC ANNOUNCEMENTS. Neither MergerCo or Buyer, on the one hand, nor
the Company, on the other hand, will issue any press release or public statement
with respect to the transactions contemplated by this Agreement, including the
Merger, without the other party's prior consent, except as, in the opinion of
its counsel, may be required by applicable law, court process or under any
listing agreement with Nasdaq. MergerCo and the Company agree to consult with
each other before issuing, and provide each other the opportunity to review and
comment upon, any such press release or other public statement with respect to
the transactions contemplated hereby. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement shall be mutually agreed upon prior to the issuance thereof.
6.5 OTHER OFFERS TO ACQUIRE THE COMPANY.
(a) NO SOLICITATION OF OTHER OFFERS. From and after the date hereof until
the termination of this Agreement, the Company will not, and will not authorize
or permit any of its Subsidiaries or any of the directors, officers, employees,
representatives, agents or Affiliates of the Company or any of its Subsidiaries
(including without limitation any investment banker, broker, financial advisor,
attorney or accountant or any other agents retained by or on behalf of the
Company or any of its Subsidiaries), whether acting in their individual
capacities or otherwise, to directly or indirectly do any of the following: (i)
solicit, initiate, encourage, facilitate or cooperate with (including through
the furnishing of any information) any inquiry or the making of any proposal
which constitutes, or may reasonably be expected to result in, any Transaction
Proposal (as hereinafter defined); (ii) propose, enter into or participate in
any discussions or negotiations with any Person regarding a Transaction
Proposal; or (iii) agree to or endorse any Transaction Proposal; provided,
however, that the foregoing shall not prohibit the Company from (A) furnishing
information to a third party who has made a Superior Transaction Proposal (as
hereinafter defined), subject to the prior receipt of a binding confidentiality
agreement containing terms and conditions no less restrictive than those set
forth in the Confidentiality Agreement dated October 19, 1998 between the
Company and Buyer, (B) thereafter engaging in discussions or negotiations with a
third party who has made a Superior Transaction Proposal, or (C) following its
receipt of a Superior Transaction Proposal and subject to Section 6.5(c) below,
taking and disclosing to its shareholders a position with respect thereto, or
taking any other legally required action with respect thereto (including without
limitation the filing of any documents with the SEC or changing or withdrawing
the recommendation of the Company's Board of Directors with respect to the
Merger), but in each case referred to in the foregoing clauses (A) through (C),
only after the Board of Directors of the Company has concluded in good faith,
after consultation with the Company's financial advisers and based upon the
advice of independent legal counsel (who may be the Company's regularly engaged
legal counsel), that such action is necessary in order for the Directors of the
Company to comply with their fiduciary obligations to the Company's shareholders
under applicable law.
(b) DEFINITIONS OF TRANSACTION PROPOSAL AND SUPERIOR TRANSACTION
PROPOSAL. For purposes of this Agreement, the term "Transaction Proposal" shall
mean any of the following (other than the Merger contemplated by this
Agreement): (i) a merger, consolidation, share exchange, recapitalization,
business combination, liquidation, dissolution or any similar transaction
involving the Company; (ii) a sale, lease, exchange, mortgage, pledge, transfer
or other disposition of ten percent (10%) or more of the assets of the Company
and its Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for, or the acquisition
(or right to acquire) of beneficial ownership by any "person" or "group" (as
such terms are defined in Section 13(d)(3) of the Exchange Act), other than by
Buyer or its Affiliates, of Company Common Shares such that such "person" or
"group" beneficially owns twenty percent (20%) or more of the outstanding
Company Common Shares or the filing of a registration statement under the
Securities Act in connection therewith; (iv) any other material corporate
transaction, the consummation of which would, or reasonably could be expected
to, impede, interfere with, prevent or materially delay the Merger or which
would reasonably be expected to dilute materially the benefits to Buyer of the
transactions contemplated herein; or (v) any public announcement of a proposal,
plan or intention to do any of the foregoing or any
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agreement to do any of the foregoing or any negotiations regarding any of the
foregoing. For purposes of this Agreement, the term "Superior Transaction
Proposal" shall mean an unsolicited written, bona fide Transaction Proposal that
the Board of Directors of the Company, after consultation with its financial
advisors, determines in good faith to be more favorable to the Company's
shareholders than the Merger contemplated by this Agreement, which is supported
by evidence of firm financing.
(c) NOTIFICATION OF BUYER. Prior to (i) any withdrawal or modification by
the Company's Board of Directors of its approval or recommendation of the Merger
or this Agreement, (ii) the approval or recommendation by the Company's Board of
Directors of a Transaction Proposal, or (iii) the Company's execution of an
agreement with respect to a Transaction Proposal, the Company shall provide
Buyer a written notice (a "Notice of Transaction Proposal") advising Buyer that
the Board of Directors has received a Transaction Proposal, specifying the
material terms and conditions of such Transaction Proposal and identifying the
Person making such Transaction Proposal, and neither the Company nor any
Subsidiary shall enter into an agreement with respect to a Transaction Proposal
until 11:00 p.m. on the later of (x) the fourth business day following Buyer's
receipt of the Notice of Transaction Proposal and (y) in the event of any
amendment to the price or any material term of a Transaction Proposal, two
business days following Buyer's receipt of written notice containing the
material terms of such amendment, including any change in price (it being
understood that each such further amendment to the price or any material terms
of a Transaction Proposal shall necessitate an additional written notice to
Buyer and an additional two business day period prior to which the Company can
take any action set forth in clauses (ii) or (iii) above). In addition, if the
Company proposes to enter into a Contract with respect to any Transaction
Proposal, it shall concurrently with entering into such Contract pay, or cause
to be paid, to Buyer the expenses and fees and the Immediate Termination Fee,
all as provided in and defined in Section 9.2. The Company shall promptly advise
Buyer orally and in writing of any request for nonpublic information from, or
discussions or negotiations with, any person or entity or of any Transaction
Proposal known to it, the material terms and conditions of such request or
Transaction Proposal and the identity of the person or entity making such
request or Transaction Proposal. The Company will promptly inform Buyer of any
material change in the details (including amendments or proposed amendments) of
any such request for nonpublic information, the contents of any discussions or
negotiations or any material change in such Transaction Proposal.
(d) CONFIDENTIALITY AND STANDSTILL AGREEMENTS. During the period from the
date of this Agreement through the Effective Time of the Merger, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it or any of its Subsidiaries is a party.
During such period, the Company shall enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreement, including, but not
limited to, by obtaining injunctions to prevent any breaches of any such
agreement and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
6.6 RESIGNATION OF DIRECTORS. Prior to the Effective Time of the Merger,
the Company shall deliver to MergerCo evidence satisfactory to MergerCo of the
resignation of all directors of the Company, effective at the Effective Time of
the Merger.
6.7 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to Buyer or MergerCo, and Buyer or MergerCo shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event which causes or is
reasonably likely to cause any representation or warranty made by such party
contained in this Agreement to be untrue or inaccurate in any material respect
or any covenant, condition or agreement contained in this Agreement not to be
complied with or satisfied and (ii) any failure of the Company on the one hand,
or Buyer or MergerCo on the other hand, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 6.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
6.8 STATE TAKEOVER LAWS. If any "fair price," "control share acquisition"
or "business combination" statute or other similar statute or regulation shall
become applicable to the transactions contemplated hereby, including the Merger,
the Company, Buyer and MergerCo, and their respective Boards of Directors, shall
use their reasonable best efforts to grant such approvals and to take such other
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated
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hereby and shall otherwise use their reasonable best efforts to eliminate the
effects of any such statute or regulation on the transactions contemplated
hereby.
6.9 COMPANY 401(K) PLAN AND BONUS PLAN. Buyer shall elect either to
continue the sponsorship of the Travel Ports of America, Inc. 401(k) Plan (the
"Travel Ports 401(k) Plan"), or for the Company to terminate the Travel Ports
401(k) Plan prior to the Closing Date. In the event Buyer elects to continue
sponsorship, Buyer may in its discretion freeze or terminate the Travel Ports
401(k) Plan any time on or after the Closing Date. Similarly, in the event Buyer
elects to continue sponsorship, Buyer may in its discretion merge the Travel
Ports 401(k) Plan into the TravelCenters of America 401(k) Savings Plan, or such
other qualified defined contribution plan as may then be maintained by Buyer,
any time on or after the Closing Date. Buyer will cause the Surviving
Corporation to pay all accrued and unpaid benefits under the Company's bonus
plan (the "Company's Bonus Plan") within seventy-five (75) days of the Closing
Date. The Company will not (i) amend or alter any of the Company's employee
benefit plans and/or welfare benefit plans, including, but not limited to the
Travel Ports 401(k) Plan and the Company's Bonus Plan, or (ii) accelerate the
eligibility under any benefit plan of the Company, including payment to any
employee of a bonus under the Company's Bonus Plan.
6.10 STATE ENVIRONMENTAL TRANSFER NOTIFICATIONS. The Company shall cause
the necessary documentation to be filed with, and the necessary approvals to be
obtained from, the proper agencies in certain states, including but not limited
to the State of New Jersey and the State of Indiana, evidencing the Company's
compliance with applicable state environmental regulations and property transfer
statutes.
6.11 SEVERANCE PLAN. Within thirty (30) days from the date hereof, the
Company shall create, with the prior consent and approval of Buyer, a severance
plan (the "Severance Plan") for a certain limited group of employees of the
Company (other than Messrs. Saunders and Holahan) providing for certain payments
which may be made to such employees under certain limited circumstances as are
to be set forth in the Severance Plan, all as more fully described in Section
6.11 of the Disclosure Schedule.
6.12 OPTION CANCELLATION AGREEMENTS. In accordance with Section 2.2(b) of
this Agreement, the Company shall deliver to Buyer prior to the Effective Time
of the Merger, Option Cancellation Agreements executed by each holder of
unexpired outstanding Company Stock Options (whether granted under a Company
Stock Option Plan or otherwise), providing for the exercise and/or cancellation
of all Company Stock Options; and all holders of such Company Stock Options not
theretofore exercised will be entitled to receive solely the cash amount
referred to in Section 2.2(b). Simultaneous with Closing, Buyer shall make
available the funds necessary to make all payments required to be made to the
holders of unexercised Company Stock Options pursuant to Section 2.2(b).
6.13 WARRANT CANCELLATION AGREEMENTS. In accordance with Section 2.2(c) of
this Agreement, the Company shall deliver to Buyer prior to the Effective Time
of the Merger, Warrant Cancellation Agreements executed by each holder of
unexpired outstanding Company Warrants, providing for the cancellation of all
Company Warrants; and the holders of Company Warrants issued pursuant to the
1995 Warrant Agreement shall have theretofore been exercised at a price of $3.15
per share or shall represent the right to receive solely $1.15 per share in cash
upon exercise (net of a $3.15 exercise price) pursuant to such Warrant
Cancellation Agreement and all other Company Warrants shall have been canceled.
Simultaneous with Closing, Buyer shall make available the funds necessary to
make all payments required to be made to the holders of unexercised Company
Warrants pursuant to Section 2.2(c).
6.14 REDEMPTION OF CONVERTIBLE DEBT SECURITIES. The Company shall cause
written notification of the redemption of the Convertible Debt Securities to be
given to the holders thereof, in accordance with the terms of the Convertible
Debt Securities or the indentures or other agreements governing the terms
thereof and in accordance with Section 2.2 hereof. Further, the Company shall
take all necessary action to arrange for all outstanding Convertible Debt
Securities, other than such Convertible Debt Securities converted into Company
Common Shares by the holder thereof, at a conversion price of $3.98 in the case
of the Convertible Debentures and $2.62 in the case of the Convertible Notes, to
be redeemed in full, in accordance with the terms thereof, and to be
extinguished and of no further force and effect simultaneous with the Effective
Time of the Merger. Simultaneous with Closing, Buyer shall provide the Company
with the funds necessary to make all payments required to be made to the holders
of outstanding Convertible Debt Securities pursuant to this paragraph.
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6.15 REPAYMENT OF INDEBTEDNESS. In addition to the redemption of the
Convertible Debt Securities, the Company shall take all action necessary to
arrange for the repayment in full of all outstanding Indebtedness of the Company
and its Subsidiaries, other than Indebtedness owed by the Company pursuant to
any capital leases of the Company that are not in default or accelerated under
the terms of any such lease, and shall cause such Indebtedness, including the
payment of any prepayment fees or penalties, to be repaid in full simultaneous
with the Effective Time of the Merger. The Company shall obtain, not later than
the Effective Time of the Merger, written releases or other termination
documents from all holders of any Liens on any assets or properties (both real
and personal) of the Company relating to such Indebtedness; provided, however,
that at the request of Buyer, the Company shall not repay the Industrial
Development Bonds on the Dansville facility (and the Surviving Corporation will
assume the obligations related thereto). Notwithstanding the foregoing, any
redemption or repayment of Indebtedness by the Company pursuant to Section 6.14
or this Section 6.15 (including any payment of prepayment penalties or fees)
shall be subject to the prior approval of Buyer. Simultaneous with Closing,
Buyer shall provide the Company with the funds necessary to make all payments
required pursuant to this paragraph.
6.16 ENVIRONMENTAL DILIGENCE. The Company shall provide or make available
to Buyer all information in its possession or reasonably obtainable concerning
the environmental condition of all Owned Properties and Leasehold Premises and
all formerly owned and leased facilities. The Company shall, at Buyer's expense,
engage a consultant or consultants (the selection and the terms of any payment
obligations of any such consultant(s) shall be acceptable to Buyer) to (i)
conduct Phase I environmental audits to be performed on each of the Company's
sites, (ii) conduct Phase II environmental audits to be performed on up to seven
of the Company's sites as selected by Buyer, (iii) conduct resampling of
monitoring wells on three of the Company's sites as selected by Buyer, (iv)
install a monitoring well at the Company's Mahwah, New Jersey facility at a
location selected by Buyer and (v) install a monitoring well at the Company's
Beach Haven, Pennsylvania facility at a location selected by Buyer. Buyer shall
direct each such consultant, within the parameters described above, as to the
scope and activities to be included in such engagement and any writings or
reports produced by the consultant shall be delivered to Buyer. The Company
agrees to use its reasonable best efforts to take or cause to be taken all
actions, and to do or cause to be done, and to assist and cooperate with each
consultant and Buyer in doing all things necessary to accomplish the purposes of
this Section 6.16. Buyer and the Company agree to cooperate so as to attempt to
minimize any (a) interference with the Company's regular conduct of its business
at the Company's properties or facilities, and (b) damages caused by such
consultants in connection with the activities contemplated by this Section 6.16.
6.17 AMENDMENT OF SUBLEASE. The Company shall, prior to the Effective Time
of the Merger, amend the sublease with Maybrook Realty, Inc. ("Maybrook") for
the Maybrook, New York travel plaza (as amended, the "Amended Sublease") and
shall cause Maybrook to enter into the Amended Sublease to provide two (2)
additional ten (10) year renewal options, in addition to the existing three (3),
five (5)-year renewal options. Rent for the existing three (3), five (5)-year
renewal periods shall be in the amount of $41,250 per month for the first
period, $45,375 per month for the second period and $49,913 per month for the
third period; rent for the first ten (10) year renewal period shall be $54,904
per month and rent for the second ten (10) year renewal period shall be $60,395.
In addition, the Amended Sublease shall change the Company's current purchase
option consideration from $3,500,000 to the greater of the fair market value of
such interest at the time of exercise of such option or $4,500,000.
6.18 TERMINATION OF CONSULTING AGREEMENT FOR E. PHILIP SAUNDERS. Prior to
the Effective Time of the Merger, each of the Company and E. Philip Saunders
shall have executed documentation (the "Saunders Consulting Agreement
Termination"), in form and substance satisfactory to Buyer, necessary to
terminate the consulting agreement between the Company and E. Philip Saunders,
dated May 1, 1992, in accordance with its terms.
6.19 GRIFFITH OIL FUEL SUPPLY CONTRACT. Buyer shall cause Surviving
Corporation to assume the obligations of the Company under its fuel and gas
supply agreement with Griffith Oil Co., Inc., dated July 1, 1996 (the "Griffith
Supply Agreement"), and shall keep such agreement in place for a period of at
least one year. Notwithstanding the foregoing, Surviving Corporation shall be
entitled in its sole discretion to provide a notice of
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termination under the Griffith Supply Agreement at any time after the Effective
Time of the Merger so long as such termination is not effective on or prior to
the first anniversary of the Effective Time of the Merger.
6.20 INDEMNIFICATION.
(a) For a period of six years following the Closing Date, Buyer shall cause
the Surviving Corporation to hold harmless and indemnify the directors, officers
and employees of the Company and its Subsidiaries immediately prior to the
Effective Time of the Merger (each, an "Indemnified Party") to the same extent
that the Company currently is required under the NYBCL and its Certificate of
Incorporation, By-Laws and contracts in effect on the date of this Agreement to
indemnify such person and Buyer shall also cause the Surviving Corporation to
advance expenses as incurred to the same extent as currently required; provided,
however, that (a) any determination required to be made with respect to whether
a person's conduct complies with the standards set forth under New York law and
the Company's Certificate of Incorporation, By-Laws and contracts shall be made
by independent counsel mutually agreed upon between Buyer and the Indemnified
Party, and (b) Surviving Corporation shall be obligated pursuant to this Section
6.20 to pay for only one firm of counsel for all Indemnified Parties, unless an
Indemnified Party shall have reasonably concluded, based on the advice of
counsel, that in order to be adequately represented, separate counsel is
necessary for such Indemnified Party, in which case Surviving Corporation shall
be obligated to pay for such separate counsel.
(b) Buyer shall cause the persons serving as officers and directors of the
Company and its Subsidiaries immediately prior to the Effective Time of the
Merger to be covered for a period of six years following the Effective Time of
the Merger by the directors' and officers' liability insurance policy maintained
by the Company (provided that Buyer may substitute or cause the Company to
substitute therefor a single premium tail coverage with a policy limit equal to
the Company's existing annual coverage limit) with respect to acts or omissions
occurring prior to the Effective Time of the Merger that were committed by such
officers and directors in their capacity as such.
6.21 PAYMENT OF TRANSFER TAXES. Following the Effective Time of the Merger,
Buyer agrees to cause the Surviving Corporation to pay all taxes imposed on the
Company or on its properties or assets that arise as a result of the
consummation of the Merger.
6.22 NON-SOLICITATION OF EMPLOYEES. Buyer agrees for a period of one year
from the date of termination of this Agreement prior to the Effective Time, not
to actively solicit for employment any salaried employees of the Company for so
long as they are employed by the Company. The Company agrees for a period of one
year from the termination of this Agreement prior to the Effective Time, not to
actively solicit for employment any salaried employees of Buyer for so long as
they are employed by Buyer. Notwithstanding the foregoing, nothing in this
paragraph shall prohibit Buyer or the Company from hiring any person whose
interest in such employment arises from such person's response to a general
advertisement for employment of Buyer or the Company, as applicable.
6.23 CONFLICTS, VIOLATIONS, DEFAULTS, ASSIGNMENTS AND NOTICES. The Company
shall, prior to the Shareholders Meeting, cure or obtain any waivers with
respect to all conflicts, violations or defaults, and provide all notices and
obtain all approvals and consents, referred to in Sections 3.4(b) or 3.28(b) and
set forth on Sections 3.4(b) or 3.28(b) of the Disclosure Schedule. Prior to the
Shareholders Meeting, the Company shall obtain written releases or other
termination documents from all holders of any Liens on any assets or properties
(both real and personal) of the Company not relating to Indebtedness.
6.24 WYOMING LEASE. Prior to the Effective Time of the Merger, the Company
shall enter into a written lease in form and substance reasonably acceptable to
Buyer with E. Philip Saunders and such other owners or parties with an ownership
or beneficial interest in the real property located at I-390 and Exit 5 in
Dansville, Livingston County, NY (the "Wyoming Lease"), and any other real
property owned by E. Philip Saunders and such other owners or parties as are
associated with the business operations at the Owned Properties and Leasehold
Premises. The terms of the Wyoming Lease shall provide for a term of years
expiring no sooner than June 30, 2024, and including such renewal or extension
provisions and purchase options as are set forth in those certain leases between
the Company and John and William Kelly dated April 18, 1979, as amended, and the
Company and Richard, James and John Bennett dated June 23, 1979, as amended,
pursuant to the Company's
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acquisition of Interstate Travel Plaza, Inc., assignee of the W.W. Griffith Oil
Co., Inc., tenant under those certain lease agreements. Rent payable for the
term of the Wyoming Lease shall be $4,800 per year and shall be subject to rent
increases at such times and in such amounts as are equal to any percentage or
proportionate rent increase or escalation paid under the leases described in
foregoing sentence. Such other leases by and between the Company and E. Philip
Saunders and such other owners or parties shall provide the Surviving
Corporation with the terms, rentals and purchase and renewal options as are the
right of the Company in any verbal or written leases, if any.
6.25 TERMINATION OF OPTIONS. Prior to the Effective Time of the Merger, the
Company shall terminate all option agreements for the lease or purchase of any
interest in real property not already owned or occupied by the Company as one of
the Owned Properties or Leased Premises, specifically including without
limitation, the Company's option to purchase certain real property in
Jeffersonville, Ohio, and shall provide all notices and other communications
necessary to effectuate such terminations to prevent further recourse or
liability to the Company or to the Surviving Corporation with respect to any
such option agreements. The Company shall provide Buyer with a reasonable
opportunity to review and comment on all notices delivered pursuant to this
Section 6.25 and any payments made pursuant to this Section 6.25 shall be
subject to the prior approval of Buyer. Buyer and the Company specifically
acknowledge and agree that the Company's agreements, dated January 7, 1998, for
the purchase of fourteen (14) acres of real property in New Milford, Susquehanna
County, Pennsylvania, are not options to be terminated pursuant to the
provisions of this Section 6.25.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective obligation of
each party to effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) COMPANY SHAREHOLDER APPROVAL. The Company Shareholder Approval
shall have been obtained if required by applicable law.
(b) HSR ACT. All waiting periods (and any extensions thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired, and any filings or approvals required under any state
or foreign antitrust or similar laws shall have been made or obtained.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any
Governmental Entity or other legal restraint or prohibition shall be in
effect preventing or prohibiting the consummation of the Merger; provided,
however, that the parties shall, subject to the second sentence of Section
6.3 (b) hereof, use their best reasonable efforts to have any such
injunction, order, restraint or prohibition vacated.
7.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND MERGERCO. The obligations of
the Buyer and MergerCo to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company and its Subsidiaries contained in this Agreement
shall have been true and correct in all material respects when made and,
except to the extent such representations and warranties speak to an
earlier date, shall be true and correct in all material respects at and as
of the Effective Time of the Merger, as if made at and as of such time;
provided, however, that each of the representations and warranties of the
Company and its Subsidiaries contained in this Agreement that are qualified
as to materiality, Material Adverse Effect or Material Adverse Change shall
have been true and correct when made and, except to the extent such
representations and warranties speak to an earlier date, shall be true and
correct at and as of the Effective Time of the Merger, as if made at and as
of such time, in any such case, except as contemplated or permitted by this
Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed and fulfilled, in all material respects, each of its obligations,
covenants and agreements under this Agreement required to
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be performed by it at or prior to the Closing Date, including but not
limited to its obligations pursuant to Sections 6.5, 6.10, 6.14, 6.15, and
6.16 hereof.
(c) CONSENTS, ETC. Buyer shall have received evidence, in form and
substance reasonably satisfactory to it, that all the Permits, consents,
approvals, authorizations, qualifications and orders of Governmental
Entities and all other third parties identified in Section 3.4(c) of the
Disclosure Schedule have been obtained.
(d) NO LITIGATION. There shall not be instituted, pending or
threatened by any Governmental Entity any suit, action or proceeding (or by
any other person any suit, action or proceeding that has a reasonable
likelihood of success in the good faith opinion of the Buyer) (i)
challenging or seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by this Agreement or,
in the good faith opinion of the Buyer, materially and adversely affecting
the contemplated economic or business benefits of the transactions
contemplated hereby, (ii) seeking to prohibit or limit the ownership or
operation by the Company, any Subsidiary, the Buyer or any of the Buyer's
subsidiaries of a material portion of the business or assets of the Company
and its Subsidiaries or the Buyer and its subsidiaries, taken as a whole,
or to compel the Company or the Buyer to dispose of or hold separate any
material portion of the business or assets of the Company and its
Subsidiaries or the Buyer and its subsidiaries, taken as a whole, in each
case as a result of the Merger or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on the
ability of the Buyer or MergerCo to acquire or hold, or exercise full
rights of ownership of, any shares of Common Stock, including, without
limitation, the right to vote such shares of Common Stock on all matters
properly presented to the shareholders of the Company or (iv) seeking to
prohibit the Buyer or any of its Subsidiaries from effectively controlling
in any respect any material portion of the business or operations of the
Company or its Subsidiaries.
(e) NO MATERIAL ADVERSE CHANGE. Except as disclosed in Section 3.7 of
the Disclosure Schedule, there has not occurred any Material Adverse Change
with respect to the Company since April 30, 1998.
(f) ABSENCE OF CERTAIN RULES AND ORDERS. There shall not be any
statute, rule, regulation, judgment, order or injunction enacted, entered,
enforced, promulgated or deemed applicable to the Merger by any
Governmental Entity that would result in any of the consequences referred
to in clauses (i) through (iv) of Section 7.2(d).
(g) OPTION CANCELLATION AGREEMENTS. Each holder of any unexpired
outstanding Company Stock Option (whether granted under a Company Stock
Option Plan or otherwise) shall have executed an Option Cancellation
Agreement and delivered such Option Cancellation Agreement to Buyer.
(h) WARRANT CANCELLATION AGREEMENTS. Each holder of any unexpired
outstanding Company Warrant shall have executed a Warrant Cancellation
Agreement and delivered such Warrant Cancellation Agreement to Buyer.
(i) THE AMENDED SUBLEASE. The Company and Maybrook shall have entered
into the Amended Sublease.
(j) CONSULTING AGREEMENT. MergerCo. shall have entered into a three
(3) year consulting agreement (the "Consulting Agreement") with John M.
Holahan, in substantially the form attached hereto as Exhibit D, pursuant
to which Mr. Holahan will be paid $150,000 per year and will agree not to
compete with Buyer for the period of the Consulting Agreement and for the
period of two (2) years following the expiration thereof.
(k) SHARE EXCHANGE. The Share Exchange shall have occurred prior to
the Effective Time of the Merger.
(l) OPINION OF COUNSEL. Harris, Beach & Wilcox, LLP, counsel to the
Company, shall have delivered to the Buyer and MergerCo a written opinion
of counsel in form and substance satisfactory to Buyer, subject to
customary assumptions and qualifications, with respect to (i) the
effectiveness of the Merger, (ii) the due incorporation, valid existence
and good standing of the Company and its Subsidiaries, (iii) the validity,
binding effect and enforceability of this Agreement, the Option
Cancellation Agreements and the Warrant Cancellation Agreements and (iv)
such other matters as MergerCo may reasonably request.
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(m) COMPANY CERTIFICATE. The Company shall have delivered to the Buyer
and MergerCo a certificate, dated as of the Closing Date and signed on its
behalf by its Chief Executive Officer and its Chief Financial Officer, as
to the satisfaction by it of the conditions set forth in subsections
7.2(a), 7.2(b), 7.2(d), 7.2(e) and 7.2(l).
(n) TERMINATION OF SAUNDERS CONSULTING AGREEMENT. Each of the Company
and E. Philip Saunders shall have executed and delivered to Buyer the
Saunders Consulting Agreement Termination.
(o) THE WYOMING LEASE AND REAL ESTATE OPTIONS. The Company and E.
Philip Saunders and any other parties with an ownership or beneficial
interest in the real property referred to Section 6.24 shall have entered
into the Wyoming Lease and any other leases referred to in Section 6.24.
The Company shall have terminated all option agreements for the lease or
purchase of real property referred to Section 6.25.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the Company
to effect the Merger is further subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company and its Subsidiaries contained in this Agreement
shall have been true and correct in all material respects when made and,
except to the extent such representations and warranties speak to an
earlier date, shall be true and correct in all material respects at and as
of the Effective Time of the Merger, as if made at and as of such time;
provided, however, that each of the representations and warranties of the
Company and its Subsidiaries contained in this Agreement that are qualified
as to materiality, Material Adverse Effect or Material Adverse Change shall
have been true and correct when made and, except to the extent such
representations and warranties speak to an earlier date, shall be true and
correct at and as of the Effective Time of the Merger, as if made at and as
of such time, in any such case, except as contemplated or permitted by this
Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF THE BUYER AND MERGERCO. The Buyer
and MergerCo shall have performed and fulfilled, in all material respects,
each of their respective obligations, covenants and agreements under this
Agreement required to be performed by them at or prior to the Closing Date.
(c) NO LITIGATION. There shall not be instituted, pending or
threatened by any Governmental Entity any suit, action or proceeding (or by
any other person any suit, action or proceeding that has a reasonable
likelihood of success in the good faith opinion of the Company) challenging
or seeking to restrain or prohibit the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
(d) OPINION OF COUNSEL. The Buyer's and MergerCo's legal counsel shall
have delivered to the Company a written opinion of counsel in form and
substance satisfactory to the Company, subject to customary assumptions and
qualifications, with respect to (i) the validity, binding effect and
enforceability of this Agreement and (ii) such other matters as the Company
may reasonably request.
(e) BUYER AND MERGERCO CERTIFICATE. The Buyer and MergerCo shall have
delivered to the Company certificates, dated as of the Closing Date and
signed on their behalf by their respective President and Chief Financial
Officer, as to the satisfaction by them of the conditions set forth in
subsections 7.3(a), 7.3(b) and 7.3(c).
(f) BRING-DOWN OPINION OF MCDONALD INVESTMENTS INC. If requested by
the Board of Directors of the Company in accordance with Section 6.1(b),
immediately prior to the mailing of the Proxy Statement to the shareholders
of the Company, the Company shall have received the written bring-down
fairness opinion of McDonald Investments Inc. dated as of such date, to the
effect that as of the date of the meeting of the Board of Directors of the
Company referred to in Section 3.16, the financial consideration to be
received by the shareholders of the Company pursuant to the Merger is fair
to the holders of Company Common Shares from a financial point of view.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of any matters
presented in connection with the Merger by the shareholders of the Company:
(a) by the written agreement of Buyer and the Company;
(b) by either Buyer or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger, or
if there shall be in effect any other legal restraint or prohibition
preventing or prohibiting the consummation of the Merger, and such order,
decree, ruling or other action shall have become final and nonappealable
(other than due to the failure of the party seeking to terminate this
Agreement to perform its obligations under this Agreement required to be
performed at or prior to the Effective Time of the Merger);
(c) by either Buyer or the Company upon the Company's execution of a
binding agreement with a third party with respect to a Transaction
Proposal, provided that if the Company seeks to terminate this Agreement
pursuant to this provision, the Company has complied with all provisions of
this Agreement, including the notice provisions contained in Section
6.5(c), and provided further that, in either case, the Company, prior to
such termination, pays the Immediate Termination Fee required in accordance
with Section 9.2;
(d) by Buyer in the event of a material breach by the Company of, or
failure by the Company to perform in any material respect, any
representation, warranty, covenant or other agreement of the Company
contained in this Agreement, which cannot be or has not been cured within
ten (10) days after the giving of written notice to the Company;
(e) by the Company in the event of a material breach by MergerCo or
Buyer of, or failure by MergerCo or Buyer to perform in any material
respect, any representation, warranty, covenant or other agreement of
MergerCo or Buyer contained in this Agreement, which cannot be or has not
been cured within ten (10) days after the giving of written notice to
MergerCo or Buyer;
(f) by Buyer if there has occurred or occurs a Material Adverse Change
with respect to the Company, at any time after the date of this Agreement;
(g) by Buyer, if at any time prior to the Shareholders Meeting, the
Company's Board of Directors shall have failed to make its recommendation
referred to in Section 6.1(d), withdrawn such recommendation or modified or
changed such recommendation in a manner adverse to the interests of Buyer
(whether in accordance with Sections 6.1(d) and 6.5 or otherwise) or taken
any position or action that is inconsistent with such recommendation
(including, without limitation, recommending or not opposing any
Transaction Proposal);
(h) by either Buyer or the Company if the Company Shareholder Approval
shall not have been obtained at the Shareholders Meeting;
(i) by either Buyer or the Company if the fairness opinion provided to
the Company's Board of Directors by McDonald Investments Inc. prior to the
execution of this Agreement shall be withdrawn after and as a result of a
Transaction Proposal that, in the reasonable opinion of McDonald
Investments Inc., requires McDonald Investments Inc. to withdraw or not
deliver such fairness opinion, or the bring-down fairness opinion of
McDonald Investments Inc. referred to in Section 7.3(f), if requested by
the Board of Directors of the Company in accordance with Section 6.1(b), is
not delivered or shall be withdrawn for any reason;
(j) by Buyer in the event that Buyer's environmental due diligence,
including the environmental audits, conducted pursuant to Section 6.16
hereof, disclose environmental-related obligations, problems or other
Liabilities that are reasonably estimated by Buyer to cost in the aggregate
more than $2,000,000 (including the cost of investigation, consulting,
remediation and compliance), net of any value reasonably expected by
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<PAGE> 91
Buyer to be recovered from any existing insurance or other identified
expected third party recoveries, that, in each case, have been disclosed by
the Company to Buyer, all as adjusted for time and likelihood of
occurrence, and all as determined by Buyer in its sole reasonable
discretion and consistent, to the extent analogous, with Buyer's past
practice; or
(k) by either Buyer or the Company, if the Closing Date has failed to
occur on or before August 31, 1999, except to the extent that such failure
arises out of or results from the knowing action or inaction of the party
seeking to terminate pursuant to this Section 8.1(k); provided, however,
that if the only condition that has not been satisfied by the Company after
reasonable best efforts is the Company's obligation to obtain Option
Cancellation Agreements or Warrant Cancellation Agreements from each holder
of Company Stock Options and Company Warrants, as the case may be, the
foregoing date shall be extended by an additional thirty (30) calendar
days.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement by either the Company or Buyer as provided in Section 8.1, this
Agreement shall forthwith become void and shall have no further effect, without
any Liability on the part of the Company, MergerCo or Buyer, except that the
provisions of Sections 3.14 and 4.3 (relating to brokers), the last sentence of
Section 6.2 (relating to confidentiality), Section 6.22 (relating to
non-solicitation of employees), this Section 8.2, Section 9.2 (relating to fees
and expenses) and Section 9.7 (relating to third party beneficiaries) shall
survive any such termination of this Agreement. Nothing contained in this
section shall relieve any party for any breach of the representations,
warranties, covenants or agreements set forth in this Agreement which occurs
prior to the termination hereof.
8.3 AMENDMENT. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with
the Merger by the shareholders of the Company; provided, however, that after any
such approval, there shall be no amendment of this Agreement that by law
requires further approval by such shareholders without the further approval of
such shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time of the
Merger, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (iii) subject to the proviso of
Section 8.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
8.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. Any
termination of this Agreement pursuant to Section 8.1, any amendment of this
Agreement pursuant to Section 8.3 or any extension or waiver under this
Agreement pursuant to Section 8.4, in order to be effective, shall require
action by the Board of Directors (or its duly authorized designee) of the party
terminating this Agreement, executing the amendment or granting the extension or
waiver, as the case may be.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
all such representations and warranties will be extinguished as of the Effective
Time of the Merger and none of the Company, Buyer and MergerCo, nor any officer,
director or employee or shareholder thereof, shall have any Liability whatsoever
with respect to any such representation or warranty after such time. This
Section 9.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time of the Merger.
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<PAGE> 92
9.2 FEES AND EXPENSES.
(a) EXPENSES.
(i) If this Agreement is terminated in connection with any of the
circumstances described in Section 9.2(b) that require the payment of an
Immediate Termination Fee (as set forth therein), or 9.2(c) in addition to
the other amounts that will be or become payable pursuant to Section 9.2(b)
or (c), the Company shall promptly reimburse Buyer and MergerCo in cash for
all out-of-pocket expenses, disbursements and fees actually paid or payable
by or on behalf of Buyer or MergerCo including to its respective
accountants, attorneys, investment banks, brokers, financial or other
advisors, commercial banks and other lending institutions (including,
without limitation, up-front fees, ticking fees, commitment fees,
administrative fees and interest expense in each case in respect of any
proposed financing sources for the Merger), or actually paid or payable to
the agents of or counsel to such commercial banks or lending institutions,
in each case, whether incurred prior to, on or after the date hereof and
arising out of, relating to, or incidental to, the discussion, evaluation,
negotiation, documentation, financing, closing and existence of the
transactions contemplated by this Agreement, the Voting Agreement or the
Share Exchange Agreement (collectively, "Buyer Expenses") up to a maximum
of $1,000,000.
(ii) If this Agreement is terminated by Buyer pursuant to Section
8.1(d) or 8.1(f), the Company shall, as Buyer's sole remedy for such
material breach or failure to perform (except as otherwise provided in
Section 9.2(c)), promptly reimburse Buyer and MergerCo in cash for Buyer
Expenses up to a maximum of $800,000. Notwithstanding the foregoing, if
this Agreement is terminated by Buyer pursuant to Section 8.1(f) as a
result of a Material Adverse Change with respect to the Company that
results solely from economic or industry conditions that are outside of the
Company's control and that affect all multi-unit truckstop or travel center
operations (an "Industry-wide Material Adverse Change"), Buyer shall not be
entitled to reimbursement of Buyer Expenses pursuant to this paragraph.
(iii) If this Agreement is terminated by Buyer pursuant to Section
8.1(j), the Company shall reimburse Buyer and MergerCo in cash for Buyer
Expenses up to a maximum of $200,000.
(iv) If this Agreement is terminated by Buyer pursuant to Section
8.1(d) or 8.1(f) and thereafter Buyer is entitled to a Deferred Termination
Fee pursuant to Section 9.2(c)(i), the Company shall promptly reimburse
Buyer and MergerCo in cash for Buyer Expenses up to a maximum of
$1,000,000, minus any amount previously reimbursed by the Company pursuant
to Section 9.2(a)(ii).
(v) If Buyer is entitled to expense reimbursement pursuant to Section
9.2(a)(i), 9.2(a)(ii) or 9.2(a)(iv) (other than upon termination by Buyer
pursuant to Section 8.1(f) as a result of an Industry-wide Material Adverse
Change), Buyer shall, upon payment of all amounts due it pursuant to this
Agreement, transfer its ownership interests to the Company or its designee
in all title reports, survey work, appraisals and environmental audits
relating to the Company's assets or properties, except to the extent Buyer
is not permitted by law to transfer any of such assets. Notwithstanding the
foregoing, Buyer shall be permitted to retain copies of any such title
reports, survey work, appraisals and environmental audits transferred to
the Company.
(vi) If this Agreement is terminated by the Company pursuant to
Section 8.1(e), Buyer shall, as the Company's sole remedy for such material
breach or failure to perform, reimburse the Company in cash for all
out-of-pocket expenses, disbursements and fees actually paid or payable by
or on behalf of the Company, including to its respective accountants,
attorneys, investment banks, brokers, financial or other advisors, whether
incurred prior to, on or after the date hereof and arising out of, relating
to, or incidental to, the discussion, evaluation, negotiation,
documentation, closing and existence of the transactions contemplated by
this Agreement, the Voting Agreement or the Share Exchange Agreement
(collectively, "Company Expenses") up to a maximum of $500,000.
Notwithstanding the foregoing, Company Expenses shall not include any
premiums, expenses, disbursements or fees paid by the Company in connection
with the procurement of directors' and officers' liability insurance.
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<PAGE> 93
(b) IMMEDIATE TERMINATION FEE. If this Agreement is terminated pursuant to
any of the following provisions:
(i) by the Company pursuant to Section 8.1(c), 8.1(i) or, after the
existence of a Transaction Proposal, pursuant to 8.1(h) unless the only
Transaction Proposal in existence at the time of the Shareholders Meeting
arises under Section 6.5(b)(iii) and a majority of the Company Common
Shares beneficially owned by the person or "group" described under said
Section 6.5(b)(iii) are voted in favor of the transactions contemplated
hereunder at the Shareholders Meeting (a "Non-Conforming Transaction
Proposal") (in which case, no Immediate Termination Fee is payable
hereunder).
(ii) by Buyer pursuant to Sections 8.1(c), 8.1(g) or 8.1(i) or, after
the existence of a Transaction Proposal, pursuant to Section 8.1(h) unless
the only Transaction Proposal in existence at the time of the Shareholders
Meeting is a Non-Conforming Transaction Proposal (in which case, no
Immediate Termination Fee is payable hereunder).
then the Company shall, simultaneously with such termination of this Agreement,
pay Buyer a fee of $1,200,000 in cash, which amount shall be payable in same day
funds (the "Immediate Termination Fee").
(c) DEFERRED TERMINATION FEE.
(i) If this Agreement is terminated under any of the circumstances
described in Section 9.2(a)(ii), other than a termination by Buyer pursuant
to Section 8.1(f) as a result of an Industry-wide Material Adverse Change,
and if, at any time prior to twelve (12) months following the termination
of this Agreement, any Person (other than Buyer or MergerCo or any of their
Affiliates) consummates a transaction that would otherwise constitute a
Transaction Proposal in which the total initially announced value of the
per share consideration for such transaction is equal to or exceeds the
Merger Consideration, the Company shall pay to Buyer, immediately prior to
the consummation of such transaction, a fee payable in same day funds in an
amount equal to $1,200,000 (the "Deferred Termination Fee"); or
(ii) If (a) any Person (other than Buyer or MergerCo or any of their
Affiliates) shall have made, proposed, communicated or disclosed a
Transaction Proposal or (b) if, after the date of this Agreement and prior
to any termination of this Agreement, any "person" or "group" (as such
terms are defined in Section 13(d)(3) of the Exchange Act) (other than
Buyer, MergerCo or any of their Affiliates) purchases or otherwise
acquires, directly or indirectly, beneficial ownership of 10% or more of
the outstanding Company Common Shares, and, in each case, if at any time
prior to twelve (12) months following the termination of this Agreement
pursuant to Section 8.1(k) any Person (other than Buyer or MergerCo or any
of their Affiliates) consummates a transaction that would otherwise
constitute a Transaction Proposal (or enters into a definitive agreement
with respect to such a transaction which transaction is subsequently
consummated), the Company shall pay to Buyer, immediately prior to the
earlier of the execution of such definitive agreement or the consummation
of such transaction, the Deferred Termination Fee. Notwithstanding the
foregoing, for purposes of this Section 9.2(c)(ii), the percentage
threshold required for a "Transaction Proposal" covered under Section
6.5(b)(iii) shall be increased from 20% or more of the outstanding Company
Common Shares to 33 1/3% or more of the outstanding Company Common Shares.
(d) LIMITATION TO ONE FEE. In no event shall the Company be required to pay
more than one fee pursuant to Section 9.2(b) or 9.2(c).
(e) OTHER EXPENSES. Except as provided otherwise in paragraph (a) above,
all costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except that the Company shall pay all costs and expenses (i) in
connection with printing and mailing the Proxy Statement, as well as all SEC
filing fees relating to the transactions contemplated herein and (ii) of
obtaining any consents of any third party.
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9.3 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) If to Buyer or MergerCo, to:
TravelCenters of America, Inc.
24601 Center Ridge Road
Suite 200
Westlake, OH 44145-5634
Attention: Edwin P. Kuhn
with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Philip M. Dawson, Esq.
(ii) If to the Company, to:
Travel Ports of America, Inc.
3495 Winton Place
Building C
Rochester, NY 14623
Attention: E. Philip Saunders
with a copy to:
Harris, Beach & Wilcox, LLP
Granite Building
130 East Main Street
Rochester, NY 14604
Attention: Thomas E. Willett, Esq.
9.4 DEFINITIONS. In addition to the other capitalized terms which are
defined elsewhere in this Agreement, as used herein the following terms shall
have the following meanings:
An "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person and any Director, officer or
controlling person of such Person.
"Books and Records" means all books and records of the Company and its
Subsidiaries relating to the businesses and properties of the Company or its
Subsidiaries, including without limitation records relating to sales and
purchases, personnel records, Tax Returns, and financial and operating data.
A "business day" means any day, other than Saturday, Sunday or a federal
holiday, and shall consist of the time period from 12:01 a.m. through 12:00
midnight Eastern Standard Time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any contract, commitment, understanding, instrument,
lease, pledge, mortgage, indenture, note, license, agreement, purchase or sale
order, promise or similar arrangement evidencing or creating any obligation,
whether written or oral.
"Defined Benefit Plan" means any Pension Plan which is a defined benefit
plan within the meaning of Section 3(35) of ERISA.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA, other than a Multiemployer Plan.
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<PAGE> 95
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Entity" means any foreign, federal, state, regional or local
authority, agency, body, court or instrumentality, regulatory or otherwise,
which, in whole or in part, was formed by or operates under the auspices of any
foreign, federal, state, regional or local government.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed by such Person, (g) all guarantees by such Person of Indebtedness
of others, (h) all capital lease obligations of such Person, (i) all obligations
of such Person in respect of interest rate protection agreements, foreign
currency exchange agreements or other interest or exchange rate hedging
arrangements, (j) all obligations of such Person as an account party to
reimburse any bank or any other Person in respect of letters of credit and
bankers' acceptances and (k) all obligations of such Person in respect of
fuel-supply hedging agreements and arrangements. The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or member, other than to the extent that the
instrument or agreement evidencing such Indebtedness expressly limits the
liability of such Person in respect thereof pursuant to provisions and terms
reasonably satisfactory to the Agent.
"Knowledge," when used with respect to the Company or any Subsidiary of the
Company, means the actual knowledge of the following officers and employees or
consultants (as well as any of their successors) of the Company or its
Subsidiaries: E. Philip Saunders, John M. Holahan and William Burslem III, and,
without duplication, the employees with direct supervisory authority over
financial, marketing, merchandising, environmental, tax, labor, employee
benefits and real estate matters or any of the foregoing, in each case after
reasonable investigation and inquiry. Notwithstanding the foregoing, for
purposes of Section 3.12 and 3.28, "Knowledge" shall also include the actual
knowledge of Gerry Beiermann and, in the case of Section 3.12, shall also
include the actual Knowledge of each of the general managers of each site
operated by the Company or any Subsidiary.
"Liabilities" means responsibilities, obligations, duties, commitments,
claims and liabilities of any and every kind, whether known or unknown, asserted
or unasserted, accrued, absolute, contingent or otherwise.
"Lien" means any lien, charge, covenant, condition, easement, adverse
claim, demand, encumbrance, limitation, security interest, option, pledge, or
any other title defect or restriction of any kind.
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the Company, any change or effect that either individually or in
the aggregate with all other such changes or effects, is, or is reasonably
likely to be, materially adverse to the business, financial condition, prospects
or results of operations of the Company and its Subsidiaries taken as a whole
and the terms "material" and "materially" shall have correlative meanings;
provided, however, that no Material Adverse Change or Material Adverse Effect
shall be deemed to have occurred as a result of any one or more of (i) a change
with respect to, or affecting the Company resulting from expenses (such as
legal, accounting and investment bankers' fees), that are known or reasonably
contemplated as of the date hereof by Buyer to be incurred by the Company in
connection with this Agreement or (ii) any financial change resulting from
actions specifically required by this Agreement.
"Multiemployer Plan" means any multiemployer plan within the meaning of
Section 3(37) of ERISA.
"Other Plan" means any employment, noncompetition, management, agency or
consulting arrangement, bonus, profit sharing, deferred compensation,
retirement, incentive, stock option, stock ownership or stock
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<PAGE> 96
purchase plan, or similar plan, policy or arrangement, whether or not in written
form, which does not constitute an Employee Benefit Plan and which is not
disclosed in Section 3.10 of the Disclosure Schedule.
"Pension Plan" means any employee pension benefit plan within the meaning
of Section 3(2) of ERISA, other than a Multiemployer Plan.
"Person" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
A "Subsidiary" of any Person means another Person, an amount of the voting
securities, voting membership interests, voting partnership interests or other
voting interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body or, if there are no such voting
interests, fifty percent (50%) or more of the equity interests of which, are
owned directly or indirectly by such first Person.
"Welfare Plan" means any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA, other than a Multiemployer Plan.
9.5 INTERPRETATION. When a reference is made in this Agreement to a section
or schedule, such reference shall be to a section of or schedule to this
Agreement unless otherwise indicated. The Table of Contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
this Agreement shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and the
other agreements referred to herein (including, without limitation, the
Confidentiality Agreement dated October 19, 1998) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement. This Agreement is not intended to confer any rights or remedies upon
any Persons other than the parties hereto.
9.8 GOVERNING LAW, JURISDICTION AND VENUE. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
APPLICABLE TO AGREEMENTS MADE AND ENTIRELY TO BE PERFORMED WITHIN SUCH STATE AND
SUCH FEDERAL LAWS AS MAY BE APPLICABLE. THE LAWS OF NEW YORK SHALL NOT BE
APPLICABLE IN ANY WAY TO THE TERMS OF THIS AGREEMENT.
9.9 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations of the parties under this Agreement shall be assigned, in whole or
in part, by operation of Law or otherwise, by any of the parties without the
prior written consent of the other parties; provided, however, that Buyer or
MergerCo may, without the Company's prior written consent, assign its rights
under this Agreement to any of the Buyer's Subsidiaries or any financial
institution that requires such assignment in connection with such financial
institution's agreement to provide financing to either Buyer or MergerCo.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
9.10 ENFORCEMENT. Except as provided by Section 9.2 in connection with a
termination as set forth therein, the parties agree that irreparable damage
would occur if any provision of any covenant or agreement contained in this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to injunctive relief to prevent breaches of any covenant or agreement contained
in this Agreement and to enforce specifically the terms and provisions thereof.
Notwithstanding the foregoing, the parties cannot seek specific performance for
those covenants or agreements contained in Sections 2.2(b) or 6.12 the
satisfactory performance of which are solely within the control of a
third-party.
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<PAGE> 97
IN WITNESS WHEREOF, Buyer, MergerCo and the Company have caused this
Agreement to be signed by their duly authorized, respective officers, all as of
the date first written above.
TRAVELCENTERS OF AMERICA, INC.
("Buyer")
By: /s/ EDWIN P. KUHN
------------------------------------
Name: Edwin P. Kuhn
Title: President and Chief Executive
Officer
TP ACQUISITION, INC.
("MergerCo")
By: /s/ EDWIN P. KUHN
------------------------------------
Name: Edwin P. Kuhn
Title: President and Chief Executive
Officer
TRAVEL PORTS OF AMERICA, INC.
(the "Company")
By: /s/ E. PHILIP SAUNDERS
------------------------------------
Name: E. Philip Saunders
--------------------------------------
Title: Chairman and Chief Executive
Officer
--------------------------------------
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<PAGE> 98
TABLE OF DEFINITIONS
DEFINITION PAGE
<TABLE>
<S> <C>
1995 Warrant Agreement...................................... I-4
1998/1999 Capital Budget.................................... I-12
affiliate................................................... I-14
Affiliate................................................... I-36
Agreement................................................... I-1
Amended Sublease............................................ I-27
Antitrust Laws.............................................. I-23
Books and Records........................................... I-36
business day................................................ I-36
Buyer....................................................... I-1
Buyer Expenses.............................................. I-34
Cephas Warrant Agreement.................................... I-4
Certificate of Merger....................................... I-2
Certificates................................................ I-5
Closing..................................................... I-2
Closing Date................................................ I-2
Code........................................................ I-36
Company..................................................... I-1
Company Common Shares....................................... I-1
Company Expenses............................................ I-34
Company Preferred Shares.................................... I-6
Company Shareholder Approval................................ I-1
Company Stock Option Plans.................................. I-3
Company Stock Options....................................... I-3
Company Warrant............................................. I-4
Company's Bonus Plan........................................ I-26
Consulting Agreement........................................ I-30
Contract.................................................... I-36
Convertible Debentures...................................... I-4
Convertible Debt Securities................................. I-4
Convertible Note............................................ I-4
Date Data................................................... I-9
Deferred Termination Fee.................................... I-35
Defined Benefit Plan........................................ I-36
Disclosure Schedule......................................... I-6
Effective Time of the Merger................................ I-2
Employee Benefit Plan....................................... I-36
Environmental Claim......................................... I-12
Environmental Laws.......................................... I-12
Environmental Permits....................................... I-12
ERISA....................................................... I-37
ERISA Affiliate............................................. I-10
Exchange Act................................................ I-37
Exchange Agent.............................................. I-4
Exchange Fund............................................... I-5
Excluded Shares............................................. I-3
Governmental Entity......................................... I-37
Griffith Supply Agreement................................... I-27
Hazardous Materials......................................... I-12
HSR Act..................................................... I-37
</TABLE>
I-i
<PAGE> 99
<TABLE>
<S> <C>
Immediate Termination Fee................................... I-35
Indebtedness................................................ I-37
Indemnified Party........................................... I-28
Industry-wide Material Adverse Change....................... I-34
Intellectual Property Rights................................ I-14
Knowledge................................................... I-37
Leasehold Premises.......................................... I-16
Leases...................................................... I-16
Liabilities................................................. I-37
Lien........................................................ I-37
material.................................................... I-37
Material Adverse Change..................................... I-37
Material Adverse Effect..................................... I-37
Material Contracts.......................................... I-13
Material Intellectual Property Rights....................... I-14
Material Permits............................................ I-15
materially.................................................. I-37
Maybrook.................................................... I-27
Merger...................................................... I-1
Merger Consideration........................................ I-3
MergerCo.................................................... I-1
MergerCo Disclosure Schedule................................ I-19
Millennium Compliant........................................ I-9
Multiemployer Plan.......................................... I-37
Nasdaq...................................................... I-24
Non-Conforming Transaction Proposal......................... I-35
Notice of Transaction Proposal.............................. I-25
NYBCL....................................................... I-1
Option Cancellation Agreement............................... I-3
Other Plan.................................................. I-37
Owned Properties............................................ I-16
Pension Plan................................................ I-38
Perk........................................................ I-18
Perk Related Parties........................................ I-18
Permits..................................................... I-12
Permitted Encumbrances...................................... I-16
Person...................................................... I-38
Proxy Statement............................................. I-8
Saunders Consulting Agreement Termination................... I-27
SEC......................................................... I-38
SEC Documents............................................... I-8
SEC Financial Statements.................................... I-8
Securities Act.............................................. I-38
Severance Plan.............................................. I-26
Share Exchange.............................................. I-1
Share Exchange Agreement.................................... I-1
Shareholders Meeting........................................ I-22
Subsidiary.................................................. I-38
Superior Transaction Proposal............................... I-25
Surviving Corporation....................................... I-1
Tax Return.................................................. I-11
Taxes....................................................... I-11
Transaction Proposal........................................ I-24
</TABLE>
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<PAGE> 100
<TABLE>
<S> <C>
Travel Ports 401(k) Plan.................................... I-26
Treasury Shares............................................. I-3
Voting Agreement............................................ I-1
WARN Act.................................................... I-22
Warrant Agreements.......................................... I-4
Warrant Cancellation Agreement.............................. I-4
Welfare Plan................................................ I-38
Wyoming Lease............................................... I-28
</TABLE>
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<PAGE> 101
ANNEX II MCDONALD INVESTMENTS
[LOGO]
MCDONALD INVESTMENTS INC.,
A KEYCORP COMPANY
600 Superior Avenue,
10th Floor
Cleveland, Ohio 44114
Tel: 216 781-9035
Fax: 216 781-6627
February 26, 1999
PERSONAL AND CONFIDENTIAL
- -------------------------
Board of Directors
Travel Ports of America, Inc.
3495 Winton Place, Building C
Rochester, NY 14623
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the issued and outstanding shares of Common Stock,
par value $0.01 (the "Common Stock") of Travel Ports of America, Inc. (the
"Company" or "Travel Ports") in connection with the proposed merger (the
"Merger") of the Company with and into TP Acquisition, Inc. ("MergerSub"), a
wholly owned subsidiary of TravelCenters of America, Inc. ("TravelCenters"),
with the Company surviving the Merger pursuant to the Agreement and Plan of
Merger dated as of February 26, 1999 (the "Agreement") among the Company,
MergerSub and TravelCenters. Capitalized terms not otherwise defined herein
shall have the same meaning given to them in the Merger Agreement.
You have informed us that, pursuant to the Agreement, as of the effective
time of the Merger: (i) the MergerSub will be merged with and into the Company,
(ii) each share of Common Stock issued and outstanding prior to the Merger will
be converted into the right to receive $4.30 in cash (the "Merger
Consideration") except as noted below, (iii) each holder of a Company Stock
Option ("Option") and/or Company Warrant ("Warrant") having an exercise price
less than $4.30 prior to the closing, will either (a) exercise such Option or
Warrant in exchange for Company Common Stock and be entitled to receive the
Merger Consideration or (b) elect to receive a cash payment for each Option and
Warrant in an amount equal to the product of the total number of shares of
Company Common Stock held subject to the Option or Warrant multiplied by $4.30
less the exercise price per share of the Option or Warrant, (iv) each
outstanding convertible debt security including without limitation, the
Company's 8.5% Senior Subordinated Convertible Debentures due January 15, 2005
and the Company's 7.81% Convertible Subordinated Note due December 4, 2007, will
be redeemed or otherwise paid in full, or at the option of the holder thereof,
to be converted into Company Common Stock, in accordance with the terms of each
instrument, TravelCenters will assume all of the Company's long term debt, net
of cash, at the time of closing and (vi) in consideration for his shares, Philip
Saunders, Chief Executive Officer of the Company, will receive for each share
$4.30 in cash for approximately two thirds of his shares and TravelCenters
common stock for a specified number of shares constituting approximately
one-third of his shares.
McDonald Investments Inc., as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisition, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
In connection with rendering this opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement, including exhibits and
schedules thereto; (ii) certain publicly available information concerning the
Company, including the Company's Annual Reports on Form 10K for the period ended
April 30, 1998 and its Quarterly Reports on Form 10Q for the quarters ended
October 31, 1998 and July 31, 1998; (iii) certain publicly available information
concerning TravelCenters, including TravelCenters Annual Report on Form 10K for
the period ended December 31, 1997 and its Quarterly Reports on Form 10Q for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998; (iv)
certain other internal information including financial and operation
projections, lease agreements, and other documents related to the Company; (v)
certain publicly available information concerning the trading of, and the
trading market for, the Company's Common Stock; (vi) certain other publicly
available information with respect to certain other companies that we believe to
be comparable to the Company and the trading markets for certain of such other
companies' securities;
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(vii) certain publicly available information concerning the nature and terms of
certain other transactions that we consider relevant to our inquiry; and (viii)
TravelCenters "Indicative Comparative Valuation Analysis" which provides a basis
for valuation of TravelCenters common stock.
In our review and analysis in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information, including the above-mentioned projections, provided to us or
publicly available and have assumed and relied upon the representations and
warranties of the Company and TravelCenters contained in the Agreement. We have
not been engaged to, and have not independently attempted to, verify any of such
information. We have also relied upon the management of the Company as to the
reasonableness and achievability of the financial and operating projections (and
the assumptions and the basis therefor) provided to us and, with your consent,
we have assumed that such projections reflect the best currently available
estimates and judgements of management and that such projections and forecasts
will be realized in the amounts and in the time periods currently estimated by
management. We have not been engaged to assess the achievability of such
projections or the assumptions on which they were based and express no view as
to such projections or assumptions. In addition, we have not conducted a
physical inspection or appraisal of any of the assets, properties, or facilities
of either the Company or TravelCenters nor have we been furnished with any such
evaluation or appraisal. We assume, without independent verification, that
TravelCenter's "Indicative Comparative Valuation Analysis" represents fairly the
value of the TravelCenters stock such that the consideration given to Philip
Saunders in the form of TravelCenters stock is equivalent to the cash
consideration given to other stockholders. We have also assumed that the
conditions to the Merger as set forth in the Agreement would be satisfied and
that the Merger would be consummated on a timely basis in the manner
contemplated by the Agreement.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date.
In addition, our opinion is, in any event, limited to the fairness, on the date
hereof, from a financial point of view, of the Merger Consideration and does not
address the Company's underlying business decision to effect the Merger, and
terms of the Merger, or the Merger Agreement. It should also be noted that we
were not engaged to act as a financial advisor to the Company in connection with
the Merger and, therefore, did not participate in the process of identifying
potential bidders for the Company or the negotiation of the terms of the Merger.
We understand that no other bids for the Company were sought other than that of
TravelCenters prior to our engagement, and we have not been instructed to seek
alternative bids for the Company.
In the ordinary course of business, we may actively trade securities of the
Company and TravelCenters for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
It is understood that this opinion is directed to the Board of Directors
and senior management of the Company and may not be disclosed, summarized,
excerpted from or otherwise publicly referred to without our prior written
consent. Our opinion does not constitute a recommendation to any shareholder of
the Company as to how such shareholder should vote at the shareholders' meeting
held in connection with the Merger.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to the holders of the
Company's Common Stock, except for the consideration, as described above, for
Philip Saunders.
Very truly yours,
McDonald Investments, Inc.
A KeyCorp Company
By: /s/ Robert B. Shepherd
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ANNEX III
EXECUTION COPY
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is entered into as of the
26th day of February, 1999, by and among TRAVELCENTERS OF AMERICA, INC., a
Delaware corporation, as purchaser ("Buyer"), and E. Philip Saunders, as seller
("Seller").
RECITALS:
A. Seller owns, in the aggregate, 1,844,275 shares of common stock of
Travel Ports of America, Inc., a New York corporation (the "Company").
B. In connection with the transaction contemplated by this Agreement, Buyer
has agreed to acquire all of the issued and outstanding shares of common stock
of the Company pursuant to a merger agreement dated the date hereof, as the same
may be amended (the "Merger Agreement"), among Buyer, TP Acquisition, Inc.
("MergerCo") and the Company providing for the merger of MergerCo with and into
the Company (the "Merger").
C. Concurrently herewith, Seller, John M. Holahan ("Holahan"), Buyer and
MergerCo are entering into a Voting Agreement (the "Voting Agreement") pursuant
to which Seller and Holahan are obligated to vote any and all shares of the
Company owned by each for the approval and adoption of the Merger Agreement.
D. Prior to the execution thereof, the Board of Directors of the Company
has approved and authorized the Company's execution, delivery and performance of
the Merger Agreement, as well as the transactions contemplated by this
Agreement, and the Voting Agreement.
E. Prior to the effective time of the Merger, Buyer desires to purchase
from Seller, and Seller desires to sell to Buyer, 653,025 shares of Company
common stock (the "Shares"), upon and subject to the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of and in reliance upon the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, Buyer and Seller hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Certain terms used in this Agreement shall have the
meanings set forth herein or elsewhere as indicated in Article 8.
ARTICLE 2
PURCHASE AND SALE
2.1 CLOSING. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at 9:00 a.m., E.S.T., on the date of the
closing of the Merger, as contemplated in the Merger Agreement (the "Closing
Date") at the offices of Calfee, Halter & Griswold LLP, 800 Superior Avenue,
1400 McDonald Investment Center, Cleveland, Ohio.
2.2 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, transfer and deliver to Buyer free
and clear of all Liens, and Buyer shall purchase from Seller, all of Seller's
right, title and interest in the Shares.
2.3 CONSIDERATION. On the Closing Date, Buyer shall purchase the Shares
from Seller in exchange for 85,000 shares of fully paid and non-assessable
shares of common stock, par value $.01 per share, of Buyer (the
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"Buyer Common Stock") which shall be issued pursuant to an exemption from the
registration requirements under Section 4(2) of the Securities Act.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that the following statements
contained in this Article 3 are true and correct at and as of the date of this
Agreement with respect to Seller. Each representation and warranty contained in
this Article 3 shall be deemed to be independently material and relied upon by
Buyer.
3.1 AUTHORITY AND CAPACITY. Seller possesses all requisite legal right,
power, authority and capacity to execute, deliver and perform this Agreement,
including, without limitation, the authority and capacity to sell and transfer
the Shares to Buyer as provided by this Agreement.
3.2 OWNERSHIP OF SECURITIES. Seller owns all of the Shares free and clear
of all Liens. The Shares are not subject to any marital property or other
agreement, judgment, order, voting trust or proxy which either limits or
restricts Seller's absolute authority to transfer the Shares as herein provided
or requires the holder thereof to vote the Shares in any particular manner,
except for the Voting Agreement.
3.3 EXECUTION AND DELIVERY; ENFORCEABILITY. This Agreement and each other
document, instrument or agreement to be executed and delivered by Seller in
connection herewith has been duly executed and delivered by Seller and
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
3.4 NONCONTRAVENTION. Seller's execution, delivery and performance of this
Agreement and any other document, instrument or agreement to be executed and
delivered by Seller in connection herewith, (i) does not require Seller to
submit any notice, report or other filing with any Governmental Authority, (ii)
violate or breach any Law applicable to Seller, any Order to which Seller is
subject or any Contract to which Seller is a party, or (iii) require the
consent, approval or authorization of any Governmental Authority or any other
Person.
3.5 BROKERAGE. No Person is or will become entitled, by reason of any
agreement or arrangement entered into or made by or on behalf of Seller, to
receive any commission, brokerage, finder's fee or other similar compensation in
connection with the consummation of the transactions contemplated by this
Agreement.
3.6 INVESTMENT INTENT.
(a) Seller is an "accredited investor" as that term is defined in Section
501 under the Securities Act. Seller has sufficient knowledge and experience in
financial and business matters to enable him to evaluate the merits and risks of
the transactions contemplated by this Agreement. However, nothing in this
Section 3.6 shall have any bearing on or mitigate, dilute or compromise in any
manner any of the representations, warranties, indemnities, agreements or
covenants contained elsewhere in this Agreement or any of the agreements
contemplated hereby.
(b) Seller has been given access to information requested by Seller
regarding Buyer, including the opportunity to ask questions of and receive
answers from the officers of Buyer concerning the present and proposed
activities of Buyer and to obtain the information which Seller deems necessary
or advisable in order to evaluate the merits and risks of the transactions
contemplated by this Agreement, and Seller has made his own independent
investigation of Buyer and the merits and risks of the transactions contemplated
by this Agreement.
(c) Seller is acquiring the Buyer Common Stock for his own account, for
investment purposes, and not with a present view to resell or distribute all or
any portion of the Buyer Common Stock.
(d) Seller understands that the Buyer Common Stock has not been registered
under the Securities Act as of the Closing or under any state securities laws,
is being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, and such certificates will bear
a legend in substantially the following form, as well as any other legend that
may be required by applicable law:
THIS CERTIFICATE AND THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE
REGISTRATION OR
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QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATIONS PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
(e) Seller acknowledges that the Buyer Common Stock will be subject to
further additional restrictions as contained in that certain Stockholders'
Agreement, dated March 6, 1997, as the same is or may be further amended, among
Buyer and its stockholders (the "Stockholders' Agreement"). Seller understands
that any certificate(s) evidencing the Buyer Common Stock will bear additional
restrictive legends as provided for in the Stockholders' Agreement.
(f) Seller further represents that:
(i) Seller or his purchaser representative is a sophisticated investor
with knowledge and experience in business and financial matters;
(ii) Seller has been provided with the information specified in Rule
502(b)(2)(ii) under the Securities Act and has had the opportunity to
obtain additional information as desired in order to evaluate the merits
and risks inherent in holding the Buyer Common Stock;
(iii) Seller has not been offered the Buyer Common Stock by any form
of general advertising or general solicitation;
(iv) Seller is aware that his investment in the Buyer Common Stock is
a speculative one and involves a high degree of risk, that the amount
realized on the investment may not equal the original amount invested and
Seller has concluded that the proposed investment in Buyer is appropriate
in light of his overall investment objectives and financial situation; and
(v) Seller is able to bear the economic risk and lack of liquidity
inherent in holding the Buyer Common Stock.
3.7 RESTRICTED SECURITIES. Seller understands and acknowledges that the
Buyer Common Stock he is receiving are "restricted securities" under federal and
state securities laws insofar as the Buyer Common Stock has not been registered
under the Securities Act or the securities laws of any other jurisdiction, that
they may not be resold or transferred without compliance with the registration
or qualification provisions of the Securities Act or applicable federal and
state securities laws of any state or other jurisdiction. Seller is familiar
with SEC Rule 144 as presently in effect and the resale limitations imposed
thereby and under the Securities Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the following statements
contained in this Article 4 are true and correct at and as of the date of this
Agreement. Each representation and warranty contained in this Article shall be
deemed to be independently material and relied upon by Seller.
4.1 ORGANIZATION; AUTHORIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite corporate power and authority to execute, deliver and
perform this Agreement and each other agreement, instrument and document to be
executed and delivered by or on behalf of Buyer in connection herewith. All
requisite corporate action to authorize, execute, deliver and perform this
Agreement and each other agreement, instrument and document to be executed and
delivered by or on behalf of Buyer in connection herewith has been taken by
Buyer.
4.2 EXECUTION AND DELIVERY; ENFORCEABILITY. This Agreement and each other
document, instrument or agreement to be executed and delivered by Buyer in
connection herewith has been duly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms.
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4.3 NONCONTRAVENTION. Buyer's execution, delivery and performance of this
Agreement and any other document, instrument or agreement to be executed and
delivered by Buyer in connection herewith, (i) does not require Buyer to submit
any notice, report or other filing with any Governmental Authority (other than
as may be required under Regulation 13-D of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or other state or federal securities laws),
(ii) violate or breach any Law applicable to Buyer, any Order to which Buyer is
subject or any Contract to which Buyer is a party, or (iii) require the consent,
approval or authorization of any Governmental Authority or any other Person.
4.4 BROKERAGE. No Person is or will become entitled, by reason of any
agreement or arrangement entered into or made by or on behalf of Buyer, to
receive any commission, brokerage, finder's fee or other similar compensation in
connection with the consummation of the transactions contemplated by this
Agreement.
4.5 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account,
for investment purposes, and not with a present view to resell or distribute any
portion thereof.
4.6 SEC DOCUMENTS. Buyer has timely filed all required reports, schedules,
forms, statements and other documents with the SEC since January 1, 1997
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, as amended, the "SEC Documents").
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Documents, and none of
the SEC Documents (including any and all financial statements included therein)
as of such dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including
footnotes) of Buyer included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
specifically indicated in the notes thereto), and fairly present the
consolidated financial position of Buyer and its consolidated subsidiaries as of
the dates thereof and the consolidated income, shareholders' equity and cash
flows for the periods then ended.
4.7 NONCONTRAVENTION. As of the date hereof, except as set forth on
Schedule A, any exercise by Seller of the Put Right (as described in Section
6.2(a)) shall not cause a breach or default under any agreement to which Buyer
or any of its subsidiaries is a party. As of the date hereof, the exercise by
Seller of the Put Right would not, to the knowledge of Buyer, violate any Law
and, in particular, Buyer has sufficient "surplus" (as that term is defined in
the Delaware General Corporation Law) to permit Buyer to purchase the Put Shares
(as defined in Section 6.2(a)), if such Put Right were to be exercised on the
date hereof.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction, at or before the Closing, of the following conditions set forth in
this Section 5.1:
(i) Seller's execution and delivery of a counterpart signature page to
the Stockholders' Agreement pursuant to which Seller agrees to be bound by
such terms and conditions as contained therein;
(ii) no suit, action, investigation or proceeding shall be pending or
threatened before any court, agency or other Governmental Authority by
which it is sought to restrain, delay, prohibit, invalidate, set aside or
impose any conditions upon the Closing, in whole or in part;
(iii) each of Seller's representations and warranties in Article 3 (a)
must have been accurate in all respects as of the date of this Agreement,
and (b) must be accurate in all respects as of the Closing Date as if made
on the Closing Date;
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(iv) all of the obligations, covenants and conditions that Seller is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing and each of these obligations, covenants and
conditions must have been duly performed and complied with by Seller in all
respects;
(v) Buyer shall have received from Seller (a) a stock certificate
evidencing or representing the Shares issued in the name of Buyer, and (b)
evidence of the cancellation of the stock certificate(s) previously issued
in the name of Seller evidencing the Shares;
(vi) Seller's execution and delivery, at the Closing, of a certificate
in form and substance reasonably acceptable to Buyer certifying as to (a)
the continued accuracy as of the Closing Date of the representations and
warranties contained in Article 3 hereof, (b) Seller's performance and
compliance with all obligations, covenants and conditions required by this
Agreement to have been performed or complied with by Seller prior to or on
the Closing Date, (c) Seller's record and beneficial ownership of the
Shares and good and marketable title thereto and Seller's absolute right to
transfer the same, and upon transfer, certifying that the Shares are not
subject to any Liens, and (d) Seller's full power and capacity to perform
the terms of this Agreement;
(vii) each of the conditions set forth in Sections 7.1, 7.2 and 7.3 of
the Merger Agreement shall have been satisfied or waived by the party
entitled to waive the same; and
(viii) Buyer shall have received each other document required to be
delivered to Buyer pursuant to this Agreement.
Any agreement or document to be delivered to Buyer pursuant to this Section 5.1,
the form of which is not attached to this Agreement as an exhibit, shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
5.2 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligations of Seller
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions set forth in
this Section 5.2:
(i) no suit, action, investigation or proceeding shall be pending or
threatened before any court, agency or other governmental authority by
which it is sought to restrain, delay, prohibit, invalidate, set aside or
impose any conditions upon the Closing, in whole or in part;
(ii) each of Buyer's representations and warranties in Article 4 (a)
must have been accurate in all respects as of the date of this Agreement,
and (b) must be accurate in all respects as of the Closing Date as if made
on the Closing Date;
(iii) all of the obligations, covenants and conditions that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing and each of these obligations, covenants and
conditions must have been duly performed and complied with by Buyer in all
respects;
(iv) Seller shall have received a stock certificate issued in the name
of Seller evidencing or representing the Buyer Common Stock; (v) Buyer's
execution and delivery, at the Closing, of a certificate in form and
substance reasonably acceptable to Seller certifying as to (a) the
continued accuracy as of the Closing Date of the representations and
warranties contained in Article 4 hereof, (b) Buyer' performance and
compliance with all obligations, covenants and conditions required by this
Agreement to have been performed or complied with by Buyer prior to or on
the Closing Date, (c) the accuracy and efficacy of the Board of Director
resolutions of Buyer respecting the issuance of the Buyer Common Stock, and
(d) Buyer's full power and authorization to execute and deliver this
Agreement;
(vi) each of the conditions set forth in Sections 7.1, 7.2 and 7.3
shall have been satisfied or waived by the party entitled to waive the
same; and
(vii) Seller shall have received each other document required to be
delivered to Seller pursuant to this Agreement.
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Any agreement or document to be delivered to Seller pursuant to this Section
5.2, the form of which is not attached to this Agreement as an exhibit, shall be
in form and substance reasonably satisfactory to Seller and his counsel.
5.3 CONDITION SUBSEQUENT TO CLOSING. Immediately following the Closing,
Buyer and the Company shall file all necessary documents and take such other
actions under and in accordance with the Merger Agreement to cause the Merger to
be consummated as provided for therein. In the event the Merger is not
consummated for any reason within two days following the Closing hereunder, all
of the transactions contemplated herein shall be deemed not to have occurred and
the parties shall thereupon promptly return to the other all deliveries made
pursuant hereto.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 BOARD APPOINTMENT.
(a) Promptly following the closing of the Merger, and subject to the
approval of Buyer's stockholders, Buyer shall use all reasonable efforts to
cause Seller to be appointed to the Board of Directors (the "Board") of Buyer at
the next regularly scheduled shareholder meeting to serve until the death,
resignation or removal of Seller (including as provided in Section 6.1(b)
below).
(b) Seller's right to maintain a position on the Board shall terminate on
the earliest to occur of (i) three years from the Closing, (ii) Seller's failure
to own at least 50,000 shares of Buyer common stock; provided, however, that the
50,000 share requirement shall be equitably adjusted up or down, as applicable,
in the event of any stock dividend or change in the common stock of Buyer by
reason of any stock split, reverse stock split, recapitalization,
reclassification, combination, exchange of shares or similar organic change
(collectively, an "Organic Change"), (iii) a registration statement filed for an
initial public offering of the common stock of Buyer is declared effective under
the Securities Act (an "IPO"), or (iv) a Change in Control (each, a "Resignation
Event"). Upon the occurrence of a Resignation Event, Seller shall immediately
tender his written resignation as a member of the Board, which resignation may
be accepted or rejected by Buyer, for a thirty (30) day period after Buyer's
receipt. In the event Buyer rejects Seller's resignation, Seller shall remain a
member of the Board and subsequently tender his written resignation on each
anniversary thereafter, which Buyer may elect to accept or reject for a thirty
(30) day period after Buyer's receipt.
(c) Seller acknowledges and agrees that his right to obtain and maintain a
position on the Board is a personal right and is in no way assignable or
transferable in any manner.
6.2 PUT RIGHT.
(a) Subject to the terms of this Section 6.2, Seller shall have the right
to sell to Buyer and Buyer shall be obligated to purchase from Seller, all but
not less than all, of the shares of Buyer Common Stock received by Seller
pursuant to this Agreement (including any additional shares of Buyer Common
Stock received by Seller with respect to such shares of Buyer Common Stock as a
result of any Organic Change) that Seller then owns at the time he elects to
exercise the Put Right (the "Put Shares") which are then eligible to be "put"
under Section 6.2(b) at the put exercise price of $33.04 (the "Exercise Price")
per share (the "Put Right"); provided, however, that the Exercise Price shall be
equitably adjusted up or down, as applicable, in the event of any Organic
Change.
(b) Subject to the following sentence of this paragraph, the Put Right
becomes exercisable in equal one-third (1/3) increments annually beginning on
the first anniversary of the Closing Date (so that two-thirds (2/3) of the Put
Shares can be "put" commencing after the second anniversary of the Closing Date
and one hundred percent (100%) commencing after the third anniversary of the
Closing Date) and terminates upon the fourth anniversary of the Closing Date.
Notwithstanding the foregoing, the Put Right shall become exercisable in full
upon consummation of a transaction pursuant to which there is a Change in
Control of Buyer in which Seller was not offered the opportunity to sell all of
the Put Shares in such transaction. The Put Right is exercisable by giving an
irrevocable written notice (the "Put Notice") of exercise to Buyer, subject to
the applicable vesting period, prior
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to the termination of the Put Right. The total consideration to be paid Seller
upon exercise of the Put Right shall be calculated by multiplying (x) the
Exercise Price by (y) the number of shares representing the Put Shares subject
to the Put Notice (the "Total Put Price"). If the Put Notice is given during the
applicable exercise period as provided above and Buyer is precluded by Law or
Contract from purchasing some or all of the Buyer Common Stock referenced in
Seller's Put Notice then (i) Buyer shall purchase those shares of Buyer Common
Stock that Buyer is not so precluded from purchasing, pursuant to a closing
under Section 6.2(e) below, and shall purchase the remainder of the Buyer Common
Stock referenced in the Put Notice (the "Unpaid Put Shares") as soon as
practicable after such time as Buyer is no longer precluded by Law or Contract
from completing such purchase (at which point a closing shall occur for the
consummation of the purchase according to the terms of Section 6.2(e)) and
provided, further, that Buyer shall remain obligated to buy and Seller obligated
to sell the remainder of the Buyer Common Stock referenced in the Put Notice as,
and to the extent, availability arises thereafter; and (ii) until such time as
the Unpaid Put Shares are so purchased, Buyer shall pay a monthly penalty fee on
the portion of the Total Put Price related to any such Unpaid Put Shares at a
rate of eight-and-one-half percent (8.5%) per annum until so paid, which penalty
fee shall be payable monthly. Any payment made with respect to the Unpaid Put
Shares shall be applied first against any such accrued but unpaid penalty fee.
(c) Under no circumstances shall Buyer be obligated to purchase the Buyer
Common Stock pursuant to the Put Right if such purchase would violate any Law,
including, but not limited to, provisions of the General Corporation Law of
Delaware (or any successor statutory provision) or would constitute or require
the breach of any provisions of the Contracts listed on Schedule A (or any
additional Contracts entered into by Buyer that either: (a) contain restrictions
or limitations on Seller's ability to exercise the Put Right that are not more
restrictive than those set forth on Schedule A or (b) have been the subject of a
Seller Waiver under Section 6.7). Notwithstanding the foregoing, if Buyer is
precluded by Contract (other than pursuant to the Indenture, dated as of March
27, 1997, listed on Schedule A or pursuant to a Contract that has been the
subject of a Seller Waiver under Section 6.7) from purchasing some or all of the
Buyer Common Stock referenced in Seller's Put Notice, Buyer shall use
commercially reasonable efforts to seek a waiver of such restrictions from the
appropriate third parties to permit the Put Right to be exercised in full. If
Seller exercises the Put Right and Buyer is precluded by Law, as described
above, then Seller and Buyer shall use their respective reasonable efforts to
accomplish such purchase and sale as contemplated by this Section 6.2, in a
manner not in violation of any Law, including, where appropriate, the parties'
attempt to modify the terms of the Put Right in such a manner as to comply with
the requirements of applicable Law.
(d) During the period commencing ninety (90) days from the date of Buyer's
receipt of the Put Notice (the "Review Period"), Seller's exercise of the Put
Right shall constitute and remain a valid and binding offer to sell all shares
of Buyer Common Stock then owned by Seller on the terms hereof and shall not be
subject to revocation, unless Buyer shall have consented thereto in writing.
Buyer shall have the term of the Review Period (and during such time will be
complying with the requirements of Section 6.2(c) above) to notify Seller
whether it is precluded by Law or Contract from acquiring such shares or to
notify Seller of its binding acceptance of such offer to purchase the Buyer
Common Stock.
(e) If Buyer is not precluded by Law or Contract from purchasing the Buyer
Common Stock, then, within thirty (30) days after the Review Period, a closing
shall occur for the consummation of such purchase, at a location determined by
Buyer, where Seller and Buyer shall be required to make the following
deliveries:
(i) By Seller:
(1) stock certificate(s) evidencing the Buyer Common Stock to be
sold and purchased duly endorsed in blank with signatures guaranteed and
otherwise in proper form for transfer.
(2) a certificate of Seller representing and warranting that (A)
Seller is the record and beneficial owner of the shares being sold
subject to the Put Right, (B) Seller has good and marketable title to
the shares subject to the Put Right and the absolute right to transfer
the same, and upon transfer, such shares will be free and clear of
Liens, (C) Seller has full power and capacity to perform the terms of
this Agreement relating to the exercise of the Put Right and (D) Seller
has had an opportunity to obtain information respecting Buyer and has
the information necessary to enable him to make a knowledgeable decision
with respect to the exercise of the Put Right.
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(3) if the Put Right is being exercised by a permitted transferee
pursuant to Section 6.2(g), in addition to the deliveries provided for
in Section 6.2(e)(1) and 6.2(e)(2), such transferee shall deliver a
certificate in form and substance reasonably acceptable to Buyer
representing and warranting that (A) such transferee or his or her
purchaser representative is a sophisticated investor with knowledge and
experience in business and financial matters and (B) such transferee or
his or her purchaser representative has received and reviewed all
filings made by Buyer with the SEC pursuant to the requirements of the
Exchange Act.
(ii) By Buyer:
(1) the purchase price for the shares being purchased subject to
the Put Right in an amount determined by Section 6.2(b) above by
certified check or wire transfer of immediately available funds to
Seller's designated account.
(f) Prior to any closing pursuant to Section 6.2(e), Buyer shall have the
right to postpone such closing for a reasonable period not to exceed sixty (60)
days if (i) Buyer is in possession of material non-public information, (ii)
Buyer determines that such postponement is necessary in order to avoid a
requirement to disclose such material non-public information and (iii) Buyer
determines in good faith that disclosure of such material non-public information
would not be in the best interests of Buyer or its stockholders.
(g) Seller acknowledges and agrees that the Put Right is in no way
assignable or transferable, except that Seller shall have the right, subject to
the next sentence and applicable law (including federal and state securities
laws), to transfer the Put Right, directly or indirectly, (i) to his parent,
spouse, ex-spouse or child (or any trust for the benefit of any such parent,
spouse, ex-spouse or child), (ii) pursuant to Seller's will (following his
death) or (iii) pursuant to the laws of descent and distribution; provided,
however, in any such case, that Seller shall not transfer or assign the Put
Right to more than five (5) persons and, provided, further, that any transfer or
devise of the Put Right shall only be transferred and devised with respect to
and in connection with the underlying shares that are the subject of the Put
Right. As a condition to any transfer or assignment by Seller pursuant to this
paragraph, each transferee or assignee, prior to such transfer or assignment,
shall agree in writing in a form reasonably acceptable to Buyer to be bound by
all the provisions of this Agreement and the Stockholders' Agreement applicable
to Seller and no such transferee or assignee shall be permitted to make any
further transfer or assignment of the Put Right. Notwithstanding the foregoing,
Buyer shall be permitted (but not obligated), without the consent of Seller, to
assign its rights, duties and obligations respecting the Put Right to any
Person, provided Buyer shall remain obligated for payment of the purchase price
related to Seller's exercise of the Put Right.
6.3 MAYBROOK TRAVEL PLAZA SUBLEASE. At the Closing, Seller shall cause his
affiliate, Maybrook Travel Plaza, Inc. ("MTP") to execute an amendment to that
certain Sublease dated March 30, 1984 between MTP and the Company which
amendment shall provide for, among other things, (i) two additional 10 year
renewal options and (ii) an increase in the price of the Company's option to
purchase the subject property, all as provided for in Section 6.17 of the Merger
Agreement.
6.4 CONSULTING AGREEMENT. Prior to or at the Closing, Seller shall
terminate all of his rights, duties and obligations under that certain
Consulting Agreement currently in effect between Seller and the Company.
6.5 AMENDMENT OF CERTIFICATE OF INCORPORATION. Buyer agrees to amend
Buyer's Restated Certificate of Incorporation prior to Closing to clarify that
no further stockholder consent is required in order for the Company to perform
its obligations with respect to the exercise of the Put Right.
6.6 LIMITATION ON FUTURE RESTRICTIONS. Subject to this Section 6.6 and
Section 6.7, Buyer agrees, during the period that the Put Right is outstanding,
not to enter into any Contract that contains any restriction or limitation on
Seller's ability to exercise the Put Right that is more restrictive than those
set forth on Schedule A, without complying with Section 6.7; provided,
however,that this Section 6.6 shall not prohibit Buyer from granting any
Allowable Put Rights (as hereinafter defined). "Allowable Put Rights" for
purposes of this Agreement shall mean any "put" rights or repurchase or
redemption obligations granted in the future that (a) are subordinated by
Contract in right of payment to the Put Right(s) granted under this Agreement,
or (b) do not become exercisable until after the Put Right(s) granted under this
Agreement have expired or been exercised in
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full, or (c) are granted to Directors, officers or employees in connection with
future acquisitions of equity securities of the Company in a manner consistent
with past practices.
6.7 CALL RIGHT.
(a) Subject to the terms of this Section 6.7, if Buyer, at any time during
the period that all or part of the Put Right remains outstanding (whether or not
exercisable), in the exercise of its reasonable business judgment, determines to
enter into a new transaction that it expects will contain any restriction or
limitation on Seller's ability to exercise the Put Right that is more
restrictive than those set forth on Schedule A (a "Restrictive Transaction"),
then Buyer shall first provide Seller with notice of the principal terms of such
Restrictive Transaction and give Seller ten (10) days thereafter to determine
whether to waive the provisions of Section 6.6 hereof (which written waiver also
shall be delivered within such ten (10) day period) (a "Seller Waiver"). In the
event that a Seller Waiver is not executed and delivered during such ten (10)
day period, then Buyer shall have the right to purchase (the "Call Right") and
Seller (or, for all purposes hereof, any transferee or assignee pursuant to
Section 6.2(g)) shall be obligated to sell all, but not less than all, of the
Put Shares owned by such person at the call exercise price of $36.34 (the "Call
Exercise Price") per share; provided, however, that the Call Exercise Price
shall be equitably adjusted up or down, as applicable, in the event of any
Organic Change.
(b) The Call Right is exercisable at any time during the period that all or
part of the Put Right remains outstanding, by Buyer giving an irrevocable
written notice (the "Call Notice") of exercise to Seller prior to consummating
the Restrictive Transaction. The total consideration to be paid Seller upon
exercise of the Call Right shall be calculated by multiplying (x) the Call
Exercise Price by (y) the number of shares representing the Put Shares subject
to the Call Notice (the "Total Call Price"). If at such time as the Call Notice
is given, Buyer is precluded by Law or Contract from purchasing some or all of
the Put Shares referenced in the Call Notice, then (i) Buyer shall purchase
those Put Shares that Buyer is not so precluded from purchasing, pursuant to a
closing under Section 6.7(c), and shall purchase the remainder of the Put Shares
referenced in the Call Notice (the "Unpaid Call Shares") as soon as practicable
after such time as Buyer is no longer precluded by Law or Contract from
completing such purchase (at which point a closing shall occur for the
consummation of the purchase according to the terms of Section 6.7(c)) and
provided, further, that Seller shall remain obligated to sell and Buyer shall
remain obligated to buy the remaining Put Shares referenced in the Call Notice
as, and to the extent, availability arises thereafter; and (ii) until such time
as the Unpaid Call Shares are so purchased, Buyer shall pay a monthly penalty
fee on the portion of the Total Call Price related to any such Unpaid Call
Shares at a rate of eight-and-one-half percent (8.5%) per annum, which penalty
fee shall be payable monthly. Any payment made with respect to the Unpaid Call
Shares shall be applied first against any such accrued but unpaid penalty fees.
Notwithstanding the foregoing, if Buyer is precluded by Contract (other than
pursuant to the Indenture, dated as of March 27, 1997, listed on Schedule A or
pursuant to a Contract that has been the subject of a Seller Waiver under this
Section 6.7) from purchasing some or all of the Put Shares referenced in Buyer's
Call Notice, Buyer shall use commercially reasonable efforts to seek a waiver of
such restrictions from the appropriate third parties to permit the Call Right to
be exercised in full.
(c) Within thirty (30) days after delivery of the Call Notice, a closing
shall occur for the consummation of such purchase, at a location determined by
Buyer, where Seller and Buyer shall be required to make the following
deliveries:
(i) By Seller:
(1) stock certificate(s) evidencing the Buyer Common Stock to be
sold and purchased duly endorsed in blank with signatures guaranteed and
otherwise in proper form for transfer.
(2) a certificate of Seller representing and warranting that (A)
Seller is the record and beneficial owner of the shares being purchased
subject to the Call Right, (B) Seller has good and marketable title to
the shares subject to the Call Right and the absolute right to transfer
the same, and upon transfer, such shares will be free and clear of
Liens; and (C) Seller has full power and capacity to perform the terms
of this Agreement relating to the sale of the Shares.
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(ii) By Buyer:
(1) the purchase price for the shares being purchased subject to
the Call Right in an amount determined by Section 6.2(b) above by
certified check or wire transfer of immediately available funds to
Seller's designated account.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION OF BUYER. Seller shall indemnify Buyer against and hold
Buyer harmless from any liability, loss, claim, deficiency, damage, cost and
expense, including attorneys' fees and other costs and expenses incident to
proceedings or investigations or the defense or settlement of any of the
foregoing (collectively, "Losses"), resulting from or arising out of any
inaccuracy in or breach of any of the representations and warranties made by
Seller in Article 3.
7.2 INDEMNIFICATION OF SELLER. Buyer shall indemnify Seller against and
hold Seller harmless from any Losses resulting from or arising out of any
inaccuracy in or breach of any of the representations and warranties made by
Buyer in Article 4.
7.3 THIRD-PARTY CLAIMS. If any legal proceeding is instituted or any claim
asserted by any third party (a "Claim") in respect of which Seller, on the one
hand, or Buyer, on the other hand, may be entitled to indemnification hereunder,
the party asserting such right to indemnification (the "Indemnitee") shall give
the party from whom indemnification is sought (the "Indemnitor") prompt written
notice thereof. A delay in giving such notice shall not relieve the Indemnitor
of liability for the Claim except only to the extent the Indemnitor suffers
prejudice because of such delay. The Indemnitor shall have the right, at its
option and expense, to participate in the defense of such a Claim, but not to
control the defense, negotiation or settlement thereof.
ARTICLE 8
CERTAIN DEFINITIONS
When used in this Agreement, the following terms in all of their tenses,
cases and correlative forms shall have the meanings assigned to them in this
Article 8, or elsewhere in this Agreement as indicated in this Article 8:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Change in Control" shall be deemed to have occurred if:
(a) any Person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on March 21, 1997), other
than (i) the Institutional Investors (including the First Boston Entities
(as defined below)) or (ii) the Management Purchasers and their Permitted
Transferees (as defined in and set forth in Section 2(b) of the
Stockholders' Agreement), shall directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, have the ability
to elect a majority of the board of directors of Seller;
(b) (i) the Institutional Investors (including the First Boston
Entities) or (ii) the First Boston Entities, respectively, shall cease to
own in the aggregate, directly or indirectly, beneficially and of record,
shares representing at least 65% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Buyer held by
such Persons on March 21, 1997, provided that such 65% shall be reduced by
the dilution suffered by such Persons as a result of any issuance by Seller
after March 27, 1997 of any capital stock representing ordinary voting
power (A) for fair value for cash to non-Affiliates of the applicable
parties under clause (i) or (ii) above, as the case may be, or (B) to its
employees to the extent that the shares
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issued to such employees do not exceed 15% of the then-outstanding capital
stock having ordinary voting power;
(c) any Person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on March 21, 1997), other
than the Institutional Investors (including the First Boston Entities),
shall own directly or indirectly, beneficially or of record, shares
representing more than the lesser at any time of (i) 35% of the aggregate
ordinary voting power represented by the issued and outstanding capital
stock of Seller and (ii) the percentage of the aggregate ordinary voting
power represented by the shares owned directly or indirectly, beneficially
or of record, by the Institutional Investors (including the First Boston
Entities) at such time;
(d) a majority of the seats (other than vacant seats) on the board of
directors of the Borrower shall at any time be occupied by Persons who were
neither (i) nominated by the Institutional Investors (including the First
Boston Entities) or the Management Purchasers and their Permitted
Transferees nor (ii) elected by directors so nominated;
For purposes of this definition, the term "First Boston Entities" shall mean
Credit Suisse First Boston Corporation, The Clipper Group, L.P., Merchant
Truckstops, L.P., Clipper Capital Associates, L.P. and Clipper/ Merchant I, L.P.
and their Affiliates and any of the designees on the Closing Date. For purposes
of clause (b) of this definition, the convertible preferred stock and the senior
convertible participating preferred stock of Seller shall be deemed to
constitute capital stock with ordinary voting power. For purposes only of
clauses (a), (c) and (d) of this definition, the term "Institutional Investor"
shall be deemed to include any other holder or holders of shares of the Borrower
having ordinary voting power if any Institutional Investor or First Boston
Entity (other than an Institutional Investor deemed to be an Institutional
Investor solely by virtue of this provision) shall hold the irrevocable general
proxy of each such holder in respect of the shares held by such holder.
"Institutional Investors" shall mean The Clipper Group, L.P., First Plaza,
Credit Suisse First Boston Corporation, Barclays USA, Inc., Olympus Private
Placement Fund, L.P., Clipper/Merchant I, L.P., Clipper Capital Associates,
L.P., National Partners, L.P., National Partners III, L.P., UBS Capital
Corporation, The Travelers Indemnity Company, The Phoenix Insurance Co. and
their respective Affiliates.
"Claim" is defined in Section 7.3.
"Closing" is defined in Article 2.
"Closing Date" is defined in Article 2.
"Code" means the United States Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Company" means Travel Ports of America, Inc., a New York corporation.
"Contract" means any agreement, contract, obligation, lease, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any federal, state, local, municipal,
foreign, or other government and any quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal).
"Indemnitee" and "Indemnitor" are defined in Section 7.3.
"Law" means any common law and any federal, state, regional, municipal,
local or foreign law, statute, ordinance, rule, regulation or order or treaty.
"Lien" means any lien, charge, easement, encumbrance, security interest,
adverse claim, equitable interest, right of first refusal or any other title
defect or restriction of any kind.
"Losses" is defined in Section 7.1.
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"Person" means an individual, a corporation, a limited liability company, a
partnership, a trust, an unincorporated association, a government or any agency,
instrumentality or political subdivision of a government, or any other entity or
organization.
"Securities Act" means The Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
ARTICLE 9
CONSTRUCTION; MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) If to Buyer or MergerCo, to:
TravelCenters of America, Inc.
24601 Center Ridge Road
Suite 200
Westlake, OH 44145-5634
Attention: Edwin P. Kuhn
with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Philip M. Dawson, Esq.
(ii) If to the Company, to:
Travel Ports of America, Inc.
3495 Winton Place
Building C
Rochester, NY 14623
Attention: E. Philip Saunders
with a copy to:
Harris, Beach & Wilcox, LLP
130 East Main Street
Rochester, NY 14604
Attention: Thomas E. Willett, Esq.
or in any case, to such other address for a party as to which notice shall have
been given to Buyer and Seller in accordance with this Section. Notices so
addressed shall be deemed to have been duly given (i) on the third business day
after the day of registration, if sent by registered or certified mail, postage
prepaid, or (ii) on the next business day following the documented acceptance
thereof for next-day delivery by a national overnight air courier service, if so
sent. Otherwise, notices shall be deemed to have been given when actually
received. A courtesy copy of any action, suit or proceeding commenced pursuant
to Article 7 shall be delivered to counsel for Buyer and Sellers within three
(3) days after filing.
9.2 ENTIRE AGREEMENT. This Agreement and exhibits hereto and the other
agreements entered into in connection herewith constitute the exclusive
statement of the agreement among Buyer and Seller concerning the subject matter
hereof, and supersedes all other prior agreements, oral or written, among or
between any of the parties hereto concerning such subject matter. All
negotiations among or between any of the parties hereto are
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superseded by this Agreement, and there are no representations, warranties,
promises, understandings or agreements, oral or written, in relation to the
subject matter hereof among or between any of the parties hereto other than
those expressly set forth or expressly incorporated herein.
9.3 JURISDICTION AND VENUE.
(a) Any action, suit or proceeding at law, in equity or otherwise
initiated by Seller that in any way arises out of or relates to this
Agreement, including all counterclaims relating thereto, shall be brought
in a state or federal court of competent jurisdiction located in Monroe
County, New York, and all objections to personal jurisdiction and venue in
any action, suit or proceeding so commenced are hereby expressly waived by
all parties hereto, except for any applicable objections concerning
insufficiency of process or insufficiency of service of process, which are
hereby preserved.
(b) Any action, suit or proceeding at law, in equity or otherwise
initiated by Buyer that in any way arises out of or relates to this
Agreement, including all counterclaims relating thereto, shall be brought
in a state or federal court of competent jurisdiction located in Cuyahoga
County, Ohio, and all objections to personal jurisdiction and venue in any
action, suit or proceeding so commenced are hereby expressly waived by all
parties hereto, except for any applicable objections concerning
insufficiency of process or insufficiency of service of process, which are
hereby preserved.
9.4 MODIFICATION AND WAIVER. No amendment, modification, or waiver of this
Agreement or any provision hereof, including the provisions of this sentence,
shall be effective or enforceable as against a party hereto unless made in a
written instrument which specifically references this Agreement and which is
signed by the party waiving compliance. Except as may otherwise be expressly
provided herein, the failure of any Person to enforce at any time, or for any
period of time, any provision of this Agreement shall not be construed as a
waiver of any provision of this Agreement or of the right of any such Person to
enforce each and every provision of this Agreement, and no single or partial
exercise of any right hereunder shall preclude any other or further exercise of
that or any other right.
9.5 BINDING EFFECT. This Agreement shall be binding upon and shall inure to
the benefit of Buyer, Seller, and the respective successors and permitted
assigns of Buyer and of Seller.
9.6 HEADINGS. The article and section headings used in this Agreement are
intended solely for convenience of reference, do not themselves form a part of
this Agreement, and may not be given effect in the interpretation or
construction of this Agreement.
9.7 COUNTERPARTS. This Agreement may be executed and delivered in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.8 THIRD PARTIES. Except as may otherwise be expressly stated herein, no
provision of this Agreement is intended or shall be construed to confer on any
Person, other than the parties hereto, any rights or benefits hereunder.
9.9 TIME PERIODS. Any action required hereunder to be taken within a
certain number of days shall, except as may otherwise be expressly provided
herein, be taken within that number of calendar days; provided, however, that if
the last day for taking such action falls on a Saturday, a Sunday, or a legal
holiday, the period during which such action may be taken shall automatically be
extended to the next business day.
9.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
choice-of-laws or conflicts-of-laws provisions thereof.
9.11 FURTHER ASSURANCES. Buyer and Seller agree that, from time to time
after the Closing each will execute, acknowledge and deliver such other
instruments as reasonably may be required (i) to more effectively transfer and
vest in Buyer the Shares, or (ii) to more effectively transfer and vest in
Seller the Buyer Common Stock, or (iii) to otherwise carry out the terms and
conditions of this Agreement.
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ARTICLE 10
TERMINATION
10.1 TERMINATION OF AGREEMENT. Subject to any obligations of Seller to
resign from the Board, this Agreement and all rights hereunder shall terminate
upon the earliest to occur of the following date:
(a) termination of the Merger Agreement in accordance with its terms;
(b) the fourth (4th) anniversary of the Closing Date under this
Agreement; or
(c) the date on which both (i) E. Philip Saunders has died or he owns
less than 50,000 shares of Buyer Common Stock and (ii) either (x) Seller
(or his transferee or devisee pursuant to Section 6.2(g)) has exercised the
Put Right, or (y) the fourth (4th) anniversary of the Closing Date under
this Agreement; or
(d) an IPO; or
(e) the failure of Buyer to satisfy the covenant set forth in Section
6.6 prior to Closing.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated, all further
obligations of the parties under this Agreement will terminate and be of no
further force and effect, except that the provisions of Article 7 shall survive.
Notwithstanding the foregoing, Buyer and Seller acknowledge that if this
Agreement is terminated pursuant to Section 10.1(e), Seller shall receive for
the Shares in the Merger the same consideration per share for the Shares as
shall be paid by Buyer to all shareholders of the Company.
IN WITNESS WHEREOF, Buyer and Seller have executed and delivered this Share
Exchange Agreement, as of the date first written above.
TRAVELCENTERS OF AMERICA, INC.
By: /s/ EDWIN P. KUHN
------------------------------------
Edwin P. Kuhn, President and Chief
Executive Officer
("Buyer")
By: /s/ E. PHILIP SAUNDERS
------------------------------------
E. Philip Saunders
--------------------------------------
('Seller')
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ANNEX IV
EXECUTION COPY
VOTING AGREEMENT
This VOTING AGREEMENT (this "Agreement"), dated as of the 26th day of
February, 1999, is entered into by and among TravelCenters of America, Inc., a
Delaware corporation ("TA"), TP Acquisition, Inc., a New York corporation and
wholly-owned subsidiary of TA ("Acquisition") and E. Philip Saunders
("Saunders") and John M. Holahan ("Holahan") (each referred to individually as a
"Shareholder" and collectively as the "Shareholders") in their individual
capacity as shareholders of Travel Ports of America, Inc., a New York
corporation ("TP").
WHEREAS, concurrently herewith, TA, Acquisition and TP are entering into an
Agreement and Plan of Merger (the "Merger Agreement"). (Capitalized terms used
without definition herein having the meanings ascribed thereto in the Merger
Agreement);
WHEREAS, concurrently herewith, TA and Saunders are entering into a Share
Exchange Agreement, dated the date hereof (the "Share Exchange Agreement");
WHEREAS, prior to the execution thereof, the Board of Directors of TP has
approved and authorized the TP's execution, delivery and performance of the
Merger Agreement, as well as the transactions contemplated by this Agreement,
and the Share Exchange Agreement;
WHEREAS, each Shareholder is the record and Beneficial Owner (as defined in
Section 2(f) hereof) of that number of shares of TP common stock (the "Shares")
set forth on Schedule A hereto;
WHEREAS, in addition to the Shares set forth on Schedule A, each
Shareholder Beneficially Owns (as defined in Section 2(f) hereof) that number of
shares of TP common stock subject to the proper exercise of options or the
conversion of warrants, bonds, debentures, promissory notes, etc. (collectively,
the "Convertible Securities"), all as more fully set forth on Schedule B hereto;
WHEREAS, approval of the Merger Agreement by TP's shareholders at a
specially convened shareholders' meeting (the "TP Special Meeting") is a
condition to the consummation of the Merger;
WHEREAS, as a condition to its entering into the Merger Agreement, TA has
required that Shareholders agree, and Shareholders have agreed, to enter into
this Voting Agreement; and
WHEREAS, Shareholders have been informed that the Board of Directors of TP
has authorized, approved and adopted the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto severally agree as follows:
Section 1. Agreement to Vote, Restrictions on Dispositions, Etc.
(a) Each Shareholder hereby agrees to attend the TP Special Meeting,
in person or by proxy, and to vote (or cause to be voted) all Shares, and
any other voting securities of TP owned by such Shareholder whether issued
heretofore or hereafter (including any shares of TP common stock issued in
connection with the exercise or conversion of a Convertible Security), that
such person owns or has the right to vote, for approval and adoption of the
Merger Agreement (as amended from time to time) and the Plan of Merger, and
the transactions contemplated by the Merger Agreement, such agreement to
vote to apply also to any adjournment of the TP Special Meeting. Each
Shareholder agrees not to grant any proxies or enter into any voting
agreement or arrangement inconsistent with this Agreement.
(b) Each Shareholder hereby agrees that, except in accordance with the
terms of the Merger Agreement, such Shareholder shall not, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or
otherwise transfer or dispose of, or enter into any agreement to sell, the
Shares, the Convertible Securities or any other voting securities of TP
that such Shareholder Beneficially Owns or otherwise owns; except that (i)
Saunders shall be permitted to sell shares of TP common stock to TA
pursuant to the Share
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<PAGE> 118
Exchange Agreement and (ii) each Shareholder may, transfer up to 250,000
Shares to any transferee that agrees in writing in a form reasonably
acceptable to TA, to be bound by the provisions of this Agreement
applicable to such Shareholder and no such transferee shall be permitted to
make any transfer or assignment other than in accordance with the terms of
this Agreement.
(c) To the extent TP solicits a vote of shareholders or the same is
required under New York law, each Shareholder agrees to vote (or cause to
be voted) the Shares, all TP shares issued in connection with the exercise
or conversion of the Convertible Securities and any other voting securities
of TP, owned by such Shareholder whether issued heretofore or hereafter,
that such person owns or has the right to vote, (i) against any
recapitalization, merger, consolidation, sale of assets or other business
combination or similar transaction involving TP or any of its Subsidiaries,
securities or assets which is not endorsed in writing by TA and (ii)
against any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement
of TP under the Merger Agreement or which could result in any of the
conditions to TP's obligations under the Merger Agreement not being
fulfilled.
(d) Each Shareholder agrees not to directly or indirectly (i) solicit,
initiate, encourage, facilitate or cooperate with (including through the
furnishing of any information) any inquiry or the making of any proposal
which constitutes, or may be reasonably expected to result in, any
Transaction Proposal (as defined in the Merger Agreement); (ii) propose,
enter into or participate in any discussions or negotiations with any
Person regarding a Transaction Proposal; or (iii) agree to or endorse any
Transaction Proposal; provided, however, that the foregoing shall not
prohibit the Shareholders from (A) furnishing information to a third party
who has made a Superior Transaction Proposal (as defined in the Merger
Agreement), subject to the prior receipt of a binding confidentiality
agreement containing terms and conditions no less restrictive than those
set forth in the Confidentiality Agreement dated October 19, 1998 between
TP and TA, (B) thereafter engaging in discussions or negotiations with a
third party who has made a Superior Transaction Proposal, or (C) following
TP's receipt of a Superior Transaction Proposal and subject to Section
6.5(c) of the Merger Agreement, taking and disclosing to other shareholders
of TP a position with respect thereto, or taking any other legally required
action with respect thereto (including without limitation the filing of any
documents with the SEC), but in each case referred to in the foregoing
clauses (A) through (C), only after the Board of Directors of TP has
concluded in good faith, after consultation with TP's financial advisers
and based upon the advice of independent legal counsel (who may be TP's
regularly engaged legal counsel), that such action is necessary in order
for the Directors of TP to comply with their fiduciary obligations to TP's
shareholders under applicable law.
(e) Each Shareholder agrees to promptly notify TA in writing of the
nature and amount of any acquisition by Shareholder after the date hereof
of any voting securities of TP, including upon the exercise or conversion
of any Convertible Securities.
(f) In the event that TA and Acquisition elect to purchase shares of
TP pursuant to a cash tender offer (an "Offer"), each Shareholder agrees to
validly tender and not withdraw, pursuant to and in accordance with the
terms of the Offer, not later than the fifteenth business day after the
commencement of the Offer and pursuant to Rule 14d-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act), the Shares set forth
on Schedule A as well as that number of shares of TP common stock issued to
such Shareholder in connection with his exercise or conversion of the
Convertible Securities (the "Shares" described on Schedule Aand the shares
issued in connection with the exercise or conversion of the Convertible
Securities described on Schedule B are collectively referred to as the "TP
Common Shares"). Each Shareholder further agrees to permit TA and
Acquisition to publish and disclose his identity and ownership of the TP
Common Shares, and the nature of their commitments, arrangements and
understandings under this Agreement as may be required by the Exchange Act
and/or the Securities and Exchange Commission or useful in connection with
the filings thereunder. TA agrees that, in the event of the commencement of
an Offer, the same consideration per share shall be paid to all
shareholders of TP, whether pursuant to such Offer or any subsequent merger
(except to the extent provided in the Share Exchange Agreement) and shall
otherwise comply with Section 1.1 of the Merger Agreement.
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<PAGE> 119
Section 2. Additional Representations and Warranties of Shareholders.
Each Shareholder represents and warrants to TA as follows:
(a) such Shareholder has all necessary power and authority to execute
and deliver this Voting Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby;
(b) this Voting Agreement has been duly executed and delivered by such
Shareholder;
(c) this Agreement constitutes the valid and binding agreement of such
Shareholder enforceable against such Shareholder in accordance with its
terms;
(d) the Shares described on Schedule A hereto are the only voting
securities of TP owned by such Shareholder and are owned free and clear of
all liens, charges, encumbrances, restrictions and commitments of any kind
except for the Share Exchange Agreement (in the case of Saunders). Upon any
exercise or conversion of the Convertible Securities, each Shareholder will
own his TP Common Shares free and clear of all liens, charges,
encumbrances, restrictions and commitments of any kind except for the Share
Exchange Agreement (in the case of Saunders);
(e) the Convertible Securities and the shares subject thereto
described on Schedule B are the only derivative or convertible securities,
or rights to acquire securities, of TP owned by such Shareholder and are
owned free and clear of all liens, charges, encumbrances, restrictions and
commitments of any kind (except pursuant to the terms of such instruments);
(f) Each Shareholder acknowledges that he Beneficially Owns (as
hereinafter defined) his Shares and that upon exercise or conversion of the
Convertible Securities, he will Beneficially Own the TP Common Shares.
"Beneficially Owns" or "Beneficial Owner" with respect to any securities
shall mean having beneficial ownership of such securities as determined
pursuant to Section 13d-3 under the Exchange Act, including pursuant to any
agreement, arrangement or understanding, whether or not in writing.
(g) such Shareholder has not appointed or granted any irrevocable
proxy, which appointment or grant is still effective, with respect to the
Shares owned by such Shareholder;
(h) such Shareholder is not a party to any other voting agreement,
shareholders' agreement or other agreement or arrangement with respect to
the Shares or the Convertible Securities owned by such Shareholder that
contains any covenant or provisions inconsistent with the terms hereof; and
(i) each Shareholder acknowledges, and TA agrees, that the
restrictions imposed upon such Shareholder in this Voting Agreement are so
imposed only in Shareholder's capacity as a shareholder of TP.
Section 3. Further Assurances.
Each party shall execute and deliver such additional instruments and other
documents and shall take such further actions as reasonably may be necessary or
appropriate to effectuate, carry out and comply with all of their obligations
under this Voting Agreement. Without limiting the generality of the foregoing,
none of the parties hereto shall enter into any agreement or arrangement (or
alter, amend or terminate any existing agreement or arrangement) if such action
would materially impair the ability of such party to effectuate, carry out or
comply with all the terms of this Voting Agreement.
Section 4. Covenants of Shareholders.
(a) Subject to the provisions of Section 5 below, each Shareholder hereby
agrees that, except as contemplated by this Voting Agreement, the Share Exchange
Agreement and the Merger Agreement, such Shareholder shall not enter into any
voting agreement or grant an irrevocable proxy or power of attorney with respect
to the TP Common Shares which is inconsistent with this Voting Agreement.
(b) At the Closing, Holahan agrees to execute that certain Consulting
Agreement as referenced in Section 7.2(j) of the Merger Agreement.
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<PAGE> 120
Section 5. Effectiveness and Termination.
It is a condition precedent to the effectiveness of this Voting Agreement
that the Merger Agreement shall have been executed and delivered. This Voting
Agreement shall automatically terminate and be of no further force or effect
upon the termination of the Merger Agreement by TA or by TP in accordance with
all of the provisions of the Merger Agreement, including, if applicable, any
requirement of TP to pay an Immediate Termination Fee to TA and/or Acquisition
prior to or simultaneous with such termination as contemplated by the Merger
Agreement. Upon any termination of this Voting Agreement, except for any rights
any party may have in respect of any breach by another party of its obligations
hereunder, no one of the parties hereto shall have any further obligation or
liability hereunder. The provisions of this Voting Agreement also shall
terminate and be of no further force or effect from and after the Effective Date
of the Merger.
Section 6. Consideration.
Each Shareholder hereby acknowledges and agrees that TA is entering into
the Merger Agreement in reliance upon the execution by the Shareholders of the
Voting Agreement and that TA's execution of the Merger Agreement (and the making
by TA to TP of the various representations, warranties and agreements contained
therein, all of which have been relied upon by Shareholders in connection with
their execution of this Voting Agreement) constitutes adequate consideration and
value for each Shareholder's execution of this Voting Agreement and compliance
with its terms.
Section 7. Miscellaneous.
(a) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier to the parties
at the following addresses (or at such other address for a party as shall
be specified by like notice):
(i) If to TA or Acquisition, to:
TravelCenters of America, Inc.
24601 Center Ridge Road
Suite 200
Westlake, OH 44145-5634
Attention: Edwin P. Kuhn
with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Philip M. Dawson, Esq.
(ii) If to TP, to:
Travel Ports of America, Inc.
3495 Winton Place
Building C
Rochester, NY 14623
Attention: E. Philip Saunders
with a copy to:
Harris, Beach & Wilcox, LLP
130 East Main Street
Rochester, New York 14604
Attention: Thomas E. Willett, Esq.
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<PAGE> 121
(b) Amendments, Waivers, Etc. This Voting Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by TA and Shareholders.
(c) Successors and Assigns. Except as provided in Section 1(b),
neither this Voting Agreement nor any of the rights, interests or
obligations of the parties hereto shall be assigned, in whole or in part,
without prior written consent of the other party, provided however, that TA
or Acquisition may, without the prior written consent of the Shareholders,
assign its rights under this Agreement to any (i) financial institution
that requires such assignment in connection with such financial
institution's agreement to provide financing or (ii) affiliate of TA.
Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and assigns.
(d) Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Voting Agreement and that
any party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunction or such other relief as
such court may deem just and proper in order to enforce this Voting
Agreement or prevent any violation hereof without any requirement for the
posting of any bond, and, to the extent permitted by applicable law, each
party waives any objection to the imposition of such relief.
(e) Governing Law. THIS VOTING AGREEMENT AND ALL DISPUTES HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
TRAVELCENTERS OF AMERICA, INC.
By: /s/ EDWIN P. KUHN
------------------------------------
Edwin P. Kuhn, President and
Chief Executive Officer
TP ACQUISITION, INC.
By: /s/ EDWIN P. KUHN
------------------------------------
Edwin P. Kuhn, President and
Chief Executive Officer
Name and Signature
/s/ E. PHILIP SAUNDERS
--------------------------------------
/s/ JOHN M. HOLAHAN
--------------------------------------
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<PAGE> 122
TRAVEL PORTS OF AMERICA, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 1999
The undersigned, revoking any proxy heretofore given, hereby
constitutes and appoints E. Philip Saunders, John M. Holahan, and
William Burslem III, or any of them, proxies of the undersigned,
each with full power of substitution, to vote all shares of Common
Stock of TRAVEL PORTS OF AMERICA, INC. (the "Company") which the
undersigned is entitled to vote at the Special Meeting of
Shareholders to be held June 1, 1999 at 9:00 A.M. local time (the
"Special Meeting"), and at any adjournment or postponement thereof,
as hereinafter specified with respect to the following proposals,
more fully described in the Notice of and Proxy Statement for the
Special Meeting, receipt of which is hereby acknowledged. The Board
of Directors recommends a vote FOR the proposal to adopt the
Agreement and Plan of Merger.
SEE REVERSE
SIDE
<PAGE> 123
<TABLE>
<C> <S>
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL.
<TABLE>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Proposal to adopt the Agreement and Plan of Merger among the [ ] [ ] [ ]
Company, TravelCenters of America, Inc. and TP Acquisition,
Inc.
2. In their discretion, upon any other business which may
properly come before the Special Meeting or any adjournment
or postponement thereof.
</TABLE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE PROPOSAL SET FORTH
HEREIN UNLESS A CONTRARY CHOICE IS SPECIFIED. SAID PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY OTHER MATTERS WHICH PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY ADJOURNMENT THEREOF.
SIGNATURE __________________________________ DATE _____________
SIGNATURE __________________________________ DATE _____________
NOTE: Please sign exactly as name appears hereon. For joint
accounts, each joint owner should sign. Executors,
administrators, trustees, etc. should so indicate when
signing.
