==========================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------
FORM 10-Q
----------------------
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30,1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 1-10717
E-Z SERVE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2168773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
2550 N. Loop West, Suite 600, Houston, TX 77092
(Address of principal executive offices, including ZIP
code)
713/684-4300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
- -- --
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
----------------------------
Common Stock $.01 par value: 69,319,530
(Number of shares outstanding as of May 12, 1997
============================================================
============
E-Z SERVE CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE MONTH ENDED MARCH 30, 1997
INDEX
Item
Number
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
March 30, 1997 and December 29, 1996
1-2
Consolidated Statements of Operations for the
Three Months ended March 30, 1997 and
March 31, 1996
3
Consolidated Statements of Stockholders' Equity for
the Year ended December 29, 1996 and Three Months
ended March 30, 1997
4
Consolidated Statements of Cash Flows for the
Three Months ended March 30, 1997 and
March 31, 1996
5-6
Notes to Consolidated Financial Statements
7-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
14-22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
23
Item 3. Defaults Upon Senior Securities
23
Item 4. Submission of Matters to a Vote of Security Holders
23
Item 6. Exhibits and Reports on Form 8-K
23
SIGNATURES
<PAGE> 1
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
March 30,
December 29,
1997
1996
--------- ---
- ---------
ASSETS
- ------
<S> <C>
<C>
Current Assets:
Cash and cash equivalents $ 7,057 $
6,333
Receivables, net of allowance for
doubtful accounts 8,231
8,764
Inventory 38,394
40,070
Environmental receivables 7,246
7,246
Assets held for resale 18,287
- --
Prepaid expenses and other current assets 2,965
2,474
-------- -
- -------
Total Current Assets 82,180
64,887
Property and equipment, net of accumulated
depreciation 116,367
137,298
Environmental receivables 34,118
34,305
Other assets 3,624
3,915
-------- -
- -------
$236,289
$240,405
========
========
The accompanying Notes to Consolidated Financial
Statements
are an integral part of these Statements.
<PAGE> 2
</TABLE>
<TABLE>
<CAPTION>
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited and In Thousands)
March 30,
December 29,
1997
1996
--------- --
- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C>
<C>
Current Liabilities:
Trade payables $ 28,437
$ 29,563
Accrued liabilities and other 23,807
26,265
Current portion of environmental liability 8,608
9,017
Current portion of long-term obligations 26,329
14,841
--------
- --------
Total Current Liabilities 87,181
79,686
--------
- --------
Long-Term Obligations:
Payable to banks, net of current portion 48,669
64,739
Obligations under capital leases 1,310
1,338
Other, net of current portion 218
238
Environmental liability 32,510
32,571
Other liabilities 6,523
6,549
Commitments and contingencies --
- --
--------
- --------
Total Long-Term Liabilities 89,230
105,435
--------
- --------
Redeemable Preferred Stock 12,648
- --
--------
- --------
Stockholders' Equity:
Preferred stock, $.01 par value, authorized
3,000,000 shares; 75,656 shares
Series C issued and outstanding at
December 29, 1996 --
1
Common stock, $.01 par value; authorized
100,000,000 shares: 69,319,530 and
69,119,530 shares issued and outstanding
at March 30, 1997 and December 29, 1996,
respectively 693
691
Additional paid-in capital 49,611
56,527
Retained earnings (accumulated deficit)
subsequent to March 28, 1993, date of
quasi-reorganization (total deficit
eliminated $86,034) (3,074)
(1,935)
--------
- --------
Total Stockholders' Equity 47,230
55,284
--------
- --------
$236,289
$240,405
========
========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements
are an integral part of these Statements.
<PAGE> 3
<TABLE>
<CAPTION>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and In Thousands except per share
amounts)
Three Months
Ended
---------------
- ---------
March 30,
March 31,
1997
1996
----------- --
- ---------
Revenues:
- --------
<S> <C>
<C>
Motor fuels (Includes excise taxes of
approximately $35,110 and $37,339
for the three month 1997 and 1996
periods, respectively) $ 124,046 $
118,665
Convenience store 73,612
72,801
Other income, net 4,102
3,294
---------- --
- --------
201,760
194,760
---------- --
- --------
Cost and Expenses:
Cost of sales:
Motor fuels 112,636
107,336
Convenience store 51,394
51,363
Operating expenses 28,033
28,394
Selling, general and administrative
expenses 5,739
6,120
Depreciation and amortization 3,341
3,385
Interest expense 2,369
2,115
---------- --
- --------
203,512
198,713
---------- --
- --------
Loss before income taxes (1,752)
(3,953)
Income tax benefit (613)
(127)
Benefit in lieu of taxes --
(1,257)
---------- --
- --------
Net loss (1,139)
(2,569)
Preferred Stock dividends and accretion (394)
(227)
---------- --
- --------
Net loss attributable to common stock $ (1,533) $
(2,796)
==========
==========
Primary loss per common and
common equivalent share $ (.02) $
(.04)
==========
==========
Fully diluted loss per common and
common equivalent share $ (.02) $
(.04)
==========
==========
Weighted average common and common
equivalent shares outstanding:
Primary 69,157,992
67,860,357
==========
==========
Fully diluted 69,157,992
67,860,357
==========
==========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements
are an integral part of these Statements.
<PAGE> 4
<TABLE>
<CAPTION>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited and In Thousands)
Additional Retained
Preferred Common Paid-In Earnings
Stock Stock Capital (Deficit) Total
--------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 $ 1 $ 679 $56,340 $ 13,140 $ 70,160
Net loss -- -- -- (15,075) (15,075)
Exercise of stock
options -- 1 57 -- 58
Exercise of stock
warrants -- 11 (13) -- (2)
Deferred compensation-
stock options -- -- 143 -- 143
------- ------- ------- ------- -------
Balance,
December 29, 1996 $ 1 $ 691 $56,527 $(1,935) $55,284
Net loss -- -- -- (1,139) (1,139)
Exercise of
stock options -- 2 78 -- 80
Deferred compensation-
stock options -- -- 16 -- 16
Stock option compensation -- -- 870 -- 870
Retirement of Series
C Preferred Stock (1) -- (7,566) -- (7,567)
Dividends - Series C
Preferred Stock -- -- (792) -- (792)
Common Stock Purchase
Warrants -- -- 872 -- 872
Dividends - Series H
Preferred Stock -- -- (314) -- (314)
Accretion of Preferred
Stock -- -- (80) -- (80)
------- ------- ------- ------- -------
Balance,
March 30, 1997 $ -- $ 693 $49,611 $(3,074) $47,230
======= ======= ======= ======= =======
</TABLE>
The accompanying Notes to Consolidated Financial
Statements
are an integral part of these Statements.
<PAGE> 5
<TABLE>
<CAPTION>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and In Thousands)
Three Months Ended
----------------------
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,139) $ (2,569)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization -
Fixed Assets 3,341 3,385
Amortization - Deferred Financing Costs 346 143
Gain on sale of assets (380) (12)
Payments for environmental remediation (470) (447)
Payments for removal of underground
storage tanks (79) (179)
Benefit in lieu of taxes -- (1,257)
Stock option expense 16 36
Changes in assets and liabilities:
(Increase) decrease in accounts and
notes receivable 678 (467)
Decrease in inventory 1,676 743
(Increase) decrease in prepaid
expenses and other (312) 326
Decrease in accounts payable
and accruals (3,028) (4,956)
Other - net 260 (481)
-------- ---------
Net cash provided by (used in)
operating activities 909 (5,735)
-------- ----------
Cash flows from investing activities:
Proceeds from sale of assets 647 151
Capital expenditures and other
asset additions (938) (3,972)
-------- ---------
Net cash used in investing activities (291) (3,821)
-------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial
Statements
are an integral part of these Statements.
<PAGE> 6
<TABLE>
<CAPTION>
E-Z SERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
(Unaudited and In Thousands)
Three
Months Ended
------------
- -----------
March 30,
March 31,
1997
1996
---------
- -----------
<S> <C>
<C>
Cash flows from financing activities:
Net borrowings under revolving line
of credit $ (1,000)
$ 5,200
Repayment of long-term debt (3,640)
(2,057)
Issuance of common stock 80
- --
Issuance of Preferred H stock, net 13,440
- --
Retirement of Preferred C stock (7,567)
- --
Dividends on Preferred C stock (792)
- --
Proceeds from long-term debt 10
- --
Payments for deferred financing costs (425)
- --
--------
- -------
Net cash provided by financing activities 106
3,143
--------
- -------
Net increase (decrease) in cash and
cash equivalents 724
(6,413)
Cash and cash equivalents at beginning
of period 6,333
15,759
--------
- -------
Cash and cash equivalents at the end
of period $ 7,057
$ 9,346
========
=======
Non-cash effect of:
Series H Preferred Stock dividends $ 314
$ --
--------
- -------
Supplemental cash flow information:
Net cash paid during the period for:
Interest $ 2,454
$ 2,064
Income taxes --
- --
</TABLE>
The accompanying Notes to Consolidated Financial
Statements
are an integral part of these Statements.
<PAGE> 7
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in Thousands)
NOTE (1) BASIS OF PRESENTATION
- ------------------------------
The consolidated financial statements presented herein
include the accounts of E-Z Serve Corporation and its
wholly-owned operating subsidiaries, E-Z Serve Convenience
Stores, Inc. ("EZCON"), and E-Z Serve Petroleum Marketing
Company ("EZPET"). Unless the context indicates to the
contrary, the term of "Company" as used herein should be
understood to include subsidiaries of E-Z Serve Corporation
and predecessor corporations.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions for preparing Form 10-
Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the three month period
ended March 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 28,
1997. It is suggested that these condensed consolidated
financial statements be read in conjunction with the
consolidated financial statements and the notes thereto
included in the Company's annual report on Form 10-K for the
year ended December 29, 1996.
Certain items in the 1996 consolidated financial statements
have been reclassified to conform with the presentations in
the March 30, 1997 consolidated financial statements.
NOTE (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
Reference is made to the Notes to Consolidated Financial
Statements included in the Company's annual report on Form
10-K for the year ended December 29, 1996.
The computation of earnings per common share is based upon
the weighted average number of common shares outstanding
during the period plus (in periods in which they have a
dilutive effect) the effect of common equivalent shares
arising from convertible preferred stock using the if-
converted method and dilutive stock options and warrants
using the treasury stock method.
During the three month periods ended March 30, 1997 and
March 31, 1996, Common Stock Equivalents were not included
in per share calculations, as they were anti-dilutive.
The carrying value of the Redeemable Preferred Stock was
initially recorded at the issue price (net of issuance
costs and the value of
<PAGE> 8
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
(Dollars in Thousands)
the associated warrants) and is being increased by
monthly accretions to retained earnings, or paid-in
capital in the absence of retained earnings, of the
difference between the issuance price and the redemption
value.
NOTE (3) QUASI-REORGANIZATION
- -----------------------------
With the acquisitions of Taylor Petroleum, Inc. and EZCON in
1992, and with the April 21, 1993 debt restructuring, the
Company was recapitalized and its primary business changed
from that of a gasoline marketer to a convenience store
operator. Accordingly, effective March 28, 1993, the
Company's Board of Directors authorized management to effect
a quasi-reorganization. In this regard, the Company
recognized a write down of $12,997 in the value of
management information systems, convenience store assets,
securities of related parties, and the future liabilities
associated with the Marketer locations.
As part of the quasi-reorganization, the deficit in retained
earnings was eliminated against additional paid-in capital.
Retained earnings after the quasi-reorganization are dated
to reflect only the results of operations subsequent to
March 28, 1993. Any tax benefits of operating loss and tax
credit carryforward items which arose prior to the quasi-
reorganization will be reported as a direct credit to paid-
in capital.
<PAGE> 9
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
(Dollars in Thousands)
NOTE (4) LONG-TERM OBLIGATIONS AND CREDIT ARRANGEMENTS
- ------------------------------------------------------
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
March 30, December 29,
1997 1996
---------- ------------
<S> <C> <C>
Revolving lines of credit payable to banks $ 4,200 $ 5,200
Term notes payable to banks 70,369 73,989
Current portion (25,900) (14,450)
------- -------
48,669 64,739
------- -------
Note payable to major stockholder 25 25
Current portion (25) (25)
------- -------
-- --
------- -------
Capital lease obligations 1,634 1,624
Current portion (324) (286)
------- -------
1,310 1,338
------- -------
Long-term obligation - other 298 318
Current portion (80) (80)
------- -------
218 238
------- -------
Total long-term obligations $50,197 $66,315
======= =======
</TABLE>
On January 17, 1995, EZCON entered into a Credit and
Guaranty Agreement ("C & G Agreement") with a group of
banks (the "Lenders") including Societe Generale as
Agent. The C & G Agreement provided for a term loan of
$45,000 ("Term Loan") and a $15,000 revolving line of
credit ("Revolver"). At closing, the Term Loan was fully
drawn and the proceeds were used (a) to repay in full the
outstanding amounts owed under the previous credit
agreement, (b) to finance the initial payment for the
acquisition of Time Saver Stores, Inc., and (c) for
working capital purposes. On July 21, 1995 the C & G
Agreement was amended whereby the Lenders increased the
Term Loan available to the Company to $60,400. The
Company fully drew the additional $15,400 and the
proceeds were used for the acquisition of Sunshine Jr.
Stores, Inc. ("SJS"). With the acquisition of SJS, the
Company assumed the indebtedness of SJS. On October 2,
1995, the Amended and Restated Credit and Guaranty
Agreement ("Amended C & G Agreement") was entered into
and the Term Loan was increased to $80,000, the Revolver
was increased to $25,000 and the letter of
<PAGE> 10
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
(Dollars in Thousands)
credit sub-limit was increased to $15,000. The Company
fully drew the additional $19,600 available on the Term
Loan and used the proceeds to retire all of the
outstanding debt of SJS.
As a result of financial covenant violations incurred by
the Company in 1996, an amendment to the Amended C & G
Agreement ("C & G Agreement -- Amendment No. 2") was
entered into on March 27, 1997. Under the terms of the C
& G Agreement -- Amendment No. 2, the Term Loan and the
Revolver mature on October 1, 1998. Both loans bear
interest at the prime rate plus 1.75%, and, with proper
notice to the Agent, both can be converted to LIBOR loans
at LIBOR plus 3.0%. During the first quarter of 1997,
the Term Loan was converted to a LIBOR loan at an average
interest rate of 8.61%.
The Term Loan requires semi-annual principal payments of
$4,820 on July 24, 1997, $5,780 on January 24, 1998, and
$6,280 on July 24, 1998. Also, the C & G Agreement --
Amendment No. 2 requires that 100% of certain transaction
proceeds, as defined, be immediately applied as a
mandatory prepayment of the Term Loan in the inverse
order of maturity. However, 50% of the first $10,600 of
any asset sale can be applied pro rata to the scheduled
Term Loan principal payments due July 1997 and January
1998. Further, in accordance with the C & G Agreement --
Amendment No. 2, the aggregate outstanding principal
amount of the Term Loan must be reduced to $60,000 by
September 30, 1997, $55,000 by December 31, 1997, and
$45,000 by February 28, 1998.
In order to facilitate these reductions, the Company is
divesting certain assets that are not consistent with its
strategic plan or are outside of its primary market area.
The net book value of these assets has been classified as
a current asset. In April 1997, net proceeds of $479
from certain transactions related to the sale of EZPET
were applied against the outstanding Term Loan balance.
Additionally, on April 30, 1997, the Company signed an
agreement to sell 20 stores in the Nashville area.
Closing is planned for May 21, 1997 and net proceeds of
approximately $11,400 will also be applied to the Term
Loan. Further, on May 2, 1997, the Company entered into
an agreement to sell 37 locations in Central Florida.
Closing is planned for the end of June and net proceeds
of approximately $4,250 will be used to reduce the Term
Loan balance. Management believes, but can provide no
assurance, that these transactions will close as
scheduled. Upon closing, the July 24, 1997 scheduled
principal payment will be reduced to $2,410 and the
January 24, 1998 scheduled principal payment will be
reduced to $2,890. Management anticipates that these
payments will be funded from cash flow. Management also
believes that other planned asset sales enable the
Company to further reduce its debt to the level required
by the C & G Agreement - Amendment No. 2 at February 28,
1998.
The Revolver can be used for working capital purposes and
for issuance of a maximum of $15,000 of letters of
credit. The Revolver has a "clean-down" provision
whereby, under the C & G Agreement -- Amendment No. 2,
during a five consecutive calendar day period of
<PAGE> 11
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in Thousands)
each calendar month, the aggregate outstanding borrowings
cannot exceed certain defined levels. At March 30, 1997,
there were $4,200 of outstanding borrowings under the
Revolver and there were $8,847 of outstanding letters of
credit issued primarily for workers compensation claims.
The Term Loan and Revolver are secured by the Company's
pledge of all the capital stock of its subsidiaries.
Further, the C & G Agreement -- Amendment No. 2 grants
the Lenders, among other things, a security interest in
substantially all of the Company's real property,
buildings and improvements, fixtures, equipment,
inventories, and receivables. Provisions of the C & G
Agreement -- Amendment No. 2 require the Company to
remain within the limits of certain defined financial
covenants, and impose various restrictions on
distributions, business transactions, contractual
obligations, capital expenditures, and lease obligations.
NOTE (5) COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Environmental Protection Agency issued regulations in
1988 that established certain requirements for
underground storage tanks ("USTs") that affect various
aspects of the Company's retail gasoline operations. The
regulations require assurances of insurance or financial
responsibility and will require the Company to replace or
upgrade a certain number of its USTs with systems to
protect against corrosion and overfill/spills and to
detect leaks. The Company has elected to self-insure to
meet the financial responsibility aspects of these
regulations.
By December 22, 1998, all USTs must be corrosion
protected and overfill/spill protected. Additionally, by
December 1993, all USTs had to have a method of leak
detection installed. As of March 30, 1997, the Company
was in complete compliance with leak detection standards
and, excluding EZPET, approximately 70% completed with
the corrosion and overfill/spill requirements. The
Company estimates that it will make additional capital
expenditures of $2,806 and $2,641 in 1997 and 1998
respectively, to be in full compliance with the
regulations by the 1998 deadline.
Additionally, the Company estimates that the total future
cost of performing remediation on contaminated sites will
be approximately $41,118, of which approximately $34,180
is expected to be reimbursed by state trust funds. Also,
the Company anticipates incurring approximately $2,208
for the costs of removing USTs at abandoned locations.
During 1995, the Company entered into an agreement with
an environmental consulting firm whereby the consulting
firm assumes responsibility for the cleanup of
contaminated sites at approximately 80% of the Company's
locations. Under this agreement ("Direct Bill
Agreement"), the consulting firm remediates the sites at
its cost and files for reimbursement from the state. The
Company experiences no cash cost for these sites, other
than the cost of the deductible, unless the state does
not reimburse the consulting firm within a period of
twenty-four months in which case the Company is obligated
<PAGE> 12
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in Thousands)
to reimburse the consulting firm. With the Direct Bill
Agreement, assuming full reimbursement by the states to
the consulting firm, the future cash cost to the Company
for remediating contaminated sites drops to approximately
$9,446, of which, approximately $5,396 is expected to be
reimbursed by state funds. At March 30, 1997, for work
largely completed prior to the Direct Bill Agreement, the
Company had completed the necessary remediation and has
reimbursement claims totaling approximately $7,184 with
the various states in which it operates.
On April 22, 1997, the Company entered into an agreement
with Environmental Corporation of America ("ECA") whereby
ECA replaced the previous environmental consulting firm
at all existing contaminated sites with the exception of
approximately 25 sites in Florida. Under this new
agreement, ECA remediates the sites at its cost and files
for reimbursement from the applicable state. The Company
incurs no cash costs for these sites, other than the cost
of the deductible and the cost to remediate any locations
deemed non-qualified for reimbursement by the state. The
agreement imposes no liability on the Company in the
event that payment from the state trust funds are
delayed.
The above estimates are based on current regulations,
historical results, assumptions as to the number of tanks
to be replaced, and certain other factors. The actual
cost of remediating contaminated sites and removing tanks
may be substantially lower or higher than the amount
reserved due to the difficulty in estimating such costs
and due to potential changes in regulations or state
reimbursement programs.
NOTE (6) REDEEMABLE PREFERRED STOCK
- ------------------------------------
On January 27, 1997 the Company sold 140,000 shares of
its newly issued Series H Preferred Stock, ("Series H
Preferred Stock") to the same major stockholder that held
substantially all of the Company's Series C Preferred
Stock. The Series H Preferred Stock is entitled to
receive semi-annual dividends at the rate of 13% per
annum paid in additional shares of Series H Preferred
Stock. In an event of default, as defined, the dividend
rate increases to 23% and the holders can elect one
director to a separate class of directors who shall have
a majority of the votes on the Board of Directors. The
Series H Preferred Stock has no voting rights, but ranks
senior to any capital stock or other equity securities of
the Company. It can be redeemed by the Company at any
time, but is mandatorily redeemable upon the earlier of
(a) the third anniversary of the date of issuance, (b)
the occurrence of a change of ownership, as defined, or
(c) the occurrence of a fundamental change, as defined.
Warrants representing the purchase of 960,000 shares of
the Company's common stock at a nominal exercise price
were also issued as part of this transaction. Additional
warrants are issuable on each anniversary that the Series
H Preferred Stock remains outstanding. The Series H
<PAGE> 13
E-Z SERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in Thousands)
Preferred Stock has a liquidation value of $14,000, and
was recorded at a net amount of $12,568 after deducting
issuance fees of $560 and the value of the 960,000
warrants of $872. The excess of the liquidation value
over the carrying value is being accreted monthly over
the three-year mandatory redemption period. Net proceeds
of $13,440 from the sale of the Series H Preferred Stock
were used by the Company in the following manner: $8,359
to redeem all of the 75,656 outstanding shares, plus all
accrued but unpaid dividends, of the Company's $6.00
Convertible Preferred Stock, Series C; and $5,081 for
general corporate purposes, including paying down a
portion of amounts outstanding under the Revolver.
NOTE (7) SUBSEQUENT EVENTS
- --------------------------
In April 1997, the Company entered into a series of
agreements with Environmental Corporation of America,
Inc. and Restructure, Inc., an affiliate of ECA,
("Restructure") to sell all of the capital stock of EZPET
("EZPET Stock Purchase Agreement"), to sell all claims
for reimbursement that EZCON has from state trust funds
for environmental remediation work completed to date, and
to enter into a new environmental remediation agreement
for the clean up of all remaining contaminated sites of
EZCON.
Under the terms of the EZPET Stock Purchase Agreement,
Restructure has agreed to indemnify the Company against
any and all actions, suits and losses, damages,
deficiencies, and obligations suffered by the Company as
a result of its ownership, operation, or conduct of
EZPET's business. ECA has guaranteed the obligations of
Restructure under the EZPET Stock Purchase Agreement.
The selling price of $451 will be collected by the
Company throughout 1997 and, as collected, will be used
to pay down a portion of the Company's Term Loan.
The environmental remediation services agreement with ECA
is similar to an agreement the Company currently has with
another environmental consulting firm whereby the
consulting firm is responsible for remediating the EZCON
sites at its cash cost and then filing for reimbursement
from the relevant state trust funds. Under the new
agreement, however, the Company is not liable for any
delay in payment that ECA may experience with any state
trust fund. Additionally, the Company received proceeds
of $1,599 from the sale to ECA of existing claims for
reimbursement from state environmental
trust funds. These proceeds were used to pay down
amounts outstanding under the Revolver.
The Company has also signed agreements to sell 20 stores
in the Nashville area and 37 stores in Central Florida.
(See Note 4 -- Long-Term Obligations and Credit
Arrangements.)
<PAGE> 14
E-Z SERVE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's results of operations
and balance sheet during the period included in the accompanying
consolidated financial statements. Operating data is presented below:
<TABLE>
<CAPTION>
Results of Operations
-----------------------------
(In thousands except store counts, per gallon prices and margins)
Three Months Ended
-----------------------
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
CONVENIENCE STORE OPERATIONS (1)
- --------------------------------
Merchandise:
Average number of merchandise stores
during the period 690 735
Merchandise sales $ 73,612 $ 72,801
Merchandise sales per location per month $ 35.6 $ 33.0
Gross profit $ 22,218 $ 21,438
Gross profit per location per month $ 10.7 $ 9.7
Gross profit percentage 30.18 29.45
Motor Fuels:
Average number of motor fuel stores
during the period 657 693
Gallons sold 90,397 93,953
Gallons sold per location per month 45.9 45.2
Revenues $108,420 $101,362
Price per gallon $ 1.20 $ 1.08
Gross profit $ 9,959 $ 9,650
Gross profit per location per month $ 5.1 $ 4.6
Gross profit per gallon $ .1102 $ .1027
MARKETER OPERATIONS (2)
- -----------------------
Average number of operating locations
during the period 171 200
Gallons sold 12,772 15,660
Gallons sold per location per month 24.9 26.1
Revenues $ 15,626 $ 17,303
Price per gallon $ 1.22 $ 1.11
Gross profit (3) $ 1,451 $ 1,679
Gross profit per location per month $ 2.8 $ 2.8
Gross profit per gallon $ .1136 $ .1072
</TABLE>
(1) At March 30, 1997, there were 687 Company operated convenience
stores (652 of which sold motor fuels) and 7 franchised convenience
stores.
(2) Represents non-company operated motor fuel retail outlets
("Marketers"). At March 30, 1997 there were 168 Marketers.
(3) Gross profit is shown before deducting compensation paid to
operators of locations not operated by the Company of $616,000 and
$866,000 for the three months ended March 30, 1997 and March 31, 1996,
respectively.
<PAGE> 15
Overview
- --------
The Company reported net losses of $1,139,000 and $2,569,000
for the three month periods ended March 30, 1997 and March
31, 1996, respectively. The first quarter 1997 loss
included a non-recurring gain of $397,000, net of tax,
related to an insurance settlement in the Company's favor.
Operating Gross Profit
- ----------------------
Convenience store ("C-Store") merchandise sales increased
1.1% in the first quarter of 1997 compared to the first
quarter of 1996. Merchandise sales per location for the
first quarter of 1997 increased 7.7% as compared to the same
period in 1996. These increases are largely due to
increased marketing efforts, and, on a per location basis,
are also affected by the Company's ongoing program of
closing or selling under-performing locations. For the
first quarter of 1997, merchandise revenue comprised 36.5%
of the Company's total revenue as compared to 37.4% for the
first quarter of 1996.
The average merchandise gross profit margin of 30.18% for
the first quarter of 1997 is up by 0.73 over the 29.45%
reported for the same period of 1996. This margin increase
reflects higher product margins and reduced shrinkage.
Merchandise sales at comparable stores increased 5.9% in the
first quarter of 1997 as compared to the same 1996 period.
Average C-Store gross profit per gallon increased .75 cents
to 11.02 cents per gallon in the first quarter of 1997 as
compared to the first quarter of 1996 reflecting improved
market conditions. Sales volumes at comparable locations
declined 1.1% in the first quarter of 1997 as compared to
the first quarter of 1996. Total gallons sold by non-
company operated motor fuel retail outlets ("Marketers")
decreased 18.4% in the first quarter of 1997 as compared to
the same period of 1996 reflecting a 14.5% decrease in the
average number of operating locations during 1997 as the
Company continued to dispose of or close Marketer locations.
The first quarter 1997 Marketer average gross profit was .64
cents per gallon above the first quarter of 1996, due to
lower industry margins in 1996, as described above.
Other Income
- ------------
Other income (which includes money order sales income, gross
profit from the sale of lottery tickets, telephone
commissions, rental income, interest income, franchise fee
income, and other) increased 24.5% in the three months ended
March 30, 1997 as compared to the first three months of
1996. Other income for the first three months of 1997
included $610,000, of non-recurring insurance settlements in
the Company's favor. Exclusive of this non-recurring item,
the 1997 increase in other income over the comparable period
of 1996 would have been 6% and is primarily due to gains
recognized on the disposition of non-strategic or under-
performing stores.
<PAGE> 16
Expenses
- --------
Total operating expenses decreased by 1.3% for the first
quarter of 1997 as compared to the same period in 1996 which
is due to the decrease in the number of operating locations.
Operating expenses as a percentage of total revenues, were
13.9% for the first quarter of 1996 as compared to 14.6% for
the same period in 1996. Operating expenses, as a
percentage of merchandise revenue, were 38.1% and 39.0% for
the first quarters of 1997 and 1996, respectively. Selling,
General, and Administrative ("SG&A") expenses for the first
quarter 1997 decreased 6.2% as compared to the first quarter
1996. SG&A expenses, as a percent of total revenue,
decreased to 2.8% in the first quarter 1997 from 3.1% in the
first quarter 1996. These decreases are primarily due to
the Company's ongoing cost reduction program.
Depreciation and amortization expense decreased 1.3% in the
three months ended March 30, 1997 as compared to the same
period in 1996 due to the lower number of operating
locations.
Interest expense increased $254,000 for the three month
period ended March 30, 1997 as compared to the same period
in 1996 due to increased debt financing costs caused by the
shorter tenure of the Company's bank debt.
Inflation
- ---------
The Company believes inflation has not had a material effect
on its results of operations. The Company does, however,
experience short-term fluctuations in its motor fuel gross
profit margins as a result of changing market conditions for
the supply and demand of gasoline.
Liquidity and Capital Resources
- -------------------------------
The following table sets forth key balance sheet amounts and
corresponding ratios for periods included in the
accompanying consolidated financial statements:
<TABLE>
<CAPTION>
March 30,
December 29,
1997
1996
----------- -----
- -------
<S> <C> <C>
Current assets $82,180,000
$64,887,000
Current liabilities $87,181,000
$79,686,000
Current ratio 0.94:1
0.81:1
Long-term debt (including related
parties, capital leases and other) $50,197,000
$66,315,000
Stockholders' equity $47,230,000
$55,284,000
Long-term debt to equity ratio 1.06:1
1.20:1
Common shares outstanding 69,319,530
69,119,530
<PAGE> 17
Liquidity
- ---------
Due to the nature of the Company's business, most sales
are for cash, and cash provided by operations is the
Company's primary source of liquidity. Receivables relate
to undeposited sales by Marketers, credit card sales,
lottery and lotto redemptions, manufacturer rebates, and
other receivables. In addition, the Company finances its
inventory requirements primarily through normal trade
credit terms. This condition allows the Company to
operate with a low level of cash and working capital. The
Company had a working capital deficit of $5,001,000 at
March 30, 1997, as compared to $14,799,000 at year end
1996. The change is due to the reclassification,
approximately $18,000,000, of the carrying value of
certain non-core locations the Company expects to sell in
1997 in order to satisfy the principal amortization
schedule required by the C & G Agreement -- Amendment No.
2. The increase in current assets is partially offset by
the increase in the current portion of long-term debt
obligations resulting from the amended terms of the
Company's Term Loan. As of March 30,1997, the Company had
$7,044,000 available on its revolving line of credit.
During the first quarter of 1997, the Company received the
following major non-recurring cash proceeds: sale of fixed
assets of $647,000 and proceeds from insurance settlements
of $610,000. Major non-recurring expenditures included:
$377,000 for capital and environmental equipment; $470,000
for environmental remediation; and $79,000 for removal of
underground storage tanks.
Approximately 62% of the Company's revenues are derived
from motor fuel sales and, because the Company acquires
100% of its product on a virtual spot basis, gross margins
are subject to sudden changes whenever a disproportionate
movement between purchase costs and retail selling prices
occurs. Frequently these movements are not in line with
each other which leads to unusually wide or narrow
margins. In addition, attempts by major oil companies and
others, including the Company, to gain market share have
placed added pressure on margin and volume. Without
stability in the marketplace, the Company may temporarily
experience operating results that are unprofitable before
considering depreciation and debt service.
The Company believes that cash flow from operations and
available working capital will provide the Company with
sufficient liquidity to conduct its business in an
ordinary manner. However, the occurrence of unanticipated
events or a prolonged motor fuel margin squeeze could
cause cash shortfalls to exist and require the Company to
borrow on its revolving line of credit to a greater extent
than currently anticipated, to seek additional debt
financing or to seek additional equity capital which may
or may not be available. In addition, in accordance with
the terms of the C & G Agreement -- Amendment No. 2 (see
Capital Resources), the Company has the option to apply a
portion of the proceeds received from sales of assets to
the July 1997 and January 1998 scheduled principal
payments.
Capital Resources
- -----------------
On January 17, 1995, EZCON entered into a Credit and
Guaranty Agreement ("C & G Agreement") with a group of
banks (the "Lenders")
<PAGE> 18
including Societe Generale as Agent. The C & G Agreement
provided for a term loan of $45,000,000 ("Term Loan") and
a $15,000,000 revolving line of credit ("Revolver"). At
closing, the Term Loan was fully drawn and the proceeds
were used (a) to repay in full the outstanding amounts
owed under the previous credit agreement, (b) to finance
the initial payment for the acquisition of Time Saver
Stores, Inc., and (c) for working capital purposes. On
July 21, 1995 the C & G Agreement was amended whereby the
Lenders increased the Term Loan available to the Company
to $60,400,000. The Company fully drew the additional
$15,400,000 and the proceeds were used for the
acquisition of Sunshine Jr. Stores, Inc. ("SJS"). With
the acquisition of SJS, the Company assumed the
indebtedness of SJS. On October 2, 1995, the Amended and
Restated Credit and Guaranty Agreement ("Amended C & G
Agreement") was entered into and the Term Loan was
increased to $80,000,000, the Revolver was increased to
$25,000,000 and the letter of credit sub-limit was
increased to $15,000,000. The Company fully drew the
additional $19,600,000 available on the Term Loan and
used the proceeds to retire all of the outstanding debt
of SJS.
As a result of financial covenant violations incurred by
the Company in 1996, an amendment to the Amended C & G
Agreement ("C & G Agreement -- Amendment No. 2") was
entered into on March 27, 1997. Under the terms of the C
& G Agreement -- Amendment No. 2, the Term Loan and the
Revolver mature on October 1, 1998. Both loans bear
interest at the prime rate plus 1.75%, and, with proper
notice to the Agent, both can be converted to LIBOR loans
at LIBOR plus 3.0%. During the first quarter of 1997,
the Term Loan was converted to a LIBOR loan at an average
interest rate of 8.61%.
The Term Loan requires semi-annual principal payments of
$4,820,000 on July 24, 1997, $5,780,000 on January 24,
1998, and $6,280,000 on July 24, 1998. Also, the C & G
Agreement -- Amendment No. 2 requires that 100% of
certain transaction proceeds, as defined, be immediately
applied as a mandatory prepayment of the Term Loan in the
inverse order of maturity. However, 50% of the first
$10,600,000 of any asset sale can be applied pro rata to
the scheduled Term Loan principal payments due July 1997
and January 1998. Further, in accordance with the C & G
Agreement -- Amendment No. 2, the aggregate outstanding
principal amount of the Term Loan must be reduced to
$60,000,000 by September 30, 1997, $55,000,000 by
December 31, 1997, and $45,000,000 by February 28, 1998.
In order to facilitate these reductions, the Company is
divesting certain assets that are not consistent with its
strategic plan or are outside of its primary market area.
The net book value of these assets has been classified as
a current asset. In April 1997, net proceeds of $479,000
from certain transactions related to the sale of EZPET
were applied against the outstanding Term Loan balance.
Additionally, on April 30, 1997, the Company signed an
agreement to sell 20 stores in the Nashville area.
Closing is planned for May 21, 1997 and net proceeds of
approximately $11,400,000 will also be applied to the
Term Loan. Further, on May 2, 1997, the Company entered
into an agreement to sell 37 locations in Central
Florida. Closing is planned for the end of June and net
proceeds of approximately $4,250,000 will be used to
reduce the Term Loan balance. Management believes, but
can provide no assurance, that these transactions will
close as scheduled. Upon closing, the July 24, 1997
scheduled principal payment will be reduced to $2,410,000
and the January 24, 1998 scheduled principal payment will
be reduced
<PAGE> 19
to $2,890,000. Management anticipates that these
payments will be funded from cash flow. Management also
believes that other planned asset sales will enable the
Company to further reduce its debt to the level required
by the C & G Agreement - Amendment No. 2 at February 28,
1998.
The Revolver can be used for working capital purposes and
for issuance of a maximum of $15,000,000 of letters of
credit. The Revolver has a "clean-down" provision
whereby, under the C & G Agreement -- Amendment No. 2,
during a five consecutive calendar day period of each
calendar month, the aggregate outstanding borrowings
cannot exceed certain defined levels. At March 30, 1997,
there were $4,200,000 of outstanding borrowings under the
Revolver and there were $8,847,000 of outstanding letters
of credit issued primarily for workers compensation
claims. The Term Loan and Revolver are secured by the
Company's pledge of all the capital stock of its
subsidiaries. Further, the C & G Agreement -- Amendment
No. 2 grants the Lenders, among other things, a security
interest in substantially all of the Company's real
property, buildings and improvements, fixtures,
equipment, inventories, and receivables. Provisions of
the C & G Agreement -- Amendment No. 2 require the
Company to remain within the limits of certain defined
financial covenants, and impose various restrictions on
distributions, business transactions, contractual
obligations, capital expenditures, and lease obligations.
On January 27, 1997 the Company sold 140,000 shares of
its newly issued Series H Preferred Stock, ("Series H
Preferred Stock") to the same major stockholder that held
substantially all of the Company's Series C Preferred
Stock. The Series H Preferred Stock is entitled to
receive semi-annual dividends at the rate of 13% per
annum paid in additional shares of Series H Preferred
Stock. In an event of default, as defined, the dividend
rate increases to 23% and the holders can elect one
director to a separate class of directors who shall have
a majority of the votes on the Board of Directors. The
Series H Preferred Stock has no voting rights, but ranks
senior to any capital stock or other equity securities of
the Company. It can be redeemed by the Company at any
time, but is mandatorily redeemable upon the earlier of
(a) the third anniversary of the date of issuance, (b)
the occurrence of a change of ownership, as defined, or
(c) the occurrence of a fundamental change, as defined.
Warrants representing the purchase of 960,000 shares of
the Company's common stock at a nominal exercise price
were also issued as part of this transaction. Additional
warrants are issuable on each anniversary that the Series
H Preferred Stock remains outstanding. The Series H
Preferred Stock has a liquidation value of $14,000,000,
and was recorded at a net amount of $12,568,000 after
deducting issuance fees of $560,000 and the value of the
960,000 warrants of $872,000. The excess of the
liquidation value over the carrying value is being
accreted monthly over the three-year mandatory redemption
period. Net proceeds of $13,440,000 from the sale of the
Series H Preferred Stock were used by the Company in the
following manner: $8,359,000 to redeem all of the 75,656
outstanding shares, plus all accrued but unpaid
dividends, of the Company's $6.00 Convertible Preferred
Stock, Series C; and $5,081,000 for general corporate
purposes, including paying down a portion of amounts
outstanding under the Revolver.
Due to capital constraints brought about largely by
operating losses and by the environmental expenditure
requirements discussed below, the Company was unable to
properly upgrade its facilities prior to
<PAGE> 20
1994. However, as a result of improved operating results,
the Company made discretionary capital expenditures of
$141,000 in the first quarter of 1997 and $7,768,000 in
1996. However, according to the terms of the Amended C &
G Agreement, if projected levels of profitability are not
maintained, the Company's capital expenditures can be
constrained. In this regard, based on reduced cash flow,
discretionary capital expenditures were essentially halted
in mid-year 1996 and remain constrained. Although this
curtailment will reduce the intended level of higher
return discretionary expenditures in 1997, the Company
believes that it will be able to generate sufficient cash
flow to meet its obligations. However, the Company must
seek alternate sources of capital if it is to remain
competitive in the marketplace in the future.
The Company's business strategy is to grow through
acquisitions. The Company's ability to expand further is
dependent upon several factors, including adequacy of
acquisition opportunities and sufficient capital
resources. The Company believes that possible acquisition
candidates will continue to exist as the industry
continues to consolidate to reduce costs, and as small
independent operators have difficulty meeting
environmental deadlines. While cash flow and capital
availability are currently sufficient to fund operations,
it will be necessary for the Company to fund any
identified acquisitions with new capital which may not be
available on terms acceptable to the Company.
Current federal law mandates that, by December 22, 1998,
all USTs must be corrosion protected, overfill/spill
protected, and have a method of leak detection installed.
Each UST is governed by different sections of the
regulations which allow for implementation of these
requirements during varying periods of up to ten years
based on type and age of the individual UST. All existing
USTs must be upgraded to provide corrosion and
overfill/spill protection by December 22, 1998;
additionally, all USTs had to meet leak detection
standards by December 22, 1993. As of March 30, 1997, the
Company was in complete compliance with leak detection
standards and, excluding EZPET, approximately 70%
completed with the corrosion and overfill/spill
requirements. The Company estimates that additional
expenditures of $5,447,000 will be necessary to meet these
upgrade standards.
Additionally, the Company estimates that the total future
cost of performing remediation on contaminated sites will
be approximately $41,118,000, of which approximately
$34,180,000 is expected to be reimbursed by state trust
funds. Also, the Company anticipates incurring
approximately $2,208,000 for the cost of removing USTs at
abandoned locations. During 1995, the Company entered
into an agreement with an environmental consulting firm
whereby the consulting firm assumes responsibility for the
cleanup of contaminated sites at approximately 80% of the
Company's locations. Under this agreement ("Direct Bill
Agreement"), the consulting firm remediates the sites at
its cost and files for reimbursement from the state. The
Company experiences no cash cost for these sites, other
than the cost of the deductible, unless the state does not
reimburse the consulting firm within a period of twenty-
four months in which case the Company is obligated to
reimburse the consulting firm. With the Direct Bill
Agreement, assuming full reimbursement by the states to
the consulting firm, the future cash cost to the Company
for remediating contaminated sites decreases to
approximately $9,446,000,
<PAGE> 21
of which, approximately $5,396,000 is expected to be
reimbursed by state funds. At March 30, 1997, for work
largely completed prior to the Direct Bill Agreement, the
Company had completed the necessary remediation and has
reimbursement claims totaling approximately $7,184,000
with the various states in which it operates.
On April 22, 1997, the Company entered into an agreement
with Environmental Corporation of America ("ECA") whereby
ECA replaced the previous environmental consulting firm
at all existing contaminated sites with the exception of
approximately 25 sites in Florida. Under this new
agreement, ECA remediates the sites at its cost and files
for reimbursement from the applicable state. The Company
incurs no cash costs for these sites, other than the cost
of the deductible and the cost to remediate any locations
deemed non-qualified for reimbursement by the state. The
agreement imposes no liability on the Company in the
event that payment from the state trust funds are
delayed.
The assumptions on which the above cost estimates are
based may not materialize, and unanticipated events and
circumstances may occur. As a result, the actual cost of
complying with these requirements may be substantially
lower or higher than the estimated costs. The Company
anticipates that required expenditures relating to
compliance with these regulations will be funded from cash
flow from its current operations.
Under federal tax law, the amount and availability of net
operating loss carryforwards ("NOL") are subject to a
variety of interpretations and restrictive tests, under
which the utilization of such NOL carryforwards could be
limited or effectively lost upon certain changes in
ownership. After an ownership change, utilization of a
loss corporation's NOL is limited annually to a prescribed
rate times the value of a loss corporation's stock
immediately before the ownership change. During 1992, the
Company experienced an "ownership change" as defined by
the Internal Revenue Code of 1986. The Company's NOL
available under the ownership change rules was
approximately $43,000,000 at December 29, 1996. The NOL
will expire if not utilized between 2005 and 2011.
Approximately $19,000,000 of the NOL was acquired with the
acquisition of EZCON and can only be used to offset future
income of EZCON. In addition, the Company has alternative
minimum tax NOL carryforwards of approximately $43,000,000
which are available over an indefinite period and can be
utilized should the Company's alternative minimum tax
liability exceed its regular tax liability.
Disclosure Regarding Forward looking Statements
- -----------------------------------------------
Item 2 of this document includes forward looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the
Company believes that the expectations reflected in such
forward looking statements are based upon reasonable
assumptions, the Company can give no assurance that these
expectations will be achieved. Important factors that
could cause actual results to differ materially from the
Company's expectations include general economic, business
and market conditions, the volatility of the price of oil,
competition, development and operating costs, and the
factors that are disclosed in conjunction with the forward
looking statements
<PAGE> 22
included herein and in the Company's most recent 10-K
filed with the Securities and Exchange Commission
("Cautionary Disclosures"). Subsequent written and oral
forward looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in
their entirety by the Cautionary Disclosures.
Adoption of New Accounting Standard
- -----------------------------------
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128
("SFAS 128") "Earnings Per Share". SFAS 128 establishes
standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common
stock or potential common stock. This statement simplifies
the standards for computing EPS previously found in
Accounting Principles Board Opinion No. 15, "Earnings Per
Share", and makes them comparable to international EPS
standards. This statement is effective for financial
statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not
permitted. This statement requires restatement of all
prior-period EPS data presented. Considering the guidelines
as prescribed by SFAS 128, management believes that the
adoption of this statement will not have a material effect
on EPS and thus pro forma EPS, as suggested for all interim
and annual periods prior to required adoption, have been
omitted.
<PAGE> 23
PART II - OTHER
- ---------------
Item 1. Legal Proceedings
- --------------------------
The Company and its subsidiaries are involved in various
lawsuits incidental to its business. The Company's
internal legal counsel monitors all such claims and the
Company has accrued for those which it believes are
probable of payment. In management's opinion, an adverse
determination against the Company or any of its
subsidiaries relating to these suits would not have a
material adverse effect on the Company and its
subsidiaries, taken as a whole. In the case of
administrative proceedings related to environmental
matters involving governmental authorities, management
does not believe that any imposition of monetary sanctions
would exceed $100,000.
Item 2. Changes in Securities
- ------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security
Holders
- ----------------------------------------------------------
- --
None.
Item 6. Exhibits and Reports on form 8-K
- -----------------------------------------
(a) Exhibits:
10.1 Guaranty Agreement dated April 22, 1997 among E-Z Serve
Corporation and Environmental Corporation of America.
10.2 Stock Purchase Agreement dated April 22, 1997 among
E-Z Serve Corporation and Restructure, Inc.
10.3 Agreement to Perform Financed Site Assessment and
Remediation Services dated April 22, 1997 among E-Z Serve
Convenience Stores, Inc. and Environmental Corporation
of America, Inc.
10.4 Asset Sale and Purchase Agreement dated April 30, 1997
among E-Z Serve Convenience Stores, Inc. and MAPCO
PETROLEUM, Inc.
10.5 Purchase and Sale Agreement dated May 2, 1997 among E-Z
Serve Convenience Stores, Inc. and Island Holdings, Ltd.
27 Financial Data Schedule for the period ended March 30, 1997.
(b) The Company did not file any reports on Form 8-K during the three months
ended March 30, 1997.
<PAGE> 24
E-Z SERVE CORPORATION
SIGNATURES
--------------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
E-Z SERVE CORPORATION
---------------------
(Registrant)
DATE: May 19, 1997 /s/JOHN T. MILLER
--------------- -------------------
- -----
John T. Miller
Senior Vice
President
Chief Financial
Officer
GUARANTEE
THIS GUARANTEE, dated as of April __, 1997 (this
"Guarantee"), is madeby Environmental Corporation of America,
Inc., a Florida corporation (the "Guarantor") in favor of E-Z
Serve Corporation, a Delaware corporation(together with its
successors and assigns, the "Beneficiary").
WHEREAS, under the terms of the Stock Purchase Agreement
dated the date hereof between Restructure, Inc., a Florida
corporation ("RI") and the Beneficiary (the "Agreement"), for the
considerations therein stated,Beneficiary has agreed to sell to RI
and RI has agreed to purchase all of the capital stock of E-Z
Serve Petroleum Marketing Company; and
WHEREAS, pursuant to the Agreement, Guarantor will execute an
agreement dated the date hereof in which Guarantor is designated
as the exclusive remediation contractor for all sites owned by the
Beneficiary through its subsidiary, E-Z Serve Convenience Stores,
Inc. ("E-Z Con"), according to the terms therein (the
"Remediation Agreement"); and
WHEREAS, the execution and delivery of this Guarantee by the
Guarantoris a material inducement and a condition precedent to
Beneficiary to execute and deliver the Agreement and to cause E-Z
Con to execute and deliver the Remediation Agreement;
NOW, THEREFORE, in consideration of the premises and other
valuable considerations, the receipt and sufficiency of which are
hereby acknowledged,the Guarantor hereby agrees as follows:
1. Terms of Guarantee. Guarantor hereby irrevocably and
unconditionally guarantees as a direct and primary obligor to the
Beneficiary
(i) the timely, complete and full performance by RI of all of the
obligations
of RI under the terms of the Agreement, and (ii) the full and
punctual payment by RI of any and all of its obligations of every
nature whatsoever under the Agreement as and when required to be
paid under the Agreement (collectively,the "Guaranteed
Obligations"). This Guarantee is in no way conditioned upon any
requirement that the Beneficiary first attempt to enforce any of
the Guaranteed Obligations against RI, any other guarantor of the
Guaranteed Obligations or any other person or entity or resort to
any other means of obtaining payment of any of the Guaranteed
Obligations. In the event of a default in payment of any
Guaranteed Obligation by RI, the Guarantor shall promptly pay or
cause to be paid such Guaranteed Obligation upon receipt of
written notice of such default and demand for payment from the
Beneficiary. Guarantor further agrees to pay all reasonable out-
of-pocket expenses(including, without limitation, reasonable
expenses for legal services) actually paid or incurred by the
Beneficiary in enforcing this Guarantee.
The obligations of the Guarantor are valid and enforceable,
irrespectiveof any other agreement or instrument, the insolvency,
bankruptcy,reorganization, dissolution or liquidation of RI or any
change in ownership ofRI or any assignment by RI or any other
circumstance whatsoever which might otherwise constitute a legal
or equitable discharge or defense of a surety or guarantor.
Without limiting the foregoing, the Guarantor hereby consents to:
(a) any amendment to, compromise, settlement, release,
change, modification or termination of any of the covenants, terms
or agreements of RI set forth in the Agreement;
(b) any waiver by RI of the payment, performance or
observance of any of the covenants, terms or agreements set forth
in the Agreement;
(c) any modification, postponement or extension of time
for payment of any amounts due or of the time for performance of
any of the covenants, terms or agreements of RI set forth in the
Agreement;
(d) any failure, omission, delay or lack on the part of
the Beneficiary to enforce, ascertain or exercise any right, power
or remedy under or pursuant to the terms of the Agreement;
(e) any partial or entire release of any guarantor,
maker or other party (including RI) primarily or secondarily
liable or responsible for the payment, performance and observance
of any other covenants, terms or agreements set forth in the
Agreement or by any extension, waiver, amendment of anything
whatsoever which may release a guarantor (other than payment or
performance); and
(f) any permitted assignment of this Guarantee in whole
or in part in connection with any assignment of the Guaranteed
obligations.
The Guarantor agrees that this Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time any
payment (in whole or in part) of any of the Guaranteed Obligations
is rescinded or must otherwise be restored by the Beneficiary,
upon the insolvency, bankruptcy or reorganization of the Guarantor
or RI, all as though such payment had not been made.
2. Assignment. All of the provisions of this Guarantee
shall be binding upon the Guarantor and its permitted successors
and assigns. None of the interests, rights or obligations of the
Guarantor hereunder shall be assignable (whether by operation of
law or otherwise) without the consent of Beneficiary. The
Beneficiary may assign its rights hereunder after notice to the
Guarantor.
3. Subrogation. Notwithstanding any payment or payments
made by the Guarantor hereunder, the Guarantor shall not be
entitled to, and shall not be subrogated to, any of the rights of
Beneficiary against RI or pursuant to any collateral security, if
any, held for the payment of the Guaranteed Obligations. If,
notwithstanding the preceding sentence, any amount shall be paid
to the Guarantor on account of such subrogation rights at any time
when any of the Guaranteed Obligations shall not have been paid in
full, such amount shall be held by the Guarantor in trust for
Beneficiary, segregated from other funds of the Guarantor and, if
payment of the Guaranteed Obligations by Guarantor is otherwise
due, be turned over to beneficiary in the exact form received by
the Guarantor (duly endorsed by the Guarantor to the Beneficiary
if required), to be applied against the Guaranteed Obligations.
4. Termination. This Guarantee, and the obligations of
Guarantor hereunder, shall terminate after the payment in full and
performance of all of the Guaranteed Obligations and upon the
expiration of any period during which the Guaranteed Obligations
are capable of being revived.
5. Representations and Warranties of Guarantor. Guarantor
hereby represents and warrants the following:
(a) Guarantor is a corporation duly incorporated,
validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to
own or use the properties and assets that it purports to own or
use, and to perform all obligations under this Guarantee.
Guarantor is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the
properties owned are used by it, or the nature of activities
conducted by it, require such qualifications, except for the
failure to be so duly qualified or licensed and in good standing
would not, individually or in the aggregate, have a material
adverse effect on Guarantor.
(b) This Guarantee constitutes a legal, valid and
binding obligation of Guarantor, enforceable upon Guarantor in
accordance with its terms, except to the extent that the
Guarantor's enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws effect in the enforcement of creditors' rights generally.
None of the execution and delivery of this Guarantee, nor the
consummation or performance of any transactions contemplated
hereby, will, directly or indirectly (with or without notice or
lapse of time): (i) contravene, conflict with, or result in a
violation of any provision of the Guarantor's Articles of
Incorporation, Bylaws or other organizational documents; (ii)
contravene, conflict with, or result in a violation of, or give
any governmental body or other person the right to challenge the
Guarantee or to exercise any remedy or obtain any relief under any
legal requirement or any order to which a Guarantor or any of the
assets owned or used by the Guarantor, may be subject; (iii)
contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any governmental body the right
to revoke, withdraw, suspend, cancel, terminate and modify any
authorization that is held by Guarantor or that relates to the
business of, or any of the assets owned or used by Guarantor; (iv)
result in an imposition or creation of an encumbrance upon or with
respect to any of the assets owned or used by Guarantor; and (v)
the Guarantor will not be required to give any notice to obtain
any consent from any person in connection with the execution and
delivery of this Guarantee or the consummation performance of any
of the transactions contemplated herein.
(c) Guarantor has delivered to Beneficiary: (i) the
balance sheet of Guarantor as at December 29, 1996 ("Balance Sheet
Date"), and (ii) the profit and loss statements of Guarantor for
the 52 weeks ending December 29, 1996 (collectively, the
"Financial Statements"). Such Financial Statements fairly present
the financial condition or results of operations of Guarantor as
of the respective dates for the periods referred to in the
Financial Statements, all in accordance with GAAP; the Financial
Statements reflect the consistent application of such accounting
principles throughout the periods.
(d) Since the Balance Sheet Date, there has not been
any material adverse change in the business, operations,
properties, assets, or condition of the Guarantor.
6. Miscellaneous.
(a) This Guarantee will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.
(b) All notices, consents, waivers, and other
communications under this Guarantee must be in writing and will be
deemed to have been duly given when (i) delivered by hand (with
written confirmation of receipt), (ii) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (iii) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Beneficiary: E-Z Serve Corporation
2550 North Loop West, Suite 600
Houston, Texas 77092
Attention: John T. Miller
Facsimile No.: (713) 684-4367
with a copy to: E-Z Serve Corporation
2550 North Loop West, Suite 600
Houston, Texas 77092
Attention: H. E. Lambert, Vice President-
Legal
Facsimile No.: (713) 684-4367
Guarantor: Environmental Corporation of
America, Inc.
205 South Hoover Street, Suite 101
Tampa, Florida 33609
Attention: Jack J. Ceccarelli
Facsimile No.: (813) 287-2290
with a copy to: Environmental Corporation of
America, Inc.
205 South Hoover Street, Suite 101
Tampa, Florida 33609
Attention: Bradford C. Vassey, General Counsel
Facsimile No.: (813) 287-2290
(c) Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Guarantee
may be brought against any of the parties in the courts of the
States of Texas or Florida, and each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection
to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party
anywhere in the world.
(d) The parties agree (i) to furnish upon request to
each other such further information, (ii) to execute and deliver
to each other such other documents, and (iii) to do such other
acts and things, all as the other party may reasonably request for
the purpose of carrying out the intent of this Guarantee.
(e) If any provision of this Guarantee is held invalid
or unenforceable by any court of competent jurisdiction, the other
provisions of this Guarantee will remain in full force and effect.
Any provision of this Guarantee held invalid or unenforceable only
in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the parties have executed and delivered
this Guarantee as of date first written above.
GUARANTOR:
Environmental Corporation of
America, Inc.
By:
Name:
Title:
BENEFICIARY:
E-Z Serve Corporation
By:
Name: John T. Miller
Title: Senior Vice President
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as
of April __, 1997, by Restructure, Inc., a Florida corporation
("Buyer") and E-Z Serve Corporation, a Delaware corporation
("Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all
of
the outstanding shares (the "Shares") of capital stock of E-Z
Serve
Petroleum Marketing Company, a Delaware corporation (the
"Company"), being all of the shares owned by Seller, for the
consideration and on the terms set forth in this Agreement.
Certain
capitalized terms used in this Agreement are defined in Article
9.
AGREEMENT
The parties, intending to be legally bound, agree as
follows:
1. Sale and Transfer of Shares; Closing
1.1 Shares. Subject to the terms and conditions of this
Agreement, Seller hereby sells and transfers the Shares to Buyer,
and Buyer hereby purchases the Shares from Seller.
1.2 Purchase Price. The
purchase price (the "Purchase Price")
for the Shares is (i) $10.00, payable in
immediately available funds at the
Closing, and (ii) the assignment and
transfer of the Remediation Receivable
from the Acquired Companies to the
Seller in the amount of $451,268.
1.3 Closing. The purchase and sale (the "Closing")
provided for in this Agreement is taking place at the offices of
Seller at 10:00 a.m. (local time) on April __, 1997.
1.4 Closing Obligations. At the Closing:
(a) Seller is delivering to Buyer:
(i) certificates representing the Shares,
duly endorsed (or accompanied by duly executed stock
powers);
(ii) an opinion of Seller's counsel in
form and substance reasonably satisfactory to Buyer;
(iii) the documents necessary to effect the
resignation of each of the directors and officers of each of
the Acquired Companies, to be effective not later than the
Closing Date;
(iv) an agreement, executed by Seller,
granting Buyer and the Acquired Companies the right to
continue to use the name "E-Z Serve" in connection with
the operation of the Acquired Companies and the Facilities
for a period of 12 months from the Closing Date;
(v) an agreement (the "Noncompetition
Agreement"), executed by Seller, by which Seller agrees,
for a period of three years, not to engage in the business
currently engaged in by the Acquired Companies in the
states in which the Acquired Companies have Facilities, as
such business is defined in, and subject to such exceptions
contained in such;
(vi) documents evidencing the release of
the Acquired Companies from the Pledge Agreement of
Seller delivered pursuant to the Amended and Restated
Credit and Guaranty Agreement, dated as of October 2,
1995 (the "Credit Agreement"), among Seller, E-Z Serve
Convenience Stores, Inc., the lenders party thereto (the
"Lenders") and Soci,t, G,n,rale, as agent (the "Agent"), in
favor of the Agent and Lenders with respect to certain
obligations of Seller;
(vii) an agreement executed by both
parties relating to administrative services which will be
performed by Seller in order to facilitate an orderly
transfer
of operating functions of the Acquired Companies to
Buyer;
(viii) an agreement executed by both
parties in which Buyer is Seller's exclusive remediation
contractor for all sites owned by E-Z Serve Convenience
Stores, Inc. according to the terms set forth therein; and
(ix) all documents necessary to support
the completion of reimbursement applications for
environmental remediation work performed at the
Company marketing operating locations, i.e., Company
receivables.
(b) Buyer is delivering to Seller:
(i) the Purchase Price by bank cashier's
or certified check payable to the order of or, at Seller's
election, by wire transfer to an account specified by the
Seller;
(ii) a Guarantee executed by
Environmental Corporation of America, Inc. in favor of
Seller in form and substance reasonably satisfactory to
Seller; and
(iii) an opinion of Buyer's counsel in
form and substance reasonably satisfactory to Seller which
includes a provision allowing Agent and Lenders to rely
thereon.
2. Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
2.1 Organization and Good Standing.
(a) Part 2.1 of the Disclosure Letter contains a
complete and accurate list for each Acquired Company of the
jurisdictions in which it is authorized to do business. Each
Acquired Company is a corporation duly incorporated, validly
existing, and in good standing under the laws of its jurisdiction
of
incorporation, with full corporate power and authority to conduct
its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to
perform
all its obligations under Applicable Contracts. Each Acquired
Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the
properties
owned or used by it, or the nature of the activities conducted by
it,
requires such qualification, except where the failure to be so
duly
qualified or licensed and in good standing would not,
individually
or in the aggregate, have a material adverse effect on the
Acquired
Company.
(b) Seller has delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as
currently in effect.
2.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid,
and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except to the extent that the
Agreement's enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors' rights generally.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in
a violation of any provision of the Organizational
Documents of the Acquired Companies;
(ii) contravene, conflict with, or result in
a violation of, or give any Governmental Body or other
Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any
Acquired Company or the Seller, or any of the assets owned
or used by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result in
a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or any of the assets
owned or used by, any Acquired Company;
(iv) except as set forth in Part 2.2(iv) of
the Disclosure Letter, contravene, conflict with, or result
in
a violation or breach of any provision of, or give any
Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to
cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of
any Encumbrance upon or with respect to any of the assets
owned or used by any Acquired Company.
(c) Except for the consent of the lenders
required under the Credit Agreement, neither the Seller nor any
Acquired Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
2.3 Capitalization. The authorized equity securities of
the Company consist of 1,000 shares of capital stock, $0.01 par
value, of which 1,000 shares are issued and outstanding. Seller
is
the record and beneficial owner and holder of the Shares, free
and
clear of all Encumbrances, other than the Encumbrance under the
Security Agreement (Parent) executed by Seller in connection with
the Credit Agreement. The authorized equity securities of the
Subsidiary consist of 1,000 shares of common stock, no par value
per share, of which 100 shares are issued and outstanding. All
of
the outstanding equity securities of the Subsidiary are owned of
record and beneficially by the Company, free and clear of all
Encumbrances, other than the Encumbrance under the Security
Agreement (Petroleum) executed by the Company in connection
with the Credit Agreement. No legend or other reference to any
purported Encumbrance appears upon any certificate representing
equity securities of any Acquired Company, other than as
generally
required by applicable securities laws. All of the outstanding
equity
securities of each Acquired Company have been duly authorized
and validly issued and are fully paid and nonassessable. Other
than
the Credit Agreement and the related Security Agreements detailed
above, there are no Contracts relating to the issuance, sale, or
transfer of any equity securities of any Acquired Company. None
of the outstanding equity securities of any Acquired Company was
issued in violation of the Securities Act or any other Legal
Requirement. Other than the equity securities of any Acquired
Company, no Acquired Company has any other outstanding
securities. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person
(other than Acquired Companies) or any direct or indirect equity
or
ownership interest in any other business.
2.4 Financial Statements. Seller has delivered to Buyer:
(a) the consolidated balance sheet of the Acquired Companies as
at
December 29, 1997 (the "Balance Sheet"), and the consolidated
profit and loss statements of the Acquired Companies for the
fifty-two weeks ended December 29, 1997 (collectively, the
"Financial
Statements"). Such Financial Statements fairly present the
financial condition and the results of operations of the Acquired
Companies as at the respective dates of and for the periods
referred
to in the Financial Statements, all in accordance with GAAP.
2.5 Books and Records. The books of account, minute
books, stock record books, and other records of the Acquired
Companies, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with
sound business practices, including the maintenance of an
adequate
system of internal controls. The minute books of the Acquired
Companies contain accurate and complete records of all meetings
held of, and corporate action taken by, the stockholders, the
Boards
of Directors, and committees of the Boards of Directors of the
Acquired Companies, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records have been
delivered to the Buyer.
2.6 Title to Properties; Encumbrances.
(a) The Acquired Companies own no real
property interests other than the properties listed in Part 2.6
of
the Disclosure Letter. Part 2.6 of the Disclosure Letter sets
forth
a complete list of all real property that the Acquired Companies
lease or sublease. Seller has delivered to Buyer correct and
complete abstracts of all such leases and subleases (the "Real
Property Leases") and has made the Real Property leases
available for Buyer's review. With respect to each such Real
Property Lease, except as set forth in Part 2.6(a) of the
Disclosure
Letter or as do not have a Material Adverse Effect:
(i) each Real Property Lease is legal,
valid, binding, enforceable against the applicable
Acquired Company and in full force and effect, except to
the extent that their respective enforceability may be
subject to applicable bankruptcy, insolvency, reorganiza-
tion, moratorium and similar laws affecting the
enforcement of creditors' rights generally;
(ii) to the Knowledge of the Seller, no
party to any Real Property Lease is in breach or default and
no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(iii) to the Knowledge of the Seller, no
party to any Real Property Lease has repudiated any
provision thereof;
(iv) to the Knowledge of the Seller, there
are no disputes, oral agreements or forbearance programs in
effect as to any Real Property Lease;
(v) with respect to each sublease
included as a Real Property Lease, the representations and
warranties set forth in subsections (i) through (iv) above
are
true and correct with respect to the underlying lease;
(vi) none of the Acquired Companies has
assigned, transferred, conveyed, mortgaged, deeded in trust
or encumbered any interest in the Real Property Leases;
(vii) to the Knowledge of the Seller, all
Facilities leased or subleased under Real Property Leases
have received all material approvals of all Governmental
Bodies (including licenses and permits) required in
connection with the operation thereof and have been
operated and maintained in accordance with applicable
laws and regulations except where the failure to do so
would not be a Material Adverse Effect; and
(viii) all Facilities leased or subleased
under Real Property Leases are supplied with utilities and
other services necessary for the operation of said
facilities.
(b) The Acquired Companies, either directly or
indirectly, have (and as of the Closing will have) good and
defensible title to and other legal right to use all properties
and
assets, real, personal and mixed, tangible and intangible
reflected
as owned on the latest balance sheet included in the Balance
Sheet
or acquired after the date of the Balance Sheet.
(c) There are no properties (real, personal or
mixed, tangible or intangible) owned by Seller or any Affiliate
of
the Acquired Companies that are used in the normal day-to-day
operations of the Acquired Companies as conducted prior to the
Closing Date, except for such properties located at Seller's
headquarters in Houston, Texas.
(d) All properties and assets reflected in the
Balance Sheet are free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights of way,
building
use restrictions, exceptions, variances, reservations, or
limitations
of any nature except, with respect to all such properties and
assets,
(a) mortgages or security interests reflected in the Balance
Sheet as
securing specified liabilities or obligations, with respect to
which
no default (or event that, with notice or lapse of time or both,
would constitute a default) exists, (b) mortgages or security
interests incurred in connection with the purchase of property or
assets after the date of the Balance Sheet (such mortgages and
security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default)
exists,
(c) liens for current taxes not yet due, (d) with respect to real
property, (i) minor imperfections of title, if any, none of which
is
substantial in amount, that impairs the operations of any
Acquired
Company as currently conducted, and (ii) zoning laws and other
land use restrictions that do not impair the current use of the
property subject thereto, and (e) for such Encumbrances that do
not
have a Material Adverse Effect.
(e) All buildings and structures located on the
real property leased by the Acquired Companies lie wholly within
the boundaries of the real property leased by the Acquired
Companies and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person, except
for
such encroachments or conflicts that do not have a Material
Adverse Effect.
2.7 Condition and Sufficiency of Assets. To Seller's
Knowledge, the physical Facilities on the properties described in
Part 2.6 of the Disclosure Letter (including Facilities held
under
lease) have been maintained in accordance with good industry
maintenance practices and are in a state of repair (normal wear
and tear excepted) that is adequate for the age and intended use
of
such facilities in the ordinary conduct of the business, except
as
does not have a Material Adverse Effect.
2.8 Accounts Receivable. All accounts and notes
receivable of the Acquired Companies that are reflected on the
Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations
arising
from sales actually made or services actually performed in the
Ordinary Course of Business. Unless paid prior to the Closing
Date, to the best of Seller's knowledge, the Accounts Receivable
are or will be as of the Closing Date current and collectible net
of
the respective reserves shown on the Balance Sheet or on the
accounting records of the Acquired Companies as of the Closing
Date (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing
Date,
will not represent a greater percentage of the Accounts
Receivable
as of the Closing Date than the reserve reflected in the Balance
Sheet represented of the Accounts Receivable reflected therein
and
will not represent a material adverse change in the composition
of
such Accounts Receivable in terms of aging). There is no
contest,
claim, or right of set-off, other than returns in the Ordinary
Course
of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts
Receivable, except as do not have a Material Adverse Effect.
2.9 Inventory. All inventory of the Acquired
Companies, whether or not reflected in the Balance Sheet,
consists
of a quality and quantity usable and salable in the Ordinary
Course
of Business, except as to an amount of inventory that does not
have
a Material Adverse Effect. All inventories have been priced at
cost
on a first in, first out basis.
2.10 No Undisclosed Liabilities. To the knowledge of
Seller, except as set forth in Part 2.10 of the Disclosure
Letter, the
Acquired Companies have no liabilities or obligations of any
nature except for liabilities or obligations reflected or
reserved
against in the Balance Sheet, current liabilities incurred in the
Ordinary Course of Business since the date thereof and
liabilities
or obligations that do not have a Material Adverse Effect.
2.11 Taxes.
(a) The Acquired Companies have filed or
caused to be filed on a timely basis all Tax Returns that are or
were
required to be filed by or with respect to either of them, either
separately or as a member of a group of corporations, pursuant
to
applicable Legal Requirements. Seller has made available to Buyer
copies of, and Part 2.11 of the Disclosure Letter contains a
complete and accurate list of, all such Tax Returns filed since
January 1, 1995. The Acquired Companies have paid, or made
provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Seller (with respect to
any
Acquired Company) or any Acquired Company, except such
Taxes, if any, as are listed in Part 2.11 of the Disclosure
Letter and
are being contested in good faith and as to which adequate
reserves
(determined in accordance with GAAP) have been provided in the
Balance Sheet.
(b) The United States federal income Tax
Returns of each Acquired Company have been audited by the IRS
or are closed by the applicable statute of limitations for all
taxable
years through December 31, 1986. All deficiencies proposed as a
result of such audits have been paid, reserved against, settled,
or, as
described in Part 2.11 of the Disclosure Letter, are being
contested
in good faith by appropriate proceedings. Except as described in
Part 2.11 of the Disclosure Letter, neither the Seller nor any
Acquired Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension
given
by any other Person) of any statute of limitations relating to
the
payment of Taxes of any Acquired Company or for which any
Acquired Company may be liable.
(c) The charges, accruals, and reserves with
respect to Taxes on the respective books of each Acquired
Company are adequate (determined in accordance with GAAP) and
are at least equal to that Acquired Company's liability for
Taxes.
To Seller's Knowledge, there exists no proposed tax assessment
against any Acquired Company except as disclosed in the Balance
Sheet or in Part 2.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be
acquired
by any Acquired Company. All Taxes that any Acquired Company
is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person.
(d) To Seller's Knowledge, all Tax Returns filed
by (or that include on a consolidated basis) any Acquired Company
are true, correct, and complete. There is no tax sharing
agreement
that will require any payment by any Acquired Company after the
date of this Agreement to the Seller or any of its Affiliates.
2.12 No Material Adverse Change. Except for the
assignment and transfer of an accounts receivable of the Acquired
Company to the Seller in the amount of $451,268 respecting
reimbursement for remediation expenses ("Remediation
Receivable"), since the date of the Balance Sheet, (i) there has
not
been any Material Adverse Change in the business, operations,
properties, assets, or condition of any Acquired Company, and
(ii)
net assets (i.e. total assets less total liabilities) have not
declined in
any given month by more than the total of (x) the operating loss
(before depreciation and amortization) for such month, if any,
plus
(y) the amount of depreciation and amortization for such month.
Except for the assignment of the Remediation Receivable, all
business activities since the date of the Balance Sheet have been
made in the Ordinary Course of Business.
2.13 Employee Benefits
(a) (i) Part 2.13 of the Disclosure Letter
contains a complete and accurate list of all Plans or other
obligations, arrangements, or customary practices, whether
or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or
former directors, employees, or agents of the Acquired
Companies ("Benefits").
(ii) Other than as set forth in Part 2.13 of
the Disclosure Letter, no Person would be treated as a
single employer with the Company under IRC 414.
(b) Seller has delivered to Buyer with respect to
the Acquired Companies:
(i) all documents that set forth the terms
of each Plan or Benefit;
(ii) all personnel, payroll, and
employment manuals and policies; and
(iii) a written description of any Plan or
Benefit that is not otherwise in writing.
(c) Except as set forth in Part 2.13 of the
Disclosure Letter and except as does not have a Material Adverse
Effect:
(i) The Acquired Companies have
performed all of their respective material obligations under
all Plans and Benefits. The Acquired Companies have
made appropriate entries in their financial records and
statements for all obligations and liabilities under such
Plans and Benefits that have accrued but are not due.
(ii) No statement, either written or oral,
has been made by any Acquired Company to any Person
with regard to any Plan or Benefits that was not in
accordance with the Plan or benefits and that has a material
adverse economic consequence to any Acquired Company
or to Buyer.
(iii) The Acquired Companies, with
respect to all Plans and Benefits are, and each Plan and
Benefit is, in material compliance with ERISA, the IRC,
and other applicable Laws.
(iv) No transaction prohibited by ERISA
406 and no "prohibited transaction" under IRC 4975(c)
which are not otherwise exempt under ERISA or the IRC
have occurred with respect to any Plan.
(v) None of the Seller or the Acquired
Companies has any liability to the IRS with respect to any
Plan, including any liability imposed by Chapter 43 of the
IRC.
(vi) None of the Seller or the Acquired
Companies has any liability to the PBGC with respect to
any Plan or has any liability under ERISA 502 or 4071.
(vii) All governmental filings required by
ERISA and the IRC as to each Plan have been timely filed,
and all notices and disclosures to participants required by
either ERISA or the IRC have been timely provided.
(viii) All contributions and payments made
or accrued with respect to all Plans and Benefits that are
intended to be deductible are deductible under IRC 162 or
404. No amount, or any asset of any Plan is subject to tax
as unrelated business taxable income.
(ix) Each Plan can be terminated within
thirty days, without payment of any additional contribution
or amount and without the vesting or acceleration of any
benefits promised by such Plan.
(x) Since the date of the Balance Sheet,
there has been no establishment or amendment of any Plan
or Benefits.
(xi) Other than claims for benefits
submitted by participants or beneficiaries, no claim
against,
or legal proceeding involving, any Plan or Benefits is
pending or, to Seller's Knowledge, is Threatened.
(xii) Part 2.13 of the Disclosure Letter
identifies each Plan that purports to satisfy the
requirements
of IRC 401(a) ("Qualified Plans"). A copy of all
determinations by the IRS with respect to the Qualified
Plans have been delivered to Buyer. All of such
determination letters remain in effect and have not been
revoked.
(xiii) No Plan or Benefit is subject to
Title IV of ERISA.
(xiv) No amendment has been made, or is
reasonably expected to be made, to any Plan that has
required or could require the provision of security under
ERISA 307 or IRC 401(a)(29).
(xv) To the Knowledge of Seller, no
Acquired Company has ever established, maintained, or
contributed to or otherwise participated in, or had an
obligation to maintain, contribute to, or otherwise
participate in, any Multi-Employer Plan.
(xvi) Each Acquired Company has the
right to modify and terminate benefits to retirees (other
than
pensions) with respect to both retired and active employees.
(xvii) Seller (with respect to the Acquired
Companies) and all Acquired Companies have complied
with the provisions of ERISA 601 et seq. and
IRC 4980B.
(xviii) No payment that is owed or may
become due to any director, officer, employee, or agent of
any Acquired Company will be non-deductible by the
Acquired Companies under IRC 280G or subject to excise
tax under IRC 4999; nor will any Acquired Company be
required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a
payment to such person.
(xix) The consummation of the
Contemplated Transactions will not result in the payment,
vesting, or acceleration of any Benefit.
2.14 Compliance with Legal Requirements;
Governmental Authorizations
(a) Except as set forth in Part 2.14 of the
Disclosure Letter and except as does not have a Material Adverse
Effect:
(i) each Acquired Company is in
material compliance with each Legal Requirement that is
applicable to it or to the conduct or operation of its
business
or the ownership or use of any of its assets;
(ii) to Seller's Knowledge, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) (A) constitutes or results in a violation
by
any Acquired Company of, or a failure on the part of any
Acquired Company to comply with, any Legal
Requirement, or (B) gives rise to any obligation on the part
of any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any
nature; and
(iii) no Acquired Company has received,
at any time since January 1, 1995 any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or
failure
to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential obligation on the part of
any
Acquired Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Except as set forth in Part 2.14 of the
Disclosure Letter and except as does not have a Material Adverse
Effect:
(i) each Acquired Company has all
material Governmental Authorizations, each of which is in
full force and effect;
(ii) no Acquired Company has received
any notice or other communication (whether oral or
written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iii) all applications required to have been
filed for the renewal of the Governmental Authorizations
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have
been made with respect to such Governmental
Authorizations have been duly made on a timely basis with
the appropriate Governmental Bodies.
2.15 Legal Proceedings; Orders
(a) Except as set forth in Part 2.15 of the
Disclosure Letter and except as does not have a Material Adverse
Effect, to Seller's Knowledge, there is no Proceeding pending or
Threatened against any Acquired Company:
(i) that relates to or affects the business
of, or any of the assets owned or used by, any Acquired
Company; or
(ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
(b) Except as set forth in Part 2.15 of the
Disclosure Letter:
(i) there is no Order to which any of the
Acquired Companies, or any of the assets owned or used by
any Acquired Company, is subject;
(ii) Seller is not subject to any Order that
relates to the business of, or any of the assets owned or
used by, any Acquired Company; and
(iii) to the Knowledge of Seller, no
officer, director, agent, or employee of any Acquired
Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing
any conduct, activity, or practice relating to the business
of
any Acquired Company.
2.16 Absence of Certain Changes and Events. Except as
set forth in Part 2.16 of the Disclosure Letter, since the date
of the
Balance Sheet, the Acquired Companies have conducted their
businesses only in the Ordinary Course of Business and there has
not been any:
(a) change in any Acquired Company's
authorized or issued capital stock; grant of any stock option or
right to purchase shares of capital stock of any Acquired
Company;
issuance of any security convertible into such capital stock;
grant
of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any
such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational
Documents of any Acquired Company;
(c) payment by any Acquired Company of any
bonuses, salaries, or other compensation to any stockholder,
director, officer, or employee, except in the Ordinary Course of
Business, or entry into any employment, severance, or similar
Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of any Acquired
Company;
(e) damage to or destruction or loss of any asset
or property of any Acquired Company, whether or not covered by
insurance, materially and adversely affecting the properties,
assets,
business, financial condition, or prospects of the Acquired
Companies, taken as a whole;
(f) entry into, termination of, or receipt of
notice of termination of (i) any license, distributorship,
dealer,
sales representative, joint venture, credit, or similar
agreement, or
(ii) any Contract or commitment involving a total remaining
amount by or to any Acquired Company of at least $10,000;
(g) sale (other than in the Ordinary Course of
Business), lease, or other disposition of any asset or property
of any
Acquired Company or mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset or property of any
Acquired Company, including the sale, lease, or other disposition
of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or
rights with a value to any Acquired Company in excess of $10,000;
(i) material change in the accounting methods
used by any Acquired Company; or
(j) agreement, whether oral or written, by any
Acquired Company to do any of the foregoing.
2.17 Contracts; No Defaults
(a) Part 2.17(a) of the Disclosure Letter contains
a complete and accurate list of, and the parties and the
remaining
term, if applicable, and Seller has delivered to Buyer true and
complete copies of:
(i) each Applicable Contract that
involves performance of services or delivery of goods or
materials by one or more Acquired Companies of an
amount or value in excess of $10,000;
(ii) each lease, rental or occupancy
agreement, license, installment and conditional sale
agreement relating to the Acquired Companies, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real
or personal property except (A) personal property leases
and installment and conditional sales agreements having a
value per item or aggregate payments of less than $10,000
and with terms of less than one year and (B) leases
identified in Part 2.6 of the Disclosure Letter;
(iii) each licensing agreement relating to
the Acquired Companies or other Applicable Contract with
respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(iv) each joint venture and partnership
agreement relating to the Acquired Companies, and other
Applicable Contract (however named) involving a sharing
of profits, losses, costs, or liabilities by any Acquired
Company with any other Person;
(v) each Applicable Contract containing
covenants that in any way purport to restrict the business
activity of any Acquired Company or any Affiliate of an
Acquired Company or limit the freedom of any Acquired
Company or any Affiliate of an Acquired Company to
engage in any line of business or to compete with any
Person;
(vi) each Applicable Contract providing
for payments to or by any Person based on sales, purchases,
or profits, other than direct payments for goods;
(vii) each power of attorney relating to the
Acquired Companies that is currently effective and
outstanding;
(viii) each Applicable Contract for capital
expenditures in excess of $10,000;
(ix) each Applicable Contract providing
for any extension of credit to or loan or guaranty or other
similar undertaking by any Acquired Company; and
(x) each amendment, supplement, and
modification (whether oral or written) in respect of any of
the foregoing.
(b) Except as set forth in Part 2.17(b) of the
Disclosure Letter:
(i) neither Seller nor any Affiliate of
Seller has or has the contractual right to acquire any
rights
under, or is or may become subject to any obligation or
liability under, any Applicable Contract; and
(ii) to the Knowledge of Seller, no
officer, director, agent, employee, consultant, or
contractor
of any Acquired Company is bound by any Contract that
purports to limit the ability of such officer, director,
agent,
employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the
business of any Acquired Company, or (B) assign to any
Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 2.17(c) of the
Disclosure Letter, each Contract identified or required to be
identified in Part 2.17(a) of the Disclosure Letter is in full
force
and effect and is valid and enforceable against an Acquired
Company, as applicable, in accordance with its terms, except to
the
extent that their respective enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights
generally
and by general equitable principles.
(d) Except as set forth in Part 2.17(d) of the
Disclosure Letter and except as does not have a Material Adverse
Effect:
(i) each Acquired Company is in full
compliance with all applicable terms and requirements of
each Applicable Contract;
(ii) to the Knowledge of Seller, each
other Person that has any obligation or liability under any
Applicable Contract under which an Acquired Company
has any rights is in full compliance with all applicable
terms and requirements of such Applicable Contract;
(iii) to the Knowledge of Seller, no event
has occurred or circumstance exists that (with or without
notice or lapse of time) contravenes, conflicts with, or
results in a violation or breach of, or gives any Acquired
Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) no Acquired Company has given to
or received from any other Person any notice or other
communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach
of,
or default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to any Acquired Company under any
Applicable Contract and, to the Knowledge of Seller, no such
Person has made written demand for such renegotiation.
2.18 Insurance
(a) Seller has delivered to Buyer:
(i) true and complete copies of all
policies of insurance to which any Acquired Company is a
party or under which any Acquired Company, or any
director or officer of any Acquired Company, is covered;
(ii) true and complete copies of all
pending applications for policies of insurance related to
the
Acquired Companies; and
(iii) any written statement by the auditor
of any Acquired Company's financial statements with
regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 2.18(b) of the Disclosure Letter
describes any Applicable Contract, other than a policy of
insurance, for the transfer or sharing of any risk by any
Acquired
Company.
(c) Except as set forth on Part 2.18(c) of the
Disclosure Letter:
(i) All insurance policies to which any
Acquired Company is a party or that provide coverage to
Seller with respect to an Acquired Company, any Acquired
Company, or any director or officer of an Acquired
Company:
(A) are valid, outstanding, and to
the Knowledge of Seller, enforceable, except to the extent
that their respective enforceability may be subject to
applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of
creditors' rights generally;
(B) taken together, provide, in the
reasonable judgment of Seller, adequate insurance coverage
for the assets and the operations of the Acquired
Companies for all risks normally insured against by a
Person carrying on the same business or businesses as the
Acquired Companies;
(C) are sufficient for material
compliance with all Legal Requirements and Applicable
Contracts; and
(D) do not provide for any
retrospective premium adjustment or other experienced-based
liability on the part of any Acquired Company.
(ii) Neither Seller with respect to an
Acquired Company nor any Acquired Company has
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or
will
not be renewed or that the issuer of any policy is not
willing
or able to perform its obligations thereunder.
(iii) The Acquired Companies have paid
all premiums due, and have otherwise performed all of their
respective obligations, except for such failure to perform
that does not have a Material Adverse Effect, under each
policy to which any Acquired Company is a party or that
provides coverage to any Acquired Company.
(iv) The Acquired Companies have given
notice to the applicable insurer of all claims that may be
insured by insurance policies issued by such insurer.
2.19 Environmental Matters.
(a) Part 2.19(b) of the Disclosure Letter
includes (i) a list of each Facility known to Seller for which
any of
the Acquired Companies is currently or in the future may
reasonably be expected to be under an obligation to satisfy any
Environmental, Health, and Safety Liabilities, (ii) the current
status
of all Environmental, Health, and Safety Liabilities known to
Seller related to the Acquired Companies; (iii) whether, and the
extent to which, any Environmental, Health, and Safety
Liabilities
of the Acquired Companies, to the Knowledge of Seller, are
eligible for reimbursement out of state or federal funds
designated
for such purposes, and (iv) a list of all currently operating
Facilities.
(b) Except as set forth in Part 2.19(b) of the
Disclosure Letter and except as does not have a Material Adverse
Effect:
(i) Each Acquired Company is, and at
all times has been, in full compliance with, and has not
been and is not in violation of or liable under, any
Environmental Law.
(ii) There are no pending or, to the
Knowledge of Seller, Threatened claims, Encumbrances, or
other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other
properties
and assets (whether real, personal, or mixed) in which any
Acquired Company has or had an interest.
(iii) Seller has no Knowledge of any basis
to expect, nor has Seller or any of the Acquired Companies,
to Seller's Knowledge, received, any citation, directive,
inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law,
or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities
or
any other properties or assets (whether real, personal, or
mixed) in which any Acquired Company had an interest, or
with respect to any Facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported,
used, or processed by any Acquired Company have been
transported, treated, stored, handled, transferred,
disposed,
recycled, or received.
(iv) To the Knowledge of Seller and
other than fuel adequately contained in above or
underground storage tanks for sale in the Ordinary Course
of Business, there are no Hazardous Materials present on or
in the Environment at the Facilities, including any
Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facilities or
property adjoining or contiguous to any Facility, or
incorporated into any structure therein or thereon. No
Acquired Company, or to the Knowledge of Seller, any
other Person, has permitted or conducted, or is aware of,
any Hazardous Activity (other than fuel adequately
contained in above or underground storage tanks for sale in
the Ordinary Course of Business) conducted with respect to
the Facilities or any other properties or assets (whether
real,
personal, or mixed) in which Seller or any Acquired
Company has or had an interest.
(v) To the Knowledge of Seller, there
has been no Release of any Hazardous Materials at or from
the Facilities or at any other locations where any Hazardous
Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or
by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any
Acquired Company has or had an interest, whether by
Seller, any Acquired Company, or any other Person.
2.20 Employees. Part 2.20 of the Disclosure Letter
contains a complete and accurate list of the following
information
for each employee of the Acquired Companies, including each
employee on leave of absence or layoff status: employer; name;
job
title and current compensation paid or payable.
2.21 Labor Relations; Compliance. No Acquired
Company is a party to any collective bargaining or other labor
Contract. There has not been, there is not presently pending or
existing, and to Seller's Knowledge there is not Threatened, (a)
any
strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any Proceeding against or affecting any Acquired
Company relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union
with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute
against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a
collective
bargaining agent. There is no lockout of any employees by any
Acquired Company, and no such action is contemplated by any
Acquired Company. Each Acquired Company has complied in all
respects with all Legal Requirements relating to employment,
equal
employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social
security and similar taxes, occupational safety and health, and
plant
closing, except for such that does not have a Material Adverse
Effect. No Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the
foregoing Legal Requirements, except for such that does not have
a
Material Adverse Effect.
2.22 Intellectual Property
(a) Intellectual Property Assets--The term
"Intellectual Property Assets" includes:
(i) all fictional business names, trading
names, registered and unregistered trademarks, service
marks, and applications owned by the Acquired
Companies, except to the extent of the name "E-Z Serve"
and derivations thereof (collectively, "Marks");
(ii) all patents, patent applications, and
inventions and discoveries that may be patentable owned or
filed by the Acquired Companies (collectively, "Patents");
and
(iii) all know-how, trade secrets,
confidential information, customer lists, software,
technical
information, data, process technology, plans, drawings, and
blue prints owned or licensed by any Acquired Company as
licensee or licensor (collectively "Trade Secrets");
provided, however, that the Trade Secrets shall not include
any Trade Secrets owned by Seller or relating to the
business of Seller or Seller's Affiliates other than the
Acquired Companies.
(b) Agreements--Part 2.22(b) of the Disclosure
Letter contains a complete and accurate list and summary
description, including any royalties paid or received by the
Acquired Companies, of all Contracts relating to the Intellectual
Property Assets to which any Acquired Company is a party or by
which any Acquired Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses
for
commonly available software programs with a value of less than
$5,000 under which an Acquired Company is the licensee. There
are no outstanding and, to Seller's Knowledge, no Threatened
disputes or disagreements with respect to any such Contracts.
(c) Intellectual Property Assets Necessary for
the Business--The Intellectual Property Assets are all those
necessary for the operation of the Acquired Companies' businesses
as they are currently conducted. Other than as disclosed in Part
2.22(b) of the Disclosure Letter, one or more of the Acquired
Companies is the owner of all right, title, and interest in and
to
each of the Intellectual Property Assets, free and clear of all
liens,
security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a
third
party all of the Intellectual Property Assets.
(d) Trademarks
(i) Part 2.22(d) of Disclosure Letter
contains a complete and accurate list and summary
description of all Marks. One or more of the Acquired
Companies is the owner of all right, title, and interest in
and
to each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other
adverse claims.
(ii) All Marks that have been registered
with the United States Patent and Trademark Office are
currently in material compliance with all formal legal
requirements (including the timely post-registration filing
of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not
subject
to any maintenance fees or taxes or actions falling due
within ninety days after the Closing Date.
(iii) No Mark has been or is now
involved in any opposition, invalidation, or cancellation
and, to Seller's Knowledge, no such action is Threatened
with the respect to any of the Marks.
(iv) To Seller's Knowledge, there is no
potentially interfering trademark or trademark application
of any third party.
(v) No Mark is infringed or, to Seller's
Knowledge, has been challenged or Threatened in any way.
None of the Marks used by any Acquired Company
infringes or is alleged to infringe any trade name,
trademark, or service mark of any third party.
(e) Trade Secrets
(i) Seller, with respect to the Acquired
Companies, has, and the Acquired Companies have, taken
all reasonable precautions to protect the secrecy,
confidentiality, and value of the Trade Secrets;
(ii) One or more of the Acquired
Companies has an absolute (but not necessarily exclusive)
right to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature, and, to Seller's
Knowledge, have not been used, divulged, or appropriated
either for the benefit of any Person (other than one or more
of the Acquired Companies) or to the detriment of the
Acquired Companies. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any
way.
2.23 Certain Payments. No Acquired Company or
director, officer, agent, or employee of any Acquired Company, or
to Seller's Knowledge any other Person associated with or acting
for or on behalf of any Acquired Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate,
payoff,
influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money,
property,
or services (i) to obtain favorable treatment in securing
business,
(ii) to pay for favorable treatment for business secured, (iii)
to
obtain special concessions or for special concessions already
obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any
Legal
Requirement, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of the
Acquired
Companies.
2.24 Disclosure. No representation or warranty of Seller
in this Agreement and no statement in the Disclosure Letter omits
to state a material fact necessary to make the statements herein
or
therein, in light of the circumstances in which they were made,
not
misleading.
2.25 Relationships with Affiliates. Except as set forth in
Part 2.25 of the Disclosure Letter:
(a) Neither Seller, any Affiliate of Seller nor
any Affiliate of any Acquired Company has, or since January 1,
1995, has had, any interest in any property (whether real,
personal,
or mixed and whether tangible or intangible), used in or
pertaining
to the Acquired Companies' businesses, except an interest by
virtue of ownership of an equity interest in an Acquired Company.
(b) Neither Seller, any Affiliate of Seller nor
any Affiliate of any Acquired Company is, or since January 1,
1995, has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person
that has
had business dealings or a material financial interest in any
transaction with any Acquired Company other than business
dealings or transactions conducted in the Ordinary Course of
Business with the Acquired Companies at prevailing market prices
and on prevailing market terms.
2.26 Brokers or Finders. Seller and its agents have
incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other
similar
payment in connection with this Agreement.
2.27 Conduct of Business. Between the date of the
Balance Sheet and the Closing Date, Seller has:
(a) Conducted the business of the Acquired
Company only in the Ordinary Course of Business.
(b) Used its reasonable best efforts to preserve
intact the current employees of the Acquired Company, and
maintain the relation and goodwill with suppliers, customers,
landlords, creditors, employees and agents and others having
business relationships with the Acquired Company.
2.28 Payment of Intercompany Indebtedness. Seller has
caused all indebtedness owed to or by an Acquired Company to or
by Seller or any affiliate of Seller to be paid in full prior to
Closing.
3. Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
3.1 Organization and Good Standing. Buyer is a
Florida corporation duly incorporated, validly existing, and in
good
standing under the laws of its jurisdiction of incorporation.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid,
and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except to the extent that the
Agreement's enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors' rights generally and
by
general equitable principles.
(b) Neither the execution and delivery of this
Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person
the right to prevent, delay, or otherwise interfere with any of
the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's
Organizational Documents;
(ii) any resolution adopted by the board
of directors of the Buyer;
(iii) any Legal Requirement or Order to
which Buyer may be subject; or
(iv) any Contract to which Buyer is a
party or by which Buyer may be bound.
(c) Buyer is not and will not be required to
obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions, other than
the consent of the Buyer's principal lender.
3.3 Investment in Shares.
(a) Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act.
(b) Buyer has received all information it
believes necessary to make an informed decision about its
acquisition of the Shares and has had an opportunity to ask
questions of Seller and has had all such questions answered to
Buyer's satisfaction.
(c) Buyer is an "accredited investor" as such
term is defined in Rule 501(a) under the Securities Act.
(d) Buyer understands that the Shares are not
registered under federal or state securities laws and may not be
offered, sold, transferred or otherwise disposed of except
pursuant
to a registration statement or an exemption from registration
under
those laws.
(e) Buyer acknowledges that the certificates
representing the Shares may bear a legend substantially as
follows:
THESE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY
APPLICABLE STATE LAW. THEY MAY
NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR PLEDGED
WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE LAW, OR (2) AN
OPINION OF COUNSEL
(SATISFACTORY TO THE COMPANY)
THAT REGISTRATION IS NOT
REQUIRED.
3.4 Certain Proceedings. There is no pending
Proceeding against Buyer that challenges, or may have the effect
of
preventing, delaying, making illegal, or otherwise interfering
with,
any of the Contemplated Transactions. To Buyer's Knowledge, no
such Proceeding has been Threatened.
3.5 Brokers or Finders. Buyer and its officers and
agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions
or
other similar payment in connection with this Agreement and will
indemnify and hold Seller harmless from any such payment alleged
to be due by or through Buyer as a result of the action of Buyer
or
its officers or agents.
3.6 Hart-Scott-Rodino. The ultimate parent entity of
the Buyer (as the term "ultimate parent entity" is defined in 16
C.F.R. 801.1(a)(3)) is Jack J. Ceccarelli. Neither Jack J.
Ceccarelli nor any entity he controls has total assets or annual
net
sales of $10,000,000 or more, all as determined in accordance
with
16 C.F.R. 801.1(a)-(c), and 801.11.
4. Definitions
For purposes of this Agreement, the following terms have
the meanings specified or referred to in this Section 4:
"Acquired Companies"--the Company and its Subsidiary,
collectively.
"Affiliate" --shall have the meaning set forth in Rule 405
of
Regulation C under the Securities Act.
"Applicable Contract"--any Contract (a) under which any
Acquired Company has or has the conditional right to acquire any
rights, (b) under which any Acquired Company has or may become
subject to any obligation or liability due to a contractual
provision,
or (c) by which any Acquired Company or any of the assets owned
or used by it is or may become bound due to a contractual
provision.
"Balance Sheet"--as defined in Section 2.4.
"Benefits"--as defined in Section 2.13(a)(i).
"Best Efforts"--the efforts that a prudent Person desiring
to
achieve a result would use in similar circumstances to ensure
that
the result is achieved as expeditiously as possible; provided,
however, that an obligation to use Best Efforts under this
Agreement does not require the Person subject to that obligation
to
take actions that would result in a materially adverse change in
the
benefits to such Person of this Agreement and the Contemplated
Transactions.
"Breach"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any
instrument delivered pursuant to this Agreement will be deemed to
have occurred if there is or has been (a) any inaccuracy in or
breach
of, or any failure to perform or comply with, the provision, or
(b)
any claim by any Person or other occurrence or circumstance that
is
or was inconsistent with the representation, warranty, covenant,
obligation, or other provision, and the term "Breach" means any
such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"Buyer"--as defined in the first paragraph of this
Agreement.
"Closing"--as defined in Section 1.3.
"Closing Date"--the date and time as of which the Closing
actually takes place.
"Company"--as defined in the Recitals of this Agreement.
"Consent"--any approval, consent, ratification, waiver, or
other authorization including any Governmental Authorization.
"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their
respective covenants and obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the
Shares and exercise of control over the Acquired Companies.
"Contract"--any agreement, contract, obligation, promise,
or undertaking (whether written or oral and whether express or
implied) that is legally binding.
"Credit Agreement"--as defined in Section 2.2(c).
"Disclosure Letter"--the disclosure letter delivered by
Seller
to Buyer concurrently with the execution and delivery of this
Agreement.
"Encumbrance"--any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge,
security
interest, right of first refusal, or restriction of any kind,
including
any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters,
streams,
ponds, drainage basins, and wetlands), groundwaters, drinking
water supply, stream sediments, ambient air (including indoor
air),
plant and animal life, and any other environmental medium or
natural resource.
"Environmental, Health, and Safety Liabilities"--any costs,
damages, expenses, liabilities, obligations, fines, penalties,
judgments, awards, settlements, losses, claims and demands, and
response, investigative, remedial, or inspection costs and
expenses,
or other responsibility arising from or under Environmental Law
or
Occupational Safety and Health Law and consisting of or relating
to any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety
and health (whether related to any Person or Facility), and
regulation of chemical substances or products);
"Environmental Law"--any Legal Requirement that relates
to:
(a) releases of pollutants, Hazardous Materials
or potentially harmful substances, violations of discharge
limits, or
other activities, such as resource extraction or construction,
that
could have significant impact on the environment;
(b) assuring that products are designed,
formulated, packaged, and used so that they do not present
unreasonable risks to human health or the environment when used
or disposed of;
(c) protecting resources, species, ecological
amenities, the Environment or human health;
(d) reducing to acceptable levels the risks
inherent in the transportation of Hazardous Materials,
pollutants,
oil, fuels, or other potentially harmful substances; or
(e) cleaning up pollutants, Hazardous Materials,
or potentially harmful substances that have been released,
preventing the threat of such a release, or paying the costs of
such a
clean up or preventive action.
"ERISA"--the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"Facilities"--any real property, leaseholds, or other
interests
currently owned or operated by any Acquired Company and any
buildings, structures, or equipment (including motor vehicles)
currently owned or operated by any Acquired Company.
"Financial Statements"--as defined in Section 2.4.
"GAAP"--generally accepted United States accounting
principles.
"Governmental Authorization"--any approval, consent,
license, permit, waiver, or other authorization issued, granted,
given, or otherwise made available by or under the authority of
any
Governmental Body or pursuant to any Legal Requirement
necessary to permit the Acquired Companies lawfully to conduct
and operate their businesses in the manner they currently
conduct
and operate such businesses and to permit the Acquired Companies
to own and use their assets in the manner in which they currently
own and use such assets.
"Governmental Body"--any federal, state, local, municipal,
foreign, or other government or any governmental or quasi-
governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or
other tribunal).
"Hazardous Activity"--the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, release, storage, transfer,
transportation,
treatment, or use of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the environment, and
any other act, business, operation, or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm
to
persons or property on or off the Facilities, or that may, in the
reasonable judgment of Seller, affect the value of the Facilities
or
the Acquired Companies.
"Hazardous Materials"--any waste, product or other
substance that is listed, defined, designated, or classified as,
or
otherwise determined to be, hazardous, radioactive, or toxic or a
pollutant or a contaminant under or pursuant to any Environmental
Law, including any admixture or solution thereof, and
specifically
including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing
materials.
"Intellectual Property Assets" --as defined in Section 2.22.
"IRC"--the Internal Revenue Code of 1986, as amended, or
any successor law, and regulations issued by the IRS pursuant to
the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Knowledge"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact
or other matter; or
(b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter
in
the ordinary course of such individual's business.
"Legal Requirement"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative
order,
constitution, law, ordinance, principle of common law,
regulation,
statute, or treaty.
"Material Adverse Effect" --as related to Balance Sheet
items, a material adverse effect to the properties, assets,
business or
financial condition of the Acquired Companies, taken as a whole,
and as related to non-Balance Sheet items, a change or event
having a negative monetary impact of greater than $7,500.
"Multi-Employer Plan" -- shall have the meaning set forth
in ERISA 3(37).
"Noncompetition Agreement"--as defined in Section
1.4(a)(v).
"Occupational Safety and Health Law"--any Legal
Requirement designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards,
and any program, whether governmental or private (including those
promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working
conditions.
"Order"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered
by
any court, administrative agency, or other Governmental Body or
by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of
Business" only if:
(a) such action is consistent with the past
practices of such Person and is taken in the ordinary course of
the
normal day-to-day operations of such Person; and
(b) such action is similar in nature and
magnitude to actions customarily taken, without any authorization
by the board of directors, in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line
of
business as such Person.
"Organizational Documents"--(a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement and
the
certificate of limited partnership of a limited partnership; (d)
any
charter or similar document adopted or filed in connection with
the
creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.
"PBGC" --Pension Benefit Guaranty Corporation.
"Person"--any individual, corporation (including any non-
profit corporation), general or limited partnership, limited
liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
"Plan"--has the meaning given in ERISA 3(3).
"Proceeding"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Release"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into
the
environment, whether intentional or unintentional.
"Remediation Receivable"--as defined in Section 2.12.
"Representative"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel,
accountants,
and financial advisors.
"Securities Act"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that
Act
or any successor law.
"Seller"--as defined in the first paragraph of this
Agreement.
"Shares"--as defined in the Recitals of this Agreement.
"Subsidiary"--E-Z Serve Petroleum Marketing Company of
California.
"Tax" --any net income, alternative or add-on minimum
tax, advance, corporation, gross income, gross receipts, sales,
use,
ad valorem, franchise, profits, license, value added,
withholding,
payroll, employment, excise, stamp or occupation tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or any penalty imposed by
any Governmental Body with respect thereto, and any liability for
such amounts as a result either of being a member of an
affiliated
group or of a contractual obligation to indemnify any other
entity.
"Tax Return"--any return (including any information
return), report, statement, schedule, notice, form, or other
document or information filed with or submitted to, or required
to
be filed with or submitted to, any Governmental Body in
connection with the determination, assessment,
collection, or payment of any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred
or any other circumstances exist, that would lead a prudent
Person
to conclude that such a claim, Proceeding, dispute, action, or
other
matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
5. Survival and Indemnification
5.1 Indemnification of Seller. Buyer and the Acquired
Companies and their respective Affiliates ("Buyer Parties") from
and after the Closing shall indemnify, exonerate and hold Seller
and its Affiliates and their respective officers, directors,
employees,
representatives and agents (the "Seller Indemnitees") harmless
from and against any and all actions, causes of action, suits and
losses, damages, including penalties, losses, deficiencies,
costs,
expenses, obligations, fines, expenditures, claims and
liabilities,
including reasonable counsel fees and reasonable expenses of
investigation, defending and prosecuting litigation
(collectively,
the "Damages"), suffered by Seller Indemnitees as a result of,
caused by, arising out of, or in any way relating to any
liability or
obligation which pertains to the ownership, operation or conduct
of
the business or assets of any Acquired Company arising from any
acts, omissions, events, conditions or circumstances including,
without limitation, (a) any investigation, litigation or
proceeding
related to any environmental cleanup, audit, compliance or other
matter relating to the protection of the environment or the
release
of any Hazardous Materials relating to the Acquired Companies;
(b) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any
real
property owned by the Acquired Companies or operated by the
Acquired Companies of any Hazardous Materials (including,
without limitation, any losses, liabilities, damages, injuries,
costs,
expenses or claims asserted or arising under any Environmental
Law, the costs of defending and or counterclaiming or claiming
over against third parties in respect of any action or matter,
and any
cost, liability or damage arising out of a settlement of any
action
entered into by the Seller or its Affiliates), regardless of
whether
caused by, or within the control of, the Seller or its
Affiliates;
(c) any order, consent, decree, settlement, judgement or verdict
arising from the deposit, storage, disposal, burial, dumping,
injection, spilling, leaking or other placement or release in, on
or
from the properties of the Acquired Companies of any Hazardous
Material (including without limitation any order under the
Environmental Laws to clean-up or decommission) occurring prior
to, on or after the Closing Date.
5.2 Indemnification of Buyer. Seller from and after the
Closing shall indemnify and hold Buyer and the Acquired
Companies and their respective officers, directors, employees,
representatives and agents (the "Buyer Indemnitees") harmless
from and against any and all Damages suffered by Buyer
Indemnitees as a result of, caused by, arising out of, or in any
way
relating to the breach of any material warranty or representation
set
forth in Article 2.
5.3 Demands. Each indemnified party hereunder agrees
that promptly upon its discovery of facts giving rise to a claim
for
indemnity under the provisions of this Agreement, including
receipt by it of notice of any demand, assertion, claim, action
or
proceeding, judicial or otherwise, by any third party (such third
party actions being collectively referred to herein as the
"Claim"),
with respect to any matter as to which it claims to be entitled
to
indemnity under the provisions of this Agreement, it will give
prompt notice thereof in writing to the indemnifying party,
together
with a statement of such information respecting any of the
foregoing as it shall have. Such notice shall include a formal
demand for indemnification under this Agreement.
5.4 Right to Contest and Defend. The indemnifying
party shall be entitled at its cost and expense to contest and
defend
by all appropriate legal proceedings any Claim with respect to
which it is called upon to indemnify the indemnified party under
the provisions of this Agreement; provided, that notice of the
intention to contest shall be delivered by the indemnifying party
to
the indemnified party within twenty (20) days from the date of
receipt by the indemnifying party of notice by the indemnified
party of the assertion of the Claim. Any such contest may be
conducted in the name and on behalf of the indemnifying party or
the indemnified party as may be appropriate. Such contest shall
be
conducted by reputable counsel employed by the indemnifying
party but the indemnified party shall have the right but not the
obligation to participate in such proceedings and to be
represented
by counsel of its own choosing at its sole cost and expense. The
indemnifying party shall have full authority to determine all
action
to be taken with respect thereto; provided, however, that the
indemnifying party will not have the authority to subject the
indemnified party to any obligation whatsoever, other than the
performance of purely ministerial tasks or obligations not
involving material expense. If the indemnifying party elects not
to
contest any such Claim, the indemnifying party shall be bound by
the result obtained with respect thereto by the indemnified
party,
having used its Best Efforts in resolution. At any time after
the
commencement of the defense of any Claim, the indemnifying
party may request the indemnified party to agree in writing to
the
abandonment of such contest or to the payment or compromise by
the indemnified party of the asserted Claim, whereupon such
action
shall be taken unless the indemnified party determines that the
contest should be continued, and so notifies the indemnifying
party
in writing within fifteen (15) days of such request from the
indemnifying party. If the indemnified party elects to continue
or
contest the Claim after the indemnifying party requests an
abandonment or compromise, the indemnified party's
indemnification obligation hereunder shall not exceed the amount
for which the Claim could have been settled or compromised plus
the indemnified party's Damages to the date of the indemnifying
party's request.
5.5 Cooperation. If requested by the indemnifying
party, the indemnified party agrees to cooperate with the
indemnifying party and its counsel in contesting any Claim that
the
indemnifying party elects to contest or, if appropriate, in
making
any counterclaim against the person asserting the Claim, or any
cross-complaint against any person, and the indemnifying party
will reimburse the indemnified party for any expenses incurred by
it in so cooperating. If the indemnifying party has not chosen
to
contest a Claim, the indemnifying party shall cooperate with the
indemnified party and its counsel in contesting any Claim at no
cost or expense to the indemnified party.
5.6 Right to Participate. The indemnified party agrees
to afford the indemnifying party and its counsel the opportunity
to
be present at, and to participate in, conferences with all
persons,
including governmental authorities, asserting any Claim against
the
indemnified party or conferences with representatives of or
counsel
for such persons.
5.7 Payment of Damages. The indemnifying party shall
pay to the indemnified party in immediately available funds any
amounts to which the indemnified party may become entitled by
reason of the provisions of this Agreement, such payment to be
made within five days after any such amounts are finally
determined either by mutual agreement of the parties hereto or
pursuant to the final unappealable judgment of a court of
competent jurisdiction. The availability of insurance proceeds
shall not delay or postpone any indemnification payment required
hereunder. If the indemnified party collects any such insurance
proceeds and receives a payment from the indemnifying party
hereunder, and the sum of such proceeds and payment is in excess
of the amount payable with respect to the matter that is the
subject
of the indemnity, then the indemnified party shall promptly
refund
to the indemnifying party the amount of such excess, if permitted
by the applicable insurance policy(ies). Except as otherwise
provided in the preceding sentence, the indemnified party's
receipt
of any such insurance proceeds shall not eliminate or reduce the
obligations of the indemnifying party or the rights of the
indemnified party hereunder.
5.8 Survival of Representations and Warranties;
Limitations. The liability of the Seller for the breach of any of
the
representations and warranties of the Seller set forth in Article
2
shall be limited to claims for which the Buyer delivers written
notice to the Seller on or before September 10, 1997. The Seller
shall not be liable for Damages under Section 5.2 unless the
aggregate amount of Damages for which the Seller would, but for
the provisions of this Section 5.8, be liable exceeds, on an
aggregate basis, $100,000, and then only to the extent of any
such
excess; provided that the Seller shall not be liable for the
amount
of Damages that exceed in the aggregate $500,000;
5.9 General. THE INDEMNIFICATION AND
ASSUMPTION PROVISIONS PROVIDED FOR IN THIS
AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN
EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND
LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER
OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS,
JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES
IN QUESTION ARISE OR AROSE SOLELY OR IN PART
FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF
ANY INDEMNIFIED PARTY. BUYER AND SELLER
ACKNOWLEDGE THAT THIS STATEMENT COMPLIES
WITH THE EXPRESS NEGLIGENCE RULE AND
CONSTITUTES CONSPICUOUS NOTICE. NOTICE IN THIS
CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE
OR ALTER THE RIGHTS AND OBLIGATIONS OF THE
PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN
THIS AGREEMENT.
6. Taxes
6.1 General. Notwithstanding any other provision in
the Agreement, Seller and Buyer covenant with each other
regarding Taxes as follows:
(a) Seller's Liability. Seller shall not be liable
for any Taxes of the Acquired Companies for any periods.
(b) Buyer's Liability. Buyer shall be liable for
any and all Taxes of the Acquired Companies for all taxable
periods.
(c) Determination of U.S. Federal Income
Taxes. When necessary for the purposes of Section 6.1(a) or
6.1(b)
to determine the federal income Taxes of the Acquired Companies
for those periods in which the Acquired Companies joined with the
Seller affiliated group in filing a consolidated return, the
parties
shall determine the U.S. federal income tax liability of the
Acquired Companies on a "stand alone" basis, as if they were not
members of the Seller affiliated group. For purposes of this
computation, items determined on a consolidated basis shall be
allocated among the Acquired Companies and the other members
of the Seller affiliated group on a basis mutually agreed by
Buyer
and Seller. The Buyer and Seller agree that for U.S. federal
income tax purposes (i) the last day of the Acquired Companies'
taxable year as members of the Seller affiliated group shall be
the
Closing Date and (ii) that all items of income, interest, loss or
deduction recognized or incurred for U.S. federal income tax
purposes through the Closing Date shall be included in the
consolidated Returns filed by Seller. Buyer and Seller covenant
and agree that each of them shall file all Income Tax Returns,
and
maintain all books and records and conduct all audits and legal
and
administrative proceedings on a basis and in a manner consistent
with this Section.
(d) Refunds. Any federal income tax refunds
received by Seller affiliated group with respect to the periods
during which the Acquired Companies were members of such
group shall be for the sole benefit of Seller. All other Tax
refunds
attributable to the Acquired Companies shall be for the sole
benefit
of Buyer. Buyer shall cause the Acquired Companies to refrain
from electing to carryback losses, credits, deductions or other
tax
attributes incurred, created or realized by the Acquired
Companies
with respect to any period after the Closing date into any
taxable
year of the Acquired Companies in which they were members of
the Seller affiliated group.
(e) Tax Attributes.
(i) Generally. To the maximum extent
permitted by law and as specifically provided in Sections
6.1(e)(ii) and (iii) below, Seller shall allocate the Seller
affiliated group's consolidated federal income tax
attributes
(such as net operating losses, net capital losses, foreign
Tax
credits, alternative minimum Tax credit, and any other
consolidated federal income tax attributes) attributable to
the taxable periods during which the Acquired Companies
were members of the Sellers affiliated group to Seller and
the continuing members of the Seller affiliated group.
Seller's determination of the amount of federal income tax
attributes of the Seller affiliated group attributable to
the
Acquired Companies shall be determinative, and Buyer and
Seller covenant and agree that each of them shall file all
Income Tax Returns, and maintain all books and records,
and conduct all audit and administrative proceedings on a
basis and in a manner consistent with such determination.
(ii) Election Under Treasury Regulation
Section 1.1502-20(g)(1). Consistent with the provisions of
Section 6.1(e)(i) above and to the extent permitted by
applicable law, Seller will elect under Treasury Regulation
Section 1.1502-20(g)(1) to reattribute to Seller all but
$155,000 of the Acquired Companies' net operating losses
generated for all taxable periods through the Closing Date.
Seller's determination of the maximum amount of the
Acquired Companies' net operating losses that can be
reattributed to Seller shall be determinative. With respect
to the Treasury Regulations Section 1.1502-20(g)(1)
election, Seller shall prepare and file such election in its
1997 federal consolidated income tax return due on or
before September 15, 1998. Seller shall deliver a copy of
the election to the Acquired Companies, and each Acquired
Company agrees to sign and return the election to Seller
prior to August 1, 1998, and each Acquired Company
agrees to include a copy of the election in its federal
income
tax return for the first taxable year ending after September
15, 1998.
(iii) Section 382 Annual Limitation.
Consistent with the provisions of Section 6.1(e)(i) above
and to the extent permitted by applicable law, Seller will
not apportion any part of the Seller affiliated group's
consolidated Section 382 limitations (as defined in
Temporary Treasury Regulations Section 1.1502-93T(a)) to
the Acquired Companies, but rather, the Seller affiliated
group will retain 100% of any consolidated Section 382
limitations. If it is necessary for Seller to file an
election
under Temporary Treasury Regulations Section 1.1502-95T(e)
to refrain from apportioning any part of the Seller
affiliated group's consolidated Section 382 limitations to
the Acquired Companies, the Acquired Companies to agree
to sign and return such election prior to August 1, 1998,
and each of the Acquired Companies agree to attach a copy
of the election to their first return filed after December
31,
1997.
6.2 Tax Indemnifications.
(a) Buyer's Indemnification. Buyer shall
indemnify the Seller against any and all Taxes of the Acquired
Companies for which Buyer is liable under Section 6.1(b). Any
indemnity payable by Buyer pursuant to this Section 6.2 shall be
paid within the later of ten (10) days after Seller's request
therefor.
(b) Payments. All payments made by Buyer to
Seller under this Section 6 shall be treated as adjustments to
the
Purchase Price for the Shares.
6.3 Tax Returns. Seller and Buyer covenant with each
other as follows:
(a) Seller. Seller shall cause to be prepared and
filed the consolidated federal income tax return for the Seller
affiliated group for the year ended December 29, 1996 and for the
Acquired Companies' short taxable year which ends on the Closing
Date.
(b) Buyer. Buyer shall cause to be prepared and
filed all Tax Returns which are required by any Governmental
Body to be filed with respect to all Taxes relating to the
Acquired
Companies except for the Tax Returns described in Section 6.3(a)
above. Buyer shall refrain from taking any position in any
future
Tax Return which would have a materially adverse effect to the
Seller or the Seller affiliated group.
6.4 Tax Agreements. All Tax Sharing Arrangements
between the members of the Seller affiliated group and the
Acquired Companies shall be terminated as of the Closing Date
canceling all rights and obligations under such agreements.
Buyer's
Tax-related obligations vis-a-vis Seller shall be controlled by
this
Agreement.
6.5 Tax Audits. Except with respect to certain federal
income Taxes as described below, Buyer shall control any Tax
audit, examination or notice of proposed adjustment, provided
however, Buyer shall not settle or otherwise resolve such Tax
audit, examination or notice of proposed adjustment without
obtaining the written consent of Seller (which consent may not be
unreasonably withheld) if such settlement would cause a material
modification in the Seller's consolidated federal income tax
return
for the Seller's affiliated group for any year in which the
Acquired
Companies were members of the Seller's affiliated group.
Furthermore, with respect to any audit, examination or notice of
proposed adjustment of the Acquired Companies' federal income
taxes for (i) any taxable period during which the Acquired
Companies were members of the Seller affiliated group or (ii) any
taxable period for which the Acquired Companies filed separate
returns, the tax attributes of which were utilized by the Seller
affiliated group, Buyer agrees (a) to cause the Acquired
Companies
to give notice to Seller of the commencement of any Tax audit,
examination or notice of a proposed adjustment which could effect
the federal income tax liability of Seller's affiliated group;
(b) to
cause the Acquired Companies to immediately furnish Seller with
copies of all correspondence received with respect to such
examination or notice; (c) that Seller shall have the right, at
Seller's cost, to approve in advance any correspondence with
respect to any such Tax audit, examination or notice of proposed
adjustments, to the extent it would impact on the Tax liability
of
the Seller's affiliated group; (d) that Seller shall have
authority, at
Seller's cost, to supervise and control, in consultation with
Buyer,
the conduct of, and to represent the Acquired Companies in
connection with any such Tax audit, (e) that Seller shall be
entitled,
at its own cost, to control the actions taken or proposed to be
taken
to avoid, mitigate or otherwise defend against any change or
imposition of Tax arising from such audit for which Seller is not
indemnified by Buyer; provided however, that Seller shall not
settle or otherwise resolve any issue which may cause the
Acquired
Companies or Buyer to incur an obligation for federal income
Taxes for any period during which the Acquired Companies were
members of the Seller affiliated group without Buyer's prior
written consent, which consent may not be unreasonably withheld.
6.6 Assistance. All Parties hereby agree to cooperate
with each other and to take such actions and execute such
agreements, Tax forms and documents as the Party controlling the
mater may reasonably expect to carry out the purposes of this
Section 6.
6.7 Section 338 Election. The Seller shall not make an
election under Section 338(h)(10) of the Code with respect to the
sale of the Shares.
6.8 FIRPTA Certificate. At the Closing, Seller shall
deliver to the Buyer an appropriate certificate of Seller, signed
by
an officer of Seller, which shall permit Buyer to refrain from
withholding any portion of the Purchase Price on account of the
FIRPTA rules.
6.9 Preservation of Records. For a period of ten (10)
years after the Closing Date, Buyer shall (i) preserve and retain
the
corporate accounting, legal, auditing, Tax and other books and
records that relate to the Acquired Companies prior to Closing
and
(ii) make such books and records available at the then current
administrative headquarters of the Acquired Companies to Seller
upon reasonable notice and at reasonable times, it being
understood
that Seller shall be entitled to make and retain copies of such
books
and records as it shall deem necessary at Seller's expense.
6.10 Conflict. In the event of a conflict relating to Taxes
between the provisions of this Section 6 and any other provisions
of the Agreement, the provisions of Section 6 shall control.
7. General Provisions
7.1 Expenses. Except as otherwise expressly provided
in this Agreement, each party to this Agreement will bear its
respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
7.2 Public Announcements. As long as this Agreement
is in effect, Seller and Buyer will consult in advance and
cooperate
with each other concerning the preparation and publication of any
press release or other announcement (other than those required by
law) with respect to the Contemplated Transactions and the means
by which the Acquired Companies' employees, customers, and
suppliers and others having dealings with the Acquired Companies
will be informed of the Contemplated Transactions.
7.3 Confidentiality. Between the date of this
Agreement and the Closing Date, Buyer and Seller will maintain in
confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Acquired Companies to
maintain in confidence, and not use to the detriment of another
party or an Acquired Company any written, oral, or other
information obtained in confidence from another party or an
Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already
known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available
through no fault of such party, (b) the use of such information
is
necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such
information is required by legal proceedings.
If the Contemplated Transactions are not consummated,
each party will return or destroy as much of such written
information as the other party may reasonably request.
7.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will
be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with
written confirmation of receipt), provided that a copy is mailed
by
registered mail, return receipt requested, or (c) when received
by
the addressee, if sent by a nationally recognized overnight
delivery
service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such
other
addresses and telecopier numbers as a party may designate by
notice to the other parties):
Seller: E-Z Serve Corporation
2550 North Loop West, Suite
600
Houston, Texas 77092
Attention: Harold E. Lambert
Facsimile No.: (713) 684-4367
with a copy to: Bracewell & Patterson.
L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
Attention: John L. Keffer
Facsimile No.: (713) 221-1212
Buyer: Restructure, Inc.
205 South Hoover Street,
Suite 101
Tampa, Florida 33609
Attention: Jack J. Ceccarelli
Facsimile No.: (813) 287-2290
with a copy to: Restructure, Inc.
205 South Hoover Street,
Suite 101
Tampa, Florida 33609
Attention: Bradford C. Vassey, General
Counsel
Facsimile No.: (813) 287-2290
7.5 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any
of
the parties in the courts of the States of Texas or Florida, and
each
of the parties consents to the jurisdiction of such courts (and
of the
appropriate appellate courts) in any such action or proceeding
and
waives any objection to venue laid therein. Process in any action
or
proceeding referred to in the preceding sentence may be served on
any party anywhere in the world.
7.6 Further Assurances. The parties agree (a) to furnish
upon request to each other such further information, (b) to
execute
and deliver to each other such other documents, and (c) to do
such
other acts and things, all as the other party may reasonably
request
for the purpose of carrying out the intent of this Agreement and
the
documents referred to in this Agreement.
7.7 Waiver. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the
failure nor any delay by any party in exercising any right,
power, or
privilege under this Agreement or the documents referred to in
this
Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right,
power,
or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right,
power,
or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the
claim
or right unless in writing signed by the other party; (b) no
waiver
that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand
as provided in this Agreement or the documents referred to in
this
Agreement.
7.8 Entire Agreement and Modification. This
Agreement supersedes all prior agreements between the parties
with respect to its subject matter and constitutes (along with
the
documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged
with the amendment.
7.9 Disclosure Letter.
(a) The disclosures in the Disclosure Letter, and those
in any supplement thereto, must relate only to the
representations
and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or warranty
in
this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the
Disclosure Letter (other than an exception expressly set forth as
such in the Disclosure Letter with respect to a specifically
identified representation or warranty), the statements in the
body of
this Agreement will control.
7.10 Assignments, Successors, and No Third-party
Rights. Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties, except
that Buyer may assign any of its rights under this Agreement to
any
Subsidiary of Buyer, provided, that Buyer joins in the indemnity
obligations of such Subsidiary pursuant to Section 5. Subject to
the
preceding sentence, this Agreement will apply to, be binding in
all
respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred
to in
this Agreement will be construed to give any Person other than
the
parties to this Agreement any legal or equitable right, remedy,
or
claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties
to
this Agreement and their successors and assigns.
7.11 Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held
invalid
or unenforceable only in part or degree will remain in full force
and
effect to the extent not held invalid or unenforceable.
7.12 Section Headings, Construction. The headings of
Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All
references to
"Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will
be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word
"including"
does not limit the preceding words or terms.
7.13 Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of
the
essence.
7.14 Governing Law. This Agreement will be governed
by the laws of the State of Texas without regard to conflicts of
laws principles.
7.15 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed to be an
original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same
agreement.
7.16 Independent Investigation. Buyer acknowledges
that in making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has
relied solely on its own independent investigation of Acquired
Companies and on the express written representations, warranties
and covenants in this Agreement. Without diminishing the scope
of the express written representations, warranties and covenants
of
the Seller in this Agreement and without affecting or impairing
Buyer's right to rely thereon, Buyer acknowledges that Seller has
not made, AND SELLER HEREBY EXPRESSLY DISCLAIMS
AND NEGATES, ANY OTHER REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE
ASSETS AND OPERATIONS OF THE ACQUIRED
COMPANIES (INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES
OF MATERIALS).
8. Employee Benefit Matters
8.1 Service under Buyer's Plans. At the Closing Date,
Buyer shall cause those employees of the Acquired Companies
who are then employed by Buyer, other than those set forth in
Part
8.1 of the Disclosure Letter, ("Transferred Employees") to be
covered by the benefit plans and programs of Buyer. Transferred
Employees shall be credited for their service with the Acquired
Companies for purposes of participation, eligibility, vesting and
the
accrual of benefits under the benefit plans and programs provided
by Buyer. Buyer shall maintain the severance policy of Seller
and
Company with respect to those employees of Company who are
employed as of the Closing.
8.2 Buyer's Health Plans. Buyer shall cause its group
health plan to provide coverage to the Transferred Employees and
to waive any limitations regarding pre-existing conditions of
Transferred Employees and their eligible dependents (except to
the
extent that such limitations would have applied to any such
individual under the group health plan of the Acquired
Companies). Buyer's group health plan will apply any amounts
paid under the group health plan of the Acquired Companies by a
Transferred Employee for deductibles and copayments during 1997
toward deductibles and out-of-pocket limits for the 1997 plan
year.
8.3 Insurance. Insurance coverage provided by Seller to
the Acquired Companies, including but not limited to liability
and
casualty insurance, shall be cancelled and terminated as of
Closing.
Buyer shall be responsible for procuring and maintaining
insurance
for the Acquired Companies as of the Closing.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
Buyer:
Restructure, Inc.
By:
Name:
Title:
Seller:
E-Z Serve
Corporation
By:
Name: John T.
Miller
Title: Senior Vice
President
The Company and Subsidiary hereby execute this
Agreement to acknowledge their obligations under Section 5
hereof.
E-Z Serve Petroleum
Marketing Company
By:
Name:
Title:
E-Z Serve Petroleum
Marketing Company
of California
By:
Name:
Title:
AGREEMENT TO PERFORM FINANCED SITE
ASSESSMENT AND REMEDIATION SERVICES
Environmental Corporation of America, Inc., a
Texas Corporation, hereinafter referred to as "ECA,"
whose primary business address is 205 S. Hoover Street,
Tampa, Florida 33609, and E-Z Serve Convenience Stores,
Inc. a Delaware Corporation, hereinafter referred to as
"E-Z Serve" whose primary business address is 2550 N.
Loop W., Suite 600, Houston, Texas 77092, hereby enter
into this Agreement to Perform Financed Site Assessment
and Remediation Services (the "Agreement").
WHEREAS, E-Z Serve is or was the owner or operator
of various properties, facilities or sites where
evidence of a potential or actual discharge of petroleum
products currently exists, which properties, facilities
or sites are eligible for participation in the state
sponsored programs set forth below which provide for the
reimbursement of costs incurred in the assessment and
remediation of petroleum product contamination; and
WHEREAS, ECA is engaged in the business of
arranging, conducting and financing petroleum product
contamination site assessment and remediation services
at petroleum contaminated sites. Specifically, ECA is
an environmental consulting firm engaged in the business
of providing environmental services, including, but not
limited to, activities related to the assessment and
remediation of petroleum product contamination at or
adjacent to contaminated sites. Such services and
activities include, but are not limited to, performing
contamination assessments, the preparation of
contamination assessment reports, the implementation and
management of site remediation activities, and all
required negotiations and coordination with various
federal, state and local agencies which are an integral
part of the highly regulated services described above.
ECA is also engaged in the business of providing
environmental consulting services which are not eligible
for reimbursement under the state programs; and
WHEREAS, the facilities owned or operated by E-Z
Serve which are the subject of this Agreement are
eligible for state funded petroleum cleanup
reimbursement programs in any state in which E-Z Serve
owns or operates facilities (collectively referred to as
the "Program"), for the assessment, remediation and
reimbursement of petroleum contaminated properties,
facilities and sites;
WHEREAS, E-Z Serve and ECA desire to enter into
this Agreement pursuant to which ECA shall fund and
arrange for itself and/or its subcontractors to perform
site assessment and remediation activities and services
integral to site assessment and remediation at all
petroleum contaminated sites which are or were owned or
operated by E-Z Serve in exchange for the right of ECA
or its assigns to receive reimbursement from the
respective states or other Program for ECA's costs
incurred in providing such services, and as further
provided for in this Agreement.
NOW, THEREFORE, for and in consideration of the
mutual promises, covenants and agreements contained
herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:
1. Purpose and Term
(a) The purpose of this Agreement is to
establish the rights, responsibilities and obligations
of ECA as the consultant, financier and provider of site
assessment and remediation services, and E-Z Serve as
the site owner and/or operator in connection with the
financed contamination assessment and remediation
services to be conducted by ECA at E-Z Serve's
facilities or sites.
(b) ECA and E-Z Serve acknowledge and agree that
this Agreement shall be applicable to all E-Z Serve
contaminated sites and facilities listed on Exhibit A,
attached hereto. ECA acknowledges that its covenant and
commitment to provide financed site assessment and
remediation services at E-Z Serve's sites is a material
inducement to E-Z Serve's entering into this Agreement.
Therefore, ECA shall timely provide financed site
assessment and remediation services at E-Z Serve's
sites.
(c) E-Z Serve and ECA previously executed an
Agreement to Perform Financial Site Assessment and
Remediation Services dated March 22, 1996 which
addressed financed cleanup services at E-Z Serve's
Georgia facilities. In light of the comprehensive
nature of this Agreement, E-Z Serve and ECA desire to
terminate the March 22, 1996 Agreement and include the
Georgia facilities which were the subject of the March
22, 1996 Agreement under this Agreement. The March 22,
1996 Agreement shall be of no further force or effect
and all services to be performed by ECA at E-Z Serve's
Georgia facilities shall hereinafter be governed and
controlled by the terms and provisions of this
Agreement.
(d) The initial term of this Agreement shall be
for a period of five (5) years from the date of
execution by the parties. During the initial term of
this Agreement, ECA shall be granted the exclusive right
to provide financed site assessment and remediation
services at all E-Z Serve's contaminated sites which are
eligible under an applicable State Program subject to
pre-existing contractual arrangements for sites which E-Z serve
may acquire after the execution of this
Agreement. The term of this Agreement may be extended
by the mutual agreement of the parties for successive
one (1) year terms.
2. Sites
(a) The Sites to be remediated by ECA pursuant
to the terms of this Agreement are listed on Exhibit A,
attached hereto. E-Z Serve and ECA understand and agree
that this Agreement will be applicable to and govern
assessment and remediation services at all petroleum
contaminated sites owned by E-Z Serve on the effective
date of this Agreement which are eligible under an
applicable State Program.
(b) E-Z Serve will coordinate site
prioritization and scheduling with ECA to provide for an
orderly and timely transfer of a specific number of E-Z
Serve's eligible sites into the respective financed site
assessment and remediation programs.
(c) The sites to be remediated by ECA under this
Agreement shall not include the twenty-nine (29) sites
in Florida currently being remediated by Handex of
Florida, Inc. under the Florida pre-approval program or
any additional sites acquired by E-Z Serve in the future
except as specifically assigned to ECA by E-Z Serve
under this Agreement.
3. Reimbursement Receivables
(a) E-Z Serve and ECA understand and agree that
E-Z Serve is the party entitled to receive reimbursement
application receivables from the respective state trust
fund programs (the Receivables) in the approximate
amount of $ 2,044,015.41 for site assessment and
remediation services completed at E-Z Serve's sites and
facilities. E-Z Serve expressly represents and warrants
that the reimbursement receivables purchased by ECA
under this Agreement are eligible for submittal for
reimbursement under the applicable state reimbursement
program, and that the documentation required to support
each reimbursement application is either presently in
the receivables file or can be provided by E-Z Serve to
ECA upon request. However, E-Z Serve makes no
representations or warranties to ECA regarding the
recoverability or reimbursement eligibility for the
Receivables in light of the fact that ECA has performed
an independent due diligence investigation as regards
the recoverability and reimbursement eligibility of
these Receivables. E-Z Serve hereby assigns to ECA all
shortfall guarantees or other indemnities obtained from
E-Z Serve's contractors and consultants who provided
site assessment and remediation services in support of
the Receivables.
(b) ECA shall purchase the Receivables and pay
E-Z Serve $1,599,239.89 in exchange for E-Z Serve's
assignment to ECA of the right to receive reimbursement
from the respective state trust funds for the total
amount of reimbursement application receivables in an
amount not to exceed $ 2,044,015.41 ECA shall
make separate payments to E-Z Serve upon E-Z Serve
providing the individual reimbursement applications to
ECA. Individual payments which total $ 1,599,239.89
shall be made by ECA in proportion to the proportionate
amount of each reimbursement site which comprises the
total $2,044,015.41 receivable. ECA acknowledges that
its sole right to recover any amounts represented by the
reimbursement applications is from the respective trust
fund programs and ECA specifically assumes the risk of
any shortfall or disallowed amount which is not paid by
the applicable governmental authority.
(c) E-Z Serve agrees to provide written
instructions to applicable State Program officials that
all future checks to be issued by the Program which
represent the Receivables shall be mailed to Post Office
Box 930117; Atlanta, GA 31193-0117. E-Z Serve hereby
grants to ECA a power of attorney to negotiate and
endorse any check or payment instrument received from a
State Program which check or payment instrument is
intended to reimburse E-Z Serve and/or ECA for monies
which represent the Receivables. E-Z Serve further
agrees to provide reasonable cooperation and furnish ECA
supporting documentation contained in its files
necessary to complete or supplement reimbursement
applications that have been or will be submitted to the
Programs.
4. Environmental Consultant; Selection of
Contractors
(a) Based upon ECA's experience in providing
site assessment and remediation services, E-Z Serve
agrees to designate ECA as the primary engineering
consultant and sub-contractor of environmental services
under this Agreement in light of ECA's expertise in
assessing and remediating petroleum contaminated sites
and its familiarity with E-Z Serve's business operations
and individual site operations and status.
(b) ECA represents and warrants and E-Z Serve
acknowledges that ECA is an environmental engineering
and consulting firm who is willing to provide financed
site assessment and remediation services at E-Z Serve's
sites. ECA shall provide E-Z Serve with a list of
subcontractors which are proposed to be utilized to
provide services under this Agreement, and E-Z Serve
shall have the right to prohibit the use of individual
sub-contractors at its sites upon a showing of good
cause. ECA acknowledges that it has entered into a
separate contract or contracts with various
subcontractors for the performance of site assessment
and remediation tasks at various sites, and that ECA
shall utilize only itself or its approved subcontractors
for the performance of all contamination assessment and
remediation tasks. Any subcontractors utilized by ECA
shall comply with all provisions of this Agreement
including the insurance requirements set forth in
Section 17.
(c) ECA acknowledges that site assessment and
remediation activities at various E-Z Serve facilities
and sites other than the sites listed on Exhibit A are
currently being provided and conducted by other
environmental consultants. ECA acknowledges and agrees
that E-Z Serve has entered into separate contracts,
agreements, or arrangements for the performance of
additional environmental compliance, assessment and
remediation services which are not covered within the
scope of this Agreement. ECA agrees to cooperate fully
with and not interfere with the services provided by
other contractors retained by E-Z Serve for services
provided at any site, and ECA shall cooperate and
coordinate with these other contractors to avoid any
interference, interruption or delay of services being
provided at any site.
(d) If E-Z Serve reasonably determines that ECA
is unable to timely and/or satisfactorily perform and
complete its duties and responsibilities under the terms
of this Agreement, then E-Z Serve or its representative
shall give notice of the deficiencies to ECA in writing.
Upon receipt of such written notice from E-Z Serve, ECA
shall commence immediately to remedy all alleged
deficiencies and ECA shall have (20) twenty days to
complete such remedy. If the alleged deficiency cannot
be completely remedied within (20) twenty days, then ECA
shall diligently pursue correction of the alleged
deficiency as soon as possible and continue to implement
the remedy until the deficiency is corrected. If the
alleged deficiencies are not remedied by ECA within the
time periods set forth above, E-Z Serve shall have the
right to select another environmental consultant to
complete site assessment and remediation services.
Regardless of the above provisions, any formal
termination of this Agreement shall be governed by the
provisions of Section 15 set forth herein.
(e) ECA and E-Z Serve understand and agree that
any reference to "ECA" in this Agreement also refers to
and includes, without limitation, other environmental
consultants and subcontractors utilized by ECA in the
provision of site assessment and remediation services,
and ECA's contractors, sub-contractors, personnel,
agents, employees, and affiliates, unless otherwise
specifically designated or excluded.
5. Services
(a) In consultation with E-Z Serve, ECA shall
arrange, finance and perform assessment and remediation
of petroleum contaminated sites under the guidelines set
forth by applicable authorities pursuant to the laws and
regulations of the respective states and as otherwise
required by the state funded reimbursement programs in
any state in which E-Z Serve owns or operates
facilities. Site assessment and remediation tasks shall
be performed as specified for sites on Exhibit A. In
performing specified site assessment and remediation
tasks, ECA shall provide or arrange for the following:
(a) necessary components (personnel, materials and
coordination of services) needed to complete assessment
and remediation of petroleum product contamination;
(b) additional actions as required by the respective
state agencies or their designees; and (c) any other
activities approved by E-Z Serve in writing.
(b) It shall be the responsibility of E-Z Serve
to make available to ECA an authorized representative of
E-Z Serve to approve or deny any additional work to be
performed by ECA which is non-reimbursable under the
Program. Additional work shall be defined as work
performed on a site which is not eligible for
reimbursement under the respective state reimbursement
fund. ECA shall have the right to perform non-reimbursable
additional work under this Agreement so
long as ECA's cost proposal as set forth below is
competitive in terms of cost and scope of work with
other contractors providing similar services. If ECA
elects to perform non-reimbursable services, ECA will
undertake to perform this work in a cost-effective,
timely manner, but will not be responsible for any
delays in the performance of additional work not within
the control of ECA. ECA shall promptly notify E-Z Serve
in writing of any additional work that may be required
to perform or complete site assessment and remediation
services which are not reimbursable under the Program.
If ECA elects to perform the additional work, ECA shall
prepare a written proposal to perform such additional
work which includes a not to exceed maximum contract
price. No additional work shall be initiated by ECA
without prior written approval by E-Z Serve except in
the case of an emergency which endangers the safety of
site personnel or the general public. If E-Z Serve
approves this proposal in writing, E-Z Serve shall pay
ECA the not to exceed agreed upon price within sixty
(60) days once completed and invoiced by ECA.
(c) ECA shall determine the current status of
each E-Z Serve site under this Agreement and verify
eligibility for state reimbursement under the applicable
Program. In the event that reimbursement eligibility is
in question under the applicable Program, ECA shall
coordinate with E-Z Serve regarding a proposed course of
action to resolve the issues and provide full assistance
to E-Z Serve to resolve eligibility issues, including
meetings with state agencies to resolve such eligibility
issues. However, ECA shall be under no obligation to
commence formal administrative proceeding or other forms
of legal proceedings in order to contest the eligibility
status of any E-Z Serve site.
(d) ECA agrees to schedule site assessment and
remediation services to the convenience of E-Z Serve
during normal working hours, and ECA further agrees to
insure the diligent performance of site assessment and
remediation services necessary to complete site
assessment and remediation work. ECA shall perform site
assessment and remediation services in strict compliance
with applicable regulatory time frames and deadlines.
ECA shall not pursue or obtain extensions of time to
applicable regulatory time frames or deadlines without
the express consent and authorization of E-Z Serve,
which consent and authorization shall not be
unreasonably withheld. ECA's failure to obtain E-Z
Serves consent and authorization for any such extensions
of time or to diligently perform site assessment and
remediation services shall constitute a material default
under the terms of this Agreement. Completion of site
assessment and remediation services shall be evidenced
by the delivery of a Site Rehabilitation Completion
Order, No Further Action approval or its equivalent as
issued by the applicable State Program to E-Z Serve.
(e) ECA shall perform all necessary accounting
and data production as required by the respective state
or other Program to obtain reimbursement for costs
incurred in performing site assessment and remediation
services. ECA shall be responsible for installing an
information system for retaining all records, drawings,
plans, documents, contracts, cost invoices and all other
writings pertaining to site assessment and remediation
activities for a period of five (5) years after
reimbursement is received. ECA understands and agrees
that E-Z Serve desires to maintain complete copies of
files and documents generated in the course of providing
the site assessment and remediation services
contemplated under this Agreement. Therefore, ECA
agrees to provide E-Z Serve with one set of copies of
all records and invoices, including subcontractors
invoices, generated in the course of providing site
assessment and remediation services.
(f) At E-Z Serve's request, ECA shall include in
a reimbursement application invoices previously paid by
E-Z Serve or its contractors and agents for reimbursable
expenses incurred prior to the execution of this
Agreement or the provision of site assessment or
remediation services at an individual site. All such
invoices shall comply with the terms of this Agreement
and all rules and regulations of the Program which
govern reimbursement eligibility matters. Upon approval
and payment of these invoices by the respective state or
other Program, ECA shall pay the approved amount to E-Z
Serve, however, ECA assumes no responsibility for the
approval of these additional invoices by the respective
state or other Program.
(g) The services to be provided by ECA under this
Agreement shall not include emergency response or
similar services, and ECA and E-Z Serve understand and
agree that emergency response services will be performed
by other contractors selected by E-Z Serve
6. Non-Liability of E-Z Serve for
Payment or Reimbursement
(a) ECA hereby specifically releases E-Z Serve
and warrants that it will not seek to hold E-Z Serve
responsible for the payment of costs or fees of any kind
for services rendered hereunder, nor will ECA seek to
impose any statutory or common law liens against any
interest of E-Z Serve or any of its properties for
recovery of the costs and expenses incurred in providing
site assessment and remediation services hereunder
except as approved in writing by E-Z Serve for non-reimbursable
work. ECA acknowledges and agrees that it
will not seek recovery from E-Z Serve of any costs
incurred by ECA in providing site assessment and
remediation services, including, but not limited to, the
recovery of interest payments.
(b) E-Z Serve and ECA acknowledge and agree that
despite the best efforts of ECA, the amount that the
Program determines that ECA will be reimbursed for the
costs incurred in providing site assessment and
remediation services may be less than the actual amount
of costs which ECA incurs in the performance of such
services. ECA acknowledges and agrees that its sole
recourse for recovery of costs and expenses associated
with site assessment and remediation services or tasks,
except for additional work approved by E-Z Serve
pursuant to Paragraph 4(b), performed under this
Agreement shall be from the respective state or other
Program, through eligibility in one of the Programs.
ECA AGREES TO ACCEPT AN ASSIGNMENT OF E-Z SERVE'S RIGHT
TO REIMBURSEMENT IN THE PROGRAMS AS FULL AND COMPLETE
PAYMENT FOR SITE ASSESSMENT AND REMEDIATION SERVICES
RENDERED UNDER THIS AGREEMENT. IN NO EVENT SHALL ECA BE
ENTITLED TO RECOVER ANY OF ITS SITE ASSESSMENT OR
REMEDIATION COSTS FROM E-Z SERVE, except for costs and
expenses incurred outside the scope of reimbursable
tasks for additional work which is specifically approved
in writing by E-Z Serve.
7. Scope of Services to be Performed by ECA
(a) During the performance of site assessment
and remediation services under this Agreement, materials
other than petroleum or petroleum product contaminants
may be discovered at the sites or facilities, including
materials designated under state or federal law as
hazardous substances. E-Z Serve acknowledges that
services rendered by ECA under this Agreement are to
assess and remediate soil and groundwater at the sites
which are deemed to be contaminated only with "non-hazardous"
materials such as petroleum or petroleum
products eligible for reimbursement under the Program.
In the event that during the performance of site
assessment or remediation services materials contained
in the soil or groundwater are determined to be
"hazardous materials" or "hazardous wastes" which are
regulated under other provisions of state or Federal
environmental law, ECA shall undertake to handle these
types of materials only with regard to the safety of
site personnel and the general public. It is further
understood that the remediation of such materials is not
covered within the scope of the Programs or this
Agreement. As such, ECA shall have neither the right
nor the obligation to assess or remediate such
contamination. In the event that during site assessment
or remediation, certain materials contained in the soil
or groundwater are determined to be "hazardous", ECA
shall undertake to promptly notify E-Z Serve while at
the same time taking whatever actions are necessary to
handle and/or otherwise address these hazardous
materials to insure the safety and health of site
personnel and the general public. Assessment or
remediation of such contamination shall only be
performed by ECA with the written approval of E-Z Serve.
In the event and to the extent that ECA incurs any
expenses, fees or costs pursuant to this provision that
are non-reimbursable and directly attributable to its
handling of materials which are deemed "hazardous", then
E-Z Serve shall reimburse ECA for the reasonable cost
incurred by ECA to insure the safety and health of site
personnel and the general public.
8. Fees
(a) Except as specifically authorized by E-Z
Serve in writing as set forth in Section 5(b), all site
assessment and remediation services to be performed by
ECA pursuant to this Agreement are understood by ECA and
E-Z Serve to be fully reimbursable by the respective
state or other Program. In order to insure that all
costs incurred in performing site assessment and
remediation services will be fully reimbursable, the
services performed by ECA shall be in strict accordance
with state Program requirements.
(b) E-Z Serve shall be responsible for
applicable Program deductibles.
(c) E-Z Serve shall not be responsible nor
obligated to pay interest to ECA or any other party on
the amount of costs incurred in providing any services
under this Agreement. To the extent that ECA is able to
earn or collect interest which is paid on amounts of
reimbursable costs on application to a Program, then ECA
shall retain all rights to such interest payments.
(e) Should any state alter its Program so as to
constitute a termination of payment or reimbursement
eligibility for services provided under this Agreement
or alter the Program so as to create a substantial
likelihood that future payments or reimbursements may be
jeopardized, ECA shall be entitled to suspend the
performance of future services under this Agreement and
enter into further negotiations with E-Z Serve in an
attempt to reach a mutual understanding as to the
performance of future services under this Agreement.
9. Confidentiality
All information acquired by ECA, including
materials prepared by ECA, concerning the subject of the
services to be rendered at E-Z Serve's sites under this
Agreement, shall be considered confidential information
which ECA shall not disclose to third parties without E-Z Serve's
prior written consent. Disclosure to ECA's
employees, professional advisors and subcontractors who
agree to be bound by the terms of this section is
permitted when required in connection with providing the
services contemplated under this Agreement. In
addition, ECA agrees that ideas or concepts under
consideration by E-Z Serve and disclosed to ECA are
confidential and proprietary to E-Z Serve and may not be
utilized by ECA for any purpose other than in connection
with the services to be provided under this Agreement.
Nothing herein shall prevent ECA from disclosing to
others or using in any manner information which ECA can
show:
(a) has been published and become part of the
public domain other than by acts, omissions or fault of
ECA or its employees; or
(b) has been furnished or made known to ECA by
third parties as a matter of legal right without
restriction on disclosure; or
(c) was in ECA's possession prior to the
disclosure thereof by E-Z Serve; or
(d) is required to be disclosed by law or a
court of competent jurisdiction.
10. Representations and Warranties of E-Z Serve
E-Z Serve represents and warrants the following:
(a) That the execution, delivery and
consummation of this Agreement has been duly authorized
and does not conflict with, or result in a breach of the
terms and conditions of, or constitute any violation or
default under any agreement, contract or mortgage to
which E-Z Serve is a party or to which the site owner or
the owner or operator of any business located at the
site (collectively the "Site Parties") is a party. In
recognition of the exclusive nature of this Agreement,
ECA acknowledges that E-Z Serve is currently engaged or
has been engaged in a contractual relationship with
Handex, ViroGroup, Inc., and ESCM to perform site
assessment and remediation services at E-Z Serve's sites
other than those listed on Exhibit A. However, neither
the existence of the above agreements or the continued
performance of site assessment or remediation services
by other contractors at sites covered under this or
other Agreements shall constitute a violation of this
provision.
(b) That (i) each site assigned under this
Agreement is eligible to participate in a State Program;
(ii) a state Program has issued a letter of eligibility
confirming the site's status as a reimbursable site or
(iii) E-Z Serve submitted a timely application for
participating in a Program, but an eligibility
determination has not yet been issued.
(c) That E-Z Serve has not and will not commit
or permit any act that would cause the site to become
ineligible for reimbursement under the Program.
(d) That E-Z Serve has attempted to identify all
underground improvements, utilities and conditions that
are known or suspected to exist at the site, including
but not limited to prior excavations and utility lines.
(e) That E-Z Serve hereby grants to ECA a
revocable license to enter upon properties which are
listed on Exhibit A owned by E-Z Serve for the purpose
of allowing ECA to perform site assessment and
remediation services as set forth herein. In the event
that services are required to be performed on any
property or site not owned by E-Z Serve or on which E-Z
Serve does not own or operate a business, E-Z Serve will
assist in obtaining all necessary authorizations from
the owners or operators of the site in order to allow
ECA to enter upon the site and conduct assessment and
remediation services, however, E-Z Serve shall not be
obligated to provide or guarantee such access.
11. Covenants of E-Z Serve
E-Z Serve covenants and agrees:
(a) Upon completion of individual site
assessment and remediation tasks by ECA, to sign or
cause to be signed any necessary state Program
reimbursement application form or their equivalents
under the Programs, designating ECA or its assigns as
the party to be paid or reimbursed by the Program, and
submit or cause to be submitted the same to the Program,
along with documentation of the costs of the services
hereunder to be supplied by ECA.
(b) E-Z Serve shall not seek reimbursement from
the respective states or other Program for site
assessment or remediation tasks performed or funded by
ECA at any site, nor do anything to render the site
ineligible for reimbursement funding or to change the
designation of ECA or its assigns on the reimbursement
application as the party to be reimbursed by the Program
for site assessment and remediation services performed
under this Agreement.
12. Representations and Covenants of ECA:
Scope of Liability
ECA represents and warrants the following:
(a) ECA shall use practices consistent with
generally accepted industry standards in the performance
of services hereunder. ECA shall comply with all
applicable federal, state and local laws and ordinances,
including but not limited to providing notices and
obtaining any required permits, licenses or other
necessary prior approvals on a timely basis to perform
site assessment and remediations services.
(b) In performing its work hereunder, ECA
warrants that it and its agents or representatives shall
use that degree of care and skill ordinarily exercised
under similar circumstances by members of its
profession. ECA shall employ or contract only with
persons competent, licensed and/or certified to perform
the site assessment and remediation services set forth
herein. These persons shall be under the exclusive
care, custody and control of ECA. ECA shall further
require its employees and employees of its
subcontractors to conform to E-Z Serve's rules of
conduct while on E-Z Serve's sites and shall immediately
remove from the site any employee who deviates from E-Z
Serve's rules of conduct.
(c) Should ECA perform services at the site
which breach the covenants contained herein, ECA shall
re-perform or remedy any services which were not
performed in accordance with industry standards as
evidenced, for example, by the Program's failure to
approve or sign-off on an applicable document or
service, provided that ECA is notified in writing of
this nonconformity by the applicable Program or E-Z
Serve after completion of the nonconforming services.
ECA shall re-perform the non-conforming services at
ECA's sole cost and expense if not reimbursable under
the Program.
(d) ECA shall maintain all records necessary to
verify and validate costs to be reimbursed by the
Program. Such records shall be maintained at a central
location convenient to E-Z Serve, and shall be made
available to E-Z Serve upon E-Z Serve's reasonable
request. ECA shall provide copies of any records
maintained hereunder to E-Z Serve upon request. ECA
shall provide one complete set of copies of any and all
materials or information provided or submitted to the
Program directly to E-Z Serve at the time these
materials are submitted to the Program. ECA shall also
provide E-Z Serve copies of all reimbursement orders and
copies of reimbursement checks and payments received
from any State Program for both work performed under
this Agreement as well as for the receivables purchased
by ECA under this Agreement.
(e) ECA shall take reasonable measures and
precautions to avoid damage to a site or any identified
underground improvements at the site as a result of
ECA's work or the use of site assessment and remediation
equipment that do not typically occur in the provision
of site assessment and remediation activities. Costs
incurred to restore any damage to the site caused by
ECA's performance of customary site assessment and
remediation activities shall be at the sole expense of
E-Z Serve, if not reimbursable under the Program.
Should any damage caused at the site be determined to be
the result of the negligence of ECA or result from the
breach of this Agreement, ECA shall be responsible for
all costs incurred in repairing or remedying such
damage.
13. Indemnification
(a) ECA shall defend and indemnify E-Z Serve for
any and all losses, claims, costs, settlements, damages,
penalties, assessments, impositions or liabilities
sustained by E-Z Serve, or for which E-Z Serve is
legally liable (including, without limitation,
attorneys, paralegals, consultants and other experts
fees and costs) caused by the negligent or intentional
acts or omissions of ECA, its employees, subcontractors
or agents.
(b) E-Z Serve shall defend and indemnify ECA for
any and all losses, claims, costs, settlements, damages,
penalties, assessments, impositions or liabilities
sustained by ECA, or for which ECA is legally liable
(including, without limitation, attorneys, paralegals,
consultants and other experts, fees and costs) caused by
the negligent or intentional acts or omissions of E-Z
Serve, its employees, subcontracts or agents.
(c) E-Z Serve covenants and agrees that the site
assessment and remediation activities performed by ECA
shall not in any way be construed to make ECA
responsible in any way for any type of hazardous or
toxic waste material, chemical, compounds, or substance,
whether latent or patent, that may be pre-existing at
the site.
14. Termination by ECA
(a) ECA may terminate this Agreement for good
cause in the event that:
(i) E-Z Serve fails to perform or
breaches any material term of this Agreement and such
failure to perform or breach results in a material and
identifiable loss, or the reasonable likelihood of a
material potential loss expense or risk to ECA,
including, without limitation, the representations,
warranties and covenants made by E-Z Serve, or
(ii) As to an individual site, the
discovery of materials or substances which may render
the site ineligible for reimbursement, or place
reimbursement in reasonable doubt; or
(iii) ECA has reasonable grounds to
believe that site assessment or remediation activities
at a site will not qualify for reimbursement under the
Program.
The foregoing shall be collectively referred to herein
as "Good Cause".
(b) ECA shall provide E-Z Serve with thirty (30)
days prior notice of its intent to terminate the
Agreement for Good Cause. During said thirty day
period, ECA and E-Z Serve shall negotiate in good faith
to attempt to eliminate the condition(s) resulting in
termination. In the event the parties fail to resolve
the condition(s) leading to termination, then ECA's
termination of this Agreement shall become effective on
the thirtieth day following the notice of termination.
Notwithstanding the foregoing, ECA shall have the right
to continue to perform and to complete the site
assessment or remediation task on which ECA is engaged
at the time of termination unless E-Z Serve provides
reasonable assurance ECA will be paid within sixty (60)
days for work performed to date.
(c) In the event of a termination under the
provisions of this Section 14 which results in the
payment by E-Z Serve to ECA of reimbursable costs or
expenses, then ECA shall execute any and all documents
required by E-Z Serve or the Program to transfer
reimbursement Program eligibility to E-Z Serve. ECA
shall also provide E-Z Serve with all documents,
invoices, receipts, logs, billing information and other
materials required by E-Z Serve or the Program to
prepare a reimbursement application.
(d) Notwithstanding the foregoing, ECA and E-Z
Serve acknowledge that this Agreement shall be
applicable to all sites eligible for a State Program.
Therefore, any termination by ECA as set forth above
shall only apply to the site or sites for which the
termination conditions apply. Otherwise, this Agreement
shall remain in full force and effect with respect to
all other sites.
(e) The rights and remedies provided to ECA in
this Agreement shall be exclusive and are given to the
exclusion of any additional rights and/or remedies
provided by law.
15. Termination by E-Z Serve
(a) E-Z Serve may terminate this Agreement at
any time as it applies to all sites at its sole election
upon the provision of written notice to ECA. If E-Z
Serve terminates the Agreement pursuant to Section 15(a)
for its own convenience, rather than upon a default by
ECA, E-Z Serve shall either:
(i) pay ECA for site assessment and
remediation work performed under this
Agreement through the date of
termination within sixty (60) days of
invoicing by ECA; or
(ii) allow ECA to complete the specific
program tasks which ECA had initiated
through the date of termination, and
thereafter allow ECA to submit such
completed program tasks to the
Program for reimbursement.
(b) E-Z Serve may terminate this Agreement as to
an individual site in the event of a default by ECA in
compliance with the terms hereof.
(c) In the event of such termination as set
forth above, ECA shall, unless otherwise specified by E-Z Serve,
cease performance of services at all sites or
on the site(s) for which notice of termination is given.
In the event that termination occurs during the
performance of site assessment and remediation tasks for
which ECA will submit for reimbursement to the
respective state or other Program, and E-Z Serve is not
otherwise obligated to pay ECA for the partially
completed work, then ECA shall compile its reimbursable
costs associated with such work, and submit the costs to
E-Z Serve. E-Z Serve shall execute all documents
required by the Program for ECA to obtain reimbursement,
and E-Z Serve shall then be obligated to submit said
costs for reimbursement at such time as E-Z Serve or its
agent submits a reimbursement application for the
completed program task. Any sums reimbursed to E-Z
Serve or its agent for work performed by ECA shall be
paid to ECA within ten (10) days of receipt by E-Z
Serve. However, in no event shall E-Z Serve be
obligated to reimburse ECA for more than the amounts
actually received by E-Z Serve from the Program for
services performed by ECA.
(d) In the event of termination by E-Z Serve
pursuant to the terms of this Section 15, ECA shall take
all reasonable actions and execute any required
documents to transfer reimbursement eligibility back to
E-Z Serve.
(e) The rights and remedies provided to E-Z Serve
in this Agreement shall be exclusive and given to the
exclusion of any additional rights and/or remedies
provided by law.
(f) If E-Z Serve terminates this Agreement as set
forth in Section 15(a) during the first two years of the
original term of the Agreement, then E-Z Serve shall pay
ECA a termination fee of two-hundred fifty thousand
dollars ($250,000.00) within forty-five (45) days after
providing notice of termination to ECA. In the event E-Z Serve
terminates the Agreement because of a sale of
all or a substantial majority of its assets to a third
party, notwithstanding anything herein to the contrary,
no termination fee shall be paid to ECA if the purchaser
or new owner of the assets agrees to an assignment of
this Agreement so as to allow ECA to continue to provide
site assessment and remediation services hereunder. No
termination of the Agreement by E-Z Serve shall occur,
and no termination fee shall be payable to ECA, in the
event:
(i) Twenty-five (25) or fewer sites are
sold, transferred or otherwise
deleted from the site list set forth
in Exhibit A by E-Z Serve, or
(ii) For any number of sites deleted from
Exhibit A upon the sale or transfer
of these sites by E-Z Serve to a
third party which accepts an
assignment of this Agreement so as to
allow ECA to continue to provide site
assessment and remediation services.
(iii) Individual sites closed by E-Z Serve
in the ordinary course of business,
which sites also shall not be
included or used for calculating the
twenty-five (25) site threshold for
purposes of termination fee payments.
The total termination fee set forth above shall be
payable to ECA in the event E-Z Serve deletes greater
than fifty percent (50%) of the total number of sites on
Exhibit A originally assigned to this Agreement. In
addition, this Agreement may also be terminated at
either party's election in the event greater than fifty
percent (50%) of the total number of sites originally
assigned to this Agreement are deleted by E-Z Serve. In
the event that greater than twenty-five 25 sites are
deleted by E-Z Serve from Exhibit A, and the Agreement
otherwise remains in effect, the termination fee payable
to ECA shall be prorated beginning with the twenty-sixth (26th)
site in the amount which is equal to the
percentage which the number of terminated sites (greater
than 25) bears to the total number of sites originally
identified on Exhibit A, multiplied by $250,000.00. In
the event E-Z Serve assigns additional sites to Exhibit
A after the execution of this Agreement, these
additional sites shall be credited against sites deleted
from Exhibit A for purposes of determining whether any
termination fee is payable to ECA as a result of
deleting greater than twenty-five (25) total sites from
the Agreement. (For example, if E-Z Serve deletes
thirty (30) sites from the Agreement during the first
two (2) years, ECA is entitled to a termination fee for
five (5) sites. If E-Z Serve later adds ten (10) new
sites to Exhibit A, the new reference point for
applicability of the termination fee would be twenty
(20) sites rather than the original twenty-five (25)
sites. Thereafter, if E-Z Serve were to delete ten (10)
stores from Exhibit A, the new reference point would be
thirty (30) sites. However, E-Z Serve would not owe ECA
any additional termination fee because E-Z Serve has
already paid a termination fee for five sites and is
therefore entitled to credit for the total number of
sites for which the termination fee was paid).
(g) Notwithstanding anything herein to the
contrary, E-Z Serve may, at its option, cancel and
terminate this Agreement, in the event E-Z Serve
Corporation and Restructure, Inc. fail to execute a
final agreement regarding the sale and purchase of the
outstanding shares of E-Z Serve Petroleum Marketing
Company prior to April 25, 1997. In the event of a
cancellation pursuant to this clause, E-Z Serve shall
promptly refund to ECA all funds paid by ECA pursuant to
paragraph 3, hereof, and this Agreement shall be null
and void.
16. Site Safety
(a) It shall be the responsibility of ECA to
provide and maintain a safe work site and environment
for the protection of persons and property and at all
times to keep the location of the work site free from
unnecessary waste and debris. ECA shall also comply
with all applicable federal, state and local laws, rules
or regulations pertaining thereto, including, but not
limited to, complying with any safety, health, and/or
notification provisions required under any federal,
state or local law, regulation or rule applicable to any
hazardous material, including, without limitation, any
notification to workers, employees or other persons at
the work site, including the provision of all applicable
Material Safety Data Sheets.
(b) ECA shall notify E-Z Serve immediately, by
telephone with prompt written confirmation, of injuries
and/or fatalities that occur to its employees or
subcontractors in connection with the performance of
services under this Agreement and shall promptly provide
E-Z Serve with reports of these injuries and/or
fatalities as E-Z Serve shall deem necessary, including
but not limited to, copies of all reports and other
documents filed or provided to the agencies having
jurisdiction in connection with such injuries and/or
fatalities.
(c) At the completion of site assessment and
remediation services, ECA shall remove all site
assessment and remediation equipment (including
groundwater monitoring wells) and cleanup and remove all
waste and debris from the work site and restore the
location to a clean and orderly condition. In no event
shall ECA be responsible for removing any debris which
was pre-existing at the site.
(d) Nothing contained in this section shall be
interpreted as enlarging E-Z Serve's legal duty to ECA
or to ECA's agents, employees, subcontractors or third
parties, or to require that E-Z Serve provide any safety
rules or regulations, or otherwise alter the status of
ECA as an independent contractor under this Agreement.
17. Insurance
Prior to commencing any site assessment or
remediation services, ECA, its agents and subcontractors
shall obtain all necessary professional certifications,
licenses, permits and appropriate insurance customary
and usual for that entities profession, industry or
expertise at their sole expense, including a certificate
of insurance showing coverage as appropriate in the
forms and types set forth below:
(a) Worker's Compensation Insurance: at
the statutory limits;
(b) Comprehensive General Liability
Insurance: property damage and
personal injury coverage (minimum
limit of $1,000,000 per occurrence);
(c) Pollution Liability Insurance:
including environmental impairment
coverage (minimum limit of $1,000,000
per occurrence);
(d) Automotive Liability Insurance:
Property damage coverage and personal
injury coverage (combined single
limit minimum of $1,000,000); and,
(e) any other insurance required by
applicable federal, state, or local
laws and/or regulations.
All policies of insurance, except for workers
compensation, shall be endorsed so as to waive any right
of subrogation against E-Z Serve, its directors,
officers, employees and agents. E-Z Serve shall be
named as an additional insured on all such policies of
insurance, and certificates shall be provided to E-Z
Serve at least five (5) days prior to the commencement
of services on any site. ECA shall provide
documentation on an annual basis, or as more frequently
required by E-Z Serve, which demonstrates that all
provisions of this Section 17 are being complied with by
ECA. In the event ECA shall fail to obtain insurance or
to otherwise comply with the requirements of this
provision, then E-Z Serve may elect, but shall not be
required, to obtain such insurance and the costs thereof
shall be payable to E-Z Serve by ECA within ten (10)
days of invoice. The failure by ECA to comply with the
provisions of this paragraph shall constitute a material
default under terms of this Agreement.
18. Compliance with Laws
In performing services under this Agreement, ECA
shall comply with all applicable laws, ordinances,
rules, regulations and orders of any local, state or
federal authority, or of any other public authority.
ECA shall obtain and pay for all required permits,
approvals, licenses and inspections necessary for the
performance of the services.
19. Liens
(a) ECA, its agents, representatives, sub-contractors and
employees, shall have no power or
authority to subject the interest of E-Z Serve in any
site to mechanic's or materialman's liens of any kind
except for non-reimbursable additional work performed by
ECA under Section 5(b) for which ECA has not been paid
by E-Z Serve (60) days. The existence of any such lien,
which lien is not discharged by ECA or bonded off within
fifteen (15) days of its recording, shall be a material
breach of this Agreement. All contracts for work on a
site shall contain a provision requiring each
subcontractor or materialman to execute a waiver of lien
upon its completion of labor or services or furnishing
of materials. All persons or entities performing work,
services or labor or providing materials at the site
shall look solely to ECA and not to E-Z Serve for
compensation of any kind.
(b) ECA hereby specifically waives its right to
pursue and warrants that it will not impose nor take any
actions to impose or attach any statutory or common law
mechanic's or materialman's liens of any kind against
any interest of E-Z Serve in any of the sites referenced
in Exhibit A or other E-Z Serve properties for the costs
and expenses incurred in the performance of site
assessment and remediation services pursuant to this
Agreement except for non-reimbursable work approved by
E-Z Serve in writing under Section 5(b). ECA shall
indemnify and hold E-Z Serve harmless as regards any and
all costs incurred by E-Z Serve in discharging,
challenging or otherwise responding to any such liens,
including any attorney fees and costs of defense. ECA
shall also indemnify E-Z Serve as regards any legal or
defense costs incurred in monitoring or participating in
proceedings to resolve any such liens if ECA does not
defend or indemnify E-Z Serve in such proceedings.
(c) ECA acknowledges that prior to submitting a
reimbursement application to the Program, E-Z Serve may
be required to execute the appropriate owner's affidavit
and/or affidavit of non-financial interest. Prior to E-Z Serve
executing any such affidavit or ECA submitting
a reimbursement application to the Program, ECA shall
provide E-Z Serve with proof that all contractors and
subcontractors performing labor on the site and
suppliers of materials to the Site have been paid and
that these subcontractors or other entities have
executed lien releases. ECA shall submit to E-Z Serve
a copy of each reimbursement application along with all
lien releases at the time a complete reimbursement
application is submitted. In the event E-Z Serve shall
determine that additional costs or expenses should be
included in the application, then ECA shall revise the
reimbursement application accordingly, unless in ECA's
professional opinion such revision would significantly
jeopardize reimbursement eligibility of the site
assessment or remediation task for which reimbursement
is sought.
20. Miscellaneous
(a) Independent Contractor. ECA is an
independent contractor in the performance of its duties
and services under this Agreement. The detailed
methods, manner and means of conducting the services
under this Agreement shall be under the complete control
and direction of ECA.
(b) Survival of Representations. All covenants,
representations, warranties and remedy provisions
contained in this Agreement shall survive the
termination of this Agreement.
(c) Delays. Neither ECA nor E-Z Serve shall
hold the other responsible for damages or delays in the
performance of the obligations set forth herein which
are caused by acts of God or other events beyond the
control of the other party and which could not have been
reasonably foreseen or prevented. For this purpose,
such acts or events shall include, but shall not be
limited to, storms, floods, war, riot, strikes, or other
industrial disturbance. Should such acts or events
occur, both parties shall use their best efforts to
overcome all difficulties arising out of these delays
and to resume as soon as reasonably practical the normal
pursuit and schedule of the services addressed by this
Agreement.
(d) Entire Agreement. This Agreement, together
with the attachments, constitutes the entire and
complete Agreement between the parties, exclusive of any
other oral or prior written communication. This
Agreement cannot be changed, waived, released or
discharged orally or by the conduct of any party. Any
change, waiver, release or discharge must be in writing
signed by each party.
(e) Assignability. This Agreement may not be
assigned by ECA without the prior written approval of E-Z Serve.
However, the Agreement may be assigned by E-Z
Serve to any affiliated company, successor in interest
or to any purchaser or joint venturer in connection with
a sale of the subject matter of the services to be
provided by ECA at E-Z Serve's sites.
(f) Waiver and Delay. No waiver of any breach
or delay in enforcing the terms of this Agreement by
either party shall be construed as a waiver of any
subsequent breach.
(g) Governing Law. The validity, construction
and enforcement of, and the remedies under this
Agreement shall be governed in accordance with the laws
of the State of Texas.
(h) Progress of the Work. ECA and E-Z Serve
shall cooperate in the scheduling and performance of the
site assessment and remediation services in order to
avoid conflict or interference with the operation of the
business on the site. ECA shall notify E-Z Serve at
least five (5) days in advance of the commencement of
work on the site, and make every reasonable effort to
accommodate specific scheduling requests of E-Z Serve.
To the extent ECA reasonably believes that site
assessment or remediation activities will disrupt
business operation at E-Z Serve's sites, ECA shall
provide advanced notice to and obtain authorization from
E-Z Serve prior to disrupting business operations.
(i) Progress Reports. ECA shall provide monthly
progress reports to E-Z Serve, setting forth at least
the following:
i. status of services being performed;
ii. schedule of costs expended both per month
and total
on site;
iii. schedule for the following month.
During the term of this Agreement, ECA and E-Z
Serve shall meet as frequently as either party
determines is necessary to review and evaluate the
performance of ECA's site assessment and remediation
services. The progress reports set forth above as well
as any meetings between the parties shall be provided by
ECA at no cost or expense to E-Z Serve.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of this day of
, 1997.
Witnesses: Environmental Corporation
of America, Inc.
By:
Mr. Jack
Ceccarelli
Its:
President
Witnesses:
E-Z Serve Convenience
Stores, Inc.
By:
Mr. Dan Waters
Its: Vice
President
EXHIBIT A
SITE DESCRIPTION FORM
ALL PETROLEUM CONTAMINATED PROPERTIES CURRENTLY OWNED
OR
OPERATED BY E-Z SERVE ON THE EFFECTIVE DATE OF THIS
AGREEMENT
WHICH ARE ELIGIBLE FOR PARTICIPATION UNDER A STATE
PROGRAM.
RHN/378
ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT (the
"Agreement") is entered into by and between MAPCO
PETROLEUM Inc., a Delaware corporation ("BUYER"), and E-Z Serve
Convenience Stores, Inc., a Delaware corporation
(the "SELLER"), this _____ day of _______________, 1997.
R E C I T A L S:
WHEREAS, SELLER owns certain assets consisting of
twenty (20) retail convenience stores (the "Stores"),
including: seventeen (17) store properties in fee
simple; three (3) property leaseholds; and certain
personal property situated in or near the city of
Nashville, the state of Tennessee, that SELLER desires
to sell and BUYER desires to purchase; and
WHEREAS, SELLER has agreed to sell and BUYER has
agreed to purchase such assets pursuant to the terms and
conditions of this Agreement.
NOW THEREFORE, for and in consideration of the
premises and the mutual covenants herein contained, and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
I - SALE AND PURCHASE OF ASSETS
1.1 Sale and Purchase of Assets. Subject to all the
terms and conditions of this Agreement and in
reliance upon the representations and warranties
contained herein, on the Closing Date, SELLER
shall sell, transfer, convey and assign to BUYER
all of SELLER's right, title and interest in and
to the following assets (the "Assets"):
1.1.1 Fee Property. Certain real property in fee
simple, together with all appurtenances,
buildings, improvements and fixtures of
SELLER located thereon, as more fully
described on Exhibit 1.1.1 attached hereto
(the "Fee Property"). The form of Deed to
convey all of SELLER's right, title and
interest in and to the Fee Property from
SELLER to BUYER is substantially set forth
in Form 1.1.1.
1.1.2 Leased Property. Certain leasehold
interests in certain real property, as more
fully described on Exhibit 1.1.2 attached
hereto (the "Leased Property"), together
with all appurtenances, buildings,
improvements and fixtures of SELLER located
thereon. The form of the Assignment of
Lease to convey all of SELLER's right,
title and interest in and to the leasehold
interest in the Property, from SELLER to
BUYER, is substantially set forth in Form
1.1.2.
References to either Fee Property or Leased
Property, as the case may be, shall herein
at times be referred to individually or
collectively as the "Property" or
"Properties."
1.1.3 Personal Property. All tangible personal
property used in the operation of the
business of the Stores and located on the
Property (the "Personal Property"), other
than those Excluded Assets as defined in
Subsection 1.1.6 herein. The owned
Personal Property at each Property shall at
a minimum consist of the items listed on
Exhibit 1.1.3. The form of the Bill of
Sale to convey the Personal Property,
exclusive of the Excluded Assets, from
SELLER to BUYER and to be entered into by
the parties is substantially set forth in
Form 1.1.3.
1.1.4 Inventory. Any and all motor fuels
inventory (including regular, unleaded and
premium motor fuels, diesel fuel, gasohol
and/or kerosene) whether heating oil or gas
(including propane) within any underground
or aboveground storage tanks located on the
Properties on the Closing Date (the "Motor
Fuels Inventory"); products and other
items, except Motor Fuels Inventory,
reflected as inventory for resale to
customers and located on the Property (the
"Merchandise Inventory"), and all items
comprising the Supplies Inventory (as
hereinafter defined); other than Excluded
Assets as defined in Subsection 1.1.6
herein.
1.1.5 Contract Rights. On the Closing Date,
SELLER shall assign to BUYER and BUYER
shall accept assignment from SELLER of all
of the rights and obligations of SELLER
pursuant to the contracts and agreements
shown on Exhibit 1.1.5(a) and such other
contracts or agreements that SELLER may
enter into in the ordinary course of
business with consent of BUYER between the
date hereof and closing (the "Contracts")
as said agreements relate to the Assets to
be transferred pursuant to this Agreement.
Exhibit 1.1.5(b) is a chart showing other
potential contracts which are designated as
"(yc)." As to these potential contracts,
SELLER and BUYER will work together in good
faith to determine whether there is a
contract, whether it is to be terminated,
or assigned. If it is determined prior to
closing that SELLER is unable to terminate
other contractual obligations not shown on
Exhibit 1.1.5(a), BUYER agrees to assume
SELLER's obligations under such contract if
a commercially reasonable arrangement can
be made.
1.1.6 Excluded Assets. The Assets of SELLER to
be sold, exchanged or transferred shall not
include (i) cash on hand or in banks, (ii)
certain prepaid expenses, and (iii) certain
personal property more particularly
described in Exhibit 1.1.6 (collectively,
the "Excluded Assets").
II - PURCHASE PRICE AND ADJUSTMENTS
2.1 Asset Price. Subject to adjustments herein, the
purchase price for the Assets, exclusive of the
Motor Fuels Inventory, Merchandise Inventory,
Supplies Inventory and Change Fund, shall be in
the amount of Eleven Million Five Hundred
Thousand and no/100 Dollars ($11,500,000.00) (the
"Asset Price").
2.2 Price of Inventory. In addition to the Asset
Price, BUYER shall pay SELLER an amount
calculated in accordance with Article III for the
Motor Fuels Inventory, Merchandise Inventory,
Supplies Inventory and Change Fund.
2.3 Contribution Funds. In addition to the Asset
Price and price of inventory, SELLER shall pay
BUYER the amount of the Contribution Funds as
specified in Section 6.1.1.
2.4 Proration of Taxes and Utilities. As of the
Closing, BUYER and SELLER shall apportion between
them on a per diem basis all prepaid utility
charges; real estate, personal property, ad
valorem and other state and local taxes and
similar charges and costs and all annual or other
period fees, charges, dues or amounts paid and
owing for licenses and ongoing service contracts
which are assigned to BUYER pursuant to this
Agreement, if any, pertaining to the Purchased
Assets. If the amount of any such charges,
taxes, fees or costs is not ascertainable as of
the Closing Date, then such amount shall be
apportioned between BUYER and SELLER based upon
the amount therefore from the immediately
preceding year or period which is ascertainable
with further adjustments to be made between the
parties after more accurate information is made
available. The Purchase Price shall be increased
by an amount equal to any amounts previously paid
by SELLER and which is to be borne by BUYER
pursuant to the terms hereof and shall be
decreased by an amount paid or payable by BUYER
following the Closing Date and which is to be
borne by SELLER pursuant to the terms hereof.
2.5 Proration of Rentals. SELLER shall pay all
rentals on the Property which are due and owing
on or before the Closing Date and such rentals
shall be prorated between BUYER and SELLER. The
Purchase Price shall be increased or decreased,
as applicable, following the calculation of the
amounts due pursuant to this Section 2.4.
2.6 Condemnation Awards. In addition to the Asset
Price, price of inventory and Contribution Funds,
SELLER shall pay BUYER an amount equal to all
awards or payments received by SELLER from
governmental authorities with regard to the
taking of Property, Property rights or relocation
of Property or equipment and for which the
activities by the governmental authority obtained
thereby have not been completed ("Condemnation
Awards").
2.7 Rental Payments. The Asset Price shall be
increased by the present value of the rental
payments due from the time of closing to the
termination of the current term of the lease of
Store 7605 located at 1029 South Riverdale Drive
(the "Termination Property").
III - MERCHANDISE, MOTOR FUELS AND SUPPLIES INVENTORY
3.1 Purchase Price of Merchandise Inventory.
3.1.1 At the Closing, SELLER shall deliver to
BUYER a written statement containing (i) an
estimate of the inventory comprising the
Merchandise Inventory as of the close of
business on the day immediately preceding
the Closing Date, which statement shall
include the retail price of the items
contained therein and the total aggregate
amount payable as the retail sales price
for all items comprising the Merchandise
Inventory; and (ii) an estimate of the
inventory comprising the Supplies Inventory
(as hereinafter defined), which statement
shall include the invoice cost therefor to
SELLER and the total aggregate invoice cost
for all items comprising the Supplies
Inventory (the "Estimated Inventory
Statement").
3.1.2 Subject to the adjustment provided in
Section 10.3 hereof, at the Closing BUYER
shall pay to SELLER an amount equal to (i)
seventy percent (70%) of the total
aggregate retail sales price for all items
comprising the Merchandise Inventory and
set forth on the Estimated Inventory
Statement plus (ii) the total aggregate
invoice cost for all items comprising the
Supplies Inventory set forth on the
Estimated Inventory Statement (the
"Estimated Inventory Price") in
consideration for the purchase by BUYER of
the Merchandise Inventory and the Supplies
Inventory.
3.1.3 Beginning at 12:01 a.m. on the day
following the Closing Date and proceeding
thereafter until completed (the "Inventory
Period"), representatives of SELLER and
BUYER (i) shall take a physical inventory
of the merchandise comprising the
Merchandise Inventory and of the supplies
comprising the Supplies Inventory purchased
by BUYER on the Closing Date and present at
each Property on the date on which such
physical inventory is taken and (ii) shall
audit the cash register receipts for such
Property as of the date on which such
physical inventory is taken in order to
determine or calculate the amount of
Merchandise Inventory and/or Supplies
Inventory sold at such Property between the
Closing Date and the date of the physical
inventory. Such inventory and audit shall
be undertaken at each Property at such time
as may be mutually agreed upon by BUYER and
SELLER. Out of code, obsolete or damaged
merchandise shall not be included as part
of the Merchandise Inventory.
Adult/pornographic magazines and cigarette
rolling paper also shall not be included as
part of the Merchandise Inventory and shall
be part of the excluded Assets; provided,
however, that SELLER shall receive a credit
for any such items sold by BUYER at a
Property between the Closing Date and the
date on which the physical inventory of the
merchandise Inventory is completed at such
Property, which shall also be the date on
which such items are to be removed by
SELLER from the corresponding Property.
3.1.4 For the purposes of this Agreement,
"Supplies Inventory" shall mean those items
at each Property which are store supplies,
fountain supplies, and deli items,
including, but not limited to, food,
utensils, syrups, cups, coffee, hot
chocolate, napkins, ice bags, straws and
cleaning supplies ; provided, however, the
Supplies Inventory shall not include any
Excluded Assets as shown on Exhibit 1.1.6.
3.2 Physical Inventory - Motor Fuels Inventory. At
or about 7:00 a.m. on the Closing Date and prior
to the Closing, representatives of SELLER and
BUYER shall jointly take appropriate stick
readings of all Motor Fuels Inventory contained
in tanks on the Property, which reading shall be
adjusted to reflect any water actually contained
in such tanks, such adjustment to be mutually
agreed upon by SELLER and BUYER. BUYER shall
purchase such Motor Fuels Inventory based upon a
per gallon price at the low Nashville OPIS Rack
Price plus two cents (2>) on the day immediately
preceding the Closing Date, for the respective
grades of motor fuels, adjusted to include all
applicable taxes, freight and other charges (the
"Motor Fuels Inventory Price").
3.3 Change Fund. Notwithstanding anything in this
Agreement to the contrary, all cash, whether at
any of the Property or in transit to or from any
bank, at 7:01 a.m. Central Standard Time on the
Closing Date shall remain the property of SELLER;
provided that (i) BUYER shall be entitled to
retain the sum of Two Hundred Dollars ($200.00)
on each Property, and (ii) BUYER shall pay to
SELLER on the Closing Date an amount equal to the
aggregate of all sums so retained at each
Property in accordance with the foregoing (the
"Change Fund").
IV - LIABILITIES OF SELLER
4.1 Pre-Closing Date Liabilities. Subject to the
provisions of Article VI below, all liabilities,
debts and obligations of every character or
description, known or unknown, accruing or
arising from circumstances, transactions or
occurrences prior to the Closing Date with
respect to the Assets shall remain SELLER's sole
obligation and responsibility, except as
specifically set forth in Article VI herein.
BUYER shall not assume any such liability, debt
or obligations, and BUYER shall have no
responsibility for the same, except as otherwise
set forth herein.
4.2 Income Taxes. SELLER shall be responsible for
its state and federal income taxes, if any shall
be incurred, to be paid by SELLER arising out of
and payable in connection with the transaction
contemplated under this Agreement.
4.3 Sales Taxes. SELLER shall be responsible for
payment without collection from BUYER for all
sales, excise or use taxes on the transfer of the
Assets. At the Closing, BUYER shall deliver to
SELLER a copy of BUYER's retail sales certificate
for the retail sale of goods in the State of
Tennessee.
4.4 Transfer Taxes. SELLER shall pay all revenue or
excise stamps, transfer taxes, and sales taxes as
may by law be required to be paid in connection
with the transfer of each Property.
V - LEASED PROPERTY
5.1 Extension of Lease Term. SELLER agrees to use
its best efforts to negotiate an extension of
the Lease Agreement for SELLER's Location No.
7619 located at 901 Gallatin Road South, Madison,
Tennessee. The terms and conditions of any such
lease extension shall be subject to the approval
of BUYER.
VI - ENVIRONMENTAL
6.1 Hydrocarbon Presence and Remediation Costs.
6.1.1 The Properties do or may contain
hydrocarbon contamination. SELLER agrees
at time of Closing to pay BUYER the sum of
Sixty-Eight Thousand Dollars ($68,000)
("Contribution Funds") which may be applied
by BUYER to the deductibles remaining to be
paid toward coverage of certain of the
Properties by the Tennessee Underground
Storage Tank Fund ("Department"). Upon the
payment by SELLER of the Contribution
Funds, BUYER agrees to assume the liability
and responsibility for the remediation of
hydrocarbon contamination and other
Hazardous Substances existing on the
Properties to the extent required by the
State of Tennessee.
6.1.2 Reimbursement of Remedial Measures. BUYER
agrees that to the extent such remedial
measures undertaken and performed by BUYER
subsequent to Closing would entitle SELLER
or BUYER to compensation or financial
assistance from any applicable state or
federal underground storage tank trust
fund, then BUYER shall receive such
compensation or financial assistance and
SELLER will take all steps necessary to
cooperate with BUYER in pursuit of such
monies.
6.1.3 Fund Eligible Invoice Costs. SELLER will
provide BUYER with invoices (including
invoices submitted to SELLER and to
Tenneco) for all costs incurred in the
assessment and remediation of the
Properties to the extent such costs may be
applied by BUYER to the deductibles as
established by the Department.
6.2 Tank Testing. BUYER may test at BUYER's expense
all tanks and product lines/piping located on the
Properties. BUYER shall provide SELLER with a
copy of the test results. Any and all tanks
and/or piping shown to be leaking according to
the tests shall be repaired or replaced in a
workmanlike manner at SELLER's expense within
thirty (30) days of closing. At such time as
this work is done, BUYER at its sole cost shall
also have removed any contaminated soil in the
vicinity of the tanks or product lines being
repaired or replaced to the extent allowed by
applicable law.
6.3 Tank Registrations. BUYER agrees on the Closing
Date to execute and deliver underground storage
tank notifications for filing with the Tennessee
Department of Environmental Compliance ("TDEC")
or other responsible governmental agency to show
that SELLER is no longer the "owner and/or
operator" and that BUYER is the new "owner and/or
operator," as such terms are defined under
applicable federal, state and local laws, rules
and regulations promulgated thereunder.
6.4 BUYER's Environmental Indemnity. BUYER shall be
responsible for and shall indemnify and hold
harmless SELLER, its successors and assigns, from
and against any and all claims, losses, costs,
actions or causes of action, lawsuits,
proceedings, damages or liabilities
(collectively, the "Damages") arising from or
relating to any and all conditions, incidents,
circumstances or occurrences with respect to the
Properties (including the Termination Property),
including but not limited to spills, leaks and
discharges of motor fuel hydrocarbons, hazardous
substances as defined hereinbelow, or other
contaminants, either in conjunction with the use
of underground storage tanks or through unrelated
operations conducted upon the property, occurring
above and/or below the surface and resulting in
the contamination and/or the deposit of hazardous
waste (collectively, the "Environmental
Conditions"); provided, however, in no event will
BUYER be responsible for or indemnify SELLER for
any fines, penalties, or assessments by
governmental authorities against SELLER relating
to the conduct of SELLER prior to Closing.
6.5 Hazardous Substances. As used herein the term
"Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes or
materials, any pollutants or contaminants, or any
other similar substances, or materials located
beneath the surface of the Properties and which
are included under, defined by or regulated by
any local, state or Federal laws, rules or
regulations pertaining to environmental
regulation, contamination or clean-up, including,
without limitation, the Comprehensive
Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Section
1801, et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 7401,
et seq.; and the publications, rules and
regulations adopted and/or promulgated pursuant
to said laws.
6.6 Forwarding of Documents. SELLER agrees that if
it receives correspondence for other documents
from the TDEC, the Department, an environmental
consultant or any other entity relating to the
Stores ("Documents"), it will immediately forward
said Documents to BUYER.
VII - TITLE AND SURVEY
AND FINANCIAL STATEMENTS OF BUYER
7.1 Title and Survey. Subject to any conditions
revealed by a subsequent property survey, BUYER
is not aware of any material objections based
upon a due diligence review conducted by BUYER
prior to execution of the Agreement. SELLER
shall provide to BUYER, within fourteen (14) days
of the date of this Agreement, a fee simple or
leasehold title commitment for the Properties.
The title commitment shall be a standard form
ALTA commitment evidencing good and marketable
fee simple or leasehold title in SELLER to the
Properties, free and clear of any liens,
encumbrances and title exceptions, except current
taxes and assessments not yet delinquent;
reservations, covenants, easements, restrictions
and exceptions of record; and zoning ordinances
or statutes and building, use and occupancy
restrictions of public record ("Permitted
Exception(s)"). SELLER shall bear the cost of
obtaining such title commitments. BUYER shall
bear the cost of obtaining title insurance.
SELLER shall supply BUYER with any previously
prepared surveys of the last of the Properties.
BUYER shall have seven (7) days from the date of
receipt of all the commitments and surveys to
review the same and to notify SELLER, in writing,
of any material objections. "Material
objections" for purposes of this Section 7.1
shall be premised upon a title or survey
disclosure that indicates a condition which is
not a Permitted Exception and which prohibits or
substantially adversely affects the use to which
the Property is being used. SELLER and BUYER
agree to use reasonable efforts to resolve all
material objections prior to the Closing Date.
To the extent any such material objections by
BUYER remain unresolved on the Closing Date, the
parties will agree on and prepare on the Closing
Date a list of the remaining material objections
and will agree on a manner and means for handling
resolution of such issues after the Closing Date.
SELLER shall deliver to the title company and
owner's Indemnity agreement for the removal of
the standard exceptions from the title policy.
VIII - CLOSING DATE
8.1 Closing Date. The closing date of this Agreement
shall take place on the 1st day of June, 1997, or
such other date as the parties may mutually agree
upon (the "Closing Date"), but in no event later
than the 1st day of July, 1997, further provided
that the closing shall not occur prior to
satisfaction of the conditions of Sections 12.1
and 12.2. The closing shall take place on the
Closing Date at a time and place as the parties
may mutually agree upon. The control transfer
time as to employees and risk of loss ("Transfer
Time") shall occur at 6:00 a.m. on the day
following the Closing Date.
IX - PROCEDURES PENDING CLOSING
9.1 Procedures Pending Closing. Between the date of
this Agreement and the Closing Date, SELLER will:
9.1.1 not sell or otherwise dispose of any
of the Assets which are the subject
of this Agreement in a manner
inconsistent with the provisions of
this Agreement.
9.1.2 not make or enter into any agreement
providing for any change in rates of
wages or salaries or employment
benefits or term or duration of
employment of any employee of SELLER
at the Property, other than in the
normal course of business.
9.1.3 carry on its business in the same
manner as heretofore conducted at the
Property and will not take any action
or enter into any contracts other
than in conformity with prior
practice in the ordinary and regular
course of business as heretofore
conducted.
9.1.4 use its best efforts to maintain and
preserve its business intact and to
maintain its relationships with
employees, suppliers and customers
and others having business
relationships with it; provided,
however, SELLER will use reasonable
efforts to terminate any agreements
or contractual relations if
specifically requested by BUYER.
9.1.5 keep BUYER currently advised of all
significant changes of circumstances
affecting the Property.
9.1.6 maintain the Assets and make
necessary repairs and replacements
in accordance with SELLER's customary
maintenance practices.
9.1.7 maintain all inventories at customary
levels consistent with customer
demand and SELLER's customary
practices.
9.1.8 terminate SELLER's agreement(s), if
any, with any and all entities,
including Citgo, to supply gasoline
to the Stores effective the date
before the Closing Date.
9.2 Condemnations.
9.2.1 Substantial or Whole Taking. In the event
that all or substantially all of any
Property shall be taken or proposed to be
taken by eminent domain or condemnation
prior to the Closing Date, except as to
Properties for which settlement has been
received by SELLER, BUYER shall have the
right to eliminate such Property from the
Assets and BUYER and SELLER shall negotiate
in good faith an adjustment to the Purchase
Price on or before the Closing Date to
reflect the exclusion of such Property from
the Assets.
9.2.2 Partial Taking. If such condemnation shall
be less than substantially all of any
Property or if BUYER does not exclude such
Property from the Assets as set forth
above, SELLER and BUYER shall negotiate in
good faith a reduction of the Purchase
Price allocated to such Property prior to
the Closing Date. SELLER shall retain all
right, title and interest in and to any
such condemnation and SELLER shall be
entitled to receive any award payable in
connection with the taking or condemnation.
If BUYER AND SELLER cannot reach agreement
as to the apportionment of any
condemnation-related award, any such
dispute shall be resolved by arbitration in
accordance with section 14.15. BUYER shall
reasonably cooperate with SELLER in
connection with such condemnation.
9.3 Risk of Loss. SELLER shall bear the risk of loss
or damage to each Property and the Assets located
thereon until the Transfer Time.
X - PROCEDURES AT CLOSING
10.1 Closing Deliveries by SELLER. On the Closing
Date, SELLER shall deliver to BUYER the
following:
10.1.1 A Deed as to each Property in
substantially the form set forth as Form
1.1.1; an Assignment of Lease as to each
Property in substantially the form set
forth as Form 1.1.2; a Bill of Sale as
to each Property in substantially the
form set forth as Form 1.1.3; and other
appropriate instruments of transfer and
physical possession as shall in the
reasonable opinion of BUYER, be
effective to vest in BUYER good and
marketable title to the Assets subject
to the Permitted Exception(s);
10.1.2 Reimbursement for taxes as provided in
Section 2.3;
10.1.3 Required consents of Lessors to the
Assignment of Lease, if any, and
consents of required parties to the
assumption and assignment of contracts,
if any;
10.1.4 Such other instruments of transfer or
assignment, or otherwise, which BUYER
may reasonably request;
10.1.5 A cashier's check or wire transfer to a
designated depository in an amount equal
to the Contribution Fund and
Condemnation Awards;
10.1.6 Underground Storage Tank Notifications
as provided in Section 6.2;
10.1.7 Secretary's Certificate for Board of
Directors' Resolutions authorizing this
Agreement and the transaction
contemplated thereunder; and
10.1.8 The Estimated Inventory Statement.
10.1.9 Releases of all UCC filings and deeds of
trust related to the Assets.
10.2 Delivery and Payment by BUYER. On the Closing
Date, BUYER will deliver to SELLER the following:
10.2.1 Cash, cashier's check, or wire transfer
to a designated depository in an amount
equal to the Asset Price, as adjusted
for tax reimbursements as provided in
Section 2.3, proration of rentals as
provided in Section 2.4 and Condemnation
Awards as provided in Section 2.6;
10.2.2 Cash, cashier's check, or wire transfer
to a designated depository in an amount
equal to the sum of the Motor Fuels
Inventory Price and Estimated Inventory
Price;
10.2.3 Duly executed original resale
certificate for the state in which the
Merchandise Inventory shall be purchased
for resale;
10.2.4 Secretary's Certificate for Board of
Directors' Resolutions authorizing this
Agreement and the transactions
contemplated thereunder;
10.2.5 Such other instruments as SELLER may
reasonably request.
10.3 Post-Closing Adjustment.
10.3.1 Promptly following the expiration of the
Inventory Period, but in any event no
later than five (5) business days
thereafter, BUYER shall prepare and
deliver to SELLER a statement (the
"Merchandise Adjustment Statement")
setting forth (i) the amount of the
Merchandise Inventory at each Property
as of the date on which the physical
inventory thereof was completed; (ii)
the cash receipts with respect to the
sale of Merchandise Inventory at each
Property during the period beginning on
the Closing date and ending, with
respect to each Property was completed;
(iii) the total amount payable by BUYER,
as of the Closing Date, with respect to
the actual Merchandise Inventory
purchased by BUYER on the Closing Date,
which amount shall be equal to seventy
percent (70%) of the retail sales price
therefor (the "Merchandise Inventory
Price"); (iv) the difference between the
amount paid as the Estimated Inventory
Price and the amount payable as the
Merchandise Inventory Price (the
"Merchandise Inventory Adjustment").
10.3.2 SELLER shall have ten (10) business days
following the delivery of the
Merchandise Adjustment Statement (the
"First Review Period") in order to
notify BUYER in writing whether or not
it disagrees with the Merchandise
Adjustment Statement and the calculation
of the Merchandise Inventory Adjustment.
During the First Review Period, BUYER
shall make available to SELLER and its
representatives, during normal business
hours, the books and records of BUYER
necessary to evaluate, review and audit
the determination of the Merchandise
Inventory Adjustment and the basis of
the calculation thereof. If SELLER
delivers written notice of its
disagreement with the Merchandise
Adjustment Statement or the calculation
of the Merchandise Inventory Adjustment,
BUYER and SELLER shall negotiate in good
faith promptly thereafter in order to
resolve such dispute. If the parties
fail to resolve their dispute with
respect to the amount payable as the
Merchandise Inventory Adjustment within
forty-five (45) days after the Closing
Date, such dispute shall be submitted to
arbitration in accordance with the terms
of Section 14.15 hereof.
10.3.3 The term "Final Adjustment Statement"
shall mean (i) the Merchandise
Adjustment Statement if the parties
agree thereon or if SELLER fails to
notify BUYER of any disagreement
therewith on or before the expiration of
the First Review Period; (i) the
Merchandise Adjustment Statement as
adjusted by the agreement of BUYER and
SELLER; or (iii) the Merchandise
Adjustment Statement as adjusted by the
panel of arbitrators if the parties fail
to agree on the Merchandise Adjustment
Statement or any adjustments thereto,
applicable.
10.3.4 If the Merchandise Inventory Adjustment,
as determined from the Final Adjustment
Statement, requires an increase from the
amount paid as the Estimated Inventory
Price, the amount of such increase shall
be paid by BUYER to SELLER; and if the
Merchandise Inventory Adjustment, as
determined from the Final Adjustment
Statement, requires a reduction in the
amount paid as the Estimated Inventory
Price, the amount of such reduction
shall be paid by SELLER to BUYER. Any
amount payable to BUYER or SELLER
hereunder, as the case may be, shall be
due and payable within five (5) business
days of the determination of the Final
Adjustment Statement and shall be paid
by wire transfer of immediately
available funds to the account
designated in writing by the payee. If
either BUYER or SELLER fails to pay when
due the amount of the Merchandise
Inventory Adjustment, interest on such
amount will accrue from the date payment
was due and payable until paid at the
per annum rate of the "prime rate" as
published in the Money Rates column of
the Eastern Edition of The Wall Street
Journal (or the average of such rates if
more than one rate is indicated plus two
percent (2%) and shall be payable on
demand.
XI - REPRESENTATIONS AND WARRANTIES
11.1 Representations and Warranties of SELLER. SELLER
represents and warrants to, and agrees with,
BUYER as follows:
11.1.1 Corporate Status. SELLER is a
corporation, duly organized, validly
existing and in good standing under the
laws of the State of Delaware and is
authorized to do business in the state
in which the Assets are located. SELLER
has full power and authority to carry on
its business as presently conducted and
to own and operate its assets,
properties and business.
11.1.2 Authorizations. SELLER has all
requisite power and authority to execute
and perform this Agreement and to
consummate the transactions contemplated
by this Agreement. On the Closing Date,
the execution and delivery of this
Agreement and all the transactions
provided for in this Agreement shall
have been duly authorized by proper
corporate proceedings and will be in all
respects legally binding upon SELLER,
except as limited by laws affecting
creditors' rights or equitable
principles generally.
11.1.3 Restrictions. Except as set forth in
Schedule 11.1.3 hereto, SELLER is not
subject to any restriction contained in
any charter, by-law, mortgage, lien,
lease, agreement, instrument, order,
judgment or decree which would prevent
the consummation of the transactions
contemplated by this Agreement, other
than consents expressly required by real
property leases or contracts to be
transferred hereunder, if any.
11.1.4 Liabilities. Except with respect to
fees, taxes or assessments not yet due,
with respect to the Assets, SELLER has
no material liabilities, fixed or
contingent, nor any material contractual
commitments nor any short- or long-term
debt which are not described or listed
in this Agreement or the Exhibits
attached hereto, except for unsecured
liabilities incurred in the ordinary
course of operating the Stores since
December 31, 1996.
11.1.5 Financial Information. SELLER has
heretofore delivered to BUYER copies of
certain financial information attached
hereto as Exhibit 11.1.5 ("Financial
Information"), and this Financial
Information is materially accurate. In
addition, BUYER has reviewed other
financial information of SELLER. Since
December 31, 1996, there has not been:
(1) Any material change in the
condition (financial or other),
of the properties, assets,
liabilities and Assets except
normal and usual changes in the
ordinary course of business which
are in the aggregate materially
adverse to the Assets.
(2) Any damage, destruction or losses
(whether or not covered by
insurance) in an aggregate amount
exceeding $25,000.00 affecting the
Assets.
(3) Except in the ordinary course of
business, any sale, lease,
abandonment or other disposition
by SELLER of any interest in any
property, machinery, equipment or
other operating property, as
respects the Assets.
(4) Any other occurrence, event, or
condition which materially and
adversely affects or, to the best
of SELLER's knowledge, is likely
to materially and adversely affect
the Assets.
11.1.6 Claims and Litigation. There are no
actions, suits or proceedings pending
before any court or administrative
agency or, to the best of SELLER's
knowledge, threatened which will
adversely affect BUYER's right to own,
lease, sublease, use and/or enjoy the
Assets to be transferred pursuant to
this Agreement, including but not
limited to condemnation, eminent domain
or similar proceedings. With respect to
the Assets, except as set forth in
Schedule 11.1.6, (i) there are no legal
or administrative proceedings, claims
or, to the best knowledge of SELLER,
investigations now pending before any
court or administrative body against
SELLER, (ii) to SELLER's knowledge,
there are no material, threatened legal
or administrative proceedings, claims or
investigations against it or the Assets,
(iii) SELLER has not received notice of
any investigation pending, threatened
or contemplated by any federal, state or
local governmental or regulatory
authority, including those involving the
safety of products, the working
conditions of employees, their
employment practices or policies, or
compliance with environmental
regulations; and (iv) neither the
business operations related to the
ASSETS, nor any of the Assets is subject
to any material judgment, order, writ,
injunction, stipulation or decree of any
court or any governmental agency or any
arbitrator.
11.1.7 Taxes and Assessments. All taxes of any
kind, including ad valorem, property,
excise, income and similar taxes and
assessments which are or have become due
and payable have been properly paid;
SELLER has filed or caused to be filed
all tax returns required to be filed
under the laws of the United States,
the state of incorporation of SELLER and
the State of Tennessee; all taxes shown
by such returns to be due and payable
have been paid; and SELLER knows of no
proposed assessment, assessment or claim
by the United States government, or any
state or any other taxing authority for
additional taxes other than those paid
in accordance with such returns or which
has been disclosed to BUYER.
11.1.8 Merchandise and Supplies Inventory. The
Merchandise and Supplies Inventory
contains no material amounts that are
unsalable and unusable for the purposes
intended in the ordinary course of the
business at each Property as conducted
by SELLER prior to the Closing Date.
11.1.9 Personal Property. Exhibit 1.1.3
contains a list of Personal Property
that at a minimum will be conveyed to
BUYER. This Exhibit 1.1.3 is not
intended to be a complete listing of
the Personal Property located at each
Property and to be transferred to BUYER.
11.1.10 Title to Assets. SELLER is the sole and
exclusive legal and equitable owner of
all right, title and interest in and has
good and marketable title to all of the
Personal Property and Merchandise, Motor
Fuels and Supplies Inventory, free and
clear of any contract of sale,
encumbrance, security agreement lien or
charge of any kind or character, and no
person, corporation or firm has any
ownership interest in the same being
transferred pursuant to this Agreement
other than SELLER; provided, however,
SELLER does not warrant ownership of the
Excluded Assets or Potentially Excluded
Assets shown on Exhibit 1.1.6 or of the
items designated as "yc" on Exhibit
1.1.5(b), except as to those items shown
on Exhibit 1.1.3.
11.1.11 Properties. SELLER is in current
uninterrupted possession of all Leased
Properties and is not in default, nor
with the passage of time will SELLER be
in default, under any of the terms,
covenants or conditions of the lease
therefor and the lease is valid and
enforceable and has not been altered,
modified, or amended except as shown in
the lease documents provided to BUYER.
Except as set forth in Schedule 11.1.6,
no portion of any Property has been
condemned, requisitioned or otherwise
taken by any public authority, and no
notice of any such condemnation,
requisition or taking has been received.
To the best knowledge of SELLER, no such
condemnation, requisition or taking is
threatened or contemplated. SELLER has
no knowledge of any public improvements
which may result in special assessments
against or otherwise affect any
Property, as presently used for
convenience store operations, when
pertaining to the use of the
corresponding Property for the operator
of a convenience store business
conducted by SELLER prior to the
Closing. To the knowledge of SELLER, no
fact or condition exists which would
result in the termination or impairment
of access to any Property or
discontinuation of sewer, water,
electric, gas, telephone, waste disposal
or other utilities or services.
11.1.12 Employees. SELLER has not made any
representations to its employees with
respect to any undertaking or commitment
by BUYER to continue the employment of
such employees. SELLER has
substantially complied with all laws,
rules and regulations relating to the
employment of labor, including
provisions relating to wages, hours,
equal opportunity, occupational health
and safety, severance and the payment of
Social Security and other taxes.
11.1.13 Contracts. Exhibit 1.1.5 sets forth an
accurate and complete list of all
material instruments, commitments and
agreements related to the Assets to
which BUYER will be bound, or by which
any of the Assets will be subject
following Closing. Except as set forth
in Schedule 1.1.5, each contract to
which BUYER will become bound is in full
force and effect and is valid, binding
and enforceable in accordance with its
terms; no event has occurred which is
or, after the giving of notice or
passage of time, or both, would
constitute a default under or a breach
of any such contract by SELLER, or, to
the knowledge of SELLER, by any other
party; and SELLER has not received or
given notice of an intention to cancel
or terminate any such contract or to
exercise or not exercise options or
rights under any such contract unless
specifically requested in writing to do
so by BUYER.
11.1.14 Tank Registrations. Pursuant to
applicable federal, state and local
laws, rules and regulations promulgated
thereunder, SELLER has filed
notification forms with designated
governmental officials for all
"underground storage tanks" as that term
is defined pursuant to applicable
federal, state and local laws, rules and
regulations promulgated thereunder.
11.1.15 Tank Fund Eligibility. The Properties
are eligible for reimbursement or
financial assistance from the Tennessee
Underground Storage Tank Trust Fund.
11.1.16 Prior Discharges, Spills and Leaks.
SELLER represents and warrants to BUYER
that SELLER has provided to BUYER copies
of all written materials in SELLER's
possession, whether received by SELLER
from a third party or developed by or on
behalf of SELLER, and has disclosed to
BUYER all other notices received by
SELLER pertaining (i) to the ownership,
operation and maintenance of the
underground storage tanks used by SELLER
in connection with the operation of its
business at the Properties; or (ii)
SELLER's compliance or non-compliance,
as the case may be, with any applicable
Environmental Laws in connection with
the conduct and operation of its
business at the Properties or the use or
operation of the Assets in connection
therewith.
11.1.17 Equipment. As of the Closing Date, all
Personal Property, equipment and
fixtures of SELLER, including without
limitation underground storage tanks,
lines, pumps, dispensers and other gas
equipment to be transferred hereunder
(other than those tanks or lines for
which SELLER is obligated under Section
6.2.2 to repair or replace) shall be in
good working condition, to the extent
such equipment is utilized by SELLER in
its current operations, ordinary wear
and tear excepted. A description of the
underground storage tanks and related
equipment is shown on Exhibit 11.1.17.
11.1.18 Governmental Compliance. Except with
respect to compliance under
Environmental Laws which are
specifically and exclusively addressed
in Section 11.1.16 hereinabove, SELLER
is in substantial compliance with all
governmental laws, rules, ordinances and
regulations governing the operation by
SELLER of the Property.
11.1.19 Financial and Operational Information.
SELLER has heretofore delivered to BUYER
copies of certain financial and
operational information, which
represents fairly the financial position
of the Assets of the dates indicates
therein, and there has been no material
adverse change therein.
11.1.20 Employee Benefit Plans. At no time has
SELLER been required to contribute to
any "multi-employer pension plan" or
incurred any withdrawal liability with
the meaning of Section 4201 of ERISA.
11.1.21 Easements, etc. SELLER has all access
upon the Property, easements and rights
of ingress and egress and easements for
utilities and services necessary for the
conduct of its current operations.
Conveyance by SELLER to BUYER hereunder
will pass to BUYER good and marketable
title subject to the Permitted
Exception(s), together with all
necessary easements and rights of
ingress and egress associated therewith.
11.1.22 Gas Equipment. To SELLER's knowledge,
all underground storage tanks, lines,
pumps, dispensers and other gas
equipment to be transferred hereunder
are tight and in good working condition.
All underground storage tank systems are
registered and in compliance with all
applicable laws and regulations
including Stage Two requirements.
11.1.23 Condition of Assets. The Assets,
including the leasehold improvements,
equipment, fixtures and personal
property, comprise all of the assets
reasonably necessary for the conduct of
the business of SELLER as currently
conducted at the locations of the
Stores, and the Assets have been
maintained in accordance with generally
accepted industry practices for
operational use in a convenience store.
Adequate inventories will be on hand at
the Stores as of the Closing Date as are
necessary to conduct normal business
operations.
11.1.24 Licenses, Permits and Authorizations.
SELLER has all material approvals,
authorizations, consents, permits,
licenses and orders of all governmental
agencies, whether federal, state or
local, required by the nature of the
business conducted by SELLER to permit
the continued operation of each of the
Stores. SELLER shall cooperate with
BUYER in obtaining the transfer of such
licenses and permits as are legally
transferrable to BUYER as may be
necessary or appropriate.
11.1.25 Gasoline Supply Agreements. SELLER has
terminated all gasoline supply
agreements relating to the Stores
effective the day before the Closing
Date, and BUYER will have no obligations
or liabilities to any such gasoline
supplier(s).
11.2 Representations and Warranties of BUYER. BUYER
represents and warrants to, and agrees with,
SELLER as follows:
11.2.1 Corporate Status. BUYER is a
corporation, duly organized, validly
existing and in good standing under the
laws of the State of Delaware and is
authorized to conduct business in the
state in which the Assets are located.
BUYER has full power and authority to
carry on its business as presently
conducted and to own and operate its
assets, properties and business.
11.2.2 Authorizations. BUYER has all requisite
power and authority to execute and
perform this Agreement and to consummate
the transactions contemplated by this
Agreement. On the CLOSING DATE, the
execution and delivery of this Agreement
and all the transactions provided for in
this Agreement have been duly authorized
by proper corporate proceedings and will
be in all respects legally binding upon
BUYER, except as limited by laws
affecting creditors' rights or equitable
principles generally.
11.2.3 Restrictions. BUYER is not subject to
any restriction contained in any
charter, certificate of incorporation,
by-law, mortgage, lien, lease,
agreement, instrument, order, judgment
or decree which would prevent the
consummation of the transactions
contemplated by this Agreement.
11.2.4 Warranties Correct. The representations
and warranties of BUYER contained in
this Agreement or otherwise made in
writing in connection with the
transactions contemplated by this
Agreement shall be true and correct on
and as of the Closing Date with the same
effect as though such representations
and warranties had been made on and as
of such date.
11.3 Warranties Correct. The representations and
warranties of SELLER contained in this Agreement
shall be deemed to have been made again and as of
the Closing Date and shall be true and correct in
all material respects, and SELLER shall have
delivered to BUYER a certificate to such effect
signed by the President or any Vice President of
SELLER.
XII - CONDITIONS TO CLOSING
12.1 Conditions Precedent to BUYER's Obligations. If
the following conditions precedent are not either
satisfied by their terms or waived by BUYER in
writing prior to the Closing Date, then BUYER, at
its option, may terminate this Agreement without
further obligations to SELLER:
12.1.1 Documents. SELLER shall have furnished
BUYER with all documents, certificates
and other instruments required to be
furnished to BUYER by SELLER pursuant to
the terms of this Agreement.
12.1.2 No Actions or Proceedings. No action or
proceeding against SELLER relating to
the Assets being transferred hereunder
shall have been instituted or, to the
knowledge of SELLER, threatened, before
a court or other governmental body or
instituted or threatened by any public
authority.
12.1.3 Title Insurance. Subject to Section
7.1, SELLER shall have delivered to
BUYER a commitment for title insurance
evidencing an obligation of a nationally
recognized title company to insure
marketable fee simple title and
leasehold title in BUYER subject to the
Permitted Exception(s).
12.1.4 Section 1445 Certificate. At closing,
SELLER shall execute and deliver to
BUYER (a) a certificate substantially in
the form of Form 12.1.4 stating that
SELLER is not a "foreign person" as
defined in Section 1445 of the Internal
Revenue Code and the regulations
thereunder; (b) an IRS Form 1099 with
respect to this transaction; and (c)
such other documents or instruments as
may be required by the Internal Revenue
Code (or regulations promulgated
pursuant thereto) consistent with the
terms of this Agreement.
12.1.5 Representations, Warranties and
Covenants. Each and every
representation and warranty of SELLER
contained in this Agreement shall be
true in all material respects when made
and shall be true in all material
respects at the Closing Date as though
such representation and warranty had
been made on the Closing Date, and
SELLER shall have performed all
covenants and agreements on its part
required to be performed and shall not
be in default under any of the
provisions of this Agreement at the
Closing Date.
12.1.6 Releases of all UCC Filings. At
closing, SELLER shall provide BUYER with
releases of all UCC security interest
filings and deeds of trust, including
but not limited to complete releases by
Societe Generale of any interest in the
Assets to be transferred to BUYER.
12.2 Conditions Precedent to SELLER's Obligations. If
the following conditions precedent are not either
satisfied or waived by SELLER in writing prior to
the Closing Date, then SELLER, at its option, may
terminate this Agreement without further
obligation to BUYER:
12.2.1 Documents. BUYER shall have furnished
SELLER with all documents, certificates
and other instruments required to be
furnished to SELLER by BUYER pursuant to
the terms of this Agreement.
12.2.2 Representations, Warranties and
Covenants. Each and every
representation and warranty of BUYER
contained in this Agreement shall be
true and correct in all material
respects when made and shall be true and
correct in all material respects at the
Closing Date as though such
representation and warranty had been
made on the Closing Date, and BUYER
shall have performed all covenants and
agreements on its part required to be
performed and shall not be in default
under any of the provisions of this
Agreement at the Closing Date.
12.2.3 Consents. SELLER shall have obtained
those consents or approvals necessary
for the assignment of those Contracts
shown on Exhibit 1.1.4 requiring the
consent or approval of the contracting
party thereto.
XIII - SELLER'S EMPLOYEES AND BENEFITS
13.1 SELLER'S Employees. BUYER may offer to the
existing employees of SELLER at each Property or
involved with the convenience store business of
SELLER in its principal offices in Nashville,
Tennessee, the opportunity to become at-will
employees of BUYER as of the Closing Date. Such
offers shall be at base salaries or wage rates
comparable to those in affect for similarly
situated employees of BUYER. SELLER shall have
no obligation to assist BUYER in efforts to cause
any employees, as designated by BUYER, to become
employees of BUYER. BUYER shall not assume any
employee benefit or compensation plans, programs,
agreements or practices of SELLER or its
affiliates, or any obligations or liabilities
associated therewith.
13.2 WARN Provisions. BUYER agrees that at closing it
will hire a sufficient number of SELLER's
existing employees such that there will not be
deemed to have been a "mass layoff" by SELLER
with respect to the Properties under the Federal
Worker Adjustment and Retraining Notification Act
(Title 29 of the United States Code, Section
2101) (the "WARN Act").
13.3 No Third Party Beneficiaries. Nothing expressed
or implied in this Agreement is intended to, nor
shall it, confer upon or deny, any employee of
SELLER any rights or remedies including, but not
limited to, any rights of employment with SELLER
or BUYER for any specified period of time.
13.4 Family and Medical Leave. SELLER agrees that it
shall be solely responsible for providing any and
all notices, election forms, continued
employment, and related benefit plan
participation that may become due or be required
with respect to an employee of SELLER under the
federal Family and Medical Leave Act and any
similar state law with respect to any leave of
such an individual commencing while employed by
SELLER.
13.5 COBRA. SELLER agrees that it shall be solely
responsible for providing any and all notices,
election forms, and related continuation coverage
that may become due or be required with respect
to any employee of SELLER under 4980B of the
IRC on account of such employee's termination
from employment with SELLER or on account of any
other qualifying event (as defined in IRC
4980B) which occurs (or relates to continuation
coverage which may commence) on or before
employment, if any, of such individual by BUYER.
13.6 Employee Orientation. SELLER agrees to arrange a
meeting with all store managers to announce the
signing of this Agreement, at which time
representatives of BUYER will be introduced. In
addition, SELLER will permit store managers to
attend one one-half day orientation meeting and
one one-half day training session conducted by
BUYER.
XIV - FURTHER AGREEMENTS
14.1 SELLER Indemnity. SELLER shall indemnify and
hold harmless BUYER from and against any and all
Damages incurred or suffered by BUYER as a result
of (i) the incorrectness or breach of any of the
representations, warranties, covenants and
agreements of SELLER contained in this Agreement
or given on the Closing Date, (ii) the assertion
against BUYER of any liability of SELLER which is
not expressly assumed by BUYER or (iii) all
actions, suits, proceedings, demands, assessments
and judgments incident to the foregoing
Subparagraphs (i) and (ii) hereinabove. Within
twenty (20) days after receipt by BUYER of notice
of the assertion of any claim by a third party as
to which BUYER is indemnified under this Section,
or the discovery by BUYER of any circumstance
giving rise to a claim of indemnity hereunder,
BUYER shall, if a claim in respect thereof is to
be made against SELLER, notify SELLER of such
claim or action in writing, by registered or
certified mail, and tender to SELLER the right to
defend against such claim or action brought by a
third party in the name of BUYER but reserving to
BUYER the right to participate, at its own cost
and expense but under the direction of SELLER, in
such defense. SELLER shall not be obligated to
indemnify BUYER hereunder if BUYER fails to
notify SELLER as provided above. This Indemnity
shall survive CLOSING.
14.2 BUYER Indemnity as to Non-Environmental Matters.
Except for environmental matters, which are
addressed previously herein, BUYER shall
indemnify and hold harmless SELLER from and
against any and all Damages incurred or suffered
by SELLER as a result of (i) the incorrectness or
breach of any of the representations or
warranties, covenants or agreements of BUYER
contained in this Agreement or given on the
Closing Date, (ii) the operation and use of the
Assets after the Closing Date, and (iii) or the
breach of any contract or lease agreement which
was assumed by BUYER. Within twenty (20) days
after receipt by SELLER of notice of the
assertion of any claim by a third party as to
which SELLER is indemnified under this Section,
or the discovery by SELLER of any circumstance
giving rise to a claim of indemnity hereunder,
SELLER shall, if a claim in respect thereof is to
be made against BUYER, notify BUYER of such claim
or action in writing, by registered or certified
mail, and tender to BUYER the right to defend
against such claim or action brought by a third
party in the name of SELLER but reserving to
SELLER the right to participate, at its own cost
and expense but under the direction of BUYER, in
such defense. BUYER shall not be obligated to
indemnify SELLER hereunder if SELLER fails to
notify BUYER as provided above. This Indemnity
shall survive CLOSING.
14.3 Bulk Sales. BUYER hereby waives compliance by
SELLER with the provisions of the Bulk Sales Laws
of the state in which the Assets are situated.
SELLER hereby agrees to indemnify and hold BUYER
harmless from and against any and all
liabilities, obligations, losses and expenses,
including reasonable attorneys' fees, incurred by
reason of any claims or actions by any third
party or parties based upon said Bulk Sales Laws
relating to this Agreement, or to any of the
transactions provided for herein.
14.4 Notices. Any notice, request, instrument or
other document to be given hereunder shall be in
writing and delivered personally by overnight
delivery or sent by certified or registered mail,
return receipt requested, postage prepaid:
14.4.1 If to BUYER, addressed as follows:
MAPCO PETROLEUM Inc.
1101 Kermit Drive, Suite 800
Nashville, Tennessee 37217
ATTN: Vice President - Retail
with a copy to:
MAPCO PETROLEUM Inc.
1800 South Baltimore Avenue
Tulsa, Oklahoma 74119
ATTN: Legal Department
14.4.2 If to SELLER, addressed as follows:
E-Z Serve Convenience Stores, Inc.
2550 North Loop West
Houston, Texas 77092
ATTN: John Miller
With a copy to:
E-Z Serve Convenience Stores, Inc.
2550 North Loop West
Houston, Texas 77092
ATTN: Ed Lambert, Esq.
or to such other address as either of the parties
hereto may designate by notice given as above
provided. Any item sent as above provided will
be deemed given when received or refused by
addressee.
14.5 Brokerage. Each party hereto represents and
warrants that all negotiations relative to this
Agreement have been carried on by them directly
without the intervention of any other person or
entity. Each party shall indemnify the other
party and hold the other party harmless against
and in respect of any claim for brokerage or
other commissions or finder's fees relative to
this Agreement, or to the transactions
contemplated hereby, and also in respect of all
expenses of any character incurred by each party
in connection with this Agreement or such
transactions.
14.6 Confidentiality. The terms of this Agreement
shall be kept confidential. Any press release,
public communication or communication of any kind
to SELLER's employees, vendors, suppliers or any
third party relating to this transaction shall
require the prior written approval of SELLER and
BUYER. Provided, that nothing herein shall
preclude compliance by SELLER or BUYER with any
applicable statutory, regulatory or judicial
disclosure requirements, or with obligations
imposed by this Agreement.
14.7 Escrow/Closing Agent. If either party deems it
necessary, BUYER and SELLER agree to retain the
title insurance company which rendered the title
commitments pursuant to this Agreement as an
escrow/closing agent to ensure the receipt by
each party of the documents and monies to be
delivered to the other as required pursuant to
this Agreement and to enter into an escrow
agreement. The costs of said escrow/closing
agent shall be divided equally between SELLER and
BUYER.
14.8 Entire Agreement. This Agreement, including the
documents and exhibits referred herein,
constitutes the entire agreement and
understanding of SELLER and BUYER with respect to
the subject matter hereof and fully supersedes,
and accordingly SELLER hereby disclaims and
negates, any and all statements, projections,
understandings, agreements, covenants,
representations and warranties between SELLER and
BUYER, made by SELLER or any SELLER's officers,
employees or representatives to BUYER, or set
forth in any document or writing delivered or
made available to BUYER (as applicable) prior to
the execution and delivery of this Agreement.
This Agreement may be amended only by a written
instrument executed by SELLER and BUYER.
14.9 Severability. Wherever possible, each provision
of this Agreement shall be interpreted in such a
manner as to be effective and valid under
applicable law, but if any provision of this
Agreement shall be prohibited by or invalidated
under applicable law, such provision shall be
ineffective to the extent of such provision and
the remaining provisions of this Agreement shall
remain fully effective.
14.10 Governing Law. This Agreement shall be a
contract made under, and shall be governed by and
construed under, the laws of the State of
Tennessee (excluding any conflict of law rules
which may direct interpretation to the laws of
any other state).
14.11 Binding Effect. This Agreement shall be binding
upon, and inure to the benefit of, the parties
hereto and their respective successors and
assigns; provided, however, that no assignment by
any party hereto of any right hereunder shall be
made on or prior to the Closing Date, and no
assignment, by operation of law or otherwise,
shall relieve any party of its obligations
hereunder.
14.12 Survival of Representations and Warranties. The
representations, warranties and covenants
contained herein shall survive the closing and
shall be enforceable at law or in equity.
14.13 Counterparts. This Agreement may be executed in
any number of counterparts, each of which when
executed and delivered shall be deemed an
original and all of which together shall
constitute one and the same instrument.
14.14 Attorneys' Fees. In the event any legal
proceeding is commenced to enforce the
obligations of the parties hereto, or to
interpret the provisions contained herein, the
prevailing party shall be entitled to recover its
reasonable attorneys' fees, costs and expenses of
litigation from the non-prevailing party.
14.15 Arbitration.
14.15.1 Any and all disputes, controversies or
claims between or among the parties
hereto shall be referred to, and finally
settled by arbitration. Either party
may elect to commence the arbitration
but in any event such election will only
be effective if made by written notice
to the other party hereto. Subject to
the provisions hereinafter set forth,
the arbitration will be conducted and
determined in accordance with the rules
of the American Arbitration Association,
as modified as follows:
14.15.2 The arbitration will be conducted with
three (3) arbitrators. Each of BUYER
and SELLER shall appoint one (1)
arbitrator and the two (2) arbitrators
thus appointed shall appoint the third
arbitrator from a list provided by the
American Arbitration Association. If
the two (2) arbitrators fail to agree on
the third arbitrator within thirty (30)
days of their appointment, the
appointment shall be made, upon request
of a party, by the American Arbitration
Association.
14.15.3 The decision of the arbitrators shall be
final and binding and neither party
shall appeal the decision on any basis
to any court;
14.15.4 Upon failure, refusal or inability of
any arbitrator to act, his or her
successor shall be appointed in the same
manner as provided his or her original
appointment; and
14.15.5 The arbitrators shall render the
decision and award in writing with
counterpart copies to all parties. The
arbitrators shall have no right to
modify the terms of this Agreement. The
costs of the arbitration, including the
fees and expenses of counsel, expert and
witness fees, and costs of the
arbitrators shall be in the discretion
of the arbitrators, who shall have the
power to make any award which is just in
the circumstances.
14.15.6 The arbitration proceeding shall take
place in Houston, Texas. The
arbitrators shall apply the laws of the
State of Tennessee without reference to
the conflicts of laws thereof.
14.15.7 Any suit, action or proceeding
instituted by either party hereto,
including, but not limited to, any
proceeding to enforce an award of
damages by the arbitrators, may be
brought in the courts of the State of
Tennessee and except to the extent as
otherwise provided in this Section
14.16, said courts will have exclusive
jurisdiction with respect to all
actions, suits, motions, issues or other
matters whatsoever arising out of this
Agreement.
14.16 Limited License. SELLER hereby grants to BUYER,
during the one hundred twenty (120) day period
beginning on the Closing Date, the non-exclusive
right and license to use the name "E-Z Serve" and
all of SELLER's trademarks and other intellectual
property rights with respect thereto in
connection with the conduct of BUYER's business
at the Property, provided that the conduct of
such business is substantially similar to that
conducted by SELLER immediately prior to the
Closing Date. With regard to the property in
Clarksville, TN, Seller grants Buyer such non-exclusive
right and license to use the name "E-Z
Serve" until the end of the current term of the
lease. BUYER shall maintain the nature and the
quality of the name "E-Z Serve" and the
trademarks and other intellectual property
associated therewith and used by BUYER pursuant
to the terms hereof and shall not take any
actions with respect thereto which would
materially adversely affect SELLER's rights in
and to such name and such intellectual property
or the value thereof, including, but not limited
to, the goodwill associated with respect thereto.
14.17 Update Schedules. SELLER shall promptly disclose
to BUYER any information contained in its
representations and warranties or any of the
Schedules hereto which, because of an event
occurring after the date of this Agreement and
prior to the Closing Date, is incomplete or is no
longer correct as of all times after the date of
this Agreement until the Closing Date. In the
event SELLER makes any disclosure prior to the
Closing and BUYER elects to close, the disclosure
shall be deemed to amend and supplement the
representations and warranties of SELLER and the
applicable Schedule hereto, and in such event
BUYER shall not have the right to be indemnified
for any matter contained in such disclosure.
14.18 Conduct of Business During Inventory Period.
During the Inventory Period, BUYER shall conduct
the business at each Property in the ordinary
course as conducted by SELLER prior to the
Closing Date in order to permit BUYER's and
SELLER's representatives to obtain an accurate
physical inventory of the Merchandise Inventory
and Supply Inventory as contemplated under
Section 3.1.3 hereof, including, by way of
example and not of limitation, maintaining the
price of each item comprising the Merchandise
Inventory at the same price therefor as of the
Closing Date.
14.19 Non-Competition. SELLER agrees from and after
the Closing Date, for itself and any subsidiary
or affiliate, that it will not engage in,
finance, promote, encourage or assist in any
manner whatsoever, in any enterprise which shall
be engaged in the retail motor fuels business or
convenience store business, or both, or grant any
rights or licenses to any third party in and to
the name "E-Z Serve" and the trademarks
associated therewith for use in connection with
the conduct or operation of a retail convenience
store business for a period of five (5) years
from the Closing Date within a geographic area
comprised of a radius twenty-five (25) miles from
the County Courthouse located in downtown
Nashville, Tennessee.
14.20 Title to Delivery of Records and Files. Within
five (5) days after the Closing Date, SELLER
shall deliver to BUYER all files relating to the
Stores, including but not limited to the
environmental, legal, construction and real
estate Store files.
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed the day and year shown
below, effective as of the date of execution by SELLER.
"BUYER"
MAPCO PETROLEUM Inc.
ATTEST:
By: ______________________ By:
__________________________________
Kristen E. Cook James C.
Alligood
Assistant Secretary Vice-President
Dated:__________________________________
"SELLER"
E-Z Serve
Convenience Stores, Inc.
ATTEST:
By: ______________________ By:
__________________________________
Name:______________________
Name:__________________________________
Its: ___________ Secretary Its: ____________
President
Dated:__________________________________
STATE OF TENNESSEE )
) SS
COUNTY OF DAVIDSON )
Before me, the undersigned authority, on this day
personally appeared James C. Alligood, known to me to be
the person whose name is subscribed to the foregoing
instrument as Vice President of MAPCO PETROLEUM Inc.,
and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the
capacity therein stated, and as the act and deed of said
Corporation.
WITNESS my hand and official seal on this
day of ___________, 1997.
Notary Public in and
for
Davidson County,
State of Tennessee
My Commission Expires:
(Print Name)
STATE OF _________________ )
) SS
COUNTY OF _______________ )
Before me, the undersigned authority, on this day
personally appeared
, known to me to be the person whose name is
subscribed to the foregoing instrument as _____________
President of
, a corporation, and acknowledged
to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein
stated, and as the act and deed of said corporation.
WITNESS my hand and official seal on this
day of , 1997.
Notary Public in and
for
___________ County,
State of _______________
My Commission Expires:
(Print Name
SCHEDULE OF EXHIBITS AND FORMS
to
Asset Sale and Purchase Agreement
Exhibits
1.1.1 Fee Property
1.1.2 Leased Property
1.1.3 Personal Property
1.1.5(a) Contracts
1.1.5(b) Potential Contracts
1.1.6 Excluded Assets
11.1.5 Financial Information
11.1.17 Tanks and Related Equipment
Forms
1.1.1 Deed
1.1.2 Assignment of Lease
1.1.3 Bill of Sale
12.1.4 Section 1445 Certificate
Schedules
11.1.6 Exceptions to Assets
EXHIBIT 1.1.3
to
Asset Sale and Purchase Agreement
Minimum Personal Property
(except as to the Termination Property)
Canopy
Gasoline Pumps
Gasoline Console
Underground Storage Tanks and Related Equipment
Upright Coolers
Price Pole and Signage (I.D. Sign/Reader Board/Can)
Kerosene Tanks (at 11 Stores only)
Gondolas
Coffee Equipment
Fountain Equipment
EXHIBIT 1.1.5(a)
to
Asset Sale and Purchase Agreement
Contracts
(except as to the Termination Property)
1. Bulk CO2 Budget Plan Agreement between UNCO2 and
E-Z Serve Corp.
2. Master Service Agreement between E-Z Serve
Convenience Stores and Waste Management Inc.
dated March 17, 1997.
3. Nine (9) alarm services agreements between
National Guardian and E-Z Serve dated March 11,
1996
EXHIBIT 1.1.5(b)
to
Asset Sale and Purchase Agreement
Potential Contracts
(except as to the Termination Property)
(See attached chart.)
EXHIBIT 1.1.6
to
Asset Sale and Purchase Agreement
Excluded Assets
Personal Computers, including all software and discs
Electronic Cash Registers
Pay Telephones
Credit Card Processors
Money Order Machines and associated supplies and forms
Supplies, forms, etc. used by SELLER in its business
and embossed with SELLER's or Citgo's name, trade name
or logo
Training Manuals of SELLER
GTE Inventory Equipment and Cards
Phone Card Equipment and Inventory
Signage Facing bearing Citgo's name, trade name or
logo
Tire Inflation and Auto Vacuum Machines
Cappuccino Machines
Potentially Excluded Assets
(The following assets are excluded if not owned by
SELLER.)
Icee/Slurpie Machines
VISI-Cooler
Ice Merchandisers
Propane Equipment
EXHIBIT 11.1.5
to
Asset Sale and Purchase Agreement
Financial Information
(See the financial information attached hereto.)
EXHIBIT 11.1.17
to
Asset Sale and Purchase Agreement
Tanks and Related Equipment
Attached hereto as part of Exhibit 11.1.17 are two
charts describing the underground storage tanks and
related equipment and the status of environmental
upgrades at the Properties.
Form 1.1.1
to
Asset Sale and Purchase Agreement
WARRANTY DEED
Address New Owner:
Map-Parcel
Numbers:
Send Tax Bills To:
MAPCO PETROLEUM
Inc.
1101 Kermit
Drive,
Suite 800
Nashville,
Tennessee 37217
MAPCO PETROLEUM
Inc.
1101 Kermit
Drive,
Suite 800
Nashville,
Tennessee 37217
This instrument prepared by: Boult, Cummings, Conners & Berry
(JTT)
414 Union Street, Suite 1600, P.O. Box 198062, Nashville, TN
37219
KNOW ALL MEN BY THESE PRESENTS:
THAT, E-Z SERVE CONVENIENCE STORES, INC.
("Grantor"), for and in consideration of the sum of Ten
and no/100 Dollars ($10.00) in hand duly paid by MAPCO
PETROLEUM INC. ("Grantee"), the receipt of which is
hereby acknowledged, does hereby grant, bargain, sell
and convey unto said Grantee, its successors and assigns
forever, the following described real property situated
in the County of , State of
Tennessee, to wit:
See Exhibit
"A" attached
hereto and
made a part
hereof (the
"Property").
TO HAVE AND TO HOLD the aforesaid real
property, together with all appurtenances, buildings and
privilege thereto belonging or in any wise appertaining
unto said Grantee, its successors and assigns in fee
simple forever.
SUBJECT TO current taxes and assessments not
yet delinquent and taxes and assessments for subsequent
years and the following matters (the "Permitted
Encumbrances"):
1.
2.
GRANTOR DOES HEREBY Covenant with said
Grantee that it is lawfully seized in fee of the
aforesaid Property; that it has a good right to sell and
convey the same; and that Grantor does hereby bind
itself, its successors and assigns, to warrant and
forever defend the title of the Property unto the
Grantee against every person whomsoever lawfully
claiming or to claim the same or any part thereof,
subject to the Conditions.
IN WITNESS WHEREOF, Grantor, by and through
its duly authorized officers, has caused this instrument
to be executed the _____ day of _____________, 1997.
"Grantor"
E-Z SERVE CONVENIENCE STORES, INC.
By:
Name:
Title:
STATE OF TENNESSEE )
COUNTY OF ______________ )
Before me, ________________ of the state and county
aforesaid, personally appeared
, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and
who, upon oath, acknowledged self to be the
of E-Z SERVE CONVENIENCE STORES, INC.,
the within named bargainor, and that he as such,
executed the foregoing instrument for the purposes
therein contained by personally signing the name of E-Z
SERVE CONVENIENCE STORES, INC..
WITNESS my hand and official seal on this
___ day of , 1997.
_______________________________________________
NOTARY
PUBLIC
My
Commission Expires:
EXHIBIT A
to the
Warranty Deed
Property
FORM 1.1.2
to
Asset Sale and Purchase Agreement
SELLER'S Store No.
MAPCO
Store No.
Instrument prepared by:
ASSIGNMENT OF LEASE AND CONSENT
THIS ASSIGNMENT OF LEASE AND CONSENT
("Assignment") by and among MAPCO PETROLEUM Inc., a
Delaware corporation (Assignee"), with an address of
1101 Kermit Drive, Suite #800, Nashville, Tennessee
37217, and E-Z Serve Convenience Stores, Inc., a
Delaware corporation ("Assignor"), with an address of
____________________, and ___________________, a
_________________ corporation ("Lessor"), with an
address of _________________________.
R E C I T A L S:
WHEREAS, Assignor is the lessee of certain
property situated in ____________, as more fully
described in Exhibit "A" attached hereto (the
"Property"), pursuant to that certain Lease Agreement
dated _________________, by and between Assignor and
Lessor, recorded on the ____ day of ______________,
19__, in Book _____ at Page _____of the records of the
________________________, State of _______________ (the
"Lease"); and
WHEREAS, pursuant to an Asset Sale and Purchase
Agreement (the "Sale Agreement") between Assignor and
Assignee, dated the _____ day of ___________, 199__,
Assignor desires to assign all of its right, title and
interest in and to the Lease to Assignee, and Assignee
desires to accept an unconditional assignment of all of
Assignor's right, title and interest in and to the
Lease.
NOW, THEREFORE, in consideration of the sum of Ten
and No/100 ($10.00) Dollars, and other good and valuable
consideration, the receipt and sufficiency of which is
hereby acknowledged, and in further consideration of the
mutual covenants and agreements herein contained, the
parties hereto agree as follows:
1. Assignor does hereby assign, transfer and set
over unto Assignee, its successors and assigns,
all of Assignors right, title and interest in and
to the Lease, together with all security deposits
posted by Assignor pursuant thereto, all
buildings, structures, facilities and
improvements (other than trade fixtures)
appurtenant thereto; and all rights of way or
use, servitudes, licenses, easements, tenements,
hereditaments and appurtenances belonging or
appertaining to any of the foregoing. Assignor
hereby agrees to indemnify, defend and save
harmless Assignee and its parent, subsidiary and
affiliated companies and their directors,
officers, employees and representatives from and
against all claims, suits, actions, liabilities,
losses, damages, costs and expenses (including
but not limited to, court costs, and reasonably
attorneys' fees) arising out of (i) Assignor's
failure to comply with all of the applicable
terms of the Lease, but only to the extent such
terms related to the period prior to the
effective date of this Assignment, or
(ii) Assignor's occupancy of the Property.
2. Assignee agrees, by acceptance and receipt of
this Assignment, to make all payments and to
assume, fully perform and discharge all of the
terms, conditions, agreements and obligations of
the Lease to be performed by the "lessee" or
"tenant" thereunder, to the extent such terms,
conditions, agreements and obligations relate to
the period after the effective date of this
Assignment. In addition, Assignee hereby agrees
to indemnify, defend and save Assignor, its
parent, subsidiaries or affiliated companies, and
their directors, officers, employees and
representatives, harmless from and against any
and all claims, suits, actions, loss, cost,
expense, damage or liability whatsoever,
including reasonable attorneys' fees and court
costs, arising out (i) Assignee's failure to
comply with all of the applicable terms of the
Lease, but only to the extent such terms relate
to the period after the effective date of this
Assignment, or (ii) the occupancy of the Property
by Assignee after the effective date of this
Assignment.
3. Assignor and Lessor represent and warrant to
Assignee as follows:
a. That the Lease is in full force and effect
and has not been modified or amended,
except as otherwise disclosed herein; and
b. There are no existing defaults or alleged
defaults by either Assignor or Lessor under
the Lease, and no circumstance exists which
with the giving of notice, the passage of
time, or both, would constitute a default
by Assignor or Lessor under the Lease; and
c. A true, correct and complete copy of the
Lease is attached hereto and incorporated
herein as Exhibit A.
4. Lessor hereby consents to the assignment of the
Lease. Lessor agrees to deliver all notices
given under the Lease, to Assignee as follows:
Notwithstanding any provisions herein to the
contrary, Assignee shall with respect to the
Property comply with any applicable federal,
state and local laws, rules and regulations
regarding financial responsibility obligations of
owners and/or operators of underground storage
tanks and lines. Assignee shall furnish evidence
of such compliance on an annual basis to
Assignor.
5. This Assignment shall be effective the _____ day
of ______________, 1997, and shall inure to the
benefit of and be binding upon the parties hereto
and their successors, assigns or legal
representatives.
6. This Assignment shall be governed by the laws of
the State of Tennessee.
IN WITNESS WHEREOF the undersigned have executed
this Assignment as of the day and year first hereinafter
set forth as to each of them.
"ASSIGNEE"
MAPCO PETROLEUM Inc.
By:
James C.
Alligood
Vice President
Dated:
"ASSIGNOR"
E-Z Serve
Convenience Stores, Inc.
By:
Name:
Its:______________
President
Dated:
"LESSOR"
By:
Name:
Its:______________
President
Dated:
STATE OF TENNESSEE )
COUNTY OF DAVIDSON )
Before me, ______________________ the undersigned,
a Notary Public in and for the County and State
aforesaid, personally appeared James C. Alligood, with
whom I am personally acquainted (or proved to me on the
basis of satisfactory evidence), and who upon oath
acknowledged himself to be Vice President of MAPCO
PETROLEUM Inc., the within named bargainor, a
corporation, and that he as such Vice President being
authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the name
of the corporation by himself as Vice President.
Witness my hand and seal, at office in
_______________, Tennessee, this the _____ day of
_______________, 1997.
NOTARY PUBLIC
My Commission Expires:
STATE OF TENNESSEE )
COUNTY OF __________ )
Before me, ______________________ the undersigned,
a Notary Public in and for the County and State
aforesaid, personally appeared _______________________,
with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who upon oath
acknowledged _____self to be _____________ President of
E-Z Serve Convenience Stores, Inc., the within named
bargainor, a corporation, and that ________ as such
_________ President being authorized so to do, executed
the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by
_______self as _________ President.
Witness my hand and seal, at office in
_____________, Tennessee, this the ____ day of
____________, 1997.
NOTARY PUBLIC
My Commission Expires:
STATE OF TENNESSEE )
COUNTY OF __________ )
Before me, ______________________ the undersigned,
a Notary Public in and for the County and State
aforesaid, personally appeared _______________________,
with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who upon oath
acknowledged _____self to be _____________ President of
________________________, the within named bargainor, a
corporation, and that ________ as such _________
President being authorized so to do, executed the
foregoing instrument for the purposes therein contained,
by signing the name of the corporation by _______self as
_________ President.
Witness my hand and seal, at office in
_____________, Tennessee, this the ____ day of
____________, 1997.
NOTARY PUBLIC
My Commission Expires:
EXHIBIT A
to
Assignment of Lease and Consent
Property
That certain property situated in
County, State of , including improvements
thereto, more fully described as follows, to wit:
FORM 1.1.3
to
Asset Sale and Purchase Agreement
SELLER's Store No. ______
MAPCO Store No. ______
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
THIS BILL OF SALE is executed and delivered
effective the ___________ day of _____________________,
1997, by E-Z Serve Convenience Stores, Inc. a Delaware
corporation ("SELLER"), to and in favor of MAPCO
PETROLEUM Inc., a Delaware corporation ("BUYER"),
pursuant to that certain Asset Sale and Purchase
Agreement ("Sale Agreement") dated the ____________ day
of _____________________, 1997, by and between BUYER and
BUYER.
WITNESSETH: That for and in consideration of the
sum of Ten and no/100 Dollars ($10.00) and other good
and valuable consideration paid by BUYER, the receipt
and sufficiency of which is hereby acknowledged, BUYER
hereby bargains, sells, grants and conveys unto BUYER,
its successors and assigns that certain property as more
fully described on Exhibit A attached hereto, less and
except the excluded items of property shown on Exhibit
B attached hereto (collectively, the property shown on
Exhibit A but not excluded by Exhibit B shall
hereinafter be referred to as the "Property"), now
belonging to the BUYER and in its possession.
TO HAVE AND TO HOLD the same unto said BUYER, its
successors and assigns, forever. SELLER hereby
expressly warrants that it has good and merchantable
title to the Property and warrants that the Property is
free of all liens and encumbrances of any nature
whatsoever. SELLER makes no other warranties with
respect to the Property, except for those warranties
contained in the Sale Agreement.
IN WITNESS WHEREOF, the undersigned has executed
and delivered this Bill of Sale the day and year first
above written.
"SELLER"
(Seal) E-Z Serve
Convenience Stores, Inc.
ATTEST:
By: ________________________ By:
__________________________________
Name:________________________
Name:__________________________________
Its: __________ Secretary Its: ___________ President
Dated:
Accepted and Agreed this "BUYER"
_____ day of __________, 1997. MAPCO PETROLEUM
Inc.
(Seal)
ATTEST:
By: ________________________ By:
_________________________________
Name:________________________
Name:__________________________________
Its: __________ Secretary Its: ___________ President
STATE OF TENNESSEE )
) SS
COUNTY OF DAVIDSON )
Before me, the undersigned authority, on this day
personally appeared James C. Alligood, known to me to be
the person whose name is subscribed to the foregoing
instrument as Vice President of MAPCO PETROLEUM Inc.,
and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the
capacity therein stated, and as the act and deed of said
Corporation.
WITNESS my hand and official seal on this
day of _____________, 1997.
Notary Public in and
for
Davidson County,
State of Tennessee
My Commission Expires:
(Print Name)
STATE OF ___________________________ )
) SS
COUNTY OF ________________________ )
Before me, the undersigned authority, on this day
personally appeared
, known to me to be the person whose name is
subscribed to the foregoing instrument as _____________
President of ,
and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the
capacity therein stated, and as the act and deed of said
Corporation.
WITNESS my hand and official seal on this
day of _____________, 1997.
Notary Public in and
for
__________________
County
State of
____________________
My Commission Expires:
Print Name)
EXHIBIT A
to
Bill of Sale
All Personal Property owned by SELLER and located at the
Store including, but not limited to, the following:
Canopy
Gasoline Pumps
Gasoline Console
Underground Storage Tanks and Related Equipment
Upright Coolers
Price Pole and Signage (I.D. Sign/Reader Board/Can)
Kerosene Tanks
Gondolas
Coffee Equipment
Fountain Equipment
EXHIBIT B
to
Bill of Sale
Excluded Assets
Personal Computers, including all software and discs
Electronic Cash Registers
Pay Telephones
Credit Card Processors
Money Order Machines and associated supplies and forms
Supplies, forms, etc. used by SELLER in its business and
embossed with SELLER's or Citgo's name, trade name or
logo
Training Manuals of SELLER
GTE Inventory Equipment and Cards
Phone Card Equipment and Inventory
Signage Facing bearing Citgo's name, trade name or logo
Tire Inflation and Auto Vacuum Machines
Potentially Excluded Assets
(The following assets are excluded if not owned by
SELLER.)
Icee/Slurpie Machines
VISI-Cooler
Ice Merchandisers
Propane Equipment
FORM 12.1.4
to
Asset Sale and Purchase Agreement
Section 1445 Certificate
Section 1445 of the Internal Revenue Code provides
that a transferee of a U.S. real property interest must
withhold tax if the transferors is a foreign person. To
inform the transferee that withholding of tax is not
required on the disposition of a U.S real property
interest by E-Z Serve Convenience Stores, Inc. (the
"center"), the undersigned hereby certifies the
following on behalf of SELLER;
1. I am _________ of the SELLER
2. SELLER is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as
of terms are defined in the Internal Revenue Code
and Income Tax Regulations);
3. SELLER's U.S. employer identification number is
________;
4. SELLER'S office is _________.
The undersigned understands that this
certification may be disclosed to the Internal Revenue
Service by transferee and that any false statement
contained herein could be punished by fine, imprisonment
or both. Under penalties perjury, I declare that I have
examined this certification and to the best of my
knowledge and belief it is true, correct and complete,
and I further declare that I have the authority to sign
this document of behalf of SELLER.
[Seal] "ASSIGNOR"
E-Z Serve
Convenience Stores, Inc.
ATTEST:
By: By:
Schedules
to
Asset Sale and Purchase Agreement
11.1.6 Exceptions to Assets
An adjacent landowner claims certain ownership rights
regarding access to an alley behind Store No. 7306.
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement is entered into
this 2nd day of May, 1997 between E-Z Serve
Convenience Stores, Inc., a Delaware corporation
(Seller), whose address is 2550 North Loop West, Suite
600, Houston, Texas 77092, and Island Holdings, Ltd.
(Buyer) whose address is 9551 Baymeadows Road, Suite 5,
Jacksonville, Florida 32256.
RECITAL
Seller operates the convenience stores at
locations listed on Exhibit "A", attached hereto. (The
locations are identified herein jointly as the
Locations, or singularly as the Location.) Seller
desires to sell, and Buyer desires to purchase Seller's
fee simple interest in, leasehold interest in, and
equipment, motor vehicle fuel and merchandise inventory
at, the Locations. Accordingly, the parties agree as
follows.
_ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _
_ _
1. Assignment and Sale. Effective as of the date of
Closing, as provided herein, Seller (i) agrees to assign
and Buyer agrees to take the assignment of the leases
for the Locations, (ii) Seller agrees to sell and Buyer
agrees to purchase Seller's fee simple interest in the
Location owned by Seller in fee (the Fee Location), and
(iii) Seller agrees to sell, and Buyer agrees to
purchase all equipment owned by Seller at the Locations,
together with all motor vehicle fuel, merchandise
inventory and supplies as provided herein.
2. Escrow Deposit. Within five (5) days after
execution of this agreement by both parties, Buyer will
deposit with Seller the sum of FIFTY THOUSAND AND 00/100
dollars ($50,000.00). Said deposit will be held in
escrow by Seller and shall be credited toward payment of
the purchase price as provided herein.
3. Purchase Price and Payment. Buyer shall pay, at
Closing, as provided below, the sum of FOUR MILLION
TWO HUNDRED FIFTY THOUSAND DOLLARS ($4,250,000.00),
(identified herein as the Purchase Price), plus the
value of merchandise inventory, and the cost to Seller
of the motor vehicle fuel at each of the respective
Locations. The value of the merchandise inventory for
purposes of this Agreement is sixty-eight percent (68%)
of the retail price posted thereon, provided, however,
that merchandise which is shopworn or beyond the
manufacturer's date for sale shall be excluded from the
items being sold hereunder. The actual cost of motor
vehicle fuel is cost plus transportation, taxes and
related fees (i. e., the laid in cost) for delivering
said motor vehicle fuel to the respective Location based
upon prices posted by the supplier of said fuel on the
date of Closing. The Purchase Price Allocation for the
thirty-seven Locations being sold hereunder shall be as
set forth on Exhibit "A", attached hereto. The Escrow
Deposit held by Seller shall be credited against the
amount due and owing at the last of the Locations to be
closed hereunder. Terms of payment shall be cash, in
good funds at Closing for the Purchase Price and ten
(10) days after Closing for fuel inventories and fifteen
(15) days after Closing for merchandise and supplies.
4. Closing. Closing shall be on a Location by
Location basis in accordance with the schedule contained
on Exhibit "A". A physical count of merchandise
inventory shall be taken by an independent third party
inventory firm at each of the respective Locations on
the date and time of Closing. Upon acceptance of the
merchandise inventory count by each party, and payment
as provided above, Closing shall be deemed to have
occurred with respect to that particular Location, and
possession of the property shall pass. Buyer and Seller
shall each pay 50% of the cost of the merchandise
inventory count.
5. Title. Seller shall convey title to the Fee
Location free and clear of all encumbrances except
easements of record, taxes accrued but not yet payable,
and standard exceptions contained on the Owner's Title
Insurance Policy. The foregoing, along with such other
encumbrances as Buyer may accept shall be Permitted
Exceptions.
6. Title Commitment and Policy. Seller will, at its
own cost and expense, obtain an Owner's Title Insurance
Policy for the Fee Location. Buyer shall have fifteen
(15) business days from the date of receipt of a title
commitment to object to any matter involving title to
the Location. Should Buyer fail to object to any such
matter, Buyer shall be deemed to have accepted same and
it will become a Permitted Exception. Seller may, within
fifteen (15) days thereafter, have items to which Buyer
validly objects cured or removed, but Seller shall not
be required to do so. In the event Seller fails to cure
any matter to which Buyer validly objects, Buyer may
elect to delete the Location from the terms of this
Agreement and deduct the value shown adjacent to the
Location on Exhibit "A".
7. Licenses. Seller will cooperate with Buyer in
transferring any business licenses or permits which are
transferrable with respect to the business being
conducted at the Locations.
8. Items to be Furnished by Seller. Upon execution
of this Agreement, Seller will provide Buyer with the
following:
a. Copies of the leases and all addendums
thereto for the Locations.
b. Copies of all licenses and operating permits
for the Locations.
c. Copies of pest control, security and waste
management contracts, or in lieu thereof,
a schedule of payments made pursuant to each.
d. Lists of vendor owned equipment at the
Locations.
e. Reasonable access to the Locations in the
accompaniment of Seller representatives for
purposes of inspecting same.
f. Payroll records.
At Closing Seller will furnish assignment
documents acceptable to Buyer for the leased Locations,
a limited warranty deed for the Fee Location, and
closing statements for each of the Locations. Seller
will pay documentary tax stamps required upon the filing
of the deed for the Fee Location.
9. Buyer's Inspection. Seller hereby grants to Buyer
and its employees and representatives the right to enter
upon the Locations and make, or cause to be made, at
Buyer's expense, such surveys, investigations,
engineering tests or any other tests it may desire;
provided however, any such surveys, investigations or
tests shall not disrupt, hinder of interfere with the
leasehold rights of, or continuous orderly operation of
any of the business being conducted at the Locations.
Buyer shall defend Seller against, and indemnify and
hold Seller harmless from the conditions of being
liable, and ultimate liability, for, any mechanics' or
materialman's claims of liens, by whomsoever made, or
injury to persons, including death, occasioned because
of Buyer's or any other party's entry onto the
Locations, or arising out of the performance of the
surveys, investigations, and tests provided for herein.
Buyer shall undertake any action necessary to release or
discharge any such claims of liens made or filed against
Seller or the Locations. Buyer will promptly give
Seller notice of any unsatisfactory conditions found as
the result of Buyer's inspection, and afford Seller the
opportunity to remedy said conditions. Notwithstanding
anything herein to the contrary, Buyer may, prior to
5:00 pm, Eastern time, May 12, 1997, cancel and
terminate this Agreement in the event Buyer's inspection
reveals unsatisfactory conditions which are not remedied
by Seller, or in the event Buyer is not satisfied with
environmental conditions, leases, equipment condition,
equipment contracts or financial information relating to
the Locations. In order to exercise its right of
cancellation hereunder, Buyer must provide Seller
written notice delivered by facsimilie, or by an
overnight delivery service which provides proof of
delivery.
10. Environmental Matters. Seller warrants that with
respect to those Locations which store and sell motor
vehicle fuel, its operations have been conducted in a
manner so as to maintain eligibility for participation
in the governmental program established for remediation
of hydrocarbon contamination. Seller will make all
records pertaining to the gasoline operation and
compliance with environmental rules and regulations at
the Locations available to Buyer. Those Locations at
which Seller is aware of hydrocarbon contamination, and
which have been reported and registered for cleanup
pursuant to the applicable state sponsored petroleum
cleanup program are listed on Exhibit "B", attached
hereto. Seller is not aware of specific hydrocarbon
contamination at the remaining Locations. However, Buyer
and Seller acknowledge that releases of motor vehicle
fuels into the soil may have occurred in connection with
the gasoline operation that has taken place at the
Locations over the years. Seller has contracted with a
third party to conduct remediation at those Locations
with reported hydrocarbon contamination. Seller will
assign said contract to Buyer. The representations and
warranties in said contract shall survive the Assignment
and the Closing of this transaction. Buyer agrees to
assume all responsibility for any hydrocarbon
contamination in or around the Locations regardless of
the extent thereof or the date said contamination is
alleged to have occurred.
11. Specific Performance. It is understood the
Locations being transferred hereunder constitute an
operating unit to Seller. It is therefore of critical
importance to Seller that all of the Locations be
transferred as provided herein. If for any reason other
than a breach of this Agreement by Seller, Buyer refuses
to accept the transfer of any of the Locations, Seller
may, at its option proceed with specific performance of
this Agreement together with reimbursement for all
additional expenses and fees caused by Buyer's failure
to proceed. If for any reason other than a breach of
this Agreement by Buyer, Seller refuses to proceed with
the assignments and title transfers as provided herein,
Buyer may, at its option, proceed with specific
performance of this Agreement together with
reimbursement for all additional expenses and fees
caused by Seller's failure to proceed, or cancel and
terminate this Agreement.
Notwithstanding the foregoing, in the event Seller
is unable to provide lease assignments as provided
herein due to the failure of certain landlords to
provide timely approval of said assignments, Seller may
elect to indemnify Buyer against costs and expenses
which may be incurred by Buyer as the result of the
ultimate failure of Seller to obtain said assignments,
and Buyer may proceed with the Closing(s) as provided on
Exhibit "A", under temporary arrangements as may be
proposed by Seller, or Buyer may elect to exclude said
Location from the terms of this Agreement.
12. Condition of Equipment. All equipment and
leasehold improvements owned by Seller and being
transferred hereunder are used, and transferred "AS IS".
Seller makes no warranties whatsoever, except warranty
of title, and that said equipment and improvements are
in reasonable operating condition and working order at
the time of Closing.
13. Vendor Owned Equipment and Services. It is
understood that certain equipment at the Locations may
be supplied by various vendors as a result of doing
business with Seller. Seller makes no warranty that the
vendors will permit said equipment to remain, and Buyer
understands that it will be Buyer's responsibility to
negotiate ongoing arrangements as it may desire. Buyer
agrees to honor all remaining commitments of Seller for
pest control, security and waste removal services
furnished to the Locations. Buyer will further assume
contractual arrangements for pay telephones, fountain
beverage machines, vacuum and tire inflation equipment,
coffee, icee/slurpee, and similar equipment, and
environmental remediation relating to the Locations.
Seller will remove cappucino machines, automatic teller
machines, and computer equipment and software used by
Seller for accounting, and the issuance of money orders
and checks. Seller shall not remove the Lotto machines
or attempt to assign same to another of Seller's stores.
The only gasoline supply contracts to be assumed by
Buyer are in connection with five Texaco and two Amoco
"Dealer" leases, and one location with Radiant Oil Co.
14. Exclusion of Intellectual Property. The sales and
transfers outlined herein specifically exclude trade
names, trademarks, trade dress and other intellectual
property of Seller. All signs, drink cups and other
merchandise bearing a Seller trademark or copyright
shall be removed by Seller and not be a part of this
transaction. Further, computer software, hardware and
printers are excluded from the equipment being sold
hereunder, and will be removed by Seller at Closing.
Buyer warrants that it will not in any way convey to any
person that it is doing business as, or affiliated with
Seller.
15. Employees of Seller. Employees at each of the
Locations shall be terminated by Seller as of the
respective date of Closing and pay all accrued vacation,
sick pay, workers' compensation, pension and profit
sharing, or bonuses due. Buyer will make reasonable
efforts to employ those persons in connection with its
continuation of the convenience store businesses.
16. Indemnification. Buyer agrees to defend,
indemnify and hold Seller harmless from all claims,
judgements, expenses and fees in any way connected with
the Locations, including without limitation thereto,
leasehold matters, subsequent to the Closing of the sale
of the respective Locations, and claims, judgements,
expenses and fees relating to an environmental incident
or concern regardless of the date when said incident or
concern is alleged to have arisen or occurred. The
indemnification also includes, without limitation
thereto, leasehold matters. Seller agrees to defend,
indemnify and hold Buyer harmless from all claims,
judgements, expenses and fees in any way connected with
the Locations, including without limitation thereto,
leasehold matters, prior to the Closing of the sale of
the respective Locations, excepting those matters
relating to an environmental event or concern as
provided herein.
17. Assignment. This Agreement may be assigned by
Buyer provided said assignee agrees in writing in a form
and content reasonably satisfactory to Seller to be
bound by all of the terms and conditions hereof, and
further provided that notwithstanding anything to the
contrary, said assignment will not relieve Buyer from
the obligations assumed by it under this Agreement.
18. Bulk Sales Waiver. The parties hereto agree to
waive compliance by Seller with Bulk Sales statutes
applicable to the transactions outlined herein, provided
that Seller agrees to defend, hold harmless and
indemnify Buyer against any claims, judgements, expenses
and fees in any way connected with the failure by Seller
to comply with said Bulk Sales statutes.
19. Rents and Taxes. All rents, ad-valorem taxes and
special assessments in the nature of taxes which are
payable by the lessee under the leases to be assigned
hereunder, shall be pro-rated as of the date of Closing.
Seller shall receive credit for rents, taxes and special
assessment paid by Seller for periods beyond the Closing
date. Ad-valorem taxes and special assessments in the
nature of taxes for the Fee Location, and personal
property taxes for all Locations shall be pro-rated as
of the date of Closing for the respective Location. Tax
and special assessment calculations which are not yet
due and payable shall be based upon the most recent
payments of same. Seller and Buyer agree to reconcile
payments made under this paragraph once current year
assessments are available.
20. Notices. All notices and demands herein required
shall be in writing. The mailing of notice shall be U.
S. Mail, Certified, to the parties as follows:
Seller: E-Z SERVE CONVENIENCE
STORES, INC.
Attention: H. E. Lambert
2550 North Loop West, Suite 600
Houston, Texas 77092
Buyer: Island Holdings, Ltd.
9551 Baymeadows Road
Suite 5
Jacksonville, Florida 32256
Attn: Bill Schwind
21. Entire Agreement. This writing embodies the
entire offer between parties and supersedes all prior
offers and understandings, if any, relating to the
Locations, and may be amended or supplemented only by an
instrument in writing executed by both parties hereto.
22. Validity. If any provision of this Agreement,
except the provisions relating to Seller's obligation to
convey the Location and Buyer's obligation to pay the
purchase price, the invalidity of either of which shall
cause this Agreement to be null and void, is held to be
illegal, invalid, or unenforceable under present and
future laws, such provision shall be fully severable;
this Agreement shall be construed and enforced as if
such illegal, invalid, or enforceable provision had
never compromised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in
full force and effect and shall not be effected by the
illegal, invalid, or unenforceable provision of by its
severance from this Agreement.
23. Identical Counterparts. This Agreement may be
executed in a number of identical counterparts. If so
executed, each of such counterparts is to be deemed an
original for all purposes, and all such counterparts
shall collectively, constitute one Agreement. In making
proof of this Agreement, it shall not be necessary to
produce of account for more than one such counterpart.
24. Time of Essence. The obligations and undertakings
of the parties hereto shall be performed within the time
specified therefor, and failure to perform within such
time shall constitute an event of default on the part of
the party which fails to perform.
25. Survival. The representations and warranties of
the parties, shall survive the Closing of this
Agreement.
26. Seller's Warranties. Seller warrants that (i) it
is not in default of any leases to be assigned hereunder
and knows of no circumstances which would give rise to
a default, (ii) it will operate the Locations in the
normal course of business from the date hereof through
the date of Closing, (iii) that it has operated the
Locations in accordance with all applicable laws and
regulations excepting matters which would not have a
material adverse affect, (iv) it has full power and
authority to enter into this Agreement and to transfer
the assets subject to this Agreement free and clear of
any liens or encumbrances, and (v) that all financial
and environmental information, summaries and reports
provided to Buyer are true and correct to the best
knowledge of Seller. All such representations and
warranties shall survive Closing.
27. Buyer's Warranties. Buyer warrants that it has
full power and authority to enter into this Agreement,
and to purchase the assets subject to this Agreement.
28. Offer and Acceptance. Furnishing this document
for purposes of review and negotiation does not
constitute an offer. Seller specifically reserves the
right to withdraw from negotiations at any time prior to
the execution of this Agreement by both parties, whether
for the purpose of entering into an Agreement with
another party on identical or different terms, or
withdrawing the Locations from sale. Buyer may similarly
withdraw from negotiations at any time prior to the
execution of this Agreement by both parties hereto.
29. Announcements. Buyer acknowledges that Seller is
an affiliate of a company whose stock is publicly held
and, as such, is under certain restrictions regarding
the disclosure of negotiations and/or sale agreements.
Buyer will maintain strict confidentiality regarding all
matters in connection with this Agreement and the
negotiation hereof. Buyer will cooperate with Seller
regarding such announcements as Seller may make in
connection herewith. However, Seller acknowledges that
Buyer needs to establish supply for motor fuel,
merchandise, lottery, money orders, licenses and permits
and operational matters prior to Closing. Seller grants
Buyer permission to begin establishing those
arrangements. Buyer shall be as discrete as possible
and not make any public announcements.
30. Lease Renewals. Between the date of execution of
this Agreement and Closing, Seller shall use best
efforts to obtain renewal options at predetermined
renewal rates satisfactory to Buyer on the following
Locations:
7325 7377 7405
7341 7379 7413
7348 7390 7417
7376 7397 7433
IN WITNESS WHEREOF, the parties hereto have caused their
names to be affixed hereto effective as of the date
first written above.
WITNESSES: E-Z SERVE CONVENIENCE
STORES, INC.
_______________________________ By:__________________________________
ATTEST: ISLAND HOLDINGS,
LTD.
_______________________________ By:
__________________________________
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FROM THE
COMPANY'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 7,057
<SECURITIES> 0
<RECEIVABLES> 8,231
<ALLOWANCES> 0
<INVENTORY> 38,394
<CURRENT-ASSETS> 82,180
<PP&E> 149,897
<DEPRECIATION> 33,530
<TOTAL-ASSETS> 236,289
<CURRENT-LIABILITIES> 87,181
<BONDS> 50,197
0
0
<COMMON> 693
<OTHER-SE> 46,537
<TOTAL-LIABILITY-AND-EQUITY> 236,289
<SALES> 197,658
<TOTAL-REVENUES> 201,760
<CGS> 164,030
<TOTAL-COSTS> 192,063
<OTHER-EXPENSES> 9,080
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,369
<INCOME-PRETAX> (1,752)
<INCOME-TAX> (613)
<INCOME-CONTINUING> (1,533)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,533)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
