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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 number)
2550 North 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)
------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $0.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant at March 31, 1997, based upon the closing price of these shares
on the American Stock Exchange, was $7,221,095.
Common Stock 69,319,530
(Number of shares outstanding as of March 31, 1997)
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<PAGE> 2
E-Z SERVE CORPORATION AND SUBSIDIARIES
FORM 10-K
FOR THE YEAR ENDED DECEMBER 29, 1996
INDEX
<TABLE>
<CAPTION>
Item
Number Page
Part I
<S> <C> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 11
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 14
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 41
Part III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 42
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 42
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
General Background
E-Z Serve Corporation, through its wholly-owned subsidiaries (the "Company"),
operated 692 and franchised 10 convenience stores, mini marts, and gas marts at
December 29, 1996 primarily under the names E-Z Serve, Majik Market and Taylor
Food Mart. The Company also retailed motor fuels at 661 of its convenience
stores and at 174 non-company operated retail outlets ("Marketers") under its
proprietary brand name E-Z Serve and a number of major brands such as Citgo,
Conoco, Texaco and Chevron. In addition to marketing motor fuels, company
operated convenience stores are engaged in retail merchandising of traditional
grocery and non-grocery lines associated with such stores.
The Company was organized in 1971 and until 1986 operated a motor fuels
wholesale business, a motor fuels supply and trading business and approximately
800 Marketers in non-urban locations in about 20 states. In 1986, Harken
Energy Corporation ("Harken") acquired the Company from its former owners, and
during 1988 and 1989 the Company acquired 49 convenience stores. In 1991,
pursuant to a rights offering, the Company became independent from Harken, and,
under new management, developed a strategic business plan intended to refocus
the Company's resources towards becoming a leader in the convenience store
industry. In 1992, the Company acquired Taylor Petroleum, Inc. ("Taylor") and
E-Z Serve Convenience Stores, Inc. ("EZCON"), bringing the company operated
convenience store total to 523 and dramatically increasing the Company's
presence in metropolitan markets. In January 1995, the Company acquired Time
Saver Stores, Inc. ("Time Saver"), a chain of 116 convenience stores (14 of
which were franchised) located primarily in New Orleans, and, in July 1995, the
Company acquired Sunshine Jr. Stores, Inc. ("SJS"), a chain of 205 convenience
stores with a strong concentration in the Florida Panhandle. During 1995 and
1996, the Company disposed of or closed 17 and 45 company operated locations,
respectively, and 40 and 30 Marketer locations, respectively, that did not meet
operating objectives. The following table shows the states in which the
Company conducted business as of December 29, 1996:
<TABLE>
<CAPTION>
Company Non-Company
Operated Operated
State Locations Locations Total
------------ ------------ ------------ --------
<S> <C> <C> <C>
Florida 161 - 161
Louisiana 128 71 199
Texas 97 27 124
Georgia 71 - 71
Alabama 68 1 69
South Carolina 46 - 46
Mississippi 43 16 59
Tennessee 25 3 28
North Carolina 21 1 22
Kansas 13 - 13
Missouri 8 - 8
Oklahoma 4 8 12
Kentucky 4 8 12
New Mexico 2 - 2
Arkansas 1 2 3
Ohio - 32 32
Other States (4) - 5 5
--- --- ---
Total 692 174 866
--- --- ---
</TABLE>
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E-Z Serve Corporation is incorporated in Delaware and maintains its principal
corporate offices at 2550 North Loop West, Suite 600, Houston, Texas 77092; its
telephone number is (713) 684-4300. Substantially all of the Company's
operations are conducted by its wholly-owned subsidiaries, EZCON (for
convenience stores) and by E-Z Serve Petroleum Marketing Company ("EZPET") (for
Marketers). Unless the context indicates otherwise, the term "the Company" as
used herein should be understood to include subsidiaries of E-Z Serve
Corporation and predecessor corporations.
Business Strategy
Prior to 1992, in excess of 50% of the Company's gross profit was derived from
the sale of motor fuels. In 1992, the Company redefined its strategy to
increase per store profitability and growth through the acquisition of
convenience stores. This strategy was intended to increase the proportion of
gross profit derived from convenience store merchandise versus motor fuels and
was established for two reasons. First, merchandise gross margins are
consistently higher and less volatile than gasoline margins, and second,
merchandise sales are less cyclical and less likely to be influenced by
national and international political and economic vagaries.
Although the Company conducts convenience store operations in 15 states, its
primary market area is the southeastern United States and Texas. A major
component of the Company's business strategy is to increase its presence in
this area as evidenced by the acquisitions of Time Saver and SJS. In addition,
the Company plans to divest certain locations outside of its primary marketing
area. Discussions are currently being held with interested parties regarding
these divestitures. Further, each location, whether part of the primary market
area or not, will continually be evaluated to determine if its economic
contribution meets the Company's objectives. Locations that fall short of
minimum requirements will be disposed of or closed. In this regard, the
Company discontinued operations at 45 convenience stores and 30 Marketer
locations during 1996. Four franchise locations were converted to company
operated locations in 1996.
The Company continues to evaluate acquisition opportunities that fit with its
strategy and are available at costs that provide acceptable rates of return.
In evaluating any acquisition, the Company reviews the operating history and
future potential of each unit on the basis of location, competition, cash flow,
demographic trends, and merchandising capability. Additionally, prior to an
acquisition, the Company reviews the environmental compliance of each location.
Depending on the results of such review, the Company will choose not to acquire
the site, negotiate an acceptable indemnification, or factor into the purchase
price of the location the estimated costs required to bring the location into
compliance with existing environmental laws.
The Company's ability to expand further is dependent upon several factors,
including adequacy of acquisition opportunities and availability of 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 smaller 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.
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Convenience Store Operations
In 1996, convenience store merchandise sales accounted for approximately 37% of
the Company's consolidated operating revenues, and motor fuel sales at company
operated convenience stores comprised approximately 53% of consolidated
operating revenues. Average monthly per store merchandise sales were
approximately $37,400, and average monthly convenience store motor fuel sales
were approximately 48,700 gallons. Merchandise sales and gasoline gallons at
comparable locations increased 4.6% and 3.9%, respectively, in 1996 from 1995
levels.
Configuration and Operations
At December 29, 1996, the Company operated 692 and franchised 10 convenience
stores throughout three zones (Eastern, Central and Southern) in 15 states
under the names E-Z Serve (438 locations), Majik Market (118 locations), Taylor
Food Mart (76 locations), and various other names (70 locations). Of these,
223 are owned in fee and 479 are operated under long-term operating lease
arrangements. Most of the stores are located in the southern United States,
with the largest concentration in Florida, Louisiana, Texas and Georgia. The
stores operate seven days a week; 440 are open 24 hours, and the remainder are
generally open from 6 a.m. to 12 a.m. At December 29, 1996, the Company
operated 567 full-size convenience stores (2000-2800 square feet), 103 mini
marts (1200-2000 square feet) and 22 gas marts (400-1200 square feet).
Convenience to the customer is emphasized through location of the store,
accessible parking, merchandise selection, and service. The majority of the
stores (661) market self-service motor fuel with 63 of the locations featuring
"pay at the pump" credit card readers. The stores do not provide automobile
maintenance service, nor do they sell tires, batteries, or other automotive
accessories other than motor oil, antifreeze, and windshield washer fluid. Of
the 661 stores that retail motor fuels, branding arrangements are as follows:
Citgo (345); Texaco (53); Diamond Shamrock (20); Conoco (8); and unbranded
(235). Retail gasoline purchases are generally concluded inside the store
where the customer is encouraged to make additional purchases. Credit card
sales account for approximately 20% of total motor fuel sales.
Merchandising
Store merchandise offered for sale is selected to provide the best response to
customer preferences. Each full-size convenience store typically stocks a
combination of nationally recognized brands and local product selections. This
product mix normally consists of food and non-food items including dry grocery
items, dairy products, candy, bakery goods, alcoholic and non-alcoholic
beverages, tobacco products, health and beauty aids, general merchandise and
periodicals. Offerings will typically include a combination of takeout
packages and immediately consumable products including coffee, fountain
beverages and snacks. Other services include pay telephones, phone cards and
copiers in stores where these items are economical. In addition, virtually all
stores offer money order services, 481 sell lottery tickets, 247 have ATM's or
scrip machines, 52 have hot food delis, 10 offer branded fast food service and
280 have cappuccino machines. Convenience stores generate higher margins than
grocery stores and many other retail outlets. Monthly promotions in key
categories such as beer and soft drinks are normally linked to supplier price
reductions, thus providing additional value to the customer without a dramatic
reduction in store margins. Advertising is conducted through local media
(television, radio, newspaper) and store level signage. In 1996, the Company
continued its comprehensive media advertising program in the greater New
Orleans and Gulf Coast markets. This program provided for the cost to be
shared between the Company and those vendors whose products were promoted.
Merchandise pricing is based on consumer demand and the competitive environment
within guidelines established on a cost of goods basis. Estimated
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sales percentages by principle categories of products sold at company operated
stores in 1996 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Gasoline 58% 58%
Tobacco Products 11 11
Beer/Wine 9 10
Soft Drinks 5 5
Food Service 3 3
Groceries 3 2
Salty Snacks 2 2
Candy 2 2
Publications 1 2
Health/Beauty Aids 1 1
Dairy 1 1
Other 4 3
---- ----
100% 100%
==== ====
</TABLE>
New merchandising initiatives for 1997 include a category management approach
to marketing which will utilize consumer data to determine product mix and
inventory levels for items within that mix. Improved technology allows
quicker, more accurate processing of information from the stores (See
Management Information Systems). This information coupled with consumer data
supplied by vendor partners and research firms will be used to improve both
product selection and inventory turns on a store-by-store basis. Budgets for
categories, and eventually, individual items within each category will be used
in 1997 to measure the effectiveness of this approach.
Management and Training
Each store is staffed with a manager who is responsible for, among other
things, recruiting and supervising store employees, store safety, cleanliness,
inventory display, in-store advertising, customer service and reporting to the
territory supervisor. Territory supervisors are generally responsible for
eight to ten stores and ensure that the store managers maintain the Company's
uniform standards for the above items. Further, the territory supervisor
oversees the accuracy of operating results reported from the store level. In
addition to their salaries, the store managers participate in a cash incentive
program based on merchandise sales improvement, control of key expense items,
store profitability, and customer service. The territory supervisor's
incentive program is based on store-level earnings less supervisory expenses.
All newly hired store level employees are given mandatory in-store training by
the store manager. This training includes customer service, safety, alcohol
and tobacco sales awareness, robbery and crime prevention, and on-the-job
operational issues. Employees who demonstrate managerial ability are given
additional training and become qualified for promotion to store manager upon
recommendation by an internal review board.
Marketer Operations
In 1996, Marketer operations accounted for approximately 8% of the Company's
total revenues and average monthly motor fuel sales per location were 27,200
gallons. Motor fuel gallons sold at comparable locations decreased 0.1% in
1996 from 1995.
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At December 29, 1996, the Company had 174 operating Marketer locations. The
following table shows, by state, the operating locations selling motor fuels
under the E-Z Serve brand or under a major brand:
<TABLE>
<CAPTION>
E-Z Serve Major Brand Total
State Locations Locations Locations
---------------- --------- ----------- ---------
<S> <C> <C> <C>
Kentucky 7 1 8
Louisiana 24 47 71
Mississippi 9 7 16
Ohio 32 - 32
Oklahoma 7 1 8
Texas 15 12 27
Nine Other States 10 2 12
--- --- ---
Total 104 70 174
=== === ===
</TABLE>
Of the 70 major brand locations, 40 are Conoco, 25 are Chevron and 5 are CITGO.
Gasoline Sales Station Agreements
At the majority of its Marketer outlets, the Company entered into gasoline
sales station agreements ("GSSA") with independent operators of convenience
stores and other retail facilities pursuant to which the Company installs
equipment used for the sale of retail gasoline products. Historically, a GSSA
had a term of ten years with two five-year renewals at the option of the
Company. Under a GSSA, the operator of the facility provides all labor
necessary for gasoline sales. A GSSA also provides that the operator of the
facility receive compensation under various terms, normally based on gallons
sold or a percentage of gross profit margin. The Company is responsible for
all maintenance costs to its equipment during the term of the agreement and has
the right to remove its equipment from the premises upon termination of the
GSSA.
Downsizing the Marketer Business
In 1991, the Company evaluated the strategic importance and profit contribution
potential of each of its Marketer locations. As a result of this study, the
Company offered for sale all of its California and Arizona locations, as well
as selected locations in several other states. Between 1992 and 1996, the
Company sold 92 of these locations for a combination of cash and notes totaling
approximately $2,960,000 and closed an additional 194 locations. Closed
locations, if unsalable, are abandoned after completion of any environmental
clean-up obligations. In certain circumstances, the Company retains fuel
supply commitments on sold locations and lease payment commitments on vacated
locations. At December 29, 1996, the Company had two fuel supply commitments.
The Company is currently discussing the sale of the Marketer business with
several potential buyers.
Seasonal Trends
Traditionally, motor fuel sales volumes are higher between April and September
and peak in July and August. Convenience store merchandise sales follow a
similar pattern, but the swings are not as dramatic. This seasonality at the
Company's locations is diminished somewhat compared to national norms since
most of the Company's convenience stores are located in the southern U.S. where
the climate is temperate. As stated previously, the Company's ongoing strategy
of increasing the proportion of gross profit from merchandise sales
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should also help moderate seasonal variations. However, it is likely that the
Company will continue to experience higher revenues and profit margins in the
second and third quarters than in the first and fourth.
Suppliers
During 1996, the Company purchased approximately 49% of its store merchandise
from one large wholesale supplier under a seven-year agreement which expires in
December 2001. This relationship allows the Company to enhance rebate and
purchase discount programs provided by national brand manufacturers.
Additionally, the Company believes that it receives better pricing and greater
flexibility with product quantities and mix. Certain products such as
alcoholic beverages, soft drinks, dairy products, and baked goods are purchased
directly from either local suppliers or from the manufacturers' distribution
networks due to legal and trade restrictions and industry practice concerning
the distribution of these products. These suppliers typically have their own
distribution networks and quality control systems.
Motor fuel supply is obtained from two primary sources. Locations that sell
motor fuels under a major brand are supplied through term agreements with major
oil companies. These agreements provide reliable, but not guaranteed, product
supply, competitive pricing (i.e. posted rack which is related to the spot
market), national advertising support, associated brand recognition, and
customer perception of quality. The major oil companies also provide
continuing support for location upgrades and credit card programs which enhance
fuel sales. Locations that sell motor fuels under the Company's trade names
(primarily E-Z Serve and Majik Market) obtain product on a spot basis based
upon the lowest rack price postings at terminals located near these outlets.
At December 29, 1996, approximately 65% of the Company's motor fuel supply
requirement was under contract with five branded suppliers, but the Company has
available, and utilizes, over 40 suppliers. The Company discontinued the
private transport of motor fuel for its own account in May, 1995. All motor
fuel supply is now transported by contracted common carriers from refineries or
product terminals to the Company's retail locations.
There are alternative wholesale merchandise supply sources available to the
Company and management believes that merchandise supply is stable and that
other sources could be obtained if necessary. Motor fuel suppliers in recent
years have had no difficulty meeting the Company's needs; however national or
international events could cause a supply interruption which, if extended in
duration, could have a material adverse effect on the Company's operations and
earnings.
Competition
The Company's business, particularly motor fuel sales, is highly competitive.
In the convenience store merchandise market, the primary competitors are
locally operated convenience or grocery stores (in rural areas) and national or
regional chain operators (in urban areas). Most convenience stores market
similar classes of products, typically stocking over 3,000 items. Competitive
factors include location, advertising, product mix and presentation,
promotions, pricing, and customer service. The Company has established
policies and procedures which address each of these areas, and, as properly
implemented by its management team, allow the Company to effectively compete in
its markets.
Motor fuel competitors include local dealers and jobbers, independent
retailers, independent and chain convenience stores, and integrated oil
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companies. The principal competitive factors affecting the Company's business
are location, product price and quality, facility appearance, and brand
identification. Product differentiation is problematic except in the case of
specific brand preferences. Since most locations offer similar equipment and
service levels, it is difficult to create a perceived value enhancement for the
Company's products. Accordingly, gasoline marketers tend to compete primarily
on the basis of price. Prices are typically advertised on highly visible
signage, thus offering the customer the opportunity to compare and shop prices
at competing locations while still in his or her car. These factors tend to
make motor fuel prices much less stable than convenience store merchandise
prices.
The Company believes that several additional factors allow it to operate
competitively. First, by operating 692 stores, the Company spreads its
corporate overhead over more locations than smaller chains. Secondly, as the
Company has grown in size, it has reduced its product cost through discounts
and rebates associated with volume purchasing. Lastly, in areas such as New
Orleans and the Florida Panhandle, where the Company is a market share leader,
the Company can effectively employ media advertising campaigns intended to
increase sales.
Employees
At December 29, 1996, the Company employed 4,845 people (including part-time
employees), of which 4,460 were employees in convenience stores, 117 were in
territory supervision, and 268 were in management, administrative, and clerical
positions. The Company is not party to any collective bargaining agreements
and has experienced no work stoppages or strikes as a result of labor disputes.
The Company experiences the high rate of turnover of store employees that is
common in the convenience store industry. The Company provides competitive
wage scales and benefits, and considers relations with employees to be
satisfactory.
Management Information Systems
In 1994, the Company implemented a three-phase plan to upgrade its information
systems. Phase I involved the installation of home office hardware and
software to serve as the foundation for the new system. Phase II, which was
completed in early 1996, included the installation of personal computers at all
store locations. With the personal computers, store managers now input
operating results and transmit daily to the corporate office for processing.
Further, this system allows the Company to control prices electronically at the
zone level rather than manually at the store level and provides for quicker
decimination of information to decision-makers. In addition, all field
operating management have computers that can transmit or retrieve data from the
host system in the corporate office. Phase II also provided the necessary base
hardware and software for future implementation of point-of-sale ("POS") product
management.
Phase III will entail the installation of POS hardware (e.g. cash registers
integrated to the personal computer and additional price look up capability and
possibly scanners) and software. When completed, this phase will provide
enhanced product category sales management, significantly enhance inventory
controls and reduce the store personnel's clerical requirements thereby
allowing each store to direct more attention to sales and profitability.
Initial implementation of Phase III is expected by the end of 1997.
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During 1996 and early 1997, the Company also installed software in the personal
computers to print money orders and payroll checks at the stores. This
eliminates the cost of separate money order dispensers and the need to maintain
money order stock at the stores. The printing of weekly payroll checks at the
stores eliminates the cost of overnight mailing from the corporate office.
Trademarks
The trade names "E-Z Serve," "Majik Market", "Taylor Food Marts", "Time Saver",
and "Jr. Food Stores" are registered with the U.S. Patent and Trademark Office.
The Company believes that these service marks are of significant value in the
promotion of the Company's business.
Government Regulation
Regulation of Underground Storage Tanks
At December 29, 1996, the Company owned approximately 2,600 underground storage
tanks ("USTs") that are used for the storage of refined products at its retail
units. The ownership and/or operation of USTs is subject to federal, state,
and local laws and regulations. Federal regulations issued in 1988 establish
requirements for (i) maintaining leak detection systems, (ii) upgrading tank
systems, (iii) taking corrective action in response to leakage, (iv) closing
tanks to prevent future leakage, (v) keeping appropriate records, and (vi)
maintaining evidence of financial responsibility for taking corrective action
and compensating third parties for bodily injury and property damage resulting
from leakage. These regulations provide that the states may take primary
responsibility for administering and enforcing regulatory programs by adopting
requirements that are at least as stringent as the federal standards. Several
states in which the Company operates or has operated (i.e., California) have
adopted programs that are more stringent than the federal requirements.
Violations of the federal regulations may be subject to enforcement orders by
the Environmental Protection Agency ("EPA") or the applicable state agency, as
the case may be, and owners and operators of USTs who fail to comply with an
EPA order alleging a violation of the regulations may be subject to a $25,000
per day civil penalty. A civil penalty of $10,000 per tank per day may also be
imposed by the EPA upon any UST owner who knowingly fails to file any required
notification forms or submits false information with respect thereto or who
fails to comply with any requirement or standard promulgated by the EPA under
these federal regulations. In some situations, the Company can be liable for
cleanup costs, even if the contamination resulted from previous conduct of the
Company that was lawful at the time, or from improper conduct of, or conditions
caused by, previous property owners, lessees or other persons not associated
with the Company. From time to time, claims are made and litigation is brought
against the Company under these and other laws.
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 new tanks must be corrosion
protected, overfill/spill protected, and have leak detection when installed.
All existing USTs must be upgraded to provide corrosion and overfill/spill
protection by December 22, 1998. The existing USTs can meet corrosion
standards by complying with the standards applicable to new tanks or by being
protected on the interior with an approved coating or a cathodic protection
system. Additionally, all USTs had to meet leak detection standards by
December 22, 1993. The Company has chosen, in most cases, to meet the leak
detection requirements by utilizing Statistical Inventory Reconciliation with
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<PAGE> 11
daily inventory reconciliations. At December 29, 1996, the Company was in
complete compliance with leak detection standards and 50% completed with the
tank upgrade requirements. The Company estimates that it will make capital
expenditures of $3,183,000 and $2,641,000 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 $41,588,000, of which
approximately $34,180,000 is expected to be reimbursed by state trust funds.
Also, the Company anticipates incurring approximately $2,331,000 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 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, of which,
approximately $5,396,000 is expected to be reimbursed by state funds. At
December 29, 1996, for work largely completed prior to the Direct Bill
Agreement, the Company had completed the necessary remediation and has
reimbursement claims totaling approximately $7,371,000 with the various states
in which it operates.
The assumptions related to the cost estimates and viability of state trust
funds may not prove accurate, and, unanticipated events and circumstances may
occur. Therefore, the actual cost of complying with these requirements may be
substantially lower or higher than the estimated costs.
The Company is required under EPA regulations to maintain evidence of financial
responsibility for taking corrective action and compensating third parties for
bodily injury and property damage resulting from leakage from USTs. The
Company has elected to satisfy this requirement by the authorized alternative
of self-insuring. In addition, the Company must comply with the necessary
Occupational Safety and Health Administration regulations and the regulations
of various state agencies, including air quality control boards. The Company
has an environmental department that is responsible for management and
adherence to local, state, and federal environmental regulations.
Other Regulations
The sale of alcoholic beverages by the Company is subject to the approval of
state and local regulatory agencies, which approval can be revoked if
substantial or persistent noncompliance with regulations governing the sale of
alcoholic beverages occurs. In addition, retailers of alcoholic beverages may
be held liable for damages caused by individuals that become intoxicated from
consuming beverages purchased from the retailer. Although the Company has
experienced no material liability to date, and has installed policies and
procedures to lessen the potential exposure, there can be no assurance that any
future liability that may arise will not have a material adverse effect on the
Company's operations and earnings.
The U.S. Food and Drug Administration, along with state and local governments,
has undertaken a high degree of enforcement activity with regard to the sale of
certain tobacco products to underage persons. Although the Company has
experienced no material liability to date, substantial or persistent
noncompliance with regulations concerning such sales could lead to revocation
of tobacco sales licenses.
9
<PAGE> 12
Executive Officers
The following named persons serve as executive officers of the Company as of
March 31, 1997:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------- --- ------------------------------------
<S> <C> <C>
Neil H. McLaurin 52 Chairman of the Board and
Chief Executive Officer
Kathleen Callahan-Guion 45 President and
Chief Operating Officer
John T. Miller 50 Senior Vice President, Chief
Financial Officer, and Secretary
Harold E. Lambert 58 Vice President - Legal and
Assistant Secretary
</TABLE>
A brief description of each executive officer is provided below:
Neil H. McLaurin has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since October 1990. He also served as
President of the Company from October 1990 until March 1997. From 1988 to
1990, Mr. McLaurin served as a consultant for L. B. Consulting Co., an
investment company in Houston, Texas. From 1966 to 1988, Mr. McLaurin was
employed by Tenneco, Inc., an integrated oil and gas company, in various
positions, including Vice President of Wholesale Marketing from 1987 to 1988,
and Vice President of Retail Marketing from 1983 to 1987.
Kathleen Callahan-Guion has been President and Chief Operating Officer of the
Company since March 1997. From 1979 to 1997 Ms. Callahan-Guion was employed by
The Southland Corporation, a convenience store chain, in various operating
positions of increasing responsibility including the most recent position of
Vice President, Chesapeake Division. From 1969 to 1979 Ms. Callahan-Guion was
employed by Jewel Food Stores in various positions including Service Manager.
John T. Miller has been Senior Vice President, Chief Financial Officer, and
Secretary of the Company since May, 1989. Mr. Miller's previous experience was
as Controller for GOTCO Ltd., a worldwide manufacturer and marketer of
lubricants, from 1984 to 1989; in various positions including Assistant
Controller for exploration and production of Gulf Oil Corporation from 1974 to
1984; and as a senior auditor with Ernst & Young LLP from 1971 to 1974.
Harold E. Lambert has been Vice President - Legal, and Assistant Secretary of
the Company since August, 1992. Mr. Lambert's prior experience includes
serving as Vice President and Corporate Counsel of EZCON prior to EZCON's
acquisition by the Company, ten years as General Counsel for Munford, Inc., a
New York Stock Exchange listed company which owned and operated 800 convenience
stores, and positions with Service Merchandise Company, Top Value Enterprises,
and the National Soft Drink Association.
10
<PAGE> 13
ITEM 2. PROPERTIES
Substantially all property and equipment owned by the Company is subject to
liens under various collateral agreements with its lenders.
Convenience Stores
The Company leases the real property and owns the equipment at 479 of its
convenience store locations and owns in fee simple the real property,
improvements and equipment at 223 of its locations. The leases generally have
initial terms of 10 years with two five-year renewals at the option of the
Company. At December 29, 1996, the Company estimates the average remaining
term of its convenience store leases, including option periods, to be
approximately eleven years.
Marketer Locations
The Company owns and maintains substantially all of the equipment (including
storage tanks, piping, pumps, meters, canopies, signs, lighting, wiring, and
remote control consoles) used to sell refined motor fuels at its Marketer
locations. The Company is granted certain rights to operate and maintain
access to this equipment under marketing agreements with the owners or
operators of the individual locations. At December 29, 1996, the Company
estimates the average remaining term of its Marketer leases to be less than
three years.
Corporate Offices
The Company's corporate offices are located in northwest Houston, Texas where
it leases approximately 39,000 square feet of office space through November
2002. All of the principal executive, accounting and administrative functions
are conducted at the Houston location.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various lawsuits incidental to
its businesses. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 29, 1996.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information for Common Stock
The Company's common stock, par value $0.01 per share ("Common Stock"), is
traded on the American Stock Exchange (Symbol: EZS). The following table
reflects the range of high and low sales prices by quarter as reported by the
American Stock Exchange from December 26, 1994 through December 29, 1996.
<TABLE>
<CAPTION>
1996
---------------------------
High Low
---------- ---------
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . $1 7/16 $1 3/16
Second Quarter . . . . . . . . . . . . . . . . . 2 3/8 1 1/4
Third Quarter . . . . . . . . . . . . . . . . . . 2 11/16 1 11/16
Fourth Quarter . . . . . . . . . . . . . . . . . 1 7/8 1 1/16
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------
High Low
--------- ---------
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . $1 1/2 $15/16
Second Quarter . . . . . . . . . . . . . . . . . 1 7/16 15/16
Third Quarter . . . . . . . . . . . . . . . . . . 1 3/4 15/16
Fourth Quarter . . . . . . . . . . . . . . . . . 1 7/16 1 1/4
</TABLE>
Holders of Record
At February 28, 1997, there were approximately 195 holders of record of the
Common Stock.
Dividends
The Company has never declared dividends on its Common Stock. The Company is
restricted from paying dividends by certain of its bank debt covenants (see
Note 6 - Long-Term Obligations and Credit Arrangements in the Notes to
Consolidated Financial Statements). The Company intends to retain any earnings
for internal investment and debt reduction, and does not intend to declare
dividends on its Common Stock in the foreseeable future.
12
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information derived from the
audited Consolidated Financial Statements of the Company, and should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto (Item 8 herein) and Management's Discussion and Analysis of Financial
Condition and Results of Operations (Item 7 herein):
<TABLE>
<CAPTION>
Year Ended (a)
--------------------------------------------------------------------------------
December 29, December 31, December 25, December 26, December 27,
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATIONS: (b)(c)
Revenues $861,642 $748,152 $563,191 $605,695 $ 434,314
Income (loss) from operations $(15,075) (d) $ 5,264 $ 5,087 $ 3,329 $ (25,664)(d)
Fully diluted earnings (loss)
per common and common
equivalent share $ (.23) $ .07 $ .07 $ .05 $ (2.62)
ASSETS: (b)(c)
Current assets $ 64,887 $ 81,355 $ 55,712 $ 44,112 $ 51,075
Current liabilities $ 73,606 $ 79,707 $ 48,138 $ 44,655 $ 46,030
-------- -------- -------- --------- --------
Working capital (deficit) $ (8,719) (g) $ 1,648 (f) $ 7,574 (e) $ (543) $ 5,045
======== ======== ======== ========= ========
Total assets $240,405 $263,346 $150,554 $126,645 $140,979
======== ======== ======== ========= ========
LONG-TERM OBLIGATIONS AND EQUITY: (b)(c)
Long-term obligations:
Long-term debt $ 72,395 $ 76,157 (h) $ 14,627 $ 15,867 (h) $ 44,639
Indebtedness to related parties - 25 25 25 4,541
Other long-term obligations $ 39,120 $ 37,297 (i) $ 25,189 (i) $ 11,541 (i) $ 15,134
-------- -------- -------- ---------- --------
Total long-term obligations $111,515 $113,479 $ 39,841 $ 27,433 $ 64,314
======== ======== ======== ========= ========
Stockholders' equity $ 55,284 $ 70,160 $ 62,575 $ 54,557 (j) $ 30,635
======== ======== ======== ========= ========
</TABLE>
(a) The Company's fiscal year ends on the last Sunday on or before
December 31. This normally provides a 52-week fiscal year, but
occasionally (e.g. 1995) provides a 53-week fiscal year.
(b) The increases in 1993 operations reflect the Taylor (March, 1992) and
EZCON (July, 1992) acquisitions. The increases in 1995 and 1996
operations and 1995 assets and liabilities reflect the Time Saver
(January, 1995) and SJS (July, 1995) acquisitions. The 1996 assets
include an SFAS 121 impairment provision related to the write-down of
EZPET to fair value.
(c) Certain amounts in prior years have been reclassified to conform to
the presentation used in 1996.
(d) The operating loss in 1992 includes non-recurring charges against
operations of $19,007,000. The 1996 operating loss includes
non-recurring charges against operations of $10,272,000.
(e) The increase in working capital reflects a decrease in current portion
of long-term debt due to the January, 1995 refinancing, and an
increase in receivables from settlements reached with certain of the
Company's insurance carriers regarding California environmental
claims.
(f) The decrease in working capital in 1995 reflects the increase in
current maturities from the new debt related to the Time Saver and SJS
acquisitions and the collection of receivables discussed in (e).
(g) The decrease in working capital in 1996 primarily reflects principal
payments on the Term Loan and an increase in the current portion of
long term debt.
(h) The decrease in 1993 reflects the April 1993 debt restructuring and
the increase in 1995 reflects the new debt related to the Time Saver
and SJS acquisitions.
(i) The decrease in 1993 is due to conversion of EZCON redeemable
preferred stock into the Company's Common Stock. Prior to 1994, the
Company accounted for environmental liabilities net of state trust
fund reimbursement; the increase in 1994 is due to reporting gross
environmental liabilities and receivables, and the increase in 1995 is
due to the Time Saver and SJS acquisitions.
(j) The increase in 1993 reflects issuance of Common Stock and Preferred
Stock of the Company to effect the Taylor and EZCON acquisitions.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 periods included in the accompanying consolidated financial
statements:
Results of Operations
(In thousands except store counts, per gallon prices and margins)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
CONVENIENCE STORE OPERATIONS (1)
- ---------------------------------
Merchandise:
Average number of merchandise
stores during the period 704 618 463
Merchandise sales $316,318 $267,045 $181,129
Merchandise sales per location
per month $ 37.4 $ 36.0 $ 32.6
Gross profit $ 92,704 $ 82,833 $ 54,925
Gross profit per location
per month $ 11.0 $ 11.2 $ 9.9
Gross profit percentage 29.31% 31.02% 30.32%
Motor Fuels:
Average number of motor fuel
stores during the period 678 574 415
Gallons sold 396,568 353,430 274,238
Gallons sold per location
per month 48.7 51.3 55.1
Revenues $459,705 $382,038 $282,530
Price per gallon $ 1.159 $ 1.081 $ 1.030
Gross profit $ 46,302 $ 46,183 $ 32,839
Gross profit per gallon $ 0.1168 $ 0.1307 $ 0.1197
Gross profit per location
per month $ 5.7 $ 6.7 $ 6.6
MARKETER OPERATIONS (2)
- -----------------------
Average number of operating
locations during the period 189 228 258
Gallons sold 61,748 73,333 83,418
Gallons sold per location
per month 27.2 26.8 26.9
Revenues $ 73,174 $ 82,006 $ 90,926
Price per gallon $ 1.185 $ 1.118 $ 1.090
Gross profit (3) $ 7,329 $ 9,853 $ 11,629
Gross profit per gallon $ 0.119 $ 0.1343 $ 0.1394
Gross profit per location
per month $ 3.2 $ 3.6 $ 3.8
</TABLE>
- --------------------------------------------------------------------------------
(1) At December 29, 1996, there were 692 company operated convenience
stores (661 of which sold motor fuels) and 10 franchised convenience
stores.
(2) Represents non-company operated motor fuel retail outlets.
(3) Gross profit is shown before deducting compensation paid to operators
of locations not operated by the Company of $3,336, $4,579 and $4,503
for the years 1996, 1995 and 1994, respectively.
14
<PAGE> 17
The following table sets forth the percentage to total revenue of certain items
in the Consolidated Statements of Operations:
Percentage of Total Revenue
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Revenues:
Motor fuels 61.8% 62.0% 66.3%
Convenience store 36.7 35.7 32.2
Other income 1.5 2.3 1.5
----- ----- ----
100.0 100.0 100.0
----- ----- ----
Costs and Expenses:
Cost of sales:
Motor fuels 55.6 54.6 58.5
Convenience store 26.0 24.6 22.4
Operating expenses 13.6 13.5 12.8
Selling, general, and administrative
expenses 3.1 3.5 3.6
Depreciation, amortization and asset
impairment 2.5 1.9 1.0
Interest expense 1.0 0.8 0.3
----- ----- -----
101.8 98.9 98.6
----- ----- -----
Income (loss) before income taxes (1.8) 1.1 1.4
Income tax expense - 0.1 -
Provision in lieu of taxes - 0.3 0.5
----- ----- -----
Net Income (loss) (1.8) 0.7 0.9
===== ===== =====
</TABLE>
Overview
The Company reported a net loss of $15,075,000 and net income of $5,264,000 and
$5,087,000 for the years ended December 29, 1996, December 31, 1995, and
December 25, 1994, respectively. Included in the net loss for fiscal year 1996,
is $10,272,000 of non-recurring expense items, $8,870,000 of which were
non-cash. These items include an additional asset impairment provision
pursuant to Statement of Financial Accounting Standards No. 121 ("SFAS 121")
and other costs of $7,393,000 related to the write-down of EZPET to fair value
and the accrual of $2,879,000 for severance and other restructuring costs.
Fiscal 1995 included a non-recurring gain of $3,614,000 (net of tax effect)
related to insurance settlements in the Company's favor. In addition, in the
fourth quarter of 1995, the Company adopted SFAS 121; as a result, 1995
included an asset impairment provision of $2,706,000 (net of tax effect)
related to certain of the Company's fixed asset groups. Fiscal 1994 included
$700,000 (net of tax effect) for a non-recurring gain from insurance
settlements. Without these non-recurring items, net income (loss) in 1996,
1995, and 1994 would have been $(4,803,000), $4,356,000, and $4,387,000,
respectively. Revenues, operating expenses and depreciation expenses increased
in 1996 reflecting a full year of operations from the SJS acquisition.
Interest expense also increased in 1996 resulting from the additional debt
associated with the Time Saver and SJS acquisitions. Revenues and operating
expenses increased in 1995 from the 1994 levels due to the acquisition of Time
Saver and SJS.
15
<PAGE> 18
Operating Gross Profit
Convenience store merchandise sales increased 18.5% in 1996 compared to 1995
primarily due to the acquisition in July 1995 of SJS. Merchandise sales per
location increased 3.9% over 1995, principally due to the acquisition of SJS
stores which have higher per store average merchandise sales, and partially due
to the Company's on-going program of closing or selling under-performing
locations. In 1995, total merchandise sales increased 47.4% from 1994 due to
the acquisitions of Time Saver and SJS. Management's goal has been, since
1992, to increase the revenue contribution from convenience store merchandise
which has higher and less volatile profit margins than motor fuel. For 1996,
merchandise revenue comprised 36.7% of the Company's total revenue as compared
to 35.7% for 1995 and 32.2% for 1994.
The merchandise gross profit margin decreased to 29.31% in 1996 from 31.02% in
1995, reflecting a shift by the Company to a more aggressive pricing strategy
designed to increase customer traffic count. The 1995 margin increase to
31.02% was principally due to the addition of Time Saver and SJS which
increased the Company's purchasing power, thereby increasing the amount of
volume discounts and rebates. Merchandise sales at comparable stores increased
4.6% and 0.2% in 1996 and 1995, respectively.
In 1996, gross profit per gallon of motor fuel sold at convenience stores
decreased 10.6% to 11.68 cents per gallon from 13.07 cents per gallon in 1995,
and total gross profit per location from motor fuel sales decreased 14.9%.
These reductions were due to lower industry margins resulting from increased
wholesale prices caused by higher crude costs and lower than normal gasoline
inventories. Due to competitive pressures, the Company was not able to fully
reflect these increased costs in its selling prices. During 1995, motor fuel
gross profit per gallon increased 9.2% to 13.07 cents per gallon, primarily due
to more favorable market conditions. The average number of gallons sold per
location decreased 5.1% in 1996 and 6.9% in 1995, primarily due to the
acquisition of Time Saver and SJS which sell lower volumes per store. However,
motor fuel gallons sold at comparable stores increased 3.9% and 0.2% in 1996
and 1995, respectively.
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) decreased 27.1% as compared to 1995,
primarily due to reduced franchise fee income and a 1995 non-recurring gain of
$5,475,000 ($3,614,000 net of tax effect) from favorable insurance settlements
related to the Company's California locations.
Expenses
In 1996, operating expenses increased 16.2% from 1995, due primarily to the
increased number of average operating locations. Operating expenses, as a
percentage of total revenues, were 13.6% in 1996 as compared to 13.5% in 1995
and 12.8% in 1994. These increases were principally attributable to the Time
Saver and SJS acquisitions because those stores, on average, have a higher
percentage of revenue derived from merchandise sales and therefore, are more
labor intensive than the average of the Company's stores prior to the
acquisitions.
Selling, general and administrative expenses increased $100,000, or 0.4%, in
1996 over 1995 and $6,019,000 or 29.6%, in 1995 over 1994. The increase in
1996 is primarily due to $2,029,000 of severance and other restructuring costs.
Without these non-recurring expenses, S G & A expenses would have decreased by
7.3% in 1996 primarily due to cost reductions associated with the new corporate
system and lower
16
<PAGE> 19
incentive bonuses. The increase in 1995 over 1994 reflects the Time Saver and
SJS acquisitions.
Depreciation, amortization and asset impairment expense increased $7,101,000 or
48.8% in 1996 from 1995 primarily due to an additional SFAS 121 impairment
provision of $7,146,000 resulting from the write-down of EZPET to fair value.
Depreciation and amortization expense increased $4,694,000, or 81.4%, in 1995
from 1994 primarily due to the Time Saver and SJS acquisitions. The 1995
amount also includes a $4,100,000 asset impairment resulting from the adoption
of SFAS 121.
Interest expense in 1996 increased $2,677,000 or 45% as compared to 1995; and
increased $4,324,000 or 265% in 1995 as compared to 1994, due to the increased
level of outstanding debt as a result of the Time Saver and SJS acquisitions.
Inflation
The Company believes inflation has not had a material effect on its results of
operations for the past three years. 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>
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Current assets . . . . . . . . . . . . . . . . . $64,887,000 $81,355,000
Current liabilities . . . . . . . . . . . . . . . $73,606,000 $79,707,000
Current ratio . . . . . . . . . . . . . . . . . . 0.88:1 1.02:1
Long-term obligations (including
related parties and other) . . . . . . . . . . . 72,395,000 $76,182,000
Stockholders' equity . . . . . . . . . . . . . . 55,284,000 $70,160,000
Debt to equity ratio . . . . . . . . . . . . . . 1.31:1 1.09:1
Common shares outstanding . . . . . . . . . . . . 69,119,530 67,854,159
</TABLE>
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 $8,719,000 at December 29, 1996, as compared to $1,648,000 of
positive working capital at year end 1995. The change is primarily due to
$6,011,000 in principal payments on the Term Loan and an increase in the
current portion of long term debt. As of December 29, 1996, EZCON had
$8,971,000 available on its bank line of credit.
17
<PAGE> 20
During 1996, the Company received the following major non-recurring cash
proceeds: sale of fixed assets of $1,146,000 and proceeds from legal
settlements of $784,000. Major non-recurring expenditures included:
$12,083,000 for capital and environmental equipment; $2,512,000 for
environmental remediation; and $808,000 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 the major oil companies to gain
market share have placed added pressure on the margins and volumes of
independent marketers. 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, unanticipated events or a prolonged
motor fuel margin squeeze could occur which may 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
As discussed in Note 6 - Long-Term Obligations and Credit Arrangements in the
Notes to Consolidated Financial Statements, 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 the agent (the "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 Company's previous credit agreement, (b) to
finance the initial payment for the Time Saver acquisition, 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 SJS. With the acquisition, the Company assumed the
indebtedness of SJS. On October 2, 1995, the C & G Agreement was amended and
restated ("Amended C & G Agreement") wherein the Term Loan was increased to
$80,000,000 and the Revolver was increased to $25,000,000. The Company drew
the additional $19,600,000 available on the Term Loan and used the proceeds to
retire 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%.
The Company made principal payments of $2,000,000, $3,550,000 and $3,550,000 in
January 1996, July 1996, and January 1997, respectively. In addition, in
accordance with the terms of the Amended C & G Agreement, proceeds from the
sale of assets provided additional principal payments of $461,000 in 1996 and
$70,000 in 1997. The outstanding Term Loan balance as of March 31, 1997 was
$70,369,000. The Term Loan
18
<PAGE> 21
requires additional 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 sales 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 plans to divest certain
locations outside of its primary market area. Discussions are currently being
held with interested parties regarding these divestitures.
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 borrowing cannot exceed certain defined levels. At December 29,
1996, there were $5,200,000 of the outstanding borrowings under the Revolver
and there were $9,845,000 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 of 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 entered into a Securities Purchase Agreement,
("Purchase Agreement") whereby the Company issued and sold 140,000 shares of
Series H Preferred Stock to one of its major stockholders. Net proceeds of
$8,359,000 from the sale were used to redeem all of the Company's 75,656
outstanding shares of Series C Preferred Stock and net proceeds of $5,081,000
were used for general corporate purposes, including paying down a portion of
amounts outstanding under the Company's Revolver.
Due to capital constraints brought about largely by operating losses and by the
environmental expenditure requirements discussed above, the Company was unable
to properly upgrade its facilities prior to 1994. However, as a result of
improved operating results, the Company made discretionary capital expenditures
of $7,768,000, $10,936,000, and $4,682,000 in 1996, 1995, and 1994,
respectively. 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 in
1996, discretionary capital expenditures were essentially halted in mid-year
and remain constrained. Although this curtailment will reduce the intended
level of high return discretionary expenditures into 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.
As discussed in Item 1, 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.
19
<PAGE> 22
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 December 29, 1996, the Company
was in complete compliance with leak detection standards and 50% completed with
the corrosion and overfill/spill requirements. The Company estimates that
additional expenditures of $5,824,000 will be necessary to meet these upgrade
standards. Additionally, the Company estimates that expenditures of
approximately $4,050,000 (net of anticipated reimbursements from state
environmental trust funds) will be necessary to perform remediation on
contaminated sites. This estimate is based upon assumptions as to the number
of tanks to be replaced and certain other factors. The assumptions on which
the 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
acquisitions of EZCON and SJS 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 7 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 included herein
(collectively the "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.
20
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Financial Statements of
E-Z Serve Corporation and Subsidiaries
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Consolidated Balance Sheets - December 29, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Operations -
Years ended December 29, 1996, December 31, 1995, and December 25, 1994 . . . . . . . . . . . . . . . 24
Consolidated Statements of Stockholders' Equity -
Years ended December 29, 1996, December 31, 1995, and December 25, 1994 . . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows -
Years ended December 29, 1996, December 31, 1995, and December 25, 1994 . . . . . . . . . . . . . . . . 26
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
21
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
E-Z Serve Corporation
We have audited the consolidated financial statements of E-Z Serve
Corporation and subsidiaries as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of E-Z Serve
Corporation and subsidiaries as of December 29, 1996 and December 31, 1995, and
the results of its operations and its cash flows for the fifty-two week period
ended December 29, 1996, the fifty-three week period ended December 31, 1995,
and the fifty-two week period ended December 25, 1994, in conformity with
generally accepted accounting principles.
As discussed in notes 1 and 4 to the consolidated financial
statements, in 1995 the Company adopted the provisions of the Statement of
Financial Accounting Standards No.121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of".
KPMG Peat Marwick LLP
Houston, Texas
March 27, 1997
22
<PAGE> 25
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 6,333 $ 15,759
Receivables, net of allowance for doubtful
accounts of $180 and $185 as of
December 29, 1996 and December 31, 1995,
respectively 8,764 9,136
Inventory 40,070 39,849
Environmental receivables (Note 7) 7,246 13,828
Prepaid expenses and other current assets 2,474 2,783
-------- --------
Total Current Assets 64,887 81,355
Property and equipment, net of accumulated
depreciation and impairment provision (Notes 1 and 4) 137,298 143,144
Environmental receivables (Note 7) 34,305 32,428
Other assets 3,915 6,419
-------- --------
$240,405 $263,346
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Trade payables $ 29,563 $ 31,729
Accrued liabilities and other (Note 5) 26,265 28,127
Current portion of environmental liability (Note 7) 9,017 14,057
Current portion of long-term obligations (Note 6) 8,761 5,794
-------- --------
Total Current Liabilities 73,606 79,707
Long-term Obligations (Note 6):
Payable to banks, net of current portion 70,819 74,450
Payable to related parties, including interest - 25
Obligations under capital leases 1,338 1,389
Other, net of current portion 238 318
Environmental liability (Note 7) 32,571 30,043
Other liabilities, net of current portion 6,549 7,254
Commitments and contingencies (Note 7) - -
-------- --------
Total Long-Term Liabilities 111,515 113,479
Stockholders' Equity: (Notes 2 and 8)
Preferred stock, $0.01 par value; authorized
3,000,000 shares; 75,656 shares Series C
issued and outstanding at December 29, 1996
and December 31, 1995, respectively; 1 1
Common stock, $0.01 par value; authorized
100,000,000 shares; 69,119,530 and 67,854,159
shares issued at December 29, 1996 and
December 31, 1995, respectively 691 679
Additional paid-in capital 56,527 56,340
Retained earnings (accumulated deficit) subsequent
to March 28, 1993, date of quasi-reorganization
(total deficit eliminated $86,034) (1,935) 13,140
-------- --------
Total Stockholders' Equity 55,284 70,160
-------- --------
$240,405 $263,346
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
23
<PAGE> 26
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Motor fuels
(includes excise taxes of approximately
$156,081, $145,551 and $128,800
for years 1996, 1995 and 1994,
respectively) $ 532,879 $ 464,044 $ 373,456
Convenience store 316,318 267,045 181,129
Other income (Note 7) 12,445 17,063 8,606
----------- ----------- -----------
861,642 748,152 563,191
Costs and Expenses:
Cost of sales:
Motor fuels 479,248 408,008 328,988
Convenience store 223,614 184,212 126,204
Operating expenses 117,434 101,087 72,193
Selling, general and administrative
expenses 26,474 26,374 20,355
Depreciation, amortization and
asset impairment (Notes 1 and 4) 21,660 14,559 5,765
Interest expense 8,630 5,953 1,629
----------- ----------- -----------
877,060 740,193 555,134
----------- ----------- -----------
Income (loss) before income taxes (15,418) 7,959 8,057
Income tax expense (benefit) (343) 568 231
Provision in lieu of taxes
(Notes 2 and 11) - 2,127 2,739
----------- ----------- -----------
Net income (loss) $ (15,075) $ 5,264 $ 5,087
=========== =========== ===========
Primary earnings (loss) per common and
common equivalent share (Note 1) $ (.23) $ .07 $ .07
=========== =========== ===========
Fully diluted earnings (loss) per common
and common equivalent share (Note 1) $ (.23) $ .07 $ .07
=========== =========== ===========
Weighted average common and common
equivalent shares outstanding:
Primary 68,684,760 77,489,093 73,752,492
=========== =========== ===========
Fully diluted 68,684,760 78,005,045 73,752,492
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
24
<PAGE> 27
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Additional Retained
Preferred Common Paid-In Earnings
Stock Stock Capital (Deficit) Total
--------- ------ ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 26, 1993 $ 1 $670 $50,004 $ 3,882 $54,557
Net income - - - 5,087 $5,087
Exercise of stock options - - 3 - 3
Deferred compensation - stock options - - 189 - 189
Conversion of Series C Preferred Stock
to Common Stock - 3 (3) - -
Provision in lieu of taxes - - 2,739 - 2,739
--- ---- ------- -------- -------
Balance, December 25, 1994 1 673 52,932 8,969 62,575
Net income - - - 5,264 5,264
Exercise of stock options - 1 5 - 6
Deferred compensation - stock options - - 188 - 188
Conversion of Series C Preferred Stock
to Common Stock - 5 (5) - -
Series C Preferred Stock Dividend - - 1,093 (1,093) -
Provision in lieu of taxes - - 2,127 - 2,127
--- ---- ------- -------- ------
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
=== ==== ======= ======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Statements.
25
<PAGE> 28
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(15,075) $ 5,264 $ 5,087
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization - Fixed Assets 14,513 10,459 5,765
Amortization - Deferred Financial Cost 1,082 317 -
Provision for asset impairment 7,146 4,100 -
Payments for environmental remediation (2,512) (2,716) (1,717)
Payments for removal of underground
storage tanks (808) (463) (755)
Provision for doubtful accounts (5) 50 109
Stock option expense 143 188 189
Provision in lieu of taxes - 2,127 2,739
(Gain) loss on sales of assets 1,022 (99) (147)
Change in current assets and liabilities:
(Increase) decrease in accounts & notes receivable 377 (1,846) (3,431)
(Increase) decrease in inventory (221) (439) 278
(Increase) decrease in prepaid expenses and other 309 (408) (99)
Decrease in trade payables and accruals (4,028) (1,150) (1,839)
Proceeds from environmental settlement - 5,740 1,600
Other - net 728 (1,326) 3,010
-------- -------- -------
Net cash provided by operating activities 2,671 19,798 10,789
Cash flows from investing activities:
Proceeds from sale of assets 1,146 2,309 2,021
Payments for purchase of companies, net of
cash acquired - (46,361) -
Capital expenditures and other asset additions (12,083) (16,124) (8,541)
-------- -------- -------
Net cash used in investing activities (10,937) (60,176) (6,520)
Cash flows from financing activities:
Issuance of common stock 56 6 3
Proceeds from long-term debt 5,563 80,181 -
Payments of long-term debt (6,383) (33,218) (5,679)
Payments of deferred financing costs (396) (3,795) -
-------- -------- -------
Net cash provided by (used in) financing
activities (1,160) 43,174 (5,676)
-------- -------- -------
Net increase (decrease)in cash & cash equivalents (9,426) 2,796 (1,407)
Cash and cash equivalents at beginning of period 15,759 12,963 14,370
-------- -------- -------
Cash and cash equivalents at end of period $ 6,333 $15,759 $12,963
======== ======== =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
Integral part of these Statements.
26
<PAGE> 29
E-Z SERVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Noncash investing and financing activities:
Conversion of Series C Preferred Stock
to Common Stock $ - $ (5) $ (3)
Issuance of Series C Preferred Stock - 1,093 -
Dividends on Series C Preferred Stock - (1,093)
Issuance of Common Stock - 5 3
------ ------ ------
$ - $ - $ -
====== ====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ - $ 511 $ 346
Interest 8,821 4,529 1,545
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these Statements.
27
<PAGE> 30
E-Z SERVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
NOTE (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of E-Z Serve
Corporation and its wholly-owned operating subsidiaries, E-Z Serve Petroleum
Marketing Company ("EZPET"), and E-Z Serve Convenience Stores, Inc. ("EZCON").
The Statement of Operations for 1995 includes the results of Time Saver Stores,
Inc. ("Time Saver") since January 17, 1995, and Sunshine-Jr. Stores, Inc.
("SJS") since July 20, 1995. Unless the context indicates to the contrary, the
term the "Company" as used herein should be understood to include subsidiaries
of E-Z Serve Corporation and predecessor corporations. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, all highly liquid
investments with original maturities of less than 90 days are considered to be
cash equivalents.
Off Balance Sheet Risk
The Company has not entered into any contracts or obligations that expose the
Company to off balance sheet risk.
Accounts Receivable
The Company maintains an allowance for potential losses in collection of its
receivables.
Inventory
Refined product and convenience store merchandise inventories are stated
principally at average cost which approximates market value.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, receivables and trade
payables, and accrued liabilities are considered to approximate fair value due
to the short term nature of these instruments. The carrying value of long term
debt is estimated to approximate fair value based on the Company's incremental
borrowing rate for similar types of borrowing arrangements, except for a
notional amount which is required by the lender to be rate protected. (See
Note 6 - Long- Term Obligations and Credit Agreements)
28
<PAGE> 31
Property and Equipment
Property and equipment are carried at cost. Retail station equipment,
convenience store buildings and equipment, and other property are depreciated
on the straight-line method over their estimated useful lives, ranging from
five to twenty years.
Asset Impairment
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be
Disposed Of" ("SFAS 121"). This standard requires that long-lived assets held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. As a result of the adoption of SFAS 121, in 1995, the Company
recorded an asset impairment write-down of $4,100 related to the Marketer
business fixed asset groups. Additionally, in 1996, a further impairment
provision of $7,146 ($4,013 for Property and Equipment and $3,133 for
Environmental Receivables) was recorded for certain long-lived assets. (See
Note 4 - Property and Equipment)
Environmental Costs
Costs incurred to comply with federal and state environmental regulations are
accounted for as follows:
- - Annual fees for tank registration and environmental compliance testing
are expensed as incurred.
- - Expenditures for upgrading and corrosion protection for tank systems and
installation of leak detectors and overfill/spill devices are capitalized
and depreciated over the remaining life of the location lease term or the
expected useful life of the equipment, whichever is less.
- - The tank removal costs associated with retail locations which provide no
significant growth potential and that the Company plans to sell or
dispose of in the near future have been estimated and a liability
established through a charge to expense. The costs to remove tanks at
all other retail locations are expensed as incurred.
- - Future remediation costs of contaminated sites related to gasoline
underground storage tanks are estimated and a liability is established.
Amounts reimbursable from the state trust funds are recognized as a
receivable. The adequacy of the liability is evaluated at least annually
and adjustments are made based on updated experience and changes in
government policy.
Income Taxes
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under the asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be applied to
29
<PAGE> 32
taxable income in the years in which those temporary differences are expected
to be recovered or settled. Under SFAS 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") was issued in October 1995. SFAS 123, which is
effective for fiscal years beginning after December 15, 1995, prescribes the
"fair value" method of measuring compensation expense for its stock-based
compensation plans. However, SFAS 123 allows for the continuation of the
measurement method as defined by Accounting Principles Board Opinion No. 25
("APB No. 25") with pro forma disclosures of the effect on net income and
earnings per share as if the fair value-based method had been applied in
measuring compensation expense. The Company has decided to continue under APB
No. 25 and provide pro forma disclosure. (See Note 10 - Stock Option Plans)
Earnings per Share
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. The net loss for
1996 is increased by unpaid, cumulative preferred stock dividends in
calculating net loss attributable to common shareholders.
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Basis of Presentation
Certain reclassifications have been made in the 1995 and 1994 financial
statements to conform with the 1996 presentation.
NOTE (2) QUASI-REORGANIZATION
With the acquisitions of Taylor and EZCON in 1992, the Company's 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. As part of
the quasi-reorganization, the deficit in retained earnings was eliminated
against additional paid-in capital. Retained earnings in the future will be
dated to reflect only the results of operations subsequent to March 28, 1993.
Any future 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. (See Note 11 - Income Taxes)
30
<PAGE> 33
NOTE (3) BUSINESS ACQUISITIONS
All acquisitions have been accounted for using the purchase method.
Time Saver
On January 17, 1995, the Company, through it's wholly-owned subsidiary EZCON,
acquired all of the capital stock of Time Saver from Dillon Companies, Inc. At
the date of acquisition, Time Saver operated 102 and franchised 14 convenience
stores in the New Orleans, Louisiana area, and was the dominant independent
convenience store chain in New Orleans.
Under the terms of the agreement with the seller, EZCON made a payment at
closing of $29,960 for the properties and, based on Time Saver's closing
balance sheet, made an additional payment of $7,000 on February 28, 1995 for
the non- property net assets. The Company financed the transaction through a
new Credit and Guaranty Agreement with a group of banks (See Note 6 - Long Term
Obligations and Credit Arrangements). On March 31, 1995, Time Saver was merged
into EZCON.
SJS
On June 15, 1995, the Company, its wholly-owned subsidiary EZS Acquisition
Corporation ("EZS") and SJS entered into an Agreement and Plan of Merger
whereby EZS agreed to make a tender offer for all 1,701,650 outstanding shares
of common stock of SJS at $12.00 per share net to the sellers in cash for an
aggregate purchase price of $20,420. The tender offer expired on July 20,
1995, which was the effective date of the acquisition. Effective July 21,
1995, EZS merged with and into SJS thereby converting all shares of SJS not
tendered into the right to receive $12.00 per share, net in cash. At such
time, SJS became a wholly-owned subsidiary of the Company. At the date of
acquisition, SJS operated 205 convenience stores in five states with 120 of the
stores in Florida, 52 stores in Alabama, 27 stores in Mississippi, 5 stores in
Georgia, and 1 store in Louisiana. EZS obtained the funds necessary for the
acquisition from a capital contribution by the Company. The Company, through
its subsidiary EZCON, obtained $15,400 of the acquisition price pursuant to an
amendment to its Credit and Guaranty Agreement (See Note 6 - Long-Term
Obligations and Credit Arrangements) with the remainder coming from funds
generated internally by the Company and its subsidiaries. On October 2, 1995,
SJS was merged into EZCON.
NOTE (4) PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Land and Buildings $ 62,424 $ 72,528
Assets under capital leases 22,677 22,258
Equipment and Fixtures 64,522 61,908
Other property 15,817 12,572
Less accumulated depreciation and
amortization (28,142) (26,122)
-------- --------
$137,298 $143,144
======== ========
</TABLE>
31
<PAGE> 34
In the fourth quarter of 1995, the Company adopted SFAS 121. In applying the
provisions of SFAS 121, the Company determined that it had 27 convenience store
asset groupings and an additional Marketer group. The future cash flows from
each asset grouping, except the Marketer group, exceeded the carrying value of
the respective asset groupings; consequently, the Company recognized an
impairment provision of $4,100 to reduce the carrying value of the Marketer
group to the amount of its estimated discounted future cash flows. The $4,100
impairment provision was calculated using discounted future cash flow, less
cash out flows necessary to maintain or abandon the assets and is included with
the caption "Depreciation, amortization and asset impairment" on the
Consolidated Statement of Operations.
In December 1996, the Company, in conjunction with its effort to sell EZPET,
recognized an additional SFAS 121 asset impairment of $4,013 for property and
equipment. The impairment decreases the carrying value to estimated fair
value. The fair value was determined by bids received by the Company.
There have been no other circumstances, as defined by SFAS 121, that would
cause the recoverability of the carrying value of any other long-lived assets
to be in question.
NOTE (5) ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES
Accrued liabilities and other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Insurance accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,387 $ 7,170
Accrued taxes due to local and federal governments . . . . . . . . . . . 9,543 13,299
Accrued salary and benefits . . . . . . . . . . . . . . . . . . . . . . . 2,638 3,024
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589 1,780
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5,108 2,854
------- -------
$26,265 $28,127
======= =======
</TABLE>
NOTE (6) LONG-TERM OBLIGATIONS AND CREDIT ARRANGEMENTS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Notes payable to bank under revolving
lines of credit . . . . . . . . . . . . . . . . . . . . . $ 5,200 $ -
Term notes payable to banks . . . . . . . . . . . . . . . 73,989 80,000
Current portion . . . . . . . . . . . . . . . (8,370) (5,550)
------- -------
70,819 74,450
------- -------
Notes payable to major stockholders . . . . . . . . . . . 25 25
Current portion . . . . . . . . . . . . . . . (25) -
------- -------
- 25
------- -------
Capital lease obligations . . . . . . . . . . . . . . . . 1,624 1,557
Current portion . . . . . . . . . . . . . . . (286) (168)
------- -------
1,338 1,389
------- -------
Long-term debt - other . . . . . . . . . . . . . . . . . 318 394
Current portion . . . . . . . . . . . . . . . (80) (76)
------- -------
238 318
------- -------
Total long-term debt obligations . . . . . . . . . . . . $72,395 $76,182
======= =======
</TABLE>
32
<PAGE> 35
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. This C & G Agreement replaced the credit facilities utilized by the
Company at December 25, 1994. 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 Time Saver acquisition, 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 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 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. Concurrently with the signing of
the Amended C & G Agreement, SJS was merged into EZCON.
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
1996 and 1995, the Term Loan was converted to a LIBOR loan at average interest
rates of 8.06% and 8.60%, respectively.
The Amended C & G Agreement requires that a notional amount of at least $20,000
of the Term Loan be rate protected, as defined, through January 17, 1998. In
this regard, the Company entered into a three-year interest rate swap in the
notional amount of $20,000. The swap agreement is a contract to exchange
floating interest rate payments for fixed rate payments without the exchange of
the underlying notional amount. The notional amount is used to measure
interest to be paid or received and does not represent an exposure to credit
loss. The Agreement effectively changes $20,000 of the Company's Term Loan to
a fixed rate of 9.35% through April, 1998.
The Company made principal payments of $2,000, $3,550 and $3,550 in January
1996, July 1996, and January 1997, respectively. In addition, in accordance
with the terms of the Amended C & G Agreement, proceeds from the sale of
33
<PAGE> 36
assets provided additional principal payments of $461 in 1996 and $70 in 1997.
The outstanding Term Loan balance as of March 31, 1997 was $70,369. The Term
Loan requires additional 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 sales 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 plans to divest certain locations outside of its
primary market area. Discussions are currently being held with interested
parties regarding these divestitures.
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 each calendar month, the aggregate
outstanding borrowing cannot exceed certain defined levels. At December 29,
1996, there were $5,200 of the outstanding borrowings under the Revolver and
there were $9,845 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 of the capital stock of its subsidiaries and also by guaranties
from EZPET. 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 (7) 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, overfill/spill
protected. Additionally, by December 1993, all USTs had to have a method of
leak detection installed. As of December 29, 1996, the Company was in complete
compliance with leak detection standards and 50% completed with the corrosion
and overfill/spill requirements. The Company estimates that it will make
additional capital expenditures of $3,183 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 $41,588, of which
approximately $34,180 is expected to be reimbursed by state trust funds. Also,
the Company anticipates incurring approximately $2,331 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
34
<PAGE> 37
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 drops to approximately $9,446, of which, approximately
$5,396 is expected to be reimbursed by state funds. At December 29, 1996, for
work largely completed prior to the Direct Bill Agreement, the Company had
completed the necessary remediation and has reimbursement claims totaling
approximately $7,371 with the various states in which it operates.
Such 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 reserved due to the difficulty in
estimating such costs and due to potential changes in regulations or state
reimbursement programs.
In connection with environmental conditions at certain of the Company's
California locations, legal proceedings have been brought by third parties
against the Company generally alleging that releases of refined products at
these locations have caused damages to the third parties. The Company's
position has been that its general liability insurance policies cover legal
defense costs and damages related to these claims, but the Company's insurance
carriers have generally argued that the policies do not provide for such
coverage. After several years of legal actions, the Company began settlement
discussions with certain of the insurance carriers and, in 1994, the Company
agreed to accept cash payments totaling $5,050 ($2,525 recognized in earnings
in 1994) in settlement of all outstanding disputes with five of the carriers.
During 1995, the Company accepted $3,650 ($700 recognized in earnings in 1994
and $1,375 recognized in earnings in 1995) in settlement of outstanding
disputes with three additional carriers. The Company had reserved a total of
$4,100 of these receipts to cover any future environmental or other
contingencies related to claims made by the State of California Water Resources
Control Board. During the fourth quarter of 1995, the Company received
notification from the Water Resources Control Board that the Board relinquished
any claim to the settlement funds. Accordingly, in December, 1995, the Company
recognized the $4,100 as other income. In March 1997, the Company received a
cash settlement of $610 for another claim; one unsettled claim remains.
The Company leases office space in various locations and has operating leases
on certain retail outlets and computer equipment. Total operating lease
expense for the Company during 1996, 1995, and 1994 was approximately $13,878,
$12,413, and $9,614, respectively. Future minimum rental payments required
under all leases which have primary or remaining noncancellable terms in excess
of one year as of December 29, 1996 are as follows:
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . 11,228
1998 . . . . . . . . . . . . . . . . . . 10,077
1999 . . . . . . . . . . . . . . . . . . 8,375
2000 . . . . . . . . . . . . . . . . . . 7,383
2001 . . . . . . . . . . . . . . . . . . 6,285
Thereafter . . . . . . . . . . . . . . . 7,676
-------
Total $51,024
=======
</TABLE>
Additionally, the Company is party to certain long-term capital leases with
future minimum payments at December 29, 1996 as follows:
35
<PAGE> 38
<TABLE>
<CAPTION>
Year Principal Interest Total
- ----------- --------- -------- -----
<S> <C> <C> <C>
1997 $ 286 $ 304 $ 590
1998 266 261 527
1999 278 216 494
2000 293 167 460
2001 239 136 375
Thereafter 262 359 621
------ ------ ------
Total $1,624 $1,443 $3,067
====== ====== ======
</TABLE>
The Company and its subsidiaries are involved in various lawsuits incidental to
its businesses. The Company's internal counsel monitors all such claims and
the Company has made accruals for those which it believes are probable of
payment. In management's opinion, an adverse determination would not have a
material effect on the Company and its subsidiaries, individually or taken as a
whole. In the case of administrative proceedings regarding environmental
matters involving governmental authorities, management does not believe that
any imposition of monetary sanctions would exceed $100.
NOTE (8) STOCKHOLDERS' EQUITY
On February 28, 1995, Harken Energy Company ("Harken"), the Company's former
parent, entered into an agreement with a major stockholder of the Company
whereby Harken sold 63,937 shares of the Company's $6.00 Convertible Preferred
Stock, Series C ("Series C Preferred Stock"), along with the right to all
accrued but unpaid dividends thereon, to such stockholder. In addition, Harken
sold its remaining 817 shares of the Series C Preferred Stock, along with the
right to all accrued but unpaid dividends thereon, to a director of the
Company. On April 1, 1995, the Company issued an additional 10,902 shares of
its Series C Preferred Stock to the holders of the Series C Preferred Stock in
payment of all cumulative but unpaid dividends through March 31, 1995. (See
Note 13 - Subsequent Events.) The Series C Preferred Stock ranks senior to the
common stock or any other capital stock in right of payment of dividends or
distributions. It is also exempt from anti-dilution provisions from the sale
or conversion of certain previously issued preferred stock or warrants to
purchase common stock or preferred stock. As of December 29, 1996 and December
31, 1995, the Company had cumulative but unpaid dividends on the Series C
Preferred Stock of $757 and $228, respectively.
In May 1996, two warrant holders exercised warrants and purchased a combined
total of 1,210,001 shares of the Company's common stock.
NOTE (9) EMPLOYEE BENEFIT PLAN
The Company does not provide post-retirement benefits for its employees.
The Company has a 401(k) retirement savings plan (the "Plan") covering all
employees meeting minimum age and service requirements. The Company will match
50% of tax deferred employee contributions up to 6% of the employee's
compensation. The Board of Directors of the Company may also elect to make
additional contributions to be allocated among all eligible participants in
accordance with the provisions of the Plan. There were approximately 435, 352
and 310 participants in the Plan at year end 1996, 1995 and 1994, respectively.
Company contributions, which are funded currently, were $229, $96, and $102 for
1996, 1995 and 1994, respectively.
36
<PAGE> 39
NOTE (10) STOCK OPTION PLANS
On May 30, 1991, the Board of Directors of the Company adopted the 1991 Stock
Option Plan, which received stockholder approval at a Special Meeting held on
August 9, 1991 (the "1991 Plan"). The 1991 Plan provides for issuance of
options to purchase up to 1,900,000 shares of the Company's common stock to
key employees and directors. The 1991 Plan requires that the purchase price of
each share of stock, subject to an incentive stock option, equals at least 100%
of the fair market value of the stock on the date the option is granted. The
Compensation Committee of the Board, which administers the 1991 Plan, may also
grant non-qualified stock options which are exercisable at a price as low as
50% of the fair market value of the stock on the date the option is granted.
At an October 29, 1993 Special Meeting, the stockholders approved (i) an
amendment to the 1991 Plan to increase the number of shares of common stock
subject to the 1991 Plan from 1,900,000 to 2,500,000; (ii) an amendment to the
1991 Plan that permits the Compensation Committee of the Board of Directors to
authorize periodic exchange programs whereby holders of non-qualified stock
options could exchange their current options for new options which contain
different option prices and new vesting periods; and lastly (iii) a plan of
exchange whereby nonqualified stock options at a price of $1.00 per share of
common stock would be issued in exchange for currently outstanding nonqualified
stock options having an exercise price of $1.50. All of the options having an
exercise price of $1.50 were exchanged for the options that have an exercise
price of $1.00.
The aggregate compensation expense related to the issuance of non-qualified
stock options and the exchange of the $1.50 stock options under the 1991 Plan
is $741, and is being amortized over vesting periods through July 1998. The
Company recognized expense related to stock options of $143, $188, and $189 in
1996, 1995, and 1994, respectively. Information regarding the 1991 Plan is as
follows:
<TABLE>
<CAPTION>
Number of Shares
---------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Outstanding at beginning of period 2,375,000 2,295,000 2,305,000
Granted at $1.00 to $1.50 per share 50,000 135,000 20,000
Exercised at $1.50 per share - - -
Exercised at $1.00 per share (40,000) (5,000) (3,000)
Canceled (95,000) (50,000) (27,000)
--------- --------- ---------
Balance at end of period 2,290,000 2,375,000 2,295,000
========= ========= =========
Exercisable at end of period 2,002,503 1,764,004 1,279,003
========= ========= =========
Available for grant at end of period 152,000 107,000 192,000
========= ========= =========
</TABLE>
In March 1997, the 1991 Plan was amended by the Board of Directors, subject to
shareholder approval, to increase the number of shares of Common Stock subject
thereto from 2,500,000 to 3,500,000.
On February 9, 1994, the Board of Directors adopted the 1994 Stock Option Plan
(the "1994 Plan"). The 1994 Plan provides for the issuance of options to
purchase up to 6,750,000 shares of the Company's common stock at an exercise
price of $0.40 per share. The option period is ten years from the date of
grant and options granted under the 1994 Plan vest proportionately, as defined
in the 1994 Plan, but only upon the occurrence of one of the following three
events:
37
<PAGE> 40
Upon the consummation of an underwritten public offering of the
Company's common stock, pursuant to a registration statement wherein
the aggregate net proceeds to the Company's stockholders is at least
$10,000;
Upon the transfer in a private transaction which could have the effect
of transferring to the transferee beneficial ownership (as defined) of
a number of shares of common stock that, in the aggregate, is equal to
or greater than 10% of the then outstanding shares of common stock; or
Upon the sale of all or substantially all of the assets of the
Company.
On March 25, 1994, grants representing 6,500,000 shares of common stock were
awarded to key officers of the Company. The 1994 Plan was approved at the
Company's 1994 Annual Meeting of Stockholders on June 17, 1994. In September
1996 and March 1997, the 1994 Plan was amended by the Board of Directors,
subject to stockholder approval, (i) to increase the number of shares of Common
Stock subject thereto from 6,750,000 to 8,000,000 and (ii) to avoid certain
detrimental tax consequences to the option holder that could occur if certain
vesting events occur. As of December 29, 1996, grants representing 6,350,000
shares of common stock awarded to key officers of the Company remain
outstanding.
In October 1995 the FASB issued Statement No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123, which is effective for fiscal years
beginning after December 15, 1995, allows companies either to continue to
measure compensation cost based on the method prescribed by Accounting
Principles Board Opinion No. 25 ("APB No. 25") or adopt a "fair value" method
of accounting for all employee stock-based compensation. The Company has
elected to continue utilizing the accounting for stock issued to employees
prescribed by APB No. 25. However, proforma disclosures for options granted
after January 1,1995, as if the Company adopted the cost recognition
requirements under SFAS 123 in 1996, are presented below:
<TABLE>
<CAPTION>
1996 1995
--------------------- -------------------
As As
Reported Proforma Reported Proforma
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net income (loss) $(15,075) $(14,964) $ 5,264 $ 5,430
Earnings per share $ (.23) $ (.23) $ (.07) $ (.07)
</TABLE>
The fair value of each option granted is estimated on the grant date
using the Black-Scholes Model. The following assumptions were made in
estimating fair value:
ASSUMPTIONS:
<TABLE>
<S> <C>
Dividend yield 0.00%
Risk-free interest rate 6.11%
Expected volatility 85.79%
Expected life 8 years
</TABLE>
NOTE (11) INCOME TAXES
As discussed in Note 1 - Summary of Significant Accounting Policies, the
Company adopted SFAS 109 effective as of December 28, 1992 on a prospective
basis. There was no cumulative effect of this change in accounting principle
as of December 28, 1992.
38
<PAGE> 41
As discussed in Note 2 - Quasi-Reorganization, the Company is required to
credit the tax benefits realized from the utilization of net operating loss
carryforwards which arose prior to the quasi-reorganization directly to paid-in
capital. In this regard, the Company recognized a provision in lieu of taxes
and credited paid-in capital for $0, $2,127, and $2,739 during 1996, 1995 and
1994, respectively. This is a non-cash provision and does not represent
deferred taxes.
Total income tax expense (benefit) was allocated as follows:
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Income (loss) from operations $(343) $ 568 $ 231
Stockholders' equity of recognition
of tax benefits of net operating
loss carryforwards - 2,127 2,739
----- ------ ------
$(343) $2,695 $2,970
===== ====== ======
</TABLE>
Income tax expense (benefit) attributable to income from operations consists
of:
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
U.S. Federal $(343) $ 366 $ 206
State - 202 25
----- ----- -----
$(343) $ 568 $ 231
===== ===== =====
</TABLE>
Income tax benefit is related to the reduction of the deferred tax liability
created by the differences between the assigned values for purchase accounting
and tax basis of assets and liabilities acquired in the SJS acquisition.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
Years Ended
-----------------------------------
December 29, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally
due to allowance for doubtful accounts $ 61 $ 63
Environmental remediation accruals 470 -
Insurance accruals 3,401 3,376
Unearned revenue 79 467
Other accruals 1,014 823
Net operating loss carryforwards 14,669 11,772
Alternative Minimum Tax credit carryforwards 1,114 1,483
------- -------
Total gross deferred tax assets 20,808 17,984
Less valuation allowance (4,480) (2,758)
------- -------
Net deferred tax assets 16,328 15,226
Deferred tax liabilities:
LIFO Reserve 424 565
Environmental Receivable - 524
Plant and equipment, principally due to
differences in depreciation and basis of assets 15,904 14,137
------- -------
Total gross deferred tax liabilities 16,328 15,226
------- -------
Net deferred tax liability $ - $ -
======= =======
</TABLE>
39
<PAGE> 42
The valuation allowance for the deferred tax assets as of December 25, 1994 was
$12,598. The net change in the total valuation allowance for the fiscal year
ended December 29, 1996 and December 31, 1995 was an increase of $1,722 and a
decrease of $9,840, respectively.
Net Operating Loss Carryforwards
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 is approximately $43,000 at December
29, 1996. The NOL will expire if not utilized between 2005 and 2011.
Approximately $19,000 of the NOL was acquired with the acquisitions of EZCON
and SJS 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, which are available over an indefinite period, that can be utilized
should the Company's alternative minimum tax liability exceed its regular tax
liability.
NOTE (12) UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of the unaudited quarterly results of operations for
the years ended December 29, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
(In thousands except per share data)
1996 March 31 June 30 September 29 December 29
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $194,760 $232,469 $225,293 $209,120
Gross Profit 36,061 45,114 42,946 34,659
Net Income (loss) (2,569) 1,690 1,494 (15,690)
Net Income (loss) Per
Common Share (.04) .02 .02 (.24)
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
(In thousands except per share data)
1995 March 26 June 25 September 24 December 31
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $148,427 $176,015 $205,346 $218,364
Gross Profit 30,506 33,930 44,793 46,703
Net Income 609 1,695 2,648 312
Net Income Per Common Share .01 .02 .03 .01
</TABLE>
NOTE (13) SUBSEQUENT EVENTS
On January 27, 1997 the Company sold 140,000 shares of its newly issued Series
H Redeemable 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. 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 liquidation value is
estimated to be approximately $14,000. Net proceeds of $8,359 from the sale of
the Series H Preferred Stock were used by the Company to redeem all of the
83,591 outstanding shares, including shares for unpaid dividends, of the Series
C Preferred Stock, and net proceeds of $5,081 were used for general corporate
purposes, including paying down a portion of amounts outstanding under the
Revolver.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
41
<PAGE> 44
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
Registrant's definitive proxy statement, pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
Registrant's definitive proxy statement, pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
Registrant's definitive proxy statement, pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
Registrant's definitive proxy statement, pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year.
42
<PAGE> 45
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number Description of Exhibit
3.1.1(a) Amended and Restated Certificate of Incorporation of the
Company dated December 6, 1990.
3.1.2(a) Certificate of Amendment of Certificate of Incorporation of
the Company filed July 2, 1992.
3.1.3(a) Certificate of Amendment of Certificate of Incorporation of
the Company filed February 26, 1993.
3.1.4(a) Certificate of Amendment of Certificate of Incorporation of
the Company filed November 1, 1993.
3.1.5 Certificate of Designation, Preferences and Rights of Series H
Preferred Stock filed January 24, 1997 - incorporated by
reference from Exhibit 4.1 of the Company's Current Report on
Form 8-K dated January 27, 1997.
3.2(a) Bylaws of the Company restated as of March 25, 1992.
4.1(a)(b) 1991 Stock Option Plan of the Company, as amended.
4.2(a)(b) Amended and Restated 1994 Stock Option Plan of the Company.
4.3.1(a) Registration Rights Agreement dated March 25, 1992 among the
Company, Phemus Corporation and Intercontinental Mining &
Resources Limited.
4.3.2(a) Amendment to Registration Rights Agreement dated July 31, 1992,
among the Company, Phemus Corporation and Intercontinental
Mining & Resouces Limited.
4.3.3(a) Second Amendment to Registration Rights Agreement dated April
21, 1993, among the Company, Phemus Corporation, Quadrant
Capital Corp. and Intercontinental Mining & Resources
Incorporated.
4.3.4 Third Amendment to Registration Rights Agreement dated as of
January 27, 1997, among the Company, Phemus Corporation and
Intercontinental Mining & Resources Incorporated -
incorporated by reference from Exhibit 4.4 of the Company's
Current Report on Form 8-K dated January 27, 1997.
4.4.1(a) Registration Rights Agreement dated July 31, 1992, between the
Company and Tenacqco Bridge Partnership, L.P.
4.4.2(a) Amendment to Registration Rights Agreement dated April 21,
1993, among the Company, Tenacqco Bridge Partnership, L.P. and
DLJ Capital Corporation.
43
<PAGE> 46
4.5.1(a) Amended and Restated Stockholders Agreement dated June 1,
1994, among DLJ Capital Corporation, Tenacqco Bridge
Partnership, L.P., Phemus Corporation, Intercontinental Mining
& Resources Incorporated, Quadrant Capital Corp., and the
Company.
4.5.2 Amendment No. 1 to Stockholders Agreement dated as of January
27, 1997, among DLJ Capital Corporation, Tenacqco Bridge
Partnership, L.P., Phemus Corporation, Intercontinental Mining
& Resources Incorporated and the Company - incorporated by
reference from Exhibit 4.3 of the Company's Current Report on
Form 8- K dated January 27, 1997.
4.5.3(a) Revised Schedule 1 to Stockholders Agreement dated as of March
28, 1997.
4.6(a) Stockholders Letter of Understanding dated January 17, 1995,
among the Company, DLJ Capital Corporation, Phemus
Corporation, Tenacqco Bridge Partnership, L.P.,
Intercontinental Mining & Resources Incorporated, Quadrant
Capital Corp. and Societe Generale, as agent.
4.7 Form of Common Stock Purchase Warrant of the Company issued
pursuant to the Securities Purchase Agreement dated January
27, 1997, between the Company and Phemus Corporation -
incorporated by reference from Exhibit 4.5 of the Company's
Current Report on Form 8-K dated January 27, 1997.
10.1(a) Stock Acquisition Agreement dated March 25, 1992, among the
Company, Larry Jack Taylor, April Michele Taylor Trust and
Kerri Denise Taylor Trust.
10.2(a) Form of Lease executed by Taylor Petroleum, Inc. as Tenant.
10.3(a) Agreement Regarding Leases effective as of March 1, 1992,
among the Company, Anadarko Development Company, Dakota Land
Company, Salt Fork Company, Inc., Larry Jack Taylor, and First
National Bank of Boston.
10.4(a) Stock Acquisition Agreement dated March 31, 1994, between the
Company and ESCM & Associates, Inc. regarding the sale of
Amber Refining, Inc. and Amber Pipeline, Inc.
10.5.1(a) Amended and Restated Credit and Guaranty Agreement dated
October 2, 1995, among E-Z Serve Convenience Stores, Inc., the
Company, the lenders party thereto, and Societe Generale, as
agent for the lenders.
10.5.2 Amendment and Waiver No.1 to Amended and Restated Credit and
Guaranty Agreement dated April 30, 1996, among E-Z Serve
Convenience Stores, Inc., the Company, the lenders party
thereto, and Societe Generale, as agent for the lenders -
incorporated by reference from Exhibit 10.1 of the Company's
quarterly report on Form 10-Q for the quarter ended March 31,
1996.
10.5.3(a) Amendment and Waiver No. 2 to Amended and Restated Credit and
Guaranty Agreement dated March 27, 1997, among E-Z Serve
Convenience Stores, Inc., the Company, the lenders party
thereto, and Societe Generale, as agent for the lenders.
10.6.1(a) Agreement Between Dillon Companies, Inc. and E-Z Serve
Convenience Stores, Inc. dated December 2, 1994.
44
<PAGE> 47
10.6.2(a) Amendment to Agreement between Dillon Companies, Inc. and E-Z
Serve Convenience Stores, Inc. dated December 28, 1994.
10.6.3(a) Second Amendment to agreement between Dillon Companies, Inc.
and E-Z Serve Convenience Stores, Inc. dated January 17,
1995.
10.7 Agreement and Plan of Merger by and among the Company, EZS
Acquisition Corporation and Sunshine dated June 15, 1995 -
incorporated by reference from Exhibit 99.(c)(1) of the
Company's Tender Offer Statement on Schedule 14D-1 dated June
19, 1995.
10.8 Offer of Purchase by EZS Acquisition Corporation dated June
19, 1995 - incorporated by reference from Exhibit 99.(a)(1) of
the Company's Tender Offer Statement on Schedule 14D-1 dated
June 19, 1995.
10.9 Securities Purchase Agreement dated January 27, 1997, between
the Company and Phemus Corporation - incorporated by reference
from Exhibit 99.1 of the Company's Current Report on Form 8-K
dated January 27, 1997.
10.10(a)(b) Employment Agreement dated March 4, 1997, between Kathleen
Callahan-Guion and the Company.
21(a) Subsidiaries of the Registrant.
23(a) Consent of KPMG Peat Marwick LLP to the incorporation of their
report, included in this Form 10-K for the year ended December
29, 1996, into the Company's previously filed Registration
Statements on Forms S-8.
27(a) Financial Data Schedule for the period ended December 29,
1996.
- -------------------
(a) filed herewith
(b) Management contract or compensatory plan or arrangement.
45
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
E-Z SERVE CORPORATION
(Registrant)
By: /s/ NEIL H. MCLAURIN
-------------------------
Neil H. McLaurin
Chairman of the Board and
Chief Executive Officer
Date: April 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NEIL H. MCLAURIN Chairman of the Board and Date: April 11, 1997
- ------------------------ Chief Executive Officer -------------------
NEIL H. MCLAURIN
/s/ JOHN T. MILLER Sr. Vice President, Date: April 11, 1997
- ------------------------ Chief Financial Officer and -------------------
JOHN T. MILLER Principal Accounting Officer
/s/ DONALD D. BEANE Director Date: April 11, 1997
- ------------------------ -------------------
DONALD D. BEANE
/s/ SHELBY R. GIBBS Director Date: April 11, 1997
- ------------------------ -------------------
SHELBY R. GIBBS
/s/ JOHN M. SALLAY Director Date: April 11, 1997
- ------------------------ -------------------
JOHN M. SALLAY
/s/ JOHN R. SCHOEMER Director Date: April 11, 1997
- ------------------------ -------------------
JOHN R. SCHOEMER
/s/ LARRY J. TAYLOR Director Date: April 11, 1997
- ------------------------ -------------------
LARRY J. TAYLOR
/s/ PAUL THOMPSON III Director Date: April 11, 1997
- ------------------------- -------------------
PAUL THOMPSON III
</TABLE>
46
<PAGE> 49
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
3.1.1(a) Amended and Restated Certificate of Incorporation of the
Company dated December 6, 1990.
3.1.2(a) Certificate of Amendment of Certificate of Incorporation of
the Company filed July 2, 1992.
3.1.3(a) Certificate of Amendment of Certificate of Incorporation of
the Company filed February 26, 1993.
3.1.4(a) Certificate of Amendment of Certificate of Incorporation of
the Company filed November 1, 1993.
3.1.5 Certificate of Designation, Preferences and Rights of Series H
Preferred Stock filed January 24, 1997 - incorporated by
reference from Exhibit 4.1 of the Company's Current Report on
Form 8-K dated January 27, 1997.
3.2(a) Bylaws of the Company restated as of March 25, 1992.
4.1(a)(b) 1991 Stock Option Plan of the Company, as amended.
4.2(a)(b) Amended and Restated 1994 Stock Option Plan of the Company.
4.3.1(a) Registration Rights Agreement dated March 25, 1992 among the
Company, Phemus Corporation and Intercontinental Mining &
Resources Limited.
4.3.2(a) Amendment to Registration Rights Agreement dated July 31, 1992,
among the Company, Phemus Corporation and Intercontinental
Mining & Resouces Limited.
4.3.3(a) Second Amendment to Registration Rights Agreement dated April
21, 1993, among the Company, Phemus Corporation, Quadrant
Capital Corp. and Intercontinental Mining & Resources
Incorporated.
4.3.4 Third Amendment to Registration Rights Agreement dated as of
January 27, 1997, among the Company, Phemus Corporation and
Intercontinental Mining & Resources Incorporated -
incorporated by reference from Exhibit 4.4 of the Company's
Current Report on Form 8-K dated January 27, 1997.
4.4.1(a) Registration Rights Agreement dated July 31, 1992, between the
Company and Tenacqco Bridge Partnership, L.P.
4.4.2(a) Amendment to Registration Rights Agreement dated April 21,
1993, among the Company, Tenacqco Bridge Partnership, L.P. and
DLJ Capital Corporation.
<PAGE> 50
4.5.1(a) Amended and Restated Stockholders Agreement dated June 1,
1994, among DLJ Capital Corporation, Tenacqco Bridge
Partnership, L.P., Phemus Corporation, Intercontinental Mining
& Resources Incorporated, Quadrant Capital Corp., and the
Company.
4.5.2 Amendment No. 1 to Stockholders Agreement dated as of January
27, 1997, among DLJ Capital Corporation, Tenacqco Bridge
Partnership, L.P., Phemus Corporation, Intercontinental Mining
& Resources Incorporated and the Company - incorporated by
reference from Exhibit 4.3 of the Company's Current Report on
Form 8- K dated January 27, 1997.
4.5.3(a) Revised Schedule 1 to Stockholders Agreement dated as of March
28, 1997.
4.6(a) Stockholders Letter of Understanding dated January 17, 1995,
among the Company, DLJ Capital Corporation, Phemus
Corporation, Tenacqco Bridge Partnership, L.P.,
Intercontinental Mining & Resources Incorporated, Quadrant
Capital Corp. and Societe Generale, as agent.
4.7 Form of Common Stock Purchase Warrant of the Company issued
pursuant to the Securities Purchase Agreement dated January
27, 1997, between the Company and Phemus Corporation -
incorporated by reference from Exhibit 4.5 of the Company's
Current Report on Form 8-K dated January 27, 1997.
10.1(a) Stock Acquisition Agreement dated March 25, 1992, among the
Company, Larry Jack Taylor, April Michele Taylor Trust and
Kerri Denise Taylor Trust.
10.2(a) Form of Lease executed by Taylor Petroleum, Inc. as Tenant.
10.3(a) Agreement Regarding Leases effective as of March 1, 1992,
among the Company, Anadarko Development Company, Dakota Land
Company, Salt Fork Company, Inc., Larry Jack Taylor, and First
National Bank of Boston.
10.4(a) Stock Acquisition Agreement dated March 31, 1994, between the
Company and ESCM & Associates, Inc. regarding the sale of
Amber Refining, Inc. and Amber Pipeline, Inc.
10.5.1(a) Amended and Restated Credit and Guaranty Agreement dated
October 2, 1995, among E-Z Serve Convenience Stores, Inc., the
Company, the lenders party thereto, and Societe Generale, as
agent for the lenders.
10.5.2 Amendment and Waiver No.1 to Amended and Restated Credit and
Guaranty Agreement dated April 30, 1996, among E-Z Serve
Convenience Stores, Inc., the Company, the lenders party
thereto, and Societe Generale, as agent for the lenders -
incorporated by reference from Exhibit 10.1 of the Company's
quarterly report on Form 10-Q for the quarter ended March 31,
1996.
10.5.3(a) Amendment and Waiver No. 2 to Amended and Restated Credit and
Guaranty Agreement dated March 27, 1997, among E-Z Serve
Convenience Stores, Inc., the Company, the lenders party
thereto, and Societe Generale, as agent for the lenders.
10.6.1(a) Agreement Between Dillon Companies, Inc. and E-Z Serve
Convenience Stores, Inc. dated December 2, 1994.
<PAGE> 51
10.6.2(a) Amendment to Agreement between Dillon Companies, Inc. and E-Z
Serve Convenience Stores, Inc. dated December 28, 1994.
10.6.3(a) Second Amendment to agreement between Dillon Companies, Inc.
and E-Z Serve Convenience Stores, Inc. dated January 17,
1995.
10.7 Agreement and Plan of Merger by and among the Company, EZS
Acquisition Corporation and Sunshine dated June 15, 1995 -
incorporated by reference from Exhibit 99.(c)(1) of the
Company's Tender Offer Statement on Schedule 14D-1 dated June
19, 1995.
10.8 Offer of Purchase by EZS Acquisition Corporation dated June
19, 1995 - incorporated by reference from Exhibit 99.(a)(1) of
the Company's Tender Offer Statement on Schedule 14D-1 dated
June 19, 1995.
10.9 Securities Purchase Agreement dated January 27, 1997, between
the Company and Phemus Corporation - incorporated by reference
from Exhibit 99.1 of the Company's Current Report on Form 8-K
dated January 27, 1997.
10.10(a)(b) Employment Agreement dated March 4, 1997, between Kathleen
Callahan-Guion and the Company.
21(a) Subsidiaries of the Registrant.
23(a) Consent of KPMG Peat Marwick LLP to the incorporation of their
report, included in this Form 10-K for the year ended December
29, 1996, into the Company's previously filed Registration
Statements on Forms S-8.
27(a) Financial Data Schedule for the period ended December 29,
1996.
- -------------------
(a) filed herewith
(b) Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 3.1.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
E-Z SERVE HOLDING COMPANY, INC.
E-Z Serve Holding Company, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation shall now and in the future be E-Z Serve
Corporation. The name under which the corporation was originally
incorporated was E-Z Serve Holding Company, Inc. The date of filing
of its original Certificate of Incorporation with the Secretary of
State was December 9, 1986.
2. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation. The text of the Certificate of Incorporation as amended
or supplemented heretofore is further amended and restated as herein
set forth:
"AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
E-Z SERVE CORPORATION
********
ARTICLE ONE
The name of the corporation is E-Z SERVE CORPORATION (the
"Corporation").
ARTICLE TWO
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
<PAGE> 2
ARTICLE THREE
The nature of the business, or objects or purposes to be transacted,
promoted or carried on are to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have the
authority to issue is one hundred ten million (110,000,000), of which one
hundred million (100,000,000) shares shall be designated as Common Stock of the
par value of one cent ($0.01) per share ($1,000,000); and ten million
(10,000,000) shall be designated as Preferred Stock of the par value of one
cent ($0.01) per share ($100,000).
The following is a statement of the designations and the powers,
preferences, and rights, and the qualifications, limitations, or restrictions
thereof, in respect of the classes of stock of the Corporation, and the
authority with respect thereto which is expressly vested in the Board of
Directors of the Corporation:
Part I - Common Stock
(1) Each share of Common Stock of the Corporation shall be equal
in all respects to each other share of Common Stock. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted to a vote of
the stockholders of the Corporation and shall be entitled to one vote for each
share of Common Stock held.
(2) Subject to the preferential dividend rights applicable to
shares of Preferred Stock, if any, the holders of shares of the Common Stock
shall be entitled to receive such dividends (payable
-2-
<PAGE> 3
in cash, stock or otherwise) as may be declared by the Board of Directors at
any time or from time to time out of any funds legally available therefor.
(3) In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation and subject to distribution of
the preferential amounts to be distributed to the holders of shares of the
Preferred Stock, if any, or a sum sufficient for such distribution shall have
been set aside, the holders of shares of the Common Stock shall be entitled to
receive all of the remaining assets of the Corporation available for
distribution to its stockholders.
Part II - Preferred Stock
(1) Shares of Preferred Stock may be issued from time to time in
one or more classes or series (hereinafter referred to collectively as
"series"), the shares of each series to have such voting powers, full or
limited, or no voting powers, and such other designations, preferences, and
relative, participating, optional, or other special rights, and qualifications,
limitations, or restrictions thereof, as shall be stated and expressed in a
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation. The Board of Directors of the
Corporation is hereby expressly authorized, subject to the limitations provided
by law, to establish and designate series of the Preferred Stock, to fix the
number of shares constituting such series, and to fix the designations and the
relative powers, rights, preferences, and limitations of the shares of each
series and the variations in the relative rights, powers, preferences, and
limitations as between series, and to increase and to decrease, but not below
the number of shares then outstanding, the number of shares constituting each
series. The authority of the Board of Directors of the Corporation with
-3-
<PAGE> 4
respect to each series shall include, but shall not be limited to, the
authority to determine the following:
(a) The designation of such series.
(b) The number of shares initially constituting such series.
(c) The increase, and the decrease to a number not less than the
number of outstanding shares of such series, of the number of
shares constituting such series, theretofore fixed.
(d) The rate or rates and the times at which dividends on the
shares of such series shall be paid, and whether or not such
dividends shall be cumulative, and, if such dividends shall be
cumulative, the date or dates from after which they shall
accumulate.
(e) Whether or not the shares of such series shall be redeemable,
and if such shares shall be redeemable, the terms and
conditions of such redemption, including, but not limited to,
the date or dates upon or after which such shares shall be
redeemable and the amount per share which shall be payable
upon such redemption, which amount may vary under different
conditions and at different redemption dates.
(f) The amount payable on the shares of such series in the event
of the voluntary or the involuntary liquidation, dissolution
or winding up of the Corporation and whether a liquidation,
dissolution or winding up of the Corporation as such terms are
used in this subparagraph (f) shall be deemed to be occasioned
by or to include any consolidation or merger of the
Corporation with or into any other corporation or corporations
or a sale, lease, or conveyance of all or a part of its
assets.
(g) Whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and,
if such shares shall have voting rights, the terms and
conditions thereof, including, but not limited to, the right
of the holders of such shares to vote as a separate class
either alone or with the holders of shares of one or more
other series of Preferred Stock and the right to have more (or
less) than one vote per share.
(h) Whether or not a sinking fund shall be provided for the
redemption of the shares of such series, and if such a sinking
fund shall be provided, the terms and conditions thereof.
-4-
<PAGE> 5
(i) Whether or not a purchase fund shall be provided for the
shares of such series, and if such a purchase fund shall be
provided, the terms and conditions thereof.
(j) Whether or not the shares of such series shall have conversion
privileges, and if such shares have conversion privileges, the
terms and conditions of conversion, including, but not limited
to, any provision for the adjustment of the conversion rate or
of the conversion price.
(k) Any other powers, preferences, and relative, participating,
optional, or other special rights or qualifications,
limitations, or restrictions thereof, as shall not be
inconsistent with the provisions of this Article Four or the
limitations provided by law.
ARTICLE FIVE
In furtherance and not in limitation of the powers conferred by
statue, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation.
To set apart out of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By resolution passed by a majority of the whole board, to designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation, which, to extent provided in the resolution or in
the by-laws of the Corporation, and not inconsistent with the Delaware General
Corporation Law, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or
-5-
<PAGE> 6
committees shall have such name or names as may be stated in the by-laws of the
Corporation or as may be determined from time to time by resolution adopted by
the Board of Directors.
ARTICLE SIX
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
-6-
<PAGE> 7
ARTICLE SEVEN
Directors, Officers and employees of the Corporation shall be entitled
to indemnification by the Corporation for the performance of their duties to
the Corporation as may be set out in the Bylaws of the Corporation. Any repeal
or limitation of any indemnification as set out in the Bylaws shall be
prospective only from the date of repeal or limitation of the indemnification
and shall not adversely affect any rights granted to any Director, Officer or
employee prior to the date of any repeal or limitation of indemnification
previously granted.
ARTICLE EIGHT
No contract or transaction between the Corporation and one or more of
its Directors or Officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the Corporation's Directors or Officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the Director or Officer is present at or participates in the
meeting of the Board or Committee which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose, if (i) the
material facts as to this relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
Committee, and the Board or Committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum; or
(ii) the material facts as to this relationship or interest and as to the
contract or transaction are disclosed or are known to the shareholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the shareholders; or (iii) the contract or transaction is
fair as to the
-7-
<PAGE> 8
Corporation as of the time it is authorized, approved, or ratified by the Board
of Directors or of a Committee which authorizes the contract or transaction.
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a Committee
which authorizes the contract or transactions.
ARTICLE NINE
No holder of any securities of the Corporation shall, as such holder,
have any preemptive or preferential right to receive, purchase, or subscribe
for (a) any unissued or treasury shares of any class of stock (whether now or
hereafter authorized) of the Corporation, (b) any obligations, evidences of
indebtedness, or other securities of the Corporation convertible into or
exchangeable for, or carrying or accompanied by any rights to receive,
purchase, or substitute for, any such unissued or treasury shares, (c) any
right of subscription to or to receive, or any warrant or option for the
purchase of, any of the foregoing securities, or (d) any other securities that
may be issued or sold by the Corporation, other than such right or rights (if
any) as the Board of Directors or the Corporation, in its sole and absolute
discretion, may determine at any time or from time to time.
ARTICLE TEN
The Corporation reserves the right to amend, alter, or repeal any
provisions contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute; provided, however, that any alteration,
repeal, change, or amendment to the Certificate of Incorporation (other than by
means of a certificate or designation as contemplated by Part II of Article
Fourth) shall require the approval of the majority of the outstanding stock
entitled to vote thereon and a majority of the
-8-
<PAGE> 9
outstanding stock of each class of stock entitled to vote thereon as a class;
and all the rights conferred upon stockholders herein are granted subject to
this reservation.
By-Laws of the Corporation may be adopted, amended, or repealed by the
affirmative vote of a majority of the Board of Directors or by the affirmative
vote of the holders of a majority of the voting power of the Corporation's
stock outstanding and entitled to vote thereon. Such by-laws may contain any
provision for the regulation and management of the affairs of the Corporation
and the rights or powers of its stockholders, directors, officers, or employees
not inconsistent with the laws of the State of Delaware.
ARTICLE ELEVEN
The number of directors of the Corporation shall be fixed by the
by-laws of the Corporation. The term of the directors shall continue until the
election and qualification of their successors.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, and any limitations provided by law, any director or the
entire Board of Directors may be removed at any time upon the affirmative vote
of the holders of a majority of the voting power of all of the stock of the
Corporation entitled to vote in the election of directors.
ARTICLE TWELVE
To the fullest extent permitted by the Delaware General Corporation
Law as it now exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. Any repeal or limitation of this
paragraph by the stockholders of the Corporation shall be prospective only and
-9-
<PAGE> 10
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or limitation.
ARTICLE THIRTEEN
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the Corporation. Elections of
directors need not be by written ballot unless the by-laws of the Corporation
so provide."
3. The Amended and Restated Certificate of Incorporation was duly adopted
by the Board of Directors in accordance with Section 245 of the
General Corporation Law of the State of Delaware.
4. The Restated Certificate of Incorporation was duly adopted by
unanimous written consent of the stockholders in accordance with the
applicable provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Bruce N. Huff, its Senior Vice President, and attested by Larry E.
Cummings, its Secretary, on this the 6th day of December, 1990.
ATTEST: E-Z SERVE HOLDING COMPANY, INC.
By: /s/ Larry E. Cummings By: /s/ Bruce N. Huff
------------------------------- ------------------------------
Larry E. Cummings Bruce N. Huff
Secretary Senior Vice President
-10-
<PAGE> 1
EXHIBIT 3.1.2
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF E-Z SERVE CORPORATION
E-Z Serve Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that:
FIRST: At a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment of the Amended
and Restated Certificate of Incorporation of the Corporation, declaring the
amendment to be advisable and putting forth such amendment for consideration at
the annual meeting of the stockholders. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the first paragraph of Article Four of
the Corporation's Amended and Restated Certificate of Incorporation is
hereby amended in its entirety to read as follows:
"The aggregate number of shares which the Corporation
shall have the authority to issue is twenty-eight million
(28,000,000), of which twenty-five million (25,000,000) shares shall
be designated as Common Stock of the par value of one cent ($0.01) per
share ($250,000); and three million (3,000,000) shall be designated as
Preferred Stock of the par value of one cent ($0.01) per share
($30,000)."
SECOND: Pursuant to a resolution of the Corporation's Board of
Directors, the annual meeting of the stockholders of the Corporation was duly
called and held on June 26, 1992, upon notice in accordance with the Delaware
General Corporation Law at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: The amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Neil H. McLaurin, its President, and attested to by John T. Miller,
its Secretary, on June 30, 1992.
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
----------------------------------
Name: Neil H. McLaurin
Title: President
<PAGE> 2
Attest:
By: /s/ John T. Miller
---------------------------
Name: John T. Miller
Title: Secretary
-2-
<PAGE> 1
EXHIBIT 3.1.3
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF E-Z SERVE CORPORATION
E-Z Serve Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that:
FIRST: At a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth proposed amendments to the Amended
and Restated Certificate of Incorporation of the Corporation, declaring the
amendments to be advisable and putting forth such amendments for consideration
at the special meeting of the stockholders. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that the first paragraph of Article Four of the
Corporation's Amended and Restated Certificate of Incorporation is
hereby amended in its entirety to read as follows:
"The aggregate number of shares which the Corporation
shall have the authority to issue is fifty-three million (53,000,000)
of which fifty million (50,000,000) shares shall be designated as
Common Stock of the par value of one cent ($0.01) per share
($500,000); and three million (3,000,000) shall be designated as
Preferred Stock of the par value of one cent ($0.01) per share
($30,000)."
; and further
RESOLVED, that the first sentence of the first paragraph of
Section 10 of the Certificate of Designation, Preferences and Rights
of $6.00 Convertible Preferred Stock, Series C ("Series C
Designation") contained as part of the Corporation's Amended and
Restated Certificate of Incorporation is hereby amended in its
entirety to read as follows, with the rest of such paragraph to remain
as it presently exists:
"SECTION 10--Conversion--All or any part of the
shares of Series C Preferred Stock shall be convertible at the option
of the holders of Series C Preferred Stock at any time at the
principal office of the Corporation located in Houston, Texas, or at
the offices of such duly appointed transfer agents for the Series C
Preferred Stock, if any, as the Board of Directors of the Corporation
may determine, into fully paid and non-assessable shares (calculated
to the nearest 1/100 of a share) of Common Stock of the Corporation at
the rate of 52.63 shares of Common Stock for each share of Series C
Preferred Stock; provided, however, that if the holder has, as
provided in the next succeeding paragraph, given
<PAGE> 2
written notice of conversion and the Corporation, within 30 days
following such notice, has given notice of redemption of the shares of
Series C Preferred Stock to be converted, such right of conversion
shall cease and terminate as to the shares called for redemption,
unless default shall be made in the payment of the redemption price,
in which case the shares shall then be immediately convertible without
the giving of any further notice; and provided, further, that if
notice of redemption is given by the Corporation at any time other
than within the 30 days following the Corporation's receipt of a
holder's notice of conversion, the right of conversion shall cease and
terminate, as to the shares called for redemption, at the close of
business on the business day immediately preceding the date fixed for
redemption, unless default shall be made in the payment of the
redemption price."
; and further
RESOLVED, that the second paragraph of Section 10 of the
Series C Designation is hereby amended in its entirety to read as
follows:
"Before any holder of Series C Preferred Stock shall be
entitled to convert the same into Common Stock, he shall (i) give
written notice to the Corporation at the principal office of the
Corporation that such holder elects so to convert said Series C
Preferred Stock on a day specified therein that is at least 30 days
subsequent to the Corporation's receipt of such written notice and
shall also state therein the name or names in which such holder wishes
the certificate or certificates for Common Stock to be issued, and
(ii) on the day specified by the holder in its written notice for
conversion, surrender the certificate or certificates for such Series
C Preferred Stock at the principal office of the Corporation or at the
office of any transfer agent appointed as aforesaid, which certificate
or certificates, if the Corporation shall so request, shall be duly
endorsed to the Corporation or in blank."
; and further
RESOLVED, that the third paragraph of Section 10 of the Series
C Designation is hereby deleted in its entirety.
SECOND: Pursuant to a resolution of the Corporation's Board of
Directors, the special meeting of the stockholders of the Corporation was duly
called and held on February 26, 1993, upon notice in accordance with the
Delaware General Corporation Law at which meeting the necessary number of
shares as required by statute were voted in favor of the amendments.
-2-
<PAGE> 3
THIRD: The amendments were duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Neil H. McLaurin, its President, and attested to by John T. Miller,
its Secretary, on February 26, 1993.
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
------------------------------
Name: Neil H. McLaurin
Title: President
Attest:
By: /s/ John T. Miller
-----------------------
Name: John T. Miller
Title: Secretary
-3-
<PAGE> 1
EXHIBIT 3.1.4
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF E-Z SERVE CORPORATION
E-Z Serve Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that:
FIRST: At a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth proposed amendments to the Amended
and Restated Certificate of Incorporation of the Corporation, declaring the
amendments to be advisable and putting forth such amendments for consideration
at the special meeting of the stockholders. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that the first paragraph of Article Four of the
Company's Amended and Restated Certificate of Incorporation be amended
in its entirety to read as follows:
"The aggregate number of shares which the Corporation shall
have the authority to issue is one hundred three million (103,000,000)
of which one hundred million (100,000,000) shares shall be designated
as Common Stock, par value $0.01 per share; and three million
(3,000,000) shall be designated as Preferred Stock, par value $0.01
per share."
; and further
RESOLVED, that the Certificate of Designation, Preferences and
Rights of $6.00 Convertible Preferred Stock, Series C ("Series C
Designation") contained as part of the Company's Amended and Restated
Certificate of Incorporation be amended as follows:
<PAGE> 2
a. The first sentence of the first paragraph of Section 7 of the
Series C Designation is hereby amended in its entirety to read as
follows, with the rest of such paragraph to remain as it presently
exists:
"SECTION 7--Ranking--The Series C Preferred Stock shall rank in right
of payment of dividends and as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, senior to the Corporation's currently
authorized Common Stock or any other capital stock ranking junior to
the Series C Preferred Stock (the capital stock referenced in this
clause collectively referred to herein as the "Other Capital Stock")."
b. The second sentence of Section 10(e) of the Series C
Designation is hereby amended in its entirety to read as follows, with
the rest of such paragraph to remain as it presently exists:
"Notwithstanding the foregoing, no adjustment of the number of shares
of Common Stock into which each share of the Series C Preferred Stock
is convertible shall be made in connection with the issuance or sale
by the Corporation of any shares of Common Stock issued or sold (A)
upon exercise of any stock options granted by the Corporation pursuant
to any stock option plan of the Corporation, or otherwise issued or
sold as compensation to any officer, director or employee of the
Corporation or any of its subsidiaries, (B) pursuant to the Consulting
Agreement between the Corporation and Herbert Hitchings, (C) upon the
sale of the Corporation's Series B Convertible Preferred Stock, Series
D Convertible Preferred Stock, Series E Convertible Preferred Stock or
Series F Convertible Preferred Stock ("Preferred Stock") or the
conversion of the Preferred Stock
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<PAGE> 3
into shares of Common Stock, (D) upon the sale or exercise of warrants
to purchase Series D Convertible Preferred Stock and upon the issuance
of Common Stock for the accrued but unpaid dividends on the shares of
Series B Preferred Stock of TOC Retail, Inc. in connection with the
exercise of such warrants, or (E) upon the exercise of warrants issued
pursuant to that certain Warrant Subscription Agreement dated as of
April 21, 1993, among the Company, Phemus Corporation and
Intercontinental Mining & Resources Incorporated."
SECOND: Pursuant to a resolution of the Corporation's Board of
Directors, the special meeting of the stockholders of the Corporation was duly
called and held on October 29, 1993, upon notice in accordance with the
Delaware General Corporation Law at which meeting the necessary number of
shares as required by statute were voted in favor of the amendments.
THIRD: The amendments were duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Neil H. McLaurin, its President, and attested to by John T. Miller,
its Secretary, on October 29, 1993.
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
--------------------------
Name: Neil H. McLaurin
Title: President
-3-
<PAGE> 4
Attest:
By: /s/ John T. Miller
------------------------
Name: John T. Miller
Title: Secretary
-4-
<PAGE> 1
EXHIBIT 3.2
E-Z SERVE CORPORATION
(A Delaware corporation)
BY-LAWS
ARTICLE I
OFFICES
SECTION 1.1. REGISTERED OFFICE. The initial registered office and
address of the corporation is Corporation Trust Center, 1209 Orange Street in
the city of Wilmington, county of New Castle, state of Delaware. The name of
its registered agent at such place shall be The Corporation Trust Company. The
Board of Directors may change the corporation's registered office or registered
agent, or both, in the manner set forth under the Delaware General Corporation
Laws (hereinafter called the "Act").
SECTION 1.2. OTHER OFFICES. The corporation may also have offices at
such other places, both within and without the State of Texas, as the Board of
Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. PLACE OF MEETINGS. All meetings of the shareholders
shall be held at Bedford, Texas, or at such other place and at such address as
shall be specified in the notice of such meeting.
SECTION 2.2. ANNUAL MEETINGS. Annual meetings of the shareholders
shall be held each year at a place and time called by a majority of the Board
of Directors. Such meetings to be held at 10:00 a.m. Central Standard Time or
such other hour as the Board of Directors may prescribe and shall be held for
the purpose of electing Directors for the ensuing year and for the transaction
of such other business as may properly come before the meeting.
SECTION 2.3. SPECIAL MEETINGS. Special Meetings of the Shareholders,
for any purpose(s), unless otherwise prescribed by the Act or by the Articles
of Incorporation, may be called by the Chairman of the Board, the President or
Secretary, and shall be called by the Chairman of the Board, the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of the
<PAGE> 2
holders owning at least one-tenth (1/10) in amount of the entire capital stock
of the corporation issued and outstanding and entitled to vote. Such request
shall state the purpose(s) of the proposed meeting. Business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice.
SECTION 2.4. NOTICES. Written or printed notice of the annual or any
special meeting stating the place, day, and hour of the meeting and, in the
case of a special meeting, the purpose(s) for which the meeting is called,
shall be delivered to each shareholder of record entitled to vote not less than
ten (10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the chairman of the board, the
president, the secretary or the officer or person calling the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the shareholder at the address as it appears on
the stock transfer books of the corporation, with postage thereon prepaid.
SECTION 2.5. VOTING LIST. The officer who has charge of the stock
transfer books of the corporation shall make, at least ten (10) days before
every meeting of shareholders, a complete list of the shareholders entitled to
vote at said meeting or any adjournment thereof, arranged in alphabetical
order, with address of and the number of shares held by each. Such list shall
be kept on file at the registered office of the corporation for a period of ten
(10) days prior to such meeting and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are shareholders entitled to examine such list or transfer books and to
vote at any meeting of shareholders.
SECTION 2.6. QUORUM AND ADJOURNMENT.
(a) The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by the Act or by the Articles of
Incorporation. Without regard to whether such quorum shall be present or
represented at the meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting. At such adjourned meeting at which quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
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<PAGE> 3
(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the shares having voting power present in person or
represented by proxy, shall decide any question brought before such meeting.
The shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 2.7. VOTING RIGHTS.
At any meeting of the shareholders --
(a) Each outstanding share, regardless of class, shall be entitled
to one (1) vote on each matter submitted to a vote, except to the extent that
the voting rights of the shares of any class or classes are limited or denied
by the Articles of Incorporation or by specific resolutions all as permitted by
the Act.
(b) Treasury shares and shares of stock held by this corporation
in a fiduciary capacity shall not be voted, directly or indirectly, at any
meeting and shall not be counted in determining the total number of outstanding
shares at any given time.
(c) A shareholder may vote either in person or by proxy executed
in writing by the shareholder or by his duly authorized attorney in fact. No
proxy shall be voted after eleven (11) months from the date of its execution
unless otherwise provided in the proxy. Each proxy shall be revocable unless
expressly provided therein to be irrevocable, and unless otherwise made
irrevocable by law.
(d) At all elections of directors no holder of stock entitled to
vote shall be permitted to cumulate his shares.
(e) Shares standing in the name of another corporation, domestic
or foreign, may be voted on by such officer, agent, or proxy as the bylaws of
such corporation may authorize or, in the absence of such authorization, as the
Board of Directors of such corporation may determine.
(f) Shares held by an administrator, guardian or conservator may
be voted by him so long as such shares forming part of an estate being served
by him, either in person or by proxy, without a transfer of such shares into
his name. Shares standing in the name of a trustee may be voted by him, either
in person or by proxy, but no trustee shall be entitled to vote shares held by
him without a transfer of such shares into his name as trustee.
(g) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
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<PAGE> 4
voted by such receiver without the transfer thereof into his name if authority
so to do be contained in an appropriate order of the court by which such
receiver was appointed.
(h) A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares as
transferred.
SECTION 2.8. METHOD OF VOTING. Voting on any question or in any
election may be by voice vote or show of hands unless the presiding officer
shall order, or the holders of at least ten percent (10%) of the shares
entitled to vote shall demand that voting be by written ballot.
SECTION 2.9. ACTION WITHOUT MEETINGS. Unless otherwise provided in
the Certificate of Incorporation, any action required or permitted to be taken
by stockholders for or in connection with any corporate action may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing setting forth the action so taken shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
If action is taken by unanimous consent of stockholders, the writing
or writings comprising such unanimous consent shall be filed with the records
of the meetings of stockholders.
If action is taken by less than unanimous consent of stockholders and
in accordance with the foregoing, there shall be filed with the records of the
meetings of stockholders the writing or writings comprising such less than
unanimous consent. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those who
have not consented in writing, and a certificate signed and attested to by the
secretary that such notice was given shall be filed with the records of the
meetings of the stockholders.
In the event that the action which is consented to is such as would
have required the filing of a certificate under any of the provisions of the
General Corporation Law of Delaware, if such action had been voted upon by the
stockholders at a meeting thereof, the certificate filed under such provision
shall state that written consent has been given under Section 228 of said
General Corporation Law in lieu of stating that the stockholders have voted
upon the corporate action in question, if such last mentioned statement is
required thereby.
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<PAGE> 5
ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER. The number of directors which shall constitute
the whole Board shall not be less than 2 nor more than 9 in number.
Thereafter, within the foregoing limits the stockholders at the annual meeting
shall determine the number of directors and shall elect the number of directors
as determined. Within the foregoing limits, the number of directors may be
increased at any time or from time to time by the stockholders or by the
directors by vote of a majority of the directors then in office. The number of
directors may be decreased to any number permitted by the foregoing at any
time, either by the stockholders or by the directors by vote of a majority of
the directors then in office, but only to eliminate vacancies existing by
reason of the death, resignation or removal of one or more directors.
Directors need not be stockholders.
SECTION 3.2. TENURE. Except as otherwise provided by law, by the
Certificate of Incorporation or by these Bylaws, each director shall hold
office until the next annual meeting and until his successor is elected and
qualified, or until he sooner dies, resigns, is removed or becomes
disqualified.
SECTION 3.3. POWERS. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors, who shall
have and may exercise all the powers of the corporation and do all such lawful
acts and things as are not by law, the Certificate of Incorporation or these
Bylaws directed or required to be exercised or done by the stockholders.
SECTION 3.4. VACANCIES. Vacancies and any newly created
directorships resulting from any increase in the number of directors may be
filled by vote of the stockholders at a meeting called for the purpose, or by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. When one or more directors shall resign from the
Board, effective at a future date, a majority of the Directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have
and may exercise all their powers notwithstanding the existence of one or more
vacancies in their number subject to any requirements of law, or of the
Certificate of Incorporation or of these Bylaws as to the number of directors
required for a quorum or for any vote or other actions.
SECTION 3.5. REMOVAL. Any director may only be removed for cause and
only in accordance with the provisions of the Certificate of Incorporation of
the Company.
-5-
<PAGE> 6
SECTION 3.6. COMPENSATION OF DIRECTORS. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
SECTION 3.7. MEETINGS OF THE BOARD OF DIRECTORS.
(a) PLACE. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Texas.
(b) ANNUAL MEETING. The Board of Directors shall meet each year
immediately after the annual meeting of shareholders at the place where such
meeting of shareholders was held, unless a different time and place be fixed by
the vote of the shareholders at the annual meetings for the purpose of
organization, election of officers and consideration of any other business that
may properly be brought before the meeting. No notice of such meeting shall be
necessary to either old or new members of the Board of Directors. In the event
such meeting is not held immediately following the annual meeting or at the
time and place as fixed by the shareholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
(c) REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board by resolution.
(d) SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or by the President, and shall be
called by the President or Secretary upon the written request of two (2)
directors. Written notice of special meetings of the Board of Directors shall
be given to each director at least 48 hours before the date of each meeting.
(e) QUORUM. A majority of the number of directors fixed by the
Bylaws shall constitute a quorum for the transaction of business. The act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by the Act or by the Articles of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting
-6-
<PAGE> 7
from time to time without notice other than announcement at the meeting until a
quorum shall be present.
(f) TELEPHONE MEETING. Annual, regular and special meetings of
the Board of Directors, upon proper notice or waiver thereof, may be held by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at the
meeting, except where a director participates in the meeting for the express
purpose of objecting to the transaction of any business on the grounds that the
meeting is not lawfully called or convened.
(g) ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors may be taken without a meeting
if a consent in writing setting forth the action so taken is signed by all the
members of the Board of Directors and such unanimous consent shall have the
same force and effect as a unanimous vote at a meeting of the Board of
Directors.
SECTION 3.8. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one or
more of its directors or officers or between the corporation and any other
corporation, partnership, association or other organization in which one or
more of the corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board or committee thereof which authorized the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the board or committee in
good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(2) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by
the Board of Directors, a committee thereof or the stockholders.
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<PAGE> 8
(b) Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 4.1. DESIGNATION OF EXECUTIVE COMMITTEE. The Board of
Directors by resolution adopted by a majority of the number of directors fixed
by the Bylaws may designate two (2) or more directors to constitute an
Executive Committee. The designation of such Executive Committee and the
delegation of authority herein granted shall not operate to relieve the Board
of Directors or any member thereof of any responsibility imposed upon it or him
by law. No member of the Executive Committee shall continue to be a member
thereof after he ceases to be a director of the corporation. The Board of
Directors shall have the power at any time to increase or decrease the number
of members of the executive committee to fill vacancies thereon, to change any
member thereof, and to change the functions or terminate the existence thereof.
SECTION 4.2. POWERS OF THE EXECUTIVE COMMITTEE. During the interval
between meetings of the Board of Directors, the Executive Committee shall have
and may exercise all of the authority of the Board of Directors in the business
and affairs of the corporation except where action of the Board of Directors is
specified by the Act or other applicable law, including power to authorize the
seal of the corporation to be affixed to all papers which may require it. The
Executive Committee may also from time to time formulate and recommend to the
Board of Directors for approval general policies regarding the management of
the business and affairs of the corporation. All minutes of meetings of the
Executive Committee shall be submitted to the next succeeding meeting of the
Board of Directors for approval; the failure to submit the same or to receive
the approval thereof shall not invalidate any completed or incompleted action
taken by the corporation upon authorization by the Executive Committee prior to
the time at which the same should have been, or was submitted as above
provided.
SECTION 4.3. CHAIRMAN AND PROCEDURE. Upon the designation of an
executive committee by the Board of Directors, such Executive Committee shall
elect one of its members as chairman and may elect one of its members as vice
chairman and shall adopt rules of procedure providing, among other things, for
the manner of calling meetings, giving notices thereof, quorum requirements
therefor, and the methods of conducting same.
-8-
<PAGE> 9
ARTICLE V
OFFICERS
SECTION 5.1. ENUMERATION. The officers of the corporation shall be
appointed by the Board of Directors, and shall be a chairman of the board,
president, senior vice president, one or more vice presidents (with or without
such descriptive titles as the Board of Directors may deem appropriate), a
secretary, a treasurer and a controller. The Board may also appoint any one or
more of the following officers: assistant secretaries and assistant
treasurers. Any two or more offices may be held by the same person except the
offices of president and secretary. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the board.
SECTION 5.2. GENERAL DUTIES. All officers and agents of the
corporation, as between themselves and the corporation, shall have such
authority and perform such duties in the management of the corporation as may
be provided in the Bylaws, or as may be determined by resolutions of the Board
of Directors not inconsistent with the Bylaws.
SECTION 5.3. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
shareholders, or as soon thereafter as conveniently as vacancies may be filled
or new offices filled at any meeting of the Board of Directors. Each officer
shall hold office until his successor shall have been duly elected and shall
have qualified or until his death or until he shall resign or shall have been
removed in the manner provided in Section 5.04 herein.
SECTION 5.4. REMOVAL. Any office or agent elected or appointed by
the Board of Directors or the executive committee may be removed by the Board
of Directors whenever in its judgment the best interests of the corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
SECTION 5.5. RESIGNATIONS. Any officer may resign at any time by
giving notice to the Board of Directors, or to the Chairman of the Board,
President or Secretary. Such resignation shall take effect a the time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5.6. VACANCIES. Any vacancy in any office because of death,
resignation, removal, or other cause shall be filled for the unexpired portion
of the term in the manner prescribed in the Bylaws for the election or
appointment to such office.
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<PAGE> 10
SECTION 5.7. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors. No officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the corporation.
SECTION 5.8. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
be chosen from among the directors and shall preside at all meetings of the
Board of Directors and of the shareholders and shall have such other authority
and responsibility as is designated to him by the Board of Directors from time
to time.
SECTION 5.9. PRESIDENT. The president shall be the chief executive
officer of the corporation and shall have general supervision over its business
and affairs, subject to the control of the Board of Directors. As Chief
Executive Officer of the corporation, the President shall have general
supervision over the subordinate officers and shall delegate and determine
their duties. He shall, at the discretion of or in the absence of the Chairman
of the Board, preside at meetings of the shareholders and in the absence of the
Chairman of the Board at meetings of the Board of Directors.
SECTION 5.10. VICE PRESIDENTS. The Vice Presidents in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President. If one of the vice presidents be designated as
executive vice president, he shall be the senior vice president. They shall
generally assist the president and exercise such other powers and perform such
other duties as are delegated to them by the President and as the Board of
Directors may prescribe.
SECTION 5.11. SECRETARY. The Secretary Shall attend all meetings of
the Board of Directors and all meetings of the shareholders and shall keep or
cause to be kept in books provided for that purpose the minutes of all meetings
of the Board of Directors and all meetings of shareholders and shall perform
like duties for the standing committees when required. He shall see that all
notices are duly given in accordance with the provisions of these Bylaws and as
required by law. He shall be custodian of the records (other than financial
records) and the seal of the corporation and, when authorized by the Board of
Directors, shall affix the same to any instrument requiring it, and when so
affixed, it shall be attested by his signature or by the signature of the
treasurer or an assistant secretary, any of which signatures may be facsimile.
In general, he shall perform all duties incident to the office of secretary and
such other duties as may, from time to time, be assigned to him by the Board of
Directors, the chairman of the board, or the president.
SECTION 5.12. ASSISTANT SECRETARIES. The Assistant Secretaries in
the order of their seniority, unless otherwise determined by the Board of
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Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary. They shall perform such other
duties and have such other powers as the Board of Directors, the Chairman of
the Board or the President may from time to time prescribe.
SECTION 5.13. TREASURER. The Treasurer shall be the financial
officer of the corporation, shall have charge and custody of, and be
responsible for all funds and securities of the corporation; shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation in such banks or other depositories as shall be designated by the
Board of Directors. In general, he shall perform all the duties incident to
the office of Treasurer and such other duties as, from time to time, may be
designated to him by the Board of Directors, the chairman of the board or the
president. He shall render to the president and the Board of Directors,
whenever the same shall be required, an account of all his transactions as
Treasurer and of the financial condition of the corporation.
SECTION 5.14. ASSISTANT TREASURERS. The Assistant Treasurers in the
order of their seniority, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the Board of Directors, the chairman of
the board or the president may from time to time prescribe.
SECTION 5.15. CONTROLLER. The Controller shall be a financial
officer of the corporation and assist the Treasurer in the discharge of his
duties as described in Section 5.13 above, and perform any and all duties
designated to him by the Board of Directors, the Chairman of the Board, the
President or the Treasurer.
SECTION 5.16. BONDING. If required by the Board of Directors, all or
any one or more of the officers (and particularly the Treasurer and Assistant
Treasurers) shall give the corporation a bond in such amount with such surety
or sureties and subject to such renewal requirements, as may be ordered by the
Board of Directors for the faithful performance of the duties of his office and
for the restoration to the corporation in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
ARTICLE VI
GENERAL COUNSEL
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The Board of Directors may appoint a general counsel for the
corporation at compensation to be set by the board. The general counsel as
such shall not be an officer of the corporation unless the Board of Directors
shall so designate him in the resolution of appointment, but the person
designated as general counsel may hold any other office to which he is elected.
The board may appoint an individual lawyer or a law firm as the general counsel
of the corporation as it may elect. If a law firm should be selected, then one
member thereof shall be designated as the particular lawyer in such firm whose
personal service are contemplated. The general counsel shall, when called
upon, counsel and advise with the officers of this corporation on any legal
matters which may arise in the conduct of the corporation's business, shall
handle all claims and litigation involving the corporation and shall perform
such further legal services as may be contemplated in the contract of
employment.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
SECTION 7.1 INDEMNIFICATION RIGHTS. Each person who was or is made
a party or is threatened to be made a party to, or is involved in any, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is or was the legal
representative, director or officer of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, excise taxes
under the Employee Retirement Income Security Act of 1974, as amended, or
penalties and amounts paid or to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection with such proceeding, and
such indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that, except as
provided in Section 7.2 hereof, the corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors. The right to indemnification
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conferred in this Section shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that if the
Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation service
to an employee benefit plan) in advance of the final disposition of the
proceeding, shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
corporation may, by action of its Board of Directors, provide indemnification
to employees and agents of the corporation with the same scope and effect as
the foregoing indemnification of directors and officers.
SECTION 7.2 SUIT AGAINST THE CORPORATION. If a claim under Section
7.1 is not paid in full by the corporation within thirty days after a written
claim has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law
for the corporation to indemnify the claimant of the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
SECTION 7.3 INDEMNIFICATION NOT EXCLUSIVE RIGHT. The right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of
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Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 7.4 INSURANCE. The corporation may maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
ARTICLE VIII
CAPITAL STOCK
SECTION 8.1. CERTIFICATES REPRESENTING SHARES. The share of capital
stock of the corporation shall be represented by certificates signed by or in
the name of the corporation by the president or vice president and the
secretary or an assistant secretary of the corporation and shall be sealed with
the seal of the corporation or a facsimile thereof. If the corporation shall
be authorized to issue more than one class of stock, the designation,
preferences, limitations and relative rights and preferences of each series of
any preferred or special class of stock shall be set forth upon the face or
back thereof in full or summary form or be incorporated by reference on the
face or back of the certificate in accordance with the provisions of the Act.
SECTION 8.2. FACSIMILE SIGNATURES. If the certificate is
countersigned by a transfer agent, or registered by a registrar other than the
corporation itself or an employee of the corporation, the signature of the
president, vice president, secretary or assistant secretary may be facsimile.
In case any officer(s) who have signed or whose facsimile signature(s) have
been placed upon such certificate(s) shall have ceased to be such officer(s) of
the corporation whether because of death, resignation or otherwise, before such
certificate(s) is issued by the corporation, such certificate(s) may be issued
and delivered as though the person(s) who signed such certificate(s) or whose
facsimile signature(s) have been placed thereon were such officer(s) at the
date of its issuance.
SECTION 8.3. LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation
may issue a new certificate(s) in the place of any certificate(s) theretofore
issued by the corporation alleged to have been lost, stolen or destroyed, but
the Board of Directors may require the owner of such lost, stolen or destroyed
certificate or his legal representative to furnish affidavit as to such loss,
theft, or destruction, and to give a bond in such form and substance, and with
such surety or sureties with fixed or open penalty as it may direct, to
indemnify the corporation, the transfer agent, and the registrar against
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any claim that may be made on account of the alleged loss, theft or destruction
of such certificate. The Board of Directors may establish with the transfer
agent a blanket bond procedure.
SECTION 8.4. TRANSFERS OF STOCK. Upon surrender to the corporation
or the transfer agent of the corporation of a certificate for share duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate and record the transaction upon its books.
SECTION 8.5. REGISTERED SHAREHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such share(s) on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
SECTION 8.6. RIGHT OF INSPECTION. Any Person who shall have been a
shareholder of record for at least six (6) months immediately preceding his
demand, or who shall be the holder of record of at least five percent (5%) of
all the outstanding share of the corporation, upon written demand stating the
purpose thereof, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times during business hours, for any proper
purpose, the corporation's books and records of account, minutes and records of
shareholders, and shall be entitled to make extracts therefrom.
SECTION 8.7. STOCK OPTIONS AND AGREEMENTS. Any share-holder of this
corporation may enter into agreements giving to any other shareholder(s) or any
third party an option to purchase any of this stock in the corporation; and
such shares of stock shall thereupon be subject to such agreement and
transferable only upon proof of compliance therewith; provided, however, that a
copy of such agreement be filed with the corporation and reference thereto
placed upon the certificate representing said shares of stock.
ARTICLE IX
GENERAL PROVISIONS -- SPECIAL CORPORATE ACTS
SECTION 9.1. NOTICE OF MEETINGS. Notice to directors and
shareholders shall be written or printed and delivered personally or mailed,
with postage prepaid thereon, to the directors or shareholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram. Neither the business to be transacted
at or the purpose of any regular or special meeting of
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the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
SECTION 9.2. WAIVER OF NOTICE OF MEETING. Whenever any notice is
required to be given under the provisions of the Act or by the Articles of
Incorporation or by these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a director
at a meeting shall constitute waiver of notice of such meeting except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
SECTION 9.3. CLOSING OF TRANSFER BOOKS - RECORD DATE. For the purpose
of determining shareholders entitled to notice of or to vote at any meting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer
books shall be closed for stated period but not to exceed, in any case, sixty
(60) days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as a record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days, and in the case of a meeting of shareholders, not less than ten (10)
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of shareholders. When a determination of
shareholders has been made as provided in this Section 9.03., such
determination shall apply to any adjournment thereof; provided, however, that
the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 9.4. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Articles of
Incorporation and Section 170 of the Act.
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SECTION 9.5. EXECUTION OF DEEDS, CONTRACTS, ETC. Subject always to
the specific directions of the Board of Directors, all deeds and mortgages made
by the corporation and all other written contracts and agreements to which the
corporation shall be party shall be executed in its name by the chairman of the
board, the president or one of the vice presidents; and the secretary or an
assistant secretary, when necessary or required, shall affix and attest the
corporate seal thereto.
SECTION 9.6. ENDORSEMENT OF STOCK CERTIFICATES. Subject always to
the specific directions of the Board of Directors, any share(s) of stock issued
by any other corporation and owned by the corporation (including reacquired
shares of stock of the corporation), may, for sale or transfer, be endorsed in
the name of the corporation by the chairman of the board, the president or one
of its vice presidents and attested by the secretary or an assistant secretary
either with or without affixing thereto the corporate seal.
SECTION 9.7. VOTING OF SHARES OWNED BY CORPORATION. Subject always
to the specific directions of the Board of Directors, any share(s) of stock
issued by any other corporation and owned or controlled by the corporation may
be voted at any shareholders' meeting of such other corporation by the chairman
of the board, the president of the corporation, if either be present, or in the
absence of the chairman of the board and the president, by any vice president
of the corporation, who may be present. Whenever, in the judgment of the
chairman of the board, the president, or in the absence of the chairman of the
board and the president, of any vice president, it is desirable for the
corporation to execute a proxy or give a shareholder's consent in respect to
any share(s) of stock issued by any other corporation and owned by the
corporation, such proxy or consent shall be executed in the name of the
corporation by the chairman of the board, the president or one of the vice
presidents of the corporation and shall be attested by the secretary or an
assistant secretary of the corporation under the corporate seal without
necessity of any authorization by the Board of Directors. Any person or
persons designated in the manner above stated as the proxy or proxies of the
corporation shall have full right, power and authority to vote the share(s) of
stock issued by such other corporation and owned by the corporation the same as
such share(s) might be voted by the corporation.
SECTION 9.8. ANNUAL STATEMENT. The Board of Directors shall present
at each Annual Meeting, and when called for by the vote of shareholders at any
special meeting of the shareholders, a full and clear statement of the business
and condition of the corporation.
SECTION 9.9. FISCAL YEAR. The fiscal year of the corporation shall
be fixed by resolution of the Board of Directors.
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SECTION 9.10. SEAL. The corporate seal shall have inscribed thereon
the name of the corporation, the words "Corporate Seal, Texas" and may have
inscribed thereon the year of the organization. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE X
AMENDMENTS TO BYLAWS
The Board of Directors, by the affirmative vote of a majority of the
directors, may at any meeting, alter, amend, or repeal any of these Bylaws, or
may adopt new Bylaws, subject, however, to the right of the shareholders to
repeal or change any such action by the Board of Directors.
CERTIFICATE
The undersigned secretary of E-Z Serve Corporation, a Delaware
corporation, hereby certifies that the foregoing by-laws are the by-laws of the
Corporation authorized and adopted by the Board of Directors of the
Corporation, effective on the date hereof.
Dated: March 25, 1992.
/s/ John T. Miller
-------------------
Secretary
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EXHIBIT 4.1
1991 STOCK OPTION PLAN
OF
E-Z SERVE CORPORATION
1. PURPOSE OF PLAN
This 1991 Stock Option Plan (the "Plan") is intended as an incentive
(a) to retain in the employ of E-Z Serve Corporation (the "Company") and its
Affiliates (as defined below) persons of training, experience and ability, (b)
to attract new employees whose services are considered unusually valuable, (c)
to attract and retain the services of experienced and knowledgeable directors,
(d) to encourage the sense of proprietorship of such persons, and (e) to
stimulate the active interest of such persons in the development and financial
success of the Company. It is further intended that the options issued
pursuant to this Plan (the "Options") may constitute incentive stock options
("incentive stock options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), while certain other options
granted under this Plan will be nonqualified options ("nonqualified stock
options") within the meaning of Section 83 of the Code.
2. ADMINISTRATION OF PLAN
(a) The Board of Directors shall appoint and maintain as
administrator of this Plan the Compensation Committee (the "Committee") which
shall consist of at least two members of the Board of Directors, each of whom
shall be a "nonemployee director" within the meaning of Rule 16b-3 promulgated
by the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each member
of the Committee shall serve at the pleasure of the Board of Directors. The
Committee shall have full power and authority to designate participants, to
determine the terms and provisions of respective option agreements (which need
not be identical) and to interpret the provisions and supervise the
administration of this Plan. All decisions and selections made by the
Committee pursuant to the provisions of this Plan shall be made by a majority
of its members. Any decision reduced to writing and signed by all of the
members shall be fully effective as if it had been made by a majority at a
meeting duly held.
(b) All Options granted under this Plan are subject to, and may
not be exercised before, the approval of this Plan at the 1992 Annual Meeting
of Stockholders, or at a special meeting of stockholders called for that
purpose prior to the 1992 Annual Meeting, by the affirmative vote of the
holders of a majority of the outstanding shares of the Company
<PAGE> 2
present, or represented by proxy, and entitled to vote thereat, or by the
written consent of the holders of a majority of the outstanding shares of the
Company entitled to vote; provided that if such approval by the stockholders of
the Company is not forthcoming, all Options previously granted under this Plan
shall be void.
(c) The Committee shall have the authority to designate which
Options granted under this Plan shall be incentive stock options and which
shall be nonqualified stock options. The Committee, in its sole discretion,
may determine that all the Options granted under this Plan may be incentive or
nonqualified stock options.
3. DEFINITIONS. For purposes of this Plan, the following definitions
shall apply:
(a) "Affiliates" means any Parent of the Company and any
Subsidiary of the Company within the meaning of Sections 424(e) and (f) of the
Code, respectively.
(b) "Cause" shall mean:
(i) for an Optionee who is not a Senior Executive, an
Optionee's actual fraud, gross negligence or willful or wanton
misconduct; or
(ii) for an Optionee who is a Senior Executive, a Senior
Executive's (a) actual fraud, gross negligence or willful or
wanton misconduct, (b) fraud, embezzlement or other material
dishonesty with respect to the Company or any of its
Affiliates, (c) conviction of, or a plea of nolo contendere
to, a felony, (d) conduct that is materially harmful to the
business, interest or reputation of the Company, (e)
intentional failure to comply with any material instructions
of the Board contained in a duly adopted resolution of the
Board, or (f) failure to devote, other than by reason of
disability, such of the Senior Executive's entire time,
attention, business judgment, skill, energies and business
efforts to his duties as an executive of the Company as are
reasonably necessary to carry out his duties.
(c) "Common Stock" shall mean the common stock of the Company, par
value $0.01 per share.
(d) "Senior Executive" shall mean any of the senior executive
officers of the Company identified in a specific resolution of the Committee to
be included within the definition of this term.
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(e) "Senior Executive Termination" shall mean (i) a Senior
Executive's permanent disability, as determined in the sole discretion of the
Committee, or death, (ii) the termination of a Senior Executive's employment by
the Company for reasons other than for Cause, or (iii) a Senior Executive's
voluntary termination of employment within 90 days after a significant
diminution of both the Senior Executive's responsibility and base salary by the
Company.
4. DESIGNATION OF PARTICIPANTS
The persons eligible for participation in this Plan as recipients of
Options shall include key employees of the Company and its Affiliates.
Directors of the Company shall also be eligible to participate, but no director
who is otherwise not an employee shall be eligible to be granted any incentive
stock options. A person who has been granted an Option hereunder ("Optionee")
may be granted an additional Option or Options, if the Committee shall so
determine.
5. STOCK RESERVED
Subject to adjustment as provided in Paragraph 9, a total of 3,500,000
shares ("Stock") of Common Stock shall be subject to this Plan. The shares of
Stock subject to this Plan shall consist of unissued shares or previously
issued shares reacquired and held by the Company or its Affiliates, and such
number of shares shall be and is hereby reserved for sale for such purpose.
Any of such shares which may remain unsold and which are not subject to
outstanding Options at the expiration of this Plan shall cease to be reserved
for the purpose of this Plan, but until termination of this Plan and the
expiration, exercise or lapse of all Options granted hereunder, the Company
shall at all times reserve a sufficient number of shares to meet the
requirements of this Plan. Should any Option expire or be cancelled prior to
its exercise, the shares theretofore subject to such Option may again be
subject to an Option under this Plan.
6. OPTION PRICE
(a) The purchase price of each share of Stock subject to an
incentive stock option under this Plan shall be 100% of the fair market value
of such share on the date the Option is granted. The purchase price of each
share of Stock subject to a nonqualified stock option under this Plan shall be
determined by the Committee prior to granting the Option. However, in the case
of an incentive stock option granted to an employee who, at the time of grant,
owns stock possessing more than 10% of the total combined voting power of the
Company's then outstanding securities ("Ten Percent Stockholder"), the price
shall not be
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less than 110% of the fair market value of a share of Stock on the date the
Option is granted. The Committee shall set the purchase price for each share
subject to a nonqualified stock option at either the fair market value of each
share on the date the Option is granted, or at such other price as the
Committee in its sole discretion shall determine; provided, however, that in no
event shall the purchase price of a share subject to a nonqualified stock
option under this Plan be less than 50% of the fair market value of such share
on the date the Option is granted.
(b) The fair market value of a share of Stock on a particular date
shall be deemed to be the average (mean) of the reported "high" and "low" sales
price for such shares as reported in The Wall Street Journal's American Stock
Exchange Composite Transactions listing for such day (corrected for obvious
typographical errors), or if such shares are not reported in such listing, then
the average of the reported "high" and "low" sales prices on the largest
national securities exchange (based on the aggregate dollar value of securities
listed) on which such shares are listed or traded, or if such shares are not
listed or traded on any national securities exchange, then the average of the
reported "high" and "low" sales prices for such shares in the over-the-counter
market, as reported on the National Association of Securities Dealers Automated
Quotations System, or, if such prices shall not be reported thereon, the
average between the closing bid and asked prices so reported, or, if such
prices shall not be reported, then the average closing bid and asked prices
reported by the National Quotation Bureau Incorporated, or, in all other cases,
the value established by the Board of Directors of the Company in good faith.
(c) In order to restore the incentive value of any options
previously granted under this Plan and to continue to provide meaningful
incentives to the Optionees, the Compensation Committee may grant new
nonqualified stock options in accordance with the terms of this Plan in
exchange for the cancellation of some or all of the options previously granted
to the Optionees, subject to the approval of such exchange by the stockholders
of the Company. The new nonqualified stock options may be granted at a lower
exercise price than the cancelled options, subject to the other terms of this
Paragraph 6, and the Compensation Committee shall have the discretion to
determine the terms and provisions of any such exchange in accordance with this
Plan.
7. OPTION PERIOD
Each Option granted under this Plan shall terminate and be of no force
and effect with respect to any shares not previously taken up by the Optionee
upon the expiration of ten years from the date of granting of such Option or
such earlier date as the Committee, in its sole discretion, may prescribe at
the date of grant. However, in the case of an incentive stock
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option granted to a Ten Percent Stockholder, the option period shall not exceed
five years from the date of grant. No incentive stock option shall be granted
after the tenth anniversary of the effective date of this Plan.
8. EXERCISE OF OPTIONS
(a) The Committee, in granting Options hereunder, shall have
discretion to determine the terms upon which such Options shall be exercisable,
subject to the applicable provisions of this Plan. The Committee may determine
to permit any Option granted hereunder to be exercisable immediately upon the
date of grant or at any time thereafter. Any Optionee who (i) was granted
stock options or stock purchase grants by Harken Energy Corporation ("HEC")
prior to the Company's rights offering (as a result of which the Company was no
longer a wholly-owned subsidiary of HEC), and (ii) has been continuously
employed by HEC (prior to the rights offering) and/or any Affiliate thereof
since June 1, 1989, will be given credit towards his vesting of the Option for
past employment equal to two years.
(b) The aggregate fair market value (determined in accordance with
Section 6(b) of this Plan at the time the Option is granted) of the Stock with
respect to which incentive stock options may be exercisable for the first time
by any Optionee during any calendar year shall not exceed $100,000.
(c) Options may be exercised solely by the Optionee during his
lifetime or after his death by the person or persons entitled thereto under his
will or the laws of descent and distribution.
(d) In the event of termination of employment for any reason other
than death, disability or retirement, Options may be exercised only with
respect to the number of shares purchasable at the time of such termination,
unless the Committee shall otherwise approve on a case by case basis.
(e) In the event of the death or disability of the Optionee
following the date of grant and while in the employ of the Company or any of
its Affiliates, and while Options granted hereunder are still in force and
unexpired under the terms of Paragraph 7, any unmatured installments of the
Options shall be accelerated. Such acceleration shall be effective as of the
date of death or disability, as the case may be. The Options outstanding in
the name of the Optionee shall thereupon be exercisable in full without regard
to any installment exercise provisions.
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<PAGE> 6
(f) In the event the Optionee terminates his employment because of
retirement under any retirement plan of the Company or any of its Affiliates
while Options granted hereunder are still in force and unexpired under the
terms of Paragraph 7, the Committee shall have discretion to permit any
unmatured installments of the Options to be accelerated as of the date of
retirement and the Options shall thereupon be exercisable in full without
regard to any installment exercise provisions.
(g) The purchase price of the shares as to which an Option is
exercised shall be paid in full at the time of the exercise. Such purchase
price shall be payable in cash (including certified check, bank draft and
postal or express money order payable to the order of the Company), or at the
option of the holder of such Option, in Common Stock theretofore owned by such
holder (or any combination of cash and Common Stock). For purposes of
determining the amount, if any, of the purchase price satisfied by payment of
Common Stock, such Common Stock shall be valued at its fair market value on the
date of exercise in accordance with Paragraph 6(b). Any Common Stock delivered
in satisfaction of all or a portion of the purchase price shall be
appropriately endorsed for transfer and assigned to the Company. The Committee
may, in its discretion and to the extent permitted by the laws of the State of
Delaware, determine to permit the holder of an Option to satisfy the purchase
price of the shares as to which an Option is exercised by delivery of the
Option holder's promissory note, such note to be subject to such terms and
conditions as the Committee may determine. The Committee may, in its
discretion and to the extent permitted by the laws of the State of Delaware,
determine to cause the Company to lend to the holder of an Option funds, on
such terms and conditions as the Committee may determine to be appropriate,
sufficient for the holder of an Option to pay the purchase price of the shares
as to which an Option is to be exercised. No holder of an Option shall be, or
have any of the rights or privileges of, a stockholder of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares shall have been issued
by the Company to such holder.
(h) The option agreement evidencing any incentive stock option
granted under this Plan shall provide that if the Optionee makes a disposition,
within the meaning of Section 424(c) of the Code and the regulations
promulgated thereunder, of any share or shares of Stock issued to him pursuant
to his exercise of an Option granted under this Plan within the two-year period
commencing on the day after the date of the grant of such Option or within a
one-year period commencing on the day after the date of transfer of the share
or shares to him pursuant to the exercise of such Option, he shall, within ten
days of such disposition, notify the Company thereof and immediately deliver to
the Company any amount of federal income tax withholding required by law.
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(i) Upon a Senior Executive Termination, 100% of the applicable
Senior Executive's outstanding unvested shares of Stock subject to the Options
shall vest.
(j) Within 60 days of a Senior Executive Termination, the Company
will provide to the Senior Executive an offer to pay the Senior Executive an
amount payable in cash in exchange for the Senior Executive's relinquishment of
all of such Senior Executive's Options. Within 30 days of the Senior
Executive's receipt of the Company's offer, the Senior Executive, or his heirs
or legal representatives in the event of death or disability, will have one of
the following alternatives:
(i) Accept the Company's offer and relinquish the Senior
Executive's Options for the cash amount offered; or
(ii) In lieu of purchasing the shares of Stock subject to
purchase under the Options, relinquish the Options for a number of
shares of Common Stock to be determined as follows: the number of
shares of Common Stock issuable pursuant to such relinquishment shall
be a number equal to the quotient obtained by dividing the Appreciated
Value by the current Stock Value (both as defined below); or
(iii) Continue to hold the Options and exercise them prior to
the earlier of five years from the date of the Senior Executive
Termination or such earlier date as the period for exercise of the
Options would end pursuant to the terms of the Plan.
As used in this Section 8, "Appreciated Value" shall mean the excess of (i) the
aggregate current Stock Value of the shares of Common Stock covered by the
Options over (ii) the aggregate purchase price for such shares specified in
such Options. As used in this Section 8, "Stock Value" of a share of Common
Stock shall mean (i) on a consolidated basis, the sum of (x) the Company's
earnings before interest, taxes, depreciation and amortization for the four
reported fiscal quarters prior to the date of the Senior Executive Termination
(the "Period") multiplied by 6, plus (y) the Company's average cash during the
Period, minus (z) the Company's average debt during the Period, (ii) divided by
the weighted average number of shares of Common Stock outstanding during the
Period.
9. STOCK DIVIDENDS, STOCK SPLITS AND CERTAIN OTHER CORPORATION
TRANSACTIONS
(a) The existence of this Plan and Options granted hereunder shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of
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bonds, debentures or preferred or preference stocks ranking prior to or
affecting the Common Stock or the rights attendant thereto, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of
the Company's assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) The shares with respect to which Options may be granted
hereunder are shares of Common Stock of the Company as presently constituted.
If, and whenever, prior to the delivery by the Company of all of the shares of
the Stock which are subject to Options granted hereunder, the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, a stock split, a combination of shares, a
recapitalization or other increase or reduction of the number of shares of the
Common Stock outstanding without receiving consideration therefor in money,
services or property, the number of shares of Stock available under this Plan
and the number of shares of Stock with respect to which Options granted
hereunder may thereafter be exercised shall (i) in the event of an increase in
the number of outstanding shares, be proportionately increased, and the cash
consideration payable per share shall be proportionately reduced, and (ii) in
the event of a reduction in the number of outstanding shares, be
proportionately reduced, and the cash consideration payable per share shall be
proportionately increased.
(c) If the Company is reorganized, merged or consolidated or is
otherwise a party to a plan of exchange with another corporation pursuant to
which reorganization, merger, consolidation or plan of exchange stockholders of
the Company receive any shares of common stock or other securities or if the
Company shall distribute ("Spin Off") securities of another corporation to its
stockholders, there shall be substituted for the shares subject to the
unexercised portions of outstanding Options an appropriate number of shares of
(i) each class of stock or other securities which were distributed to the
stockholders of the Company in respect of such shares in the case of a
reorganization, merger, consolidation or plan of exchange, or (ii) in the case
of a Spin Off, the securities distributed to stockholders of the Company
together with shares of Stock, such number of shares or securities to be
determined in accordance with the provisions of Section 424 of the Code (or
other applicable provisions of the Code or regulations issued thereunder which
may from time to time govern the treatment of incentive stock options in such a
transaction); provided, however, that all such Options may be cancelled by the
Company as of the effective date of (x) a reorganization, merger,
consolidation, plan of exchange or Spin Off or (y) any dissolution or
liquidation of the Company, by giving notice to each holder thereof or his
personal representative of its intention to do so and by permitting the
purchase for a period of at least thirty days during the sixty days next
preceding such effective date of all of the shares subject to such outstanding
Options, without regard to the installment provisions set forth in the option
agreements; and provided further that in the event of a Spin Off, the Company
may, in lieu
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<PAGE> 9
of substituting securities or accelerating and cancelling Options as
contemplated above, elect (i) to reduce the purchase price for each share of
Stock subject to an outstanding Option by an amount equal to the fair market
value, as determined in accordance with the provisions of Paragraph 6(b), of
the securities distributed in respect of each outstanding share of Common Stock
in the Spin Off or (ii) to reduce proportionately the purchase price per share
and to increase proportionately the number of shares of Stock subject to each
Option in order to reflect the economic benefits inuring to the stockholders of
the Company as a result of the Spin Off.
(d) Except as hereinbefore expressly provided the issue by the
Company of shares of stock of any class, or securities convertible into or
exchangeable for shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into or exchangeable for shares of stock of any class
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to Options granted hereunder.
(e) The Committee may, in its sole discretion, provide that an
Option shall become fully exercisable upon a Change in Control of the Company
(as defined in the next sentence). "Change in Control" of the Company shall be
conclusively deemed to have occurred if (and only if) any of the following
shall have taken place: (i) a change in control is reported by the Company in
response to either Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act or Item 1 of Form 8-K promulgated under the Exchange
Act; (ii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent or more of the combined voting power of the
Company's then outstanding securities; or (iii) any "person" (as defined in
clause (ii) above), other than HEC, who is, at the time of the effective date
of this Plan, the "beneficial owner" (as defined in clause (ii) above) of more
than five percent of the combined voting power of the Company's then
outstanding securities, acquires, or disposes of, beneficial ownership (as
defined in clause (iii) above) of 33% or more of the combined voting power of
the Company's then outstanding securities.
10. PURCHASE FOR INVESTMENT
Unless the Options and shares of Stock covered by this Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person exercising an
Option under this Plan may be required by the Company to give a representation
in writing that he is acquiring such shares for his
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<PAGE> 10
own account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.
11. TAXES
(a) The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any Options granted under this Plan.
(b) Notwithstanding the terms of Paragraph 11(a), any Optionee may
pay all or any portion of the taxes required to be withheld by the Company or
paid by him in connection with the exercise of a nonqualified stock option by
electing to have the Company withhold shares of Stock, or by delivering
previously owned shares of Common Stock, having a fair market value, determined
in accordance with Paragraph 6(b), equal to the amount required to be withheld
or paid. An Optionee must make the foregoing election on or before the date
that the amount of tax to be withheld is determined. All such elections are
subject to prior approval of the Committee.
12. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of May 30, 1991.
13. AMENDMENT OR TERMINATION
The Board of Directors may amend, alter or discontinue this Plan,
except that no amendment or alteration shall be made which would impair the
rights of any Optionee under any Option theretofore granted, without his
consent, and except that no amendment or alteration shall be made which,
without the approval of the stockholders, would:
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<PAGE> 11
(a) Increase the total number of shares reserved for the purposes
of this Plan or decrease the option price provided for in Paragraph 6, except
in each case as provided in Paragraph 9 or 6(c) as applicable, or change the
class of employees eligible to participate in this Plan as provided in
Paragraph 4;
(b) Extend the option period provided for in Paragraph 7;
(c) Materially increase the benefits accruing to Optionees under
this Plan; or
(d) Materially modify the requirements as to eligibility for
participation in this Plan.
14. GOVERNMENT REGULATIONS
This Plan, and the grant and exercise of Options thereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
15. NOT A CONTRACT.
The Plan shall not be deemed to constitute a contract between the
Company and any employee or to be a consideration or an inducement for the
employment of any employee. No part of any employee's payments under the Plan
shall be used as a basis for calculation of retirement or any other benefits to
which such employee might be entitled under any other benefit plans which are
or may in the future be in place at the Company. Nothing contained in the Plan
shall be deemed to give any employee the right to be retained in the service of
the Company or to interfere with the right of the Company to discharge any
employee at any time regardless of the effect which such discharge shall have
upon him as a participant of the Plan.
16. INDEMNIFICATION.
In the event any claim, suit or proceeding is brought regarding the
Plan established hereunder to which the Committee, or any member thereof, or
any person or agent acting for or at the instruction or request of the
Committee, may be a party, the Committee and such members, persons or agents
shall be entitled to be reimbursed by the Company for any and all costs,
attorney's fees, and other expenses pertaining thereto incurred by them for
which they shall have become liable.
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<PAGE> 12
17. COMPANY RECORDS.
No person shall, as a result of the existence of the Plan or such
person's participation therein, be entitled to review or have access to the
Company's books and records.
18. MISCELLANEOUS.
The headings of the Sections herein are inserted only for convenience
of reference and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. Any reference herein to the masculine gender
includes the feminine gender and any singular or plural reference includes the
other where the context requires.
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<PAGE> 13
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
------------------------
Neil H. McLaurin
President
ATTEST:
/s/ John T. Miller
- -----------------------
John T. Miller
Senior Vice President
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<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
OF
E-Z SERVE CORPORATION
1. PURPOSE OF PLAN.
This 1994 Stock Option Plan (the "Plan") is intended to act as an
incentive (a) to retain key management employees of E-Z Serve Corporation (the
"Company") and its Affiliates (as defined below), (b) to stimulate the active
interest of such persons in the development and financial success of the
Company, and (c) to provide a financial benefit to such persons at the same
time as the stockholders of the Company receive financial consideration based
on certain events as set forth herein. The options issued pursuant to this
Plan (the "Options") are not intended to qualify as incentive stock options
("nonqualified stock options") under Section 422 of the Internal Revenue Code
of 1986, as amended ("Code").
2. ADMINISTRATION OF PLAN
(a) The Board of Directors shall appoint and maintain as
administrator of this Plan the Compensation Committee (the
"Committee") which shall consist of at least two members of the Board
of Directors, each of whom shall be a "nonemployee director" within
the meaning of Rule 16b-3 promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Each member of the Committee shall serve at the
pleasure of the Board of Directors of the Company ("Board").
(b) The Committee shall administer the Plan in accordance with its
terms as in effect from time to time and shall have the power to
determine all questions arising in connection with the administration,
interpretation, and application of the Plan. The Committee is
authorized to make any and all decisions and determinations as it may,
in its discretion, determine to make under or with respect to the
Plan. Any such decision or determination by the Committee shall be
conclusive and binding upon all persons. The Committee may establish
procedures, correct any defect, supply any information, or reconcile
any inconsistency in such manner and to such extent as it shall deem
necessary or advisable to carry out the purpose of the Plan. The
Committee shall have all powers necessary or appropriate to accomplish
its duties under the Plan.
<PAGE> 2
(c) The Committee shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the
following:
(i) to determine all questions relating to the
eligibility of key employees to participate or remain eligible
to participate hereunder;
(ii) to grant Options pursuant to this Plan;
(iii) to interpret the provisions of the Plan and to make
and publish such rules for regulation of the Plan as are not
inconsistent with the terms hereof; and
(iv) to assist any employee regarding his rights,
benefits, or elections available under the Plan.
(d) The Committee shall keep or cause to be kept all books of
account, records, and other data (not including the general accounting
records of the Company) that may be necessary for proper
administration of the Plan.
(e) All decisions and selections made by the Committee pursuant to
the provisions of this Plan shall be made by a majority of its
members. Any decision reduced to writing and signed by a majority of
the members shall be fully effective as if it had been made by a
majority at a meeting duly held.
3. DEFINITIONS. For purposes of this Plan, the following definitions
shall apply:
(a) "Affiliates" means any Parent of the Company and any
Subsidiary of the Company within the meaning of Sections 424(e) and
(f) of the Code, respectively.
(b) "Cause" shall mean:
(i) for an Optionee who is not a Senior Executive, an
Optionee's actual fraud, gross negligence or willful or wanton
misconduct in the course of his employment by the Company or
any of its Affiliates; or
(ii) for an Optionee who is a Senior Executive, a Senior
Executive's (a) actual fraud, gross negligence or willful or
wanton misconduct in the course of his employment by the
Company or any of its Affiliates, (b) fraud, embezzlement or
other material dishonesty with respect to the Company or
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<PAGE> 3
any of its Affiliates, (c) conviction of, or a plea of nolo
contendere to, a felony, (d) conduct that is materially
harmful to the business, interest or reputation of the
Company, (e) intentional failure to comply with any material
instructions of the Board contained in a duly adopted
resolution of the Board, or (f) failure to devote, other than
by reason of disability, such of the Senior Executive's entire
time, attention, business judgment, skill, energies and
business efforts to his duties as an executive of the Company
as are reasonably necessary to carry out his duties.
(c) "Common Stock" shall mean the common stock of the Company, par
value $0.01 per share.
(d) "Senior Executive" shall mean any of the senior executive
officers of the Company identified in a specific resolution of the
Committee to be included within the definition of this term.
(e) "Senior Executive Termination" shall mean (i) a Senior
Executive's permanent disability, as determined in the sole discretion
of the Committee, or death, (ii) the termination of a Senior
Executive's employment by the Company for reasons other than for
Cause, or (iii) a Senior Executive's voluntary termination of
employment within 90 days after a significant diminution of both the
Senior Executive's responsibility and base salary by the Company.
(f) "Fair Market Value" shall be determined as follows:
First, determine the average (mean) price for each of the thirty days
preceding the date of determination on which the Common Stock traded
as follows:
(i) the reported "high" and "low" sales price of the Common
Stock as reported in The Wall Street Journal's American Stock
Exchange Composite Transactions listing (corrected for obvious
typographical errors),
(ii) if the Common Stock is not reported in such listing,
then the reported "high" and "low" sales prices on the largest
national securities exchange (based on the aggregate dollar
value of securities listed) on which the Common Stock is
listed or traded,
(iii) if the Common Stock is not listed or traded on any
national securities exchange, then the reported "high" and
"low" sales prices for the Common
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<PAGE> 4
Stock in the over-the-counter market, as reported on the
National Association of Securities Dealers Automated
Quotations System, or,
(iv) if such prices shall not be reported thereon, the
closing bid and asked prices so reported, or, if such prices
shall not be reported, then the closing bid and asked prices
reported by the National Quotation Bureau Incorporated;
Second, the relevant thirty-day average determined pursuant to clause
(i), (ii), (iii) or (iv) above shall then be multiplied by the total
number of shares of Common Stock traded on each date used to determine
such average (the "Value of Shares Traded Daily"); and
Third, the Value of Shares Traded Daily for each of the thirty days
shall be added together and the sum shall be divided by the total
number of shares of Common Stock traded during the thirty days, which
result shall be the Fair Market Value.
4. DESIGNATION OF PARTICIPANTS.
The persons eligible for participation in this Plan as recipients of
Options shall be such key employees of the Company or its Affiliates as
designated by the Committee. A person who has been granted an Option hereunder
("Optionee") may be granted an additional Option or Options, if the Committee
shall so determine.
5. STOCK RESERVED
Subject to adjustment as provided in Section 10, a total of 8,000,000
shares ("Stock") of Common Stock shall be subject to this Plan. The shares of
Stock subject to this Plan shall consist of unissued shares or previously
issued shares reacquired and held by the Company and such number of shares
shall be and is hereby reserved for sale for such purpose. Any of such shares
which may remain unsold and which are not subject to outstanding Options at the
expiration of this Plan shall cease to be reserved for the purpose of this
Plan, but until termination of this Plan and the expiration, exercise or lapse
of all Options granted hereunder, the Company shall at all times reserve a
sufficient number of shares to meet the requirements of this Plan. Should any
Option expire or be canceled prior to its exercise, the shares theretofore
subject to such Option may again be subject to an Option under this Plan.
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<PAGE> 5
6. OPTION PRICE
The purchase price of each share of Stock subject to an Option granted
under this Plan prior to September 17, 1996 shall be $0.40. The purchase price
of each share of Stock subject to an Option granted under this Plan after
September 17, 1996 shall be determined by the Committee prior to granting the
Option, which may be any amount the Committee shall determine in its sole
discretion.
7. OPTION AND SALE PERIOD
No Options may be granted after December 31, 1997. Each Option
granted under this Plan shall terminate and be of no force and effect with
respect to any Stock not purchased upon exercise by the Optionee upon the
expiration of ten years from the date of granting of such Option or such
earlier date as the Committee, in its sole discretion, may prescribe at the
date of grant. In addition, any Stock purchased upon exercise of an Option but
unable to be sold pursuant to the terms of this Plan before the expiration of
ten years from the date of granting of the Option under which such Stock was
purchased shall be repurchased by the Company at the purchase price paid per
share by the Optionee as soon as practicable after such expiration date.
8. VESTING OF OPTIONS.
Each Option granted under this Plan shall be evidenced by an
agreement, in a form approved by the Committee, which shall be subject to the
express terms and conditions stated in this Plan and to such other terms and
conditions as the Committee may deem appropriate, including, but not limited to
terms and conditions related to the ability of an Optionee to exercise an
Option and sell any Stock purchased upon exercise of an Option. The Committee
may provide in the option agreement that an Option may be exercised in whole,
immediately, or is to be exercisable in increments. As of September 17, 1996,
all options outstanding under this Plan shall be fully vested and exercisable,
subject to approval of such vesting by the stockholders of the Company at any
time prior to September 17, 1997. All Options granted subsequent to September
17, 1996 shall be fully vested and exercisable upon grant.
9. EXERCISE OF OPTIONS.
(a) Options may be exercised solely by the Optionee during his
lifetime or after his death by the person or persons entitled thereto
under his will or the laws of descent and distribution.
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<PAGE> 6
(b) In the event of termination of employment of an Optionee
(other than in the case of a Senior Executive Termination) for any
reason other than death or permanent disability, an Option may be
exercised only with respect to the number of shares of Stock that
could be sold (pursuant to Section 12 hereof) and any Options with
respect to shares of Stock that could not be sold (pursuant to Section
12) at that time shall lapse, unless the Committee shall otherwise
approve on a case by case basis; provided, that if the termination of
employment was for Cause, all Options held by such Optionee shall be
forfeited upon the termination of employment, and no exercise of the
Option shall be permitted; and provided further, that if the
termination was not for Cause, the Optionee must exercise the Options
(and such exercise may be made only to the extent that the underlying
Stock may be sold pursuant to Section 12) within 60 days of the
termination of employment at which time any unexercised Options shall
be forfeited, unless the Committee shall otherwise approve on a case
by case basis. Whether or not a termination of employment is for
Cause shall be determined in the sole discretion of the Committee.
(c) In the event of the death or permanent disability (whether or
not someone is permanently disabled shall be determined in the sole
discretion of the Committee) of an Optionee (other than a Senior
Executive) following the date of grant of any Option and while in the
employ of the Company or any of its Affiliates, and while Options
granted hereunder are still in force and unexpired under the terms of
Section 7, the entire Option (except for the portion of the Option for
which shares of Stock subject to the Option held by such Optionee
could, if the Option had been exercised, be sold at such time due to
the provisions of Section 12) shall be forfeited except for a portion
of the Option to acquire a number of shares of Stock equal to AxB,
where:
A = the number of shares of Stock subject to the Option granted
to the Optionee that, if the Option had been exercised by the
Optionee prior to his death or permanent disability, could not
have been sold pursuant to Section 12
B = the number of months elapsed (but not greater than 60) from
January 1, 1993, until Optionee's death or permanent
disability divided by 60.
(d) The purchase price of the shares of Stock as to which an
Option is exercised shall be paid in full at the time of the exercise.
Such purchase price shall be payable in cash (including certified
check, bank draft and postal or express money order payable to the
order of the Company).
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<PAGE> 7
The Committee may, in its discretion and to the extent permitted by
the laws of the State of Delaware, determine to permit the holder of
an Option to satisfy the purchase price of the shares as to which an
Option is exercised by delivery of the Option holder's promissory
note, such note to be subject to such terms and conditions as the
Committee may determine. The Committee may, in its discretion and to
the extent permitted by the laws of the State of Delaware, determine
to cause the Company to lend to the holder of an Option funds, on such
terms and conditions as the Committee may determine to be appropriate,
sufficient for the holder of an Option to pay the purchase price of
the shares as to which an Option is to be exercised. No holder of an
Option shall be, or have any of the rights or privileges of, a
stockholder of the Company in respect of any shares purchasable upon
the exercise of any part of an Option unless and until certificates
representing such shares shall have been issued by the Company to such
holder.
(e) Within 60 days of a Senior Executive Termination, the Company
will provide to the Senior Executive an offer to pay the Senior
Executive an amount payable in cash in exchange for the Senior
Executive's relinquishment of all of such Senior Executive's Options.
Within 30 days of the Senior Executive's receipt of the Company's
offer, the Senior Executive, or his heirs or legal representatives in
the event of death or disability, must exercise one of the following
alternatives:
(i) Accept the Company's offer and relinquish the Senior
Executive's Options for the cash amount offered; or
(ii) In lieu of purchasing the shares of Stock subject to
purchase under the Options, relinquish the Options for a
number of shares of Common Stock to be determined as follows:
the number of shares of Common Stock issuable pursuant to such
relinquishment shall be a number equal to the quotient
obtained by dividing the Appreciated Value by the Stock Value
(both as defined below); or
(iii) Continue to hold the Options and exercise them prior
to the earlier of five years from the date of the Senior
Executive Termination or such earlier date as the period for
exercise of the Options would end pursuant to the terms of the
Plan.
As used in this Section 9, "Appreciated Value" shall mean the excess of (i) the
Stock Value times the number of shares of Common Stock covered by the Options
over (ii) the purchase price for each share specified in such Options times the
number of shares of Common Stock
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<PAGE> 8
covered by the Options. As used in this Section 9, "Stock Value" of a share of
Common Stock shall mean (i) on a consolidated basis, the sum of (x) the
Company's earnings before interest, taxes, depreciation and amortization for
the four reported fiscal quarters prior to the date of the Senior Executive
Termination (the "Period") multiplied by 6, plus (y) the Company's average cash
during the Period, minus (z) the Company's average debt during the Period, (ii)
divided by the average number of shares of Common Stock outstanding during the
Period.
10. STOCK DIVIDENDS, STOCK SPLITS AND CERTAIN OTHER CORPORATION
TRANSACTIONS
(a) The existence of this Plan and Options granted hereunder shall
not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures or preferred or
preference stocks ranking prior to or affecting the Common Stock or
the rights attendant thereto, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of the Company's
assets or business, or any other corporate act or proceeding, whether
of a similar character or otherwise.
(b) The shares with respect to which Options may be granted
hereunder are shares of Common Stock of the Company as presently
constituted. If, and whenever, prior to the delivery by the Company
of all of the shares of the Stock which are subject to Options granted
hereunder, the Company shall effect a subdivision or consolidation of
shares or other capital readjustment, the payment of a stock dividend,
a stock split, a combination of shares, a recapitalization or other
increase or reduction of the number of shares of Common Stock
outstanding without receiving consideration therefor in money,
services or property, the number of shares of Stock available under
this Plan and the number of shares of Stock with respect to which
Options granted hereunder may thereafter be exercised shall (i) in the
event of an increase in the number of outstanding shares, be
proportionately increased, and the cash consideration payable per
share shall be proportionately reduced, and (ii) in the event of a
reduction in the number of outstanding shares, be proportionately
reduced, and the cash consideration payable per share shall be
proportionately increased.
(c) If the Company is reorganized, merged or consolidated or is
otherwise a party to a plan of exchange with another corporation
pursuant to which reorganization, merger, consolidation or plan of
exchange the holders of Common Stock receive any
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<PAGE> 9
shares of Common Stock or other securities or if the Company shall
distribute ("Spin Off") securities of another corporation to the
holders of Common Stock, there shall be substituted for the shares
subject to the unexercised portions of outstanding Options an
appropriate number of shares of (i) each class of stock or other
securities which were distributed to the holders of Common Stock in
respect of such shares in the case of a reorganization, merger,
consolidation or plan of exchange, or (ii) in the case of a Spin Off,
the securities distributed to the holders of Common Stock together
with shares of Stock; provided, however, that all such Options may be
canceled by the Company as of the effective date of (x) a
reorganization, merger, consolidation, plan of exchange or Spin Off or
(y) any dissolution or liquidation of the Company, by giving notice to
each holder thereof or his personal representative of its intention to
do so and by permitting the purchase for a period of at least thirty
days during the sixty days next preceding such effective date of all
of the shares subject to such outstanding exercisable Options; and
provided further that in the event of a Spin Off, the Company may, in
lieu of substituting securities or accelerating and canceling Options
as contemplated above, elect (i) to reduce the purchase price for each
share of Stock subject to an outstanding Option by an amount equal to
the fair market value (as determined by the Board) of the securities
distributed in respect of each outstanding share of Common Stock in
the Spin Off or (ii) to reduce proportionately the purchase price per
share and to increase proportionately the number of shares of Stock
subject to each Option in order to reflect the economic benefits
inuring to the holders of Stock as a result of the Spin Off.
(d) Except as hereinbefore expressly provided the issue by the
Company of shares of stock of any class, or securities convertible
into or exchangeable for shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into or
exchangeable for shares of stock of any class shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
of shares of Stock subject to Options granted hereunder.
11. PURCHASE FOR INVESTMENT
Unless the Options and shares of Stock covered by this Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person exercising an
Option under this Plan may be required by the Company to give a representation
in writing that he is acquiring such shares for his
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<PAGE> 10
own account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.
12. SALE OF COMMON STOCK AFTER EXERCISE OF OPTION.
Upon the exercise of an Option by an Optionee in accordance with
Section 9(d) of this Plan, the Company shall deliver to the Optionee
certificates for the number of shares of Common Stock with respect to which
such Option has been so exercised, issued in the name of the Optionee;
provided, however, that such delivery shall be deemed effected for all purposes
when a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the Optionee at the
Optionee's last known address. Once delivery of the shares of Common Stock
have been deemed delivered to the Optionee, the Optionee may sell, pledge,
hypothecate or otherwise encumber (for purposes of this Plan, any such act
referred to as a "sale" or being "sold") such shares of Common Stock purchased
through the exercise of an Option only as follows:
(a) Persons Entitled to Sell. Stock may be sold solely by the
Optionee during his lifetime or after his death by the person or
persons entitled thereto under his will or the laws of descent and
distribution.
(b) Secondary Offering. Upon the consummation of each
underwritten public offering of Common Stock pursuant to a
registration statement wherein the aggregate net proceeds (after
deducting all costs, discounts, commissions and other expenses of the
offering) to the Company's stockholders are at least $10,000,000
("Secondary Offering"), then:
(i) a percentage of all Stock subject to this Plan (on a
pro rata basis per Option granted under this Plan) shall be
able to be sold equal to a ratio determined by the number of
shares of Common Stock sold in the Secondary Offering divided
by the number of outstanding shares of Common Stock, on a
fully diluted basis, existing prior to the Secondary Offering;
and
(ii) regardless of any previous ability to sell due to a
previous offering under this clause (b), a percentage of all
remaining shares of Stock shall be able to be sold on the last
day of each month from the effective date of the Secondary
Offering until December 1997 equal to the number of months
that have elapsed since the effective date of the registration
statement divided by the total number of months between the
effective date of the registration statement and December 31,
1997; provided, that if no Secondary Offering
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<PAGE> 11
has occurred prior to December 31, 1997, all shares of Stock
shall be able to be sold upon the consummation of any
Secondary Offering occurring after such date.
(c) Private Sale of Common Stock. Upon each transfer or series of
related transfers in a private transaction which would have the effect
of transferring to any transferee or group (as defined for purposes of
Section 13(d)(3) of the Exchange Act of persons beneficial ownership
(as defined in Rule 13(d)(3) of the Exchange Act) of a number of
shares of Common Stock that, in the aggregate is equal to or greater
than 10% of the then outstanding shares of Common Stock on a fully
diluted basis, a number of shares of all Stock subject to this Plan
(on a pro rata basis per Option granted under this Plan) shall be able
to be sold equal to the number of shares of Common Stock transferred
multiplied by 9%; provided, however, that shares of Stock purchased or
purchasable through the exercise of an Option may not be sold by the
Optionee upon any transfer to:
(i) a person or entity who is the beneficial owner (as defined
in Rule 13(d)(3) of the Exchange Act) of 5% or more of the
Common Stock on the Effective Date (as defined below), or
(ii) any person or entity controlling, controlled by or under
common control with any person or entity who is the beneficial
owner of 5% or more of the Common Stock on the Effective Date.
For purposes of this clause (ii), "control" (including the
terms "controlling," "controlled by" and "under common control
with") shall mean the direct or indirect possession of the
power to direct or cause the direction of the management and
policies of a person or entity, whether through the ownership
of voting securities, by contract or otherwise.
(d) Asset Sale. Upon the sale of all or substantially all of the
assets of the Company or its subsidiary E-Z Serve Convenience Stores,
Inc. (or whichever Affiliated subsidiary holds substantially all of
the assets related to the Company's convenience store business), 100%
of the Stock purchased or purchasable through the exercise of an
Option may be sold by the Optionee.
(e) Senior Executive Termination. Upon a Senior Executive
Termination, 100% of the applicable Senior Executive's Stock purchased
through the exercise of an Option may be sold by such Senior Executive
without restriction under this Plan.
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<PAGE> 12
(f) Termination other than Senior Executive Termination. In the
event of termination of employment of an Optionee (other than in the
case of a Senior Executive Termination) for any reason other than
death or permanent disability, Stock purchased upon exercise of an
Option may be sold only with respect to the number of shares of Stock
able to sold at the time of such termination pursuant to Sections
12(b), (c) or (d). Any shares of Stock purchased upon exercise of an
Option and not able to be sold at the time of termination shall be
repurchased by the Company at the purchase price paid per share by
such Optionee as soon as practicable, unless the Committee shall
otherwise approve on a case by case basis; provided, that if the
termination of employment was for Cause, all shares of Stock held by
such Optionee shall be purchased by the Company at the purchase price
paid per share by such Optionee as soon as practicable and no sale of
the Stock to anyone other than the Company shall be permitted.
Whether or not a termination of employment is for Cause shall be
determined in the sole discretion of the Committee.
(g) Death or Disability. In the event of the death or permanent
disability (whether or not someone is permanently disabled shall be
determined in the sole discretion of the Committee) of an Optionee
(other than a Senior Executive) following the date of grant of any
Option and while in the employ of the Company or any of its
Affiliates, and prior to such time as 100% of the Stock may be sold,
the Company shall repurchase any shares of Stock purchased by an
Optionee upon exercise of an Option that are unable to be sold due to
the provisions of Section 12, at the purchase price paid per share by
such Optionee as soon as practicable except for such number of shares
of Stock equal to CxD, where:
C = the number of shares of Stock subject to the Option
purchased by the Optionee that were not able to be sold by the
Optionee prior to his death or permanent disability due to the
provisions of Section 12
D = the number of months elapsed (but not greater than 60) from
January 1, 1993, until Optionee's death or permanent
disability divided by 60.
Any shares of Stock that are unable to be sold and may be retained by the
Optionee in accordance with this clause (g) shall continue to be subject to the
limitation on the ability to sell such shares of Stock in accordance with the
provisions of this Plan while held by the persons entitled thereto in clause
(a) of this Section 12.
13. LEGEND. All certificates representing Stock issued upon exercise of
Options shall be endorsed on the reverse side thereof substantially as follows:
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<PAGE> 13
BY THE TERMS OF THE AMENDED AND RESTATED 1994 STOCK OPTION
PLAN OF THE COMPANY, CERTAIN RESTRICTIONS HAVE BEEN PLACED UPON THE
TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE. THE COMPANY
WILL FURNISH A COPY OF SUCH PLAN TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
The Company shall also inform the transfer agent of the Common Stock to place
stop transfer instructions with respect to such shares of Stock in the Common
Stock transfer records for such purpose. Upon the occurrence of any event
listed in Section 12, an Optionee may request the Company and the transfer
agent for the Common Stock to remove such legend from the certificate
representing the applicable number of shares of Stock.
14. TAXES
The Company may make such provisions as it may deem appropriate for
the withholding of any taxes which it determines is required in connection with
any Options granted under this Plan.
15. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of February 9, 1994 ("Effective
Date").
16. AMENDMENT OR TERMINATION
The Board of Directors may amend, alter or discontinue this Plan,
except that no amendment or alteration shall be made which would impair the
rights of any Optionee under any Option theretofore granted, without his
consent, and except that no amendment or alteration shall be made which,
without the approval of the stockholders, would:
(a) Increase the total number of shares reserved for the purposes
of this Plan or decrease the Option price provided for in Section 6,
except in each case as provided in Section 10, or change the class of
employees eligible to participate in this Plan as provided in Section
4;
(b) Extend the Option period provided for in Section 7;
(c) Materially increase the benefits accruing to Optionees under
this Plan; or
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<PAGE> 14
(d) Materially modify the requirements as to eligibility for
participation in this Plan.
17. GOVERNMENT REGULATIONS
This Plan, and the grant and exercise of Options thereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
18. STOCKHOLDER APPROVAL.
All Options granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan at the 1994 Annual Meeting of
Stockholders, or at a special meeting of stockholders called for that purpose
prior to the 1994 Annual Meeting, by the affirmative vote of the holders of a
majority of the outstanding shares of the Company present, or represented by
proxy, and entitled to vote thereat, or by the written consent of the holders
of a majority of the outstanding shares of the Company entitled to vote;
provided that if such approval by the stockholders of the Company is not
forthcoming, all Options previously granted under this Plan shall be void.
19. NOT A CONTRACT.
The Plan shall not be deemed to constitute a contract between the
Company and any employee or to be a consideration or an inducement for the
employment of any employee. No part of any employee's payments under the Plan
shall be used as a basis for calculation of retirement or any other benefits to
which such employee might be entitled under any other benefit plans which are
or may in the future be in place at the Company. Nothing contained in the Plan
shall be deemed to give any employee the right to be retained in the service of
the Company or to interfere with the right of the Company to discharge any
employee at any time regardless of the effect which such discharge shall have
upon him as a participant of the Plan.
20. INDEMNIFICATION.
In the event any claim, suit or proceeding is brought regarding the
Plan established hereunder to which the Committee, or any member thereof, or
any person or agent acting for or at the instruction or request of the
Committee, may be a party, the Committee and such members, persons or agents
shall be entitled to be reimbursed by the Company for any and
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<PAGE> 15
all costs, attorney's fees, and other expenses pertaining thereto incurred by
them for which they shall have become liable.
21. COMPANY RECORDS.
No person shall, as a result of the existence of the Plan or such
person's participation therein, be entitled to review or have access to the
Company's books and records.
22. MISCELLANEOUS.
The headings of the Sections herein are inserted only for convenience
of reference and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. Any reference herein to the masculine gender
includes the feminine gender and any singular or plural reference includes the
other where the context requires.
ATTEST: E-Z SERVE CORPORATION
/s/ JOHN T. MILLER By: /s/ NEIL H. McLAURIN
- ---------------------------------- -------------------------------
John T. Miller Neil H. McLaurin
Senior Vice President President
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<PAGE> 1
EXHIBIT 4.3.1
REGISTRATION RIGHTS AGREEMENT
This AGREEMENT (the "Agreement") is made as of March 25, 1992 by and
among E-Z SERVE CORPORATION, a Delaware Corporation (the "Company") and the
investors listed on Exhibit A hereto, (the "Investors").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and the Investors have entered into a Series B
Convertible Preferred Stock Purchase Agreement dated the date hereof (the
"Purchase Agreement") in connection with the issuance and sale of certain
shares of Series B Convertible Preferred Stock of the Company (the "Shares");
WHEREAS, each Share issued in accordance with the Purchase Agreement
is convertible into the number of shares of Common Stock, $.01 par value (the
"Common Stock"), of the Company as set forth in the Certificate of Designation
of the Company attached to the Purchase Agreement as Exhibit B; and
WHEREAS, it is a condition to the purchase of the Shares pursuant to
the Purchase Agreement that the Company and the Investors enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
1. Registration Rights.
1.1 Definitions.
(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and
filing a registration statement or similar document in compliance with
the Securities Act of 1933, as amended (the "1933 Act"), and the
automatic effectiveness or the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the
Common Stock issued or issuable the conversion of the Shares and (2)
any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right, or other security which
is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such securities described in (1) of
this paragraph; provided, however, that any shares previously sold to
the public pursuant to a registered public offering or pursuant
<PAGE> 2
to an exemption from the registration requirements of the 1933 Act
shall cease to be Registrable Securities;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by adding the number of shares of
Common Stock outstanding which are, and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible securities
which upon issuance would be, Registrable Securities;
(d) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 hereof;
(e) The terms "Form S-3," "Form S-4" and "Form S-8"mean
such respective forms under the 1933 Act as in effect on the date
hereof or any successor registration forms to Form S-3, Form S-4 and
Form S-8, respectively, under the 1933 Act subsequently adopted by the
Securities and Exchange Commission ("SEC").
1.2 Request for Registration.
(a) If the Company shall receive at any time a written
request from the Holders of at least 50% of the Registrable Securities
then outstanding and entitled to registration rights under this
Section 1 (the "Initiating Holders") that the Company effect the
registration under the 1933 Act of the lesser of (i) 20% of the
Registrable Securities then outstanding or (ii) the number of
Registrable Securities whose aggregate offering price is expected to
be at least $3,000,000, then the Company shall, within five days of
the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of this Section 1.2, use
its best efforts to effect such a registration as soon as practicable
and in any event to file within 120 days of the receipt of such
request a registration statement under the 1933 Act covering all the
Registrable Securities which the Holders shall in writing request
(given within 20 days of receipt of the notice given by the Company
pursuant to this Section 1.2(a)) to be included in such registration
and to use its best efforts to have such registration statement become
effective.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company's part of their request
made pursuant to this Section 1.2 and the Company shall include such
information in the written notice referred to in subsection 1.2(a).
In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(d)) enter
into an underwriting agreement
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<PAGE> 3
in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders
after consultation with the Company: provided, however, that the
consent of the Company is not required. Notwithstanding any other
provision of this Section 1.2, if, in the case of a registration
requested pursuant to Section 1.2(a), the underwriter advises the
Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and
the number of Registrable Securities that may be included in the
underwriting shall be allocated pro rata among all Holders thereof
desiring to participate in such underwriting (according to the number
of Registrable Securities then held by each Holder). No Registrable
Securities requested by a Holder to be included in a registration
pursuant to Section 1.2(a) shall be excluded from the underwriting
unless all securities other than Registrable Securities are first
excluded.
(c) The Company is obligated to effect only one
registration pursuant to Section 1.2(a).
(d) Notwithstanding the foregoing, (i) the Company shall
not be obligated to effect the filing of a registration statement
pursuant to this Section 1.2 during the six months following the
effective date of a registration statement pertaining to the
underwritten public offering of securities for the account of the
Company, or (ii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2 a certificate
signed by the President of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would not be in
the best interests of the Company and its stockholders generally for
such registration statement to be filed, the Company shall have the
right to defer such filing for a period of not more than 90 days after
receipt of the request of the Initiating Holders; provided, however,
that the Company may not utilize the right set forth in this
subsection (d)(ii) more than once in any twelve-month period.
1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register(including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
capital stock or other securities under the 1933 Act in connection with the
public offering of such securities solely for cash (other than a registration
on Form S-8 , or a registration on Form S-4 or any successor form), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of any Holder given within 20 days
after mailing of such notice by the Company the Company shall, subject to the
provisions of Section 1.7, use its best efforts to cause a registration
statement covering all of the Registrable Securities that each such Holder has
requested to be registered to become effective under the 1933 Act. The Company
shall be under no obligation to complete any offering of its securities it
proposes to make and shall incur no liability to any Holder for its failure to
do so.
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<PAGE> 4
1.4 Obligations of the Company. Whenever required under this
Section 1 to use its best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
Prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 180 days or until the Holders have
informed the Company in writing that the distribution of their securities has
been completed; and shall:
(a) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement, and use its best efforts
to cause each such amendment to become effective, as may be necessary
to (comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement.
(b) Furnish to the Holders such reasonable number of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(c) Use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Molders, provided that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or Jurisdiction.
(d) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter
of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an
agreement, including furnishing any opinion of counsel or entering
into a lock-up agreement reasonably requested by the managing
underwriter.
(e) Notify each Holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto covered by such registration statement is required to be
delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing and promptly file such
amendments and supplements which may be required pursuant to
subparagraph (b) of this Section 1.4 on account of such event and use
its best efforts to cause each such amendment and supplement to become
effective.
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<PAGE> 5
(f) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to
this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given by company
counsel to the underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, if any, and (ii) a letter
dated such date, from the independent certified public accountant of
the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any,
and to the Holders requesting registration of Registrable Securities.
(g) Apply for listing and use its best efforts to list
the Registrable Securities, if any, being registered on any national
securities exchange on which a class of the Company's equity
securities is listed or, if the Company does not have a class of
equity securities listed on a national securities exchange, apply for
qualification and use its best efforts to qualify the Registrable
Securities, if any, being registered for inclusion on the automated
quotation system of the National Association of Securities Dealers,
Inc.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 in
respect of the Registrable Securities of any selling Holder that such selling
Holders, if any, shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions relating to Registrable Securities
incurred in connection with each registration, filings or qualifications
pursuant to Section 1.2(a) and each registration in any six-month period,
filing or qualification pursuant to Section 1.10, including (without
limitation) all registration, filing and qualification fees, printing and
accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2(a) if the registration request is subsequently withdrawn at any
time at the request of the Holders of a majority of the Registrable Securities
to be registered (in which case all participating Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 1.2(a);
provided further, however, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Holders of a majority of the
Registrable Securities
-5-
<PAGE> 6
then outstanding at the time of their request that makes the proposed offering
unreasonable in the good faith judgment of a majority in interest of the
Holders of the Registrable Securities then the Holders shall not be required to
pay any of such expenses and the right to one demand registration pursuant to
Section 1.2(a) shall not be forfeited. Underwriting discounts and commissions
relating to Registrable Securities will be borne and paid ratably by the
Holders of such Registrable Securities.
1.7 Underwriting Requirements. In connection with any offering
involving an underwriting of securities being issued by the Company, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity, if any, as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company. If
the managing underwriter for the offering shall advise the Company in writing
that the total amount of securities, including Registrable Securities,
requested by shareholders to be included in such offering exceeds the amount of
securities to be sold other than by the Company that can be successfully
offered, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
managing underwriter believes will not jeopardize the success of the offering,
provided, however, that the number of Registrable Securities to be included in
the offering shall not be reduced unless the securities to be included in such
offering for the account of any person other than the Company are also reduced
on a pro rata basis; provided, however, that in no event shall the amount of
securities of the selling Holders included in the offering be reduced below 50%
(fifty percent) of the total amount of securities included in such offering.
For purposes of apportionment pursuant to this Section 1.7, for any selling
shareholder which is a Holder of Registrable Securities and which is a
partnership or a corporation, the partners, retired partners and shareholders
of such holder, or the estates and family members of such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
collectively be deemed to be a 'selling shareholder', and any pro rata
reduction with respect to such 'selling shareholder' shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such 'selling shareholder' as defined in this
sentence.
1.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors,
partners, agents and employees of each Holder, any underwriter (as
defined in the 1933 Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the 1933 Act
or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several)
to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations (a
"Violation"): (i) any untrue statement or alleged untrue statement
-6-
<PAGE> 7
of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iii) any
violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities
law. The Company will reimburse each such Holder, officer, director,
partner, agent, employee, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action. The indemnity agreement contained in this subsection 1.8(a)
shall not apply to amounts paid in settlement of any loss, claim,
damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable to a Holder in any such
case for any such loss, claim, damage, liability, or action (i) to the
extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by or on behalf
of such Holder, underwriter or controlling person or (ii) in the case
of a sale directly by a Holder of Registrable Securities (including a
sale of such Registrable Securities through any underwriter retained
by such Holder to engage in a distribution solely on behalf of such
Holder), such untrue statement or alleged untrue statement or omission
or alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such Holder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Securities to the person
asserting any such loss, claim, damage or liability in any case where
such delivery is required by the Securities Act.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the
1933 Act, each agent and any underwriter for the Company, and any
other Holder selling securities in such registration statement or any
of its directors, officers, partners, agents or employees or any
person who controls such Holder or underwriter, against any losses,
claims, damages, or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, agent, or
underwriter or controlling person, or other such Holder or director,
officer or controlling person may become subject, under the 1933 Act,
the 1934 Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by or on behalf
of such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
controlling person, agent or underwriter or controlling person, other
Holder, officer, director, partner,
-7-
<PAGE> 8
agent, employee, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the liability of any Holder hereunder
shall be limited to the amount of proceeds received by such Holder in
the offering giving rise to the Violation; and provided further that
the indemnity agreement contained in this subsection 1.8(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld nor,
in the case of a sale directly by the Company of its securities
(including a sale of such securities through any underwriter retained
by the Company to engage in a distribution solely on behalf of the
Company), shall the Molder be liable to the Company in any case in
which such untrue statement or alleged untrue statement or omission or
alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and the Company failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the person asserting any
such loss, claim, damage or liability in any case where such delivery
is required by the 1933 Act.
(c) Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 1.8, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume and control the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests, as reasonably determined by either
party, between such indemnified party and any other party represented
by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.8 to the
extent of such prejudice, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this
Section 1.8.
(d) The obligations of the Company, the Molders under
this Section 1.8 shall survive the conversion, if any, of the Shares
and the completion of any offering of Registrable Securities in a
registration statement whether under this Section 1 or otherwise.
1.9 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 and 144A promulgated
under the 1933 Act and any other rule or regulation of the SEC that may at any
time permit a Molder to sell securities of the Company to
-8-
<PAGE> 9
the public without registration, and with a view to making it possible for
Holders to register the Registrable Securities pursuant to a registration on
Form S-3, the Company agrees to:
(a) use its best efforts to make and keep public
information available, as those terms are understood and defined in
Rule 144, at all times after 90 days after the effective date of the
first registration statement filed by-the Company for the offering of
its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as
is necessary to enable the Holders to utilize Form S-3 for the sale of
their Registrable Securities;
(c) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the 1933 Act and the 1934 Act;
(d) furnish to any Holder, so long as the Molder owns any
Registrable Securities, forthwith upon request (i) a written statement
by the Company as to its compliance with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), or as to its
qualification as a registrant whose securities may be resold pursuant
to Form S-3 (at any time it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Molder of
any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form; and
(e) at all times during which the Company is neither
subject to the reporting requirements of Section 13 or 15(d) of the
1934 Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under
the 1934 Act, provide in written form, upon the written request of any
Holder, or a prospective purchaser of securities of the Company from
such Molder, all information required by Rule 144A(d)(4)(i) of the
General Regulations promulgated by the SEC under the 1933 Act ("144A
Information"); the Company further agrees, upon written request, to
cooperate with and assist any Holder or any member of the National
Association of Securities Dealers, Inc. system for Private Offerings
Resales and Trading through Automated Linkages ("PORTAL") in applying
to designate and thereafter maintaining the eligibility of the
Company's securities for trading through PORTAL. With respect to each
Holder, the Company's obligations under this Section 1.10(e) shall at
all times be contingent upon such Holder's obtaining from a
prospective purchaser an agreement to take all reasonable precautions
to safeguard the 144A Information from disclosure to anyone other than
employees of the prospective purchaser who require access to the 144A
Information for the sole purpose of evaluating its purchase of the
Company's securities.
-9-
<PAGE> 10
1.10 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 (or on any successor form to Form S-3 regardless of
its designation) and any related qualification or compliance with respect to
all or a part of the Registrable Securities owned by such Holder or Holders,
the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders; and
(b) use its best efforts to effect, as soon as
practicable, such registration, qualification or compliance as may be
so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's or Holders'
Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder
or Holders joining in such request as are specified in a written
request given within 20 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.10 if: (1) Form S-3 (or any
successor form to Form S-3 regardless of its designation), is not
available for such offering by the Holders: (2) the aggregate net
offering price (after deduction of underwriting discounts and
commissions) of the Registrable Securities specified in such request
is not at least $500,000; (3) the Company has already affected one
registration on Form S-3 within the previous six-month period
(exclusive of registrations affected pursuant to Sections 1.2 or 1.3
hereof).; or (4) the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would
not be in the best interests of the Company and its stockholders for
such Form S-3 registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the Form S-3
registration for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.10,
provided, however, that the Company shall not utilize this right more
than once in any twelve-month period.
1.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by any Holder to (i) a transferee of at least 500 shares of
Registrable Securities or some lesser number of Registrable Securities if such
lesser number represents all of the Registrable Securities issued to such
Holder, or (ii) to an affiliate, partner or stockholder of such Investor or
transferee or an account managed or advised by the manager or adviser of such
investor or transferee.
1.12 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company relating to registration rights unless such
agreement includes: (a) to the extent the agreement would allow such holder or
prospective holder
-10-
<PAGE> 11
to include such securities in any registration filed under Section 1.2 or 1.3
hereof, a provision that such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
its securities will not reduce the amount of the Registrable Securities of the
Holders which would otherwise be included; (b) to the extent the agreement
would allow such holder or prospective holder to include such securities in any
registration effected pursuant to Section 1.2 or 1.3 hereof, a provision that
the rights of such holder to participate in such registration shall permit
participation on no greater level than that of the Holders; and (C) no
provision which would allow such holder or prospective holder to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of the dates set forth in subsection 1.2(a) or
within six months after the effective date of any registration effected
pursuant to Section 1.
2. Miscellaneous.
2.1 Legend. Each certificate representing Registrable Securities
shall state therein:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF
MARCH 25, 1992 BY AND AMONG THE CORPORATION AND THE INVESTORS
NAMED THEREIN, A COPY OF WHICH IS ON| FILE AT THE OFFICES OF
THE CORPORATION.
2.2 Notices. All notices, requests, consents and demands shall be
in writing and shall be personally delivered, mailed, postage prepaid,
telecopied or telegraphed, to the Company at:
E-Z Serve Corporation
10700 North Interstate 45
Suite 500
Houston, Texas 77037
Telecopy: (713) 847-4739
Attn: Neil H. McLaurin
with a copy to:
Bracewell & Patterson, L.L.P.
2900 South Tower
711 Louisiana Street, Suite 2900
Houston, Texas 77002
Telecopy: (713) 221-1212
Attn: John L. Keffer, Esq.
-11-
<PAGE> 12
to each Investor at its address set out on Exhibit A hereto with a copy to:
Larry Jordan Rowe, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopy: (617) 951-7050
and a copy to:
Jeff Fromm, Esq.
Intercontinental Mining & Resources Limited
c/o Quadrant Management Inc.
127 East 73rd Street
New York, New York 10021
Telecopy: (212) 439-9450
or such other address as may be furnished in writing to the other parties
hereto. All such notices, requests, demands and other communication shall,
when mailed (registered or certified mail, return receipt requested, postage
prepaid), personally delivered, or telegraphed, be effective four days after
deposit in the mails, when personally delivered, or when delivered to the
telegraph company, respectively, addressed as aforesaid, unless otherwise
provided herein and, when telecopied, shall be effective upon actual receipt.
2.3 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters contemplated herein. This
Agreement supersedes any and all prior understandings or agreements as to the
subject matter of this Agreement.
2.4 Amendments, Waivers and Consents. Any provision in this
Agreement to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein set
forth may be omitted or waived, if the Company (i) shall obtain consent thereto
in writing from persons holding or having the right to acquire an aggregate of
at least sixty-six and two-thirds percent (66 2/3%) of the aggregate of the
Registrable Securities then outstanding and (ii) shall, in each such case,
deliver copies of such consent in writing to any Holders who did not execute
the same.
2.5 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the personal representatives, successors and
assigns of the respective parties hereto. The Company shall not have the right
to assign its obligations hereunder or any interest herein without obtaining
the prior written consent of the Holders in accordance with Section 2.4.
-12-
<PAGE> 13
2.6 General. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural, the singular, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the laws of the State of Texas.
2.7 Severability. If any provisions of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable,
the parties hereby waive such provision to the extent that it is found to be
invalid or unenforceable. Such provision shall, to the maximum extent
allowable by law, be modified by such court so that it becomes enforceable,
and, as modified, shall be enforced as any other provision hereof, all the
other provisions hereof continuing in full force and effect.
2.8 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.
2.9 Specific Performance. The Company recognizes that the rights
of the Holders under this Agreement are unique, and, accordingly, the Holders
shall, in addition to such other remedies as may be available to them at law or
in equity, have the right to enforce their rights hereunder by actions for
injunctive relief and specific performance to the extent permitted by law.
This Agreement is not intended to limit or abridge any rights of the Holders
which may exist apart from this Agreement.
-13-
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
-------------------------------------
Name: John T. Miller
Title: Senior Vice President
INVESTORS
PHEMUS CORPORATION
By: /s/ Michael Eisenson
-------------------------------------
Title: Authorized Signatory
----------------------------------
By:
-------------------------------------
Title: Authorized Signatory
----------------------------------
INTERCONTINENTAL MINING & RESOURCES
LIMITED
By: /s/ Jeffrey A. Fromm
-------------------------------------
Name: Jeffrey A. Fromm
-----------------------------------
Title: Vice President
----------------------------------
-14-
<PAGE> 15
EXHIBIT A
INVESTORS
Phemus Corporation
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Telecopy: (617) 523-1063
Attn: Michael R. Eisenson
Intercontinental Mining & Resources Limited
c/o Quadrant Management, Inc.
127 East 73rd Street
New York, New York 10021
Telecopy: (212) 439-9450
Attn: Alan G. Quasha
<PAGE> 1
EXHIBIT 4.3.2
AMENDMENT TO REGISTRATION
RIGHTS AGREEMENT
This Amendment to Registration Rights Agreement ("Amendment") is made
as of July 31, 1992, by and among E-Z Serve Corporation, a Delaware Corporation
(the "Company"), and Phemus Corporation, a Massachusetts corporation ("Phemus")
and Intercontinental Mining & Resources Limited, a British Virgin Islands
limited partnership ("IMR Limited").
WHEREAS, the Company, Phemus and IMR Limited entered into that certain
Registration Rights Agreement dated as of March 25, 1992 (the "Agreement");
WHEREAS, the Company has issued to Phemus and IMR warrants (the "D
Warrants") to purchase an aggregate of 30,000 shares of the Company's Series D
Convertible Preferred Stock, par value $0.01 per share (the "Series D
Preferred") and the D Warrants also provide for the issuance to Phemus and IMR
of the Company's Common Stock, par value $0.01 per share;
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Section 1.1(b) of the Agreement is hereby amended in its
entirety to be as follows:
(b) The term "Registrable Securities" means (1) the
Common Stock issued or issuable upon the conversion of the
Shares, (2) the Common Stock issued or issuable upon the
exercise of the Warrants issued pursuant to that certain
Warrant Purchase Agreement dated as of July 15, 1992, by and
among the Company, Phemus, and Intercontinental Mining &
Resources Incorporated, a British Virgin Islands corporation
("IMR Inc."), (3) the Common Stock issued or issuable upon the
conversion of the Series D Preferred which is issued or
issuable upon the exercise of the D Warrants, (4) the Common
Stock issued or issuable pursuant to the D Warrants, and (5)
any Common Stock of the Company issued (or issuable upon the
conversion or exercise of any warrant, right, or other
security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such
securities described in (1), (2), (3) or (4) of this
paragraph; provided, however, that any shares previously sold
to the public pursuant to a registered public offering or
<PAGE> 2
pursuant to an exemption from the registration requirements of
the 1933 Act shall cease to be Registrable Securities;
2. Section 1.7 of the Agreement is hereby amended in its entirety
to be as follows:
1.7 Underwriting Requirements. In connection
with any offering involving an underwriting of securities
being issued by the Company, the Company shall not be required
under Section 1.3 to include any of the Holders' securities in
such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity,
if any, as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the
managing underwriter for the offering shall advise the Company
in writing that the total amount of securities, including
Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities to
be sold other than by the Company that can be successfully
offered, then the Company shall be required to include in the
offering only that number of such securities, including
Registrable Securities, which the managing underwriter
believes will not jeopardize the success of the offering,
provided, however, that the number of Registrable Securities
to be included in the offering shall not be reduced unless the
securities to be included in such offering for the account of
any person other than the Company are also reduced on a pro
rata basis provided, however, that in no event shall the
amount of securities of (i) the selling Holders and (ii) any
other parties pursuant to Section 1.7 of the Registration
Rights Agreement dated July 31, 1992, between the Company and
Tenacqco Bridge Partnership as in effect on the date hereof,
included in the offering be reduced below 50% (fifty percent)
of the total amount of securities included in such offering.
For purposes of apportionment pursuant to this Section 1.7,
for any selling Holder which is a partnership or a
corporation, the partners, retired partners and shareholders
of such Holder, or the estates and family members of such
partners and retired partners and any trusts for the benefit
of any of the foregoing persons, shall collectively with such
Holder be deemed to be one 'selling Holder', and any pro rata
reduction with respect to such 'selling Holder' shall be based
upon the aggregate amount of shares carrying registration
rights owned by entities and individuals included in
such 'selling Holder', as defined in this sentence.
3. Exhibit A to the Agreement is hereby amended to include IMR
Inc., and IMR Inc. will be considered an "Investor" for all
-2-
<PAGE> 3
purposes under the Agreement, entitled to all benefits and
subject to all obligations thereunder as are other Investors.
Except as expressly amended herein, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
----------------------------------------
Name: John T. Miller
Title: Senior Vice President
PHEMUS CORPORATION
By: /s/ Michael Eisenson
----------------------------------------
Name: Michael Eisenson
By:
----------------------------------------
Name:
--------------------------------------
INTERCONTINENTAL MINING & RESOURCES LIMITED
By: /s/ Jeffrey A. Fromm
----------------------------------------
Name: Jeffrey A. Fromm
Title: Vice President
-3-
<PAGE> 1
EXHIBIT 4.3.3
SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
This Second Amendment to Registration Rights Agreement ("Amendment")
is made as of April 21, 1993, by and between E-Z Serve Corporation, a Delaware
Corporation (the "Company"), Phemus Corporation, a Massachusetts corporation
("Phemus"), Intercontinental Mining & Resources Incorporated, a British Virgin
Islands corporation ("IMR"), and Quadrant Capital Corp., a Delaware
corporation, formerly named Intercontinental Mining & Resources Limited
("QCC"). Phemus, IMR and QCC are referred to herein together as the
"Investors."
WHEREAS, the Company and the Investors entered into that certain
Registration Rights Agreement dated as of March 25, 1992, as amended on July
31, 1992 (the "Agreement");
WHEREAS, the Company has issued to Phemus and IMR 105,820 and 94,180
shares, respectively, of the Company's Series F Convertible Preferred Stock,
par value $0.01 per share (the "Series F Preferred") and the shares of Series F
Preferred are convertible into shares of the Company's common stock, par value
$0.01 per share ("Common Stock");
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Section 1.1(b) of the Agreement is hereby amended in its
entirety to be as follows:
(b) The term "Registrable Securities" means (1) the Common
Stock issued or issuable upon the conversion of the Shares, (2) the
Common Stock issued or issuable upon the conversion of the Series D
Preferred which is issued or issuable upon the exercise of the D
Warrants, (3) the Common Stock issued or issuable pursuant to the D
Warrants, (4) the Common Stock issued or issuable upon
<PAGE> 2
the conversion of the shares of the Company's Series F Convertible
Preferred Stock issued to Phemus Corporation and Intercontinental
Mining & Resources Incorporated on April 20, 1993, (5) the Common
Stock issued or issuable upon the exercise of the warrants issued to
Phemus Corporation and Intercontinental Mining & Resources
Incorporated on April 20, 1993, and (6) any Common Stock of the
Company issued (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in
replacement of, such securities described in (1), (2), (3), (4) or (5)
of this paragraph; provided, however, that any shares previously sold
to the public pursuant to a registered public offering or pursuant to
an exemption from the registration requirements of the 1933 Act shall
cease to be Registrable Securities;
Except as expressly amended herein, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
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Name: John T. Miller
Title: Senior Vice President
PHEMUS CORPORATION
By: /s/ Michael Eisenson
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Name: Michael Eisenson
By:
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Name:
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QUADRANT CAPITAL CORP.
By: /s/ John Schoemer
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Name: John Schoemer
Title: Vice President
INTERCONTINENTAL MINING & RESOURCES INCORPORATED
By: /s/ John Schoemer
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Name: John Schoemer
Title: Attorney-in-Fact
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EXHIBIT 4.4.1
REGISTRATION RIGHTS AGREEMENT
This Agreement (the "Agreement") is made as of July 31, 1992 by and
among E-Z Serve Corporation, a Delaware corporation (the "Company"), and
Tenacqco Bridge Partnership, a partnership formed under the laws of New York
(the "Investor").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and the Investor have entered into an Amended and
Restated Stock Purchase Agreement dated as of the date hereof (the "Amended
Purchase Agreement") in connection with the issuance and sale of certain shares
of (i) Common Stock, $ .01 par value (the "Common Stock") and (ii) Series E
Convertible Preferred Stock and Series D Convertible Preferred Stock (together,
the "Preferred Stock"), of the Company (collectively, the "Shares") and the
issuance of certain Warrants, as defined below, in consideration of the
contribution of funds by the Investor to the Company and the sale by the
Investor to the Company of all of the Investor's interest in the TOC Securities
(as defined in the Amended Purchase Agreement);
WHEREAS, each share of Preferred Stock issued in accordance with the
Amended Purchase Agreement is convertible into the number of shares of Common
Stock of the Company set forth in the Certificate of Designation of the
Preferred Stock; and
WHEREAS, it is a condition to the purchase of the Shares pursuant to
the Amended Purchase Agreement that the Company and the Investor enter into
this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
1. Registration Rights.
1.1 Definitions.
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the
Securities Act of 1933, as amended (the "1933 Act"), and the automatic
effectiveness or the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (1) the shares of
Common Stock issued pursuant to the Amended Purchase Agreement, (2)
the Common Stock issued in exchange for the accrued but unpaid
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dividends on TOC Retail, Inc.'s Series B Preferred Stock pursuant to
the warrants to purchase the Company's Series D Convertible Preferred
Stock ("Warrants") which are issued pursuant to the Amended Purchase
Agreement (3) the Common Stock issued or issuable upon the conversion
of the shares of Preferred Stock and (4) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any
warrant, right, or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in
replacement of, such securities described in (1),(2), and (3) of this
paragraph; provided, however, that any shares of Common Stock
previously sold to the public pursuant to a registered public offering
or pursuant to an exemption from the registration requirements of the
1933 Act shall cease to be Registrable Securities;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by adding the number of shares of
Common Stock outstanding which are, and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible securities
which upon issuance would be, Registrable Securities;
(d) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 hereof;
(e) The terms "Form S-3", "Form S-4" and "Form S-8" mean
such respective forms under the 1933 Act as in effect on the date
hereof or any successor registration forms to Form S-3, Form S-4 and
Form S-8, respectively, under the 1933 Act subsequently adopted by the
Securities and Exchange Commission ("SEC").
1.2 Request for Registration.
(a) If the Company shall receive at any time a written
request from the Holders of at least 50% of the Registrable Securities
then outstanding and entitled to registration rights under this
Section 1 (the "Initiating Holders") that the Company effect the
registration under the 1933 Act of not less than the lesser of (i) 20%
of the Registrable Securities then outstanding or (ii) the number of
Registrable Securities whose aggregate offering price is expected to
be at least $3,000,000, then the Company shall, within five days of
the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of this Section 1.2, use
its best efforts to effect such a registration as soon as practicable
and in any event to file within 120 days of the receipt of such
request a registration statement under the 1933 Act covering all the
Registrable Securities which the Holders shall in writing request
(such request to be made within 20 days of receipt
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of the notice given by the Company pursuant to this Section 1.2(a)) to
be included in such registration and to use its best efforts to have
such registration statement become effective.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as part of their
request made pursuant to this Section 1.2 and the Company shall
include such information in the written notice referred to in
subsection 1.2(a). In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in
subsection 1.4(d)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders after
consultation with the Company, provided, however, that the consent of
the Company is not required. Notwithstanding any other provision of
this Section 1.2, if, in the case of a registration requested pursuant
to Section 1.2(a), the underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise
all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of Registrable Securities
that may be included in the underwriting shall be allocated pro rata
among all Holders thereof desiring to participate in such underwriting
(according to the number of Registrable Securities then held by each
Holder). No Registrable Securities requested by a Holder to be
included in a registration pursuant to Section 1.2(a) shall be
excluded from the underwriting unless all securities other than
Registrable Securities are first excluded.
(c) The Company is obligated to effect only one
registration pursuant to Section 1.2(a).
(d) Notwithstanding the foregoing, (i) the Company shall
not be obligated to effect the filing of a registration statement
pursuant to this Section 1.2 during the six months following the
effective date of a registration statement pertaining to the
underwritten public offering of securities for the account of the
Company, or (ii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2 a certificate
signed by the President of the Company stating that in the good
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faith judgment of the Board of Directors of the Company, it would not
be in the best interests of the Company or its stockholders generally
for such registration statement to be filed, the Company shall have
the right to defer such filing for a period of not more than 90 days
after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize the right set forth in this
subsection (d)(ii) more than once in any twelve-month period.
1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
capital stock or other securities under the 1933 Act in connection with the
public offering of such securities solely for cash (other than a registration
on Form S-8, or a registration on Form S-4 or any successor form), the Company
shall, at such time, promptly give each Holder written notice of such
registration but in no event less than 15 days before the anticipated filing
date. Upon the written request of any Holder given within 20 days after
mailing of such notice by the Company the Company shall, subject to the
provisions of Section 1.7, use its best efforts to cause a registration
statement covering all of the Registrable Securities that each such Holder has
requested to be registered to become effective under the 1933 Act. The Company
shall be under no obligation to complete any offering of its securities it
proposes to make pursuant to this Section 1.3 and shall incur no liability to
any Holder for its failure to do so.
1.4 Obligations of the Company. Whenever required under this
Section 1 to use its best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible, prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to 180 days or until the Holders have informed the Company in
writing that the distribution of their securities has been completed; and
shall:
(a) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement, and use its best efforts
to cause each such amendment to become effective, as may be necessary
to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement.
(b) Furnish to the Holders and each underwriter such
reasonable number of copies of a prospectus, including a preliminary
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prospectus, in conformity with the requirements of the 1933 Act, and
such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(c) Use its best efforts to (i) register or qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders and (ii) cause such Registrable
Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to
enable the selling Holders to consummate the registration of their
Registrable Securities; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such state or jurisdiction.
(d) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter
of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an
agreement, including furnishing any opinion of counsel or entering
into a lock-up agreement reasonably requested by the managing
underwriter.
(e) Notify each Holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto covered by such registration statement is required to be
delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing and promptly file such
amendments and supplements which may be required pursuant to
subparagraph (b) of this Section 1.4 on account of such event and use
its best efforts to cause each such amendment and supplement to become
effective.
(f) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to
this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated
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such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given by
company counsel to the underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities, if any, and (ii) a
letter dated such date, from the independent certified public
accountant of the Company, in form and substance as is customarily
given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable
Securities.
(g) Apply for listing and use its best efforts to list
the Registrable Securities, if any, being registered on any national
securities exchange on which a class of the Company's equity
securities is listed or, if the Company does not have a class of
equity securities listed on a national securities exchange, apply for
qualification and use its best efforts to qualify the Registrable
Securities, if any, being registered for inclusion on the automated
quotation system of the National Association of Securities Dealers,
Inc.
(h) After the filing of the registration statement,
promptly notify the Holders of any stop order issued or threatened by
the SEC and take all reasonable steps required to prevent the entry of
such stop order and to remove it if entered.
(i) Enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
registration of such Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 in
respect of the Registrable Securities of any selling Holder that such selling
Holders, if any, shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions relating to Registrable Securities
incurred in connection with each registration, filings or qualifications
pursuant to Section 1.2(a) and each registration, filing or qualification
pursuant to Section 1.10, including (without limitation) all registration,
filing and qualification fees, printing and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
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Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2(a) if
the registration request is subsequently withdrawn at any time at the request
of the Holders of a majority of the Registrable Securities to be registered (in
which case all participating Holders shall bear such expenses), unless the
Holders of a majority of the Registrable Securities agree to forfeit their
right to one demand registration pursuant to Section 1.2(a); provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders of a majority of the Registrable Securities then
outstanding at the time of their request that makes the proposed offering
unreasonable in the good faith judgment of a majority in interest of the
Holders of the Registrable Securities then the Holders shall not be required to
pay any of such expenses and the right to one demand registration pursuant to
Section 1.2(a) shall not be forfeited. Underwriting discounts and commissions
relating to Registrable Securities will be borne and paid ratably by the
Holders of such Registrable Securities.
1.7 Underwriting Requirements. In connection with any offering
involving an underwriting of securities being issued by the Company, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity, if any, as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company. If
the managing underwriter for the offering shall advise the Company in writing
that the total amount of securities, including Registrable Securities,
requested by shareholders to be included in such offering exceeds the amount of
securities to be sold other than by the Company that can be successfully
offered, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
managing underwriter believes will not jeopardize the success of the offering,
provided, however, that the number of Registrable Securities to be included in
the offering shall not be reduced unless the securities to be included in such
offering for the account of any person other than the Company are also reduced
on a pro rata basis provided, however, that in no event shall the amount of
securities of (i) the selling Holders and (ii) those parties pursuant to
Section 1.7 of the Registration Rights Agreement dated March 25, 1992, between
the Company and the Investors named therein, included in the offering be
reduced below 50% (fifty percent) of the total amount of securities included in
such offering. For purposes of apportionment pursuant to this Section 1.7, for
any selling Holder which is a partnership or a corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of such partners and retired partners and any trusts for the benefit of
any of the foregoing persons, shall collectively with such Holder be deemed to
be one
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'selling Holder', and any pro rata reduction with respect to such 'selling
Holder' shall be based upon the aggregate amount of shares carrying
registration rights owned by entities and individuals included in such 'selling
Holder', as defined in this sentence.
1.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors,
partners, agents and employees of each Holder, any underwriter (as
defined in the 1933 Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the 1933 Act
or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several)
to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations (a
"Violation"): (i) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iii) any
violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities
law. The Company will reimburse each such Holder, officer, director,
partner, agent, employee, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action. The indemnity agreement contained in this subsection 1.8(a)
shall not apply to amounts paid in settlement of any loss, claim,
damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable to a Holder in any such
case for any such loss, claim, damage, liability, or action (i) to the
extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by or on behalf
of such Holder, underwriter or controlling person or (ii) in the case
of a sale directly by a Holder of Registrable Securities (including a
sale of such Registrable Securities through any underwriter retained
by such Holder to engage in a distribution solely on behalf of such
Holder),
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such untrue statement or alleged untrue statement or omission or
alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such Holder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Securities to the person
asserting any such loss, claim, damage or liability in any case where
such delivery is required by the Securities Act.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the
1933 Act, each agent and any underwriter for the Company, and any
other Holder selling securities in such registration statement or any
of its directors, officers, partners, agents or employees or any
person who controls such Holder or underwriter, against any losses,
claims, damages, or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, agent, or
underwriter or controlling person, or other such Holder or director,
officer or controlling person may become subject, under the 1933 Act,
the 1934 Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by or on behalf
of such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
controlling person, agent or underwriter or controlling person, other
Holder, officer, director, partner, agent, employee, or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the
liability of any Holder hereunder shall be limited to the amount of
proceeds received by such Holder in the offering giving rise to the
Violation; and provided further that the indemnity agreement contained
in this subsection 1.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld nor, in the case of a sale
directly by the Company of its securities (including a sale of such
securities through any underwriter retained by the Company to engage
in a distribution solely on behalf of the Company), shall the Holder
be liable to the Company in any case in which such untrue statement or
alleged untrue statement or omission or alleged omission was contained
in a preliminary prospectus and corrected in a final or amended
prospectus, and the Company failed to deliver a copy of the final or
amended prospectus at or prior to the confirmation of the sale of
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the securities to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the 1933 Act.
(c) Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 1.8, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume and control the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests, as reasonably determined by either
party, between such indemnified party and any other party represented
by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.8 to the
extent of such prejudice, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this
Section 1.8.
(d) The obligations of the Company and the Holders under
this Section 1.8 shall survive the conversion, if any, of the Shares
of Preferred Stock and the completion of any offering of Registrable
Securities in a registration statement whether under this Section 1 or
otherwise.
1.9 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 and 144A promulgated
under the 1933 Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration, and with a view to making it possible for Holders to register the
Registrable Securities pursuant to a registration on Form S-3, the Company
agrees to:
(a) use its best efforts to make and keep public
information available, as those terms are understood and defined in
Rule 144, at all times after 90 days after the effective date of the
first
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registration statement filed by the Company for the offering of its
securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as
is necessary to enable the Holders to utilize Form S-3 for the sale of
their Registrable Securities;
(c) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the 1933 Act and the 1934 Act;
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement
by the Company as to its compliance with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), or as to its
qualification as a registrant whose securities may be resold pursuant
to Form S-3 (at any time it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form; and
(e) at all times during which the Company is neither
subject to the reporting requirements of Section 13 or 15(d) of the
1934 Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under
the 1934 Act, provide in written form, upon the written request of any
Holder, or a prospective purchaser of securities of the Company from
such Holder, all information required by Rule 144A(d)(4)(i) of the
General Regulations promulgated by the SEC under the 1933 Act ("144A
Information"); the Company further agrees, upon written request, to
cooperate with and assist any Holder or any member of the National
Association of Securities Dealers, Inc. system for Private Offerings
Resales and Trading through Automated Linkages ("PORTAL") in applying
to designate and thereafter maintaining the eligibility of the
Company's securities for trading through PORTAL. With respect to each
Holder, the Company's obligations under this Section 1.09(e) shall at
all times be contingent upon such Holder's obtaining from a
prospective purchaser an agreement to take all reasonable precautions
to safeguard the 144A Information from disclosure to anyone other than
employees of the prospective purchaser who require access to the 144A
Information for the sole purpose of evaluating its purchase of the
Company's securities.
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1.10 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 (or on any successor form to Form S-3 regardless of
its designation) and any related qualification or compliance with respect to
all or a part of the Registrable Securities owned by such Holder or Holders,
the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders; and
(b) use its best efforts to effect, as soon as
practicable, such registration, qualification or compliance as may be
so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's or Holders'
Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder
or Holders joining in such request as are specified in a written
request given within 20 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.10 if: (1) Form S-3 (or any
successor form to Form S-3 regardless of its designation), is not
available for such offering by the Holders; (2) the aggregate net
offering price (after deduction of underwriting discounts and
commissions) of the Registrable Securities specified in such request
is not at least $500,000; (3) the Company has already effected one
registration on Form S-3 within the previous six-month period
(exclusive of registrations effected pursuant to Section 1.2 or 1.3
hereof); or (4) the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would not be in
the best interests of the Company or its stockholders generally for
such Form S-3 registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the Form S-3
registration for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.10,
provided, however, that the Company shall not utilize this right more
than once in any twelve-month period.
1.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by any Holder to (i) a transferee of at least 500 shares of
Registrable Securities or some lesser number of Registrable Securities if such
lesser number represents all of the Registrable Securities issued to such
Holder, or (ii) an affiliate, partner or stockholder of such Holder
-12-
<PAGE> 13
or such transferee or an account managed or advised by the manager or adviser
of such Holder or such transferee.
1.12 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company relating to registration rights unless such
agreement includes: (a) to the extent the agreement would allow such holder or
prospective holder to include such securities in any registration filed under
Section 1.2 or 1.3 hereof, a provision that such holder or prospective holder
may include such securities in any such registration only to the extent that
the inclusion of its securities will not reduce the amount of the Registrable
Securities of the Holders which would otherwise be included; (b) to the extent
the agreement would allow such holder or prospective holder to include such
securities in any registration effected pursuant to Section 1.2 or 1.3 hereof,
a provision that the rights of such holder to participate in such registration
shall permit participation on no greater level than that of the Holders; and
(c) no provision which would allow such holder or prospective holder to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of the dates set forth in subsection
1.2(a) or within six months after the effective date of any registration
effected pursuant to Section 1.
2. Miscellaneous.
2.1 Legend. Each certificate representing Registrable Securities
shall state therein:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 31,
1992, BY AND BETWEEN THE CORPORATION AND THE INVESTOR NAMED THEREIN, A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION.
2.2 Notices. All notices, requests, consents and demands shall be
in writing and shall be personally delivered, mailed, postage prepaid,
telecopied or telegraphed, to the Company at:
E-Z Serve Corporation
Suite 500
10700 North Freeway
Houston, Texas 77037
Telecopy: (713) 591-9884
Attn: Neil McLaurin
-13-
<PAGE> 14
with a copy to:
Bracewell & Patterson
2900 South Tower Pennzoil Place
Houston, Texas 77002
Telecopy: (713) 221-1212
Attn: John L. Keffer
to the Investor at:
DLJ Bridge Finance, L.P.
140 Broadway
New York, New York 10005
Telecopy: (212) 504-4991
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attn: Joseph Rinaldi
or such other address as may be furnished in writing to the other parties
hereto. All such notices, requests, demands and other communication shall,
when mailed (registered or certified mail, return receipt requested, postage
prepaid), personally delivered, or telegraphed, be effective four days after
deposit in the mails, when personally delivered, or when delivered to the
telegraph company, respectively, addressed as aforesaid, unless otherwise
provided herein and, when telecopied, shall be effective upon actual receipt.
2.3 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters contemplated herein. This
Agreement supersedes any and all prior understandings or agreements as to the
subject matter of this Agreement.
2.4 Amendments, Waivers and Consents. Any provision in this
Agreement to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein set
forth may be omitted or waived, if the Company (i) shall obtain consent thereto
in writing from persons holding or having the right to acquire an aggregate of
at least sixty-six and two-thirds percent (66 2/3%) of the aggregate of the
Registrable Securities then outstanding and (ii) shall, in each such case,
deliver copies of such consent in writing to any Holders who did not execute
the same.
-14-
<PAGE> 15
2.5 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the personal representatives, successors and
assigns of the respective parties hereto. The Company shall not have the right
to assign its obligations hereunder or any interest herein without obtaining
the prior written consent of the Holders in accordance with Section 2.4.
2.6 General. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural includes the singular, the masculine gender includes the
neuter, masculine and feminine genders. This Agreement shall be governed by
and construed under the laws of the State of Texas.
2.7 Severability. If any provisions of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable,
the parties hereby waive such provision to the extent that it is found to be
invalid or unenforceable. Such provision shall, to the maximum extent
allowable by law, be modified by such court so that it becomes enforceable,
and, as modified, shall be enforced as any other provision hereof, all the
other provisions hereof continuing in full force and effect.
2.8 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.
2.9 Specific Performance. The Company recognizes that the rights
of the Holders under this Agreement are unique, and, accordingly, the Holders
shall, in addition to such other remedies as may be available to them at law or
in equity, have the right to enforce their rights hereunder by actions for
injunctive relief and specific performance to the extent permitted by law.
This Agreement is not intended to limit or abridge any rights of the Holders
which may exist apart from this Agreement.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
-------------------------------
Title: Senior Vice President
TENACQCO BRIDGE PARTNERSHIP
By: DLJ CAPITAL CORP.
as General Partner
By: /s/ Paul Thompson III
-------------------------------
Title: Vice President
-15-
<PAGE> 1
EXHIBIT 4.4.2
AMENDMENT TO REGISTRATION
RIGHTS AGREEMENT
This Amendment to Registration Rights Agreement ("Amendment") is made
as of April 22, 1993, by and between E-Z Serve Corporation, a Delaware
Corporation (the "Company"), DLJ Capital Corp., a Delaware corporation (the
"DLJ"), and Tenacqco Bridge Partnership, a partnership formed under the laws of
New York ("Tenacqco").
WHEREAS, the Company and Tenacqco entered into that certain
Registration Rights Agreement dated as of July 31, 1992 (the "Agreement");
WHEREAS, the Company has issued to DLJ 200,000 shares of the Company's
Series F Convertible Preferred Stock, par value $0.01 per share (the "Series F
Preferred") and the shares of Series F Preferred are convertible into shares of
the Company's common stock, par value $0.01 per share ("Common Stock");
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. The term "Investor" shall be deemed to include DLJ.
2. Section 1.1(b) of the Agreement is hereby amended in its
entirety to be as follows:
(b) The term "Registrable Securities" means (1) the
shares of Common Stock issued pursuant to the Amended Purchase
Agreement, (2) the Common Stock issued in exchange for the accrued but
unpaid dividends on TOC Retail, Inc.'s Series B Preferred Stock
pursuant to the warrants to purchase the Company's Series D
Convertible
<PAGE> 2
Preferred Stock ("Warrants") which are issued pursuant to the Amended
Purchase Agreement, (3) the Common Stock issued or issuable upon the
conversion of the shares of Preferred Stock, (4) the Common Stock
issued or issuable upon the conversion of the shares of the Company's
Series F Convertible Preferred Stock issued to DLJ Capital Corp. on
April 20, 1993, and (5) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such
securities described in (1),(2), (3) or (4) of this paragraph;
provided, however, that any shares of Common Stock previously sold to
the public pursuant to a registered public offering or pursuant to an
exemption from the registration requirements of the 1933 Act shall
cease to be Registrable Securities.
3. Section 2.2 of the Agreement is hereby amended by replacing
the words "DLJ Bridge Finance, L.P." with the words "DLJ
Capital Corp."
Except as expressly amended herein, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first above written.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
-------------------------------------
Name: John T. Miller
Title: Senior Vice President
-2-
<PAGE> 3
DLJ CAPITAL CORP. for itself and as
General Partner of TENACQCO
BRIDGE PARTNERSHIP
By: /s/ Paul Thompson, III
-------------------------------------
Name: Paul Thompson, III
Title: Vice President
-3-
<PAGE> 1
EXHIBIT 4.5.1
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMONG
DLJ CAPITAL CORPORATION
TENACQCO BRIDGE PARTNERSHIP
PHEMUS CORPORATION
INTERCONTINENTAL MINING & RESOURCES INCORPORATED
QUADRANT CAPITAL CORP.
E-Z SERVE CORPORATION
AND
CERTAIN EMPLOYEES OF E-Z SERVE CORPORATION
Dated June 1, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
TRANSFER RESTRICTIONS
SECTION 2.1. General Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.2. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.3. Improper Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.4. Right to Compel Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.5. Tag Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.6. No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3
GOVERNANCE
SECTION 3.1. Board of Directors of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.2. Actions Requiring Consent of the
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4
MISCELLANEOUS
SECTION 4.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.2. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.3. Frustration of Purpose;
Administration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.6. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.7. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.8. Successors, Assigns, Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.10. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.11. Recapitalization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.12. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.13. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.14. Adoption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.15. Appointment of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement (the "Agreement") is
made as of June 1, 1994, by and among DLJ Capital Corporation, a Delaware
corporation ("DLJ Capital"), Tenacqco Bridge Partnership, a New York
partnership ("Tenacqco"), Phemus Corporation, a Massachusetts corporation
("Phemus"), Intercontinental Mining & Resources Incorporated, a British Virgin
Islands corporation ("IMR"), Quadrant Capital Corp., a Delaware corporation
("Quadrant"), E-Z Serve Corporation , a Delaware corporation (the "Issuer"),
and certain key employees of the Issuer.
WHEREAS, Tenacqco, Phemus, IMR, Quadrant and the Issuer entered into
that certain Stockholders Agreement dated as of July 31, 1992 ("Stockholders
Agreement");
WHEREAS, DLJ Capital was added as a party to the Stockholders
Agreement pursuant to an Amendment to Stockholders Agreement dated April 20,
1993, among the parties hereto other than the Employees (as defined below);
WHEREAS, Schedule 1 to the Stockholders Agreement was amended pursuant
to a Second Amendment to Stockholders Agreement dated May 11, 1993, among the
parties hereto other than the Employees;
WHEREAS, the parties desire to amend and restate the Stockholders
Agreement, as amended, in its entirety to include the Employees as parties
thereto and to provide to such Employees certain limited rights and
obligations; and
WHEREAS, the parties hereto desire to provide for certain rights and
obligations relating to the Common Stock certain rights to acquire Common Stock
and certain matters relating to the affairs of the Issuer following the
Effective Date (as defined in Section 4.13).
NOW THEREFORE, the parties hereto agree as follows:
-1-
<PAGE> 5
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Exchange Act.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Commission" means the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Common Stock" means the shares of common stock, par value $0.01 per
share, of the Issuer. With respect to the Employees, "Common Stock" means only
such shares of Common Stock issued upon exercise of an Option held by such
Employee but does not include shares of Common Stock held by an Employee
Transferee.
"Employee" or "Employees" means any key employee of the Issuer or any
subsidiary thereof who is the beneficial owner of an Option granted pursuant to
the Plan, and includes an Employee Transferee.
"Employee Transferee" means any Person who, as permitted by the terms
of the Plan, becomes the beneficial owner of an Option granted under the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means each of DLJ Capital, Tenacqco, Phemus, IMR and
Quadrant, including each of their respective Affiliates who may from time to
time hold shares of Common Stock or Options and who, for purposes of Sections
2.1, 2.4, 2.5, 3.1,
-2-
<PAGE> 6
3.2 and 4.2, is obligated to act or vote with and through Tenacqco, Phemus, IMR
and Quadrant respectively, except that (i) IMR and Quadrant, and each of their
respective Affiliates, shall together be treated as a single Holder, and (ii)
DLJ Capital and Tenacqco, and each of their respective Affiliates, shall
together be treated as a single Holder.
"Irrevocable Proxies" means the irrevocable proxies dated as of July
31, 1992 of each of Phemus, Quadrant and IMR.
"Options" means any options, warrants, convertible securities or other
rights upon exercise of which the Issuer is obligated to issue shares of Common
Stock to the holder thereof. With respect to an Employee, "Options" means only
(i) with respect to a sale to a Compelled Sale Purchaser, all vested Options
and such Options that will vest upon consummation of the sale to the Compelled
Sale Purchaser granted to such Employee pursuant to the terms of the Plan, and
(ii) with respect to a Tag Along Sale, such Options that, pursuant to the terms
of the Plan, will vest upon consummation of the Tag Along Sale.
"Person" means an individual, partnership, corporation, trust, joint
stock company, association, joint venture, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means the Issuer's 1994 Stock Option Plan, as in effect on the
date hereof.
"Public Offering" means any public offering of equity securities (or
securities convertible into equity securities) of the Issuer pursuant to an
effective registration statement under the Securities Act other than pursuant
to a registration statement on Form S-8 or any successor or similar form.
"Securities Act" means the Securities Act of 1933, as amended.
-3-
<PAGE> 7
"Stock Purchase Agreement" means the Stock Purchase Agreement dated
July 18, 1992, amended July 21, 1992, and further amended and restated as of
July 31, 1992 among DLJ Bridge Finance, L.P., Tenacqco and the Issuer.
"Transfer" means with respect to any shares of Common Stock, Options
or other property, the sale, assignment, granting of a participation in,
pledge, disposition or other transfer, directly or indirectly, of such shares
of Common Stock, Options or property.
(b) Each of the following terms is defined in the Section
set forth opposite such terms:
<TABLE>
<CAPTION>
Terms Section
----- -------
<S> <C>
Agreement Preamble
Buyer(s) 3.2(c)
Buy-Sell 3.2(b)
Buy-Sell Response 3.2(c)
Compelled Sale Notice 2.4(b)
Compelled Sale Offer 2.4(a)
Compelled Sale Purchaser 2.4(a)
Consenting Holder(s) 3.2(b)
Disposing Holder 2.5
Effective Date 4.13
Fundamental Action 3.2(b)
Holder Nominee 3.1(b)
Non-Consenting Holder(s) 3.2(b)
Participating Holders 2.5
Remaining Holder 2.4(a)
Sale Notice 2.5(a)
Schedule 1 2.1(b)
Seller(s) 3.2(c)
Selling Holders 2.4(a)
Selling Shares 2.5
Tag Along Sale 2.5
Triggering Holder(s) 3.2(b)
Trigger Price 3.2(b)
</TABLE>
-4-
<PAGE> 8
ARTICLE 2
TRANSFER RESTRICTIONS
SECTION 2.1. General Restrictions. (a) Each Holder agrees that it
will not offer or Transfer any shares of Common Stock or Options except, in
each case, in compliance with the Securities Act and this Agreement.
(b) Each Holder agrees that, except for sales of shares
of Common Stock or Options (i) in a Public Offering, (ii) pursuant to Section
2.4 or 2.5, (iii) pursuant to Rule 144 promulgated by the Commission under the
Securities Act or (iv) with the prior written consent of all Holders, it will
not offer or Transfer any shares of Common Stock or Options to any Person,
other than an Affiliate of such Holder, if as a result of such Transfer any
such Holder would at any time be entitled to cast less than 70% of the votes
the number of fully-diluted shares of Common Stock set forth opposite its name
on Schedule 1 attached hereto ("Schedule 1") carries, without the prior written
consent of the other Holders.
(c) Except for the Irrevocable Proxies and except as
provided in this Agreement, no Holder shall (i) grant any proxy or enter into
or agree to be bound by any voting trust or other voting agreement with respect
to the shares of Common Stock owned by it (or that would be owned by it upon
exercise or conversion of any Option) or (ii) enter into any agreement or
arrangement of any kind with any Person with respect to the shares of Common
Stock or any Option (including, but not limited to, agreements or arrangements
with respect to the Transfer of the shares of Common Stock or Options)
inconsistent with the provisions of this Agreement.
SECTION 2.2. Legends. Each certificate evidencing outstanding shares
of Common Stock or Options held by or issued to any Holder shall bear a legend
in substantially the following form:
-5-
<PAGE> 9
THE SHARES OR OPTIONS REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
STOCKHOLDERS AGREEMENT DATED AS OF JULY 31, 1992, AS AMENDED
OR RESTATED, COPIES OF WHICH WILL BE FURNISHED BY E-Z SERVE
CORPORATION AND ANY SUCCESSOR THERETO UPON REQUEST AND WITHOUT
CHARGE.
Each certificate evidencing shares of Common Stock or Options issued
to a Holder on or after the Effective Date (including certificates issued in
substitution for or replacement of such shares of Common Stock or Options but
excluding certificates issued on or after the Effective Date in substitution
for or replacement of shares of Common Stock or Options which were issued
pursuant to a Public Offering or in compliance with Rule 144 under the
Securities Act) shall also bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144(k) OR RULE 144A OF SUCH ACT.
SECTION 2.3. Improper Transfer. Any attempt by a Holder to Transfer
any shares of Common Stock or Options not in compliance with this Agreement
shall be null and void and neither the Issuer nor any transfer agent shall give
any effect in the Issuer's stock records to such attempted Transfer.
SECTION 2.4. Right to Compel Sale. (a) If any two Holders
(including their respective Affiliates) holding more than an aggregate of 30%
of the shares of Common Stock then
-6-
<PAGE> 10
outstanding (calculated on a fully diluted basis) (the "Selling Holders")
propose to sell to any Person, other than an Affiliate of such Holder (the
"Compelled Sale Purchaser"), all of the shares of Common Stock and Options held
by such Selling Holders (the "Compelled Sale Offer"), then such Selling Holders
shall have the right, exercisable as set forth below, to require the remaining
Holder (the "Remaining Holder") and if the Selling Holders also elect, each of
the Employees, to sell all, but not less than all, of the shares of Common
Stock and Options then held by such Remaining Holder and Employees to the
Compelled Sale Purchaser. Any sale pursuant to this Section 2.4 will be for
the same consideration per share of Common Stock and Option and otherwise on
the same terms and conditions upon which the Selling Holders sell their
respective shares of Common Stock and Options; provided that (i) each Option
held by the Remaining Holder will be purchased by the Compelled Sale Purchaser
(and thereafter cancelled) for an amount (payable in the same form of
consideration as the consideration paid to the Selling Holders) equal to the
excess, if any, of the price per share of Common Stock being offered by the
Compelled Sale Purchaser over the exercise or conversion price per share of
Common Stock underlying the Option, multiplied by the number of shares of
Common Stock for which the Option is exercisable or convertible, and (ii) the
Options held by the Employees shall be exercised contemporaneously with the
sale to the Compelled Sale Purchaser and the Common Stock received as a result
of such exercise shall be included in the sale to the Compelled Sale Purchaser.
For the purpose of this Section 2.4, any reasonable and customary investment
banking or advisory fees paid by the Compelled Sale Purchaser to the Selling
Holders or any Affiliate of any Selling Holder shall not be included in
determining the amount of consideration paid by the Compelled Sale Purchaser
for the shares of Common Stock and Options held by the Selling Holders and
Employees.
(b) If the Selling Holders elect to exercise their right to
compel sale pursuant to this Section 2.4, they shall deliver written notice (a
"Compelled Sale Notice") of any Compelled Sale Offer to the Remaining Holder,
the Employees
-7-
<PAGE> 11
and the Issuer, setting forth the consideration per share of Common Stock and
Option and other material terms and conditions thereof. The Remaining Holder
and the Employees shall deliver to each of the Selling Holders, prior to the
expiration of the 10 Business Day period commencing on the date of the
applicable Compelled Sale Notice, the certificate or certificates representing
the number of shares of Common Stock and Options held by such Remaining Holder
and the Employees, duly endorsed, together with all other documents which are
necessary in order to effect such Compelled Sale Offer. If such Remaining
Holder or any Employee fails to deliver such certificates to the Selling
Holders, the Issuer shall cause the books and records of the Issuer to show
that such shares of Common Stock and Options are bound by the provisions of
this Section 2.4 and that such shares of Common Stock and Options shall not
thereafter be transferable except to the Compelled Sale Purchaser pursuant to
the Compelled Sale Offer.
(c) The Selling Holders shall have 60 days from the date
of delivery of a Compelled Sale Notice to sell to the Compelled Sale Purchaser
all the shares of Common Stock and Options subject to the Compelled Sale Offer.
Promptly after completion of any sale pursuant to this Section 2.4, the Selling
Holders shall notify the Issuer, the Employees and the Remaining Holder of such
completion and shall furnish evidence of such sale (including time of
completion) and of the terms thereof as the Issuer, the Employees or such
Remaining Holder may request. The Selling Holders shall also promptly remit to
the Employees and such Remaining Holder the proceeds of such sale attributable
to the sale of the Employees' and such Remaining Holder's shares of Common
Stock and Options.
(d) If any Compelled Sale Offer is withdrawn, or
terminated for any reason other than for the failure of the Remaining Holder or
an Employee to comply with the obligations hereunder, the Selling Holders
shall, without prejudice to their rights hereunder to deliver a subsequent
Compelled Sale Notice, return to such Remaining Holder and Employees all
certificates representing the shares of Common Stock and
-8-
<PAGE> 12
Options or other instruments or documents which such Remaining Holder or
Employees previously delivered to the Selling Holders in connection with such
Compelled Sale Offer and notify the Issuer that the Compelled Sale Offer is
withdrawn.
SECTION 2.5. Tag Along Rights. If any Holder (a "Disposing Holder")
proposes to sell, in one transaction or in a series of related transactions (a
"Tag Along Sale") more than 3% of its shares of Common Stock (the "Selling
Shares") (calculated on a fully diluted basis) and Options to a Person other
than an Affiliate of such Disposing Holder, then the other Holders (the
"Participating Holders") and the Employees (in the case of the Employees, only
if the Selling Shares constitute 10% or more of all of the Issuer's then
outstanding shares of Common Stock on a fully diluted basis and the proposed
sale is not to another Holder, in which case the Employees shall be included
within the definition of "Participating Holders") shall have the right to
participate in such Tag Along Sale on the following terms:
(a) At least 15 days prior to the closing of such Tag
Along Sale, the Disposing Holder shall give written notice (the "Sale Notice")
to each Participating Holder and the Issuer. The Sale Notice shall specify the
Selling Shares and Options, the price offered for such Selling Shares and
Options, all other material terms and conditions of the Tag Along Sale and, if
the consideration payable pursuant to the Tag Along Sale consists in whole or
in part of consideration other than cash, such information relating to such
other consideration as such Disposing Holder may reasonably determine.
(b) Each Participating Holder may participate in the Tag
Along Sale and offer to sell a portion of shares of Common Stock or Options
held by such Participating Holder (rounded to the nearest whole number) equal
to the lesser of (i) the amount specified by such Participating Holder in the
notice provided pursuant to the next sentence, and (ii) an amount equal to the
product of (x) the total number of shares of Common Stock and Options to be
sold pursuant to such Tag
-9-
<PAGE> 13
Along Sale times (y) a fraction, the numerator of which shall be the total
number of shares of Common Stock and Options held by such Participating Holder,
and the denominator of which shall be the aggregate number of shares of Common
Stock and Options held by all the Holders and all of the Employees (all such
numbers of shares of Common Stock and Options to be calculated on a fully
diluted basis). Such Participating Holder shall be entitled to receive pursuant
to such Tag Along Sale the same consideration per share of Common Stock and
Options and on the same terms and conditions, to the extent possible, as the
Disposing Holder receives in the Tag Along Sale. Such Participating Holder
must exercise their respective tag along right by giving written notice to the
Disposing Holder within 10 Business Days of the date of the Sale Notice,
specifying the number of shares of Common Stock and Options such Participating
Holder desires to include in the Tag Along Sale and by delivering to such
Disposing Holder, together with such written notice, the certificate or
certificates representing such Participating Holder's shares of Common Stock
and Options, duly endorsed, and all other documents required to be executed by
such Participating Holder in connection with such Tag Along Sale.
(c) The Disposing Holder shall have 60 days from the date
of the Sale Notice to close the Tag Along Sale. If such Tag Along Sale does
not close within such 60 day period, such Disposing Holder shall return to each
Participating Holder all certificates representing the shares of Common Stock
and Options or other instruments or documents which such Participating Holder
previously delivered to such Disposing Holder in connection with such Tag Along
Sale and notify the Issuer that such Tag Along Sale is withdrawn.
SECTION 2.6. No Liability. There shall be no liability on the part
of any Holder to any other Holder any Employee or on the part of any Employee
to any Holder if any proposed Compelled Sale Offer or Tag Along Sale is not
consummated for whatever reason. It is understood that, subject to the terms
of this Agreement, each Holder and each Employee, in its or his sole
discretion, shall determine whether to effect a sale
-10-
<PAGE> 14
of any or all of the shares of Common Stock and Options held by it or him and
has no duty to consider the interest of other Holders or other Employees in
deciding whether, when and on what terms to effect any such sale or whether,
when and on what terms to sell to any Compelled Sale Purchaser pursuant to
Section 2.4 or to any Person in a Tag Along Sale pursuant to Section 2.5.
ARTICLE 3
GOVERNANCE
SECTION 3.1. Board of Directors of the Issuer. (a) The Board of
Directors shall be composed of seven members.
(b) Each Holder shall be entitled to designate in the manner
set forth below one member of the Board of Directors (each, a "Holder Nominee"
and collectively, the "Holder Nominees"). Each Holder agrees that it will vote
all of its shares of Common Stock and Options, at any regular or special
meeting of the stockholders of the Issuer called for the purpose of filling
positions of the Directors, or in any written consent executed in lieu of such
a meeting of stockholders, and shall take all actions necessary, to ensure the
election to the Board of Directors of each Holder's Holder Nominee.
(c) Each Holder hereby agrees to (i) use such Holder's best
efforts to call, or cause the appropriate officers and directors of the Issuer
to call, a special meeting of stockholders of the Issuer and agrees to vote all
of the shares of Common Stock and Options owned or held of record by such
Holder for, or to take all actions by written consent in lieu of any such
meeting necessary to cause, the removal (with or without cause) of any Holder
Nominee if the Holder who designated such Holder Nominee requests his shares of
Common Stock and Options in favor of the removal of any Holder Nominee unless
requested to do so by the Holder who designated such Holder Nominee. Each
Holder shall have the
-11-
<PAGE> 15
right to designate a new nominee if such Holder's Holder Nominee shall vacate
its directorship for any reason.
SECTION 3.2. Actions Requiring Consent of the Holders. (a) The
Issuer agrees that, without the consent of each of the Holders, the Issuer will
not (i) amend the Certificate of Incorporation of the Issuer, except for any
filing of a Certificate of Elimination to eliminate any previously outstanding
series of the Issuer's preferred stock that has been converted or redeemed and
which is no longer outstanding; (ii) adopt an agreement of merger or
consolidation; (iii) sell, lease or transfer all or substantially all of the
Issuer's property and assets; (iv) recommend to the stockholders a dissolution
of the Issuer or a revocation of dissolution; (v) amend the Bylaws of the
Issuer; or (vi) increase or decrease the number of members of the Board of
Directors other than the increase contemplated herein.
(b) Each of the Holders agrees that in the event that (i)
one Holder shall have withheld its consent (the "Non-Consenting Holder") to any
of the actions specified in (a) above which shall have been the basis of a bona
fide proposal by a Holder (each, a "Fundamental Action"), and each of the other
Holders shall have given its consent (the "Consenting Holders") to such
Fundamental Action or (ii) two Holders shall have withheld their consent (the
"Non-Consenting Holders") to a Fundamental Action and the remaining Holder
shall have given its consent (the "Consenting Holder") to such Fundamental
Action, then the respective persons described below shall have the right to
invoke the buy- sell mechanism (the "Buy-Sell") set forth below; provided,
however, that, in the case of (b) (i) above, if the action proposed is an
action described in (a)(i), (a)(v) or (a)(vi) above, the Buy-Sell shall not
invoked (x) by a Non- Consenting Holder that would not have been materially
adversely affected by the taking of such action or (y) by Consenting Holders
that would not have been materially adversely affected by the failure to take
such action and, in the case of (b)(ii) above, if the action proposed is an
action described in (a)(i), (a)(v) or (a)(vi) above, the Buy-Sell shall not be
invoked (x) by a Consenting
-12-
<PAGE> 16
Holder that would not have been materially adversely affected by the failure to
take such action or (y) by Non- Consenting Holders that would not have been
materially adversely affected by taking such action. If the Buy-Sell is
invoked in accordance with the preceding sentence, then, in the case of (i)
above, either the Consenting Holders, acting as one, or the Non-Consenting
Holders shall have the right to set a cash price (the "Trigger Price") at which
such price-setting Holder(s) (the "Triggering Holder(s)") would buy all the
shares of Common Stock and Options owned by the other Holder or Holders or
would sell all of the shares of Common Stock and Options owned by it or them,
as the case may be, to the other Holder or Holders, and, in the case of (ii)
above, either the Consenting Holder, or the Non-Consenting Holders acting as
one, shall have the right to set the Trigger Price at which the Triggering
Holder(s) would buy all the shares of Common Stock and Options owned by the
other Holder or Holders or would sell all of the shares of Common Stock and
Options owned by the Triggering Holder(s) to the other Holder or Holders.
(c) The Triggering Holder(s) shall give written notice of
the Trigger Price to the other Holder or Holders and the other Holder or
Holders must respond with a written response (the "Buy-Sell Response")
specifying a date not later than 10 days following the setting of the price
pursuant to the preceding paragraph on which it promises to buy all the shares
of Common Stock and Options owned by the Triggering Holder(s) or to sell all of
the shares of Common Stock and Options owned by such Holder or Holders to the
Triggering Holder or if there is more than one Triggering Holder, to the
Triggering Holders, pro rata. Upon the date specified in the Buy-Sell
Response, the selling Holder or Holders (the "Seller" or "Sellers") shall
deliver to the buying Holders or Holder (the "Buyers" or "Buyer") certificates,
duly endorsed for transfer, representing all the Seller's or Sellers' shares of
Common Stock and Options, and, if there is more than one Buyer, the
certificates shall represent such number of shares of Common Stock and Options
allocated as the buyers may request. Such delivery shall be made against
payment of the Trigger Price to the Seller or Sellers in immediately
-13-
<PAGE> 17
available funds, whereupon the Issuer shall register such transfer of ownership
upon notification thereof.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1. Termination. This Agreement shall terminate and be of
no further force or effect as to all Holders and Employees at the close of
business on December 31, 1997. Notwithstanding the above stated termination
date, this Agreement shall terminate and be of no further force and effect (i)
as to any Holder at such time as such Holder ceases to own at least 10% of the
shares of Common Stock and Options then outstanding, calculated on a fully
diluted basis, and (ii) as to any Employee at such time as such Employee ceases
to be employed by the Issuer or any subsidiary thereof; provided, however, that
any Employee Transferee shall continue to be subject to the terms and
provisions of this Agreement until such Employee Transferee ceases to own any
Options granted under the Plan.
SECTION 4.2. Amendments; Waivers. (a) Any term of this Agreement
may be amended or waived only with the written consent of each of the Holders.
(b) Sections 2.4 and 2.5, and any other term of this
Agreement that affects the rights and obligations of any Employee hereunder, to
the extent such waiver or consent would affect the rights of such Employee
hereunder, may be amended or waived only with the written consent of each of
the Employees.
(c) No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
SECTION 4.3. Frustration of Purpose; Administration of Agreement. No
Holder may do directly or indirectly that which
-14-
<PAGE> 18
is prohibited by this Agreement. The Board of Directors shall have general
authority to take such action as may be necessary to give effect to this
Agreement.
SECTION 4.4. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties hereto with respect to the subject matter
hereof.
SECTION 4.5. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto
shall be in writing (including telex, telecopier or similar writing) and shall
be given to such party at the address set forth listed on the signature page
hereto (or, in the case of transferees, at the address set forth in the records
of the Issuer), or to such other address as the party to whom notice is to be
given may provide in a written notice to the party giving such notice, a copy
of which written notice shall be on file with the Secretary (or other executive
officer) of the Issuer. Each such notice, request or other communication shall
be effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified by such party on the signature page of this Agreement
or (ii) if given by mail, three business days after being sent to the address
specified in this Section 4.5 or (iii) if given by any other means, when
delivered at the address specified in this Section 4.5.
SECTION 4.6. Applicable Law. This Agreement will be governed by the
laws of the State of New York.
SECTION 4.7. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and
-15-
<PAGE> 19
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
SECTION 4.8. Successors, Assigns, Transferees. The provisions of
this Agreement shall be binding upon and accrue to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns.
Notwithstanding the foregoing, neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Issuer, any Holder or any Employee (other than to an Employee
Transferee pursuant to the terms of the Plan). This Agreement shall be binding
upon the Issuer, each Holder, each Employee and their respective successors and
permitted assigns. Neither this Agreement nor any provision hereof shall be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors and permitted
assigns.
SECTION 4.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 4.10. Attorneys' Fees. In any action or proceeding brought
to enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to any other available remedy.
SECTION 4.11. Recapitalization, etc. In the event that any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any shares of Common Stock and Options by reason of any
reorganization, recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, stock dividend, split-up, sale of
assets, distribution to stockholders or combination of the shares of Common
Stock and Options or any other change in capital structure of the Issuer,
appropriate adjustments shall be made with respect to the relevant
-16-
<PAGE> 20
provisions of this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
SECTION 4.12. Remedies. The parties hereby acknowledge that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, any Person against whom such action or
proceeding is brought hereby waives the claim or defense therein that such
party has an adequate remedy at law, and such Person shall not claim in any
such action or proceeding the claim or defense that such remedy at law exists.
SECTION 4.13. Effectiveness. This Agreement shall be effective (the
"Effective Date") on the date of, and simultaneously with, the closing of the
transactions under the Stock Purchase Agreement.
SECTION 4.14. Adoption Agreement. Any Person who after the date
hereof is granted options to purchase Common Stock pursuant to the Plan may
become a party to this Agreement by executing an Adoption Agreement in the form
of Exhibit "A" attached hereto or in any other form satisfactory to the Issuer,
whereupon such Person shall be deemed an "Employee" under this Agreement and
shall have all of the rights and obligations of an "Employee" under this
Agreement. Each Holder and each Employee who is a party to this Agreement
hereby agrees that such Adoption Agreement when executed by the Issuer is
binding upon them and such adopting Person shall be deemed an "Employee" under
this Agreement as if such Person was originally a party hereto. After the
execution of any such Adoption Agreement, the Issuer shall promptly deliver a
copy thereof or amendment to Schedule 1 to the Holders and the Employees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
-17-
<PAGE> 21
DLJ CAPITAL CORPORATION
By: /s/ Paul Thompson, III
-------------------------------------
Name: Paul Thompson, III
Title: Vice President
Address: 140 Broadway
New York, NY 10005
Telephone: (212) 504-3661
Telecopier: (212) 504-4991
TENACQCO BRIDGE PARTNERSHIP
By: DLJ Capital Corporation,
as General Partner
By: /s/ Paul Thompson, III
-------------------------------------
Name: Paul Thompson, III
Title: Vice President
Address: 140 Broadway
New York, NY 10005
Telephone: (212) 504-3661
Telecopier: (212) 504-4991
-18-
<PAGE> 22
PHEMUS CORPORATION
By: /s/ John M. Sallay
-------------------------------------
Name: John M. Sallay
By: /s/ Michael R. Eisenson
-------------------------------------
Name: Michael R. Eisenson
Address: c/o Harvard Management Company
600 Atlantic Avenue
Boston, MA 02210
Telephone: (617) 523-4400
Telecopier: (617) 523-1063
INTERCONTINENTAL MINING & RESOURCES
INCORPORATED
By: /s/ John R. Schoemer
-------------------------------------
Name: John R. Schoemer
Title: Attorney in Fact
Address: c/o P.M.M. Services (B.V.I.)
Limited
P. O. Box 438
Tropic Isle Building
Wickhams Cay
Road Town, Tortola
British Virgin Islands
Telephone:
Telecopier:
-19-
<PAGE> 23
QUADRANT CAPITAL CORP.
By: /s/ Alan G. Quasha
-------------------------------------
Name: Alan G. Quasha
Title: President
Address: c/o Quadrant Management, Inc.
127 East 73rd Street
New York, NY 10021
Telephone: (212) 439-9292
Telecopier: (212) 439-9435
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
-------------------------------------
Name: Neil H. McLaurin
Title: President
Address: 2550 North Loop West
Suite 600
Houston, TX 77092
Telephone: (713) 684-4300
Telecopier: (713) 684-4367
-20-
<PAGE> 24
EMPLOYEES:
/s/ Neil H. McLaurin
---------------------------
Name: Neil H. McLaurin
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ John T. Miller
---------------------------
Name: John T. Miller
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ Thomas L. Davis
---------------------------
Name: Thomas L. Davis
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ Robert L. Howell
---------------------------
Name: Robert L. Howell
Address:
--------------------------------
----------------------------------------
----------------------------------------
-21-
<PAGE> 25
/s/ H. E. Lambert
---------------------------
Name: H. E. Lambert
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ Scott Shafer
---------------------------
Name: Scott Shafer
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ L. May Dyer
---------------------------
Name: L. May Dyer
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ Glen O. Willis
---------------------------
Name:Glen O. Willis
Address:
--------------------------------
----------------------------------------
----------------------------------------
-22-
<PAGE> 26
/s/ John A. Robinson
---------------------------
Name: John A. Robinson
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ John R. Corbett
---------------------------
Name: John R. Corbett
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ Marion H. Blackmon
---------------------------
Name: Marion H. Blackmon
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ D.D. Waters. Jr.
---------------------------
Name: D.D. Waters. Jr.
Address:
--------------------------------
----------------------------------------
----------------------------------------
/s/ D. R. Anderson
---------------------------
Name: D. R. Anderson
Address:
--------------------------------
----------------------------------------
----------------------------------------
-23-
<PAGE> 27
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement ("Agreement") is executed by the person named
as "Employee" below pursuant to the terms of the Amended and Restated
Stockholders Agreement dated as of June 1, 1994, as it may be amended
("Stockholders Agreement").
1. Acknowledgement. Employee acknowledges that Employee has
acquired options granted to him or her pursuant to the 1994 Stock Option Plan
of E-Z Serve Corporation, a Delaware corporation (the "Issuer").
2. Agreement. Employee (1) agrees that Employee shall be bound
by and subject to the terms of the Stockholders Agreement, and (2) adopts the
Stockholders Agreement with the same force and effect as if Employee were
originally a party thereto.
3. Notice. Any notice required or permitted by the Stockholders
Agreement shall be given to Employee at the address of the Issuer.
This Agreement is executed by Employee on ________ __, 199_.
EMPLOYEE:
-------------------------------
Name:
--------------------------
-24-
<PAGE> 28
Agreed to on behalf of the Issuer, the Holder and the Employees on
_____________ __, 199_.
E-Z SERVE CORPORATION
By:
-----------------------
Name:
---------------------
Title:
--------------------
-25-
<PAGE> 29
SCHEDULE 1
<TABLE>
<CAPTION>
Number of Shares of
Common Stock on a
Holder Fully Diluted Basis
------ -------------------
<S> <C>
DLJ Capital / Tenacqco 29,715,364
Phemus 16,700,457
IMR / Quadrant 14,802,325
</TABLE>
-26-
<PAGE> 1
EXHIBIT 4.5.3
SCHEDULE 1
TO AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, AS AMENDED
OF
E-Z SERVE CORPORATION
(as of March 28,1997)
Holder Number of Shares of Common Stock
------ on a Fully Diluted Basis
------------------------
DLJ Capital/Tenacqco 29,715,364
Phemus 17,350,006
IMR/Quadrant 14,961,480
<PAGE> 1
EXHIBIT 4.6
January 17, 1995
The Lenders (as defined below)
and
Societe Generale, as Agent
1221 Avenue of Americas
New York, New York 10019
Attention: David I. Brunson
Re: Letter of Understanding Regarding Amended
and Restated Stockholders Agreement
Dear Sirs:
Reference is made to (a) the Credit and Guaranty Agreement, dated as
of January 17, 1995 (together with all amendments and modifications thereto
from time to time, the "Credit Agreement"), among E-Z Serve Convenience Stores,
Inc., a Delaware corporation (the "Borrower"), E-Z Serve Corporation, a
Delaware corporation (the "Parent"), the various financial institutions as are
or may become parties thereto (collectively, the "Lenders") and Societe
Generale ("SG"), as agent (in such capacity, the "Agent") for the Lenders and
(b) the Amended and Restated Stockholders Agreement, dated as of June 1, 1994
(the "Stockholders Agreement"), among the Parent, DLJ Capital Corporation,
Phemus Corporation, Tenacqco Bridge Partnership, Intercontinental Mining &
Resources Incorporated, Quadrant Capital Corp. (collectively, the
"Stockholders") and certain employees of the Parent.
In order to induce the Lenders and the Agent to execute the Credit
Agreement and consummate the transactions contemplated thereby, and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Stockholders and the Parent (each, an "Agreeing Party") each
severally, but not jointly, agree to the following:
1. Notwithstanding any term or provision thereof to the
contrary, including Section 4.1 thereof, the Stockholders Agreement,
as modified hereby and as it applies to the Stockholders, shall not
terminate and shall remain in full force and effect until all
obligations (monetary or otherwise) of the Parent and each of its
Subsidiaries (including without limitation the Borrower) arising under
or
<PAGE> 2
in connection with the Credit Agreement, the Notes issued thereunder
(the "Notes") and each other Loan Document executed pursuant thereto
(including without limitation as to letters of credit ("Letters of
Credit")) have been paid in cash in full and all Commitments (as
defined in the Credit Agreement) have expired or terminated;
2. Each Agreeing Party agrees that it will not (a) amend,
supplement or otherwise modify the Stockholders Agreement without the
prior written consent of the Agent, which consent shall not be
unreasonably withheld, or (b) amend, supplement or otherwise modify
this Letter of Understanding without the prior written consent of the
Agent;
3. Notwithstanding any term or provision of the Stockholders
Agreement (including without limitation any permissions, exceptions,
rights to compel, tag along rights and buy-sell rights contained
therein), each Stockholder agrees that it will not sell, offer or
otherwise Transfer (as defined in the Stockholders Agreement) any
shares of Common Stock (as defined in the Stockholders Agreement) or
Options (as defined in the Stockholders Agreement) if, as a result of
such action, such Holder (as defined in the Stockholders Agreement)
would at any time (a) be entitled to cast less than 70% of the votes
the number of fully-diluted shares of Common Stock set forth opposite
its name on Schedule I attached to the Stockholders Agreement carries
or (b) have ownership and control, free and clear of all liens,
security interests and other encumbrances (other than non-consensual
liens and encumbrances that arise by operation of law and that would
not reasonably be expected to result in a Transfer of such Common
Stock), of less than 70% of the number of fully-diluted shares of
Common Stock set forth opposite its name on Schedule I attached to the
Stockholders Agreement, in each case without the prior written consent
of the Agent;
4. Subject to paragraph 3 above, each Stockholder agrees that
it will maintain its ownership interest in the Parent without any
lien, security interest or other encumbrance thereon, in whole or in
part (other than non-consensual liens and encumbrances that arise by
operation of law and that would not reasonably be expected to result
in a Transfer of such Common Stock);
5. Such Agreeing Party will strictly comply with all
provisions of the Stockholders Agreement, as modified hereby, and in
any event any attempt by a Holder to Transfer any shares of Common
Stock or Options not in compliance with
-2-
<PAGE> 3
the Stockholders Agreement, as modified hereby, shall be null and
void;
6. The Parent shall maintain a copy of this letter agreement
together with the Stockholders Agreement at its executive office and
its registered office in the State of Delaware and shall comply with
any other requirements, if any, applicable to this letter agreement
under the Delaware General Corporation Law and, in any event, each
Stockholder agrees that it shall duly legend its shares of Common
Stock with a legend to the effect that such shares are subject to this
letter and shall supply the Agent with satisfactory evidence thereof
within 10 days after the date hereof; and
7. Each Agreeing Party hereby represents and warrants that
(a) this letter agreement constitutes a legal, valid and binding
obligation of such Agreeing Party, enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the rights of creditors
generally and except for limitations imposed by general principles of
equity and (b) the Stockholders Agreement has become effective and is
in full force and effect.
This letter agreement constitutes a Loan Document (as defined in the
Credit Agreement) and, notwithstanding the provisions of Section 4.8 of the
Stockholders Agreement, shall inure to the benefit of the Agent and the
Lenders. The parties hereto acknowledge that any breach of this letter
agreement or the Stockholders Agreement will result in an immediate Event of
Default under the Credit Agreement. The parties hereto hereby further agree
that money damages would not be a sufficient remedy for any breach of this
letter agreement and that the Agent shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach, and
the parties hereto further agree to waive any requirement for the securing or
posting of any bond in connection with such remedy. Such remedy shall not be
deemed to be the exclusive remedy for breach of this agreement, but shall be in
addition to all other remedies available at law or equity. In any action or
proceeding brought to enforce any provision of this letter, the Agent, if
successful, shall be entitled to recover reasonable attorney's fees and
expenses from the party against which enforcement is sought.
This letter is intended to create several, and not joint, obligations
and no Agreeing Party shall be responsible for any act or omission, or any
breach of a representation, warranty or covenant, by any other Agreeing Party.
-3-
<PAGE> 4
Please acknowledge your agreement with the foregoing terms by
executing in the space provided below and delivering to the Agent a counterpart
of this letter. This letter (together with the Stockholders Agreement)
constitutes the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and may be executed in separate
counterparts, shall be binding upon and inure to the benefit of successors and
assigns of the parties hereto AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. The obligations
of the parties under this letter shall terminate when all principal and
interest on the Notes or payable under the Credit Agreement, all amounts with
respect to the Letters of Credit and all fees and expenses payable under the
Credit Agreement have been paid in full in cash and all Commitments have
expired or terminated.
Very truly yours,
E-Z SERVE CORPORATION
By:/s/ John T. Miller
-------------------------------------
Title: Senior Vice President
DLJ CAPITAL CORPORATION
By:/s/ Paul Thompson III
-------------------------------------
Title: Vice President
PHEMUS CORPORATION
By:/s/ Michael R. Eisenson
-------------------------------------
Title: Authorized Signatory
TENACQCO BRIDGE PARTNERSHIP
By: DLJ Capital Corporation,
as General Partner
By:/s/ Paul Thompson III
-------------------------------------
Title: Vice President
-4-
<PAGE> 5
INTERCONTINENTAL MINING & RESOURCES
INCORPORATED
By:/s/ John R. Schoemer
-------------------------------------
Title: Attorney-in-Fact
QUADRANT CAPITAL CORP.
By:/s/ John R. Schoemer
-------------------------------------
Title: Vice President
Agreed, Accepted and Acknowledged
This 17th Day of January, 1995:
SOCIETE GENERALE,
as Agent
By:/s/ David I. Brunson
----------------------------------
Title: First Vice President
-5-
<PAGE> 1
EXHIBIT 10.1
STOCK ACQUISITION AGREEMENT
dated as of
March 25, 1992
by and among
E-Z SERVE CORPORATION
and
LARRY JACK TAYLOR,
APRIL MICHELE TAYLOR TRUST and
KERRI DENISE TAYLOR TRUST
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TABLE OF CONTENTS
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ARTICLE 1
The Acquisition
1.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 The Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
Representations and Warranties by
the Shareholders
2.1 Organization and Existence of Dart; Capitalization . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Organization and Existence of TPI; Capitalization . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Organization and Existence of Titan; Capitalization . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Qualification of the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.13 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.14 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.15 Brokerage Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.16 No Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3
Representations and warranties by E-Z Serve
3.1 Organization and Existence of E-Z Serve; Capitalization . . . . . . . . . . . . . . . . . . . . 16
3.2 Qualification of E-Z Serve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 E-Z Serve Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.6 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.8 Brokerage Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 No Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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ARTICLE 4
Certain Covenants and Agreements
4.1 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 UST Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.5 Personal Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5
Conditions to Closing
5.1 E-Z Serve's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 Obligations of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 6
Tax Matters
6.1 Liability for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Tax Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.3 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Survival of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 Limitation on Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.6 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 7
Indemnification
7.1 Indemnification of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Indemnification of E-Z Serve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Right to Contest and Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Right to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 Payment of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.8 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8
Arbitration
8.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 9
Miscellaneous
9.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.9 Modifications and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.10 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.13 Combined Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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STOCK ACQUISITION AGREEMENT
This STOCK ACQUISITION AGREEMENT (the "Agreement"), made as of the
25th day of March, 1992, by and among E-Z Serve CORPORATION, a corporation
organized under the laws of the State of Delaware ("E-Z Serve"), LARRY JACK
TAYLOR ("Taylor"), an individual, HERBERT W. HITCHINGS, as trustee of the APRIL
MICHELE TAYLOR TRUST (who enters into this Agreement solely in its capacity as
trustee of, and on behalf of, such trust, but not individually) (the "April
Trust"), and HERBERT W. HITCHINGS, as trustee of the KERRI DENISE TAYLOR TRUST
(who enters into this Agreement solely in its capacity as trustee of, and on
behalf of, such trust, but not individually) (the "Kerri Trust"), (Taylor, the
April Trust and the Kerri Trust are collectively referred to herein as the
"Shareholders").
W I T N E S S E T H :
WHEREAS, Taylor is the owner of (a) all of the issued and outstanding
capital stock of Dart Investment Company, a corporation organized under the
laws of the State of Texas ("Dart"), and (b) 50% of the issued and outstanding
capital stock of Titan Energy, Inc., a corporation organized under the laws of
the State of Texas ("Titan"); and
WHEREAS, the April Trust is the owner of 25% of the issued and
outstanding capital stock of Titan; and
WHEREAS, the Kerri Trust is the owner of 25% of the issued and
outstanding capital stock of Titan; and
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WHEREAS, Dart is the owner of all of the issued and outstanding
capital stock of Taylor Petroleum, Inc., a corporation organized under the laws
of the State of Texas ("TPI"); and
WHEREAS, the Shareholders deem it desirable and in their respective
best interests for E-Z Serve to acquire from the Shareholders and for the
Shareholders to transfer to E-Z Serve all of the issued and outstanding capital
stock of Titan and Dart;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:
ARTICLE 1
The Acquisition
1.1 The Closing. Pursuant to the terms, covenants and
conditions of this Agreement, on the Closing Date (as hereinafter defined):
(a) E-Z Serve shall acquire from Taylor, and Taylor
shall transfer to E-Z Serve, 1,000 shares of common stock of Dart, par
value $10 per share, which constitutes all of the issued and
outstanding shares of Dart (the "Dart Stock"), solely in exchange for
1,600,000 shares of voting common stock, $.01 par value per share, of
E-Z Serve (the "E-Z Serve Stock").
(b) E-Z Serve shall purchase from the Shareholders, and
the Shareholders shall sell to E-Z Serve, 100 shares of Common Stock
of Titan, par value $10 per share, which constitutes all of the issued
and outstanding shares of Titan (the "Titan Stock") for $800,000
payable in immediately available funds at the Closing (as hereinafter
defined) as
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follows: (i) $400,000 to Taylor; (ii) $200,000 to the April Trust;
and (iii) $200,000 to the Kerri Trust.
1.2 The Closing Date. The closing (the "Closing") shall
take place at the offices of Bracewell & Patterson, 2900 South Tower Pennzoil
Place, Houston, Texas 77002, at 10:00 a.m. (Central Standard Time) on March 25,
1992 or such other date or time as E-Z Serve and the Shareholders may agree to
in writing (the "Closing Date"). All of the actions taken and documents
executed and delivered at the Closing shall be deemed to be taken, executed and
delivered simultaneously.
ARTICLE 2
Representations and Warranties by
the Shareholders
The Shareholders hereby, jointly and severally, represent and warrant
to E-Z Serve as follows:
2.1 Organization and Existence of Dart; Capitalization. Dart
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. The total authorized capital stock of Dart consists
of 100,000 shares of common stock, par value $10 per share, of which 1,000
shares are outstanding, validly issued, fully paid and nonassessable and
beneficially owned by Taylor, free and clear of all security interests, liens,
charges, encumbrances and rights of others. Except as set forth in Schedule 2.1,
there are no outstanding subscriptions, options, voting trusts, rights,
warrants, calls, restrictions, commitments or agreements relating to shares of
the capital stock of Dart to which Dart or Taylor is a party. Except as set
forth in
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Schedule 2.1, there are no preemptive rights, preferential rights to purchase
or other restrictions or encumbrances on the transfer, issuance, sale or voting
of any shares of the capital stock of Dart. In the event that any such rights
or restrictions exist, Taylor shall deliver to E-Z Serve at the Closing
documents evidencing the removal or permanent waiver of such rights or
restrictions. Other than as set forth in Schedule 2.1, there are no existing
rights with respect to registration under the Securities Act of 1933, as
amended (the "Securities Act"), of any of the capital stock of Dart. No shares
of capital stock of Dart that have been issued were issued in violation of the
preemptive or other restrictive rights of any person.
2.2 Organization and Existence of TPI; Capitalization. TPI
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Texas. The total authorized capital stock of TPI
consists of 5,000 shares of common stock, par value $100 per share, of which
2,550 shares are outstanding, all of which are fully paid and non-assessable
and owned beneficially and of record by Dart. There are no outstanding
subscriptions, options, voting trusts, rights, warrants, calls, restrictions,
encumbrances, commitments or agreements relating to shares of the capital stock
of TPI, except as set forth in Schedule 2.2. Except as set forth in Schedule
2.2, Dart does not own or control any capital stock, bonds, or other securities
of, and does not have any proprietary interest in, any other corporation or
business entity; and, other than TPI, Dart does not control the management or
policies of any corporation or business entity or "control" any corporation or
business entity
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within the meaning of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
2.3 Organization and Existence of Titan; Capitalization.
Titan is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. The total authorized capital stock of
Titan consists of 50,000 shares of common stock, $10 par value per share, of
which 100 shares are outstanding, validly issued, fully paid and nonassessable
and beneficially owned by the Shareholders, free and clear of all security
interests, liens, charges, encumbrances and rights of others. Except as set
forth in Schedule 2.3, there are no outstanding subscriptions, options, voting
trusts, rights, warrants, calls, restrictions, commitments or agreements
relating to shares of the capital stock of Titan or to which Titan or any of
the Shareholders is a party. Except as set forth in Schedule 2.3, there are no
preemptive rights, preferential rights to purchase or other restrictions or
encumbrance on the transfer, issuance, sale or voting of any shares of the
capital stock of Titan. In the event that any such rights or restrictions
exist, the Shareholders shall deliver to E-Z Serve at the Closing documents
evidencing the removal or permanent waiver of such rights or restrictions.
Other than as set forth in Schedule 2.3, there are no existing rights with
respect to registration under the Securities Act of any of the capital stock of
Titan. No shares of capital stock of Titan that have been issued were issued
in violation of the preemptive or other restrictive rights of any person.
Except as set forth in Schedule 2.3, Titan does not own or control any capital
stock, bonds, or other securities of, and does not have any proprietary
interest in, any corporation or business entity; and Titan does not
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control the management or policies of any corporation or business entity or
"control" any corporation or business entity within the meaning of the Exchange
Act.
2.4 Qualification of the Companies. Each of Dart, Titan and
TPI (hereinafter sometimes referred to, collectively, as the "Companies" and,
individually, as the "Company") does business in the states listed in Schedule
2.4 and is duly qualified to do business and is in good standing under the laws
of such states. Each Company has full corporate power and lawful corporate
authority to carry on its business as presently conducted and to own and
operate its assets and business. The copies of the charter documents of each
Company and all amendments thereto (certified by the Secretary of State of
Texas) and of its by-laws, as amended to date (certified by its secretary),
which have been delivered to E-Z Serve, are true, complete and correct.
2.5 Financial Statements. Attached hereto as Schedule 2.5
are copies of the following described financial statements: the separate
unconsolidated and audited combined balance sheets of the Taylor Companies with
supporting schedules on each of the Companies as at October 31, 1991, and the
related statements of income or loss, and stockholders' equity of the Companies
for the twelve months ended October 31, 1991, together with an unqualified
report thereon by KPMG Peat Marwick (the "Financial Statements"). Such
Financial Statements present fairly the financial position of the Companies as
of the periods indicated, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated.
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2.6 No Adverse Changes. Except as set forth in Schedule 2.6,
there has not been since April 30, 1991:
(a) any changes in the financial condition or business
of any of the Companies except changes in the ordinary course of
business which have not in any one case or in the aggregate been
Materially adverse to any of the Companies or any of their operations;
(b) any damage, destruction or loss (whether or not
covered by insurance) Materially and adversely affecting any of the
assets or business of any of the Companies;
(c) any change in the accounting methods or practices
followed by any of the Companies or any change in depreciation,
amortization or inventory valuation policies or rates theretofore used
or adopted;
(d) any sale, lease, transfer, mortgage, pledge,
hypothecation, license, abandonment or other disposition by any of the
Companies of any interest in real, personal or intellectual property
(including, but not limited to, any patent, technology, software or
trademark), or of any vehicle, machinery, equipment or other operating
property with book value or sale price (whichever is greater) of
$10,000 or more, except in the ordinary course of business;
(e) any declaration, setting aside or payment of any
dividend or other distribution on or in respect of shares of the
capital stock of any of the Companies or any direct or indirect
redemption, retirement, purchase or other acquisition by any of the
Companies of any such shares or of any option or other right to
acquire any such shares;
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(f) any grant of options or other rights to purchase
shares of capital stock of any of the Companies;
(g) any other occurrences or events which, alone or in
the aggregate, have Materially and adversely affected or may
Materially and adversely affect any of the assets, operations or
businesses of any of the Companies. For purposes of this Agreement,
"Materially", "Material" and any derivation thereof means in reference
to items, occurrences, claims or matters, those items, occurrences,
claims or matters that are, singly or in the aggregate, in excess of
$50,000; or
(h) any change in any of the working capital management,
policies or practices of the Companies, including, but not limited to,
any acceleration in the collection of receivables or delay in the
payment of payables.
2.7 Fees. Except for the fees paid to KPMG Peat Marwick for
the audit of the Financial Statements described in Section 2.5, which audit
shall be paid for by the Companies, and except for such other fees set forth on
Schedule 2.7, which fees will be paid by the Companies, none of the Companies
has any liability or obligation for, or has made any payments for, accounting,
consulting, investment banking or legal fees, or other fees, expenses or charges
of professional advisors in connection with the negotiation, preparation,
execution or performance of this Agreement or the transactions contemplated
hereby. Except as set forth in this Section 2.7, any such fees shall be paid by
the Shareholders.
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2.8 Taxes. The Companies have duly and timely filed all
federal, state and local tax reports and returns required to be filed by the
Companies, and all taxes and levies of every kind, character or description,
shown by such reports or returns to be due and payable, and all other taxes and
levies which are otherwise due and payable, have been paid when due.
2.9 Litigation. There are no actions, suits or proceedings
pending or, except as set forth in Schedule 2.9, threatened against the
Companies at law or in equity or before or by any governmental authority or
instrumentality, or before any arbitrator of any kind, either with respect to
any of the transactions contemplated hereby or which, if adversely determined,
would have a Material adverse effect on the Companies.
2.10 Compliance with Laws. Except as set forth in Schedule
2.10, each of the Companies has complied with all laws and governmental
regulations and orders (including, but not limited to those promulgated by the
U.S. Immigration and Naturalization Service and those relating to the
employment of aliens) relating to any of the property (real or personal,
tangible or intangible) owned, leased or used by it, or applicable to its
business, including, but not limited to, the labor, equal employment
opportunity, occupational safety and health, environmental and antitrust laws.
2.11 No Default. Except as set forth on Schedule 2.11, the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not (a) result in the breach of any of
the terms of, or constitute a default under, the charter documents or by-laws
of any of the Companies, or (b) result in the breach of any of the terms of, or
constitute a
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default under, any contract, agreement, commitment, lease or other obligation
which any of the Companies is now a party or by which it or any of its assets
may be bound or affected, except as indicated on any Schedule hereto with
respect to the need for any consent by any other party to any such contract,
agreement, commitment, lease or other obligation.
2.12 Real Property. The leases of real property listed on
Schedule 2.12 to which any of the Companies is a party are legally valid and
binding and in full force and effect, and there are no defaults thereunder that
will result in payments by any of the Companies (whether for costs of
correction, damages or otherwise) in excess of $10,000 in the aggregate. No
party to any such lease has threatened to terminate it on account of any breach
(actual or alleged). Except as set forth in Schedule 2.12, the Companies have
the right to quiet enjoyment of all real property leased to them for the full
term of such lease and any renewal option relating thereto, and no leasehold or
other interest of any of the Companies, relating to or affecting real property
or any interest therein, is subject or subordinate to any security interest or
mortgage, or subject to any other easement, covenant, restriction, encroachment
or burden except for items that do not Materially and adversely detract from
the value to any of the Companies of such property for the purposes for which
it is now used. None of the rights of any of the Companies under any leasehold
or other interest in real property listed in Schedule 2.12, will be impaired by
the consummation of the transactions contemplated by this Agreement, and all of
such rights will be enforceable by the Companies after the Closing without the
consent or agreement
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of any other person, except consents and agreements specifically described in
Schedule 2.12.
2.13 Authority and Approval. Except as set forth in
Schedule 2.13: (i) each of Taylor, the April Trust and the Kerri Trust has the
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, (ii) the execution and delivery of this
Agreement by the April Trust and the Kerri Trust and the consummation of the
transactions contemplated hereby have been duly authorized and approved, and no
other act, approval or proceedings on the part of Taylor, the April Trust or the
Kerri Trust is required to authorize the execution and delivery of this
Agreement by them or the consummation of the transactions contemplated hereby,
and (iii) this Agreement constitutes the valid and binding obligation of Taylor,
the April Trust and the Kerri Trust enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally and by general principles of equity (whether applied
in a proceeding at law or in equity).
2.14 Investment. Taylor represents and warrants to, and
covenants and agrees with, E-Z Serve that the E-Z Serve Stock to be acquired by
him hereunder is being acquired for his own account and with no intention of
distributing or reselling the E-Z Serve Stock in any transaction which would be
in violation of the securities laws of the United States of America or any
state thereof, without prejudice, however, to Taylor's right at all times to
sell or otherwise dispose of all or any part of the E-Z Serve Stock under a
registration statement under
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the Securities Act or under an exemption from such registration available under
the Securities Act and subject, nevertheless, to the disposition of Taylor's
property being at all times within his control. If Taylor should in the future
decide to dispose of any of the E-Z Serve Stock, Taylor understands and agrees
that he may do so only if he obtains an opinion of counsel, satisfactory to E-Z
Serve, that such transfer will not cause E-Z Serve's acquisition of the stock
of Dart to be disqualified from treatment as a tax-free reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"), and (i) that he may do so only (A) in compliance with the Securities
Act, as then in effect, and (B) in the manner contemplated by any registration
statement pursuant to which such securities are being offered, and (ii) that
stop-transfer instructions to that effect will be in effect with respect to
such securities. Taylor agrees to the imprinting, so long as appropriate, of
the legends set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES.
EXCEPT FOR SALES OR OTHER DISPOSITIONS PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE
SECURITIES LAWS (THE "ACTS"), SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF BY ANY HOLDER HEREOF UNLESS PRIOR TO SELLING OR OTHERWISE
DISPOSING OF ANY SUCH SHARES, SUCH HOLDER DELIVERS TO THE COMPANY
PRIOR TO THE DISPOSITION AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE
TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACTS.
Taylor represents and warrants to, and covenants and agrees with, E-Z Serve
that by reason of his business and financial experience he has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
E-Z Serve Stock, is able to bear the economic risk of such investment and would
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be able to afford a complete loss of such investment. Taylor represents and
warrants to E-Z Serve that he has received and reviewed (i) E-Z Serve's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on October 3, 1990, as amended, and the Prospectus dated March 22,
1991 constituting a part of such Registration Statement, (ii) each of E-Z
Serve's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy
Statements and Schedule 13Ds that E-Z Serve is required to file pursuant to the
Exchange Act and E-Z Serve's Annual Report on Form 10-K for the year ended
December 31, 1991 (the documents listed in clauses (i) and (ii) are hereinafter
collectively referred to as the "E-Z Serve Documents"), and (b) all of the
other information, if any, requested by Taylor from E-Z Serve, and that Taylor
believes that the E-Z Serve Documents and such other information are sufficient
to enable Taylor to make an informed decision with respect to his investment in
the E-Z Serve Stock.
2.15 Brokerage Arrangements. The Shareholders have not
entered (directly or indirectly) into any agreement with any person, firm or
corporation that would obligate E-Z Serve or, except as set forth in Section
2.7, any of the Companies to pay any commission, brokerage or "finder's fee" in
connection with the transactions contemplated herein.
2.16 No Misleading Statements. The representations and
warranties of the Shareholders contained in this Agreement, the Schedules
hereto and all other documents and information furnished to E-Z Serve and its
representatives pursuant hereto do not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
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ARTICLE 3
Representations and warranties by E-Z Serve
E-Z Serve hereby represents and warrants to each of the Shareholders
as follows:
3.1 Organization and Existence of E-Z Serve; Capitalization.
E-Z Serve is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The total authorized
capital stock of E-Z Serve consists of (a) 100,000,000 shares of common stock,
par value $0.01 per share, of which as of the Closing Date, 9,609,234 shares
were outstanding and issued, (b) 10,000,000 shares of preferred stock, $0.01
par value per share, of which (i) 200,000 shares have been designated as $6.00
Convertible Preferred Stock, Series C ("Series C Stock"), of which 66,924
shares of Series C Stock are issued and outstanding as of the Closing Date,
(ii) 25,000 shares have been designated as Series B Convertible Preferred
Stock, of which as of the Closing Date, all will be issued and outstanding and
(iii) 100,000 shares have been designated as $6.00 Convertible Preferred Stock,
Series A ("Series A Stock"), of which as of the Closing Date none will be
issued and outstanding. Except as set forth in the E-Z Serve Documents, the
Series B Convertible Preferred Stock Purchase Agreement dated as of the date
hereof among E-Z Serve and the investors named therein, and the Preferred Stock
Exchange Agreement dated the date hereof between the Company and Harken Energy
Corporation (the "Exchange Agreement"), there are no (i) outstanding
subscriptions, options, voting trusts, rights, warrants, calls, restrictions,
commitments or agreements relating to shares of the capital stock of E-Z Serve
to which E-Z Serve is a party or (ii) preemptive
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rights, preferential rights to purchase or other restrictions or encumbrances
on the transfer, issuance, sale or voting of any shares of the authorized
capital stock of E-Z Serve. Other than as set forth in the E-Z Serve
Documents, the Registration Rights Agreement dated as of the date hereof among
E-Z Serve and the other parties named therein, the Common Stock Registration
Rights Agreement dated as of the date hereof between E-Z Serve and Taylor, the
Common Stock Registration Rights Agreement between E-Z Serve and Herbert W.
Hitchings and the Exchange Agreement, there are no existing rights with respect
to registration under the Securities Act of any of the capital stock of E-Z
Serve. No shares of capital stock of E-Z Serve that have been issued were
issued in violation of the preemptive or other restrictive rights of any
person.
3.2 Qualification of E-Z Serve. E-Z Serve does business in
the states listed in Schedule 3.2 and is duly qualified to do business and is
in good standing under the laws of such states. E-Z Serve has full corporate
power and lawful corporate authority to carry on its business as presently
conducted and to own and operate its assets and business. The copies of the
charter documents of E-Z Serve and all amendments thereto (certified by the
Secretary of State of Delaware) and of its by-laws, as amended to date
(certified by its secretary), which have been delivered to the Shareholders,
are true, complete and correct.
3.3 Authority and Approval. E-Z Serve has the corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. E-Z Serve is acquiring the Dart Stock and
the Titan Stock for its own account for investment purposes and not with a view
to distribution. The execution and delivery of this Agreement by E-Z Serve and
the
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consummation of the transactions contemplated hereby have been duly authorized
and approved by its Board of Directors. No other act, approval or proceedings
on the part of E-Z Serve or the holders of any class of its equity securities
is required to authorize the execution and delivery of this Agreement by E-Z
Serve or consummation of the transactions contemplated hereby. This Agreement
constitutes the valid and binding obligation of E-Z Serve enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and by general principles
of equity (whether applied in a proceeding at law or in equity).
3.4 E-Z Serve Stock. The E-Z Serve Stock to be issued to the
Shareholders hereunder has been duly authorized for issuance by all necessary
corporate action on the part of E-Z Serve. Such shares of E-Z Serve Stock will
be fully paid and non-assessable, free and clear from any liens or encumbrances
except as specifically set forth in Section 3.1.
3.5 Litigation. There are no actions, suits or proceedings
pending or, except as set forth in Schedule 3.5, threatened against E-Z Serve
at law or in equity or before or by any governmental authority or
instrumentality, or before any arbitrator of any kind, either with respect to
any of the transactions contemplated hereby or which, if adversely determined,
would have a Material adverse effect on E-Z Serve.
3.6 No Adverse Changes. Except as set forth in Schedule 3.6,
there has not been since E-Z Serve's third fiscal quarter ended September 30,
1991:
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(a) any changes in the financial condition or business
of E-Z Serve except changes in the ordinary course of business which
have not in any one case or in the aggregate been Materially adverse
to E-Z Serve or any of its operations;
(b) any damage, destruction or loss (whether or not
covered by insurance) Materially and adversely affecting any of the
assets or business of E-Z Serve;
(c) any change in the accounting methods or practices
followed by E-Z Serve or any change in depreciation, amortization or
inventory valuation policies or rates theretofore used or adopted;
(d) any sale, lease, transfer, mortgage, pledge,
hypothecation, license, abandonment or other disposition by E-Z Serve
of any material interest in real, personal or intellectual property
(including, but not limited to, any patent, technology, software or
trademark), or of any vehicle, machinery, equipment or other operating
property with book value or sale price (whichever is greater) of
$10,000 or more, except in the ordinary course of business;
(e) any declaration, setting aside or payment of any
dividend or other distribution on or in respect of shares of the
capital stock of E-Z Serve or any direct or indirect redemption,
retirement, purchase or other acquisition by E-Z Serve of any such
shares or of any option or other right to acquire any such shares;
(f) any grant of options or other rights to purchase
shares of capital stock of E-Z Serve; or
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(g) any other occurrences or events which, alone or in
the aggregate, have Materially and adversely affected or may
Materially and adversely affect any of the assets, operations or
businesses of E-Z Serve.
3.7 No Default. Except as set forth on Schedule 3.7, the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not (a) result in the breach of any of
the terms of, or constitute a default under, the charter documents or by-laws of
E-Z Serve, or (b) result in the breach of any of the terms of, or constitute a
default under, any contract, agreement, commitment, or other obligation which
E-Z Serve is now a party or by which it or any of its assets may be bound or
affected, except as indicated on any Schedule hereto with respect to the need
for any consent by any other party to any such contract, agreement, commitment,
or other obligation.
3.8 Brokerage Arrangements. E-Z Serve has not entered
(directly or indirectly) into any agreement with any person, firm or
corporation that would obligate the Shareholders to pay any commission,
brokerage or "finder's fee" in connection with the transactions contemplated
herein.
3.9 No Misleading Statements. The representations and
warranties of E-Z Serve contained in this Agreement, the Schedules hereto and
all other documents and information furnished to the Shareholders and their
representatives pursuant hereto do not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
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3.10 Compliance with Laws. Except as set forth in Schedule
3.10, E-Z Serve has complied with all laws and governmental regulations and
orders (including, but not limited to those promulgated by the U.S. Immigration
and Naturalization Service and those relating to the employment of aliens)
relating to any of the property (real or personal, tangible or intangible)
owned, leased or used by it, or applicable to its business, including, but not
limited to, the labor, equal employment opportunity, occupational safety and
health, environmental and antitrust laws.
ARTICLE 4
Certain Covenants and Agreements
4.1 Access. Each party hereto agrees that they will, upon
reasonable notice, give to the other parties, their counsel, accountants and
employees who need access to such information, full access, during normal
business hours throughout the period prior to the Closing Date, to the
properties, books, contracts and records of the other relating to their assets
or business operations. Each party agrees that it will, and will cause its
employees to, hold in strict confidence all information so obtained hereby,
agrees that such information is proprietary to the other party and if the
transactions herein provided for are not consummated as contemplated herein,
agrees that it shall not disclose such information to any third parties or use
such information for itself or on behalf of others, or allow its employees to
use or disclose any of such information, except to the extent that such
information is otherwise publicly known or as required by law to be disclosed.
Each party further agrees that it shall require its employees, agents and
representatives having access to such
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information to comply with these obligations and to return promptly all such
information.
4.2 Permits and Licenses. The Shareholders will comply with
required procedures and cooperate with E-Z Serve to enable E-Z Serve to obtain
licenses and permits to sell liquor, beer and wine at the retail gasoline
marketing locations and convenience stores owned or leased by any of the
Companies or to which any of the Companies has certain operating rights, as
listed on Schedule 4.2 hereto (the "Locations"), as soon as possible after the
Closing Date. Taylor and E-Z Serve shall cooperate in effecting the transfer
to E-Z Serve, or its designee, of inventories of beer and wine located at each
Location.
4.3 Title to Properties. No later than 90 days after the
Closing Date, the Shareholders shall, at their own cost and expense, with
respect to each property leased by any of the Companies (the "Properties"),
furnish or cause to be furnished to the Companies a "nothing further
certificate" showing changes to the title to such properties from the date of
issuance of the Owner's Policy of Title Insurance held by the then current
owner of such properties. The Shareholders shall during a period of 120 days
after the Closing Date (a) cure any title defect that is a lien on any of the
Properties, and (b) have the option to cure any other type of title defect,
encumbrance or objection identified by E-Z Serve that adversely affects, in the
opinion of E-Z Serve, any of the Properties. If the Shareholders have not, to
the satisfaction of E-Z Serve, cured any title defect, encumbrance or objection
(a "Defect") within such 120-day period, E-Z Serve may elect (x) in the case of
a lease that has a Defect and of which any of the Shareholders is a lessor, to
terminate such lease without any
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further obligation to the Companies, and (y) in all other cases, to assign any
lease that has a Defect to any Shareholder or its assignee without retaining
any obligation therefor. E-Z Serve shall give notice of such termination or
assignment to the Shareholders and the Shareholders shall, within 10 days of
such notice, transfer such number of shares of E-Z Serve Stock as shall equal
in value the value of the property to which the terminated or assigned lease
relates. For the purposes of this Section, (a) the value of the E-Z Serve
Stock shall be deemed to be $1.90 per share, and (b) the value of each of the
Properties shall be such as is set forth on Schedule 4.3.
4.4 UST Registration. Within 30 days following the Closing
Date, the Shareholders shall take, at their own cost and expense, such action
as may be necessary to cause the underground storage tanks relating to
properties not being leased by E-Z Serve or any of the Companies not to be
registered in the name of E-Z Serve or any of the Companies.
4.5 Personal Guarantee. Taylor shall, upon the written
request of E-Z Serve, issue a personal guarantee for the benefit of any of the
Companies' suppliers of motor fuels that are not, prior to the Closing Date,
suppliers of E-Z Serve; provided, however, that no such personal guarantee,
which shall be in such form as is acceptable to the suppliers for whose benefit
it is issued, shall extend beyond the first anniversary date of the issuance of
such personal guarantee.
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ARTICLE 5
Conditions to Closing
5.1 E-Z Serve's Obligations. The obligations of E-Z Serve at
the Closing are subject to the following conditions:
(a) The representations and warranties of the
Shareholders shall be true, complete and correct when made, and, in
addition, shall be true, complete and correct on and as of the Closing
Date with the same force and effect as though made on and as of the
Closing Date;
(b) Each of the Shareholders shall have performed all
obligations and agreements and complied with all covenants and
conditions contained in this Agreement to be performed and complied
with by them on or prior to the Closing Date and E-Z Serve shall have
received a certificate from each of the Shareholders, dated the
Closing Date, to such effect;
(c) E-Z Serve shall have received a favorable opinion of
Gibson, Ochsner & Adkins, L.L.P., counsel to the Shareholders, dated
the Closing Date, in form and substance reasonably satisfactory to E-Z
Serve and its counsel;
(d) Taylor shall have executed and delivered a
Consulting Agreement, which contains a non-competition covenant;
(e) The consents, waivers, approvals, licenses and
authorizations of third parties or governmental authorities or any
amendments or modifications to existing agreements with third parties
required to consummate the transactions contemplated hereby that are
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listed in Schedule 5.1(e) shall have been duly obtained on terms and
conditions reasonably satisfactory to E-Z Serve;
(f) The leases of the real and personal properties
listed on Schedule 5.1(f) shall have been cancelled and new leases of
such properties shall have been executed by the respective lessors and
TPI as lessee, and delivered at the Closing to E-Z Serve (the "New
Leases");
(g) The Shareholders shall have delivered to E-Z Serve,
at the Closing, certificates or other documentation evidencing that
none of the Companies are guarantors of, nor are otherwise obligated
under, any mortgages, bank loans, or other indebtedness relating to
any loans or other obligations of the Shareholders, or related to the
Locations or other properties of the Companies;
(h) The Companies shall not have any bank indebtedness
exceeding in the aggregate $2 million;
(i) No shares of capital stock of Salt Fork Company,
Inc. ("Salt Fork") shall be owned by Dart;
(j) Dart shall have transferred its intercompany
accounts to Salt Fork as a contribution to capital; and
(k) TPI shall have transferred its wholesale gasoline
business, including, except as set forth in the Receivables Agreement
of even date herewith between TPI and Salt Fork, all assets and
liabilities associated therewith, to Salt Fork.
5.2 Obligations of the Shareholders. The obligations of the
Shareholders at the Closing are subject to the following conditions:
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(a) The representations and warranties of E-Z Serve
shall be true, complete and correct when made, and, in addition, shall
be true, complete and correct on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date;
(b) E-Z Serve shall have performed all obligations and
agreements and complied with all covenants and conditions contained in
this Agreement to be performed and complied with by E-Z Serve on or
prior to the Closing Date and the Shareholders shall have received a
certificate from E-Z Serve, dated the Closing Date, to such effect;
(c) The Shareholders shall have received a favorable
opinion of Bracewell & Patterson, dated the Closing Date, in form and
substance reasonably satisfactory to the Shareholders and their
counsel;
(d) The consents, waivers, approvals, licenses and
authorizations of third parties or governmental authorities or any
amendments or modifications to existing agreements with third parties
required to consummate the transactions contemplated hereby that are
listed in Schedule 5.2(d) shall have been duly obtained on terms and
conditions reasonably satisfactory to the Shareholders; and
(e) The leases of the real and personal properties
listed on Schedule 5.1(f) shall have been cancelled and the New Leases
shall have been executed and delivered at the Closing.
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ARTICLE 6
Tax Matters
6.1 Liability for Taxes. (a) For purposes of this
Agreement, "Taxes" means (i) all federal, foreign, state or local net or gross
income, gross receipts, sales, use, real property gains or transfer, ad valorem,
property, value-added, franchise, production, severance, windfall profit,
withholding, payroll, employment, excise or similar taxes, assessments, duties,
fees, levies or other governmental charges, together with any interest thereon,
any penalties, additions to tax or additional amounts with respect thereto and
any interest in respect of such penalties, additions or additional amounts, and
(ii) liability for the payment of any consolidated or combined tax (including,
without limitation, any liability imposed pursuant to Treasury Regulations
Section 1.1502-6 as a result of being a member of the Seller Group), together
with any interest thereon, any penalties, additions to tax or additional amounts
with respect thereto and any interest in respect of such penalties, additions or
additional amounts, of the type described in clause (i) above.
(b) The Shareholders shall be liable for, and shall
indemnify and hold E-Z Serve and its affiliates harmless from, (1) any Taxes
caused by or resulting from the transfer of the Dart Stock and the sale of the
Titan Stock, (2) any Taxes (other than Taxes described in clause (1) above)
imposed on or incurred by the Companies for any taxable period ending on or
before March 1, 1992 (the "Effective Date") (or the portion, determined as
described in clause (d) of this Section 6.1, of any such Taxes imposed on or
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incurred by the Companies for any taxable period beginning on or before and
ending after the Effective Date which is allocable to the portion of such
period occurring on or before the Effective Date (the "Pre-Effective Date
Period")), excluding (i) any such Taxes caused by or resulting from any actual
or deemed election pursuant to Section 338 of the Code with regard to the
transfer of the Dart Stock and the sale of the Titan Stock, (ii) any such Taxes
that have been reflected as current accrued tax liabilities on the balance
sheet of the Companies as of the Effective Date, and (iii) any Taxes caused by
or resulting from the satisfaction of the condition set forth in Section
5.1(i), (3) any attorneys' fees or other litigation costs incurred by E-Z
Serve, the Companies, or any affiliate thereof in connection with any payment
from the Shareholders under this clause (b) of Section 6.1, (4) any Taxes
payable as a result of any breach by the Shareholders of any representation set
forth herein and (5) any sales, use, real property transfer or gain or similar
Taxes arising from the transactions contemplated in this Agreement.
(c) E-Z Serve shall be liable for, and shall indemnify
and hold the Shareholders harmless from, (1) any Taxes caused by or resulting
from any actual or deemed election pursuant to Section 338 of the Code with
regard to the acquisition of the Dart Stock and Titan Stock (2) any Taxes
imposed on or incurred by the Companies for which the Shareholders are not
liable under clause (b) of this Section 6.1 and (3) any attorneys' fees or
other litigation costs incurred by the Shareholders in connection with any
payment from E-Z Serve under this clause (c) of Section 6.1.
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(d) Whenever it is necessary for purposes of clause (b)
or (c) of this Section 6.1 to determine the portion of any Taxes imposed on or
incurred by the Companies for a taxable period beginning on or before and
ending after the Effective Date which is allocable to the Pre-Effective Date
Period, the determination shall be made, in the case of property or ad valorem
Taxes or franchise Taxes (which are not measured by, or based upon, net
income), on a per diem basis and, in the case of other Taxes, by assuming that
the Pre-Effective Date Period constitutes a separate taxable period of the
Companies and by taking into account the actual taxable events occurring during
such period (except that exemptions, allowances and deductions for a taxable
period beginning on or before and ending after the Effective Date that are
calculated on an annual or periodic basis, such as the deduction for
depreciation, shall be apportioned to the Pre-Effective Date Period ratably on
a per diem basis).
6.2 Tax Proceedings. In the event E-Z Serve or any of its
affiliates receives notice (the "Proceeding Notice") of any examination, claim,
adjustment, or other proceeding with respect to the liability of the Companies
for Taxes for any period for which the Shareholders are or may be liable under
clause (b) of Section 6.1, E-Z Serve shall notify the Shareholders in writing
thereof (the "E-Z Serve Notice") no later than the earlier of (i) 30 days after
the receipt by E-Z Serve or any of its affiliates of the Proceeding Notice or
(ii) ten days prior to the deadline for responding to the Proceeding Notice.
As to any such Taxes for which the Shareholders are solely liable under clause
(b) of Section 6.1, the Shareholders shall be entitled at their expense to
control or settle the contest of such examination, claim, adjustment, or other
proceeding, provided (a) it
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notifies E-Z Serve in writing that it desires to do so no later than the
earlier of (i) 30 days after receipt of the E-Z Serve Notice or (ii) five days
prior to the deadline for responding to the Proceeding Notice and (b) it may
not, without the consent of E-Z Serve, agree to any settlement which could
result in an increase in the amount of Taxes for which E-Z Serve is liable
under clause (c) of Section 6.1. The parties shall cooperate with each other
and with their respective affiliates, and will consult with each other, in the
negotiation and settlement of any proceeding described in this Section 6.2.
E-Z Serve will provide, or cause to be provided, to the Shareholders necessary
authorizations, including powers of attorney, to control any proceedings which
the Shareholders are entitled to control pursuant to this Section 6.2.
6.3 Payment of Taxes. All Taxes with respect to the
Companies shall be paid by the party that is legally responsible therefor.
Except as otherwise provided in this Article 6, any amount to which a party is
entitled under this Article 6 shall be promptly paid to such party by the party
obligated to make such payment following written notice to the party so
obligated stating that the Taxes to which such amount relates have been paid or
incurred and providing details supporting the calculation of such amount.
6.4 Survival of Obligations. The obligations of the parties
set forth in this Article 6 shall be unconditional and absolute and shall
remain in effect without limitation as to time.
6.5 Limitation on Tax Indemnity. E-Z Serve shall not be
liable for any amount of Taxes that may be payable pursuant to Section
6.1(b)(2)(iii) that exceed in the aggregate $1 million.
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6.6 Conflict. In the event of a conflict between the
provisions of this Article 6 and any other provisions of this Agreement, the
provisions of this Article 6 shall control. The provisions of Article 7 shall
not apply to any Taxes for which any party is liable under this Article 6.
ARTICLE 7
Indemnification
7.1 Indemnification of the Shareholders. E-Z Serve, from and
after the Closing Date, shall indemnify and hold the Shareholders harmless from
and against any and all damages (including exemplary damages and 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 the Shareholders as a result of, caused by, arising out
of, or in any way relating to (a) any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of E-Z Serve under this
Agreement or any misrepresentation in or omission from any list, schedule,
certificate, or other instrument furnished or to be furnished to the
Shareholders by E-Z Serve pursuant to the terms of this Agreement, and (b) any
liability or obligation (other than those for which E-Z Serve is being
indemnified by the Shareholders hereunder) which pertains to the ownership,
operation or conduct of the businesses or affairs of the Companies arising from
any acts, omissions, events, conditions or circumstances occurring after the
Effective Date.
7.2 Indemnification of E-Z Serve. The Shareholders, from and
after the Closing Date, shall indemnify and hold the Companies and E-Z Serve
harmless
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from and against any and all Damages suffered by any of the Companies or E-Z
Serve as a result of, caused by, arising out of, or in any way relating to:
(a) any misrepresentation, breach of warranty, or nonfulfillment of any
agreement or covenant on the part of the Shareholders under this Agreement or
any misrepresentation in or omission from any list, schedule, certificate, or
other instrument furnished or to be furnished to E-Z Serve by any of the
Shareholders or any of the Companies pursuant to the terms of this Agreement;
(b) any liability or obligation which pertains to the ownership, operation or
conduct of the business or affairs of the Companies arising from any acts,
omissions, events, conditions or circumstances occurring or existing on or
prior to the Effective Date, including, without limitation, those matters
disclosed on any Schedule hereto, other than (i) any liability reserved for or
recorded on the Financial Statements and (ii) any liability incurred since
October 31, 1991 in the ordinary course of business for the purchase of goods
or services; (c) an assignment of any lease pursuant to Section 4.3; and (d)
any Environmental Cleanup Liability (as hereinafter defined).
7.3 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
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respecting any of the foregoing as it shall have. Such notice shall include a
formal demand for indemnification under this Agreement. The indemnifying party
shall not be obligated to indemnify the indemnified party with respect to any
Claim if the indemnified party knowingly failed to notify the indemnifying
party thereof in accordance with the provisions of this Agreement in sufficient
time to permit the indemnifying party or its counsel to defend against such
matter and to make a timely response thereto including, without limitation, any
responsive motion or answer to a complaint, petition, notice or other legal,
equitable or administrative process relating to the Claim, only insofar as such
knowing failure to notify the indemnifying party has actually resulted in
prejudice or damage to the indemnifying party. The Shareholders hereby
acknowledge notice of indemnity from E-Z Serve and the Companies with regards
to the Claims set forth in the Schedules attached to this Agreement.
7.4 Right to Contest and Defend. The indemnifying party is
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 so to contest shall be delivered by the indemnifying party to
the indemnified party within 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
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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
does not elect to contest any such claim, the indemnifying party shall be bound
by the result obtained with respect thereto by the indemnified party. 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 15 days of such request from the
indemnifying party. If the indemnified party determines that the contest
should be continued, the indemnifying party shall be liable hereunder only to
the extent of the amount that the other party to the contested Claim had agreed
unconditionally to accept in payment or compromise as of the time the
indemnifying party made its request therefor to the indemnified party.
7.5 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, but the indemnifying party
will
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reimburse the indemnified party for any third party expenses incurred by it in
so cooperating. At no cost or expense to the indemnified party, the
indemnifying party shall cooperate with the indemnified party and its counsel
in contesting any Claim.
7.6 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.
7.7 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 award of the arbitrator; provided, however, that with respect to any
Damages that may be owed by the Shareholders, the Shareholders may, at their
option, credit such amount of Damages to the payments owed by any of the
Companies pursuant to the New Leases. In the event the Shareholders should,
within such period of time, fail either to pay the amounts in immediately
available funds or so credit the New Leases, then any of the Companies may
offset such amounts from the amounts payable under the New Leases.
7.8 Limitations on Indemnification.
(a) In connection with any Environmental Cleanup
Liability (as hereinafter defined), the Shareholders shall not be
liable for the amount
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of Damages that exceed in the aggregate $300,000. Further, with
respect to any Environmental Cleanup Liability that arises in
connection with underground storage tanks at any of the Locations that
are located in a State that has an underground storage tank remediation
reimbursement fund, the liability of the Shareholders for Damages shall
be limited to the amounts not reimbursed to E-Z Serve pursuant to such
fund.
(b) The liability of the Shareholders for the breach of
any of the representations and warranties by the Shareholders set
forth in Article 2 shall be limited to claims for which E-Z Serve
delivers written notice to the Shareholders on or before the third
anniversary date of the Closing Date.
(c) For purposes of this Agreement, "Environmental
Cleanup Liability" means any cost or expense of any nature whatsoever
incurred to contain, remove, remedy, clean up, or abate any deposit,
emission, discharge, release or threatened release of hazardous
substances, pollutants or contaminants from or on any of the
Locations, including, without limitation, (i) any direct costs or
expenses for investigation, study, assessment, legal representation,
cost recovery by governmental agencies, or on-going monitoring in
connection therewith, and (ii) any cost, expense, loss or damage
incurred with respect to any of the Locations or its operation as a
result of actions or measures necessary to implement or effectuate any
such containment, removal, remediation, cleanup or abatement.
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(d) With regards to any Damages arising from the matters
discussed under the captions "Sean P. Johnson vs. TPI," "Estate of
Lorena Haynes" and "Estate of Barney Hudson" in Schedule 2.6(b), the
liability of the Shareholders shall not exceed in the aggregate $2
million.
(e) In determining the amount of any Damages for which
any party is entitled to indemnification under this Agreement, the
amount thereof will be reduced by any insurance proceeds realized by
the indemnified party net of any insurance premium that becomes due as
a result of the claim for which indemnity is sought.
ARTICLE 8
Arbitration
8.1 Arbitration. The parties hereto agree that any
controversy or claim arising out of or relating to a disagreement or dispute
under this Agreement shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"), and judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof and shall be binding upon the parties
hereto. The parties hereto agree that (a) any decision of the arbitrator shall
be final, nonappealable and binding, (b) any arbitration proceeding or hearings
in connection with any dispute hereunder shall be held in Houston, Texas and
the hearing will commence within 30 days after receipt by the AAA of an
arbitration notice, and (c) any fees of arbitration, reasonable attorneys' fees
of the prevailing party and transcript costs, shall be paid by the unsuccessful
party in the arbitration, unless otherwise determined by the arbitrator. The
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arbitration notice shall be sent from either the Shareholders to E-Z Serve or
E-Z Serve to the Shareholders expressing the intention to arbitrate with the
AAA a disagreement and the nature of the disagreement. Simultaneously
therewith, the Shareholders or E-Z Serve, as the case may be, shall transmit
three copies of the arbitration notice to the regional office of the AAA which
includes within its boundaries Houston, Texas, along with three copies of this
Agreement and the appropriate administrative fee, thereby submitting such
dispute for arbitration.
ARTICLE 9
Miscellaneous
9.1 Fees and Expenses. Whether or not the transactions
contemplated hereby are consummated, each party shall bear its own fees and
expenses incident to the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated hereby,
including the fees and expenses of its own counsel, accountants and other
professionals.
9.2 Post-Closing Access. For a period of five years after
the Closing, Taylor will have reasonable access to the records of any of the
Companies covering any period prior to the Closing, at reasonable times during
normal business hours and for any proper business purpose, at his sole cost and
expense.
9.3 Public Statements. No party hereto shall, without the
prior consent of the other parties hereto, issue or make any public
announcement or statement regarding this Agreement and the transactions
contemplated hereby unless required to do so in order to comply with
requirements of applicable law, rule or regulation. In the event any party
hereto is required to make any such
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public announcement or statement, it shall furnish a proposed text thereof to
the other parties for their review and comments.
9.4 Interpretation. Wherever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under any applicable law, such provision shall be in
effect only to the extent of such prohibition or invalidation, without
invalidating the remainder of this Agreement.
9.5 Entire Agreement. This Agreement, including the
Schedules hereto, constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, among the parties hereto with respect to
the subject matter hereof.
9.6 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or express
delivery service or mailed by registered or certified mail, postage prepaid, as
follows:
If to each Shareholder:
Larry Jack Taylor
1515 Alabama Street
Amarillo, Texas 79102
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If to E-Z Serve:
E-Z Serve Corporation
10700 North Freeway, Suite 500
Houston, Texas 77037
Attention: President
or such other address as any party hereto shall have designated by notice in
writing to the other parties hereto. All such notices given in compliance with
the provisions of this Section shall be deemed to have been given when
delivered or mailed.
9.7 Assignment. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. Neither this Agreement nor any of the parties' rights hereunder shall
be assignable without the prior written consent of the other parties hereto.
Notwithstanding the foregoing, at or after the Closing Date the Shareholders
may assign their rights hereunder and under other documents and instruments
contemplated herein to The First National Bank of Boston (the "Bank"); and
provided further, that upon foreclosure or sale in lieu of foreclosure of the
E-Z Serve Stock or a substantial portion thereof by or to the Bank, the
warranties, representations, obligations, agreements and indemnities of the
Shareholders and in the other documents and instruments contemplated herein
shall inure to the benefit of the Bank or any purchaser or grantee of such E-Z
Serve Stock. Notwithstanding any other provision of this Agreement, no
stockholder, director, officer, employee or Trustee of any of the parties
hereto shall have any liability under or by reason of this Agreement or the
transactions contemplated hereby.
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<PAGE> 43
9.8 Headings. The headings and titles to the Articles and
Sections of this Agreement are inserted for convenience only and shall not be
deemed a part hereof or affect the construction or interpretation of any
provision hereof.
9.9 Modifications and Waivers. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement
or any provision thereof, or waiver of any right or remedy herein provided,
shall be effective for any purpose unless specifically set forth in a writing
signed by the party or parties to be bound thereby. The waiver of any right or
remedy in respect of any occurrence or event on one occasion shall not be
deemed a waiver of such right or remedy in respect of such occurrence or event
on any other occasion.
9.10 Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
9.11 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute one instrument representing the
agreement among the parties hereto.
9.12 Further Assurances. Each party hereto shall execute and
deliver such instruments and take such other actions as any other party hereto
may reasonably request in order to carry out the intent of this Agreement.
9.13 Combined Working Capital. For purposes of this
Agreement, the parties have estimated that as at the Effective Date, the
Combined Working Capital (as hereinafter defined) of the Companies was at least
$(125,000). For the purposes of this Agreement, "Combined Working Capital"
means the sum of the
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Companies' cash and cash equivalents, accounts receivable (minus reserves
therefor), inventories, prepaid expenses and other current assets as at the
Effective Date, less the sum of the Companies' current liabilities as at the
Effective Date, all as determined in accordance with generally accepted
accounting principles employed by the Companies on a basis consistent with
prior periods and exclusive of any intercompany accounts. E-Z Serve shall have
up until 60 days after the Closing Date during which to verify the accuracy of
the Combined Working Capital. If E-Z Serve shall have failed to notify the
Shareholders within 60 days after the Closing Date of any dispute with respect
to the amount of such Combined Working Capital, then such amount shall be
conclusively considered to be true and correct. In the event the Combined
Working Capital is found to be less than $(125,000), then the Shareholders
shall pay to E-Z Serve such difference in cash within five days of E-Z Serve's
notice to the Shareholders that such is the case. If E-Z Serve and the
Shareholders are unable to agree upon the determination of the actual Combined
Working Capital, an accounting firm selected in the manner hereinafter provided
shall be requested to audit and determine such amount. The selection of the
accounting firm shall be made by the Shareholders from a list of three
nationally recognized independent accounting firms submitted by E-Z Serve. The
decision of the independent accounting firm shall be binding upon the
Shareholders and E-Z Serve, and the fees and expenses of such independent
accounting firm shall be borne one-half by E-Z Serve and one-half by the
Shareholders.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the date first above written.
/s/ Larry Jack Taylor
----------------------------------------
Larry Jack Taylor
KERRI DENISE TAYLOR TRUST
By: Herbert W. Hitchings, Trustee
By: /s/ Herbert W. Hitchings
-------------------------------------
Name: Herbert W. Hitchings
APRIL MICHELE TAYLOR TRUST
By: Herbert W. Hitchings, Trustee
By: /s/ Herbert W. Hitchings
-------------------------------------
Name: Herbert W. Hitchings
E-Z SERVE CORPORATION
By: /s/ John T. Miller
------------------------------------
Name: John T. Miller
Title: Senior Vice President
The undersigned, being the spouse of Larry Jack Taylor, joins in the
execution of this Agreement to evidence her knowledge of its existence and
content, to acknowledge that this Agreement is fair, equitable and in her best
interests, and to bind her community interest, if any, and her heirs,
beneficiaries, assigns, executors, administrators and legal representatives to
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the covenants, agreements, terms and conditions contained in this Agreement, as
it may be amended from time to time.
/s/ Billie Jean Taylor
----------------------------------------
Billie Jean Taylor
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<PAGE> 1
EXHIBIT 10.2
TAYLOR PETROLEUM, INC.
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
Leased Premises
Section 1.01 Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
Term
Section 2.01 Length of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.02 Extension Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.03 Holding Over by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
Rent
Section 3.01 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Rental Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. Leased Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Rent for Extension Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.02 Terms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.03 Taxes and Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.04 Proration of Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.05 Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
USE OF LEASED PREMISES
Section 4.01 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
A. Exclusive Right to Sell Motor Fuel and Use the Leased Equipment . . . . . . . . . . 9
B. Use of Leased Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
C. Option to Purchase Leased Equipment . . . . . . . . . . . . . . . . . . . . . . . . 10
D. Removal of Leased Equipment and/or Tenant's Capital Equipment . . . . . . . . . . . 10
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
E. Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
F. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V
Landlord Improvements
Section 5.01 Ownership of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.02 Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.03 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
Insurance
Section 6.01 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.02 Property of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.03 Fire and Special Extended Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.04 Environmental Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.05 Certificates of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
Damage or Destruction to Landlord's Improvements
Section 7.01 Destruction to Landlord's Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.02 Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.03 Restoration Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII
Eminent Domain
Section 8.01 Effect of Non-Interfering Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.02 Effect of Interfering Partial or Entire Taking . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.03 Allocation of Compensation Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX
Encumbrance of this Lease
Section 9.01 Right to Pledge Leasehold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.02 Subordination of this Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.03 Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 9.04 Landlord to Obtain Mortgagee-Tenant Non-Disturbance and Attornment Agreement . . . . . . . 17
ARTICLE X
Assignment and Subletting
Section 10.01 Assignment and Subletting by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10.02 Assignment by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI
Quiet Enjoyment Entry and Return
Section 11.01 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.02 Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.03 Return of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE XII
Default
Section 12.01 Default by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 12.02 Bankruptcy by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 12.03 Taylor's Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 12.04 Default by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 12.05 Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIII
Remedies
Section 13.01 Landlord's Remedies for Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIV
First Right of Refusal and Purchase Option
Section 14.01 Tenant's Right of Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 14.02 Tenant's Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 14.03 Tenant's Closing of Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14.04 Adjustments to Stated Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 14.05 Covenants Run with Title to Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XV
Arbitration of Certain Bonafide Disputes
Section 15.01 Bonafide Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 15.02 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XVI
Miscellaneous
Section 16.01 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 16.02 Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 16.03 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.04 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.05 Legal Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.06 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.07 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.09 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.10 Texas Law to Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.11 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.12 Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.14 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.15 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBIT
A - Legal Description
B - Leased Equipment
C - Tenant's Capital Equipment
D - Mortgagee - Tenant Non-Disturbance and Attornment Agreement
E - Tenant Estoppel Certificate
F - Taylor Leases
G - Rental Reduction calculation
H - Memorandum of Lease
</TABLE>
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<PAGE> 5
LEASE AGREEMENT
STATE OF ____________ ) LOCATION NO. ___
)
COUNTY OF __________ )
This LEASE AGREEMENT ("Lease") is made and entered into on this the
St. day of March, 1992 by and between __________________________, a Texas
corporation, hereinafter referred to as "Landlord," and TAYLOR PETROLEUM, INC.,
a Texas corporation, hereinafter referred to as "Tenant."
ARTICLE I
Leased Premises
Section 1.01 Description of Property. For and in consideration of
the agreement, covenants and obligations hereinafter set out, Landlord does
hereby lease and let unto Tenant, and Tenant does hereby lease from Landlord,
the following described real property:
SEE EXHIBIT "A" ATTACHED HERETO
Together with all buildings, structures, fixtures and other
improvements constructed thereon as well as, all personal property
including but not limited to the certain convenience store equipment
and motor fuel sales, storage and dispensing equipment (more
particularly described on Exhibit "B" attached hereto) and all and
singular the rights, easements and appurtenances pertaining to the
foregoing real property and usually had and enjoyed therewith,
including but not limited to any right, title and interest of Landlord
in and to adjacent streets, alleys, shopping centers, common areas,
parking lots, other space or rights-of-way.
Section 1.02 Definition. The real property, buildings, rights,
easements and appurtenances described in Section 1.01 and Exhibit "A" are
hereinafter collectively referred to as the "Leased Premises" and the personal
property belonging to Landlord including motor fuel storage and dispensing
equipment and convenience store equipment, more particularly described in
Exhibit "B" is hereinafter referred to as the "Leased Equipment". The Leased
Premises and the Leased Equipment are hereinafter collectively referred to as
the "Leased Material".
<PAGE> 6
ARTICLE II
Term
Section 2.01 Length of Term.
This Lease shall be for a primary term of ten (10) years, beginning on
March 1,1992, and ending on February 28, 2002, subject to the other provisions
of this Lease.
Section 2.02 Extension Term. If Tenant is not then in default
under any provision hereof, the term of this Lease shall be automatically
extended for each of three (3) consecutive additional five (5) year terms upon
the same terms and conditions contained herein unless Tenant gives Landlord at
least ninety (90) days' prior written notice of its intent to terminate this
Lease at the end of the primary ten-year term or any of the five-year
extensions thereof.
Section 2.03 Holding Over by Tenant. Except as provided in Section
4.01 B and C, if Tenant remains in possession of any portion of the Leased
Premises after the expiration of this Lease as to that portion, or any
extension thereof, Tenant shall be deemed to be occupying that portion of the
Leased Premises as a Tenant from month-to-month, subject to all of the
agreements, covenants and obligations of this Lease insofar as same are
applicable to a month-to- month tenancy.
ARTICLE III
Rent
Section 3.01 Rent.
A. Leased Premises. As rental for the Leased Premises, Tenant
agrees to pay Landlord the sum of $________ for the primary term of this Lease
payable in installments of $________ per month, payable without demand; said
rent and monthly installments being subject to downward adjustment in
accordance with the provision of Subparagraph B hereinbelow.
B. Rental Reduction. Landlord(s) and Tenant understand and agree
that the Landlord(s) of this and the other Taylor Leases (as listed on Exhibit
"F") have incurred indebtedness to The First National Bank of Boston,
Metropolitan Life Capital and may have mortgaged, pledged assigned or
encumbered the Taylor Leases and/or the real and personal property belonging to
said Landlord(s) and referred to in each Lease as the Leased Premises or Leased
Equipment to secure such indebtedness (the "Indebtedness"). Tenant's monthly
rental under this Lease and in the Taylor Leases was set in relation to
Landlord(s) monthly debt service obligation. After execution of the Taylor
Leases, Landlord(s) intend to refinance the Indebtedness, meaning that
Landlord(s) intend to find new or additional lenders; negotiate new loan
agreements with existing lenders or reorganize or retire the Indebtedness in
whole or in part. In the event Landlord(s) refinance the Indebtedness
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and obtain a reduction in the monthly debt service amount it is agreed by each
Landlord(s) that Tenant will receive the benefit of a rental reduction to be
determined in accordance with the terms and provisions hereof.
It is the intent of Landlord(s) and Tenant that Tenant will be
entitled to a rental reduction to the extent of one-half of the reduction, if
any, in Landlord(s) principal payments due on the Indebtedness a result of such
refinancing. In no event will Tenant's monthly rental be increased due to
Landlord(s) refinancing of the Indebtedness. Landlord(s) shall calculate the
rental reduction on July 31 and January 31 of each year beginning July 31, 1992
and ending January 31, 1995 and within thirty (30) days of any such
refinancing(s) involving at least $1.0 Million in the aggregate of the
Indebtedness during the period commencing with the execution of the Lease and
ending January 31, 1995. Tenant shall be entitled to a total aggregate rental
reduction equal to the total current straight-line principal payment required
to be made by Landlord(s) (i.e. the total principal installment payments
excluding any prepayments, deposits or end of term balloon payments; as of
March 1, 1992 this amount is $95,111), the straight-line principal payments to
be made under any new loan or refinanced part of the Indebtedness, multiplied
by 0.5. For this calculation any current or refinanced loan or mortgage
amortization principal payment excluding end of term balloon payments, will be
converted to a straight-line amortization principal payment excluding end of
term balloon payments using stated current interest rate and term of refinanced
loan (see example calculation attached as Exhibit "G"). The total aggregate
rental reductions will be rounded to the nearest whole dollar amount and will
become effective on the first day of the month next following such calculation.
The total aggregate rental reduction shall be allocated to each of the Taylor
Leases in proportion that each such Lease's monthly rental payment bears to the
current total rental payment on the Taylor Leases which is $164,471 as of March
1, 1992. This Lease's proportional allocation factor is __________ as of March
1, 1992 and the rental reduction for this Lease shall be determined by
multiplying any total rental reduction by the allocation factor corresponding
to this Lease as set forth above. Landlord(s) and Tenant agree to execute a
written certificate confirming the new monthly rental amount due under each of
the Taylor Leases within thirty (30) days of each such rental reduction.
C. Leased Equipment. As rental for the Leased Equipment, Tenant
agrees to pay Landlord the sum of $_______ for the primary term of this Lease
payable in installments of $________ per month.
D. Proration. All rent for the first or last month shall be
prorated on a calendar day basis if the term begins on other than the first of
the month.
E. Rent for Extension Terms. The monthly rental amount for the
first five (5) year extended term' if any, as provided in Section 2.02 hereof
shall be 110% of the monthly rental amount set forth in Paragraph A of this
Section 3.01. Similarly, the monthly rental amount for each of the
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two other successive five (5) year extended terms hereof, if any, shall be
115.5% and 121.3% respectively of said rental amount set forth in Paragraph A
of this Section 3.01. All other terms and conditions of this Lease shall remain
the same for any extension terms.
Section 3.02 Terms of Payment.
Rent. Rent for the Leased Premises and Leased Equipment shall be
payable on or before the first day of each month during the term of this Lease
to Landlord at P.O. Box 9000, Amarillo, Texas, 79105-9000, Attention: Larry
Jack Taylor, or at such other place as Landlord may from time to time
designate.
Section 3.03 Taxes and Utility Charges. Landlord covenants and
agrees to provide the facilities necessary to enable Tenant to obtain and enjoy
all necessary utilities for the Leased Premises. Tenant agrees to pay as due
all ad valorem or real property taxes assessed or levied on the Leased Premises
and all personal property taxes on the Leased Equipment located on the Leased
Premises during the term hereof except that Tenant may (but shall not be
required to) dispute or contest any such assessment or levy in which case the
disputed item need not be paid until finally adjudged to be valid. Landlord
represents and warrants that all taxes affecting the Leased Premises for
periods prior to the term hereof have been paid and Landlord further agrees to
provide Tenant with copies of all tax assessments and bills on a timely basis.
Tenant agrees to pay all utility charges incurred by Tenant on said premises,
including charges for water, gas, heat, light, sewer, waste water, garbage
removal and telephone service.
Section 3.04 Proration of Charges. Real and personal property
taxes, insurance premiums and utility charges assessed or to be assessed for
the years in which the term of this Lease shall commence or terminate shall be
prorated as of the date of commencement and termination of this Lease. Landlord
shall be obligated to pay Tenant promptly for that part of real property tax
attributable to the portion of any tax year which is not included in the term
of this Lease and which has been paid by Tenant.
Section 3.05 Right of Offset. Landlord agrees that in addition to
any and all other remedies that may be available to Tenant by law or otherwise,
Tenant may offset against any present or future obligations to make payments to
Landlord under this Lease, any claim, damage, liability or expense from any
cause or any other amount that becomes due Tenant pursuant to the terms of that
certain Stock Acquisition Agreement dated March ____, 1992 (the "Stock
Acquisition Agreement") or pursuant to the terms of this Lease. Similarly,
Tenant agrees that Landlord may offset against any present or future
obligations to make payments to Tenant under this Lease any claim, damage,
liability or expense from any cause or any other amount that becomes due
Landlord pursuant to the terms of that certain Stock Acquisition Agreement.
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ARTICLE IV
USE OF LEASED PREMISES
Section 4.01 Use of Leased Premises. Tenant shall be entitled to
use and occupy the Leased Premises during the term of this Lease for any lawful
purpose including, but not necessarily limited to, the operating of a drive-in
grocery with motor fuel sales facilities, which may include the sale and
offering for sale of all the goods, foods, wares and merchandise including
alcoholic beverages and tobacco products and the performance of such services
as are usually incident to such business. Tenant may at any time during the
term of this Lease change the nature of the business operation conducted on the
Leased Premises or Tenant may at any time cease business operations in whole or
in part, temporarily or permanently, as it may deem necessary or prudent;
provided, however, Tenant shall continue to maintain the Leased Premises and
shall keep the Leased Premises insured as provided herein. Landlord and Tenant
agree to cooperate with each other and to execute any additional documents
reasonably necessary to assure Tenant's use and enjoyment of the Leased
Premises.
A. Exclusive Right to Sell Motor Fuel and Use the Leased
Equipment. Landlord hereby grants Tenant the exclusive right to store and sell
motor fuels at the Leased Premises. Landlord has heretofore installed or
acquired certain motor fuel storage, selling and dispensing equipment on the
Leased Premises and Landlord consents to Tenant's exclusive use, occupancy,
operation, maintenance, repair, alteration, relocation, removal, disposal,
modification, addition to or replacement of such motor fuel equipment being
part of the Leased Equipment as defined herein.
B. Use of Leased Equipment. Landlord has heretofore installed or
acquired the "Leased Equipment". Landlord hereby consents to Tenant's
exclusive use, occupancy, operation, maintenance, repair, alteration,
relocation, removal, disposal, modification, addition to or replacement of the
Leased Equipment including but not limited to the repair or replacement of
underground storage tank; lines, dispenser; leak detector; pump; hoses, piping,
wiring, canopies, kiosks, lights and monitoring devices. The Leased Equipment
and any repairs thereto which may be made from time to time during the term of
this Lease are and shall continue to be the sole and exclusive property of
Landlord subject, however, to Tenant's Purchase Option Rights as Set forth in
Subparagraph C of this Section 4.01; provided, however, Tenant may, in its sole
discretion and without prior consent of Landlord remove and/or dispose of all
or any item of the Leased Equipment and install Tenant': own equipment,
apparatus, devices or other assets on the Leased Premises which may be in
replacement of or in addition to the Leased Equipment and such replacement or
additional equipment of the general type, character or nature of the items set
forth on attached Exhibit "C' shall hereinafter be referred to as "Tenant's
Capital Equipment" and shall be and remain the sole and exclusive property of
Tenant (except in the case in which Tenant fails to cure a default hereunder
and Landlord terminates this Lease as a result thereof pursuant to the
provisions of Article XII, in which event title to replacement equipment
installed inside the convenience store building shall be
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vested in Landlord subject the provisions of Section 9.01) which may be removed
from the Leased Premises upon the expiration or termination of this Lease as
provided in Subparagraph D hereof Notwithstanding the foregoing and
Subparagraph A above, it is understood and agreed that any Leased Equipment
that is removed or disposed of by Tenant during the term of this Lease shall be
replaced by Tenant with comparable equipment which shall be and remain the
personal property of Tenant and shall constitute Tenant's Capital Equipment
Tenant shall maintain appropriate records of any part or parts of the Leased
Equipment that may be removed from the Leased Premises, relocated to another
site or otherwise disposed of and shall routinely provide Landlord with notice
of the removal and disposal or relocation of any portion of the Leased
Equipment and/or make its records of any such equipment removal, disposal,
relocation or transfers available to Landlord upon reasonable request.
C. Option to Purchase Leased Equipment. Landlord hereby grants
Tenant an option to purchase the Leased Equipment at any time during the term
of this Lease after March 1, 1995, (unless Tenant exercises its purchase option
rights as provided in Sections 14.01 and 14.02 hereof in which case Tenant may
purchase the Leased Equipment contemporaneously with such purchase of the real
property) for a purchase price of $_______ if said option is exercised during
the first year of the term of this Lease, or thereafter for a price which is
reduced each year on the anniversary of the commencement date hereof by an
amount which is 10% of the price set forth in this Subparagraph C of Section
4.01. Therefore, in the fourth year of the initial term hereof (March 1, 1995
to February 29, 1996), the purchase option price for the Leased Equipment shall
be reduced to 70% of the price set forth above; in the fifth year, 60% of such
price and so on; provided, however, if this Lease is extended beyond the
initial ten-year term hereof, Tenant may acquire tide to the Leased Equipment
by notifying Landlord of its desire to take title and tendering payment of the
sum of $1.00 to Landlord. The option to purchase the Leased Equipment may be
exercised by Tenant (or its designee) by giving Landlord written notice of its
desire to purchase the Leased Equipment and the tendering of payment in the
amount determined pursuant to the provisions hereof. Upon receipt of such
notice and payment, Landlord shall promptly execute and deliver to Tenant a
Bill of Sale evidencing transfer to Tenant of good unencumbered title to the
Leased Equipment Landlord and Tenant agree to cooperate with each other in
connection with conducting any tightness testing of the underground storage
tanks and lines or taking environmental samples from the area surrounding the
underground storage tanks and lines prior to completion of such sale. In the
event Tenant exercises its purchase option rights with respect to the Leased
Equipment, Tenant's obligation to pay the monthly Leased Equipment rental
amount hereunder shall be automatically terminated, released and waived.
D. Removal of Leased Equipment and/or Tenant's Capital Equipment.
If Tenant exercises its purchase option and acquires title to the Leased
Equipment and/or installs Tenant's Capital Equipment as provided herein,
Landlord agrees that no part of the purchased Leased Equipment or Tenant's
Capital Equipment shall become or be deemed to be a fixture or a part of the
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realty under any circumstance whatsoever. At any time after March 1, 1995
(unless Tenant exercises its purchase option rights as provided in Article XIV
hereof in which case Tenant may remove any purchased Leased Equipment or
Tenant's Capital Equipment at any time thereafter) and prior to the final
expiration or termination of this Lease, Tenant shall have the right at its
sole discretion to enter the Leased Premises and remove the purchased Leased
Equipment and Tenant's Capital Equipment, or any part thereof, or take whatever
action it deems necessary or advisable with respect thereto. Any such removal
shall be accomplished in a good and workmanlike manner at Tenant's sole cost
and expense. Any excavations will be filled to grade level but Tenant will not
be required to repave unless otherwise specifically requested by Landlord in
writing within ten (10) days of Tenant's notice of intention to excavate and
remove any such buried equipment. Tenant may, by paying one or more additional
months' rental, extend the period during which it may enter the Leased Premises
and remove its equipment but not to exceed a total of ninety (90) days. Any
Leased Equipment or Tenant Capital Equipment Dot removed prior to the
expiration of the term of this Lease or the ninety (90)-day holdover period if
Tenant so elects as provided herein shall be forfeited and shall become the
personal property of Landlord.
E. Regulatory Compliance. Landlord represents and warrants that
to the best of its knowledge, the Leased Equipment has been operated prior to
the term hereof in compliance with the appropriate federal, state and local
statutes, ordinances, regulations or requirements and is currently in
compliance therewith. Tenant agrees to use its best efforts to maintain the
operation of the Leased Equipment in compliance with the appropriate Federal,
state and local statutes, ordinances, regulations or requirements throughout
the term of this Lease. If any investigation or monitoring of site conditions
or any clean-up, containment, restoration, removal, or other remedial work
(collectively the "remedial work") is required under any applicable federal,
state, or local law or regulation, by any judicial order, or by any
governmental entity, Tenant shall perform or cause to be performed the remedial
work in compliance with such law, regulation, order or agreement; provided,
that Tenant may withhold such compliance pursuant to a good faith dispute
regarding the application, interpretation, or validity of the law, regulation,
order or agreement. if Tenant shall fall to timely commence, or cause to be
commenced, or fails to diligently prosecute to completion, such remedial work,
Landlord may, but shall not be required to cause such remedial work to be
performed, and all reasonable costs and expenses thereof, or reasonably
incurred in connection therewith shall be paid by Tenant. AU such costs shall
be due and payable upon demand therefor by Landlord. Notwithstanding any
provision of this Lease to the contrary, Tenant will be permitted to contest or
cause to be contested, subject to compliance with the requirements of this
paragraph, by appropriate action any remedial work requirement, and Landlord
shall not perform such requirement on its own or Tenant's behalf, so long as no
default under this Lease has occurred and is continuing under this Lease and
Tenant has given Landlord written notice that Tenant is contesting or shall
contest or cause to be contested the application, interpretation, or validity
of the governmental law, regulation, order, or agreement pertaining to the
remedial work by appropriate proceedings conducted in good faith with due
diligence; provided, such contest shall not subject Landlord or any
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assignee of its interest (including any person having a beneficial interest) in
the Leased Premises to civil liability.
F. Signs. Tenant shall have the right to erect signs on any
portion of the Leased Premises, including but not limited to exterior walls of
Landlord's Improvements, subject to all applicable laws. Landlord shall
cooperate with Tenant if necessary to obtain permits to erect such signs.
Tenant shall repair any damage to the Leased Premises due to removal of such
signs.
ARTICLE V
Landlord Improvements
Section 5.01 Ownership of Improvements. Tenant acknowledges that
Landlord has installed and erected certain improvements including buildings,
plumbing, wiring, driveways, parking lots, and sidewalks which are affixed to
the real property leased hereunder and have become a part thereof and are
herein referred to as "Landlord's Improvements". Landlord represents and
warrants that to the best of Landlord's knowledge, Landlord's Improvements are
in compliance with appropriate building and zoning codes and all federal, state
and local statutes, ordinances, regulations or requirements, if any, are in
good working order and are suitable for their intended purpose. All Landlord's
Improvements shall remain upon and be surrendered with the Leased Premises upon
termination of this Lease. Unless otherwise agreed, any alterations or
additions to Landlord Improvements installed by Tenant pursuant to the
provisions of Section 5.03 hereof shall also remain upon and be surrendered
with the Leased Premises upon termination of this Lease; provided, however,
Tenant at its own expense may remove (within the removal or holdover period
provided in Section 4.01) any trade fixtures which it may have installed upon
these Leased Premises during the term of the Lease. Tenant shall, at its sole
expense, make reasonable repairs to any portion of Landlord's Improvements, the
Leased Premises and Leased Equipment damaged by the removal of said trade
fixtures and signs and to restore them to their condition prior to such removal
subject to ordinary wear, tear and effects of the elements.
Section 5.02 Repairs and Maintenance. Tenant, at its own expense
shall maintain and keep the Leased Material in good repair, provided, however,
that Landlord shall be responsible for repair and maintenance of the structural
aspects of Landlord's Improvements including but not limited to the foundation
and walls. Tenant shall maintain routine maintenance of driveways and parking
areas. Landlord will be responsible to repair/replace driveways and parking
areas when repairs over 50% of the area is required. Tenant shall be
responsible for painting parking stripes on the driveway and parking area.
Tenant shall maintain the roof, windows, plumbing, pipes, wiring, doors, air
conditioning and heating equipment and interior walls in good repair. In the
event Tenant shall neglect to reasonably maintain the Leased Material after
receiving thirty (30) days' prior written notice of the necessity of any such
repair, Landlord shall have the right to cause such repairs or
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corrections to be made and to charge the reasonable cost thereof to Tenant as
additional rental. If total replacement of heating or air conditioning
equipment is required during the term hereof, Landlord shall bear such expense.
if estimated repair costs exceed 70% of estimated replacement costs such repair
shall be deemed to be a total replacement. For purposes of this provision,
unless otherwise agreed, cost estimates will be provided by at least three
contractors reasonably acceptable to Landlord and Tenant.
Section 5.03 Alterations. Tenant shall have the right to make
changes or alterations to Landlord's Improvements or Leased Equipment on the
Leased Premises; provided, however, that any such changes or alterations shall
be made in all cases subject to the following conditions which Tenant agrees to
observe and perform:
A. No change or alterations to Landlord's Improvements shall at
any time be made which shall impair the structural soundness of the Landlord's
Improvements and any alterations involving a structural change shall require
Landlord's prior written consent which shall not be unreasonably withheld or
delayed.
B. No changes or alterations to Landlord's Improvements shall be
undertaken until Tenant shall have procured and paid for all required municipal
and other governmental permits and authorizations of the various municipal
departments and governmental subdivisions having jurisdiction.
C. All work done in connection with any change or alteration to
Landlord's Improvements or Leased Equipment shall be done in a good and
workmanlike manner.
D. Tenant shall use its best efforts to perform such alterations
without subjecting the Leased Premises to mechanic's and/or materialmen's liens
and Tenant will promptly pay or cause to be released any such lien that may be
filed.
ARTICLE VI
Insurance
Section 6.01 Liability Insurance. Tenant covenants and agrees
that it will at all times during the term of this Lease, or any extension
thereof, at its own expense maintain and keep in force public liability
insurance in an amount of at least $1,000,000, against liability for claims
through the public use of or arising out of accidents occurring in, on, or
around the Leased Premises, naming Landlord as an additional insured.
Section 6.02 Property of Tenant. Tenant assumes all risk of damage
to the Leased Equipment, Tenant's Capital Equipment and other personal property
belonging to Tenant and located
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on the Leased Premises arising from any cause other than the willful or
negligent acts or omissions of Landlord, its agents or assigns and including
without limitation, loss by theft, fire and acts of God.
Section 6.03 Fire and Special Extended Coverage. Tenant covenants
and agrees to maintain in force, at all times during the term of this Lease at
its own expense, a policy or policies of fire and extended special coverage
insurance, in an amount equal to not less than ninety (90%) percent of the
actual cash value of Landlord's Improvements and Leased Equipment on the Leased
Premises. Such policy or policies shall name both Landlord and Tenant as named
insureds and the financial lending institutions of Landlord provided, however,
that all insurance proceeds shall be used to reconstruct the Leased Material
unless otherwise mutually agreed by Landlord and Tenant.
Section 6.04 Environmental Insurance. Tenant agrees to provide
insurance if required by law or provide other assurances as specified by
regulations or statutes of its ability to fulfill its responsibilities under
applicable federal, state or other laws regarding the protection of the
environment. if a policy of environmental liability insurance is provided by
Tenant, such policy will name Landlord as an additional insured.
Section 6.05 Certificates of Insurance. Tenant shall furnish
Landlord with certificates of all insurance required in the foregoing
paragraphs. The insurance is to be carried by one or more insurance companies
licensed to do business in the state where the Leased Premises is located, or
having a Best rating of "A" or better, or one of the Lloyds of London
Companies, or is mutually approved by Landlord and Tenant. All of the
insurance policies required in the foregoing paragraphs shall provide that they
may not be cancelled before the expiration date thereof without giving fifteen
(15) days prior written notice to Landlord and the financial lending
institution of Landlord named as an insured in the insurance policies. if
Tenant does not provide such certificates upon Landlord's delivery of
possession to Tenant, or if Tenant allows any insurance required under the
foregoing paragraphs to lapse, Landlord may, if Tenant is in default and after
notice and chance to cure as provided herein, at Landlord's option, take out
and pay the premiums on the necessary insurance to comply with Tenant's
obligations under the provisions of the foregoing paragraphs. Landlord is
entitled to reimbursement from Tenant for all amounts spent by Landlord to
procure and maintain such insurance.
ARTICLE VII
Damage or Destruction to Landlord's Improvements
Section 7.01 Destruction to Landlord's Improvements. In the event
any of Landlord's Improvements are partially or wholly damaged or destroyed or
any other portion of the Leased Premises are totally or partially destroyed by
fire, hurricane, storm, explosion or any other unavoidable casualty for which
insurance coverage is required by this Lease, Tenant shall give notice to
Landlord of such damage or destruction and Tenant shall employ reasonable
efforts to restore said
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Landlord Improvements and/or Leased Premises to good condition and fitness for
occupancy, to the extent that the insurance proceeds provided under section
6.03 shall permit. Landlord acknowledges that all insurance proceeds received
shall be available to Tenant for reconstruction except for insurance proceeds
related to Tenant's personal property which may be retained by Tenant. If the
insurance proceeds are insufficient to cover the cost of reconstruction of the
Landlord's Improvements to a condition similar to that existing immediately
prior to the damage or destruction the building or reconstruction costs in
excess of said insurance proceeds shall be borne by Tenant. If Landlord
requests that the Landlord Improvements be reconstructed in a manner which
enlarges or enhances the nature of said Landlord Improvements when compared to
that existing prior to the damage or destruction, the building or
reconstruction costs in excess of said insurance proceeds shall be borne by
Landlord and shall be payable to Tenant immediately upon demand.
Section 7.02 Rent Abatement. During the period in which any
reconstruction or repair is being performed, and until such repair or
reconstruction is substantially completed, the Rent due Landlord shall be
apportioned from the day following the casualty according to the portion of the
Leased Premises or Led Equipment which remains usable to Tenant; provided,
however, the total rental abatement for Tenant for any particular
reconstruction or repair shall not exceed a period of 180 days or a period of
90 days after receipt of final insurance settlement payment, whichever first
occurs.
Section 7.03 Restoration Work. All work done in restoring the
Landlord's Improvements shall be done in a good and workmanlike manner and in
compliance with all laws, ordinances and requirements of all federal, state and
municipal governments. All work done by Tenant in restoring the Leased Premises
shall be done only after submitting to Landlord for their approval, which
approval shall not be unreasonably withheld or delayed, written plans and
specifications for all such work.
ARTICLE VIII
Eminent Domain
Section 8.01 Effect of Non-Interfering Partial Taking. Eminent
domain proceedings resulting in condemnation of part of the Leased Premises
that leave the rest usable by Tenant without any significant operational
disadvantages or interference for purposes of the business for which the Leased
Premises are being used, will not terminate this Lease. The effect of partial
condemnation will be to terminate the Lease as to the portion of the Leased
Premises condemned and to reduce proportionately the Rent.
Section 8.02 Effect of Interfering Partial or Entire Taking. In
the event a partial taking of a portion of the Leased Premises or the entire
Leased Premises through eminent domain proceedings results in Tenant being
unable to continue its desired business operation as a practical matter or to
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operate such business profitably, Tenant shall have the right to terminate this
Lease. Such termination of the Lease shall result in relieving the Tenant of
any further obligations under this Lease except any outstanding obligations.
Section 8.03 Allocation of Compensation Award. The compensation
awarded for diminution of value of the Leased Premises in the eminent domain
proceedings as a result of condemnation shall belong to the Landlord. Tenant
shall be entitled to any portion of the condemnation award attributable to
Tenant's loss of business, diminution in value of Tenant's leasehold interest
and/or the cost of relocating Leased Equipment, Tenant's Capital Equipment or
other personal property and business endeavor.
ARTICLE IX
Encumbrance of this Lease
Section 9.01 Right to Pledge Leasehold. Landlord grants,
acknowledges, and consents to Tenant's right from time to time during the term
hereof to mortgage, pledge, assign or otherwise encumber the leasehold interest
herein granted to Tenant by landlord or any other of Tenant's property as long
as Tenant is not in default hereof at the time of such encumbrance. Landlord
hereby subordinates any statutory and contractual landlord liens with respect
to Tenant's Capital Equipment and other personal property located on the Leased
Premises to any such mortgage, pledge, lien, or encumbrance granted by Tenant
hereunder or any modification, replacement, renewal, or extension thereof,
provided, however, if and to the extent any such mortgagee, pledgee, or
assignee of Tenant is given notice to cure a default by Tenant in payment of
rent due under this Lease, and fails to cure such default for a period of three
(3) consecutive months from the date of receipt of such notice, then with
respect to Tenant's Capital Equipment and Leasehold interest (excluding
inventory) Landlord's subordination of its statutory and contractual landlord
liens shall be deemed to have been waived and released.
Section 9.02 Subordination of this Lease. This Lease and Tenant's
rights under this Lease are subject and subordinate to any deed of trust or
mortgage ("lien") currently in existence and provided landlord complies with
the provisions of Section 9.04 below, all renewals, extensions, modifications,
consolidations, and replacements of such lien, now or hereafter affecting or
placed, charged, or enforced against the Leased Material or all or any portion
of the building or any interest of Landlord in them or landlord's interest in
this Lease and the leasehold estate created by this Lease. This provision will
be self-operative and no further instrument of subordination will be required
in order to effect it. Nevertheless, Tenant will execute, acknowledge, and
deliver to landlord, at any time and from time to time, upon demand by
Landlord, at Landlord's sole cost and expense such documents as may be
requested by Landlord, or any mortgagee, to confirm or effect any such
subordination, provided that Tenant receives a non-disturbance agreement
described in Section 9.04 (a "Mortgagee-Tenant Non-Disturbance and Attornment
Agreement"). If Tenant fails or refuses to
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execute, acknowledge, and deliver any such document within twenty (20) working
days after written demand, Landlord, Landlord's successors and assigns, will be
entitled to execute, acknowledge, and deliver any and all such documents for
and on behalf of Tenant as attorney-in-fact for Tenant, coupled with an
interest. Tenant, by this paragraph, constitutes and irrevocably appoints
Landlord, Landlord's successors and assigns, as Tenant's attorney-in-fact to
execute, acknowledge, and deliver any and all documents described in this
Section for and on behalf of Tenant as provided in this Section. Any
attorney-in-fact under this Section shall require that any document executed by
the attorney-in-fact for Tenant shall be delivered conditioned upon Tenant
receiving a Mortgagee-Tenant Non-Disturbance and Attornment Agreement from the
holder of the lien for which the subordination or other document is delivered.
Section 9.03 Attornment. Tenant agrees that if any holder of any
lien encumbering any part of the Leased Premises (the "Purchaser") succeeds to
Landlord's interest in the Leased Premises, after receipt of written notice,
Tenant will pay to the Purchaser all rents subsequently payable under this
Lease. Tenant agrees that in the event of enforcement by the trustee or the
beneficiary under or holder or owner of any such lien of the remedies provided
for by law or by such lien, Tenant will, upon request of the Purchaser,
automatically become the tenant of and attorn to the Purchaser without change
in the terms or provisions of this Lease. Upon request by Landlord or the
Purchaser, and without cost to Tenant, Tenant will execute, acknowledge, and
deliver an instrument or instruments confirming the attornment or acknowledging
the agreement to so attorn, provided that Tenant receives a Mortgagee-Tenant
Non-Disturbance and Attornment Agreement as provided for in Section 9.04 below.
If Tenant fails or refuses to execute, acknowledge, and deliver any such
document within twenty (20) days after written demand, landlord or the
Purchaser will be entitled to execute; acknowledge, and deliver any and all
such documents for and on behalf of Tenant as attorney-in-fact for Tenant,
coupled with an interest. Tenant, by this paragraph, constitutes and
irrevocably appoints Landlord or the Purchaser, as Tenant's attorney-in-fact,
to execute, acknowledge, and deliver any and all documents described in this
Section for and on behalf of Tenant, as provided in this Section. Any
attorney-in-fact under this Section shall require that any document executed by
the attorney-in-fact for Tenant shall be delivered conditioned upon Tenant
receiving a Mortgagee- Tenant Non-Disturbance and Attornment Agreement.
Section 9.04 Landlord to Obtain Mortgagee-Tenant Non-Disturbance
and Attornment Agreement. If landlord has granted or hereafter grants a deed
of trust or mortgage lien on the Leased Premises and/or Leased Equipment to a
bank, lending institution, or otherwise ("Mortgagee"), landlord agrees to
obtain from Mortgagee or its assigns a written attornment and non-disturbance
agreement expressly providing for the recognition of the validity and
continuance of this Lease in the event of foreclosure of landlord's interest or
in the event of conveyance in lieu of foreclosure, as long as Tenant has not
defaulted on the terms hereof and substantially in form of the attached Exhibit
"D".
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ARTICLE X
Assignment and Subletting
Section 10.01 Assignment and Subletting by Tenant. Tenant shall
have the right to assign this Lease or sublet the Leased Premises and/or Leased
Equipment in whole or in part, from time to time during the term hereof,
without the written consent of Landlord; provided, however, Tenant shall remain
primarily liable for its obligations as Tenant hereunder. In the event Tenant
so requests and Landlord consents and executes a written release Tenant shall
be released from any further obligation hereunder when an assignment of this
Lease is made. It is understood that Landlord's consent to any such requested
release may be withheld for any reason.
Section 10.02 Assignment by Landlord. Landlord shall have the
right to assign this Lease without Tenant's consent; provided however, that
Tenant may continue to make rental payments and deliver notices and demands to
original landlord until proper notice of such assignment and the identity of
landlord's assignee has been received by Tenant.
ARTICLE XI
Quiet Enjoyment Entry and Return
Section 11.01 Quiet Enjoyment. Landlord covenants, represents and
warrants that it has full right and power to execute and perform this Lease and
to grant the leasehold estate demised herein and that Tenant upon payment of
the rent herein provided and performance of the obligations contained herein,
shall peaceably and quietly have, hold and enjoy the Leased Premises during the
full term of this Lease and any extension or renewal thereof without hindrance
or molestation by Landlord or any person claiming under Landlord.
Section 11.02 Right of Entry. Upon at least twenty-four (24) hours
notice, Landlord shall have the right to enter upon the Leased Premises during
Tenant's normal business hours for the purpose of inspecting same, exhibiting
the premises for sale or rent, and making necessary repairs to Landlord's
Improvements; provided, however, that Landlord's exercise of such rights of
entry shall not inhibit, interfere with or adversely affect Tenant's normal
business operation.
Section 11.03 Return of Leased Premises. Upon the final
termination of this Lease, Tenant agrees to surrender the Leased Premises to
Landlord in as good condition as it was received by Tenant, ordinary wear,
tear, effects of the elements and Landlord's repair and maintenance obligations
as set forth in Section 5.02 excepted.
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ARTICLE XII
Default
Section 12.01 Default by Tenant. Any one or more of the following
shall be deemed to be an Event of Default (herein so called) by Tenant under
this Lease:
A. Tenant shall fail to pay to Landlord as and when due any
installment of rent or any other payment hereunder for a period of ten (10)
days after written notice to Tenant of such failure;
B. Tenant shall fail to comply with any term, provision, or
covenant of this Lease, other than the payment of rent or other monetary
payment required pursuant to this Lease, and the failure is not cured within
thirty (30) days after written notice to Tenant or if the failure cannot be
cured within thirty (30) days and Tenant fails to commence and diligently
pursue curing the failure within the thirty (30) days to a conclusion
reasonably satisfactory to Landlord within a reasonable time after Such notice;
C. Tenant shall file in any court a petition for relief under the
United States Bankruptcy Code 11 U.S.C. Sections 101, et seq. (the "Code");
D. An involuntary petition for relief under the Code shall be
filed against Tenant, and such petition shall not be denied, dismissed, or
withdrawn within one hundred twenty (120) days after the date of filing
thereof;
E. Tenant shall make an assignment for the benefit of creditors;
F. A receiver shall be appointed for any properly of Tenant by
order of a court of competent jurisdiction in a judicial case or proceeding
commenced by Tenant;
G. A receiver shall be appointed for any property of Tenant by
order of a court of competent jurisdiction in a judicial case or proceeding
commenced against Tenant, and such receivership shall not be dismissed or
withdrawn within one hundred twenty (120) days from the date of such
appointment;
H. A trustee, receiver, or agent under applicable law or under a
contract, or other "custodian" within the meaning of Section 101(11), of the
Code, is appointed by a court having lawful jurisdiction or authorized to take
charge of property of Tenant for the purpose of enforcing a lien against such
property or for the purpose of general administration of such property for the
benefit of Tenant's creditors; or
I. Tenant or its trustee shall "reject" within the meaning of
Section 365 of the Code:
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1. Between March 1, 1992, and February 28, 1995, Tenant
rejects any of the Taylor Leases (defined in Section
12.03);
2. Between March 1, 1995, and February 29, 1996, Tenant
rejects more than 30% of the Taylor Leases;
3. Between March 1, 1996' and February 28, 1997, Tenant
rejects more than 50% of the Taylor Leases; or
4. After March 1, 1997, this Lease.
J. Cross-default provisions:
1. Between March 1, 1992, and February 28, 1995, the
occurrence and continuation beyond the applicable
cure period of an Event of Default on the part of
Tenant (except for a Bonafide Dispute as defined in
Article XV) under any of the Taylor Leases shall be
an Event of Default under this Lease.
2. Between March 1, 1995, and February 29, 1996, the
occurrence and continuation beyond the applicable
cure period of an Event of Default on the part of
Tenant (except for a Bonafide Dispute as defined in
Article XV) in more than 30% of the Taylor shall be
an Event of Default under this Lease.
3. Between March 1, 1996, and February 28, 1997, the
occurrence and continuation beyond the applicable
cure period of an Event of Default on the part of
Tenant (except for a Bonafide Dispute as defined in
Article XV) in more than 50% of the Taylor Leases
shall be an Event of Default under this Lease.
4. After March 1, 1997, the occurrence and continuation
beyond the applicable cure period of an Event of
Default under any other Taylor Lease shall not be an
Event of Default under this Lease.
Section 12.02 Bankruptcy by Tenant. In the event Tenant shall,
voluntary or involuntarily, become a debtor in a case under the Code, Tenant
and Landlord agree that the following provisions shall apply:
A. From the date of the order for relief, Tenant or its trustee
shall timely perform all of Tenant's obligations under this Lease, except those
Events of Default specified in subsections C and D of Section 12.01, arising
from and after the order for relief until this Lease is assumed or rejected.
Tenant or its trustee shall in accordance with the Code and the Federal Rules
of Bankruptcy
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Procedure provide to Landlord all notices relating to: (1) assumption or
rejection of this Lease or any of the Taylor Leases; (2) any intention to
abandon the Lease or any of the Taylor Leases; and (3) all other pleadings,
motions, proceedings, and orders that may affect Tenant's performance of this
Lease or any of the Taylor Leases and recovery by Landlord of all amounts due
it under this Lease or any of the Taylor Leases.
B. Tenant or its trustee shall assume or reject this Lease and
all of the Taylor Leases promptly in accordance with the Code or such longer
time as the Bankruptcy Court may permit.
C. If Tenant or its trustee wishes to assume this Lease or any of
the Taylor Leases, Tenant or its trustee shall:
1. Cure, or provide Adequate Assurance (as hereinafter
defined) that Tenant or its trustee will promptly
cure the Events of Default under this Lease and all
of the Taylor Leases that are required to be cured in
accordance with the Code;
2. In accordance with the Code, compensate, or provide
Adequate Assurance that Tenant or its trustee will
promptly compensate, Landlord for all actual
pecuniary loss to Landlord resulting from each Event
of Default, including, without limitation, all
accrued but unpaid interest, reasonable attorneys'
fees costs, and expenses if allowed by the Code; and
3. Provide Adequate Assurance of future performance by
Tenant or its trustee under this Lease and all of the
Taylor Leases.
D. Tenant or its trustee shall not assign this Lease or any of
the Taylor Leases without prior approval of the Bankruptcy Court and provided
that:
1. Tenant or its trustee has first assumed this Lease
and all of the Taylor Leases in accordance with the
provisions of Section 12.02; and
2. The assignee of this Lease and all of the Taylor
Leases has first provided Adequate Assurance to
Landlord of such assignee's future performance of
this Lease and all of the Taylor Leases, whether or
not there has been an Event of Default in this Lease
or any of the Taylor Leases.
E. As used in this Section 12.02, the term "Adequate Assurance",
unless otherwise determined by the Bankruptcy Court means, with respect to
either Tenant or its trustee or assignee of this Lease or any of the Taylor
Leases, as the case may be, that such party has and will continue to have
sufficient unencumbered assets after the payment of all secured obligations and
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administrative expenses to assure Landlord that the obligations of Tenant under
this Lease and all of the Taylor Leases will be fully and timely performed and
that the Leased Premises will at all times be stocked with merchandise and
properly staffed with sufficient employees to conduct a fully operational,
actively promoted business in the Leased Premises.
Section 12.03 Taylor's Leases. Landlord and Tenant acknowledge
that on the same date as this Lease, Tenant has entered into various other
leases with Landlord, Landlord's affiliates and other; containing similar terms
as this Lease and more particularly described in Exhibit "F" attached hereto
(the "Taylor Leases"), all being done pursuant to the provisions of the Stock
Acquisition Agreement.
Section 12.04 Default by Landlord. If Landlord should fail to keep
and perform any of the covenants and agreements of this Lease, other than those
included in the definition of Bonafide Dispute in Section 15.01, Tenant shall
give written notice of such default to Landlord. Should such default continue
to exist at the -ration of thirty (30) days after such notice has been given,
or should Landlord not be proceeding with due diligence to correct same or if
failure cannot be cured within thirty (30) days and Landlord fails to commence
and diligently pursue curing the failure within the thirty (30) days to a
conclusion reasonably satisfactory to Tenant within a reasonable time after
such notice, then Tenant may correct such default at Landlord's expense,
including reasonable attorney's fees which may be incurred by Tenant in
enforcing the provisions of this Lease. Any payment due under this Section
shall be paid upon ten (10) days notice. If such payment is not so paid, Tenant
may set off same against the rent as provided in Section 3.05.
Section 12.05 Waiver of Default. Any assent or waiver, express or
implied, by Landlord or Tenant to any breach of any agreement, covenant, or
obligation herein contained, shall operate as such only in the specific
instance and shall not be construed as an assent or waiver of any such
agreement, covenant, or obligation generally, or of any subsequent breach
thereof. The various rights, powers, elections, and remedies of Landlord and
Tenant contained in this Lease shall be construed as cumulative, and no one of
them is exclusive of the other, or exclusive of any rights or priorities,
allowed by law, and no rights shall be exhausted by being exercised on one or
more occasions.
ARTICLE XIII
Remedies
Section 13.01 Landlord's Remedies for Tenant's Default. Upon the
occurrence of an Event of Default by Tenant and the continuance of the Event of
Default beyond the applicable cure periods, Landlord shall have the option
during such~continuance to pursue any one or more of the remedies set forth
below without any additional notice or demand:
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A. Landlord may enter upon and take possession of the Leased
Material in accordance with applicable law, by picking or changing locks if not
prohibited thereby, and lock out, expel, or remove Tenant and any other person
who may be occupying or using all or any part of the Leased Material without
being liable for any claim for damages except those resulting from Landlord's
willful misconduct or negligent acts and without terminating this Lease, and
relet the Leased Material on behalf of Tenant and receive directly the rent by
reason of the reletting. Tenant agrees to pay Landlord on demand as and when
due all rent and other sums due Landlord under this Lease less all sums
received by Landlord by reason of reletting after deducting all expenses
incurred by Landlord that may arise by reason of any reletting of the Leased
Material (the Deficiency"); provided, however, Tenant's obligation to pay any
Deficiency shall be limited as follows: (I) if the occurrence of an Event of
Default which prompts Landlord to take possession of the Leased Material occurs
prior to February 28, 1993, Tenant's obligation to pay any Deficiency shall
terminate on February 28, 1997; or (ii) if the occurrence of an Event of
Default which prompts Landlord to take possession of the Leased Material occurs
after February 28,1995, Tenant's obligation to pay Deficiencies shall cease 24
months after the occurrence of such Event of Default or the expiration of the
term of this Lease, whichever first occurs. If Landlord fails to relet the
Leased Premises within 24 months from the occurrence of an Event of Default
which prompts Landlord to such taking of possession of the Leased Material,
then this Lease shall be deemed to have been terminated and shall be of no
further force or effect after such 24 month period or on February 28,1997,
whichever last occurs; and/or
B. Landlord may terminate this Lease, in which event, Tenant
shall immediately surrender the Leased Material to Landlord, and if Tenant
fails to surrender the Leased Material, Landlord may, without prejudice to any
other remedy which Landlord may have for possession or arrearages in rent,
enter upon and take possession of the Leased Material, in accordance with
applicable law by picking or changing locks if not prohibited thereby, and lock
out, expel, or remove Tenant and any other person who may be occupying all or
any part of the Leased Material without being liable for any claim for damages
except those resulting from Landlord's willful misconduct or negligent acts.
Tenant agrees to pay Landlord on demand as and when due any Deficiency that may
arise by reason of such termination; provided, however, Tenant's obligation to
pay any Deficiency shall be limited as follows: (I) if the occurrence of an
Event of Default which prompts Landlord to terminate this Lease occurs prior to
February 28, 1995, Tenant's obligations to pay any Deficiency shall terminate
on February 28, 1997; or (ii) if the occurrence of an Event of Default which
prompts Landlord to terminate this Lease occurs after February 28,1995,
Tenant's obligation to pay any Deficiency shall cease 24 months after the
occurrence of such Event of Default or the expiration of the this Lease,
whichever first occurs. If Landlord fails to relet the Leased Material within
24 months from the occurrence of an Event of Default which prompts Landlord to
terminate the Lease, then this Lease shall be deemed to have been terminated
and shall be of no further force or effect after such 24 month period or on
February 28, 1997, whichever last occurs.
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ARTICLE XIV
First Right of Refusal and Purchase Option
Section 14.01 Tenant's Right of Refusal. At any time or times
during the term of this Lease or any extensions thereof, if Landlord receives a
bona fide offer for the purchase or acquisition in any form of all or any part
of its interest in the Leased Material, Landlord shall either refuse such offer
or give Tenant written notice setting out the full details of such offer, which
notice, among other things, shall specify the name of the offeror, the terms of
payment, whether cash or credit, and, if on credit, the time and interest rate,
type of conveyance documents, as well as, any and all other consideration being
received or paid in connection with such proposed transaction, as well as any
and all other terms, conditions, and details of such offer. Upon receipt of
the notice with respect to such offer, Tenant, if not in default under this
Lease at the time it exercises said option, shall have the exclusive right and
option exercisable at any time during a period of thirty (30) days from
Landlord's notice, to purchase or acquire the Leased Material at the same price
and on the same terms and conditions of the offer as set out in such notice.
If Tenant decides to exercise the option, it shall give written notification to
this effect to Landlord within such thirty (30) day period, and said sale and
purchase (or acquisition) shall be closed within ninety (90) days thereafter.
If Tenant does not elect to exercise its option, Landlord shall be so notified
in writing within such thirty (30) day period and Landlord shall be free to
sell the Leased Material, but only within one hundred fifty (150) days after
Tenant's notice of refusal. Such sale, if permitted, shall be made at the
price or any higher price and substantially upon the terms and conditions and
to the person described in the re-red notice.
Section 14.02 Tenant's Purchase Option. In consideration of Tenant
entering into this Lease, Landlord hereby grants Tenant the right to purchase
fee simple title to the Leased Premises at any time during the initial or any
extended term of this Lease for a total aggregate price of $________ (the
"Stated Price') or the appraised price provided below; provided Tenant is not
in default under this Lease at the time it exercises said option. In the event
Tenant desires to so execute this option to purchase the Leased Premises, it
shall so notify Landlord of its intent to so purchase. The notice to Landlord
shall state whether or not Tenant is willing to purchase the Leased Premises at
the Stated Price. If Tenant is not willing to purchase the Leased Premises at
the Stated Price, Tenant shall set forth in the notice the price it is willing
to pay (the "Suggested Price") for the Leased Premises. If Tenant and Landlord
are willing to purchase and sell the Leased Premises at the Stated Price or the
Suggested Price, the sale of the Leased Premises shall be completed as set
forth in Section 14.03. if Landlord does not agree to sell the Leased Premises
for the Stated Price or the Suggested Price, Landlord shall give Tenant notice
of such refusal. Tenant shall then have the Leased Premises appraised
("Tenant's Appraisal") and deliver the written appraisal to Landlord. If
Landlord is not willing to sell the Leased Premises at the value shown in
Tenant's Appraisal, Landlord shall have the Leased Premises appraised
("Landlord's Appraisal"). If the value of the Leased Premises shown in
Landlord's Appraisal is within five percent (5.0%) of the value shown in
Tenant's Appraisal, the purchase price of the Leased Premises shall be equal to
the average of the two (2) appraisals. If there is more than five percent
(5.0%) variance between the two (2) appraisals, then the two (2) appraisers
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shall select a third appraiser to appraise the Leased Premises. After the
third appraiser has completed his appraisal, the appraisers shall all attempt
to agree on the fair market value of the Leased Premises. If any two (2) of
the appraisers agree on the fair market value of the Leased Premises, they
shall issue a written report and deliver it to Landlord and Tenant stating the
agreed fair market value of the Leased Premises which shall be the price to be
paid by Tenant to Landlord for the Leased Premises. If two (2) of the
appraisers are unable to agree as to the fair market value for the Leased
Premises, the two (2) original appraisers shall select another appraiser who
shall appraise the Leased Premises and go through the same process to determine
the fair market value for the Leased Premises. This process shall be repeated
until at least two (2) of the appraisers, including at least one of the
original appraiser; agree on the fair market value of the Leased Premises which
shall be the price to be paid by Tenant to Landlord for the Leased Premises. If
and when the fair market value of the Leased Premises is determined by the
appraisal method set forth above, the sale of the Leased Premises shall be
completed as set forth in Section 14.03. All appraisers appraising the Leased
Premises shall have MAN and State Certified Real Estate Appraiser designations
and shall be familiar with appraising real estate similar to the Leased
Premises. The phrase "fair market value" as used above shall mean the sum of
money a willing buyer and seller would be willing to pay and accept for the
purchase and sale of the Led Premises taking into account all factors that the
appraiser deems relevant.
Section 14.03 Tenant's Closing of Purchase. Within thirty (30)
days after the purchase price of the Leased Premises has been determined as set
forth in Section 14.02, unless otherwise agreed, Landlord shall deliver a
special warranty deed conveying good title to the Leased Premises free and
clear from any and all encumbrances except easements or encumbrances existing
as of the date of this Lease other than those for indebtedness, and Tenant
shall tender payment in good funds of the purchase price as determined in
Section 14.02. Landlord agrees to provide a survey and an owner's policy of
title insurance covering the Leased Premises in the amount as determined in
Section 14.02. Closing cost and expenses of the sale of the Leased Premises
shall be borne as follows:
A. Landlord shall be obligated for and shall pay (i) premium for
owner's policy of title insurance; (ii) one-half of any escrow fee, if any;
(iii) Landlord's attorney's fees; (iv) up to $200.00 on survey costs; (v) title
curative matter; if any; (vi) cost of Landlord's Appraisal, if any; and (vii)
one-half of the cost of appraisals other than Tenant's Appraisal, if any.
B. Tenant shall be obligated for and shall pay (i) costs of
recording the deed and deed of trust, if any; (ii) one-half of escrow fees, if
any; (iii) Tenant's attorney's fees; (iv) survey costs in excess of $200.00;
(v) cost of Tenant's Appraisal, if any; and (vi) one-half of the cost of
appraisals other than Landlord's Appraisal, if any.
C. Rentals shall be prorated as of the date title to the Leased
Premises is vested in Tenant.
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Section 14.04 Adjustments to Stated Price. if Landlord consummates
a sale of the Leased Premises to a third party, in accordance with the express
provisions set forth in Sections 14.01 or 14.02, then the Stated Price as
defined in Section 14.02 shall be automatically adjusted upward or downward to
be 103% of the actual price paid by the third party purchaser for said Leased
Premises in such consummated sales transaction. Landlord shall notify Tenant
as to the amount of such price and provide satisfactory documentation such as
the closing statement corresponding to such transaction. Such adjusted Stated
Price shall be effective prospectively as if originally set forth in said
Section 14.02 until the occurrence of any subsequent adjustment thereto
pursuant to the terms hereof.
Section 14.05 Covenants Run with Title to Leased Premises. The
covenants set forth in Sections 14.01-14.04 shall remain in full force and
effect and any sale of the Leased Premises by Landlord to a third party shall
be made subject to the terms and conditions of these covenants. These covenants
shall run with the land and bind Landlord, his heirs, successors and assigns
and shall remain in full force and effect until exercised by Tenant or until
this Lease expires by its terms or is otherwise terminated in accordance with
the terms and conditions hereof.
ARTICLE XV
Arbitration of Certain Bonafide Disputes
Section 15.01 Bonafide Disputes. Landlord and Tenant agree that
there may arise genuine differences of opinion and legitimate disputes of a
substantial and material nature regarding matters such as Tenant's offset
rights, Landlord's maintenance responsibilities, reconstruction of damaged or
destroyed Landlord's improvements, allocation of a compensation award in
connection with an eminent domain proceeding, Tenant's first right of refusal
or purchase option and certain other matters under the Lease, more
particularly, controversies or claims arising out of or relating to a
disagreement or dispute under Sections 3.05, 4.01, 5.02, 7.01, 14.01, 14.02 and
&03 of this Lease. Therefore, Landlord and Tenant hereby agree that either
Landlord or Tenant may submit a claim or controversy arising under the above-
referenced Sections of this Lease which involves an amount in dispute of at
least $2,000 to arbitration in accordance with the rules of the American
Arbitration Association (the "AAA"), and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof and
shall be binding upon the parties hereto subject to the additional provisions
of Section 15.02 hereinbelow. If Tenant believes in good faith that Landlord
has failed to perform any duty or obligation under the above-referenced
Sections of the Lease or if Landlord believes in good faith that Tenant has
failed to perform any duty or obligation set forth in the above-referenced
Sections of the Lease, and the amount in controversy is at least $2,000, then
either parry may elect to notify the other in writing of such alleged failure
to perform and set forth in reasonable detail the particulars of such
allegation, thereby constituting such claim or controversy as a "Bonafide
Dispute". Landlord and Tenant agree to meet if necessary and to discuss or
negotiate in good faith in order to attempt to resolve any such Bonafide
Dispute for a period of ten (10) days after the sending of any such notice. If
no resolution is forthcoming either party may then submit
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such Bonafide Dispute to arbitration as provided in Section 15.02 hereof.
During the pendency of such Bonafide Dispute, that is, from the initiation
thereof until it is finally resolved by the parties whereby an arbitration
award, neither Landlord nor Tenant shall be considered to be in default" under
the terms of this Lease due to any act or omission directly related to a
Bonafide Dispute nor shall such act or omission be construed as an Event of
Default hereunder.
Section 15.02 Arbitration. In the event either Landlord or Tenant
submits a claim or controversy to the AAA as provided in Section 15.01,
Landlord and Tenant hereby agree that (a) any decision of the arbitrators shall
be final, nonappealable and binding, (b) any arbitration proceeding or hearings
in connection with any dispute hereunder shall be held in Houston, Texas and
the hearing will commence within thirty (30) days after receipt by the AAA of
an arbitration notice, and (C) any fees of arbitration, attorneys' fees of the
prevailing party and transcript cost, shall be paid by the unsuccessful party
in the arbitration, unless otherwise determined by the arbitrators. The
arbitration notice shall be sent from either the Landlord to Tenant or Tenant
to the Landlord expressing the intention to arbitrate with the AAA a
disagreement and the nature of the disagreement. Simultaneously therewith, the
Landlord or Tenant, as the case may be, shall transmit two copies of the
arbitration notice to the regional office of the AAA which includes within its
boundaries Houston, Texas, along with a copy of this Lease, thereby submitting
such dispute for arbitration. The failure by Landlord or Tenant to comply with
the terms of an arbitrator's award shall constitute a default under the terms
of this Lease.
ARTICLE XVI
Miscellaneous
Section 16.01 Notice. Whenever under this Lease a provision is
made for notice of any kind, it shall be deemed sufficient notice and service
thereof of such notice to the Tenant if in writing addressed to the Tenant at
10700 North Freeway, Suite 500, Houston, Texas 77037, Attention: Attention:
John D. Hemphill, and deposited in the mail, postage prepaid, registered or
certified mail, return receipt requested and if such notice is to the Landlord
in writing addressed to the Landlord at P.O. Box 9000, Amarillo, Texas,
79105-9000 and deposited in the mail with postage prepaid, registered or
certified mail, return receipt requested, with any notice of change of address
and in the same manner as above described.
Section 16.02 Estoppel Certificate. Landlord and Tenant mutually
agree to cooperate with each other regarding requests for estoppel certificates
and without cost to the responding party each will, at any time and from time
to time, upon not less than ten (10) days prior request by the other, execute,
acknowledge, and deliver to the requesting party a statement in writing
executed by Landlord or Tenant as appropriate, certifying that this Lease is
unmodified and in full effect (or, if there have been modifications, that this
Lease is in full effect as modified, setting forth such modifications) and the
date to which the rent has been paid, and either stating that to the knowledge
of the signer of such certificate, no default exists hereunder or specifying
each such default of which
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<PAGE> 28
the signer may have knowledge; it being intended that any such statement by the
signer may be relied upon by any prospective purchaser or mortgagee of the
Leased Premises or any leasehold interest therein. Any Tenant Estoppel
Certificate requested by Landlord shall be substantially in the form of the
attached Exhibit"E".
Section 16.03 Binding Effect. It is further covenanted and agreed
that each and every one of the terms, agreements, covenants and obligations
herein contained shall be binding upon all the parties hereto and their
respective successors and permitted assigns. The execution and delivery of,
and performance by Landlord and Tenant under this Lease have been duly
authorized by all requisite corporate action; are not in contravention of any
applicable law or the terms of Landlord's or Tenant's Articles of
Incorporation, Bylaws, or other charter documents. This Lease, when executed
and delivered by Landlord and Tenant, will constitute the valid, legal, and
binding obligation of Landlord and Tenant enforceable against them in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, or other similar laws relating to or
affecting the enforcement of creditors' rights generally.
Section 16.04 No Partnership. The relationship between Landlord and
Tenant at all times shall remain solely that of "Landlord and Tenant" and not
be deemed a partnership or joint venture.
Section 16.05 Legal Construction. In case anyone or more of the
provisions contained in this agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision thereof and this
agreement shall he construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
Section 16.06 Entire Agreement. It is mutually agreed that the
terms, agreements, covenants and obligations herein are the full and complete
terms of this Lease; and, that no alterations, amendments or modifications of
said terms shall be binding unless first reduced to writing and signed by both
parties hereto.
Section 16.07 Memorandum of Lease. Landlord and Tenant agree at
any time, on request of either party, to execute a short form or memorandum of
this Lease in a form substantially similar to that attached as Exhibit "H",
permitting its recording in the real estate records of the counties where the
Leased Premises are located.
Section 16.08 Interest. All sums of money not paid by Tenant when
due and all sums of money paid by Landlord which are due by Tenant shall bear
interest from the due date or from the date paid by Landlord at the lesser of
the highest legal rate of interest or eighteen percent (18.0%) per annum. All
sums of money not paid by Landlord when due and all sums of money paid by
Tenant which are due by Landlord shall bear interest from the due date or from
the date paid by Tenant at the lesser of the highest legal rate of interest or
eighteen percent (18.0%) per annum.
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<PAGE> 29
Section 16.09 Attorney's Fees. If any action at jaw or in equity,
including an action for declaratory relief, is brought to enforce or interpret
the provisions of this Lease, the prevailing party shall be entitled to recover
reasonable attorney's fees from the other party, which fees may be set by the
Court in the trial of such action or may be enforced in a separate action
brought for that purpose, and which fees shall be in addition to any other
relief which may be awarded.
Section 16.10 Texas Law to Apply. This Lease shall be construed
under, and in accordance with the laws of the State of Texas. In the event a
lawsuit is filed to enforce the provisions of this Lease, venue shall be proper
in Dallas County, Texas.
Section 16.11 Rights and Remedies Cumulative. The rights and
remedies provided by this Lease are cumulative, and the use of any one right or
remedy by either party shall not preclude or waive its right to use any or all
other remedies. These rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance, or otherwise.
Section 16.12 Waiver of Default. No waiver by either party of any
default or breach of any term, condition, or covenant of this Lease shall be
deemed to be waiver of any other breach of the same or any other term,
condition, or covenant of this Lease.
Section 16.13 Time of Essence. Time is of the essence of this
Lease.
Section 16.14 Gender. Whenever used, the singular shall include
the plural, the plural the singular, and the use of any gender shall include
all genders.
Section 16.15 Captions. The paragraph captions and titles are
included only for convenience and shall not be used to define or construe any
portion of this Lease.
IN WITNESS WHEREOF, the Lease Agreement is executed in triplicate, any
copy of which shall constitute an original, effective as of the St. day of
March, 1992.
LANDLORD: TENANT:
SALT FORK COMPANY, INC. TAYLOR PETROLEUM, INC.
By: By:
----------------------- -------------------------
Larry Jack Taylor Larry Jack Taylor
President President
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<PAGE> 30
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared
Larry Jack Taylor, President of Salt Fork Company, Inc., a corporation, known
to me to be the person whose name is subscribed to the foregoing instrument,
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.
Given under my hand and seal of office this the __ day of
_________________,1992.
________________________________________
Notary Public, State of Texas
My Commission Expires:
______________________
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared
Larry Jack Taylor, President of Taylor Petroleum, Inc., a corporation, known to
me to be the person whose name is subscribed to the foregoing instrument, 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.
Given under my hand and seal of office this the ___________ day of
___________,1992.
________________________________________
Notary Public, State of Texas
My Commission Expires:
______________________
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<PAGE> 1
EXHIBIT 10.3
AGREEMENT REGARDING LEASES
THIS AGREEMENT dated as of the Effective Date, is by and among SALT
FORK COMPANY, INC. ("Salt Fork"), a Texas corporation, ANADARKO DEVELOPMENT
COMPANY ("Anadarko"), a Texas corporation, DAKOTA LAND COMPANY ("Dakota"), a
Texas corporation (Anadarko, Salt Fork and Dakota collectively referred to as
"Landlord"), TAYLOR PETROLEUM, INC. ("Tenant"), a Texas corporation, and THE
FIRST NATIONAL BANK OF BOSTON, a national banking association (the "Bank"), and
executed by E-Z SERVE CORPORATION ("E-Z Serve"), a Delaware corporation, and
LARRY J. TAYLOR ("Mr. Taylor").
WITNESSETH:
WHEREAS, the real property and personal property located on the real
property described more fully on Exhibit A attached hereto and incorporated
herein for all purposes (individually a "Mortgaged Property" and collectively
the "Mortgaged Properties") is subject to first and prior liens and security
interests in favor of the Bank to secure certain indebtedness and other
obligations from Landlord to the Bank; and
WHEREAS, Landlord and Tenant have entered into certain lease
agreements covering the Mortgaged Properties, and in connection with such
leases, Landlord and the Bank have executed that certain Assignment of Leases
and Rents of even date herewith covering the leases between Landlord and Tenant
described more fully on Exhibit A (the "Assigned Leases"); and
WHEREAS, Landlord, Tenant and the Bank wish to agree among themselves
as to certain matters concerning rights and obligations as to the Mortgaged
Properties and the Assigned Leases.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions herein contained, the receipt and sufficiency of which are hereby
acknowledged, Landlord, Tenant and the Bank have agreed that during the term
hereof:
1. NO OFFSET RIGHTS. Tenant will not exercise any right, including but
not limited to rights under Section 3.05 of any of the Assigned Leases, it
might have to offset any present or future obligations to make payments to
Landlord under the Assigned Leases.
2. NOTICES. The Bank shall be provided with copies of all exhibits,
notices, records, schedules and lists, including but not limited to those
specified in Sections 1.01, 1.02, 4.01, 5.02, 6.05, 7.01, 9.02, 9.03, 9.04,
10.01, 10.02, 12.01, 12.04, 14.01, 14.02, 15.01, 16.02 and 16.07 of any of the
Assigned Leases, that either Landlord or Tenant provide to the other under the
Assigned Leases, or
<PAGE> 2
that is to be attached to any of the Assigned Leases. The party required under
the Assigned Leases to provide such exhibits, notices, records, schedules and
lists shall provide a copy to the Bank.
3. ASSIGNMENT OR SUBLEASE. In the event tenant assigns its rights under
any Assigned Lease or sublets the leased premises to any Assigned Lease, in
whole or in part, Tenant shall not be released from any further obligation
under any such Assigned Lease unless it first obtains the express written
consent of the Bank.
4. PURCHASE OPTION. In the event Tenant exercises the purchase option as
to a Mortgaged Property provided in the Assigned Leases (as defined therein)
and the purchase price for such Mortgaged Property is less than forty-five (45)
times the monthly base rent payable under the Assigned Lease applicable to that
Mortgaged Property, the Bank shall not be required to release its lien against
the Mortgaged Property.
5. SUBORDINATION. Subject to the provisions of the Mortgagee-Tenant
Non-Disturbance and Attornment Agreement executed by and among Landlord, Tenant
and the Bank, all rights of Tenant under the Assigned Leases, including but not
limited to Sections 14.01, 14.02 and 14.03, shall be subordinate to the lien of
the Bank.
6. COLLATERAL ACCOUNT. Until further written notice from Landlord and
the Bank, all payments of rent under the Assigned Leases shall be made from
Tenant directly into an account at the Bank in the name of the Bank. As long as
payments are made in accordance with this agreement or other written
instructions of both Landlord and Bank, Landlord shall have no claim against
Tenant for non-payment of rent.
7. FORECLOSURE OR DEED IN LIEU. The acquisition by the Bank or other
party of a Mortgaged Property, whether by foreclosure, deed in lieu or
otherwise, shall not be an offer for the purchase or acquisition of such
Mortgaged Property and will not give rise to any right of tenant to acquire
such Mortgaged Property pursuant to the provisions of the Assigned Leases.
8. SALE OR REFINANCING. When and as a Mortgaged Property is sold or
refinanced so that it no longer is subject to the liens and security interests
of the Bank, such Mortgaged Property and the Assigned Lease covering such
Mortgaged Property shall no longer be subject to terms of this agreement. This
provision shall not be deemed to authorize any sale or refinance that is
contrary to the terms of any of the documents evidencing the Bank's liens and
security interests against the Mortgaged Properties or the indebtedness secured
thereby.
9. NOTICES. Except as otherwise specifically provided in this agreement,
any notice or other information required to be given by a party shall be in
writing and shall be sufficient if personally delivered or sent certified mail,
return receipt requested, postage prepaid to the following addresses:
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<PAGE> 3
LANDLORD
AND MR. TAYLOR: P.O. Box 10000
Amarillo, Texas 79116
TENANT
AND E-Z SERVE: 10700 North Freeway
Suite 500
Houston, Texas 77037
BANK: Loan Review Department
Mail Stop 02-12-04
100 Federal Street
Boston, Massachusetts 02110
ATTN: Robert S. Allen
Any notice shall be deemed delivered on the date mailed in the manner set out
above. The designation or address of the person to be notified may be changed
at any time by delivery of notice of that change to the other parties.
10. MISREPRESENTATION. As to each of the Assigned Leases, an additional
event of default shall be if any representation or warranty made by or on
behalf of E-Z Serve to either Landlord or the Bank shall be proved to have been
knowingly or intentionally (i) false, (ii) misleading or (iii) incorrect in any
material respect when made.
11. EXECUTION BY MR. TAYLOR AND E-Z SERVE. Mr. Taylor and E-Z Serve have
guaranteed the obligations of the Tenant under the Assigned Leases and execute
this agreement solely in connection with their capacity as a guarantor of the
obligations of Tenant under the Assigned Leases.
12. SEVERABILITY. Should any clause, sentence, paragraph or provision of
this agreement be judicially declared to be invalid, unenforceable or void,
such decision will not have the effect of invalidating or voiding the remainder
of this agreement, and the parties hereto agree that the part or parts of this
agreement so held to be invalid, unenforceable, or void shall be deemed to have
been stricken herefrom by the parties hereto, and the remainder will have the
same force and effect as if such stricken part or parts have never been
included herein.
13. NO CLOUD ON TITLE. As to any party to this agreement in whom title to
the Mortgaged Property or any part thereof is not vested, the execution of this
agreement by such party shall not Constitute a claim of title by such
party against a Mortgaged Property or any owner thereof.
14. INUREMENT. The agreement shall be binding upon and inure to the
benefit of the parties, their respective heirs, successors and permitted
assigns.
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<PAGE> 4
15. EFFECTIVE DATE AND TERM. The effective date of this agreement is
March 1, 1992 ("Effective Date"). This agreement shall remain in full force and
effect as to all paragraphs except paragraphs 2, 3, 6 and 7 until August 31,
1993. This Agreement shall remain in full force and effect as to Paragraph 2,
3, 6 and 7 as to an Assigned Lease for so long as the Bank has a lien and
security interest in the Mortgaged Property applicable to that Assigned Lease.
The expiration of this Agreement (except for paragraphs 2, 3, 6 and 7 hereof)
on August 31, 1993, shall in no manner be interpreted or construed to amend or
modify the Credit Agreement by and between Landlord and Bank or to reduce or
limit the rights of the Bank under the security documents relating to the
Credit Agreement.
ATTEST: [SEAL] SALT FORK COMPANY, INC.,
a Texas corporation
By: /s/ Herbert Hitchings By: /s/ Larry J. Taylor
------------------------------- ----------------------------------
, Secretary Larry J. Taylor, President
--------------------
TAYLOR PETROLEUM, INC.,
a Texas Corporation
By: /s/ Larry J. Taylor
----------------------------------
Name: Larry J. Taylor
Title: President
E-Z SERVE CORPORATION,
a Delaware corporation
By: /s/ John T. Miller
----------------------------------
Name: John T. Miller
Title: Senior Vice President
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<PAGE> 5
THE FIRST NATIONAL BANK
OF BOSTON,
a national banking association
By: /s/ Thomas Sommerfield
----------------------------------
Name: Thomas Sommerfield
Title: Vice President
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<PAGE> 6
ATTEST: [SEAL] ANADARKO DEVELOPMENT
COMPANY, a Texas corporation
By: /s/ Herbert Hitchings By: /s/ Larry J. Taylor
------------------------------- ----------------------------------
, Secretary Larry J. Taylor, President
--------------------
ATTEST: [SEAL] DAKOTA LAND COMPANY,
a Texas corporation
By: /s/ Herbert Hitchings By: /s/ Larry . Taylor
------------------------------- ----------------------------------
Assistant , Secretary Larry J. Taylor, President
--------------------
/s/ Larry J. Taylor
-------------------------------------
Larry J. Taylor
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<PAGE> 1
EXHIBIT 10.4
STOCK ACQUISITION AGREEMENT
This STOCK ACQUISITION AGREEMENT (the "Agreement"), made as of the
31st day of March, 1994, between E-Z SERVE PETROLEUM MARKETING COMPANY, a
Delaware corporation ("E-Z Serve"), and ESCM & ASSOCIATES, INC., a Georgia,
corporation (ESCM).
ARTICLE 1
THE ACQUISITION
1.1 The Closing. On the Closing Date (as hereinafter defined):
E-Z Serve shall sell and ESCM shall purchase all of the issued and outstanding
stock of Amber Refining, Inc., a North Carolina corporation, (Refining) and
Amber Pipeline, Inc., a Texas corporation (Pipeline).
1.2 The Closing Date. The closing (the "Closing") shall take
place at the offices of E-Z Serve, 2550 North Loop West, Suite 600, Houston,
Texas 77092, at 10:00 a.m. (Central Standard Time) on March 31, 1994, or such
other date or time as E-Z Serve and ESCM may agree to in writing (the "Closing
Date").
1.3 Purchase Price. At Closing, ESCM shall pay to E-Z Serve the
sum of SEVEN HUNDRED FIFTY AND 00/100 DOLLARS ($750.00), for the stock of
Refining and TWO HUNDRED FIFTY AND NO/100 DOLLARS ($250.00), for the stock of
Pipeline, which payments shall total ONE THOUSAND AND 00/100 DOLLARS
($1,000.00). As further consideration ESCM agrees to provide funding for
Environmental Cleanup Liability of Refining and Pipeline (hereinafter sometimes
referred to collectively as the "Companies" and individually as the "Company*),
as hereunder defined.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
E-Z SERVE
E-Z Serve represents and warrants to ESCM as follows:
2.1 Organization and Existence of Refining. Refining is a
corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina. The total authorized capital stock of
Refining consists of 100,000 shares of common stock, par value $1.00 per share,
of which 100,0000 shares are outstanding, validly issued, fully paid and
nonassessable and owned by E-Z Serve.
2.2 Organization .and Existence of Pipeline. Pipeline is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. The total authorized capital stock of Pipeline
consists of 100,000 shares of common stock, par value $1.00 per share, of which
100,000 shares are outstanding, all of which are fully paid and non-assessable
and owned by E-Z Serve.
<PAGE> 2
2.3 Qualification of the Companies. The Companies are duly
qualified to do business and in good standing where required under the laws of
the states in which they conduct business. Each Company has full corporate
power and lawful corporate authority to carry on its business as presently
conducted and to own and operate its assets and business.
2.4 Financial Statements. Attached hereto as Schedule 2.4 are
copies of the following described financial statements: the separate
unconsolidated and combined balance sheets of the Companies as of December 26,
1993, and the related statements of income or loss, and stockholders' equity of
the Companies for the twelve fiscal periods ended December 26, 1993.
2.5 Taxes. The Companies have duly and timely filed all federal,
state and local tax reports and returns required to be filed by the Companies,
and paid all taxes and levies as same have become due and owing.
2.6 Litigation. Except as set forth in Schedule 2.6, E-Z Serve is
not aware of any actions, suits or proceedings pending or, threatened against
the Companies with respect to any of the transactions contemplated hereby or
which, if adversely determined, would have a Material adverse effect on the
Companies.
2.7 Real Property. Schedule 2.7 contains a list of all real
property owned by each Company, and a list of real property easements held by
Pipeline.
2.8 Authority and Approval. E-Z Serve has the power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ESCM
ESCM hereby represents and warrants to E-Z Serve as follows:
3.1 Organization and Existence of ESCM. ESCM is a corporation
duly organized, validity existing and in good standing under the laws of the
State of Georgia.
3.2 Authority and Approval. ESCM has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. ESCM is acquiring the Refining Stock and the
Pipeline Stock for its own account for investment purposes and not with a view
to public distribution. No other act, approval or proceedings on the part of
ESCM or the holders of any class of its equity securities is required to
authorize the execution and delivery of this Agreement by ESCM or consummation
of the transactions contemplated hereby.
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<PAGE> 3
3.3 Litigation. There are no actions, suits or proceedings
pending or threatened against ESCM at law or in equity or before or by any
governmental authority or instrumentality, or before any arbitrator of any
kind, either with respect to any of the transactions contemplated hereby or
which, if adversely determined, would have a Material adverse effect on ESCM.
ARTICLE 4
CERTAIN COVENANTS AND AGREEMENTS
4.1 Access. Each party hereto agrees that it will, upon
reasonable notice, give to the other party full access, during normal business
hours throughout the period prior to the Closing Date, to the properties,
books, contracts and records relating to this transaction. Each party agrees
that it will, and will cause its employees to, hold in strict confidence all
information so obtained hereby, agrees that such information is proprietary to
the other party and if the transactions herein provided for are not consummated
as contemplated herein, agrees that it shall not disclose such information to
any third parties or use such information for itself or on behalf of others.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 ESCM's Obligations. The obligations of ESCM at the Closing
are subject to the following conditions:
(a) The representations and warranties of E-Z Serve shall
be true, complete and correct when made, and, in addition, shall be true,
complete and correct on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date;
(b) E-Z Serve shall have performed all obligations and
agreements and complied with all covenants and conditions contained in this
Agreement to be performed and complied with by E-Z Serve on or prior to the
Closing Date.
5.2 E-Z Serve's Obligations. The obligations of E-Z Serve at the
Closing are subject to the following conditions:
(a) The representations and warranties of ESCM shall be
true, complete and correct when made, and, in addition, shall be true, complete
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date;
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<PAGE> 4
(b) ESCM shall have performed all obligations and
agreements and complied with all covenants and conditions contained in this
Agreement to be performed and complied with by ESCM on or prior to the Closing
Date.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification of E-Z Serve. ESCM, from and after the
Closing Date, shall indemnify and hold E-Z Serve harmless from and against any
and all damages (including exemplary damages and 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 E-Z Serve as a result of, caused by, arising out of,
or in any way relating to (a) any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of ESCM under this
Agreement or any misrepresentation in or omission from any list, schedule,
certificate, or other instrument furnished or to be furnished to E-Z Serve by
ESCM pursuant to the terms of this Agreement; and (b) Environmental Cleanup
Liability (as hereinafter defined) excepting those funding responsibilities for
environmental matters which E-Z Serve has assumed pursuant to Article 7,
hereto.
6.2 Indemnification of ESCM. E-Z Serve, from and after the
Closing Date, shall indemnify and hold the Companies and FSCM harmless from and
against any and all Damages suffered by any of the Companies or FSCM as a
result of, caused by, arising out of, or in any way relating to: (a) any
misrepresentation, breach of warranty, or nonfulfillment of any agreement or
covenant on the part of E-Z Serve under this Agreement or any misrepresentation
in or omission from any list, schedule, certificate, or other instrument
furnished or to be furnished to ESCM by E-Z Serve or any of the Companies
pursuant to the terms of this Agreement; (b) any liability or obligation which
pertains to the ownership, operation or conduct of the business or affairs of
the Companies arising from any acts, omissions, events, conditions or
circumstances occurring or existing on, or prior to, the Closing Date,
including, without limitation, those matters disclosed on any Schedule hereto
but excepting Environmental Cleanup Liability for which FSCM is indemnifying
E-Z Serve pursuant to paragraph 6.1, above; and (C) those matters listed in
Article 7 hereof, for which E-Z Serve has assumed funding responsibilities
pursuant to this Agreement.
6.3 Limitations on Indemnification.
(a) The liability of either party for the breach of' any
of the representations and warranties set forth in Article 2, shall be limited
to claims for which written notice to the indemnifying party by the party
seeking indemnification is delivered on or before the second anniversary date
of the Closing Date; and shall further be limited to those claims for which the
party
-4-
<PAGE> 5
claiming indemnification gives the indemnifying party prompt notice and permits
the indemnifying party full participation in the adjustment and/or resolution
of said claim(s).
(b) For purposes of this Agreement, "Environmental
Cleanup Liability" means any cost or expense of any nature whatsoever incurred
to contain, remove, remedy, clean up, or abate any deposit, emission,
discharge, release or threatened release of hazardous substances, pollutants or
contaminants from or on any of the properties owned by or on which the
Companies hold a property interest, including without limitation, easement
fights, as of the date of dosing including, without limitation, (i) any direct
costs or expenses for investigation, study, assessment, legal representation,
cost recovery by governmental agencies, or on-going monitoring in connection
therewith, and (ii) any cost, expense, loss or damage incurred with respect to
any of the properties owned by, or on which the Companies hold a property
interest, including without limitation, easement fights, as of the date of
closing, or with respect to their operation as a result of actions or measures
necessary to implement or effectuate any such containment, removal,
remediation, cleanup or abatement.
(c) In determining the amount of any Damages for which
any party is entitled to indemnification under this Agreement, the amount
thereof will be reduced by any insurance proceeds realized by the indemnified
party net of any insurance premium that becomes due as a result of the claim
for which indemnity is sought.
ARTICLE 7
ADDITIONAL DUTIES OF E-Z SERVE
7.1 Upon Closing, E-Z Serve shall:
(a) pay to ESCM an amount equal to real property,
personal property and ad valorem taxes levied against any of the properties of
Refinery for the period before and through September 30, 1994, provided that
E-Z Serve shall not be required to pay any sums hereunder which exceed in the
aggregate ONE HUNDRED THOUSAND AND 00/100 DOLLARS($100,000.00). See paragraph
9.7.
(b) pay to ESCM an amount equal to real property,
personal property and ad valorem taxes levied against any of the properties of
Pipeline for the period before and through the calendar year, 1994.
(c) pay to ESCM an amount equal to environmental
assessment expenses incurred by Refinery at its property located in Fort Worth,
Texas, up to a maximum reimbursement of NINETY THOUSAND AND 00/100
($90,000.00).
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<PAGE> 6
(d) pay to ESCM an amount equal to payments for which
Refinery is obligated pursuant to a demolition contact dated December 1, 1992,
between Refinery and ESCM.
(e) pay to ESCM an amount equal to costs incurred by ESCM
and/or Refinery in disposal of hazardous liquids currently stored at Refinery's
property in Fort Worth, Texas, up to a maximum payment of SIXTEEN THOUSAND AND
00/100 DOLLARS ($16,000.00).
(f) pay to ESCM an amount equal to costs incurred by
Refinery in renewing and obtaining operating licenses and permits for the
current year up to a maximum payment of FIFTEEN HUNDRED AND 00/100 DOLLARS
($1,500.00).
(g) pay to ESCM an amount equal to Refinery's 1993
Hazardous Waste Facility Fee and a pro-rata share (as of the date of Closing)
of the 1994 Fee up to a maximum reimbursement of SEVEN THOUSAND FIVE HUNDRED
AND 00/100 DOLLARS ($7,500.00).
(h) pay to ESCM an amount equal to a pro-rata share (as
of the date of dosing) of the 1994 Texas Franchise Tax up to a maximum
reimbursement of SEVEN THOUSAND AND 00/100 DOLLARS ($7,000.00)
(i) pay to ESCM an amount equal to. Pipeline's and or
ESCM's reasonable costs for Environmental Cleanup Liability at the following
three locations:
(i) Amber Pipeline Mustang Drive
Crossing at High School Grapevine, Texas
(ii) Amber Pipeline
Caldwell Addition
(iii) Amber Pipeline
Exposed Pipe in Farmer's Held
for purposes hereof "reasonable costs" shall not exceed (a) those costs for
work that is determined to be necessary by applicable authorities or in a court
of law, including fines penalties or judgments, unless such fines, penalties or
judgments are occasioned solely by the activities of ESCM and/or Pipeline
subsequent to the date of closing, and (b) in an amount which would be charged
by a duly qualified contractor retained by E-Z Serve to accomplish said tasks.
(j) pay to ESCM an mount equal to the costs for the
Environmental. Cleanup Liability of existing Pipeline real property easements
that exceed the proceeds of sales of said Pipeline properties and easements as
outlined in Article 8, below, provided that the obligation of E-Z Serve under
this subparagraph (i) shall cease and be of no further force and effect as of
June 1, 2004,
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<PAGE> 7
and further provided that under no condition shall E-Z Serve be responsible for
contamination created or occurring after the date of Closing.
ARTICLE 8
ADDITIONAL DUTIES OF ESCM
8.1 Upon Closing, FSCM shall:
(a) use its best efforts, and cause Pipeline to use its
best efforts, to sell or lease Pipeline's real property and real property
easements.
(b) cause Pipeline to give E-Z Serve a right of first
refusal to purchase or lease any properties for which Pipeline has received a
bona fide offer to purchase or lease. E-Z Serve shall have thirty (30) days
from the date of notification by Pipeline in which to purchase or lease the
respective property upon the same terms and conditions at which Pipeline
proposes to sell or lease said property. In the event E-Z Serve declines said
offer or fails to respond within said thirty day period, Pipeline shall be free
to proceed with the transaction.
(c) establish or cause Pipeline to establish an escrow
account with an attorney or escrow agent mutually approved by ESCM and E-Z
Serve and to place therein all funds received from a sale or lease of Pipeline
properties.
(d) disburse or cause Pipeline to disburse funds from the
escrow account referenced above only for bona fide expenses incurred for
Environmental Cleanup Liability of Pipeline properties; and on the sooner of
June 1, 2004, or the date when no further Environmental Cleanup Liability of
Pipeline properties exists, cause said escrow account to be disbursed fifty
percent (50%) to ESCM and fifty percent (50%) to E-Z Serve.
ARTICLE 9
TAX CONSIDERATIONS
9.1 It is understood that as of December 26, 1993, Refining had
net operating loss carry forwards (NOUS), as that term is defined in Section
172 of the Internal Revenue Code of 1986 ("IRC"), in an amount of approximately
TWO MILLION EIGHT HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($2,850,000). E-Z
Serve and Refining have agreed that 100% of the NOL'S generated by Refining
through and including the 1994 short-period return ending on the date of
acquisition will no longer be available for the benefit of Refining but will be
reattributed to E-Z Serve under the election described in Treasury Regulation
Section 1502-20(g) (1). This election to retribute losses will be prepared by
E-Z Serve and filed in its 1994 federal consolidated income tax
-7-
<PAGE> 8
return due on or before September 15, 1995. E-Z Serve agrees to deliver a copy
of the election to Refining and Refining agrees to sign and return the election
to E-Z Serve prior to September 1, 1995, and Refining agrees to include a copy
of the election in its federal income tax return for the first year ending
after September 15, 1995.
9.2 It is understood that as of December 26, 1993, Pipeline had
net operating loss carry forwards (NOL'S), as that term is defined in IRC
Section 172, in an amount of approximately EIGHTY THOUSAND AND 00/DOLLARS
($80,000). E-Z Serve and Pipeline have agreed that 100% of the NOUS generated
by Pipeline through and including the 1994 short-period return ending on the
date of acquisition will no longer be available for the benefit of Pipeline but
will be reattributed to E-Z Serve under the election described in Treasury
Regulation Section 1502-20 (g) (1). This election to retribute losses will be
prepared by E-Z Serve and filed in its 1994 federal consolidated income tax
return due on or before September 15, 1995. E-Z Serve agrees to deliver a copy
of the election to Pipeline and Pipeline agrees to sign and return the election
to E-Z Serve prior to September 1, 1995 and Pipeline agrees to include a copy
of the election in its federal income tax return for the first year ending
after September 15, 1995.
9.3 It is understood that E-Z Serve will not make the election
under Treasury Regulation 1.1502-95 to apportion any of its consolidated
Section 382 limitation to Refining.
9.4 It is understood that E-Z Serve will not make the election
under Treasury Regulation 1.1502-95 to apportion any of its consolidated
Section 382 limitation to Pipeline.
9.5 ESCM understands and agrees that on March 28, 1994, Refining
forgave an indebtedness owed by E-Z Serve to Refining in the approximate amount
of FOUR MILLION SIX HUNDRED NINETY-ONE THOUSAND AND 00/100 DOLLARS
($4,691,000.00). The exact amount of the debt forgiveness will be determined
within sixty (60) days of closing. Said debt forgiveness to be effected by a
distribution from Refining to E-Z Serve of indebtedness in the amount of TWO
MILLION AND 00/100 DOLLARS ($2,000,000.00) pursuant to IRC Section 301(c)(2).
The remainder of the debt forgiveness to be effected by a cancellation of
indebtedness pursuant to IRC Section 166.
9.6 ESCM understands and agrees that on March 28, 1994, Pipeline
forgave an indebtedness owed by E-Z Serve to Pipeline in the approximate amount
of ONE MILLION FOUR HUNDRED NINETY FIVE THOUSAND AND 00/100 DOLLARS
($1,495,000.00). The exact amount of the debt forgiveness will be determined
within sixty (60) days of closing. Said debt forgiveness to be effected by a
cancellation of indebtedness pursuant to IRC Section 166.
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<PAGE> 9
9.7 Notwithstanding anything herein to the contrary, it is
understood that E-Z Serve shall retain complete control over litigation listed
on Schedule 2.6 entitled Amber Refining, Inc. v. Tarrant Appraisal District.
E-Z Serve may, at its option, continue to discontinue said litigation. ESCM and
Refining will cooperate with any continuation of said litigation insofar as
reasonably necessary. Any tax refunds received by Refining and/or ESCM as the
result of said litigation for tax payment made by Refining for the period
through September 30, 1994, shall be promptly remitted to E-Z Serve. All costs
associated with this litigation shall be borne by E-Z Serve.
ARTICLE 10
MISCELLANEOUS
10.1 Fees and Expenses. Each party shall bear its own fees and
expenses incident to the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated hereby.
10.2 Post-Closing Access. For a period of five (5) years after the
Closing, E-Z Serve will have reasonable access to the records of any of the
Companies covering any period prior to the Closing, at reasonable times during
normal business hours.
10.3 Entire Agreement. This Agreement, including the Schedules
hereto, constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, among the parties hereto with respect to the
subject matter hereof.
10.4 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
delivered by hand or express delivery service or mailed by registered or
certified mail, postage prepaid, as follows:
If to ESCM:
ESCM Associates, Inc.
P. O. Box 7487
Athens, Georgia 30604
Attn: President
If to E-Z Serve:
E-Z Serve Corporation
2550 North Loop West, Suite 600
Houston, Texas 77092
Attention: President
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<PAGE> 10
or such other address as any party hereto shall have designated by notice in
writing to the other parties hereto. All such notices given in compliance with
the provisions of this Section shaft be deemed to have been given when
delivered or mailed.
10.5 Modifications and Waivers. No termination, cancellation,
modification, amendment, or other change in this Agreement, or waiver of any
right or remedy herein provided, shall be effective for any purpose unless
specifically set forth in a writing signed by the party or parties to be bound
thereby. The waiver of any right or remedy in respect of any occurrence or
event on one occasion shall not be deemed a waiver of such right or remedy in
respect of such occurrence or event on any other occasion.
10.6 Agreement Binding. This Agreement shall be binding upon the
heirs, successors and assigns of the parties hereto. ESCM shall not sell,
pledge or alienate the stock of Pipeline or Refinery unless the holder thereof
specifically agrees to accept the terms and conditions of this Agreement, and
any purported sale pledge or alienation in contravention of this clause shall
be null and void.
10.7 Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
10.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute one instrument representing the
agreement among the parties hereto.
10.9 Further Assurances. Each party hereto shall execute and
deliver such instruments and take such other actions as any other party hereto
may reasonably request in order to carry out the intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the date first above written.
ATTEST: ESCM AND ASSOCIATES, INC.
/s/ Malia M. Shaw By: /s/ Edward A. Shaw
- ------------------------------ -------------------------------------
Secretary
Name: Edward A. Shaw
-----------------------------------
Title: Vice President
----------------------------------
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ATTEST: E-Z SERVE PETROLEUM MARKETING CO.
/s/ Bob Bailey By: /s/ Marion H. Blackmon
- ------------------------------ -------------------------------------
Assistant Secretary
Name: Marion H. Blackmon
-----------------------------------
Title: Senior Vice President
----------------------------------
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<PAGE> 1
EXHIBIT 10.5.1
U.S.$105,000,000
AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT,
dated as of October 2, 1995,
(amending and restating the Credit and Guaranty Agreement
dated as of January 17, 1995)
among
E-Z SERVE CONVENIENCE STORES, INC.
as Borrower,
E-Z SERVE CORPORATION,
as Guarantor,
CERTAIN FINANCIAL INSTITUTIONS,
as Lenders,
and
SOCIETE GENERALE,
as Agent for the Lenders.
<PAGE> 2
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ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.3. Increased Costs, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND CREDIT EXTENSIONS
5.1. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.1.1. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.1.2. Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.1.3. Delivery of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.1.4. Beverage License Certification Date; Merger of
Sunshine and the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.1.5. Required Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.1.6. Termination of Sunshine Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.1.7. Transfer of Sunshine Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.1.8. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.1.9. Affirmation and Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.1.10. UCC Search Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.11. Amendment to Borrower Security Agreement, Filings,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.12. Solvency Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.13. Closing Date Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.14. Evidence of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.1.15. Payment of Outstanding Indebtedness, Payment of
Fees and Interest, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.1.16. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.1.17. Agent's Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.1.18. Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.1.19. Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.1.20. Stockholders' Acknowledgment and Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.1.21. Satisfactory Legal Form, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.2. Conditions to Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.2.1. Compliance with Warranties, No Default, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.2.2. Credit Extension Request, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.3. Government Approval, Regulation, Compliance
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with Law, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.5. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.7. Litigation, Labor Controversies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.9. Ownership of Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.12. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.13. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.14. Confirmation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.15. Expropriation and Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.16. Intellectual Property Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.17. Ownership of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.18. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.19. Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.20. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.21. Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.22. List of Guaranty Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.1.1. Financial Information, Reports, Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.1.2. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.1.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.1.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.1.5. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.1.6. Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.1.7. As to Intellectual Property Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.1.8. Future Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.9. Springing Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.10. Gasoline Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.11. Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.12. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.2.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.2.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.2.5. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2.6. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.2.7. Capital Expenditures, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.2.8. Rental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.2.9. Take or Pay Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.2.10. Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.2.11. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.2.12. Modification of Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
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7.2.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.2.14. Negative Pledges, Restrictive Agreements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.2.15. Management and Director Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.2.16. Environmental Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.2.17. Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.2.18. Activities of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.2.19. Activities of Certain Subsidiaries of the Parent . . . . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.1.3. Non-Performance of Certain Covenants and
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . . . . . . . . . . . . . . . . . 98
8.1.5. Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.1.6. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.7. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.8. Change in Control; Stockholders Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.1.10. Impairment of Security, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.1.11. Beverage Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
ARTICLE IX
GUARANTY
9.1. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.2. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.3. Reinstatement in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.4. Waiver by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.5. Postponement of Subrogation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.6. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
ARTICLE X
THE AGENT
10.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
10.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
10.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
10.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
10.5. Credit Extensions by SG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10.7. Loan Documents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10.8. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
11.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
11.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
11.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.8. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
11.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
11.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
11.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
11.11.3. Certain Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
11.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
11.13. Certain Collateral and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
11.14. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
11.15. Forum Selection and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 117
11.16. Waiver of Jury Trial, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
11.17. Re-Allocation of Loans, Letters of
Credit Outstanding and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
</TABLE>
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages
SCHEDULE III - Capital Expenditure Levels II and III
SCHEDULE IV - Administrative Information
SCHEDULE V - Sunshine United States Trademarks
EXHIBIT A - Form of Revolving Note
EXHIBIT B - Form of Term Note
EXHIBIT C-1 - Form of Borrowing Request
EXHIBIT C-2 - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Issuance Request
EXHIBIT E - Form of Borrowing Base Certificate
EXHIBIT F - Form of Compliance Certificate
EXHIBIT G-1 - Conformed copy of Parent Pledge Agreement
EXHIBIT G-2 - Conformed copy of Borrower Pledge Agreement
EXHIBIT H-1 - Conformed copy of Borrower Security Agreement
EXHIBIT H-2 - Conformed copy of Petroleum Security Agreement
EXHIBIT H-3 - Conformed copy of Parent Security Agreement
EXHIBIT I - Amendment No. 1 to Security Agreement
(Trademark)
EXHIBIT J - Conformed copy of Petroleum Guaranty
-v-
<PAGE> 6
EXHIBIT K-1 - Conformed copy of Petroleum Note
EXHIBIT K-2 - Conformed copy of Parent Inter-Company Note
EXHIBIT L - Form of Closing Date Certificate
EXHIBIT M - Form of CFO/CEO Solvency Certificates
EXHIBIT N - Conformed copy of Stockholders Letter of
Understanding
EXHIBIT O - Form of Lender Assignment Agreement
EXHIBIT P - Form of Affirmation and Acknowledgement
EXHIBIT Q - Form of Opinion of Counsel to the Obligors
EXHIBIT R - Form of Bankruptcy Court Order
EXHIBIT S - Form of Sunshine Letter of Credit
EXHIBIT T - Form of Amendment to Borrower Security
Agreement
-vi-
<PAGE> 7
AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT
AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of
October 2, 1995 (amending and restating the Credit and Guaranty Agreement,
dated as of January 17, 1995), among E-Z SERVE CONVENIENCE STORES, INC., a
Delaware corporation (the "Borrower"), E-Z SERVE CORPORATION, a Delaware
corporation (the "Parent"), the various financial institutions as are or may
become parties hereto (collectively, the "Lenders") and SOCIETE GENERALE
("SG"), as agent (in such capacity, the "Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower is a direct, wholly-owned Subsidiary (such
capitalized term and other capitalized terms used in these recitals without
definition shall have the meanings provided for in Section 1.1) of the Parent
which also owns, as a direct, wholly-owned Subsidiary, E-Z Serve Petroleum
Marketing Inc., a Delaware corporation ("Petroleum"); and
WHEREAS, the Borrower is engaged in the business of owning and
operating convenience stores and Petroleum is engaged in the business of owning
and operating gasoline stations, some of which also house convenience stores;
and
WHEREAS, the Borrower entered into the Credit and Guaranty Agreement,
dated as of January 17, 1995, among the Borrower, the Parent, the Lenders party
thereto and the Agent (the "Original Credit Agreement"), pursuant to which the
Borrower obtained commitments to make credit extensions comprised of loans and
letters of credit in an aggregate principal and stated amount not to exceed
$60,000,000 at any one time outstanding; and
WHEREAS, such commitments provided financing to, among other things,
enable the Borrower to acquire Time Saver Stores, Inc., from Dillon Companies,
Inc.; and
WHEREAS, the Original Credit Agreement has been amended and otherwise
modified by (a) Amendment No. 1, dated as of April 27, 1995, (b) Amendment No.
2 and Waiver No. 1, dated as of June 15, 1995 and (c) Amendment No. 3 and
Waiver No. 2 ("Amendment No. 3"), dated as of July 21, 1995 (the Original
Credit Agreement, as amended and modified by all of the foregoing, is hereafter
referred to as the "Existing Credit Agreement"); and
WHEREAS, the Parent and EZS Acquisition Corporation, a Delaware
corporation and a direct wholly-owned subsidiary of the Parent ("Acquisition"),
entered into the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of June 15, 1995, with
<PAGE> 8
Sunshine-Jr. Stores, Inc., a Florida corporation ("Sunshine"); and
WHEREAS, pursuant to the Merger Agreement, the Parent caused
Acquisition to make a tender offer to acquire all of the 1,701,650 outstanding
shares of common stock, par value $.10 per share, of Sunshine; and
WHEREAS, pursuant to Amendment No. 3, the Borrower obtained Tender
Loans (as defined therein) on the date of the consummation of such tender offer
in an aggregate principal amount of $15,136,984 to finance the purchase by
Acquisition of over 97% of the outstanding shares of Sunshine pursuant to such
tender offer; and
WHEREAS, upon consummation of such tender offer, the Parent caused
Acquisition to merge with and into Sunshine, with Sunshine being the survivor
of such merger (and a direct wholly-owned Subsidiary of the Parent) in
accordance with the terms and conditions of the Merger Agreement (the "First
Merger"); and
WHEREAS, concurrently with the First Merger, each then outstanding
share of Sunshine (other than shares owned by the Parent or any of its
Subsidiaries) was converted into the right to receive $12.00 in cash; and
WHEREAS, pursuant to Amendment No. 3, the Borrower obtained First
Merger Loans (as defined therein) in an aggregate principal amount of
$15,400,000 which, among other things, refinanced the Tender Loans (as defined
therein) on the date of the consummation of the First Merger; and
WHEREAS, the Borrower now desires to merge Sunshine with and into the
Borrower, with the Borrower being the surviving corporation (the "Merger"),
and, in connection therewith, to (a) obtain $20 million to (i) refinance
approximately $12 million in Indebtedness of Sunshine (net of cash on hand at
Sunshine), (ii) refinance $5 million in cash supplied by the Borrower in
connection with the Sunshine tender offer, and (iii) pay fees and expenses not
yet paid in connection with such tender offer, the First Merger and the Merger
(so long as the aggregate of such fees and expenses does not exceed $3,000,000)
and (b) to restate all of the Indebtedness and commitments under the Existing
Credit Agreement such that:
(i) new Term Loans will be made to the Borrower on the date
the Merger is consummated in an aggregate principal amount not to
exceed $20,000,000 solely for the purposes of refinancing Indebtedness
of Sunshine outstanding immediately prior to the Merger and for the
other purposes set forth in clause (a) of the immediately preceding
recital, and such Term Loans shall be consolidated with the $45
million in
-2-
<PAGE> 9
Term Loans outstanding under the Existing Credit Agreement and $15
million of the First Merger Loans outstanding under the Existing
Credit Agreement so that Term Loans in an aggregate principal amount
of $80,000,000 shall be outstanding hereunder with a revised
amortization schedule as set forth herein;
(ii) Revolving Loan Commitments will be extended by the
Lenders pursuant to which Revolving Loans will be made from time to
time in a maximum aggregate principal amount at any one time
outstanding not to exceed the lesser of $25,000,000 (of which
$400,000, and no more than $400,000, may be used to refinance a
portion of the First Merger Loans) and the Borrowing Base Amount in
effect at such time for the Borrower's working capital purposes; and
(iii) Letter of Credit Commitments pursuant to which the
Issuer will issue Letters of Credit from time to time for the account
of the Borrower for the Borrower's ordinary course of business
purposes and for the purpose of submitting the Sunshine Letter of
Credit to the Bankruptcy Court, all of such Letters of Credit to be in
a maximum aggregate Stated Amount at any one time outstanding not to
exceed $15,000,000; provided that, in any event, the aggregate
outstanding principal amount of all Revolving Loans, together with the
aggregate amount of all Letter of Credit Outstandings, shall not at
any one time exceed the lesser of $25,000,000 and the Borrowing Base
Amount plus the Letter of Credit Outstandings in respect of the
Sunshine Letter of Credit in effect at such time; and
WHEREAS, the Borrower and the Parent have also requested that certain
covenants and other provisions of the Existing Credit Agreement be modified as
set forth herein; and
WHEREAS, the Lenders and the Issuer are willing, on the terms and
subject to the conditions hereinafter set forth (including that the Bankruptcy
Court shall have duly issued the Bankruptcy Court Order, which order shall be
in full force and effect and shall not have been stayed, and including all
other conditions contained in Article V), to extend such Commitments and make
such Loans to the Borrower and issue (or participate in) Letters of Credit for
the account of the Borrower and to make such modifications to the covenants and
other provisions contained in the Existing Credit Agreement; and
-3-
<PAGE> 10
WHEREAS, pursuant to the Existing Credit Agreement, the Parent and the
Borrower and certain of their Subsidiaries granted to the Agent for the benefit
of the Lenders certain guaranties and first priority, perfected pledges and
security interests and/or liens in the collateral delivered pursuant to certain
Security Agreements, Pledge Agreements and Guaranties and in certain other Loan
Documents, all as more particularly set forth in such Loan Documents; and
WHEREAS, in order to induce the Lenders, each Issuer and the Agent to
amend and restate the Existing Credit Agreement and to make Credit Extensions
hereunder, the Borrower desires, and it is a condition to the effectiveness
hereof, that the Guarantor and its Subsidiaries and the Borrower and its
Subsidiaries confirm their respective grants to the Agent for the benefit of
the Lenders of the aforementioned first priority, perfected pledges and
security interests and/or liens in such collateral to secure all Obligations
under and in connection with this Agreement and the documents executed in
connection herewith and confirm all related guaranties and pledge agreements,
and grant certain additional collateral, all as more particularly set forth in
the Loan Documents; and
WHEREAS, the outstanding Loans and Commitments of certain of the
Lenders under the Existing Credit Agreement have been re-allocated among the
credit facilities provided for hereunder, and certain new Lenders have become
parties to this Agreement, so that after giving effect thereto the Percentages
of all Lenders are as set forth on Schedule II hereto;
NOW, THEREFORE, the parties hereto hereby agree to amend the Existing
Credit Agreement in its entirety, and to restate the Existing Credit Agreement
as so amended, as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Account" means any "account" (as that term is defined in Section
9-106 of the U.C.C.).
"Account Debtor" is defined in clause (d) of the definition of
"Eligible Account".
"Acquisition" is defined in the sixth recital.
-4-
<PAGE> 11
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person has, directly or indirectly,
(a) power to vote 10% or more of the securities (on a fully
diluted basis) or other interests having ordinary voting power for the
election of directors or managing general partners;
(b) power to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise; or
(c) beneficial ownership of 10% or more of any class of the
voting stock of such Person or 10% or more of all outstanding equity
interests in such Person.
For purposes of this Agreement and the other Loan Documents, DLJ and its
Affiliates shall be Affiliates of the Borrower.
"Affirmation and Acknowledgement" means the Affirmation and
Acknowledgement, substantially in the form of Exhibit P hereto, as amended,
supplemented, restated of otherwise modified from time to time.
"Agent" is defined in the preamble and includes each other Person as
shall have subsequently been appointed as the successor Agent pursuant to
Section 10.4.
"Agreement" means the Existing Credit Agreement, as amended and
restated by this Amended and Restated Credit and Guaranty Agreement and as
further amended, supplemented, restated or otherwise modified from time to
time.
"Amendment No. 3" is defined in the fifth recital.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 5.1.1.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Middle District of Florida (Tampa Division).
"Bankruptcy Court Order" means a duly issued order of the Bankruptcy
Court in the form of Exhibit R hereto.
"Base Rate Loan" means a Loan bearing interest at a fluctuating
interest rate determined by reference to the SG Base Rate.
-5-
<PAGE> 12
"Beverage License" means any authorization, permit, consent, approval,
franchise, concession, ordinance, registration, certificate, license, agreement
or other right filed with, granted by, or entered into by a federal, state or
local governmental authority which permits or authorizes the sale or
distribution of any alcoholic beverage.
"Beverage License Certification Date" means the date as of which (a)
the Borrower and, to the extent required by applicable law, the Parent have all
or substantially all Beverage Licenses necessary to permit, at the convenience
stores owned or operated by Sunshine prior to the Merger, the sale and
distribution of the alcoholic beverages sold or distributed at such convenience
stores as of the Effective Date, including all consents and approvals, if any,
necessary to take into account effectuation of the Merger, and (b) the Agent
shall have received (i) a certificate duly executed by the chief financial
Authorized Officer of the Parent certifying the foregoing, together with (ii)
all documents related thereto that the Agent may reasonably request. For the
purposes of the preceding clause (a), "substantially all Beverage Licenses"
shall not be construed to mean less than all the Beverage Licenses necessary to
permit, at 90% of the convenience stores owned or operated by Sunshine
immediately prior to the Effective Date, the sale and distribution of the
alcoholic beverages sold or distributed at such convenience stores as of the
Effective Date; provided that such 90% may include each convenience store as to
which the Borrower, after the exercise of its best efforts, has not obtained
all such Beverage Licenses, to the extent (i) the applicable governmental
authority has represented to and assured the Borrower that any such Beverage
Licenses are forthcoming, (ii) such convenience store has not suffered any
interruption in its sales of alcoholic beverages as a result thereof and (iii)
the Borrower has represented the foregoing in the certificate referred to in
clause (b) of the preceding sentence.
"Borrower" is defined in the preamble.
"Borrower Pledge Agreement" means the Pledge Agreement, executed and
delivered pursuant to the Existing Credit Agreement, dated as of January 17,
1995, a conformed copy of which is attached as Exhibit G-2 hereto, as the same
may be amended, supplemented, restated or otherwise modified from time to time.
"Borrower Security Agreement" means the Borrower Security Agreement,
executed and delivered pursuant to the Existing Credit Agreement, dated as of
January 17, 1995, a conformed copy of which is attached as Exhibit H-1 hereto,
together with the Security Agreement (Trademark) related thereto, a conformed
copy of which is attached to such Borrower Security Agreement and Amendment
No. 1 to such Security Agreement (Trademark) substantially in the form of
Exhibit I attached hereto, in each
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<PAGE> 13
case as amended, supplemented, restated or otherwise modified from time to
time.
"Borrowing" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period, made by all Lenders on the same
Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Base Amount" means, at any time, an amount equal to the sum
of, without duplication,
(a) 80% of the aggregate amount of all Eligible Accounts at
such time; and
(b) 50% of the aggregate amount of all Eligible Inventory at
such time.
The Borrowing Base Amount shall initially be computed by the Borrower in each
Borrowing Base Certificate delivered from time to time to the Agent pursuant to
Section 5.1.18 and clause (d) of Section 7.1.1. The Agent shall have the right
to review such computations and if, in the Agent's reasonable judgment, such
computations have not been computed in accordance with the terms of this
Agreement, the Agent shall have the right to adjust such computations.
"Borrowing Base Certificate" means a certificate duly completed and
executed by the chief accounting or financial Authorized Officer of the
Borrower, substantially in the form of Exhibit E hereto, together with such
changes thereto as the Agent may from time to time reasonably request for the
purpose of monitoring the Borrower's compliance therewith.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
C-1 hereto.
"Business Acquisition" means (a) any Investment in the capital stock
of any Person or (b) any acquisition of the assets of any Person pursuant to a
transaction not in the ordinary course of such Person's business.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York, New York or New Orleans, Louisiana; and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loan, any day which is a Business Day described in
clause (a) above and which is also a day on
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<PAGE> 14
which dealings in Dollars are carried on in the interbank eurodollar
market of the Agent's LIBOR Office.
"Capital Expenditure Level" means, with respect to any Fiscal Year and
for purposes of Section 7.2.7, Capital Expenditure Level I, Capital Expenditure
Level II, Capital Expenditure Level III or Capital Expenditure Level IV, based
on the Fixed Charge Coverage Ratio as of the last day of such Fiscal Year and
EBITDA for such Fiscal Year, in accordance with the following clauses (a) and
(b):
(a) with respect to any Fiscal Year, if EBITDA for such
Fiscal Year is equal to or greater than the amount set forth below
opposite such Fiscal Year, Capital Expenditure Level I shall be
applicable to such Fiscal Year so long as the Fixed Charge Coverage
Ratio as of the last day of such Fiscal Year is equal to or greater
than the ratio set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
Minimum EBITDA
for Capital Minimum Fixed Charge Coverage Ratio
Expenditure for Capital Expenditure
Fiscal Year Level I Level I
----------- -------------- -----------------------------------
<S> <C> <C>
1995 $26,100,000 1.00:1.00
1996 37,700,000 1.05:1.00
1997 41,500,000 1.15:1.00
1998 45,000,000 1.25:1.00
1999 48,400,000 1.35:1.00
2000 52,400,000 1.45:1.00
2001 57,100,000 1.45:1.00
</TABLE>
(b) if Capital Expenditure Level I shall not be applicable to
a Fiscal Year in accordance with the preceding clause (a), then (i)
the Capital Expenditure Level set forth opposite the highest level of
EBITDA set forth in Schedule III hereto with respect to such Fiscal
Year that has been met by the Parent and its Subsidiaries with respect
to such Fiscal Year shall be applicable to such Fiscal Year so long as
the Fixed Charge Coverage Ratio as of the last day of such Fiscal Year
(the "Subject Fixed Charge Coverage Ratio") is equal to or greater
than the ratio set forth in Schedule III hereto opposite such Capital
Expenditure Level; provided that, if such Subject Fixed Charge
Coverage Ratio is not equal to or greater than such ratio set forth in
Schedule III hereto, then Capital Expenditure Level IV shall be
applicable to such Fiscal Year.
-8-
<PAGE> 15
"Capital Expenditures" means, for any period, without duplication, the
sum of
(a) the aggregate amount of all expenditures of the Parent
and its Subsidiaries (including the Borrower and its Subsidiaries) (i)
for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures and
(ii) to the extent not included in the preceding subclause (i), in
respect of Business Acquisitions made during such period; and
(b) the aggregate amount of all Capitalized Lease Liabilities
incurred during such period.
"Capitalized Lease Liabilities" means all monetary obligations of the
Parent or any of its Subsidiaries (including the Borrower and its Subsidiaries)
under any leasing or similar arrangement which, in accordance with GAAP, would
be classified as capitalized leases, and, for purposes of this Agreement and
each other Loan Document, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may
be terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after the date of issuance, issued or guaranteed by the United
States Government;
(b) commercial paper, maturing not more than nine months from
the date of issuance and rated at least A-1 by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., or
P-1 by Moody's Investors Service, Inc., which is issued by
(i) a corporation (other than an Affiliate of any
Obligor) organized under the laws of any state of the United
States or of the District of Columbia, or
(ii) any Lender or any Affiliate thereof;
(c) any certificate of deposit or bankers acceptance,
maturing not more than one year after such time, which is issued by
(i) a Lender or (ii) a commercial banking institution that (A) is a
member of the Federal Reserve System, (B) has a combined capital and
surplus and undivided profits of not less than $1,000,000,000 and (C)
has outstanding short-term debt securities which are rated at least
A-1 by Standard & Poor's Ratings Services, a division
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<PAGE> 16
of The McGraw-Hill Companies, Inc., or P-1 by Moody's Investors
Services, Inc.;
(d) any repurchase agreement entered into with any Lender (or
other commercial banking institution of the stature referred to in
clause (c)) secured by a fully perfected Lien in any obligation
thereunder of the type described in any of clauses (a) through (c),
having a market value at the time such repurchase agreement is entered
into of not less than 100% of the repurchase obligation thereunder of
such Lender or other commercial banking institution; or
(e) any money market mutual fund with a daily right of
redemption and a net asset value of $1.00 per share substantially all
the assets of which are comprised of investments of the types
described in the preceding clauses (a) through (d).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means
(a) the failure of the Stockholders at any time (i) to own
beneficially free and clear of all Liens at all times, at least 52.35%
of the issued and outstanding shares of common stock of the Parent
(both voting and non-voting), on a fully diluted basis, and (ii) to
have and exercise voting power for the election of at least a majority
of the board of directors of the Parent;
(b) the direct or indirect acquisition by any Person or a
group (as such term is defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended), other than the Stockholders, of
beneficial ownership (as such term is defined in Rule 13D-3
promulgated under the Securities Exchange Act of 1934, as amended) of
25% or more of the outstanding shares of common stock of the Parent;
(c) the failure of the Parent at any time to own beneficially
100% of the issued and outstanding shares of common stock of the
Borrower (both voting and non-voting) free and clear of all Liens
(other than Liens in favor of the Agent arising pursuant to the Parent
Pledge Agreement), on a fully diluted basis; or
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<PAGE> 17
(d) a change in the majority of the board of directors of the
Parent unless approved by the then majority of the board of directors
of the Parent.
"Class 7 Claimants" means each of the Class 7 Claimants listed on
Annex A to the Sunshine Letter of Credit.
"Clean-Down Period" is defined in Section 3.1.2(e).
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Collateral" means any assets of the Borrower or any of its
Subsidiaries or of any other Obligor subject to a Lien pursuant to any Loan
Document.
"Commitment" means, as the context may require, a Lender's Revolving
Loan Commitment, Term Loan Commitment or Letter of Credit Commitment.
"Commitment Amount" means, as the context may require, either the
Revolving Loan Commitment Amount, the Term Loan Commitment Amount or the Letter
of Credit Commitment Amount.
"Commitment Termination Event" means
(a) the occurrence of any Default described in clauses (b)
through (d) of Section 8.1.9; or
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
(ii) the giving of notice by the Agent, acting at
the direction of the Required Lenders, to the Borrower that
the Commitments have been terminated.
"Compliance Certificate" means a certificate duly executed by the
chief accounting or financial Authorized Officer of the Parent, substantially
in the form of Exhibit F hereto, together with such changes thereto as the
Agent may from time to time reasonably request for the purpose of monitoring
the Borrower's and the Parent's compliance with the financial covenants
contained herein.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or
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otherwise to assure a creditor against loss) the indebtedness, obligation or
any other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person. The
principal amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice duly executed by an
Authorized Officer of the Borrower, substantially in the form of Exhibit C-2
hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Parent or any Subsidiary, are treated as a single employer under Section 414(b)
or 414(c) of the Code or Section 4001 of ERISA.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, the extension of
any Stated Expiry Date of any existing Letter of Credit or the
increase in the Stated Amount of any existing Letter of Credit, in
each case by an Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Delight" means Delight Distributing and Sales Co., Inc., a Louisiana
corporation.
"Disbursement" is defined in Section 2.7.2.
"Disbursement Date" is defined in Section 2.7.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Agent and the Required
Lenders.
"DLJ" means DLJ Capital Corporation.
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"Dollar" and the symbol "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such on Schedule IV hereto or designated in a Lender
Assignment Agreement, or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender to each other Person party hereto.
"EBIT" means, for any period, the sum, without duplication, of
(a) Net Income for such period;
plus
(b) the amounts deducted, in determining Net Income for such
period, for
(i) all income taxes paid by, or accrued to be paid
by, the Parent and its Subsidiaries during such period in
respect of such period (assuming utilization of all available
Net Operating Losses to the extent permitted by the Code),
plus
(ii) Interest Expense for such period.
"EBITDA" means, for any period, the sum, without duplication, for such
period, of
(a) EBIT;
plus
(b) the amount deducted, in determining Net Income for such
period, for amortization and depreciation of assets of the Parent and
its Subsidiaries during such period.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 5.1.
"Eligible Account" means, at any time of determination thereof, any
Account of the Borrower or any other Subsidiary of the Parent as to which each
of the following requirements has been fulfilled to the reasonable satisfaction
of the Agent:
(a) the Borrower or such Subsidiary has lawful and absolute
title to such Account, free and clear of all Liens
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other than the Liens in favor of the Agent for the benefit of the
Lenders;
(b) the Agent has a security interest in such Account, which
security interest is legal, valid, binding, perfected and first
priority under the U.C.C.; provided, however, that
(i) no Account as to which any United States federal
or state governmental agency or instrumentality is the Account
Debtor may be an Eligible Account, except to the extent the
Borrower or such Subsidiary has complied with the Assignment
of Claims Act of 1940, as amended (31 U.S.C. Section 3727; 41
U.S.C. Section 15), by delivering to the Agent a notice of
assignment in favor of the Agent under such Act and in
compliance with applicable provisions of 31 C.F.R. Section
7-103.8 and 41 C.F.R. Section 1-30.7, or with similar state
law; and
(ii) no Account as to which any other government or
agency of such government (including any foreign governmental
authority or agency) is the Account Debtor may be an Eligible
Account;
(c) the Borrower or such Subsidiary has the full and
unqualified right to assign and grant a Lien in such Account to the
Agent;
(d) such Account is payable in Dollars and is a legal, valid,
binding and enforceable obligation of the Person who is obligated
under such Account (the "Account Debtor");
(e) if such Account is subject to any dispute, setoff,
counterclaim or other claim or defense on the part of the Account
Debtor denying liability under such Account, the portion of such
Account so subject shall be excluded from Eligible Accounts;
(f) such Account is evidenced by an invoice or marketer's
sales report rendered to the Account Debtor and evidences monetary
obligations;
(g) such Account is a bona fide Account which arose in the
ordinary course of business, and with respect to which,
(i) in the case of an Account arising from the sale
of goods, such goods have been shipped or delivered to and not
rejected by the Account Debtor, such Account was created as a
result of a sale on an absolute basis and not on a
consignment, approval or sale-and-return basis and all other
actions necessary to create a binding obligation on the part
of the Account Debtor for such Account have been taken, and
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(ii) in the case of an Account relating to the sale
of services, such services have been performed or completed
and not rejected by the Account Debtor and all other actions
necessary to create a binding obligation on the part of the
Account Debtor have been taken;
(h) with respect to such Account, the Account Debtor is not
(i) an Affiliate of the Borrower, the Parent or any
of their respective Subsidiaries,
(ii) organized or located in a jurisdiction other
than the United States, or
(iii) the subject of any reorganization, bankruptcy,
receivership, custodianship or insolvency or any other
condition of the type described in clauses (b) through (d) of
Section 8.1.9;
(i) such Account is not outstanding more than 60 days past
the due date with respect thereto;
(j) no payment with respect to such Account made by check has
been returned for insufficient funds;
(k) such Account has not been placed with a lawyer or other
agent for collection;
(l) if the Borrower, the Parent or any of their respective
Subsidiaries is indebted to such Account Debtor, unless the Borrower,
the Parent or the relevant Subsidiary, (as the case may be) on the one
hand, and such Account Debtor, on the other hand, have entered into an
agreement whereby the Account Debtor is prohibited from exercising any
right of setoff with respect to the Accounts of the Borrower and the
other Subsidiaries of the Parent, Eligible Accounts shall exclude an
amount equal to the amount of such indebtedness; and
(m) such Account has such other characteristics or criteria
as the Agent, in its reasonable discretion, may specify in writing to
the Borrower from time to time.
"Eligible Inventory" means, at any time of determination thereof, any
Inventory of the Borrower or any other Subsidiary of the Parent arising in the
ordinary course of business and as to which each of the following requirements
has been fulfilled to the reasonable satisfaction of the Agent:
(a) such Inventory is located in the United States;
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<PAGE> 22
(b) the Borrower or such Subsidiary has full and unqualified
right to assign and grant a Lien in such Inventory to the Agent for
the benefit of the Lenders;
(c) the Borrower or such Subsidiary has full and lawful title
to such Inventory, free and clear of all Liens, other than any Liens
in favor of the Agent for the benefit of the Lenders;
(d) the Agent has a security interest in such Inventory,
which security interest is legal, valid, binding, perfected and first
priority under the U.C.C.;
(e) none of such Inventory shall consist of (i) items in the
custody of third parties for processing or manufacture, (ii) items in
the Borrower's or such Subsidiary's possession but intended by the
Borrower or such Subsidiary for return to the suppliers thereof, (iii)
items belonging to third parties that have been consigned to the
Borrower or such Subsidiary or are otherwise in the Borrower's or such
Subsidiary's custody or possession or (iv) items in the Borrower's or
such Subsidiary's custody and possession on a sale-on-approval or
sale-or-return basis or subject to any other repurchase or return
agreement; and
(f) none of such Inventory (i) is obsolete, unsalable,
damaged or otherwise unfit for sale or further processing in the
ordinary course of business or (ii) has remained unsold in inventory
for more than three months or beyond the manufacturer's expiration or
"sale by" or similar date.
"Environmental Laws" means all applicable federal, state, county,
parish or local statutes, laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders) relating to
public health and safety and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any Fiscal Year, the excess for such
Fiscal Year of
(a) the sum, determined for such Fiscal Year, of
(i) EBITDA;
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<PAGE> 23
plus
(ii) the aggregate proceeds received by the Parent
and its Subsidiaries during such Fiscal Year on account of
business interruption insurance, to the extent not included in
EBITDA;
over
(b) the sum, determined for such Fiscal Year, of
(i) Capital Expenditures permitted by Section 7.2.7
made or incurred by the Parent and its Subsidiaries and paid
in cash during such Fiscal Year;
plus
(ii) all prepayments and repayments of Term Loans
made pursuant to Section 3.1.1 or 3.1.2 (other than pursuant
to Section 3.1.2(c)(ii)(B));
plus
(iii) all income taxes paid by the Parent and its
Subsidiaries in cash during such Fiscal Year in respect of
such Fiscal Year;
plus
(iv) Interest Expense paid in cash during such
Fiscal Year;
plus
(v) to the extent not reflected in EBITDA and to the
extent previously reserved against on the consolidated
financial statements of the Parent and its Subsidiaries, the
excess of (A) the aggregate amount of payments made by the
Parent and its Subsidiaries during such Fiscal Year in respect
of environmental remediation over (B) the aggregate amount of
payments received by the Parent and its Subsidiaries from
governmental authorities administering any trust or similar
fund relating to protection of the environment.
"Excess Insurance Proceeds" means the insurance proceeds received by
the Agent pursuant to clause (d) of Section 7.1.4.
"Existing Credit Agreement" is defined in the fifth recital.
"Facility" means (a) any real property, fixture or appurtenance owned
or operated by the Parent or any of its
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<PAGE> 24
Subsidiaries (including the Borrower or any of its Subsidiaries) or
predecessors in interest, (b) any stationary source of air pollution or any air
pollution control equipment owned or operated by the Parent or any of its
Subsidiaries or predecessors in interest, (c) any source of water pollution
(including indirect sources to sewer systems) or any water pollution control
equipment owned or operated by the Parent or any of its Subsidiaries or
predecessors in interest, (d) all contiguous property under the control of the
Parent or any of its Subsidiaries or predecessors in interest, (e) any
building, structure, installation, equipment, pipe or pipeline (including any
pipe into a sewer or publicly owned treatment works), well, pit, pond, lagoon,
impoundment, ditch, landfill, storage container, motor vehicle, rolling stock,
or aircraft owned or operated by the Parent or any of its Subsidiaries or
predecessors in interest, and (f) any site or area where a hazardous substance
provided to or generated by the Parent or any of its Subsidiaries or
predecessors in interest has been deposited, stored, disposed of, or placed, or
otherwise come to be located; but does not include any consumer product in
consumer use or any vessel.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by SG from three federal funds brokers of
recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated June 30, 1995,
from SG, addressed to, and agreed and accepted by, the Borrower and the Parent.
"First Merger" is defined in the ninth recital.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on the last Sunday of each December. References to a Fiscal Year with a
number corresponding to any calendar year (e.g., "Fiscal Year 1995") refer to
the Fiscal Year ending during such calendar year.
"Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal
Quarter, the ratio of:
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(a) EBITDA for the Rolling Period ending on such day minus
all Capital Expenditures of the Parent and its Subsidiaries incurred
or committed to be incurred during such Rolling Period;
to
(b) the sum of
(i) Interest Expense for such Rolling Period;
plus
(ii) all scheduled repayments of Term Loans made
pursuant to Section 3.1.2(b) during such Rolling Period;
plus
(iii) all income taxes paid by the Parent and its
Subsidiaries during such Rolling Period in respect of such
Rolling Period (assuming utilization of all available Net
Operating Losses (to the extent permitted by the Code)).
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Funded Debt" means, as of any date of determination, (a) the Stated
Amount of the Sunshine Letter of Credit and (b) any Indebtedness of the Parent
and its Subsidiaries of a type described in clause (a), (b) (to the extent
actually drawn) or (c) of the definition of Indebtedness, or any Contingent
Liability of the Borrower or any of its Subsidiaries in respect of any such
type of Indebtedness, which
(i) is in respect of the Term Loans;
(ii) matures more than one year from such date of
determination;
(iii) matures within one year from such date of determination
but is renewable or extendible, at the option of the Borrower or any
such Subsidiary, as the case may be, to a date more than one year from
such date; or
(iv) arises under a revolving credit or similar agreement
which obligates the lender or lenders thereof to extend such
Indebtedness during a period of more than one year from such date.
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"Funded Debt to EBITDA Ratio" means, as of the last day of any Rolling
Period, the ratio of:
(a) Funded Debt as at the last day of such Rolling Period;
to
(b) EBITDA for such Rolling Period.
"GAAP" is defined in Section 1.4.
"Gross Profit Margin" means, as of the last day of any Fiscal Quarter,
the percentage obtained by dividing (a) the excess of total sales of the Parent
and its Subsidiaries for the Rolling Period ending on such day over cost of
goods sold of the Parent and its Subsidiaries for such Rolling Period (in each
case, as determined in accordance with GAAP) by (b) total sales of the Parent
and its Subsidiaries for such Rolling Period (as determined in accordance with
GAAP).
"Gross Transaction Proceeds" means gross cash payments received by the
Parent or any of its Subsidiaries pursuant to the Purchase Agreement in excess
of $250,000 in the aggregate (including any cash payments received by way of
any adjustment to the purchase price provided for therein and any indemnity
payments), other than any such cash payments in respect of indemnity payments
which reimburse the Parent or any of its Subsidiaries for liabilities and costs
previously paid by the Parent or such Subsidiary.
"Guaranteed Obligations" is defined in Section 9.1.
"Guarantor" means the Parent.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
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"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under Rate Protection Agreements.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its
obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of contract
interpretation to the effect that where general words are followed by a
specific listing of items the general words shall not be given their widest
meaning, shall not be applicable to limit a general statement, which is
followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money, all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments and all capital stock which has redemption
provisions exercisable at the option of the holder thereof in whole or
in part for cash;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
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(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person with respect to each
Hedging Obligation;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; and
(g) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner thereof or has direct liability in the nature of a
general partner.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Intellectual Property Collateral" has the meaning provided for such
term in the Security Agreements.
"Interest Coverage Ratio" means, as of the last day of any Fiscal
Quarter, the ratio of:
(a) EBITDA for the Rolling Period ending on such day,
to
(b) Interest Expense for such Rolling Period.
"Interest Expense" means, for any period, the aggregate consolidated
interest expense of the Parent and its Subsidiaries for such period, as
determined in accordance with GAAP, including, without duplication, net
obligations of the Parent and its Subsidiaries (including fees) in respect of
Rate Protection Agreements and the portion of any Capitalized Lease Liabilities
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of the Parent and its Subsidiaries allocable to interest expense, in each case
paid or payable during such period.
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.4 or
2.5 and ending on (but excluding) the day which is one, three or six months
thereafter (or, if such month has no numerically corresponding day, on the last
Business Day of such month), as the Borrower may select in its relevant notice
pursuant to Section 2.4 or 2.5; provided, however, that
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than five different dates;
(b) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless such next following Business Day
is the first Business Day of a month, in which case such Interest
Period shall end on the Business Day next preceding the day on which
such Interest Period would otherwise end); and
(c) the Borrower shall not be permitted to select, and there
shall not be applicable, any Interest Period that would be broken by
reason of a mandatory payment of Term Loans required pursuant to
clause (b) of Section 3.1.2 or any Interest Period for any Loan which
would end later than the Stated Maturity Date for such Loan.
"Inventory" means any "inventory" (as defined in Section 9-109(4) of
the U.C.C.) of any Person.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Contingent Liability of such Person incurred in
connection with loans or advances made by others to such Person; and
(c) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial
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condition of such other Person) and shall, if made by the transfer or exchange
of property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such property.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the Borrower, substantially in the
form of Exhibit D hereto.
"Issuer" means SG in its capacity as issuer of the Letters of Credit.
At the request of SG, another Lender or an Affiliate of SG may, but shall not
be obligated to, issue one or more Letters of Credit hereunder, in which case
the term "Issuer" as used herein shall refer to each of SG, any such Lender and
any such Affiliate of SG.
"Lender Assignment Agreement" means a lender assignment agreement in
substantially the form of Exhibit O hereto.
"Lender" is defined in the preamble.
"Letter of Credit" is defined in clause (a) of Section 2.1.3.
"Letter of Credit Commitment" means, with respect to the Issuer, the
Issuer's obligation to issue Letters of Credit pursuant to Section 2.7 and,
with respect to each of the other Lenders, the obligations of each such Lender
to participate in such Letters of Credit pursuant to Section 2.7.1.
"Letter of Credit Commitment Amount" means, on any date, $15,000,000,
as such amount may be permanently reduced from time to time pursuant to Section
2.3; provided, however, that only $2,700,000 will be available in respect of
the Sunshine Letter of Credit.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit;
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO Rate" is defined in Section 3.2.1.
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"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"LIBOR Office" means, relative to any Lender, the office of such
Lender designated as such on Schedule IV hereto or designated in a Lender
Assignment Agreement, or such other office of a Lender as designated from time
to time by notice from such Lender to the Borrower and the Agent, whether or
not outside the United States, which shall be making or maintaining LIBO Rate
Loans of such Lender hereunder.
"LIBOR Reserve Percentage" is defined in Section 3.2.1.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan" means, as the context may require, either a Revolving Loan or a
Term Loan.
"Loan Document" means this Agreement, the Notes, the Affirmation and
Acknowledgement, the Petroleum Note, the Parent Inter-Company Note, the Letters
of Credit, the Fee Letter, the Borrower Security Agreement, the Parent Security
Agreement, the Petroleum Security Agreement, the Parent Pledge Agreement, the
Borrower Pledge Agreement, the Petroleum Guaranty, the Stockholders Letter of
Understanding, each Rate Protection Agreement with a Lender, each Lender
Assignment Agreement and each other agreement, instrument or document executed
and delivered pursuant to or in connection with this Agreement and the other
Loan Documents (including the agreements executed from time to time by
Subsidiaries of the Borrower pursuant to Section 7.1.8, the agreements executed
from time to time by Borrower and its Subsidiaries pursuant to Section 7.1.9
and the promissory notes evidencing Indebtedness permitted by clause (h) of
Section 7.2.2).
"Marketers" means those business locations as to which Petroleum or
any other Subsidiary of the Parent only operates or owns the equipment and
inventory relating to the sale and distribution of gasoline products.
"Memorandum" means the Confidential Memorandum, dated July, 1995, with
respect to the Borrower, compiled by the Agent from
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information supplied by the Parent and the Borrower and heretofore delivered to
each Lender.
"Merger" is defined in the twelfth recital.
"Merger Agreement" is defined in the sixth recital.
"Merger Certificate" is defined in Section 5.1.4.
"Net Debt Proceeds" means, in the case of the issuance, incurrence,
placement or sale of any Indebtedness (other than Indebtedness in respect of
the Notes) of the type referred to in clause (a) of the definition thereof
(whether pursuant to a public or private offering), permitted to be outstanding
pursuant to Section 7.2.2 or otherwise permitted with the prior consent of the
Required Lenders from and after the effective date of the Original Credit
Agreement, the excess of
(a) the gross cash proceeds received by the Parent or any of
its Subsidiaries from such issuance, incurrence, placement or sale of
permitted Indebtedness (including any cash payments received by way of
deferred payment of principal pursuant to a permitted promissory note
or installment receivable or otherwise, but only as and when
received);
over
(b) in connection with the issuance, incurrence, placement or
sale of permitted Indebtedness, (i) all reasonable and customary fees
and expenses actually paid by the Parent or its Subsidiaries (except
as provided in clause (ii)) and (ii) underwriters' discounts and
commissions not payable to the Parent, any of its Subsidiaries or any
of their Affiliates (other than underwriters' discounts and
commissions payable (x) to DLJ or any of its Affiliates if such
discounts and commissions are the same as the usual and customary
discounts and commissions of DLJ and its Affiliates to Persons which
are not their Affiliates or (y) to any other Stockholder or its
Affiliates if such discounts and commissions would be reasonable and
customary if charged in arm's length transactions by recognized
investment banking institutions which provide underwriting and
placement services in the ordinary course of their business).
"Net Disposition Proceeds" means the excess of
(a) the gross cash proceeds (other than proceeds from any
sale of Inventory of the Parent or any of its Subsidiaries in the
ordinary course of their business) received by the Parent or any of
its Subsidiaries from any
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Permitted Disposition with a purchase price in excess of $250,000
(such purchase price to be determined in the same manner as the
purchase price of a Permitted Business Acquisition (as set forth in
clause (b) of the definition thereof)), including any cash payments
received by way of a deferred payment of principal pursuant to a
permitted note or installment receivable or otherwise, but only when
and as received;
over
(b) (i) all reasonable and customary fees and expenses with
respect to legal, investment banking, brokerage, accounting and other
professional fees actually incurred by the Parent and its Subsidiaries
in connection with such Permitted Disposition which have not been paid
to Affiliates of the Parent or any of its Subsidiaries (other than
fees and expenses payable (x) to DLJ or any of its Affiliates if such
fees and expenses are the same as the usual and customary fees and
expenses of DLJ and its Affiliates to Persons which are not their
Affiliates or (y) to any other Stockholder or its Affiliates if such
fees and expenses would be reasonable and customary if charged in
arm's length transactions by recognized investment banking
institutions which provide merger and acquisition advice and services
in the ordinary course of their business), (ii) all taxes actually
paid or estimated by the Parent (in good faith) to be payable in cash
in connection with such Permitted Disposition; provided, however, that
if, after the payment of all taxes with respect to such Permitted
Disposition, the amount of estimated taxes, if any, pursuant to clause
(ii) above exceeded the amount of taxes actually paid in cash in
respect of such Permitted Disposition, the aggregate amount of such
excess shall be immediately payable, pursuant to clause (c) of Section
3.1.2, as Net Disposition Proceeds, and (iii) if permitted hereunder
or otherwise by the Required Lenders, the aggregate amount of any
Indebtedness of the type referred to in clause (a) of the definition
thereof which is secured by such asset and required to be repaid from
such gross cash proceeds;
provided, however, that such cash proceeds shall not constitute Net Disposition
Proceeds to the extent the Parent or its applicable Subsidiary uses such
proceeds within 365 days of the closing date of such Permitted Disposition to
replace the assets disposed in such Permitted Disposition or to reinvest in
other capital assets reasonably related to the ownership and operation of
convenience stores.
"Net Equity Proceeds" means, in the case of the issuance, placement or
sale of equity securities (whether pursuant to a
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public or private offering) from and after the effective date of the Original
Credit Agreement, the excess of
(a) the gross cash proceeds received by the Parent or any of
its Subsidiaries or any corporation of which the Parent is a
Subsidiary from such issuance, placement or sale of equity securities
(including any cash payments received by way of deferred payment of
principal pursuant to a permitted promissory note or installment
receivable or otherwise, but only as and when received);
over
(b) in connection with such issuance, placement or sale of
such equity securities, all (i) reasonable and customary fees and
expenses actually paid by the Parent or its Subsidiaries or the Parent
or any corporation of which the Parent is a Subsidiary (except as
provided in clause (ii)) and (ii) underwriters' discounts and
commissions not payable to the Parent, any of its Subsidiaries or any
of their Affiliates (other than underwriters' discounts and
commissions payable (x) to DLJ or any of its Affiliates if such
discounts and commissions are the same as the usual and customary
discounts and commissions of DLJ and its Affiliates to Persons which
are not their Affiliates or (y) to any other Stockholder or its
Affiliates if such discounts and commissions would be reasonable and
customary if charged in arm's length transactions by recognized
investment banking institutions which provide underwriting and
placement services in the ordinary course of their business).
"Net Income" means, for any period, all amounts (exclusive of all
amounts in respect of any extraordinary gains or losses) which, in accordance
with GAAP, would be included as net income on the consolidated statements of
income of the Parent and its Subsidiaries for such period.
"Net Operating Loss" means all net operating losses incurred by the
Parent and its Subsidiaries, as shown on any federal tax return (as amended or
otherwise modified) filed or to be filed by the Parent.
"Note" means, as the context may require, either a Revolving Note or a
Term Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes and each other Loan Document.
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<PAGE> 35
"Obligor" means the Parent and any of its Subsidiaries (including the
Borrower and any of its Subsidiaries).
"Organic Document" means, relative to any Obligor, its articles or
certificate of incorporation, its by-laws and all shareholder agreements,
voting trusts and similar arrangements applicable to any of its authorized
shares of capital stock.
"Original Credit Agreement" is defined in the third recital.
"Parent" is defined in the preamble.
"Parent Inter-Company Note" means the $20,400,000 promissory note of
the Parent payable to the Borrower, dated July 25, 1995 (and delivered to the
Agent in connection with Amendment No. 3), executed, delivered and pledged to
the Agent pursuant to the Borrower Pledge Agreement, a conformed copy of which
is attached as Exhibit K-2 hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time subject to the terms of the
Borrower Pledge Agreement), and also means all other promissory notes issued
from time to time in substitution therefor or renewal thereof subject to the
terms of the Borrower Pledge Agreement.
"Parent Pledge Agreement" means the Pledge Agreement (Parent),
executed and delivered pursuant to the Existing Credit Agreement, dated as of
January 17, 1995, a conformed copy of which is attached as Exhibit G-1 hereto,
as the same may be amended, supplemented, restated or otherwise modified from
time to time.
"Parent Security Agreement" means the Parent Security Agreement,
executed and delivered pursuant to the Existing Credit Agreement, dated as of
January 17, 1995, a conformed copy of which is attached as Exhibit H-3 hereto,
together with the Security Agreement (Trademark) related thereto, a conformed
copy of which is attached to such Parent Security Agreement, in each case as
amended, supplemented, restated or otherwise modified from time to time.
"Participant" is defined in Section 11.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Parent or any Subsidiary or any corporation, trade or business that is, along
with the Parent or any Subsidiary, a member of a Controlled Group, may have
liability, including any liability by reason of having been
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<PAGE> 36
a substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
opposite the name of such Lender on Schedule II hereto or set forth in a duly
executed Lender Assignment Agreement, as such percentage may be adjusted from
time to time pursuant to Lender Assignment Agreement(s) executed by such Lender
and its Assignee Lender(s) and delivered pursuant to Section 11.11.
"Permitted Business Acquisition" means any Business Acquisition
pursuant to which:
(a) (i) the Borrower acquires all of the capital stock of a
Person engaged solely in the business of owning and operating one or
more convenience stores, (ii) a Subsidiary of the Borrower acquires
assets comprising one or more convenience stores or (iii) with the
prior written consent of the Agent, the Borrower acquires assets
comprising one or more convenience stores (provided that such consent
shall not be required to the extent such assets will be acquired in a
single transaction or series of related transactions (each such
transaction, a "Threshold Acquisition") which relate to five or fewer
locations and do not have a purchase price in excess of $1,000,000
(such purchase price to be determined in the same manner as provided
in the immediately succeeding clause (b));
(b) the purchase price with respect to such Business
Acquisition (inclusive of any deferred portion thereof (which shall,
for the purposes of this clause (b), equal the present value thereof
based on a discount factor equal to the sum of the SG Base Rate and
1.25% on the closing date of such Business Acquisition) and any
securities or other assets issued or transferred and liabilities
(other than current liabilities) assumed), when added to the aggregate
purchase price of all Permitted Business Acquisitions consummated
during the Fiscal Year in which such Business Acquisition would be
consummated, does not exceed $5,000,000;
(c) the Agent shall have received, other than in the case of
a Threshold Acquisition, a certificate executed by the chief financial
Authorized Officer of the Borrower (i) stating that no Default has
occurred and is continuing or would occur upon consummation of such
Business Acquisition and (ii) showing (in reasonable detail and with
appropriate calculations and computations in all respects satisfactory
to the Agent) compliance for the succeeding four fiscal quarters (the
fiscal quarter in which such Business
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Acquisition would be consummated being the first such fiscal quarter)
with the covenants set forth in Section 7.2.4 on a prospective pro
forma basis (after giving effect to such Business Acquisition and all
transactions related thereto); and
(d) the Borrower has complied with the provisions of Section
7.1.8 to the extent such provisions are applicable to the Persons
party to, or otherwise subject to, such Business Acquisition.
"Permitted Disposition" means any sale, lease, transfer or other
disposition of assets of the Borrower or any other Subsidiary of the Parent to
the extent that
(a) the Borrower or such other Subsidiary shall receive only
cash consideration therefor, provided that (i) the Borrower or such
other Subsidiary may receive promissory notes having terms that are
customary for seller-financed transactions, to the extent the
aggregate principal amount of all such promissory notes received by
the Borrower and such other Subsidiaries in any Fiscal Year does not
exceed $250,000 and (ii) in the event of a sale of assets comprised of
convenience stores or marketers, the Borrower or such other Subsidiary
may obtain in exchange therefor convenience stores (or, if the assets
sold are marketers, convenience stores or marketers), to the extent
the number of convenience stores so sold does not exceed 15% of the
convenience stores operated by the Borrower and the other Subsidiaries
of the Parent as of the Effective Date and the number of marketers so
sold does not exceed 15% of the marketers operated by such other
Subsidiaries of the Parent as of the Effective Date (each such
transaction, an "Exchange Transaction");
(b) the aggregate fair market value of all such dispositions
(exclusive of any such disposition effectuated as an Exchange
Transaction to the extent of the fair market value of the capital
assets obtained by the Borrower or other such Subsidiary in respect of
such Exchange Transaction) shall not exceed $2,500,000 in any Fiscal
Year;
(c) the Borrower and such other Subsidiaries shall have
received fair value therefor; and
(d) at the time of each such disposition, no Event of Default
shall have occurred and be continuing.
"Permitted Encumbrances" means Liens permitted under Section 7.2.3.
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"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
"Petroleum" is defined in the first recital.
"Petroleum Guaranty" means the Guaranty (Petroleum), executed and
delivered pursuant to the Existing Credit Agreement, dated as of January 17,
1995, a conformed copy of which is attached as Exhibit J hereto, as the same
may be amended, supplemented or otherwise restated from time to time.
"Petroleum Note" means the revolving promissory note of Petroleum
payable to the Borrower, executed, delivered and pledged to the Agent pursuant
to the Borrower Pledge Agreement, a conformed copy of which is attached as
Exhibit K-1 hereto (as such promissory note may be amended, endorsed or
otherwise modified from time to time subject to the terms of the Borrower
Pledge Agreement), and also means all other promissory notes issued from time
to time in substitution therefor or renewal thereof subject to the terms of the
Borrower Pledge Agreement.
"Petroleum of California" means E-Z Serve Petroleum Marketing Company
of California, a California corporation.
"Petroleum Security Agreement" means the Petroleum Security Agreement
executed and delivered pursuant to the Existing Credit Agreement, dated as of
January 17, 1995, a conformed copy of which is attached hereto as Exhibit H-2
hereto, together with the Security Agreement (Trademark) related thereto, in
each case as amended, supplemented, restated or otherwise modified from time to
time.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreements" means, as the context may require, the Parent
Pledge Agreement or the Borrower Pledge Agreement.
"Purchase Agreement" means the Purchase Agreement, dated as of
December 1, 1994, between Dillon Companies, Inc., a Kansas corporation (the
"Seller"), and the Borrower, pursuant to which the Borrower acquired all of the
issued and outstanding shares of capital stock of Time Saver Stores, Inc., a
Kansas corporation, which was a wholly-owned Subsidiary of the Seller.
"Quarterly Payment Date" means the 24th day of each March, June,
September and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"Rate Protection Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar
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agreement, currency swap or exchange agreement or any similar arrangement
designed to protect a Person against fluctuations in interest rates or currency
fluctuations and entered into, from time to time, by the Parent or any of its
Subsidiaries.
"Realty" means all right, title and interest of the Borrower, the
Parent and their respective Subsidiaries in any land, buildings, improvements,
fixtures, other interests in real estate and any leasehold interest in any of
the foregoing.
"Reimbursement Obligation" is defined in Section 2.7.3.
"Release" means any spilling, leaking, pumping, pouring emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
any Hazardous Material or pollutant or contaminant into the environment
(including the abandonment or discarding of barrels, containers, and other
closed receptacles containing any Hazardous Material or pollutant or
contaminant).
"Required Lenders" means, at the time any determination thereof is to
be made, Lenders holding more than 50% of the aggregate of (a) the then
aggregate unpaid principal amount of the Term Notes and (b) the Revolving Loan
Commitments (or, if the Revolving Loan Commitments are no longer in effect, the
aggregate unpaid principal amount, if any, of Revolving Notes and Letter of
Credit Outstandings).
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Revolving Loan" is defined in Section 2.1.2.
"Revolving Loan Commitment" means, relative to any Lender, such
Lender's obligation to make Revolving Loans pursuant to Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $25,000,000, as
such amount is reduced from time to time pursuant to Section 2.3.
"Revolving Loan Commitment Termination Date" means the earliest of
(a) January 24, 1998;
(b) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.3;
(c) the date on which the principal amount of Term Loans are
repaid in full; and
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(d) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described above, the Revolving Loan
Commitments shall terminate automatically and without any further action.
"Revolving Note" means a promissory note of the Borrower payable to
any Lender, in the form of Exhibit A hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Revolving Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Rolling Period" means, as of any date of calculation, the immediately
preceding four full Fiscal Quarters; provided, however, that prior to the first
four full Fiscal Quarters following the date of the initial credit extension
under the Original Credit Agreement until the fourth Fiscal Quarter of the 1995
Fiscal Year, the "Rolling Period" as of any date of calculation shall mean the
period from the date of the initial credit extension under the Original Credit
Agreement to such date of calculation.
"Security Agreements" means, as the context may require, the Parent
Security Agreement, the Borrower Security Agreement and the Petroleum Security
Agreement.
"Series C Preferred Stock" means the $6.00 Convertible Preferred
Stock, Series C, of the Parent, par value $.01 per share.
"SG" is defined in the preamble.
"SGA Margin" means, as of the last day of any Fiscal Quarter, the
percentage obtained by dividing (a) selling, general and administrative
expenses (as determined in accordance with GAAP) of the Parent and its
Subsidiaries for the Rolling Period ending on such day by (b) total sales (as
determined in accordance with GAAP) by the Parent and its Subsidiaries for such
Rolling Period.
"SG Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the SG Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus 1/2 of
1%.
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The SG Base Rate is not necessarily intended to be the lowest rate of interest
determined by SG in connection with extensions of credit. Changes in the rate
of interest on that portion of any Loans maintained as Base Rate Loans will
take effect simultaneously with each change in the SG Base Rate. The Agent
will give notice promptly to the Borrower and the Lenders of changes in the SG
Base Rate.
"SG Rate" means, at any time, the rate of interest then most recently
established by SG in New York, New York as its base rate for U.S. dollars
loaned in the United States.
"State" means the several states of the United States of America,
including the District of Columbia, and their political subdivisions.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.7.
"Stated Maturity Date" means (a) in the case of any Term Loan, January
24, 2002 and (b) in the case of any Revolving Loan, January 24, 1998.
"Stockholders" means DLJ, Phemus Corporation, Tenacqco Bridge
Partnership, Intercontinental Mining & Resources Incorporated and Quadrant
Capital Corp.
"Stockholders Agreement" means the Amended and Restated Stockholders
Agreement, dated as of June 1, 1994, among the Stockholders, certain employees
of the Obligors and the Parent.
"Stockholders Letter of Understanding" means the Stockholders Letter
of Understanding, executed and delivered pursuant to the Existing Credit
Agreement, dated as of January 17, 1995, a conformed copy of which is attached
as Exhibit N hereto, together with all amendments, supplements and
modifications, if any, thereto.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by
such Person and one or more Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person, or (b) any partnership, joint venture, or
other entity as to which such Person, such Person and one or more of its
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Subsidiaries or one or more Subsidiaries of such Person owns more than a 50%
ownership, equity or similar interest or has power to direct or cause the
direction of management and policies, or the power to elect the managing
partner (or the equivalent), of such partnership, joint venture or other
entity, as the case may be.
"Sunshine" is defined in the sixth recital.
"Sunshine Indenture" means the Trust Indenture, dated June 21, 1994,
between Sunshine and NationsBank of Florida, N.A., as Trustee.
"Sunshine Letter of Credit" means the Letter of Credit, substantially
in the form of Exhibit S hereto, to be issued in the Stated Amount of
$2,700,000 to Rydberg & Goldstein, P.A., as distribution agent for the Class 7
Claimants.
"Tangible Net Worth" means, at any time, the sum of all amounts
(without duplication) which, in accordance with GAAP, would be included under
paid-in capital and retained earnings on a balance sheet of the Parent and its
Subsidiaries on a consolidated basis at such time after subtracting therefrom
the aggregate amount of any intangible assets of the Parent and its
Subsidiaries, including goodwill, franchises, licenses, patents, trademarks,
trade names, copyrights, service marks and brand names.
"Taxes" means all federal, state, local or foreign income, gross
receipts, windfall profits, severance, real and personal property, production,
sales, use, license, excise, franchise, stamp, leasing, lease, value added,
employment, withholding, transfer, registration, alternative or add-on minimum,
estimated, unemployment, social security, payroll, capital stock or similar
taxes, charges, fees, duties, levies, or other assessments, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
"Term Loan" is defined in Section 2.1.1.
"Term Loan Commitment" means, relative to any Lender, such Lender's
obligation to make Term Loans pursuant to Section 2.1.1.
"Term Loan Commitment Amount" means, on any date prior to the Term
Loan Commitment Termination Date, $80,000,000.
"Term Loan Commitment Termination Date" means the earlier of
(a) immediately after the making of the initial Credit
Extension after the Effective Date; and
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(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (a) or (b), the Term Loan
Commitments shall terminate automatically and without any further action.
"Term Note" means a promissory note of the Borrower payable to any
Lender, in the form of Exhibit B hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"Total Commitment Amount" means the sum, without duplication, of the
Term Loan Commitment Amount and the Revolving Loan Commitment Amount.
"type" means, relative to any Loan, that part of such Loan being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"U.C.C." means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"United States" or "U.S." means the United States of America, its
fifty States and the District of Columbia.
"Welfare Plan" means a "welfare plan" (as such term is defined in
Section 3(1) of ERISA), maintained by the Borrower or for which the Borrower or
any of its Subsidiaries has any contractual liability.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and
each other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.4) shall be made, and all
financial
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statements required to be delivered hereunder or thereunder shall be prepared
in accordance with, those generally accepted accounting principles ("GAAP")
applied in the preparation of the financial statements referred to in Section
6.5.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
LETTERS OF CREDIT AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Article V), each Lender severally agrees to make
Loans pursuant to the Commitments described in this Section 2.1.
SECTION 2.1.1. Term Loan Commitment. On the Business Day the Merger
is consummated (but only if the Term Loans are requested to be made on, or
prior to, the Term Loan Commitment Termination Date), each Lender agrees to
make a term loan to the Borrower equal to such Lender's Percentage of the
aggregate amount of the Borrowing of term loans requested by the Borrower to be
made on such day and to amend and restate and consolidate all term loans and
First Merger Loans outstanding under the Existing Credit Agreement, together
with the term loans requested on the date of the Merger, into term loans
hereunder (relative to each Lender, its "Term Loan") in accordance with each
Lender's Percentage of such Term Loans. The Commitment of each Lender
described in this Section is herein referred to as its "Term Loan Commitment".
No amounts paid or prepaid with respect to Term Loans may be reborrowed.
SECTION 2.1.2. Revolving Loan Commitment. From time to time on any
Business Day occurring prior to the Revolving Loan Commitment Termination Date,
each Lender agrees to make Loans (relative to such Lender, its "Revolving
Loans") to the Borrower equal to such Lender's Percentage of the aggregate
amount of the Borrowing of Revolving Loans requested by the Borrower to be made
on such day. The Commitment of each Lender described in this Section is herein
referred to as its "Revolving Loan Commitment". On the terms and subject to
the conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow the Revolving Loans. All Revolving Loans outstanding under the
Existing Agreement shall, from and after the Effective Date, be deemed to be
outstanding under this Agreement in accordance with each Lender's Percentage of
such Revolving Loans.
SECTION 2.1.3. Letter of Credit Commitment. From time to time on any
Business Day occurring prior to the Revolving Loan Commitment Termination Date,
the Issuer will
(a) issue one or more standby letters of credit (relative to
such Issuer, its "Letter of Credit") for the
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account of the Borrower in respect of obligations of the Borrower or
Petroleum in Stated Amounts requested by the Borrower on such day with
a Stated Expiry Date not later than one year from such requested date
of issuance, provided that any Letter of Credit requested to be issued
to satisfy the Bankruptcy Court Order shall comprise the Sunshine
Letter of Credit; or
(b) extend the Stated Expiry Date of an existing Letter of
Credit previously issued hereunder to a date not later than the
earlier of (i) the Revolving Loan Commitment Termination Date and (ii)
one year from the date of such extension.
All Letters of Credit outstanding under the Existing Agreement shall, from and
after the Effective Date, be deemed to be outstanding under this Agreement in
accordance with each Lender's Percentage of such Letters of Credit.
SECTION 2.2. Lenders Not Permitted or Required To Make Credit
Extensions. No Lender shall be permitted or required to make any Loan, and no
Issuer shall be obligated to issue or extend any Letter of Credit, under any
circumstance described below in this Section.
SECTION 2.2.1. Term Loans. No Borrowing of Term Loans shall be made
if, after giving effect thereto, the aggregate outstanding principal amount of
all the Term Loans (a) of all Lenders would exceed the Term Loan Commitment
Amount or (b) of such Lender would exceed such Lender's Percentage of the Term
Loan Commitment Amount.
SECTION 2.2.2. Revolving Loans. No Borrowing of Revolving Loans
shall be made if, after giving effect thereto, the aggregate outstanding
principal amount of all the Revolving Loans, together with the aggregate amount
of all Letter of Credit Outstandings, (a) of all the Lenders would exceed the
lesser of (i) the Revolving Loan Commitment Amount or (ii) the then existing
Borrowing Base Amount plus the Letter of Credit Outstandings in respect of the
Sunshine Letter of Credit, or (b) of such Lender would exceed such Lender's
Percentage of the lesser of (i) the Revolving Loan Commitment Amount or (ii)
such Lender's Percentage of the then existing Borrowing Base Amount plus such
Lender's Percentage of the Letter of Credit Outstandings in respect of the
Sunshine Letter of Credit.
SECTION 2.2.3. Letters of Credit. No issuance or extension of a
Letter of Credit shall be made if, after giving effect thereto, (a) the
aggregate amount of all Letter of Credit Outstandings would exceed the Letter
of Credit Commitment Amount or (b) the aggregate amount of all Letter of Credit
Outstandings together with the aggregate outstanding principal amount of all
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<PAGE> 46
Revolving Loans, would exceed the lesser of (i) the Revolving Loan Commitment
Amount or (ii) the then existing Borrowing Base Amount plus the Letter of
Credit Outstandings in respect of the Sunshine Letter of Credit, provided,
however, that the issuance of the Sunshine Letter of Credit shall not be
subject to the foregoing Borrowing Base calculation.
SECTION 2.3. Optional Reduction of the Commitment Amounts. The
Borrower may, from time to time on any Business Day occurring after the time of
the initial Credit Extension hereunder, voluntarily reduce the unused amount of
the Revolving Loan Commitment Amount; provided, however, that all such
reductions shall require at least one Business Days' prior notice to the Agent
and be permanent, and any partial reduction of the unused amount of the
Revolving Loan Commitment Amount shall be in a minimum amount of $1,000,000 and
in an integral multiple of $500,000.
SECTION 2.4. Borrowing Procedure. By delivering a Borrowing Request
to the Agent on or before 10:00 a.m. (New York City time) on a Business Day,
the Borrower may from time to time irrevocably request that Base Rate Loans be
made on such Business Day or on another Business Day within five Business Days
of such Business Day, or that LIBO Rate Loans be made on any Business Day not
less than three nor more than five Business Days thereafter. All Loans shall
be made in a minimum aggregate amount of $1,000,000 and an aggregate integral
multiple of $100,000 or, if less, in the unused amount of the applicable
Commitment, and the proceeds of all Loans shall be used solely for the purposes
described in Section 4.10. On the terms and subject to the conditions of this
Agreement, each Borrowing shall be made on the Business Day specified in such
Borrowing Request. On or before 1:00 p.m. (New York City time) on such
Business Day, each Lender shall deposit with the Agent same day funds in an
amount equal to such Lender's Percentage of the requested Borrowing. Such
deposit will be made to an account which the Agent shall specify from time to
time by notice to the Lenders. To the extent funds are received from the
Lenders, the Agent shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its Borrowing
Request. No Lender's obligation to make any Loan shall be affected by any
other Lender's failure to make any Loan. As to all Credit Extensions on the
Effective Date, only Base Rate Loans will be available.
SECTION 2.5. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Agent on or before 10:00 a.m. (New York
City time) on a Business Day, the Borrower may from time to time irrevocably
elect, on not less than one Business Day's notice in the case of conversions to
Base Rate Loans, or three Business Days' notice in the case of conversions to
or continuations of LIBO Rate Loans, and in either
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<PAGE> 47
case not more than five Business Days' notice, that all, or any portion in an
aggregate minimum aggregate amount of $1,000,000 and an aggregate integral
multiple of $100,000 be, in the case of Base Rate Loans converted into LIBO
Rate Loans or be, in the case of LIBO Rate Loans converted into Base Rate Loans
or continued as LIBO Rate Loans (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days (but not more than five Business Days) before the last day
of the then current Interest Period with respect thereto, such LIBO Rate Loan
shall, on such last day, automatically convert to a Base Rate Loan); provided,
however, that (a) each such conversion or continuation shall be prorated among
the applicable outstanding Loans of all Lenders and (b) no portion of the
outstanding principal amount of any Loans may be continued as, or be converted
into, LIBO Rate Loans when any Default or any Event of Default has occurred and
is continuing (unless the Required Lenders otherwise agree in writing).
SECTION 2.6. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Sections 4.1 through 4.5, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.7. Issuance Procedures. By delivering to the Agent an
Issuance Request on or before 10:00 a.m., New York City time, on a Business
Day, the Borrower may, from time to time irrevocably request, on not less than
three nor more than 15 Business Days' notice, that the Issuer issue, increase
the Stated Amount of, or extend the Stated Expiry Date of, as the case may be,
a Letter of Credit in such form as may be requested by the Borrower and
approved by the Issuer, such Letter of Credit to be used solely for the
purposes described in Section 4.10. Each Letter of Credit shall by its terms
be stated to expire on a date (its "Stated Expiry Date") no later than the
earlier of (a) one year (or, in the case of the Letter of Credit issued under
the Existing Credit Agreement to Bankers Trust Company, up to 15 months) from
the date of issuance (or, if extendable beyond such period, cancelable upon at
least 30 days' notice given by the Issuer to the beneficiary of such Letters of
Credit) and (b) the Revolving Loan Commitment Termination Date. The Issuer
will make available to the beneficiary thereof the original of each Letter
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<PAGE> 48
of Credit which it issues hereunder. Unless notified in writing by the
Required Banks before it issues a Letter of Credit that a Default or Event of
Default exists, the Issuer may issue the requested Letter of Credit in
accordance with the Issuer's customary practices.
SECTION 2.7.1. Other Lenders' Participation. Upon the issuance of
each Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) shall be deemed to have irrevocably
and unconditionally purchased (without recourse, representation or warranty),
to the extent of its Percentage, a participation interest in such Letter of
Credit (including the Contingent Liability and any Reimbursement Obligation
with respect thereto), and such Lender shall, to the extent of its Percentage,
be responsible for reimbursing promptly (and in any event within one Business
Day together with interest at the Federal Funds Rate (rounded upward, if
necessary, to the next highest 1/16 of 1%) for each day until reimbursement is
made) the Issuer for Reimbursement Obligations which have not been reimbursed
by the Borrower in accordance with Section 2.7.3 or which have been reimbursed
by the Borrower but have been required to be returned or disgorged by the
Issuer. In addition, such Lender shall, to the extent of its Percentage and so
long as it shall have complied with its obligations under this Section and
Section 2.7.3, be entitled to receive a ratable portion of the Letter of Credit
fees payable pursuant to Section 3.3.2 with respect to each Letter of Credit
and of interest payable pursuant to Section 3.2 with respect to any
Reimbursement Obligation.
SECTION 2.7.2. Disbursements. The Issuer will notify the Borrower
and the Agent promptly of the presentment for payment of any Letter of Credit
issued by the Issuer, together with notice of the date (the "Disbursement
Date") such payment shall be made (each such payment, a "Disbursement").
Subject to the terms and provisions of such Letter of Credit and this
Agreement, the Issuer shall make such payment to the beneficiary (or its
designee) of such Letter of Credit. Prior to 11:00 a.m. (New York City time)
on the first Business Day following the Disbursement Date, the Borrower will
reimburse the Agent, for the account of the Issuer, for all amounts which the
Issuer has disbursed under such Letter of Credit, together with interest
thereon at a rate per annum equal to the highest rate per annum then in effect
pursuant to Section 3.2 for the period from the Disbursement Date through the
date of such reimbursement.
SECTION 2.7.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.7.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon), and, upon the
failure of the Borrower to reimburse the Issuer (or if any reimbursement by the
Borrower must be returned or disgorged by the Issuer for any
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reason), each Lender's obligation under Section 2.7.1 to reimburse the Issuer,
shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower or such Lender, as the case may be, may have or have had against the
Issuer or any Lender, including any defense based upon the failure of any
Disbursement to conform to the terms of the applicable Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such
Letter of Credit; provided, however, that after paying in full its
Reimbursement Obligation hereunder, nothing herein shall adversely affect the
right of the Borrower or such Lender, as the case may be, to commence any
proceeding against the Issuer for any wrongful Disbursement made by the Issuer
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or wilful misconduct on the part of such Issuer.
SECTION 2.7.4. Deemed Disbursements. Upon the occurrence and during
the continuation of any Default of the type described in Section 8.1.9 or, with
notice from the Agent, upon the occurrence and during the continuation of any
other Event of Default
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is
undrawn and available under all Letters of Credit issued and
outstanding for the account of the Borrower shall, without demand upon
or notice to the Borrower, be deemed to have been paid or disbursed by
the Issuer under such Letters of Credit (notwithstanding that such
amount may not in fact have been so paid or disbursed); and
(b) upon notification by the Agent to the Borrower of its
obligations under this Section, the Borrower shall be immediately
obligated to reimburse the Issuer for the amount deemed to have been
so paid or disbursed by such Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash in an account under the sole control of the Agent and
otherwise on terms satisfactory to the Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuers. In the case of any such deemed disbursement resulting from the
occurrence of a Default or Event of Default, if such Default or Event of
Default has been cured or waived, the Agent shall return to the Borrower all
amounts then on deposit with the Agent pursuant to this Section which have not
been applied to the partial satisfaction of such Obligations.
SECTION 2.7.5. Nature of Reimbursement Obligations. The Borrower
and, to the extent set forth in Section 2.7.1, each
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Lender shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Issuer shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may
prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
(d) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Lender hereunder. In furtherance
and extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by an Issuer in good faith shall be binding
upon the Borrower and each such Lender, and shall not put such Issuer under any
resulting liability to the Borrower or any such Lender, as the case may be.
SECTION 2.8. Notes. Each Lender's Loans under a Commitment shall be
evidenced by a Note payable to the order of such Lender in a maximum principal
amount equal to such Lender's Percentage of the original applicable Commitment
Amount. The Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made) appropriate notations on the grid attached to such Lender's
Notes (or on any continuation of such grid), which notations, if made, shall
evidence, inter alia, the date of, the outstanding principal of, and the
interest rate applicable to, the Loans evidenced thereby. Such notations shall
be rebuttable presumptive evidence of the matters evidenced thereby; provided,
however, that the failure of any Lender to make any such
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notations shall not limit or otherwise affect any Obligations of the Borrower
or any other Obligor.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor and pursuant to Section 8.2 and Section 8.3. Prior thereto,
repayments and prepayments of Loans shall be made as set forth in this Section
3.1.
SECTION 3.1.1. Voluntary Prepayments. Prior to the Stated Maturity
Date, the Borrower may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of all
Term Loans or Revolving Loans; provided, however, that
(a) any such prepayments shall be made pro rata among Loans
of the same type and, if applicable, having the same Interest Period
of all the Lenders;
(b) all such voluntary prepayments shall require written
notice prior to 10:00 a.m. (New York City time) on any Business Day
but no more than five Business Days' prior written notice to the
Agent; and
(c) all such voluntary partial prepayments shall be in an
aggregate minimum amount of (i) $1,000,000 and an integral multiple of
$500,000 for Term Loans, and (ii) $1,000,000 and an integral multiple
of $100,000 for Revolving Loans.
Each voluntary prepayment of Term Loans made pursuant to this Section, shall be
applied, to the extent of such prepayment, in the inverse order of the
scheduled repayments of the Term Loans set forth in clause (b) of Section 3.1.2
and shall be applied first to any Base Rate Loans outstanding prior to being
applied to any LIBO Rate Loans outstanding. Each prepayment of any Loans made
pursuant to this Section shall be without premium or penalty but subject to
Section 4.4.
SECTION 3.1.2. Mandatory Prepayments. Prior to the Stated Maturity
Date,
(a) the Borrower shall, on each date when the sum of (x) the
aggregate outstanding principal amount of all Revolving Loans and (y)
Letter of Credit Outstandings exceeds the lesser of (i) the Revolving
Loan Commitment Amount (as it may be reduced from time to time) and
(ii) the then existing Borrowing Base Amount plusthe Letter of
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Credit Outstandings in respect of the Sunshine Letter of Credit, make
a mandatory prepayment of all Revolving Loans in an amount equal to
such excess;
(b) the Borrower shall, on each date set forth below, make a
scheduled repayment of the aggregate outstanding principal amount of
all Term Loans in the amount set forth opposite each such date:
<TABLE>
<CAPTION>
Amount of Required
Repayment Date Principal Repayment
-------------- -------------------
<S> <C>
January 24, 1996 $2,000,000
July 24, 1996 $3,550,000
January 24, 1997 $3,550,000
July 24, 1997 $4,820,000
January 24, 1998 $5,780,000
July 24, 1998 $6,280,000
January 24, 1999 $6,670,000
July 24, 1999 $6,920,000
January 24, 2000 $7,110,000
July 24, 2000 $7,110,000
January 24, 2001 $7,110,000
July 24, 2001 $7,600,000
January 24, 2002 $11,500,000;
</TABLE>
(c) the Parent or the Borrower, as the case may be, shall,
(i) on the date of receipt by it or any of its Subsidiaries of any
Gross Transaction Proceeds, Net Disposition Proceeds, Net Equity
Proceeds, Net Debt Proceeds or Excess Insurance Proceeds and (ii) on
the date of delivery of the audited financial statements pursuant to
clause (b) of Section 7.1.1 (and, in any event, on the date 90 days
after the end of each Fiscal Year), in the case of Excess Cash Flow,
apply (A) 100% of all such Gross Transaction Proceeds, Net Disposition
Proceeds, Net Equity Proceeds, Excess Insurance Proceeds and Net Debt
Proceeds, as the case may be, and (B) 75% of all such Excess Cash
Flow, to make a mandatory prepayment of the Term Loans to be applied
to the installments thereof in the inverse order of the scheduled
repayments of the Term Loans; and
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(d) the Borrower shall, immediately upon any acceleration of
the Stated Maturity Date of any Loans pursuant to Section 8.2 or
Section 8.3, repay all (or if only a portion of the Loans are
accelerated thereunder, such portion of) the Loans; and
(e) the Borrower shall prepay Revolving Loans so that the
aggregate outstanding principal amount of all Revolving Loans
outstanding does not exceed $4,000,000 during a five consecutive
calendar day period during each calendar month (each such period, a
"Clean-Down Period").
Each prepayment of any Loans made pursuant to this Section shall be made
without premium or penalty, except as specified herein.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
SECTION 3.2.1. Rates. Subject to Sections 2.4 and 2.5, the Borrower
may elect, pursuant to an appropriately delivered Borrowing Request or
Continuation/Conversion Notice, that Loans comprising a Borrowing accrue
interest at a rate per annum:
(a) on that portion maintained from time to time as Base Rate
Loans, equal to the sum of the SG Base Rate from time to time in
effect plus 1.25%; and
(b) on that portion maintained as a LIBO Rate Loan, during
each Interest Period applicable thereto, equal to the sum of the LIBO
Rate (Reserve Adjusted) for such Interest Period plus 2.5%.
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined pursuant to the following formula:
<TABLE>
<CAPTION>
<S> <C> <C>
LIBO Rate = LIBO Rate
-----------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
</TABLE>
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Agent on the basis of the LIBOR Reserve Percentage in
effect on, and the applicable rates furnished to and received by the Agent from
SG, two Business Days before the first day of such Interest Period.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate
Loans, the rate of interest equal to the average (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the rates
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per annum at which Dollar deposits in immediately available funds are offered
to SG's LIBOR Office in the London, England interbank market at or about 11:00
a.m. (London, England time) two Business Days prior to the beginning of such
Interest Period for delivery on the first day of such Interest Period, and in
an amount approximately equal to the amount of SG's LIBO Rate Loan and for a
period approximately equal to such Interest Period.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve requirements (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of or including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including the first
day of the applicable Interest Period to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such LIBO
Rate Loan.
SECTION 3.2.2. Post-Default Rates. From and after the occurrence of
any Event of Default, the Borrower shall pay, but only to the extent permitted
by law, interest (after as well as before judgment) on such amounts at a rate
per annum equal to the rate per annum otherwise in effect plus a further margin
of 2% per annum.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan on the principal amount so
paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly
Payment Date occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
90 days, on the 90th day of such Interest Period); and
(e) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
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<PAGE> 55
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date therefor, upon acceleration or
otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Agent, for the pro rata account of each Lender of Revolving Loans, for the
period (including any portion thereof when the Revolving Loan Commitment is
suspended by reason of the Borrower's inability to satisfy any condition of
Article V) commencing on the Effective Date and continuing through the
Revolving Loan Commitment Termination Date, a commitment fee at the rate of 1/2
of 1% per annum on such Lender's Percentage of the sum of the average daily
undrawn and unused portion of the Revolving Loan Commitment Amount. The
Revolving Loan Commitment shall be considered to be used by the amount of the
Letter of Credit Outstandings. Such commitment fees shall be payable by the
Borrower in arrears on each Quarterly Payment Date, commencing with the first
Quarterly Payment Date following the Effective Date, and on the Revolving Loan
Commitment Termination Date.
SECTION 3.3.2. Letter of Credit Fee. The Borrower agrees to pay to
the Agent, for the pro rata account of the Issuer and each other Lender of
Revolving Loans, a Letter of Credit fee in an amount equal to 2.5% multiplied
by the Stated Amount of all Letters of Credit outstanding, such fee to be paid
quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan
Commitment Termination Date. The Borrower further agrees to pay to the Issuer
(a) on the date of (x) the issuance of each Letter of Credit, (y) each increase
in the Stated Amount thereof and (z) each extension (automatic or otherwise) of
the Stated Expiry Date thereof, an issuance fee in an amount equal to the
greater of (i) $500 and (ii) 1/4 of 1% of the Stated Amount thereof (or
increase in such Stated Amount) and (b) all costs and expenses incurred by the
Issuer in connection with such Letter of Credit.
SECTION 3.3.3. Agent's Fees, etc. The Borrower agrees to pay to the
Agent for its own account, fees in the amounts, on the dates and in the manner
set forth in the Fee Letter.
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<PAGE> 56
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Agent, be conclusive and binding on the Borrower) that the introduction of
or any change in or in the interpretation of any law makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful, for
such Lender to make, continue or maintain any Loan as, or to convert any Loan
into, a LIBO Rate Loan, the obligations of such Lender to make, continue,
maintain or convert any such LIBO Rate Loan shall, upon such determination,
forthwith be suspended until such Lender shall notify the Agent that the
circumstances causing such suspension no longer exist, and all outstanding LIBO
Rate Loans of such Lender shall automatically convert into Base Rate Loans at
the end of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If the Agent shall have
determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to SG in its relevant
market; or
(b) by reason of circumstances affecting SG's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,
then, upon notice from the Agent to the Borrower and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased Costs, etc. (a) The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans (including but not limited to any imposition or
effectiveness of reserve requirements not already included in the LIBO Rate
Reserve Percentage but excluding increases in Taxes and taxes expressly
excluded from Taxes pursuant to the first sentence of Section 4.6, as to which
the provisions of Section 4.6 shall control) that arise in connection with any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in, after the Effective Date, of, any law or
regulation, directive, guideline, decision
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<PAGE> 57
or request (whether or not having the force of law) of any court, central bank,
regulator or other governmental authority. Such Lender shall promptly notify
the Agent and the Borrower in writing of the occurrence of any such event, such
notice to state, in reasonable detail, the reasons therefor and the additional
amount required fully to compensate such Lender for such increased cost or
reduced amount. Such additional amounts shall be paid by the Borrower directly
to such Lender promptly (and, in any event, within 15 Business Days of receipt
of such notice), and such notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
(b) If at any time the introduction or effectiveness of or any change
in any applicable law, rule or regulation (including without limitation those
announced or published prior to the date of this Agreement), or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Lender
with any request or directive issued by any such authority (whether or not
having the force of law) shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against letters of
credit issued, or participated in, by any Issuer or Lender, or (ii) impose on
any Issuer or Lender any other conditions affecting this Agreement or any
Letter of Credit; and the result of any of the foregoing is to increase the
cost to any Issuer or Lender of issuing, maintaining or participating in any
Letter of Credit, or reduce the amount of any sum received or receivable by any
Issuer or Lender hereunder with respect to Letters of Credit, then, within ten
days of the receipt of the notice referred to below (which notice shall be
given by the respective Issuer or Lender promptly after it determines such
increased cost or reduction is applicable to Letters of Credit or its
participation therein) to the Borrower by the respective Issuer or Lender (a
copy of which notice shall be sent by such Issuer or Lender to the Agent), the
Borrower shall pay to such Issuer or Lender such additional amount or amounts
as will compensate such Issuer or Lender for such increased cost or reduction.
A notice submitted to the Borrower by such Issuer or Lender, setting forth the
basis for the calculation of such additional amount or amounts necessary to
compensate such Issuer or Lender as aforesaid shall be conclusive and binding
on the Borrower absent manifest error.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss (other than the loss of any payments in
respect of the 1.25% and 2.5% margins referred to in clauses (a) and (b),
respectively, of Section 3.2.1) or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of
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(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor as a result of the conditions
precedent to such Loans not being satisfied or as a result of the
Borrower attempting to revoke such Borrowing Request; or
(c) any Loans not being continued as, or converted into LIBO
Rate Loans in accordance with the Continuation/Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to
the Agent), the Borrower shall promptly (and, in any event, within 15 Business
Days of receipt of such notice) pay directly to such Lender such amount as will
(in the determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or Issuer or any Person
controlling such Lender or Issuer, and such Lender or Issuer determines (in its
sole and absolute discretion) that the rate of return on its or such
controlling Person's capital as a consequence of its Commitments or the Loans
made by such Lender or (to the extent, if any, not covered by Section 4.3(b)
hereof) Letters of Credit issued or participated in by such Lender or Issuer is
reduced to a level below that which such Lender, Issuer or such controlling
Person (to the extent, if any, not covered by Section 4.3(b) hereof) could have
achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by such Lender or Issuer to the Borrower,
the Borrower shall immediately pay directly to such Lender or Issuer additional
amounts sufficient to compensate such Lender or Issuer or such controlling
Person for such reduction in rate of return. A statement of such Lender or
Issuer as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such amount, such
Lender or Issuer may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
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SECTION 4.6. Taxes. All payments by the Borrower hereunder and under
all other Loan Documents shall be made free and clear of and without deduction
for any present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties or withholdings or other charges of any nature whatsoever
imposed by any taxing authority, but excluding franchise taxes, taxes imposed
on or measured by any Lender's net income or receipts or similar taxes (such
non-excluded items, solely for purposes of this Section, being called
"Charges"). In the event that any withholding or deduction from any payment to
be made by the Borrower hereunder is required in respect of any Charges
pursuant to any applicable law, rule or regulation (whether such law, rule or
regulation is in effect at the Effective Date or is enacted or implemented at
any time thereafter), then the Borrower will
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(iii) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
Moreover, if any Charges are directly asserted against the Agent, any Lender or
any Issuer with respect to any payment received by the Agent, such Lender or
such Issuer hereunder, the Agent or such Lender may pay such Charges and the
Borrower will promptly pay such additional amounts (including any penalties,
interest or expenses) as is necessary in order that the net amount received by
such person after the payment of such Charges (including any Charges on such
additional amount) shall equal the amount such person would have received had
not such Charges been asserted.
If the Borrower fails to pay any Charges when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lenders and the Issuer, the required receipts or other required
documentary evidence, the Borrower shall indemnify the Lenders and the Issuer
for any incremental Charges, interest or penalties that may become payable by
any Lender as a result of any such failure. For purposes of this Section, a
distribution hereunder by the Agent or any Lender or the Issuer to or for the
account of any Lender or the Issuer shall be deemed a payment by the Borrower.
Each Lender which is not a United States Person for Federal income tax
purposes agrees, to the extent that (i) all income realized by such Lender in
respect of any loan or this Agreement
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is, or is expected to be, effectively connected with the conduct by such Lender
of a trade or business in the United States and is includable in gross income
of such Lender for the relevant tax year or (ii) such Lender is entitled to a
total or partial exemption from withholding that is required to be evidenced by
United States Internal Revenue Service Form 1001 or 4224, to deliver to the
Agent and the Borrower, from time to time as requested to the Agent and the
Borrower, such Form 1001 or 4224 ("Exemption Certificate") or any applicable
successor form thereto, completed in a manner reasonably satisfactory to the
Agent and the Borrower.
If a Lender which is not a United States person for federal income tax
purposes has not delivered an Exemption Certificate to the Borrower on or
before its first participation as Lender hereunder or within a reasonable
period of time thereafter, then the Borrower shall not have any obligation to
indemnify such Lender for charges (including related penalties, interest and
expenses) imposed by the United States or any political subdivision thereof
pursuant to this section.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to or in respect of this
Agreement, the Notes, each Letter of Credit or any other Loan Document shall be
made by the Borrower to the Agent for the pro rata account of the Lenders
entitled to receive such payment. All such payments required to be made to the
Agent shall be made, without setoff, deduction or counterclaim, not later than
11:00 a.m. (New York City time), on the date due, in same day or immediately
available funds, to such account as the Agent shall specify from time to time
by notice to the Borrower. Funds received after that time shall be deemed to
have been received by the Agent on the next succeeding Business Day. The Agent
shall promptly remit in same day funds to each Lender its share, if any, of
such payments received by the Agent for the account of such Lender. All
interest and fees (including any Post-Default Rate interest payments made
pursuant to Section 3.2.2) shall be computed on the basis of the actual number
of days (including the first day but excluding the last day) occurring during
the period for which such interest or fee is payable over a year comprised of
360 days (or, in the case of interest on Base Rate Loans, 365 days or, if
appropriate, 366 days). Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall (except as otherwise
required by clause (c) of the definition of the term "Interest Period" with
respect to LIBO Rate Loans) be made on the next succeeding Business Day and
such extension of time shall be included in computing interest and fees, if
any, in connection with such payment. The Agent is authorized to charge any
account maintained by the Borrower with it for any Obligations owing to it or
any of the Lenders.
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SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan (other than pursuant to the terms
of Sections 4.3, 4.4, 4.5 and 4.6) in excess of its pro rata share of payments
pursuant to Section 4.7, then or therewith obtained by all Lenders, such Lender
shall purchase from the other Lenders such participations in Credit Extensions
made by them (without recourse, representation or warranty) as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and each Lender which
has sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender's ratable share (according to the
proportion of (a) the amount of such selling Lender's required repayment to the
purchasing Lender to (b) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. The Borrower agrees that
any Lender so purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all its rights of
payment (including pursuant to Section 4.9) with respect to such participation
as fully as if such Lender were the direct creditor of the Borrower in the
amount of such participation. If under any applicable bankruptcy, insolvency
or other similar law, any Lender receives a secured claim in lieu of a setoff
to which this Section applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders entitled under this Section to share in the
benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default and with the consent of the Required Lenders, to the extent
permitted under applicable law, appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
Obligations) each of the Borrower and the Parent hereby grants to each Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower and the Parent then or thereafter maintained
with such Lender; provided, however, that any such appropriation and
application shall be subject to the provisions of Section 4.8 (each Lender
agreeing promptly to notify the Borrower or the Parent, as the case may be, and
the Agent after any such setoff and application made by such Lender; but the
failure to give such notice shall not affect the validity of such setoff and
application). The rights of each Lender under this Section are in addition to
other
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rights and remedies (including other rights of setoff under applicable law or
otherwise) which such Lender may have.
SECTION 4.10. Use of Proceeds. The Borrower shall apply all the
proceeds of the Credit Extensions made on the Effective Date in accordance with
the twelfth recital. The proceeds from all subsequent Credit Extensions shall
be applied (a) for working capital and general corporate purposes of the
Borrower, (b) to make revolving loans from time to time by the Borrower to
Petroleum, and (c) for issuing Letters of Credit for working capital and
general corporate purposes of the Borrower and its Subsidiaries and Petroleum.
ARTICLE V
CONDITIONS TO EFFECTIVENESS AND CREDIT EXTENSIONS
SECTION 5.1. Effectiveness. This Amended and Restated Credit
Agreement shall become effective on the date (the "Effective Date") that each
of the conditions precedent set forth in this Section 5.1 shall be fulfilled to
the satisfaction of the Agent.
SECTION 5.1.1. Resolutions, etc. The Agent shall have received from
the Parent, the Borrower, Petroleum and each other Obligor party to a Loan
Document, a certificate, dated the date of the initial Credit Extension, of its
Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of this
Agreement, the Notes and each other Loan Document to be executed by
it;
(b) each Organic Document of the Parent, the Borrower,
Petroleum and each such other Obligor; and
(c) the incumbency and signatures of the officers of the
Parent, the Borrower, Petroleum and each such other Obligor authorized
to act with respect to this Agreement, the Notes and each other Loan
Document as is to be executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary or Assistant Secretary of the
Parent, the Borrower, Petroleum and each other Obligor canceling or amending
such prior certificate.
SECTION 5.1.2. Agreement. The Agent shall have received, with
counterparts for each Lender identified on the signature pages hereto, this
Agreement duly executed by each Lender, the
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Agent and an Authorized Officer of each of the Borrower and the Parent.
SECTION 5.1.3. Delivery of Notes. The First Merger Loans and the
Term Loans (as such terms are defined in the Existing Credit Agreement) shall
have been restated and consolidated in full with the Term Loans made hereunder
and Lenders holding First Merger Notes and Term Notes (as such terms are
defined in the Existing Credit Agreement) shall have returned such Notes for
replacement to the Agent. In addition, the Agent shall have received, for the
account of each Lender entitled thereto, its Term Note and Revolving Note,
dated the Effective Date, and duly executed and delivered by an Authorized
Officer of the Borrower.
SECTION 5.1.4. Beverage License Certification Date; Merger of
Sunshine and the Borrower. The Beverage License Certification Date shall have
occurred and the Merger shall contemporaneously with the making of the initial
Credit Extension on the Effective Date, have been consummated pursuant to
applicable law and a certificate of merger (the "Merger Certificate"), in a
manner reasonably satisfactory to the Agent. In addition, the Borrower shall
have delivered or caused to be delivered to the Agent counterparts for each
Lender of the following:
(a) Resolutions. Resolutions of the Boards of Directors and,
to the extent required by applicable law, stockholders of each party
to the Merger Certificate, each certified by the Secretary or an
Assistant Secretary of such party, duly adopted and in full force and
effect on the date of the Merger, authorizing the execution, delivery
and performance by such party of the Merger Certificate and all other
agreements, documents and instruments being delivered in connection
therewith.
(b) Certificates. A certificate from an Authorized Officer
of the Borrower to the effect that attached thereto are true and
correct copies of the Merger Certificate.
(c) Merger Certificate, etc. A true copy of the Merger
Certificate that has been duly completed and stamp filed by the
Secretary of State of Delaware and Florida.
(d) Opinions of Counsel. Opinions of legal counsel for the
Borrower and Sunshine relating to the Merger, which legal opinions
shall be in form and substance reasonably satisfactory to the Agent.
SECTION 5.1.5. Required Consents and Approvals. All required
consents and approvals shall have been obtained and be in full force and effect
with respect to the transactions contemplated hereby and the Merger from (a)
all relevant governmental authorities and regulatory bodies and (b) any other
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Person whose consent or approval the Agent reasonably deems necessary or
appropriate to effect the transactions contemplated hereby and by the Merger.
SECTION 5.1.6. Termination of Sunshine Indenture. All Class 7
Claimants of Sunshine shall have been paid in full or duly provided for
pursuant to a duly entered final Bankruptcy Court Order issued by the
Bankruptcy Court which has not been stayed and through the issuance of the
Sunshine Letter of Credit, and all holders of notes under the Sunshine
Indenture shall have been paid in full (after first applying all cash on hand
at Sunshine to the payment thereof) and the Sunshine Indenture shall have been
terminated and be of no further force or effect.
SECTION 5.1.7. Transfer of Sunshine Trademarks. The Borrower shall
have all right and title in the Sunshine United States Trademarks listed on
Schedule V hereto, free and clear of all Liens, charges or claims (other than
Permitted Encumbrances), and the Agent shall have received a duly perfected
first Lien therein in a manner and pursuant to legal documentation (including
legal opinions) reasonably satisfactory to the Agent.
SECTION 5.1.8. Financial Information, etc. The Agent shall have
received prior to the Effective Date, with counterparts for each Lender,
(a) audited financial statements for the Parent and its
Subsidiaries for the fiscal year ending December 25, 1994 and for
their prior two fiscal years, in each case prepared in accordance with
GAAP consistently applied and free of any Impermissible Qualification;
(b) unaudited financial statements for the Parent and its
Subsidiaries for the seven-month period ending in July of 1995 and
unaudited financial statements of Sunshine for the fiscal quarter
ending on or about June 30, 1995, certified by the chief financial
Authorized Officer of each such Person, in each case prepared in
accordance with GAAP consistently applied (subject to normal year-end
audit adjustments); and
(c) a pro forma consolidated balance sheet for the Parent and
its Subsidiaries (including Sunshine) satisfactory in form and
substance to the Agent and the Lenders, certified by the chief
financial Authorized Officer of the Borrower and the Parent, as the
case may be, giving effect to the consummation of the Merger and all
the transactions contemplated by this Agreement and the other Loan
Documents.
SECTION 5.1.9. Affirmation and Acknowledgement. The Agent shall have
received an Affirmation and Acknowledgement, dated as
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of the Effective Date, substantially in the form of Exhibit P hereto, duly
executed and delivered by each Obligor that is a party to the Security
Agreements, the Pledge Agreements, the Petroleum Guaranty and each other Loan
Document which was executed and delivered pursuant to the Existing Credit
Agreement.
SECTION 5.1.10. UCC Search Results. The Agent shall have received
certified copies of Uniform Commercial Code Requests for Information or Copies
(Form UCC-11), or a similar search report certified by a party acceptable to
the Agent, dated a date reasonably near (but prior to) the Effective Date,
listing all effective financing statements, tax liens and judgment liens which
name Sunshine, as the debtor and which are filed in the jurisdictions in which
filings are to be made pursuant to this Agreement and the other Loan Documents,
and in such other jurisdictions as the Agent may reasonably request, together
with copies of such financing statements (none of which (other than financing
statements (i) filed pursuant to the terms hereof in favor of the Agent, if
such Form UCC-11 or search report, as the case may be, is current enough to
list such financing statements, (ii) being terminated or (iii) in respect of
protective filings or Liens permitted under Section 7.2.3) shall cover any of
the Collateral).
SECTION 5.1.11. Amendment to Borrower Security Agreement, Filings,
etc. The Agent shall have received executed counterparts of an Amendment to
the Borrower Security Agreement, dated as of the Effective Date and duly
executed by the Borrower, substantially in the form of Exhibit T hereto,
together with executed copies of U.C.C. financing statements naming the
Borrower as the debtor and the Agent as the secured party, filed under the
U.C.C. of all jurisdictions (including the locations of all Sunshine stores) as
may be necessary or, in the opinion of the Agent, desirable to perfect the
first priority security interest of the Agent pursuant to the Borrower Security
Agreements, together with evidence satisfactory to the Agent of the filing (or
delivery for filing) of the appropriate trademarks.
SECTION 5.1.12. Solvency Certificates. The Agent shall have
received, with copies for each Lender, solvency certificates in substantially
the form of Exhibit M attached hereto, duly executed by the chief executive
officer and chief financial Authorized Officer of the Borrower, Petroleum and
the Parent, dated the Effective Date and expressly permitting the Agent and the
Lenders to rely thereon.
SECTION 5.1.13. Closing Date Certificates. The Agent shall have
received, with copies for each Lender, a closing date certificate in
substantially the form of Exhibit L attached hereto, duly executed by the chief
financial or executive Authorized Officer of the Borrower and the Parent, and
dated the
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Effective Date, in which certificate the Borrower and the Parent shall agree
and acknowledge that the statements made therein shall be true and correct
representations and warranties of the Borrower and the Parent as of such date.
All documents and agreements appended to such Closing Date Certificate shall be
in form and substance satisfactory to the Agent and the Required Lenders.
SECTION 5.1.14. Evidence of Insurance. The Agent shall have received
evidence of the insurance coverage required to be maintained pursuant to
Section 7.1.4, which insurance shall have been reviewed by one or more of the
Agent's risk managers and be satisfactory to the same, together with a
satisfactory insurance broker's letter or letters as to the compliance of the
same with the requirements of this Agreement.
SECTION 5.1.15. Payment of Outstanding Indebtedness, Payment of Fees
and Interest, etc. The Agent shall have received satisfactory evidence that
all Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, have been paid in full and
all obligations with respect thereto have been terminated and that all Liens
securing such payment of any Indebtedness have been released. In addition, the
Agent shall have received all Uniform Commercial Code Form UCC-3 termination
statements and mortgage releases, if any, or other instruments as may be
suitable or appropriate in connection with the foregoing. Furthermore, all
accrued interest and fees under the Existing Credit Agreement shall have been
paid in full.
SECTION 5.1.16. Opinions of Counsel. The Agent shall have received
opinions, dated the Effective Date and addressed to the Agent and all the
Lenders, from
(a) Bracewell & Patterson, L.L.P., counsel to the Obligors,
substantially in the form of Exhibit Q hereto; and
(b) Florida local counsel for matters related to the Merger
and personal property matters in form and substance satisfactory to
the Agent.
SECTION 5.1.17. Agent's Closing Fees, Expenses, etc. The Agent shall
have received for its own account, and for the account of each Lender, as the
case may be, all fees, costs and expenses due and payable pursuant to Sections
3.3 and, if then invoiced, 10.3.
SECTION 5.1.18. Borrowing Base Certificate. The Agent shall have
received, with counterparts for each Lender, an initial Borrowing Base
Certificate from the Borrower, dated the date of the initial Credit Extension
and calculated as of a
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recent date satisfactory to the Agent, duly executed and delivered by an
Authorized Officer of the Borrower.
SECTION 5.1.19. Effective Date. The Effective Date shall have
occurred by October 31, 1995.
SECTION 5.1.20. Stockholders' Acknowledgment and Confirmation. The
Agent shall have received, with a copy for each Lender, a duly executed
acknowledgment and agreement with respect to the Stockholders' Letter of
Understanding acknowledging the terms and conditions of this Agreement, and
agreeing that the terms and provisions thereof remain in full force and effect,
and otherwise in form and substance reasonably satisfactory to the Agent.
SECTION 5.1.21. Satisfactory Legal Form, etc. All documents executed
or submitted pursuant hereto on or prior to the Effective Date by or on behalf
of the Borrower or any of its Subsidiaries or any other Obligors shall be
satisfactory in form and substance to the Agent, the Lenders and their counsel;
the Agent, the Lenders and their counsel shall have received all information,
approvals, opinions, documents or instruments as the Agent, the Lenders or
their counsel may reasonably request.
SECTION 5.2. Conditions to Credit Extensions. The obligation of each
Lender and Issuer to make any Credit Extension (including the initial Credit
Extension and including any issuance of the Sunshine Letter of Credit) shall be
subject to the fulfillment of each of the conditions precedent set forth in
this Section 5.2 to the satisfaction of the Agent:
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Credit Extension, the following
statements shall be true and correct:
(a) the representations and warranties set forth in Article
VI (excluding, however, those contained in Section 6.7) and those set
forth in the other Loan Documents shall be true and correct in all
material respects with the same effect as if then made (unless stated
to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date);
(b) except as disclosed by the Borrower to the Agent and the
Lenders pursuant to Section 6.7,
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or,
to the knowledge (after due inquiry) of the Parent or the
Borrower, threatened against the Parent or any of its
Subsidiaries (including the Borrower or
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any of its Subsidiaries) which has a reasonable likelihood of
materially and adversely affecting the Parent's or the
Borrower's consolidated business, operations, assets,
revenues, properties or prospects, which purports to affect
the legality, validity or enforceability of this Agreement,
the Notes or any other Loan Document or, in the case of the
initial Credit Extension, seeks to restrain, enjoin or
otherwise prevent the consummation of, or to recover damages
or obtain relief as a result of, the transactions contemplated
by or in connection with the Merger, this Agreement or the
other Loan Documents; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which has a reasonable likelihood of materially and adversely
affecting the consolidated businesses, operations, assets,
revenues, properties or prospects of the Parent and its
Subsidiaries taken as a whole or the Borrower and its
Subsidiaries taken as a whole;
(c) the sum of the (i) aggregate outstanding principal amount
of all Revolving Loans and (ii) aggregate amount of Letter of Credit
Outstandings does not exceed the lesser of the Revolving Loan
Commitment Amount (as such amount may be reduced from time to time)
and the Borrowing Base Amount in effect at such time; and
(d) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request, etc. The Agent shall have
received a Borrowing Request if Loans are being requested or an Issuance
Request if a Letter of Credit is being requested or extended. Each of the
delivery of a Borrowing Request or Issuance Request and the acceptance by the
Borrower of the proceeds of such Credit Extension shall constitute a
representation and warranty by the Borrower that on the date of such Credit
Extension (both immediately before and after giving effect to such Credit
Extension and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, each Issuer and the Agent to amend and
restate the Existing Credit Agreement and to make Credit Extensions hereunder,
the Borrower and the Parent jointly
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and severally represent and warrant to the Agent, each Issuer and each Lender
as set forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries and each other Obligor (a) is a corporation validly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation and (b) is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the nature of its business
requires such qualification except where the failure to be so qualified or in
good standing could not reasonably be expected to have a material adverse
effect on the financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries taken as a whole or
the Parent and its Subsidiaries taken as a whole, and has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to enter into and perform its Obligations under this Agreement, the
Notes and each other Loan Document to which it is a party, to consummate the
Merger and to own and hold under lease its property and to conduct its business
substantially as currently conducted by it except where the failure to hold a
governmental license, permit, or other approval to own or hold under lease its
property and to conduct its business substantially as currently conducted could
not reasonably be expected to have a material adverse effect on the financial
condition, operations, assets, business, properties, revenues or prospects of
the Borrower and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries taken as a whole.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower and the Parent of this
Agreement, the Notes and each other Loan Document executed or to be executed by
it, and the execution, delivery and performance by each other Obligor of each
Loan Document executed or to be executed by it, and the consummation of the
Merger, are within the Borrower's, the Parent's and each such Obligor's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene or result in a default under the Borrower's,
the Parent's or any such Obligor's Organic Documents;
(b) contravene or result in a default under any contractual
restriction, law or governmental regulation or court decree or order
binding on the Borrower, the Parent or any such Obligor; or
(c) result in, or require the creation or imposition of, any
Lien on any of any Obligor's properties other than the Liens created
under the Loan Documents in favor of the Agent.
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SECTION 6.3. Government Approval, Regulation, Compliance with Law,
etc. No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or other Person
(other than the filing of UCC-1 financing statements in the appropriate
jurisdictions) is required for (a) the due execution, delivery or performance
by the Borrower, the Parent or any other Obligor of this Agreement, the Notes
or any other Loan Document to which it is a party or the consummation of the
Merger, (b) the grant by the Borrower and each applicable Obligor of the
security interests, pledges and Liens granted by the Loan Documents, or (c) the
perfection of or the exercise by the Agent of its rights and remedies under
this Agreement or any other Loan Document.
SECTION 6.4. Validity, etc. This Agreement and each of the Notes has
been duly executed and delivered, and each other Loan Document executed by the
Borrower, and the Parent, as the case may be, will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of the
Borrower, and the Parent, as the case may be, enforceable in accordance with
their respective terms; and each Loan Document executed pursuant hereto by each
other Obligor will, on the due execution and delivery thereof by such Obligor,
be the legal, valid and binding obligation of such Obligor enforceable in
accordance with its terms, such enforceability being subject in each case to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally, and subject to the effect
of general principles of equity (regardless of whether considered in a
proceeding in equity or at law). Each of the Loan Documents which purports to
create a security interest creates a valid first priority security interest in
the Collateral subject thereto, subject only to Liens permitted by Section
7.2.3, securing the payment of the Obligations.
SECTION 6.5. Financial Information. The financial statements
delivered pursuant to Sections 5.1.8(a) and (b) have been prepared in
accordance with GAAP consistently applied (including application of Financial
Accounting Statement No. 106) and such financial statements and the pro forma
balance sheets delivered pursuant to clause (c) of Section 5.1.8 present fairly
the financial condition of the corporations covered thereby as at the dates
thereof and the results of their operations for the periods then ended. The
Parent and its Subsidiaries have no material liabilities, including as to
contingencies and unusual or forward commitments, that are not disclosed in the
foregoing financial statements or the footnotes thereto or set forth in Item
6.5 ("Certain Material Liabilities") of the Disclosure Schedule. The pro forma
balance sheet delivered pursuant to clause (c) of Section 5.1.8 have been
prepared in accordance with the requirements of GAAP for the preparation of pro
forma financial statements.
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SECTION 6.6. No Material Adverse Change. (a) As of the Effective
Date, from and after June 25, 1995, there has been no material adverse change
in the financial condition, operations, assets, business, properties, revenues
or prospects of Sunshine or the Parent and its Subsidiaries or the Borrower and
its Subsidiaries, in each case taken as a whole.
(b) For the period after the Effective Date, since the Effective Date
there has been no material adverse change in the financial condition,
operations, assets, business, properties, revenues or prospects of the Parent
and its Subsidiaries or the Borrower and its Subsidiaries, in each case taken
as a whole.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of the Borrower, threatened litigation, action,
proceeding, or labor controversy affecting the Parent or any of its
Subsidiaries (including the Borrower or any of its Subsidiaries) or any other
Obligor, or any of their respective properties, businesses, assets or revenues,
which could reasonably be expected to materially adversely affect the financial
condition, operations, assets, business, properties, revenues or prospects of
the Borrower and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries taken as a whole, except as disclosed in Item 6.7 ("Litigation")
of the Disclosure Schedule, or which purports to affect the legality, validity
or enforceability of this Agreement, the Notes or any other Loan Document.
SECTION 6.8. Subsidiaries. The Parent has no direct Subsidiaries
except the Borrower and Petroleum. The Borrower has no Subsidiaries except
Delight and those Subsidiaries, if any, which it may acquire or create after
the date of the initial Credit Extension in accordance with the provisions
hereof. Petroleum has no Subsidiaries except Petroleum of California.
SECTION 6.9. Ownership of Properties; Liens. Except as set forth in
Item 6.9 ("Ownership of Properties") of the Disclosure Schedule, the Borrower
and the Parent, and each of their respective Subsidiaries, own good and
marketable title to all of their properties and assets, and have valid fee or
leasehold interests in all property, real and personal, tangible and
intangible, of any nature whatsoever (including patents, trademarks, trade
names, service marks and copyrights), free and clear of all Liens, charges or
claims (including infringement claims with respect to patents, trademarks,
copyrights and the like which could interfere in the conduct of their
businesses as currently conducted) except to the extent expressly permitted by
Section 7.2.3.
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SECTION 6.10. Taxes. The Parent and each of its Subsidiaries
(including the Borrower and its Subsidiaries) have filed (a) all returns and
reports required by law to have been filed by or with respect to it in
connection with federal, state and local income taxes (including any
predecessor or prior consolidated group of which it may have been a member) and
(b) all other returns and reports with respect to Taxes required by law to have
been filed to the extent (as to this clause (b)) the failure to do so could
reasonably be expected to have a material adverse effect on the financial
condition, operations, assets, business, properties, revenues or prospects of
the Parent and its Subsidiaries taken as a whole or the Borrower and its
Subsidiaries taken as a whole. All federal, state and local income taxes (as
described above) that are owing have been paid in full and all other Taxes and
governmental charges that are owing have been paid in full to the extent the
failure to do so could reasonably be expected to have a material adverse effect
on the financial condition, operations, assets, business, properties or
prospects the Parent and its Subsidiaries taken as a whole or the Borrower and
its Subsidiaries taken as a whole, except in each such case any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Credit Extension hereunder, no
steps have been taken to terminate any Pension Plan, and no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise
to a Lien under Section 302(f) of ERISA. No condition exists or event or
transaction has occurred with respect to any Pension Plan which might result in
the incurrence by the Borrower or any member of the Controlled Group of any
material liability, fine or penalty. Except as disclosed in Item 6.11
("Employee Benefit Plans") of the Disclosure Schedule, neither the Borrower nor
any member of the Controlled Group or any other Obligor has any contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Title I
of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 ("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower, the Parent or any of
their respective Subsidiaries have been, and continue to be, owned or
leased by the Borrower, the Parent and such Subsidiaries in compliance
in all material respects with all Environmental Laws;
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(b) there have been no past, and there are no pending or, to
the best knowledge of the Parent and the Borrower, threatened
(i) claims, complaints, notices or requests for
information received by the Borrower, the Parent or any of
their respective Subsidiaries with respect to any alleged
violation of any Environmental Law, as to which the Agent has
not received written notice, or
(ii) complaints, notices or inquiries to the
Borrower, the Parent or any of their respective Subsidiaries
regarding potential liability under any Environmental Law or,
with regard to contamination, any common or civil law, as to
which the Agent has not received written notice;
(c) there is no claim, complaint, notice, request for
information or inquiry that has been received by or made to the
Borrower, the Parent or any of their respective Subsidiaries with
respect to any alleged violation of any Environmental Law or regarding
potential liability under any Environmental Law or, with regard to
contamination, any common or civil law, which, singly or in aggregate,
could reasonably be expected to have a material adverse effect on the
financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries taken as a
whole or the Parent and its Subsidiaries taken as a whole;
(d) there have been no Releases of Hazardous Materials at, on
or under any property now or previously owned or leased by the
Borrower, the Parent or any of their respective Subsidiaries that,
singly or in the aggregate, could reasonably be expected to have a
material adverse effect on the financial condition, operations,
assets, business, properties, revenues or prospects of the Borrower
and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries taken as a whole;
(e) the Borrower, the Parent and their respective
Subsidiaries have been issued and are in compliance in all material
respects with all permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and necessary or
desirable for their businesses;
(f) no property now or previously owned or leased by the
Borrower, the Parent or any of their respective Subsidiaries is listed
or proposed for listing (with respect to owned property only) on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-up;
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(g) there are no underground storage tanks (including
petroleum storage tanks) that are abandoned or that have been inactive
for greater than one year on or under any property now or previously
owned or leased by the Borrower, the Parent or any of their respective
Subsidiaries;
(h) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower, the Parent or any
of their respective Subsidiaries that do not have leak detection
systems as required by and in compliance in all material respects with
all Environmental Law;
(i) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower, the Parent or any
of their respective Subsidiaries that have Released or suffered
Release(s) of Hazardous Materials that, singly or in the aggregate,
could reasonably be expected to have a material adverse effect on the
financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries taken as a
whole or the Parent and its Subsidiaries taken as a whole;
(j) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower, the Parent or any
of their respective Subsidiaries that have Released Hazardous
Materials and have not or would not qualify and be eligible for the
funding (subject to applicable deductibles) of the cleanup of
Release(s) and third party liability by a State fund;
(k) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower, the Parent or any
of their respective Subsidiaries that have Release(s) the cleanup of
which will or is reasonably expected to exceed the maximum funding of
cleanup by a State fund;
(l) there are no septic systems, cess pools, underground
systems or underground injection wells on or under any property now or
previously owned or leased by the Borrower, the Parent or any of their
respective Subsidiaries that have Released or suffered Releases of
Hazardous Materials which, singly or in the aggregate, could
reasonably be expected to have a material adverse effect on the
financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its
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Subsidiaries taken as a whole or the Parent and its Subsidiaries taken
as a whole;
(m) there are no fuel pumps, underground storage tanks, or
above ground storage tanks, including petroleum storage tanks, on or
under any property now owned or leased by the Borrower, the Parent or
any of their respective Subsidiaries that required or are reasonably
expected to be required to be modified, upgraded or replaced to
include emission control devices in a manner (including as to costs
and expenses) that, singly or in the aggregate, could reasonably be
expected to have a material adverse effect on the financial condition,
operations, assets, business, properties, revenues or prospects of the
Borrower and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries taken as a whole;
(n) any tank or pump replacement program of the Borrower, the
Parent or any of their respective Subsidiaries, singly or in the
aggregate, is not reasonably expected to have a material adverse
effect on the financial condition, operations, assets, business,
properties, revenues or prospects of Borrower and its Subsidiaries
taken as a whole or the Parent and its Subsidiaries taken as a whole;
(o) neither the Parent nor any Subsidiary of the Parent
(including the Borrower and its Subsidiaries) has directly transported
or directly arranged for the transportation of any Hazardous Material
to any location which is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material
claims against the Parent or such Subsidiary thereof for any remedial
work, damage to natural resources or personal injury, including claims
under CERCLA;
(p) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower, the Parent or any of their respective Subsidiaries that,
singly or in the aggregate, have, or may reasonably be expected to
have, a material adverse effect on the financial condition,
operations, assets, business, properties, revenues or prospects of the
Borrower and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries taken as a whole; and
(q) no conditions (other than those covered in the preceding
clauses (a) through (p)) exist at, on or under any property now or
previously owned or leased by the Borrower, the Parent or any of their
respective Subsidiaries which,
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with the passage of time, or the giving of notice or both, would give
rise to any material liability under any Environmental Law.
SECTION 6.13. Accuracy of Information. (a) All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower and
the Parent in writing to the Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower and the Parent to the Agent or any Lender, will be, when taken as a
whole true and accurate in every material respect on the date as of which such
information is dated or certified and, as to information delivered before the
Effective Date, as of the date of execution and delivery of this Agreement by
the Agent and such Lender, and such information is not, when taken as whole or
shall not be, as the case may be, incomplete by omitting to state any material
fact necessary to make such information not misleading.
(b) All written information prepared by any consultant or
professional advisor on behalf of the Parent or any of its Subsidiaries which
was furnished to the Agent or any Lender in connection with the preparation,
execution and delivery of this Agreement (including, without limitation, the
Memorandum) has been reviewed by the Borrower and the Parent, and nothing has
come to the attention of the Borrower and the Parent in the context of such
review which would lead it to believe that such information (or the assumptions
on which such information is based) is not, taken as a whole, true and correct
in all material respects or that such information, taken as a whole, omits to
state any material fact necessary to make such information not misleading in
any material respect.
(c) Insofar as any of the information described above includes
assumptions, estimates, projections or opinions, the Borrower and the Parent
have reviewed such matters and nothing has come to the attention of the
Borrower and the Parent in the context of such review which would lead it to
believe that such assumptions, estimates, projections or opinions, omit to
state any material fact necessary to make such assumptions, estimates,
projections or opinions not reasonable or not misleading in any material
respect. All projections and estimates have been prepared in good faith on the
basis of reasonable assumptions and represent the best estimate of future
performance by the party supplying the same.
SECTION 6.14. Confirmation of Representations and Warranties. Each
of the representations and warranties contained in the Existing Credit
Agreement (including without limitation those contained in Amendment No. 3) is
hereby confirmed and restated in all material respects as of the date when
made.
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SECTION 6.15. Expropriation and Condemnation. Not more than fifteen
locations as to which any Realty is located is the subject of a condemnation,
expropriation or other taking by any federal, state, provincial, municipal or
other competent authority or a notice or proceeding in respect thereof.
SECTION 6.16. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a material adverse effect on the financial condition, operations,
assets, business, properties, revenues or prospects of the Borrower and its
Subsidiaries taken as whole or the Parent and its Subsidiaries taken as a
whole:
(a) such Intellectual Property Collateral is subsisting and
has not been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and
enforceable;
(c) the Borrower and the other Subsidiaries of the Parent
have made all necessary filings and recordations to protect their
respective interests in such Intellectual Property Collateral,
including recordations of all such interests in the Intellectual
Property Collateral in the United States Patent and Trademark Office
and/or the United States Copyright Office;
(d) the Borrower and the other Subsidiaries of the Parent are
the exclusive owners of the entire and unencumbered right, title and
interest in and to such Intellectual Property Collateral (except for
Liens created under the Loan Documents) and no claim has been made
that the use of such Intellectual Property Collateral does or may
violate the asserted rights of any third party except for claims that
could not reasonably be expected to have a material adverse effect on
the financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries taken as a
whole or the Parent and its Subsidiaries taken as a whole; and
(e) the Borrower and the other Subsidiaries of the Parent
have performed and will continue to perform all acts and has paid and
will continue to pay all required fees and taxes to maintain each and
every item of such Intellectual Property Collateral in full force and
effect in the United States.
SECTION 6.17. Ownership of Stock. The Parent owns free and clear of
all Liens (other than any Lien pursuant to the Parent
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Pledge Agreement), 100% of the outstanding shares of common stock (whether
voting or non-voting) of the Borrower and Petroleum on a fully diluted basis.
The Borrower owns free and clear of all Liens 100% of the outstanding shares of
common stock (whether voting or non-voting) of Delight on a fully diluted
basis. There are no outstanding options, warrants or convertible securities
with respect to the shares of common stock of the Borrower.
SECTION 6.18. Absence of Default. Neither the Parent nor any of its
Subsidiaries is (i) in default as of the Effective Date in the payment of (or
in the performance of any obligation applicable to) any Indebtedness, except as
disclosed in Item 6.18 ("Absence of Default") in the Disclosure Schedule or
(ii) in violation of any law or governmental regulation or court decree or
order, except where such violation could not reasonably be expected to have a
material adverse effect on the financial condition, operations, assets,
business, properties, revenues or prospects of the Borrower and its
Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a
whole.
SECTION 6.19. Regulations G, U and X. Neither the Parent nor any of
its Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
"margin stock". None of the proceeds of any Loan or any Letter of Credit will
be used for the purpose of, or be made available by the Borrower in any manner
to any other Person to enable or assist such Person in, directly or indirectly
purchasing or carrying "margin stock". Terms for which meanings are provided
in F.R.S. Board Regulation G, U or X or any regulations substituted therefor,
as from time to time in effect, are used in this Section with such meanings.
SECTION 6.20. Government Regulation. Neither the Parent nor any of
its Subsidiaries is an "investment company" nor a "company controlled by an
investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
SECTION 6.21. Burdensome Agreements. Neither the Parent nor any of
its Subsidiaries is or will be a party to any instrument or subject to any
charter or other corporate restriction which could have a materially adverse
effect on its financial condition, operations, assets, business, properties,
revenues or prospects.
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SECTION 6.22. List of Guaranty Beneficiaries. Set forth in Item
7.2.2(j) ("E-Z Serve Corporation Outstanding Corporate Guaranties") of the
Disclosure Schedule is a list of each of the beneficiaries of the corporate
guaranties referred to in Section 7.2.2 (j) as of the Effective Date.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower and the Parent
jointly and severally agree with the Agent, each Issuer and each Lender that,
until all Commitments have terminated and all Obligations have been paid and
performed in full, the Borrower and the Parent will perform the obligations set
forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower and the Parent will furnish, or will cause to be furnished, to each
Lender and the Agent copies of the following financial statements, reports,
notices and information:
(a) as soon as available and in any event within 35 days
after the end of each month of each Fiscal Year of the Parent, (i) a
monthly financial report for such month and consolidated balance
sheets of the Parent and its Subsidiaries as of the end of such month
and consolidated statements of earnings of the Parent and its
Subsidiaries for such month and for the period commencing at the end
of the previous Fiscal Year and ending with the end of such month,
setting forth in each case in comparative form the consolidated
figures for the corresponding periods of the previous Fiscal Year (it
being acknowledged that such figures for corresponding periods of the
previous Fiscal Year shall not include the operations of Time Saver
until delivery of the financial statements for February of 1996 and
Sunshine until delivery of the financial statements for September of
1996), certified by the chief financial Authorized Officer of the
Parent in a manner acceptable to the Agent and (ii) a certificate,
executed by the chief financial Authorized Officer of the Parent
showing the amount of intercompany Indebtedness outstanding at the end
of such month.
(b)(i) as soon as available and in any event within 90 days
after the end of each Fiscal Year of the Parent, a copy of the annual
audit report for such Fiscal Year for the Parent and its Subsidiaries,
including therein consolidated and consolidating balance sheets of the
Parent and its Subsidiaries as of the end of such Fiscal Year and
consolidated and consolidating statements of earnings and consolidated
statements of cash flow of the Parent and its
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Subsidiaries for such Fiscal Year, in each case certified (without any
Impermissible Qualification) by KPMG Peat Marwick or other independent
public accountants of nationally recognized standing as fairly
presenting, in accordance with GAAP consistently applied, the
financial condition, results of operations and cash flows of the
Parent and its Subsidiaries at the end of such Fiscal Year and for the
Fiscal Year then ended, together with a certificate, executed by the
chief financial Authorized Officer of the Borrower, showing (in
reasonable detail and with appropriate calculations and computations
in all respects satisfactory to the Agent) the calculation of Excess
Cash Flow, and (ii) as soon as available and in any event within 120
days after the end of each Fiscal Year of the Parent, all management
letters and internal control and similar memoranda prepared by the
accountants certifying the financial statements of the Parent for such
Fiscal Year;
(c) as soon as available and in any event within 45 days
after the end of each Fiscal Quarter of each Fiscal Year of the
Parent, (i) a quarterly financial report and consolidated balance
sheets of the Parent and its Subsidiaries as of the end of such Fiscal
Quarter and consolidated statements of earnings and consolidated
statements of cash flow of the Parent and its Subsidiaries for such
Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
setting forth in each case in comparative form the consolidated
figures for the corresponding periods of the previous Fiscal Year (it
being acknowledged that such figures for corresponding periods of the
previous Fiscal Year shall not include the operations of Time Saver
until delivery of the financial statements for the first Fiscal
Quarter of the 1996 Fiscal Year and Sunshine until delivery of the
financial statements for the third Fiscal Quarter of the 1996 Fiscal
Year) certified by the chief financial Authorized Officer of the
Parent in a manner acceptable to the Agent and (ii) a Compliance
Certificate, executed by the chief financial Authorized Officer of the
Parent, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to the
Agent) compliance with the financial covenants set forth in Section
7.2.4;
(d) as soon as available and in any event within 15 days
after the end of each calendar month, a Borrowing Base Certificate
calculated as of the last day of the immediately preceding month;
(e) as soon as possible and in any event within three
Business Days after knowledge of an Authorized Officer of the
occurrence of any Default, a statement of the chief
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financial Authorized Officer of the Borrower setting forth details of
such Default and the action which the Borrower has taken and proposes
to take with respect thereto;
(f) as soon as possible and in any event within three
Business Days after (x) the occurrence of any materially adverse
development with respect to any litigation, action, proceeding, or
labor controversy described in Section 6.7 or (y) the commencement of
any labor controversy, litigation, action, proceeding of the type
described in Section 6.7, notice thereof and, at the Agent's request,
copies of all documentation relating thereto;
(g) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any class of its security
holders generally, in their capacities as such, and all reports and
registration statements which the Borrower or any of its Subsidiaries
files with the Securities Exchange Commission or any securities
exchange;
(h) immediately upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA, or the taking of any action with respect to a
Pension Plan which could result in the requirement that the Borrower
furnish a bond or other security to the PBGC or such Pension Plan, or
the occurrence of any event with respect to any Pension Plan which
could result in the incurrence by the Borrower of any material
liability, fine or penalty, or any material increase in the contingent
liability of the Borrower with respect to any post-retirement Welfare
Plan benefit, notice thereof and copies of all documentation relating
thereto;
(i) promptly when available and, in any event, (x) at least
30 days prior to the last day of each Fiscal Year, a preliminary
budget in form and scope reasonably satisfactory to the Agent for the
next succeeding Fiscal Year, and (y) within 30 days after the
beginning of each Fiscal Year, a definitive budget in form and scope
satisfactory to the Agent for such Fiscal Year, in each case in
reasonable detail for the relevant Fiscal Year and setting forth the
principal assumptions upon which such budget is based; and
(j) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries or the Parent or any of its Subsidiaries as any Lender
through the Agent may from time to time reasonably request, including
in respect of establishing the eligibility of the Accounts and
Inventory comprising the
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Eligible Accounts and Eligible Inventory included in each Borrowing
Base Certificate delivered pursuant to this Agreement.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower and the
Parent will, and will cause each of their respective Subsidiaries to:
(a) comply in all respects with all governmental rules and
regulations and all other applicable laws, rules, regulations and
orders (except where the failure to so comply could not reasonably be
expected to have a material adverse effect on the financial condition,
operations, assets, business, properties, revenues or prospects of the
Borrower and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries taken as a whole), such compliance to include the
maintenance and preservation of its corporate existence (except to the
extent permitted under Section 7.2.10) and qualification as a foreign
corporation in any jurisdiction where the Borrower or the other
Subsidiaries of the Parent have assets or conduct business, except
where failure to maintain and preserve such existence or qualification
would not materially adversely affect the Borrower's or the Parent's
consolidated financial condition, operations, assets, business,
revenues, properties or prospects; and
(b) comply in all material respects with all governmental
rules and regulations and all other material applicable laws, rules,
regulations and orders relating to taxation, including the payment,
before the same become delinquent, of (i) all federal, state and local
income taxes and (ii) all other taxes, assessments and governmental
charges except in each such case to the extent being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on
its books.
The Parent will continue to file a consolidated federal income tax return of
the "affiliated group" of corporations of which the Parent is the "common
parent corporation" (as such terms are defined in Section 1504(a)(1) of the
Code) for each taxable year of the Parent and will cause each of its
Subsidiaries to consent to each such filing.
SECTION 7.1.3. Maintenance of Properties. The Borrower and the
Parent will, and will cause each of their respective Subsidiaries to, maintain,
preserve, protect and keep their respective properties in good repair, working
order and condition (except to the extent sold, transferred or otherwise
disposed of pursuant to a Permitted Disposition), and make necessary and proper
repairs, renewals (including lease payments on leasehold
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<PAGE> 83
properties) and replacements so that the business carried on in connection
therewith may be properly conducted at all times (including the maintenance of
convenience stores consistent with the specifications set forth in the
Memorandum), unless the Borrower or the Parent, as the case may be, determines
in good faith that the continued maintenance of any of its properties is no
longer economically desirable (provided that any such determination with
respect to any property material to the operations of the Borrower or any other
Subsidiary of the Parent shall be made only after consultation with the Agent).
Without limiting the effect of any provision contained in the immediately
preceding sentence, and in furtherance thereof, the Borrower and the Parent,
unless otherwise directed by the Required Lenders, will, and will cause each of
their respective Subsidiaries to, make Capital Expenditures for each Fiscal
Year set forth below in an aggregate amount equal to or greater than (subject
to Section 7.2.7) the amount set forth opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Capital Expenditures
----------- --------------------
<S> <C>
1995 $11,400,000
1996 $ 9,800,000
1997 $ 8,800,000
1998 $ 8,900,000
1999 $ 6,000,000
2000 $ 6,100,000
2001 $ 6,200,000
</TABLE>
SECTION 7.1.4. Insurance. (a) The Borrower and the Parent shall
maintain, and shall cause each of their respective Subsidiaries to maintain,
with responsible and reputable insurance carriers licensed to write insurance,
insurance with respect to all their property, business and assets against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses.
(b) All premiums on insurance policies required under this Section
shall be paid by the Parent and its Subsidiaries. Each policy for property
insurance maintained by the Parent and its Subsidiaries shall (i) name the
Agent (as Agent for the Lenders) as loss payee under a lenders loss payable
clause, (ii) provide that no cancellation, reduction in amount or material
change in coverage thereof or any portion thereof shall be effective until at
least 30 days after receipt by the Agent of written notice thereof, (iii)
provide that any notice under such policies relating to cancellation, reduction
or material change in coverage or the occurrence of any loss in excess of
$250,000 shall be simultaneously delivered to the Agent and (iv) be
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reasonably satisfactory in all other respects to the Agent. Each policy for
liability insurance maintained by the Parent and its Subsidiaries shall (i)
name the Agent as an additional insured, (ii) provide that no cancellation,
reduction in amount or material change in coverage thereof or any portion
thereof shall occur by reason of any breach of any representation or warranty,
nor shall any thereof be effective until at least 30 days after receipt by the
Agent of written notice thereof, (iii) provide that any notice under such
policies relating to cancellation, reduction or material change in coverage or
the occurrence of any loss in excess of $250,000 shall be simultaneously
delivered to the Agent and (iv) be reasonably satisfactory in all other
respects to the Agent.
(c) The Borrower will deliver, and the Parent will cause its
Subsidiaries to deliver, to the Agent, promptly upon request, (i) the originals
of all policies evidencing all insurance required to be maintained under clause
(a) or certificates thereof by the insurers together with a counterpart of each
policy, (ii) a satisfactory insurance broker's letter as to the adequacy of the
insurance being maintained by the Parent and its Subsidiaries and as to the
compliance of the same with the requirements of this Section and (iii) evidence
as to the payment of all premiums then due thereon (or with respect to any
insurance policies providing for payment other than by a single lump sum, all
installments for the current year due thereon to such date), provided that
neither the Agent nor any Lender shall be deemed by reason of its custody of
such policies to have knowledge of the contents thereof. The Borrower will
also deliver, and the Parent will also cause its Subsidiaries to deliver, to
the Agent not later than five days prior to the expiration of any policy a
binder or certificate of the insurer evidencing the replacement thereof.
(d) If a Default or Event of Default has not occurred and is
continuing, all proceeds of property insurance (other than any such proceeds
which reimburse the Borrower or any other applicable Subsidiary of the Parent
for environmental liabilities or remediation costs previously paid by the
Borrower or such Subsidiary) paid on account of the loss of or damage to any
property or asset of the Parent or any of its Subsidiaries shall be paid to the
Borrower or other applicable Subsidiary of the Parent, and the Borrower or such
Subsidiary shall use such proceeds within 365 days thereafter to repair,
restore or replace such property or asset or to reinvest in other capital
assets reasonably related to the ownership and operation of convenience stores.
With respect to any casualty or other covered occurrence in which the aggregate
proceeds of property insurance receivable by the Borrower or any other
applicable Subsidiary of the Parent (other than any such proceeds which
reimburse the Borrower or such Subsidiary for environmental liabilities or
remediation costs previously paid by the Borrower or such Subsidiary) exceeds
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<PAGE> 85
$250,000, to the extent the Borrower or such Subsidiary elects not to apply
such insurance proceeds for the repair, replacement or restoration of such
property or asset or for reinvestment in capital assets reasonably related to
the ownership and operation of convenience stores, or such insurance proceeds
are not in fact so applied within 365 days, all of such unutilized insurance
proceeds shall be delivered by the Borrower or such Subsidiary (and the Parent
shall cause such Subsidiary to so deliver) to the Agent and shall constitute
"Excess Insurance Proceeds," to be applied as a mandatory prepayment of the
Term Loans pursuant to clause (c) of Section 3.1.2. Notwithstanding any
provision to the contrary in this Agreement or any other Loan Document, if an
Event of Default has occurred and is continuing, all proceeds of property
insurance (including business interruption insurance) shall be payable directly
to the Agent and the Agent in its sole discretion may treat such proceeds as
"Excess Insurance Proceeds" or, subject to the consent of the Required Lenders,
permit the use of such proceeds to repair, restore or replace the property or
asset which suffered the loss for which such proceeds are being paid.
SECTION 7.1.5. Books and Records. (a) The Borrower and the Parent
will, and will cause each of their respective Subsidiaries to, keep books and
records which accurately reflect all of their respective business affairs and
transactions.
(b) The Borrower and the Parent will, and will cause each of their
respective Subsidiaries to, permit the Agent and each Lender or any of their
representatives, at reasonable times and intervals and upon reasonable notice,
to visit all of their respective offices, to discuss their respective financial
matters with their respective officers and independent public accountant and
consultants (and the Borrower and the Parent hereby authorize such independent
public accountant and consultants to discuss such financial matters with each
Lender or its representatives whether or not any representative of the Borrower
or Parent is present) and to examine (and, at the expense of the Borrower, copy
extracts from) any of their respective books or other corporate records
(including computer records).
(c) The Borrower shall pay any fees of such independent public
accountant and consultants incurred in connection with the Agent's or any
Lender's exercise of its rights pursuant to this Section. The Agent, in its
sole discretion and at the sole expense of the Borrower, may conduct such
audits and examinations of the books and records of the Parent and its
Subsidiaries as the Agent reasonably deems necessary or advisable.
SECTION 7.1.6. Environmental Covenant. The Borrower and the Parent
will, and will cause each of their respective Subsidiaries to,
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<PAGE> 86
(a) use and operate all of its facilities and properties in
compliance in all material respects with all Environmental Laws, keep
(and, when applicable, obtain in a timely manner) all necessary
material permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain
in compliance in all material respects therewith, and handle all
Hazardous Materials (including the disposition and storing thereof) in
compliance in all material respects with all applicable Environmental
Laws;
(b) respond to all Releases in accordance with law and in a
manner that assures and will assure that, to the maximum extent
commercially practicable, State funds pay for the response to
Releases;
(c) promptly notify the Agent and provide copies upon receipt
of all written claims, complaints, notices or inquiries relating to
the condition of its facilities and properties or compliance with
Environmental Laws; and
(d) provide such information and certifications which the
Agent may reasonably request from time to time to evidence compliance
with this Section.
SECTION 7.1.7. As to Intellectual Property Collateral. (a) The
Borrower shall not, and the Parent shall not permit any of its other
Subsidiaries to, unless the Borrower or such Subsidiary shall reasonably and in
good faith determine that any of its Intellectual Property Collateral is of
negligible economic value to it (provided that any such determination with
respect to any trademark or other mark used in connection with the name of any
convenience store or gasoline station shall be made only after consultation
with the Agent), do any act, or omit to do any act, whereby any of such
Intellectual Property Collateral may lapse or become abandoned or dedicated to
the public or unenforceable.
(b) The Borrower or the Parent shall notify the Agent immediately if
it knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or invalid
or unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any foreign counterpart thereof or any court) regarding the ownership
of the Borrower or any other Subsidiary of the Parent of any material item of
the Intellectual Property Collateral or the Borrower's or such Subsidiary's
right to register the same or to keep and maintain and enforce the same.
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<PAGE> 87
(c) In no event shall the Borrower or any other Subsidiary of the
Parent, or any of their respective agents, employees, designees or licensees,
file an application for the registration of any Intellectual Property
Collateral with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other country or
any political subdivision thereof, unless it promptly informs the Agent, and
upon request of the Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Agent may reasonably request to
evidence the Agent's security interest in such Intellectual Property Collateral
and the goodwill and general intangibles of the Borrower or such Subsidiary
relating thereto or represented thereby.
(d) The Borrower shall take, and the Parent shall cause its
Subsidiaries to take, all necessary steps, including in any proceeding before
the United States Patent and Trademark Office, the United States Copyright
Office, to maintain and pursue any application (and to obtain the relevant
registration) filed with respect to, and to maintain any registration of, any
material item of the Intellectual Property Collateral, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and the payment of fees
and taxes (except to the extent that dedication, abandonment or invalidation is
permitted under the foregoing clauses (a), (b) and (c)).
SECTION 7.1.8. Future Subsidiaries. Without limiting the effect of
any provision contained herein (including Section 7.2.5), upon any Person
becoming, after the Effective Date, either a direct or indirect Subsidiary of
the Borrower, or upon the Parent or the Borrower acquiring additional capital
stock of any existing Subsidiary having voting rights or contingent voting
rights
(a) such Person shall become a party to (x) a guaranty in
substantially the form of the Petroleum Guaranty delivered pursuant to
the Original Credit Agreement, and (y) a security agreement in
substantially the form of the Petroleum Security Agreement delivered
pursuant to the Original Credit Agreement, if not already a party to
any of the foregoing, with such modifications as the Agent may
reasonably request, in a manner satisfactory to the Agent;
(b) the Borrower and the applicable Subsidiary shall,
pursuant to the Borrower Pledge Agreement, or the Parent and the
applicable Subsidiary shall, pursuant to the Parent Pledge Agreement,
as the case may be, pledge to the Agent
(i) all of the outstanding shares of such capital
stock of such Subsidiary owned directly by it, along with
undated stock powers for such certificates,
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executed in blank (or, if any such shares of capital stock are
uncertificated, confirmation and evidence satisfactory to the
Agent that the security interest in such uncertificated
securities has been perfected by the Agent in accordance with
Section 8-313 and Section 8-321 of the U.C.C. or any similar
law which may be applicable); and
(ii) all notes (if any) evidencing intercompany
Indebtedness in favor of the Borrower and each such Subsidiary
(which shall be in substantially the form of Attachment A to
the Borrower Pledge Agreement), as the case may be;
(c) the Agent shall have received from each such Subsidiary
certified copies of Uniform Commercial Code Requests for Information
or Copies (Form UCC-11), or a similar search report certified by a
party acceptable to the Agent, dated a date reasonably near (but prior
to) the date of any such Person becoming a direct or indirect
Subsidiary of the Borrower, listing all effective financing
statements, tax liens and judgment liens which name such Person as the
debtor and which are filed in the jurisdictions in which filings are
to be made pursuant to this Agreement and the other Loan Documents,
and in such other jurisdictions as the Agent may reasonably request,
together with copies of such financing statements (none of which
(other than financing statements (i) filed pursuant to the terms
hereof in favor of the Agent, if such Form UCC-11 or search report, as
the case may be, is current enough to list such financing statements,
(ii) being terminated pursuant to termination statements that are to
be delivered on or prior to the date such Person becomes such
Subsidiary or (iii) in respect of protective filings or Liens
permitted under Section 7.2.3) shall cover any of the Collateral); and
(d) the Agent shall have received from each such Subsidiary
executed copies of U.C.C. financing statements naming each such
Subsidiary as the debtor and the Agent as the secured party, suitable
for filing under the U.C.C. of all jurisdictions as may be necessary
or, in the reasonable opinion of the Agent, desirable to perfect the
first priority security interest of the Agent pursuant to the security
agreement entered into by such Subsidiary, together with evidence
satisfactory to the Agent of the filing (or delivery for filing) of
appropriate trademark, copyright and patent security supplements,
together, in each case, with such opinions of legal counsel for the Borrower
relating thereto, which legal opinions shall be in form and substance
reasonably satisfactory to the Agent.
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SECTION 7.1.9. Springing Liens. Within 60 days after (a) any
judgment or order for the payment of money is rendered against the Borrower or
any of its Subsidiaries or any other Obligor and an amount in excess of
$1,000,000 in respect of such payment is not covered in full by insurance
maintained with responsible insurance carriers, (b) the occurrence of any Event
of Default or (c) the Funded Debt to EBITDA Ratio being greater than (i) with
respect to the third Fiscal Quarter of the 1995 Fiscal Year, 4.50 to 1.00, (ii)
with respect to the fourth Fiscal Quarter of the 1995 Fiscal Year, 3.55 to 1.00
(iii) with respect to the first Fiscal Quarter of the 1996 Fiscal Year, 3.15 to
1.00, (iv) with respect to the second Fiscal Quarter of the 1996 Fiscal Year,
2.85 to 1.00, (v) with respect to the third Fiscal Quarter of the 1996 Fiscal
Year, 2.40 to 1.00, (vi) with respect to the fourth Fiscal Quarter of the 1996
Fiscal Year 2.35 to 1.00 and (vii) with respect to each Fiscal Quarter
thereafter, 1.90 to 1.00, at the direction of the Agent (at the request of the
Required Lenders), the Borrower and the Parent shall, and shall cause each of
their respective Subsidiaries to, take all steps necessary, at their own cost
and expense, to (a) grant the Agent a first priority leasehold Lien on
operating facilities (including renewals) and a first priority mortgage Lien on
real property, fixtures, buildings and improvements thereon (including the
Sunshine properties after the Merger) and (b) obtain title insurance coverage
on such property in an amount, containing such terms and exceptions and issued
by an insurance company, acceptable to the Agent in the Agent's reasonable
discretion (together with such favorable legal opinions with respect thereto as
the Agent may reasonably request).
SECTION 7.1.10. Gasoline Purchases. Without limiting the effect of
Section 7.2.1, each of the Borrower and Petroleum will purchase gasoline only
to satisfy its own retail and wholesale requirements, will not engage in
speculative trading or trade in gasoline futures for speculative purposes and
will not purchase or sell futures contracts or enter into any commodities
derivative transactions of any kind.
SECTION 7.1.11. Rate Protection. The Borrower shall have in effect
interest rate swap, hedge, cap, collar or similar arrangements with any Lender
or Lenders satisfactory in form and substance (including as to the counterparty
thereto) and pursuant to documentation satisfactory to the Agent in a notional
amount equal to or greater than $20,000,000, and shall maintain such
arrangements in full force and effect until the third anniversary of the
Effective Date.
SECTION 7.1.12. Further Assurances. The Borrower and the Parent
agree that from time to time, at the expense of the Borrower and the Parent,
the Borrower and the Parent will, and will cause each of their respective
Subsidiaries to, promptly execute and deliver all further instruments and
documents, and
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take all further action, that may be reasonably necessary or desirable, or that
the Agent may reasonably request, in order to perfect and protect the
assignments, security interests and Liens granted or purported to be granted
under the Loan Documents or to enable the Agent to exercise and enforce its
rights and remedies under this Agreement or any other Loan Document with
respect to any Collateral. Without limiting the generality of the foregoing,
the Borrower and the Parent will, and will cause each of their respective
Subsidiaries to
(a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may
request, in order to perfect and preserve the assignments, security
interests and Liens granted or purported to be granted under the Loan
Documents;
(b) furnish to the Agent, at the request of the Agent, an
opinion of counsel acceptable to the Required Lenders to the effect
that all financing or continuation statements have been filed, and all
other action has been taken, to perfect and validate continuously from
the date hereof the assignments, security interests and Liens granted
under the Loan Documents; and
(c) furnish to the Agent, from time to time at the Agent's
request, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request, all in reasonable
detail.
With respect to the foregoing and the grant of the security interest
under the Loan Documents, the Borrower and the Parent and each of their
respective Subsidiaries hereby authorize the Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral without the signature of the Borrower, the Parent
or any such Subsidiary where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
SECTION 7.2. Negative Covenants. The Borrower and the Parent jointly
and severally agree with the Agent, each Issuer and each Lender that, until all
Commitments have terminated and all Obligations have been paid and performed in
full, the Borrower and the Parent will perform the obligations set forth in
this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower and the Parent will
not, and will not permit any of their respective
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Subsidiaries to, engage in any business activity, except those described in the
second recital and such activities as may be incidental or related thereto and
activities incidental or related to the consummation of the Merger.
SECTION 7.2.2. Indebtedness. The Borrower and the Parent will not,
and will not permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist or otherwise become or be liable in respect of any
Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and
other Obligations;
(b) until the date of the initial Credit Extension on the
Effective Date, Indebtedness identified in Item 7.2.2(b)
("Indebtedness to be Paid") of the Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date which is
identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure
Schedule;
(d) Indebtedness (other than Indebtedness described in the
immediately preceding clause (c)) in an aggregate principal amount not
to exceed $2,000,000 at any time outstanding in respect of (i)
Indebtedness which is incurred by the Borrower or any other Subsidiary
of the Parent to a vendor to finance its acquisition of any assets
permitted to be acquired pursuant to Section 7.2.7 and (ii)
Capitalized Lease Liabilities to the extent permitted by Section
7.2.7;
(e) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal
trade terms in connection with purchases of goods and services, but
excluding all Indebtedness incurred through the borrowing of money and
all Contingent Liabilities);
(f) Indebtedness in respect of Rate Protection Agreements
with a Lender and entered into solely with respect to the Credit
Extensions or, as to currency matters, for protection in connection
with the Borrower's ordinary course of business;
(g) Indebtedness in an aggregate principal amount not to
exceed $15,000,000 at any time outstanding in respect of the Petroleum
Note;
(h) Indebtedness of the Parent owing to the Borrower pursuant
to the Parent Inter-Company Note;
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(i) other Indebtedness in an aggregate amount not exceeding
$1,000,000 at any time; and
(j) Obligations of the Parent under guarantees of any of its
Subsidiaries' obligations to trade creditors in an aggregate amount
outstanding not to exceed $10,000,000; provided that (i) each of such
guaranties have an expressly stated limited amount and are for a term
of no more than one year and (ii) the identity of the beneficiaries of
such guaranties is provided in writing to the Agent;
provided, however, that no Indebtedness pursuant to clauses (d) and (i) may be
incurred if, after giving effect to the incurrence thereof, any Default shall
have occurred and be continuing.
SECTION 7.2.3. Liens. The Borrower and the Parent will not, and will
not permit any of their respective Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon any of its property, revenues or assets, whether
now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations granted
pursuant to any Loan Document;
(b) Liens (i) granted to secure payment of Indebtedness
described in clause (c) of Section 7.2.2 to the extent such Liens are
identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure
Schedule or (ii) on properties of Sunshine identified in Item 7.2.3
("Liens") of the Disclosure Schedule;
(c) Liens granted to secure payment of the Indebtedness of
the type permitted and described in clause (d) of Section 7.2.2 and
covering only those assets acquired with the proceeds of such
Indebtedness;
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment
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insurance or other forms of governmental insurance or benefits
(excluding any Liens in favor of a Pension Plan or PBGC), or to secure
performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds;
(g) judgment Liens in existence less than 15 days after the
entry thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with responsible insurance
companies; and
(h) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or
its Subsidiaries.
SECTION 7.2.4. Financial Condition. The Borrower and the Parent will
not permit:
(a) the Interest Coverage Ratio, as of the last day of each
Fiscal Quarter set forth below, to be less than the ratio set forth
opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Minimum Interest
Fiscal Quarter Coverage Ratio
---------------- --------------
<S> <C>
The third and fourth
Fiscal Quarters of the
1995 Fiscal Year 3.0:1.00
Each Fiscal Quarter of
the 1996 Fiscal Year 4.0:1.00
Each Fiscal Quarter of
the 1997 Fiscal Year 5.0:1.00
Each Fiscal Quarter of
the 1998 Fiscal Year 6.0:1.00
Each Fiscal Quarter of
the 1999 Fiscal Year
and thereafter 7.0:1.00
</TABLE>
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<PAGE> 94
(b) the Fixed Charge Coverage Ratio, as of the last day of
each Fiscal Quarter set forth below, to be less than the ratio set
forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Minimum Interest
Fiscal Quarter Coverage Ratio
---------------- --------------
<S> <C>
The third Fiscal Quarter
of the 1995 Fiscal Year 1.00:1.00
The fourth Fiscal Quarter
of the 1995 Fiscal Year 1.00:1.00
The first Fiscal Quarter
of the 1996 Fiscal Year .85:1.00
The second Fiscal Quarter
of the 1996 Fiscal Year .90:1.00
The third Fiscal Quarter
of the 1996 Fiscal Year 1.00:1.00
The fourth Fiscal Quarter
of the 1996 Fiscal Year 1.05:1.00
The first Fiscal Quarter
of the 1997 Fiscal Year 1.05:1.00
The second Fiscal Quarter
of the 1997 Fiscal Year 1.10:1.00
The third Fiscal Quarter
of the 1997 Fiscal Year 1.10:1.00
The fourth Fiscal Quarter
of the 1997 Fiscal Year 1.15:1.00
The first Fiscal Quarter
of the 1998 Fiscal Year 1.15:1.00
The second Fiscal Quarter
of the 1998 Fiscal Year 1.20:1.00
The third Fiscal Quarter
of the 1998 Fiscal Year 1.20:1.00
The fourth Fiscal Quarter
of the 1998 Fiscal Year 1.25:1.00
</TABLE>
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<TABLE>
<CAPTION>
Minimum Interest
Fiscal Quarter Coverage Ratio
---------------- --------------
<S> <C>
The first Fiscal Quarter
of the 1999 Fiscal Year 1.25:1.00
The second Fiscal Quarter
of the 1999 Fiscal Year 1.30:1.00
The third Fiscal Quarter
of the 1999 Fiscal Year 1.30:1.00
The fourth Fiscal Quarter
of the 1999 Fiscal Year 1.35:1.00
The first Fiscal Quarter
of the 2000 Fiscal Year 1.35:1.00
The second Fiscal Quarter
of the 2000 Fiscal Year 1.40:1.00
The third Fiscal Quarter
of the 2000 Fiscal Year 1.45:1.00
The fourth Fiscal Quarter
of the 2000 Fiscal Year 1.45:1.00
The first Fiscal Quarter
of the 2001 Fiscal Year
and thereafter 1.45:1.00
</TABLE>
(c) the Gross Profit Margin, as of the last day of each
Fiscal Quarter set forth below, to be less than the percentage set
forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Calendar Month Gross Profit Margin
---------------- -------------------
<S> <C>
The second Fiscal Quarter
of the 1995 Fiscal Year 14.5%
The third Fiscal Quarter of
the 1995 Fiscal Year 18.5%
The fourth Fiscal Quarter
of the 1995 Fiscal Year 18.5%
Each Fiscal Quarter of the
1996 Fiscal Year 19.0%
Each Fiscal Quarter of the
1997 Fiscal Year 19.5%
</TABLE>
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<TABLE>
<CAPTION>
Calendar Month Gross Profit Margin
---------------- -------------------
<S> <C>
Each Fiscal Quarter of the
1998 Fiscal Year 20.0%
Each Fiscal Quarter of the
1999 Fiscal Year 20.5%
Each Fiscal Quarter of the
2000 Fiscal Year 21.0%
Each Fiscal Quarter of the
2001 Fiscal Year 21.5%
</TABLE>
(d) the Funded Debt to EBITDA Ratio, as of the last day of
each Fiscal Quarter set forth below, to be greater than the ratio set
forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Maximum Funded Debt
Fiscal Quarter to EBITDA Ratio
---------------- -------------------
<S> <C>
The third Fiscal Quarter of
the 1995 Fiscal Year 4.75:1.00
The fourth Fiscal Quarter
of the 1995 Fiscal Year 3.75:1.00
The first Fiscal Quarter of
the 1996 Fiscal Year 3.25:1.00
The second Fiscal Quarter
of the 1996 Fiscal Year 3.00:1.00
The third Fiscal Quarter of
the 1996 Fiscal Year 2.50:1.00
The fourth Fiscal Quarter
of the 1996 Fiscal Year 2.50:1.00
Each Fiscal Quarter of the
1997 Fiscal Year
and thereafter 2.00:1.00
</TABLE>
(e) the Tangible Net Worth at any time to be less than the
sum of
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(i) $55,000,000
plus
(ii) 50% of Net Income for each Fiscal Quarter of
each Fiscal Year commencing with the 1995 Fiscal Year without
deduction for losses;
(f) the SGA Margin, as of the last day of each Fiscal
Quarter, commencing with the second Fiscal Quarter of the 1995 Fiscal
Year, to be greater than 3.8%.
SECTION 7.2.5. Investments. The Borrower and the Parent will not,
and will not permit any of their respective Subsidiaries to, make, incur,
assume or suffer to exist any Investment in any other Person, except:
(a) the Parent's Investment existing on the Effective Date in
the Borrower and Petroleum;
(b) the Borrower's Investment existing on the Effective Date
in Delight;
(c) Petroleum's Investment existing on the Effective Date in
Petroleum of California;
(d) Cash Equivalent Investments;
(e) without duplication, Investments permitted as
Indebtedness pursuant to clauses (g) and (h) of Section 7.2.2;
(f) without duplication, Investments permitted as Permitted
Business Acquisitions pursuant to Section 7.2.7 (including any
Subsidiary of the Borrower formed for the sole purpose of effectuating
a Permitted Business Acquisition so long as the Borrower shall have
complied with the provisions of Section 7.1.10 in respect of such
Subsidiary);
(g) promissory notes received as consideration in respect of
Permitted Dispositions (subject to the limitations set forth in the
definition thereof), to the extent pledged to the Agent for the
benefit of the Agent and the Lenders; and
(h) other Investments in an aggregate amount at any one time
not to exceed $250,000;
provided, however, that
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(i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such requirements;
and
(ii) no Investment otherwise permitted by clause (e) shall be
permitted to be made if, immediately before or after giving effect
thereto, any Default shall have occurred and be continuing.
SECTION 7.2.6. Restricted Payments, etc. (a) On and at all times
after the Effective Date, the Borrower
(i) will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of capital stock (now or hereafter outstanding) of the Borrower
or on any warrants, options or other rights with respect to any shares
of any class of capital stock (now or hereafter outstanding) of the
Borrower (other than dividends or distributions payable in its common
stock or warrants to purchase its common stock or split-ups or
reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply,
any of its funds, property or assets to the purchase, redemption,
sinking fund or other retirement of, or agree or permit any of its
Subsidiaries to purchase or redeem, any shares of any class of capital
stock (now or hereafter outstanding) of the Borrower, or warrants,
options or other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of the Borrower; and
(ii) will not, and will not permit any of its Subsidiaries
to, make any deposit for any of the purposes described in the
preceding clause (a)(i).
(b) On and at all times after the Effective Date, the Parent
(i) will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of capital stock (now or hereafter outstanding) of the Parent or
on any warrants, options or other rights with respect to any shares of
any class of capital stock (now or hereafter outstanding) of the
Parent (other than dividends or distributions payable in its common
stock or warrants to purchase its common stock or split-ups or
reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply,
any of its funds, property or assets to the purchase, redemption,
sinking fund or other
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retirement of, or agree or permit any of its Subsidiaries to purchase
or redeem, any shares of any class of capital stock (now or hereafter
outstanding) of the Parent, or warrants, options or other rights with
respect to any shares of any class of capital stock (now or hereafter
outstanding) of the Parent; provided, however, that the Parent may,
with respect to any shares of Series C Preferred Stock, declare and
pay dividends thereon solely in the form of additional shares of
Series C Preferred Stock, in accordance with the terms of such Series
C Preferred Stock as in effect on the date of Amendment No. 3; and
(ii) will not, and will not permit any of its Subsidiaries
to, make any deposit for any of the purposes described in the
preceding clause (b)(i).
SECTION 7.2.7. Capital Expenditures, etc. The Borrower and the
Parent will not, and will not permit any of their respective Subsidiaries to,
make or, without duplication, commit to make Capital Expenditures in any Fiscal
Year, except
(a) Capital Expenditures (other than Capitalized Lease
Liabilities) of the Borrower and other Subsidiaries of the Parent
which do not aggregate in any Fiscal Year in excess of the amount set
forth opposite such Fiscal Year under the Capital Expenditure Level
applicable to such Fiscal Year, plus an amount equal to insurance
proceeds (other than business interruption insurance proceeds) which
are reinvested in accordance with Section 7.1.4 in capital assets of
the Borrower or other applicable Subsidiary which suffered such loss:
<TABLE>
<CAPTION>
Capital Capital Capital Capital
Fiscal Expenditure Expenditure Expenditure Expenditure
Year Level I Level II Level III Level IV
---- ------- -------- --------- --------
<S> <C> <C> <C> <C>
1995 $19,900,000 $15,900,000 $11,900,000 $11,400,000
1996 18,800,000 15,000,000 11,300,000 9,800,000
1997 16,200,000 13,000,000 9,700,000 8,800,000
1998 13,400,000 10,700,000 8,900,000 8,900,000
1999 13,300,000 10,600,000 8,000,000 6,000,000
2000 14,800,000 11,800,000 8,900,000 6,100,000
2001 16,400,000 13,100,000 9,800,000 6,200,000
</TABLE>
provided, however, that, during any Fiscal Year, commencing with the
1996 Fiscal Year, in which Capital Expenditure Level I is in effect,
the Borrower and such other Subsidiaries may make or, without
duplication, commit to
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make, additional Capital Expenditures (other than Capitalized Lease
Liabilities) in an amount not to exceed 25% of Excess Cash Flow for
the immediately preceding Fiscal Year; provided further, however, that
the Borrower and such other Subsidiaries may not make any Business
Acquisition unless such Business Acquisition is a Permitted Business
Acquisition; and
(b) Capitalized Lease Liabilities which do not aggregate in
any Fiscal Year in excess of $500,000.
SECTION 7.2.8. Rental Obligations. The Borrower and the Parent will
not, and will not permit any of their respective Subsidiaries to, enter into at
any time any arrangement which does not create a Capitalized Lease Liability
and which involves the leasing by the Borrower or any other Subsidiary of the
Parent from any lessor of any real or personal property (or any interest
therein), except arrangements which, together with all other such arrangements
which shall then be in effect, will not require the payment of an aggregate
amount of rentals by the Borrower and such other Subsidiaries of the Parent in
excess of (excluding escalations resulting from a rise in the consumer price or
similar index) $15,000,000 for any Fiscal Year; provided, however, that any
calculation made for purposes of this Section shall exclude any amounts
required to be expended for maintenance and repairs, insurance, taxes,
assessments, and other similar charges.
SECTION 7.2.9. Take or Pay Contracts. The Borrower and the Parent
will not, and will not permit any of their respective Subsidiaries to, enter
into or be a party to any arrangement for the purchase of materials, supplies,
other property or services if such arrangement by its express terms requires
that payment be made by the Borrower, the Parent or any such Subsidiary
regardless of whether such materials, supplies, other property or services are
delivered or furnished to it.
SECTION 7.2.10. Consolidation, Merger, etc. Other than the
consummation of the Merger, the Borrower and the Parent will not, and will not
permit any of their respective Subsidiaries to, liquidate or dissolve,
consolidate or amalgamate with, or merge into or with, any other Person, or
purchase or otherwise acquire all or any substantial part of the assets or
stock of any Person (or of any division thereof) other than pursuant to a
Permitted Business Acquisition.
SECTION 7.2.11. Asset Dispositions, etc. The Borrower and the Parent
will not, and will not permit any of their respective Subsidiaries to, sell,
transfer, lease, contribute or otherwise convey or dispose of, or grant
options, warrants or other rights with respect to, all or any part of its
assets (including
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accounts receivable and capital stock of Subsidiaries) to any Person, except
(a) if such sale, transfer, lease, contribution or conveyance
is of Inventory in the ordinary course of its business;
(b) if such disposition is a Permitted Disposition; or
(c) if such assets are worn or obsolete and the net book
value of such assets, together with the net book value of all other
assets sold, transferred, leased, contributed or conveyed by the
Borrower, the Parent or any of their respective Subsidiaries pursuant
to this clause during the Fiscal Year in which such assets are to be
sold, transferred, leased, contributed or conveyed, does not exceed
$250,000 in the aggregate.
SECTION 7.2.12. Modification of Certain Agreements. Neither the
Borrower nor the Parent will consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or applicable to,
the Purchase Agreement, the Merger Certificate or the Stockholders Agreement,
other than any such amendment, supplement or other modification which is
immaterial and which could not adversely affect the Agent or any Lender.
SECTION 7.2.13. Transactions with Affiliates. The Borrower and the
Parent will not, and will not permit any of their respective Subsidiaries to,
enter into, or cause, suffer or permit to exist any arrangement or contract
with, any of its other Affiliates unless such arrangement or contract is on
fair and reasonable terms and is an arrangement or contract of the kind which
would be entered into by a prudent Person in the position of the Borrower or
such Subsidiary with a Person which is not one of its Affiliates (it being
acknowledged that transactions between the Parent or any of its Subsidiaries,
on the one hand, and any Stockholder or any of its Affiliates, on the other
hand, involving the provision of financial, investment banking, management,
consulting or underwriting services by such Stockholder or any of its
Affiliates shall not be prohibited by this Section to the extent that the fees
payable (x) to DLJ or its Affiliates do not exceed the usual and customary fees
of DLJ or its Affiliates charged to Persons that are not Affiliates of DLJ and
its Affiliates or (y) to any other Stockholder or its Affiliates do not exceed
the fees charged by recognized investment banking institutions which provide
financial, investment banking, management, consulting or underwriting services
in the ordinary course of their business, whether through direct equity
ownership, warrants, contract rights or otherwise).
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SECTION 7.2.14. Negative Pledges, Restrictive Agreements, etc. The
Borrower and the Parent will not, and will not permit any of their respective
Subsidiaries to, enter into any agreement (excluding this Agreement and any
other Loan Document) prohibiting:
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired (other than pursuant to an agreement governing Indebtedness
permitted by clause (d) of Section 7.2.2 to the extent such agreement
relates solely to the assets financed with the proceeds of such
Indebtedness), or the ability of the Borrower or any other Obligor to
amend or otherwise modify this Agreement or any other Loan Document;
or
(b) the ability of any Subsidiary of the Parent to make any
payments, directly or indirectly, to the Borrower or the Parent by way
of dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges, expenses
and accruals or other returns on investments, or any other agreement
or arrangement which restricts the ability of any such Subsidiary to
make any payment, directly or indirectly, to the Borrower.
In addition, the Borrower and the Parent will not, and will not permit
any of their respective Subsidiaries to, enter into any tax sharing agreement
or similar arrangement unless the same shall have been reviewed by and
consented to by the Agent (such consent not to be unreasonably withheld).
SECTION 7.2.15. Management and Director Fees, Expenses, etc. The
Borrower and the Parent will not, and will not permit any of their respective
Subsidiaries to:
(a) pay management, advisory, consulting or other similar
fees, other than (i) fees payable to the Lenders or any of their
affiliates, (ii) fees payable on the date of the initial Credit
Extension and disclosed to the Agent, and (iii) fees payable to
consultants engaged on arm's-length basis; or
(b) reimburse any Affiliates for any expenses unless the same
shall be otherwise permitted hereunder and shall be reasonable and
documented in reasonable detail.
SECTION 7.2.16. Environmental Liens. The Borrower and the Parent
will not, and will not permit any of their respective Subsidiaries to, allow
any Lien imposed pursuant to any law, rule, regulation or order relating to any
Hazardous Material (including the disposal thereof) to be imposed or to remain
on any real property owned or operated by the Borrower, the Parent
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or any of their respective Subsidiaries, except as contested in good faith by
appropriate proceedings for which adequate reserves have been established and
are being maintained on its books.
SECTION 7.2.17. Fiscal Year End. Neither the Borrower nor the Parent
shall change its fiscal year to end on any date other than on the last Sunday
of December.
SECTION 7.2.18. Activities of the Parent. Without limiting the
effect of any provision contained in this Article VII, the Parent will not
engage in any business activity other than its continuing ownership of all the
shares of capital stock of the Borrower and Petroleum and its compliance with
the obligations applicable to it under the Loan Documents. Without limiting
the generality of the immediately preceding sentence, the Parent will not (a)
create, incur, assume or suffer to exist any Indebtedness (other than
Indebtedness in respect of the guaranty contained in Article IX), (b) create,
assume, or suffer to exist any Lien upon, or grant any options or other rights
with respect to, any of its revenues, property or other assets, whether now
owned or hereafter acquired (other than pursuant to the Loan Documents), (c)
wind-up, liquidate or dissolve itself (or suffer to exist any of the
foregoing), consolidate or amalgamate with or merge into or with any other
Person, or convey, sell, transfer, lease or otherwise dispose of all or any
part of its assets, in one transaction or a series of transactions, to any
Person or Persons, (d) create, incur, assume or suffer to exist any Investment
in any Person other than (i) as provided in clause (a) of Section 7.2.5 and
(ii) in respect of any additional equity Investments in the Borrower or (e)
permit to be taken any action that would result in a Change in Control. The
Parent agrees not to commence or cause the commencement of any of the actions
described in clause (b), (c) or (d) of Section 8.1.9 of this Agreement with
respect to any of its Subsidiaries.
SECTION 7.2.19. Activities of Certain Subsidiaries of the Parent.
Without limiting the effect of any provision contained in this Article VII:
(a) Petroleum of California will not engage in any business
activity other than owning and operating gasoline stations in
California and Arizona; and
(b) Delight will not engage in any business activity other
than the holding of the lease at the merchandise distribution
warehouse located at 508 Time Saver Avenue, Harahan, Louisiana.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall
default
(a) in the payment or prepayment when due of any principal of
any Loan;
(b) in the payment when due of any interest or fees and such
default shall remain unremedied for a period in excess of three
Business Days; and
(c) in the payment when due of any other Obligation and such
default shall continue unremedied for a period of 10 Business Days.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower or any other Obligor to the Agent or
any Lender pursuant to this Agreement or any such other Loan Document
(including any certificates delivered pursuant to Article V) is or shall be
incorrect when made in any material respect. Any representation or warranty of
Dillon Companies, Inc. under the Purchase Agreement or of Sunshine under the
Merger Agreement shall have been incorrect when made which could reasonably be
expected to have a material adverse effect on the financial condition,
operations, assets, business, properties, revenues or prospects of the Borrower
and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken
as a whole.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower or the Parent shall default in the due performance and observance
of any of their obligations under clause (e) of Section 7.1.1, Section 7.1.8,
Section 7.1.9, Section 7.1.11 or Section 7.2 or any other Obligor shall default
in the performance of any of its obligations in respect of such Sections as
such Sections are incorporated by reference or otherwise in any Loan Document
to which such Obligor is a party.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
Any Obligor shall default in the due performance and observance of (a) any
agreement contained in Section 7.1.1 not covered in Section 8.1.3 and such
default shall continue unremedied for a period of 10 days from the earlier of
the date an Authorized Officer of an Obligor has actual knowledge thereof
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and the receipt by an Obligor of written notice thereof from the Agent, or (b)
any other agreement contained herein or in any other Loan Document (other than
items covered by Section 8.1.3) executed by it, and such default shall continue
unremedied for a period of 30 days from the earlier of the date an Authorized
Officer of an Obligor has actual knowledge thereof and the receipt by an
Obligor of written notice thereof from the Agent.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any of its Subsidiaries or any
other Obligor having a principal amount, individually or in the aggregate, in
excess of $1,000,000, or a default shall occur in the performance or observance
of any obligation or condition with respect to such Indebtedness if the effect
of such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or agent
for such holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $2,000,000 shall be rendered against the Borrower or any of
its Subsidiaries or any other Obligors and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 45 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal, bond or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower any member
of its Controlled Group, any other Obligor, or any other Person to
terminate a Pension Plan if, as a result of such termination, the
Borrower or any such member could be required to make a contribution
to such Pension Plan, or could reasonably expect to incur a liability
or obligation to such Pension Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien on property of the Borrower or
any of its Controlled Group under Section 302(f) of ERISA.
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SECTION 8.1.8. Change in Control; Stockholders Letter. Any Change in
Control shall occur or there is a breach of the Stockholders Letter of
Understanding.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of
its Subsidiaries or any other Obligor shall
(a) generally fail to pay debts as they become due, or admit
in writing its inability to pay debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator, or other custodian for the
Borrower or any of its Subsidiaries or any other Obligor or any
property of any thereof, or make a general assignment for the benefit
of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the involuntary appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower
or any of its Subsidiaries or any other Obligor or for a substantial
part of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within thirty
days;
(d) permit or suffer to exist the involuntary commencement
of, or voluntarily commence, any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or
insolvency laws, or permit or suffer to exist the involuntary
commencement of, or voluntarily commence, any dissolution, winding up
or liquidation proceeding, in each case, by or against the Borrower or
any of its Subsidiaries or any other Obligor, provided that if not
commenced by the Borrower or such Subsidiary or any other Obligor such
proceeding shall be consented to or acquiesced in by the Borrower or
such Subsidiary or any other Obligor, or shall result in the entry of
an order for relief or shall remain for thirty days undismissed; or
(e) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Without the consent of
the Lenders, any Loan Document, or any Lien granted thereunder, shall (except
in accordance with its terms), in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and enforceable obligation
of the Borrower or any Obligor party thereto; the Borrower, any other Obligor
or any other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or any Lien securing
any Obligation shall, in
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whole or in part, cease to be a perfected first registered priority Lien.
SECTION 8.1.11. Beverage Licenses. The Borrower and each other
Subsidiary of the Parent which owns or operates convenience stores shall fail
at any time to have in full force and effect Beverage Licenses necessary to
permit, at 75% or more of the convenience stores owned or operated by the
Borrower and such Subsidiaries which sold and distributed alcoholic beverages
as of the Effective Date (exclusive of convenience stores sold by the Borrower
or any such Subsidiary) and, if acquired or opened after the Effective Date,
which sold and distributed alcoholic beverages on the date of such acquisition
or opening, the sale and distribution of the alcoholic beverages so sold or
distributed on such respective dates.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described
in clauses (b) through (d) of Section 8.1.9 shall occur, the Commitments (if
not theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.
SECTION 8.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (b) through (d)
of Section 8.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Agent, upon the direction of the Required Lenders, shall
by notice to the Borrower declare all or any portion of the outstanding
principal amount of the Loans and other Obligations to be due and payable
and/or the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable, without further notice, demand or presentment, and/or, as the case may
be, the Commitments shall terminate.
ARTICLE IX
GUARANTY
SECTION 9.1. The Guaranty. The Parent hereby unconditionally and
irrevocably guarantees the full and prompt payment when due, whether at stated
maturity, by acceleration or otherwise (including all amounts which would have
become due but for the operation of the automatic stay under Section 362(a) of
the Federal Bankruptcy Code, 11 U.S.C. 362(a), and the operation of Sections
502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section
502(b) and Section 506(b)), of the following (collectively, the "Guaranteed
Obligations"),
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(a) all Obligations of the Borrower and each other Obligor to
the Agent and each of the Lenders now or hereafter existing under this
Agreement and each other Loan Document, whether for principal,
interest, fees, expenses or otherwise; and
(b) all other Obligations to the Agent and each of the
Lenders now or hereafter existing under any of the Loan Documents,
whether for principal, interest, fees, expenses or otherwise.
The obligations of the Parent under this Article IX constitute a guaranty of
payment when due and not of collection, and the Parent specifically agrees that
it shall not be necessary or required that the Agent, any Lender or any holder
of any Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the Borrower or any other Obligor (or any other
Person) before or as a condition to the obligations of the Parent under this
Article IX.
SECTION 9.2. Guaranty Unconditional. The obligations of the Parent
under this Article IX amend and restate the Parent's guaranty under the
Existing Credit Agreement and shall be construed as a continuing, absolute,
unconditional and irrevocable guaranty of payment and shall remain in full
force and effect until all the Guaranteed Obligations have been indefeasibly
paid in full in cash and all Commitments shall have permanently terminated.
The Parent guarantees that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the agreement, instrument or document under which
they arise, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or any of the Lenders with respect thereto. The liability of the Parent
hereunder shall be absolute and unconditional irrespective of:
(a) any lack of validity, legality or enforceability of this
Agreement, the Notes, any Rate Protection Agreement with a Lender or
any other Loan Document or any other agreement or instrument relating
to any thereof;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
compromise, renewal, extension, acceleration or release with respect
thereto, or any other amendment or waiver of or any consent to
departure from this Agreement, the Notes, any Rate Protection
Agreement with a Lender or any other Loan Document;
(c) any addition, exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of
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or consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;
(d) the failure of the Agent or any Lender
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or any
other Person (including any other guarantor) under the
provisions of this Agreement, any Note, any Rate Protection
Agreement with a Lender or any other Loan Document or
otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any of the
Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
this Agreement, any Note, any Rate Protection Agreement with a Lender
or any other Loan Document;
(f) any defense, set-off or counter-claim which may at any
time be available to or be asserted by the Borrower or any other
Obligor against the Agent or any Lender;
(g) any reduction, limitation, impairment or termination of
the Guaranteed Obligations for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Parent hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, the Guaranteed Obligations or otherwise; or
(h) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor or any surety or guarantor.
SECTION 9.3. Reinstatement in Certain Circumstances. If at any time
any payment in whole or in part of any of the Guaranteed Obligations is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower, any other Obligor or otherwise,
the Parent's obligations under this Article IX with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
SECTION 9.4. Waiver by the Parent. The Parent irrevocably waives
promptness, diligence, notice of acceptance hereof,
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presentment, demand, protest and any other notice with respect to any of the
Guaranteed Obligations, as well as any requirement that at any time any action
be taken by any Person against the Borrower or any other Person.
SECTION 9.5. Postponement of Subrogation, etc. The Parent will not
exercise any rights which it may acquire by way of rights of subrogation by any
payment made hereunder or otherwise, until the prior payment, in full and in
cash, of all Guaranteed Obligations. Any amount paid to the Parent on account
of any such subrogation rights prior to the payment in full of all Guaranteed
Obligations shall be held in trust for the benefit of the Lenders and each
holder of a Note and shall immediately be paid to the Agent and credited and
applied against the Guaranteed Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement; provided, however, that if
(a) the Parent has made payment to the Lenders and each
holder of a Note of all or any part of the Guaranteed Obligations, and
(b) all Guaranteed Obligations have been paid in full and all
Commitments have been permanently terminated,
each Lender and each holder of a Note agrees that, at the Parent's request, the
Agent, on behalf of the Lenders and the holders of the Notes, will execute and
deliver to the Parent appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation
to the Parent of an interest in the Guaranteed Obligations resulting from such
payment by the Parent. In furtherance of the foregoing, for so long as any
Guaranteed Obligations or Commitments remain outstanding, the Parent shall
refrain from taking any action or commencing any proceeding against the
Borrower (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in the respect of payments to
any Lender or any holder of a Note.
SECTION 9.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under this Agreement or any Note
is stayed upon the occurrence of any event referred to in Section 8.1.9 with
respect to the Borrower, all such amounts otherwise subject to acceleration
under the terms of this Agreement shall nonetheless be payable by the Parent
hereunder forthwith.
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ARTICLE X
THE AGENT
SECTION 10.1. Actions. Each Lender hereby appoints SG as Agent under
and for purposes of this Agreement, the Notes and each other Loan Document.
Each Lender authorizes the Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by
the Agent (with respect to which the Agent agrees that it will comply, except
as otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Without limiting the effect of
the preceding sentences of this Section 10.1, each Lender authorizes the Agent
to act as collateral agent and to hold and accept title to all liens and
security interests granted to the Agent by the Borrower, the Parent or any
other Obligor for the ratable benefit of the Agent and the Lenders, in order to
exercise remedies on behalf of the Lenders in connection with the enforcement
of such liens and security interests in accordance with the provisions of the
Loan Documents. Each Lender hereby indemnifies (which indemnity shall survive
any termination of this Agreement) the Agent, pro rata according to such
Lender's Percentage, from and against any and all liabilities, obligations,
losses, damages, claims, costs or expenses of any kind or nature whatsoever
which may at any time be imposed on, incurred by, or asserted against, the
Agent in any way relating to or arising out of this Agreement, the Notes and
any other Loan Document, including reasonable attorneys' fees, and as to which
the Agent is not reimbursed by the Borrower; provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs or expenses which are determined by
a court of competent jurisdiction in a final proceeding to have resulted solely
from the negligence or wilful misconduct of the Agent. The Agent shall not be
required to take any action hereunder, under the Notes or under any other Loan
Document, or to prosecute or defend any suit in respect of this Agreement, the
Notes or any other Loan Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Agent shall be or become, in
the determination of the Agent, inadequate, the Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given; provided, however, that no
Lender shall be required to indemnify the Agent, with respect to any
obligation, loss, damage, claim, cost or expense for which the Agent would be
entitled to indemnification hereunder, in an amount which would be greater than
such Lender's Percentage of the aggregate amount of such obligation, loss,
damage, claim, cost or expense.
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SECTION 10.2. Funding Reliance, etc. Unless the Agent shall have
been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m.
(New York City time), on the day prior to a Borrowing that such Lender will not
make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Agent may assume that such Lender
has made such amount available to the Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If and to
the extent that such Lender shall not have made such amount available to the
Agent, such Lender and the Borrower severally agree to repay the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date the Agent made such amount available to the Borrower
to the date such amount is repaid to the Agent, in the case of the Borrower, at
the interest rate applicable at the time to Loans comprising such Borrowing
and, in the case of such Lender, for the period from the date such funds were
advanced to the Borrower to (and including) three days thereafter, at the
Federal Funds Rate and, following such third day, at the interest rate
applicable at the time to Loans comprising such Borrowing.
SECTION 10.3. Exculpation. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other
Loan Document, or in connection herewith or therewith, except for its own
wilful misconduct or negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor for the creation,
perfection or priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, nor to make any inquiry respecting the
performance by the Borrower of its obligations hereunder or under any other
Loan Document. Any such inquiry which may be made by the Agent shall not
obligate it to make any further inquiry or to take any action. The Agent shall
be entitled to rely upon advice of counsel concerning legal matters and upon
any notice, consent, certificate, statement or writing which the Agent believes
to be genuine and to have been presented by a proper Person.
SECTION 10.4. Successor. The Agent may resign as such at any time
upon at least 30 days' prior notice to the Borrower and all Lenders. If no
successor Agent shall have been appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be one of the Lenders or a
commercial banking institution organized under the laws of the U.S. (or any
State thereof) or a U.S. branch or agency of a commercial banking institution,
and having a combined
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capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's resignation
hereunder as the Agent, the provisions of
(a) this Article X shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent
under this Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to inure to
its benefit.
SECTION 10.5. Credit Extensions by SG. SG shall have the same rights
and powers with respect to (x) the Loans made by it or any of its Affiliates,
and (y) the Notes held by it or any of its Affiliates as any other Lender and
may exercise the same as if it were not the Agent. SG and each of its
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or Affiliate of the
Borrower as if it were not the Agent hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it
has, independently of the Agent and each other Lender, and based on such
Lender's review of the financial information of the Borrower, this Agreement,
the other Loan Documents (the terms and provisions of which being satisfactory
to such Lender) and such other documents, information and investigations as
such Lender has deemed appropriate, made its own credit decision to extend its
Commitments. Each Lender also acknowledges that it will, independently of the
Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
SECTION 10.7. Loan Documents, etc. Each Lender hereby authorizes the
Agent to enter into the applicable Loan Documents and to take all action
contemplated thereby. Each Lender agrees that no Lender shall have any right
individually to seek to realize upon the security granted by any Loan Document,
it being understood and agreed that such rights and remedies may be exercised
solely by the Agent for the benefit of the Lenders and the Agent upon the terms
of the Loan Documents. The Agent shall determine (after consultation with the
Required Lenders (provided that, in the case there are only two Lenders at the
time of such
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determination, such consultation will be with each such Lender)) the manner in
which proceeds of Collateral will be applied to the Obligations (after the
payment of fees and expenses as set forth in the Loan Documents).
SECTION 10.8. Copies, etc. The Agent shall give prompt notice to
each Lender of each notice or request given to the Agent by the Borrower or the
Parent and required to be delivered to the Lenders pursuant to the terms of
this Agreement (unless concurrently delivered to the Lenders by the Borrower or
the Parent). The Agent will promptly distribute to each Lender each document
or instrument received for its account and copies of all other communications
received by the Agent from the Borrower for distribution to the Lenders by the
Agent in accordance with the terms of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Agent (acting only at the direction or
with the authority of the Required Lenders); provided, however, that no such
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 11.1, change the definition of
"Required Lenders", increase the Commitment Amount or the Percentage
of any Lender, reduce any fees described in Article III, change the
time for payment of fees to the Lenders described in Article III, or
release all or any substantial part of the collateral security, except
as otherwise specifically provided in any Loan Document, shall be made
without the consent of each Lender affected thereby;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment under Section 3.1.2(b) of principal of, or
interest on, any Loan or Reimbursement Obligation (or reduce the
principal amount of or rate of interest on any Loan or Reimbursement
Obligation) or extend any Commitment Termination Date without the
consent of the holder of that Note evidencing such Loan;
(d) increase the Stated Amount of any Letter of Credit unless
consented to by each Issuer; or
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(e) affect adversely the interests, rights or obligations of
the Agent in its capacity as Agent or the Issuer in its capacity as
Issuer, without the consent of the Agent or the Issuer, as the case
may be.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Agent, any Lender or the
holder of any Note under this Agreement or any other Loan Document shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
The remedies provided in this Agreement are cumulative, and not exclusive of
remedies provided by law.
SECTION 11.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing and addressed, delivered or transmitted to such party at its address or
telecopy number set forth on Schedule IV hereto (or set forth in a Lender
Assignment Agreement) or at such other address or telecopy number as may be
designated by such party in a notice to the other parties given in accordance
with this Section. Any notice, if mailed and properly addressed and sent
return receipt requested with postage prepaid, shall be deemed given three
Business Days after posting; any notice, if sent by prepaid overnight express
shall be deemed delivered on the next Business Day; any notice, if transmitted
by telecopy, shall be deemed given when sent, with confirmation of receipt; any
notice, if transmitted by hand, shall be deemed received when delivered.
SECTION 11.3. Payment of Costs and Expenses. The Borrower and the
Parent jointly and severally agree to pay on demand all reasonable expenses of
the Agent (including the reasonable fees and out-of-pocket expenses of counsel
to the Agent, including any legal counsel and consultants, if any, who may be
retained in connection with the transactions contemplated hereby by the Agent)
in connection with
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Loan Document as
may from time to time hereafter be required, and the Lenders' and the
Agent's consideration of their rights and remedies hereunder
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or in connection herewith from time to time whether or not the
transactions contemplated hereby or thereby are consummated;
(b) the filing, recording, refiling or rerecording of the
Pledge Agreements, the Security Agreements (and any supplements
thereto) and any other security instruments executed in connection
with the transactions contemplated hereby and/or U.C.C. financing
statements relating thereto and all amendments, supplements and
modifications to any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or of the Pledge Agreements
or the Security Agreements or such other documents; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower and the Parent jointly and severally further agree to pay, and to
save the Agent and the Lenders harmless from all liability for, any stamp or
other taxes which may be payable in connection with the execution or delivery
of this Agreement, the borrowings hereunder, or the issuance of the Notes or
any other Loan Documents. The Borrower and the Parent jointly and severally
also agree to reimburse the Agent and each Lender upon demand for all
reasonable out- of-pocket expenses (including attorneys' fees and legal
expenses, including allocated fees and expenses of internal counsel) incurred
by the Agent or such Lender in connection with (x) the negotiation of any
restructuring or "work-out", whether or not consummated, of any Obligations and
(y) the enforcement of any Obligations (including the Obligations of the Parent
under Article IX). The Borrower and the Parent jointly and severally also
agree to reimburse the Agent on demand for all administration, audit and
monitoring expenses incurred in connection with the Borrowing Base and
determinations in respect thereof. The Borrower and the Parent jointly and
severally further agree to reimburse the Agent on demand for all other
administration, audit and monitoring expenses incurred after the occurrence of
an Event of Default in connection with this Agreement and the other Loan
Documents.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower and the Parent jointly and severally hereby indemnify, exonerate
and hold the Agent and each Lender and each of their respective officers,
directors, employees and agents (collectively, the "Indemnified Parties") free
and harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in connection
therewith (irrespective of
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whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (including allocated fees and expenses of internal counsel)
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or with
any Letter of Credit;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on behalf of the Borrower as the result of
any determination by the Required Lenders pursuant to Article V not to
fund any Borrowing);
(c) any investigation, litigation or proceeding related to
any acquisition or proposed acquisition by the Borrower, the Parent or
any of their respective Subsidiaries of all or any portion of the
stock or assets of any Person, whether or not the Agent or such Lender
is party thereto;
(d) 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 by the Borrower,
the Parent or any of their respective Subsidiaries of any Hazardous
Material;
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower, the Parent or any
of their respective Subsidiaries of any Hazardous Material (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 Agent), regardless of whether caused by, or within the
control of, the Borrower, the Parent or any such Subsidiary;
(f) Environmental Laws relating to the Borrower, the Parent
or any of their respective Subsidiaries, including the assertion of
any lien thereunder;
(g) 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 Realty of any
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Hazardous Material (including without limitation any order under the
Environmental Laws to clean-up or decommission), whether or not such
deposit, storage, disposal, burial, dumping, injecting, spillage,
leaking or other placement or release in, on or from the Realty of any
Hazardous Material:
(i) results by, through or under the Borrower, the
Parent or any of their respective Subsidiaries; or
(ii) occurred with the knowledge and consent of the
Borrower, the Parent or any of their respective Subsidiaries;
or
(iii) occurred before or after the Effective Date,
whether with or without the knowledge of the Borrower, the
Parent or any of their respective Subsidiaries; or
(h) the failure to maintain insurance coverage required by
Section 7.1.4;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower and the Parent
each hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 11.5. Survival. The obligations of the Borrower under
Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the obligations of the Lenders
under Section 10.1, shall in each case survive any termination of this
Agreement, the payment in full of all the Obligations and the termination of
all the Commitments. The representations and warranties made by each Obligor
in this Agreement and in each other Loan Document shall survive the execution
and delivery of this Agreement and each such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or
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interpretation of this Agreement or such other Loan Document or any provisions
hereof or thereof.
SECTION 11.8. Execution in Counterparts. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
an original and all of which shall constitute together but one and the same
agreement.
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT AND
THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
SECTION 11.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) neither the Borrower nor the Parent may assign or
transfer its rights or obligations hereunder without the prior written
consent of the Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes. Each Lender may assign, or sell participations in, its
Loans and Commitments to one or more other Persons in accordance with this
Section 11.11.
SECTION 11.11.1. Assignments. (a) Any Lender, upon notice to the
Borrower and with the written consent of the Agent (which consent shall not be
unreasonably withheld or delayed), may at any time assign and delegate all or
any fraction of such Lender's Loans, Commitments and Letter of Credit
participations to one or more commercial banks or other financial institutions
(each Person described in either of the foregoing clauses as the Person to whom
such assignment and delegation is to be made being hereinafter referred to as
an "Assignee Lender"), all or any fraction of such Lender's total Loans,
Commitments and Letter of Credit participations (which assignment and
delegation shall be of a constant, and not a varying, percentage of all the
assigning Lender's Loans and Commitments) in a minimum aggregate amount of
$5,000,000 (or, if less, the total of such Lender's Commitment Amount);
provided, however, that the Borrower, each other Obligor and the Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned and delegated to an Assignee Lender until
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(i) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Lender, shall have been given to the
Borrower and the Agent by such Lender and such Assignee Lender;
(ii) such Assignee Lender shall have executed and delivered
to the Borrower and the Agent a Lender Assignment Agreement, accepted
by the Agent; and
(iii) the processing fees described below shall have been
paid.
From and after the date that the Agent accepts such Lender Assignment
Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Agent (for delivery to the relevant Assignee Lender)
new Notes evidencing such Assignee Lender's assigned Loans and Commitments and,
if the assignor Lender has retained Loans and Commitments hereunder,
replacement Notes in the principal amount of the Loans and Commitments retained
by the assignor Lender hereunder (such Notes to be in exchange for, but not in
payment of, those Notes then held by such assignor Lender). Each such Note
shall be dated the date of the predecessor Notes. The assignor Lender shall
mark the predecessor Notes "exchanged" and deliver them to the Borrower.
Accrued interest on that part of the predecessor Notes evidenced by the new
Notes, and accrued fees, shall be paid as provided in the Lender Assignment
Agreement. Accrued interest on that part of the predecessor Notes evidenced by
the replacement Notes shall be paid to the assignor Lender. Accrued interest
and accrued fees shall be paid at the same time or times provided in the
predecessor Notes and in this Agreement. Such assignor Lender or such Assignee
Lender must also pay a processing fee to the Agent upon delivery of any Lender
Assignment Agreement in the amount of $3,000. Any attempted assignment and
delegation not made in accordance with this Section 11.11.1 shall be null and
void.
(b) Notwithstanding clause (a), any Lender may assign and pledge all
or any portion of its Loans and Notes and other rights to a Federal Reserve
Bank as collateral security; provided,
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however, that no such assignment under this clause (b) shall release the
assignor Lender from any of its obligations hereunder.
SECTION 11.11.2. Participations. (a) Any Lender may at any time
without the consent of the Borrower or the Agent (but with prior written notice
to the Borrower and the Agent) sell to one or more commercial banks or other
Persons (each of such commercial banks and other Persons being herein called a
"Participant") participating interests in any of the Loans, Commitments, or
other interests of such Lender hereunder; provided, however, that
(i) no participation contemplated in this Section 11.11.2
shall relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document;
(ii) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(iii) the Borrower and each other Obligor and the Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and
each of the other Loan Documents;
(iv) no Participant, unless such Participant is an Affiliate
of such Lender, or is itself a Lender, shall be entitled to require
such Lender to take or refrain from taking any action hereunder or
under any other Loan Document, except that such Lender may agree with
any Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (b) or (c)
of Section 11.1; and
(v) the Borrower shall not be required to pay any amount
under clause (b) of this Section that is greater than the amount which
it would have been required to pay had no participating interest been
sold.
(b) The Borrower acknowledges and agrees that each Participant, for
purposes of Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, shall be considered a
Lender, subject to clause (v) above.
SECTION 11.11.3. Certain Other Provisions. (a) The Borrower and the
Parent authorize each Lender to disclose to any participant or assignee (each,
a "Transferee") and any prospective Transferee, subject to the agreement of
such Transferee or prospective Transferee to comply with Section 11.14
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hereof, any and all financial and other information in such Lender's possession
concerning the Borrower, the Parent or any of their respective Subsidiaries
which has been delivered to such Lender by any such Person pursuant to or in
connection with this Agreement or which has been delivered to such Lender by
any such Person in connection with such Lender's credit evaluation of the
Borrower, the Parent or any of their respective Subsidiaries prior to entering
into this Agreement.
(b) If, pursuant to this Section, any interest in this Agreement or
any Loan or Note is transferred to any Transferee which is organized under the
laws of any jurisdiction other than the United States or any State thereof, the
transferor Lender shall cause such Transferee (other than any Participant), and
may cause any Participant, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Lender (for the benefit of the
transferor Lender, the Agent and the Borrower) that under applicable law and
treaties, no taxes will be required to be withheld by the Agent, the Borrower
or the transferor Lender with respect to any payments to be made to such
Transferee in respect of the Loans, (ii) to furnish to the transferor Lender,
the Agent and the Borrower either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims
entitlement to whole or partial exemption from U.S. Federal withholding tax on
all interest payments hereunder) and (iii) to agree (for the benefit of the
transferor Lender, the Agent and the Borrower) to provide the transferor
Lender, the Agent and the Borrower a new Form 4224 or Form 1001 upon the
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by such Transferee, and to comply from time to time with
all applicable U.S. laws and regulations with regard to such withholding tax
exemption.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude either the Agent or any other Lender from engaging in any transaction,
in addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower, the Parent or any of their respective Affiliates in which
the Borrower, the Parent or such Affiliate is not restricted hereby from
engaging with any other Person.
SECTION 11.13. Certain Collateral and Other Matters. (a) The Agent
is authorized on behalf of all the Lenders, without the necessity of any notice
to or further consent from the Lenders, from time to time to take any action
with respect to any Collateral or the Loan Documents which may be necessary to
perfect and maintain perfected the security interest in and Liens upon the
Collateral granted pursuant to the Loan Documents.
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<PAGE> 123
(b) The Lenders irrevocably authorize the Agent, at its option and in
its discretion, to release any security interest or Lien granted to or held by
the Agent upon any Collateral (i) upon termination of the Commitments and
Letters of Credit and payment in full in cash of all principal of and interest
on the Loans, all fees payable pursuant to Section 3.3 and 11.3, all
Reimbursement Obligations (including interest thereon) and all other fees,
costs and expenses that are payable under this Agreement or under any other
Loan Document and have been invoiced (in which case the Lenders hereby
authorize the Agent to execute, and the Agent agrees to execute, reasonable
releases in connection with this Agreement (other than, in any event, as to
items stated to survive the termination of this Agreement)); (ii) constituting
property sold or to be sold or disposed of as part of or in connection with any
disposition permitted hereunder; (iii) constituting property in which the
Borrower or any Subsidiary of the Borrower owned no interest at the time the
security interest and/or Lien was granted or at any time thereafter; (iv)
constituting property leased to the Borrower or any Subsidiary of the Borrower
under a lease which has expired or been terminated in a transaction permitted
under this Agreement or is about to expire and which has not been, and is not
intended by the Borrower or such Subsidiary to be, renewed or extended; (v)
consisting of an instrument evidencing Indebtedness or other debt instrument,
if the Indebtedness evidenced thereby has been paid in full; or (vi) if
approved, authorized or ratified in writing by the Required Lenders or, if
required by Section 11.1, each Lender. Upon request by the Agent at any time,
the Lenders will confirm in writing the Agent's authority to release particular
types or items of collateral pursuant to this Section.
SECTION 11.14. Confidential Information. The Agent and each Lender
agree to hold all non-public information (which has been identified as such by
the Borrower to the Agent and each Lender) obtained pursuant to this Agreement
and the other Loan Documents in accordance with its customary procedures for
handling confidential information, provided that disclosure of such
confidential information may be made (a) to the Affiliates, examiners,
directors, shareholders, accountants, auditors, counsel and other professional
advisors of the Agent and each Lender, (b) in connection with any assignment or
participation to an Assignee Lender or Participant, as the case may be, so long
as such Assignee Lender or Participant has previously agreed to these
confidentiality provisions, or (c) as required or requested by any governmental
agency, authority or representative, or pursuant to any court order, legal
process or applicable law, rule or regulation.
SECTION 11.15. Forum Selection and Consent to Jurisdiction. TO THE
FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR
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ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE AGENT, THE LENDERS, THE BORROWER OR THE PARENT MAY BE BROUGHT
AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE PARENT
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. EACH OF THE BORROWER AND THE PARENT FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH
OF THE BORROWER AND THE PARENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER OR THE PARENT HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, EACH OF THE
BORROWER AND THE PARENT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.16. Waiver of Jury Trial, etc. THE AGENT, THE LENDERS,
THE BORROWER AND THE PARENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE
BORROWER OR THE PARENT. THE BORROWER AND THE PARENT ACKNOWLEDGE AND AGREE THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. IN NO EVENT SHALL ANY
LENDER OR THE AGENT BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 11.17. Re-Allocation of Loans, Letters of Credit Outstanding
and Commitments. All Loans, Letters of Credit and Commitments outstanding of
each Lender under the Existing Credit Agreement shall, from and after the
Effective Date, be assigned and re-allocated among the Loans, Letters of Credit
and Commitments provided for hereunder, so that after giving effect thereto,
the Percentages of all Lenders are as set forth on Schedule II hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
E-Z SERVE CONVENIENCE STORES, INC.
as Borrower
By: /s/ JOHN T. MILLER
-----------------------------------
Title: Senior Vice President
E-Z SERVE CORPORATION,
as Guarantor
By: /s/ JOHN T. MILLER
-----------------------------------
Title: Senior Vice President
SOCIETE GENERALE,
as Agent
By: /s/ CATHERINE A. SCAILLIER-LOISEAU
-----------------------------------
Title: Vice President
LENDERS
SOCIETE GENERALE
By: /s/ CATHERINE A. SCAILLIER-LOISEAU
-----------------------------------
Title: Vice President
BANK OF AMERICA TEXAS, N.A.
By: /s/ KIM RUTH
-----------------------------------
Title: Vice President
PREMIER BANK, N.A.
By: /s/ LYNN RICHARD
-----------------------------------
Title: Vice President
AMSOUTH BANK OF ALABAMA
By: /s/ ANDREW W. BRASWELL
-----------------------------------
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ DANIEL G. HEAD, JR.
-----------------------------------
Title: Vice President
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EXHIBIT 10.5.3
AMENDMENT AND WAIVER NO. 2 TO AMENDED AND RESTATED CREDIT
AND GUARANTY AGREEMENT
THIS AMENDMENT AND WAIVER NO. 2 TO AMENDED AND RESTATED CREDIT AND
GUARANTY AGREEMENT, dated as of March 27, 1997 (this "Amendment Agreement"),
among E-Z SERVE CONVENIENCE STORES, INC., a Delaware corporation (the
"Borrower"), E-Z SERVE CORPORATION, a Delaware corporation (the "Parent"), the
Lenders (as defined below) and SOCIETE GENERALE ("SG"), as agent (in such
capacity, the "Agent") for the Lenders,
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent, the various financial institutions
parties thereto (collectively, the "Lenders") and the Agent have heretofore
entered into a certain Amended and Restated Credit and Guaranty Agreement
(amending and restating the Credit and Guaranty Agreement, dated as of January
17, 1995), dated as of October 2, 1995 (the "Existing Credit Agreement" and, as
heretofore amended, and together with this Amendment Agreement, the "Credit
Agreement"); and
WHEREAS, the Borrower and the Parent desire to amend, among other
things, the Revolving Loan Commitment Termination Date, the amortization
schedule and Stated Maturity Date of the Term Loans, the interest rate for LIBO
Rate Loans, the financial covenants and the capital expenditure levels, all as
more fully set forth herein; and
WHEREAS, the Lenders are willing to consent to such limited waiver and
amendments, but only upon the terms and conditions set forth below (including
Article III);
NOW, THEREFORE, the parties hereto hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
Unless otherwise defined or the context otherwise requires, terms used
in this Amendment Agreement, including its preamble and recitals, have the
meanings provided in the Credit Agreement.
ARTICLE II
AMENDMENTS AND LIMITED WAIVER TO CERTAIN PROVISIONS OF
THE CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Effective Date (as
defined in Section 3.1), certain terms and provisions of the Existing Credit
Agreement are hereby waived, modified and amended in accordance with this
Article II. Except as so waived, modified and amended, the Existing Credit
Agreement shall continue in full force and effect in accordance with its terms.
SECTION 2.1 Limited Waiver with respect to Section 7.1.9 (Springing
Liens) of the Existing Credit Agreement, etc. The Lenders hereby waive
compliance (to the extent necessary and so long as the Borrower and the Parent
continue to cooperate with the Agent to achieve compliance as soon as possible)
by the Borrower and the Parent until May 5, 1997, solely with respect to (i)
the applicable provisions of Section 7.1.9 of the Credit Agreement and (ii) the
applicable provisions of the letter agreement, dated as of January 27, 1997,
among the Agent, the Lenders signatories thereto, the Parent, the Borrower and
Phemus Corporation, requiring the Borrower, within 30 days from the date of
such letter agreement, to execute the mortgages, deeds of trust, UCC financing
statements and any other related documents required to grant the Agent a first
priority leasehold Lien on operating facilities and a first priority mortgage
Lien on real property, fixtures, buildings and improvements thereon.
SECTION 2.2 New definition of BofA Cash Management Agreement. The
definition of BofA Cash Management Agreement is hereby inserted as a new
definition in its correct alphabetical order.
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<PAGE> 3
"BofA Cash Management Agreement" means, the Cash Management
Services Agreement, dated March 6, 1997, between the Borrower and Bank
of America.
SECTION 2.3 Amendment to definition of Borrowing Base Amount. The
definition of Borrowing Base Amount is hereby amended by adding the following
new sentence to the end of such definition:
"From the period beginning March 27, 1997 and ending on
September 30, 1997 only, on any Borrowing Base Amount calculation
date, the calculation of the Borrowing Base Amount shall be decreased
by $2,000,000 during such period; provided, however, that for only the
period from the 20th day of each month (commencing March 27, 1997)
through the later of (i) the first Monday of each month and (ii) the
5th day of each subsequent month, only through September 30, 1997, the
calculation of the Borrowing Base Amount shall be increased by
$2,000,000 during such period."
SECTION 2.4 Amendment to definition of Business Acquisition. The
definition of Business Acquisition is hereby deleted in its entirety.
SECTION 2.5 Amendment to definition of Capital Expenditure Level.
The definition of Capital Expenditure Level is hereby deleted in its entirety.
SECTION 2.6 Amendment to definition of Capital Expenditures. The
definition of Capital Expenditures is hereby amended in its entirety by
substituting the following therefor:
"Capital Expenditures" means, for any period, without
duplication, the sum of
(a) the aggregate amount of all expenditures of the
Parent and its Subsidiaries (including the Borrower and its
Subsidiaries) for fixed or capital assets made during such
period which, in accordance with GAAP, would be classified as
capital expenditures; and
(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
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<PAGE> 4
SECTION 2.7 New definition of Commitment Termination Date. The
definition of Commitment Termination Date is hereby inserted as a new
definition in its correct alphabetical order.
"Commitment Termination Date" means, as the case may be, the
Revolving Loan Commitment Termination Date or the Term Loan Commitment
Termination Date.
SECTION 2.8 New definition of Cumulative Capital Expenditures. The
definition of Cumulative Capital Expenditures is hereby inserted as a new
definition in its correct alphabetical order.
"Cumulative Capital Expenditures" means, the cumulative
aggregate amount of Capital Expenditures commencing with the fiscal
month beginning December 30, 1996.
SECTION 2.9 New definition of Cumulative EBITDA. The definition of
Cumulative EBITDA is hereby inserted as a new definition in its correct
alphabetical order.
"Cumulative EBITDA" means, the cumulative aggregate amount of
EBITDA commencing with the fiscal month beginning December 30, 1996.
SECTION 2.10 New definition of Cumulative Interest Expense. The
definition of Cumulative Interest Expense is hereby inserted as a new
definition in its correct alphabetical order.
"Cumulative Interest Expense" means, the cumulative aggregate
amount of Interest Expense commencing with the fiscal month beginning
December 30, 1996.
SECTION 2.11 Amendment to definition of Excess Insurance Proceeds.
The definition of Excess Insurance Proceeds is hereby deleted in its entirety.
SECTION 2.12 Amendment to definition of Fixed Charge Coverage Ratio.
The definition of Fixed Charge Coverage Ratio is hereby amended in its entirety
by substituting the following therefor:
"Fixed Charge Coverage Ratio" means, as of the last day of any
fiscal month, the ratio of:
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<PAGE> 5
(a) Cumulative EBITDA for the Rolling Period ending
on such day;
to
(b) the sum of
(i) Cumulative Interest Expense paid in cash
for such Rolling Period;
plus
(ii) all Cumulative Capital Expenditures made
in such Rolling Period.
SECTION 2.13 Amendment to definition of Gross Profit Margin. The
definition of Gross Profit Margin is hereby deleted in its entirety.
SECTION 2.14 New definition of Insurance Proceeds. The definition of
Insurance Proceeds is hereby inserted as a new definition in its correct
alphabetical order.
"Insurance Proceeds" means the insurance proceeds received by
the Agent pursuant to clause (d) of Section 7.1.4.
SECTION 2.15 Amendment to definition of Interest Coverage Ratio. The
definition of Interest Coverage Ratio is hereby amended in its entirety by
substituting the following therefor:
"Interest Coverage Ratio" means, as of the last day of any
fiscal month, the ratio of:
(a) Cumulative EBITDA for the Rolling Period ending on such
day
to
(b) Cumulative Interest Expense paid in cash for such Rolling
Period.
SECTION 2.16 Amendment to definition of Interest Period. The
definition of Interest Period of the Existing Credit
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<PAGE> 6
Agreement is hereby amended by deleting the words "one, three or six months
thereafter" appearing on the fifth line thereof and substituting such words
with "one month thereafter".
SECTION 2.17 Amendment to definition of Net Debt Proceeds. Clause
(b) of the definition of Net Debt Proceeds of the Existing Credit Agreement is
hereby amended in its entirety by substituting the following therefor:
"(b) in connection with the issuance, incurrence, placement
or sale of permitted Indebtedness, (i) all reasonable and customary
fees and expenses actually paid by the Parent or its Subsidiaries
(except as provided in clause (ii)) and (ii) underwriters' discounts
and commissions not payable to the Parent, any of its Subsidiaries or
any of their Affiliates."
SECTION 2.18 Amendment to definition of Net Disposition Proceeds.
The definition of Net Disposition Proceeds of the Existing Credit Agreement is
hereby amended in its entirety by substituting the following therefor:
"Net Disposition Proceeds" means the excess of
(a) the gross cash proceeds (other than proceeds
from any sale of Inventory of the Parent or any of its
Subsidiaries in the ordinary course of their business)
received by the Parent or any of its Subsidiaries from any
Permitted Disposition, including any cash payments received by
way of a deferred payment of principal pursuant to a permitted
note or installment receivable or otherwise, but only when and
as received;
over
(b) (i) all reasonable and customary fees and
expenses with respect to legal, investment banking, brokerage,
accounting and other professional fees actually incurred by
the Parent and its Subsidiaries in connection with such
Permitted Disposition which have not been paid to Affiliates
of the Parent or any of its Subsidiaries, (ii) all taxes
actually paid or estimated by the Parent (in good faith) to be
payable in cash in connection with such Permitted Disposition;
provided,
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<PAGE> 7
however, that if, after the payment of all taxes with respect
to such Permitted Disposition, the amount of estimated taxes,
if any, pursuant to clause (ii) above exceeded the amount of
taxes actually paid in cash in respect of such Permitted
Disposition, the aggregate amount of such excess shall be
immediately payable, pursuant to clause (c) of Section 3.1.2,
as Net Disposition Proceeds, and (iii) if permitted hereunder
or otherwise by the Required Lenders, the aggregate amount of
any Indebtedness of the type referred to in clause (a) of the
definition thereof which is secured by such asset and required
to be repaid from such gross cash proceeds.
SECTION 2.19 Amendment to definition of Net Equity Proceeds. Clause
(b) of the definition of Net Equity Proceeds of the Existing Credit Agreement
is hereby amended in its entirety by substituting the following therefor:
"(b) in connection with such issuance, placement or
sale of such equity securities, all (i) reasonable and
customary fees and expenses actually paid by the Parent or its
Subsidiaries or the Parent or any corporation of which the
Parent is a Subsidiary (except as provided in clause (ii)) and
(ii) underwriters' discounts and commissions not payable to
the Parent, any of its Subsidiaries or any of their
Affiliates.
SECTION 2.20 Amendment to definition of Net Income. The definition
of Net Income is hereby deleted in its entirety by substituting the following
therefor:
"Net Income" means, for any period, all amounts (exclusive of
all amounts in respect of any non-cash gains or losses and gains and
losses associated with dispositions (except to the extent of gains of
up to $458,000 in Fiscal Year 1997 in respect of any such
dispositions)) which, in accordance with GAAP, would be included as
net income on the consolidated statements of income of the Parent and
its Subsidiaries for such period.
SECTION 2.21 Amendment to definition of Obligations. The definition
of Obligations is hereby deleted in its entirety by substituting the following
therefor:
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<PAGE> 8
"Obligations" means all obligations (monetary or otherwise) of
the Borrower and each other Obligor arising under or in connection
with this Agreement, the Notes, each other Loan Document and, until
September 30, 1997, the obligations of the Borrower to Bank of America
under the BofA Cash Management Agreement (to the extent and only to
the extent of up to $2,000,000 in the aggregate).
SECTION 2.22 Amendment to definition of Permitted Business
Acquisition. The definition of Permitted Business Acquisition is hereby
deleted in its entirety.
SECTION 2.23 Amendment to definition of Permitted Disposition. The
definition of Permitted Disposition is hereby amended in its entirety by
substituting the following therefor:
"Permitted Disposition" means any sale, lease, transfer or
other disposition of assets of the Borrower or any other Subsidiary of
the Parent to the extent that
(a) the Borrower or such other Subsidiary shall
receive only cash consideration therefor, provided that the
Borrower or such other Subsidiary may receive promissory notes
having terms that are customary for seller-financed
transactions, to the extent the aggregate principal amount of
all such promissory notes received by the Borrower and such
other Subsidiaries in any Fiscal Year does not exceed
$250,000;
(b) the Borrower and such other Subsidiaries shall
have received fair value therefor; and
(c) at the time of each such disposition, no Default
or Event of Default shall have occurred and be continuing.
SECTION 2.24 Amendment to definition of Required Lenders. The
definition of Required Lenders of the Existing Credit Agreement is hereby
amended in its entirety by substituting the following therefor:
"Required Lenders" means, at the time any determination
thereof is to be made, Lenders holding 66-2/3% or more of the
aggregate of (a) the then aggregate unpaid principal
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<PAGE> 9
amount of the Term Notes and (b) the Revolving Loan Commitments (or,
if the Revolving Loan Commitments are no longer in effect, the
aggregate unpaid principal amount, if any, of Revolving Notes and
Letter of Credit Outstandings).
SECTION 2.25 Amendment to definition of Revolving Loan Commitment
Termination Date. Clause (a) of the definition of Revolving Loan Commitment
Termination Date of the Existing Credit Agreement is hereby amended in its
entirety by substituting the following new clause (a) therefor:
"(a) October 1, 1998;".
SECTION 2.26 Amendment to definition of Rolling Period. The
definition of Rolling Period of the Existing Credit Agreement is hereby amended
in its entirety by substituting the following therefor:
"Rolling Period" means, as of any date of calculation, the
period commencing with December 30, 1996 and ending on the date of
such calculation, provided, however, that commencing with the fiscal
month ending January 25, 1998, the "Rolling Period" shall mean the
immediately preceding twelve month period from the date of
calculation.
SECTION 2.27 Amendment to definition of Series H Preferred Stock.
The definition of Series H Preferred Stock is hereby added in its correct
alphabetized order.
"Series H Preferred Stock" means the Convertible Preferred
Stock, Series H, of the Parent, par value $.01 per share.
SECTION 2.28 Amendment to definition of SGA Margin. The definition
of SGA Margin is hereby amended in its entirety to read as follows:
"SGA Margin" means, as of the last day of any Fiscal Quarter
(commencing with the Fiscal Quarter ending March 30, 1997), the
percentage obtained by dividing (a) selling, general and
administrative expenses (as determined in accordance with GAAP) of the
Parent and its Subsidiaries for the period ending on such day by (b)
total sales (as
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<PAGE> 10
determined in accordance with GAAP) by the Parent and its Subsidiaries
for such period.
SECTION 2.29 Amendment to definition of Stated Maturity Date. The
definition of Stated Maturity Date is hereby amended in its entirety to read as
follows:
"Stated Maturity Date" means in the case of any Term Loan or
Revolving Loan, October 1, 1998.
SECTION 2.30 Amendment to definition of Tangible Net Worth. The
definition of Tangible Net Worth is hereby deleted in its entirety.
SECTION 2.31 Amendment to Clause (b) of Section 3.1.2 (Mandatory
Prepayments) of the Existing Credit Agreement. Clause (b) of Section 3.1.2 of
the Existing Credit Agreement is hereby amended by deleting clause (b) in its
entirety and substituting the following therefor:
"(b) the Borrower shall, on each date set forth below, make a
scheduled repayment of the aggregate outstanding principal amount
of all Term Loans in the amount set forth opposite each such
date:
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<PAGE> 11
Amount of Required
"Repayment Date Principal Repayment
-------------- -------------------
January 24, 1996 $2,000,000
July 24, 1996 $3,550,000
January 24, 1997 $3,550,000
July 24, 1997 $4,820,000
September 30, 1997 $6,080,000
December 31, 1997 $5,000,000
January 24, 1998 $5,780,000
February 28, 1998 $4,220,000
July 24, 1998 $6,280,000
October 1, 1998 $38,188,919 or the remaining principal
amount of Term Loans outstanding on
such date;
; provided, however, that at the option of the Borrower (after notice to the
Agent in writing), the Borrower may defer the July 24, 1997 scheduled
amortization payment until no later than September 30, 1997 (it is understood
that any such deferred principal payment payable on September 30, 1997 shall be
in addition to the $6,080,000 scheduled amortization payment required to be
made on September 30, 1997) after payment to the Agent, for the pro rata
account of the Lenders, the fee described in clause (a) of Section 3.3.4;
provided, further, however, that (i) if the Borrower has reduced the aggregate
amount of outstanding Term Loans to at least $60,000,000 by September 30, 1997,
the scheduled principal amortization payment required on September 30, 1997
will be automatically and permanently waived, (ii) if the Borrower has reduced
the aggregate amount of outstanding Term Loans to at least $55,000,000 by
December 31, 1997, the scheduled principal amortization payment required on
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<PAGE> 12
December 31, 1997 will be automatically and permanently waived, and (iii) if
the Borrower has reduced the aggregate amount of outstanding Term Loans to at
least $45,000,000 by February 28, 1998, the scheduled principal amortization
payment required on February 28, 1998 will be automatically and permanently
waived;"
-12-
<PAGE> 13
SECTION 2.32 Amendment to Clause (c) of Section 3.1.2 (Mandatory
Prepayments) of the Existing Credit Agreement. Clause (c) of Section 3.1.2 of
the Existing Credit Agreement is hereby amended by deleting clause (c) in its
entirety and substituting the following therefor:
"(c) the Parent or the Borrower, as the case may be, shall,
(i) on the date of receipt by it or any of its Subsidiaries of any
Gross Transaction Proceeds, Net Disposition Proceeds, Net Equity
Proceeds, Net Debt Proceeds or Insurance Proceeds and (ii) on the date
of delivery of the audited financial statements pursuant to clause (b)
of Section 7.1.1 (and, in any event, on the date 90 days after the end
of each Fiscal Year), in the case of Excess Cash Flow, apply (A) 100%
of all such Gross Transaction Proceeds, Net Disposition Proceeds, Net
Equity Proceeds, Insurance Proceeds and Net Debt Proceeds, as the case
may be, and (B) 100% of all such Excess Cash Flow, to make a mandatory
prepayment of the Term Loans to be applied to the installments thereof
in the inverse order of the scheduled repayments of the Term Loans;
provided, however, that 50% of the first $10,600,000 of Net
Disposition Proceeds received by the Parent or the Borrower shall be
applied pro rata to the July 24, 1997 and January 24, 1998 scheduled
Term Loan principal amortization payments; and provided, further,
however, that any Net Disposition Proceeds received by the Parent or
the Borrower that are allocated solely to current assets (i.e.,
Eligible Inventory and Eligible Accounts) will be applied to make a
mandatory prepayment of the Revolving Loans outstanding and 50% of any
reduction to the Borrowing Base Amount (as a result of Net Disposition
Proceeds arising from the sale of current assets (i.e., Eligible
Inventory and Eligible Accounts)), will permanently reduce the
Revolving Loan Commitment Amount by such amounts; and"
SECTION 2.33 Amendment to Clause (e) of Section 3.1.2 of the Existing
Credit Agreement. Clause (e) of Section 3.1.2 of the Existing Credit Agreement
is hereby amended by deleting clause (e) in its entirety and substituting the
following therefor:
"(e) the Borrower shall prepay Revolving Loans so that the
aggregate outstanding principal amount of all Revolving Loans
outstanding does not exceed (i) for the period from
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<PAGE> 14
March 27, 1997 until January 31, 1998, the greater of (a) $8,000,000
minus 50% of the aggregate amount of Net Disposition Proceeds applied
to the Revolving Loans during such period and (b) $4,000,000; and (ii)
from and after January 31, 1998, $4,000,000; during a five consecutive
calendar day period during each calendar month (each such period, a
"Clean-Down Period")."
SECTION 2.34 Amendment to Section 3.2.1 of the Existing Credit
Agreement (Rates). Clauses (a) and (b) of Section 3.2.1 of the Existing Credit
Agreement are hereby amended in their entirety by substituting the following
therefor:
"(a) on that portion maintained from time to time as Base
Rate Loans, equal to the sum of the SG Base Rate from time to time in
effect plus 1.75% (retroactive to all Loans outstanding on and after
January 1, 1997); provided, however, that if the Borrower has not
reduced the aggregate principal amount of Term Loans to at least
$55,000,000 by September 30, 1997, such rate of interest shall
automatically and permanently increase to the sum of the SG Base Rate
from time to time in effect plus 2.25%; and
(b) on that portion maintained as a LIBO Rate Loan, during
each Interest Period applicable thereto, equal to the sum of the LIBO
Rate (Reserve Adjusted) for such Interest Period plus 3.0%
(retroactive to all Loans outstanding on and after January 1, 1997);
provided, however, that if the Borrower has not reduced the aggregate
principal amount of Term Loans to at least $55,000,000 by September
30, 1997, such rate of interest shall automatically and permanently
increase to the sum of the LIBO Rate (Reserve Adjusted) for such
Interest Period plus 3.5%."
SECTION 2.35 Amendment to Section 3.2.2 of the Existing Credit
Agreement (Post-Default Rates). Section 3.2.2 of the Existing Credit Agreement
is hereby amended in its entirety by substituting the following therefor:
"SECTION 3.2.2. Post-Default Rates. From and after the
occurrence of any Event of Default, the Borrower shall pay, but only
to the extent permitted by law, interest (after as well as before
judgment) on all amounts payable hereunder (including fees in respect
of Letters of Credit)
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<PAGE> 15
at a rate per annum equal to the rate per annum otherwise in effect
plus a further margin of 4% per annum."
SECTION 2.36 Amendment to Section 3.2.3 of the Existing Credit
Agreement (Payment Dates). Clause (d) of Section 3.2.3 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period; and"
SECTION 2.37 Amendment to Article III of the Existing Credit
Agreement (Deferral and Extension Fees). Article III of the Existing Credit
Agreement is hereby amended to add a new Section 3.3.4 to read as follows:
"SECTION 3.3.4. Deferral and Extension Fees, etc.
The Borrower agrees to pay to the Agent for the pro rata account of
the Lenders (based on each such Lender's Percentage of outstanding
Term Loans) the following fees on the following dates:
(a) a deferral fee payable on July 24, 1997 (but
earned by the Lenders on March 27, 1997) in the amount of
2.50% multiplied by $4,820,000 (the amount of the scheduled
Term Loan principal payment required pursuant to clause (b) of
Section 3.1.2), only if the Borrower exercises its option to
defer such scheduled Term Loan principal payment until
September 30, 1997;
(b) an extension fee payable on September 30, 1997
(but earned by the Lenders on March 27, 1997) in the amount of
.50% multiplied by the aggregate amount of Term Loans
outstanding on such date, only if the Borrower has not reduced
the aggregate amount of Term Loans outstanding on such date to
at least $55,000,000;
(c) an extension fee payable on December 31, 1997
(but earned by the Lenders on March 27, 1997) in the amount of
.50% multiplied by the aggregate amount of Term Loans
outstanding on such date, only if the Borrower has not reduced
the aggregate amount of Term Loans outstanding on such date to
at least $50,000,000; and
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<PAGE> 16
(d) an extension fee payable on March 31, 1998 (but
earned by the Lenders on March 27, 1997) in the amount of 1%
multiplied by the aggregate amount of Term Loans and Revolving
Loan Commitments outstanding on such date, only if the
Borrower has not terminated all Commitments, not repaid all
Loans and cancelled all Letters of Credit and all Obligations
have not been paid in full in cash."
SECTION 2.38 Amendment to Section 6.17 of the Existing Credit
Agreement (Ownership of Stock). Section 6.17 of the Existing Credit Agreement
is hereby amended in its entirety by substituting the following therefor:
"SECTION 6.17 Ownership of Stock. The Parent owns free and
clear of all Liens (other than any Lien pursuant to the Parent Pledge
Agreement), 100% of the outstanding shares of common stock (whether
voting or non-voting) of the Borrower and Petroleum on a fully diluted
basis. There are no outstanding options, warrants or convertible
securities with respect to the shares of common stock of the
Borrower."
SECTION 2.39 Amendments to Section 7.1.1 of the Existing Credit
Agreement (Financial Information, Reports, Notices, etc). (a) Clause (a) of
Section 7.1.1 of the Existing Credit Agreement is hereby amended by (i)
deleting the word "and" appearing immediately before clause (a)(ii) and
substituting therefor a ","; (b) Clause (a) of Section 7.1.1. of the Existing
Credit Agreement is hereby further amended by adding the following new clause
(iii) immediately prior to the period of such clause (a)(ii):
"and (iii) Compliance Certificate, executed by the chief
financial Officer of the Parent, showing (in reasonable detail
and with appropriate calculations and computations in all
respects satisfactory to the Agent) compliance with the
financial covenants set forth in Section 7.2.4"
; (c) clause (c) of Section 7.1.1 of the Existing Credit Agreement is hereby
amended by deleting the words "and (ii) a Compliance Certificate, executed by
the chief financial Authorized Officer of the Parent, showing (in reasonable
detail and with appropriate calculations and computations in all
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<PAGE> 17
respects satisfactory to the Agent) compliance with the financial covenants set
forth in Section 7.2.4;" ; (d) clause (i) of Section 7.1.1 of the Existing
Credit Agreement is hereby amended by deleting the word "and" at the end of
such clause and (e) a new clause (k) and (l) are hereby added to Section 7.1.1
of the Existing Credit Agreement to read as follows:
"(k) as soon as available and in any event within 2
Business Days after the end of each week, a comprehensive
weekly report (with respect to the previous week) with respect
to the Borrower's cash liquidity position and such other items
as described on Annex I attached hereto; and
(l) as soon as available and in any event no later
than May 31, 1997, a detailed operating and merchandising
operation plan prepared by the president and chief operating
officer of the Borrower, in form satisfactory to the Agent."
SECTION 2.40 Amendment to Section 7.1.3 of the Existing Credit
Agreement (Maintenance of Properties). Section 7.1.3 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"SECTION 7.1.3. Maintenance of Properties. The Borrower and
the Parent will, and will cause each of their respective Subsidiaries
to, maintain, preserve, protect and keep their respective properties
in good repair, working order and condition (except to the extent
sold, transferred or otherwise disposed of pursuant to a Permitted
Disposition), and make necessary and proper repairs, renewals
(including lease payments on leasehold properties)
and replacements so that the business carried on in connection
therewith may be properly conducted at all times, unless the Borrower
or the Parent, as the case may be, determines in good faith that the
continued maintenance of any of its properties is no longer
economically desirable (provided that any such determination with
respect to any property material to the operations of the Borrower or
any other Subsidiary of the Parent shall be made only after
consultation with the Agent)."
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<PAGE> 18
SECTION 2.41 Amendment to Section 7.1.4 of the Existing Credit
Agreement (Insurance). Clause (d) of Section 7.1.4 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"(d) All proceeds of property insurance (including with
respect to any casualty or other covered occurrence) in excess of
$1,000,000 in the aggregate (so long as any such insurance proceeds
are used by the Borrower for the repair, replacement or restoration of
any properties covered by such insurance within 180 days of the
receipt thereof), shall be delivered by the Borrower or such
Subsidiary (and the Parent shall cause such Subsidiary to so deliver)
to the Agent and shall constitute "Insurance Proceeds," to be applied
as a mandatory prepayment of the Term Loans pursuant to clause (c) of
Section 3.1.2. Notwithstanding any provision to the contrary in this
Agreement or any other Loan Document, the Agent in its sole discretion
may, subject to the consent of the Required Lenders, permit the
Borrower the use of such Insurance Proceeds to repair, restore or
replace the property or asset which suffered the loss for which such
proceeds are being paid."
SECTION 2.42 Amendment to Article VII of the Existing Credit
Agreement. A new Section 7.1.13 is hereby added in its correct numerical order
to Article VII of the Existing Credit Agreement to read as follows:
"SECTION 7.1.13. Deposit and Pledge Agreements. The Parent
and the Borrower shall deliver to the Agent prior to June 15, 1997,
with respect to all bank accounts maintained with any and all
depository institutions (including, in the case of any new accounts
opened by the Borrower after such date), a deposit and pledge
agreement or a concentration account agreement, as the case may be
(relating to such account) duly authorized and executed by the
Borrower and such depository institution (it is understood and agreed
that the Borrower will use its best efforts to secure the signature of
each such depository institution prior to June 15, 1997), along with
an appropriate opinion of counsel (if required by the Agent) as to
such due authorization and execution by the Borrower, in form and
substance reasonably satisfactory to the Agent and its counsel. In
addition, the Borrower shall not institute a new cash management system
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<PAGE> 19
(including, without limitation, any replacement or material changes to
the BofA Cash Management Agreement) without the prior written consent
of the Agent."
SECTION 2.43 Amendment to Section 7.2.2 of the Existing Credit
Agreement. Section 7.2.2 of the Existing Credit Agreement is hereby amended in
its entirety by substituting the following therefor:
"SECTION 7.2.2. Indebtedness. The Borrower and the Parent
will not, and will not permit any of their respective Subsidiaries to,
create, incur, assume or suffer to exist or otherwise become or be
liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and
other Obligations;
(b) until the date of the initial Credit Extension on the
Effective Date, Indebtedness identified in Item 7.2.2(b)
("Indebtedness to be Paid") of the Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date which is
identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure
Schedule;
(d) Indebtedness (other than Indebtedness described in the
immediately preceding clause (c)) in an aggregate principal amount not
to exceed $2,000,000 at any time outstanding in respect of Capitalized
Lease Liabilities to the extent permitted by Section 7.2.7;
(e) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal
trade terms in connection with purchases of goods and services, but
excluding all Indebtedness incurred through the borrowing of money and
all Contingent Liabilities);
(f) Indebtedness in respect of Rate Protection Agreements
with a Lender and entered into solely with respect to the Credit
Extensions or, as to currency matters,
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<PAGE> 20
for protection in connection with the Borrower's ordinary course of
business;
(g) Indebtedness in an aggregate principal amount not to
exceed $15,000,000 at any time outstanding in respect of the Petroleum
Note;
(h) Indebtedness of the Parent owing to the Borrower pursuant
to the Parent Inter-Company Note; and
(i) Obligations of the Parent under guarantees of any of its
Subsidiaries' obligations to trade creditors in an aggregate amount
outstanding not to exceed $10,000,000; provided that (i) each of such
guaranties have an expressly stated limited amount and are for a term
of no more than one year and (ii) the identity of the beneficiaries of
such guaranties is provided in writing to the Agent;
provided, however, that no Indebtedness pursuant to clause (d) may be
incurred if, after giving effect to the incurrence thereof, any
Default shall have occurred and be continuing."
SECTION 2.44 Amendment to Section 7.2.4 of the Existing Credit
Agreement (Financial Condition). Section 7.2.4 of the Existing Credit
Agreement is hereby amended (retroactive to December 29, 1996) in its entirety
by substituting the following therefor:
"(a) the Interest Coverage Ratio, as of the last day of each
calendar month of each Fiscal Year set forth below, to be less than
the ratio set forth opposite such fiscal month of each Fiscal Year:
Minimum Interest
Month/Fiscal Year Coverage Ratio
------------------- --------------
March, 1997 0.16:1.00
April, 1997 0.23:1.00
May, 1997 0.47:1.00
June, 1997 1.02:1.00
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<PAGE> 21
Minimum Interest
Month/Fiscal Year Coverage Ratio
------------------- --------------
July, 1997 1.42:1.00
August, 1997 1.71:1.00
September, 1997 2.14:1.00
October, 1997 2.49:1.00
November, 1997 2.61:1.00
December, 1997 2.91:1.00
January, 1998 3.06:1.00
February, 1998 3.08:1.00
March through May, 1998 3.19:1.00
June, 1998 and thereafter; 3.35:1.00
(b) the Fixed Charge Coverage Ratio, as of the last day of
each fiscal month of each Fiscal Year set forth below, to be less than
the ratio set forth opposite such fiscal month:
Fixed Charge
Month/Fiscal Year Coverage Ratio
------------------- --------------
March, 1997 0.10:1.00
April, 1997 0.14:1.00
May, 1997 0.25:1.00
June, 1997 0.53:1.00
July, 1997 0.71:1.00
August, 1997 0.83:1.00
September, 1997 1.02:1.00
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<PAGE> 22
Fixed Charge
Month/Fiscal Year Coverage Ratio
------------------- --------------
October, 1997 1.17:1.00
November, 1997 1.22:1.00
December, 1997 1.35:1.00
January, 1998 1.35:1.00
February, 1998 1.36:1.00
March through May, 1998 1.40:1.00
June, 1998 and
thereafter; 2.05:1.00
(c) Cumulative EBITDA, as of the last day of each fiscal
month of each Fiscal Year set forth below, to be less than the amount
set forth opposite such fiscal month:
Month/Fiscal Year Cumulative EBITDA
------------------- -----------------
March, 1997 $700,000
April, 1997 $1,100,000
May, 1997 $2,100,000
June, 1997 $4,700,000
July, 1997 $7,200,000
August, 1997 $9,600,000
September, 1997 $13,300,000
October, 1997 $16,800,000
November, 1997 $19,100,000
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<PAGE> 23
Month/Fiscal Year Cumulative EBITDA
------------------- -----------------
December, 1997 $23,000,000
January, 1998 $23,100,000
February, 1998 $23,200,000
March through May, 1998 $23,700,000
June, 1998 and thereafter; $25,400,000
(d) the SGA Margin, as of the last day of each Fiscal
Quarter, to be greater than the percentage set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter SGA Margin
-------------- ----------
<S> <C>
The first Fiscal Quarter of the 1997 Fiscal Year 3.40:1.00
The second Fiscal Quarter of the 1997 Fiscal Year 3.20:1.00
The third Fiscal Quarter of the 1997 Fiscal Year 3.20:1:00
The fourth Fiscal Quarter of the 1997 Fiscal Year 3.00:1:00
The first Fiscal Quarter of the 1998 Fiscal Year 3.00:1:00
and thereafter."
</TABLE>
SECTION 2.45 Amendment to Section 7.2.5 of the Existing Credit
Agreement (Investments). Section 7.2.5 of the Existing Credit Agreement is
hereby amended by deleting clause (f) in its entirety and substituting the
following therefor:
"(f) [Reserved];"
SECTION 2.46 Amendment to Section 7.2.6 of the Existing Credit
Agreement (Restricted Payments). Clause (b)(i) of Section 7.2.6 of the Existing
Credit Agreement is hereby amended by deleting the proviso thereof and
substituting the following therefor:
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<PAGE> 24
"provided, however, that the Parent may, with respect to any shares of
Series H Preferred Stock, declare and pay dividends thereon solely in
the form of additional shares of Series H Preferred Stock, in
accordance with the terms of such Series H Preferred Stock as in
effect on the date of the Consent and Limited Waiver, dated as of
January 27, 1997, among the Lenders signatories thereto, the Agent,
the Parent and the Borrower."
SECTION 2.47 Amendment to Section 7.2.7 of the Existing Credit
Agreement (Capital Expenditures). Section 7.2.7 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"SECTION 7.2.7. Capital Expenditures, etc. The Borrower and
the Parent will not, and will not permit any of their respective
Subsidiaries to, make or, without duplication, commit to make Capital
Expenditures in any Fiscal Year, except
(a) Cumulative Capital Expenditures (other than
Capitalized Lease Liabilities) of the Borrower and other
Subsidiaries of the Parent which do not aggregate in any
fiscal month of any Fiscal Year the amount set forth opposite
such fiscal month of such Fiscal Year listed below;
Month/Fiscal Year Cumulative Capital
----------------- ------------------
Expenditures
------------
March, 1997 $ 1,500,000
April, 1997 $ 2,100,000
May, 1997 $ 2,800,000
June, 1997 $ 3,600,000
July, 1997 $ 4,500,000
August, 1997 $ 5,300,000
September, 1997 $ 6,200,000
October, 1997 $ 7,000,000
November, 1997 $ 7,700,000
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<PAGE> 25
Month/Fiscal Year Cumulative Capital
----------------- ------------------
Expenditures
------------
[S] [C]
December, 1997 $8,500,000
January, 1998 and $8,600,000
thereafter
; provided, however, that the Borrower may not carry-forward any
unused Capital Expenditures to the next Fiscal Year; and
(b) Capitalized Lease Liabilities which do not
aggregate in any Fiscal Year in excess of $500,000."
SECTION 2.48 Amendment to Section 7.2.10 of the Existing Credit
Agreement (Consolidation, Merger, etc.). Section 7.2.10 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"SECTION 7.2.10. Consolidation, Merger, etc. Other than the
consummation of the Merger, the Borrower and the Parent will not, and
will not permit any of their respective Subsidiaries to, liquidate or
dissolve, consolidate or amalgamate with, or merge into or with, any
other Person, or purchase or otherwise acquire all or any substantial
part of the assets or stock of any Person (or of any division
thereof)."
SECTION 2.49 Amendment to Section 7.2.11 of the Existing Credit
Agreement (Asset Dispositions, etc.). Section 7.2.11 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"SECTION 7.2.11. Asset Dispositions, etc. The Borrower and
the Parent will not, and will not permit any of their respective
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey
or dispose of, or grant options, warrants or other rights with respect
to, all or any part of its assets (including accounts receivable and
capital stock of Subsidiaries) to any Person, except
(a) if such sale, transfer, lease, contribution or
conveyance is of Inventory in the ordinary course of its
business; or
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<PAGE> 26
(b) if such assets are worn or obsolete and the net
book value of such assets, together with the net book value of
all other assets sold, transferred, leased, contributed or
conveyed by the Borrower, the Parent or any of their
respective Subsidiaries pursuant to this clause during the
Fiscal Year in which such assets are to be sold, transferred,
leased, contributed or conveyed, does not exceed $1,000,000 in
the aggregate."
SECTION 2.50 Amendment to Section 7.2.13 of the Existing Credit
Agreement (Transactions with Affiliates). Section 7.2.13 of the Existing Credit
Agreement is hereby amended in its entirety by substituting the following
therefor:
"SECTION 7.2.13. Transactions with Affiliates. The Borrower
and the Parent will not, and will not permit any of their respective
Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with, any of its other Affiliates unless such
arrangement or contract is on fair and reasonable terms and is an
arrangement or contract of the kind which would be entered into by a
prudent Person in the position of the Borrower or such Subsidiary with
a Person which is not one of its Affiliates."
SECTION 2.51 Amendment to Section 7.2.19 of the Existing Credit
Agreement (Activities of Certain Subsidiaries of the Parent). Section 7.2.19
of the Existing Credit Agreement is hereby amended in its entirety by
substituting the following therefor:
"SECTION 7.2.19 Activities of Certain Subsidiaries of the
Parent. Without limiting the effect of any provision contained in
this Article VII, Petroleum of California will not engage in any
business activity other than owning and operating gasoline stations in
California and Arizona"
SECTION 2.52 Amendment to Section 8.1.1 of the Existing Credit
Agreement (Non-Payment of Obligations). Section 8.1.1 of the Existing Credit
Agreement is hereby amended by deleting the words "10 Business Days" appearing
in clause (c) of such Section and substituting therefor the words "5 Business
Days".
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<PAGE> 27
SECTION 2.53 Amendment to Section 8.1.3 of the Existing Credit
Agreement (Non-Performance of Certain Covenants and Obligations). Section
8.1.3 of the Existing Credit Agreement is hereby amended by adding the words ",
Section 7.1.13" immediately following the words "7.1.11".
SECTION 2.54 Amendment to Section 10.8 of the Existing Credit
Agreement (Copies, Etc.). Section 10.8 of the Existing Credit Agreement is
hereby amended by adding the following new sentence to the end of such
definition:
"The Borrower will simultaneously deliver copies to each
Lender of all communications being sent to the Agent."
SECTION 2.55 Amendment to Section 11.15 of the Existing Credit
Agreement (Forum Selection and Consent to Jurisdiction). The first sentence of
Section 11.15 of the Existing Credit Agreement is hereby amended by substituting
the following therefor:
"TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
AGENT, THE LENDERS, THE BORROWER OR THE PARENT MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT, INCLUDING, WITHOUT LIMITATION,
AGAINST ANY COLLATERAL OR OTHER PROPERTY, MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY OTHER JURISDICTION."
SECTION 2.56 Amendment to Schedule III of the Existing Credit
Agreement (Capital Expenditure Levels II and III). Schedule III of the
Existing Credit Agreement is hereby deleted in its entirety.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1 Conditions to Effectiveness of Article II. The limited
waiver and amendments set forth in Article II shall become effective upon the
prior or concurrent satisfaction of
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<PAGE> 28
each of the conditions precedent set forth in this Article III (the "Effective
Date").
SECTION 3.2 Resolutions, etc. The Agent shall have received from the
Parent, Petroleum and the Borrower and each other Obligor party to a Loan
Document, a certificate, dated the date of the initial Credit Extension, of its
Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of this
Amendment Agreement and each other Loan Document to be executed by it;
and
(b) the incumbency and signatures of the officers of the
Parent, Petroleum and the Borrower and each such other Obligor
authorized to act with respect to this Amendment Agreement and each
other Loan Document as is to be executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary or Assistant Secretary of the
Parent, Petroleum and the Borrower each other Obligor canceling or amending
such prior certificate.
SECTION 3.3 Amendment Fee. The Borrower shall have paid to the Agent,
for the pro rata account of each Lender in accordance with their respective
Commitment Amounts, a non-refundable amendment fee in the amount of .25%
multiplied by the aggregate amount of all outstanding Term Loans and Revolving
Loan Commitments on the Effective Date.
SECTION 3.4 Stockholders' Acknowledgment and Confirmation. The Agent
shall have received, with a copy for each Lender, a duly executed Stockholders'
Acknowledgment and Confirmation, dated as of the Effective Date, substantially
in the form of Exhibit B hereto, duly executed and delivered by each party
thereto, with respect to the Stockholders' Letter of Understanding
acknowledging the terms and conditions of this Amendment Agreement, and
agreeing that the terms and provisions thereof remain in full force and effect.
SECTION 3.5 Affirmation and Acknowledgement. The Agent shall have
received an Affirmation and Acknowledgement, dated as of the Effective Date,
substantially in the form of Exhibit A hereto, duly executed and delivered by
each Obligor that is a party to the Security Agreements and the Pledge
Agreements and
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<PAGE> 29
each other Loan Document which was executed and delivered pursuant to the
Existing Credit Agreement.
SECTION 3.6 Agent's Closing Fees, Expenses, etc. The Agent shall
have received for its own account, and for the account of each Lender, as the
case may be, all fees, costs and expenses due and payable pursuant to Section
11.3 (including consulting and legal fees and expenses).
SECTION 3.7 Opinion of Counsel. The Agent and the Lenders shall have
received a legal opinion, dated the Effective Date, in form and substance
satisfactory to the Agent from Bracewell & Patterson, L.L.P, as to such matters
as the Agent may reasonably request.
SECTION 3.8 Execution of Counterparts. The Agent shall have received
counterparts of this Amendment Agreement duly executed by the Borrower, the
Parent, the Agent and the Lenders, and duly acknowledged by Petroleum, each of
which counterparts shall be deemed to be an original and all of which shall
constitute together but one and the same agreement.
SECTION 3.9 Representations and Warranties. The Agent shall have
received a certificate executed by the chief financial Authorized Officer of
each of the Parent and the Borrower certifying that the representations and
warranties set forth in Article VI of the Credit Agreement and in the other
Loan Documents are true and correct in all material respects as of the
Effective Date, and that no Default or Event of Default has occurred and is
continuing.
SECTION 3.10 Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower, the Parent or any
other Obligor shall be satisfactory in form and substance to the Agent and its
counsel; the Agent and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Agent or its counsel may
reasonably request.
-29-
<PAGE> 30
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
In order to induce the Lenders and the Agent to enter into this
Amendment Agreement, the Borrower and the Parent jointly and severally
represent and warrant unto the Agent, each Issuer and each Lender as set forth
in this Article IV.
SECTION 4.1 Compliance With Warranties. The representations and
warranties set forth in Article VI of the Credit Agreement and in each other
Loan Document delivered in connection herewith or therewith are true and
correct in all material respects with the same effect as if made on and as of
the Effective Date (unless stated to relate solely to an earlier date).
SECTION 4.2 Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by each of the Borrower, Petroleum and the
Parent of this Amendment Agreement and each Loan Document to be executed by it
in connection with the terms and conditions hereof, have been duly authorized
by all necessary corporate action, and do not (i) contravene the Borrower's or
the Parent's Organic Documents, (ii) contravene or result in a default under
any contractual restriction, law or governmental regulation or court decree or
order binding on or affecting the Borrower or the Parent or (iii) result in, or
require the creation or imposition of, any Lien (except as contemplated in or
created by the Loan Documents).
SECTION 4.3 Validity, etc. This Amendment Agreement has been duly
executed and delivered and is, and each other Loan Document to be executed and
delivered by the Borrower, Petroleum or the Parent, as the case may be, will,
on the due execution and delivery thereof, constitute, the legal, valid and
binding obligations of the Borrower and the Parent, as the case may be,
enforceable in accordance with their respective terms; subject in each case to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally, and subject to the effect
of general principles of equity (regardless of whether considered in a
proceeding in equity or at law). Each of such Loan Documents which purports to
create a security interest creates a valid first priority security interest in
the Collateral subject thereto, subject only to Liens permitted by Section
7.2.3, securing the payment of the Obligations.
SECTION 4.4 No Material Adverse Change. There has been no event or
occurrence, nor has any fact or state of facts existed,
-30-
<PAGE> 31
which could reasonably be expected to have a material adverse change in the
financial condition, operations, assets, business, properties, revenues or
prospects of the Parent and its Subsidiaries or the Borrower and its
Subsidiaries, taken as a whole.
SECTION 4.5 Compliance With Credit Agreement. As of the execution
and delivery of this Amendment Agreement and as of the Effective Date, each of
the Borrower, the Parent and each other Obligor is in compliance with all the
terms and conditions of the Credit Agreement and the other Loan Documents to be
observed or performed by it, and no Default has occurred and is continuing.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1 Ratification of Existing Credit Agreement. The Existing
Credit Agreement, as expressly amended by the terms hereof, is hereby ratified,
approved and confirmed in each and every respect. Except as specifically
amended herein, the Existing Credit Agreement shall continue in full force and
effect in accordance with the provisions thereof and except as expressly set
forth herein the provisions hereof shall not operate as a waiver of any right,
power or privilege of the Agent and the Lenders nor shall the entering into of
this Amendment Agreement preclude the Lenders from refusing to enter into any
further or future amendments. This Amendment Agreement shall be deemed to be a
"Loan Document" for all purposes of the Credit Agreement and all other Loan
Documents.
SECTION 5.2 Consent and Acknowledgment of Guarantors, etc. By their
signatures below, each of the Parent and Petroleum, each in their capacity as a
guarantor and (where applicable) as a grantor of collateral security under a
Loan Document, hereby acknowledge, consent and agree to this Amendment
Agreement and hereby ratify and confirm their respective obligations under each
guaranty and Loan Document executed and delivered by it in all respects.
SECTION 5.3 Existing Credit Agreement, References, etc. All
references to the Existing Credit Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Existing Credit
Agreement as modified hereby. As used in the Existing Credit Agreement, the
terms "Agreement", "herein", "hereinafter", "hereunder", "hereto" and words of
similar import shall mean, from and after the applicable
-31-
<PAGE> 32
Effective Date, the Existing Credit Agreement as modified by this Amendment
Agreement.
SECTION 5.4 Headings. The various headings of this Amendment
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment Agreement or any provisions hereof.
SECTION 5.5 Governing Law; Entire Agreement. THIS AMENDMENT
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. This Amendment Agreement constitutes the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements, written or oral, with respect
thereto. This Amendment Agreement and the provisions contained
herein may be modified only by an instrument in writing executed by the
Borrower, the Parent, the Agent and the Lenders.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
E-Z SERVE CONVENIENCE STORES, INC.,
as the Borrower
By: /s/ John T. Miller
_________________________________
Title: Sr. Vice President
E-Z SERVE CORPORATION, as the
Guarantor/Parent
By: /s/ John T. Miller
_________________________________
Title: Sr. Vice President
SOCIETE GENERALE, as the Agent
By:_________________________________
-32-
<PAGE> 33
Title:
-33-
<PAGE> 34
LENDERS:
SOCIETE GENERALE
By:________________________________
Title:
BANK OF AMERICA TEXAS, N.A.
By:_________________________________
Title:
BANK ONE, LOUISIANA, N.A.
By:_________________________________
Title:
AMSOUTH BANK OF ALABAMA
By:_________________________________
Title:
HELLER FINANCIAL, INC.
By:__________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
-34-
<PAGE> 35
By:__________________________________
Title:
-35-
<PAGE> 36
ACKNOWLEDGED, CONFIRMED
AND AGREED TO WITH RESPECT
TO SECTION 5.2:
E-Z SERVE PETROLEUM MARKETING, INC.
By:_______________________________
Title:
-36-
<PAGE> 1
EXHIBIT 10.6.1
E-Z SERVE
Final December 1, 1994
AGREEMENT
BETWEEN
DILLON COMPANIES, INC.
AND
E-Z SERVE CONVENIENCE STORES, INC.
<PAGE> 2
E-Z SERVE
Final December 1, 1994
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase And Sale Of Stock 1
2. Representations And Warranties 3
3. Covenants And Agreements 18
4. Closing 22
5. Severance Provisions 33
6. Tax Matters 37
7. Environmental 40
8. Termination 44
9. Indemnification 46
10. General Provisions 52
</TABLE>
<PAGE> 3
E-Z SERVE
Final December 1, 1994
EXHIBITS
<TABLE>
<S> <C>
1.2 Time Saver Non-Property Assets & Liabilities
2.1(a)(iii) Exceptions to State Qualifications
2.1(a)(iii)(A) List of each jurisdiction that Time Saver and Delight are licensed or qualified
to do business as a foreign corporation
2.1(a)(v) Missing approvals, licenses and permits to conduct business
2.1(a)(vi) Violations from execution and delivery
2.1(a)(vii) Time Saver and Delight Articles of Incorporation and bylaws
2.1(b) Outstanding options, rights, etc.
2.1(c) Owned investments, corporations, etc.
2.1(d) Time Saver and Delight Officers and Directors
2.1(f) Time Saver Liabilities since 1/2/94
2.1(g) Time Saver and Delight Agreements with Officers, Directors,
Employees Consultants and Agents
</TABLE>
<PAGE> 4
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
2.1(h) Time Saver and Delight employee benefits, programs, etc.
2.1(i) Time Saver and Delight employee compensation, bonus, pension, profit
sharing/retirement plan and collective-bargaining agreements
2.1(j)(i) Time Saver and Delight property subject to tax liens
2.1(j)(ii) Time Saver and Delight federal, state, and local tax returns since 1990
2.1(k) Time Saver and Delight violations or defaults - laws or regulations
2.1(l) Time Saver and Delight claims or court actions
2.1(m) Time Saver and Delight mortgage defaults
2.1(n) Title Exceptions
2.1(n)(i) Assignments of leases of real or personal property
2.1(n)(ii) Time Saver and Delight legal descriptions and surveys for each
parcel real property owned in fee
2.1(p)(i) Time Saver store list - owned, leased, and franchised
2.1(p)(ii) Time Saver equipment
</TABLE>
<PAGE> 5
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
2.1(q) Violations of laws, etc.
2.1(r)(i) Time Saver and Delight material contracts/agreements
2.1(r)(ii) Non-Compete Agreements
2.1(s) Time Saver and Delight accounts and notes receivable
2.1(t)(i) Time Saver letters of credit/powers of attorney
2.1(t)(ii) Time Saver powers of attorney (governmental agencies)
2.1(u) Hazardous Materials Releases
2.1(v)(i) Discharged Liens
2.1(v)(ii) Dividends, etc.
2.1(v)(iii) Cancelled debts, claims, etc.
2.1(v)(iv) Extraordinary transactions
2.1(v)(v) Material adverse change in financial condition
2.1(v)(vi) Damage, destruction, etc.
</TABLE>
<PAGE> 6
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
2.1(v)(vii) Time Saver and Delight Intellectual Property
2.1(w) Employee Benefit Plans-Failures to Report/Contribute
2.2(b) E-Z suits, etc.
4.3(b) Shareholder Opinion of Counsel
4.3(b)(vi) Litigation and governmental investigations
4.4(a) Wiring Instructions
4.4(b) E-Z Opinion of Counsel
5.1(i) Time Saver Severance Policy
5.1(ii) E-Z Severance Policy
5.2 Employment Agreements
5.6 Employees with Wage Continuation - To be Attached at Closing
7.2(a)(i) Time Saver locations, owned or leased
7.2(a)(ii) UST Sites
</TABLE>
<PAGE> 7
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
7.2(a)(iii) Release, Qualified and Non-Qualified UST Sites
7.2(c) Time Saver Expenditures
7.2(d) Non-Release Sites
7.2(e) UST Sites containing non-operating underground storage tanks
</TABLE>
<PAGE> 8
E-Z SERVE
Final December 1, 1994
LIST OF DEFINED TERMS
<TABLE>
<S> <C>
"Claims " - as defined on Page 49
"Closing Financial Statements" - as defined on Page 3
"Code" - as defined on Page 8
"Confidentiality Agreement" - as defined on Page 20
"Damages" - as defined on Page 46
"Delight" - as defined on Page 3
"Eligible Employee" - as defined on Page 33
"Employee Benefit Plans" - as defined on Page 7
"Environmental Claim" - as defined on Page 13
"Environmental Law" - as defined on Page 14
"ERISA" - as defined on Page 7
"E-Z" - as defined on Page 1
</TABLE>
<PAGE> 9
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
"E-Z Indemnitees" - as defined on Page 46
"E-Z Severance Payment" - as defined on Page 33
"Financing" - as defined on Page 24
"Financial Statements" - as defined on Page 6
"401(k) Plan" - as defined on Page 34
"Fund" - as defined on Page 40
"GAAP" - as defined on Page 3
"Hazardous Materials" - as defined on Page 14
"H-S-R" - as defined on Page 19
"Material Adverse Effect" - as defined on Page 4
"Non-Property Capital" - as defined on Page 2
"Non-Qualified UST Sites - as defined on Page 41
"Non-Release Sites" - as defined on Page 42
</TABLE>
<PAGE> 10
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
"Profit Sharing Plan" - as defined on Page 34
"Purchase Price" - as defined on Page 2
"Qualifying Remediation" - as defined on Page 41
"Qualified UST Sites - as defined on Page 41
"Releases" - as defined on Page 14
"Release UST Sites" - as defined on Page 41
"Remediation" - as defined on Page 40
"Severance Period" - as defined on Page 33
"Shareholder" - as defined on Page 1
"Shareholder Indemnitees" - as defined on Page 48
"Shareholder Severance" - as defined on Page 33
"Stock" - as defined on Page 1
"Study" - as defined on Page 40
</TABLE>
<PAGE> 11
E-Z SERVE
Final December 1, 1994
<TABLE>
<S> <C>
"Time Saver" - as defined on Page 1
"UST Sites" - as defined on Page 41
"Warehouse" - as defined on Page 40
"8023-A Statement" - as defined on Page 38
</TABLE>
<PAGE> 12
E-Z SERVE
Final December 1, 1994
THIS AGREEMENT, made as of the 2nd day of December, 1994, by and
between DILLON COMPANIES, INC. ("Shareholder"), a Kansas corporation with its
principal place of business at 700 East 30th Street, Hutchinson, Kansas, and
E-Z Serve Convenience Stores, Inc. ("E-Z"), a Delaware corporation with its
principal place of business at 2550 North Loop West, Suite 600, Houston,
Texas.
WHEREAS, Shareholder is the sole shareholder of Time Saver Stores,
Inc., a Kansas corporation ("Time Saver");
WHEREAS, E-Z, subject to the terms and conditions of this Agreement,
desires to acquire all of the issued and outstanding capital stock (the
"Stock") of Time Saver; and
WHEREAS, the Shareholder, subject to the terms and conditions of this
Agreement, desires to sell the Stock to E-Z;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties contained herein, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK
1.1 Subject to the terms and conditions of this Agreement, E-Z
shall purchase from Shareholder, and Shareholder shall sell, transfer and
deliver to E-Z all right, title, and interest in and to all of the issued and
outstanding shares of Stock, free and clear of all liens, pledges, claims,
interests, and encumbrances of any kind, on the Closing Date, as
<PAGE> 13
E-Z SERVE
Final December 1, 1994
hereinafter defined in Article 4. The Shareholder will pay or provide for
payment of all applicable stock transfer taxes.
1.2 The total purchase price (the "Purchase Price") to be
paid for the Stock shall be Twenty Nine Million Nine Hundred Sixty Thousand
Dollars ($29,960,000). Subject to the terms and conditions of this Agreement,
E-Z shall, on the Closing Date, deliver the Purchase Price by wire transfer of
funds to the Shareholder in accordance with Section 4.4.
The Purchase Price shall be subject to adjustment (i) upward
by an amount equal to the amount by which Time Saver's Non-Property Capital, as
defined below, exceeds $0, or (ii) downward by an amount equal to the amount
by which the Non-Property Capital is less than $0. For purposes of this
Agreement, the "Non-Property Capital" shall be equal to Time Saver's
non-property assets evidenced by the accounts listed on Exhibit 1.2 attached
hereto minus Time Saver's non-property liabilities evidenced by the accounts
listed on Exhibit 1.2 attached hereto, with all such accounts determined in the
same manner as the Closing Financial Statements, as defined below.
If the Purchase Price is required to be adjusted pursuant to
this section, Shareholder or E-Z, as the case may be, shall, within 15 business
days after (i) the date on which copies of the Closing Financial Statements
shall have been delivered to Shareholder and E-Z, or (ii) the final
determination pursuant to Section 10.8 of the adjustment to the Purchase Price,
pay to the other party, by wire transfer of funds, an amount equal to the total
Purchase Price adjustment; provided, however, that to the extent the parties
agree on an amount that is due pursuant to this Section 1.2, such amount shall
be paid inaccordance with clause (i) above and any disputed amount shall be
paid in accordance
2
<PAGE> 14
E-Z SERVE
Final December 1, 1994
with clause (ii) above.
The Time Saver financial statements, including a balance sheet
and statement of income, for the partial year ended as of the Closing Date (the
"Closing Financial Statements"), shall be prepared by Shareholder within thirty
(30) days after the Closing Date, in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent with the basis on
which the Financial Statements (as defined at Section 2.1(e)) were prepared
(including usual and customary adjustments of the kind ordinarily made at
year-end) and shall be consolidated to include the financial affairs of Time
Saver's wholly-owned subsidiary, Delight Distributing and Sales Co., Inc.
("Delight").
2. REPRESENTATIONS AND WARRANTIES
2.1 The Shareholder represents and warrants to E-Z that each
of the following will be true and correct as of the date hereof and as of the
Closing Date:
(a) (i) Time Saver is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas. Delight
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Louisiana.
(ii) Each of Time Saver and Delight has the corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted in each jurisdiction wherein such
properties are located and such business is currently conducted;
3
<PAGE> 15
E-Z SERVE
Final December 1, 1994
(iii) Except as described on Exhibit 2.1(a)(iii), each of
Time Saver and Delight is duly qualified as a foreign and domestic corporation,
respectively, and is in good standing in every jurisdiction in which the nature
of its business or of its properties makes such qualification necessary.
Exhibit 2.1(a)(iii)(A) contains a list of each jurisdiction in which Time Saver
and Delight are duly licensed or qualified to do business as a foreign
corporation;
(iv) The Shareholder has the corporate power and authority
to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. This Agreement constitutes the valid and binding obligation
of the Shareholder enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity);
(v) Except as otherwise disclosed on Exhibit 2.1(a)(v),
Time Saver and Delight have received and maintain all approvals, licenses, and
permits of federal, state and local authorities necessary for them to conduct
their respective business as currently conducted, except to the extent that the
failure to receive same will not have a material adverse effect on the
business, assets, operations, properties, prospects or condition of Time Saver
and Delight, taken as a whole ("Material Adverse Effect");
(vi) Except as listed on Exhibit 2.1(a)(vi), the execution
and delivery of this Agreement and the related documents required herein and
the consummation of the transaction contemplated hereby will not violate any
provision of, or result in the
4
<PAGE> 16
E-Z SERVE
Final December 1, 1994
acceleration of any obligation under, the Articles of Incorporation, any bylaw,
mortgage, loan, lien, lease, agreement, indenture, order, arbitration, award,
judgment or decree to which Time Saver or Delight is a party or by which Time
Saver or Delight is bound and will not violate any other restriction of any
kind or character to which Time Saver or Delight is subject, except to the
extent that same will not result in a Material Adverse Effect; and
(vii) the certified copies of Time Saver's and Delight's
Articles of Incorporation and bylaws attached as Exhibit 2.1(a)(vii) are true,
complete and correct, have not been further amended or repealed, and are in
full force and effect.
(b) The total authorized capital stock of Time Saver consists
of One Hundred (100) common shares, $100 par value per share. Of the
authorized shares of Time Saver, One Hundred (100) shares are issued and
outstanding and are owned beneficially and of record by Shareholder. The total
authorized capital stock of Delight consists of One Thousand (1,000) common
shares, no par value per share. Of the authorized shares of Delight, Nine
Hundred Ten (910) shares are issued and outstanding and are owned beneficially
and of record by Time Saver.
All such issued and outstanding shares of Time Saver and
Delight are legally and validly issued, fully paid and non-assessable. Except
as listed on Exhibit 2.1(b), there are no outstanding options, subscription
rights, warrants, preemptive rights or commitments of any kind, which restrict,
or grant rights with respect to, the Stock, the issued and outstanding capital
stock of Delight, or the authorized but unissued capital stock of Time Saver or
Delight or which create any right to purchase or which impose or
5
<PAGE> 17
E-Z SERVE
Final December 1, 1994
grant any lien, encumbrance, or claim with respect to any of such shares.
Shareholder has full legal right to sell, assign and transfer the Stock to E-Z
and will, upon delivery of the Stock to E-Z pursuant to the terms hereof,
transfer to E-Z good and valid title to the Stock free and clear of all liens,
security interests, claims, charges, encumbrances, rights, options to purchase,
voting trusts or other voting agreements and calls and commitments of every
kind affecting the Stock.
(c) Except as otherwise listed on Exhibit 2.1(c), Time Saver
does not own, directly or indirectly, any investment, whether debt or equity,
in any corporation, partnership, business, trust or other entity and is not a
party to any partnership or joint venture or similar arrangement.
(d) The minute books of Time Saver and Delight contain
substantially complete and accurate records of all material meetings,
proceedings and actions of their respective shareholders and board of
directors. Such minute books will be delivered to E-Z on or before the Closing
Date. Attached hereto as Exhibit 2.1(d) is a complete list of the officers and
directors of Time Saver and Delight as of the date hereof.
(e) The Shareholder (i) has furnished to E-Z the unaudited
consolidated financial statements, including balance sheets and the related
statements of income, of Time Saver for the two consecutive fiscal years ended
January 3, 1993, and January 2, 1994, and the interim unaudited consolidated
financial statements of Time Saver for the nine month period ended October 2,
1994 (collectively, the "Financial Statements"), and (ii) has made available
such other financial reports and examinations as are reasonably necessary to
show the financial condition and results of operation of Time Saver.
6
<PAGE> 18
E-Z SERVE
Final December 1, 1994
(f) Except as otherwise listed on Exhibit 2.1(f), since
January 2, 1994, neither Time Saver nor Delight has incurred any liabilities or
obligations of any kind (whether absolute, accrued, contingent or otherwise and
whether due or to become due) not incurred in the ordinary course of business,
consistent with past practices. The Financial Statements fairly present the
consolidated financial position and results of operation of Time Saver as of
and for the periods indicated, in conformity with GAAP applied on a consistent
basis, except as otherwise disclosed therein. Except to the extent reflected
in or reserved against in the Financial Statements, Time Saver did not, as of
the date of such Financial Statements, have any liabilities or obligations of
any nature, either accrued, absolute, contingent or otherwise, including,
without limitation, tax liabilities due or accruable, and no basis exists for
the assertion of any such liability or obligation against Time Saver which was
not fully reflected or reserved against in such Financial Statements or
disclosed in Exhibit 2.1(f), other than those which would not result in a
Material Adverse Effect.
(g) Exhibit 2.1(g) lists all agreements with any officers,
directors, employees, consultants and agents of Time Saver or Delight not
terminable at the will of Time Saver or Delight.
(h) Except as disclosed on Exhibit 2.1(h), neither Time Saver
nor Delight has any employee benefit plans, policies, programs and arrangements
and all related contracts, agreements and other descriptions thereof with
respect to the employee benefits provided to the employees of Time Saver or
Delight prior to the Closing Date (collectively, the "Employee Benefit Plans")
that are subject to Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the minimum funding obligations of
7
<PAGE> 19
E-Z SERVE
Final December 1, 1994
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code"); and
neither Time Saver, Delight, nor any entity required to be aggregated therewith
pursuant to Section 414(b) or (c) of the Code has any liability under Title IV
of ERISA or under Section 412(f) or 412(n) of the Code.
(i) Time Saver and Delight employees do not participate in
any deferred compensation, bonus, pension, profit sharing or retirement plan,
or collective bargaining contracts, except as described on Exhibit 2.1(i).
Copies of all such agreements and plans have been furnished to E-Z.
(j) Time Saver and Delight have paid or made provision for
payment of all taxes due or levied against them by the federal, state,
municipal or other taxing authorities, including but not limited to corporation
taxes, franchise taxes, federal, state and local income taxes, stamp, excise
and excess profits taxes, federal unemployment and insurance taxes, capital
stock taxes, and all taxes levied by any taxing authority.
Except as described in Exhibit 2.1(j)(i), none of Time Saver's
or Delight's property, or the Stock to be acquired hereby, is subject to any
lien for the payment of any taxes of Time Saver or Delight currently due and
payable.
All tax reports and returns required by any applicable law or
governmental regulation have been duly filed by Time Saver or Delight, as
applicable. Attached as Exhibit 2.1(j)(ii) is a true and complete list of all
federal, state and local tax returns, including state capital stock tax
returns, of Time Saver and Delight which have been filed since January 1, 1990,
identifying the returns which, as of the Closing Date, have been or
8
<PAGE> 20
E-Z SERVE
Final December 1, 1994
are being audited or for which notice of audit has been received. Such returns
or copies thereof have been provided to E-Z.
There are no tax deficiencies now being asserted against Time
Saver or Delight.
(k) Except as otherwise disclosed on Exhibit 2.1(k), neither
Time Saver nor Delight is in violation of or default under any law or
regulation, including all laws and regulations governing labor relations and
employment, nor is Time Saver or Delight under any order of any court or
federal, state, municipal or other governmental body other than those which
would not result in a Material Adverse Effect. Each of Time Saver and Delight
has all governmental permits, licenses, and other authorizations, including all
licenses for the sale of alcoholic beverages, necessary to the conduct of its
business in the manner and in the areas in which such business is at present
conducted. No action or proceeding contemplating any revocation or suspension
of such permits, licenses or authorizations is pending or, to the best
knowledge of the Shareholder, threatened except those which would not result in
a Material Adverse Effect.
(l) Neither Time Saver nor Delight is a party to any action
in any court or before any governmental board, agency or body, and there are
not any claims in law or at equity against Time Saver or Delight and, to the
best knowledge of the Shareholder, none are threatened, except as listed on
Exhibit 2.1(l) or those which would not result in a Material Adverse Effect.
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E-Z SERVE
Final December 1, 1994
(m) Except as listed on Exhibit 2.1(m), neither Time Saver
nor Delight is in default under, and no condition exists that, with notice or
lapse of time or both, would constitute a default under (i) any mortgage, loan
agreement, indenture, evidence of indebtedness or other instrument evidencing
borrowed money to which it or any of its properties are bound, (ii) any
judgment, order, or injunction of any court, arbitrator, or governmental
agency, or (iii) any other agreement, except for such defaults and conditions
that, individually or in the aggregate, will not result in a Material Adverse
Effect.
(n) Time Saver has possession, as owner in possession or as
lessee (or franchises through a franchise arrangement), of not less than 116
operating convenience store locations.
On the Closing Date, each of Time Saver and Delight will have
good and marketable title to all of the properties and assets, real and
personal, tangible and intangible, which it purports to own, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance, or charge
other than those of record or which would not unreasonably interfere with the
use of the property in the manner as being conducted by Time Saver or Delight
as of the date hereof, except as otherwise shown on Exhibits 2.1(n).
Each real or personal property lease of Time Saver or Delight
is in writing, is in full force and effect, and, to the best of Shareholder's
knowledge, constitutes the legal, valid and binding obligation of the
respective parties thereto, enforceable in accordance with its terms, except as
such enforceability may be limited or affected by applicable bankruptcy,
reorganization, insolvency, moratorium, or other laws relating to or affecting
generally the enforcement of creditors' rights and by equitable principles.
Except as listed
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E-Z SERVE
Final December 1, 1994
on Exhibit 2.1(n)(i), no lease of real or personal property has been assigned
by Time Saver or Delight. The Shareholder is not aware of any default in any
mortgage or deed of trust on premises leased by Time Saver or Delight.
Each real property owned in fee by Time Saver or Delight on
the Closing Date will be free and clear from any mortgage, pledge, lien,
conditional sale contract, encumbrance, easement, covenant, restriction, right
of occupancy, or charge, other than those reflected in Exhibit 2.1(n) and those
of record or which would not unreasonably interfere with the use of the
property in the manner as being conducted by Time Saver or Delight as of the
date hereof.
Exhibit 2.1(n)(ii) sets forth complete and accurate copies of
all legal descriptions and surveys (to the extent available) for each parcel
of real property owned in fee by Time Saver or Delight as of the Closing Date.
(o) Each of the buildings and the equipment of Time Saver and
Delight is maintained as of the date hereof, and will be as of the Closing
Date, in substantial conformity with each lease, if applicable, and in
substantial compliance with all applicable laws, ordinances, regulations,
building, zoning and other similar codes and laws except to the extent that
such failure to comply would not result in a Material Adverse Effect.
(p) Exhibit 2.1(p)(i) lists all of the store locations owned
or leased by Time Saver and identifies whether each location is owned or
leased, and whether it is franchised. Lists of all the equipment owned by
Time Saver and Delight have been or will be provided to E-Z at least ten (10)
days prior to the Closing Date. Such lists contain a
11
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E-Z SERVE
Final December 1, 1994
general representation of the equipment so owned but are not warranted to be
complete or accurate. Lists of all the equipment leased by Time Saver and
Delight are attached hereto as Exhibit 2.1(p)(ii).
(q) Each of Time Saver and Delight is conducting its business
in substantial conformity with all applicable federal, state and municipal
laws, ordinances and regulations and with all rules and regulations of all
governmental agencies and authorities having jurisdiction over such business
except where such noncompliance would not result in a Material Adverse Effect,
or except as disclosed on Exhibit 2.1(q).
(r) Attached as Exhibit 2.1(r)(i) is a complete and accurate
list as of the Closing Date of all material contracts and agreements (other
than the store and equipment leases referred to in Section 2.1(p)) to which
Time Saver or Delight is a party or by which it or any of its property is
bound. A contract or agreement shall be deemed material if the annual amounts
owed by or owing to Time Saver or Delight exceed $25,000.00. To the best of
Shareholder's knowledge, each such contract or agreement is in full force and
effect and constitutes the legal, valid and binding obligation of the
respective parties thereto enforceable in accordance with its terms, except as
such enforceability may be limited or affected by applicable bankruptcy,
reorganization, insolvency, moratorium, or other laws relating to or affecting
generally the enforcement of creditors' rights and by equitable principles.
Neither Time Saver nor Delight has been notified that it is in breach in any
material respect under any such instrument. To the best of Shareholder's
knowledge, no party other than Time Saver or Delight is in breach of any of the
material provisions thereof, and there has not occurred any event which with
the passage of time or the giving of notice would constitute such a breach.
12
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E-Z SERVE
Final December 1, 1994
Except as contained in contracts, leases, or agreements
delivered to E-Z under this Agreement or as disclosed in Exhibit 2.1(r)(ii),
neither Time Saver nor Delight is a party to any contract or agreement limiting
its freedom to engage in any line of business or to compete with any person or
entity.
(s) Exhibit 2.1(s) lists, as of October 2, 1994, the accounts
receivable (in the form of an aged account balance) and notes receivable of
Time Saver and Delight.
(t) Except as otherwise disclosed on Exhibit 2.1(t)(i), Time
Saver and Delight do not have any outstanding letters of credit or powers of
attorney, except routine powers of attorney relating to representation before
governmental agencies which are disclosed on Exhibit 2.1(t)(ii).
(u) (1) For this Section 2.1(u), the following definitions
shall apply:
Environmental Claim shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
orders, notices of noncompliance or violations, investigations or proceedings
relating in any way to any Environmental Law (for purposes of this definition,
"Claims") or any permit issued under any such Environmental Law, including
without limitation (i) any and all Claims by governmental or regulatory
authorities or private parties for enforcement, cleanup, removal, remedial or
other actions for damages pursuant to any applicable Environmental Law and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from Hazardous
13
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E-Z SERVE
Final December 1, 1994
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
Environmental Law shall mean any federal, state or local
statute, law, rule, regulation, ordinance, code, policy or rule of common law
now in effect and in each case as amended and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree, guidance policy or judgment, relating to Hazardous Materials, the
environment or health relating to or arising from environmental conditions.
Hazardous Materials shall mean any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import under any applicable
Environmental Law.
(2) Except as disclosed on Exhibit 2.1(u), except as
contemplated by Article 7 hereof and except where it would not have a Material
Adverse Effect, (A) Hazardous Materials have not been disposed, discharged,
injected, spilled, leaked, leached, dumped, emitted, escaped, emptied, allowed
to seep, placed and the like, into or upon any land or water or air, or
otherwise allowed to enter into the environment (collectively, "Releases") by
Time Saver and Delight, their authorized agents or their independent
contractors (including suppliers) on the real property owned or leased by Time
Saver and Delight or any property adjoining such real property except such
Releases which do not violate any Environmental Laws, (B) each of Time Saver
and Delight is in compliance with all applicable Environmental Laws and the
requirements of any permits issued under such
14
<PAGE> 26
E-Z SERVE
Final December 1, 1994
Environmental Laws with respect to such real property, (C) there are no pending
or, to the best knowledge of the Shareholder, threatened Environmental Claims
against Time Saver and Delight or such real property, or (D) there are no facts
or circumstances, conditions, pre-existing conditions or occurrences on such
real property known to the Shareholder, Time Saver or Delight that could
reasonably be anticipated (x) to form the basis of an Environmental Claim
against either of Time Saver and Delight or such real property, or (y) to cause
such real property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such real property under any Environmental
Law. .
(v) From the date of the latest Financial Statements
furnished to E-Z to the Closing Date:
(i) Except as otherwise disclosed on Exhibit 2.1(v)(i),
neither Time Saver nor Delight has discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or contingent) other
than current liabilities shown on such Financial Statements and current
liabilities incurred since the date thereof in the ordinary course of business;
(ii) Except as otherwise disclosed on Exhibit 2.1(v)(ii),
Time Saver has not declared or made or agreed to declare or make any payment of
dividends or distributions of any assets of any kind whatsoever to Shareholder,
or purchased or redeemed, or agreed to purchase or redeem, any of Time Saver's
capital stock;
(iii) Except as otherwise disclosed on Exhibit 2.1(v)(iii),
neither Time Saver nor Delight has cancelled or agreed to cancel any debts or
claims, except in the ordinary
15
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E-Z SERVE
Final December 1, 1994
course of business, or suffered any extraordinary losses or waived any
extraordinary rights or values;
(iv) Except as otherwise disclosed on Exhibit 2.1(v)(iv),
neither Time Saver nor Delight has entered into any transaction, terminated or
materially amended any contract or agreement or incurred any liability, other
than in the ordinary course of business;
(v) Except as otherwise disclosed on Exhibit 2.1(v)(v), there
has not been any material and adverse change in the financial condition,
assets, liabilities, income, business or prospects, taken as a whole, of Time
Saver or Delight; and
(vi) Except as listed on Exhibit 2.1(v)(vi), there has not
been any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the property or business of Time Saver or
Delight.
(vii) To the best knowledge of the Shareholder and except as
otherwise disclosed on Exhibit 2.1(v)(vii), all trade names, trademarks,
copyrights, patents and applications, if any, whether currently issued or
pending, currently used by each of Time Saver and Delight are its property free
and clear of all encumbrances, and each of Time Saver and Delight has the right
to bring actions for the infringement thereof. Exhibit 2.1(v)(vii) lists all
such intellectual property and, where applicable, identifies the registration
of each.
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E-Z SERVE
Final December 1, 1994
(viii) Copies of the leases, which have been or will be
furnished, prior to the Closing Date, to E-Z are complete and, except as have
been provided to or requested by E-Z, there are no amendments or modifications
thereto, or separate agreements, which change the terms and conditions thereof.
Time Saver is not in default in any material respect under any such lease, and
there has not occurred any event which with the passage of time or the giving
of notice or both would constitute such a default.
(w) Except as disclosed on Exhibit 2.1(w), Time Saver and
Delight have made the contributions required and due to be paid under the
Employee Benefit Plans, satisfied all reporting requirements to federal, state
and local governments and governmental agencies and to all Employee Benefit
Plan participants and beneficiaries, and satisfied the applicable requirements
under Part 6 of Title I of ERISA and Section 4980B of the Code, except to the
extent that any failure would not result in a Material Adverse Effect.
(x) To Shareholder's knowledge, there is no transaction in
connection with the Employee Benefit Plans which would be subject to either a
civil penalty assessed pursuant to Section 502 of ERISA, a tax imposed by
Section 4975 of the Code or liability for breach of fiduciary responsibility
under ERISA.
2.2 E-Z represents and warrants to Shareholder, as of the date hereof
and on the Closing Date:
17
<PAGE> 29
E-Z SERVE
Final December 1, 1994
(a) The execution of this Agreement by E-Z and the
consummation of the transactions contemplated hereby are duly and validly
authorized by all necessary corporate action.
(b) Except as set forth in Exhibit 2.2(b), there is no suit,
action, legal, administrative or other proceeding or investigation, contract,
indenture, mortgage, or loan agreement relating to E-Z which adversely affects
E- Z's right or ability to consummate the transactions contemplated by this
Agreement.
(c) E-Z is purchasing the Stock for its own account for
investment only and not with a view to any further resale or distribution
thereof.
(d) This Agreement constitutes the valid and binding
agreement of E-Z, enforceable in accordance with its terms, except as
enforceability may be limited or affected by applicable bankruptcy,
reorganization, insolvency, moratorium, or other laws relating to or affecting
generally the enforcement of creditors' rights and by equitable principles.
3. COVENANTS AND AGREEMENTS
3.1 Shareholder agrees, from and after the date hereof and to
the Closing Date:
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E-Z SERVE
Final December 1, 1994
(a) To make all governmental filings required, including
those required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended (the "H-S-R"), and promptly to comply with all requests for
additional information that may be made in connection therewith.
(b) To continue to operate the business of Time Saver and
Delight in the ordinary course of business in substantially the same manner as
prior to the date hereof.
(c) To notify E-Z of any change in circumstance of which its
senior management becomes aware between the date hereof and the Closing Date
which would result in a Material Adverse Effect.
(d) Except as otherwise provided in this Agreement, not to
dispose of the assets of Time Saver or Delight except in the ordinary course of
business or consistent with past practices.
3.2 The Shareholder will afford to E-Z and its authorized
representatives reasonable access to Time Saver's and Delight's financial,
title, tax, corporate and legal materials and operating data and information
available as of the date hereof and which becomes available to the Shareholder
at any time prior to the Closing Date, and will furnish to E-Z such other
information as it may reasonably request, unless any such access and disclosure
would violate the terms of any agreement to which the Shareholder, Time Saver
or Delight is bound or any applicable law or regulation. The Shareholder will
use its reasonable business efforts to secure all requisite consents for the
examination by E-Z and its representatives of all information covered by
confidentiality agreements. The
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E-Z SERVE
Final December 1, 1994
Shareholder will cause Time Saver and Delight to allow E-Z access to and
consultation with the lawyers, accountants, and other professionals employed by
or used by Time Saver and Delight for all purposes under this Agreement. Any
such consultation and access to information and data shall occur under
circumstances appropriate to maintain intact the attorney-client privilege as
to privileged communications and attorney work product. Additionally, the
Shareholder will afford to E-Z and its authorized representatives reasonable
access to the books and records of the Shareholder insofar as they relate to
property, accounting and tax matters of Time Saver and Delight. Until the
Closing Date, the confidentiality of any data or information so acquired shall
be maintained by E-Z and its representatives pursuant to the terms of that
certain Letter Agreement between E-Z and Shareholder dated September 29, 1994
(the "Confidentiality Agreement"). Further, the Shareholder will afford to E-Z
and its authorized representatives reasonable access from the date hereof until
the Closing Date, during normal business hours, to Time Saver's and Delight's
assets and properties; provided that such access shall be at the sole cost,
expense and risk of E-Z. The Shareholder acknowledges that E-Z has had access
and will continue to have access to the senior management of Time Saver and
Delight and that each of such members of senior management is entitled to
reveal to E-Z and its representatives information concerning Time Saver and
Delight that may be deemed confidential and proprietary.
3.3 The Shareholder and E-Z shall use their reasonable
business efforts to (i) obtain all approvals and consents required by or
necessary for the transactions contemplated by this Agreement, and (ii) ensure
that all of the conditions to the obligations of E-Z and the Shareholder
contained in Article 4 are satisfied timely.
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E-Z SERVE
Final December 1, 1994
3.4 After the Closing Date, the Shareholder shall not,
directly or indirectly, use or provide to, or shall not permit any affiliate,
directly or indirectly, to use or provide to any other person any non-public
information concerning the business or operations (financial or other) of Time
Saver and Delight, except as on the advice of counsel is required in
governmental filings or judicial, administrative or arbitration proceedings.
3.5 The Shareholder shall give E-Z prompt notice if at any
time on or prior to the Closing Date there is a change in any state of facts,
or there is the occurrence, nonoccurrence or existence of any event subsequent
to the date of this Agreement, which change or event is known to any executive
officer of the Shareholder and which would make any representation and warranty
(including the information set forth in the Exhibits) made by the Shareholder
to E-Z not true or correct in any material respect, it being the intention of
the parties to this Agreement that the Shareholder shall engage in a continuous
disclosure process from the date of this Agreement through the Closing Date.
3.6 Shareholder will provide to E-Z reasonable information
systems support for fiscal year 1994 as necessary in preparation of W-2
statements for Time Saver and Delight employees. In addition, Shareholder will
furnish to E-Z, for a period of ninety (90) days from the Closing Date,
reasonable processing support for financial systems and warehouse systems in
order to ease the transition of processing data from Shareholder's systems to
E-Z's systems.
3.7 E-Z agrees, from and after the date hereof and to the
Closing Date:
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E-Z SERVE
Final December 1, 1994
(a) To make all governmental filings required, including
those required under the H-S-R, and promptly to comply with all requests for
additional information that may be made in connection therewith.
(b) To treat all information received from Shareholder, Time
Saver or Delight, prior to or after the date of this Agreement, as strictly
confidential and to use same only in furtherance of the transactions
contemplated by this Agreement.
(c) To use its reasonable best efforts to obtain the
Financing, as hereinafter defined.
4. CLOSING
This transaction shall be closed at the offices of counsel for
E-Z in Houston, Texas, at 10:00 a.m., or as soon thereafter as practicable, on
December 16, 1994, or such other place, date or time as the parties hereto
shall mutually agree (the "Closing Date").
4.1 The obligation of E-Z to proceed with the closing
contemplated hereby is subject to the satisfaction on or prior to the Closing
Date of all of the following conditions, any one or more of which may be waived
in writing, in whole or in part, by E-Z:
(a) The Shareholder shall have complied in all material
respects with each of its covenants and agreements contained herein and each of
its representations and warranties contained in this Agreement shall be deemed
to have been made again at and as of the Closing Date and shall then be true
and correct in all material respects.
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<PAGE> 34
E-Z SERVE
Final December 1, 1994
(b) E-Z shall have received a certificate, dated as of the
Closing Date, of an executive officer of the Shareholder certifying as to the
matters specified in Section 4.1(a) hereof.
(c) All necessary filings with and consents of any
governmental authority or agency required for the consummation of the
transactions contemplated in this Agreement shall have been made and obtained,
all waiting periods with respect to filings made with governmental authorities
in contemplation of the consummation of the transactions described herein shall
have expired or been terminated, and no action or proceeding before a court or
any other governmental agency or body shall have been instituted or threatened
to restrain or prohibit E-Z's acquisition of the Stock and no governmental
agency or body shall have taken any other action as a result of which the
management of E-Z reasonably deems it inadvisable to proceed with the
transactions hereunder.
(d) The Shareholder shall have delivered such resignations
effective as of the Closing Date of any officer or director of Time Saver and
Delight as may be requested by E-Z.
(e) The Shareholder shall have, as of the Closing Date,
caused Time Saver and Delight to cancel the authority of each person who is
listed on Exhibit 2.1(g) hereto to draw checks on or withdraw funds from any of
the bank accounts maintained by Time Saver and Delight, except for any person
designated by E-Z in writing prior to the Closing Date, and shall provide to
E-Z evidence of said cancellation.
23
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E-Z SERVE
Final December 1, 1994
(f) All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall have been approved by counsel to E-Z and such counsel shall
have been furnished with all such documents and instruments as it shall have
reasonably requested in connection with the transactions contemplated herein.
(g) No suit, action or other proceeding shall be pending in
which there is sought any remedy to restrain, enjoin or otherwise prevent the
consummation of this Agreement or the transactions in connection herewith.
(h) E-Z shall have received evidence of notice of the
termination of Time Saver's contract for money orders with Travelers Express as
of a date designated in writing by E-Z.
(i) Shareholder shall have approved the assignment of the
lease between Dillon Real Estate Co., Inc., as lessor, and Time Saver, as
lessee, for the Warehouse, as hereinafter defined, if requested by E-Z, subject
to Time Saver remaining primarily liable under said lease.
(j) E-Z Serve shall have received financing for the
purchase of the Stock on terms reasonably acceptable to E-Z (the "Financing").
(k) The Shareholder shall have contributed all long term
debt payable by Time Saver and Delight to the Shareholder or any affiliate
thereof and all other accounts payable by Time Saver and Delight to the
Shareholder or any affiliate thereof to the capital
24
<PAGE> 36
E-Z SERVE
Final December 1, 1994
of Time Saver or Delight, as applicable, as additional paid in capital, and all
other intercompany accounts between the Shareholder or any affiliate thereof on
the one hand and Time Saver and Delight on the other hand, and all deferred
income taxes of Time Saver and Delight, shall be eliminated by contribution to
capital, dividend or payment.
(l) The Shareholder shall have caused to be contributed to
Time Saver the real property owned by the Shareholder or its subsidiaries in
fee that is associated with Time Saver or Delight locations and shall have
delivered executed special warranty deeds for such real property, subject to
all matters affecting title existing on the date of acquisition of such real
property by Dillon Real Estate Co., Inc. and any subsequent encumbrances by
Dillon Real Estate Co., Inc., in form and substance reasonably satisfactory to
E-Z.
(m) Shareholder shall have furnished to E-Z copies of surveys
and title insurance policies in Shareholder's possession, for E-Z's review in
addition to any title reports which E-Z may elect to obtain at E-Z's sole cost
and expense. E-Z shall only be entitled to object to matters affecting title
which would unreasonably interfere with the use of the fee properties in the
manner in which the properties are being used as of the date hereof, and by
giving written notice thereof to Shareholder (the "Objection"). Should
Shareholder fail to cure such Objection to E-Z's reasonable satisfaction, which
Shareholder shall in no event be obligated to do, E-Z may terminate this
Agreement pursuant to Article 8 hereof.
(n) Shareholder shall have made the deliveries as set forth
in Section 4.3 below.
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<PAGE> 37
E-Z SERVE
Final December 1, 1994
4.2 The obligation of the Shareholder to proceed with the
Closing contemplated hereby is subject to the satisfaction on or prior to the
Closing Date of all of the following conditions, any one or more of which may
be waived in writing, in whole or in part, by the Shareholder:
(a) E-Z shall have complied in all material respects with
its covenants and agreements contained herein and each of its representations
and warranties contained in this Agreement shall be deemed to have been made
again at and as of the Closing Date and shall then be true in all material
respects.
(b) The Shareholder shall have received a certificate,
dated the Closing Date, of an executive officer of E-Z certifying as to the
matters specified in Section 4.2(a) hereof.
(c) All necessary filings with and consents of any
governmental authority or agency or lessor required for the consummation of the
transactions contemplated in this Agreement shall have been made and obtained,
all waiting periods with respect to filings made with governmental authorities
in contemplation of the consummation of the transactions described herein shall
have expired or been terminated, and no action or proceeding before a court or
any other governmental agency or body shall have been instituted or threatened
to restrain or prohibit E-Z's acquisition of the Stock and no governmental
agency or body shall have taken any other action as a result of which the
management of the Shareholder reasonably deems it inadvisable to proceed with
the transactions hereunder.
26
<PAGE> 38
E-Z SERVE
Final December 1, 1994
(d) All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall have been approved by counsel to the Shareholder and such
counsel shall have been furnished with all such documents and instruments as it
shall have reasonably requested in connection with the transactions
contemplated herein.
(e) No suit, action or other proceeding shall be pending in
which there is sought any remedy to restrain, enjoin or otherwise prevent the
consummation of this Agreement or the transactions in connection herewith.
(f) E-Z shall have made the deliveries as set forth in
Section 4.4 below.
4.3 On the Closing Date, Shareholder shall deliver to E-Z:
(a) Certificates representing all of the Stock, duly endorsed
in blank, in form suitable for transfer, containing no contractual restrictions
whatsoever, free and clear of all liens, claims and encumbrances.
(b) An opinion of counsel, in the form attached as Exhibit
4.3(b), dated the Closing Date, to the effect that:
(i) Each of Time Saver and Delight is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and authority to
own and lease its properties and carry on its business as now conducted;
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<PAGE> 39
E-Z SERVE
Final December 1, 1994
(ii) Each of Time Saver and Delight is duly qualified
as a foreign corporation for the transaction of business and is in good
standing under the laws of each jurisdiction in which it conducts significant
business and in which failure so to qualify would have a material adverse
effect on Time Saver, Delight, their respective business or properties;
(iii) this Agreement constitutes the valid and binding
obligation of the Shareholder and is enforceable in accordance with its terms
except as enforcement thereof may be limited or affected by applicable
bankruptcy, insolvency or other laws relating to or affecting generally the
enforcement of creditors' rights and by equitable principles;
(iv) the total authorized capital stock of Time Saver
consists of 100 common shares, $100 par value per share, of which 100 common
shares are outstanding and the total authorized capital stock of Delight
consists of 1,000 common shares, no par value per share, 910 of which are
outstanding.
(v) the execution and delivery of this Agreement and
the other agreements referenced herein by Shareholder and the performance by
the Shareholder of its obligations thereunder will not violate any provision of
any existing law or regulation applicable to Shareholder, Time Saver or
Delight, or of any order, judgment, award or decree, known to us after due
inquiry, of any court, arbitrator or governmental authority applicable to the
Shareholder, Time Saver or Delight, the Articles of Incorporation or bylaws or,
or any securities issued by, the Shareholder, Time Saver or Delight or any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking, known to us after due inquiry, to which Shareholder, Time Saver or
Delight is a party or by which
28
<PAGE> 40
E-Z SERVE
Final December 1, 1994
the Shareholder, Time Saver or Delight or any of their respective assets is
bound, and will not result in, or require, the creation or imposition of any
lien on any of Time Saver's or Delight's property, assets or revenues pursuant
to the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
(vi) except as otherwise stated herein, there is no
litigation or investigation pending or to the best knowledge of such counsel
after due inquiry, threatened, in any court, legislative or administrative body
which if adversely decided would in the aggregate result in any material
adverse change in the condition, financial or otherwise, assets, liabilities,
business or prospects, taken as a whole, of Time Saver or Delight, or which
would cast any question upon Shareholder's title to the Stock, or which
questions the validity of any action taken or to be taken by the Shareholder in
connection with the transactions contemplated hereby, and such counsel does not
know or reasonably has any ground to know, of any basis for any such
litigation, proceeding or investigation;
Attached hereto as Exhibit 4.3(b)(vi) is an accurate list of
all material litigation and governmental investigations pending or, to the best
knowledge of such counsel after due inquiry, threatened, involving any court,
legislative or administrative body, in which Time Saver or Delight is a party.
(vii) Shareholder has full corporate power and authority
to sell and deliver the Stock, and no provision of the Articles of
Incorporation or bylaws of Time Saver or Delight or any other contract or
agreement creates any lien or encumbrance upon or prevents the Shareholder from
delivering to E-Z, in the manner contemplated by this Agreement, good, valid
and merchantable title to the Stock.
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In rendering such opinions, counsel is authorized to rely, provided
counsel has no reason to question any of the recitals therein, on certificates
of public officials or on certificates or statements of officers of Time Saver,
Delight and Shareholder, with respect to factual matters upon which such
opinion is based, or opinion of other counsel (which other counsel shall be
identified by name) which such counsel shall reasonably consider appropriate
and upon which such counsel's opinion is based.
(c) A certificate of good standing for Time Saver from the
Secretaries of State of Kansas and Louisiana and a certificate of good standing
for Delight from the Secretary of the State of Louisiana dated no more than
ninety (90) days prior to the Closing Date.
(d) Certified copies of all resolutions authorizing the
transactions contemplated hereunder.
(e) All minute books, corporate and other records of Time
Saver and those of Delight and predecessor corporations or other business
entities of each.
4.4 On the Closing Date, E-Z shall deliver to Shareholder:
(a) The Purchase Price, by wire transfer, to Shareholder in
accordance with the wiring instructions attached as Exhibit 4.4(a) hereto.
(b) An opinion of counsel, in the form attached as Exhibit
4.4(b), dated the Closing Date, to the effect that:
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E-Z SERVE
Final December 1, 1994
(i) E-Z is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has the corporate power and authority to own and lease its
properties and carry on its business as now conducted;
(ii) E-Z is duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each
jurisdiction in which it conducts significant business and in which failure so
to qualify would have a material adverse effect on E-Z, its business, or
properties;
(iii) this Agreement constitutes the valid and binding
obligation of E-Z and is enforceable in accordance with its terms except as
enforcement thereof may be limited or affected by applicable bankruptcy,
insolvency or other laws relating to or affecting generally the enforcement of
creditors' rights and by equitable principles;
(iv) the execution and delivery of this Agreement and
the other agreements referenced herein by E-Z and the performance by E-Z of its
obligations thereunder will not violate any provision of any existing law or
regulation applicable to E-Z or of any order, judgment, award or decree, known
to us after due inquiry of any court, arbitrator or governmental authority
applicable to E-Z, the Articles of Incorporation or bylaws or any securities
issued by or any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking, known to us after due inquiry, to which E-Z is a
party or by which E-Z or any of its assets is bound, and will not result in, or
require the creation or imposition of any lien on any of E-Z's property, assets
or revenues pursuant to
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E-Z SERVE
Final December 1, 1994
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
(v) except as otherwise stated herein, there is no
litigation or investigation pending or to the best knowledge of such counsel
after due inquiry, threatened, in any court, legislative or administrative body
which if adversely decided would question the validity of any action taken or
to be taken by E-Z in connection with the transactions contemplated hereby, and
such counsel does not know or reasonably has any ground to know, of any basis
for any such litigation, proceeding or investigation;
(vi) E-Z has full corporate power and authority to
consummate the transactions contemplated under this Agreement.
In rendering such opinions, counsel is authorized to rely, provided
counsel has no reason to question any of the recitals therein, on certificates
of public officials or on certificates of E-Z, with respect to factual matters
upon which such opinion is based, or opinion of other counsel (which other
counsel shall be identified by name) which such counsel shall reasonably
consider appropriate and upon which such counsel's opinion is based.
(c) A certificate of good standing for E-Z from the
Secretary of State of Delaware and the State of Louisiana dated no more than
ninety (90) days prior to the Closing Date.
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E-Z SERVE
Final December 1, 1994
(d) Certified copies of all resolutions authorizing the
transactions contemplated hereunder.
5. SEVERANCE/ BENEFITS PROVISIONS
5.1 Prior to the Closing, Shareholder shall terminate or
cause to be terminated any severance policies applicable to the employees of
Time Saver and Delight. After the Closing Date up through March 15, 1995 (the
"Severance Period"), any person who was employed by Time Saver or Delight at
the Closing and whose employment is terminated by E-Z or any affiliate thereof
following the Closing Date (an "Eligible Employee") shall receive severance
benefits from E-Z based upon Time Saver's severance policies in effect prior to
the Closing Date, in accordance with Exhibit 5.1(i) ("E-Z Severance Payment");
provided, that the Eligible Employee shall receive credit for the time employed
with Time Saver or Delight prior to the Closing Date and from the Closing Date
to the date of separation as if such employment was with a member of the
Shareholder consolidated group. During the Severance Period Shareholder shall
reimburse E-Z the amount, if any, by which (i) the E-Z Severance Payment
actually paid (without any deduction for any tax withheld) to the Eligible
Employee exceeds (ii) the severance payment the Eligible Employee would have
received under the severance policies of E-Z in accordance with Exhibit
5.1(ii) hereto (without deduction for any taxes which would have been
withheld), including credit for the time employed with Time Saver or Delight
prior to the Closing Date and from the Closing Date to the Date of separation
as if such employment was with a member of the E-Z consolidated group (such
excess hereinafter referred to as the "Shareholder Severance"). For purposes
of calculating the Shareholder Severance to be reimbursed to E-Z, if any, E-Z
shall notify Shareholder, within ten (10) days
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E-Z SERVE
Final December 1, 1994
of the end of any month during the Severance Period in which an Eligible
Employee has been terminated, of the names of any Eligible Employee whose
employment was terminated during such month, the E-Z Severance Payment, if any,
paid to such Eligible Employee, and the amount which would have been paid under
E-Z's severance policies in effect at the time of separation. Any Shareholder
Severance owed shall be paid by Shareholder to E-Z within fifteen (15) days of
Shareholder's receipt of E-Z's notice.
5.2 Except for such employees covered by employment
agreements listed on Exhibit 5.2, (a) neither Time Saver nor Delight shall have
any obligation to continue the employment of any employee of Time Saver or
Delight on or after the Closing Date, and (b) after the Closing Date any
continued employment of the employees of Time Saver and Delight shall be on
such terms and conditions and, except as otherwise provided in this Agreement
to the contrary, include such benefits as E-Z shall deem appropriate in its
sole and unlimited discretion.
5.3 Time Saver and Delight shall adopt appropriate resolutions
terminating, effective as of the Closing Date, their participation in the
Dillon Companies, Inc. Profit Sharing and Savings Plan ("Profit Sharing Plan")
and the Dillon Companies, Inc. Employees Ownership and Savings Plan ("401(k)
Plan"), collectively, "the Plans" herein. The Plans will be amended
accordingly and will be amended so that each employee of Time Saver or Delight
participating in the Plans effective as of Time Saver and Delight's terminating
their participation in the Plans will be 100% vested in his or her account
under the Plans. As soon after the Closing Date as is practical, each employee
of Time Saver or Delight participating in the Profit Sharing Plan shall receive
a distribution of his or her account in accordance with the terms of the Profit
Sharing Plan and applicable law. For those Time
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E-Z SERVE
Final December 1, 1994
Saver and Delight employees participating in the 401(k) Plan, each may
elect a distribution of his or her account any time after the Closing Date
through December 31, 1995, after which time they may elect a distribution only
upon separation of employment from E-Z, in accordance with the terms of the
401(k) Plan and applicable law.
5.4 Effective on the Closing Date and except as provided in
Section 5.6 below, E-Z, Time Saver or Delight, shall provide all employees of
Time Saver and Delight who are employees of Time Saver or Delight immediately
following the Closing Date with welfare and retirement benefits substantially
equivalent to those E-Z provides similarly situated employees hired by E-Z
after the Closing Date; provided, however, that E-Z reserves the right to
modify or terminate such benefits from time to time after the Closing Date.
Each employee of Time Saver or Delight that participates in the employee
benefit plans of E-Z or any affiliate thereof shall be credited under such
employee benefit plans with the same amount of service for vesting purposes
credited to such employees as of the Closing Date under the Employee Benefit
Plans in which they have theretofore participated.
5.5 Effective as of 12:01 a.m. on the Closing Date, Time
Saver and Delight shall terminate participation in Shareholder's health care
and welfare benefit plans and Shareholder shall have no responsibility toward
employees of Time Saver and Delight who are employees of Time Saver or Delight
on or after the Closing Date and their dependents for any hospitalization,
medical, survivor benefits, life insurance, disability or other claims. On or
after the Closing Date, E-Z, Time Saver and Delight shall have no obligations
or
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E-Z SERVE
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liabilities in connection with Shareholder's health care and welfare benefit
plans. Commencing on the Closing Date, all employees of Time Saver and Delight
who are employees of Time Saver or Delight on or after the Closing Date shall
participate in E-Z's health care and welfare benefit plans, and E-Z shall waive
any pre-existing condition restrictions under its health care plan and shall be
responsible for any hospitalization, medical, survivor benefits, life insurance
or disability claims thereunder made by such employees and their dependents
regardless of when incurred. Notwithstanding the foregoing, for any employee
of Time Saver or Delight or his or her dependent who either (i) for the
twelve-month period immediately preceding the Closing Date filed claims for
medical, hospital or health care expenses on any of Shareholder's, Time
Saver's, or Delight's health care related plans in an aggregate amount of
$10,000 or more over such period, or (ii) for the sixty days immediately
preceding the Closing Date filed claims for medical, hospital or health care
expenses on any of Shareholder's, Time Saver's, or Delight's health care
related plans in an aggregate amount of $5,000 or more over such period,
Shareholder shall reimburse E-Z for all claims for medical, hospital and other
health care expenses of such employees and their dependents paid by E-Z for the
twelve-month period immediately following the Closing Date less any premiums
paid by such employee. E-Z shall notify Shareholder, within ten (10) days of
the end of each month, of the amount paid by E-Z pursuant to this Section 5.5,
if any, and Shareholder shall pay to E-Z such
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E-Z SERVE
Final December 1, 1994
amount, if any, owing E-Z under this Section 5.5 within fifteen (15) days of
receipt of E-Z's notice. As soon after the Closing Date as is practicable,
Shareholder shall provide E-Z a list of employees described in (i) and (ii),
above, based upon medical claims incurred and reported through the Closing
Date.
5.6 Notwithstanding anything contained in Section 5.5 to the
contrary, as of the Closing Date, Shareholder will list on Exhibit 5.6 hereto
those employees of Time Saver or Delight who are entitled to wage or salary
related continuation benefits under any of Shareholder's, Time Saver's or
Delight's disability plan(s), and Shareholder covenants and agrees to continue
to provide such employees with the wage or salary related continuation benefits
under and in accordance with Shareholder's disability plan(s) on or after the
Closing Date. On or after the Closing Date, E- Z, Time Saver and Delight shall
have no responsibility, obligation or liability in connection with providing
such employees listed on Exhibit 5.6 any wage or salary related continuation
benefits under E-Z's, Time Saver's or Delight's disability plans.
6. TAX MATTERS
6.1 The parties hereto elect to treat the transactions
covered by this Agreement in accordance with Section 338(h)(10) of the Code,
and shall file such forms as
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E-Z SERVE
Final December 1, 1994
are necessary to evidence such election. Any legal, accounting or appraisal
costs related to such election which E-Z, at its sole discretion, chooses to
incur shall be paid for by E-Z.
6.2 Within one hundred twenty days after the Closing Date,
E-Z shall provide to Shareholder all exhibits required by Form 8023-A ("8023-A
Statement") with E-Z's allocation of the Purchase Price among the assets of
Time Saver and Delight (which allocation shall be adopted by the Shareholder).
Thereafter E-Z shall provide to Shareholder any revised copies of the 8023-A
Statement. Any depreciation or amortization tax assessments resulting from
adjustments to asset basis allocations shall be the sole liability of E-Z.
6.3 Shareholder agrees to indemnify E-Z and Time Saver, and
Delight for all liabilities pursuant to Treasury Regulation Section
1.338(h)(10)-1(e) and 1.1502-6, and to indemnify Time Saver and Delight for any
other Taxes that may be imposed on Time Saver or Delight for any period prior
to the Closing Date, to the extent such Taxes have not been reserved for on
Time Saver's balance sheet.
6.4 Shareholder shall, pursuant to Section 47.287.441
Louisiana Revised Statutes of 1950, file the appropriate Louisiana income tax
return and shall be responsible
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E-Z SERVE
Final December 1, 1994
for any tax liability resulting from the imposition of the Louisiana income tax
for the period ending on the Closing Date, and shall also be liable for any
other state tax liabilities for Time Saver and Delight attributable to any
taxable period ending on or before the Closing Date.
6.5 Shareholder shall be liable for any state income tax
liability which may be triggered by the execution of this agreement and the
Code Section 338(h)(10) election.
6.6 Immediately prior to the Closing Date, Time Saver and
Delight shall be released from any tax sharing or allocation agreements to
which they may be parties, and following the Closing Date, Time Saver and
Delight shall have no obligations under any such agreements.
6.7 The indemnification rights of Time Saver, Delight, and
E-Z related to Section 338(h)(10) of the Code shall not be subject to the
limitation of Section 9.3 hereof.
7. ENVIRONMENTAL
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Final December 1, 1994
7.1 Within fifteen (15) days from the Closing Date, E-Z shall
contract for and commence a Phase II environmental study (the "Study") of the
warehouse located at Humphreys Street and Time Saver Avenue, Jefferson Parish,
Louisiana (the "Warehouse"), with an environmental firm and methodology
acceptable to Shareholder. Shareholder shall reimburse E-Z for 50% of the
costs incurred by E-Z or any affiliate thereof in conducting the Study,
provided that any such costs allocable to Shareholder over $15,000 are first
approved in writing by Shareholder. In the event that the Study discloses
environmental contamination for which Time Saver is responsible for remediation
to the extent required by any Environmental Law (hereinafter, "Remediation"),
Shareholder shall reimburse Time Saver for the costs incurred by Time Saver in
completing such Remediation, only to the extent that such costs are not
reimbursable under a local, state or federal statute or fund including, but not
limited to, the Louisiana Underground Storage Tank Trust Fund (hereinafter, a
"Fund"), and only to the extent of the contamination disclosed in the Study.
In addition, as a condition to Shareholder's obligations, E-Z must obtain
Shareholder's written approval, which approval shall not be unreasonably
withheld, of the contractors performing the Remediation, the methodology used
and the cost to be incurred. Remediation conforming to the requirements of the
preceding sentence is hereinafter referred to as "Qualifying Remediation."
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E-Z SERVE
Final December 1, 1994
7.2(a) The parties acknowledge that of the locations owned or
leased by Time Saver as of the Closing Date listed on Exhibit 7.2(a)(i), 104
locations contain underground storage tanks (the "UST Sites") as identified on
Exhibit 7.2(a)(ii). Of the UST Sites, Time Saver has reported to the proper
local authorities a Release which has occurred prior to the Closing Date at
those UST Sites (the "Release UST Sites") identified in Exhibit 7.2(a)(iii),
with those UST Sites which have qualified for clean-up pursuant to the
Louisiana Underground Storage Tank Trust Fund, as identified on Exhibit
7.2(a)(iii), (the "Qualified UST Sites") noted with an asterisk. The remaining
Release UST Sites are hereinafter referred to as "Non-Qualified UST Sites", as
defined on Exhibit 7.2(a)(iii).
(b) In the event that it is reasonably practicable to do so,
Shareholder agrees prior to the Closing Date to remediate the contamination at
the Non-Qualified UST Sites. If such Remediation is not reasonably
practicable, Shareholder shall reimburse Time Saver for the costs incurred by
Time Saver in effecting the Remediation in accordance with Corrective Action
Plans dated April 8, 1993 and August 22, 1994, provided that such remediation
meets the standards for a Qualifying Remediation.
(c) Shareholder shall reimburse Time Saver for the costs
incurred by Time Saver from and after the Closing Date for Remediation of the
Qualified UST Sites, provided
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E-Z SERVE
Final December 1, 1994
that such remediation meets the standards for Qualifying Remediation, and
further provided that the amount of such reimbursement per Qualified UST Site
in no event shall exceed an amount equal to $15,000 less an amount equal to the
sums expended by Time Saver on remediation of such Qualified UST Sites prior to
the Closing Date, as set forth on Exhibit 7.2(c).
(d) With respect to the remaining UST Sites which are not as
of the date hereof Release UST Sites (the "Non-Release Sites") and identified
on Exhibit 7.2(d) hereof, E-Z will cause Time Saver to conduct at its cost
within six (6) months of the Closing Date, such studies as E-Z deems necessary
to determine whether a Release has occurred. E-Z shall notify Shareholder of
any such Release within such six (6) month period. To the extent of any such
identified Release, E-Z shall obtain a determination from the proper local
authorities whether such Non-Release Site qualifies for clean-up under the
applicable state fund. In the event that a Non-Release Site does not so
qualify, Shareholder shall reimburse Time Saver for the costs incurred by Time
Saver from and after the Closing Date to the extent that such costs exceed
$15,000 at any Non-Release Site, provided that such remediation meets the
standards for a Qualifying Remediation, but in no event shall such
reimbursement exceed $35,000 per Non-Release Site.
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Final December 1, 1994
(e) The parties acknowledge that the UST Sites identified in
Exhibit 7.2(e) contain non-operating underground storage tanks as of the date
hereof. In the event that it is reasonably practicable to do so, Shareholder
shall remove the tanks and complete Remediation of such sites. If not so
practicable, Shareholder agrees to reimburse Time Saver for the costs incurred
by Time Saver in removing such tanks and in completing the Remediation of such
sites to the extent of a Release provided that the underground storage tanks
are not operated after the Closing Date, and further provided that such
remediation meets the standards for a Qualifying Remediation.
(f) For a period of five (5) years from the Closing Date,
Shareholder shall indemnify and hold harmless E-Z, in accordance with the
provisions of Article 9, for any third party claims made for Damages related to
any Environmental Claim arising from the property or assets of Time Saver or
Delight prior to the Closing Date. Claims made in writing to Shareholder by
E-Z during the first thirty (30) months from the Closing Date shall be presumed
to relate to pre-Closing Date releases and those made during the second thirty
(30) months from the Closing Date shall be presumed to relate to post-Closing
Date releases. In either case a party may rebut the presumption with evidence
to the contrary.
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Final December 1, 1994
(g) Any payments to be made to either party pursuant to
this Article 7 shall be made within 15 business days after written request
therefor.
8. TERMINATION
8.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of E-Z and the
Shareholder;
(b) by E-Z or the Shareholder in writing without liability
on the part of the terminating party (provided the terminating party is not in
material default or breach of this Agreement and has not failed or refused to
close without proper justification hereunder), if the Closing Date shall not
have occurred on or before December 31, 1994;
(c) by either E-Z, on the one hand, or the Shareholder, on
the other hand, in writing, without prejudice to other rights and remedies
which the terminating party may have (provided the terminating party is not in
material default or breach of this Agreement and has not failed or refused to
close without justification hereunder), if the other party
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Final December 1, 1994
shall (i) fail to perform its or their covenants or agreements contained herein
required to be performed prior to the Closing Date, or (ii) breach or have
breached any of its or their representations or warranties contained herein; or
(d) by E-Z or Shareholder, respectively, for failure of a
condition precedent to closing set forth in Section 4.1 or 4.2, respectively
For purposes of this Agreement, it is expressly agreed that, subject
to Section 3.6(d) hereof, the failure to obtain the Financing shall not
constitute a default or failure to perform of E-Z.
8.2 Termination of this Agreement pursuant to this Article
8 shall terminate (i) all obligations of the parties hereunder, except for the
obligations under Sections 10.6, 10.10, and 10.12 hereof and (ii) the
obligations set forth in the next succeeding sentence of this Section 8.2, and
(iii) the obligations under the Confidentiality Agreement. Upon any
termination of this Agreement each party hereto will redeliver all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, and all copies of such materials, whether so obtained
before or after the execution hereof, to the party furnishing the same.
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Final December 1, 1994
9. INDEMNIFICATION
9.1 From and after the Closing Date, Shareholder agrees to
indemnify and hold harmless E-Z, Time Saver, Delight, their successors and
assigns, or any parent or subsidiary company of E-Z, Time Saver or Delight, and
any employee, representative, director, officer or agent thereof (collectively,
the "E-Z Indemnitees"), from and against any and all losses, liabilities,
damages, including exemplary damages and penalties, deficiencies, fines,
obligations, costs, judgments, expenses, taxes, and reasonable fees and
expenses of counsel and agents who are not regular employees of such companies,
including reasonable expenses of investigating, defending and prosecuting
litigation (collectively, "Damages") which may be sustained, suffered or
incurred by any of the E-Z Indemnitees, arising from, by reason of, caused by,
or in any way related to (i) the breach or inaccuracy of any covenant,
warranty, agreement or representation made by the Shareholder under this
Agreement or any agreement referenced herein, (ii) the final determination of
liability, deficiency or penalty against Time Saver or Delight incurred prior
to the Closing Date but not reserved for on its Closing Financial Statements in
accordance with GAAP applied on a basis consistent with that applied when
preparing the Financial Statements, (iii) the Shareholder's failure in any
respect to comply with or
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Final December 1, 1994
perform any covenant or agreement contained in this Agreement or any agreement
referenced herein, (iv) the business activities of Time Saver or Delight or
Shareholder's ownership of Time Saver or Delight for the period on or prior to
the Closing Date, excluding, however, all obligations or Damages which are
reflected in the Closing Financial Statements, and (v) any Remediation or
Environmental Claim related to the UST Sites identified on Exhibit 7.2(e).
9.2 Notwithstanding any other provision of this section, the
obligations of the Shareholder under this Agreement with respect to any
representation, warranty, covenant or agreement contained in this Agreement (i)
shall be limited to any such representation, warranty, covenant or agreement as
is actually made by Shareholder, and (ii) shall not apply to any such losses,
liabilities, damages, costs, judgments, expenses, taxes and fees that arise out
of the negligence or misconduct of any of the parties otherwise entitled to
indemnification (provided, however, that this clause shall not limit Time
Saver's or Delight's indemnification rights relating to Time Saver's or
Delight's negligent actions occurring prior to the Closing Date).
9.3 No monies shall be due to E-Z under this Article 9 unless
the total of any amounts due exceeds $250,000 and the amount due under this
Agreement shall be the
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amount in excess of $250,000. The determination of whether the total amount
due exceeds $250,000 shall be made on a pre-tax basis; provided that the
foregoing deductible of $250,000 shall not apply to any claims made pursuant to
Section 6.7, Article 7 and Section 9.1(v) .
9.4 Excluding liability assumed by Shareholder pursuant to
Article 8 hereof, E-Z agrees to indemnify, defend and hold harmless
Shareholder, any parent or subsidiary company of Shareholder, any employee or
agent thereof, any current or former shareholder and any former director,
officer, or employee of Time Saver or Delight who served or was employed prior
to the Closing Date (collectively, the "Shareholder Indemnitees") against any
and all Damages which may be sustained, suffered or incurred by any of the
Shareholder Indemnitees, arising from, by reason of, caused by or in any way
related to (i) the breach or inaccuracy of any covenant, warranty, agreement or
representation made by E-Z under this Agreement or any agreement referenced
herein, (ii) E-Z's failure in any respect to comply with or perform any
covenant or agreement contained in this Agreement or any agreement referenced
herein, or (iii) the business activities of Time Saver or Delight or E-Z's
ownership of Time Saver or Delight for the period from and after the Closing
Date.
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9.5 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 claims for indemnification and third party actions being
collectively referred to herein as the "Claims"), 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.
9.6 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 so to contest shall be delivered by the indemnifying party to the
indemnified party within 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
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E-Z SERVE
Final December 1, 1994
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 does not elect to
contest any such Claim, the indemnifying party shall be bound by the result
obtained with respect thereto by the indemnified party. 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 15 days of such request from the indemnifying party. If the
indemnified party determines that the contest should be continued, the
indemnifying party shall be liable hereunder only to the extent of the amount
that the other party to the contested Claim had agreed unconditionally to
accept in payment or compromise as of the time the indemnifying party made its
request therefor to the indemnified party.
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E-Z SERVE
Final December 1, 1994
9.7 If requested by the indemnifying party, the indemnified
party agrees to cooperate with the indemnifying party and its counsel in
contesting any third party 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.
9.8 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.
9.9 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
51
<PAGE> 63
E-Z SERVE
Final December 1, 1994
jurisdiction. Each indemnified party agrees to use its best efforts to pursue
any claims related to the event giving rise to the Damages or rights it may
have against any third party which would materially reduce the amount of
Damages otherwise incurred by such indemnified party.
10. GENERAL PROVISIONS
10.1 Unless otherwise expressly provided otherwise to the
contrary in this Agreement, all representations and warranties of the
Shareholder and E-Z made in or pursuant to this Agreement, or any exhibit,
schedule or annex hereto, or in any document or instrument delivered hereunder,
or in connection with the transactions contemplated hereby, shall survive the
Closing Date for a period of one (1) year and shall be fully enforceable for
such period, except to the extent that the party making the claim of such
breach has knowledge acquired before the Closing Date of any fact in variance
with or of any breach of, any representation or warranty.
10.2 Shareholder represents to E-Z and E-Z represents to the
Shareholder, that no broker or finder has been involved in this transaction.
Any commission or fee
52
<PAGE> 64
E-Z SERVE
Final December 1, 1994
which is or will be due to any broker or lender retained or alleged to have
been retained by any party to this Agreement, will be paid by such party.
10.3 This Agreement, the exhibits attached hereto, and any
letter agreements or other documents executed by the parties on or before the
Closing Date together constitute the entire agreement between the parties and
supersede and cancel any other agreement, representation or communication,
whether oral or written, between the parties relating to the transactions
contemplated herein or the subject matter hereof. All information required or
permitted by this Agreement to be disclosed on an Exhibit shall be deemed to
have been so disclosed if such information appears on any other Exhibit
pertaining to similar information.
10.4 The tables and section headings in this Agreement are
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.5 All notices, requests, demands and other communications
to be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered in person or by courier service requiring acknowledgment of
receipt of delivery or mailed by certified mail, postage prepaid and return
receipt requested, or by telecopier: (i) if to E-Z,
53
<PAGE> 65
E-Z SERVE
Final December 1, 1994
at 2550 North Loop West, Suite 600, Houston, Texas 77092, Attention John
Miller, Senior Vice President, with a copy to John L. Keffer, Bracewell &
Patterson, L.L.P., 711 Louisiana, Suite 2900, Houston, Texas 77002; (ii) if to
Shareholder, at 700 East 30th Street, Hutchinson, Kansas 67502, Attention:
Frank Remar, Senior Vice President, with a copy to Bruce M. Gack, Esq., The
Kroger Co., 1014 Vine Street, Cincinnati, Ohio 45202-1100; or to such other
person or address as may be specified from time to time by the person entitled
to receive such notice. Notice given by personal delivery, courier service or
mail shall be effective upon actual receipt. Notice given by telecopier shall
be confirmed by appropriate answer back and shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All Notices by telecopier shall
be confirmed promptly after transmission in writing by certified mail or
personal delivery.
10.6 All details of this transaction shall be kept
confidential and may be disclosed only to those persons or entities to whom
such disclosures shall be reasonably required. In the event the transactions
contemplated hereby are not consummated, each party shall return to the other
all documents furnished by the other, and all copies thereof shall be likewise
returned.
54
<PAGE> 66
E-Z SERVE
Final December 1, 1994
10.7 This Agreement may be amended only by a written
instrument executed by the Shareholder and E-Z. The failure of a party to
exercise any right or remedy shall not be deemed or constitute a waiver of such
right or remedy in the future. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (regardless of whether similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.
10.8 In the event that either party objects to a matter
disclosed in a financial statement or review prepared pursuant to Section 1.2
or Section 9.1 hereof, it shall advise the other party of such objection in
writing (the "Notice") within thirty (30) days of its receipt of such financial
statement or review, and the parties shall endeavor to resolve the dispute
within thirty (30) days of the Notice. If the parties are unsuccessful in
resolving the dispute, they shall retain the independent public accounting firm
of Ernst & Young, whose determination of the disputed items, which the parties
shall endeavor to have completed within one hundred twenty (120) days, shall be
binding on the parties. Shareholder and E-Z shall bear equally the cost of the
services provided by such independent public accounting firm.
55
<PAGE> 67
E-Z SERVE
Final December 1, 1994
10.9 The parties acknowledge that this contract reflects
significant negotiations between the parties and agree that no provision of
this Agreement shall be construed against the party which drafted this
Agreement.
10.10 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Kansas (excluding any
conflicts-of-law rule or principle that might refer same to the laws of another
jurisdiction).
10.11 This Agreement and the rights and obligations hereunder
shall bind and inure to the benefit of the parties and their respective
personal representatives, heirs, successors and permitted assigns; but neither
this Agreement nor any of the rights, benefits or obligations hereunder shall
be assigned, by operation of law or otherwise, by any party hereto without the
prior written consent of the other party; provided, that E-Z may assign this
Agreement and E-Z's rights hereunder and under other documents entered into in
connection herewith to financial institutions or their affiliates providing any
financing for this transaction or any refinancing thereof; and provided
further, that upon foreclosure or sale in lieu of foreclosure or deed in lieu
of foreclosure or deed of any of the assets of E-Z to its affiliates of E-Z's
rights hereunder or under other documents entered into in connection herewith
or a substantial portion thereof by or to any such financial institutions
56
<PAGE> 68
E-Z SERVE
Final December 1, 1994
or their affiliates, the representations, warranties, obligations, covenants,
agreements and indemnities of the Shareholder herein and in such other
documents will inure to the benefit of such financial institutions (or their
affiliates) or any such purchaser or grantee. Except for the foregoing,
nothing in this Agreement, express or implied, is intended to confer upon any
person or entity other than the parties hereto and their respective successors
and permitted assigns, any rights, benefits or obligations hereunder.
10.12 Except as otherwise provided in this Agreement, E-Z
and the Shareholder shall each pay their own costs and expenses incurred by
them or on their behalf in connection with this Agreement and the transactions
contemplated hereby.
10.13 If any provision of the Agreement is rendered or
declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by decree of a court of last resort, E-Z and the
Shareholder shall promptly meet and negotiate substitute provisions for those
rendered or declared illegal or unenforceable, but all of the remaining
provisions of this Agreement shall remain in full force and effect.
10.14 All references to "E-Z Serve Corporation" in the
headings of the Exhibits hereto shall be deemed to be references to "E-Z Serve
Convenience Stores, Inc."
57
<PAGE> 69
E-Z SERVE
Final December 1, 1994
10.15 This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have signed this Agreement as of the 2nd day of December, 1994.
DILLON COMPANIES, INC.
By: /s/ Frank J. Remar
-----------------------------
Attest: Frank J. Remar
Senior Vice President
/s/ Robert L. Meyers
- -------------------------------
Vice President E-Z SERVE CONVENIENCE STORES, INC.
By: /s/ John T. Miller
-----------------------------
John T. Miller
Senior Vice President
Attest:
/s/ H. E. Lambert
- -----------------------------------------
Assistant Secretary
58
<PAGE> 70
E-Z SERVE
Final December 1, 1994
E-Z SERVE CORPORATION joins in the execution hereof for the purposes of
unconditionally guarantying the performance and undertakings of E-Z under this
Agreement.
E-Z SERVE CORPORATION
By: /s/ John T. Miller
------------------------
John T. Miller
Senior Vice President
Attest:
/s/ H. E. Lambert
- -------------------------
Assistant Secretary
STATE OF KANSAS
SS.
COUNTY OF
BE IT REMEMBERED, That on this 2nd day of December, 1994, before me, a Notary
Public in and for said County and State, personally appeared Frank J. Remar, and
Robert L. Meyers, Senior Vice President and Assistant Secretary, respectively,
of DILLON COMPANIES, INC., the corporation, whose name is subscribed to and
which executed the foregoing instrument, and for themselves and as such officers
respectively, and for and on behalf of the corporation, acknowledged the signing
and execution of said instrument as their free and voluntary act and deed as
such officers respectively, and the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my official seal, on the day and year last aforesaid.
/s/ Faith W. White
----------------------
Notary Public
My Commission Expires: 12/29/94
59
<PAGE> 71
E-Z SERVE
Final December 1, 1994
STATE OF TEXAS
SS.
COUNTY OF HARRIS
BE IT REMEMBERED, That on this 2nd day of December, 1994, before me, a
Notary Public in and for said County and State, personally appeared John T.
Miller, and H.E. Lambert, Senior Vice President and Assistant Secretary,
respectively, of E-Z Serve Convenience Stores, Inc., the corporation, whose
name is subscribed to and which executed the foregoing instrument, and for
themselves and as such officers respectively, and for and on behalf of the
corporation, acknowledged the signing and execution of said instrument as their
free and voluntary act and deed as such officers respectively, and the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my Notarial seal, on the day and year last aforesaid.
ANDRE MASSEY /s/ Andre Massey
Notary Public, State of Texas -----------------------
My Commission Expires 05-20-97 Notary Public
My Commission Expires: May 20, 1997
STATE OF TEXAS
SS.
COUNTY OF HARRIS
BE IT REMEMBERED, That on this 2nd day of December, 1994, before me, a
Notary Public in and for said County and State, personally appeared John T.
Miller, and H.E. Lambert, Senior Vice President and Assistant Secretary,
respectively, of E-Z Serve Corporation, the corporation, whose name is
subscribed to and which executed the foregoing instrument, and for themselves
and as such officers respectively, and for and on
60
<PAGE> 72
E-Z SERVE
Final December 1, 1994
behalf of the corporation, acknowledged the signing and execution of said
instrument as their free and voluntary act and deed as such officers
respectively, and the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my Notarial seal, on the day and year last aforesaid.
[SEAL]
/s/ Andre Massey
Notary Public
My Commission Expires: May 20, 1997
61
<PAGE> 1
EXHIBIT 10.6.2
AMENDMENT TO AGREEMENT
THIS AMENDMENT TO AGREEMENT, made as of the 28th day of December,
1994, by and between Dillon Companies, Inc. ("Shareholder") and E-Z Serve
Convenience Stores, Inc. ("E-Z").
W I T N E S S E T H :
WHEREAS, Dillon and E-Z are parties to an Agreement dated as of
December 2, 1994, pursuant to which E-Z is to acquire the common stock of Time
Saver Stores, Inc., on the terms and conditions set forth in the Agreement; and
WHEREAS, the parties desire to modify and amend the Agreement as set
forth below;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
1. Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
2. Upon execution hereof, E-Z shall deliver to Dillon, in immediately
available funds, the sum of Two Hundred Thousand Dollars ($200,000) as
a non-refundable extension fee, which amount shall be credited against
the Purchase Price, without interest, at the closing, but in no event
(other than a failure of the transaction to close due solely to a
default by Dillon under the Agreement, in which event the extension
fee shall be refundable) shall such amount be refundable by Dillon, it
being agreed by the parties that such amount shall be earned by Dillon
on the date hereof.
<PAGE> 2
3. Article 4 of the Agreement is hereby modified so that the term
"December 16, 1994" in the second line thereof is changed to read
"January 17, 1995."
4. Section 5.1 of the Agreement is hereby modified so that the term
"March 15, 1995" in the third line thereof is changed to read "April
15, 1995."
5. Section 8.1(b) of the Agreement is hereby modified so that the term
"December 31, 1994" in the last line thereof is changed to read
"January 17, 1995."
6. Except as otherwise modified herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have signed this Agreement as of the day and year first above written.
DILLON COMPANIES, INC.
By: /s/ FRANK J. REMAR
-------------------------------
Attest: Frank J. Remar
Senior Vice President
/s/ HAROLD D. RYAN
- -----------------------------------
Vice President
E-Z SERVE CONVENIENCE STORES, INC.
By: /s/ JOHN T. MILLER
-------------------------------
John T. Miller
Senior Vice President
Attest:
/s/ H.E. LAMBERT
- -----------------------------------
Assistant Secretary
E-Z SERVE CORPORATION joins in the execution hereof for the purposes of
consenting hereto and unconditionally guarantying the performance and
undertakings of E-Z under this Amendment
<PAGE> 3
to Agreement.
E-Z SERVE CONVENIENCE STORES, INC.
By: /s/ JOHN T. MILLER
-------------------------------
John T. Miller
Senior Vice President
Attest:
/s/ H.E. LAMBERT
- -----------------------------------
Assistant Secretary
STATE OF KANSAS
) SS.
COUNTY OF RENO
BE IT REMEMBERED, That on this 28th day of December 1994, before me, a Notary
Public in and for said County and State, personally appeared Frank J. Remar,
and Harold D. Ryan, Senior Vice President and Vice President, respectively, of
DILLON COMPANIES, INC., the corporation, whose name is subscribed to and which
executed the foregoing instrument, and for themselves and as such officers
respectively, and for and on behalf of the corporation, acknowledged the
signing and execution of said instrument as their free and voluntary act and
deed as such officers respectively, and the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my official seal, on the day and year last aforesaid.
/s/ NANCY A. ROBERTS
--------------------------------------
Notary Public
My Commission Expires:
NOTARY PUBLIC - State of Kansas
NANCY A. ROBERTS
My Appt. Exp. 8/21/98
STATE OF TEXAS
SS.
COUNTY OF HARRIS
BE IT REMEMBERED, That on this 28th day of December 1994, before me, a
Notary Public in and for said County and State, personally appeared John T.
Miller, and
<PAGE> 4
Harold E. Lambert, Senior Vice President and Assistant Secretary, respectively,
of E-Z Serve Convenience Stores, Inc., the corporation, whose name is
subscribed to and which executed the foregoing instrument, and for themselves
and as such officers respectively, and for and on behalf of the corporation,
acknowledged the signing and execution of said instrument as their free and
voluntary act and deed as such officers respectively, and the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my Notarial seal, on the day and year last aforesaid.
/s/ ANDRE MASSEY
--------------------------------------
Notary Public
My Commission Expires:
ANDRE MASSEY
Notary Public, State of Texas
My Commission Expires 05-20-97
STATE OF TEXAS
) SS.
COUNTY OF HARRIS
BE IT REMEMBERED, That on this 28th day of December, 1994, before me,
a Notary Public in and for said County and State, personally appeared John T.
Miller, and Harold E. Lambert, Senior Vice President and Assistant Secretary,
respectively, of E-Z Serve Corporation, the corporation, whose name is
subscribed to and which executed the foregoing instrument, and for themselves
and as such officers respectively, and for and on behalf of the corporation,
acknowledged the signing and execution of said instrument as their free and
voluntary act and deed as such officers respectively, and the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my Notarial seal, on the day and year last aforesaid.
/s/ ANDRE MASSEY
--------------------------------------
Notary Public
My Commission Expires:
ANDRE MASSEY
Notary Public, State of Texas
My Commission Expires 05-20-97
<PAGE> 1
EXHIBIT 10.6.3
SECOND AMENDMENT TO AGREEMENT
THIS SECOND AMENDMENT TO AGREEMENT, made as of the 17th day of
January, 1995, by and between Dillon Companies, Inc. ("Shareholder") and E-Z
Serve Convenience Stores, Inc. ("E-Z").
W I T N E S S E T H :
WHEREAS, Dillon and E-Z are parties to an Agreement dated as of
December 2, 1994, as amended by Amendment to Agreement dated as of December 28,
1994, pursuant to which E-Z is to acquire the common stock of Time Saver
Stores, Inc., on the terms and conditions set forth in the Agreement; and
WHEREAS, the parties desire to modify and amend the Agreement as set
forth below;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
1. Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
2. E-Z has conducted a lien and judgment search on Time Saver and Delight
which has disclosed the liens and judgments attached hereto as
Schedule 1 (the "Judgments"). Shareholder believes that all of the
Judgments have been satisfied. Shareholder shall use its best efforts
to deliver to E-Z, on or before the date of delivery of the Closing
Financial Statements, documentation evidencing the
<PAGE> 2
satisfaction of the Judgments and the release of record of judgment
liens associated therewith. In the event that Shareholder is unable
to furnish such documentation, it shall indemnify E-Z with respect to
such Judgments as to which documentation is not furnished, to the same
extent as set forth in Article 9 of the Agreement.
3. Except as otherwise modified herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have signed this Agreement as of the day and year first above written.
DILLON COMPANIES, INC.
By: /s/ FRANK J. REMAR
Attest: -------------------------------------
Frank J. Remar
Senior Vice President
/s/ ROBERT L. MEYERS
- --------------------------------
Vice President
E-Z SERVE CONVENIENCE STORES, INC.
By: /s/ JOHN T. MILLER
-------------------------------------
John T. Miller
Senior Vice President
<PAGE> 3
E-Z SERVE CORPORATION joins in the execution hereof for the purposes of
consenting hereto and unconditionally guarantying the performance and
undertakings of E-Z under this Second Amendment to Agreement.
E-Z SERVE CORPORATION
By: /s/ JOHN T. MILLER
-------------------------------------
John T. Miller
Senior Vice President
STATE OF NEW YORK
) SS.
COUNTY OF NEW YORK
BE IT REMEMBERED, That on this 17th day of January, 1995, before me, a Notary
Public in and for said County and State, personally appeared Frank J. Remar,
and Robert L. Meyers, Senior Vice President and Vice President, respectively,
of DILLON COMPANIES, INC., the corporation, whose name is subscribed to and
which executed the foregoing instrument, and for themselves and as such
officers respectively, and for and on behalf of the corporation, acknowledged
the signing and execution of said instrument as their free and voluntary act
and deed as such officers respectively, and the free and voluntary act and deed
of said corporation, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my official seal, on the day and year last aforesaid.
/s/ BERNADETTE M. COLGAN
--------------------------------
Notary Public
My Commission Expires:
BERNADETTE M. COLGAN
Notary Public, State of New York
No. 03-5028006
Qualified in Bronx County
Commission Expires: May 23, 1996
STATE OF NEW YORK
) SS.
COUNTY OF NEW YORK
BE IT REMEMBERED, That on this 17th day of January, 1995, before me, a
Notary Public in and for said County and State, personally appeared John T.
Miller, Senior Vice President of E-Z Serve Convenience Stores, Inc., the
corporation, whose name is subscribed to and which executed the foregoing
instrument, and for themselves and as such officers respectively, and for and
on behalf of the corporation, acknowledged the signing and execution of said
instrument as their free and voluntary act and deed as such officers
respectively, and the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned.
<PAGE> 4
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my Notarial seal, on the day and year last aforesaid.
/s/ BERNADETTE M. COLGAN
--------------------------------
Notary Public
My Commission Expires:
BERNADETTE M. COLGAN
Notary Public, State of New York
No. 03-5028006
Qualified in Bronx County
Commission Expires: May 23, 1996
STATE OF NEW YORK
SS.
COUNTY OF NEW YORK
BE IT REMEMBERED, That on this 17th day of January, 1995, before me, a Notary
Public in and for said County and State, personally appeared John T.
Miller, Senior Vice President of E-Z Serve Corporation, the corporation, whose
name is subscribed to and which executed the foregoing instrument, and for
themselves and as such officers respectively, and for and on behalf of the
corporation, acknowledged the signing and execution of said instrument as their
free and voluntary act and deed as such officers respectively, and the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed
my Notarial seal, on the day and year last aforesaid.
/s/ BERNADETTE M. COLGAN
--------------------------------
Notary Public
My Commission Expires:
BERNADETTE M. COLGAN
Notary Public, State of New York
No. 03-5028006
Qualified in Bronx County
Commission Expires: May 23, 1996
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is by and between E-Z
Serve Corporation, a Delaware corporation (the "Company"), and Kathleen
Callahan-Guion, an individual residing in Alexandria, Virginia (the
"Employee"). The parties hereto, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, hereby agree as follows:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts employment with the Company subject to the terms and conditions set
forth in this Agreement. Employee will use her reasonable best efforts to
begin working at the Company by March 17, 1997, but no later than March 24,
1997 (the "Start Date").
2. Term. This Agreement shall be effective immediately upon full
execution hereof, but the term of Employee's employment ("Employment Term")
shall commence as of the Start Date and continue through the date two (2) years
thereafter, unless terminated earlier as provided in this Agreement.
3. Compensation.
a. Salary. As compensation for all services of whatever type
rendered by Employee in the performance of her duties or obligations under this
Agreement, the Company shall in the aggregate pay Employee a base salary of
$225,000 per year during the Employment Term.
b. Bonus. Based on the actual performance of the Company as
compared to its budgeted performance, and any other criteria that the Board may
determine, during each year of the Employment Term, as determined by the Board
of Directors of the Company, Employee's target bonus per year shall be $175,000
("Bonus").
c. Additional Compensation. Employee shall receive $5,100 per
year for a car allowance and the Company shall pay monthly dues plus a
reasonable initiation fee at a club of Employee's choice
<PAGE> 2
d. Relocation Expenses. Company shall pay or reimburse to
Employee her expenses to relocate to the greater Houston, Texas metropolitan
area as follows:
1. Travel costs for a reasonable number of trips for Employee and
her spouse for purposes of locating a residence in the
Houston, Texas, area;
2. Employee's temporary living expenses in the Houston, Texas,
area while locating and accomplishing the move to a permanent
residence;
3. Movement of household goods by a commercial carrier to include
the following: packing materials, packing labor, loading
labor, transportation, unloading labor, unpacking labor,
debris pickup and insurance/replacement coverage.
4. Reasonable closing costs on sale of current residence to
include real estate commission paid at settlement (up to 7%),
document preparation, notary public, reasonable attorney fees
and title insurance.
5. Reasonable closing costs on the purchase of new residence in
Houston to include appraisal fees, credit report, lender's
inspection fee, mortgage insurance application fee, settlement
or closing fee, title search, title examination fee,
attorney's fee, title insurance, recording fees, city/county
tax stamps, deed and mortgage, and state tax stamps, deed and
mortgage, and loan origination fee (up to 1% of first mortgage
principal).
6. Loan discount points (up to 2%).
7. Relocation of two personal vehicles to include the relocation
of one vehicle to Houston shortly after the Start Date and the
second vehicle at the time of the final move.
8. An incidental relocation payment equal to two months salary
less normal payroll and withholding deductions, payable within
30 days of the Start Date.
-2-
<PAGE> 3
9. Such other reasonable and necessary expenses of relocation as
may be incurred by Employee and approved by Company.
Except for those items set forth in subparagraph 8 hereof, all
payments made to or on behalf of Employee pursuant to this
paragraph shall be subject to a "tax adder" with respect to
federal income taxes only which shall be paid by Company to
Employee to offset additional tax liability created by such
payments.
e. Stock Options. When sufficient shares are authorized under
the Company's 1991 Stock Option Plan ("1991 Plan"), Employee shall be issued
options to purchase 500,000 shares of the Company's common stock under the 1991
Plan at an exercise price of the market price of the shares of common stock as
of the effective date hereof. When sufficient shares are authorized under the
Company's 1994 Stock Option Plan ("1994 Plan"), Employee shall be issued
options to purchase 1,500,000 shares of the Company's common stock under the
1994 Plan at an exercise price of $0.70 per share. Following the first
anniversary of the Start Date, Employee's performance shall be evaluated and
the Board of Directors may designate Employee as a "Senior Executive" under the
1991 Plan and the 1994 Plan. Further, in the event there should occur prior to
the issuance of such options to Employee an event that accelerates the vesting
of the options under the 1991 Plan or that permits a participant of the 1994
Plan to sell his or her stock, the Employee shall receive the same economic
benefits she would have been entitled to had she been issued the options under
the 1991 Plan and the 1994 Plan on the date hereof.
f. Withholding. All salary, bonus, commissions and any
termination payments made pursuant to this Agreement shall be subject to any
and all payroll and withholding deductions required by the law of any
jurisdiction, state or federal, having taxing authority with respect to such
salary, bonus and/or commissions.
4. Other Benefits. In addition to the compensation specified in Section
3 above, Employee also shall be entitled to receive the following benefits as
made available on the same terms and conditions to other employees of the
Company, all in accordance with such policies as may be established by the
Company:
a. Annual vacation of four weeks and specified holidays, both
with full pay; and
b. Group hospitalization, major medical, and any long-term
disability and life insurance coverages.
-3-
<PAGE> 4
In addition, the Company will reimburse Employee for her medical and dental
COBRA payments during the period, not to exceed 60 days from the Start Date
that Employee is not eligible to participate in the Company's benefit plans.
5. Duties. Employee shall be employed as the President and Chief
Operating Officer of the Company and shall perform such services and functions
for the Company and its subsidiaries as may from time to time be specified by
the Chief Executive Officer of the Company or such subsidiaries' respective
Boards of Directors.
6. Trade Secrets and Confidential Information. The Company and Employee
acknowledge and agree that during the term of her employment with the Company,
Employee will have access to certain confidential information relating to the
business of the Company, including, but not limited to, corporate books and
records, trade secrets, know-how, computer programs, marketing plans, financial
information, personnel information, lists of vendors, consultants, customers
and suppliers with which the Company does business or has engaged in
negotiations, as well as to certain information pertaining to confidential or
secret designs, processes, formulae, plans, processes, techniques, procedures,
methods, trademarks, patents, copyrights, devices or materials, if any, of the
Company (or an affiliate thereof) (collectively, the "Confidential
Information"), all of which are of extreme importance to the future financial
success of the Company because of the highly specialized nature of the Company'
business. To ensure the continued secrecy of the Confidential Information,
Employee agrees that she will not, during the term of her employment under this
Agreement, or at any time thereafter, divulge, furnish or make accessible to
anyone (other than in the ordinary course of business of the Company or any
affiliate thereof), any knowledge or information with respect to any of the
Confidential Information relating to the business of the Company. Upon the
termination of Employee's employment with the Company, Employee shall not take
from the premises of the Company and shall return to the premises, if
previously taken, any such Confidential Information and any records, files or
other documents, or copies thereof, relating to the business or affairs of the
Company. The obligations of this paragraph shall not apply to any (i) use or
disclosure of any information in the enforcement of Employee's rights
hereunder; (ii) information that is now or later becomes publicly available
through no fault of Employee; (iii) information obtained by Employee from a
third party, other than in connection with Employee's employment by the
Company, without any obligation of secrecy or confidentiality; (iv) information
independently developed by Employee without reference to any Confidential
Information; (v) any disclosure required by applicable law, provided that
Employee shall use reasonable efforts to give advance notice to and cooperate
with Company in connection with any such disclosure; and (vi) any disclosure
with the consent of Company.
-4-
<PAGE> 5
7. Termination.
a. Employee's employment by the Company shall terminate
immediately upon the death or permanent disability of Employee. Employee shall
be deemed permanently disabled if deemed so in accordance with the terms of the
1994 Plan.
b. Employee may voluntarily terminate her employment with the
Company by giving 60 days written notice to the Company prior to Employee's
desired termination date.
c. The Company may terminate Employee's employment with the
Company by giving 60 days written notice to the Employee prior to the proposed
termination date.
d. The Company may also terminate Employee's employment for Cause
(as defined in the 1994 Plan) by giving 24 hour written notice to the Employee
prior to the proposed effectiveness of the termination ("Cause Termination").
e. Any termination caused other than by Employee's death shall
not, however, relieve Employee of her obligations pursuant to Section 6 hereof.
8. Continuing Rights Upon Termination of Employment. Immediately upon
the effectiveness of the termination of Employee's employment with the Company,
all rights of the Employee to receive any payment hereunder shall immediately
cease, except as follows:
a. In the event Employee voluntarily terminates her employment
with the Company for any reason, Employee shall receive any payments due and
payable or which have accrued under this Agreement at the time of termination;
provided, however, that no Bonus payment under paragraph 3.b above shall accrue
or be payable for the year of termination or any subsequent year thereafter.
b. In the event of Employee's termination of employment by the
Company for any reason other than a Cause Termination, Employee shall be
entitled to a lump sum severance payment on the date of termination in the
amount of $225,000.
c. In the event of a Cause Termination, Employee shall not
receive any payments under this Agreement other than pursuant to clause (a) of
this Section 8.
9. Acknowledgments of Employee. Employee hereby acknowledges that her
execution of this Agreement is given in consideration of the Company's
employment of Employee
-5-
<PAGE> 6
under the terms and conditions contained in this Agreement and Employee
acknowledges that this is adequate consideration.
10. Miscellaneous.
a. Notice. Any notice, request, reply, instruction, or other
communication provided or permitted in this Agreement must be given in writing
and may be served (i) by depositing same in the United States mail in certified
or registered form, postage prepaid, addressed to the party or parties to be
notified with return receipt requested, (ii) by telecopy with a confirming copy
forwarded as in clause (i) or (iii) by delivering the notice in person to such
party or parties. Notice deposited in the United States mail in the manner
herein prescribed shall be effective on dispatch. Notice by telecopy shall be
effective upon confirmation of a completed transmittal. Written notice given by
delivery or by certified or registered mail shall be effective upon actual
receipt by the party to be notified. For purposes of notice, the address of
Employee, her spouse, any purported donee or transferee or any administrator,
executor or legal representative of Employee or her estate, as the case may be,
shall be as follows:
Kathleen Callahan-Guion
419 North Fairfax Street
Alexandria, Virginia 22314
The address of the Company for purposes of notice hereunder shall be:
E-Z Serve Corporation
2550 North Loop West, Suite 600
Houston, Texas 77092
Telecopy: (713) 684-4367
Employee and the Company shall have the right to change their respective
addresses by giving notice as provided herein.
b. CONTROLLING LAW. THE EXECUTION, VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS.
c. Entire Agreement/Amendment. This Agreement contains the
entire agreement of the parties hereto and supersedes any prior written or oral
agreements among
-6-
<PAGE> 7
the parties with respect to the subject matter hereof. The Agreement may be
amended only by an agreement in writing signed by the parties hereto.
d. Separability. If any provision of the Agreement is rendered
or declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by decree of a court of last resort, the Company and
Employee shall promptly meet and negotiate substitute provisions for those
rendered or declared illegal or unenforceable, but all of the remaining
provisions of this Agreement shall remain in full force and effect.
e. Effect of Agreement; Assignment. This Agreement shall be
binding on Employee and her heirs, executors, administrators, legal
representatives and successors and the Company and its successors and assigns.
This Agreement may not be assigned by Employee. This Agreement may be assigned
by the Company to any entity acquiring its business or substantially all of its
assets (whether through an acquisition or by the dissolution of the Company or
by the transfer of the business of the Company to an affiliate of the Company),
and Employee specifically consents to such future assignment.
f. Execution. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original and all of which shall
constitute one instrument.
g. Waiver of Breach. The waiver by the Company or Employee of a
breach of any provision of the Agreement by the other shall not operate or be
construed as a waiver of any subsequent breach.
EXECUTED AND EFFECTIVE this 4th day of March,1997.
E-Z SERVE CORPORATION
By: /s/ Neil H. McLaurin
-----------------------------
Neil H. McLaurin
Chairman and Chief Executive
Officer
-7-
<PAGE> 8
EMPLOYEE:
/s/ Kathleen Callahan-Guion
---------------------------
Kathleen Callahan-Guion
-8-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
E-Z Serve Convenience Stores, Inc. - a Delaware corporation
E-Z Serve Petroleum Marketing Company - a Delaware corporation ("EZPET")
E-Z Serve Petroleum Marketing Company of California - a California corporation
and wholly-owned subsidiary of EZPET
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
E-Z Serve Corporation
We consent to the incorporation by reference in the Registration Statements
(No. 33-79410 on Form S-8 and No. 33-77772 on Form S-8) of our report dated
March 27, 1997, relating to the consolidated balance sheets of E-Z Serve
Corporation and subsidiaries as of December 29, 1996 and December 31, 1995 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 29, 1996,
which report appears in the December 29, 1996, annual report on Form 10-K of E-Z
Serve Corporation. Our report refers to a change to the provisions of the
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of".
KPMG Peat Marwick LLP
Houston, Texas
April 11, 1997
<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-K FOR THE PERIOD ENDED DECEMBER 29, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 6,333
<SECURITIES> 0
<RECEIVABLES> 8,764
<ALLOWANCES> 0
<INVENTORY> 40,070
<CURRENT-ASSETS> 64,887
<PP&E> 165,440
<DEPRECIATION> 28,142
<TOTAL-ASSETS> 240,405
<CURRENT-LIABILITIES> 73,606
<BONDS> 72,395
0
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<COMMON> 691
<OTHER-SE> 54,592
<TOTAL-LIABILITY-AND-EQUITY> 240,405
<SALES> 849,197
<TOTAL-REVENUES> 861,642
<CGS> 702,862
<TOTAL-COSTS> 820,296
<OTHER-EXPENSES> 48,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,630
<INCOME-PRETAX> (15,418)
<INCOME-TAX> (343)
<INCOME-CONTINUING> (15,075)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,075)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
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