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OMB APPROVAL
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Expires: August 31, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _______)*
THE PANTRY, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $0.01 Par Value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
698657 10 3
- --------------------------------------------------------------------------------
(CUSIP Number)
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
FS Equity Partners IV, L.P.
11100 Santa Monica Blvd.
Suite 1900
Los Angeles, CA 90025
Attn: William M. Wardlaw
(310) 444-1822
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 14, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of (S)(S) 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), following box. [ ]
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See (S) 240.13d-7 for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Potential persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays
a currently valid OMB control number.
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS Equity Partners III, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
9,468,762
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
9,468,762
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
9,468,762
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 46.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
PN
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
2
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS Capital Partners, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
9,468,762
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
9,468,762
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
9,468,762
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 46.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
PN
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
3
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS Holdings, Inc.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
9,468,762
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
9,468,762
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
9,468,762
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 46.3%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
CO
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
4
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS Equity Partners International, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
381,072
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
381,072
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
381,072
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 1.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
PN
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
5
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS&CO. International, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Cayman Islands
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
381,072
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
381,072
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
381,072
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 1.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
PN
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
6
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS International Holdings Limited
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Cayman Islands
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
381,072
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
381,072
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
381,072
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 1.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
CO
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
7
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS Equity Partners IV, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
2,265,690
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,265,690
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,650,690
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 11.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
PN
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
8
<PAGE>
CUSIP NO. 698657 10 3
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
FS Capital Partners LLC
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE INSTRUCTIONS)
2 (a) [x]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS(SEE INSTRUCTIONS)
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
2,265,690
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,265,690
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,265,690
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES(SEE
12 INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
Approximately 11.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
14
OO
- ------------------------------------------------------------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001)
9
<PAGE>
Item 1. Security and Issuer
-------------------
This statement on Schedule 13D (this "Statement") relates to the
Common Stock, $0.01 par value per share, CUSIP Number 698657 10 3 (the "Issuer
Common Stock"), of The Pantry, Inc., a Delaware corporation ("Issuer"), which
has its principal executive offices at 1801 Douglas Drive, Sanford, North
Carolina 27331-1410.
Item 2. Identity and Background
-----------------------
This Schedule 13D is filed on behalf of FS Equity Partners III, L.P.,
a Delaware limited partnership ("FSEP III"), FS Capital Partners, L.P., a
California limited partnership ("Capital Partners"), FS Holdings, Inc., a
California corporation ("Holdings"), FS Equity Partners International, L.P., a
Delaware limited partnership ("FSEP International"), FS&Co. International, L.P.,
a Cayman Islands limited partnership ("FS&Co. International"), FS International
Holdings Limited, a Cayman Islands exempt corporation ("International
Holdings"), FS Equity Partners IV, L.P., a Delaware limited partnership ("FSEP
IV"), and FS Capital Partners LLC, a Delaware limited liability company
("Capital Partners LLC"). FSEP III, Capital Partners, Holdings, FSEP
International, FS&Co. International, International Holdings, FSEP IV and Capital
Partners LLC, are collectively referred to hereinafter as the "Filing Persons."
The Filing Persons are members of a group.
Holdings is the general partner of Capital Partners which is the
general partner of FSEP III. FSEP III, Capital Partners and Holdings have their
principal offices at 11100 Santa Monica Boulevard, Suite 1900, Los Angeles,
California 90025. FSEP III was formed to make private equity investments.
Capital Partners was formed to participate in the management of FSEP III.
Holdings was formed to manage Capital Partners.
International Holdings is the general partner of FS&Co. International
which is the general partner of FSEP International. FSEP International, FS&Co.
International and International Holdings have their principal offices at
Westwind Building, P.O. Box 1111 Georgetown, Grand Cayman, Cayman Islands - c/o
Paddett-Brown & Company, Ltd., and have agent offices at 11100 Santa Monica
Boulevard, Suite 1900, Los Angeles, CA 90025. FSEP International was formed to
make private equity investments. FS&Co. International was formed to participate
in the management of FSEP International. International Holdings was formed to
manage FS&CO. International.
Capital Partners LLC is the general partner of FSEP IV. FSEP IV and
Capital Partners LLC have their principal offices at 11100 Santa Monica
Boulevard, Suite 1900, Los Angeles, CA 90025. FSEP IV was formed to make private
equity investments. Capital Partners LLC was formed to participate in the
management of FSEP IV.
Schedule A sets forth with respect to each executive officer and
director of each of Holdings and International Holdings and each officer and
managing member of Capital
10
<PAGE>
Partners LLC, such person's name, business address and principal employment, the
name and address of any business corporation or other organization in which such
employment is conducted and such person's citizenship.
During the last five years, none of the Filing Persons nor any of the
persons listed on Schedule A have been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to federal or state securities laws or finding any violation
with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
As of December 17, 1999, FSEP IV owned 2,265,690 shares of Issuer
Common Stock. Since December 9, 1999, FSEP IV has made the following purchases
of Issuer Common Stock on the open market:
<TABLE>
<CAPTION>
Date of Purchase Number of Shares Purchase Price
- ------------------- ---------------- --------------
<S> <C> <C>
12/9/99 350,000 8 1/8
12/9/99 25,000 8 5/16
12/14/99 45,000 10 3/8
</TABLE>
The purchase price for the foregoing open market transactions was paid from
borrowings under a margin loan facility that was arranged with Merrill Lynch,
Pierce, Fenner & Smith Incorporated to provide interim funding until FSEP IV is
able to complete an equity capital call from its limited partners. Upon
completion of the capital call, the proceeds thereof will be used to repay the
borrowings under the margin loan facility.
On July 2, 1998, FSEP IV purchased 1,845,690 shares of Issuer Common
Stock at a purchase price of $11.27 per share. The purchase price for such
transaction was obtained through an equity capital call from the limited
partners of FSEP IV.
As of December 17, 1999, FSEP III owned 9,468,762 shares of Issuer
Common Stock, which includes 2,255,271 shares issuable upon the exercise of
warrants. On October 23, 1997, FSEP III purchased 2,912,610 shares of Issuer
Common Stock at a purchase price of $8.82 per share. On December 30, 1996, FSEP
III acquired warrants to purchase 2,255,271 shares of Issuer Common Stock at an
exercise price of $7.45 per share. The warrants were acquired in connection with
the purchase of preferred stock that has since been redeemed. On August 19,
1996, FSEP III purchased 2,069,682 shares of Issuer Common Stock at a purchase
price of $2.98 per share. On November 30, 1995, FSEP III purchased 2,231,199
shares of Issuer Common Stock at a purchase price of $2.98 per share. The
11
<PAGE>
purchase price for the foregoing transactions was obtained through equity
capital calls from the limited partners of FSEP III.
As of December 17, 1999, FSEP International owned 381,072 shares of
Issuer Common Stock, which includes 90,729 shares issuable upon the exercise of
warrants. On October 23, 1997, FSEP International purchased 117,861 shares of
Issuer Common Stock at a purchase price of $8.82 per share. On December 30,
1996, FSEP International acquired warrants to purchase 90,729 shares of Issuer
Common Stock at an exercise price of $7.45 per share. The warrants were acquired
in connection with the purchase of preferred stock that has since been redeemed.
On August 19, 1996, FSEP International purchased 83,130 shares of Issuer Common
Stock at a purchase price of $2.98 per share. On November 30, 1995, FSEP
International purchased 89,352 shares of Issuer Common Stock at a purchase price
of $2.98 per share. The purchase price for the foregoing transactions was
obtained through equity capital calls from the limited partners of FSEP
International.
In June 1999, the Issuer completed its initial public offering and the
Issuer Common Stock was registered under Section 12(g) of the Act concurrently
therewith.
Item 4. Purpose of Transaction
----------------------
FSEP IV, FSEP III and FSEP International acquired the shares of Issuer
Common Stock referenced herein for investment purposes only. The Filing Persons
may in the future purchase additional shares of Issuer Common Stock if market
conditions and price are favorable. Any additional purchases of Issuer
securities will be solely for investment purposes.
Subject to the foregoing and except for the arrangements described in
Item 5 hereof, none of the Filing Persons presently have any plans or proposals
which relate to or would result in:
(a) The acquisition of additional securities, or disposition of
securities, of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) The sale or transfer of a material amount of assets of the Issuer
or any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
12
<PAGE>
(e) Any material change in the present capitalization or dividend
policy of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter, bylaws or instruments
corresponding thereto or any actions which may impede the acquisition of control
of the Issuer by any person.
(h) Causing any class of securities of the Issuer to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation of a registered national securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act; or
(j) Any similar action to any of those enumerated above.
The Filing Persons intend to continually monitor their investment in
the Issuer and, based upon such review as well as other factors such as market
conditions and share prices, the Issuer's business, prospects and future
developments and applicable legal requirements, the Filing Persons reserve the
right to engage in any of the foregoing activities.
Item 5. Interest in the Securities of Issuer
------------------------------------
(a)-(b) The percentages of outstanding Common Stock reported in this
Item 5(a) are based on the assumption that there are 20,457,478 shares of Issuer
Common Stock outstanding, which is based upon 18,111,478 shares of Issuer Common
Stock outstanding as reported by the Issuer in its Quarterly Report on Form 10-Q
for the period ended June 24, 1999 as filed with the Securities and Exchange
Commission on August 9, 1999, and 2,346,000 shares of Issuer Common Stock
issuable upon the exercise of warrants.
As of December 17, 1999, each of the Filing Persons may be deemed to
be the beneficial owner of 90,729 shares of Issuer Common Stock that are
issuable on the exercise of warrants held by FSEP International, 2,255,271
shares of Issuer Common Stock that are issuable on the exercise of warrants held
by FSEP III, 7,213,491 shares of Issuer Common Stock held by FSEP III, 290,343
shares of Issuer Common Stock held by FSEP International and 2,265,690 shares of
Issuer Common Stock held by FSEP IV, which in the aggregate represents
approximately 59.2% of the outstanding Issuer Common Stock. FSEP III, Capital
Partners and Holdings disclaim beneficial ownership of the shares of Issuer
Common Stock held by FSEP International and FSEP IV. FSEP International, FS&Co.
International and International Holdings disclaim beneficial ownership of the
shares of Issuer Common Stock held by FSEP III and FSEP IV. FSEP IV and Capital
Partners LLC disclaim beneficial ownership of the shares of Issuer Common Stock
held by FSEP International and FSEP III.
13
<PAGE>
The responses of the Filing Persons to Items (7) through (11) of the
portions of the cover pages of this Schedule 13D which relate to the shares of
Common Stock beneficially owned are herein incorporated by reference.
(c) As described in Item 2, since December 9, 1999, FSEP IV has
purchased the following shares of Issuer Common Stock on the open market:
<TABLE>
<CAPTION>
Date of Purchase Number of Shares Purchase Price
- ------------------- ---------------- --------------
<S> <C> <C>
12/9/99 350,000 8 1/8
12/9/99 25,000 8 5/16
12/14/99 45,000 10 3/8
</TABLE>
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
------------------------------------------
Relationships with Respect to Securities of Issuer
--------------------------------------------------
The Filing Persons have executed a Joint Reporting Agreement dated
December 17, 1999, which is attached hereto as Exhibit 1 and incorporated herein
by reference, pursuant to which they have agreed to file one joint statement on
behalf of all of them with respect to the subject matter of this Schedule 13D.
The Issuer has entered into a registration rights agreement (the
"Registration Rights Agreement") with FSEP III, FSEP IV and FSEP International
(collectively, the "FS Entities"). The Registration Rights Agreement obligates
the Issuer, on up to three occasions at the request of holders of at least 50%
of the Issuer Common Stock held by the parties to the agreement, to register the
resale of all Issuer Common Stock held by the requesting holders. In addition,
at any time commencing six months after the Issuer's initial public offering,
the Issuer is obligated to register the resale of shares of Issuer Common Stock
having a value of more than $5 million at the request of any party to the
agreement. The Registration Rights Agreement also obligates the Issuer, at any
time, to allow any party to the agreement to include shares of Issuer Common
Stock held by such party in any registration of common stock by the Issuer.
The Issuer has entered into a stockholders' agreement (the
"Stockholders' Agreement") with the FS Entities and certain other holders of
Issuer Common Stock. Pursuant to the Stockholders' Agreement, the FS Entities
have a right of first offer enabling them to purchase shares held by certain
other stockholders prior to transfers of shares of Issuer Common Stock to non-
affiliates, other than transfers pursuant to a registration statement or
14
<PAGE>
under Rule 144 of the Exchange Act. The FS Entities also have the right to
require certain other stockholders to sell their shares of Issuer Common Stock
to a third party buyer on the same terms as the FS Entities if the FS Entities
are selling all of their shares. The FS Entities and certain other stockholders
also have rights to be included in sales of Issuer Common Stock by the other
stockholders. There is no termination provision in the Stockholders' Agreement.
Capital Partners is the sole general partner of FSEP III under an
Amended and Restated Agreement of Limited Partnership dated as of October 30,
1995, as amended (the "FSEP III Agreement"). The FSEP III Agreement provides for
the formation of FSEP III as a partnership to invest the funds of the
partnership in private equity investments. Capital Partners, as general partner
of FSEP III, has the exclusive right and power to manage the business and
affairs of the partnership, including the power to purchase and dispose of the
securities owned by FSEP III. The general partner and limited partners of FSEP
III have certain rights to receive the proceeds of the sales of securities, if
any, in accordance with the FSEP III Agreement. Holdings is the sole general
partner of Capital Partners and has the exclusive right and power to manage the
business and affairs of Capital Partners. Messrs. Freeman, Spogli, Wardlaw,
Simmons, Roth and Rullman are the directors, executive officers and sole
shareholders of Holdings.
FS&Co. International is the sole general partner of FSEP International
under an Amended and Restated Agreement of Limited Partnership dated as of
February 25, 1994, as amended (the "FSEP International Agreement"). The FSEP
International Agreement provides for the formation of FSEP International as a
partnership to invest the funds of the partnership in private equity
investments. FS&Co. International, as general partner of FSEP International,
has the exclusive right and power to manage the business and affairs of the
partnership, including the power to purchase and dispose of the securities owned
by FSEP International. The general partner and limited partners of FSEP
International have certain rights to receive the proceeds of the sales of
securities, if any, in accordance with the FSEP International Agreement.
International Holdings is the sole general partner of FS&Co. International and
has the exclusive right and power to manage the business and affairs of FS&Co.
International. Messrs. Freeman, Spogli, Wardlaw, Simmons, Roth and Rullman are
the directors, executive officers and sole shareholders of International
Holdings.
Capital Partners LLC is the sole general partner of FSEP IV under an
Agreement of Limited Partnership dated December 18, 1997 (the "FSEP IV
Agreement"). The FSEP IV Agreement provides for the formation of FSEP IV as a
partnership to invest the funds of the partnership in private equity
investments. Capital Partners LLC, as general partner of FSEP IV, and Freeman
Spogli & Co. LLC, the management company of FSEP IV, have the exclusive right
and power to manage the business and affairs of FSEP IV, including the power to
purchase and dispose of any securities owned by FSEP IV. The general partner
and limited partners of FSEP IV have certain rights to receive the proceeds of
the sales of securities, if any, in accordance with the FSEP IV Agreement.
Messrs. Freeman, Spogli, Roth, Rullman,
15
<PAGE>
Simmons, Wardlaw, Doran, Halloran and Ralph are the sole officers and managing
members of Capital Partners LLC.
Except as disclosed in this Item 6, none of the Filing Parties has
entered into any contracts, arrangements, understandings or relationships with
respect to the Issuer Common Stock.
Item 7. Material to be Filed as Exhibits
--------------------------------
The Filing Persons file as exhibits the following:
Exhibit 1. Joint Reporting Agreement dated December 17, 1999, among
FSEP III, Capital Partners, Holdings, FSEP International, FS&Co. International,
International Holdings, FSEP IV and Capital Partners LLC.
Exhibit 2. Amended and Restated Registration Rights Agreement dated
as of July 2, 1998 among the Issuer, FSEP III, FSEP IV, FSEP Interational and
certain other stockholders of the Issuer.
Exhibit 3. Amended and Restated Stockholders' Agreement dated as of
July 2, 1998 among the Issuer, FSEP III, FSEP IV, FSEP Interational and certain
other stockholders of the Issuer.
16
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 17, 1999 FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
FS CAPITAL PARTNERS, L.P.,
a California limited partnership
By: FS Holdings, Inc.
Its: General Partner
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
FS HOLDINGS, INC.,
a California corporation
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
17
<PAGE>
FS EQUITY PARTNERS INTERNATIONAL,
L.P., a Delaware limited partnership
By: FS&CO. International, L.P.
Its: General Partner
By: FS&Co. International Holdings
Limited
Its: General Partner
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
FS&CO. INTERNATIONAL, L.P.,
a Cayman Islands limited partnership
By: FS International Holdings
Limited
Its: General Partner
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
FS INTERNATIONAL HOLDINGS LIMITED,
a Cayman Islands exempt corporation
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
FS EQUITY PARTNERS IV, L.P.,
a Delaware limited partnership
By: FS Capital Partners LLC
Its: General Partner
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
18
<PAGE>
FS CAPITAL PARTNERS LLC,
a Delaware limited liability company
By: /s/ William M. Wardlaw
-------------------------------
William M. Wardlaw
Title: Vice President
19
<PAGE>
SCHEDULE A
----------
This Schedule A sets forth the name, citizenship and business address
of each executive officer and director of Holdings and International Holdings
and each executive officer and managing member of Capital Partners LLC. The
principal occupation of each of the individuals named on this Schedule A is to
organize and manage the transactions in which FSEP III, FSEP International and
FSEP IV are the principal investors.
<TABLE>
<CAPTION>
Name and Citizenship Position Business Address
<S> <C> <C>
Bradford M. Freeman President and Director of Holdings; Freeman Spogli & Co. Incorporated
U.S.A. Director of International Holdings; 11100 Santa Monica Boulevard
Chairman and Managing Member of Suite 1900
Capital Partners LLC Los Angeles, CA 90025
Ronald P. Spogli Director of Holdings; President and Freeman Spogli & Co. Incorporated
U.S.A. Director of International Holdings; 11100 Santa Monica Boulevard
President and Managing Member of Suite 1900
Capital Partners LLC Los Angeles, CA 90025
John M. Roth Director of Holdings; Vice President Freeman Spogli & Co. Incorporated
U.S.A. and Director of International Holdings; 599 Lexington Avenue
Vice President and Managing Member 18th Floor
of Capital Partners LLC New York, NY 10022
Charles P. Rullman, Jr. Director of Holdings; Vice President Freeman Spogli & Co. Incorporated
U.S.A. and Managing Member of Capital 11100 Santa Monica Boulevard
Partners LLC Suite 1900
Los Angeles, CA 90025
J. Frederick Simmons Treasurer and Director of Holdings; Freeman Spogli & Co. Incorporated
U.S.A. Treasurer and Director of International 11100 Santa Monica Boulevard
Holdings; Vice President/Treasurer and Suite 1900
Managing Member of Capital Partners LLC Los Angeles, CA 90025
William M. Wardlaw Secretary and Director of Holdings; Freeman Spogli & Co. Incorporated
U.S.A. Vice President and Director of 11100 Santa Monica Boulevard
International Holdings; Vice Suite 1900
President/Secretary and Managing Los Angeles, CA 90025
Member of Capital Partners LLC
Mark J. Doran Vice President and Managing Member Freeman Spogli & Co. Incorporated
U.S.A. of Capital Partners LLC 599 Lexington Avenue
18th Floor
New York, NY 10022
Todd W. Halloran Vice President and Managing Member Freeman Spogli & Co. Incorporated
U.S.A. of Capital Partners LLC 599 Lexington Avenue
18th Floor
New York, NY 10022
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
Jon D. Ralph Vice President and Managing Member Freeman Spogli & Co. Incorporated
U.S.A. of Capital Partners LLC 11100 Santa Monica Boulevard
Suite 1900
Los Angeles, CA 90025
</TABLE>
21
<PAGE>
EXHIBIT 1
JOINT REPORTING AGREEMENT
In consideration of the mutual covenants herein contained, each of the
parties hereto represents to and agrees with the other party as follows:
(a) Such party is eligible to file a statement or statements on Schedule
13D pertaining to the Common Stock, $.01 par value per share, of The Pantry,
Inc., to which this agreement is an exhibit, for filing of the information
contained herein.
(b) Such party is responsible for timely filing of such statement and any
amendments thereto and for the completeness and accuracy of the information
concerning such party contained herein, provided that no such party is
responsible for the completeness or accuracy of the information concerning the
other parties making the filing, unless such party knows or has reason to
believe that such information is inaccurate.
(c) Such party agrees that such statement is filed by and on behalf of
each party and that any amendment thereto will be filed on behalf of each such
party.
This agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original instrument, but all of such counterparts
together shall constitute but one agreement.
Dated: December 17, 1999 FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ William M. Wardlaw
------------------------------
William M. Wardlaw
Title: Vice President
FS CAPITAL PARTNERS, L.P.,
a California limited partnership
By: FS Holdings, Inc.
Its: General Partner
By: /s/ William M. Wardlaw
------------------------------
William M. Wardlaw
Title: Vice President
<PAGE>
FS HOLDINGS, INC.,
a California corporation
By: /s/ William M. Wardlaw
-------------------------------------
William M. Wardlaw
Title: Vice President
FS EQUITY PARTNERS INTERNATIONAL,
L.P., a Delaware limited partnership
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: /s/ William M. Wardlaw
------------------------------------
William M. Wardlaw
Title: Vice President
FS&CO. INTERNATIONAL, L.P.,
a Cayman Islands limited partnership
By: FS International Holdings Limited
Its: General Partner
By: /s/ William M. Wardlaw
-------------------------------------
William M. Wardlaw
Title: Vice President
FS INTERNATIONAL HOLDINGS LIMITED,
a Cayman Islands exempt corporation
By: /s/ William M. Wardlaw
------------------------------------
William M. Wardlaw
Title: Vice President
Exhibit 1
<PAGE>
FS EQUITY PARTNERS IV, L.P.,
a Delaware limited partnership
By: FS Capital Partners LLC
Its: General Partner
By: /s/ William M. Wardlaw
------------------------------------
William M. Wardlaw
Title: Vice President
FS CAPITAL PARTNERS LLC,
a Delaware limited liability company
By: /s/ William M. Wardlaw
------------------------------------
William M. Wardlaw
Title: Vice President
Exhibit 1
<PAGE>
Exhibit 2
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
by and among
THE PANTRY, INC.,
FS EQUITY PARTNERS III, L.P.,
FS EQUITY PARTNERS IV, L.P.
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
CHASE MANHATTAN CAPITAL, L.P.,
CB CAPITAL INVESTORS, L.P.,
BASEBALL PARTNERS
and
PETER J. SODINI
July 2, 1998
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is made and entered into as of July 2, 1998 by and between The Pantry, Inc., a
Delaware corporation (the "Company"), FS Equity Partners III, L.P., a Delaware
limited partnership ("FSEP III"), FS Equity Partners IV, L.P., a Delaware
limited partnership ("FSEP IV"), FS Equity Partners International, L.P., a
Delaware limited partnership ("FSEP International;" FSEP III, FSEP IV and FSEP
International are sometimes collectively referred to herein as the "FS
Entities"), Peter J. Sodini, an individual ("Sodini"), Chase Manhattan Capital,
L.P., a Delaware limited partnership, as successor-in-interest to Chase
Manhattan Capital Corporation, a Delaware corporation ("Chase"), CB Capital
Investors, L.P., a Delaware limited partnership ("CBC"), and Baseball Partners,
a New York general partnership ("BP;" Chase, CBC and BP are sometimes
collectively referred to herein as the "Chase Entities"). The FS Entities, the
Chase Entities and Sodini are sometimes collectively referred to as the
"Holders" and individually as the "Holder."
R E C I T A L S
- - - - - - - -
A. The Company, FSEP III, FSEP International, Chase, CBC and BP have
previously entered into an Amended and Restated Registration Rights Agreement
(the "Common Stock Registration Rights Agreement") dated as of October 23, 1997
with respect to an aggregate of One Hundred Eighty-Six Thousand Twenty-Nine
(186,029) shares of the Company's common stock, par value $0.01 per share (the
"Common Stock"), held by such parties;
B. Pursuant to that certain Stock Purchase Agreement (the "Stock Purchase
Agreement") dated July 2, 1998 and entered into by and among the Company, FSEP
IV and CBC (collectively, the "Purchasers"), the Purchasers have agreed to
purchase and the Company has agreed to sell to the Purchasers an aggregate of
Forty-Three Thousand Four Hundred Seventy-Eight (43,478) shares of Common Stock
(all such shares of Common Stock purchased pursuant to the Stock Purchase
Agreement and the One Hundred Eighty-Six Thousand Twenty-Nine (186,029) shares
of Common Stock defined as Registrable Securities under the Common Stock
Registration Rights Agreement, together with any other securities for which or
into which they may be converted or exchanged, shall be referred to herein as
the "Registrable Securities");
C. Section 17 of the Common Stock Registration Rights Agreement provides
that the Common Stock Registration Rights Agreement may be amended by written
instrument executed by the Company and the holders of at least fifty percent
(50%) of the Registrable
<PAGE>
Securities, as defined therein, (i) held by the FSEP III and FSEP International
and (ii) held by the Chase Entities;
D. FSEP III, FSEP International and the Chase Entities collectively own
at least fifty percent (50%) of the Registrable Securities, as defined in the
Common Stock Registration Rights Agreement, held by each of FSEP III and FSEP
International and the Chase Entities, and hereby desire to amend and restate the
Common Stock Registration Rights Agreement in its entirety; and
E. The Board of Directors of the Company (the "Board") has approved this
Agreement and the transactions contemplated hereby, upon the terms and subject
to the conditions set forth herein.
A G R E E M E N T
- - - - - - - - -
1. Termination of Common Stock Registration Rights Agreement. Effective
---------------------------------------------------------
as of the date hereof, and simultaneous with the consummation of the
transactions contemplated by the Stock Purchase Agreement, the Common Stock
Registration Rights Agreement shall terminate and be of no further force or
effect.
2. Restrictions on Transfer. Notwithstanding any provision contained in
------------------------
this Agreement to the contrary, the Registrable Securities shall not be
transferable except upon the conditions specified in this Agreement, which
conditions are intended, among other things, to insure compliance with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), in
respect of the transfer of such Registrable Securities. Each Holder, on the
execution and delivery of this Agreement, agrees that such Holder will not
transfer the Registrable Securities prior to delivery to the Company of an
opinion of counsel (as such opinion and such counsel are described in Section 3
of this Agreement), or until registration of such Registrable Securities under
the Securities Act has become effective.
3. Opinion of Counsel. In connection with any exercise or transfer of
------------------
the Registrable Securities, the following provisions shall apply:
(a) If in the opinion of Riordan & McKinzie, or such other counsel as
shall reasonably be approved by the Company, the proposed transfer of
Registrable Securities may be effected without registration of such Registrable
Securities under the Securities Act, each Holder shall be entitled to transfer
such Registrable Securities in accordance with the proposed method of
disposition.
(b) If, in the opinion of such counsel the proposed transfer of such
Registrable Securities may not be effected without registration of such
Registrable Securities under the Securities Act, then none of the Holders shall
be entitled to transfer such Registrable Securities until such registration is
effected.
<PAGE>
(c) Chase may transfer Registrable Securities within the "Chase
Capital Group" without complying with the above opinion procedures provided that
the transferee agrees to be bound by all provisions of this Agreement. "Chase
Capital Group" means and includes (i) Chase, (ii) CBC, (iii) entities that are
Affiliates (as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Chase or CBC and (iv) entities the majority of the equity
owners of which are employees, officers or directors of any of the foregoing.
BP may transfer Registrable Securities to a member of the Chase Capital Group in
the manner described in Section 6(b) of that certain Amended and Restated
Stockholders' Agreement dated as of an even date herewith (the "Stockholders'
Agreement") by and among the Company and the Holders.
4. Demand Registration.
-------------------
(a) Upon the written request of the Holder or Holders of at least
fifty percent (50%) of the Registrable Securities (the "Initiating Holders") the
Company shall be obligated to effect the registration under the Securities Act
of such Registrable Securities as are requested to be registered by the
Initiating Holders, all in accordance with the following provisions of this
Agreement, provided that the obligation of the Company to effect such
registration shall not be deemed to have been satisfied until the registration
statement with respect thereto has become effective under the Securities Act and
only so long as no stop order suspending the effectiveness of the registration
statement or the qualification or registration of any of the Registrable
Securities for sale in any jurisdiction in which the Company shall be required
pursuant to Section 6(d) to register or qualify such Registrable Securities
shall not have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Securities and Exchange Commission (the
"Commission") or any similar state agency. Within ten (10) days of the request
for registration by the Initiating Holders, the Company shall give written
notice of such request to all Holders, who shall be entitled, by written notice
to the Company and subject to Section 5(a) hereof, to include shares of
Registrable Securities in any registration prepared by the Company pursuant to
this Section 4(a). The Company shall not be obligated to effect more than three
(3) demand registrations pursuant to this Section 4(a).
(b) In addition to the registration rights provided pursuant to
Section 4(a) hereof, at any time and from time to time after six months
following a firm commitment underwritten initial public offering of the
Company's Common Stock (an "IPO"), upon the written request of the Initiating
Holders, or at the request of any Holder which agrees to register Registrable
Securities having a value of Five Million Dollars ($5,000,000) or more after an
IPO, the Company shall be obligated to effect the registration under the
Securities Act on Form S-3 (if the Company is then eligible to use such
registration form), or any similar short form registration adopted by the
Commission for which the Company may then be eligible, of all or any portion of
the Registrable Securities held by such Holder, all in accordance with the
applicable provisions of this Agreement.
<PAGE>
(c) Whenever the Company shall be requested by the Initiating Holders
pursuant to Section 4(a) or by a Holder pursuant to Section 4(b) to effect the
registration of Registrable Securities under the Securities Act, the Company
shall, as provided in Section 5, effect the registration under the Securities
Act of the Registrable Securities which the Company has been requested to
register pursuant to Section 4(a) or (b), all to the extent requisite to permit
the disposition by such Holder of the Registrable Securities so registered.
(d) In connection with requesting registration of Registrable
Securities pursuant to Section 4(a) or (b), if the Initiating Holders or a
Holder in the case of Section 4(b) advise the Company that they intend to
publicly offer or distribute Registrable Securities to be covered by the
registration statement pursuant to a firm commitment underwriting with an
investment banking firm or firms selected by the Holders, the Company and any
other person entitled to include shares of Common Stock in such registration
statement shall enter into the same underwriting agreement with such underwriter
or underwriters as shall such Holders, containing representations, warranties
and agreements not substantially different from those customarily made by an
issuer or selling shareholder in underwriting agreements with respect to
secondary distributions.
(e) Neither the Company nor any of its security holders (other than
the Holders) shall have the right to include any securities of the Company in a
registration requested pursuant to Section 4(a) or (b) unless (i) such
securities are of the same class as any of the Registrable Securities included
in such registration and (ii) the offering is either (x) not being underwritten
and the Holders of a majority of the Registrable Securities requesting
registration consent to such inclusion in writing or (y) a firm commitment
underwriting and the managing underwriter has informed the Holders that
inclusion of such securities will not adversely affect the price range or the
probability of success of the offering and such securities are allocated as
provided in Section 4(f) and sold on the same terms and conditions as apply to
the Registrable Securities being sold. If any security holders of the Company
(other than the Holders) register securities of the Company in a registration in
accordance with the provisions of Section 4(a) or (b), such security holders
shall pay their pro rata share of the Registration Expenses, as defined below,
unless the Company has agreed to pay such expenses and, in the opinion of
counsel to the Holders, such payment would not affect the ability of the
Registrable Securities to be registered or qualified under the blue sky laws of
any jurisdiction.
(f) If the Company or any of its security holders request the right to
include equity securities in a registration statement filed pursuant to Section
4(a) or (b) and such securities are proposed to be sold in a firm commitment
underwritten offering and the managing underwriters advise the Company that, in
their opinion, the total number of securities requested to be included in such
registration exceeds the number of securities which can be sold in such offering
without adversely affecting the price range or probability of success of such
offering, the securities to be included in such offering shall include (i)
first, all of the Registrable Securities being registered, (ii) second, pro rata
among the other holders of the Company's securities requesting inclusion in such
registration on the basis of the number of shares of
<PAGE>
securities requested to be registered by such holders and (iii) third, such
other securities being offered by the Company.
5. "Piggyback" Registrations.
-------------------------
(a) If the Company at any time or from time to time after the IPO,
proposes to file with the Commission a registration statement under the
Securities Act (other than a registration statement on Form S-4 or S-8, or any
form substituting therefor, or filed in connection with an exchange offer) for
the sale of shares of Common Stock, it will at each such time give written
notice to each Holder of its intention so to do. Upon the written request of
any Holder, the Company will use its best efforts to cause each Registrable
Security which the Company has been requested to register by any Holder, in the
aggregate, to be included in such registration statement under the Securities
Act, all to the extent required to permit the sale or other disposition by each
such Holder of the Registrable Securities so registered. Notwithstanding the
foregoing, if the managing underwriter or underwriters, if any, of the offering
to be effected pursuant to such registration statement delivers a written
opinion to each Holder requesting the registration of Registrable Securities
that the total number of shares of Common Stock which it and any other persons
or entities intend to include in such offering would adversely affect the price
range or probability of success of such offering, then the Company shall include
in such registration: (i) first, all securities the Company proposes to sell,
and (ii) second, all Registrable Securities requested to be included in such
registration by any Holders and all securities of the Company requested to be
included in such registration by any other holders of Securities who are
entitled to include securities in such registration pursuant to written
registration rights agreements approved by the Board of Directors of the Company
(the "Other Stockholders") in excess of the number of shares of its securities
of the Company proposes to sell which, in the opinion of such underwriters, can
be sold without adversely affecting the price range or probability of success of
such offering (allocated pro rata among such Holders and the Other Stockholders
on the basis of the number of shares of such securities requested to be included
therein).
(b) If all or substantially all of the securities (other than the
Registrable Securities) to be registered for sale pursuant to a registration
statement, the intention to file which caused a notice to be given pursuant to
Section 5(a), are to be offered for sale for the account of the Company and are
to be distributed by or through an underwriter or underwriters of recognized
standing pursuant to underwriting terms appropriate for such transactions, then
each Holder agrees that such Holder shall forbear from selling Registrable
Securities to the public (except as part of such underwritten registration)
pursuant to a registration statement or pursuant to Rule 144 or 144A under the
Securities Act for a period of fourteen (14) business days prior to and one
hundred twenty (120) days following the effective date of the registration
statement to which reference is made in Section 5(a).
(c) Notwithstanding anything contained herein to the contrary, if the
FS Entities are permitted to include any Registrable Securities in the IPO then
each other Holder shall also be permitted to include a pro rata portion of the
Registrable Securities held thereby.
<PAGE>
6. Company's Obligations in Registration. If and whenever the Company is
-------------------------------------
obligated by the provisions of this Agreement to effect the registration of
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible,
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective during the period required
for the distribution of the securities covered by the registration statement,
provided that, if the Registrable Securities covered by such registration
statement are not to be sold to or through underwriters acting for the Company,
the Company shall not be required to keep such registration statement effective,
or to prepare and file any amendment or supplement thereto, after the expiration
of one hundred eighty (180) days following the date on which such registration
statement becomes effective under the Securities Act or such longer period
during which the Commission requires that such registration statement be kept
effective with respect to any of the Registrable Securities so registered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration
statement, whenever any Holder shall desire to dispose of the same, subject,
however, to the proviso contained in Section 6(a) and provided that in any event
the Company's obligations under this Section 6(b) shall terminate on the first
anniversary of the effective date of any such registration statement;
(c) furnish to each Holder such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such Holder may reasonably request in order to facilitate the
disposition of such Registrable Securities;
(d) make the Chairman of the Board of Directors of the Company, the
Chief Executive Officer and other members of the management of the Company
available to cooperate fully in any offering of Registrable Securities
hereunder, which cooperation shall include, among other things, the
participation of such persons in meetings with potential investors and the
assistance of such persons with the preparation of all materials for such
investors;
(e) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each Holder shall reasonably request, and
do any and all other acts and things to so register or qualify which may be
necessary or advisable to enable such Holder to consummate the disposition in
such jurisdictions of such Registrable Securities;
<PAGE>
(f) if at any time a prospectus relating to the Registrable Securities
covered by such registration statement is required to be delivered under the
Securities Act and any event occurs as a result of which the prospectus included
in such registration statement as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend the
prospectus to comply with the Securities Act, the Company promptly will prepare
and file with the Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance and
shall use its best efforts to cause any amendment of such registration statement
containing an amended prospectus to be made effective as soon as possible; and
(g) furnish to each Holder at the time of the disposition of
Registrable Securities by such Holder an opinion of counsel for the Company, in
form and substance satisfactory to such Holder, to the effect that (i) a
registration statement covering such Registrable Securities has been filed with
the Commission under the Securities Act and has been made effective by order of
the Commission, (ii) such registration statement and the prospectus contained
therein comply in all material respects with the requirements of the Securities
Act, and nothing has come to said counsel's attention which would cause it to
believe that either such registration statement or the prospectus contains any
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, in the light
of the circumstances under which they were made, not misleading, (iii) the
prospectus meeting the delivery requirements of the Securities Act is available
for delivery, (iv) no stop order has been issued by the Commission suspending
the effectiveness of such registration statement and, to the best of such
counsel's knowledge, no proceedings for the issuance of such a stop order are
threatened or contemplated, and (v) there has been compliance with the
applicable provisions of the securities or blue sky laws of each jurisdiction in
which the Company shall be required pursuant to Section 6(d) hereof to register
or qualify such Registrable Securities, assuming the accuracy and completeness
of the information furnished to such counsel with respect to each filing related
to such laws.
7. Payment of Registration Expenses. The costs and expenses of all
--------------------------------
"piggyback" registrations and qualifications under the Securities Act pursuant
to Section 5 hereof, all registrations and qualifications under the Securities
Act pursuant to Section 4(b) hereof and three (3) demand registrations and
qualifications under the Securities Act pursuant to Section 4(a), and of all
other actions which the Company is required to take or effect pursuant to this
Agreement shall be paid by the Company (including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company and for each Holder and expenses of any special audit
incident to or required in connection with any such registration) (collectively,
"Registration Expenses"), provided that the Company shall not be obligated to
pay the underwriters' discount or commission in respect of such Registrable
Securities.
<PAGE>
8. Information From Each Holder. Notices and requests delivered by any
----------------------------
Holder to the Company pursuant to this Agreement shall contain such information
regarding the Holder, such Holder's Registrable Securities and the intended
method of disposition thereof as shall reasonably be required in connection with
the action to be taken.
9. Restrictions on Public Sale by the Company and Others. The Company
-----------------------------------------------------
shall not effect any public sale or distribution of any of its equity
securities, or cause to be effected any other registration of such securities
(other than securities issued pursuant to an employee benefit plan), during the
fourteen (14) business days prior to, and during the one hundred twenty (120)-
day period beginning on the effective date of a registration statement covering
the Registrable Securities (the "Holdback Period"), and the Company shall cause
each holder of its equity securities (other than securities purchased in a
registered public offering) issued after November 30, 1995 to agree not to
effect any public sale or distribution of any securities during such period,
except as part of such registration, if permitted. Each Holder agrees not to
effect any public sale or distribution of such securities during any Holdback
Period with respect to securities that the Company issued or agreed to be issued
prior to November 30, 1995, except pursuant to a registration covering the
Registrable Securities effected pursuant to Section 5 hereof.
10. Participation in Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten registration hereunder unless such Holder (i)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and this Agreement, provided that (x) if the FS
Entities or any of their Affiliates, or the Chase Entities or any of their
Affiliates participate in such registration, such parties will not be required
to make any representations or warranties except those that relate solely to
such parties and (y) the liability of the FS Entities or any of their
Affiliates, and the Chase Entities or any of their Affiliates to any underwriter
under such underwriting agreement will be limited to liability arising from
misstatements in, or omissions from, written information regarding such parties
provided by or on behalf of such parties for inclusion in the prospectus and
shall be limited to proceeds received by such Holder from the offering.
11. Company's Indemnification. In the event of any registration under the
-------------------------
Securities Act of Registrable Securities pursuant to this Agreement, the Company
hereby agrees to indemnify and hold harmless each Holder and each other person,
if any, who controls each such Holder within the meaning of Section 15 of the
Securities Act and each other person (including any underwriter) who
participates in the offering of such Registrable Securities, against any loss,
claim, damage or liability, joint or several, to which any Holder or such
controlling person or a participating person may become subject under the
Securities Act, the Exchange Act or other federal or state law or regulation, at
common law or otherwise, to the extent that such loss, claim, damage or
liability (or proceeding in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the
<PAGE>
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arises out of or is based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Holder and each such controlling person or participating
person for any legal or other expense reasonably incurred by such Holder or such
controlling person or participating person in connection with investigating or
defending any such loss, claim, damage, liability or proceeding, provided that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, said preliminary or final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or such controlling or participating person, as the case may be,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
12. Indemnification of Each Holder. It shall be a condition of the
------------------------------
Company's obligation under this Agreement to effect any registration under the
Securities Act that there shall have been delivered to the Company an agreement
or agreements duly executed by each Holder whereby each Holder, severally but
not jointly, agrees to indemnify and hold harmless the Company, each other
person referred to in subparts (1), (2) and (3) of Section 11(a) of the
Securities Act in respect of such registration statement and each other person,
if any, which controls the Company within the meaning of Section 15 of the
Securities Act, against any loss, claim, damage or liability, joint or several,
to which the Company or such other person or such person controlling the Company
may become subject under the Securities Act, the Exchange Act or other federal
or state law or regulation, at common law or otherwise, but only to the extent
that such loss, claim, damage or liability (or proceeding in respect thereof)
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein or in any amendment
or supplement thereto, or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which, in each such
case, has been made in or omitted from such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder specifically for use in the preparation
thereof. Such indemnification shall be limited to proceeds received by such
Holder from the offering.
13. Notification of and Participation in Actions. Promptly after receipt
--------------------------------------------
by an indemnified party under this Agreement of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Agreement, notify the
indemnifying party in writing of the commencement thereof, but the omission so
to notify the indemnifying party will not affect the liability of the
<PAGE>
indemnifying party hereunder except to the extent it is actually prejudiced by
such omission and will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Agreement. In case any such
action is brought against any indemnified party and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so as to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Agreement for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
14. Contribution.
------------
(a) If the indemnification provided for in this Agreement from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages or liabilities to which such indemnified party
would be otherwise entitled under this Agreement, then the indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified parties in
connection with the actions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding. In no event
shall any Holder be required to contribute an amount greater than the dollar
amount of the net proceeds received by such Holder with respect to the sale of
Registrable Securities to which such losses, claims, damages or liabilities
relates.
(b) The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Agreement were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Neither the Company nor any Holder, if guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act), shall be entitled
to contribution. The contribution provided for in this Agreement shall survive
the transfer of the Registrable Securities and shall remain in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party.
<PAGE>
15. Public Information. At any time after the Company has completed its
------------------
initial public offering of Common Stock, if any Holder desires to make sales of
any Registrable Securities in reliance on Rule 144 promulgated under the
Securities Act the Company covenants and agrees that either there will be
available adequate current public information with respect to the Company as
required by paragraph (c) of said Rule 144 or the Company will use its best
efforts to make such information available without delay if such information is
not available. Without limiting the foregoing, after the Company has completed
its initial public offering of Common Stock, the Company will timely file with
the Commission all reports required to be filed under Sections 13 and 15(d) of
the Exchange Act and will promptly furnish to each Holder, upon request, a
written statement that the Company has complied with all such reporting
requirements.
16. Subsequent Offerings of Shares. The Company hereby grants to each
------------------------------
Holder the right of first refusal to purchase, pro rata, all or any part of any
Additional Securities, as defined below, which the Company may, from time to
time, propose to sell and issue. A Holder's pro rata share, for purposes of
this right of first refusal, shall be such Holder's percentage interest in the
shares of Common Stock then outstanding (assuming, for purposes of such
percentage interest, complete conversion of all outstanding convertible
securities and complete exercise of any and all outstanding options and warrants
of the Company). This right of first refusal shall be subject to the following
provisions:
(a) "Additional Securities" shall mean any shares of capital stock of
the Company, including any shares of Common Stock or of preferred stock, whether
now authorized or not, and any rights, options or warrants to purchase such
shares, and securities of any type whatsoever that are, or may become,
convertible into such shares, provided that "Additional Securities" do not
include (i) any securities that are issued on a proportional basis to all of the
holders of Common Stock, (ii) any securities that are issued or issuable in
connection with any public offering of shares of Common Stock by the Company,
(iii) any securities issued pursuant to the acquisition of another corporation
by the Company, (iv) any of the Company's Common Stock (or related options
exercisable for such Common Stock) issued to employees, officers and directors
of, and consultants to, the Company, pursuant to any arrangement approved by the
Board of Directors of the Company, (v) any securities issued upon conversion or
exercise of any convertible securities, options or warrants, provided that the
rights of first refusal established by this Section 16 first applied or were
properly waived with respect to the initial sale or grant by the Company of such
convertible securities, options or warrants, (vi) any securities issued in
connection with any stock split, stock dividend or recapitalization by the
Company, and (vii) any securities issued in connection with an issuance of debt
securities of the Company where the primary purpose of such issuance is to
provide debt financing for the Company.
(b) In the event the Company proposes to undertake an issuance of
Additional Securities, it shall give each Holder written notice of its
intention, describing the type of Additional Securities, and the price and terms
upon which the Company proposes to issue the same. Each Holder shall have
fifteen (15) days from the date of receipt of any such
<PAGE>
notice to agree to purchase up to such Holder's pro rata share of such
Additional Securities for the price and upon the terms specified in the notice
by giving written notice to the Company and stating therein the quantity of
Additional Securities to be purchased.
(c) If a Holder fails to exercise the right of first refusal within
such fifteen (15) days period, the Company shall have ninety (90) days
thereafter to sell the Additional Securities with respect to which a Holder's
option was not exercised, at the price and upon terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the Additional Securities within said ninety (90)
day period, the Company shall not thereafter issue or sell any Additional
Securities, without first offering such securities to the Holders in the manner
provided in Section 16.
(d) The rights granted to a Holder under this Section 16 shall
terminate (i) upon completion of the Company's initial public offering of Common
Stock pursuant to an effective registration statement that results in gross
proceeds to the Company of Twenty Million Dollars ($20,000,000) or more or (ii)
upon the sale by a Holder of more than fifty percent (50%) of the shares of
Common Stock held by such Holder on the date of such sale, provided that a
transfer within the Chase Capital Group will not count against this limitation
if made in accordance with the provisions of Section 6 of the Stockholders
Agreement of even date herewith.
17. Amendments. This Agreement may not be amended, supplemented, canceled
----------
or discharged except by written instrument executed by the Company and the
holders of at least fifty percent (50%) of the Registrable Securities held by
the FS Entities and fifty percent (50%) of the Registrable Securities held by
the Chase Entities.
18. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, provided,
however, that the registration and other rights set forth in this Agreement may
only be assigned to a purchaser of at least fifty percent (50%) of the
Registrable Securities held by such party on the date of such sale, provided
that the Chase Entities may transfer their rights within the Chase Capital Group
subject to and in accordance with the provisions of Section 6 of the
Stockholders' Agreement.
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same Agreement and
each of which shall be deemed an original.
20. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of North Carolina, without regard to
principles of conflicts of laws.
21. Entire Agreement. This Agreement is intended by the parties hereto as
----------------
a final expression of their agreement, and is intended to be a complete and
exclusive statement of the parties hereto in respect of the subject matter
contained herein. This Agreement is intended to
<PAGE>
and does hereby supersede and restate entirely in all respects the Common Stock
Registration Rights Agreement.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by an officer or partner thereunto duly authorized, all as of the date
first written above.
THE PANTRY, INC.,
a Delaware corporation
By: /s/ Peter J. Sodini
--------------------
Name:
---------------
Title:
--------------
FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ Charles P. Rullman
-----------------------
Name: Charles P. Rullman
------------------
Title: Vice President
--------------
FS EQUITY PARTNERS IV, L.P.,
a Delaware limited partnership
By: FS Capital Partners LLC
Its: General Partner
By: /s/ Jon D. Ralph
-----------------
Name: Jon D. Ralph
------------
Title:
------------
[Signatures continued on following page]
<PAGE>
[Signatures continued from previous page]
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
a Delaware limited partnership
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: /s/ Charles P. Rullman
-----------------------
Name: Charles P. Rullman
-------------------
Title:
-------------------
CHASE MANHATTAN CAPITAL, L.P.
a Delaware limited partnership
By: /s/ Christopher Behrens
------------------------
Name:
-------------------
Title:
------------------
CB CAPITAL INVESTORS, L.P.,
a Delaware limited partnership
By: CB Capital Investors, Inc.
Its: General Partners
By: /s/ Christopher Behrens
------------------------
Name:
-------------------
Title:
------------------
[Signatures continued on following page]
<PAGE>
[Signatures continued from previous page]
BASEBALL PARTNERS,
a New York general partnership
By: /s/ Christopher Behrens
------------------------
Name:
Title: General Partner
PETER J. SODINI
/s/ Peter J. Sodini
--------------------
Peter J. Sodini
<PAGE>
Exhibit 3
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
by and among
THE PANTRY, INC.,
FS EQUITY PARTNERS III, L.P.,
FS EQUITY PARTNERS IV, L.P.,
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
CHASE MANHATTAN CAPITAL, L.P.,
CB CAPITAL INVESTORS, L.P.,
BASEBALL PARTNERS
and
PETER J. SODINI
July 2, 1998
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
--------------------------------------------
THIS AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this "Agreement")
is made and entered into as of July 2, 1998 by and among The Pantry, Inc., a
Delaware corporation (the "Company"), FS Equity Partners III, L.P., a Delaware
limited partnership ("FSEP III"), FS Equity Partners IV, L.P., a Delaware
limited partnership ("FSEP IV"), FS Equity Partners International, L.P., a
Delaware limited partnership ("FSEP International"), Chase Manhattan Capital,
L.P., a Delaware limited partnership as successor-in-interest to Chase Manhattan
Capital Corporation, a Delaware corporation ("CMC"), CB Capital Investors, L.P.,
a Delaware limited partnership ("CBC"), Baseball Partners, a New York general
partnership ("BP"), and Peter J. Sodini, an individual ("Sodini").
RECITALS
1. The Company, FSEP III, FSEP International, CMC, CBC, BP and
Sodini wish to amend and restate that certain Stockholders' Agreement dated as
of October 22, 1997 (the "Old Stockholders' Agreement") by and among such
parties, as further set forth below.
2. The execution and delivery of this Agreement is a condition to
the consummation of the transactions contemplated by that certain Stock Purchase
Agreement dated as of an even date herewith by and among the Company, FSEP IV,
and CBC (the "Stock Purchase Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following
-----------
capitalized terms shall have the following meanings:
Affiliate: Such term shall have the meaning set forth in Rule 12b-2
---------
of the General Rules and Regulations promulgated under the Securities Exchange
Act of 1934, as amended.
Chase Entities: CMC, CBC, BP and any member of the Chase Capital
--------------
Group to which any of CMC, CBC or BP transfers shares of Common Stock in
accordance
1
<PAGE>
with Section 6.
Common Stock: The Common Stock, par value $0.01 per share, of the
------------
Company.
Employee: Any employee, director or consultant of the Company.
--------
FS Entities: FSEP III, FSEP IV and FSEP International.
-----------
Person: Any individual, corporation, entity, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
Public Market Sale: A sale of securities into the public market
------------------
pursuant to Rule 144 or an effective registration statement.
SBIC: A Small Business Investment Company licensed by the U.S. Small
----
Business Administration (or any successor agency) (the "SBA") that owns shares
of Common Stock.
Securities Act: The Securities Act of 1933, as amended.
--------------
SEC: Securities and Exchange Commission.
---
Voting Securities: All of the outstanding shares of the capital stock
-----------------
of the Company then possessing general voting power with respect to the election
of directors.
2. Right of First Offer.
--------------------
(a) Offer. Subject to Section 6(a), if either Sodini or any of
-----
the Chase Entities determines to solicit, or causes to be solicited, proposals
for the acquisition (whether by means of a sale of stock, exchange or other
method of sale) of any shares of Common Stock, or receives an unsolicited offer
to so acquire any such shares and such Person determines to pursue such an offer
for the acquisition of such shares, such Person shall first give the FS Entities
written notice (the "Notice") of such intention, which notice shall include a
term sheet stating, among other material terms, the minimum sales price that
such Person would accept for such shares (the "Target Price"). The FS Entities
shall have the right for a period of 20 days following the delivery of the
Notice (the "Acceptance Period") to accept the offer to purchase all but not
less than all such shares at the Target Price and upon the other terms provided
with the Notice.
(b) Acceptance. The FS Entities shall, if either so desires,
----------
exercise their rights by delivering to such Person written notice of election
prior to 5:00 p.m.
2
<PAGE>
Los Angeles time on or before the last day of the Acceptance Period. The
acceptance of the offer to purchase all such shares of Common Stock shall
identify the committed source of financing for such purchase or provide evidence
that the FS Entities are able to effect the purchase. Such Person and the FS
Entities shall, as soon as reasonably possible, negotiate in good faith a
definitive acquisition agreement containing appropriate provisions customary for
a transaction of the type contemplated. If no definitive agreement is agreed
upon within 30 days after negotiations are so commenced, such Person shall be
free to resume its efforts to sell such shares of Common Stock to other
prospective buyers, as further set forth in Section 2(c) below.
(c) Rejection. If the FS Entities elect not to exercise their
---------
purchase rights under Section 2(b) during the Acceptance Period or if such
Person and the FS Entities are unable to conclude negotiations of a definitive
agreement during the 30-day period described above, such Person shall have the
right for a period of 60 days thereafter to sell such shares of Common Stock or,
within such 60-day period, to enter into a definitive agreement to sell such
shares within 30 days of the date of such agreement for a sales price equal to
or greater than the Target Price and upon terms that are not materially less
favorable to such Person than the terms provided to the FS Entities in the
Notice.
(d) Below Target Price Offer. If such Person receives a written offer
------------------------
for such shares of Common Stock at any time during such 60-day period which is
acceptable to such Person but is less than the Target Price or upon terms
materially less favorable to such Person than the terms provided to the FS
Entities in the Notice (the "Below Target Price Offer"), such Person shall
promptly deliver a copy of the Below Target Price Offer to the FS Entities.
During the 20-day period following delivery of such written offer, the FS
Entities shall have the right to accept the offer to purchase all, but not less
than all, of such shares of Common Stock on the terms reflected in the Below
Target Price Offer. The FS Entities shall, if they so desire, exercise such
right by delivering to such Person written notice of election prior to 5:00 p.m.
Los Angeles time on or before the final day of such additional 20-day period
(and shall identify the committed source of financing or evidence that the FS
Entities are able to effect the purchase), and such Person and the FS Entities
shall then negotiate a definitive acquisition agreement, in each case in the
manner contemplated by Section 2(b) above. If the FS Entities do not elect to
accept the offer to purchase such shares on such terms within such 20-day period
or if such Person and the FS Entities are unable to conclude negotiations of a
definitive agreement within 30 days of the date of the acceptance of the Below
Target Price Offer, such Person shall have 60 days to consummate the sale of
such shares at a price and upon terms that are not materially less favorable to
such Person than the price and terms specified in the Below Target Price Offer.
(e) Exempt Transfers. The FS Entities' rights under this Section 2
----------------
shall not apply to (i) transfers by Sodini or the Chase Entities in connection
with a public offering of shares of Common Stock pursuant to a registration
statement filed with and
3
<PAGE>
declared effective by the SEC, (ii) transfers pursuant to Rule 144 of the
Securities Act or (iii) transfers permitted by Section 6 below.
(f) Transferees Bound. The obligations of each of Sodini and the
-----------------
Chase Entities pursuant to this Section 2 shall be binding upon any transferee
of any of the shares of Common Stock held by such Persons, and Sodini and each
of the Chase Entities shall obtain and deliver to the FS Entities a written
commitment to be bound by such provisions from such transferee prior to any
transfer.
3. Obligation to Sell Securities.
-----------------------------
(a) Sale Requirement. Subject to Section 6(a), if the FS Entities
----------------
find a third-party buyer, who is not an Affiliate of the FS Entities, for all,
but not less than all, of the shares of Common Stock held by the FS Entities
(whether such sale is by way of purchase, merger or other form of transaction),
upon the request of the FS Entities, Sodini and each of the Chase Entities shall
sell all of their respective shares of Common Stock to such third-party buyer
pursuant to the terms and conditions negotiated by the FS Entities for the sale
of all the shares of Common Stock held by the FS Entities. Sodini and each of
the Chase Entities further agrees to timely take such other actions as the FS
Entities may reasonably request to enforce each of Sodini's and the Chase
Entities' respective obligation to sell his and its shares of Common Stock and
otherwise as necessary in connection with the approval of the consummation of
such sale, including any approval by the Company's stockholders of such sale.
(b) Conditions to Sale Requirement. The obligations of each of Sodini
------------------------------
and the Chase Entities pursuant to this Section 3 are subject to the
satisfaction of the following conditions:
(i) Upon the consummation of a transaction as described in
Section 3(a) (the "Proposed Transaction"), Sodini and the Chase Entities
will each receive the same form and amount of consideration per share, or
if the FS Entities are given an option as to the form and amount of
consideration to be received, Sodini and the Chase Entities will be given
the same option;
(ii) No FS Entity or Affiliate of an FS Entity who holds any debt
or other securities issued by the Company (i.e., securities other than
shares of Common Stock) shall, pursuant to the Proposed Transaction,
receive in consideration of such debt or other securities an amount greater
than the sum of, without duplication, a) the face amount or liquidation
value of such securities, plus b) any accrued but unpaid interest or
dividends (including cumulative dividends, if applicable) plus c) any
prepayment or redemption premium or penalty set forth in the terms of the
agreements evidencing such securities;
4
<PAGE>
(iii) Neither Sodini nor any Chase Entity shall be obligated to make
any out-of-pocket expenditure prior to the consummation of the Proposed
Transaction (excluding modest expenditures for postage, copies, etc.) and
neither Sodini nor any Chase Entity shall be obligated to pay more than his
or its "pro rata share" of reasonable expenses incurred in connection with
a consummated Proposed Transaction to the extent such costs are incurred
for the benefit of the FS Entities, Sodini and all Chase Entities selling
shares of Common Stock and are not otherwise paid by the Company or the
third-party (costs incurred by or on behalf of an FS Entity for its sole
benefit will not be considered costs of the Proposed Transaction
hereunder);
(iv) In the event that either Sodini or the Chase Entities are
required to make any representations or indemnities in connection with the
Proposed Transaction (other than representations and indemnities concerning
each such Person's valid ownership of his or its shares of Common Stock,
free of all liens and encumbrances (other than those arising under
applicable securities laws), and such Person's authority, power, and right
to enter into and consummate such purchase or merger agreement without
violating any other agreement), then each of Sodini and each Chase Entity
shall not be liable with respect to a sale of such shares for more than his
or its "pro rata share" of any liability for misrepresentation or indemnity
and such liability shall be capped at no more than his or its "pro rata
share" of the total purchase price received in such Proposed Transaction by
such Person for such shares; and
(v) Neither Sodini nor any Chase Entity shall be obligated to take
any action, or refrain from taking any action, that he or it reasonably
believes will result in his or in its or any of its Affiliates' violation
of any law or order.
(vi) As used in this Section 3, a "pro rata share" shall mean the
ratio of (i) the total number of shares of Common Stock to be sold by such
Person in a Proposed Transaction, to (ii) the total number of shares of
Common Stock to be sold by all entities in such Proposed Transaction.
(c) Transferees Bound. The obligations of each of Sodini and the
-----------------
Chase Entities pursuant to this Section 3 shall be binding upon any transferee
of any of his or their shares of Common Stock and each of Sodini and each Chase
Entity shall obtain and deliver to the FS Entities a written commitment to be
bound by such provisions from such transferee prior to any transfer.
5
<PAGE>
4. Tag Along Rights.
----------------
(a) Rights. Neither the FS Entities nor the Chase Entities (each of
------
the foregoing may from time to time be the "Selling Holder") shall sell or
otherwise dispose of to any Person (the "Buyer") (other than transfers within
the Chase Capital Group pursuant to Section 6) any shares of Common Stock held
or beneficially owned by the Selling Holder unless the non-Selling Holder (the
"Non-Selling Holder") together with Sodini or any other holder of shares of
Common Stock who have rights to participate in sales or other dispositions of
such shares by any of the Stockholders pursuant to written agreements by and
between such Stockholder and any such holder (collectively, and together with
the Non-Selling Holders, the "Co-Sale Right Holders"), are given an opportunity
to sell or otherwise dispose of to the Buyer their respective Pro Rata Share
(determined in accordance with Section 4(b) below) of any shares of Common Stock
held by such Co-Sale Right Holders (the "Tag Along Rights").
(b) TAR Offer. Prior to the consummation by the Selling Holder of any
---------
sale or other disposition of the Selling Holder's shares of Common Stock which
is subject to the provisions of Section 4(a), the Selling Holder shall cause the
bona fide offer from the Buyer to purchase or otherwise acquire such Selling
Holder's shares of Common Stock from the Selling Holder to be reduced to writing
(the "TAR Offer") and shall deliver written notice of the TAR Offer, together
with a true copy of the TAR Offer (the "TAR Notice"), to each of the Co-Sale
Right Holders in the event such proposed sale or other disposition is subject to
the Tag Along Rights (a "TAR Sale"). Each TAR Offer shall include an offer to
purchase or otherwise acquire from each Co-Sale Right Holder (individually, a
"TAR Offeree" and collectively, the "TAR Offerees"), at the same time, at the
same price and on the same terms as apply to the sale or other disposition by
the Selling Holder to the Buyer and according to the terms and subject to the
conditions of this Agreement, not less than the amount of the shares of Common
Stock held by such TAR Offeree as shall be equal to the product of (i) the total
number of shares of Common Stock which the Buyer desires to purchase or
otherwise acquire, times (ii) the TAR Offeree's Pro Rata Share, which is a
fraction, the numerator of which is the total number of shares of shares of
Common Stock subject to the TAR Offer held by such TAR Offeree on the date of
the TAR Notice and the denominator of which is the total number of shares of
Common Stock held on such date by the Selling Holder and all the TAR Offerees
who elect, pursuant to Section 4(c) below, to accept the TAR Offer. Pursuant to
Section 4(d), the Selling Holder may then sell to the Buyer the number of shares
of Common Stock remaining after the shares of Common Stock to be sold by the TAR
Offerees are subtracted from the number of shares of Common Stock to be sold by
the Selling Holder as contained in the TAR Offer.
(c) Acceptance Notice. If a TAR Offeree desires to accept the TAR
-----------------
Offer with respect to his or its shares of Common Stock, such TAR Offeree shall
do so by delivering to the Selling Holder a written notice stating such TAR
Offeree's irrevocable acceptance of the TAR Offer with respect to such TAR
Offeree's shares of Common Stock and setting forth the amount of the shares of
Common Stock that such TAR Offeree desires to sell
6
<PAGE>
to the Buyer (the "Acceptance Notice"), which Acceptance Notice shall be
delivered to the Selling Holder within 20 days after the delivery of the TAR
Notice to such TAR Offeree. Such Acceptance Notice shall constitute such TAR
Offeree's agreement to sell to the Buyer the lesser of (i) the amount of such
TAR Offeree's shares of Common Stock which such TAR Offeree is entitled to sell
to the Buyer pursuant to this Section 4 and (ii) the amount of such TAR
Offeree's shares of Common Stock which such TAR Offeree desires to sell to the
Buyer as set forth in such TAR Offeree's Acceptance Notice. In addition, such
Acceptance Notice shall include (i) a written undertaking of the TAR Offeree to
deliver, at least three business days prior to the expected date of the
consummation of such sale or other disposition to the Buyer as indicated in the
TAR Notice, such documents (including stock assignments and stock certificates,
if any) as shall be reasonably required to transfer the amount of such TAR
Offeree's shares of Common Stock that such TAR Offeree agrees to sell to the
Buyer pursuant to the TAR Offer and (ii) a limited power-of-attorney authorizing
the Selling Holder to transfer such shares to the Buyer pursuant to the terms of
the TAR Offer. If a TAR Offeree does not deliver an Acceptance Notice to the
Selling Holder in accordance with the provisions of this Section 4(c), such TAR
Offeree shall be deemed to have irrevocably rejected the TAR Offer.
(d) Consummation. If there is a decrease in the price to be paid by
------------
the Buyer for the shares of Common Stock to be sold from the price set forth in
the TAR Offer, which decrease is acceptable to the Selling Holder or other
material change in terms which are less favorable to the Selling Holder but
which are acceptable to the Selling Holder, the Selling Holder shall notify the
TAR Offerees of such decrease or other material terms, and each TAR Offeree
shall have five business days from the date of receipt of the notice of such
decrease to reduce the shares of Common Stock he or it will sell to such Buyer
as previously indicated in the applicable Acceptance Notice. The Selling Holder
shall act as agent for the TAR Offerees in connection with such sale or other
disposition and shall cause to be remitted promptly to each of the TAR Offerees
the total consideration for the shares of Common Stock sold by such TAR Offeree
pursuant thereto, which consideration shall be in the same form as the
consideration received by the Selling Holder and shall be net of such TAR
Offeree's applicable portion of the expenses of such sale or other disposition,
as provided in Section 4(e) below. The Selling Holder shall furnish, or shall
cause to be furnished, promptly such other evidence of the consummation and time
of consummation of such sale or other disposition and the terms thereof as shall
be reasonably requested. If the Selling Holder does not complete such sale or
other disposition, the Selling Holder shall return to the TAR Offerees all
documents (including stock assignments and stock certificates, if any) and
powers-of-attorney which the TAR Offerees delivered to the Selling Holder
pursuant to the terms of this Section 4 or otherwise in connection with such
sale or other disposition.
(e) Expenses. Each Co-Sale Right Holder shall bear such holder's pro
--------
rata share of the reasonable expenses incurred by the Selling Holder in
connection with any sales or other dispositions of such Co-Sale Right Holder's
shares of Common Stock made pursuant to the Tag Along Rights.
7
<PAGE>
(f) Exempt Sales. The Tag Along Rights and obligations set forth in
------------
this Section 4 shall not apply to a Public Market Sale.
5. Affiliate Transactions.
----------------------
(a) Neither the Company nor any Affiliate will enter into any
transaction with any stockholder of the Company or any Affiliate thereof or with
any member of management of the Company unless the terms and conditions of such
transaction are no less favorable to the Company or its Affiliate, as the case
may be, than would be obtained in a comparable arm's length transaction with an
unaffiliated third party.
(b) As long as the Chase Entities (or any of them) own shares of
Common Stock, no FS Entity or any Affiliate of an FS Entity will be entitled to
payment of fees except for services rendered in connection with a material
acquisition, merger, divestiture, reorganization or restructuring, provided that
such fee is no more favorable to the FS Entity or an Affiliate of the FS Entity
than would be available from a nationally recognized investment banking firm,
and provided, further, that such fee shall not be payable without the consent of
the Majority Chase Entities, as defined below, if the FS Entity is selling its
entire interest in an acquisition, merger, reorganization or restructuring
transaction. The foregoing shall not prevent payment after the date hereof of a
fee of $1,000,000 to an FS Entity or an Affiliate of an FS Entity in connection
with the consummation of the transactions contemplated by the Stock Purchase
Agreement.
6. Transfers; Transfers Within Chase Capital Group.
-----------------------------------------------
(a) Prior to February 18, 1998, no Chase Entity shall sell, assign,
transfer, hypothecate, encumber or otherwise dispose of (collectively, a
"Transfer") any shares of Common Stock or any right, title or interest therein,
without the consent of the FS Entities. Except as otherwise set forth in Section
3, prior to February 18, 1998, no FS Entity shall sell, assign, transfer,
hypothecate, encumber or otherwise dispose of any shares of Common Stock, or any
right, title or interest therein, without the consent of the Majority Chase
Entities. Any attempt to Transfer any shares of Common Stock, or any right,
title or interest therein, other than in compliance with this Agreement, shall
be null and void, and the Company shall not give effect to any such attempted
transaction or transfer.
(b) For purposes of this Agreement, "Chase Capital Group" means and
includes (i) The Chase Manhattan Corporation, (ii) entities that are Affiliates
of The Chase Manhattan Corporation and (iii) entities the majority of the equity
owners of which are employees, officers or directors of any of the foregoing.
Notwithstanding anything in this Agreement to the contrary, any member of the
Chase Capital Group may Transfer its shares of Common Stock to other members of
the Chase Capital Group without restriction, provided that any transferee agrees
to be bound by provisions in this Agreement, and members of the Chase Capital
Group may purchase shares of Common Stock from BP upon the Transfer of
8
<PAGE>
such shares of Common Stock by BP to such members, including without limitation,
any Transfer resulting from the enforcement of a security interest by Chase in
such shares existing as of the date hereof pursuant to the terms of a pledge
agreement between Chase and BP (the "Pledge Agreement"), provided that the
Transfer of such shares of Common Stock by BP or Chase in connection with the
enforcement by Chase of its rights under the Pledge Agreement to any person
other than a member of the Chase Capital Group shall be subject to Section 2
hereof, and provided, further, that, to the extent the terms of the Pledge
Agreement are contrary to or otherwise inconsistent with the terms of this
Agreement, the terms of this Agreement shall supersede all such contrary or
inconsistent terms. In the event of a Transfer within the Chase Capital Group,
all references to "Chase" or the "Chase Entities" shall thereafter refer to each
of the members of the Chase Capital Group with respect to the shares of Common
Stock owned by such member. The FS Entities' Tag Along Rights pursuant to
Section 4 will not apply to Transfers within the Chase Capital Group, or to
Transfers from BP to the Chase Capital Group.
7. Regulatory Compliance Cooperation.
---------------------------------
(a) In the event that an SBIC determines that it has a Regulatory
Problem (as defined below), the Company agrees to use commercially reasonable
efforts to take all such actions as are reasonably requested by such SBIC in
order (i) to effectuate and facilitate any transfer by such SBIC of any
Securities (as defined below) of the Company then held by such SBIC to any
Person designated by such SBIC and approved by the FS Entities (with such
approval not to be unreasonably withheld), (ii) to permit such SBIC (or any
Affiliate of such SBIC) to exchange all or any portion of the voting Securities
then held by such Person on a share-for-share basis for shares of a class of
non-voting Securities of the Company, which non-voting Securities shall be
identical in all respects to such voting Securities, except that such new
Securities shall be non-voting and shall be convertible into voting Securities
on such terms as are requested by such SBIC in light of regulatory
considerations then prevailing, (iii) to continue and preserve the voting
interests with respect to the Company arising out of such SBIC's ownership of
voting Securities before the transfers and amendments referred to above
(including entering into such additional agreements as are requested by such
SBIC to permit any Person(s) designated by such SBIC and approved by the FS
Entities (with such approval not to be unreasonably withheld) to exercise any
voting power which is relinquished by such SBIC upon any exchange of voting
Securities for nonvoting Securities of the Company) and (iv) entering into such
additional agreements, adopting such amendments to this Agreement, the
Certificate of Incorporation and Bylaws of the Company and other relevant
agreements and taking such additional actions, in each case as are reasonably
requested by such SBIC in order to effectuate the intent of the foregoing.
If an SBIC elects to transfer Securities of the Company to a Regulated
Holder (as defined below) in order to avoid a Regulatory Problem, the Company
shall enter into such agreements with such Regulated Holder as it may reasonably
request in order to assist such Regulated Holder in complying with applicable
laws, rules and regulations to which
9
<PAGE>
it is subject. Such agreements may include restrictions on the redemption,
repurchase or retirement of Securities of the Company that would result or be
reasonably expected to result in such Regulated Holder holding more voting
securities or total securities (equity and debt) than it is permitted to hold
under such regulations.
(b) In the event an SBIC has the right to acquire any of the Company's
Securities (as the result of a preemptive offer, pro rata offer or otherwise),
at such SBIC's request the Company will offer to sell to such SBIC non-voting
Securities on the same terms as would have existed had such SBIC acquired the
Securities so offered and immediately requested their exchange for non-voting
Securities pursuant to paragraph (a) above.
(c) In the event that any subsidiary of the Company ever offers to
sell any of its Securities to an SBIC, then the Company will cause such
subsidiary to enter into agreements with such SBIC substantially similar to this
Section 7 and Section 8.
(d) For purposes of this Section 7:
(i) "Regulated Holder" means any holder of the Company's
Securities that is (or that is a subsidiary of a bank holding company that
is) subject to the various provisions of Regulation Y of the Board of
Governors of the Federal Reserve Systems, 12 C.F.R., Part 225 (or any
successor to Regulation Y);
(ii) "Regulatory Problem" means (A) any set of facts or
circumstances wherein it has been asserted by any governmental regulatory
agency (or an SBIC believes that there is a significant risk of such
assertion) that such Person (or any bank holding company that controls such
Person) is not entitled to hold, or exercise any material right with
respect to, all or any portion of the Securities of the Company which such
Person holds or (B) when such Person and its Affiliates would own, control
or have power (including voting rights) over a greater quantity of
Securities of the Company than is permitted under any law or regulation or
any requirement of any governmental authority applicable to such Person or
to which such Person is subject; and
(iii) "Securities" means with respect to any Person, such Person's
capital stock or any options, warrants or other Securities which are
directly or indirectly convertible into, or exercisable or exchangeable
for, such Person's capital stock (whether or not such derivative Securities
are issued by the Company). Whenever a reference herein to Securities
refers to any derivative Securities, the rights of an SBIC shall apply to
such derivative Securities and all underlying Securities directly or
indirectly issuable upon conversion, exchange or exercise of such
derivative Securities.
10
<PAGE>
(e) Any transferee of Securities from Buyer must agree in writing
to be bound by all of the provisions of this Agreement.
8. Information Rights and Related Covenants.
----------------------------------------
(a) Within 75 days after the closing of a purchase of shares of
Common Stock pursuant to the terms of the Stock Purchase Agreement, the Company
shall provide to each SBIC a certificate of its chief financial officer (i)
verifying (and describing in reasonable detail) the use of the proceeds of such
SBIC's financing and (ii) certifying compliance by the Company with the
provisions of this Agreement and any purchase or subscription agreement to which
such SBIC is a party. In addition to any other rights granted hereunder, the
Company shall provide each SBIC, any Affiliate of such SBIC and the SBA access
to its books and records for the purpose of verifying the use of the proceeds of
such Person's financing and for all other purposes required by the SBA.
(b) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall provide to each SBIC a
written assessment, in form and substance satisfactory to such SBIC, of the
economic impact of such SBIC's financing hereunder, specifying the full-time
equivalent jobs created or retained, the impact of the financing on the
Company's business in terms of expanded revenue and taxes and other appropriate
economic benefits, including, but not limited to, technology development or
commercialization, minority business development, urban or rural business
development, expansion of exports and assistance to manufacturing firms.
(c) Upon the request of an SBIC or any Affiliates of an SBIC, the
Company will (i) provide to such Person such financial statements and other
information as such Person may from time to time request for the purpose of
assessing the Company's financial condition and (ii) furnish to such Person all
information requested by it in order for it to prepare and file SBA Form 468 and
any other information requested or required by any governmental agency asserting
jurisdiction over such Person.
(d) For a period of one year following the date hereof, neither
the Company nor any of its subsidiaries will change its business activity if
such change would render the Company ineligible to receive financial assistance
from a Small Business Investment Company under the Small Business Investment Act
and the regulations thereunder. If the Company breaches this covenant, then, in
addition to all other remedies available to each SBIC, such SBIC may demand that
the Company immediately repurchase all securities acquired by such SBIC at the
purchase price paid therefor.
(e) The Company will at all times comply with the non-
discrimination requirements of 13 C.F.R., Parts 112, 113 and 117.
11
<PAGE>
9. Observer Rights. From and after August 19, 1996, the Chase
---------------
Entities shall no longer be entitled to designate one non-voting observer (the
"Observer") to be admitted to each meeting of the Board of Directors of the
Company and each subsidiary, including telephonic meetings.
10. Representation on the Board of Directors. Subject to the terms
----------------------------------------
and conditions of this Section 10, and provided that the Chase Entities own at
least ten percent (10%) of the outstanding Common Stock of the Company, at each
annual or special meeting of stockholders of Company, or in any written consent
executed in lieu of a stockholder meeting, at or pursuant to which persons are
being elected to fill positions on the Board of Directors of Company, each of
the FS Entities and the Chase Entities agrees to exercise, or cause to be
exercised, voting rights with respect to Voting Securities then owned or held of
record by such entity in such a manner that a candidate designated by a majority
vote of the shares of Common Stock held by the Chase Entities (the "Majority
Chase Entities") shall be elected to fill and continue to hold one of the
positions on the Board of Directors of the Company. If at any time from and
after the date hereof, the Majority Chase Entities shall notify the FS Entities
of their desire to remove any director previously designated by the Majority
Chase Entities to serve on the Board of Directors of the Company, each of the FS
Entities agrees to exercise or cause to be exercised voting rights with respect
to Voting Securities owned or held of record by such entity so as to remove such
director of the Company. If at any time from and after the date hereof, any
director previously designated by the Majority Chase Entities to serve on the
Board of Directors of the Company ceases to be a director (whether by reason of
death, resignation, removal or otherwise), the Majority Chase Entities shall be
entitled to designate a successor director to fill the vacancy created thereby,
and each of the FS Entities agrees to exercise its voting rights with respect to
Voting Securities owned or held of record by such entity so as to elect such
designee as a director of Company. The Majority Chase Entities may not assign
their rights pursuant to this Section 10 and such rights will terminate if the
Majority Chase Entities hold less than ten percent (10%) of the Company's
outstanding Common Stock.
11. Copy of Agreement. A copy of this Agreement and all amendments
-----------------
hereto shall be filed with the Secretary of the Company and shall be kept at the
principal executive offices of the Company.
12. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the laws of the State of Delaware without regard
to the conflicts of laws rules thereof.
13. Successors and Assigns. Except for the right set forth in
----------------------
Section 10 of this Agreement, which is not assignable, the FS Entities and the
Chase Entities may assign their respective rights under this Agreement in
connection with the transfer or sale of at least 50% of the Securities held by
each; provided, however, that any such transfer or sale must be in compliance
with this Agreement and all applicable federal and state securities laws. Any
12
<PAGE>
transferee of Securities will be bound by all obligations of the transferring
party hereunder and shall obtain a written undertaking to be so bound prior to
any such transfer. Each of the Chase Entities only may assign its rights under
this Agreement to only one (1) assignee and such assignee shall not be entitled
to further assign such rights.
14. Continuation of Rights and Obligations. All of the FS Entities'
--------------------------------------
and the Chase Entities' other rights and obligations shall continue in full
force and effect following the Company's initial public offering of shares of
Common Stock pursuant to an effective registration statement.
15. Amendment and Waiver. This Agreement may be amended, modified or
--------------------
supplemented, and compliance with any provision hereof may be waived, only with
the written consent of the FS Entities, the Majority Chase Entities and Sodini,
and any amendment, modification, supplement or waiver so consented to in writing
shall be binding upon the parties hereto and all transferees of shares of Common
Stock held by any of the FS Entities, the Majority Chase Entities and Sodini.
16. Interpretation. The headings of the sections contained in this
--------------
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
17. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or delivered by telecopier (with receipt
confirmed) or three (3) days after deposit in the mail, by registered or
certified mail (return receipt requested) postage prepaid, (i) if to the FS
Entities, at Freeman Spogli & Co. Incorporated, 11100 Santa Monica Boulevard,
Suite 1900, Los Angeles, California 90025, Attention: William M. Wardlaw,
telecopier: (310) 444-1870, (ii) if to the Chase Entities, at Chase Capital
Partners, L.P., 380 Madison Avenue, 12th Floor, New York, New York 10017,
Attention: Christopher C. Behrens, telecopier: (212) 622-3101 and (iii) if to
Sodini, The Pantry, Inc., 1801 Douglas Drive, Sanford, North Carolina 27330,
telecopier: (919) 774-3329 (or at such other address or telecopier number for
any party as shall be specified by like notice provided that notices of a change
of address or telecopier number shall be effective only upon receipt thereof).
18. Legends. All certificates evidencing shares of Common Stock that
-------
are issued to the FS Entities, the Chase Entities and Sodini shall be legended
as follows (in addition to any other legend required to be placed thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS WITH RESPECT TO THE TRANSFER AND VOTING THEREOF AS SET
FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF JULY 2, 1998
13
<PAGE>
WHICH MAY BE VIEWED AT THE PRINCIPAL PLACE OF BUSINESS OF THE
CORPORATION AND A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER
WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR."
19. Further Assurances. The Company covenants and agrees that it
------------------
will act in good faith to preserve for the FS Entities, the Chase Entities and
Sodini the benefits of this Agreement and that it will take no voluntary action
to impair the benefits hereof or to avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder or to deny
to the FS Entities, the Chase Entities or Sodini any of the benefits or
protections contemplated hereby.
20. Injunctive Relief. It is acknowledged that it will be impossible
-----------------
to measure in money the damages that would be suffered if the parties hereto
fail to comply with any of the obligations herein imposed on them and that, in
the event of any such failure, an aggrieved party hereto will be irreparably
damaged and will not have an adequate remedy at law. Any such party shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
21. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
22. Entire Agreement. This Agreement is intended by the parties
----------------
hereto as a final expression of their agreement, and is intended to be a
complete and exclusive statement of the parties hereto in respect of the subject
matter contained herein. This Agreement is intended to and does hereby
supersede entirely in all respects the Old Stockholders' Agreement, which shall
terminate and have no further force or effect.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE PANTRY, INC.,
a Delaware corporation
By:/s/ Peter J. Sodini
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ Charles P. Rullman
-----------------------
Name: Charles P. Rullman
--------------------
Title: Vice President
-------------------
FS EQUITY PARTNERS IV, L.P.,
a Delaware limited partnership
By: FS Capital Partners LLC
Its: General Partner
By:/s/ Jon D. Ralph
------------------------------
Name: Jon D. Ralph
------------------------
Title:
----------------------
15
<PAGE>
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
a Delaware limited partnership
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By:/s/ Charles P. Rullman
-------------------------------
Name: Charles P. Rullman
---------------------------
Title:
-------------------------
CHASE MANHATTAN CAPITAL, L.P.
a Delaware limited partnership
By: Chase Manhattan Capital Corporation
Its: General Partner
By:/s/ Christopher Behrens
-------------------------------
Name:
--------------------------
Title:
--------------------------
CB CAPITAL INVESTORS, L.P.,
a Delaware limited partnership
By: CB Capital Investors, Inc.
Its: General Partner
By:/s/ Christopher Behrens
-------------------------------
Name:
--------------------------
Title:
--------------------------
BASEBALL PARTNERS,
a New York general partnership
By:/s/ Christopher Behrens
------------------------------------
Name:
------------------------------
Title: General Partner
16
<PAGE>
PETER J. SODINI
By:/s/ Peter J. Sodini
------------------------------
Peter J. Sodini
17
