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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) July 16, 1996
THE PANTRY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-72574 56-1574463
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification Number)
1801 DOUGLAS DRIVE, SANFORD, NORTH CAROLINA 27330
(Address of principal executive offices)
(919) 774-6700
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On July 16, 1996, the Company's shareholders signed an agreement
providing for the settlement of their previously disclosed disputes.
As previously reported, on November 30, 1995, the Company entered into
certain stock purchase and related agreements with FS Equity Partners III, L.P.,
a Delaware limited partnership ("FSEP III"), FS Equity Partners International,
L.P., a Delaware limited partnership ("FSEP International") (collectively with
FSEP III the "FS Group"), Chase Manhattan Capital Corporation ("Chase"),
Montrose Value Fund Limited Partnership ("MVF"), controlled by W. Clay
Hamner ("Hamner"), Chairman of the Company's Board of Directors, and Wayne M.
Rogers ("Rogers"), a member of the Company's Board of Directors, and Montrose
Financial No. 6 Limited Partnership (Pantry) ("MF No. 6") (collectively with
MVF the "Montrose Group"), controlled by Hamner, as a result of which
the FS Group and Chase acquired 39.9% and 12%, respectively, of the Company's
stock, and the Montrose Group retained 48.1% of the Company's stock (the
"Initial Transaction"). On November 30 and December 1, 1995, the FS Group,
Chase, the Company, and the Montrose Group entered into related agreements,
which called for the FS Group and Chase to acquire substantially all of the
remaining shares of the Company's stock held by the Montrose Group, subject to
certain conditions, prior to May 1, 1996 (the "Subsequent Transaction").
In March, 1996, each of the FS Group and Chase advised the Montrose
Group, that they believed, among other things, that all the conditions to the
Subsequent Transaction had not been met and that each of the FS Group, certain
of its related entities, and Chase was therefore relieved of its obligations
to proceed with the purchase contemplated thereby. In April, 1996, the
Montrose Group brought suit against the FS Group, certain of its related
entities, and Chase seeking to require their performance of the Subsequent
Transaction (the "Litigation"). In the Litigation, the Company was named a
nominal defendant. All of these matters have been more fully reported in the
Company's 8-K dated December 14, 1995, 10-K dated December 21, 1995, and
10-Q dated May 10, 1996.
On July 16, 1996, the Montrose Group, Hamner and Rogers and the FS
Group, certain of its related entities, Chase and the Company entered into a
Settlement Agreement to resolve these disputes. Pursuant to the terms of that
agreement, subject to certain regulatory approvals, at closing: (i) the FS
Group and Chase will purchase all the Montrose Group's stock in the Company;
(ii) Hamner and Rogers will resign from the Company's Board of Directors;
(iii) Hamner's employment agreement with the Company, which extended to
December 31, 2000, at a current annual base salary of $367,000, and all
benefits thereunder, will be terminated in exchange for a payment of $750,000
and Hamner's agreement, subject to certain exceptions, not to compete with the
Company for a period of three years; (iv) the parties, including the Company,
will exchange mutual releases and dismiss with prejudice the Litigation. The
Settlement Agreement also provides for a closing of the purchases contemplated
thereby no later than September 10, 1996, subject to certain rights to extend
that date to September 20, 1996. In the event the closing does not occur as
contemplated, the Settlement Agreement also provides that the Montrose Group
will have the option, for a period of 90 days, to acquire the stock of the
Company previously purchased by the FS Group and Chase in the Initial
Transaction.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
<S> <C>
10.1 Settlement Agreement dated as of July 16, 1996 among the Montrose Group,
Hamner and Rogers, the FS Group, Chase and the Company
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE PANTRY, INC.
Date: July 18, 1996 /s/ Mark C. King
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Mark C. King
Senior Vice President
Chief Financial Officer and Secretary
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EXHIBIT INDEX
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<CAPTION>
Exhibit No. Description of Exhibit Sequentially Numbered Page
<S> <C> <C>
10.1 Settlement Agreement dated as of July 16, 1996
among the Montrose Group, Hamner and Rogers, the
FS Group, Chase and the Company
</TABLE>
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AGREEMENT
THIS AGREEMENT made and entered into this July 16th, 1996, by
and between
FREEMAN SPOGLI & CO., INCORPORATED, FS EQUITY PARTNERS III,
L.P., FS EQUITY PARTNERS INTERNATIONAL, L.P. (collectively referred
to as "FS") and CHASE MANHATTAN CAPITAL CORPORATION ("Chase").
MONTROSE VALUE FUND LIMITED PARTNERSHIP and MONTROSE FINANCIAL
NO. 6 LIMITED PARTNERSHIP (collectively referred to "Montrose") and
W. CLAY HAMNER ("Hamner") and WAYNE M. ROGERS ("Rogers"); and
THE PANTRY, INC. ("The Pantry").
PRELIMINARY STATEMENT
A dispute exists between the parties and is the subject of a
pending action entitled "MONTROSE, ET AL. V. FREEMAN SPOGLI, ET AL." (Civil
Action No. 96-CVS-1220, Durham County Superior Court) ("the
Action"). The parties have agreed to the full settlement and
resolution of this dispute and the Action and all matters relating
to The Pantry and purchase and sale of stock of The Pantry, as set
forth in this Agreement.
NOW, THEREFORE in consideration of the mutual promises and releases
herein, the parties for themselves, successors and assigns agree as follows:
1. Purchase of Montrose Stock. FS and Chase will purchase
all of Montrose's stock in The Pantry (being 54,828 shares of
common stock and 12,500.784 shares of preferred stock) for a total
sales price of $20,834,640.00 ("the Sales Price"), payable by wire
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transfer, with said purchase by FS and Chase to be in amounts reflecting the
original stock purchase agreement.
2. Closing Date. The purchase of the stock ("the Closing")
shall take place on or before the tenth day after HSR Approval (as
defined below). The later of such date by which the Closing is
required to occur, or the tenth day after the Approval Deadline, is
referred to herein as the "Outside Date."
3. Conditions to Purchase. FS and Chase shall not be
obligated to purchase said Montrose stock unless the following
conditions are satisfied:
a. HSR Approval. The waiting period under Hart-Scott- Rodino
Antitrust Improvement Act of 1976 as amended (the "HSR Act") shall have
expired or "early termination" shall have been granted with respect
thereto (either condition of which is referred to herein as "HSR
Approval"), prior to August 31, 1996 (the "Approval Deadline").
FS in cooperation with The Pantry shall make good faith
efforts to promptly secure HSR Approval, as provided in Section 10.
Montrose, Hamner and Rogers, may, for up to an additional ten (10)
days, at their discretion, in writing to The Pantry, extend beyond
August 31, 1996, the Approval Deadline. Counsel for FS will provide
counsel for Montrose with written certification of the HSR notification
at the time of its submission.
b. No injunction or court order. No state or federal
governmental authority or other agency or state court shall
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have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, injunction or other order which has been expressly
determined by a federal or state regulatory agency or court of
competent jurisdiction to prohibit the consummation of the purchase
hereunder. In the event of such an injunction, court order, or similar
directive, FS and Chase shall expeditiously undertake to take all
reasonable steps necessary to have the injunction, order or similar
directive lifted, or to consummate the purchase in a manner that is not
violative of such injunction, order or similar directive. Montrose,
Hamner and Rogers shall cooperate in all reasonable respects in such
efforts. In the event such an injunction, order, or similar directive
is made by any federal or state agency or court of competent
jurisdiction, then all deadlines and dates called for hereunder shall
be tolled to not later than September 10, 1996 pending the attempts by
FS and Chase to remove the impediments to consummating the transaction.
c. Warranties and representations of title. The warranties and
representations of title by Montrose as provided in paragraph 8(a)
below shall be true and correct as of the Closing and Montrose will
provide appropriate certificate as of closing so certifying.
d. Warranties and representations concerning HSR. FS,
Chase, and The Pantry each respectively warrants that they
know of no fact, matter, or other consideration that they
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believe may legally impede or prevent HSR Approval and the
stock purchase hereunder.
e. Delivery of share certificates. Montrose will, at
the closing and upon receipt of the Sales Price, cause the
physical delivery to FS and Chase of the share certificates
duly endorsed in blank for transfer to FS and Chase or their
designees representing said stock to be purchased hereunder,
and upon the signing of this agreement, FS and Chase will
instruct Chicago Title to deliver the share certificates to
Montrose's attorney for retention pending the Closing.
4. Termination of All Rights and Interests In, and
Obligation or Duties to The Pantry by Hamner and Rogers. From and after the
closing, Hamner and Rogers shall have no rights and interests of any kind in The
Pantry, including without limitation, any right or option of purchase of any
Pantry stock including any currently vested options, any contract rights, any
payment or reimbursement rights, and any employment rights or relationship; and
both shall resign any employment, officer or director relationship with The
Pantry as of the closing, such resignations to be delivered in writing and
delivered with the stock certificates at the Closing. Further, from and after
the Closing, Hamner and Rogers shall, except as otherwise provided in this
agreement, have no obligations, duties, or responsibilities to The Pantry
whatsoever.
5. Termination of the Employment Agreement dated
November 30, 1995 between Hamner and The Pantry. The Employment
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Agreement dated November 30, 1995 between Hamner and The Pantry and all rights
and obligations thereunder shall be fully terminated as of the Closing, and
Hamner shall then assume and be solely responsible for the sublease and all
expenses related to the Durham office space being occupied by Hamner. In
consideration of such termination, The Pantry shall pay to Hamner the amount of
$750,000, payable by certified check at the Closing, in full settlement and
satisfaction of all rights and claims which Hamner has or may have under said
Employment Agreement.
Hamner shall not for a period of three (3) years commencing with the
Closing of the stock purchase hereunder engage directly or indirectly in the
operation of, or own or have any interest of any kind in, any convenience store
or gas station business in any state where The Pantry owns a store on the date
of this Agreement (the "Territory"); provided that the foregoing shall not be
deemed to restrict Hamner's ownership, directly or as a limited partner, in any
of the six store locations that are currently being leased by Hamner, or such
partnership, to The Pantry. The foregoing notwithstanding, without being in
violation of this non-competition provision Hamner may purchase or invest in up
to ten additional individual convenience stores or gas stations in the Territory
provided that none of such additional convenience stores or gas stations shall
be a newly constructed location within a one mile radius of any Pantry store
location in operation on the date of this Agreement, and provided this
non-competition provision shall
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not apply to Hamner's serving as a director and being a shareholder
of Wendy's.
6. Stay and Dismissal of the Action With Prejudice. Until the Closing
takes place, all discovery and proceedings in the Action shall be stayed by the
parties and no further discovery or proceedings shall be undertaken or
maintained and immediately upon the closing the parties will cause the Action to
be fully dismissed with prejudice. This Stay shall expire if the Closing has not
taken place by the Outside Date.
7. Mutual Releases. Upon the occurrence of the Closing:
a. Except for the rights and obligations under this
Agreement, Montrose, Hamner and Rogers do hereby fully release and
discharge FS, Chase (including Baseball Partners, a New York general
partnership, Chase affiliates, and members of the Chase Capital Group),
and The Pantry, and any employee, officer, director and agent thereof
from any and all claims and liabilities, charges, costs, expenses and
fees of any kind and nature in any way relating to or arising out of
the subject matter of the Action, the Employment Agreement, their
employment with The Pantry, The Pantry or the purchase and sale of
Pantry stock, provided that this release shall not affect any rights of
indemnification owed Hamner and Rogers as directors or officers of The
Pantry, which rights shall be deemed to continue as in effect as of the
date of this agreement for so long as any such claim may be assertable,
and to the extent of insurance, if any, that may apply to any such
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rights of indemnification, Hamner and Rogers will be listed as
insureds so long as such inclusion is at no additional cost or
premium;
b. Except for the rights and obligations under this Agreement,
FS, Chase (including Baseball Partners, a New York general partnership,
Chase affiliates, and members of the Chase Capital Group), and The
Pantry do hereby fully release and discharge Montrose, Hamner and
Rogers and any employee, officer, director and agent thereof from any
and all claims and liabilities, charges, costs, expenses and fees of
any kind and nature in any way relating to or arising out of the
subject matter of the Action, the Employment Agreement, their
employment with The Pantry, The Pantry or the purchase and sale of
Pantry stock. Chase warrants that it has authority as agent for said
above referenced Chase related entities to grant this release.
8. Representations and warranties by Montrose, Hamner and
Rogers.
a. Montrose represents and warrants that it is the owner, free
and clear of any encumbrances, of all of The Pantry stock subject to
this Agreement and being sold to FS and Chase hereunder, has full right
and authority to sell and transfer said stock to FS and Chase, and upon
delivery of and payment for said stock that FS and Chase will acquire
good and marketable title to said stock, free and clear of any and all
encumbrances.
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b. Montrose, Hamner and Rogers each respectively
represents and warrants that:
(1) each has not entered into any oral or written
commitment, contract, agreement or obligation by or on behalf of The
Pantry since November 30, 1995, except any such commitment entered with
one or more other officers of The Pantry other than themselves;
(2) they have not obligated The Pantry to pay any fee
or commission to any broker, finder, investment banker or other agent
or representative in connection with the sale, transfer or other
disposition of any security of or interest in The Pantry excluding any
of such payments heretofore made in connection with the purchase of
Pantry stock by FS and Chase on November 30, 1995 and excluding any
claims by Prudential; and
(3) they know of no fact, matter or other
consideration that they believe may legally impede or prevent
the stock purchase hereunder.
9. Status of the Option Agreement. The Option Agreement
dated November 30, 1995 between FS and Montrose (the "Option Agreement") shall
be suspended from the date of this Agreement until the Closing takes place
hereunder and upon the Closing the Option Agreement shall automatically
terminate and be of no further force and effect. If the Closing hereunder does
not occur by the Outside Date, for any reason other than the failure of Montrose
to deliver the stock certificates or failure to satisfy the warranties
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set forth in Section 8, then the Option Agreement shall be in full force and
effect in accordance with its terms and conditions until 90 days following the
Outside Date. In the event the Option Agreement is so reinstated, FS, Chase, and
The Pantry covenant to use their best efforts to cause The Pantry to fully
cooperate in providing operating, financial, and other relevant information on
an expedited basis as may be reasonably requested by Montrose in connection with
the possible exercise of the Option Agreement, and their obtaining financing or
capital therefor, subject to the previously agreed confidentiality agreement.
If the Closing does not take place by the Outside Date, then FS and
Chase shall place all stock in The Pantry owned by them or entities controlled
by them into escrow, pursuant to an escrow agreement of terms substantially
similar to those previously agreed to by the parties as part of the November 30,
1995 transaction between them. The running of 90 day extension of the Option
Agreement described immediately above shall be tolled until said stock is placed
into escrow.
10. Best efforts of Parties. The parties shall employ their best
efforts to cause the purchase hereunder to be consummated as herein provided. FS
and the Pantry shall cause a full and complete expedited application for HSR
Approval (also known as a request for Early Termination) to be sent by overnight
mail or FedEx to the F.T.C. within 3 business days of the signing of this
Agreement, and shall diligently and in good faith use their best efforts to do
all things reasonably necessary to receive HSR Approval by the Approval
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Deadline, including but not limited to reasonable efforts to remove any
impediments to HSR Approval. Montrose shall not, prior to Outside Date, sell or
transfer any stock which is subject to this Agreement, nor shall it make any
efforts to sell or transfer such stock prior to the Outside Date. FS, Chase, and
The Pantry shall not, prior to the expiration of the 90 day period following the
Outside Date, sell or transfer any Pantry stock, or make any efforts to do so.
Further, prior to the earlier of the Closing or the expiration of the 90 day
period following the Outside Date, FS and Chase shall not take any action
outside the ordinary course of business or take any action or preparation
whatsoever to change the capital structure of The Pantry in any way, including
but not limited to the issuance of new equity or debt.
11. Confidentiality of Pantry Materials. Montrose, Hamner and Rogers
will until the Outside Date and from and after the Closing, treat all financial
and other non-public materials relating to The Pantry as confidential, and shall
not disclose the same to anyone other than their attorneys and accountants,
except as ordered by a court of law or as permitted by The Pantry. Further,
until the Outside Date and from and after the Closing, Montrose, Hamner and
Rogers shall not use, provide or disclose any non-public information relating to
The Pantry in any manner adverse to or in competition with The Pantry and upon
Closing they will use their reasonable efforts to return to The Pantry all
financial and other proprietary materials relating to The Pantry created since
January 1, 1995.
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12. No Prejudicial Effect on Litigation. In addition to such rights as
the parties may have under this Agreement, it is specifically and expressly
agreed that, by entering into this Agreement no rights of any party in the
pending litigation between them, or rights as shareholders of The Pantry, shall
be prejudiced in any way. In the event the Closing does not occur by the Outside
Date, Montrose shall have the absolute right to proceed in the alternative with
the claims in the litigation and/or enforcement of this Agreement. All releases
contemplated herein are expressly contingent upon the Closing of the purchase of
Montrose's stock by FS and Chase.
13. Miscellaneous.
a. This Agreement is made in full settlement and resolution of
the above matters as between the parties and without any acknowledgment
of liability or obligation of any kind other than as herein provided.
b. This Agreement shall be governed by the laws of North
Carolina, and any dispute arising hereunder shall be litigated in the
appropriate North Carolina state court in Durham County, North
Carolina, provided the parties will seek to have any such litigation
occur in the Business Court of the Superior Court Division.
c. In the event of a dispute arising out of this
Agreement that necessitates the filing of formal legal
proceedings, the prevailing party in said litigation, or in
alternative dispute resolution related herein, shall be
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entitled to collect its reasonable attorneys fees incurred in bringing
the action, from the losing party.
d. In the event the closing does not occur by reason of the
failure of Montrose to deliver the stock certificates evidencing the
shares of the capital stock of The Pantry owned by it as contemplated
by this Agreement, FS and Chase shall have the right to seek specific
performance of this Agreement against Montrose, in addition to all
other rights that may be available thereto, whether at law or in
equity.
e. This agreement may be signed in counterpart and by
facsimile copy.
IN WITNESS WHEREOF the parties have caused this Agreement to
be signed by an officer or partner thereto duly authorized, all as
of the date above.
FS: FREEMAN SPOGLI & CO., INCORPORATED
By: /s/ Charles P. Rullman
FSEPIII: 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
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FSEP INTERNATIONAL: 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
CHASE: CHASE MANHATTAN CAPITAL CORPORATION
a Delaware corporation
By: /s/ Chris Behrens
THE PANTRY: THE PANTRY, INC.
a Delaware corporation
By: /s/ Peter J. Sodini
MVF: MONTROSE VALUE FUND LIMITED PARTNERSHIP
a North Carolina limited partnership
By: WMR Montrose Company, a North
Carolina general partnership
By: Montrose Capital Corporation
Its: General Partner
By: /s/ W. Clay Hamner
MF#6: MONTROSE FINANCIAL NO. 6 LIMITED
PARTNERSHIP (PANTRY)
a North Carolina limited partnership
By: Montrose Capital Associates No. 2
Limited Partnership (Pantry G.P.)
Its: General Partner
By: Hamner & Associates, Inc.
Its: General Partner
By: /s/ W. Clay Hamner
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HAMNER: /s/ W. Clay Hamner
W. CLAY HAMNER
ROGERS: /s/ Wayne M. Rogers
WAYNE M. ROGERS
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